Fresnillo plc | Annual Report and Accounts 2023

WORKING

TOGETHER

TO BUILD A

SUSTAINABLE

FUTURE

Fresnillo plc | Annual Report and Accounts 2023

WE ARE THE

WORLD’S LARGEST

SILVER PRODUCER

AND MEXICO’S

LARGEST GOLD

PRODUCER.

Our Purpose

TO CONTRIBUTE TO

THE WELLBEING OF

PEOPLE THROUGH THE

SUSTAINABLE MINING

OF SILVER AND GOLD.

Our Purpose springs directly from how we

operate as a business. It guides everything we do

and how we do it, and ensures that we deliver

for all our stakeholders, including our teams,

shareholders, local communities, suppliers,

the authorities and the environment.

Chief Executive’s

Statement

STRATEGIC REPORT

2 Performance highlights

4 Where we operate

6 Working together

12 Chairman’s statement

16 Chief Executive’s

statement

20 Business model

22 Our strategy

28 Our markets

30 Our stakeholders

37 Section 172 Companies

Act statement

38 Principal decisions

40 Workforce engagement

42 Review of operations

64 Financial review

76 Letter from the Chairman

of the HSECR Committee

78 Sustainability at the core

of our Purpose

151 Managing our risks

and opportunities

184 2023 Long-term viability

statement

185 Going concern statement

186 Non-financial information

statement

Additional

Information

Strategic

Report Governance

Financial

Statements

For the latest investor relations

www.fresnilloplc.com/investors

Putting our

stakeholders first

Review of operations

190

Our approach

to Governance

Sustainability at the core

of our Purpose

CORPORATE GOVERNANCE

188 The Chairman’s letter on

Governance 2023

190 Fresnillo’s approach

to Governance

191 Board activities in 2023

192 About the Board and

Committees

194 The Board of Directors

198 Executive Committee

200 UK Corporate Governance

code compliance statement

201 Board leadership and purpose

204 Division of responsibilities

206 Composition, succession

and evaluation

209 Nominations Committee

report

212 Audit, risk and internal control

213 Audit Committee report

225 Remuneration

226 Director’s remuneration report

244 Fresnillo plc Directors’

report 2023

248 Statement of Directors’

responsibilities

FINANCIAL STATEMENTS

249 Independent auditor’s report

262 Consolidated income

statement

263 Consolidated statement

of comprehensive income

264 Consolidated balance sheet

265 Consolidated statement

of cash flows

266 Consolidated statement

of changes in equity

267 Notes to the consolidated

financial statements

314 Parent Company balance

sheet

315 Parent Company statement

of cash flows

316 Parent Company statement

of changes in equity

317 Notes to the Parent Company

financial statements

ADDITIONAL INFORMATION

336 Consolidated audited

mineral resource statement

for underground operational

properties

337 Consolidated audited

mineral resource statement

for Sonora properties

338 Consolidated audited

mineral resource statement

of exploration projects

and prospects

339 Consolidated audited reserve

statement for underground

operational properties

340 Consolidated audited ore

reserve statement for

Sonora properties

341 Audited mineral resource

and ore reserve statements

for Juanicipio

342 Operating statistics

344 Shareholder information

2 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

PERFORMANCE HIGHLIGHTS

Despite challenges, including a tight

labour market, inflation, the revaluation

of the Mexican peso and supply chain issues,

we made steady progress in 2023 due to

the quality of our assets, the commitment

of our people and the strength of our

approach to ESG.

Sustainability at the

core of our Purpose

p78

Attributable silver resources

2,219.7moz

+0.7%

Attributable gold resources

37.9moz

-3.1%

Attributable gold production

610.6 koz

-4.0%

Financial

review

p64

Attributable silver production

(Silverstream)

56.3 moz

+4.7%

Review of

operations

p42

Additional

Information

Strategic

Report Governance

Financial

Statements

Operational highlights

Attributable silver production of 56.3 moz

(including Silverstream) was slightly below

expectations but up 4.7% vs 2022, driven by

the ramp-up at Juanicipio and higher ore

grade at San Julián Veins.

Attributable gold production of 610.6 koz

decreased 4.0% vs 2022, in line with guidance,

due to the decrease in gold production at Noche

Buena as it approached the end of its mine life,

partially mitigated by the ramp-up at Juanicipio

and the higher ore grade at Herradura.

The flotation plant at Juanicipio was

commissioned and production was successfully

ramped up, reaching nameplate capacity in

3Q23.

The tie in of the Pyrites plant at Fresnillo to the

national power grid completed in 2Q23, with

commissioning starting immediately afterwards.

Silver resources remained broadly unchanged

vs 2022 at 2.2bn oz as exploration results, mainly

at the Guanajuato exploration project and San

Julián veins, balanced the mining depletion at

mine sites, and higher costs and cut-off grades.

Gold resources decreased vs 2022 to 37.9 moz

primarily driven by extraction and higher costs

and cut-off grades at Herradura, Saucito and

Soledad-Dipolos (no mining), partly offset

by exploration results and increased mineral

resources at the Guanajuato and Centauro

Profundo exploration projects and the Ciénega

mine site.

Silver reserves decreased 10.0% due to 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 reserves decreased 13.7% to 7.1 moz mostly

due to extraction, higher costs and cut-off grades

at Herradura and Saucito, and depletion at

Noche Buena as it reached the end of its

mine life.

For more information

see pages 42-63.

1 Adjusted revenue is the revenue shown in the income statement adjusted to add back treatment and refining costs and gold, lead and zinc hedging. The Company considers

this a useful additional measure to help understand underlying factors driving revenue in terms of volumes sold and realised prices. The reconciliation of Adjusted revenue to

revenue as shown in the income statement is provided on page 66.

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 gross profit plus depreciation less administrative, selling and exploration expenses.

The reconciliation of EBITDA to amounts determined in accordance with IFRS can be found on page 71.

4 Cash and other liquid funds are disclosed in note 17 to the consolidated financial statements.

ESG highlights

Action taken to overhaul our ‘I Care, We Care’

programme after a regrettable four fatalities in

2023, with a sharper focus on performance and

effective management of high-potential and

critical risks. We remain determined to restore

our safety record to its previous path, eliminate

fatalities and achieve our target of reaching the

International Council on Mining and Metals

(ICMM) benchmark ranges.

Approved the Tailings Policy and Commitments

for Responsible Tailings Management, which

established the roles, responsibilities and duties

of the different participants in the management

system of our TSFs.

Increased our electricity supply from renewable

sources from 35.6% in 2022 to 53.3% in 2023.

Signed a collaboration agreement with the

Fresnillo municipality for the rehabilitation and

operation of a water potabilisation plant. This

initiative aims to supply clean water to Fresnillo

city, enabling a reduction in our mine water

consumption by substituting it with treated

municipal wastewater.

Provided training to 82% of employees and 92%

of unionised staff.

Began the deployment of the Living in Balance

programme, promoting healthy habits and

emotional wellbeing across the organisation.

Promoted the first Women in Mining Survey in

Mexico – with 1,230 participants – to improve

understanding of how to develop opportunities

for women in mining.

Collaborated with UNAM Foundation and

different local, federal and health authorities

to deploy Community Health Weeks across

our units, benefiting 198 communities and

6,013 people.

Generated a positive economic impact of

US$2,347.8 million in 2023 through wages,

taxes and payments to suppliers. 73.74% of

our workforce is drawn from the regions

where we operate.

For more information

see pages 78-150.

Financial highlights

Revenue of US$2,705.1 million, up 11.2% vs 2022

due to increased Adjusted revenue.

Adjusted revenue

of US$2,869.1 million, up 10.5%

vs 2022 due to the increased volumes of silver

and zinc sold and higher gold and silver prices.

Adjusted production costs

of US$1,624.1 million,

up 12.3% vs 2022 primarily due to the revaluation

of the Mexican peso vs the US dollar, cost

inflation, 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.

Cost of sales of US$2,201.8 million, up 16.1%

vs 2022 due to higher adjusted production costs

and the decrease in inventories at Juanicipio, as

a result of the start-up of the beneficiation plant,

and at Noche Buena as the mine approached

the end of its life.

Gross profit of US$503.2 million, down 6.1%;

EBITDA

of US$655.7 million, down 12.7%.

Profit from continuing operations before net

finance costs and income tax of US$142.5 million,

down 49.8%.

Strong balance sheet and low leverage ratio;

cash and other liquid funds

of US$534.6

million, down 44.8% driven by an investment

of US$483.4 million in capex, the redemption

of the outstanding US$317.9 million principal

amount of 5.500% Notes due in November 2023,

and dividend payments of US$108.4 million in

accordance with our dividend policy.

For more information

see pages 64-75.

Find out more online at

www.fresnilloplc.com

4 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

WHERE WE OPERATE

Based in Mexico, Fresnillo draws on the country’s significant geological resources and

strong potential for continued growth. We benefit from Mexico’s skilled workforce and solid

infrastructure and we are proud to continue playing an important part in a rich mining tradition

that stretches back more than 500 years. Our mining concessions extend to approximately

1.6 million hectares in Mexico, securing valuable employment for 19,776 people and contributing

some US$2,347.8

million to the country’s economy each year.

Key assets

Operating mines

Asset Type Main metal EBITDA Reserves (Silver)

Reserves (Gold)

Year

Fresnillo Underground Silver primary US$93.1m 98.8 moz 272 koz 1554

Saucito Underground Silver primary US$123.5m 110.9 moz 411 koz 2011

Juanicipio Underground Silver primary US$240.4m 68.4 moz 437 koz 2022

San Julián Underground Silver primary US$111.7m 56.5 moz 218 koz 2016

Ciénega Underground Gold/Silver (US$1.3m) 21.9 moz 213 koz 1992

Herradura Open pit Gold US$157.2m 5,507 koz 1997

Soledad-Dipolos

Open pit Gold Excluded in 2023 2010

Noche Buena Open pit Gold US$6.1m – 2012

1 Total economic impact. This is considered to be a social performance measure. For more details see page 142.

2 Represents start of commercial production.

3 Operations at Soledad-Dipolos are currently suspended.

4 As of 31 May 2023.

Advanced exploration projects

Asset Main metal Resources (Silver)

Resources (Gold)

Orisyvo Gold 12.7 moz 9,575 koz

Guanajuato Silver/Gold 252.1 moz 2,293 koz

Rodeo Gold 13.8 moz 1,331 koz

Tajitos Gold 1,029 koz

5 As of 31 December 2023.

In addition, we have many further early stage projects and prospects located in Mexico, Peru and Chile.

Read more in our Review of

operations on pages 48-63.

For more on our exploration

projects and prospects

See pages 42-47.

5 11

Additional

Information

Strategic

Report Governance

Financial

Statements

Ciénega

7.2 moz

Silver equivalent

produced in 2023

Saucito

17.9 moz

Silver equivalent

produced in 2023

Noche Buena

42.5 koz

Gold produced in 2023

Fresnillo

15.7 moz

Silver equivalent

produced in 2023

Herradura

355.5 koz

Gold produced in 2023

Fresnillo

District

Ciénega

District

Herradura

District

San Julián

District

Orisyvo

District

USA

Mexico

San Julián

16.9 moz

Silver equivalent

produced in 2023

Juanicipio

11.1 moz

Silver equivalent

produced in 2023

Mining operations

Advanced exploration

1 Au: Ag ratio of 1:80.

6 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

WORKING TOGETHER WITH

OUR

PEOPLE

Increasing safety

Our safety performance in 2023 was

unacceptable and has led to an even

greater focus on safety, as we work hard

to bring our performance back in line

with its historical trajectory. The full and

rigorous implementation of our ‘I Care,

We Care’ programme will continue to

play a key role, together with dedicated

safety meetings, such as the 11th Safety

Symposium which was held in 2023 and

served as a forum for communication,

reflection and training.

For more information,

see pages 98-102.

Unblocking potential

We are striving to embed a culture that

further encourages inclusion, creativity,

innovation and collaboration – helping

to unlock the full potential of our

workforce. For example, we provide

internships, residencies and programmes

such as Engineers in Training to create

meaningful career paths and secure our

talent pipeline. We also offer a wide range

of programmes to improve wellbeing

such as flexible working arrangements.

For more information,

see pages 90-95.

Improving productivity

We engage with our unions and

contractors to foster a safety culture,

drive proactive collaboration and

increase productivity. Improved training

programmes – supported by close

supervision – and updated mining works

contracts ensure that our contractors

share our goals, and know how to reach

them safely and efficiently.

For more information,

see pages 30-36.

We are dedicated to providing

a supportive work culture

that prioritises the safety and

wellbeing of our workforce.

Fresnillo has been built on the skills, experience and

commitment of our people – and our close working

relationship with them is the foundation stone

for our continuing track record as a profitable and

sustainable Company.

We fully recognise our responsibility to generate value for our employees and their

families, and we are committed to providing a safe, respectful, equitable and fair

workplace where everybody in our workforce – contractors as well as unionised

employees – feels valued and empowered.

Additional

Information

Strategic

Report Governance

Financial

Statements

19,766

Total number of employees

Average of 64 hours

of training per worker,

including 28 hours

on HSECR

8 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

WORKING TOGETHER THROUGH

OUR ESG

APPROACH

Ethics culture

In 2023, we carried out a major review

of our Code of Ethics and Conduct,

ensuring that everything we do reflects

our corporate values of Confidence,

Responsibility and Respect, Integrity and

Loyalty (CRIL). We also implemented an

internal survey to identify where we are

performing well and, just as important,

where we can do better.

For more information,

see pages 82-84.

Climate change

The regulatory uncertainties that had

slowed progress towards our goal of

supplying 75% of our electricity from

renewable sources were largely resolved

in 2023 – and we achieved 53.3%, up

from 35.6% in 2022. In addition, we

finalised our regional climate modelling

and initiated a decarbonisation roadmap

assessment that will inform decisions

regarding climate-related initiatives.

For more information,

see pages 111-128.

Community relations

As well as creating value through

employment, procurement, talent

development and taxes, during 2023

we continued to invest in education,

health and sports, water and capacity

building in line with the UN’s Sustainable

Development Goals.

For more information,

see pages 139-150.

Water stewardship

Mining can consume vast amounts of

water, often in regions where water

is scarce. In 2023, we established a

dedicated corporate water management

team charged with supporting the

implementation of sustainable water

management. We also signed an

agreement to rehabilitate and operate

a facility that will increase potable

water for people in Fresnillo city,

as well as the availability of treated

wastewater for our operations.

For more information,

see pages 134-136.

Our ESG approach guides our business practices

across our entire value chain. We behave responsibly

and ethically at all times – working with communities

and partners, being accountable for our actions

and impacts, and sharing the benefits of mining

with our stakeholders.

During 2023, we again demonstrated our commitment to ESG through a wide range

of initiatives and developments, including in the four areas outlined below.

We are committed

to reducing our

environmental

impact. We do this

by optimising our

resources, mitigating

adverse effects

and ensuring we

are accountable

by transparently

communicating

our environmental

footprint.

Additional

Information

Strategic

Report Governance

Financial

Statements

Local and regional labour

as a percentage of the total

workforce is

73.74%

84.86%

Water reuse efficiency

53.3%

Electricity from

renewables

$2,347.8m

Total economic impact

10 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

WORKING TOGETHER WITH

THE MINING

INDUSTRY

Supply chain

We work with key industry suppliers –

such as truck, equipment and ventilation

system companies – to identify

efficiencies that can improve logistics,

manage inflationary pressures and

reduce costs. We also participate in the

mining clusters of Zacatecas, Sonora and

Chihuahua. These clusters contribute to

the development of regional suppliers,

strengthening their participation in the

value chains of mining companies.

For more information,

see page 35.

Governments

Local and national governments are

important stakeholders – and the taxes

we pay demonstrate our commitment to

sharing the benefits of mining. Guided

by our ‘Alliance for the Common Good’

strategy, we maintain transparent

two-way relationships with all levels

of government, supported by high

standards of corporate governance and

compliance with regulatory, legal and tax

obligations. We also engage constructively

with regulators and lawmakers through

industry associations, and via partnerships

that promote projects that are valuable to

local communities.

For more information,

see pages 34 and 142-143.

Industry partners

We work with a range of partners

to enhance quality of life and long-

term wellbeing, with a focus on

environment, education, health and social

integration, entrepreneurship and social

infrastructure. In partnership with the

Mexican Mining Chamber, we promoted

the first Women in the Mining Industry

2023 survey, which aims to understand

and develop female talent. Among

many partnerships, we also worked

with FUNAM to deploy our Community

Health Weeks and with PROEMPLEO to

promote and train small and medium-

sized enterprises in San Julián. In

addition, we forged new partnerships

with the Chihuahua and León campuses

of La Salle University, benefiting a total of

21 students.

For more information,

see pages 139-150.

$3.82m

Community investment

We depend on the support of our industry

stakeholders in order to build and maintain a

sustainable and profitable business. We engage

with these companies, authorities and other

organisations through respectful partnerships

based on trust and mutual benefits.

Additional

Information

Strategic

Report Governance

Financial

Statements

Our vision is to creatively

promote the diversification

of local procurement,

contributing to our

value chain. Through our

programmes, partners

and strategic alliances,

we create and support

high-quality projects

that develop individuals’

capabilities and that

strengthen our relationships.

12 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CHAIRMAN’S STATEMENT

ALEJANDRO BAILLÈRES

WORKING TOGETHER

TO BUILD A

SUSTAINABLE

FUTURE

By working closely with

our people, our suppliers,

our communities and the

government, we were

able to achieve a good

operating performance

while also taking

important steps towards

building a sustainable

future for Fresnillo plc.”

Alejandro Baillères

Chairman

Additional

Information

Strategic

Report Governance

Financial

Statements

Although this year was

characterised by high levels

of cost inflation exacerbated

by the strength of the

Mexican peso and

compounded by other

negative macroeconomic

factors, as well as some

operational difficulties,

Fresnillo plc proved to be

a resilient business.

By working closely with our people, our

suppliers, our communities and the

government, we were able to achieve a

good operating performance while also

taking important steps towards building

a sustainable future for Fresnillo plc.

Delivering on our promises

In terms of silver equivalent ounces, our

total production was in line with our

guidance for the year. Silver production

was up from the previous year, primarily

due to the ramp-up at Juanicipio, while

gold production decreased as our Noche

Buena mine approached the end of its life.

We achieved US$2,869.1 million in

Adjusted revenue during the year. This

represented an increase of 10.5%, primarily

due to the increase in the volume of silver,

zinc and lead produced and higher prices

for gold and silver. Gross profit decreased

by 6.1% year-on-year to US$503.2 million,

primarily driven by the adverse effect

of the revaluation of the Mexican peso

against the US dollar, cost inflation, the

recognition of additional costs from the

start-up of the flotation plant at Juanicipio,

and the increased use of maintenance

services and contractors, which significantly

impacted cost of sales. This was offset by

the increase in Adjusted revenue. Cash

and other liquid funds decreased from

US$969.1 million to US$534.6 million as

the use of funds, primarily the investment

in capital expenditure and dividend

payments, in addition to the redemption

of the outstanding US$317.9 million

principal amount of 5.500% Notes due in

November 2023, was higher than the cash

generated by the mines.

For more details on our financial

performance see pages 64-75.

With a history that can be traced back over

500 years, Fresnillo plc is a well-established

and solidly-financed business focused

on long-term outcomes and sustainable

shareholder value. Our strategy is robust

and proven, and our dividend policy

remains unchanged. We aim to pay out

33-50% of profit after tax each year, while

making certain adjustments to exclude

non-cash effects in the income statement.

Dividends are paid in the approximate

ratio of one-third as an interim dividend

and two-thirds as a final dividend. Before

declaring a dividend, the Board carries

out a detailed analysis of the profitability

of the business, underlying earnings,

capital requirements and cash flow. Our

goal is to maintain enough flexibility to be

able to react to movements in precious

metals prices and seize attractive business

opportunities.

For 2023, we declared an interim

dividend of 1.40 US cents per share,

with a final dividend of 4.20 US cents

per share, bringing the total for the year

to 5.6 US cents per share.

A challenging macroenvironment

The final effects of the pandemic have

now largely worked through the system,

but global geopolitics continue to create

stresses in the supply chain, notably the

ongoing tensions between the US and

China, which are impacting the timely

delivery of equipment and spare parts.

In addition, we have also been affected by

changing government policies, which have

extended permitting processes for mining

operations and projects.

Cost inflation was 3.9% in 2023 and led

to across-the-board hikes in the cost of

labour, materials and equipment. The price

of diesel ran counter to this inflationary

trend in the early part of the year but that

too increased in later months.

The effect of inflation was made

significantly worse by the unhelpful

Mexican peso – US dollar exchange rate

caused by a relatively positive economy

in Mexico. This was driven by investment

attracted by the high rates of interest

offered by the central bank and also by

investment from foreign companies,

seeking to establish a presence in

Mexico in order to capitalise on its close

geographic proximity to the US.

Working together, thriving together

The year underlined the value of the close

working relationships we have forged

over many years with all our stakeholders.

Founded on a spirit of trust and mutual

respect, these relationships not only help

us navigate our short-term challenges

but also to build a sustainable future that

will provide long-term benefits for all,

in line with our Purpose – to contribute

to the wellbeing of people through the

sustainable mining of silver and gold.

For example, we are working together with

our suppliers to mitigate the effects of

inflation and the strong peso by identifying

opportunities to improve supply chain

logistics, reduce costs and increase the

speed of deliveries of equipment, spare

parts and services.

In terms of our workforce, while the

recent labour reforms caused some

initial disruption to our activities, they

have ultimately helped us build closer

relationships with our people and their

unions. Through initiatives such as greater

automation, we are working closely with

them to increase productivity in our mines

–– which will enable us to manage the

impact of inflation by producing more

from the same resources.

Adjusted revenue

US$2,869.1m

14 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CHAIRMAN’S STATEMENT CONTINUED

We are also collaborating with our

workforce to bolster our organisation,

processes and culture – ensuring that

everybody at Fresnillo is aligned as we

collectively address the challenges that

lie ahead. Key among these is safety, and

it is with great sadness that we report

four fatalities among the contractors’

workforce during 2023 and one in early

2024. These incidents are unacceptable

and serve only to strengthen our resolve

to achieve zero harm. We are intensifying

the implementation of our ‘I Care, We Care’

safety programme, with a heightened

focus on improving our management

of high-potential risks and critical risks,

together with increased engagement with

our contractors’ workforce. The safety of

our people is paramount and will never be

compromised.

Our neighbouring communities continue

to be the foundation stones that sustain

our existing operations and facilitate future

projects – and we value and nurture our

vital partnerships with them. We earn their

trust through meaningful engagement

and by being accountable for our actions,

working hard to establish close and

harmonious relationships that ensure the

seamless continuation of our social licence

to operate across our project pipeline. We

fully understand the concerns that can

arise when a new mine is proposed, and

are committed to engaging with local

people in order to address their concerns

and explain how our presence can lead to

more sustainable communities – ranging

from creating employment opportunities

and economic growth to providing

comprehensive support for education

and healthcare.

Board activities

The Board met regularly throughout the

year and discussed a range of matters,

including the latest mining and regulatory

developments in Mexico. For the second

year running, in July we held a valuable

working meeting of the Board which

enabled Directors to discuss wider strategic

issues with our executive team. Key topics

included: a review of Fresnillo’s Purpose,

mission, vision, values and business

model; megatrends in the global mining

industry; production; mine exploration and

development; and the Company’s ESG

(environment, social and governance) and

climate strategy.

Fresnillo’s safety record during the

year was a significant cause of concern

at Board level. We have stressed the need

for our management team to improve

safety culture across all our sites, and

fully support the HSECR Committee’s

insistence on the implementation of

stricter disciplinary measures.

At the 2023 AGM in London, it was

pleasing to see that all the proposed

resolutions were strongly supported

by our shareholders, including the

re-appointment of Charles Jacobs and

Bárbara Garza Lagüera as Independent

Non-executive Directors, as well as

some minor changes to our Directors’

Remuneration Policy.

In September, we engaged consultants

Lintstock to manage our annual review

of the Board and its committees, in

compliance with our commitment to

seek external support for this review every

three years. Lintstock’s findings were

discussed at our Board meeting in October

and we were delighted to note that the

key outcome of the review was that the

Board and its committees continue to

perform very well. Lintstock did, however,

make a number of helpful suggestions to

improve that performance still further and,

following consideration, these will be acted

upon during 2024.

For further details of the Board’s activities,

please see my introduction to the

Governance Report on page 188.

Additional

Information

Strategic

Report Governance

Financial

Statements

Board changes

There were no changes to the Board this

year, with all of the Directors being re-

elected at the 2023 AGM.

Outlook

While global macro issues, such as

inflation and the slow recovery of certain

economies, the ongoing US-China

tensions and the wars in Ukraine and the

Middle East, will dampen confidence

and challenge our performance targets,

we will continue to work together with

our stakeholders to improve productivity.

At the same time, we will maintain our

commitment to investing in exploration

activities in Mexico, Peru and Chile, and

strive to transform what is an undoubtedly

exciting pipeline into operational projects

that will help us achieve our ambitions in

the years ahead.

Fresnillo does not and cannot operate in

a vacuum. We depend on our employees,

our suppliers, our local communities,

our shareholders and the government to

actively engage with our objectives and

ambitions in order to fulfil our Purpose.

On behalf of the Board, I thank them and

the full range of our stakeholders for their

continued understanding, support and

encouragement during 2023. By working

together, we are building a stronger and

more sustainable business.

Alejandro Baillères

Chairman

16 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

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 Mexican peso – US 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 macroeconomic

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

Additional

Information

Strategic

Report Governance

Financial

Statements

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.

Please find more details on production

at each of our mines on pages 48-63.

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. Please see pages 28-29 for

more details on prices and how they have

been influenced by market dynamics.

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.

Gold production

610.6 koz

Silver production

56.3 moz

18 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CHIEF EXECUTIVE’S STATEMENT CONTINUED

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 2.2bn oz as the positive exploration

results at the Guanajuato exploration project

and San Julián veins were offset by mining

activities, 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-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 conclusion of mining

at Noche Buena.

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 wellbeing 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

We achieved a sound

operating performance in

2023, despite headwinds

which included inflation

and an unfavourable

Mexican peso – US dollar

exchange rate.”

Octavio Alvídrez

Chief Executive Officer

Additional

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Report Governance

Financial

Statements

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 benefiting 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 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

20 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

BUSINESS MODEL

Our ability to create value is underpinned by the quality of our assets, the capability of our

people, our operational performance, mitigation of risks and disciplined capital allocation.

How we operate –

Our competitive advantage

Fresnillo is a leading precious metals mining company

with a world-class portfolio of mining operations and

undeveloped resources.

Risk management and strict corporate governance

Creating shareholder value is the

reward for taking and accepting risk

responsibly. Our risk management

process aims to strike a balance

between mitigating and monitoring

our risks and maximising the potential

reward. We have a structured internal

risk management process in place

to identify risks while simultaneously

considering the views and interests of

our stakeholders.

Our approach to sustainable mining

With a sustained and realistic

exploration strategy that invests across

price cycles, we have a proven track

record of discovering world-class gold

and silver mines through our respected

team of 84 geologists in Mexico, Peru

and Chile, supported by 90 specialists

across claims management, land

negotiation, community relations

and environmental control. Our team,

which also comprises 300 assistants

drawn from local communities, has

access to realistic budgets and is hugely

respected across our industry.

For more information

See pages 42-47.

We assess each potential operation

against a set of strict criteria including

risk, potential returns, and the long-

term sustainability and value to our

stakeholders. We only approve projects

with the potential to create value across

precious metals price cycles. Approved

projects have the ability to optimise

long-term productivity at minimal risk,

drawing synergistic benefits from our

district consolidation strategy while also

creating opportunities for costs to be

shared through our association with the

Peñoles Group and members’ common

requirements across a number of

service areas.

1 Net debt (Debt at 31 December 2023 – Cash and

other liquid funds at 31 December 2023) divided by

the EBITDA generated in the last 12 months. This ratio

measures our ability to pay off our debt.

EXPLORE

DEVELOP

Strategic resources

and relationships

Partnering

with our

communities

Protecting

the

environment

Caring

for our

people

Doing business

ethically and

responsibly

BUILDING

TRUST

For more information

See pages 78-81.

People

We rely on the skills, experience and

commitment of our people to create

sustainable value. Attracting, developing and

retaining the best people is crucial in enabling

us to meet our business goals. We have a skilled

workforce of 7,260 unionised workers and

employees and 12,516 contractors who provided

services along our full value chain during 2023,

supported by an experienced and purpose-led

leadership team.

Natural resources

Our operations rely on a range of natural

resources, including surface land, water,

energy and fuel.

• 1.6 million hectares in mining concessions

in Mexico.

• 3,806 megalitres of recycled water (efficiency

of 84.86%).

• 53.3% of our electricity consumption comes

from renewable sources.

Relationships with key stakeholders

Our stakeholders include governments,

communities, suppliers, customers,

shareholders and our workforce. We maintain

purposeful engagements with these

stakeholders to understand the issues that

matter to them, address them collaboratively

and gain their trust. We are active members of

several mining organisations and associations,

where we use our influence to promote greater

recognition of the advantages that mining

brings to society.

Financial strength

Our business is underpinned by a disciplined

approach to capital allocation and strict cost

controls. Today, our balance sheet is a key

strength, providing a resilient platform to

invest though the cycles to generate

sustained returns to shareholders.

• Total equity of US$4,067.2 million.

• Net debt to EBITDA 0.46x

Property and equipment

Our assets include properties, infrastructure,

processing plants and mining equipment.

• Net book value of property, plant and

equipment of US$2,860.9 million.

Technology

Digital transformation, in particular connectivity,

is a leading driver of the modern economy.

We continue to adopt smart technology to

address productivity, growth and sustainability

challenges through leveraging the knowledge

of our partners, identifying and implementing

innovative and effective solutions across our

value chains.

Additional

Information

Strategic

Report Governance

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Statements

Sustainable mining

We believe that mining must be compatible

with high stakeholder expectations in

terms of ethical, social and environmental

performance. This underlines the importance

of integrating responsible business practices

deeply into our business model and

considering factors that affect stakeholders

at every critical decision-making level.

Stakeholders

We rely on strong relationships with

our stakeholders to fulfil our Purpose of

contributing to the wellbeing of people,

through the sustainable mining of silver

and gold. Embedded in our culture, our

values are the compass that guides how we

engage with all our stakeholders – including

local communities as well as employees,

unions, contractors and suppliers –

to foster prosperity and wellbeing.

We also engage with governments

and regulators and ensure open

communications with investors.

Build trust

An organisational culture based on

trust enhances the resilience of strategic

relationships. We are committed to

building and maintaining a strong

relationship with our stakeholders; through

active engagement, we balance the

issues that matter to them, ensuring the

social acceptance of our operations and

maintaining our licence to operate in order

to create shared value and achieve long-

term success.

Our approach to sustainable mining

Through our commitment to sustainable

business practices, we have built a

portfolio of high-quality assets and ample

mineral resources, sustained through

continued investment in infrastructure

and technological improvements. At all

times, we target safe, environmentally-

responsible working practices and a

high-performing culture that delivers

production at competitive costs. We aim

to improve productivity by evolving our

mining practices, optimising capacity

and beneficiation processes.

For more information

See pages 48-63.

Embedded within our business philosophy is

the conviction that mining operations must

integrate responsible business practices at

every level of the decision-making process

and that stakeholder concerns are addressed

comprehensively. We aim to surpass

expectations in the areas of ethical conduct,

health and safety, environmental stewardship

and governance, complemented by a keen

awareness of the needs and aspirations of

local communities. Guided by an ethical

culture and an extensive understanding of

Mexico’s economy, culture and communities,

we take pride in our reputation as a trusted

corporate leader, committed to sharing the

benefits of mining with wider society.

For more information

See pages 78-150.

Sharing the benefits

Economic value distributed is

considered to be a social performance

measure.

Wages and benefits to workers

(US$)

151.7m

Payments to suppliers (contractors)

(US$)

1,983.2m

Payments to federal government

(US$)

200.2m

Payments to local governments

(US$)

12.6m

Total economic impact (US$)

2,347.8m

Effective risk management is an essential

part of our culture and strategy. The accurate

and timely identification, assessment and

management of key risks gives us a clear

understanding of the actions required

throughout the organisation in order to

achieve our objectives.

Risk can manifest as opportunities or threats

that can affect our business performance.

Our risk management framework reflects

the importance of risk awareness across

the Company. The framework enables us

to identify, assess, prioritise and manage

risks in order to deliver the value creation

objectives defined in our business model.

We ensure that our networks, systems and

data are secure, in accordance with best

practice, and also follow best practice in

terms of corporate governance.

OPERATE

SUSTAIN

22 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAIN

DEVELOP

OPERATE

EXPLORE

Risk management framework

OUR STRATEGY

Our Purpose is to contribute to the

wellbeing of people, through the

sustainable mining of silver and gold.

We engage our people in our long-term

strategy to instil a Purpose-led culture

where everybody understands how we do

business. The values that are embedded in

our culture support our strategy, inspiring

winning behaviours on ethics, safety,

innovation and operational excellence.

We are committed to fostering a culture that values long-

term engagement, and promotes empowerment, flexibility,

collaboration, transparency and active involvement. Guided by

these principles, we embrace:

• Holding ourselves accountable for individual and collective

work (build trust and act ethically).

• Building our future together through ecosystems and

co-creation, recognising that our differences strengthen

us (leverage diversity).

• A transformational leadership model that recognises,

empowers, motivates, integrates and inspires (lead

transformatively).

Our values, embedded in our culture, are the compass

that guide our efforts to foster prosperity and wellbeing.

These values are Confidence, Responsibility and Respect,

Integrity and Loyalty.

For more details see Our culture on pages 88-89.

• Potential actions by the government (political, legal

and regulatory).

• Security.

• Global macroeconomic developments (energy and

supply chain disruptions, inflation, productivity and cost).

• Impact of metals prices (commodity prices and exchange

rates).

• Human resources (attract and retain requisite skilled

people/talent crisis).

• Cybersecurity.

• Projects (performance risk).

• Safety (incidents due to unsafe acts or conditions could

lead to injuries or fatalities).

• Union relations (labour relations).

• Access to land.

• Licence to operate (community relations).

• Exploration (new ore resources).

• Climate change.

• Tailings dams (overflow or collapse of tailings deposits).

• Environmental incidents (cyanide spills and chemical

contamination).

For more details see Managing our risks and

opportunities on pages 151-183.

Our culture

Values and behaviours

Principal risks

Additional

Information

Strategic

Report Governance

Financial

Statements

Extend and maintain a robust growth pipeline.

Deliver profitable growth,optimise cash flowand returns.

EXPLORE

DEVELOP

Strategic priorities for 2024-2025

• Establish a management system for industrial hygiene

and begin the improvement of project designs in the

mining units.

• Advance our ‘I Care, We Care’ safety strategy by maturing our

High-potential incidents, critical risks and controls initiatives

and ensuring accountability.

• Continue to mature our safety preventive reporting (near-

misses), identifying failed or missing critical controls and

enabling workers to make timely decisions.

• Continue to increase the participation of women at the

mine site managerial levels to 8% and in all our workforce

to 12% by 2025.

• Renew our cybersecurity governance framework, building

upon the three lines of defence model.

• Implement a targeted training plan covering anti-bribery,

corruption prevention and regulatory compliance for

key areas.

• Ensure safe management of tailings storage facilities

by maintaining focus on governance and engineering

best practices.

• Continue to mature our climate change adaptation

and mitigation strategies.

• Generate a strategic level decarbonisation roadmap that

considers multiple decarbonisation levers, their impact on

emissions reductions, the speed of implementation and

their financial implications.

Long-term strategic priorities

• Attract and develop people committed to our Purpose

of contributing to the wellbeing of people, through the

sustainable mining of silver and gold.

• Continue strengthening general working conditions, training,

education and productivity, as well as health and safety.

• Mature our safety culture and reduce TRIFR and fatality rates

to the ICMM range.

• Consolidate safety leadership practices across all organisational

levels and transversal processes.

• Make progress on our development and management of

inclusive talent.

• Develop water stewardship to improve our performance

and increase collaboration with our stakeholders.

• Supply 75% of our electricity from renewable sources by 2030.

• Enhance our decarbonisation strategy with the addition

of robust energy efficiency, and technologically and

economically-feasible initiatives.

Advance and enhance the sustainability of our business.

SUSTAIN

Strategic priorities for 2024-2025

• Monitor infrastructure projects to make sure they

are developed in accordance with the mine plans.

• Advance the Rodeo and Tajitos projects.

Long-term strategic priorities

• Progress the Orisyvo and Guanajuato projects.

• Identify two further world-class assets with the potential

to complement our portfolio.

• Continue advancing projects in the exploration pipeline

towards development.

Strategic priorities for 2024-2025

• Continue to invest in our exploration pipeline, focused on

brownfield exploration to maximise probability of returns.

• Replenish reserves mined during the year.

• Convert reserves into the proven category at our underground

operations.

• Continue discussions with local communities at the Rodeo

project to resume intensive infill, step-out, condemnation

and geotechnical drilling programme.

• Advance pre-feasibility to feasibility level studies at Orisyvo.

• Delineate the main Tajitos ore bodies, conduct additional

metallurgical and geotechnical test work, and advance

conceptual studies.

• Accelerate exploration drilling at the most promising

areas of the Guanajuato district, and update preliminary

economic assessments.

Long-term strategic priorities

• Continue to invest in our exploration pipeline.

• Increase the resource base to drive future growth.

• Increase gold production to replace decreases at

Noche Buena and Herradura.

• Identify silver resources in the Fresnillo, San Julián and

Guanajuato Districts.

• Concentrate on identifying M&A targets, not only in

Mexico but also in the wider region.

Strategic priorities for 2024-2025

• Maintain ore throughput and improve ore grades, primarily in

the Fresnillo district.

• Focus on initiatives to capture efficiencies and reduce costs.

• Continue to improve the Company’s geological models as

well as the reserves and resource estimates.

• Improve short- and medium-term planning processes.

• Conclude testing the recommendations of the pit slope

optimisation programme at Herradura in different domains of

the pit, and finalise the life of mine plan.

• Implement the mine closure plans at Noche Buena and

San Julián DOB.

Long-term strategic priorities

• Focus on the profitability of our mines.

Maximise the potential of our operations.

OPERATE

24 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL

Earnings per share excluding post-tax

Silverstream revaluation effects

This is calculated as attributable

profit available to equity shareholders,

excluding the revaluation effects

of the Silverstream contract, divided

by the weighted average number

of shares in issue during the period.

It measures net profit levels generated

for equity shareholders.

EBITDA, EBITDA margin and cash flow from operating activities before changes

in working capital

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.

EBITDA margin is EBITDA divided by total revenue.

Both EBITDA and cash flow from operating activities before changes in working capital

measure the Group’s ability to generate cash from its core business.

2023 Group KPIs/performance

Earnings per share excluding post-tax

Silverstream revaluation effects

(US$/share)

0.317

Lower profits divided across an unchanged weighted

average number of shares in issue.

0.231

0.440

0.572

0.369

0.317

2022

2021

2020

2019

2023

EBITDA and EBITDA margin

(US$ and %)

655.7m 24.2%

Decreased vs 2022 due to the lower gross profit, increase

in administrative and corporate expenses and higher

exploration expenses.

674.6

1,169.1

1,206.3

751.1

655.7

30.9%

24.2%

44.6%

48.1%

31.8%

2022

2021

2020

2019

2023

Cash flow from operating activities

before changes in working capital

(US$)

649.3m

Decreased vs 2022 due to the lower profits.

685.5

1,168.7

1,208.3

743.1

649.3

2022

2021

2020

2019

2023

EXPLORE

2023 Goals

• Invest US$175 million with a continued

focus on the San Julián and Fresnillo

districts and advanced exploration

projects.

• Further develop resource modelling

and reserve engineering activities

initiated in 2020, with the aim of

reporting proven reserves for all

operating assets.

• Convert resources into reserves at all

our operating mines.

• Continue the exploration programme

at Juanicipio to delineate the

Valdecañas vein and advance the

evaluation of nearby veins.

• Continue discussions with local

communities at the Rodeo project

and conduct an intensive infill, step-

out, condemnation and geotechnical

drilling programme.

• Complete the required studies to

deliver an updated pre-feasibility

study by year-end at Orisyvo and

strengthen the engagement plan with

stakeholders.

• Complete the delineation of the

main Tajitos ore bodies and conduct

additional metallurgical testwork;

update the project’s preliminary

economic assessment.

• Accelerate exploration drilling at

the most promising areas of the

Guanajuato district.

2023 Progress

• US$186.0 million was invested in risk

capital in exploration.

• Geotechnical and economic modelling

continued to progress. However, proven

reserves were only reported at Juanicipio

and the open pit mines.

• Higher costs and increased cut-off grades

at the mines affected conversion of

resources into reserves, apart from silver

reserves at the Fresnillo mine.

• Core drilling continued at the main

Valdecañas and subsidiary veins,

confirming the structure continues at

depth, albeit with lower silver grades.

• Negotiations with private landowners

continued at Rodeo. However, exploration

and development works remained on

stand-by during 2023.

• Several pre-feasibility level studies, land

acquisition and community engagement

programmes progressed as scheduled

at Orisyvo.

• Core and reverse circulation drilling were

intensified at the Tajitos project, with

good results in infill and step-out holes.

• Drilling programme at Guanajuato

continued with good results, including

the discovery of a significant ore shoot

and the extension of vein and stockwork

ore bodies.

• Drilling programmes were completed

at Pilarica and Santo Domingo in Peru.

• Drilling and additional targets delineation

continued with promising results at

Capricornio in Chile.

2024 Targets

• Invest US$190 million with a continued

focus on the Fresnillo and San Julián

districts and advanced exploration

projects.

• Further develop resource modelling and

reserve engineering activities initiated in

2020, with the aim of reporting proven

reserves for all operating assets.

• Convert resources into reserves at all

our operating mines.

• Continue the exploration programme

at Juanicipio to fully delineate the

Valdecañas vein at depth.

• Advance pre-feasibility to feasibility

level studies at Orisyvo.

• Complete the full delineation of

the Tajitos ore bodies and advance

metallurgical, geotechnical and

conceptual studies.

• Accelerate drilling in the Guanajuato

District and conduct detailed

metallurgical investigations. Update the

Preliminary Economic Assessment of

priority areas.

• Continue discussions with the local

communities at Rodeo and conduct an

intensive infill, step-out, condemnation

and geotechnical drilling programme

upon completion of agreements.

• Continue drilling several targets at

Capricornio in Chile, resume drilling

at Supaypacha and work towards

permitting the drill-testing of targets

at Santo Domingo and Pilarica in Peru

in 2025.

2023 Group KPIs/performance

Quantified, measured, indicated and inferred resources at all our assets; an indicator of the Group’s growth potential and ability to

discover and develop new ore bodies.

2,256.7

2,292.5

2,319.7

2,203.9

2,219.7

2022

2021

2020

2019

2023

Attributable silver resources

(millions of ounces)

2,219.7

Silver resources remained broadly unchanged vs 2022 as

exploration results, mainly at the Guanajuato exploration

project and San Julián veins, balanced depletion at mine

sites, and higher costs and cut-off grades.

1 2023 resources from the mines are presented as of

31 May 2023. Resources from the exploration projects

are presented as of 31 December 2023.

39.0

38.9

39.0

39.1

37.9

2022

2021

2020

2019

2023

Attributable gold resources

(millions of ounces)

37.9

Gold resources decreased vs 2022 primarily driven

by extraction and higher costs and cut-off grades at

Herradura, Saucito and Soledad-Dipolos (no mining),

partly offset by exploration results and increased mineral

resources at the Guanajuanto and Centauro Profundo

exploration projects and the Ciénega mine site.

1 2023 resources from the mines are presented as of

31 May 2023. Resources from the exploration projects

are presented as of 31 December 2023.

DEVELOP

2023 Goals

• Ramp-up production of the flotation

plant at Juanicipio to full capacity by

3Q 2023.

• Subject to permits being obtained,

start and ramp-up the Pyrites plant

at Fresnillo.

2023 Progress

• The flotation plant at Juanicipio reached

its nameplate capacity of 4,000 tpd by

3Q 2023.

• Permits to tie in the Pyrites plant at

Fresnillo were granted in 2Q23. We

conducted tests and technical work

to improve recovery rates and defined

a strategy to optimise performance.

2024 Targets

• There are no projects currently under

development as Juanicipio and the

Pyrites plant at Fresnillo have both been

commissioned and are now reported

as part of our operations, and additional

work is required before our projects in

the advanced exploration phase can

become development projects.

2023 Group KPIs/performance

Ability to adhere to forecasted

schedules and budgets. This measures

management’s forecast accuracy and

execution capabilities.

Total capex todate

There are no figures for 2023 as there

are no projects under development.

OUR STRATEGY CONTINUED

Additional

Information

Strategic

Report Governance

Financial

Statements

FINANCIAL

Earnings per share excluding post-tax

Silverstream revaluation effects

This is calculated as attributable

profit available to equity shareholders,

excluding the revaluation effects

of the Silverstream contract, divided

by the weighted average number

of shares in issue during the period.

It measures net profit levels generated

for equity shareholders.

EBITDA, EBITDA margin and cash flow from operating activities before changes

in working capital

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.

EBITDA margin is EBITDA divided by total revenue.

Both EBITDA and cash flow from operating activities before changes in working capital

measure the Group’s ability to generate cash from its core business.

2023 Group KPIs/performance

Earnings per share excluding post-tax

Silverstream revaluation effects

(US$/share)

0.317

Lower profits divided across an unchanged weighted

average number of shares in issue.

0.231

0.440

0.572

0.369

0.317

2022

2021

2020

2019

2023

EBITDA and EBITDA margin

(US$ and %)

655.7m 24.2%

Decreased vs 2022 due to the lower gross profit, increase

in administrative and corporate expenses and higher

exploration expenses.

674.6

1,169.1

1,206.3

751.1

655.7

30.9%

24.2%

44.6%

48.1%

31.8%

2022

2021

2020

2019

2023

Cash flow from operating activities

before changes in working capital

(US$)

649.3m

Decreased vs 2022 due to the lower profits.

685.5

1,168.7

1,208.3

743.1

649.3

2022

2021

2020

2019

2023

EXPLORE

2023 Goals

• Invest US$175 million with a continued

focus on the San Julián and Fresnillo

districts and advanced exploration

projects.

• Further develop resource modelling

and reserve engineering activities

initiated in 2020, with the aim of

reporting proven reserves for all

operating assets.

• Convert resources into reserves at all

our operating mines.

• Continue the exploration programme

at Juanicipio to delineate the

Valdecañas vein and advance the

evaluation of nearby veins.

• Continue discussions with local

communities at the Rodeo project

and conduct an intensive infill, step-

out, condemnation and geotechnical

drilling programme.

• Complete the required studies to

deliver an updated pre-feasibility

study by year-end at Orisyvo and

strengthen the engagement plan with

stakeholders.

• Complete the delineation of the

main Tajitos ore bodies and conduct

additional metallurgical testwork;

update the project’s preliminary

economic assessment.

• Accelerate exploration drilling at

the most promising areas of the

Guanajuato district.

2023 Progress

• US$186.0 million was invested in risk

capital in exploration.

• Geotechnical and economic modelling

continued to progress. However, proven

reserves were only reported at Juanicipio

and the open pit mines.

• Higher costs and increased cut-off grades

at the mines affected conversion of

resources into reserves, apart from silver

reserves at the Fresnillo mine.

• Core drilling continued at the main

Valdecañas and subsidiary veins,

confirming the structure continues at

depth, albeit with lower silver grades.

• Negotiations with private landowners

continued at Rodeo. However, exploration

and development works remained on

stand-by during 2023.

• Several pre-feasibility level studies, land

acquisition and community engagement

programmes progressed as scheduled

at Orisyvo.

• Core and reverse circulation drilling were

intensified at the Tajitos project, with

good results in infill and step-out holes.

• Drilling programme at Guanajuato

continued with good results, including

the discovery of a significant ore shoot

and the extension of vein and stockwork

ore bodies.

• Drilling programmes were completed

at Pilarica and Santo Domingo in Peru.

• Drilling and additional targets delineation

continued with promising results at

Capricornio in Chile.

2024 Targets

• Invest US$190 million with a continued

focus on the Fresnillo and San Julián

districts and advanced exploration

projects.

• Further develop resource modelling and

reserve engineering activities initiated in

2020, with the aim of reporting proven

reserves for all operating assets.

• Convert resources into reserves at all

our operating mines.

• Continue the exploration programme

at Juanicipio to fully delineate the

Valdecañas vein at depth.

• Advance pre-feasibility to feasibility

level studies at Orisyvo.

• Complete the full delineation of

the Tajitos ore bodies and advance

metallurgical, geotechnical and

conceptual studies.

• Accelerate drilling in the Guanajuato

District and conduct detailed

metallurgical investigations. Update the

Preliminary Economic Assessment of

priority areas.

• Continue discussions with the local

communities at Rodeo and conduct an

intensive infill, step-out, condemnation

and geotechnical drilling programme

upon completion of agreements.

• Continue drilling several targets at

Capricornio in Chile, resume drilling

at Supaypacha and work towards

permitting the drill-testing of targets

at Santo Domingo and Pilarica in Peru

in 2025.

2023 Group KPIs/performance

Quantified, measured, indicated and inferred resources at all our assets; an indicator of the Group’s growth potential and ability to

discover and develop new ore bodies.

2,256.7

2,292.5

2,319.7

2,203.9

2,219.7

2022

2021

2020

2019

2023

Attributable silver resources

(millions of ounces)

2,219.7

Silver resources remained broadly unchanged vs 2022 as

exploration results, mainly at the Guanajuato exploration

project and San Julián veins, balanced depletion at mine

sites, and higher costs and cut-off grades.

1 2023 resources from the mines are presented as of

31 May 2023. Resources from the exploration projects

are presented as of 31 December 2023.

39.0

38.9

39.0

39.1

37.9

2022

2021

2020

2019

2023

Attributable gold resources

(millions of ounces)

37.9

Gold resources decreased vs 2022 primarily driven

by extraction and higher costs and cut-off grades at

Herradura, Saucito and Soledad-Dipolos (no mining),

partly offset by exploration results and increased mineral

resources at the Guanajuanto and Centauro Profundo

exploration projects and the Ciénega mine site.

1 2023 resources from the mines are presented as of

31 May 2023. Resources from the exploration projects

are presented as of 31 December 2023.

DEVELOP

2023 Goals

• Ramp-up production of the flotation

plant at Juanicipio to full capacity by

3Q 2023.

• Subject to permits being obtained,

start and ramp-up the Pyrites plant

at Fresnillo.

2023 Progress

• The flotation plant at Juanicipio reached

its nameplate capacity of 4,000 tpd by

3Q 2023.

• Permits to tie in the Pyrites plant at

Fresnillo were granted in 2Q23. We

conducted tests and technical work

to improve recovery rates and defined

a strategy to optimise performance.

2024 Targets

• There are no projects currently under

development as Juanicipio and the

Pyrites plant at Fresnillo have both been

commissioned and are now reported

as part of our operations, and additional

work is required before our projects in

the advanced exploration phase can

become development projects.

2023 Group KPIs/performance

Ability to adhere to forecasted

schedules and budgets. This measures

management’s forecast accuracy and

execution capabilities.

Total capex todate

There are no figures for 2023 as there

are no projects under development.

26 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OUR STRATEGY CONTINUED

OPERATE

2023 Goals

• Produce between 57-64 moz silver

and 590-640 koz gold.

• Prevent fatal or serious accidents.

• Focus on increasing productivity.

• Conduct an assessment of optimal

development rates.

• Implement efficiency and cost

reduction initiatives.

2023 Progress

• Produced 56.3 moz of silver (including

Silverstream) and 610.6 koz of gold.

• Four fatal accidents during the year,

three at the Saucito mine and one

at the Tajitos project.

• Productivity increased at most of the

mines as training campaigns were

completed and additional mine

equipment purchased.

• An assessment at Fresnillo and Saucito

was conducted and concluded that

current development rates will suffice to

sustain production levels going forward.

• Works to deepen the San Carlos

shaft concluded, but commissioning

was delayed due to the installation

of key equipment and a number of

modifications to improve the design

of the service infrastructure.

• Cost reduction initiatives were

implemented and mitigated the adverse

effects of the revaluation of the Mexican

peso vs US dollar and inflation.

2024 Targets

• Produce between 55-62 moz silver

and 580-630 koz gold.

• Prevent fatal or serious accidents.

• Focus on cost reduction initiatives.

• Improve short- and mid-term planning

processes at the Fresnillo district.

• Implement contractor cost

improvement initiative.

Production: Monitors total production

levels at our mines and contributions from

advanced development projects.

2023 Group KPIs/performance

2.8

2.7

3.1

2.8

53.5

51.1

50.0

50.3

51.8

56.3

53.7

53.1

54.6

2022

2021

2020

2019

2023

Attributable silver production

(millions of ounces)

56.3

Attributable silver production increased vs 2022 due to

the ramp-up at Juanicipio and higher ore grade at San

Julián Veins, partly offset by the lower ore grade at San

Julián (DOB) and Fresnillo.

Graph: illustrates silver production from our own mines,

with shaded portion representing additional ounces

accrued under the Silverstream contract.

875.9

769.6

751.2

635.9

610.6

2022

2021

2020

2019

2023

Attributable gold production

(thousands of ounces)

610.6

Attributable gold production decreased vs 2022

primarily driven by the decrease in gold production at

Noche Buena as the mine approached the end of its life,

partially mitigated by the ramp-up at Juanicipio and the

higher ore grade at Herradura.

Proven and probable reserves:

A measure of the quality of the Group’s

operating assets and our ability to

extend the life of operating mines

at profitable levels.

484.1

457.4

419.8

396.1

356.6

2022

2021

2020

2019

2023

Attributable silver reserves

(millions of ounces)

356.6

Attributable silver reserves decreased mainly due to

mining depletion and higher costs and cut-off grades at

San Julián (DOB), Juanicipio and Ciénega, partly offset by

increased ore reserves at Fresnillo.

1 2023 reserves are presented as of 31 May 2023.

9.3

8.4

7.8

8.2

7.1

2022

2021

2020

2019

2023

Attributable gold reserves

(millions of ounces)

7.1

Attributable gold reserves decreased mainly due

to extraction and higher costs and cut-off grades

at Herradura and Saucito and the end of the

Noche Buena mine life.

1 2023 reserves are presented as of 31 May 2023.

SUSTAIN

2023 Goals

• Appoint an Ergonomics Committee

to develop projects to improve

ergonomics and industrial hygiene.

• Decrease our Total Recordable Injury

Frequency Rate (TRIFR) by 5%.

• Consolidate the ‘I Care, We Care’

operating committee to guarantee

the deployment of a consistent safety

strategy across our operations.

• Further analyse reporting frameworks

to improve how we report on our

strategy to increase the participation of

women, as well as the positive impacts

achieved to date.

• Continue to strengthen harassment

prevention by reinforcing, consolidating

and evolving the programme and

strengthening confidence in our

whistleblowing mechanism.

• Perform an ethical culture evaluation

to benchmark our progress against our

previous performance and amongst

our peers.

• Approve and publish our tailings

storage facilities policy.

• Advance our climate change strategy by

maturing our regional climate modelling

to determine climate variables that may

inform engineering decisions.

• Standardise and mature assessed

climate risk controls, determine a

baseline and estimate deployment costs.

2023 Progress

• Launched an Ergonomics Committee

pilot in Herradura.

• Established the Occupational Health

Transversal Committee and Wellbeing

Committee to promote healthy habits

and wellbeing.

• Total Recordable Injury Frequency

Rate (TRIFR) increased vs 2022 and

we suffered four fatalities.

• The ‘I Care, We Care’ operating

committee held monthly sessions,

conducted leadership field practices,

and endorsed the Leadership Standard.

• Launched the second generation of

the Women-to-Women Mentorship

programme and activated a network

of women at our headquarters.

• Conducted workshops for 4,732

employees and contractors as part of our

Harassment Prevention programme.

• Conducted a comprehensive review

of our Code of Ethics and Conduct.

• Approved the Tailings Policy and

Commitments for Responsible Tailings

Management, which establishes

roles, responsibilities and duties of

the different participants of the TSFs

management system.

• Streamlined climate risk in scoring

and criteria to the ERM framework.

• Finalised the regional climate modelling

and initiated a decarbonisation

roadmap assessment that will guide

decision-making in climate initiatives.

2024 Targets

• Define a plan to establish ergonomics

committees at all mining units and

define a work programme to 2025.

• Expand the ‘Living in Balance’

programme to include emotional

and family dimensions, with oversight

by the Wellbeing Committee.

• Make progress on our pledges to

decrease our fatality rates and TRIFR.

• Continue to consolidate the ‘I Care, We

Care’ operating committee to guarantee

the deployment of a consistent safety

strategy across our operations.

• Sustain and improve on our current

gender targets (8% women in

managerial roles and 12% of total

share of the workforce).

• Conduct third-party periodic evaluations

of the Ethics Culture and Compliance

programmes.

• Strengthen confidence in our

Whistleblowing Mechanism through

Company-wide dissemination

campaigns and workshops for key

departments.

• Designate three more Engineers of

Record (EoR) to our TSFs to continue

to implement best in class industry

standards.

• Continue maturing the climate risk

management framework on a site-

specific basis.

• Advance our climate change strategy,

based on insights from assessments

tailored specifically to our operations.

2023 Group KPIs/performance

Fatalities

(Number of fatal injuries to employees or contractors)

2022

2021

2020

2019

2023

Water intensity

per tonne of mineral processed)

0.44

0.29

0.37

0.43

0.38

0.44

2022

2021

2020

2019

2023

Greenhouse gas intensity

(Tonnes of CO

e per tonne of mineral processed)

0.0248

0.0190

0.0231

0.0232

0.0246

0.0248

2022

2021

2020

2019

2023

Lost time injury frequency rate (LTIFR)

(For every 1,000,000 hours worked)

7.40

7.63

6.18

5.76

5.44

7.40

2022

2021

2020

2019

2023

Additional

Information

Strategic

Report Governance

Financial

Statements

OPERATE

2023 Goals

• Produce between 57-64 moz silver

and 590-640 koz gold.

• Prevent fatal or serious accidents.

• Focus on increasing productivity.

• Conduct an assessment of optimal

development rates.

• Implement efficiency and cost

reduction initiatives.

2023 Progress

• Produced 56.3 moz of silver (including

Silverstream) and 610.6 koz of gold.

• Four fatal accidents during the year,

three at the Saucito mine and one

at the Tajitos project.

• Productivity increased at most of the

mines as training campaigns were

completed and additional mine

equipment purchased.

• An assessment at Fresnillo and Saucito

was conducted and concluded that

current development rates will suffice to

sustain production levels going forward.

• Works to deepen the San Carlos

shaft concluded, but commissioning

was delayed due to the installation

of key equipment and a number of

modifications to improve the design

of the service infrastructure.

• Cost reduction initiatives were

implemented and mitigated the adverse

effects of the revaluation of the Mexican

peso vs US dollar and inflation.

2024 Targets

• Produce between 55-62 moz silver

and 580-630 koz gold.

• Prevent fatal or serious accidents.

• Focus on cost reduction initiatives.

• Improve short- and mid-term planning

processes at the Fresnillo district.

• Implement contractor cost

improvement initiative.

Production: Monitors total production

levels at our mines and contributions from

advanced development projects.

2023 Group KPIs/performance

2.8

2.7

3.1

2.8

53.5

51.1

50.0

50.3

51.8

56.3

53.7

53.1

54.6

2022

2021

2020

2019

2023

Attributable silver production

(millions of ounces)

56.3

Attributable silver production increased vs 2022 due to

the ramp-up at Juanicipio and higher ore grade at San

Julián Veins, partly offset by the lower ore grade at San

Julián (DOB) and Fresnillo.

Graph: illustrates silver production from our own mines,

with shaded portion representing additional ounces

accrued under the Silverstream contract.

875.9

769.6

751.2

635.9

610.6

2022

2021

2020

2019

2023

Attributable gold production

(thousands of ounces)

610.6

Attributable gold production decreased vs 2022

primarily driven by the decrease in gold production at

Noche Buena as the mine approached the end of its life,

partially mitigated by the ramp-up at Juanicipio and the

higher ore grade at Herradura.

Proven and probable reserves:

A measure of the quality of the Group’s

operating assets and our ability to

extend the life of operating mines

at profitable levels.

484.1

457.4

419.8

396.1

356.6

2022

2021

2020

2019

2023

Attributable silver reserves

(millions of ounces)

356.6

Attributable silver reserves decreased mainly due to

mining depletion and higher costs and cut-off grades at

San Julián (DOB), Juanicipio and Ciénega, partly offset by

increased ore reserves at Fresnillo.

1 2023 reserves are presented as of 31 May 2023.

9.3

8.4

7.8

8.2

7.1

2022

2021

2020

2019

2023

Attributable gold reserves

(millions of ounces)

7.1

Attributable gold reserves decreased mainly due

to extraction and higher costs and cut-off grades

at Herradura and Saucito and the end of the

Noche Buena mine life.

1 2023 reserves are presented as of 31 May 2023.

SUSTAIN

2023 Goals

• Appoint an Ergonomics Committee

to develop projects to improve

ergonomics and industrial hygiene.

• Decrease our Total Recordable Injury

Frequency Rate (TRIFR) by 5%.

• Consolidate the ‘I Care, We Care’

operating committee to guarantee

the deployment of a consistent safety

strategy across our operations.

• Further analyse reporting frameworks

to improve how we report on our

strategy to increase the participation of

women, as well as the positive impacts

achieved to date.

• Continue to strengthen harassment

prevention by reinforcing, consolidating

and evolving the programme and

strengthening confidence in our

whistleblowing mechanism.

• Perform an ethical culture evaluation

to benchmark our progress against our

previous performance and amongst

our peers.

• Approve and publish our tailings

storage facilities policy.

• Advance our climate change strategy by

maturing our regional climate modelling

to determine climate variables that may

inform engineering decisions.

• Standardise and mature assessed

climate risk controls, determine a

baseline and estimate deployment costs.

2023 Progress

• Launched an Ergonomics Committee

pilot in Herradura.

• Established the Occupational Health

Transversal Committee and Wellbeing

Committee to promote healthy habits

and wellbeing.

• Total Recordable Injury Frequency

Rate (TRIFR) increased vs 2022 and

we suffered four fatalities.

• The ‘I Care, We Care’ operating

committee held monthly sessions,

conducted leadership field practices,

and endorsed the Leadership Standard.

• Launched the second generation of

the Women-to-Women Mentorship

programme and activated a network

of women at our headquarters.

• Conducted workshops for 4,732

employees and contractors as part of our

Harassment Prevention programme.

• Conducted a comprehensive review

of our Code of Ethics and Conduct.

• Approved the Tailings Policy and

Commitments for Responsible Tailings

Management, which establishes

roles, responsibilities and duties of

the different participants of the TSFs

management system.

• Streamlined climate risk in scoring

and criteria to the ERM framework.

• Finalised the regional climate modelling

and initiated a decarbonisation

roadmap assessment that will guide

decision-making in climate initiatives.

2024 Targets

• Define a plan to establish ergonomics

committees at all mining units and

define a work programme to 2025.

• Expand the ‘Living in Balance’

programme to include emotional

and family dimensions, with oversight

by the Wellbeing Committee.

• Make progress on our pledges to

decrease our fatality rates and TRIFR.

• Continue to consolidate the ‘I Care, We

Care’ operating committee to guarantee

the deployment of a consistent safety

strategy across our operations.

• Sustain and improve on our current

gender targets (8% women in

managerial roles and 12% of total

share of the workforce).

• Conduct third-party periodic evaluations

of the Ethics Culture and Compliance

programmes.

• Strengthen confidence in our

Whistleblowing Mechanism through

Company-wide dissemination

campaigns and workshops for key

departments.

• Designate three more Engineers of

Record (EoR) to our TSFs to continue

to implement best in class industry

standards.

• Continue maturing the climate risk

management framework on a site-

specific basis.

• Advance our climate change strategy,

based on insights from assessments

tailored specifically to our operations.

2023 Group KPIs/performance

Fatalities

(Number of fatal injuries to employees or contractors)

2022

2021

2020

2019

2023

Water intensity

per tonne of mineral processed)

0.44

0.29

0.37

0.43

0.38

0.44

2022

2021

2020

2019

2023

Greenhouse gas intensity

(Tonnes of CO

e per tonne of mineral processed)

0.0248

0.0190

0.0231

0.0232

0.0246

0.0248

2022

2021

2020

2019

2023

Lost time injury frequency rate (LTIFR)

(For every 1,000,000 hours worked)

7.40

7.63

6.18

5.76

5.44

7.40

2022

2021

2020

2019

2023

28 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Price volatility

The performance of our top line is tied

to the volatility of precious metals prices,

which is in turn driven by industry

production and market sentiment.

Ongoing geopolitical tensions and

changing monetary policies have

combined to create a climate of

uncertainty which can have a knock-on

impact on investment decisions.

Energy transition

Metals play essential roles in numerous

clean energy technologies. Our industry

will need to step up the supply of these

metals in order to meet increased demand

driven by the transition to net zero.

Cost inflation

Increased consumer demand, coupled

with supply chain constraints, has led to

greater inflation in many economies across

the globe. The consequent increase in

the cost of labour, equipment and energy

directly impacts the mining industry.

Labour shortages

Attracting and retaining talent continues

to pose challenges for the mining industry.

The talent shortage is particularly acute

for workers with the skills and experience

required to support the industry’s shift

towards greater use of technology,

including automation, as outlined in

‘Advancements in technology’ below.

Government regulation

Government policy has to strike a delicate

and difficult balance between encouraging

economic prosperity, environmental

preservation and social welfare, while also

addressing climate change by supporting

the development and implementation

of sustainability-led initiatives across all

aspects of industry and public life.

OUR MARKETS

WORKING TOGETHER TO

MEET OUR CHALLENGES

AND SEIZE OUR

OPPORTUNITIES

Political and economic landscapes – along with the dynamics of the precious

metals market – are evolving rapidly and can take unexpected turns. A number

of key trends influence our operating environment, including:

Advancements in technology

A key area of focus for the mining

industry is to improve planning and

increase efficiency through the greater

use of technology, including automation.

The successful implementation of new

technologies will help the industry

manage challenges posed by rising costs,

particularly of labour.

Gold and silver prices

During 2023, uncertain economic growth,

high inflation and rising interest rates led

to significant volatility in Gold and silver

prices. The continuing geopolitical tensions

between Russian and Ukraine, along with

a complex and evolving situation in the

Middle East favoured safe haven assets.

As a result, the price of gold trended

upwards throughout the year. While the

price of silver also showed strength, it

underperformed relative to gold.

1,393.34

1,773.73

1,798.89

1,802.37

1,942.67

2023

2022

2021

2020

2019

16.22

20.69

25.14

21.78

23.40

2023

2022

2021

2020

2019

Additional

Information

Strategic

Report Governance

Financial

Statements

Gold as a safe haven

Opportunities

• Increased market volatility and

uncertainty due to ongoing geopolitical

tensions.

• Central banks’ holdings and purchases.

• Portfolio diversifier and risk hedge.

• Increased demand from growing social

economic development in emerging

markets.

Threats

• Competition from other assets that

provide income (interest, dividends).

• Emerging alternatives perceived as

solid investments.

• Storage and insurance costs.

Silver as a safe haven

Opportunities

• Increased market volatility and

uncertainty due to ongoing

geopolitical tensions.

• Portfolio diversifier and risk hedge.

• Cheaper alternative to gold.

Threats

• Competition from other assets that

provide income (interest, dividends).

• Emerging alternatives perceived as

solid investments.

• Storage and insurance costs.

Advancing technology

Opportunities

• Increase in demand for electronics

and electrical goods.

• Installation of 5G networks.

• Potential growth of nanotechnology

in the food, medical and electronics

sectors.

GOLD

SILVER

Industrial applications

Opportunities

• Increased demand for consumer

electronics globally.

• Emerging applications in printed circuit

boards in the automotive, aerospace and

high-speed computing sectors.

• Need for high-end wireless chips in the

long term.

Threats

• Worsening global economic conditions

could affect disposable incomes, limiting

demand for electronics.

• Trade restrictions and supply chain issues

may impact production of electronics.

Threats

• Worsening global economic conditions

could affect disposable incomes, limiting

demand for electronics.

• Thrifting if silver price increases

to specific levels.

Climate change

Opportunities

• Significant expansion of the photovoltaic

market as countries decrease reliance on

fossil fuels.

• Increased use of silver in the automotive

sector, such as electric vehicles (EVs).

• Supporting infrastructure for EV

charging stations.

Threats

• Thrifting as manufacturers seek to

control costs.

• Delays in investments in infrastructure.

Gold price chart

(US$ per ounce)

1,942.67

Silver price chart

(US$ per ounce)

23.40

30 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OUR STAKEHOLDERS

BUILDING TRUST – RELATIONSHIPS

WITH KEY STAKEHOLDERS

We rely on strong relationships with our stakeholders to

fulfil our Purpose of contributing to the wellbeing of people,

through the sustainable mining of silver and gold.

Our values, embedded within our

culture, are the compass that guides our

engagement efforts to foster prosperity

and wellbeing. To this end, we engage

purposefully with the communities

in which we operate, as well as with

employees, unions, contractors and

suppliers. We also work closely with

the government to ensure open

communications with investors.

Why we engage

We are committed to building and

maintaining strong relationships with our

stakeholders, recognising that they are

key to our value-creation and long-term

success. The feedback and insights we gain

from this stakeholder engagement allow

us to balance their interests, needs and

concerns, and the continuity, profitability

and sustainability of our Company.

Our stakeholders

We have identified our relevant

stakeholders by considering their influence

on the success of our business model and

strategy, including:

• how they are relevant to our business

model and strategy;

• their interests, needs and concerns;

• how engagement is conducted;

• how management and governance

activities are implemented;

• the actions and outcomes from

engagement;

• the metrics used to monitor

relationships; and

• what risks could affect our relationships

with them.

How we engage

Fresnillo uses a variety of engagement

opportunities to generate both direct and

indirect feedback. Through collaboration

and dialogue, we are able to gather each

stakeholder’s concerns and priorities on

specific topics.

Read more see pages 32-36.

The insights form the basis for the

discussions and actions of our Board and

Executive Committee. Further information

regarding their principal decisions and

actions can be found on pages 38-39.

Employees and unions

Relevance

An experienced and motivated

workforce is fundamental to

Fresnillo’s ability to be a sound

business and deliver strong

financial and ESG performance.

Why we engage

To understand employee areas

of interest and concern, along

with fostering open dialogue and

collaboration with unions that will

inform decision-making.

The difference it makes

From our culture and workplace

health and safety to diversity, equity

and inclusion, we develop more

positive and effective relationships.

Communities

Relevance

Mutually beneficial community

relationships build long-term

trust and collaboration.

Why we engage

To better serve our local communities

and the environment that they live

within.

The difference it makes

By focusing on minimising the

negative impacts of our business

we can implement initiatives that

deliver positive outcomes now and

in the future.

Read more see page 32. Read more see page 33.

Additional

Information

Strategic

Report Governance

Financial

Statements

Government

Relevance

Building strong relationships

will support positive recognition

and outcomes.

Why we engage

To address a wide range of strategic

issues that are of importance to

policymakers, governments and the

private sector, with a particular focus

on the mining industry.

The difference it makes

The development of meaningful

partnerships strengthens our vision of

joint responsibility with governments

for the common good of the mining

industry and the communities it serves.

Contractors and suppliers

Relevance

Capable contractors are valuable

members of our workforce,

performing specialised works

and services that provide essential

support to our operations, projects

and exploration.

Why we engage

To strengthen our safety culture and

alignment with our values and ethics.

The difference it makes

As valuable members of our workforce

they strengthen our culture and

contribute to our ability to deliver

our Purpose and strategy, safely

and effectively.

Minority shareholders

Relevance

Continuous investment makes

it possible to contribute to the

wellbeing of people, through the

sustainable mining of silver and gold.

Why we engage

To gain valuable feedback and insights

regarding our strategy, performance,

risks and ESG performance.

The difference it makes

Investor support for our strategy,

governance and long-term objectives

is essential for the continuous

development of our business

and its long-term success.

Read more see page 34. Read more see page 35. Read more see page 36.

32 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OUR STAKEHOLDERS CONTINUED

EMPLOYEES AND UNIONS

Engaging our stakeholders for the long term to instil

a long-lasting culture where everybody understands

our Purpose and how we do business.

How we engage with employees

and unions

Management

• Union engagement across relevant

employment, workplace safety and

critical controls.

• Safety symposium and LEAL survey,

in collaboration with the union.

• Surveys to better understand the issues

that matter to our workforce.

• Interviews and focus groups to

understand employee perceptions

of our social performance in the

communities where we operate.

• Comprehensive programme to

prevent and address harassment

in the workplace.

Executive Committee and Board

• The CEO and COO engage with union

leaders in constructive dialogue on

safety, productivity and collaboration.

• Our designated Non-executive Director

for workforce engagement brings

workforce feedback to the Board

through periodic town hall meetings.

What issues matter to our

employees and unions

• Ethics and integrity.

• Health and safety in the workplace.

• Security in the regions where we

operate.

• Organisational culture.

• Remuneration (including statutory

profit-sharing).

• Labour and human rights.

• Preventing and addressing workplace

harassment.

• Diversity, equity and inclusion.

Outcomes from our

engagement

Actions

• Maintain a synergistic relationship

with the union and authorities.

• Strengthen our health strategy by

promoting wellness programmes,

preventive care and healthier lifestyles.

• Champion skills development through

immersive workshops tailored for

unionised local committee members,

newcomers and aspiring individuals.

• Deploy the leadership standards, laying

out responsibilities and accountability

both for leaders and operational teams,

aimed at fortifying our preventive

safety culture.

• Enhance operational discipline by

intensifying efforts in safety awareness,

training, and supervision along our entire

command line.

Decisions

• Intensify the ‘I Care, We Care’

programme with an enhanced

focus on verification of critical controls,

visible leadership, operational discipline

and accountability, safety training

and empowerment.

• Create the ‘Wellbeing Committee’ to

provide oversight of the deployment

of the ‘Living in Balance’ programme’s

initiatives.

Outcomes

• Positive relations with workers

and unions.

• No strikes affecting our capacity

to operate.

• Increase in near-miss reporting.

• Continued improvement in gender

diversity.

• Certification of mining units as Safe and

Healthy Working Environments (ELSSA)

by the Mexican Social Security Institute

(IMSS) voluntary programme.

Metrics

• Fatal injuries.

• Total Injury Frequency Rate.

• Lost Time Injury Frequency Rate.

• New cases of occupational diseases.

• Turnover rate.

• Gender diversity and payment gap.

• Honour Commission and whistleblowing

mechanism KPIs.

Associated principal risks

• Security: risk rating #2.

• Human resources: risk rating #5.

• Safety: risk rating #8.

• Union relations: risk rating #9.

For more information, please refer to the

Managing our risks and opportunities

section on pages 151-183.

Additional

Information

Strategic

Report Governance

Financial

Statements

COMMUNITIES

Building trust in the communities where we operate,

acting ethically, being accountable for our impacts

and sharing the benefits of mining.

How we engage with

communities

Management

• Social investment portfolio with

emphasis on education, health

and sports, water access and decent

work opportunities.

• Engagement with formal and informal

leaders, local and regional authorities to

understand and discuss their concerns

and aspirations.

• Biennial social studies to identify

and evaluate issues that matter to

our communities.

• Grievance mechanisms to address

the concerns and enquiries of local

communities.

Executive Committee and Board

• Meetings with key government officials.

What issues matter to our

communities

• Safety.

• Security.

• Clean water access.

• Education quality and infrastructure.

• Public infrastructure and services: roads,

health, water and sanitation, public

lighting and garbage collection.

• Inflation.

• Unemployment.

• Our transparency and access to

information.

• Our environmental performance.

Outcomes from our

engagement

Actions

• Medical services – Collaboration with

public health and local authorities to

facilitate free healthcare through the

‘Community Health Weeks’.

• Social Investment – Emphasis on

education, health and sports, water

access and decent work.

Outcomes

• No conflicts with communities affecting

our ability to operate our active mines.

• Social investment.

• Local employment and procurement.

• Economic value distributed throughout

the regions where we operate.

Metrics

• Social investment.

• Local employment.

• Economic value distributed.

• Tax payments to the Fund for

Sustainable Development of

Mining States and Municipalities.

• Environmental performance KPIs.

Associated principal risks

• Security: risk rating #2.

• Access to land: risk rating #10.

• Licence to operate: risk rating #11.

For more information, please refer to the

Managing our risks and opportunities

section on pages 151-183.

34 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OUR STAKEHOLDERS CONTINUED

GOVERNMENT

Collaborative and respectful relations for the common

good with policymakers and representatives of local,

state and federal government.

How we engage with

governments and regulators

Management

• Meetings with federal authorities

through trade associations such as

CAMIMEX (Mexican Mining Chamber),

CONACAMIN (Mexican Confederation of

Industrial Chambers) and CCE (Business

Coordinating Council), and sustainability

associations such as CESPEDES (Mexican

Chapter of the World Business Council

for Sustainable Development) and the

CCA (Mexican Water Advisory Council),

and at state-level through the Mining

Clusters Associations, COPARMEX offices

and independent hearings.

• Provision of data-based information

to decision-makers about the mining

sector and adoption of an open-

door approach to enable greater

understanding of mining processes.

• Direct meetings with policymakers

and federal, state and local authorities

regarding safety in operations, security,

mining royalties, environmental

permitting, etc. in the regions where

we operate.

Executive Committee and Board

• The Chairman and Non-executive

Directors lend assistance on tax matters

as may be necessary through liaison

with government officials, including

by providing an industry perspective.

• The CEO meets with key municipal,

state and federal authorities on safety,

security, mining regulations and tax

issues to support positive public policy

implementation for the sector.

• The CFO meets with tax authorities.

What issues matter to

governments and regulators

• Employment and regional development.

• Nearshoring of value chain.

• Public policies and programmes that

benefit communities where mines

are located.

• Social benefits for communities where

mines operate.

• Support for public events.

• Tax payments.

• State and municipal sources of revenue

such as property, payroll, environmental,

taxes, etc.

• Health, safety, environmental and

social best practices focused on

their jurisdictions.

• Accountability and transparency of

information relating to each mining

company.

Outcomes from our

engagement

Actions

• Participation in health, safety and

environmental certifications by

the Mexican authorities and

international standards.

Outcomes

• Regional employment and

procurement.

• Economic value distributed through

payment of taxes and levies.

• Compliance record on health, safety and

environment recognised by national and

international awards and certifications.

Metrics

• Economic value distributed: taxes and

levies paid.

• Social investment.

• Royalties paid according to the Federal

Royalties Law.

• Health, safety and environment KPIs.

• Compliance with laws and regulations.

Associated principal risks

• Potential actions by the government: risk

rating #1.

For more information, please refer to the

Managing our risks and opportunities

section on pages 151-183.

Additional

Information

Strategic

Report Governance

Financial

Statements

CONTRACTORS

AND SUPPLIERS

Collaborative partnerships with contractors and

suppliers to improve productivity and safety.

How we engage with

contractors and suppliers

Management

• Recognition of contractors as valuable

members of our workforce.

• Regular engagement and capacity

building through the ‘I Care, We Care’

initiative.

• Involvement of contract owners in

accident or incident investigations.

• Enhanced controls to assure compliance

with their tax and labour obligations.

• Necessary endorsement of our Code

of Conduct for Third Parties.

• Due diligence procedures to verify

the ethical profile of new contractors

and suppliers.

• Capacity building of contractors to

implement measures to prevent and

address harassment.

• Focus groups with contractors to better

understand our social performance in

local communities.

Executive Committee and Board

• HSECR Committee oversight of safety

performance KPIs.

• Reviews by the Board and the

Audit Committee of the contractor

engagement elements of the anti-

bribery and corruption programme.

• The CEO and COO meet with key

contractors on production and

safety matters.

• The COO monitors and supervises

safety performance.

What issues matter to

contractors and suppliers

• Productivity/development rates.

• Health and safety in the workplace.

• Security in the regions where we

operate.

• Labour and human rights.

• Preventing and addressing harassment.

• Diversity, equity and inclusion.

• Ethics and integrity.

Outcomes from our

engagement

Actions

• Safety meetings between management

and key business partners at each mining

unit, addressing safety opportunities

and cross-functional cases for

implementation.

• Dissemination of the ‘Right to say no’

policy to halt unsafe working conditions.

• Capacity building for contractors and

accountability through the ‘I Care, We

Care’ and anti-harassment programmes.

• Monitored the security situation and

maintained clear communications

with contractors.

Decisions

• Intensify the field presence of

operational leaders to ensure the

systematic involvement, detection

and addressment of potential risks.

• Update the safety annexe in mining

works contracts to align and comply

with our Company’s prescribed

guidance and standards.

• Facilitate effective communication and

collaboration on issue addressment,

transversal learning, regular meetings

and tours, systematic monitoring and

verification mechanisms.

Outcomes

• Implementation of corrective actions to

reinforce engineering control, personnel

competencies and strengthening of the

accountability processes.

• Training of contractor companies in the

implementation of the mechanism to

prevent workplace harassment.

Metrics

• Fatal injuries.

• Total Injury Frequency Rate.

• Lost Time Injury Frequency Rate.

• Gender diversity.

Associated principal risks

• Security: risk rating #2.

• Human resources: risk rating #5.

• Safety: risk rating #8.

For more information, please refer to the

Managing our risks and opportunities

section on pages 151-183.

36 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OUR STAKEHOLDERS CONTINUED

MINORITY

SHAREHOLDERS

Strong and transparent relationships

to invest through the cycles and

generate sustained returns.

How we engage with

minority shareholders

Management

• Conference calls and roadshows.

• Investment forums and conferences.

• Physical and virtual engagement.

Executive Committee and Board

• The Company’s 2023 Annual General

Meeting (AGM) was held physically,

with all the necessary precautions and

Covid-19-related measures in place.

• The CEO and CFO meet with analysts,

hold conference calls after production

reports and engage shareholders

via roadshows.

• The Senior Independent Director

engages directly with shareholders.

What issues matter to minority

shareholders

• Operating, financial and cost

performance.

• Capex project execution.

• Country risk uncertainty.

• Environmental, social and governance

performance.

Outcomes from our

engagement

Actions

• Ensure their interests are always

considered in decision-making, and that

all transactions with related parties are

transparent and fully documented.

• Report our Environmental, Social

and Governance (ESG) performance

and strategy in a transparent and

timely fashion.

Decisions

• Support for a 2023 Business Plan and

Budget that balances responsibly the

operating performance targets and

the considerations that matter to

our stakeholders.

• Declaration of an interim dividend

considering the principle of balancing

growth with shareholder returns and

following a comprehensive review of

the current and expected near-term

financial position and the Company’s

ability to adapt its operations and

growth plans to adverse scenarios.

Outcomes

• Declaration of a final dividend as well

as interim dividend in 2023.

• Sound financial and operational

performance.

• Safeguarding and preservation of

the Company’s assets.

Metrics

• Financial and operational performance.

• Dividend payments.

• Health, Safety, Environment and

Social KPIs.

Associated principal risks

• Human resources: risk rating #5.

• Safety: risk rating #8.

• Climate change: risk rating #13.

• Tailings dams: risk rating #14.

• Environmental incidents: risk rating #15.

For more information, please refer to the

Managing our risks and opportunities

section on pages 151-183.

Additional

Information

Strategic

Report Governance

Financial

Statements

In compliance with sections

172 (‘Section 172’) and 414CZA

of the UK Companies Act,

the Board of Directors of the

Company (the ‘Board’) makes

the following statement in

relation to the year-ended

31 December 2023:

We are committed to building and

maintaining a strong relationship with

our stakeholders as we recognise that

they are key to our value-creation and

long-term success. Taking a holistic

and stakeholder-oriented approach to

decision-making, particularly when it

comes to principal decisions that have

significant long-term implications and

consequences, allows us to build trust and

foster a sense of shared purpose, make

better decisions that benefit all parties

involved and contribute to the overall

health and wellbeing of our organisation.

We believe that by purposefully engaging

our stakeholders, we are able to balance

their interests, needs and concerns, thereby

promoting the continuity, profitability and

sustainability of our Company.

Our Section 172 Statement identifies our

stakeholders, explains how we consider

them in our principal decision-making

processes, and reports on how these

are connected to our business model

and overall strategy. Rapidly evolving

environmental, social and governance

(ESG) factors are the subject of increasing

interest from society and investors, as well

as the focus of international regulatory

trends, and this is therefore an important

area of focus and prioritisation for the

Board of Directors.

Our materiality assessment (page

79) identifies the ESG factors that are

significant to our stakeholders and material

to our operations. Our ‘Building Trust –

relationship with key stakeholders’ section

pages 30-36 introduces our stakeholders,

explains why they are important and

provides details on the engagement

strategies we deploy to build and maintain

strong relationships. Our ‘Managing our

risks and opportunities’ section (pages

151-183) evaluates the risks associated with

these relationships and the strategies we

use to mitigate them.

Our stakeholders

We have identified our relevant

stakeholders by considering their influence

on the success of our business model and

strategy, including:

• how they are relevant to our business

model and strategy;

• their interests, needs and concerns;

• how engagement is conducted;

• how management and governance

activities are implemented;

• the actions and outcomes from

engagement;

• the metrics used to monitor

relationships; and

• what risks could affect our relationships

with them.

Our principal decisions

We consider ‘principal decisions’ to be

those decisions linked with our strategy,

or resulting from major regulatory changes,

that have significant implications for

our stakeholders and the Company’s

future. We have developed a pro forma

template that identifies the relevant

stakeholder considerations for inclusion

in the papers which accompany Board

discussions whenever principal decisions

are considered.

During 2023, several of the Board’s principal

decisions had relevant implications for our

stakeholders and the Company’s future,

including:

i. The approval of the Company’s 2024

Business Plan and Budget.

ii. The approval of the Tailings Policy and

Commitments for Responsible Tailings

Management.

On pages 38-39, we provide the following

information on our principal decisions:

• Context of the decisions.

• Decision-making process.

• Stakeholder considerations.

• Impact on communities and

the environment.

• Strategic actions supported by

the Board.

• Impact of these actions in the long term.

• Outcomes of the decisions.

The Company, its Board of Directors

and management are fully committed

to effectively engaging with all key

stakeholders. Further information about

the Board’s approach to stakeholder

engagement is also set out in the ‘Board

Leadership and Purpose’ section of the

Governance Report on pages 201-203.

Approved by the Board of Directors on:

4 March 2024.

SECTION 172 COMPANIES ACT STATEMENT

38 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Decision: Approve the 2024 Business Plan and Budget

Context

The Business Plan and Budget is aligned with the Strategic Plan and Company Purpose; it considers site-specific priorities

and challenges, sets the annual production targets and the resources necessary to achieve them, while responsibly

managing the impacts of our activities. Even though approving a business plan and budget is a recurring decision year-on-

year, the relevant context and circumstances change annually; the Company therefore deploys strategies and actions that

might affect stakeholders differently each year. This period’s business planning took place in a still-challenging environment

with uncertainty driven by geopolitical tensions, high inflationary pressures, an unfavourable exchange rate that impacts our

costs, as well as challenging new regulations for the mining industry.

Decision-

making

process

The Executive Committee presents the Business Plan and Budget for the Board’s discussion and approval. The discussion

and decision-making of the Board is complemented by a pro forma template, distributed within the Board papers, that

identifies relevant stakeholder considerations that are required to be taken into account, with a focus on:

• Generating long-term value for all our stakeholders in a challenging and changing environment characterised by

increasing demands and expectations.

• Prioritising social and environmental performance to maintain the trust of our stakeholders, providing essential support

for our business model.

Stakeholder

interests

considered

Employees

and unions

• Enhance safety culture and implement preventive management across our operations through the

‘I Care, We Care’ programme, focusing on critical risk control protocols and verifications, visible leadership

and top-safety engagements with the workforce, among others.

• Promote comprehensive health programmes focusing on preventive care to reduce occupational

illnesses and chronic diseases, seasonal campaigns to prevent respiratory diseases, foster healthier

lifestyles, sport and nutrition, sleep hygiene, emotional wellbeing and increase overall workers’ satisfaction.

• Make progress on our diversity, equity and inclusion (DEI) strategy by deploying Group-specific

programmes and initiatives (Women Mentorship programme, inclusive recruitment strategies, disability

sensibilisation campaigns, etc.).

• Carry out continuous campaigns to promote programmes on harassment, corruption and bribery

prevention, and raise awareness of and trust in the whistleblowing mechanism.

• Support free elections for the ratification of Collective Bargain Agreements (CBAs) by unionised workers.

• Reinforce security protocols for personnel due to rising levels of insecurity surrounding our projects and

operations, and of safety surveillance technology.

• Provide specific technical and soft skills training for onboarding and career development plans.

• Maintain an adequate level of compensation and benefits.

Community • Deploy social investment through local programmes that contribute to the economic prosperity and

self-sufficiency of the communities where we operate.

• Establish partnerships to foster projects that improve local infrastructure, leading to endorsement and

financing by local authorities.

• Prioritise the delivery of clean water to the Fresnillo district through the rehabilitation and operation

of a municipal potabilisation plant and increase wastewater treatment capacity.

• Promote local procurement and employment.

Government

and regulators

• Continue high standards of corporate governance and compliance with regulatory, legal and tax

obligations.

• Engage constructively with regulators and lawmakers through industry associations.

• Collaborate in partnerships to promote projects that are valuable to our communities and operations.

Contractors

and suppliers

• Foster engagement, enhanced communication and updated mining works contracts aligned to the

Company’s standards to improve safety performance.

• Expand comprehensive wellbeing initiatives to contractors.

• Identify efficiencies across the business and opportunities to improve supply chain logistics to achieve

operational goals, managing inflationary pressures and reducing costs.

Minority

shareholders

• Pay dividends in accordance with the Company’s dividend policy.

• Manage and operate the Company in a sustainable and sound way, both financially and operationally.

• Capitalise operational efficiency projects to reduce costs and reduce our environmental impact.

• Ensure their interests are always considered in decision-making, and that all transactions with related

parties are transparent and fully documented.

• Report our environmental, social and governance (ESG) performance and strategy in a transparent and

timely fashion.

Environmental

considerations

• Manage tailings storage facilities (TSFs) responsibly and invest continuously to ensure operational

excellence and storage capacity throughout a mine’s lifecycle.

• Continue to capitalise investments and operational efficiency projects to reduce our carbon emissions

footprint, resource consumption and waste.

• Decrease freshwater consumption through closed circuits for water reuse, operational efficiency and

investments in wastewater treatment facilities to enable its use as an alternative to municipal wastewater.

• Ensure that reporting is aligned with Task Force on Climate-related Financial Disclosures guidelines.

PRINCIPAL DECISIONS

Additional

Information

Strategic

Report Governance

Financial

Statements

Decision: Approve the 2024 Business Plan and Budget continued

Strategic

actions

supported by

the Board

The strategic actions of the Business Plan supported by the Board to generate value for stakeholders are:

• Promotion of safety culture, incident prevention and consolidation of the ‘I Care, We Care’ operational committee.

• Follow-up of commitments and launch of new initiatives in response to feedback gathered via workforce engagement

mechanisms.

• Strengthening of community relations through community programmes, local employment and procurement

opportunities.

• Strong governance of our TSFs and execution of planned investments to ensure safe operations for our people,

communities and the environment.

Impact of

these actions

in the long-

term success

of the

Company

The Business Plan and Budget 2024 is expected to balance responsibly the operating performance targets and the

considerations that matter to our stakeholders in the short and long term, including but not limited to health and safety,

wellbeing, environmental performance and social licence to operate.

Outcome

In October 2023, the Board discussed and supported the draft 2024 Business Plan and Budget (subject to final review and

approval by the Board in early 2024, which occurred at the first Board meeting of 2024).

Decision: Approve the Tailings Policy and Commitments for Responsible Tailings Management

Context

Safe tailings management is a key consideration in the design, construction, operation, closure and post-closure of our

mining operations. Recent tailings accidents in the industry have served as a reminder of the complex nature of these

structures. The Company is committed to the continuous goal of zero harm to people and the environment, implementing

best practices in the engineering and governance of TSFs, and has made significant progress in maturing both the

governance and operational aspects of its TSF management system. The purpose of the Tailings Policy and Commitments

for Responsible Tailings Management (the ‘Policy’) is to establish a clear statement regarding TSFs, including relevant roles

and responsibilities of each operating unit to manage, operate and oversee day-to-day operations of TSFs.

Decision-

making

process

The tailings management team, in collaboration with internal and external expert teams and advisors, drafted the Policy.

Subsequently, the HSECR Committee reviewed and initially approved it. Following recommendations from both the

Executive Committee and the HSECR Committee, the Board of Directors concurred, officially endorsing and approving the

Policy during the 1 March Board meeting.

Stakeholder

interests

considered

Employees

and unions

Foster health and safety, minimising any potential harm to individuals.

Community Engage with parties that have an interest in or perceive being impacted by the construction, operation,

closure and management of TSFs.

Government

and regulators

Ensure that tailings management complies with regulatory requirements.

Contractors

and suppliers

Foster health and safety, minimising any potential harm to individuals.

Minority

shareholders

Manage TSFs in a manner that meets performance and ESG requirements, reducing impacts, risks and

liabilities.

Environmental

considerations

Ensure the proper handling of mineral waste in operational, inactive and closed TSFs to minimise

environmental impact.

Strategic

actions

supported by

the Board

The strategic actions of the Business Plan supported by the Board to generate value for stakeholders are:

• Define roles and responsibilities for the strong governance of TSFs to ensure safe operations for our workforce,

communities and the environment.

• Ensure alignment with sound engineering practices, design criteria, corporate standards and guidelines to minimise

operational risk.

• Implement a programme to review and continually enhance health, safety and environmental performance.

Impact of

these actions

in the long-

term success

of the

Company

The strategy to establish the strong governance, meticulous operation, and rigorous accountability of TSFs’ management,

supports the Company’s risk management, mitigates social and environmental impacts, and reduces overhead and

insurance costs.

Outcome

In March 2023 the Board discussed and approved the Policy.

40 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

WORKFORCE ENGAGEMENT

Our workforce is the

foundation of our business

success, and their dedicated

contribution is instrumental

in building a more sustainable

future, both for our business

and the planet. The Board

strives to create a workplace

culture where everyone

feels valued, supported and

inspired to contribute their

best, encouraging creativity,

innovation and collaboration

through open communication,

empathy and a shared

commitment to wellbeing.

The Board and its Committees receive

information related to the workforce

through a range of channels, including

direct engagement, as shown in the

diagram opposite. This Board-level

engagement process enables the Board

to understand the views of the workforce

on their experiences of working for

the Company as well as providing an

additional mechanism to raise concerns.

For this purpose, Mr Arturo Fernández has

been designated as the Non-executive

Director to represent the workforce in

the boardroom.

In response to the Covid-19 restrictions

in 2020, 2021 and 2022, the Company

adapted its approach to workforce

engagement by conducting virtual online

sessions. However, with the declaration of

the end of the global health emergency

by the World Health Organisation in

2023, the Company made a strategic shift

towards in-person sessions. This decision

was driven by the intention to capitalise

on lessons learnt from previous exercises,

to strengthen communication foster

more personal connections and cultivate

a heightened sense of trust within the

workforce. However, the option remains for

Mr Fernández and top management

to consider holding certain sessions in

a mixed virtual and physical format in

the future.

During 2023, Mr Fernández led two in-

person sessions in Fresnillo city to gain

first-hand knowledge of the views of

our workforce. These sessions brought

together representatives from the

Company’s operations in the Fresnillo

district (Fresnillo, Saucito and Juanicipio),

including unionised and non-unionised

personnel, with the appropriate balance

of demography and responsibilities.

The sessions’ agendas reflected relevant

workforce-related issues to encourage a

candid discussion regarding ‘safety and

wellbeing’ from a holistic perspective.

The areas of most concern expressed by

workers were: (i) insecurity surrounding

our operations, which also increases stress

levels and affects personal harmony; (ii)

fair compensation in the context of the

increasing cost of living and travel for

non-locals; (iii) safety-related incidents;

and (iv) scepticism of the whistleblowing

mechanism. Other areas of concern

included the need for more training

and professional growth opportunities,

high turnover, burnout and a call for an

improved work-life balance. On a positive

note, the workforce expressed warm

appreciation for the Company’s early

engagement with young professionals

through a variety of programmes,

appropriate technical training, increased

diversity, equity and inclusion, and a solid

safety strategy. Overall, the workforce

believes that the Company provides great

job opportunities that have enabled our

people to build successful careers.

Mr Fernández’s effective communication

of specific workforce concerns during 2023

Board meetings has been immensely

valuable in shaping the Board’s ongoing

and subsequent discussions and

influencing our decision-making processes.

His input has raised the standard for

how we define and refine Board-level

engagement, and has played a major

part in informing our management

programmes and practices.

Building on the insights gained through

our workforce engagement efforts, we have

implemented comprehensive, multifaceted

initiatives to address longstanding concerns

in three key areas:

• Strengthening industrial safety: we

are working to enhance accountability,

operational discipline, rigorous

verification of critical controls, near-miss

reporting and visible leadership, while

also promoting the ‘workers right to say

no to unsafe conditions’ campaign.

• Understanding health holistically:

our objective is to encourage healthy

habits and disease prevention through

permanent campaigns; we also

implement initiatives that address

emotional aspects, supporting

our psychosocial risk factors

prevention strategy.

• Improving whistleblowing awareness:

we aim to provide certainty and trust in

the whistleblowing process, in particular

around confidentiality and protection

from retaliation.

This is an iterative process that identifies

areas for improvement while creating a

positive and productive work environment

with employee wellbeing and satisfaction

at its core. Through our unwavering

commitment to understanding and

addressing workforce needs, we foster an

engaged workforce committed to shared

goals and continued collaboration to

create a more successful business together.

Additional

Information

Strategic

Report Governance

Financial

Statements

Surveys/

Focus groups

Communication

initiatives

NED/Workforce

engagement sessions

ContractorsEmployees

Executive Committee

(Led by the CEO)

Board Of Directors

(Led by the NED responsible for workforce engagement)

Workforce

Workforce engagement: communication and feedback

NED/Workforce

feedback sessions

42 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAIN

DEVELOP

OPERATE

EXPLORE

Systemic project generation

REVIEW OF OPERATIONS

A STRONG GROWTH PIPELINE

Our pipeline of exploration projects is key to our

ongoing strategy of organic growth. The diagram

below shows our operations, projects and

prospects across all stages.

1.1 Prospecting and drill target generation (37)

Chiclayo/Peru, Pencahue/Chile, Escritorio, Buenavista

1.2 Early stage drilling (14)

Capricornio/Chile, Santo Domingo-Supaypacha/Peru,

Fresnillo district

1.3 Advanced exploration

Pilarica/Peru, San Juan, Candameña, Lucerito

1.4 PEA – Feasibility

Orisyvo, Rodeo, Guanajuato, Tajitos

Development projects

No projects under development.

Mine operations

Fresnillo, Saucito, Herradura, Noche Buena, Soledad-

Dipolos*, San Julián, Ciénega, Juanicipio

* Operations at Soledad-Dipolos are currently suspended.

130 – 150 koz Au

140 – 165 koz Au

1.0 moz gold

2.8 moz gold

275 moz silver

Expected delivery of growth

Approved by the Board Subject to ongoing internal review (subject to Board approval)

Greenfield project development to be complemented with brownfield growth possibilities at the Herradura and Guanajuato Centro Districts.

1 Total average annual production.

Subject to pre-feasibility and feasibility assessment, final feasibility assessment and Board approval.

Project

Resources

Early stage project, indicative timetable

2024 2025 2026 2027 2028 2029 2030

Expected avg. annual production

Guanajuato

Orisyvo

Tajitos

Rodeo

Projects and prospects portfolio

Infill drilling exploration, feasibility,

development and construction

Production

Exploration to increase resources. Update the preliminary economic

assessment, start pre-feasibility assessment level studies

Production

Final metallurgical testing, feasibility,

development and construction

Production

Exploration to increase resources. Update the preliminary economic assessment,

start pre-feasibility assessment level studies. Refine conceptual development scenarios

Production

Additional

Information

Strategic

Report Governance

Financial

Statements

REVIEW OF OPERATIONS – EXPLORATION

Highlights of 2023

• Invested US$185.9 million of risk capital

in exploration during the year.

• Silver in consolidated overall mineral

resources remained broadly stable at

2,219.7 moz (up 0.7%) as exploration

results, mainly at the Guanajuato

exploration project and San Julián veins,

balanced mining depletion at mine sites,

and higher costs and cut-off grades.

• Gold in consolidated overall mineral

resources decreased 3.1% to 37.9 moz

as a result of extraction and higher costs

and cut-off grades at Herradura, Saucito

and Soledad-Dipolos (no mining),

partly offset by exploration results and

increased mineral resources at the

Guanajuato and Centauro Profundo

exploration projects and the Ciénega

mine site.

• 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 reserves at Fresnillo.

• Gold in consolidated overall ore reserves

decreased 13.7% to 7.1 moz primarily as a

result of extraction, and higher costs and

cut-off grades at Herradura and Saucito,

and the Noche Buena mine reaching

the end of its life.

• Progress and focused development

efforts towards reporting proved ore

reserves continue at all sites.

• Drilling of the vein system in the

southern part of the San Julián district

continues to deliver good results.

Several new drill targets were identified

at the Fresnillo district and are under

evaluation. Drilling of new targets will

be prioritised systematically.

• Pre-feasibility level studies at the Orisyvo

project, including mining and processing

scenarios, metallurgical, infrastructure

and water/energy supply advanced at a

good pace along with community and

government engagement programmes.

• Core and reverse circulation drilling

intensified in the main zone at the

Tajitos project with good results in infill

and step-out holes; ongoing column

metallurgical test work delivered good

preliminary gold recoveries. Drilling

started in the western part of the district.

• The drilling programme at the three

areas of the Guanajuato district delivered

good silver and gold results, including

the discovery of a significant ore shoot

and the extension of both vein and

stockwork ore bodies.

• The exploration programme at Rodeo

remained on stand-by while land access

negotiations with the local communities

progressed. Social, environmental,

hydrological and power supply studies

advanced, supported by the continuation

of the community relations programme

in the region.

• In Chile, drilling and the delineation

of additional targets continued with

promising results at Capricornio. The

ongoing prospecting programme at

Pencahue showed several gold-silver

targets with good exploration potential.

• Drilling programmes were completed

at Pilarica and Santo Domingo in Peru;

several large-volume exploration targets

were delineated at the latter. Agreements

have been reached with several

communities at the Supaypacha-Alto

Dorado porphyry cluster. The community

engagement programme was

strengthened at all our Peruvian projects,

including the new Chiclayo prospect.

Priorities for 2024

• Invest a further US$190 million in

exploration during the year.

• Continue to focus mine exploration on

upgrading mineral resources into ore

reserves, with special emphasis on the

San Julián and Fresnillo districts.

• Continue the exploration programme

at Juanicipio to fully delineate the

deeper areas of the Valdecañas vein and

advance the evaluation of nearby veins;

start drilling in new potential areas.

• Further develop and strengthen our

mineral resource modelling and ore

reserve engineering capability, with the

aim of providing a stronger technical

value foundation and reporting proved

reserves for all operating assets.

• Advance pre-feasibility to feasibility

level studies at Orisyvo, under a

continued community and government

engagement programme.

• Complete the full delineation of

the Tajitos ore bodies and advance

metallurgical, geotechnical and

conceptual studies to support an

updated preliminary economic

assessment for a new open pit heap-

leaching gold mine. Advance the

drilling programme across additional

existing targets.

• Continue drilling at an accelerated pace

at two areas of the Guanajuato district

and conduct detailed metallurgical

investigations. Update the preliminary

economic assessment for these areas.

• Conduct detailed metallurgical

investigations at Candameña and

Lucerito.

• Continue discussions with the local

communities at Rodeo, aiming at

implementing an intensive infill, step-

out, condemnation and geotechnical

drilling programme and conducting

detailed metallurgical test work once

agreements are reached.

• Continue drilling several targets at

Capricornio in Chile and advance

an additional project to the drill-ready

stage.

• Maintain a strong community relations

programme at our Peruvian projects.

Resume drilling at the Supaypacha

porphyry cluster and work towards

permitting the drill-testing of targets at

Santo Domingo and Pilarica in 2025.

Our firm and unchanging commitment to

exploration sets us apart from many of our

peers and provides a solid platform for our

future success.

44 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – EXPLORATION CONTINUED

Where many major mining companies

seek to grow through acquisition, we

believe that the most effective and

sustainable route to growth is achieved by

creating our own pipeline of reserves and

resources which demands a long-term

commitment to exploration. By continuing

to invest in exploration across all precious

metals price cycles and regardless of the

peaks and troughs of economies, we aim

to keep our pipeline well-stocked both to

replace reserves mined each year and to

create a steady flow of opportunities.

Our exploration teams have a proud

and highly-respected reputation in the

Mexican mining industry. They have

been responsible for our most significant

breakthroughs, such as those at San Julián

and Saucito, and are ideally qualified to

identify and develop new opportunities.

One of the most important roles our teams

have is engaging with local communities

and seeking their participation at an early

stage of a project. Not only does this help

safeguard our licence to operate, it also

gives us the opportunity to meet and

consult with local people, thereby ensuring

that we are able to tailor any subsequent

community support programmes to meet

their specific needs.

For more details on community

engagement see pages 139-150.

Our focus remains on Latin America,

and in particular on maximising the

geological potential in and around our

current operations. At the same time,

we continue to look to locate and

consolidate new districts in Mexico,

Chile and Peru where we have identified

favourable gold-silver potential.

All our exploration projects are measured

against a set of strict criteria to ensure

they meet our operational and revenue

objectives. For example, we will only

proceed with a standalone project if it

offers a minimum potential of 150 moz of

silver or 2 moz of gold. We also consider

a range of additional factors before

commencing activities, such as ore grades,

metallurgical recoveries, extraction costs,

environmental impact, and sustainability

and community investment, as well as the

available infrastructure. Only those projects

that score well against these requirements

receive the green light.

2023 performance

Mineral resources and ore reserves

Estimations of our mineral resources

and ore reserves are developed by our

corporate technical staff in line with

industry standards and audited every year

by independent expert firms prior to public

statement under the JORC Code reporting

standards. 2023 underground mineral

resources and ore reserve estimates were

based on price assumptions of US$1,450/

oz gold and US$20.0/oz silver, with open

pit ore reserves and mineral resources

estimated at US$1,515 and US$1,650/oz

gold respectively.

Silver in consolidated overall mineral

resources remained broadly stable at

2,219.7 moz (up 0.7%) as exploration results,

mainly at the Guanajuato exploration

project and San Julián veins, balanced

mining depletion at mine sites, and

higher costs and cut-off grades.

Gold in consolidated overall mineral

resources decreased 3.1% to 37.9 moz

as a result of extraction and higher costs

and cut-off grades at Herradura, Saucito

and Soledad-Dipolos (no mining), partly

offset by exploration results and increased

mineral resources at the Guanajuato and

Centauro Profundo exploration projects

and the Ciénega mine site.

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 reserves at Fresnillo.

Gold in consolidated overall ore reserves

decreased 13.7% to 7.1 moz primarily due

to extraction, and higher costs and cut-off

grades at Herradura and Saucito, and the

Noche Buena mine reaching the end of

its life.

In 2020, we initiated a major technical

development effort to upgrade our mineral

resource modelling and ore reserve

engineering functions, both of which

again made significant progress in 2023.

With a dedicated team of 27 specialists,

geotechnical, ventilation and economical

modelling continued to advance, as did

the underground and open pit ore reserve

engineering and reconciliation processes.

The corporate technical team will continue

to develop all disciplines in 2024, with a

special focus on mining reconciliation,

as well as further process improvement,

integration and documentation.

In 2023, our drilling programmes

decreased by 2.4% compared to 2022,

with a total of 933,185 metres drilled.

92% of drilling activities were carried out

at, or close to, our existing operations,

in line with our continued focus on

brownfield exploration which maximises

the possibility of good returns. The

following section provides details about

our exploration pipeline, highlighting the

progress made in 2023 as well as outlining

our plans for the year ahead. We drilled

78,576 metres in greenfield targets where

we are consolidating districts.

Exploration at our existing mines

Excellent exploration potential exists around

our operating mines, where numerous

drill targets have been identified using

geological, geochemical, geophysical and

remote sensing data, which is analysed and

interpreted by our expert team. Exploring

these targets represents a good opportunity

to add value to our current operations by

increasing our resource and reserve base.

In line with this approach, 92% of the

933,185 metres drilled in 2023 were devoted

to brownfield targets, including 642,598

metres drilled by the mine operation teams,

and 212,011 metres completed by the

exploration and projects divisions.

The objectives of the drilling campaigns at

our mines are threefold: (i) replenish and

augment our mineral reserves, converting

inferred resources into the indicated

category with infill drilling; (ii) increase the

total and inferred resources by drilling

at extensions of known mineralisation

and also by testing new targets; and (iii)

continue to ensure the quality of the

reserves blocks scheduled to be mined in

the short term, with selected additional

drilling carried out wherever deemed

necessary due to grade variations. We work

hard to ensure the long-term sustainability

of our business and to drive growth by

replenishing depleted reserves and

maintaining a robust growth pipeline.

Fresnillo district

While Fresnillo is one of the most

important silver districts in the world,

our exploration activities show that

it remains under-explored. We are

addressing this opportunity through an

integrated approach based on detailed

mapping, geophysics and geochemistry.

We are following up three high-priority

exploration targets located within the area

of influence of the processing facilities,

with positive results.

Additional

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Across the district, the mines and

exploration teams drilled 416,858 metres

during the year. 65% of the drilling by the

mine teams was infill drilling, both within

reserves and inferred resources, and 35%

to vein extensions and other purposes.

Good results were obtained from the San

Alberto, Santa Elena, San Carlos and San

Demetrio veins at the Fresnillo mine. Good

results were also obtained at the Saucito

mine, where good silver grades and vein

continuity were found at the Natalias,

Roble and Ramal Oriente structures, along

with the Saucito and Desprendido vein in

the southern part of the mine.

Juanicipio – (56% Fresnillo plc,

44% MAG Silver)

22,015 mine + 13,272 exploration metres of

core drilling were completed during 2023

over the main NW-trending Valdecañas

and subsidiary veins, carried out by both

the exploration division and the mine

teams. The programme was designed to

define the vein character at depth, where

silver grades are decreasing but lead, zinc

and local copper show higher grades over

good widths. A significant portion of the

programme was devoted to increasing

the potential of secondary veins, such as

Preanticipada, Ramal 1 and the oblique

Venadas and Valentina veins.

Herradura district

We drilled a total of 73,036 metres in the

Herradura district in 2023, with activities

focused in the final Centauro pit to identify

additional mineralised sections and to

better define reserve blocks, to advance

the evaluation of high-grade veins and

disseminated ores outside the final pit

limits and to finalise the exploration

programme around the Noche Buena pit,

which was exhausted in 2023.

31,024 metres of drilling was carried out

in the Herradura pit, 60% focused on

improving the certainty of the reserve

grades and distribution, 30% on resource

conversion from inferred to indicated and

10% on the search for extensions of known

mineralisation. 33,966 metres of drilling

focused on defining high-grade veins

and related disseminated mineralisation

outside the current final pit model which

were incorporated into the Centauro

Profundo ore bodies. Good results were

obtained from the Ocotillo area and in

the evaluation of high-grade structures

in the San Andres and Yaqui areas.

3,849 metres of drilling peripheral to the

Noche Buena pit and 4,196 metres drilled

in a nearby prospect area failed to identify

additional resources.

Ciénega district

56,635 metres of core drilling were

completed at Ciénega during 2023, 40%

of which was focused on increasing the

resource base in targets within trucking

distance from the mill. The remainder was

evenly distributed between reserve infill

and resource conversion. The Stockwork

and the Jessica Transversal shallow ore

shoots, located within the mine workings,

delivered good gold and silver grades, and

resources and reserves were incorporated

into the current mining plans.

San Julián district

An intensive drilling programme

amounting to 180,435 metres was

implemented by the mine and district

exploration teams.

124,073 metres were drilled by the mine

team, with infill drilling of reserves and

resource conversion accounting for 70%

of the total; the remainder was focused on

exploration for additional disseminated

sulphides and extensions to known veins.

Positive results were obtained at the

Ultima Tierra and Santa Cecilia structures,

where a new vein was discovered in the

footwall, and good continuity was proven

over a NNW trend, respectively.

The exploration division team drilled

56,362 metres, focused on following-up

the vein system in the southern part of the

district. Good results were obtained at the

Dura del Bajo, Blanca del Alto, Eliza and

Andrea veins. Drilling targets were refined

at the Ceniza prospect area, slated for

drilling in 2024 once environmental and

social permits are granted. A district-wide

review of geophysical and geochemical

information is ongoing, aiming to generate

additional exploration targets based

on improved, drill-tested geophysical

modelling and the incorporation of

detailed multi-elemental geochemistry

and hyperspectral data built into an

integrated understanding of the

San Julián mineral system.

Greenfield exploration

Greenfield exploration, preliminary

economic assessments and feasibility

studies

We look for projects that have shown

good potential for supporting our growth

ambitions to bring forward into this

category. For projects in the relatively

early stages we may conduct preliminary

economic assessments (PEAs), which

comprise an economic analysis of the

potential viability of mineral resources.

For more advanced projects, we undertake

extensive de-risking activities to refine

models, explore the extent of mineralisation

and provide comprehensive support to

a project as it moves into and through

the development stage – a key moment

in the journey towards becoming an

operational mine.

Advanced exploration projects

Orisyvo

Several pre-feasibility level studies are

advancing well, with completion targeted

in 1H 2024, to be followed by a final

feasibility study in 2025. Studies in progress

include mining and processing scenarios

for an underground mine development,

location of suitable tailings disposal sites,

and alternatives for road access and

water and energy supply. Environmental

and geohydrological studies, additional

land acquisition and a thorough risk

analysis coupled with a robust social

and government engagement plan

(including indigenous consultation) also

show good progress. Different options for

the mineral processing of sulphide ores,

including the bio-oxidation and Albion

processes, are under review. These options,

together with high-efficiency cutting-edge

milling technologies, are expected to

produce significant reductions in capital

expenditures and operating costs, and will

be addressed in the feasibility study.

Rodeo

The Rodeo deposit contains 1.3 moz of gold

in oxidised ores, amenable to low strip-

ratio, open pit mining and gold recovery

using heap-leach technologies. Potential

for expansion exists in several exploration

targets in the district. While we have not

yet reached a land access agreement

with the two main relevant communities,

during 2023 we continued to strengthen

a region-wide community relations

programme and have already acquired

some land from private landowners.

Simultaneously, we are advancing pre-

feasibility level hydrological, infrastructure

and environmental studies, and analysing

alternatives for water and energy supply.

Tajitos

Tajitos is an open pit, heap-leach,

disseminated gold project displaying

fully oxidised ore bodies up to 200

metres in depth, containing 1.03 moz

of gold, 68% in the indicated category.

An intensive core and reverse circulation

drilling programme amounting to 83,224

metres was completed in 2023, focused

on step-out and infill holes in the main

area of resources. Some drilling was also

completed in new exploration targets in

the western part of the district, showing

promising results.

46 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – EXPLORATION CONTINUED

Column test work completed to date has

delivered good gold recoveries; a second

stage of detailed column metallurgical

test work performed on the historic core

available is underway, with attractive

preliminary gold recoveries; these studies

will be supplemented by a third stage to be

carried out over large-diameter core from

a current dedicated drill programme. The

preliminary economic assessment for Tajitos

will be updated in 2024, incorporating the

evaluation of social, infrastructure, water

and energy supply risks. Given its location in

Fresnillo-owned land with excellent access

and available infrastructure and labour,

Tajitos displays good preliminary indications

to be fast-tracked into pre-feasibility and

feasibility stages.

Guanajuato

Guanajuato is a historic, world-class gold

and silver mineral system, displaying

numerous attractive exploration targets

that have the potential to increase its large

precious-metals endowment. The drilling

programme was intensified in 2023, with

83,576 metres of core drilling completed

over priority vein zones in the central

and southern portions of the district. This

programme included 19,805 metres drilled

underground from the Peregrina and Veta

Madre historical mine workings.

The application of our upper-level

epithermal model over the large

hydrothermal alteration zones in the

southern part of the district, supported by

detailed field mapping and hyperspectral

and geochemical studies, continued to

deliver good results. The El Roble ore

shoot grew to circa 2.7 moz of in-situ gold

equivalent with good grades, widths,

continuity and preliminary metallurgical

gold and silver recoveries. This discovery

highlights the exploration potential of

this area, largely over Fresnillo claims.

A preliminary economic assessment

for a potential underground operation

is ongoing.

At Guanajuato Centro significant growth

was achieved both in terms of total gold

and silver ounces and indicated resources

in veins and stockwork zones, the latter

being amenable to low-cost underground

bulk mining methods. Metallurgical

investigations are ongoing over the largest

ore zones detected so far. Conceptual

mining and processing scenarios are under

consideration for the Veta Madre, Peregrina

and San Gregorio vein clusters.

Prospects

Mexico

5,309 metres of core drilling was

completed at Candameña in 2023 at a

large high-sulphidation epithermal silicic

alteration zone, which unfortunately

delivered long interceptions of uneconomic

grade. Drilling will continue in 2024 over

significant exploration targets displaying

attractive gold values at surface elsewhere

in the district. The focus will be on the

search for porphyry-type mineralisation and

on detailed metallurgical investigation of

sulphide ores from the current resources.

At San Juan, a sizeable, gold and silver-

bearing vein system, 5,391 metres of

drilling continued to evaluate near surface

mineralisation discovered in 2022. Good

results of attractive gold and silver grades

over tens of metres were obtained. The

resource estimation of this new area has

been delayed until results are received

from metallurgical studies to define the

most suitable processing method.

Elsewhere in Mexico, initial drilling was

carried out in two projects, and the team

continues to apply its expertise in the

evaluation of our extensive claim portfolio,

using state-of-the-art technologies

supported by field work to generate

new projects with good potential for the

discovery of gold and/or silver deposits.

Peru

In 2023 drilling resumed at the Pilarica

and Santo Domingo projects, following

the return of normal social and political

conditions to the country. Long intervals

of anomalous to marginal gold and

silver grades were found; however, both

projects still have significant exploration

potential for veins as well as large-volume

deposits. The process to obtain social

and government permits is in progress,

with the aim of resuming the drilling

programmes in 2025. At the Supaypacha

and Alto Dorado gold-copper porphyry

cluster, our strengthened community

engagement programme allowed us

to start negotiations for the resumption

of drilling at several targets in 2024. Our

regional prospecting team successfully

defined several gold (± copper) targets on

Fresnillo concessions; this portfolio has

been prioritised and the most attractive

targets will be followed up in 2024 to

secure social acceptance for future drilling.

Chile

At the Capricornio project, located in the

Antofagasta region, a reverse-circulation

and core drilling programme amounting

to 14,526 metres was carried out. Good

results were obtained from several veins of

the epithermal field over significant widths,

including the discovery of veins below

caliche cover. Mineralisation is shallow and

oxidised with potential for open pit mining.

Good gold recoveries were obtained in

preliminary metallurgical testing. The

exploration programme will continue in

2024, searching for additional veins and

following-up on targets delineated by

geochemical and geophysical surveys.

In southern Chile, a significant gold-

bearing vein field is in the target definition

stage and will be drilled once claim

consolidation and social/government

permits are obtained.

Early-stage exploration

We routinely carry out activities at all six

exploration offices to accumulate regional

geological, geophysical, structural and

geochemical data and analyse it in a GIS

environment. Areas identified with good

potential are followed up by gathering

remote sensing hydrothermal alteration

data commissioned from international

high-quality service providers. The

information gained is integrated into the

database to refine our understanding of the

targeted ore deposit systems. Furthermore,

our regional prospecting teams in Mexico,

Peru and Chile carry out the field work

required to validate the exploration targets

and eventually incorporate them into our

prospect pipeline.

Additional

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Project Location

2023 Drilling

(metres) Mineral resources (attributable) Status

Guanajuato

Guanajuato 83,576

2023: 2,786 koz Au and 275 moz Ag

In drilling

Change vs 2022: 584 koz Au; 123 moz Ag

San Julián Sur

Chihuahua/

Durango

56,362

2023: 214 koz Au and 54 moz Ag

In drilling

Change vs 2022: -136 koz Au; 2 moz Ag

San Juan

Durango 5,391

2023: 581 koz Au and 54 moz Ag

In drilling

Change vs 2022: 6 koz Au, 1 moz Ag

Candameña

Chihuahua 5,309

2023: 1,371 koz Au and 32 moz Ag

In drilling

Change vs 2022: nil

Tajitos

Sonora 83,224

2023: 1,029 koz Au

In drilling

Change vs 2022: -64 koz Au

Fresnillo district

Zacatecas 10,536

Mexico Nuevo, Jaralillo

In drilling

(Additional resources in drilling not estimated yet)

Centauro

Profundo

Sonora 33,966

2023: 3,376 koz Au

In drilling

Change vs 2022: 201 koz Au

Orisyvo

Chihuahua –

2023: 9,575 koz Au and 13 moz Ag

In PFS level studies

Change vs 2022: nil

Lucerito

Durango –

2023: 2,826 koz Au and 205 moz Ag

Metallurgical

investigations

Change vs 2022: nil

Rodeo

Durango –

2023: 1,331 koz Au and 14 moz Ag

Land access

Change vs 2022: nil

Juanicipio

Zacatecas 13,272

2023: 839 koz Au and 154 moz Ag

In drilling

Change vs 2022: -1 koz Au; -4 moz Ag

Pilarica

Peru 4,793

2023: 110 koz Au and 56 moz Ag

Standby

Change vs 2022: nil

Others

Mexico, Peru

and Chile

28,125 – –

1 No new resources model; updated metal prices only.

2 Mineral resources quoted reﬂect Fresnillo plc’s attributable 56% ownership.

48 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION

FRESNILLO

One of the world’s longest continuously operated mines,

Fresnillo produced 22.7% of the Group’s total silver in 2023 and

generated 16.7% of total Adjusted revenue.

Ownership: 100% Fresnillo plc

In operation since: 1554

Mine life (years): 4.6 at 7,816 tpd (2022: 4.8), (2,462k tpy)

Facilities: Underground mine and flotation plant

Workforce: 1,564 employees, 2,572 contractors

Location: Zacatecas

Milling capacity (2023): 8,000 tpd/2,640,000 tpy

Mine production

2023 2022 % change

Ore milled (kt) 2,619 2,462 6.3

Silver (koz) 12,772 13,609 (6.2)

Gold (oz) 36,909 34,432 7.2

Lead (t) 21,373 21,756 (1.8)

Zinc (t) 45,386 43,343 4.7

Silver ore grade (g/t) 170 189 (9.8)

Total reserves

Silver (moz) 98.8 91.6 7.9

Gold (koz) 272 291 (6.5)

Avg ore grade in reserves

Silver (g/t) 253 242 4.5

Gold (g/t) 0.70 0.77 (9.1)

Cut-off grade (g/t AgEq) 274 298 (8.1)

Total resources

Silver (moz) 670.9 706.7 (5.1)

Gold (moz) 1.50 1.63 (8.0)

Avg ore grade in resources

Silver (g/t) 399 373 7.0

Gold (g/t) 0.90 0.86 4.7

Cut-off grade (g/t AgEq) 210 203 3.4

1 Fresnillo mine production excludes ore processed

and production from the Juanicipio development

project.

2 2023 reserves as of 31 May 2023.

3 2023 resources as of 31 May 2023.

2023 Objectives

• Conclude the deepening of the San

Carlos shaft project.

• Subject to permits being obtained,

start up the Pyrites plant at Fresnillo

and ramp-up to nameplate capacity.

• Sustain our development

performance at the required levels.

2023 Performance

• Deepening of the San Carlos shaft

concluded. However, commissioning

was delayed due to the installation

of key equipment and a number of

modifications to improve the design

of the service infrastructure.

• Permits to tie in the Pyrites plant

at Fresnillo were granted in 2Q23,

with commissioning and process

stabilisation both progressing well.

• Development rates averaged 3,105

metres per month.

• Ore milled increased to an average

of 7,816 tpd.

2024 Objectives

• Conclude the connection

of the two sections and the

commissioning of the San Carlos

shaft during Q1.

• Sustain our development

performance at circa 3,250 metres

per month.

• Improve short- and mid-term

planning processes.

• Focus on key cost reduction

initiatives.

• Improve our safety performance

and continue strengthening our

safety-centred culture.

Key developments in the year

Silver production decreased by 6.2% vs

2022, driven by the increased volume of

ore extracted from the Western areas of

the mine with lower silver ore grades.

The average development rate in the

year increased 6.0% year-on-year to 3,105

metres per month (2022: 2,929 metres

per month) primarily due to the higher

productivity of the unionised personnel.

We expect to maintain a development rate

of circa 3,250 metres per month for the

foreseeable future.

The relocation of the tunnel boring

machine (TBM) to develop the haulage

level to the west continued, albeit at a

slower pace than anticipated due to

difficult transport conditions, including the

need to cross a geological fault. Activities

were also carried out to ensure the TBM

Additional

Information

Strategic

Report Governance

Financial

Statements

was in optimal condition. These works

were concluded in 2H 2023 and the TBM’s

contribution to development rates is

expected to resume in 2024.

Productivity, calculated as tonnes of ore

milled per person, increased vs 2022

driven by the higher volumes processed

following training conducted for unionised

personnel, post the labour reform and the

normalisation of development rates, which

gave access to additional stopes.

Progress at the San Carlos shaft continued

with the installation of key equipment

and a number of modifications to improve

the design of the service infrastructure.

As a result, commissioning of the shaft

was delayed from 2Q 2023 to early 2024,

thus providing more time to optimise the

haulage of ore via ramps while the two

sections of the shaft are connected. This

project, once fully operational, is expected

to support a reduction in haulage costs.

Pyrites plant at Fresnillo

The tie in of the Pyrites plant to the

national electricity grid was completed in

2Q 2023, with commissioning following

immediately afterwards. However, recovery

rates did not reach anticipated levels.

Following some tests and technical work, it

was decided to only process the historical

tailings as this strategy significantly

improved recovery rates. We will continue

on this path in 2024, which means that

volumes processed will inevitably be lower

than originally planned but recovery rates

and profitability will be higher than when

processing both current and historical

tailings. As a result, output from the

Pyrites plant at Fresnillo, together with

the production from the Pyrites plant at

Saucito, is expected to average circa 2 moz

silver per year.

Reserves and resources

Silver reserves increased 7.9% as additional

mineral resources converted to ore reserves

and offset depletion. Silver in overall

mineral resources decreased 5.1% due to

extraction, increased costs and a higher

cut-off grade and lower grade exploration

results.

Capital expenditure

Total capital expenditure in 2023 was

US$97.8 million, which included sustaining

capex, mine development, the deepening

of the San Carlos shaft and the tailings

management programme.

2024 Outlook

For 2024, the silver ore grade is expected

to be in the range of 180-200 g/t, with the

gold ore grade around 0.60-0.70 g/t.

We will review our short- and mid-term

planning processes to achieve a better

balance between the western and eastern

areas of the mine, and optimise volumes

and ore grades.

The majority of our investment in the year

ahead will focus on mine development

and sustaining capex, as well as the tailings

management programme.

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 423.1 418.5 1.1

Adjusted revenue (US$m) 479.6 475.8 0.8

Adjusted production costs (US$m) 264.8 225.2 17.6

Depreciation (US$m) 95.5 88.1 8.4

Segment profit (US$m) 156.8 197.0 (20.4)

Capital expenditure (US$m) 97.8 106.6 (8.3)

Exploration (US$m) 38.1 20.8 83.2

Cost per tonne (US$) (standalone) 97.8 91.5 6.9

Pyrites plant (US$) 3.3 – 100.0

Cost per tonne total (US$) 101.1 91.5 10.5

Cash cost (US$/oz silver) 10.2 5.7 78.9

Margin (US$/oz)

13.4 16.0 (16.3)

Margin (expressed as % of silver price) 56.8 73.7

All-in sustaining cost (US$) 20.4 16.3 25.6

Adjusted revenue, excluding inter-segment

sales, remained stable at US$479.6 million,

principally due to the higher silver and

gold prices offset by the lower volumes

of silver sold.

Cost per tonne increased 10.5% 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.

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%).

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.

4 Financial figures for Fresnillo exclude ore sales from Juanicipio.

5 Margin defined as average realised price less cash cost per ounce.

Fresnillo

(US$/tonne milled)

101.1

62.7

69.9

84.7

91.5

101.1

2023

2022

2021

2020

2019

Fresnillo ore milled per person

(Tonnes)

633

712

655

589

608

633

2023

2022

2021

2020

2019

Fresnillo cash cost

(Silver US$/ounce)

10.2

2.3

5.9

5.4

5.7

10.2

Silver price Cash cost

16.1

86.0%

21.372.1%

24.9

78.1%

21.773.8%

23.656.8%

2023

2022

2021

2020

2019

% figures represent margin between cash cost and

silver price.

50 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

SAUCITO

Saucito contributed 21.5% to total silver production in 2023

and generated 18.4% of total Adjusted revenue.

Ownership: 100% Fresnillo plc

In operation since: 2011

Mine life (years): 4.6 (2022: 6.6)

Facilities: Underground mine and flotation plant

Workforce: 1,494 employees, 1,993 contractors

Location: Zacatecas

Milling capacity (2023): 7,000 tpd/2,600,000 tpy

Mine production

2023 2022 % change

Ore milled (kt) 2,164 2,073 4.4

Silver (koz) 12,102 11,977 1.0

Gold (oz) 72,763 73,497 (1.0)

Lead (t) 19,535 17,816 9.6

Zinc (t) 32,991 28,415 16.1

Silver ore grade (g/t) 195 201 (3.1)

Gold ore grade (g/t) 1.34 1.40 (4.3)

Total reserves

Silver (moz) 110.9 115.9 (4.3)

Gold (koz) 411 516 (20.3)

Avg ore grade in reserves

Silver (g/t) 343 264 29.9

Gold (g/t) 1.3 1.2 8.3

Cut-off grade (g/t AgEq) 346 309 12.0

Total resources

Silver (moz) 383.9 428.4 (10.4)

Gold (moz) 1.7 1.9 (10.5)

Avg ore grade in resources

Silver (g/t) 328 282 16.3

Gold (g/t) 1.47 1.27 15.7

Cut-off grade (g/t AgEq) 267 225 18.7

Pyrites plant production

Ore processed (t) 162,344 135,044 20.2

Silver (koz) 861 529 62.6

Gold (oz) 1,960 1,959 0.1

Silver ore grade (g/t) 248 164 51.0

Gold ore grade (g/t) 1.59 1.44 10.4

1 Saucito mine production excludes ore processed and

production from the Juanicipio development project.

2 2023 reserves as of 31 May 2023.

3 2023 resources as of 31 May 2023.

4 Includes concentrates of Fe from Saucito and

Fresnillo.

2023 Objectives

• Increase volume of ore processed to

the optimal run rate of 7,000 tpd.

• Conduct an assessment of the

optimal development rate going

forward.

• Continue the deepening of the

Jarillas shaft.

• Implement cost reduction initiatives.

• Continue to stabilise operations.

2023 Performance

• Volume of ore processed increased

albeit not to 7,000 tpd as mine

preparation was impacted by

equipment availability and a

reassessment of ground control

methods in certain areas.

• An assessment of the optimal

development rate was undertaken

and concluded. The current rate of

3,000 metres per month is sufficient

to sustain production levels.

• Deepening of the Jarillas shaft

progressed as expected.

• Cost reduction initiatives were

implemented. However, the impact

of these initiatives was lessened by

the revaluation of the Mexican peso

vs the US dollar and underlying cost

inflation.

• Volume of ore milled increased and

silver ore grade was within guidance.

2024 Objectives

• Increase volume of ore processed to

the optimal run rate of 7,000 tpd.

• Continue progressing the

deepening of the Jarillas shaft.

• Focus on key cost reduction

initiatives.

• Improve our safety performance and

continue strengthening our safety-

centred culture.

Additional

Information

Strategic

Report Governance

Financial

Statements

Key developments in the year

Silver production increased slightly to 12.1

moz in 2023 due to the higher volume of

ore processed as productivity increased

and equipment availability improved

throughout the year. This was partly

offset by the lower ore grade due to the

increased dilution in narrower veins.

Annual gold production decreased 1.0%

due to the lower ore grade.

Mine development rates increased year-

on-year to an average of 2,920 metres per

month in 2023 (2022: 2,550 metres per

month), primarily due to the increased

availability of mine equipment and

improved workforce productivity. An

assessment to define the optimal level

of development was carried out, and

concluded that current development rates

of 3,000 metres per month are sufficient

to sustain production levels going forward.

Productivity increased vs 2022 as personnel

hired and trained post the labour reform

became more experienced.

In 2023, we focused on cost reduction

initiatives such as decreasing contractor,

maintenance and pumping costs,

optimising the haulage process and

reassessing our ground control methods

depending on the rock quality of the area.

The Pyrites plant at Saucito produced 861

koz of silver and 2.0 koz of gold during

the year. This was higher year-on-year due

to the contribution of the Pyrites plant at

Fresnillo, partly offset by the decrease in

volume of iron concentrates processed

from Saucito.

The project to deepen the Jarillas shaft

from 630 metres to 1,000 metres

continued to advance, with further

progress made in horizontal development

and supporting infrastructure. However,

a tight labour market and changes to

detailed engineering have delayed this

project, which is now expected to be

completed by 2027.

Reserves and resources

Silver in ore reserves decreased 4.3% due

to depletion and higher costs and cut-offs.

This was partly balanced by the conversion

of additional mineral resources to ore

reserves in the period.

Similarly, silver in overall mineral resources

decreased by 10.4% as a result of increased

costs, a higher cut-off grade and extraction.

Capital expenditure

Capital expenditure in 2023 totalled

US$125.1 million, mainly allocated to

sustaining capex, in-mine development,

the tailings dam and the project to deepen

the Jarillas shaft.

2024 Outlook

We expect volume of ore processed to

continue increasing to circa 7,000 tpd in

2024 as we increase equipment availability.

The silver ore grade is expected to be in

the range of 200-220 g/t, while the gold

ore grade is expected to average between

1.1-1.3 g/t.

Capex will primarily be allocated to

required mine development, sustaining

capex, increasing the capacity of the

tailings dam and the deepening of the

Jarillas shaft.

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 487.3 442.7 10.1

Adjusted revenue (US$m) 527.8 485.9 8.6

Adjusted production costs (US$m) 305.5 247.6 23.4

Depreciation (US$m) 104.4 95.0 9.9

Segment profit (US$m) 186.0 197.8 (6.0)

Capital expenditure (US$m) 125.1 118.0 6.0

Exploration (US$m) 31.2 30.2 3.3

Cost per tonne (US$) (standalone) 122.0 113.3 7.7

Pyrites plant (US$) 19.2 6.2 209.7

Cost per tonne total (US$) 141.2 119.5 18.2

Cash cost ($/oz silver) 8.7 4.5 93.3

Margin ($/oz) 14.9 17.2 (13.4)

Margin (expressed as % of silver price) 63.1 79.3

All in sustaining cost (US$) 21.6 16.8 28.8

Adjusted revenue at Saucito increased

8.6% year-on-year, mainly as a result of the

higher silver and gold prices and, to a lesser

extent, the increased volumes of lead and

zinc sold.

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.

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

13.4% 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%.

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.

Saucito

(US$/tonne milled)

141.2

67.8

72.0

89.8

119.5

141.2

2022

2021

2020

2019

2023

Saucito ore milled per person

(Tonnes)

621

749

858

721

558

621

2022

2021

2020

2019

2023

Saucito cash cost

(Silver US$/ounce)

8.7

2.3

0.8

-0.8

4.5

8.7

Silver price Cash cost

85.7%

96.4%

103.2%

79.3%

63.1%

16.1

21.3

24.9

21.7

23.6

2023

2022

2021

2020

2019

% figures represent margin between cash cost and

silver price.

52 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

SAN JULIÁN

The San Julián silver-gold mine started operations in 2016.

In 2023, it contributed 23.7% to total silver production and

generated 14.2% of total Adjusted revenue.

Ownership: 100% Fresnillo plc

In operation since: 2016 (Veins)/2017 (Disseminated Ore Body)

Facilities: Underground mine, flotation plant and a dynamic leaching plant

Workforce: 792 employees, 1,256 contractors

Location: Chihuahua/Durango border

Mine life (years): 3.8 Veins (2022: 4.8), 1.1 Disseminated Ore Body (2022: 2.8)

2023 Objectives

• Implement cost reduction

initiatives.

• Continue exploration in the region,

targeting a similar disseminated

ore body.

• Conclude the pilot project to

confirm the feasibility for the

extraction of ore panels under

paste fill.

2023 Performance

• Cost reduction initiatives were

implemented. However, costs

were negatively impacted by the

revaluation of the Mexican peso

vs the US dollar and underlying

cost inflation.

• Exploration continued in the area.

However, no additional resources

were discovered at San Julián DOB.

• The recovering of ore panels under

paste fill started and progressed

as expected.

2024 Objectives

• Successfully conclude DOB mining.

• Continue exploration in the region

with the aim of increasing the

resource base.

• Convert inferred resources to

reserves at San Julián Veins.

• Focus on key cost reduction

initiatives at Vein operations.

• Improve our safety performance

and continue strengthening our

safety-centred culture.

Key developments in the year

Silver production at San Julián Veins

increased 19.8% year-on-year, primarily due

to the higher ore grade in the San Antonio,

Elisa and San Atanasio areas of the mine.

Gold production decreased 5.5% due to

the lower ore grade and a decrease in

volume of ore processed due to the lower

availability of trucks to haul ore to the

beneficiation plant.

Silver production decreased at San Julián

Disseminated Ore Body year-on-year,

mainly due to the expected lower ore

grades in the areas on the periphery of

the ore body and structural geological

features which slowed down the long

hole drilling cycles.

Productivity decreased due to the

increase in unionised personnel

as additional activities that were

previously carried out by contractors

were internalised, and lower volume of

ore throughput driven by the reduced

availability of haulage trucks.

Additional drilling, geotechnical studies

and development were carried out to

recover ore panels under paste fill. Mining

works will continue in 2024, with the aim

of extracting the last remaining ore at DOB.

Reserves and resources

Silver in ore reserves at San Julián Veins

remained stable year-on-year as exploration

balanced extraction and higher costs

and cut-offs grades, while gold reserves

decreased mainly due to the combination

of the aforementioned factors and lower

gold grades in new areas.

Silver in overall mineral resources at

San Julián Veins increased 9.1% due to

exploration, while gold in overall mineral

resources decreased 3.8% as a result of the

lower gold grade.

Silver and gold in ore reserves and mineral

resources at San Julián DOB decreased

year-on-year driven by mining depletion,

changes to pillar design as well as higher

costs and cut-off grades.

Capital expenditure

Capital expenditure in 2023 was US$74.8

million, mainly allocated to mining works

and sustaining capex.

Additional

Information

Strategic

Report Governance

Financial

Statements

1 2023 reserves as of 31 May 2023.

2 2023 resources as of 31 May 2023.

Mine production

2023 2022 % change

Total production

Gold (oz) 44,487 46,727 (4.8)

Silver (koz) 13,349 14,252 (6.3)

Production San Julián Veins

Ore milled (kt) 1,142 1,176 (2.8)

Silver (koz) 5,559 4,638 19.8

Gold (oz) 41,009 43,397 (5.5)

Silver ore grade (g/t) 166 135 23.1

Gold ore grade (g/t) 1.17 1.21 (3.3)

Production San Julián Disseminated Ore Body

Ore milled (kt) 2,074 2,093 (0.9)

Silver (koz) 7,791 9,614 (19.0)

Gold (oz) 3,478 3,330 4.5

Lead (t) 6,843 7,105 (3.7)

Zinc (t) 14,410 17,487 (17.6)

Silver ore grade (g/t) 136 168 (18.9)

Gold ore grade (g/t) 0.08 0.08 0.0

Lead ore grade (%) 0.43 0.43 0.0

Zinc ore grade (%) 0.94 1.09 (13.8)

Reserves San Julián Veins

Silver (moz) 45.3 45.7 (0.9)

Gold (koz) 210 294 (28.6)

Avg ore grade in reserves San Julián Veins

Silver (g/t) 327 252 29.8

Gold (g/t) 1.52 1.62 (6.2)

Cut-off grade (g/t AgEq) 240 218 10.1

Reserves San Julián Disseminated Ore Body

Silver (moz) 11.2 27.9 (59.9)

Gold (koz) 8 17 (52.9)

Avg ore grade in reserves San Julián

Disseminated Ore Body

Silver (g/t) 157 148 6.1

Gold (g/t) 0.1 0.1 0.0

Cut-off grade (g/t AgEq) 138 113 22.1

Resources San Julián Veins

Silver (moz) 141.1 129.3 9.1

Gold (koz) 955 993 (3.8)

Avg ore grade in resources San Julián Veins

Silver (g/t) 262 216 21.3

Gold (g/t) 1.77 1.66 6.6

Cut-off grade (g/t AgEq) 175 162 8.0

Resources San Julián Disseminated Ore Body

Silver (moz) 39.5 70.4 (43.9)

Gold (koz) 25.1 53.0 (52.6)

Avg ore grade in resources San Julián

Disseminated Ore Body

Silver (g/t) 170 138 23.2

Gold (g/t) 0.1 0.1 0.0

Cut-off grade (g/t AgEq) 118 102 15.7

San Julián (Veins)

(US$/tonne milled)

109.0

72.0

71.8

81.5

91.0

109.0

2022

2021

2020

2019

2023

San Julián (Veins) cash cost

(Silver US$/ounce)

9.60

0.79

-5.95

1.83

7.10

9.60

Silver price Cash cost

95.1%

128.0%

92.6%

67.5%

59.3%

16.1

21.3

24.9

21.7

23.6

2023

2022

2021

2020

2019

% figures represent margin between cash cost and silver

price.

San Julián (DOB)

(US$/tonne milled)

50.0

39.1

39.0

39.2

44.8

50.0

2022

2021

2020

2019

2023

San Julián (DOB) cash cost

(Silver US$/ounce)

11.80

6.98

6.99

4.84

6.90

11.80

Silver price Cash cost

56.6%

67.2%

80.5%

68.2%

50.0%

16.1

21.3

24.9

21.7

23.6

2023

2022

2021

2020

2019

% figures represent margin between cash cost and silver

price.

San Julián (Veins and DOB) ore milled per

person

(Tonnes)

1,570

1,715

1,576

1,602

1,693

1,570

2022

2021

2020

2019

2023

54 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

All in sustaining cost increased 9.6% 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)

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.

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.

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.

2024 Outlook

For the year ahead, the silver ore grade at

the San Julián Veins is expected to be in

the range of 160-180 g/t, with the gold ore

grade expected to average 1.0-1.20 g/t.

For the San Julián Disseminated Ore Body,

silver ore grade for 2024 is forecast to be

in the range of 80-100 g/t as the mine

approaches the end of its life, with the gold

ore grade remaining around 0.08 g/t.

On 10 January 2024, Fresnillo learnt that

Mexico’s Supreme Court had granted a

ruling in a case in which Fresnillo, as an

affected third party, expects an impact to

the water concessions that supply water

to Minera San Julián that were granted

by the Mexican State. The Mexican State

is identified as the defendant in this case.

The Company has not yet been formally

notified of this ruling but expects it to

take place in the coming weeks, and

will thereafter fully assess the ruling itself

and its potential implications. This ruling

affects Minera San Julián although, based

on current information, any impact to

the Company’s production is expected

to be immaterial.

Budgeted capex for 2024 will be allocated

to mining works, sustaining capex, and the

tailings management programme.

Financial performance

Adjusted revenue decreased compared to

2022, mainly due to the lower volumes of

silver sold from San Julián DOB and of gold

from San Julián Veins, partly mitigated by

higher gold and silver prices.

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.

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.

Additional drilling, geotechnical studies and

development were carried out to recover ore panels

under paste fill. Mining works will continue in 2024, with

the aim of extracting the last remaining ore at DOB.”

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

SAN JULIÁN CONTINUED

Additional

Information

Strategic

Report Governance

Financial

Statements

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 385.5 392.1 (1.7)

Adjusted revenue (US$m) 406.4 417.6 (2.7)

Adjusted production costs (US$m) 228.1 200.7 13.7

Depreciation (US$m) 101.9 129.0 (21.0)

Segment profit (US$m) 158.7 190.8 (16.8)

Capital expenditure (US$m) 74.8 64.5 16.0

Exploration (US$m) 30.0 32.5 (7.7)

Cost per tonne (US$) (Veins) 109.0 91.0 19.8

Cash cost (US$/oz silver) (Veins) 9.6 7.1 35.2

Margin (US$/oz) (Veins) 14.0 14.7 (4.8)

Margin (expressed as % of silver price)

(Veins) 59.3 67.5 

All in sustaining cost (Veins) (US$) 23.9 21.8 9.6

Cost per tonne (US$)

(Disseminated Ore Body) 50.0 44.8 11.6

Cash cost (US$/oz silver)

(Disseminated Ore Body) 11.8 6.9 71.0

Margin (US$/oz) (Disseminated Ore Body) 11.8 14.8 (20.3)

Margin (expressed as % of silver price)

(Disseminated Ore Body) 50.0 68.2 

All in sustaining cost

(Disseminated Ore Body) (US$) 14.5 8.8 65.0

56 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

CIÉNEGA

Ciénega is our most polymetallic mine, contributing 5.9% to

total gold production and 7.7% to total silver production. The

mine generated 5.9% of total Adjusted revenue during 2023.

Ownership: 100% Fresnillo plc

In operation since: 1992

Mine life (years): 2.5 (2022: 4.2)

Facilities: Underground mine, flotation and leaching plant

Workforce: 693 employees, 953 contractors

Location: Durango

Milling capacity (2023): 4,000 tpd/1,340,000 tpy

Mine production

2023 2022 % change

Ore milled (kt) 1,065 1,114 (4.5)

Silver (koz) 4,335 4,709 (8.0)

Gold (oz) 35,934 37,466 (4.1)

Lead (t) 2,881 3,518 (18.1)

Zinc (t) 3,550 5,387 (34.1)

Silver ore grade (g/t) 147 152 (3.2)

Gold ore grade (g/t) 1.14 1.14 0.0

Total reserves



Silver (moz) 21.9 31.6 (30.7)

Gold (koz) 213 295 (27.8)

Avg ore grade in reserves 

Silver (g/t) 253 211 19.9

Gold (g/t) 2.46 1.96 25.5

Cut-off grade (g/t AgEq) Multiple Multiple 

Total resources



Silver (koz) 126,441 126,713 (0.2)

Gold (koz) 1,476.3 1,412.2 4.5

Avg ore grade in resources 

Silver (g/t) 279 229 21.8

Gold (g/t) 3.26 2.56 27.3

Cut-off grade (g/t AgEq) Multiple Multiple 

2023 Objectives

• Decrease personnel rotation.

• Increase productivity and

implement efficiency and cost

reduction initiatives.

• Advance exploration programmes

to generate resources.

2023 Performance

• Several initiatives were

implemented to decrease

personnel rotation, with the impact

expected to materialise in 2024.

• The contractor base was optimised

and the productivity of unionised

personnel increased.

• Several cost reduction initiatives

continued to be implemented.

• Gold resources increased, silver

resources were replenished.

2024 Objectives

• Focus on key cost reduction

initiatives.

• Continue the exploration

programme in the region and

reevaluate mineral hauled from

satellite veins.

• Decrease personnel rotation.

• Improve our safety performance

and continue strengthening our

safety-centred culture.

1 2023 reserves as of 31 May 2023.

2 2023 resources as of 31 May 2023.

Additional

Information

Strategic

Report Governance

Financial

Statements

Key developments in the year

Gold and silver production decreased year-

on-year due to the decrease in volume

of ore processed, in accordance with the

mine plan, and a lower silver ore grade.

Productivity increased as the programme

to optimise the contractor base and

increase the productivity of unionised

personnel bore fruit and more than offset

the lower volume of ore processed.

Several initiatives to decrease personnel

rotation were implemented during the

year, including adjusting the work schemes

to offer more flexibility, reviewing career

plans and training programmes, and

improving infrastructure and facilities on

site to enhance the quality of life of our

workers and their families.

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 162.0 169.5 (4.4)

Adjusted revenue (US$m) 169.3 180.3 (6.1)

Adjusted production costs (US$m) 144.6 129.6 11.6

Depreciation (US$m) 48.7 50.9 (4.3)

Segment profit (US$m) 18.9 39.6 (52.3)

Capital expenditure (US$m) 43.8 47.0 (6.8)

Exploration (US$m) 7.8 9.6 (18.8)

Cost per tonne (US$) 135.8 116.3 16.8

Cash cost ($/oz gold) 1,597.8 518.5 208.2

Margin ($/oz) 359.9 1,280.8 (71.9)

Margin (expressed as % of gold price) 18.4 71.2 

All in sustaining cost (US$) 3,178.5 2,011.1 58.0

Adjusted revenue decreased 4.4% vs 2022,

mainly due to lower volumes of gold, silver,

lead and zinc sold, and lower zinc prices.

Ciénega is the Group’s most polymetallic

mine, a fact demonstrated by the 61.3%

contribution from silver, lead and zinc in

2023 (2022: 64.8%).

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.

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%).

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.

Ciénega

(US$/tonne milled)

135.8

78.3

76.7

86.1

116.3

135.8

2022

2021

2020

2019

2023

Ciénega ore milled per person

(Tonnes)

647

791

900

842

612

647

2022

2021

2020

2019

2023

Ciénega cash cost

(Gold US$/ounce)

1,597.8

-0.2

-276.2

-523.1

518.5

1,597.8

Gold price Cash cost

1,418.0

100.0%

1,792.4115.4%

1,795.0129.1%

1,799.371.2%

1,957.718.4%

2023

2022

2021

2020

2019

% figures represent margin between cash cost and

gold price.

A number of cost reduction initiatives

were also implemented. These included

a comprehensive analysis of areas of

opportunity to decrease consumption of

certain operating materials, increase the

efficiency of the maintenance process,

re-evaluate ground support alternatives

and optimise extraction from satellite

areas. Together with the rationalisation

of the contractor base and the increased

productivity of the unionised personnel,

these initiatives are expected to decrease

costs in 2024.

Reserves and resources

Silver and gold in ore reserves decreased

30.7% and 27.8% respectively year-on-

year as a result of extraction as well as

higher costs and cut-offs. Gold in mineral

resources increased 4.5% year-on-year due

to exploration results, while silver in mineral

resources remained stable as exploration

results offset higher costs, cut-off grades

and depletion.

Capital expenditure

Capital expenditure in 2023 totalled

US$43.8 million and was allocated primarily

to mine development, sustaining capex

and safety and environment, including the

construction of the tailings dam.

2024 Outlook

In 2024, the average gold ore grade is

expected to be between 1.1-1.3 g/t, with

the silver ore grade expected to average

160-180 g/t.

Budgeted capex for 2024 will continue to

be primarily focused on mining works and

sustaining capex.

58 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.comwww.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

HERRADURA

One of Mexico’s largest open pit gold mines, Herradura

produced 58.2% of the Group’s total gold in 2023 and

generated 24.7% of total adjusted revenue.

Ownership: Minera Penmont (100% Fresnillo plc)

In operation since: 1997

Mine life (years): 10.2 (2022: 10.9)

Facilities: Open pit mine, heap leach and Merrill Crowe plants; two dynamic leaching

plants (DLP)

Workforce: 1,929 employees, 839 contractors

Location: Sonora

Mine production

2023 2022 % change

Ore deposited (kt) 20,224 22,195 (8.9)

Total volume hauled (kt) 99,542 120,370 (17.3)

Gold (oz) 355,485 349,715 1.6

Silver (koz) 611 776 (21.3)

Gold ore grade (g/t) 0.76 0.69 9.9

Total reserves



Gold (moz) 5.5 6.2 (11.3)

Avg ore grade in reserves 

Gold (g/t) 0.83 0.80 3.7

Cut-off grade (g/t Au) Multiple Multiple 

Total resources



Gold (moz) 6.7 7.8 (14.1)

Avg ore grade in resources 

Gold (g/t) 0.85 0.81 4.9

Cut-off grade (g/t Au) Multiple Multiple

2023 Objectives

• Commission and ramp-up the

Carbon in Column project.

• Develop pit slope optimisation

pilot programme.

• Initiate the construction of the

15th leaching pad.

2023 Performance

• The Carbon in Column project was

commissioned in 2Q 2023, with

ramp-up starting in 2H 2023.

• The pit slope optimisation

programme continued and

recommendations are being tested

in different geotechnical domains

of the pit.

• Construction of the 15th leaching

pad was delayed as its location was

under review to consider the growth

of the pit.

2024 Objectives

• Conclude the life of mine plan

review and implement relevant

recommendations.

• Focus on key cost reduction

initiatives.

• Improve our safety performance

and continue strengthening our

safety-centred culture.

1 2023 reserves as of 31 May 2023.

2 2023 resources as of 31 May 2023.

Additional

Information

Strategic

Report Governance

Financial

Statements

Key developments in the year

Annual gold production increased year-on-

year as a result of the higher ore grade in

the sulphides and positive variations with

the geological model. These factors were

partly offset by the decreased volume of

ore processed at the dynamic leaching

plant (I and II) as a result of the electrical

failure in 3Q 2023.

Waste material hauled decreased 17.3%, in

accordance with the mine plan. However,

the portion of waste material hauled

charged to costs, rather than capitalised,

increased in 2023 compared to 2022. This

was due to the lower stripping ratio for the

main component of the mine during the

year compared to the prevailing stripping

ratio for the life of the mine (LOM) of this

component. This impacted costs because

all the stripping was registered as cost

in the income statement. In 2022, the

stripping ratio was above the average LOM

stripping ratio as mineral benches that

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 708.2 634.0 11.7

Adjusted revenue (US$m) 708.7 634.9 11.6

Adjusted production costs (US$m) 490.9 437.4 12.2

Depreciation (US$m) 78.4 81.5 (3.8)

Segment profit (US$m) 157.2 127.9 22.9

Capital expenditure (US$m) 56.9 105.3 (46.0)

Exploration (US$m) 18.3 19.2 (4.7)

Cost per tonne (US$) 24.2 19.7 22.8

Cost per tonne hauled (US$) 5.4 4.7 14.9

Cash cost ($/oz gold) 1,378.8 1,155.5 19.3

Margin ($/oz) 578.9 643.8 (10.1)

Margin (expressed as % of gold price) 29.6 35.8 

All in sustaining cost (US$) 1,608.7 1,527.4 5.3

Adjusted revenue increased year-on-year

due to the higher gold price.

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.

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 10.1% 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.

All-in sustaining cost increased 5.3% to

US$1,608.7 per ounce, mainly due to the

higher cash cost.

Herradura

(US$/tonne milled)

24.2

18.1

18.3

21.7

19.7

24.2

2022

2021

2020

2019

2023

Herradura ore milled per person

(Tonnes)

35,959

49,974

39,531

42,672

40,967

35,959

2022

2021

2020

2019

2023

Herradura cash cost

(Gold US$/ounce)

1,378.8

818.6

727.9

900.4

1,155.5

1,378.8

Gold price Cash cost

42.3%

59.4%

49.8%

35.8%

29.6%

1,418.0

1,792.4

1,795.0

1,799.3

1,957.7

2023

2022

2021

2020

2019

% figures represent margin between cash cost and

gold price.

would be accessed in the future were

prepared, leading to a greater portion

of the stripping costs being capitalised.

Productivity decreased vs 2022 as

personnel hauled material over greater

distances, combined with the impact of

the temporary suspension of operations

following an illegal stoppage by a very

small group of unionised employees in

the first half of the year.

The Carbon in Column project to increase

gold recovery from the old leaching pads

was commissioned in 2Q 2023. Ramp-up

started in 2H 2023 with a few adjustments

being required during the period.

The pit slope optimisation programme

continued, and recommendations are

being tested in different geotechnical

domains of the pit. Once this is concluded,

the mine design will be reviewed and

adjusted accordingly.

Reserves and resources

Gold in ore reserves and mineral resources

decreased 11.3% and 14.1% respectively,

due to extraction, higher cost assumptions

and cut-off grades and neutral exploration

drilling results.

Capital expenditure

Capital expenditure in 2023 totalled

US$56.9 million, which was focused on

mining works, sustaining capex and the

implementation of the activated carbon

process to increase gold recovery.

2024 Outlook

Gold ore grades in 2024 are expected to be

in the range of 0.60–0.70 g/t.

Capex for 2024 will continue to focus

primarily on sustaining capex, expansion of

the tailings dam and construction of the

15th leaching pad.

60 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

NOCHE BUENA

Noche Buena, located in the Herradura district, produced over 1.4 moz

of gold over its ten year life and generated total Adjusted revenue of

US$1.9bn from 2012 to 2022.

Ownership: Minera Penmont (100% Fresnillo plc)

In operation since: 2012

Mine life (years): 0.0 (2022: 0.8)

Facilities: Open pit mine, heap leach, Merrill Crowe plant and Carbon in Column

process

Workforce: 218 employees, 73 contractors

Location: Sonora

Mine production

2023 2022 % change

Ore deposited (kt) 2,510.6 7,428.2 (66.2)

Total volume hauled (kt) 8,424.7 26,855 (68.6)

Gold (oz) 42,537 79,669 (46.6)

Silver (koz) 10 20 (48.0)

Gold ore grade (g/t) 0.47 0.53 (11.3)

Total reserves



Gold (koz) 0 92 (100.0)

Avg ore grade in reserves 

Gold (g/t) 0.0 0.48 (100.0)

Cut-off grade (g/t Au) 0.0 0.22 (100.0)

Total resources



Gold (koz) 94 193 (51.3)

Avg ore grade in resources 

Gold (g/t) 0.70 0.59 18.6

Cut-off grade (g/t Au) 0.20 0.20 0.0

2023 Objectives

• Close the open pit operation once

reserves have been fully depleted.

• Continue to extract gold from the

leaching pads.

2023 Performance

• The mine closure plan commenced.

Ore extraction ended in 2Q 2023

although gold recovery from the

leaching pads continued.

2024 Objectives

• Continue to leach remaining

inventories.

• Continue site closure and

reclamation programme.

1 2023 reserves as of 31 May 2023.

2 2023 resources as of 31 May 2023.

Additional

Information

Strategic

Report Governance

Financial

Statements

Key developments in the year

Annual gold production decreased 46.6%

vs 2022 as ore mining ended in 2Q 2023, in

accordance with the mine plan, although

gold recovery from the leaching pads

continued. Productivity and all operating

and financial indicators decreased as the

mine nears its end of life.

The mine closure plan started with

geochemical characterisation and

remediation activities at the pit,

the removal of access roads and

comprehensive assessments of leaching

pads and waste rock heaps. Further details

of our closure activities are explained in the

Sustainability section, page 138.

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 84.2 142.7 (41.0)

Adjusted revenue (US$m) 84.8 143.8 (41.0)

Adjusted production costs (US$m) 32.9 103.6 (68.2)

Depreciation (US$m) 8.2 39.4 (79.2)

Segment profit (US$m) 5.6 44.4 (87.4)

Capital expenditure (US$m) 0.0 0.4 (100.0)

Exploration (US$m) 0.4 1.4 (71.4)

Cost per tonne (US$) 13.1 13.9 (5.8)

Cost per tonne hauled (US$) 3.9 3.9 –

Cash cost ($/oz gold) 1,780.8 1,269.9 40.2

Margin ($/oz) 176.9 529.4 (66.6)

Margin (expressed as % of gold price) 9.0 29.4 

All in sustaining cost (US$) 1,873.0 1,359.6 37.8

Adjusted revenue at Noche Buena

decreased to US$84.8 million as a result

of the lower volumes of gold sold.

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 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.

The 37.8% increase to US$1,873.0 per

ounce in all-in sustaining cost was the

result of higher cash cost.

Noche Buena

(US$/tonne milled)

13.1

9.8

10.8

11.0

13.9

13.1

2022

2021

2020

2019

2023

Noche Buena ore milled per person

(Tonnes)

28,967

53,867

40,945

37,166

45,248

28,967

2022

2021

2020

2019

2023

Noche Buena cash cost

(Gold US$/ounce)

1,780.8

847.8

1,158.5

1,029.5

1,269.9

1,780.8

Gold price Cash cost

40.2%

35.4%

42.6%

29.4%

9.0%

1,418.0

1,792.4

1,795.0

1,799.3

1,957.7

2023

2022

2021

2020

2019

% figures represent margin between cash cost and

gold price.

Reserves and resources

Gold in ore reserves and mineral resources

were depleted in line with the mine’s

lifecycle.

Capital expenditure

Capital expenditure in 2023 was immaterial

and focused on sustaining capex.

2024 Outlook

Continue with our mine closure and

reclamation programme and leach

remaining inventories while it is

economically feasible.

62 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REVIEW OF OPERATIONS – MINES IN OPERATION CONTINUED

JUANICIPIO

Despite this project not being fully operational in the period due to

the pending tie-in of the flotation plant to the national grid, the mine

commenced operations and contributed 16.7% to the Group’s total

attributable silver production. The mine generated 17.2% of total

Adjusted revenue during 2023.

Ownership: 56% Fresnillo plc, 44% MAG Silver

In operation since: Development ore processed from mid-2020, mineralised material

processed from 2022, flotation plant expected to begin commercial operations in

2023

Mine life (years): 12.1 (2022: 12.0)

Facilities: Underground mine and flotation plant

Workforce: 496 employees, 746 contractors

Location: Zacatecas

Milling capacity (2023): 4,000 tpd/1,340,000 tpy

Mine production

2023 2022 % change

Ore milled (kt) 711 362 96.4

Silver (koz) 9,415 5,180 81.8

Gold (oz) 20,570 12,461 65.1

Lead (t) 7,202 2,755 161.4

Zinc (t) 11,368 4,521 151.5

Silver ore grade (g/t) 472 520 (9.1)

Gold ore grade (g/t) 1.27 1.39 (8.7)

Total reserves

Silver (moz) 68.4 83.3 (17.9)

Gold (koz) 437 448 (2.5)

Avg ore grade in reserves

Silver (g/t) 248 284 (12.7)

Gold (g/t) 1.58 1.53 3.3

Cut-off grade (g/t AgEq) 277 265 4.5

Total resources

Silver (koz) 154,473 158,351 (2.4)

Gold (koz) 839 840 (0.1)

Avg ore grade in resources

Silver (g/t) 276 285 (3.2)

Gold (g/t) 1.50 1.51 (0.7)

Cut-off grade (g/t AgEq) 209 196 6.6

2023 Objectives

• Complete commissioning and

ramp-up production, with the

objective of achieving nameplate

capacity by 3Q 2023.

• Advance exploration programmes

to generate resources and convert

resources into reserves.

2023 Performance

• Commissioning was completed in

1Q 2023 and ramp-up commenced,

achieving nameplate capacity in 3Q

2023 as planned.

• Exploration programme continued

although ore reserves and mineral

resources decreased due to

extraction, increased costs and

higher cut-offs.

• Mineralised material continued to

be processed at the Saucito plant.

2024 Objectives

• Increase development rates.

• Advance exploration programmes

to generate resources and convert

resources into reserves.

1 2023 reserves as of 31 May 2023.

2 2023 resources as of 31 May 2023.

Additional

Information

Strategic

Report Governance

Financial

Statements

Key developments in the year

The commissioning of the flotation plant at

Juanicipio was completed in 1Q 2023 and

ramp-up progressed as planned, achieving

nameplate capacity in 3Q 2023. However,

mineralised material from development

and production stopes continued to

be processed primarily at the nearby

Saucito plant and, to a lesser extent, at

Fresnillo in the first half of the year, while

the commissioning and ramp-up were

implemented. In total, production of silver,

gold, lead and zinc materially increased

year-on-year.

Financial performance

Financial highlights 2023 2022 % change

Revenue (US$m) 454.7 236.7 92.1

Adjusted revenue (US$m) 492.5 259.0 90.2

Adjusted production costs (US$m) 156.7 100.7 55.6

Depreciation (US$m) 68.9 22.1 211.8

Segment profit (US$m) 271.6 154.5 75.8

Capital expenditure (US$m) 82.2 149.6 (45.1)

Exploration (US$m) 7.6 7.8 (2.6)

Cost per tonne (US$) 114.8 N/A N/A

Cash cost ($/oz silver) 6.8 N/A N/A

Margin ($/oz) 16.8 N/A N/A

Margin (expressed as % of silver price) 71.2 N/A

All in sustaining cost (US$) 11.4 N/A N/A

The flotation plant at Juanicipio was not in operation until 2Q 2023, thus there were

no representative cost indicators (cost per tonne, cash cost and all in sustaining cost)

in 2022.

Silver and gold ore grades varied

throughout the year with higher ore grade

areas mined in 2Q 2023 and 3Q 2023 but

trending down in the last months of the

year as per mining sequence.

Mine development continued and

reached an average of 1,239 metres per

month in 2023.

Reserves and resources

Silver in ore reserves and mineral resources

and gold in reserves decreased year-

on-year reflecting extraction, increased

costs and higher cut-offs. Gold in mineral

resources remained stable vs 2022.

Capital expenditure

Capital expenditure in 2023 totalled

US$82.2 million and was allocated

primarily to mine development and

purchase of equipment.

2024 Outlook

The average silver ore grade is expected

to be between 380-420 g/t.

Budgeted capex for 2024 will continue

to be primarily focused on mining works,

sustaining capex and a haulage conveyor.

64 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

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 full

financial statements and their accompanying notes can be found on pages 262-313.

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 revenue

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

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 EBITDA

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 revenue

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)

EBITDA

655.7 751.1 (95.4) (12.7)

Tax income net of special mining rights

(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)

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.

Additional

Information

Strategic

Report Governance

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 dollars this 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.

66 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL REVIEW CONTINUED

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 revenue

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

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 revenue

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

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

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 Juanicipio 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).

Additional

Information

Strategic

Report Governance

Financial

Statements

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

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

68 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL REVIEW CONTINUED

2023

% contribution of

each mine 2022

% contribution of

each mine Change %

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

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 costs

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 costs

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 vi) costs from the start-up of the Pyrites plant at Fresnillo (US$8.8 million). These

adverse effects were mitigated by 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.

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

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 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.

4 Cost inflation would have been 3.9% excluding the effect of the Mexican peso revaluation.

Additional

Information

Strategic

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Financial

Statements

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

Explanations regarding changes in cost per tonne by mine are covered in the Review of operations section, on pages 48-63.

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

Explanations regarding changes in cash cost per ounce by mine are covered in the Review of operations section, on pages 48-63.

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.

70 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL REVIEW CONTINUED

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

Explanations regarding changes in AISC by mine are covered in the Review of operations section, on pages 48-63.

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/US$ revaluation effect (-US$113.3 million); iii) the lower zinc and lead prices (-US$70.4 million); iv) underlying cost inflation of 3.9%

(-US$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.

Additional

Information

Strategic

Report Governance

Financial

Statements

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.

72 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL REVIEW CONTINUED

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 programme to manage its exposure to foreign

exchange risk associated with the purchase of equipment denominated in euro (EUR). As of 31 December 2023, the total EUR

outstanding net forward position was EUR5.08 million with maturity dates through September 2024. Volumes that expired during the

second half of 2023 were EUR7.07 million with a weighted average strike of 1.1043 US$/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%.

Additional

Information

Strategic

Report Governance

Financial

Statements

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 December

534.6 969.1 (434.5) (44.8)

1 Cash and other liquid funds are disclosed in note 17 to the consolidated financial statements.

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).

74 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FINANCIAL REVIEW CONTINUED

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 funds

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 0.46x

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.

1 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.

Additional

Information

Strategic

Report Governance

Financial

Statements

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.

76 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

LETTER FROM THE CHAIRMAN OF THE HEALTH, SAFETY,

ENVIRONMENT AND COMMUNITY RELATIONS (HSECR) COMMITTEE

Dear Shareholder,

At Fresnillo, our ethical and responsible business practices

extend across our entire value chain. Supported by a robust

governance structure, a solid performance and guided by the

UN Sustainable Development Goals, we strive to create value

for all our stakeholders, with a view to consistently earning and

upholding their trust.

Company Chairman, CEO, COO and

top management; additionally, we also

held a safety week as well as the 11th

Safety Symposium.

As most fatalities involved contractors’

staff, we have urged management to

engage more effectively with contractors

through enhanced communication

mechanisms, training, closer supervision

and updated mining works contracts

aligned to Fresnillo’s safety standards. We

are also actively implementing corrective

measures, including more thorough

investigations, enhanced accountability

(including increased sanctions for breaches

of safety procedures), improved training,

strengthened operational discipline and

rigorous verification of critical controls,

among other initiatives. Additionally, key

strategic actions include the systematic

involvement and field presence of

operational leaders to guide and coach

broader teams regarding risk assessments.

Dissemination campaigns and workshops

are also being deployed to empower any

member of the workforce to halt operations

under any unsafe conditions that may

be detected through the ‘Right to say

no’ policy. Notably, the results obtained

in December 2023 were promising, with

reductions in the TRIFR and LTIFR of over

40% compared to November, and of 15%

and 40% respectively compared to the

same period in 2022. These outcomes

provide valuable insight into the efficacy

of the overall strategy and give us some

confidence in its potential to create

sustained improvement in our safety

performance moving forward. However,

we recognise that further efforts are

required to achieve our desired

results and are committed to making

ongoing improvements.

After the World Health Organization

(WHO) and Mexican government

announced the end of the Covid-19

public health emergency in 2023, the

Company continued to diligently adhere

to the recently updated Health Ministry’s

protocols, to monitor contagion cases –

with an 82% decrease in comparison to

2022 – and to enforce comprehensive

respiratory disease prevention measures.

These included conducting influenza

vaccination campaigns for workers and

their families and providing reminders

for essential practices such as vitaminC

intake, amongst others. We made

good progress in evolving the Health

Department to a more holistic view of

comprehensive health, with the ‘Living

in Balance Programme’ promoting

healthy habits and emotional wellbeing

across the organisation. Furthermore, the

establishment of the Occupational Health

Transversal Committee and the Wellbeing

Committee in 2023, as well as the plan to

The Health, Safety, Environment and

Community Relations (HSECR) Committee,

assists the Board by collaborating with

management to meticulously supervise the

Company’s strategies, ensuring that they

effectively address environmental, social

and governance (ESG) considerations. As

Chairman of the HSECR Committee, I share

with you the key highlights of the period.

Despite improvement in recent years,

the Company’s safety record deteriorated

across most indicators last year; most

notably, a 12.08 Total Recordable Injury

Frequency Rate (TRIFR) and 7.40 Lost Time

Injury Frequency Rate (LTIFR), vs 10.26 and

5.44 in 2022, respectively. Regrettably, it

is with deep sadness that I also report

four fatalities at our operations during this

period and one in January 2024. Most of

the fatalities involved contractors’ workers.

On behalf of the Board of Directors, we

express our heartfelt condolences to their

families and loved ones. This is a matter of

profound concern as we are dedicated to

safeguarding our most invaluable asset –

the lives and wellbeing of our workforce.

Recognising the gravity of our safety

performance, strategic measures, swift

action and enhanced accountability are

imperative in order to address and rectify

the underlying issues. So far, a series

of measures that aim to strengthen a

proactive, safety-centric culture have been

deployed, with an enhanced performance-

oriented focus to manage high-potential

and critical risks.

We firmly uphold the principle of safety first

– valuing life above business results – and

our commitment towards the ultimate

goal of achieving zero fatalities remains

steadfast. Recognising that behavioural

change is a key element of success, the

Company is actively dedicating significant

time and resources to enhance awareness

through the continuous evolution of the

‘I Care, We Care’ programme. Under the

stewardship of our Chairman, leadership

standards were designed to strengthen our

preventive safety culture. These standards

were endorsed by the CEO, COO and Senior

Management, and systematically rolled-

out across all mining units, reaching our

entire workforce. During the period, we also

organised high-level safety engagements

with the personal attendance of our

Additional

Information

Strategic

Report Governance

Financial

Statements

create unit-level Ergonomics Committees

in 2024, demonstrates a forward-looking

approach to address preventive actions

and implement improvements going

forward.

The Company remains committed

to advancing its social investments

with a dual focus on strengthening its

relationships with communities and

enhancing their capabilities over the

long term. Our Community Relations

strategy is built on a dedication to

meaningful engagement that is aligned

with community priorities, and on key

departments within the organisation

working together to achieve results. The

Community Health Weeks – conducted

in close collaboration with the UNAM

Foundation, local authorities and civil

society organisations – reached almost

200 communities and over 6,000

people across all areas influenced by

our operations. Sports and educational

programmes were also fully reinstated

during the period, including summer

camps, tournaments and workshops, all

geared towards fostering social cohesion

through open dialogue and interactive

learning experiences.

The Company maintained its support

to five existing FIRST Robotics teams

and introduced a new one in Orysivo,

underscoring our commitment to

STEM education, teamwork and

project management in neighbouring

communities. At the Laguna Regional

Championship, teams from Fresnillo,

Ciénega and Guanajuato earned awards,

with the Guanajuato team qualifying for

the World Championship in Houston. The

Company also received the ‘Volunteer of

the Year’ award for the dedication of its

outstanding volunteers. Leveraging the

success of the robotics team, we have

extended its impact through the Fresnillo –

La Salle Excellence Scholarship Programme

for the highest-performing students

from each team. Following the inaugural

generation’s graduation in 2022, we forged

new partnerships with the Chihuahua

and León campuses of La Salle university,

expanding its reach beyond Northeast and

Laguna. The programme welcomed ten

new students during the period, with a total

of 21 students benefiting from this initiative.

Water scarcity and hydric stress persist

as major concerns for both Fresnillo and

our neighbouring communities and

compelled us to take proactive measures

throughout the year. In Penmont,

Ciénega and San Julián, we conducted

comprehensive studies and proof-of-

concept projects aimed at improving

local water infrastructure. These initiatives

are conducted hand-in-hand with local

communities and NGOs, emphasising the

importance of securing endorsement and

financial support from local authorities for

their execution. In addition, we recently

signed a collaboration agreement with

the Potable Water, Sewage and Sanitation

System of the Municipality of Fresnillo.

Under this agreement, the Company

will undertake the rehabilitation and

operation of a water potabilisation plant

and provide the resulting clean water to

the municipality. This project serves a dual

purpose: mitigating the region’s water

scarcity issues by reducing our freshwater

consumption while also potentially

increasing the availability of municipal

wastewater for mining operations. By

prioritising the delivery of clean water to

the municipality, we have underlined our

dedication to environmental protection

and acknowledged the intrinsic value of

ensuring access to a sustainable and clean

water supply for our local communities.

The Committee has continued to

thoroughly monitor management’s

efforts to ensure the safe operation of

tailings storage facilities (TSFs). Several

key milestones were passed during the

year, including Board approval of the

Tailings Policy and Commitments for

Responsible Tailings Management, clearly

establishing roles, responsibilities, and

duties of the different participants of the

TSFs management system. Management

also approved the Tailings Management

System’s Corporate Tailings Guidelines,

with this governance framework being

successfully implemented across all mining

units. Finally, Operation, Maintenance and

Surveillance (OMS) Manuals as well as

Emergency Preparedness and Response

Plans (EPRPs) have been issued by all

mining units and integrated into current

procedures and existing plans. Potential

Failure Mode Assessments (PFMA), which

focus on prevention of major risks, also

continue to progress. Management has

plans for investments to improve the safety

of TSFs. Overall, the Company’s actions not

only demonstrate our compliance and

commitment to industry best practices,

but further consolidate accountable and

responsible TSF operations.

Climate change is a formidable challenge

for our era, and the Committee diligently

monitored the Company’s progress towards

achieving its 75% renewable energy target

by 2030. We are pleased to report that by

carrying out adjustments in the Company’s

energy portfolio, we successfully secured

53.3% renewables in the overall electricity

supply during 2023. This achievement

has restored the trajectory back onto

its intended course, despite substantial

increases in energy demand driven by

expanding operations and setbacks in

previous periods, including regulatory

headwinds. Additionally, the Company

continued to evolve the climate-risk

assessment in the enterprise risk framework

(ERM), revaluating the shortlist of climate-

related risks and opportunities (CROs)

and strengthening the scenario analysis,

demonstrating Fresnillo’s commitment

towards operational resilience.

Looking ahead to 2024, we anticipate

seeing results from the regional climate

modelling and the decarbonisation

roadmap studies. We aim to thoroughly

analyse these studies to extract valuable

insights that will support the development

of a pragmatic, clear and feasible

decarbonisation pathway, balancing

economic realities, current technological

limitations and regulatory uncertainty.

The HSECR Committee is determined to

conduct a comprehensive assessment of

matters under its remit and to advance

the Company’s ESG strategy and overall

performance. As we move forward, our

institutional practices will stand as a

testament to the Company’s unwavering

and ongoing dedication to constructing

a more sustainable business model in

collaboration with its key stakeholders.

Yours faithfully,

Arturo Fernández

Chairman, Health, Safety, Environment

and Community Relations Committee

Role of the Committee

The role and duties of the HSECR

Committee are set out in its terms

of reference, a copy of which can be

found on the Company’s website.

HSECR Committee membership

Mr Arturo Fernández (Chairman),

Dame Judith Macgregor, Mr Fernando

Ruiz and Ms Georgina Kessel.

Key contributors: Chief Executive

Officer, Chief Operating Officer,

CEO Engineering Services

(Peñoles-Baluarte), Health, Safety

and Environment Assistant VP

(Peñoles-Baluarte), Sustainability and

Community Relations VP (Peñoles-

Baluarte), Safety and Environment

Assistant VP, General Counsel, Health

Corporate Manager, Community

Relations Manager and ESG

Compliance Manager.

HSECR Committee Activity

During the year, the Committee

met in accordance with its terms

of reference.

78 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

HSECR

performance

Organisation

and context

Compliance

with

requirements

Stakeholders

needs and

expectations

Leadership

Plan

Performance

evaluation

Plan

Support and

operation

Improve

CheckAct

We adhere to the principle that mining

should align with the high ethical, social

and environmental expectations of our

stakeholders. This belief is embedded in

our business model and influences every

decision. During the year, we made good

progress in our wellbeing programmes,

underlining our commitment to employee

physical and mental health, as well as

promoting nutrition, sports and healthy

habits. Our safety record has fallen short of

our recent pledges to eliminate fatalities

and reduce our Total Recordable Injury

Frequency Rate (TRIFR) to ICMM’s ranges.

Nevertheless, we believe that we have

defined and started to deploy a series of

strategic measures with an enhanced

performance-oriented focus to manage

OUR APPROACH TO

SUSTAINABLE MINING

SUSTAINABILITY AT THE CORE OF OUR PURPOSE

Social-compatibility strategy

Last year marked the implementation of

a comprehensive strategy, collaboratively

executed both internally and in

coordination with our Parent Company,

Industrias Peñoles. This strategic initiative

is designed to foster trust within society

while ensuring the enduring success of our

business. At its core, the strategy focuses on

enhancing ESG performance in alignment

with national and international standards

and addresses the evolving demands

of stakeholders and society at large,

consolidating our approach to ESG.

To facilitate the effective implementation

of this strategy, we have established a

robust governance structure, comprising

an Executive Committee, a Technical

Committee, and ESG networks, along with

associated working groups. These working

groups address our most material issues:

climate change, water, biodiversity, tailings

high-potential and critical risks, and that

enhanced accountability will improve

overall operational discipline. We have

also continued to progress our climate

change strategy, for example by improving

our overall climate risk framework and

launching initiatives that will better inform

our decision-making in the upcoming

years, as we continue to mature our

decarbonisation ambitions. Finally, we

continue to engage with our neighbouring

communities throughout every stage

of the mining life cycle, engagement,

development and shared growth through

programmes aligned to the Sustainable

Development Goals (SDGs) on health,

education, clean water and decent work.

HSECR management system

Our focused approach to Environmental,

Health, Safety and Community Relations

(HSECR) matters ensures that any impact

on workers or facilities is considered as

a critical factor in shaping policies and

strategies across all Fresnillo’s operations.

A systematic approach to HSECR

management enables us to provide

pertinent information to top management,

fostering long-term success and creating

opportunities to contribute to sustainable

development. Each unit defines HSECR

requirements with clear guidelines for

implementation and assessment; the

system establishes measurable goals,

objectives and programmes, defining

procedures for measurement, monitoring,

and improvement, as well as periodic

audits and reviews by top management.

PARTNERING

WITH OUR

COMMUNITIES

PROTECTING

THE

ENVIRONMENT

CARING

FOR OUR

PEOPLE

DOING BUSINESS

ETHICALLY AND

RESPONSIBLY

For more information

see pages 82-87.

For more information

see pages 88-105.

For more information

see pages 139-150.

For more information

see pages 106-138.

HSECR management system

Stakeholder

identification

Issue

identification

and

prioritisation

Stakeholder

engagement

Review and

evaluation

1.0

0.9

0.8

0.7

0.6

0.5

Issue signiﬁcance for our stakeholder

Issue materiality for the business

0.4

0.3

0.2

0.1

1.00.90.80.70.60.50.40.30.20.10

Issue signiﬁcance for our stakeholder

Issue materiality for the business

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

1.00.90.80.70.60.50.40.30.20.10

Additional

Information

Strategic

Report Governance

Financial

Statements

Materiality 2023 Materiality 2033

Materiality assessment

We actively engage our stakeholders to

gain deeper insight into the issues that hold

significance for them and that are material to

our business. This process, known as materiality

assessment, serves as a crucial tool in holding

our sustainability strategy and shaping our

reporting of non-financial issues. Because society

and our industry are dynamic and expectations

shift over time, we conduct in-depth materiality

assessments every few years.

• Firstly, our relevant stakeholders are identified

by a multidisciplinary team.

• Secondly, we employ a systematic approach

to identify issues relevant to our industry

by monitoring and evaluating reporting

frameworks, international trends, regulations

and compliance requirements, and review

ESG questionnaires to capture emerging

concerns and evolving expectations.

• Thirdly, we develop a structured engagement

plan involving both internal and external

stakeholders, utilising surveys and focus

groups, to assess the current relevance of

issues and include forward-looking questions

to assess their anticipated relevance over the

next decade.

• Finally, we integrate the materiality

assessment outcomes into the sustainability

strategy and reporting.

storage facilities, mine closure, value

chain, human rights, health and safety,

and diversity, equity and inclusion (DEI).

We continue to be committed to

transparently communicating our

progress in years to come.

Awards

During 2023, we received recognition

from several organisations, including:

Ethics and Values in Industry from

the Mexican Confederation of

Industrial Chambers (CONCAMIN); the

Exceptional Enterprises award from the

Business Coordinating Council (CCE),

Communication Council and Institute

for the Promotion of Quality; the Socially

Responsible Company award from the

Mexican Centre for Philanthropy (CEMEFI);

and we also obtained a Maximum Score

in the Corporate Integrity survey, a joint

initiative by the NGOs Mexicans Against

Corruption and Mexican Transparency.

Executive

Committee

Strategic

alignment.

Assessing

performance.

Ensuring

accountability.

Technical

Committee

ESG strategy and

synergies.

Evaluate roadmaps

and proposed

targets.

ESG working

groups and

networks

Plan roadmaps

and associated

projects.

Propose targets.

Biodiversity conservation

Climate change

Community relations

Data privacy and cybersecurity

Diversity, equity and inclusion

Environmental management

Ethics and corporate integrity

Governance, risk and crisis

management

Health, safety and occupational

wellbeing

Human rights

Innovation and technology

Mine closure

Relationship with government and

authorities

Relationship with indigenous people

Responsible value chain

Talent development

Waste management

Water management

80 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

The latest assessment reflects the ongoing

iterative process described earlier, with

new material issues incorporated. Notably,

some issues have maintained their

significance throughout, such as water

management, ethics, corporate integrity

and safety. However, we observed shifts

including the heightened importance

of various granular subjects related to

community relations, health, safety and

occupational health and, conversely, the

decreased prominence of other topics

within the waste management and mine

closure categories.

Next, we outline the key materiality

issues underpinning our commitment to

responsible business practices. These have

been grouped into four pillars – Doing

business ethically and responsibly, Caring

for our people, Protecting the environment

and Partnering with our communities.

The following table provides further

information about our key materiality

issues, and how they are interlinked

to the principal risks. Additionally, we

highlight the strategic alignment of our

core business with the United Nations

Sustainable Development Goals (SDGs)

and our contribution to them. For a general

overview of the Company’s risk assessment

and strategies for mitigation, please refer to

the Managing our Risks and Opportunities

section in pages 151-183.

We optimise resource use to curb our impacts and

are accountable for our environmental footprint.

Key matters

• Environmental management.

• Energy.

• Climate change.

• Waste management.

• Water stewardship.

• Biodiversity.

• Mine closure.

Material issues

• Climate change.

• Environmental management.

• Biodiversity conservation.

• Water management.

• Waste management.

• Mine closure.

• Innovation and technology.

Intersection with principal risks

• 13 Climate change.

• 14 Tailing dams.

• 15 Environmental incidents.

SDG Alignment

How we contribute to the SDGs

Mitigate our impact by decreasing

resource consumption, improving

resource efficiency, increasing

renewable energies, managing

waste responsibly, and fostering

biodiversity stewardship and land

remediation across our operations.

We engage meaningfully with our communities

and support the issues that matter to them.

Key matters

• Community relations.

• Socioeconomic development.

• Respecting human rights.

Material issues

• Community relations.

• Relationship with indigenous

people.

• Human rights.

Intersection with principal risks

• 2 Security.

• 10 Access to Land.

• 11 License to operate.

SDG Alignment

How we contribute to the SDGs

Engage with our communities

to address their concerns with

projects aimed at improving their

livelihoods and reducing poverty.

BUILDING TRUST

PARTNERING WITH

OUR COMMUNITIES

PROTECTING

THE ENVIRONMENT

STAKEHOLDERS

Additional

Information

Strategic

Report Governance

Financial

Statements

Key contribution of silver and gold to the UN SDGs

Protect health

by reducing

infections and

through use in

rapid testing.

Present in

innovative

electronics

that improve

lives.

Make water

safer.

Used in

technologies

togenerate

clean energy.

We affirm our ethical culture through

our behaviour and actions.

Key matters

• Ethics culture.

• Responsible business.

Material issues

• Ethics and corporate integrity.

• Responsible value chain.

• Data privacy and cybersecurity.

• Relationship with government

and authorities.

Intersection with principal risks

• 1 Potential actions by the

government.

• 5 Human resources.

• 6 Cybersecurity.

SDG Alignment

How we contribute to the SDGs

Promote and maintain an ethical

culture in the way we conduct

ourselves and our business,

taking responsibility and being

accountable for our actions across

our value chain.

We prioritise our workforce’s health,

safety and wellbeing.

Key matters

• Our culture.

• Safety.

• Health.

Material issues

• Health, safety and occupational

wellbeing.

• Talent development.

• Human rights.

• Diversity, equity and inclusion.

• Innovation and technology.

Intersection with principal risks

• 5 Human resources.

• 8 Safety.

• 9 Union Relations.

SDG Alignment

How we contribute to the SDGs

Cultivate an inclusive and diverse

culture, invest in training and

development, prioritise the health

and safety of our workforce

to create a workspace where

everyone is safe, respected and

has equal access to opportunities.

BUILDING TRUST

CARING FOR OUR

PEOPLE

DOING BUSINESS

ETHICALLY AND

RESPONSIBLY

STAKEHOLDERS

82 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Inspirational motivation

Idealised influence

Individualised

consideration

Intellectual

stimulation

Supports others

speaking up

Raises ethical and

safety concerns

Makes ethical decisions

Candour

Accountability

Solutions

Courage

Embraces diversity

Minimises

unconscious biases

Challenges artefacts

and assumptions

Step-Up

culture

Builds trust

Leads

transformatively

Acts

ethically

Leverages

diversity

DOING BUSINESS

ETHICALLYAND

RESPONSIBLY

‘Step-Up’ culture framework

We affirm our ethical culture

through our behaviour

and actions.

Ethics culture

As a Company, we hold ourselves to the

highest ethical standards and believe that

our actions and behaviour should always

reflect our corporate values: Confidence,

Responsibility and Respect, Integrity and

Loyalty (CRRIL). We expect our workforce

and related third parties to consistently

embody and adhere to these standards

and to our Code of Conduct.

To further promote ethical decision-

making and align our behaviour with our

overall strategy, in 2013 we began a journey

to embed ethics into our organisational

culture, implementing a framework known

as ‘Step-Up’ culture: in the first phase (2013-

2016), our objective was the reduction

of behavioural risk – the gap between

intended, expressed and actual behaviours.

The second phase (2016–present) has

focused on raising awareness and

developing the ethical decision-making

competencies of our workforce.

In 2023, we conducted a comprehensive

review of our Code of Ethics and Conduct,

streamlining and categorising all

aspects related to legal and regulatory

compliance. This included crucial

matters such as the prevention of money

laundering, safeguarding personal data

and contracting specialised services

in alignment with the Mexican labour

reform, that although already embedded

within internal policies, required further

clarification and transparency. As an

additional measure, we also introduced

a provision requiring our personnel to

decline any gifts from third parties.

Since 2016 we have actively participated

SUSTAINABILITY AT THE CORE

OF OUR PURPOSE CONTINUED

Additional

Information

Strategic

Report Governance

Financial

Statements

in Ethisphere’s

™

Most Ethical Companies

survey, using its Ethics Quotient

regularly assess and monitor our ethical

culture and identify international best

practices, as well as to track our progress

towards maintaining and improving our

own practices. As a result of our latest

exercise, we have generated initiatives that

we will roll-out during 2024 to strengthen

our ethical culture and integrity practices

in the following years.

Training and capacity

building

Our Compliance programme and

communications aim to foster a desired

set of culture and behaviours within the

Company and our stakeholders.

Our workforce undergoes mandatory online

training to set expectations for desired

behaviours. During the period, we held an

integrity-related onboarding workshop for

new generations of Engineers in Training,

with additional workshops addressing key

integrity and compliance matters across

different areas and business units in the

Fresnillo district: regulatory compliance,

conflicts of interest and harassment

prevention. In addition, we delivered

periodic compulsory courses on:

• Our Code of Conduct (the ‘Code’):

onboarding session covering key

compliance policies – such as donations,

political contributions, promotional

expenses, government relations, and

the use of the whistleblowing line – and

an annual evaluation and endorsement

of the Code, requiring a declaration of

potential conflicts of interest; in 2023,

we introduced an interactive form

facilitating a user-friendly experience

while ensuring a more efficient means of

storing data for subsequent processing.

• Labour and Sexual Harassment:

designed for non-unionised workers

and covering fundamental concepts

around harassment, emphasising our

zero-tolerance stance. The course also

provides guidance on the reporting

mechanism for any situations they may

experience or witness.

We also conduct permanent campaigns

to engage our entire workforce through

various channels, such as emails,

posters, infographics, videos, computer

screensavers and a dedicated internal

portal for ethics and compliance topics

to ensure that key aspects of our Code

of Conduct and internal policies are

effectively communicated and understood.

Dissemination efforts in 2023 included:

• Awareness of cybersecurity.

• Knowledge of gifts and services.

• Semi-annual statistics on the

whistleblowing mechanism.

• Education on the right of access,

rectification, cancellation, and opposition

of the holders regarding their personal

data (ARCO rights).

• Recognition of conflicts of interest.

• Endorsement of the 2023 commitment

to integrity.

For third parties in our value chain –

including owners, legal representatives

and residents – we also provided online

workshops, covering essential topics

to enable alignment with our integrity

policy, organisational values and

Third-Party Code of Conduct. Subjects

included human rights responsibility, due

diligence, conflicts of interest, bribery and

corruption, expected behaviours and our

whistleblowing mechanism.

Moving forward, our commitment

remains unwavering. We will persist

in our efforts to prioritise the wellbeing

of our people through ongoing training,

addressing grievances promptly,

dispelling myths surrounding workplace

culture, fortifying our organisational

values and actively encouraging the

use of our various reporting channels,

with a particular emphasis on our

whistleblowing mechanism. Through

these measures, we aim to sustain a

workplace where every individual feels

heard, respected and secure.

Harassment Prevention

programme

In line with our purpose to enhance the

wellbeing of people, we believe that

a positive work environment not only

contributes to overall wellbeing but also

significantly influences productivity. The

Harassment Prevention programme serves

as a cornerstone for fostering this positive

environment. Through comprehensive

training, we provide our workforce with

the tools to effectively identify, prevent,

and report workplace and sexual

harassment. The delivery of face-to-face

awareness workshops has also played

a crucial role in establishing trust in the

whistleblowing mechanism.

These workshops go beyond traditional

training methods; they actively cultivate

a welcoming and inclusive space for

the exchange of ideas and experiences

through hands-on activities and

group dynamics, empowering them

to effectively address harassment. The

impact of these workshops is evident

as attendees often respond positively,

challenging and re-evaluating ingrained

norms such as chauvinism or gender-

based violence. Importantly, participants

gain new perspectives and strategies to

constructively address these issues.

During 2023, we conducted workshops

for 4,732 employees and contractors. This

ongoing effort ensures that every member

of our team is well-versed in the Company’s

stance on workplace and sexual

harassment since onboarding, fostering a

collective commitment to maintaining a

safe and respectful workplace.

Onboarding Harrassment Prevention

programme for new personnel, 2023

Business unit People

Fresnillo 1,471

Juanicipio 1,382

Saucito 1,357

San Julián 231

Ciénega 208

New projects 66

Penmont 17

Total 4,732

84 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2023

022

021

020

019

163

113

157

110

213

143

186

154

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Whistleblowing mechanism

Our whistleblowing mechanism, known

as ‘Línea Correcta’, serves as a confidential

and secure channel for raising concerns

regarding the Company’s operations or

any unethical behaviour. It is operated

by Ethics Global, an external third-party

provider, which ensures the anonymity

of whistleblowers when filing a report.

The whistleblowing mechanism is

widely available to our employees,

contractors, and other stakeholders such

as suppliers and members of surrounding

communities. The reports received

are reviewed quarterly by the Honour

Commission and monitored by the Audit

Committee. Twice a year, the Board of

Directors also receives reports at meetings.

Ethics culture continued

We recently conducted a third-party

survey to assess employee trust in the

whistleblowing mechanism. Leveraging

these insights, we developed a

comprehensive plan aimed at enhancing

the reception, handling and resolution

of reports related to unethical conduct.

The overarching goal is to reduce risks

associated to information leakage, reprisals

and to foster improved communication

with the potential whistleblowers who

utilise any reporting channel for violations

to our Codes of Ethics and/or Conduct. This

plan will be implemented during 2024,

featuring a campaign disseminating key

aspects such as confidentiality, protection

against retaliation and how to effectively

collaborate in an investigation. Additionally,

we will also target workshops to strengthen

the capabilities of key departments that

are frequently featured in such reports.

In 2023, we observed an increase in

complaints related to labour and sexual

harassment compared to the previous

year. We attribute this result to the

continued dissemination of our reporting

mechanisms and, notably, the growing

trust among our personnel to report

instances of workplace harassment. We

anticipate this trend will continue into

2024, supported by the project to enhance

trust in the whistleblowing mechanism.

2023 cases

Type 2023 2022

Labour harassment 66 43

Sexual harassment 23 11

Inappropriate arrangements with suppliers 21 15

Abuse of authority 19 17

Other 11 3

Non-compliance with internal policy 8 7

Conflict of interest 5 6

Professional negligence 5 4

Unsafe conditions 4 –

Fraud 1 –

Misuse of assets – 3

Breach of trust – 2

Inappropriate behaviour at work – 2

Total 163 113

What’s next

• Continue our efforts to eliminate

all forms of workplace violence,

raising awareness to prevent

labour and sexual harassment,

and strengthening confidence in

our whistleblowing mechanism.

• Roll-out a Company-wide

dissemination campaign highlighting

key elements for whistleblowing

along with workshops to enhance

capabilities in key departments that

often feature in such reports.

• Permanent ‘tone from the top’

dissemination campaigns on

ethics culture and compliance.

• Third-party periodic evaluations

of the ethics culture and compliance

programmes.

Ethical Conduct KPIs

Whistleblowing – Number of reports

Whistleblowing – Number of cases

Tone from the top – Number of reports

related to managers

Discipline – Number of disciplinary actions

Discipline – Number of control

reinforcement

Additional

Information

Strategic

Report Governance

Financial

Statements

Modern slavery and

commitment to human rights

Fresnillo plc is committed to upholding

human rights and does not tolerate any

form of modern slavery, including forced

labour and human trafficking. We are

dedicated to ensuring that these practices

are not present in any aspect of our

business or our value chain. Inspired by our

purpose to contribute to the wellbeing of

people through the sustainable mining of

silver and gold, we prioritise the promotion

of best practices on human rights due

diligence, which includes the identification,

mitigation and remediation of any

negative impacts on human rights.

At the core of Fresnillo’s commitment

to being a responsible business and an

employer of choice lies our profound

dedication to our people. We have

invested significant efforts in providing

comprehensive assistance and unwavering

support to our workforce and our

Responsible business

communities, recognising their unique

needs, and striving to meet them with

utmost care and diligence.

For more information, please refer

to our website for the latest available

Modern Slavery Statement.

Bribery and corruption

prevention

The ethical conduct of our workforce is

key to achieving the Company’s purpose.

Adhering to applicable laws on bribery

and corruption, including the UK Bribery

Act 2010, the Mexican General Law of

Administrative Accountability, the Mexican

Federal Criminal Code, and the federal

and state secondary laws applicable

to anticorruption, is a fundamental

commitment with which all our personnel

comply. We also vigilantly monitor

transactions and report on vulnerable

activities, ensuring compliance with

regulations on operations involving illicit

funds and money laundering.

Our anti-bribery and anticorruption

mechanisms align with international

best practices and guidelines, including

the United Nations Global Compact,

fundamental conventions of the

International Labour Organization (ILO)

and guidelines promoting corporate

responsibility issued by the Organization

for Economic Cooperation and

Development (OECD).

Our policy mandates:

• Maintain a zero-tolerance stance

regarding any form of corruption

and bribery.

• Report suspected bribery and

corruption through our institutional

whistleblowing mechanism

(‘Línea Correcta’).

• Investigate all bribery and

corruption reports.

• Avoid doing business with third

parties where concerns have

been raised regarding bribery or

corruption, or suspicions raised that

the third party may engage in such

activities on our behalf, following

our analysis and due diligence

evaluation process.

• Record transactions accurately and

transparently in accounting books

and accounts.

We engage with diverse third parties, such

as contractors, suppliers, logistics, law and

advisory firms, unions, donation recipients

and government officers. We prioritise the

cultivation of positive relationships while

proactively managing potential risks such

as bribery, corruption, money laundering,

fraud and human rights violations.

We operate with a robust compliance

framework that oversees strategies and

initiatives with a preventive focus to

avert situations related to bribery and/

or corruption, to ensure compliance with

applicable internal regulations. These

efforts encompass processes, areas and

individuals responsible for maintaining an

anti-bribery and anti-corruption stance due

to their nature or high level of exposure.

Disciplinary measures for individuals

involved directly or indirectly in bribery

and corruption, including third parties,

may range from legal measures to the

termination of their employment contract,

in the case of our workforce, or termination

of business relationships in the case of

third parties.

In 2023, we enhanced processes and

documented procedures to ensure

compliance with external regulations

across various subjects and operational

processes. Collaborating with different

departments and stakeholders, this effort

86 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2023

2022

2021

2020

2019

364

343

415

367

222

Low Medium High Rejected

Third-party due diligences performed, by risk level

aligned with sites visited during the year.

Following the 2022 third-party anti-bribery

and corruption programme verification, we

developed an action plan to implement

improvement in high-risk processes,

updating procedures for construction

and services contracting, procurement,

due diligence and financial operations.

The significance of regulatory compliance

and its value to the organisation has

been effectively communicated through

the ‘Compliance Matters’ campaign.

Additionally, a 2024 training plan is in

place for high-risk areas.

Since 2013, we have conducted ethical

due diligence that precedes any business

relationship and is tailored to the specific

risks and characteristics of each party.

Continuous compliance monitoring

is carried out, and adjustments to

arrangements with third parties are made

as needed. If risks cannot be mitigated,

business relationships are suspended.

In 2023, we successfully implemented

new software to automate and optimise

the third-party due diligence process.

This transformation and standardisation

considers the criticality of each third-party

category with a risk-based approach,

enabling us to efficiently detect alerts

and establish a precise methodology

for quantifying risk levels. The software

facilitates informed decision-making

regarding the initiation and continuation

of business relationships with third parties.

It also enhances greater traceability in

operations with third parties, reduces

response times, and streamlines the

process for both external partners and

internal personnel. Our efforts reflect our

commitment to staying ahead of regulatory

requirements, fostering efficiency and

transparency in our operations.

Cybersecurity

At Fresnillo, we recognise that information

is a key asset that demands collective

responsibility from all our workforce for its

protection, ensuring digital security across

all technological processes. Maintaining

a pervasive awareness of cybersecurity at

all organisational levels is integral to our

strategy, and we focus on updating and

strengthening cybersecurity in alignment

with our strategic objectives.

We employ various methods to foster

and elevate our cybersecurity culture,

including workshops, communications,

campaigns and exercises. Our collaborative

ethos extends to working closely with

information technology departments,

contributing to the definition and

establishment of best practices and

security standards. This collaborative

effort ensures that our business processes,

adhere to the highest standards of security

and reliability. In parallel, our cybersecurity

governance initiatives actively enhance our

regulatory capabilities to meet the diverse

compliance requirements applicable to

our Company.

During the period, we laid robust

foundations for adherence to the Mexican

Federal Law for the Protection of Personal

Data in Possession of Private Parties

(LFPDPPP). We successfully completed

the second phase of a third-party audit of

our personal data management system,

a significant stride towards achieving

certification across our business units.

In line with our commitment to

safeguarding information, we also plan

to renew our cybersecurity governance

framework, building upon the three lines

of defence model. This approach will

engage all levels and areas of our business.

Government payment

transparency

Mining can drive economic and social

progress when carried out responsibly.

However, corruption and inadequate

governance can undermine the benefits

that society should receive from mining

revenue. At Fresnillo, we believe that

transparency in government payments

fosters trust and strengthens society.

As required by the UK Reports on

Payments to Governments Regulation

2014, its amendment in December 2015

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Responsible business continued

Additional

Information

Strategic

Report Governance

Financial

Statements

What’s next

• Carry out continuous monitoring

of Group-related operations with

vulnerable activities, along with the

necessary adaptation to emerging

regulatory changes.

• Continue onboarding training

for all personnel, emphasising

harassment and fraud prevention,

specifically tailoring modules

for areas and personnel with a

higher likelihood of encountering

bribery risk.

• Implement a targeted training

plan covering anti-bribery,

corruption prevention and

regulatory compliance for

areas more susceptible to

bribery and corruption.

• Renewal of our cybersecurity

governance framework, building

upon the three lines of defence

model.

• Continue participating and

improving our performance in

transparency and accountability

initiatives.

and the Disclosure and Transparency Rules

of the Financial Conduct Authority (FCA),

since 2016 we have reported an overview

of payments to governments made by our

Company and its subsidiaries during the

previous reporting year.

The payments disclosed are those arising

from activities involving the exploration,

prospecting, discovery, development and

extraction of minerals (extractive activities),

based on materiality established by such

regulations (where a payment or a series or

related payments have exceeded £86,000).

The type of payments that were disclosed

for the 2022 fiscal year are:

• Taxes: there are taxes paid by Fresnillo

on its income, including special mining

rights. In accordance with the UK

Regulations payments made in relation

to consumption, sales or employee taxes

were excluded.

• Royalties.

• Licence fees, rental fees, entry fees

and other considerations for licences

or concessions: these are fees paid as

consideration for acquiring a licence

for gaining access to an area where

extractive activities are performed.

For more information, please refer to our

website for the latest available report on

payments to governments.

Transparency and

accountability

Transparency and accountability for social

and environmental impact are crucial in

establishing trust. By disclosing important

non-financial information, we enable

our investors to make better investment

decisions. Mitigating negative impact is

crucial to ensuring our business model

is socially responsible. We therefore

conduct regular perception studies in

the communities where we operate,

monitor media, hold regular meetings

with stakeholders and operate grievance

mechanisms to engage people who might

be adversely affected by our activities.

We disclose our environmental, social and

governance (ESG) information using the

appropriate channels, such as:

• Annual Report and Accounts.

• Carbon Disclosure Project (CDP).

• Corporate Sustainability Assessment

(CSA).

• Corporate website.

• Ethisphere BELA.

• Meetings and traditional media to

inform stakeholders.

• Modern Slavery Report Statement.

• Workforce Disclosure Initiative (WDI).

During the period, we received the

following recognitions: Ethics and Values in

Industry from the Mexican Confederation

of Industrial Chambers (CONCAMIN);

the Exceptional Enterprises award from

the Business Coordinating Council (CCE),

Communication Council, and Institute

for the Promotion of Quality; the Socially

Responsible Company award from the

Mexican Centre for Philanthropy (CEMEFI);

and obtained a Maximum Score in the

Corporate Integrity survey, a joint initiative

by the NGOs Mexicans Against Corruption

and Mexican Transparency.

88 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Accountability

ecosystems

co-creation

Monitoring our culture

Taking corrective actions

Values

Relational and

operational

principles

Transformational

leadership

Culture

CARING FOR

OUR PEOPLE

Our workforce is the driving force

behind our ability to contribute to

the wellbeing of people through

the sustainable mining of silver

and gold.

SUSTAINABILITY AT THE CORE

OF OUR PURPOSE CONTINUED

Our culture

Our organisation initiated its cultural

evolution journey in 2021 and has

consistently progressed, prioritising the

workforce’s wellbeing, and enhancing

company effectiveness and efficiency. We

are committed to fostering a culture that

values long-term engagement, promotes

empowerment, flexibility, collaboration,

transparency and active involvement.

Guided by these principles, we embrace:

• Holding ourselves accountable for

individual and collective work (build

trust and act ethically).

• Building our future together through

ecosystems and co-creation recognising

that our differences strengthen us

(leverage diversity).

• Our transformational leadership

model recognises, empowers,

motivates, integrates and inspires (lead

transformatively).

Embedded in our core values, this cultural

ethos fosters innovation and encourages

wholehearted dedication to results

and operational excellence; it enhances

productivity but also drives cost reduction

and reduces our environmental footprint:

Additional

Information

Strategic

Report Governance

Financial

Statements

Relationship principles

• Agility based on trust.

• Effective communication.

• Inclusive collaboration.

• Commitment to results.

• Emotional intelligence.

Way of working

• Accountability.

• Teamwork.

• Co-creation.

Operational principles

• Health and safety.

• Sustainability.

• Risk management.

• Operational and financial

discipline.

• Efficiency and innovation.

Transformational leadership

• Inspires.

• Motivates.

• Recognises.

• Integrates.

• Leverages diversity.

Board’s oversight

• Ensuring the alignment of Purpose,

strategy, culture and workforce

engagement.

• Monitoring the culture and

the outcomes on engagement,

safety, ethics, diversity, equity

and inclusion.

Workforce engagement

• Comprehensive wellbeing strategy.

• ‘I Care, We Care’ programme.

• Union relations.

• Cultural evolution strategy.

• Ethics culture training and capacity

building.

• Harrassment Prevention

programme.

• Diversity, equity and inclusion

initiatives.

Monitoring our culture

• Engagement: Basher methodology,

organisational climate, and

leadership assessment surveys.

• Safety Culture: ‘I Care, We Care’

and LEAL surveys.

• Ethics culture: integrity.

environment survey and

Ethisphere’s

™

Ethics Quotient

surveys.

• Whistleblowing mechanism KPIs.

• Diversity KPIs.

• Turnover rate.

Outcomes from monitoring our

culture

• Robust strategies to support our

business objectives by embedding

diversity, collaboration and agility in

decision-making, based on a sound

understanding of our culture and

winning behaviours.

• Transformational leadership that

thrives and promotes our people’s

wellbeing.

Trust: Fosters appreciation and

resilience in strategic relations.

We foster trust by actively engaging

with our people, communities,

authorities, and shareholders on

the issues significant to them.

Our principal decisions prioritise

stakeholders, ensuring the

preservation of their trust. Trust in

our people and their talents forms

the foundation for delivering on

our Purpose.

Responsibility and respect:

Cultivates care and accountability

for our actions, decisions and

outcomes.

We manage our operations and

projects responsibly. Our social

acceptability relies on being

accountable for our impacts on

our people, communities and the

environment. We recognise the

inherent value of every person

and welcome different opinions

and beliefs.

Integrity: Prevents adverse

consequences of unethical actions

through complete transparency

and honesty.

Our behaviours and actions should

always reflect our well-established

ethical culture. Operating with

integrity is the only way to contribute

to the wellbeing of people.

Loyalty: Builds long-term and

reciprocal relationships aligned

with our organisational principles.

Strong relationships with our

workforce, communities, authorities

and shareholders ensure our ability

to create long-lasting value.

Values Engagement

Winning behaviours

90 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Our culture continued

Our workforce

At the heart of our commitment lies

the goal of attracting, developing, and

retaining top talent and fostering a long-

term relationship with our workforce. We

prioritise maintaining a corporate culture

deeply rooted in ethics and a genuine

concern for our people’s wellbeing. This

commitment extends to respecting labour

rights, engaging in constructive dialogue

with union representatives and embracing

diversity in our workforce, comprising

unionised employees, non-unionised

employees and contractors.

Commencing with a breakdown of the

workforce composition based on age

groups and employment categories, the

data reveals relatively similar percentages

for non-unionised and unionised

employees, and contractors, with the

largest group being people over 30 and

below 50 (56.8%), then people below 30

(35.7%), and finally, people above 50 (7.5%).

Over the years, we have made substantial

strides in gender diversity, steadily

increasing the percentage of women in

our workforce, reaching 11.88% in 2023, up

from 9.73% in 2019. We continue to close

the gap on the country average, which

currently stands at 17.3% according to data

from the Mexican Mining Chamber. While

proud of our progress, we acknowledge

there is more work to be done. For a

detailed overview of our strategies to foster

female talent, refer to the Diversity, Equity,

and Inclusion section on pages 96-97.

During the period we experienced an 8.9%

decrease in our total workforce, motivated

by the administrative reorganisation that

was undertaken to achieve efficiencies and

cost reductions, as well as the workforce

consolidation at the Herradura district

following the progressive closure of mine

operations at Noche Buena, thus affecting

both the labour turnover figures compared

to its historical trend and our share of

women in the workforce. We expect

these trends to stabilise in the future.

Men Women Total

Employees

(unionised and

non-unionised)

6,254 1,006

7,260

Senior

managers

151 14

165

Contractors 11,173 1,343

12,516

Total

workforce 17,427 2,349 19,776

Workforce composition, by contract

2023

2022

2021

2020

2019

1,580

1,710

1,533

1,431

1,317

5,680

6,360

5,826

4,327

4,165

12,516

13,639

12,757

13,606

13,407

Contractors

Unionised employees

Non-unionised employees

Workforce composition, by age

3,388

438

4,703

6,886

927

496

965

119

1,854

Contractors

Non-

unionised

Unionised

Above 50

Between 30 and 50

Below 30

Percentage of women, by group

14.03%

7.69%

10.73%

13.86%

8.48%

5.17%

10.06%

12.66%

5.29%

10.97%

9.59%

10.07%

4.58%

9.03%

11.29%

2023

2021

2020

2019

2022

Manager and senior executive positions

Employees (unionised and non-

unionised)

Contractors

Labour turnover

6.44%

13.56%

9.19%

22.07%

9.19%

10.31%

5.71%

9.55%

3.97%

10.00%

2023

2021

2020

2019

2022

Voluntary labour turnover

Total turnover

Labour turnover includes unionised and non-unionised

personnel.

To unlock the full potential of our workforce

and maximise their contribution, we are

dedicated to cultivating a supportive

work culture that encourages inclusion,

creativity, innovation and collaboration.

Regular discussions with our designated

Non-executive Director (NED) and biennial

workforce engagement surveys keep

us aware of their needs. These exercises

provide valuable insights, informing our

strategies for future policies and initiatives

aimed at enhancing employee satisfaction

and driving organisational success. For a

detailed overview of the designated NED’s

engagement with the workforce, refer to

the Workforce Engagement section on

pages 40-41.

Engaging our people

We administer biennial engagement surveys employing the Basher methodology

to monitor organisational climate. It encompasses 60 items across seven key

areas to evaluate employee and contractor satisfaction. The survey employs a

dual evaluation scale, combining responses with the relevance they hold for each

individual. The outcomes undergo comprehensive analysis across different cohorts,

leading to discussions among leadership teams and relevant departments. Areas

with the lowest scores, as well as specific items, are pinpointed and incorporated

into existing programmes or integrated as focal points of new improvement plans.

Topics: Cohorts analysed:

• Our working practices. • Process/Department.

• Industrial safety. • Organisational roles.

• Code of Conduct and compliance. • Age groups.

• Management and leadership. • Seniority.

• Work environment. • Gender.

• Trust. • Key personnel.

• Teamwork.

Comprehensive

wellbeing

Transcendental

Professional

Physical

Cultural

Emotional

Intellectual

Additional

Information

Strategic

Report Governance

Financial

Statements

We prioritise initiatives to enhance the

overall wellbeing of our workforce. In

recent years, we embarked on a cultural

evolution journey aimed at integrating

the dimensions that contribute to an

individual’s development. These pathways

are designed to help individuals reach their

fullest potential and unlock both collective

and individual ‘comprehensive wellbeing’.

Recognising the significance of a

contemporary work environment and

Routes for our Comprehensive Wellbeing

building on our commitment to improve

the holistic wellbeing of our workforce,

we have expanded health, nutrition and

cultural programmes. Our facilities also

boast state-of-the-art sports infrastructure,

including gyms, pools and basketball

courts. Additionally, we accommodate

diverse needs within our operating units

through flexible working arrangements.

For locations with limited family support

structures, we have implemented fly-in-

fly-out schedules and variable workdays,

Intellectual: Fostering optimal

cognitive abilities for thoughtful

reflection, informed decision-

making, continuous learning

and adaptability to change.

Cultural: Blending traditions,

beliefs and personal values

into a cohesive corporate

culture, capable of adapting

to socioenvironmental

shifts and fostering

meaningful relationships

with the community.

Professional: Cultivating

skills and competencies

aligned with roles and

responsibilities, fostering

a culture of continuous

learning and development,

promoting collaborative

engagement with colleagues

and leaders, and achieving

overall job satisfaction.

Emotional: Cultivating the

recognition, management

and appropriate expression of

emotions and feelings, adeptly

navigating stress, and nurturing

positive self-relationships and

interpersonal connections.

Transcendental: Elevating

consciousness, uncovering

life’s purpose, experiencing

love, joy, peace and a sense of

achievement (self-fulfilment)

to attain personal excellence

and contribute to the wellbeing

of others.

Physical: Ensuring a sense of

physical security, wellbeing and

vitality, enabling individuals to

relish life fully and execute their

responsibilities with satisfaction.

offering enhanced flexibility. For nursing

mothers, we allow a more flexible working

schedule to fulfil their breastfeeding rights.

For a detailed overview of our strategies to

improve our workforce’s wellbeing, refer to

the Health section on pages 103-105 and

for our strategies to accommodate women

in our workforce refer to the Diversity,

Equity, and Inclusion section on pages

96-97.

92 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Our culture continued

Training and development

In our drive to secure a robust pipeline for

future success, we prioritise the attraction,

retention and development of top talent.

Long-term career growth is highly-valued,

and our investment in training and

mentorship programmes reflects our

commitment to helping employees reach

their full potential, helping our people

grow and develop, serving as a cornerstone

of our retention strategy.

Our recruitment approach involves a

cohort-based system for both short-term

and long-term interns through internships,

residencies, and our flagship programme,

‘Engineers in Training’. Collaborating with

leading Mexican educational institutions,

we tap into a diverse pool of young talent

pursuing mining and metals-related

degrees in fields such as mining, geology,

metallurgy and various engineering

disciplines. These programmes allow for

a steady talent pipeline aligned with our

• The programme encompasses

students undergoing professional

internships.

• It covers both the traditional one-

month continuous internship

in mining units and specialised

programmes like ‘Dual Internships’,

in which, participants spend one

week per month at work centres,

reinforcing the knowledge acquired

during their academic coursework.

• Designed to accommodate students

from earth sciences disciplines

such as mines, metallurgy, geology,

topography, and maintenance,

primarily from leading universities.

• The programme extends over three

months in mining units, where

students undertake impactful

projects for the organisation,

presenting their findings to an

interdisciplinary team.

• Residencies provide eligibility for the

Engineers-in-Training programme.

• This programme targets recent

undergraduates who also completed

the residency programme.

• Participants undergo an integral

training programme over a six

month period.

• The programme aims to develop

their skills in each mining production

process: geology, planning, mine

operations, plant operations and

maintenance.

• It provides comprehensive technical,

administrative and occupational

safety competencies.

• Each student is paired with an

operations team coach, ensuring

guidance and performance

evaluations.

• High-performing interns are

subject to potential offers for

permanent positions.

Recruitment programmes

growth strategy. Significantly, they engage

students early in their college education

but also promote increased participation

of women in the mining industry. Over

time, we have actively worked towards

achieving more gender-balanced cohorts.

Diversity in talent attraction

2023

2022

2021

2020

2019

42%

45%

44%

38%

29%

58%

55%

56%

62%

71%

Men

Women

Long-term internships and Engineers in Training.

Junior non-unionised positions.

During our onboarding procedures, we

provide essential courses designed to

seamlessly integrate both our unionised

and non-unionised personnel into our

organisational culture. Through immersive,

in-person sessions, we dive into crucial

topics such as health, environment

and industrial safety, fostering a deep

understanding and commitment to these

vital aspects. In the case of our contractors,

we hold onboarding sessions through an

online platform known as ‘Virtual Campus’

with the purpose of training them on these

subjects before their access to our facilities,

ensuring safe operations from the start. At

the core of our onboarding experience is

the dissemination of the ‘I Care, We Care’

programme, embodying our collective

commitment to our workforce’s wellbeing.

It aims to strengthen our approach to

work-related risk prevention and the

implementation of critical risk controls

across our operations, building a strong

sense of responsibility and accountability

to ensure that each individual is actively

committed to our shared pursuit of safety

and operational excellence. For a detailed

overview of our safety strategy, refer to the

Safety section on pages 98-102.

Internships Engineers in trainingResidencies

Virtual campus

Company overview

Welcome section

Health and environmental

regulation

Labour relations

Basic safety

Mine safety regulation

Health and first

aid regulation

Training container tours

Safety regulation

Safety and hygiene

HSECR management system, ethics, compliance and antibribery

Mexican Official Standards (NOMs) on safety, shift start meeting, defensive driving,

rock mechanics, self-rescuer

NOMs on occupational health, first aid and environment

Company overview, work harassment, psychosocial risks

factors in the workplace

Behaviour based safety, ‘I Care, We Care’, critical risk controls

NOMs on special permits, principal risks in mine and plant

NOMs on first aid and PCR

Virtual practice on critical risk controls protocols

at training centres

‘I Care, We Care’, critical risk control protocols,

hazard identification and risk assessment

In person

training at site

Additional

Information

Strategic

Report Governance

Financial

Statements

We currently operate three evaluation

centres at our facilities in the Fresnillo

district, which are registered with the

National Council for Standardisation and

Certification of Labour Competencies

(CONOCER). The purpose of strengthening

and certifying technical competencies

is to fortify core business processes and

critical areas such as rock mechanics,

ventilation, safety, environment, planning,

and metallurgy. In addition, the aim is to

achieve reductions in occupational risks,

incidents and damage to equipment.

We also prioritise initiatives that foster a

safety culture through the ‘I Care, We Care’

programme, identifying critical risks and

controls, and strengthening workforce

capabilities. These strategies contribute to

the development of our people and the

fulfilment of our strategies.

Institutional onboarding

94 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Company induction,

organisational

competencies,

productive processess

and value chain,

integrity and social

responsibility, asset

security, mine and

plant visits, among

others.

Workshop on

workplace harassment.

Introduction to

industrial safety,

‘I Care, We Care’, risk

control hierarchy and

safety tools, protocols

for managing critical

risks, and specific risks

associated with plant

and mining operations.

Regulatory standards in

safety and health,

first aid and

environmental care.

Take part in containers

training tour.

Broad understanding

of mining unit

overarching process

and interconnections:

• Geology and rock

mechanics.

• Planning and

surveying.

• Mine operations.

• Processing plant.

• Maintenance.

• Safety.

• Human resources.

• Financial control.

• Warehouse and

procurement.

Tailored training in

the area to which

they are assigned.

Delve deeper into

directly related

processes to

understand how

outcomes impact

one another.

Enhance their

technical and process

specific skills.

An expert mentor will

guide them, providing

support throughout

the process.

Institutional

onboarding

(1.5 weeks)

Safety standard

onboarding

(1 week)

Short tours

(1.5 weeks)

Focused tours

(21 weeks)

Area specific

training

(4 weeks)

Programme

graduation

Our non-technical development

programmes target leadership growth.

These programmes facilitate valuable

knowledge transfer, expertise sharing

and serve as a catalyst for inspiration and

engagement. For area managers and

supervisors, the emphasis is on immediate

tools for effective team management

and instigating a change in attitudes and

behaviours. Middle managers benefit

from programmes that hone leadership

skills and refine technical competencies

in mining, planning, mineral processing

and managerial soft skills. Executive

programmes concentrate on enhancing

competencies in finance, accounting,

human resources, corporate social

responsibility and leadership. These

programmes, including Leadership

Plus, Leaders with Vision, Leaders in

Training, BAL Managerial Diploma and

Capital Project Diploma, are conducted

in collaboration with the prestigious

Autonomous Technological Institute

of Mexico (ITAM).

Our commitment to individual

performance appraisal and formal

feedback remains unwavering. This

process not only enables us to identify

specific training needs but also serves

as a key tool for pinpointing promising

candidates for our institutional

development programmes at different

organisational levels. During the year,

we maintained an average of 64 training

hours per worker, including an average of

28 hours on HSECR training.

Training hours

2023

2022

2021

2020

2019

Average non-HSECR training hours

Average HSECR training hours

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Our culture continued

Case study

Training the engineers of the future

In partnership with premier Mexican educational institutions – such as the Autonomous University of Zacatecas (UAZ), the National

Autonomous University of Mexico (UNAM), the Guanajuato University and the Technological Institute of León (ITL), among others

– we actively seek out and nurture a diverse array of young professionals specialising in mining, geology, metallurgy and a range of

engineering fields in the early stages of their academic journey. Over the last six years, we have seen a total of 529 engineers graduate

through this scheme, and our current retention rate stands at 80.3%. Breaking down their roles, 0.3% of graduates are in operational

leadership, 11.1% in senior engineer positions, 85% in junior engineer positions and 3.5% in assistant positions and roles.

The Engineers in Training programme comprises 29 weeks of training and is structured as follows:

Additional

Information

Strategic

Report Governance

Financial

Statements

Labour relations

Unions play a pivotal role in our

commitment to enhancing productivity

and fostering a robust safety culture. We

believe that maintaining fair and respectful

relationships with unions is essential to

building trust and mutual accountability.

Our approach is centred on upholding

workers’ rights to freedom of expression,

free association and collective bargaining.

We actively engage with unions through

regular dialogue, leadership development

initiatives and wellbeing programmes –

including sports and cultural events – as

well as collaborative projects focused on

continuous improvement to reinforce our

partnership ethos.

Regular interactions take place between

the CEO, Head of HR and union senior

leadership, while at the operational level,

our business units maintain close ties with

local union committees and delegates.

These engagements underscore our

dedication to open communication and

foster collaboration for capacity-building

initiatives, particularly for newly elected

committees. Annual Safety Symposiums,

conducted in partnership with unions

and authorities, provide a platform for

exchanging best practices and promoting

meaningful discussions on industry

challenges and opportunities. Additionally,

we partner with unions to conduct the

‘LEAL’ survey on work behaviours and

wellbeing, leveraging insights to enhance

our workforce engagement strategy.

In 2023, operations at Herradura mine

experienced a temporary suspension

following an illegal stoppage by a very

small group of unionised personnel. The

stoppage prevented site access for other

workers, and was not approved by the

union, nor supported by the vast majority

of unionised workers at Herradura, with

whom we have a very constructive and

long-term relationship. This situation was

rapidly resolved with no significant impact

to the operations at Herradura.

Case study continued

The Engineers in Training programme was an incredibly enriching

experience for me. It allowed me to reinforce my academic foundations and

equipped me with essential professional skills. I am convinced that some

skills and insights can only be acquired through hands-on experience, and I

was lucky to be guided by mentors rich in expertise and eager to share their

wisdom. I am eternally grateful to my mentors, who were not just technical

and professional advisers but also life mentors, showing me how to grow

and develop both professionally and personally. ”

Adriana Arroyo, Mining Operations Centre Superintendent

I joined the Engineers in Training programme in 2013, shortly after

earning my degree in Mining and Metallurgical Engineering. I found

this initiative to be invaluable for talent development, providing me the

opportunity to enhance both my technical and interpersonal skills for

my initial role as junior engineer. Reflecting on this time brings both

nostalgia and deep appreciation, as I was involved in key projects at

San Julián mine. The programme’s structured approach to learning and

mentorship were crucial in motivating me, instilling the confidence to

foresee a promising career trajectory within the Company. Furthermore,

I wish to express my gratitude towards the programme’s counterparts

for their patience and willingness to share knowledge and experience,

a practice that significantly enriches our organisational culture.”

Tania Pineda, Mining Operations Centre Superintendent

The Engineers in Training programme has been a cornerstone in developing

my technical, administrative and interpersonal skills, offering me a

comprehensive overview of the Company’s value chain. This programme

laid a strong foundation for my organisational competencies through

continuous training, enabling me to progress professionally across various

roles within the organisation. My upcoming pursuit of a graduate degree

stands as a testament to Fresnillo’s substantial commitment to investing in

the growth and education of its workforce.”

Daniel Álvarez, Engineering and Planning Superintendent

96 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

During the period, the LEND Committee

met for the first time, to develop

comprehensive DEI work proposals. As a

strategic initiative, our senior executives

underwent targeted training on preventing

labour and sexual harassment, facilitated

by an external consultancy. The Virtual

Campus also played a pivotal role by

delivering 188 microlearning capsules

on discrimination and DEI to employees,

contributing to a more informed and

inclusive workplace culture.

On our female talent development

strategy front, we launched the call for

the second generation of the Women-

to-Women Mentorship programme and

activated a network of women in our

workplaces in the Torreón and Mexico City

Headquarters to create a safe and trusting

space; we expect to be able to replicate

these across all mining units. In partnership

with the Mexican Mining Chamber, we also

promoted the first Women in the Mining

Industry 2023 survey, aiming to understand

the development of female talent and the

benefits their expertise and professionalism

bring to companies, with 1,230 women

participating in total across the country.

We also achieved significant progress in

advancing disability inclusion initiatives

during the year. We conducted ‘Inclusive

Leadership’ training, led by Éntrale, a

leading advocate for the labour inclusion

of individuals with disabilities, specifically

tailored to sensitise senior leadership

to the importance of fostering an

inclusive workplace. Another noteworthy

accomplishment was the completion

of the initial phase of mapping our

workforce’s disabilities: through a

survey involving 980 participants, we

identified essential accommodations and

adjustments for optimal performance.

This process also led to the establishment

of criteria, protocols, processes, and

formats for the implementation of

these accommodations. Furthermore,

we conducted training for recruitment

personnel, emphasising inclusive practices

to mitigate unconscious biases and

prioritise the selection of candidates based

on their abilities and job requirements,

Diversity, equity and

inclusion

Our commitment is to

foster an inclusive culture

where diversity is not just acknowledged

but celebrated, empowering every

employee to realise their full potential. We

understand that equity and inclusion are

catalysts for talent attraction, retention

and development, fostering innovation

and creativity. Upholding the principle of

equality, we strive to create a workplace

where everyone enjoys equal opportunities

and is treated with respect. Our emphasis

on openness, belonging and respect

establishes a supportive environment,

enabling each individual to make a

meaningful impact.

Our dedication to advancing diversity

and inclusivity begins with a focus

on increasing the representation and

participation of women, recognising

the inherent competitive advantage

in embracing diversity. To achieve this,

we have set two key objectives:

1. Enhance the contribution of women

to the success of the Company.

2. Have a positive impact on female

employees.

In 2020, we committed to raising the

overall representation of women in our

workforce from 10% to 12% by 2025 and

breaking the glass ceiling at the operating

manager and superintendent levels, with

the aim of increasing the percentage of

women in these roles from 2% to 8% by

2025. In recent years, the Company has

made significant strides in improving

both indicators, although considerable

reconfigurations to our workforce initiated

in 2023 saw an 8.9% overall decrease

in headcount and shifted the organic

historical trends in gender diversity.

We expect the figures to stabilise during

2024, and will continue to keep them

under review, seeking to expand our

female representation in the future —

including in our senior management

and leadership roles.

Since 2019, we have actively embraced

the Women’s Empowerment Principles

established by the UN Global Compact

and UN Women. In 2020, we entered the

PAR Ranking, the largest ranking system in

Latin America measuring gender equality

performance. Subsequently, in 2021,

we contributed to the Women Matter

Mx – a comprehensive study of diversity

and gender in Mexico, conducted by

McKinsey & Company. In the same year,

we launched our Women’s Leadership

programme. Our commitment continued

in 2022, with dedicated efforts to enact

recommendations from both diagnostics,

strategically outlined in a DEI masterplan.

This master plan is built across three pillars,

containing several priority initiatives:

Total percentage of women

9.73%

9.70%

11.01%

12.11%

11.88%

2023

2022

2019

2021

2020

Glass ceiling

2.22%

2.56%

3.85%

5.42%

8.00%

2023

2022

2019

2021

2020

Period Cultural transformation Leadership and government Processes

2022 • Disseminate the DEI initiative

• Promote a culture of zero tolerance

towards harassment

• Establish the Labour Equity and Non-

Discrimination (LEND) Committee

• Create inclusive talent attraction

processes

• Issue the LEND policy (based on the

Mexican voluntary norm NMX-R025-

SCFI-2015)

2023 • Establish a network for women • Establish mentorship programmes • Develop DEI KPIs

2024+ • Create DEI champions programme

• Endorse the UN’s Women’s

Empowerment Principles (WEP)

• Implement and disseminate policies

and procedures with a DEI focus

• Finalise the development and

implementation of DEI KPIs

• Enhance safety conditions

• Develop and manage inclusive talent

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Our culture continued

Additional

Information

Strategic

Report Governance

Financial

Statements

irrespective of disability. Finally, we actively

participated in the BAL Group’s DEI week,

an annual event that features conferences

and discussions on disability awareness

and best practices on labour inclusion,

contributing to our ongoing effort to

create an inclusive and supportive

work environment.

Since 2022, we have extended our

commitment to fostering inclusion by

hosting annual inclusion rallies in Caborca,

Sonora, in collaboration with the TELETON

Sonora Foundation and the local National

System for Integral Family Development

(DIF). The goal is to enhance awareness

and cultivate a more inclusive society

and workplace environment. In the 2023

edition, the University of Sonora played

an active role, contributing valuable

insights to the discussions by involving

both teachers and students. These two-

day workshops and conferences cater to

a diverse audience, including students,

teachers, physiotherapists, physicians,

psychologists, individuals with disabilities

and the general public. They are designed

to equip participants with tools for early

interventions that contribute to the holistic

growth and fulfilment of individuals

with disabilities.

Gender Pay Gap

We are committed to paying an equal

wage for an equal job. Based on salary

scales, we have policies in place to close

the gender pay gap. In 2023, the gender

pay gap for non-unionised, non-executive

employees was -3.12% compared to -3.59%

in 2022. The gap is calculated using the

weighted average salary per hierarchical

level. The head count per hierarchical

level and business unit is used to

determine the weights in the overall

average gap calculation. We are

committed to closing this gap and to

promoting women in our operations,

projects and exploration activities.

Overall gender pay gap

-2.98%

-2.64%

-2.28%

-3.59%

-3.12%

2023

2021

2020

2019

2022

Open pit

operations

Underground

operations

Advanced

exploration

Exploration

offices

Support and

administrative

staff

Average gap per

hierarchical level

First level – Senior engineer -6.32% -8.59% -18.67% -5.09% -14.11% -8.32%

Second level – Junior engineer -2.26% -1.17% -12.43% 11.90% -2.88% -0.23%

Third level – Assistant 12.70% -6.14% 7.07% 64.37% 1.41%

What’s next

• Strengthen the labour inclusion

programme.

• Implement a DEI module in

onboarding virtual trainings.

• Continue rolling-out our DEI

strategy.

• Continue analysing reporting

frameworks to improve how we

report on our strategy to increase

the participation of women and the

positive impacts achieved to date.

Case study

Promoting breastfeeding in the workplace

To raise awareness about the

significance and benefits of

breastfeeding, we launched a

communication campaign during

the 2023 World Breastfeeding Week.

Our goal was to nurture a culture

of comprehensive wellness that

supports the balance of work, family

and personal life.

The campaign featured two webinars

led by doctors specialising in the

field. The first, titled ‘Breastfeeding

for the working mother: A holistic

wellness approach’ and the second,

‘Work and breastfeeding: Making

it possible’, were made available to

all our workforce. Additionally, the

campaign also highlighted the benefits

of breastfeeding through both printed

and digital posters, and provided

guidance on how to successfully

express, store and transport breast milk,

mindful of the challenges faced by our

female workers in remote locations.

This initiative underscores our

commitment to our employees’

wellbeing, and dedication to creating

an inclusive and supportive work

environment that values and supports

the health of the mothers in our

workforce as well as their children.

98 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Improvement

+ Strategic &

systematic review

+ ‘Risk watch’

Measurement

+ KPIs and

monitoring

+ Corrective and

preventive actions

+ Incident

investigations

Implementation

+ Strategic projects

+ Roles,

responsibilities

and training

Strategies

+ Safety

management

system

+ ‘I Care, We Care’

pillars

Principles and

beliefs

+ Safety as a value

+ Improve

performance and

empower people

Safety

Our vision is clear: secure

operations that function effectively

and safely, ensuring zero fatalities,

zero accidents, zero injuries and

zero harm.

Strategy

At Fresnillo, safety is a fundamental value

ingrained in our Sustainability policy,

reflecting a preventive culture and our

moral obligation to ensure our workers’

wellbeing. Our goal is clear – operating

without fatal accidents, minimising

exposure to risk, preventing harm to

people and damage to assets, while

maintaining an ethical and safe work

environment, with strong and visible

leadership at all organisational levels.

Prevention is at the heart of our safety

culture, supported by our ‘I Care, We Care’

philosophy. Spanning from exploration

to operations, this approach addresses all

inherent risks by promoting five strategic

lines of action: leadership, accountability,

risk competencies for both behaviours

and systems and cross-functional learning.

These pillars aim to establish critical and

performance controls in every operation,

making all personnel responsible for

verifying standards and identifying gaps.

This empowerment ensures a continuous

cycle of improvement, effectively reducing

risks through the right tools and training.

Since its inception in 2017, ‘I Care, We Care’

has evolved and steadily improved. The

technical components prioritise critical

risks – those with the potential for fatalities

or serious harm to individuals – while the

operational framework ensures that all risks

are systematically addressed; it enables

a comprehensive risk management

strategy and continuous innovation in

safety practices, risk management and

emergency readiness. Since 2021, we have

also implemented the process of reporting

near-misses – which identify missed or

failed critical controls that could lead to

harm – to promote a proactive approach

to management and encourage worker

involvement in an early warning system,

thereby monitoring operational safety and

facilitating timely decision-making.

‘I Care, We Care’ strategic pillars

1. Leadership: Values-driven leadership

- Higher-education courses for senior leadership.

- Education courses for supervisors.

- Training for our people.

2. Accountability: Integrating safety and operational management systems

- Promoting recognition of safety as the responsibility of line management.

- Senior management involvement in monitoring processes, systems, operations

and reporting policies.

3. Behaviours risk competencies: A mature and resilient safety culture.

- Step back (a method used to raise awareness and identify safety risks

in work areas).

- Positive recognition.

4. Systems risk competencies: Establish a risk-based management system.

- Internal documentation aligned to ISO standards.

- Critical risk control standards and organisational deployment.

5. Learning environment: Reduce risks through engineering, systems, behaviours

and lessons learnt.

- Communicate and implement improvements and corrective actions.

- Investigation – Risk watch.

The ‘I Care, We Care’ cycle

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

High-potential focus

Leadership

Accountability Accountability

Learning environment

Risk competency – Behaviours

Risk competency – Systems

Performance and Improvements

Strategy

HSECR

Safety management system

Critical risk control protocols

Engaging our people

Processes

Tools

Incident

HPI

Accident

Property

damage

Near-miss

event

HPI

LPI

Close out

Actions and reports

Investigation and analysis

Flash

Substandard

conditions

Event

Unsafe

acts

Force

majeure

Flash

Free

Lesson

Proactive Reactive

RiskActs

Culture management

Documentation hierarchy

Conditions

Lessons learned

Additional

Information

Strategic

Report Governance

Financial

Statements

‘I Care, We Care’ conceptual map: risk management based on systems, behaviours and infrastructure

Management

The safety operating plan concentrates

on the uniform and cross-functional

implementation of critical controls.

This includes their verification, proper

deployment and the practice of visible

leadership both in the field and through

active participation and engagement

of workers at every organisational

level. We have various mechanisms

in place for identifying and assessing

risks and establishing controls, all with

an operational focus and with the aim

of minimising risks in the execution of

activities in the field.

• For general risks, each operating unit

carries out the process based on the

NOM-023-STPS-2012 standard. For

routine activities, employees and

business partners use general tools to

evaluate risk and establish controls; for

non-routine activities, we deploy the Safe

Work Analysis mechanism, permits and

authorisations for high-risk work.

• Our approach to critical risks begins

with the Workplace Risk Assessment

and Control (WRAC), prepared by the

leadership team of each operating unit.

This is followed by a bow-tie analysis

to identify and review the controls

with the goal of avoiding or mitigating

the risk, carried out with risk owners,

critical control owners and risk experts.

This analysis leads to critical control

verification tools: a checklist before

initiation of critical risk associated

activities, performance standards,

the establishment of parameters and

quality criteria to guarantee critical

controls, and a portfolio of critical risks

derived from their previous identification

and evaluation.

Leadership in the field

At Fresnillo, we uphold safety as a ‘Life

Value’ through our commitment to values-

driven visible leadership. Responsibility and

accountability are ingrained at every level

of our organisation.

We systematically deliver leadership

programmes in the field for all leaders,

from facilitators to management teams,

with a focus on instilling values into their

actions and leading by example. This

ensures control and verification of the

implementation of critical risks and their

respective critical controls, contributing to

the strengthening of the preventive culture

and visible leadership.

Furthermore, our leadership practices aim

to empower people by enabling them

to take responsibility for their right and

their obligation to halt any unsafe activity

resulting from the absence or failure

of critical controls. This empowerment

persists until the situation is corrected or

until safe operation is ensured.

2023 marked a significant step in the

implementation of leadership practices,

symbolised by the delivery of the

leadership standard, which lays out our

leaders’ expected behaviours and tasks.

This initiative, guided by our Chairman

and CEO, aims to fortify our preventive

safety culture, and was endorsed by

senior management. This endorsement

process was replicated across all business

units to ensure widespread deployment

and dissemination.

Participation

At all levels of the organisation, our

workforce has various roles and

responsibilities to support our safety

strategy and actively participate in hazard

identification, risk assessment and control-

establishment processes. Specialists are

assigned to all operations and projects to

train, guide and advise our workforce on

safety management. We utilise various

forms of collaboration and participation,

such as committees, health and safety

commissions, and emergency teams, to

carry out safety-focused activities such as

training and risk management projects

to enhance our safety culture. Hand-in-

hand with the union, our Health and

Safety Committees, or business partner

committees, also conduct facility safety

inspections to identify hazards and

unsafe practices, make suggestions

for preventive measures and conduct

accident investigations.

100 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Safety continued

Certifications

Juanicipio San Julián Fresnillo Saucito Ciénega Herradura

Noche

Buena

OHSAS 18001/ISO 45001

Sets out criteria for international best practice in occupational health and safety

management.

– – Certified Certified – Certified Certified

In 2022, we established the ‘I Care, We

Care’ operational committee to assist the

Executive Committee and management

in risk management and ensure a uniform

and cross-functional deployment of

the safety strategy across operations.

Led by our operational leaders, the

committee comprises general operational

superintendents, service area leaders

with an impact on risk control, technical

specialists from various disciplines related

to risks and safety leaders. The committee’s

objective is to manage workplace safety

risks, challenges and opportunities; track

and report safety performance; implement

clear, compatible corporate guidelines;

monitor and follow-up on risk verifications

according to our leadership standards;

conduct in-depth verifications; and foster

cross-functional learning. Throughout

2023, this committee held monthly

sessions, conducted leadership field

practices and symbolically endorsed

the leadership standard.

Throughout 2023, safety meetings

were held with key business partners;

management teams from each mining

unit, along with our partners’ key

representatives, collaboratively engaged

to align their operational standards,

performance reporting and evaluation

with our ‘I Care, We Care’ programme.

During these engagement sessions,

safety opportunities were addressed

collaboratively and cross-functional

learning cases presented

for implementation.

2023 also saw the 11th Safety Symposium

take place in Fresnillo, Zacatecas. This

unprecedented event served as a key

forum for communication, reflection and

training in safety – and it brought together

the union, the Company, business partners

and authorities. At this event, agreements

were reached with the National Miners

and Metallurgists’ Union FRENTE to

reinforce the synergy between each local

executive committee and business unit

leaders, and to strengthen safety culture

through the implementation of leadership

practices. The event drew 816 attendees

over three days, representing all union

sections from seven Mexican states.

Training

We maintain our firm belief in developing

competencies to underpin our safety

culture, covering safety induction,

regulatory courses, risk analysis, risk

control protocols, operational procedures,

practices for high-risk tasks, permits and

authorisations, safety management,

hazardous material handling, business

goals, preventive safety tools, brigade

training and accident investigations using

various methodologies, among others.

Additionally, we continue to strengthen the

professionalism of our workforce through

certification in competency standards

accredited by the National Council for

Standardization and Certification of

Labour Competencies (CONOCER). We

also maintain emergency response teams

trained in mine rescue, firefighting, first

aid, hazardous materials handling and

evacuation. For a detailed overview of our

training and development strategies, refer

to Our culture section on pages 92-95.

As part of our commitment to strengthen

the safety culture, we have also established

a synergistic relationship with the National

Miners and Metallurgists Union, FRENTE.

Together, we engage in coordinated efforts

to champion skills development through

immersive workshops tailored for local

committee members, newcomers and

aspiring individuals.

Certifications and awards

We hold safety related certifications

relevant for our industry in our mining

units, such as ISO 45001, and the

International Cyanide Management

Code; refer to Protecting our environment

section for more information on the

Code. For the third consecutive year,

Centauro Profundo received the ‘Jorge

Rangel Zamorano’ Silver Helmet award

for its safety performance in the category

‘Underground mining – up to 500 workers’,

granted by the Mexican Mining Chamber.

Performance

The executive team is committed to

safeguarding our people and promoting

zero harm. To this end, our 2026 vision

is to achieve zero fatalities and decrease

our TRIFR to International Council on

Mining and Metals (ICMM) standards.

Furthermore, we aim to minimise

individuals’ risk exposure, protect assets,

and use advanced technology to increase

preventive reporting and enable proactive

decision-making – such as critical control

automation, software to ensure proper

scaling and safety analytics, among others.

We have continued to mature our

preventive reporting (near misses),

identifying failed or missing critical

controls. These instances, which do not

represent energy release or damage,

allow operational leaders to promptly

address potential hazards to individuals or

equipment. In addition to its management

focus, our cultural objective is to ensure

workers’ participation in an early warning

system, enabling them to understand

the safety environment and make

timely decisions. In 2023, we generated

34,638 near miss reports, marking a 75%

increase compared in 2022, showcasing

the significant progress in our preventive

reporting efforts.

While our safety performance has

exhibited a positive trend in recent years,

we deeply regret that four colleagues

tragically lost their lives while performing

their operational duties – one unionised

worker and three contractors. We

recognise that maturing our safety culture

is an ongoing journey and that these

disappointing incidents underscore the

urgent need for a top-down, organisation-

wide approach to prevent recurrence.

We are resolute in our determination to

foster a disciplined application of controls,

enhance leadership qualities, and improve

accountability processes at every level.

Our foremost priority is to safeguard the

most invaluable asset – the lives, safety and

integrity of our workforce. Our response to

fatalities has been to implement a series

of contingency, control and improvement

measures, with a focus on addressing

organisational root causes. Noteworthy

actions include:

• Conducting thorough investigations

using the Incident Cause Analysis

Method (ICAM) to guarantee more

meticulous analysis and an enhanced

focus on organisational causes.

Currently, corrective actions are being

implemented across our operations

to reinforce engineering controls,

personnel competencies, and improve

the application and verification of

critical controls in the field, along with

strengthening the accountability process.

101

Additional

Information

Strategic

Report Governance

Financial

Statements

• Intensifying the field presence

of all operational leaders – from

supervision to management, including

business partners – to guarantee

systematic involvement, detection

and addressment of potential risks.

Additionally, to enhance communication

with the workforce and provide

guidance and coaching through regular

deployment.

• Engaging more effectively with business

partners through two key strategies: 1)

Updating the safety annex in mining

works contracts to align and comply

with our prescribed guidance and

standards; and 2) Facilitating effective

communication and collaboration by

fostering synergy to address issues,

encourage transversal learning,

conducting regular meetings and

coordinated tours, and establishing

systematic monitoring and verification

mechanisms.

• Enhancing operational discipline

by intensifying efforts in awareness,

training and supervision along our

entire command line, recognising that

the risks associated with the 2023 fatal

incidents (interaction and rock fall) are

both recognised under the critical risks

protocols. Yet despite controls being

implemented controls in the field, we

have failed to avoid recurrence.

• Empowering our entire workforce to

halt activities if safety conditions or

controls are compromised, through the

‘right to say no’ policy, disseminated

through permanent workshops and

communication campaigns.

• Establishing a robust verification

and monitoring mechanism within

leadership practices that informs

decision-making.

2026 goals

Short-term (1 year) Medium and long-term (3-5 years)

Decrease TRIFR by 5%:

• Mature risk management.

• Organise consultation forums.

• Consolidate ‘I Care, We Care’ operating committee.

• Strengthen leadership practices.

Reduce TRIFR and fatality rate to ICMM range:

• Consolidate risk management.

• Improve risk management across scenarios and

stakeholders.

• Improve personnel competencies and training.

• Implement projects to improve safety.

Fatal injuries and fatal injury

frequency rates

0.081

0.024

0.045

0.022

0.020

2023

2020

2019

2022

2021

Fatalities: Number of fatal injuries to employees and

contractors.

Fatality frequency rate: Number of fatal injuries to

employees and contractors for every 1,000,000 hours

of hours worked.

Injury frequency rate for every

1,000,000 hours

10.42

5.44

10.26

7.40

12.08

7.63

18.67

6.18

13.88

5.76

2023

2021

2020

2019

2022

Total recordable injury frequency rates

(TRIFR)

Lost-time injury frequency rates (LTIFR)

Recordable Injuries: Lost-time cases + restricted work

cases + medical treatment per 1,000,000 hours worked.

Lost-time injuries: Number of lost-time injuries per

1,000,000 hours worked.

Total recordable injury frequency rate

(TRIFR) for every 1,000,000 hours

16.09

3.72

2.73

16.77

11.45

3.47

1.07

7.47

10.41

17.40

13.75

22.89

7.39

13.23

Fresnillo

Herradura

Juanicipio

Ciénega

Noche

Buena

San Juli

án

Saucito

2023 2022

Recordable Injuries: Lost-time cases + restricted work

cases + medical treatment per 1,000,000 hours worked.

What’s next

• Continue progress on our pledges to

decrease our fatality rates and TRIFR.

• Roll-out new technologies –

including data analytics – and

promote automation to improve

risk management and the wellbeing

of our workers.

• Consolidate the ‘I Care, We Care’

operating committee to guarantee

the deployment and homogenous

safety strategy across our operations.

• Establish and consolidate leadership

practices across all organisational

levels and transversal processes.

Lost-time injury frequency rate (LTIFR) for

every 1,000,000 hours

10.59

3.15

2.73

7.20

6.91

3.47

1.07

2.49

6.24

9.61

7.32

11.64

5.15

10.12

Fresnillo

Herradura

Juanicipio

Ciénega

Noche Buena

San Julián

Saucito

2023 2022

Lost-time Injuries: Number of lost-time injuries per

1,000,000 hours worked.

102 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Case study

Safety innovations at our newest mine

Following 15 years of exploration,

pre-feasibility studies, design and

construction, and an investment of

$440 million, we began commercial

operations at Juanicipio in 2023. As befits

our newest mine, we have introduced

a suite of advanced operational

technologies, which will continue to

evolve in the coming years, reaffirming

our commitment to ensuring the safe

management of operations. These

technologies include:

• Intelligent Geomechanical Cables:

Initiated in 2021, this technology

plays a crucial role in pre-emptively

adjusting and refining fortification

strategies, especially in permanent

structures and zones characterised by

suboptimal rock conditions (critical

terrains).

• Anticollision System: Launched

in 2021, this project included 70%

coverage of both heavy and light

equipment by 2023, and incorporates

detection, alert and visualisation

features. We aim to achieve full

coverage of real-time tracking and

geolocation of personnel, in addition to

the anticollision system on equipment,

by 2024.

• Mining Operations Control (COM):

Real-time monitoring, alerts and

control of key operational metrics.

The goal is the preventative control of

variables and processes, such as mine

traffic coordination and control, and to

facilitate swift decision-making, such

as emergency response protocols,

incident command and crisis

committee activation.

• Fire Detection, Alerts and Network

Control: Functions automatically

in the mining operations’ control

room, ensuring immediate response

capabilities.

• Telemetry and Equipment Health:

Software for assessing the integrity

and status of heavy equipment and

primary components, operational and

maintenance profiles, and reporting; it

facilitates informed decision-making

over assets and operations and

currently covers 20% of equipment.

• Remote Operation Centre: Based at

the surface, this centre operates tele-

remotely counterpoise drills, long-hole

drilling jumbos and scoop trams.

• Training Simulators: Available for

equipment training and retraining,

including the LH517i Loader, DD421

Jumbo, DL431 Long-Hole Drilling

Jumbo and TH551i Truck.

• Remote Ventilation System Control:

This demand-controlled ventilation

system allows for remote controlled

main ventilation, bulkheads and gates.

• Electricity Demand Monitoring

and Control System: Ensures

uninterrupted supply, avoiding losses

while maximising efficiency and

control over the power distribution.

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Safety continued

Case study

Using radar systems to detect risks

Since its establishment in 1990,

Penmont has consistently demonstrated

its commitment to safe operations

through the adoption of operational

technologies for risk detection,

monitoring, alert and control.

For example, back in 2016 we acquired

the first radar system for the Noche

Buena mine before expanding the

initiative to the Herradura mine,

both part of Penmont. This risk

detection technology and its ability

to predict potential failures proved

its true value in 2018, following the

impact of Hurricane Rosa, a Category 4

hurricane. The radar systems detected

all ground movements and enabled us

to develop a comprehensive equipment

relocation strategy that guaranteed ‘zero

damage’.

Today, Penmont boasts a fleet of 11 state-

of-the-art radar systems, safeguarding

94% of the entire pit area and earning

Penmont its reputation as the mining

operation with the most extensive

coverage in Mexico. The radar-based

detection, monitoring, alerting and

control system is operated around

the clock, 365 days a year, generating

automated reports and a wealth of

data to support predictive analysis. The

technology also significantly enhances

decision-making processes regarding

operational timings and methods (when

and how to operate), contributing to

both productivity and safety.

Embracing a culture of continuous

improvement and the sharing of best

practices, Penmont has also become

the first mine in Mexico to install slope

stability radar systems at its tailings

storage facilities. This proactive

approach to safety has culminated

in Penmont achieving a ‘zero events/

zero accidents’ record related to slope

stability, underlining its leadership

in the implementation of advanced

safety measures in our country’s

mining industry.

103

A. Health care: Check-ups, medical consultations and

health campaigns

B. Comprehensive wellbeing: Nutritional support,

sports promotion and psychological support

C. Industrial care: Ergonomics and industrial hygiene

D. Innovation and development: Health technologies

and software

E. Emergencies: Emergency preparedness

and training

Additional

Information

Strategic

Report Governance

Financial

Statements

Health

We prioritise the health, safety and

wellbeing of our workforce.

Comprehensive health

Our foremost commitment is to safeguard

the wellbeing of our people by ensuring

a safe and healthy work environment.

Our comprehensive approach extends

across several aspects of workplace health,

supported by a multidisciplinary focus

through specialists in the health sector

and organisational development. This

collaborative effort aims to continually

enhance our processes, ensuring the

preservation of the physical and mental

health of our workforce.

Our strategic framework encompasses

emergency preparedness, the promotion

of healthy habits, and the early detection

and management of health risks,

effectively preventing both occupational

and chronic diseases. To mitigate these

risks, we meticulously establish operating

procedures, provide necessary equipment

and training, and implement controls.

Prior to joining our workforce, individuals

undergo a thorough health check that

includes both physical and psychosocial

evaluations. We also implement regular

check-ups to screen for occupational

diseases, and workers receive guidance

on preventive care measures. We actively

monitor exposure levels to physical

and chemical risks, such as noise, dust,

vibration, heavy metal contamination

and extreme temperatures, and conduct

biological monitoring to prevent sanitary

risks. Behavioural change workshops are

organised to promote personal wellbeing

and prevent accidents and workplace

stress. Additionally, we continually assess

and enhance the ergonomics of our work

environment to prevent musculoskeletal

disorders and operate rehabilitation

facilities to expedite recovery from

workplace injuries.

External audits of the health and safety

management system are conducted

regularly at the Fresnillo, Saucito

and Penmont units, with the aim of

strengthening and continually enhancing

our processes. To ensure accountability,

heads of medical services participate in

a structured mechanism and present

results during end-of-month meetings;

these sessions also serve as forums to reach

agreements and establish commitments,

contributing to the overall efficacy of our

health and safety measures.

In recent years, our health departments

have evolved to embrace a more holistic

perspective that extends beyond

occupational health programmes. Our

health plans and programmes emphasise

comprehensive wellbeing, addressing

both physical and mental health –

promoting nutrition, sports and healthy

habits, psychological care, wellness in

the workplace and at home – as well

as focusing on hygiene, ergonomics,

health surveillance, women’s health

and implementation of health-oriented

technologies in the workplace. Aligned

with our ‘I Care, We Care’ programme, this

health management system addresses five

main courses of action.

In line with our commitment to workforce

wellbeing and operational efficiency, we

initiated a groundbreaking ergonomics

committee pilot in Herradura during

2023. This marked the beginning of our

broader plan to establish ergonomics

committees across all mining units.

Over the next two years, we plan to

implement a comprehensive training

programme encompassing six strategic

initiatives, ranging from early diagnosis

to the establishment of processes for

continual improvement:

1. Historical review of work-related risks

with ergonomic implications.

2. Specialised academic training in

ergonomics for our industrial hygienists.

Five comprehensive health courses of action

3. Development of a matrix for identifying

ergonomic risks specific to mining units.

4. Analysis and evaluation of ergonomic

risks within the mining unit.

5. Conveying the findings to the mining

unit’s leadership team.

6. Formation of a comprehensive

ergonomics committee for ongoing

monitoring and continuous

improvement.

At the same time, our dedication to

community health has continued through

the regular deployment of our Community

Health Weeks, a flagship programme

renowned for its popularity and success

among neighbouring communities.

In collaboration with local and federal

authorities, health agencies and the

National Autonomous University of Mexico

(UNAM) Foundation, we offer free dental

care, eye care and physical therapy to our

communities. In 2023, the programme

had a positive impact on over 6,000

individuals across almost 200 communities.

For a comprehensive overview of our

Community Health Weeks and other

health-related initiatives dedicated to our

neighbouring communities, please refer to

the Socioeconomic development segment

in the Partnering with our communities

section on pages 142-149.

104 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Health continued

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Certifications

In 2023, Saucito achieved certification as a Cardio-Protected Space, a recognition backed by Civil Protection of Zacatecas, the National

Association of Cardiologists of Mexico (ANCAM), the Mexican Resuscitation Committee, the Inter-American Heart Foundation and the

Mexican Society of Cardiology (SMC). Over 2,000 employees were trained and equipped with the necessary skills in Cardiopulmonary

Resuscitation (CPR) and how to use an Automated External Defibrillator (AED). In the event of a sudden cardiac arrest within our

facilities, these trained individuals are prepared to provide immediate care until emergency services arrive. We expect to continue

certifying other units in the coming years.

Juanicipio San Julián Fresnillo Saucito Ciénega Penmont

Safe and healthy working environment (ELSSA): IMSS voluntary programme to implement strategies and measures to improve

health, safety and wellbeing of workers, as well as productivity and quality in the workplace.

Certified In progress Certified Certified Certified Certified

Cardio-protected space: endorsed by Civil Protection of Zacatecas and other prestigious organisations, this guarantees that workers are

trained in CPR and AED manoeuvres.

– – – Certified – –

Case study

Living in Balance

Our ‘Living in Balance’ programme is

continuing to help our people gain

insights into their current physical,

mental and emotional wellbeing –

and to empower and guide them

on a holistic journey towards an

enhanced quality of life.

First introduced in 2022, ‘Living in

Balance’ includes a survey to assess

general wellness, identify opportunities

for dietary improvements and reveal

levels of work-related stress. This initial

survey brought to light concerns related

to inadequate sleep and signs of anxiety

and depression. A follow-up survey,

carried out in 2023, dived into more

detail around the adoption of a healthy

lifestyle and key drivers of change. The

results of this diagnostics phase have

enabled us to lay the foundations for an

organisational plan strategically designed

to proactively address the most pressing

issues, fostering a transformative impact

on our workforce’s quality of life.

In the course of 2023, we also held the

inaugural ‘Living in Balance’ fair in the

Fresnillo district, with the participation

of approximately 400 workers and their

families. Two impactful master sessions,

‘You are the key’ and ‘Living marvellously’,

emphasised the importance of wellness,

self-care, and positive psychology.

To complement these sessions, we

organised information stands dedicated

to the programme’s dissemination,

nutritional guidance, psychological

education and physical therapy.

Furthermore, to amplify our

commitment to employee wellbeing,

we established the Wellbeing

Committee in 2023 to follow-up on

initiatives regarding physical and mental

health, sports, culture and social activities.

This committee will be fully operational

in 2024, overseeing additional courses

of action within the ‘Living in Balance’

programme, including: i) Sleep hygiene,

ii) Depression, iii) Anxiety, iv) Work-related

stress, and v) Drivers of change.

Through these concerted efforts, the

‘Living in Balance’ programme not only

addresses immediate concerns but

also aligns seamlessly with our broader

organisational strategy, reinforcing our

commitment to cultivating a thriving

and supportive workplace culture.

2022 2023 2024

• First phase of diagnostics survey

implementation

• Results dissemination and

integration to Health Plan

• Second phase of diagnostics survey

implementation

• Working groups to review new

comprehensive screening

• Creation of Wellbeing Committee

• Deploy initiatives on emotional

and family dimensions

• Evolve to a culture that places

greater emphasis on recognising

how work can impact health and

wellbeing

• Share programme’s insights with

contractors

• Adopt new comprehensive

screening

‘Living in Balance’ timeline

105

Additional

Information

Strategic

Report Governance

Financial

Statements

Occupational health

Our strategy is centred on proactively

identifying and mitigating the health risks

faced by our workforce. By cultivating a

culture of health through proactive care

and promoting healthy lifestyles, we aim

to prevent specific chronic diseases and

enhance overall wellbeing and fitness for

work. Occupational health is a collective

endeavour, necessitating the active

participation and commitment of every

individual within the organisation.

New cases of occupational diseases

2023

2022

2019

2021

2020

Covid-19

During the year, we continued to adhere

to the updated guidelines issued by

the Health Ministry. As a result of the

preventive measures ingrained in our

robust Covid-19 protocol and the successful

vaccination campaigns carried out with our

workforce, we achieved an 82% reduction

in cases compared to 2022.

Beyond our focused efforts on Covid-19,

we continued our vigilance by

encompassing other respiratory illnesses,

such as seasonal influenza. This involved

conducting comprehensive vaccination

and vitamin fortification campaigns across

all our work centres.

What’s next

• Establish a management system for

Industrial Hygiene and begin the

improvement of project designs in

the mining units.

• Define a plan for the establishment

of the Ergonomics Committees

across mining units, and define

a work programme to 2025.

• Increase health epidemiological

surveillance, with a particular focus

on business partners.

• Launch the work plan to certify

another mining unit as a cardio-

protected space.

• Consolidate the fatigue

management system at Juanicipio.

• Strengthen the labour inclusion

programme.

• Continue strengthening general

working conditions, training,

education and productivity, as well

as health and safety through:

- The recertification of all our

mining units as Safe and Healthy

Working Environments (ELSSA).

- The execution of the Secretary of

Labor and Social Welfare’s (STPS)

new programme – the Voluntary

Labour Verification Programme

(VELAVO).

106 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

While acknowledging the critical nature

of mining and the processing of precious

metals as essential industries, we also

recognise the environmental impact

inherent in our operations, including

factors such as water consumption,

land disturbance, waste generation and

Greenhouse Gas (GHG) emissions. To

maintain our social licence to operate, it

is imperative that we prioritise resource

optimisation, mitigate adverse effects

and transparently communicate our

environmental footprint to our stakeholders.

Understanding that industry performance

enhancement requires more than internal

efforts, we are committed to fostering

effective engagement by working together

through partnerships with governments,

non-governmental organisations, business

associations and diverse stakeholders to

collectively drive positive environmental

and social impact. This collaborative

approach is pivotal in producing crucial

information, researching innovative

solutions, allocating resources, and

seamlessly sharing and implementing

best practices.

Through the Silver Institute, we participate

in an industry-wide initiative on silver and

the low-carbon economy. The objective

is to produce more carbon footprint

information for stakeholders, showcase

carbon abatement best practices and

further study silver’s life cycle and its role

as a climate-smart metal. In addition,

we actively endorse and participate in

initiatives such as the Colorado Cleantech

Challenge — a dynamic innovation

showcase that facilitates connections

between mining companies and clean

technology solution providers. Our shared

objective is to collaboratively address

and overcome the environmental

challenges inherent in our industry, as

clean technologies play a pivotal role in

advancing environmental performance

PROTECTING OUR

ENVIRONMENT

We optimise resource use to curb

our impact, and are accountable

for our environmental footprint.

and reinforcing the social acceptability of

the mining industry.

Our engagement initiatives extend to

companies and organisations in other

industries. In Mexico, we are part of the

Private Sector Study Commission for

Sustainable Development (CESPEDES) –

the Mexican Chapter of the World Business

Council for Sustainable Development

(WBCSD) – which shares best practices and

engages with governments and society at

large. In 2021, we also joined the Mexico

TCFD Consortium. Following the success of

the Japanese model, the consortium was

created to share lessons learnt and assist

companies that are starting to adopt these

recommendations to shorten their learning

curve, build capacity and improve TCFD

engagement levels across the country.

Additionally, as members of the World

Environment Centre (WEC), a respected

think tank, we actively contribute to

advancing sustainable development

and learning best practices on climate

change strategy from leading member

international companies. We also support

Naturalia, a key NGO dedicated to the

development and implementation of

projects aimed at the safeguarding and

conservation of Mexican ecosystems and

their diverse wild species.

SUSTAINABILITY AT THE CORE

OF OUR PURPOSE CONTINUED

107

Organisational

context

Leadership

Plan

Operation

Support

Performance

evaluation

Improve

Plan Do Check Act

Additional

Information

Strategic

Report Governance

Financial

Statements

High level structure of our HSECR management system

A systematic approach to environmental

management enables us to provide

pertinent information to top management,

fostering long-term success and creating

opportunities to contribute to sustainable

development by:

• Protecting the environment through

the prevention or mitigation of adverse

environmental impacts.

• Mitigating potentially adverse effects

of environmental conditions on the

organisation.

• Supporting the organisation in

complying with legal and other

requirements.

• Improving environmental performance.

• Controlling or influencing how the

organisation designs, manufactures,

distributes, consumes and disposes

of products or services, using a life cycle

perspective to prevent environmental

impacts from being inadvertently

transferred to another stage of the

life cycle.

• Achieving financial and operational

benefits resulting from implementing

environmentally friendly alternatives

that strengthen the organisation’s

market position.

• Communicating environmental

information to relevant stakeholders.

Before embarking on any mining project,

a top priority is to carry out thorough

Environmental Impact Assessments (EIAs).

These assessments meticulously identify

potential impacts and outline the requisite

actions for effective management. EIAs

comprehensively address a spectrum of

critical factors, encompassing surface and

groundwater resources, water quality,

air quality, soils, biodiversity (including

threatened or endangered species),

landscape and socioeconomic conditions.

The valuable insights derived from these

assessments serve as the cornerstone for

the development of our environmental

management plans and systems, including

the adherence to ISO 14001 standards.

Certifications

Penmont

Certification/Award Juanicipio San Julián Fresnillo Saucito Ciénega Herradura Noche Buena

ISO 14001

Framework and criteria for an effective

environmental management system.

– – Certified Certified – Certified Certified

International Cyanide Management Code

Sets criteria for the global gold mining industry

on cyanide management practices.

– – – – – Certified Certified

Environmental management

Our Environmental, Health, Safety and

Community Relations (HSECR) approach

focuses on our employees, teams and

facilities – and it is a critical consideration

that shapes policies and strategies across

all our operations. To this end, we establish

and maintain a HSECR management

system, in accordance with ISO

14001:2015 and ISO 45001:2018 standards,

incorporating environmental aspects,

hazards, and risks.

Each unit defines HSECR requirements

with clear guidelines for implementation

and assessment. This process establishes

measurable goals, objectives and

programmes, defining procedures

for measurement, monitoring and

improvement as part of the system, as well

as periodic internal and external audits and

reviews by top management. Audits assess

the adequacy and effectiveness of the

implemented system and the fulfilment of

defined objectives, while reviews analyse

the state of the strategy and performance

for decision-making purposes.

108 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

20%

40%

60%

80%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

36.3%

37.6%

39.7%

41.2%

44.1% 44.1%

59.3%

60.0%

62.9% 60.1%

69.6%

78.5%

10%

20%

30%

40%

50%

60%

Consumption MWh-year

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Pct. renewable consumption

2023 2022 2021 2020 2019

Fresnillo

Ciénega

Herradura

Saucito

San Julián

Juanicipio

53.3%

35.6%

49.8%

48.4%

56.0%

Environmental management continued

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Energy

By its very nature, mining is an energy-

intensive activity that demands significant

inputs – in particular, energy. Fuel and

electricity are crucial in order to extract,

process and transport minerals from

deep within the earth to the final stages

of production and, at times, initiating

subsequent industrial processes. Vigilant

monitoring of energy consumption, GHG

emissions and their respective intensities

per tonne of processed mineral are central

to our commitment to sustainability. This

rigorous oversight helps us to mitigate risks

and also identify opportunities for resource

efficiency that may contribute to business

continuity and cost efficiency.

We have been steadily increasing our

use of renewable energy in recent years,

aiming to achieve 75% renewables in our

energy mix by 2030. However, regulatory

uncertainties have caused delays to new

renewable energy sources which were

due to come online. Waiting times for

modifications to transmission permission

agreements have become extended, and

as a result, in 2022, we had to rely more

on electricity from the Mexican power

utility, Comisión Federal de Electricidad

(CFE), temporarily reducing our renewable

energy consumption. This setback was

resolved in 2023 through several measures:

San Julián was reintegrated into the

self-supply scheme with Coahuila Wind

Force (EDC); one of Herradura’s lines was

migrated to the Wholesale Electricity

Market (WEM), sourcing energy from Mesa

La Paz Eolic windfarm through a Power

Purchase Agreement; and Juanicipio

and the Pyrites plant commenced

operations late in 2022, also consuming

electricity through the latter scheme.

These developments enabled us to achieve

53.3% renewables, up from 35.6% in

2022 and representing a 59.9% increase

in comparison to 2022, despite a 6.8%

increase in average electricity demand.

Evolution in the share of renewable energy consumption in 2023

Renewable energy consumption by mine

GHG-energy profile

Energy

GHG

2016

15.88.1 5.5

26.6

10.6

16.5

17.8

17.2

42.2

39.7

Combustion from fossil fuels (own)

Combustion from fossil fuels

(contractors)

Electricity from the National Grid

Electricity from TEP (thermal)

Electricity from MLP (wind)

Electricity from EDC (wind)

Performance

In 2023, 60% of our energy consumption

came from fuels, mainly diesel and

gasoline, while the remaining 40% was

derived from electricity, 53.3% of which

came from renewable energy. We also saw

an overall increase in both energy intensity

and GHG emissions intensity, of 0.9% and

10.6% respectively, despite a decrease

in both energy and GHG emissions, of

14.9% and 6.8% respectively. This was due

to a more than proportional decrease in

mineral processed of 15.7%. For a

detailed overview of initiatives to decrease

our energy consumption and enhance

our climate change resilience strategy,

refer to the Climate change section in

pages 111-128.

Renewable

Non-renewable

% renewable

Juanicipio

San Julián

Saucito

Herradura

Ciénega

Fresnillo

% renewable

109

Additional

Information

Strategic

Report Governance

Financial

Statements

Global GHG emissions for the period 1 January 2023 to 31 December 2023

GHG emissions (tonnes of CO

e) Energy (MWhe)

Reporting

year

change

Comparison

year

Reporting

year

change

Comparison

year

2023 2022 2023-2022 2012 2023 2022 2023-2022 2012

Scope 1 and Scope 2 824,387

968,249 (14.9) 704,366

2,941,925

3,153,026 (6.7) 1,806,063

Scope 1 (direct): Combustion of fuel

(mobile and stationary sources).

469,146

545,970 (14.1) 375,121

1,766,162

2,052,634 (14.0) 1,385,448

Diesel total 428,015

500,747 (14.5) 366,784

1,580,181

1,848,756 (14.5) 1,729,591

Diesel (Company-owned)

288,762

333,781 (13.5) 228,085

1,066,088

1,232,294 (13.5) 841,216

Diesel (contractors)

139,254

166,966 (16.6) 138,700

514,094

616,462 (16.6) 511,550

Gasoline total 5,995

7,512 (20.2) 3,686

23,092

28,934 (20.2) 12,234

Gasoline (Company-owned)

3,487

4,196 (16.9) 3,686

13,432

16,161 (16.9) 12,234

Gasoline (contractors)

2,508

3,316 (24.4) 0

9,661

12,773 (24.4) 0

Natural gas total 30,657

33,330 (8.0) 0

143,192

155,680 (8.0) 0

Natural gas (Company-owned)

30,657

33,330 (8.0) 0

143,192

155,680 (8.0) 0

Natural gas (contractors)

0 n/a 0

LPG total 4,478

4,380 2.2 4,650

19,696

19,264 2.2 20,448

LPG (Company-owned)

4,243

4,115 3.1 4,650

18,663

18,097 3.1 20,448

LPG (contractors)

235

265 (11.5) 0

1,033

1,167 (11.5) 0

Scope 2 (indirect): Electricity

purchased from the grid and PPAs

355,241

422,279 (15.9) 329,245

1,175,763

1,100,392 6.8 420,615

Mexican National Grid (CFE)

135,977

203,486 (33.2) 69,966

312,590

467,784 (33.2) 135,461

Thermal – Thermoelectric Peñoles

(TEP)

219,265

218,793 (0.2) 259,279

236,889

240,875 (1.7) 285,164

Wind – Coahuila Wind Force (EDC) &

Mesa la Paz (MLP) - WEM

0 n/a 0

626,284

391,733 59.9 0

Intensity measurement: Emissions

and energy reported above per tonne

of mineral processed.

0.0248

0.0246 0.8 0.013

0.088

0.080 10.4 0.034

Methodology: We have reported on all the emission sources required under the Streamlined Energy & Carbon Reporting. These sources fall within our operational control. We do

not have responsibility for any emission sources that are not included in our consolidated statement. The emissions and energy consumed in the United Kingdom and offshore

as well as those pertaining to our exploration projects and corporate offices are negligible. We have used the Greenhouse Gas Protocol: A Corporate Accounting and Reporting

Standard (Revised Edition), and a 100-year time horizon Global Warming Potential (GWP) for Methane (CH

) and Nitrous oxide (N

O) equivalences. Updates to Scope 1 and 2 data vs

previous periods are twofold: the former due to rectifications of fuel inventories derived from the external audits – but not material as they amount to an increase of less than 1.5% of

GHG emissions – and the latter due to the Mexican National Grid emission factor for the period – usually published on a later date than this annual report. For the same reason, the

emission factor of electricity consumed from the Mexican Power Utility CFE during 2023, corresponds to 2022.

Scope 1: Direct GHG emissions/energy consumed.

Scope 2: Indirect GHG emissions/energy consumed from purchased electricity.

Mineral processed: Corresponds to the mineral processed in the beneficiation and leaching plants and the mineral deposited in the leaching pads.

GHG Intensity (tonnes of

e per tonne of mineral processed)

0.019

0.0231

0.0232

0.0246

0.0248

2023

2022

2021

2020

2019

Energy intensity (MWhe per tonne of

mineral processed)

0.067

0.077

0.082

0.080

0.088

2023

2022

2021

2020

2019

GHG emissions (kt of CO

2023

2022

2021

2020

2019

355

422

350

370

331

469

546

474

531

Scope 1 Scope 2

Energy (GWhe)

1,176

1,100

1,101

1,070

1,047

1,766

2,053

2,054

1,762

1,971

2023

2022

2021

2020

2019

Scope 1 Scope 2

Electricity supply

53.3%

35.6%

49.7%

48.4%

56.0%

46.7%

64.4%

50.3%

51.6%

44.0%

2023

2022

2021

2020

2019

Other sources Wind energy

110 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Scope 3 emissions

We have taken our first steps towards assessing Scope 3 emissions, which belong to our partners in the value chain and are outside our

operating boundary. The following are the categories we have prioritised due to their materiality. We are committed to collaborating

with internal and external stakeholders to refine our understanding of Scope 3 emissions, specifically those related to the downstream

processing of our product.

GHG emissions (tonnes of CO

Category Description 2023 2022 % change

Purchased goods

and services

Our most relevant supplies are blasting agents (explosives),

steel balls for milling, lube oil, shell liners for mills, tyres,

steel for drilling and sodium cyanide. In this Scope 3

category we provide an estimate of emissions for blasting

agents (explosives), steel balls for milling and lube oil.

157,073

168,947 (7.0)

Processing of sold products The products sold by Fresnillo are intermediate products

that require further processing (smelting and refining).

456,390

460,478 (0.9)

Downstream transportation

and distribution

Products sold are transported to the metallurgical

complex.

16,371

16,595 (1.3)

Investments Emissions from the Silverstream contract.

70,645

67,022 5.4

Total 700,480

713,043 (1.8)

Case study

Improving how we manage and control energy

As energy is one of our Company’s major

costs, increasing consumption at the

Fresnillo mine signalled the need for

greater focus on energy control and

management. Our response during

2023 was to pilot then implement an

enhanced approach to energy load

management and distribution. Guided

by Lean Six Sigma principles, the initiative

aimed to reduce demand by 1.7 MW

versus the baseline.

Using a holistic strategy, the project

mapped and involved a wide range of

stakeholders across different roles, with

particularly close collaboration between

the operational and maintenance

departments. Our team fine-tuned

the timing of stoppages and start-ups

of operational equipment, mitigating

demand spikes during the more

expensive electricity rate periods while

guaranteeing production targets. This

process was overseen from the Mining

Operations Centre (COM), which is

also responsible for coordinating and

supporting the movement of ore loads

on the surface.

Operators at the COM were given

the critical task of optimising energy

loads across pumping stations and

production shafts, scheduling the usage

of exploration drills and maintaining

principal ventilation systems, subject

to hourly industrial electricity rates set

by the Mexican power utility, CFE. By

meticulously calculating the impact of

each process on energy demand, the

team aimed to minimise operational

disruptions and manage energy use

more efficiently during peak rate periods.

Following its successful implementation,

the project not only achieved an overall

decrease of 4.8% in electricity demand,

but also reduced the unit cost of electricity

(average cost per kWh) by 6.5%. This

delivered savings of over US$2.4 million

compared to the period’s original budget,

and of 3.4% compared to 2022 energy

costs. This successful implementation

of demand control underscores

our commitment to environmental

stewardship by reducing our operational

impact, as well as to operational efficiency

by optimising energy use, contributing

to a more sustainable and cost-effective

business management.

Environmental management continued

111

Additional

Information

Strategic

Report Governance

Financial

Statements

Climate change

Task Force on

Climate-related

Financial

Disclosures (TCFD)

Compliance Statement

FCA Listing Rules

We have provided climate-related

financial disclosures for the year ending

31 December 2023 according to the UK’s

Listing Rule 9.8.6R(8) of information to

be included in the annual report and

accounts, having taken into consideration

the Listing Rule Guidance 9.8.6BG and LR

9.8.6DG for all sectors and non-financial

sectors. This includes all four of the

TCFD pillars and the 11 recommended

disclosures set out in Figure 4 of Section C

of the report entitled ‘Recommendations

of the Task Force on Climate-related

Financial Disclosures’ published in

2021 by the TCFD. In completing this

work, we made use of TCFD guidance

material including the TCFD technical

supplement on the use of scenario

analysis, TCFD Guidance on Metrics,

Targets and Transition Plans, and the

TCFD Guidance for All Sectors. Our report

is partially consistent with the TCFD

recommendations as outlined in the

table below, with Strategy-recommended

disclosures B and C, and Metrics and

Targets recommended disclosure C still

requiring further development. We are

in the process of developing a roadmap

to integrate adaptation measures into

financial planning and maturing our

approach to carbon pricing. We believe

this will also allow us to mature the

connections between climate change and

other relevant environmental, social and

governance (ESG) risks and incorporating

them more explicitly into KPIs and targets.

In 2024, we plan to continue our progress

in reporting against all four pillars of the

recommendations.

Task Force on Climate-related Financial Disclosures Statement. Summary of Fresnillo’s TCFD response

TCFD Pillar TCFD recommendation

Cross-reference for the

disclosure in the report Summary of progress to date What’s next

Governance

a) Board oversight. Pages 112-113 Consistent: The HSECR Committee

assists the Board and collaborates

with management to provide

oversight on the effectiveness of

the Company’s ESG strategies –

including climate change –

which is discussed at quarterly

meetings; the Chairman of the

HSECR reports insights from

these meetings to the Board.

HSECR Committee evaluation

of progress on TCFD disclosure,

strategic determination of

mitigation efforts, including the

energy strategy. Oversight of the

development of our approach to

physical risks and transition risks.

Develop synergy between the

Audit and the HSECR Committees.

b) Management’s role. Pages 113-114 Consistent: Within the senior and

middle management tiers, the

responsibility for climate change

encompasses identifying strategic

risks, evaluating their impact on

achieving strategic objectives, and

supervising the implementation

of controls in both strategic and

operational plans.

Define criteria and coordinate

efforts to mature climate

financial analysis.

Strategy

a) Climate-related risks

and opportunities.

Pages 114-119 Consistent: CROs time horizons

are defined based on the ERM

framework and the operational

frontiers of the Company’s strategic

planning. CROs shortlist includes

detailed description of impact to

our business and management

approach.

Continue to improve and

refine CROs financial

materiality assessment.

b) Impact on the

Company’s business,

strategy and financial

planning.

Pages 125-126 Partially consistent: Initiated

two projects (regional climate

modelling and decarbonisation

roadmap) that will guide decision-

making in climate initiatives.

Mature our approach to internal

carbon pricing. Develop a

roadmap to integrate adaptation

measures into financial planning.

c) Resilience of the

Company’s strategy.

Pages 120-125 Partially consistent: Strengthened

climate-scenario analysis including

a 2°C scenario and gathered key

insights on risk exposure, both

qualitative and quantitative.

Mature our approach to climate

mitigation and adaptation

strategies.

Risk

management

a) Risk identification

and assessment

process.

Pages 126-127 Consistent: Achieved

comprehensive CRO register

that has been subject to several

iterations and improvements.

Quantify our most prevalent

climate-related opportunities.

b) Risk management

process.

Pages 126-127 Consistent: Design of climate-

risk management framework,

preliminary risk owners and

associated controls.

Replicate climate risk

management framework

on a site-specific basis.

112 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

HSECR

Committee

Chief Executive

Officer

ESG Compliance

Manager

Remuneration

Committee

Chief Operations

Officers

Nominations

Committee

Chief Financial

Officer

Audit

Committee

Explorations

Assistant VP

Board of Directors

Executive Committee

Safety

and Environment

Assistant VP

Corporate

Risk Manager

Financial

Controller

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Introduction

The Task Force on Climate-related

Financial Disclosures (TCFD) provides

a framework for businesses to report

on the impact of climate-related risks

and opportunities. While we recognise

there are significant opportunities to

increase our revenue, for example through

increased demand for our products – e.g.

silver for solar photovoltaic (PV) – climate

change poses risks to our business (both

transition and physical) such as increased

drought and heat reducing business

productivity. We have progressed on our

TCFD disclosures year-on-year. This year, we

have evolved our disclosure to consider the

potential financial impact of physical risks

and carbon pricing mechanisms through

quantitative scenario analysis. This has

further informed our strategy regarding

climate-related risks and opportunities

to ensure we are resilient in the short,

medium and long term.

Governance

Board

Our governance structure is outlined

below, with further details available

in the Governance section. The Board

oversees key risks and associated

management strategies, while the Audit

Committee evaluates the efficiency of risk

management and internal controls. The

Board has overall responsibility for the

oversight of the climate change strategy

and considers its impact on the business

during decision-making regarding our

strategy, risk management, investments

and stakeholders. The Health, Safety,

Environment and Community Relations

(HSECR) Committee, assists the Board

and collaborates with management to

meticulously supervise the Company’s

strategies ensuring they effectively

address ESG considerations, including

climate change. The Board reviews this

progress in quarterly meetings, during

which the Chairman of the HSECR

Committee presents updates. Directors

actively engage in inquiries and provide

recommendations during these sessions

to guide management. Furthermore, the

Board also receives quarterly updates from

the CEO on sustainability performance,

including advancements in our climate

change strategy. In 2023, the main climate-

related activities by the Board were:

• Review of the update provided to

the Board by the HSECR Committee

Chairman to the Board.

• Review of the CEO’s report on the

Company’s areas of opportunity

according to a 2022 TCFD gap analysis.

• Overview of ESG reporting, with a

focus on climate change regulation

and mining industry climate-target

benchmarks (working session).

TCFD Pillar TCFD recommendation

Cross-reference for the

disclosure in the report Summary of progress to date What’s next

Risk

management

c) Integration

into overall risk

management.

Pages 126-127 Consistent: Climate change has

been streamlined in scoring and

criteria into the ERM framework.

Continue maturing the climate-

risk management framework.

Metrics and

targets

a) Climate-related

metrics to assess

climate risks and

opportunities.

Page 128 Consistent: Industry specific

metrics disclosed.

Fully comply with cross-industry

indicators.

b) Scope 1, Scope 2 and,

if appropriate, Scope

3 GHG metrics and

the related risks.

Page 128 Consistent: GHG emissions aligned

to GHG protocol methodology.

Concurrent third-party verification

of Scope 1 and Scope 2 GHG

emissions.

Refine Scope 3 GHG inventory.

Concurrent third-party verification

of climate-related KPIs.

c) Climate-related

targets and

performance

against targets.

Page 128 Partially consistent: Set a 75%

renewable goal in the Company’s

electricity consumption by 2030.

Analyse different GHG emission

reduction setting approaches.

Increase engagement activities

on climate change with our

partners in the value chain.

Mature connections between

climate change and other ESG

risks, incorporating them more

explicitly into KPIs and targets.

Climate change continued

113

Additional

Information

Strategic

Report Governance

Financial

Statements

Relevant competencies of Board members

for addressing climate change, particularly

within the HSECR Committee, are detailed

in the Board biographies on pages 194-197.

Notably, Mr Arturo Fernández contributes

extensive expertise in Mexican public

policy and possesses a strong academic

background in macroeconomics;

Ms Georgina Kessel, former Minister of

Energy (2006-2011), offers significant

experience in energy and climate change;

Dame Judith Macgregor, with extensive

diplomatic experience, provides valuable

international perspectives on climate

change and Mr Fernando Ruiz contributes

considerable experience in Mexican

taxation and insights into evolving carbon

pricing legislation. Additional information

about the HSECR and Audit committees’

Terms of Reference and their specific

contribution to climate strategy, can be

found on the Company’s corporate website.

The Health, Safety, Environment

and Community Relations (HSECR)

Committee

The HSECR committee actively engages

with Management to provide oversight

on the effectiveness of the Company’s

ESG strategies. This involves assessing

management’s handling of climate-

related risks and opportunities (CROs).

Climate change is discussed at quarterly

meetings, and the HSECR Chairman

reports insights from these meetings to the

Board. The HSECR Committee monitors

the Company’s progress against key

targets and metrics at quarterly meetings

through a dashboard produced by the ESG

Compliance team with key inputs provided

by the mining units. Discussions at these

meetings include TCFD requirements,

progress against renewables target, and

intensity metrics on water, energy and

GHG emissions.

In 2023, the main climate-related activities

of the HSECR Committee were:

• Calibration of KPIs for review at the

beginning of each session and definition

of benchmarking against peers.

• Review of climate change KPIs trends.

• Review of Company’s TCFD reporting

gaps and recommendations for full

compliance with regulations.

• Review of the TCFD 2023 programme to

address a portion of the reporting gaps.

In previous years, briefings and capacity

building have covered the basic principles

of science-based targets, with a specific

focus on the identifying, evaluating and

prioritising CROs; a global perspective of

TCFD reporting including benchmarks and

gap analysis, has also been covered. During

2023, the committee was briefed on ESG

rankings and ESG-criteria in credit ratings,

TCFD’s alignment with other relevant

methodologies (FTSE4Good index, S&P’s

CSA, CDP’s climate change questionnaire,

among others), and delved deeper into

analysing specific gaps that may hinder

the Company’s full TCFD compliance,

strategically prioritising issues slated for

resolution. The objective is to ensure that

the Directors possess the necessary skills

and competencies to oversee Fresnillo’s

regulatory compliance and overall

climate strategy.

Audit Committee

The Audit Committee continues to have an

active role in climate-related management

after updating its terms of reference in

2022 to include the review and approval

of the statement on climate-related

financial disclosures. Its role has continued

to include:

• Overseeing the TCFD disclosures and

progress towards consistency with

TCFD recommendations.

• Reviewing principal and emerging risks

on a quarterly basis and monitoring the

effectiveness of risk management and

internal controls.

This year, the Audit Committee also

approved the preparation for a third-party

external assurance of our KPIs related to

Scope 1 and 2 energy consumption and

greenhouse gas emissions concurrent with

the fiscal year reporting.

Management’s role

Guided by the Board and Executive

Committee leadership, and in alignment

with our risk appetite tailored on a case-

by-case basis, we systematically seek to

understand, prioritise, and address our

risks through a robust risk management

framework. Within the senior and middle

management tiers, the responsibility

for climate change encompasses

identifying strategic risks, evaluating

their impact on achieving strategic

objectives, and ultimately supervising

the implementation of controls in both

strategic and operational plans. A detailed

breakdown of the responsibilities is

provided in the table below:

Management role Responsibilities

Chief Executive Officer Orchestrates the strategic connection between business strategy and CROs, overseeing

target setting, communicating climate goals, and holding the organisation accountable

for climate-related initiatives.

Chief Operations Officers (North

and Centre Districts)

Lead operational initiatives that achieve energy and resource efficiency in current

operations, contributing to GHG emissions reduction, addressing environmental risks,

and identifying opportunities for cost-effective energy utilisation.

Chief Financial Officer Collaborates with the COOs to identify operational efficiency opportunities and oversees

compliance with climate-related regulations.

Industrial Safety and Environment

Assistant VP

Ensures the organisation meets safety and environmental standards, regulations and

targets, and that it adheres to industry’s best practices.

Financial Planning and Executive

Information Assistant VP

Provides critical financial insights to support strategic decision-making and guides the

integration of streamlined climate-related analysis into existing financial analysis processes.

Financial Controller Ensures transparency and accountability in financial climate-related disclosures.

Corporate Risk Manager Manages corporate risks, including those associated with climate change, contributes

to developing risk mitigation strategies and ensures alignment with the organisation’s

risk management framework. In addition, prepares scenarios of possible risks that could

materialise.

ESG Compliance Manager Ensures the organisation adheres to and complies with climate-related regulation, aligns

with investors’ and stakeholders’ disclosure expectations, and collaborates across various

departments to enhance overall maturity in addressing climate change.

Management’s climate-related responsibilities

114 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

In 2021, a steering group, comprising

representatives from finance, exploration,

projects, operations, industrial safety

and environment, and sustainability

teams, formed to discuss the impact of

climate change on operations. This group

designated representatives to form an

expert team for a scoping workshop,

focusing on TCFD and climate risk

management practices. The team explored

the Fresnillo business model – its value

creation mechanisms, operational control,

influence across the value chain – identified

risks and opportunities and laid the

foundations for the comprehensive CROs

assessment of that period. Fast forward to

2022, the finance team continued to deep

dive into carbon pricing mechanisms and

various approaches to assess their impacts

in financial analysis.

Building on this momentum, 2023

witnessed a new initiative with

representatives from risk, financial control

and ESG compliance, forming a new

steering team. This group reassessed

the CROs long-list, concluded the

harmonisation of the climate-risk

framework with the central enterprise

risk framework (ERM), and commenced

a collaboration with the mining units

to refine, homogenize and assign site-

specific controls, key risk indicators (KRIs),

mitigation strategies and risk owners for

continuous monitoring moving forward.

Simultaneously, workshops were

conducted for senior management and

middle management focusing on climate

scenarios and financial risk quantification

to bolster climate-capacity building at key

positions within the organisation. Strategic

meetings with financial planning and

long-term mine planning aimed to define

criteria and coordinate efforts for 2024,

setting new priorities towards our climate

financial analysis and maturity. Finally, in

the environmental department’s annual

meeting, we engaged in a comprehensive

discussion on the latest climate-reporting

practices to continue building capacities

among our workforce.

Strategy

Climate risks, opportunities and

strategic decision-making

Climate change represents a principal risk

for Fresnillo, and the CROs it poses have

strategic implications for our business.

The world’s transition to a low-carbon

future depends on mining in providing

the essential minerals required for

technologies such as solar panels, wind

turbines, electric vehicles and batteries.

However, we must simultaneously

decarbonise our operations to comply

with increasing regulation supporting the

global transition to a net-zero economy.

Although Mexico, where our operations

are based, does not currently have a net

zero target, there is an increasingly robust

regulatory framework aligned with the

recently updated National Determined

Contributions (NDC) of 30% reduction in

economy-wide emissions by 2030, which

necessitates heavy industry playing its part.

Therefore, we must consider and prepare

for risks such as carbon taxes, while using

the opportunity to increase efficiency

and incorporating renewables to reduce

operational costs.

In 2021, we conducted a comprehensive

review of our business model to identify

CROs through the life cycle of mining. Our

approach began with desktop research

to establish a risk catalogue, drawing

insights from industry benchmarks, by

significant peers and climate change

guidance documents, such as sector-

specific and cross-industry guidance from

TCFD. We also held interviews with key

representatives and workshops involving

personnel that represented every aspect

of the business – including finance,

exploration, projects, operations, industrial

safety and environment, and sustainability

– engaging in conversations about how

climate change may affect our operations;

this group designated representatives

from different areas to form an expert

team from administrative and operational

areas across the Company to participate

in a scoping workshop to leverage existing

progress on TCFD and climate risk

management practices.

The team discussed the Fresnillo business

model – its value creation mechanisms,

operational control, influence across

the value chain and the risks and

opportunities of growth and innovation

plans – its current processes, criteria

and thresholds to identify risks and

opportunities, and explored additional

exposure sources and consequences of

climate change, setting the foundations

for a comprehensive view on the matter

that provided the raw material for the

CROs assessment, thus achieving an initial

robust and comprehensive CRO register,

comprising 100 elements. The outcome

was a comprehensive CROs register with

detailed information on each identified

risk including its TCFD category, external

root cause, value chain impact and value

driver affected. A longlist of 55 individual

CROs was retained for evaluation and

prioritisation.

In 2023, we revisited the original longlist

of CROs, such that instead of assessing

them with preliminary modelling for

prioritisation, as we did in 2021, we might

keep the complete universe, incorporating

more general aspects onto the definitions.

This approach was informed with

interviews held with risk owners, such as

industrial safety and environment, TSFs,

water, mine planning, and maintenance,

and rectified during two comprehensive

workshops with Senior management

and middle management. This process

allowed us to reach a comprehensive 25

element universe of CROs that later was

subject to assessment for likelihood and

impact, according to the enterprise risk

management (ERM) framework. What we

saw in the original exercise – and continue

to see as we have rebalanced and updated

this analysis – is that most CROs are related

to the operational phase of the value chain

(extraction and beneficiation), as compared

to others (development and construction,

closure and post-closure, others).

Management role Responsibilities

Baluarte’s CEO of Engineering Services Contributes to the technology strategy for mineral processing, as well as design and

operation of mine infrastructure such as tailings storage facilities (TSFs) and water reservoirs,

which could potentially be affected by physical risks.

Baluarte’s Energy Assistant VP Manages the electric power portfolio of Fresnillo’s Parent Company, optimising costs and

demand, analyses and assesses energy sourcing and feasibility for advanced exploration

projects and collaborates with mine managers for potential decarbonisation roadmaps.

Baluarte’s Sustainability and Community

Relations Assistant VP

Supports the Energy Assistant VP in decarbonisation initiatives, conducts research, offers

strategic guidance and lends expertise for the execution of sustainability programmes,

including climate change.

115

Additional

Information

Strategic

Report Governance

Financial

Statements

Risk/Opportunity

Risk/Opportunity description

and impact on business Impact time horizon How is this being managed? Metrics and targets

Physical risks

Acute:

Extreme

weather

Increase in

frequency and

intensity of

floods, storms,

cyclones and

hurricanes.

Risk rating:

HIGH

An increase in the frequency or

intensity of floods, storms, cyclones

and hurricanes could affect the health

and safety of our people, damage

assets and affect the continuity of our

operations and exploration projects.

This has occurred previously, with

Hurricane Rosa halting operations

temporarily. Potential impacts include:

• Damage to mine infrastructure and

access roads.

• Flooding at development sites.

• Disrupted transportation and supply

chains.

• Damage to energy infrastructure.

• Discharges of untreated water into

surrounding areas.

• Decrease in slope and TSF stability.

• Environmental impact on

neighbouring communities.

We conducted scenario analysis this

year (see Climate change section) to

understand which locations are likely

to be most impacted by physical

risk, including flooding caused by

extreme rainfall and hurricane events.

By understanding the location of

these events, we can prioritise further

mitigating actions.

Medium and

long-term

We have developed business resilience

plans, Emergency Preparedness

Response Plans (EPRPs), personnel

training and annual exercises to prepare

for natural disasters to protect our people

and facilities.

We have collaborated with our

communities in the response and

recovery from natural disasters and

developed plans to communicate

and coordinate with local regional

and state agencies.

Our TSFs are monitored with state-of-the-

art technology – Interferometric Synthetic

Aperture Radar (InSAR), drones, etc. – their

design, construction, surveillance, and

maintenance follow industry guidelines

and adhere to practices outlined by

Mining Association of Canada (MAC),

Canadian Dam Association (CDA) and

International Commission on Large Dams

(ICOLD) – which consider extreme weather

events. We also continue to make progress

in our ongoing efforts to prepare Potential

Failure Model Assessments (PFMA) for

each site.

Our key mining infrastructure such

as leaching pads and TSFs take into

consideration measures and capacity to

handle excess water to prevent discharges.

Geotechnical engineering teams at our

open pit operations use radars to monitor

slope stability in real time to detect and

predict potential failures. Herradura mine

has also implemented this technology at

its TSF.

Operations implement energy efficiency

measures including demand control

and peak shaving to reduce electricity

demand in peak hours. Mines are also

equipped with back-up diesel plants

to supply critical activities such as

groundwater pumping to protect

mining works in case of a loss of power.

Under

development

We also defined time horizons for the

materialisation of our CROs, set out in

the table below, which align to the ERM

framework, and the operational frontiers of

the Company’s strategic planning. While

2040 has been chosen to give a consistent

long-term perspective of climate risk

overall assessment for the business, some

locations will cease operations before that.

However, we have continued to include

these locations in the assessment as the

risk at these sites continues throughout

the closure and post-closure stages of the

mining life cycle.

Time horizon Description

Short-term Up to 5 years: 2024-

2028

Medium-term From 6-10 years:

2029-2034

Long-term Over 10 years: 2035+

The CROs list is Red-Amber-Green (RAG)

rated based on the ERM framework

scoring. The following table outlines

our prioritised CROs, based on the

materiality of the risk rating in the current

shortlisted analysis (high or more) and the

corresponding time horizon. The strategic

review of our CROs has informed our risk

management approach and provided

valuable insights to mature our climate

strategy in the coming years. For more

information on the ERM framework,

please refer to the Managing our risks and

opportunities section on pages 151-183.

116 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

Risk/Opportunity

Risk/Opportunity description

and impact on business Impact time horizon How is this being managed? Metrics and targets

Physical risks continued

Acute:

Extreme

weather

Increase in

frequency and

intensity of

cold, freezing

conditions and

snowfall.

Risk rating:

HIGH

An increase in the frequency or

intensity of cold, freezing conditions

and snowfall could affect the health

and safety of our people and the

continuity of our operations and

exploration projects. This has occurred

previously, with the Texas winter storm

temporarily shutting down the power

grid. Impacts include:

• Damage to mine infrastructure and

access roads.

• Disrupted transportation and supply

chains, including energy.

• Damage to energy infrastructure.

• Discharge of untreated water into

surrounding areas.

• Reduced slope and tailings storage

stability.

• Negative impacts on our

neighbouring communities.

Medium and

long-term

Under

development

Acute:

Extreme

weather

Increase in

frequency

and duration

of heatwaves,

wildfires and

windspeed.

Risk rating:

HIGH

Elevated temperatures during

heatwaves pose a dual challenge,

presenting risks to both workforce

health and safety. These challenges

manifest in the form of heat-related

illnesses and potential impairment of

decision-making capacities, thereby

heightening the likelihood of accidents.

The increased energy demand

during these heatwaves place

pressure machinery and equipment

that might overheat, on our internal

energy needs and the national grid’s

transmission capacity.

The increased frequency and

intensity of wildfire events pose

multiple challenges. They could

affect access roads, compromise

local power supplies, and damage

stored flammable critical inventory.

Moreover, these events may hinder the

successful restoration of mined land,

leading to land degradation and higher

closure costs.

The heightened risk of high wind

speeds not only intensifies the wildfire

threat, promoting swift and extensive

spread, but also raises the possibility of

wind speeds causing damage to the

liners of TSFs.

We conducted scenario analysis this

year (see Climate resilience section) to

understand which locations are likely

to be most impacted by physical risk,

including heatwaves and wildfires,

and assessing the financial impact

of disruption and downtime on this.

By understanding the location of

these events, we can prioritise further

mitigating actions.

Medium and

long-term

Our strategy for addressing the

increased frequency of heatwaves

hinges on our comprehensive health

and safety programmes. These initiatives

assess potential hazards and closely

monitor temperature conditions. In

our open pit mines, fatigue monitoring

is conducted using the Driver Safety

System ( DSS), directly engaging with

the driver through alarms, and with the

Vehicle Control Centre, staffed by safety

advisors, who analyse data and may

decide to implement driver switches

when necessary.

Operations implement energy efficiency

measures including demand control

and peak shaving to reduce electricity

demand in peak hours. Mines are also

equipped with back-up diesel plants

to supply critical activities such as

groundwater pumping to protect

mining works in case of a loss of power.

All mining units have firefighting systems

as well as firefighting brigades, and

adequate ventilation systems.

Under

development

117

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Statements

Risk/Opportunity

Risk/Opportunity description

and impact on business Impact time horizon How is this being managed? Metrics and targets

Physical risks continued

Chronic:

Changes to

temperature

and

precipitation

Risk rating:

HIGH

A chronic increase in maximum

temperatures will drive our demand

for energy for cooling purposes.

Reduced annual precipitation

directly contributes to heightened

water stress, potentially resulting in

diminished water availability for critical

activities, such as mining, agriculture

and other industrial activities. This

scenario intensifies competition for

water resources in the regions where

we operate. Drought conditions

may consequently lead to revenue

reductions through decreased

throughput and can further extend

to impede operations and extraction

processes, simultaneously posing a

detrimental impact on livelihood in

our neighbouring communities.

A persistent rise in maximum

temperatures not only amplifies our

need for energy for cooling but also

exacerbates challenges tied to reduced

annual precipitation, which exacerbates

water stress, threatening the availability

of water for vital activities like mining,

agriculture and industrial processes.

Consequently, competition for water

resources may intensify. The potential

emergence of drought conditions

not only risks revenue reduction due

to decreased throughput but also

poses a significant threat to our water-

dependent operations and extraction

processes. Additionally, this scenario

has a ripple effect on the wellbeing of

our neighbouring communities.

Medium and

long-term

Most of our water demand is supplied

from groundwater which makes our

mines more resilient to droughts. We

also rely on closed system circuits and

benefit from a high rate of water reuse.

In addition, we have developed a new

approach to technology for mineral

processing in our TSFs, improving tailings

deposition and water management, by

piloting and implementing technologies

such as high compaction thickener and

colossal filters.

Using treated municipal wastewater

reduces our exposure in the Fresnillo

district and may be a feasible option

in operations and projects close to

medium-sized communities. In

San Julián, we have constructed a

water reservoir to increase resilience

to droughts.

We actively engage communities to

partner with them to improve their

water access, infrastructure as well as

water-related resilience.

Percentage

of freshwater

withdrawn

in regions

with high or

extremely high

water stress*.

Percentage

of freshwater

consumed

in regions

with high or

extremely high

water stress*.

Percentage of

water reuse

efficiency**.

Water

intensity**.

Third party

wastewater

inputs**.

Note: * Refers to indicators shown at the end of this section. ** Refers to indicators shown elsewhere in the Sustainability chapter of this report.

118 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

Risk/Opportunity

Risk/Opportunity description

and impact on business Impact time horizon How is this being managed? Metrics and targets

Transition risks

Policy and legal:

Introduction of

carbon taxes or

similar schemes

Risk rating:

VERY HIGH

Emerging regulations such as local or

transborder carbon taxes, cap and trade

systems or increasing requirements

from current emissions regulations.

Mexico’s current pilot (non-binding)

Emissions Trading System (ETS)

programme excludes direct emissions

from haulage and indirect emissions

from electricity. However, an increase

in ambition to curb climate change

may drive a change in regulations

of the ETS to increase the emissions

sources regulated and their thresholds

or requirements for the mining

sector from the National Emissions

Registry (RENE). Other carbon pricing

mechanisms such as carbon taxes

on fuels or products may also arise

either nationally, sub-nationally

or internationally (i.e. subnational

environmental taxes, carbon border

adjustment mechanisms, etc).

We conducted a quantitative scenario

analysis exercise this year (see section x)

to understand the impact of a carbon

price on our business. We used a range

of prices to reflect the uncertainty of the

current schemes proposed. The analysis

suggests decarbonisation is required to

minimise the cost from this risk.

Short to

medium-term

We engage constructively with regulators

and lawmakers on energy and climate

change regulations through industry

associations. National regulatory

requirements for land change use

requires us to engage in rehabilitation

and reforestation activities throughout

the life cycle of mining, in which we

have considerable experience.

We pursue a resilient energy strategy

supported by renewables – which

account for over 50% of our electricity

consumption – and cost-effective energy

efficiency projects, such as haulage

route optimisation and mine shaft

construction, harmonic filters, on

demand ventilation systems, demand

control and peak shaving.

We have embarked on two projects

whose results will help us make informed

decisions regarding our climate change

initiatives – the regional climate modelling

and the decarbonisation roadmap in two

of our largest assets – which we believe

will provide more information on available

and economically feasible technologies,

informing our decarbonisation reduction

ambitions.

Absolute Scope

1 and 2 GHG

emissions*.

Percentage of

electricity from

renewable

sources*.

Percentage of

grid electricity*.

Policy and legal:

Increase in

number and

stringency of

government

regulations

Risk rating:

HIGH

Fresnillo must ensure compliance

with stringent regulations in Mexico

relating to surface and groundwater use,

particularly in the face of the updated

mining law. Regulations pertaining

to land-use change and land-use

licences exert notable influence on

construction and equipment costs.

This extends to sectors like electricity,

where the prevailing regulatory

landscape, particularly in recent years,

has not favoured self-supply initiatives,

prioritising the state power utility.

Additionally, it has constrained the

growth of renewable supply integration

into the grid. This in turn has the

potential to affect electricity prices.

Short to

medium-term

Our Executive Committee remains

up to date with regulations and to

track our progress against renewable

energy targets. We have a robust

regulatory and compliance programme,

overseen by our compliance and legal

team, with periodic reviews conducted

by the audit department. A dedicated

system tracks compliance dates,

minimising the risk of non-compliance.

We also engage constructively with

regulators and lawmakers on energy

and climate change regulations through

industry associations.

We have developed a new approach

to technology for mineral processing in

our TSFs, improving tailings deposition

and water management, by piloting

technologies such as high compaction

thickener and colossal filters. We also rely

on closed system circuits and have a high

efficiency water reuse.

Using treated municipal wastewater

reduces our exposure in the Fresnillo

district and may be a feasible option in

operations and projects close to medium-

sized communities. In San Julián, we have

constructed a water reservoir to increase

resilience to droughts.

Total freshwater

withdrawn*.

Total freshwater

consumed*.

Percentage of

grid electricity*.

Total energy

consumed*.

119

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Risk/Opportunity

Risk/Opportunity description

and impact on business Impact time horizon How is this being managed? Metrics and targets

Transition Risks continued

Policy and legal:

Impact of

purchasing

carbon offsets

Risk rating:

HIGH

In order to meet regulatory standards

and improve market reputation

in relation to decarbonisation, the

Company may incur costs of offsetting

the GHG emissions of its operations.

Medium to

long-term

The Mexican Environmental Agency

requires that operating mining units

compensate for the impact they

have throughout their life. We have

considerable experience in reforestation

and land rehabilitation, but further

exploration of voluntary carbon markets

and carbon offsets are still required.

External offset

prices.

Transition opportunities

Market:

Increase

demand of silver

for solar PV

Opportunity

impact rating:

VERY HIGH

Silver is used in the manufacturing

of solar photovoltaic (PV) cells. Solar

energy is expected to increase its

role in the global energy mix as

decarbonisation ambitions rise

globally, and manufacturing

becomes cheaper. PV manufacturing

is expected to be one of the drivers

of greater silver demand.

Short-term We monitor the progress of this

opportunity through the Silver Institute

and specialised reports.

Operating budgets have been boosted

to favour silver production and new

exploration projects such as Rodeo

or Orisyvo focus on silver reserves.

Our exploration projects in Latin

America focus on product diversification,

with a special interest in copper, which

is also an important mineral for the

energy transition.

Annual global

industrial silver

demand.

Resource

efficiency:

Switching to

renewable

sources of

energy

Opportunity

impact rating:

HIGH

Renewables offer cost-effective

decarbonisation opportunities

and build resilience to fossil fuel

price volatility. Electrification could

transform mining equipment and

truck fleets in underground mines.

Microgrids (off the grid) supported

by renewables and energy storage

offer opportunities for remote

mining operations and for reducing

dependence on the national grid.

Green hydrogen (hydrolysis with

renewable energy) represents an

opportunity to decarbonise truck

fleets in open pit mines.

Short-term We follow a resilient energy strategy

of self-supply to reduce dependence

on the power utility and price volatility,

supported by renewables – which

account for over 50% of our electricity

consumption.

We use hydraulic electric drills in our

underground mines and have the

objective to test hydrogen-fuelled

commuting trucks for personnel

in the near future.

In late 2023, we launched a

decarbonisation roadmap in two

mining units. Results are expected

to bring further insight into the

decarbonisation of operations.

Furthermore, we engage with suppliers of

truck equipment and ventilation systems,

as well as with industry associations, to

monitor the ways in which technologies

are evolving; we also sponsor industry

oriented cleantech challenges to foster

the introduction of innovative solutions

to the marketplace.

Percentage of

electricity from

renewable

sources*.

Note: * Refers to indicators shown at the end of this section. ** Refers to indicators shown elsewhere in the Sustainability chapter of this report.

120 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

Climate resilience

The scenarios used in scenario analysis

(outlined in the table below) encompass

a spectrum of potential futures shaped

by various combinations of possible

socioeconomic, regulatory and climate

factors, among other variables. For

evaluating physical risk, scenario data

is sourced from the Intergovernmental

Panel on Climate Change (IPCC), an

intergovernmental body of the United

Nations, dedicating to advancing scientific

knowledge on climate change resulting

from human activities. The IPCC scenarios

are based on shared socioeconomic

pathways (SSPs), which offer insights

into possible social, economic, political

and technological changes between the

present and 2100.

Transition risks are evaluated using

scenarios provided by the International

Energy Association (IEA). The IEA uses a

scenario approach relying on the Global

Energy and Climate (GEC) Model to

examine future energy trends, and to

explore a variety of scenarios with different

underlying assumptions. Two of these

scenarios have been employed to assess

the drivers of potential outcomes and

analyse associated potential risks. These

are the Net Zero Emissions (NZE) which

shows a narrow but achievable pathway

for the global energy sector to achieve Net

Zero by 2050, and the Announced Pledges

Scenario (APS), which considers all climate

commitments made by governments

around the world, including NDCs and

Net Zero targets.

While scenario analysis is a hypothesised

outcome rather than a forecast, our analysis

enables us to understand the potential

impact of climate change on our business

under a selection of scenarios so we can

plan accordingly, both operationally and

financially. In previous years, we have

conducted qualitative scenario analysis

across our shortlist of climate change risks

and opportunities. This year, we utilised

quantitative scenario analysis to assess

which physical risks our business is most

exposed to, as well as how a carbon tax

could impact our business financially. Only

results for most material risks are included

in the following analysis. Looking ahead,

we envision employing similar scenario

analysis techniques for all our climate

risks, and to quantify our most significant

opportunities, such as the increase in

demand for metals and minerals in the

global transition toward Net Zero .

Climate scenarios description

Warming trajectory

by 2100 Scenario

Physical

scenario source

Transition

scenario source

1.5°C Rapid transition to a global low carbon economy. Not considered IEA NZE

<2°C Steady transition to a global low carbon economy in line with the Paris

Agreement. This scenario aligns with a Net Zero target in the second half of

the century, limiting peak warming below 2°C compared to pre-industrial

times. World economies move towards a more sustainable path that respects

environmental boundaries through lower material growth and resource intensity.

IPCC SSP 1-2.6 IEA APS

2-3°C Delayed transition leading to notable transition and physical impacts.

Considered a ‘middle of the road scenario where both physical and transition

impacts occur’ and aligns to stated policy. Emissions start to decrease until

2045 and environmental systems experience degradation, global growth is

moderate and income inequality persists, as does vulnerability to societal and

environmental changes.

IPCC SSP 2-4.5 Not considered

>4°C Business-as-usual emissions, extreme warming, this is a worst-case scenario.

Existing climate and energy policies are unsuccessful, resulting in a significant

increase in global GHG emissions without constraint, intensifying physical risks.

Additionally, competitive markets produce rapid technological progress and

development, but coupled with abundant fossil fuel exploitation, and resource-

and energy-intensive lifestyles.

IPCC SSP 5-8.5 Not considered

121

Physical risk

Transition risk

SSP1-2.6 SSP2-4.5 SSP5-8.5

NZE APS

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Strategic

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Statements

We expect that transition risks will emerge

at a quicker pace compared to physical

risks. This expectation is rooted in the belief

that proactive climate action will avert

the most severe consequences of climate

change. Opting for a transition path to

mitigate climate change impacts will

bring about transition risks. Conversely, in

the absence of limitations on greenhouse

gas emissions, physical risks will manifest,

growing in severity and frequency.

Transition risk: Carbon price

There is significant potential exposure to

increased costs from carbon pricing if our

Company does not take actions to reduce

our carbon emissions. Our analysis assumes

50% of increases in upstream value chain

costs will be passed on to Fresnillo as a

simplifying assumption to reflect both the

possibility of costs from investment in new

equipment and carbon costs being passed.

It also assumes 0% of costs are passed

onto customers and there is no impact

from Scope 3 downstream emissions

because we have no agency in final prices

of our commodities as these are driven by

the market. Greater granularity of carbon

emission data across the value chain is

required in order to fully understand the

financial impact of carbon. We present

the findings from our scenario analysis on

page 124.

Climate scenarios pathways

RisksScenarios

2-3°C >4°C<2°C1.5°C

Rapid Steady Delayed Business-as-usual

122 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

Carbon pricing

Risk/Opportunity Policy: Carbon pricing

TCFD Category Policy and legal

The potential financial impacts of increased carbon taxes on emissions across our operations and supply chain.

Time horizon 1.5°C <2°C

Developed economy

pricing

Developing economy

pricing

Developed economy

pricing

Developing economy

pricing

Potential Impact Short term US $127m US$82m US$123m US$37m

Medium term US$165m US$129m US$141m US$89m

Long term US$201m US$161m US$161m US$129m

• Direct increase in overhead costs, from Scope 1 and 2 emissions (e.g. cost of electricity and fuel).

• Increased cost of raw materials, under Scope 3, due to upstream suppliers passing on increased costs.

• Reduction in sales due to potential consumer shifts if increased costs from carbon taxes are passed on

to the consumer.

Scenario analysis Scenario analysis was carried out under a Net Zero emissions pathway (1.5°C) scenario and an announced

pledges (2-3°C) scenario. For our analysis, we used carbon prices provided by these scenarios (in the absence of

current Mexican carbon prices), along with our GHG footprint by mine site and by emissions scope. Carbon prices

used in the analysis were collated from the International Energy Agency (IEA) for both developing and developed

economies. This is to represent the range of prices that may be introduced in Mexico in the future, and to also

represent prices related to the introduction of the CBAM in the EU.

Key analysis

Under a Net Zero-aligned scenario, the potential financial impact of carbon taxes is US$127.7 million using

developed economy carbon pricing, and US$82.1 million using developing economy pricing. This incorporates our

current aim to reduce Scope 2 emissions by 75% by 2030 into the analysis. This risk is due to significant projected

growth in carbon prices in both scenarios and in both types of economies modelled. Assuming constant emissions

over the medium and long term, impacts continue to increase with rising carbon prices. This risk is reduced if we

continue to reduce Scope 2 emissions beyond 2030 and formalise plans to reduce Scope 1 emissions.

Indirect Scope 3 emissions account for the majority of our potential exposure to carbon costs, particularly

upstream efforts to reduce emissions which may result in extra costs being passed on to us from our suppliers.

We have limited ability to influence these costs as they will depend on the extent to which suppliers reflect carbon

tax expenditure/mitigation expenditure within their prices. Regarding downstream passing on of costs, the ability

for us to set and control prices is limited, and broadly controlled by global commodity prices and markets.

Assumptions

• A 75% reduction in Scope 2 emissions by 2030 has been assumed based on our target to have 75% of our

energy coming from renewable sources by 2030. A 100% reduction in Scope 2 emissions by 2035 has also

been assumed for the purposes of this analysis.

• We expect our Scope 2 emissions reductions noted above to be cost neutral through the move towards

renewable energy.

• We have assumed that only 50% of the Scope 3 upstream emissions as pricing from suppliers is on an arm’s

length basis, therefore expect higher costs to suppliers to be passed on to us, although allows to reflect the

costs from investing in new equipment as well.

• We have assumed 0% of Scope 3 downstream emissions will be passed on to us and there is no room for

negotiation in agreeing pricing with customers.

Key

Impact rating Financial impact range Colour

Insignificant $100,000 - $999,999

Minor $1,000,000 - $9,999,999

Medium $10,000,000 - $99,999,999

Significant/Major $100,000,000 - $999,999,999

Catastrophic/Extreme > $1,000,000,000

Note: The impact rating is obtained though the quantification of the risk rating, based in likelihood.

123

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Statements

Physical risks

There are significant physical risks to our

operations due to extreme weather events

caused by climate change. The risks are

diverse and will affect sites differently,

primarily dependent on whether mines

are underground or open pit, and in which

region of Mexico they are located. Primary

physical risks across sites are increasing

events of excess heat, increased frequency

and severity of wildfires and the potential

for increased precipitation resulting

in tailings dam breaches. Insurance

covers some physical risk impact but not

necessarily all physical risks associated

with climate change. Our analysis focused

on the total assessed impact from

asset damage, business disruption and

productivity loss. This risk will be mitigated

to an extent by insurance and current and

planned mitigation activities outlined on

pages 115-117.

We conducted scenario analysis on eight

physical risk hazards (wildfire, heat, flood,

precipitation, drought, hail/thunderstorms,

cold and wind). This analysis utilised the

scenarios created by the IPCC, and was

conducted over five-year intervals from

2020 to 2100. There were three areas of

focus for our analysis: risk ratings; risk-

specific metrics; and potential financial

loss due to physical risks. Risk ratings for

all eight hazards analysed allow us to

compare the severity and frequency of

these risks in the short term, with how

these risks are modelled to change over

time, specifically, over 2050. We use this

information to identify sites exposed to

physical risks in the nearer term, and also

sites that may become exposed to risk

in the future but may be currently at a

much lower risk level, as explained in the

figure below.

Current vs future physical risks

Change

Risk

UNEXPECTED RISKS

LOW RISK

HIGH RISK

GETTING WORSE

MANAGEABLE

124 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

We analyse the potential resulting impacts

of certain hazards (flooding, wind, heat and

wildfire), focusing on the damage to assets

and infrastructure, as well as the disruption

to revenue-generating activities; the most

impactful to our business are wildfire and

heat, which connect with emerging risks,

particularly, water stress and droughts,

which in turn, also connect with the

principal risk climate change. Following,

our insights into these results. For more

information on emerging and principal

risks, refer to the Managing our risks and

opportunities section of this report in

pages 151-183.

TCFD Category Risk/Opportunity Potential Impact Scenario analysis findings

Physical – Acute Impact of increased

frequency and severity of

wildfire on mine sites and

infrastructure/equipment.

• Revenue disruption from the

interruption of supply of electricity

due to wildfire damage in the area

surrounding a mine site.

• Inefficiencies in production due to

disrupted employee travel due to

disruption to access routes caused

by fires.

• Increased facility and operational

down time, due to damaged

infrastructure and equipment

with limited mobility.

• Direct damage to critical inputs

such as cyanide or plastic and

rubber spare parts, which are

more susceptible to wildfire than

ore and mineral concentrates.

Key analysis

Wildfire is one of the most material risks

to Fresnillo, having a high impact on 75%

of our operational sites. The highest risk

sites are situated in the centre of Mexico,

however, all of our sites are in the ‘high’ or

‘very high’ risk tiers in relation to wildfire,

with small increases in risk between 2020

and 2050. Wildfire risk is likely to disrupt

operations and damage site infrastructure

and equipment. It also poses a safety

hazard for our employees due to the risk

from flames, excess heat and smoke.

Assumptions

• A wildfire event is assumed to cause

complete site disruption, so that no

work can be performed.

• Damage/Disruption due to smoke and

embers is not considered.

• For the purposes of scenario analysis

modelling, each wildfire is considered

to be of the same intensity and strength.

Physical – Acute Impact of increased

frequency and severity

of extreme heat events

on mine sites and worker

productivity.

• Reduction in the rate of revenue

generation due to reduced

productivity of our employees in

instances of extreme high heat.

• Increased reliance on cooling systems

and increased potential for cooling

system failure due to increased usage.

• Increase in days exceeding 38°C

at all sites.

Key analysis

Extreme heat can impact a business

through a decrease in worker productivity

or by impacting the performance of

machinery without sufficient cooling

equipment. Days exceeding 38°C gives an

indication of the number of days when

business as usual operations could be

disrupted due to extreme heat. For the

high risk locations, there are expected to be

73–85 days exceeding 38°C per year under

a 2-3°C scenario. Under a 4°C scenario,

there are expected to be 77–86 days. The

impact is likely to be felt most at sites

which have not historically experienced

this level of heat, as mitigation measures

are less likely to be in place. However, our

mitigating actions are outlined on pages

116 and 117. Sites which have historically

experienced extreme temperatures may be

more prepared, but are at risk of extended

periods of extreme temperatures. Our open

pit mines in the north-west region will likely

be most vulnerable to heat risk.

Assumptions

• Productivity losses occur by a uniform

percentage above a temperature of 35°C.

• There is no distinction made between

potential differences in productivity in

accordance with genders, age or pre-

existing conditions.

• It is not taken into consideration

whether workers are acclimatised to

temperatures exceeding the threshold

used (35°C).

• Absenteeism from health impacts of

heat is not considered.

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Risk ratings are detailed below for all

hazards across all sites. Current risk ratings

are rated on a scale from ‘Lowest’ risk to

‘Highest’ risk and are based on the severity

of a given hazard in 2020 under a >4°C

scenario. The risk change ratings reflect

the change in risk from 2020 under a >4°C

scenario to 2050 under the same scenario.

These are on a scale from ‘Lowest’ risk

change to ‘Highest’, with the additional

rating option of ‘Reduction in risk’ (as the

risk posed by a hazard can also decrease

over time). We have provided the rating

per hazard as a mean average for all sites

included in our scenario analysis.

Impact on the businesses, strategy and

financial planning

In line with our commitment to robust

governance, as described in the previous

section, the thorough analysis of our CROs

is intended to serve as a cornerstone for

informed strategic decision-making for

current operations and development

projects. The Group has already made

certain climate-related strategic decisions,

such as to focus on decarbonisation and

to increase wind energy and investments

in energy and operational efficiency.

Where decisions have been approved by

the Board, the effects were considered

in the preparation of the financial

statements (for more information, see the

Judgements section of the consolidated

financial statements note on page 270).

In anticipation of potential impacts,

we recognise further work needs to be

carried out to account for stand-alone

effects, particularly concerning energy and

operational efficiency measures. Strategic

priorities include capitalising on the

increased demand for silver in solar PV

and optimising operational costs.

Climate change affects various stages of

the mining life cycle, including exploration,

development, operation, closure and post-

closure. A comprehensive understanding

and strategic planning on climate-related

risks will allow us to implement effective

measures that will mitigate the impact of,

and reduce our exposure to transitional

risks. Adapting to climate change will

safeguard the wellbeing of our workforce,

fortify our mining infrastructure, secure

water supplies, allow us to collaborate with

surrounding communities, and overall

minimise the potential impact on our

business. Therefore, our climate strategy

goes beyond mere resilience; it embraces

a proactive approach, aiming to both

mitigate our impact on climate change

and adapt to its physical consequences at

the same time. In pursuit of this goal, we

have initiated a transformative journey to

enhance our practices and secure our long-

term sustainability through two ongoing,

impactful projects. While we are in the

process of developing transition plans and

strategies, we believe these two projects

will enable us to anticipate and integrate

associated costs and revenue streams with

more accuracy. This will ensure that we

align our financial strategies to deliver long-

term profitability and resilience.

Average risk ratings for all mining sites assessed

Hazard Current risk rating (2020) Risk change rating (2020-2050)

Wildfire High Lowest

Wind Low Lowest

Heat Low Medium

Drought Low Reduction in risk

Precipitation Low Low

Cold Low Reduction in risk

Hail and thunderstorms Low Reduction in risk

Flood Lowest Lowest

Project Regional Climate Modelling Decarbonisation roadmap

Background

Existing climate information for Mexico is

insufficient to assess impacts on mining

infrastructure, necessitating advanced, Company-

tailored climate modelling to understand risk,

vulnerabilities and adaptation measures for each

stage of the mining cycle. The project methodology

involves Global Climate Models (IPCC CMIP5 and

CIMP6), dynamically scaled by regional physical

models that feed a stochastic generator of climate

ensembles trained with data from meteorological

stations. Modelling was concluded during 2023 with

inputs from the Company’s key stakeholders.

We are committed to establishing decarbonisation

commitments and targets: We understand our

emissions, processes with the largest carbon

footprint and have expertise in adopting

technologies such as wind farms and dual motor

vehicle fleets. While renewable electricity has been

a primary lever in our decarbonisation strategy,

the mining and metals industry faces challenges

in decarbonising certain activities and processes.

The project’s purpose is to generate a strategic level

decarbonisation roadmap in collaboration with our

Parent Company, Industrias Peñoles, considering

multiple decarbonisation levers, their impact on

emissions reductions, the speed of implementation

and their financial implications.

Relevant

activities in 2023

Virtual climate change workshop:

• A series of presentations on research projects

related to climate change adaptation in the

mining industry were presented by faculty from

the University of Arizona’s Center for Applied

Hydroclimatic Sciences, with the participation

of the School of Mining and Mineral Resources,

the Center for Climate Adaptation Science and

Solutions, and the Center for Sustainable Mining,

among others.

• The workshops were attended by representatives

from different areas of the Company such as

planning, projects, engineering, water, tailings

and environment, among others, that will have

a relevant role in climate change adaptation.

• Definition of pilot sites: Herradura open pit

mine was selected based on its level of emissions

and energy sourcing decarbonisation challenges;

Fresnillo underground mine was selected due to

its strategic role in our business model.

• Management involvement: Received support

from the Chairman of the Board of Directors,

CEO, CFO, Executives and Operations Managers.

• Work ecosystem: Integration of multidisciplinary

teams, along with a steering committee for

project oversight.

• Information collation: Compiled site-level

energy and emissions inventory to guide visits

and develop projections for decarbonisation

scenario analysis.

126 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

Project Regional Climate Modelling Decarbonisation roadmap

Workshop with UNAM researchers:

• Presentation of the project objectives and

methodology to UNAM’s Engineering Faculty

departments of Atmospheric Sciences, Climate

Change and the School of Mining and Metallurgy.

• The workshop generated interest in collaboration

with the Company on climate modelling and

capacity building projects for climate change

adaptation in mining.

In-person climate change workshop:

• Raised awareness of climate change impacts,

presenting climate modelling methodology and

key results.

• It brought together multidisciplinary teams

across the Company with key roles in identifying

vulnerabilities and planning climate change

adaptation measures to discuss the approach,

challenges and opportunities of climate change

adaptation with an emphasis on environment,

mine closure, water and TSFs.

• Site visits: Conducted visits to understand key

processes’ emissions, operations’ energy efficiency

initiatives, and discuss decarbonisation challenges

and opportunities with operations’ teams.

• Decarbonisation levers: Preliminary identification

of decarbonisation levers considering process

alternatives, energy efficiency, green fuels

replacement, electrification and renewables.

• Green energy analysis: Analysis and assumptions

considering potential opportunities for

biomethane, biodiesel, bio-coke, green electricity

and hydrogen technologies.

Next steps

Preparation and transfer of climate modelling results

so they may be incorporated into engineering and

operational decision-making.

• Workshops (pilot sites): Present research on

decarbonisation levers, understand potential

risks, align key assumptions and prioritise unit

decarbonisation levers.

• Workshop (steering committee): Establish

decarbonisation ambition, analyse the baseline

and key levers identified in the pilots, determine

three scenarios for detailed analysis and align

criteria for defining targets.

• Preparation of roadmaps: Simulation for

decarbonisation scenarios, definition of marginal

abatement curves (MAC), prioritisation of

technologies and development of site-level

roadmaps.

• Presentation of results: Communicate results

to the work ecosystem and executive team.

Based on our thorough analysis of CROs,

our management is confident in the

Company’s resilience and ability to thrive

amidst the challenges of climate change.

We are dedicated to sustainable operations

and remain optimistic about our profit-

generation capacity. With strong processes

to manage and adapt to climate-related

risks, we are well-equipped to successfully

navigate the changing climate landscape,

securing the long-term sustainability and

success of our business.

Priorities for 2024

In last year’s report, we announced

our intention to mature our approach

to internal carbon pricing, and during

2023, internal discussion took place

among different departments with

a stake in financial and long-term

planning. An agreed action item for

2024 is to standardise of the long-term

energy planning forecast to enable its

incorporation into different internal

operational and strategic reports, thus

providing sufficient elements to continue

maturing our financial analysis. We also

aim to pursue the refining of quantitative

analysis to examine our climate-related

opportunities in the future.

Last year’s report also described our

interest in developing a roadmap to

integrate mitigation and adaptation

measures into our financial planning. For

this purpose, we have embarked on two

projects which will help us make informed

decisions regarding our climate change

initiatives. The regional climate modelling

project was successfully concluded

during 2023, providing industry-valuable

insights that will continue to be further

developed with the engineering teams

throughout 2024. Additionally, an in-

depth analysis of our two largest assets

was launched at the end of 2023 to better

understand the available the low-carbon

technologies for the Company and the

objectives we may realistically commit

to for the decarbonisation of our mining

operations. We believe these studies

will also provide insights into engaging

the value chain for Scope 3 reductions

moving forward. All these initial efforts are

geared towards making progress on our

path to developing a transition plan that

aligns with the framework outlined by the

Transition Pathway Taskforce (TPT) in the

years ahead.

Risk management

The Board has overall responsibility

for our approach to risk management

and delegates this responsibility to the

Audit Committee. Climate change is

considered a principal risk to the business,

and we adopt a Group-wide approach

to risk management see page 151-183

based on risk identification, assessment,

prioritisation, mitigation and monitoring

processes, which are continually evaluated,

improved and enhanced in line with

best practice. The principal risk of climate

change connects with our emerging

risks (see page 151-183), notably water stress

and drought, transition to a low-carbon

future and increasing societal

and investor expectations.

Identifying and assessing climate risks

and opportunities

The intricate and rapidly evolving nature

of climate change amplifies various risks,

including environmental incidents, access

to water, workforce health and safety,

government regulations, and social licence

to operate. A robust climate strategy relies

on a sound understanding of the CROs of

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our business model, taking into account

the mining life cycle and our value chain.

Our risk management system is based on

risk identification, assessment, prioritisation,

mitigation and monitoring, which are

continually evaluated and improved in

line with best practice.

In 2021, we successfully integrated climate

change considerations into our annual

risk appraisal. By 2023, this integration

seamlessly became part of our enterprise

risk management (ERM) framework,

streamlining scoring and criteria. Our

approach began with desktop research to

establish a risk catalogue, drawing insights

from industry benchmarks, by significant

peers and climate change guidance

documents. We also held interviews

with key representatives and workshops

involving personnel that represented every

aspect of the business, thus achieving a

robust and comprehensive CRO register.

In 2023, we reassessed this register,

enhancing the prioritisation of risks. The

integration process involved aligning

the scoring criteria from the Company’s

ERM into the climate risk framework.

Simultaneously, we consolidated

the longlist of CROs into a concise

compilation of the most material risks

and opportunities. This entailed redefining

some of the risks to ensure the definitions

were generalisable to our business, but

not too site-specific. The result was a more

focused list of top priority CROs, allowing

us more clarity to plan mitigation actions

around, as well as confirm our risk appetite

regarding these material climate risks.

In the future, we look to use scenario

analysis techniques to quantify our

most prevalent opportunities, such

as the increase in demand for metals

and minerals in the world’s transition to

net zero.

Managing climate risks

The business-wide impacts of climate

change led the Company to include

climate change as one of the emerging

risks, as part of Provision 28 of the 2018

UK Corporate Governance Code; climate

change is now a principal risk. Updates on

the regulatory landscape are considered

in line with business-wide regulatory

monitoring processes. In this regard,

climate change related risks have been

included in the financial viability study,

primarily hypothetical scenarios of winter

storms and extreme rainfall.

For a more detailed overview of these

scenarios, please see Viability statement

on pages 120-125.

This year, our focus has been on fully

integrating our assessment of climate-

related risks and opportunities with our

ERM framework. As a result, we have

updated our climate risk framework to

reflect the same scoring system and

timeframes as our central ERM framework,

enabling ranking of climate alongside

other risks to our business. We also used

scenario analysis to determine the scale

and magnitude of the physical and one

transition risk, namely carbon tax. We used

three physical and transition scenarios

against medium- and long-term horizons.

This analysis informed the identification

of risks and opportunities as well as the

corresponding mitigation measures and

implications for our strategy.

Our updated climate change risk

management system is a collaborative

effort involving operational and corporate

departments such as mine operations, plant

operations, maintenance, mine closure,

environment, industrial safety, tailing

storage facilities (TSFs), community relations,

energy, financial planning, operational

comptrollership, financial comptrollership,

explorations comptrollership, legal, ESG and

risk. Ongoing work focuses on the definition

of risk owners, identifying current controls

and mitigation actions, and collaboratively

enhancing these through monitoring and

management, across all operating units. Our

purpose is to run this exercise periodically

with risk owners to ensure accuracy of

impact assessment and adequacy of

mitigation actions moving forward.

Further work will be carried out in 2024 for

the purpose of standardising and maturing

controls and mitigation actions with their

risk owners across our units, determining

a baseline for each and planning ahead

given our current analysis of our assets’

vulnerabilities to physical risks.

Priorities for 2024

During 2024 we will be assessing physical

risks in the business units more frequently

with the support of weather stations,

and we plan to implement a training

programme on climate change issues for all

environmental and industrial safety areas.

We will also continue to monitor our

climate-related risks and opportunities,

calibrating the risk management

framework at the mining unit basis for

the top priority identified in the 2023

reassessment exercise. This activity will

be followed by a second phase, which

we expect to achieve the same level of

detail for the entire list of CROs.

Metrics and targets

Our target is to source 75% of electricity

from renewable sources by 2030. We

have steadily increased our consumption

of renewables in recent years, despite

regulatory uncertainties which have

caused delays to new renewable supply

sources coming online. Waiting periods

for the modifications to our transmission

permission agreements have increased

and meant that we have been unable

to move directly from our Wind-Power

Purchase Agreements (PPAs) to our

Wholesale Electricity Market (WEM)

available wind-sources. In 2022, this led

to us having to consume more electricity

from the Mexican power utility, Comisión

Federal de Electricidad (CFE). The result

was a temporary reduction in renewable

consumption, offset in 2023. We are

currently running studies to gain insight

into further target setting across other

climate ambitions, as explained in the

Strategy section.

Our primary climate-related metrics

and targets are linked to our priority

CROs, provided in Table on pages 115-119.

Additionally the mining industry is energy

and water intensive, and thus the rigorous

monitoring of our usage of both resources

is key to our operations. Our metrics are

outlined on page 128. Further work is

still needed to comply with the cross-

industry metrics.

128 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Climate change continued

TCFD cross-industry

category Metric Unit of measurement FY23 FY22 FY21

GHG emissions Absolute Scope 1 and 2 tCO

e 824,387 968,249 894,149

Scope 1 tCO

e 469,146 545,970 544,107

Percentage of Scope 1 emissions under

emissions limiting regulations

% 0 0 0

Scope 2 tCO

e 355,241 422,279 350,042

Absolute Scope 3 tCO

e 700,480 713,043 729,158

GHG emissions intensity measurement tCO

e/tonne of mineral

processed

0.0248 0.0246 0.0232

Energy

management

Energy-intensity measurement MWh/tonne of mineral

processed

0.088 0.080 0.082

Total energy consumed GJ 10,590,930 11,350,894 11,327,936

Percentage of grid electricity % 10.6 14.8 10.0

Percentage of electricity from renewable

sources

% 21.3 12.4 17.4

Water

management

Total freshwater withdrawn thousand m

24,907 30,023 28,488

Total freshwater consumed thousand m

11,276 12,817 14,534

Percentage of freshwater withdrawn

in regions with high or extremely high

baseline water stress

% 100 100 100

Percentage of freshwater consumed

in regions with high or extremely high

baseline water stress

% 100 100 100

Tailings storage

facilities

management

Number of TSFs Number 24 19 N/A

Note: Scope 3 GHG emissions categories include purchased goods and services, processing of sold products, downstream transportation and distribution, and investments. For more

detail, refer to the energy section. TSF management is a new indicator. Detail is as follows: Active – 6 TSF, 3 Heap Leaching Facilities (HLF); 3 Water Storage Facility (WSF). Maintenance

– 11 TSF, 1 HLF.

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Waste management

Our goal is to protect local communities and the environment by

managing waste responsibly.

Tailings and mineral waste

Safe tailings management is paramount

across the entire life cycle of our mining

operations, encompassing design,

construction, operation, closure and

post-closure phases. Aligned with our

commitment to achieve zero harm to

people and the environment, we have

embarked on a comprehensive journey to

implement industry-leading best practices

in the governance and operation of our

tailings storage facilities (TSFs), yielding

substantial results so far, as described

below. There were no tailings-related

failures at our operations in 2023.

Governance

Our governance framework establishes the

roles, responsibilities and accountability

of the groups involved in the design,

construction, operation, maintenance and

surveillance of TSFs in accordance with the

diagram below. The Board’s Health, Safety,

Environment and Community Relations

(HSECR) Committee is informed of

compliance status, relevant issues or risks

and recommended courses of action. The

Independent Tailing Review Panel meets

with the Company every two months and

annually conducts field visits; findings are

then presented to senior management for

follow-up. The Tailings Review Executive

Committee – composed of members of

the Board of Directors, advisors and general

managers – continues to hold monthly

sessions that foster coordination across

management and enables informed and

opportune decision-making.

Tailings

Tailings are a by-product of mineral processing. The ore is reduced in sized by

crushing and milling to obtain sand and silt-sized particles. The milled rock is

then mixed with water and moved as a slurry for further processing to separate

the valuable minerals from the milled rock. The remaining slurry of milled rock

is known as tailings. Tailings are transported and stored in engineered structures

known as Tailings Storage Facilities (TSFs) or combined with cement to be reused

as paste backfilling in underground workings.

Waste rock

Mining operations remove waste rock to access the ore. Most mining waste is

transported and deposited in waste piles for permanent storage, though some

waste rock is used in underground cut and fill operations. Most of the Company’s

mineral waste is generated by the open pit operations and deposited in waste

rock piles.

Heaps

Part of the disseminated ore deposits at Herradura and Noche Buena are

processed using heap leaching. Channels surrounding the heaps and contingency

ponds are hydraulically designed to handle flood flows caused by extreme rainfall

events. Conditions both up and downstream are proactively monitored to detect

changes in water quality. Once extraction of ore from the mine is complete,

the piles are rinsed and allowed to drain down to protect the environment.

SITE

MANAGEMENT

Roles

Mine Manger

Regional Tailings Manager

Engineer of Record (EoR)

Responsibilities

Operate TSFs in accordance

with guidelines

Provide technical expertise

Manage change processes

TAILINGS

MANAGEMENT AND

STEWARDSHIP TEAM

Roles

Accountable Executive (AE)*

Corporate Tailings Specialist

Corporate Tailings Manager

Responsibilities

Lead team and provide oversight

Develop corporate governance

and controls

Administer external reviews

and verifications

EXTERNAL

REVIEWS

Roles

Independent Tailings Review Panel

(ITRP)

Dam Safety Inspections (DSI)

Dam Safety Reviews (DSR)

Responsibilities

Confirm compliance with governance

and best practice requirements

GROUP-LEVEL

OVERSIGHT

Roles

TSF Review Executive Committee

Responsibilities

Provide overall oversight

Continuous review of operation,

governance, inspection, review

and audit reports

Governance framework of TSFs

* Fresnillo plc’s CEO is the Accountable Executive for operations and Baluarte’s CEO of Engineering Services for Governances matters.

130 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

During 2023, we successfully implemented

the governance framework across all our

mining units. The key milestones of the

year included the internal issuance of the

Tailings Management System’s Corporate

Tailings Guidelines and the Tailings Policy

and Commitments for Responsible Tailings

Management, both of which are essential

pillars for a safety culture in mineral waste

management. In 2023, we formalised the

appointment of one Engineer of Record

(EoR), adding to the EoR formalised in the

previous period and further demonstrating

our commitment to industry standards.

Looking ahead, we aim to build on this

commitment and have strategic plans

to designate three more EoRs across

our operations in 2024, with another

appointment pending and expected at

In line with the ITRP’s recommendation,

during 2023 we implemented a tracking

platform and monitoring dashboard.

This allows us to efficiently oversee and

evaluate progress while prioritising the

most salient issues. Additionally, we have

also successfully applied the initial audit

tool to assess compliance with our tailings

management system, demonstrating

an improved performance compared to

2022. This exercise has provided valuable

insights to enhance and strengthen

our practices moving forward. We also

successfully concluded ITRP reviews of

the sites scheduled for the year; one point

of note is the reduction in the issuance

of priority recommendations by 66%

compared to 2022, reinforcing the integrity

of our operations and our commitment to

transparency and accountability.

During the period, Operation, Maintenance,

and Surveillance (OMS) Manuals as

well as Emergency Preparedness and

Response Plans (EPRPs) were issued

by all mining units and integrated into

current procedures and existing plans,

strengthening our ability to respond

effectively to any situation. Ongoing

efforts to prepare Potential Failure Mode

Design and construction Operation

Surveillance, maintenance

and external reviews

• Compliance with best practices.

• Site option studies (technology

and construction).

• Geotechnical investigation.

• Quality assurance and controls.

• Site management.

• Tailings management and

stewardship team.

• Master Services Agreement.

• Routine surveillance.

• Intrumentation and monitoring.

• OMS manuals development.

• Independent experts, inspectors

and auditors.

Risk management framework of TSFs

the earliest opportunity. This proactive

approach demonstrates our compliance

and commitment to industry standards,

but also reinforces our internal capacity for

leadership in tailings management.

Risk management

Continual evaluation is integral to

upholding safety and environmental

standards across the life cycle of TSFs.

Adhering to best practices outlined

by organisations such as the Mining

Association of Canada (MAC), the Canadian

Dam Association (CDA), the International

Commission of Large Dams (ICOLD) and

the International Council of Mining and

Metals (ICMM), our design, construction,

surveillance and maintenance follow

industry guidelines with support from

Assessments (PFMA) for each site continue

to progress; we expect to finalise them next

year, further consolidating our responsible

TSF standards and practices.

Strategy

We conduct a formal process to budget

for the planning and resourcing of our

TSFs, based on: i) Construction of current

facilities; ii) Siting, design and construction

of new facilities; iii) Improvement in

instrumentation and monitoring; and iv)

Technical services. During the year, our

strategic investments focused on the

growth of our existing TSFs, as well as the

development of new facilities to ensure

operational continuity. A total of seven

projects were executed with an overall

investment of US$70 million. Among

the most outstanding projects were

the following:

• Growth of San Julián’s TSF.

• Construction of Saucito’s cell number 4.

• Third phase of San Carlos’ TSF

at Fresnillo.

Our approach to technology takes into

consideration its strategic priority and

maturity, and evaluates the contribution

that it can make to:

qualified engineering firms. Mine

managers, guided by our protocols,

operate facilities with a blend of shared

services and internal resources. They are

backed by a Regional Tailings Manager

and an EoR through established Master

Services Agreements with recognised

consultancies. The Independent Tailings

Review Panel (ITRP) and Dam Safety

Inspections/Reviews (DSIs/DSRs) ensure

compliance through renowned specialists

and qualified consultants engaged by our

tailings management and stewardship

team. Routine surveillance, enhanced by

advanced instrumentation and monitoring

equipment enhance near real-time

management of critical controls, condition

reporting and response times, aligning

with MAC guidelines.

i) Improve safety: Surveillance,

monitoring and alerting technology (i.e.

inSar, drones, data analytics, etc.);

ii) Improve operational efficiency:

Downstream processing technology (i.e.

paste tailings and filtered tailings); and

iii) Reduce environmental risks and

footprint: Upstream processing

technology (i.e. selective processing,

water and energy reduction, etc.).

Technological improvements have been

implemented in the instrumentation

and monitoring systems at the tailings

deposits of San Julián and Herradura,

with ongoing efforts continuing at

Ciénega and Juanicipio. These

enhancements include robotic stations

for the automatic measurement of prisms

and topographic controls on the main

geotechnical structures of the deposits.

In addition, they involve the remote,

continuous and automatic measurement

of vibrating-wire piezometers, contributing

to the confidence and timeliness of the

data collected.

In the analysis of alternatives for the

necessary infrastructure for tailings

management in our current and future

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Waste management continued

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operations, various options for pulp

tailings management are considered and

evaluated. This involves exploring different

technologies for the filtration and drying of

tailings. Currently, these technologies have

not been implemented due to their lack of

technical and economic feasibility with our

current operations.

It is important to note the alternative

use of tailings in some of our operations.

In Fresnillo, the Pyrites plant further

reprocesses some tailings with economical

value. In line with their management

plans, Fresnillo and San Julián are

authorised to use tailings as mine fill.

Saucito is authorised to use tailings as a

complementary construction material

for TSF embankments and buttresses.

These initiatives aim to reduce the need

for surface storage facilities and enhance

mineral recovery from the deposit. The

Company is actively working to extend

these practices to all units, seeking the

necessary approvals through applicable

legal instruments. This not only adds

value to mining waste but also reduces

the quantity of waste deposited in

situ, contributing to our ongoing

efforts in waste management and

environmental stewardship.

During 2023, we continued to strengthen

our global presence and positive influence

in TSF management. For example, we

actively participated in various national

and international forums in Mexico, Peru,

Chile, Canada and the United States. We

presented technical papers, allowing us to

highlight the relevance and importance

of the work we have done and the

challenges we have faced during the

course of implementing our strategy, and

positioning Fresnillo as a benchmark in the

utilisation of advanced technologies and

innovative strategies in mining waste and

water management.

Regarding the Global Industry Standard on

Tailing Management (GISTM), we recognise

its importance and relevance, having

closely followed its development and

progress. Although we do not currently

intend to implement it, we understand

the value and significance it brings to our

industry and are committed to reviewing

and assessing the impact of its potential

implementation. As we previously

explained in this section, we are working

to develop and implement our Tailings

Management System based on MAC’s

management protocol and we believe that

achieving this milestone will enable us to

meet many of the requirements outlined

in the GISTM.

Performance

Mineral waste

Unit 2023 2022 2021 2020 2019

Mine waste Waste rock Tonne

88,241,010

119,424,384 131,603,499 119,233,877 141,717,898

Processing waste from

flotation – concentration

Tailings Tonne

8,980,310

8,166,918 7,985,885 8,969,146 9,370,672

Metallurgical waste from heap

and dynamic leaching facilities

Tailings Tonne

5,045,411

5,993,498 6,224,972 5,909,107 6,137,482

Heaps Tonne 21,208,753 29,345,382 28,641,642 20,570,573 34,422,898

Case study

Setting the standards for TSF management

We understand the importance of

effective TSF management and strive

to lead our industry in terms of safety

and reliability.

At our Fresnillo mine, the San Carlos

TSF represented a significant challenge

because it was originally designed

and constructed based on criteria

and practices that predated the

implementation of our current Tailings

Management System. Beginning in

2020, we carried out a comprehensive

process grounded in studies and

research to validate the stability of

the deposit. This phase of the project

was followed by the establishment

of a rigorous quality control and

assurance system to guide the

construction of the facility’s subsequent

phases. These efforts culminated in

2023, with the formalisation of the

Engineer of Record (EoR) supported by

a robust governance framework that

ensures that the operation, maintenance

and monitoring of the TSF follows

international best practices.

In the early part of 2023, TSF Number

3 at Ciénega marked a significant

milestone by meeting the stability safety

factors defined by the Canadian Dam

Association (CDA). To achieve this, we

conducted field research on the original

structure, which informed the design and

construction of strategic reinforcements

to the main embankment. Today, this

facility is prepared for any potential

expansion to accommodate the mine’s

remaining operational lifespan, ensuring

high safety standards aligned with the

best in our industry.

132 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Waste management continued

Non-mineral waste

We seek to optimise the use

of resources, eliminating

physical waste and

maximising process efficiency.

Non-hazardous waste

Most of the non-hazardous waste

generated by our mining operations

involves recyclable materials such as

cardboard, tyres, wood, steel and plastics,

or urban solids. We place a strong

emphasis on materials management,

adhering to rigorous protocols for the

proper handling of various non-hazardous

waste streams.

Within various business units, dedicated

sites are established for the storage of non-

mineral waste. Waste that requires special

handling as per regulations, including

organic waste, is gathered and transported

to a dedicated warehouse for meticulous

segregation by trained operators. Here, we

ensure the segregation of municipal solid

waste from special waste (recyclables).

Once classified, it undergoes reprocessing

by accredited companies, ensuring

compliance with regulatory standards.

We identify two categories of non-mineral

waste: hazardous and non-hazardous.

According to national regulation, we

dispose of these two different categories

as shown in the diagram below.

Special waste is sent to facilities accredited

by authorities for recycling and reuse,

thereby extending the lifespan of waste

generated by our business units. Urban

solid waste undergoes a compaction

process and is directed to sanitary landfills

or approved disposal sites. In certain mining

operations, organic waste is given a second

life through composting or utilisation by

nearby communities, further underscoring

our dedication to environmentally-

conscious waste management practices

across our operations.

Hazardous waste

We are fully committed and aware of our

responsibility in the handling of hazardous

waste. As part of our awareness strategies,

comprehensive training sessions are

conducted for all personnel on proper

waste management. These sessions

emphasise the benefits of effective waste

management, leading to a reduction in

Non-mineral waste disposal by category

Mining unit

Hazardous waste Non-hazardous waste

Generates non-

mineral waste

Recycling

Special handling

waste

CRETIB*

Car batteries

Neutralised for

incineration

Urban solids

CRETIB*

but reusable

Spent oil

Landfill

Mining operations require the use

of engine oils, fuels and chemical

compounds as well as the management

of tailings that may contaminate the soil

if accidentally spilled. Soil can also be

polluted by air-blown dust from tailings

storage facilities (TSFs). Our management

system has procedures in place to prevent

soil contamination.

waste generation. The training covers the

entire life cycle of waste for all personnel in

the mining units. Additionally, preventive

maintenance tasks are undertaken

to ensure the efficient operation of

equipment, minimising the risk of oil spills.

Hazardous waste is carefully stored,

identified and organised before being

dispatched for final disposal by authorised

companies. Additionally, spent lubricating

oil is sent for reprocessing to facilitate its

reuse, aligning with our commitment to

sustainable waste management practices.

* CRETIB: For its acronym in Spanish, means corrosive reactive, explosive, environmentally toxic, flammable and biologically infectious.

All final destinations are regulated, either authorised or certified by the competent authority.

• Cardboard

• Wood

• Iron

• Plastics

• (Others)

133

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Information

Strategic

Report Governance

Financial

Statements

Acid mine drainage (AMD) is a major

environmental challenge for the mining

industry. Uncontrolled AMD represents a

risk to surface and groundwater resources

during mine operation as well as a legacy

issue after closure. We analyse minerals

and conduct geochemical tests to identify

the AMD potential of ore mineral and

waste rock. In our operations with AMD

risk, notably the San Ramón satellite mine,

we implement site-specific management

strategies such as capping waste rock piles

with a dry cover (to reduce the ingress

of oxygen and water) and collecting and

treating acid water.

Responsible cyanide management is

critical for environmental protection and

safety. We comply with international

best practices as promoted by the

International Cyanide Management

Institute (ICMI) and the Mexican standard

NOM-155 SEMARNAT-2007, which

establish environmental requirements

for gold and silver leaching systems

(production, transportation, storage,

usage and facilities decommissioning).

As part of our commitment to safe

cyanide management, we engage with

local authorities and collaborate with

fire departments and hospitals to build

emergency response capabilities. We

also provide comprehensive training

to our personnel and make operational

and environmental information available

to our stakeholders, ensuring both open

dialogue and trust, which strengthen our

social licence.

We design and operate our gold

producing mines in compliance with

the International Cyanide Management

Institute (ICMI):

• Purchase sodium cyanide from certified

manufacturers.

• Protect the environment and

communities during transport

to our facilities.

• Protect our people and the environment

during handling and storage.

• Follow working practices that prevent

impacts on health or ecosystems.

• Optimise mineral processing to

minimise the residual cyanide in tailings.

• Manage and monitor seepage to

prevent impacts on groundwater.

• Decommission facilities responsibly

to prevent legacy issues.

• Provide our people with emergency

response training, and on how to engage

authorities and communities.

• Provide training and organise drills

for operational and emergency

response personnel regarding

cyanide management.

• Engage with communities and

authorities to ensure the transparency

of our processes, potential hazards

and controls.

Visit us online at https://www.fresnilloplc.

com/responsibility/environment/case-

study/ to learn more about our responsible

cyanide management practices.

Our operations at Herradura and Noche

Buena are certified by the Cyanide

Code, which accounts for each of their

Merrill-Crowe processes and the dynamic

leaching plants – the latter certifying its

carbon column process in 2022. During

2023, there were no incidents related to

cyanide management.

Generation

Packaging

and storage

Collection and storage Final disposal

• Hazardous waste is

generated at the end

of the life cycle of

hazardous materials,

and as inputs in

production processes

or auxiliary services.

• Hazardous waste is

labelled and packaged

to prevent dispersion

and facilitate handling

according to its physical

state, hazardous

characteristics and

compatibility.

• Storage involves

temporarily retaining

hazardous waste in

areas that comply with

current regulations until

transportation to an

authorised facility.

• An authorised provider

collects and transports

hazardous waste

to an authorised

storage facility.

Shipments are made

with corresponding

manifests.

• The service provider

maintains a record of

waste movements,

specifying the handling

method (reuse,

recycling, co-processing,

treatment or final

disposal).

Hazardous waste framework

Performance

Waste disposal

Unit 2023 2022

Total non-mineral waste Tonne

13,201

13,148

Hazardous waste Tonne

3,206

1,870

Non-hazardous waste Tonne

9,994

11,279

Municipal solid waste Tonne

2,786

2,337

Special handling waste Tonne

7,209

8,941

Note: New indicator so historic figures not available.

Sodium cyanide (NaCN) consumption (tonnes)

2023 2022 2021 2020 2019

11,632

13,503 13,400 13,549 14,692

134 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Stewardship

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Our goals are to secure

water access, minimise

our water footprint and

cooperate with our

stakeholders.

Mining and ore processing operations

demand substantial water resources, a

challenge exacerbated in arid regions

where local communities grapple with

water scarcity. Prioritising responsible

water use and minimising environmental

impact are key objectives. We conduct

Environmental Impact Assessments (EIAs)

to comprehensively assess the state of

local and regional water resources and

their vulnerability before embarking

on any project. Recognising the pivotal

role of water access and responsible

management in our operations’ success,

we have developed a robust stewardship

strategy anchored on four key pillars and

supported by activities implemented

across our operations.

For a detailed overview of our Waste

Management policies, specifically

regarding tailings and cyanide, refer to the

mineral or non-mineral waste sections on

pages 129-131 and 132-133, respectively. For

a detailed overview of our engagement

with authorities and communities to

increase clean water access, refer to the

Social investment section on page 147.

Finally, for a detailed overview on our

sustainable development engagement

initiatives, refer to the introduction of the

Protecting our environment section on

page 106 or the beginning of this chapter

on pages 78-79.

River basin context

We operate in river basins that currently experience water stress. Climate change is expected to increase water stress under all scenarios.

Current conditions Water stress considering climate change scenarios*

Business unit Overall water risk Water stress Business as usual 2030 Pessimistic 2030

Fresnillo Medium – High (2-3) Extremely High (>80%) 1.4x increase 1.4x increase

Saucito Medium – High (2-3) Extremely High (>80%) 1.4x increase 1.4x increase

Juanicipio Medium – High (2-3) Extremely High (>80%) 1.4x increase 1.4x increase

Ciénega High (3-4) Extremely High (>80%) 1.4x increase 1.4x increase

Penmont Extremely High (4-5) Extremely High (>80%) 1.4x increase 1.4x increase

San Julián Medium – High (2-3) High (40-80%) Near normal 1.4x increase

Water stress measures the ratio of total annual water withdrawal to average annual available blue water. This is a commonly used indicator also known as relative water demand.

* Climate change scenarios from WRI Aqueduct tool. Please check the climate change scenarios at: https://www.wri.org/aqueduct

Water stewardship

Watershed and

community

engagement

• Secure water rights from authorities

before operational usage.

• Collaborate with water authorities

and stakeholders to increase

water access in our neighbouring

communities.

• Share best practices with other

industries and civil societies at

relevant forums organised by

business associations and NGOs.

Transparency and

accountability

• Implement the Water Accounting

Framework (WAF) from the Minerals

Council of Australia.

• Adhere to water quotas and

quality regulations, monitoring

and improving withdrawals and

discharges.

• Continuously improve water

accounting practices.

Pollution prevention

• Direct unused water from dewatering

to settlement ponds to control

suspended solids before discharging

the cleaned water downstream.

• Ensure responsible cyanide

management.

• Ensure the responsible operation

of TSFs.

Efficiency and reuse

• Implement closed water circuits to

eliminate discharge into streams.

• Reuse wastewater from municipalities

and our own operations to reduce

freshwater usage.

• Evaluate and adopt mineral

processing technologies (upstream

and downstream) for improved

safety, and reduced carbon and

water footprints.

135

Additional

Information

Strategic

Report Governance

Financial

Statements

Performance

In 2023, we established a dedicated

corporate water management

team charged with supporting the

implementation of sustainable water

management. This marked a pivotal step

towards reinforcing our commitment

to responsible water stewardship. Our

new, specialised team is entrusted with

overseeing the effective management of

each of the four critical pillars and plays a

central role in providing technical expertise

and guidance to operational teams on

crucial aspects such as hydrogeology,

hydrology, developing water management

plans, and the review and assurance of

water balances and quality.

Over the last 12 months, tangible

progress has been achieved, with the

implementation of water management

initiatives at various projects, gathering

vital information which has enabled

us to develop comprehensive water

management and availability plans at our

mining units and advanced exploration

projects. Notably, we carried out key

baseline studies encompassing hydrology,

hydrogeology, water balance and water

supply assessment at Orisyvo. In the

Fresnillo district, we continue to increase

our wastewater treatment capacity

to reduce freshwater consumption

for our operations. In 2023, we signed

an agreement with the municipal

government to rehabilitate and operate

a potabilisation water facility that will

increase potable water for Fresnillo city

inhabitants, as well as the availability of

treated wastewater for our operations. See

the case study on page 136 for more detail.

During the year, we achieved a 7.19%

decrease in our water consumption. A

15.63% decrease in our mineral processed

resulted in a 10.01% increase in our overall

water intensity. On a more positive note,

we also achieved a 14.46% decrease in our

water withdrawal and a 3.24% increase

in our reuse efficiency, which rose to

84.95%. We did not detect any negative

downstream impact on ecosystems or

waterbodies due to our groundwater

intake or water discharges.

Looking ahead, in 2024 we will focus

on further developing standards and

procedures for water management

within our operations. This strategic

move is geared towards continuous

improvement, ensuring that our water

management practices not only meet

but exceed industry standards, solidifying

our commitment to sustainable and

responsible resource usage.

Water management in megalitres*

Category 2023 2022 2021 2020 2019

Total water withdrawn 28,399 32,180 30,707 21,138 20,941

Total water deviations 13,631 17,207 13,954 7,522 7,721

Total water consumed 14,768 14,973 16,753 13,616 13,220

* 1 megalitre = 1,000 m

Statement of water inputs and outputs in megalitres

For the period 1 January 2023 to 31 December 2023.

Category Element Sub-element 2023 2022

Input Surface water Rivers and creeks

540

617

Groundwater Mine water

2,270

5,154

Bore fields

7,959

6,721

Ore entrainment

542

353

Third party Waste water

3,417

2,094

Total water inputs 14,728 14,939

Output Surface water Discharges

Other Water entrained in

concentrates

Total water outputs 75 63

Water deviations in megalitres

For the period 1 January 2023 to 31 December 2023.

Category Element Sub-element 2023 2022

Input Surface water Rivers and creeks

Groundwater Aquifer interception

(dewatering)

13,595

17,179

Total water inputs 13,595 17,179

Output Surface water Discharges

13,394

17,051

Supply to third party

(donation)

202

128

Loss (evaporation, infiltration,

etc.)

Total water outputs 13,595 17,179

Statement of operational efficiency in megalitres

Efficiency for the period 1 January 2023 to 31 December 2023.

2023 2022

Total volume to tasks 71,653 77,135

Total volume of reused water 60,803 63,025

Efficiency of reuse 84.86% 81.71%

Total volume of recycled water 3,806 2,401

* To enhance transparency, we followed the International Council of Mining and Metals (ICMM) water reporting

guidance and the Mineral Council of Australia’s Water Accounting Framework.

Unit 2023 2022 2021 2020 2019

Reuse efficiency % 84.86% 81.71% 78.98% 81.66% 79.89%

Total volume of

recycledwater Megalitre 3,806 2,401 1,955 1,716 982

136 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Case study

Rising to the challenge of water stress

Home to three of our major mines –

Fresnillo, Saucito and Juanicipio – the

Fresnillo district experiences acute

water stress challenges. Recognising

our responsibility as a corporate citizen,

we have embarked on a multifaceted

strategy to tackle water stress head-on

through a series of initiatives, including

the deployment of wastewater,

purification and water potabilisation

treatment plants.

Our journey began in 2009 when we first

began using municipal wastewater from

Fresnillo city for our industrial processes,

considerably reducing mine dewatering

consumption. During 2023, we took

an important next step by signing an

agreement with the Potable Water,

Sewage and Sanitation System of the

Municipality of Fresnillo to rehabilitate

and operate the city’s potabilisation

plant, which has a capacity to treat 150

litres per second (lps). This plant will treat

Fresnillo’s mine dewatering water: half of

the treated water will be allocated to the

residents of Fresnillo city for consumption,

with the remaining rejected water from

the potabilisation process being used in

our industrial processes.

This strategic development underlines

our commitment to working with local

government to support the wellbeing

of our neighbouring communities – and

it bears testament to the long-term

sustainability of our operations.

The results are expected to be significant

and wide-ranging. Firstly, we are helping

to ensure that communities facing water

shortages receive the clean water they

urgently need. At the same time, we

are addressing the larger issue of water

scarcity in the region by cutting down on

our use of underground water. Secondly,

the project will cut our operational

expenses because treating municipal

wastewater is over six times more

cost-effective than using underground

water from mine dewatering. Finally,

by increasing the use of municipal

wastewater in our processes, we are

reducing our vulnerability to water stress

and bolstering our operational resilience.

Our water treatment facilities are

available to visitors and we also offer

educational tours. On average, we

welcome 3,500 students from our school

district each year, sharing information

on our environmental culture and, in

particular, on water stewardship.

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Water stewardship continued

General flow diagram for water management in the Fresnillo district

Fresnillo city

Treated

water pond

Tamasopo pond

Municipal

potabilisation

plant

WTP West

San Alberto

re-pumping

FresnilloSaucito

Juanicipio

WTP Proaño

Water consumption (megalitres)

13,220

13,616

16,753

14,973

14,768

2023

2022

2021

2020

2019

Water intensity (m

/tonne of mineral

processed)

0.29

0.37

0.43

0.38

0.44

2023

2022

2021

2020

2019

Water input (megalitres)

2,803

2,316

1,753

6,681

6,489

1,789

1,643

908

954

2,562

397

743

320

383

Herradura

Noche Buena

Fresnillo

Saucito

San Julián

Ciénega

Juanicipio

2023 2022

City sewage 75 lps

Drinking water 75 lps

Rejected water 45 lps

Rejected water 30 lps

(Osmosis)

City sewage 225 lps

Treated water 100 lps

Mine dewatering 150 lps

Treated water 75 lps

137

Additional

Information

Strategic

Report Governance

Financial

Statements

Conservation programmes

Mining unit Programme Started operations Species of interest

Fresnillo UMA 2001 Buteo Jaimaicensis, Parabuteo Unicinctus, Polyborus Plancus, Ovis

musimon, Bubalus Bubalis, Bubo Virginianus, Canis Latrans, Linx rufus,

Panthera Onca, Procyon Lotor, Ateles Geoffroyi, Ursus Americanus, Pecari

tajacu, Crotalus atrox, Taxidea taxus, Gopherus agassizii, Podocnemis

lewyana, Pituophis Deppei Jani, Spilogale acilis, Panthera tigris tigris, Iguana

iguana, Buteo Swaisoni, Panthera Leo, Urocyon cinereoargenteus, Puma

concolor, Python mulurus, Aquila chrysaetos, Ara militaris, Sulcata, Tyto Alba

Penmont Agreement with

local government

2008 Sonoran pronghorn

Ciénega UMA – Cebollitas 2015 Odocoileus viginianus couesi

Ciénega UMA – Ciénega 2017 Picea Chihuahuana

San Julián UMA 2022 Pseudosuga menziesii glauca

Our commitment is

to implement sound

measures to safeguard

biodiversity and ensure

that it is not adversely affected by

our operations.

The depletion of natural capital in

conjunction with climate change pose

significant threats to the wellbeing of

communities, the health of ecosystems

and economic prosperity. Notably, we

deliberately avoid Mexican Natural

Protected Areas, UNESCO Natural World

Heritage sites, UNESCO Man and the

Biosphere Reserves, and Ramsar Wetlands

of International Importance as well as

International Union for Conservation of

Nature (IUCN) Protected Areas.

Biodiversity

Anchored in the Mexican biodiversity

norm NOM-059-SEMARNAT-2010, our

Environmental Impact Assessments (EIAs)

and management plans serve as a robust

framework, enabling us to responsibly

manage biodiversity by identifying

avoidance, mitigation and compensation

measures. Before starting any project,

and whenever significant events prompt

a review – such as changes to permits

or project expansion – we conduct

comprehensive assessments to gauge

our potential impact on biodiversity.

We identify species of special concern,

capturing and releasing wildlife, relocating

plant species, mapping, and providing

periodic follow-ups, aligning with IUCN

and Mexican biodiversity norm listings

and species under protection status.

Through collaborative efforts with state

governments, we play an active role in

safeguarding endemic endangered

species. In particular, we contribute to the

protection of the Sonoran pronghorn near

Penmont and the golden eagle in the

Fresnillo district. Moving forward, we are

diligently working towards fulfilling the

requirements to extend this protection to

species such as the white-tailed deer and

wild turkey in San Julián.

Within several of our mining sites, we

have established Wildlife Conservation

Management Units. These dedicated

facilities aim to conserve natural habitats,

wildlife populations and individual species.

Their registry and management plans

are approved by the Mexican Federal

Environmental Agency, SEMARNAT.

The unit at Fresnillo opens its doors to

the public while those at both Fresnillo

and Ciénega feature educational tours

designed to engage and educate

children on the critical importance

of environmental preservation.

Forest Nurseries

Mining unit

Started

operations Species of interest

Production

capacity

(seedlings/year)

Ciénega 2003 Pinus duraguensis, Pinus engelmannii, Pinus arizonica, Picea chihuahuana, Pinus

pseudotsuga, Pinus abies.

100,000

Saucito 2009 Pinus pinea, Pinus greggii, Fraxinus, Quercus, Schinus molle, Phoenix canariensis. 30,000

Fresnillo 2010 Fraxinus excelsior, Washingtonia robusta, Phoenix canariensis, Pinus pinea, Ligustros. 60,000

Penmont 2022 Olneya tesota, Cercidium microphyllum, Prosopis juliflora, Acacia greggii, Acacia constricta,

Bursera microphylla.

150,000

San Julián 2022 Pinus Duraguensis, Pinus arizonica, Pinus pseudotsuga. 120,000

We also carry out meticulous soil

conservation work and plant material

cordons for erosion control, contributing

to an increase in humidity levels, which

in turn reinforces natural rehabilitation of

habitats. At Ciénega, we have designated

a 1,000-hectare conservation area,

incorporating reclaimed land from our

operations and rehabilitated zones

following deforestation.

Forestry nurseries established across all

operations and projects play a pivotal

role in fulfilling our commitment to

restore sites to their pre-operation state,

and support our conservation and

restoration goals for endemic species. In

order to properly operate these facilities,

our personnel undergo comprehensive

training encompassing operational and

maintenance activities, including facility

upkeep, planting, irrigation, protection

from harmful agents and reforestation.

In some cases, these facilities may also

support environmental education and

research in partnership with relevant

authorities.

138 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Mine closure

Our mine closure vision is integral

to the conceptual design and cost

estimation of any project; it outlines the

intended use and goals for the land

after mining operations have ceased,

significantly impacting both capital and

operational costs.

Alongside addressing physical risks, the

closure vision meticulously considers

potential social impacts, and therefore

demands early stakeholder engagement.

Fresnillo collaborates closely with external

stakeholders to ensure aspirations for a

post-mining community are integrated

into the closure plan through regular

consultation. Social transition initiatives,

including workforce training, local

procurement, infrastructure transfer

and ongoing monitoring, are integral

components of our strategy. For a

detailed overview of how we engage with

communities throughout the life cycle of

mining, refer to the Partnering with our

communities section in pages 139-140.

Noche Buena is the first mine in the

current portfolio that is planned for

closure. Today, while it has stopped its pit

operations, Noche Buena is continuing

inventory recovery while it is economically

feasible. Its progressive closure plan

entails restoring land to its original pre-

mining use, particularly for livestock and

wildlife purposes. Guided by principles of

restoration and long-term maintenance,

our objectives encompass a 20-year

post-closure period. This means removing

most access roads, power corridors, water

supply and other infrastructure, while

retaining certain facilities until post-closure

care obligations are fulfilled. All waste

management facilities, processing areas

and other structures will be closed to

ensure the safety of livestock and wildlife.

Demolition waste and debris will be

responsibly removed off-site, while certain

facilities, such as the leach yard, may

require ongoing care.

Noche Buena’s progressive closure

plan is structured around three

distinct phases of infrastructure: pits

and waste rock heaps; industrial area;

and leaching pads. Throughout 2023,

various activities were initiated and

will continue into 2024. These include

ongoing mining works, geochemical

characterisation, ecohydrological studies

and comprehensive assessments of

leaching pads, waste rock heaps and

industrial areas. Further activities include

dismantling and decommissioning

processes, regulatory compliance reviews,

and efforts related to reforestation, safety,

environmental protection and social

action plans.

Noche Buena’s progressive closure plan stages

What’s next

• Continue maturing our climate

change strategy.

• During 2024 we will focus on

further developing standards and

procedures for water management

within our operations.

• Progressively implement critical

environmental risk management

methodology guided by the

International Council on Mining

and Metals (ICMM) in our mining

units.

• Continue to deploy Noche Buena’s

progressive closure plan.

1. Pits and

waste rock

2. Industrial

area

3. Leaching

pads

Characterisation

Planning

Characterisation

Physical

stability

Dismantling

and demolition

Physical

stability

Preparation

of areas

Waste

management

Ponds

Physical

delimitation

of pits

Site

preparation

Ground cover

Wildlife

monitoring

Revegetation

Monitoring and

maintenance

139

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PARTNERING

WITH OUR

COMMUNITIES

We engage meaningfully with

our communities and support

the issues that matter to them.

We earn and maintain the trust

of communities through effective

engagement and by being accountable for

our impacts – and we recognise that this

is the only way to obtain and preserve our

social licence to operate. Our community

strategy, which spans all phases of the

mining life cycle, aims to build mutual

understanding between our operations

and local communities, ensuring that we

engage, develop and grow together.

Engaging communities

effectively in the life cycle

of mining

In the global mining industry, stakeholders

are placing a growing emphasis on social

and environmental responsibility, along

with enhanced corporate governance:

there is an increasing expectation for

responsible management of negative

impacts, coupled with a desire for

tangible contributions to community

development. Therefore, we firmly believe

in the responsible, timely and transparent

management of these expectations. This

approach aims to reduce opposition to

projects and strives to avoid or mitigate

negative impacts on the communities

where we operate.

Our community engagement strategy

is seamlessly integrated into every

phase of the mining life cycle, fostering

mutual understanding between our

operations and local communities.

This comprehensive approach ensures

that we not only engage, develop and

grow together but also emphasises our

commitment to address stakeholder

concerns and expectations throughout the

mining life cycle. Our projects are therefore

carefully designed to avoid adverse

impacts. Should challenges arise, we

proactively employ mitigation measures,

addressing community concerns

responsibly. This overarching strategy is

supported by a multifaceted approach:

• Monitoring public opinion to

collaboratively identify industry

challenges through partnerships with

peers and business associations.

• Conducting social studies to gain insights

into the community’s perceptions of our

Company’s performance, guiding our

engagement strategies.

• Engaging with communities through

both formal and informal settings

and ongoing social programmes to

consolidate meaningful relations.

• Utilising a grievance mechanism to

swiftly address concerns, mitigate

potential escalation and foster proactive

resolution processes.

• Aligning mitigation strategies with best

practices in social and environmental

responsibility.

We have procedures in place to detect

potential risks, and conduct a thorough

and strategic assessment, prioritising

risks based on potential impact and

location. Preventive and mitigation

actions are established and overseen by

dedicated monitoring committees for

each risk, ensuring ongoing supervision.

Strategic leaders in our mining units are

kept informed, and mitigation strategies

are collaboratively planned. Clear

responsibilities are assigned to specialists,

operating within an accountability

framework for effective resolution. This

process persists until the underlying

conditions contributing to the risk are

thoroughly addressed and resolved,

resulting in the complete elimination

of the risk.

Situations that may heighten potential

risks include the negative perception of

the Company’s performance, failure to

address community concerns, reduction

in public spending, increased expectations

and scrutiny, ineffective engagement and

communication, competition for natural

resources and anti-mining activism,

among others.

Our exploration teams are the first to

establish contact with a local community.

We identify the relevant stakeholders and

focus our engagement efforts on obtaining

temporary access to explore land. We

develop early local employment and

procurement opportunities related to our

Community relations

SUSTAINABILITY AT THE CORE

OF OUR PURPOSE CONTINUED

140 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

exploration activities. Social investment is

channelled through donations and early-

stage social programmes.

Our stakeholder relationships deepen

during the project development, as we

build trust through activities including

local hiring, and contracts for project-

related activities. For our advanced

feasibility and development projects,

we conduct social baseline and impact

assessments, manage impacts responsibly

and identify development opportunities.

During the operational phase of a facility,

we regularly engage with the community

via formal and informal meetings to

manage expectations and detect risks

and opportunities. Local employment

and procurement are related to operation

and support activities. We carry out

comprehensive social studies to evaluate

our social performance and reputation,

as well as community concerns and

development opportunities.

Finally, we prepare for closure through

social studies and community

engagement to identify impacts,

mitigation measures and opportunities.

Framework for community engagement in the life cycle of mining

Stakeholder identification, evaluation and mapping

Informal and formal meetings

Social studies: Baseline, impact assessment and reputation

Social management plans

Community committees

Indigenous peoples consultation

Strategic social investment

Grievance mechanism

Community requests of contribution

Social incident investigations

Community small and medium enterprises

Land acquisitions and resettlements

Social closure plans

Exploration

Project

development

Operation Closure

Know

Engage

Develop

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Community relations continued

141

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Community grievances

We maintain a strong track record of

transparent engagement with our

stakeholders to address any genuine

concerns. Our grievance mechanism

ensures a fair and effective resolution

process to respond to concerns and

resolve disputes. Each operating unit and

current advanced project have dedicated

community relations teams to effectively

address stakeholder concerns. Grievances

are documented and managed through

a specialised system, with the community

relations teams acting as mediators

between the communities and the

relevant areas responsible for the perceived

grievance. The process involves thorough

investigation and prompt resolution of

concerns identified.

We do not assess the effectiveness of our

grievance mechanism by solely considering

the number of grievances received.

Fluctuations may be influenced by various

factors; for instance, an increase may signify

improved communication channels,

enhanced two-way trust or increased

openness to community concerns.

Conversely, a decrease may not necessarily

indicate an improvement in performance.

Instead, we focus on consistently

understanding community needs and

demands, sharing lessons across our

operations, enhancing performance and

preventing the recurrence of incidents. The

true value of our grievance mechanism lies

in fostering enduring relationships built on

mutual trust and an effective procedure for

fair and successful concern resolution.

EvaluationReception

Investigation and

recommendations

Response Conclusion

Grievances statistics

Category 2023 2022 2021

Outstanding grievances from previous periods 10 11 14

New grievances received in the period 21 11 22

Total grievances 31 22 36

Closed grievances in the period (25) (12) (25)

Outstanding grievances at the end of the period 6 10 11

142 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Socioeconomic development

In addition to effective stakeholder

engagement, the equitable distribution of

mining benefits significantly contributes

to the overall wellbeing of communities.

Our commitment to creating value in the

regions where we operate is demonstrated

by our actions, which include providing

job opportunities, local procurement,

skills development, targeted community

investments and fulfilling our financial

responsibilities by paying our fair share

of taxes.

Economic impact

Our activities yield a positive economic

impact in the regions where we operate.

In particular, employment, contracting

opportunities and contributions

to governments demonstrate our

commitment to sharing the benefits of

mining. We consider our community

investment to be an indirect economic

impact of our activities and therefore

present it separately from the Economic

Value Distributed measure.

Mining fund

In 2014, Mexico introduced a special

tax to create a fund for the sustainable

development of mining regions. This fund

was intended to support communities

close to mining operations. However,

Congress has reallocated the Mining Fund

to national public spending. We partner

with the communities where we operate

to engage the authorities and aim to

encourage them to fund infrastructure

projects that benefit mining communities.

The Fresnillo plc contribution to the Fund

for Sustainable Development of Mining

States and Municipalities was US$33.15

million in 2023.

2023

US$ million

2022

US$ million

33.15 48.66

* Current mining fund taxes are used in our sustainability

review as a social performance measure.

Local employment and procurement

Local employment is a key driver of

social acceptability and community

development. We promote local

employment from the early days of

the exploration phase onwards. In the

development and operational phases,

for example, we offer employment

opportunities directly or through our

mining contractors. Our local and

regional labour as a percentage of

the total workforce is 73.74%.

We participate in the mining clusters

of Zacatecas, Sonora and Chihuahua.

These clusters contribute to the

development of regional suppliers,

strengthening their participation in

the value chain of mining companies.

Additionally, our Centre for Technical

Studies (CETEF) and Peñoles Centre

for Technical Studies in Laguna del Rey

(CETLAR) train mining, instrumentation

and maintenance technicians to meet

our specific needs. Candidates are chosen

from the communities surrounding our

operations, thus securing talent and

engaging the community in the long term.

Local employment

68.41%

72.29%

70.98%

67.25%

73.74%

2023

2022

2021

2020

2019

Economic value distributed

2023

US$ million

2022

US$ million % change

Wages and benefits to workers 151.7 146.6 3.5

Payments to suppliers (contractors) 1,983.2 1,817.3 9.1

Payments to local governments 12.6 6.2 104.9

Payments to federal government 200.2 258.6 (22.6)

Total economic impact 2,347.8 2,228.7 5.3

Economic value distributed by concept

Payments to suppliers (contractors) 84%

Payments to federal government 9%

Wages and benefits to

workers 6%

Payments to local governments 1%

Economic value distributed is considered to be a social

performance measure.

Economic value distributed by state

Mexico City 24.8%

Sonora 22.0%

Zacatecas 19.3%

Chihuahua 10.2%

Durango 8.2%

Coahuila 6.6%

Guanajuato 6.0%

Other 3.0%

143

Social investment portfolio

Creates long-term value with our communities

Additional

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Statements

Health

and sports

Improve communities’

health and habits

Education

Foster social cohesion

and develop reading

and STEM skills

Water

Work with

communities to

increase access to

safe water

Capacity

building

Develop community

entrepreneurs and

regional procurement

Social investment

We strive to maintain and

strengthen our social licence to

operate, securing a bright and

self-determined future for our

communities by prioritising their

most pressing issues. We earn

and maintain their trust through

strong, accountable partnerships.

Aligned with the UN Sustainable

Development Goals, we continuously

strive to build a robust portfolio of

social investments by collaborating

with our communities. Our ‘Alliance for

the Common Good’ strategy adopts

a proactive approach, establishing

transparent and participatory dialogues

with all levels of government where we

operate. By providing accurate, verifiable

and pertinent information, we aim to

influence decision-making in favour of

our communities. We achieve this by

presenting projects that directly address

their most pressing concerns, leveraging

funding opportunities across different

government tiers. This ensures that public

policy decisions within their jurisdiction

enhance the state’s presence in the region,

but most importantly, contribute to the

overall wellbeing of the community.

Our overarching goal is to fortify the

long-term capabilities of neighbouring

communities and cultivate enduring

relationships with them, civil society

organisations and all three government

levels. These tripartite partnerships play

a crucial role in preventing adverse

conditions caused by external entities,

ensuring our operational continuity

from both a regulatory and public

investment perspective, and facilitate the

acknowledgment and promotion of our

contributions to society by authorities.

We firmly believe that only through

collaborative efforts can we achieve

a more significant and lasting impact.

For a detailed overview of our social

investment performance, refer to the

end of this section on page 149; for an

overview of our payments to local and

federal governments, refer to our economic

impact indicators on page 142; finally, for a

more thorough review of our government

payment transparency policy, refer to

our Responsible business section on

pages 86-87.

144 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Socioeconomic development continued

Education

We are committed to

advancing inclusive and

quality education, recognising

its pivotal role in reducing poverty

and inequality. We firmly believe that

nurturing quality education increases

learning and development opportunities

for children and young people within

our communities. This commitment is

crucial given the evolving landscape of

the Mexican education system, existing

educational disparities and the lingering

impacts of the Covid-19 pandemic. The

results of the PISA test in Mexico have

underscored concerning indicators that

mirror the social reality of the nation’s

schools. The return to classrooms has

enabled us to reactivate our educational

initiatives since 2022, primarily focused on

strengthening three foundational pillars:

Reading, Mathematics and Science.

Key activities:

• The ‘Picando Letras’ programme, which

is jointly operated alongside our strategic

partner Ensamble Alejandría, was

reactivated in-person at the Penmont,

Ciénega, Juanicipio, Saucito, Fresnillo,

San Julián units and Guanajuato project

(see case study).

• The ‘Tools for Peace Building’ workshop

was conducted to promote human

rights, non-discrimination and the role of

educators and students as peacebuilders

at Penmont, in response to security

concerns in the region.

Case study

Revitalising communities through creative and playful reading

As the challenges presented by the

pandemic receded, 2023 marked a

significant turning point for community

engagement and social interaction. In

collaboration with Alejandría Ensemble,

we were delighted to relaunch our widely

respected ‘Picando Letras’ programme

across all our mining units and at the

Guanajuato advanced exploration project.

Designed around the concept of

playful and creative reading, Picando

Letras’ fosters engaging spaces for

community interaction and aims to

narrow the educational gap caused by

the pandemic-induced inactivity, which

affected students and educators alike.

‘Picando Letras’ empowers children

and young people to see themselves

as independent and critical readers,

awakening them to the transformative

potential of literature. However, the

programme is not just about reading –

it brings together entire families, building

participatory and inclusive communities.

The programme’s relaunch was

strategically planned, involving a total

of 70 schools across 37 communities in

two distinct phases:

• Phase 1 – a comprehensive assessment

to gauge the post-pandemic

educational backlog among children

and evaluate the programme’s

relevance and impact. This phase also

revisited the pre-pandemic state of

learning resources, ensuring a tailored

approach to current needs.

• Phase 2 – foundational training

activities which laid the groundwork

for effective deployment of the

programme.

Together with other initiatives that

fall under the Quality Education

SDG, ‘Picando Letras’ underscores

our dedication to nurturing resilient

communities – providing brighter

and better opportunities in the

key moments of young people’s

development, and ensuring that

education acts as the cornerstone

for future prosperity and wellbeing.

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

• In alignment with our commitment to

advancing STEM education in schools,

we continue to sponsor teams in the

FIRST Robotics competition. Notably,

in the 2023-2024 season, the recently

formed team from the Mineral de La

Luz community in Guanajuato clinched

the Rookie Team of the Year award at

the Laguna Championship and earned

a spot at the World Championship in

Houston, Texas, where they also earned

another recognition – the Inspiration

Award (see case study). Additionally,

a new team from the Orisyvo project

joined this season, bringing the number

of sponsored teams to six.

• In order to raise awareness among

elementary and secondary school

students about the causes and

mitigation of climate change, we signed

an agreement with the Cozcyt of the

Government of Zacatecas to deliver the

‘Latinamerica for Climate Education’

course through our partner INNOVEC

in the Fresnillo district.

• For the fourth consecutive year, we

collaborated with Larousse Editorial to

donate books focused on subjects that

enhance the understanding of school

topics for children and young people.

• We champion quality education through

the Excellence Scholarship Programme

in collaboration with Universidad La Salle

campuses Laguna and Noroeste. During

this academic year, we welcomed ten

students from communities in San

Julián, Guanajuato, Fresnillo, Ciénega

and Penmont. Two students from the

second generation graduated in 2023, in

Marketing and Mechatronics, following

the first four in 2022.

• In line with our drive to foster artistic

education as a creative alternative

for children and young people, we

supported the establishment of the

Children’s Rondalla in the Presa de

Linares community in Juanicipio and

continue to support the Juan Álvarez

Rondalla in Penmont.

• To support our commitment to

encourage environmental responsibility

and advocate for healthy nutrition

among students, we have continued to

promote School and Family Gardens

in schools across communities within

the Fresnillo district. This initiative is

carried out with the valuable assistance

of the Education Brigade for Rural

Development No. 46 and our dedicated

internal personnel.

• In partnership with Sonora’s Secretary

of Education and Culture and fellow

mining companies in the Sonora Mining

Cluster, we spearheaded initiatives to

benefit school communities. These

initiatives include the ‘Reactivate your

school’, ‘We are’, and ‘Smart with your

school’ programmes. Furthermore,

we created a hybrid virtual-in person

model for implementation in institutions

such as UTHermosillo, UNISIERRA and

CONALEP.

145

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Case study

Developing skills to help young people thrive

Since 2017, we have supported a

leading project that gives high school

students the skills they need to thrive

in a world increasingly reliant on science

and technology.

The FIRST Robotics competition uses

robotics to engage students in Science,

Technology, Engineering and Maths

(STEM) subjects. Under the guidance of

mentors, the aim is to kindle a spirit of

healthy competition and collaboration,

while developing skills in teamwork,

leadership, business strategy and

management.

Our support is rooted in our

commitment to quality education and

the cultivation of an environment where

our communities’ young people are

engaged in science and engineering, but

also empowered with self-confidence

and instilled with the values of solidarity,

respect and personal responsibility.

During 2023, we sponsored six teams

from our local communities, with the

Silverbots 9120 team from Mineral

de La Luz, Guanajuato, achieving

unprecedented success in their

inaugural FIRST Robotics Competition

season. Winning the ‘Rookie Team of

the Year’ award at the Laguna Regional

Championship gave Silverbots 9120

entry into the World Championship in

Houston, where they won the prestigious

‘Inspiration Award’.

The team comprised 25 dedicated

students from the Advanced

Baccalaureate and Higher Education

Institute (SABES) who, along with their

teachers and mentors, embarked on

a mission to achieve excellence — and

succeeded brilliantly. Representing

their school and community on the

international stage, travelling over 2,000

kilometres from their hometown, they

showcased the transformative power of

dedication, innovation and teamwork,

obtaining a lifechanging experience on

the way.

FIRST Robotics also brings together

education and community service.

Participation requires students to

actively engage in the creation and

execution of social programmes, aimed

at supporting vulnerable groups within

their communities. This component

of the competition broadens their

academic horizons by deepening their

understanding of social responsibility.

Coached by their mentors, the Silverbots

9120 engaged in community initiatives

such as park clean-ups and reforestation,

cultural trips, awareness on substance

abuse and sports promotion.

Health

We are dedicated to

improving the health and

wellbeing of our neighbouring

communities through a preventive health

approach. Our commitment involves

advocating for initiatives that foster

community wellbeing and encourage a

healthy lifestyle. Following our response

to the challenges posed by the Covid-19

pandemic, during 2023 we again worked

with the authorities to organise events

and promote actions that contribute to

peace, self-esteem and the development

of socioemotional skills among the

younger population.

Key activities:

• In partnership with FUNAM, we

continued to deploy our Community

Health Weeks, involving Penmont, San

Julián, Ciénega, the Fresnillo district and

the Guanajuato project, benefiting over

6,000 people and 198 communities. In

total, we managed to provide:

- 2,424 optometry appointments and

2,109 items of corrective eyewear;

- 2,617 odontology appointments and

17,838 dental procedures;

- 620 physical therapy appointments;

and

- 1,303 general health appointments.

• Additionally, we promoted cataract

surgeries among patients with sight

deficiencies in Penmont.

• In the area of preventive healthcare,

we organised the Breast Cancer Health

Fair, featuring informative talks for

women in communities around the

Penmont, San Julián, Ciénega, Fresnillo

district, and Guanajuato project.

• Through collaborative efforts, Penmont

supported Sonora’s Teleton Children’s

Rehabilitation and Inclusion Center

(CRIT) by facilitating the transportation

of patients from communities to

receive medical care and physical

therapy services.

• In response to the decline in social

cohesion and increased violence in the

regions, we continued our ‘Leaders on

the Horizon’ programme in Penmont

and recently launched it in the

Guanajuato project (see case study).

• The Santos-Fresnillo Academy, which is

committed to fostering sports, discipline

and values among children in Penmont

and the Fresnillo district, continues to

make positive contributions.

• In the Fresnillo district, we are

developing an integrated sports strategy,

encompassing the deployment of

sports clubs and academies to enhance

community wellbeing, including the

tennis club, BMX BiciCross races and

baseball academies.

146 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Case study

Strengthening social fabric through sport in Guanajuato

Following its successful implementation

in Penmont, during 2023 we launched

the ‘Leaders on the Horizon’ programme

within the Guanajuato advanced

exploration project. In partnership with

FutbolMas, this programme addresses

the urgent need to counteract the effects

of increasing violence in the region,

which leaves children and young people

vulnerable to stress and anxiety.

This programme is dedicated to

enhancing the self-esteem and

psychosocial abilities of the younger

population by leveraging their love of

sport and the structured discipline

it offers. The initiative is designed to

cultivate peace and harmony, thereby

reinforcing the social cohesion of

families within the community and

raising awareness of the importance

of protecting the environment.

‘Leaders on the Horizon’ revolves

around sociosporting events that unite

neighbourhoods or rural communities,

with football serving as both the medium

and the message. Uniquely, the matches

feature the use of blue and green cards

to encourage positive behaviours and

attitudes while discouraging conduct

that undermines shared values. The

introduction of the blue and green

cards represents a paradigm shift from

the traditional yellow and red cards of

football, which are often associated

with threat and punishment. This

innovative approach signifies a move

towards positive reinforcement and the

promotion of values associated with fair

play and sportsmanship.

The programme currently positively

impacts over 500 children and young

people across seven communities in

Guanajuato, laying the groundwork for

establishing environments conducive to

healthy, positive and friendly exchanges.

Crucially, ‘Leaders on the Horizon’ has

galvanised the community towards

nurturing the wellbeing of its younger

generations, ensuring a collective

effort in fostering a supportive and

uplifting environment.

Socioeconomic development continued

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

147

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Case study

Providing opportunities for leisure

In line with our commitment to

supporting the wellbeing of our local

communities, we developed the Fresnillo

Recreational Park in 2023, equipping

it with premium, functional amenities

designed to promote sports among

children and teenagers. The park also

features lush green areas and relaxation

zones for family time.

Our aim was to create a flagship park

that offers safe and reliable spaces for

a range of sporting activities, children’s

playgrounds, and a pet-friendly area, all

centred around an artificial lake bordered

by a jogging path. These amenities are

tailored to encourage physical activities,

contributing positively to the health of

local people, while the serene setting is

designed to provide a peaceful retreat.

The park is an all-year-round venue

and a vibrant hub for major events,

including BMX competitions, football

and baseball tournaments, as well as

athletics competitions for both adults

and children. During 2023, we added

new pavilions, restrooms and sports

facilities to further enrich the overall

park facilities and users’ experience.

Water and

Environment

Our goal is to reduce our

freshwater footprint and

ensure that our communities have access

to safe water. Our mining operations use

closed-circuit water systems and have

a high rate of water reuse; in the case

of the Fresnillo district, we use treated

municipal wastewater in our processes

to decrease our freshwater consumption.

Local governments benefit from the

cost reduction to treat wastewater

and the community benefits from

a cleaner environment.

Key activities:

• We continue monitoring and

maintaining 300 rainwater harvesting

systems in San Julián. We actively

participate in the Water Committee

to oversee infrastructure projects in

collaboration with FORMAC, among

other community service initiatives.

• In Ciénega, we contributed to a third-

party project for the potable water and

sewage network; budget authorisation

by local government is still pending.

• Within the Penmont local area, we

actively contributed to the diagnosis

and maintenance of wells serving ten

communities. Through our collaboration

with the Municipal Water, Sewage

and Sanitation Operating Agency

(OOMPAS), we play a crucial role in the

Water Committee, which is dedicated

to addressing the specific needs of the

15 de Septiembre community.

• In partnership with the Commission of

Ecology and Sustainable Development

of the State of Sonora (CEDES) and the

Intercultural Center for the Study of

Deserts and Oceans (CEDO), we actively

participate in the protection of the

Sonoran Pronghorn within the Pinacate

Biosphere Reserve.

• In 2023, we experienced a substantial

surge in family visits to the Environmental

Management Unit (UMA) at the Fresnillo

unit. Additionally, we introduced new

recreational and sports facilities to

encourage physical activity, sports

and healthy community interactions

(see case study).

• We maintain an ongoing tree donation

campaign in communities within the

Fresnillo district, providing tree species

such as palms (Arecaceae), white cedar

(Cupressus lindleyi), garden privet

(Ligustrum ovalifolium), pineapple palm

(Phoenix canariensis) and stone pine

(Pinus Pinea) from the Fresnillo Nursery.

148 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Case study

Enabling local communities to develop entrepreneurial businesses

In the heart of the Campodónico

community, near Penmont, we have

helped a determined group of female

entrepreneurs to successfully launch a

frozen crab meat venture that is both

sustainable and self-sufficient.

Overcoming numerous obstacles,

these women established the Bahía

San Jorge Cooperative Society and

Fishery Production, in partnership with

the Intercultural Center for the Study

of Deserts and Oceans (CEDO) and

under the guidance of SMART-FISH.

The business now aims to collaborate

with CONAPESCA and the municipal

government in order to distribute the

product across restaurants and sales

outlets in the urban zones of Caborca

and Puerto Peñasco, broadening its

market presence.

The support of Fresnillo demonstrates

our commitment to nurturing

entrepreneurial ventures within our

local communities. By championing

the development of small and medium-

sized enterprises we can drive organic

and sustainable economic growth,

building the community independence

and autonomy that is so important

following a mine closure.

Decent work and

economic growth

We are committed to driving

entrepreneurship in our

neighbouring communities through

collaborative strategies, aiming to foster

self-sustaining local economies. Our vision

is to creatively promote the diversification

of local procurement, contributing to

our value chain. Working with strategic

partners, we also focus on developing

entrepreneurial skills that empower the

establishment and success of small and

medium-sized enterprises, facilitating

an effective and independent economic

transition after mine closure.

Through our programmes, partners

and strategic alliances, we create and

support high-quality projects that

develop individuals’ capabilities and

that strengthen our relationships. As

active members of the regional mining

clusters in Zacatecas, Sonora and

Chihuahua, we collaborate to promote

regional procurement capabilities and

skills development. These clusters play a

crucial role as effective mechanisms for

maintaining close relationships with key

stakeholders, including state governments.

Key activities:

• In the Fresnillo district, we continue to

take the lead in promoting economic

development within our communities:

- At Juanicipio, we supported families to

establish Backyard Poultry projects in

the communities of Presa de Linares

and Col. El Obligado, in collaboration

with the Agricultural Development

Department of the Municipality of

Fresnillo.

- In Saucito and Fresnillo, we

encouraged housewives in the

production of cleaning products

and materials.

- A robust initiative is underway

in Saucito for the meat

commercialisation project (see case

study).

- In Juanicipio and Saucito, we support

a project for the production of

preserves.

- In Juanicipio, Saucito and Fresnillo, we

are supporting the implementation

of eight self-development workshops

in collaboration with the municipal

National System for Integral Family

Development (DIF).

- We also promote the federal

government’s Field Schools

programme in conjunction with

the National Institute of Forestry,

Agricultural and Livestock Research

(INIFAP), advising on agricultural

activities in the community of Presa

de Linares.

• Minera Penmont actively supports the

Fisheries Improvement for Women of

the Desert and Sea Productive Project

in crab meat processing and vacuum

packaging, now commercially available

(see case study).

• In partnership with our partner

PROEMPLEO, we have strengthened

efforts to promote and train small and

medium-sized enterprises in San Julián

through the Emprende programme,

designed for people in the community.

• We have successfully introduced the

EmprendeKids programme, which aims

to instil an entrepreneurial culture in

primary school children.

• We foster the technical skills of young

students from our communities at

the Fresnillo Technical Studies Center

(CETEF) and the Laguna del Rey

Technical Studies Center (CETLAR),

equipping them to actively participate

in the mining value chain.

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

Socioeconomic development continued

149

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Case study

Fostering entrepreneurial spirit among women

One of our major community objectives

is to encourage entrepreneurship –

helping the local economy diversify so

the community can reduce its reliance

on mining and navigate towards a self-

sufficient economic future.

In celebration of International Women’s

Day and Rural Women, our team

at Saucito launched the inaugural

Entrepreneur Fair to highlight and

promote the community’s productive

endeavours. A group of 52 women took

centre stage, demonstrating the diverse

talents and entrepreneurial spirit within

the community. The group showcased

a wide range of projects, including

soybean cultivation, cleaning product

manufacturing, material recycling,

backyard economies, family gardens,

baking and foraging for cactus.

Organised in partnership with Rural

Development Education Brigade No. 46,

the fair’s highlights included the Meat

Products Project. Organised by eight

women, this project aims to establish

a formal structure to market their

products in a way that is both

profitable and sustainable.

Community investment by strategic lever

Health 35.1%

Education 30.1%

Water 5.6%

Decent work 4.8%

Other 24.4%

* Includes the Orisyvo, Rodeo and Guanajuato advanced

exploration projects.

Community investment by business unit

Fresnillo district 30.0%

Corporate 21.5%

Penmont 21.1%

Advanced exploration* 14.3%

Ciénega 5.7%

San Julián 4.0%

Exploration 3.3%

Performance

Community investment in

(US$ million)

3.55

3.12

3.14

3.31

3.82

2023

2022

2021

2020

2019

150 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

We Identify indigenous communities, proactively conducting due diligence of our exploration concessions.

We engage respectfully in a culturally-appropriate manner that recognises their culture, values and aspirations.

We implement best practices regarding the free, prior and informed consent of indigenous peoples.

Respecting human rights

Our due diligence approach centres on

social assessments in the communities

and development projects where we

operate. These assessments enable us

to identify risks and impacts on social,

environmental, labour and human

rights matters, with the findings guiding

the continuous improvement of our

stakeholder engagement strategy and

social management plans. In addition,

we employ processes to early identify the

presence of indigenous peoples at our

concessions, informing our engagement

approach. We unequivocally condemn

any threats or intimidation mechanisms

for corporate benefits, fostering an ethics

culture and conduct that does not

condone attacks on anyone, including

those who may oppose our activities.

Interactions with

private security

We demand ethical conduct from our

private security contractors, based on

honest, respectful, transparent, equitable

and fair relationships, in strict accordance

with the law and guidelines in relation

to environmental protection, corruption

prevention, labour and human rights.

Private security suppliers undergo a

background screening process informed

by national criminal databases.

The deterrent function of our private

security forces is supported by technology

and by collaboration with security

authorities at the municipal, state

and federal level. In alignment with

our risk assessment, our private security

forces remain unarmed to mitigate and

avoid potential:

• Clashes with criminal groups that

could endanger the lives of our

workforce or communities.

• Violent confrontations with artisanal

miners accessing our facilities illegally.

Interactions with

public security

In 2020, Mexico’s Federal Protection

Agency formed a new police force

specialising in providing security to mining

facilities and operations. The Mining Police

force is the result of collaboration between

Mexico’s Federal Protection Agency, the

Secretariat of Economy and Mexico’s

Mining Chamber. Herradura was the first

mining operation in Mexico to benefit

from the deployment of the Mining Police,

accompanied by a public commitment

from Senior Government Security Officials,

our CEO and the President of the Mexican

Mining Chamber.

Members of the Mining Police undergo a

15-hour Human Rights training module,

emphasising the protection of both

mining facilities and human rights. The

learning objectives are the identification

of the core concepts of human rights and

police action, and how to protect, respect,

promote and guarantee human rights in

their work activities and also in their daily

lives. Criminal background checks of all

Fresnillo plc employees are conducted

during the hiring process with enhanced

confidence controls for members of our

security department.

Indigenous peoples

We are dedicated to meaningful

engagement with indigenous peoples,

respecting their right to free, prior and

informed consent, and are committed

to ensuring that every interaction with

them respects their values, culture and

traditions. We recognise that consultation

is a fundamental right of indigenous

communities and a mechanism to

build trust. Good faith, transparency

and accountability are the key values

that guide our consultative approach.

Consultation allows us to understand the

perspective of indigenous peoples on our

projects and to address their concerns.

Before the consultation phase, we assess

the potential impacts and benefits of

our projects and develop the capacities

of the communities to fully exercise their

right to consultation. During consultation,

we consider their preferred method of

engagement, present information in a

culturally-appropriate manner and reach

agreements on shared benefits.

In 2018, our commitment to constructive

dialogue and inclusive participation was

fundamental to obtaining the free, prior

and informed consent of the Raramuri

indigenous peoples to build and operate a

water reservoir for our San Julián mine. In

2021, we engaged the indigenous peoples’

committee to collaborate on roads and

collective water monitoring. We have

since provided guidance to Indigenous

Consultations in Mexico based on our

experience at San Julián, the Mexican

regulatory framework and international

best practices. We are also strengthening

our relationships with the indigenous

peoples of Orisyvo and San Julián.

Land acquisitions and

resettlements

Our goal is to manage resettlement

responsibly, respecting local laws and

international best practices. Developing a

mining project involves land acquisition

and, in some cases, the resettlement of

households. We recognise that these

are complex and life-changing issues

for communities. When poorly planned

and managed, land acquisition and

resettlement may adversely impact

the livelihoods and social structure of

communities, damage our relationships

and even cause conflict. We recognise

that the right to an adequate standard

of living after land acquisition and

resettlement projects is a basic human

right, and strive to:

• Avoid resettlements whenever possible,

by exploring alternative options.

• Work together with affected households,

communities and governments to

minimise adverse impacts, restoring

or improving livelihoods and living

conditions, if resettlements are

unavoidable.

• Develop our competencies and internal

processes to manage resettlements,

including: social baseline and asset

surveys, entitlement and compensation

frameworks, negotiation, livelihood

restoration programmes and ongoing

monitoring and evaluation.

Performance

No community resettlements occurred at

our operations or development projects

during 2023.

SUSTAINABILITY AT THE CORE OF OUR PURPOSE CONTINUED

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Statements

MANAGING OUR RISKS AND OPPORTUNITIES

We operate in a complex global environment, where opportunities come with corresponding

risks. Taking and managing risk responsibly is essential to running our business safely, effectively

and in a way that creates value for all our stakeholders. Risk management is one of our

management team’s core responsibilities and is central to our decision-making process.

The effective management of risk is

integral to good management practice

and fundamental in living up to our

Purpose and delivering our strategy.

By understanding, prioritising and

managing risk, we safeguard our people,

our assets, our values and reputation,

and the environment, and identify

opportunities to best serve the long-term

interests of all our stakeholders.

Understanding our risks and developing

appropriate responses is critical to

our future success. We are therefore

committed to an effective, robust system of

risk identification and response, in order to

support the achievement of our objectives.

Our approach

Effective risk management enables

us to manage both the threats and

the opportunities associated with our

strategy, operations and projects. Our risk

management process helps us to manage

material risks that have the potential to

impact our business objectives. While

risk management is a key accountability

and performance criterion for our leaders,

all employees have responsibility for

identifying and managing risks. Our risk

management framework reflects the

importance of risk awareness across

Fresnillo plc. It enables us to identify,

assess, prioritise and manage risks to

deliver the value creation objectives

defined in our business model.

Timely risk monitoring is at the core of our

management practices, helping to deliver

on our strategy and our commitments

to stakeholders, including colleagues,

communities and the planet. We are

focused on conducting our business

responsibly, safely and legally, while

making risk-informed decisions when

responding to opportunities or threats that

present themselves. With the leadership of

the Board and the Executive Committee

and guided by our risk appetite on a risk-

by-risk basis, we understand, prioritise and

manage our risks. Our risk management

framework, which we further enhanced

during the year, enables us to undertake

this exercise with structure and rigour.

Our Board oversees our principal risks

and associated management responses,

while the Audit Committee monitors the

effectiveness of risk management and

internal controls. Our risk management

system comprises six core elements

(see page 154) – one of which is our risk

management framework, which sets out

clear roles and responsibilities, standards

and procedures. We also have three lines

of defence (see page 153) to verify that

risks are being effectively managed

in line with our policy, standards and

procedures, including across core business

processes such as finance, health and

safety, social performance, environment

and major hazards.

At the front-line operational level, all

employees are required and empowered

to identify and manage the risks that arise

within their area of responsibility. This

governance structure supports our risk

management framework and enables

effective management of material risks.

The top risks of 2023 range across

the spectrum of geopolitical, security,

operational, safety, regulatory, cyber,

climate change and ESG risks. We have

implemented risk techniques and

processes to identify new risks associated

with these topics, while also analysing

their impact on all our risks. Our risk

management methodology is applied to

all our operating units, projects, exploration

activities and support areas so that we have

a comprehensive view of the uncertainties

that could affect the achievement of our

strategic goals. The framework is based on

ISO 31000 and COSO ERM

Risk management system

Our risk management system is based on

risk identification, assessment, prioritisation,

mitigation and monitoring processes,

which are continually evaluated, improved

and enhanced in line with best practice.

A complete view of our risk universe

starts with the analysis of our business,

the external environment in which we

operate, the regulatory landscape and

our internal operations. This includes the

impacts on and of our strategy, initiatives,

governance and processes. In addition to

our established risk management activities,

our executives (including operations and

project managers, the controllership group,

Health, Safety, Security, Environment and

Community Relations (HSECR) Team and

exploration managers) regularly engage

in strengthening the effectiveness of our

current controls. These actions support

the executives and the Board in each of

their responsibilities.

The Company’s risk profile has been

developed based on the most significant

risks in our business. All our principal risks

were reviewed at least twice during the

year, including through Key Risk Indicators

(KRIs), which were developed to help

embed the risk appetite framework in

the business and enhance the monitoring

and mitigation of risks.

The new mining law and the labour law

in Mexico, security close to our business

units, the increase in the cost of operations,

geopolitical instability, our licence to

operate and climate disruption all posed

new challenges for the risk department

and the Executive Committee. Due to

the uncertainty around these topics, all

strategic decisions by the Company were

analysed using risk scenarios modelling

their potential impacts. In addition, we

continue to use five key processes to

better manage our risks: (i) a monthly

procedure for evaluating and mitigating

principal risks; (ii) a process to identify

and analyse the impact of the pandemic

and geopolitical instability in all the

Company’s risks, including projects, with

a main focus on the health and safety of

employees and the identification of new

risks; (iii) dashboards for each business

unit to monitor mitigation actions and risk

level; (iv) impact and probability scenarios

which were conducted for risks related

to the supply chain of critical inputs for

operations, cost increases and projects;

and (v) collaboration with government,

the mining sector, health experts and

communities to ensure that we followed

best practice.

It is important to recognise that the

Board, the Audit Committee, the HSECR

Committee and the Executive Committee

periodically use working sessions to review

the evolution of principal and emerging

risks, as well as the appetite for each

risk. At these working sessions, the views

and suggestions of Board members are

gathered, and adjustments are made

according to the factors influencing each

risk. In addition, the HSECR Committee

continues to meet before every Board

meeting to review the effectiveness of our

risk management and internal control

systems, with particular attention paid

to safety, climate, tailings dams and

environmental risks.

1 The Committee of Sponsoring Organizations of the Treadway Commission Enterprise Risk Management framework.

152 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Cybersecurity risks ESG risks Legal and compliance risks

Finance risks

Data corruption Environmental risks

(e.g. forest fires, heat waves,

floods, etc.)

Employee behaviour

and ethics

Market risk

(foreign currency, commodity

price, interest rate, inflation

rate and equity price risks)

Unauthorised access Sustainability risks

(e.g. future risk from carbon

pricing-scenario analysis)

Fraud (bribery and corruption) Credit risk

Breach and theft of

information

Corporate governance risks

(e.g. ESG scores)

Environmental legal

requirements

Liquidity risk

Business interruption TCFD Provisions

(physical and transitional risks)

Occupational health and

safety requirements

Lack of ownership of

cybersecurity

Corruption and illegal

practices

Non-compliance with

regulations

Other licences and

authorisations

Health and safety incidents

Stoppage or loss of operations

Principal risks

Emerging risks

Operational risks

Potential actions by the

government (political, legal

and regulatory)

Access to land Geopolitical instability High-potential incident and

critical risk (e.g. rock fall, lack of

ventilation, electrocution, etc.)

Security Licence to operate

(community relations)

Water stress and drought Business continuity risks

Global macroeconomic

developments (energy and

supply chain disruptions,

inflation, productivity

and cost)

Exploration (new ore

resources)

Transition to a low-carbon

future (decarbonisation)

Increased operating costs and

critical input supply shortages

Impact of metals prices

(commodity prices and

exchange rates)

Climate change Technological disruption Productivity and target

achievement

Human resources (attract

and retain requisite skilled

people/talent crisis)

Tailings dams (overflow or

collapse of tailings deposits)

Future of the workforce Ability to access and replace

mineral reserves (mine

development)

Cybersecurity Environmental incidents

(cyanide spills and chemical

contamination)

Increased expectations of

society and investors

Tailings storage

Projects (performance risk) Replacement on depletion

of ore reserves

Follow-up to the most relevant

findings determined by

internal audit (red flags)

Safety (incidents due to

unsafe acts or conditions

could lead to injuries

or fatalities)

Pandemics and infectious

diseases

Union relations (labour

relations)

Risk rating

Very high High Medium Low Very low

To better assess and control our risks, as well as to analyse the relationship between them, Fresnillo plc has seven risk categories, which

have the following risk ratings:

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

153

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Strategic

Report Governance

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Statements

Risk governance basis

All risk governance, including principal, individual and emerging risks.

Including personnel at mine sites, development projects, exploration sites and support areas.

Bottom-up

Identification,

assessment and

mitigation of risk

across all operational

and functional areas.

Top-down

Oversight, identification,

assessment and

mitigation of risk at a

corporate level.

The Board

• Reviews and approves

risk management

and internal control

systems.

• Determines the

nature and extent

of principal risks.

• Monitors exposures to

ensure their nature

and extent are aligned

with overall goals and

strategic objectives.

• Sets tone on risk

management culture.

Executive Committee

• Identifies strategic risks.

• Assesses level of risk related to

achieving strategic objectives.

• Oversees execution and

implementation of controls

into strategic and operating

plans.

Audit Committee

• Supports the Board in

monitoring risk exposures

against risk appetite.

• Reviews the effectiveness of

our risk management and

internal control systems.

Internal audit

• Supports the Audit

Committee in evaluating

the effectiveness of risk

mitigation strategies

and internal controls

implemented

by management.

Operational level

• Risk identification and

assessment across mining

operations, projects and

exploration sites.

• Risk mitigation and internal

controls monitoring embedded

across functional areas and

businessunits.

• Risk awareness and safety

culture embedded in

day-to-day operations.

Risk governance basis

The Board and the Executive Committee oversee our principal risks, and the Audit Committee and internal audit monitor the overall

effectiveness of our risk management and internal controls framework. In addition, the operational level of our mining units also oversee

risk management in their areas of responsibility, with insights from assurance and compliance activities. This process is explained in the

following executive table:

1st 2nd 3rd

Three lines

of defence

Unit leaders including mine,

exploration and project personnel,

as well as leaders of corporate and

support areas.

Corporate level oversight functions

involve the risk management

team, the HSECR team, the

project oversight function and

the Executive Committee.

Group internal audit.

Responsibilities

Identifying, managing, verifying

and monitoring risks and controls.

Overseeing risks and the

effectiveness of controls, advising

on capability and ensuring

compliance with our policies,

standards and procedures.

Providing independent verification

that risks are being managed

and internal controls are being

operated effectively.

Accountability

Management Management and Baluarte Minero*

Board and Committees

* A virtual structure in Peñoles that coordinates and provides technical and administrative services to Fresnillo plc and subsidiaries.

154 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

• Assurance for management that

risks and critical controls are being

managed effectively.

• Group roles and responsibilities,

standards, procedures and guiding

principles for effective, consistent and

integrated risk management.

• Risk identification capability built through

coaching and training for leaders and

teams across our business.

• Risk culture of active management of risk is

embedded into how we run our business.

• Risk culture fosters collective ability to identify

and understand, openly discuss and respond

to current and future risks.

• The measurement, monitoring and

management of risks requires that the

performance of critical controls is also

measured, monitored and managed.

• Risks and their control information are

current, transparent and connected.

• Leader-led analysis and management.

• Leverage systems and data analytics to

support risk analysis, management and

oversight.

• Management’s oversight is supported

by proactive reporting and effective

escalation.

• Decision-making is supported by

connected and insightful risk analysis.

Risk assurance

Capability and culture

Systems, technology and data analytics

Risk analysis and management

Reporting oversight and insights

Risk management framework

RISK

MANAGEMENT

SYSTEM

Our strategy, values and risk appetite inform and shape our risk management framework.

We embed risk management at every level of the organisation to effectively manage threats

and opportunities to our business and host communities, as well as our environmental impact.

Our risk management process can be described as a ‘Plan-Do-Check-Act’ system. We monitor how

well we manage material risks to our objectives by checking and verifying the implementation

of our response plans (actions and controls) and our actual performance against objectives. We

enhance the check and verify step by applying the three lines of defence approach.

155

Act

Set strategy,

objectives and

risk appetite.

1. Risk analysis

Identify and

evaluate risks to

our strategy and

objectives.

2. Risk

management

Implement controls

and actions to

manage risks within

risk appetite.

3. Assurance

Check and verify

that controls

and actions

are effective in

managing the risks.

4. Communication

Communicate

current and

emerging risk

exposure.

5. Improvement

Improve controls

and actions

according to

risk appetite.

Plan Do Check

Additional

Information

Strategic

Report Governance

Financial

Statements

Our risk management system

Emerging risks

The 2018 UK Corporate Governance Code

covers emerging risks and requires the

Board to carry out a robust assessment of

the Company’s emerging risks, disclose

procedures to identify them and also

explain how these are being managed.

This requirement has been adopted and

embedded within our risk management

reporting process and, in parallel with the

day-to-day management of risk, within

each business unit and project. The risk

control and assessment processes in mines,

exploration offices and projects have been

adapted to pay attention to emerging risks.

At each location, Health, Safety, Security,

Environment and Community Relations

risk-responsible staff monitor local

information and analysis related to these

emerging risks. This monitoring process

involves building scenarios for three, five

and ten years for each emerging risk and

quarterly performance indicators that

assess probability and impact.

Fresnillo plc defines an emerging risk as

a new manifestation of risk that cannot

yet be fully assessed, a risk that is known

to some degree but is not likely to

materialise or have an impact for several

years or a risk that the Company is not

aware of but that could, due to emerging

macro trends in the mid or long-term

future, have significant implications for

the achievement of our strategic plan.

Furthermore, we consider emerging risks

in the context of longer-term impact

and shorter-term risk velocity. We have

therefore defined emerging risks as those

risks captured on a risk register that: (i) are

likely to be of significant scale beyond a

five-year timeframe; or (ii) have the velocity

to significantly increase in severity within

the five-year period.

Disruption to global markets post-Covid-19

lockdowns, as well as the impact from

Russia’s war with Ukraine, Hamas’ war with

Israel and attacks on commercial shipping

in the Red Sea by Iran-backed Houthi

rebels, has exposed vulnerabilities in the

security of supply of certain raw materials

for industrial production. The mining

sector, like many others, faces a new reality

of having to mitigate inflationary impacts

across a range of inputs while dealing with

macroeconomic shocks that may impact

operations and costs.

Global trade restrictions are likely to

further impede supply chains with certain

constraints on the supply of strategic

commodities being experienced at an

operational level. Rising geopolitical

tensions and conflicts are likely to further

exacerbate supply blockages for goods

and services and will contribute to

cost increases.

Gold and silver resources are finite, and

this presents challenges for growth that

requires investment in exploration and

the maintenance of high-quality mines.

Mining is a long-term business, and so our

strategy aims to create sustained value

over the life of our mining operations and

beyond. This involves careful allocation of

key resource inputs – the natural, human,

intellectual, financial, manufactured, and

social and relationship capitals – which are

essential to achieving this aim.

In the longer term, as the world transitions

to a low-carbon future and consumer

demand for sustainable goods flows

through the value chain, the supply-

demand dynamics of commodities

are expected to shift. This will lead to

increasing demand for sources and

solutions with low CO

emissions, and a

lower social and environmental footprint,

in addition to a growing demand for

transparent, sustainable and circular

value chains.

To strengthen our emerging risk

management framework, during 2023

we carried out activities to: (i) identify new

emerging risks in light of geopolitical

instability, technological disruption and

climate change; (ii) re-assess the emerging

risks identified in 2022; (iii) deploy effective

monitoring mechanisms; (iv) carry out

horizon scanning to consider disruptive

scenarios; and (v) implement mitigating

control actions and enhance our risk

awareness culture. These activities involved

workshops, surveys and meetings with

the Executive Committee, business unit

leaders, support and corporate areas,

as well as suppliers, contractors and

customers. We also consulted third-party

information from global risk reports,

academic publications, risk consulting

experts and industry benchmarks.

Our risk management standards promote

communication of up-to-date information

on the Company and industry risks, trends

and emerging risks. This year’s emerging

risk assessment determined the two most

exposed emerging risks to be: ‘Geopolitical

instability’ and ‘Water stress and drought’.

156 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

Relevant emerging risks are discussed below:

Emerging risk Description Potential impact Mitigating actions Timescale

1 Geopolitical

instability

(Linked to global

macroeconomic

development

principal risk)

Current global geopolitical tensions,

such as the war between Russia

and Ukraine and Hamas and Israel,

the problems between Taiwan and

China, the US-China tariff issues as

well as the upcoming US presidential

election and attacks on commercial

shipping in the Red Sea by Iran-

backed Houthi rebels, may affect

our operations and projects.

Disruptions and shortages in the

supply chain of critical mining

inputs such as cyanide, ammonia,

spare parts, equipment, etc.

Increases in the prices of key inputs

such as steel, diesel, cement, etc.

Volatility in the prices of precious

metals and the Mexican peso/US

dollar exchange rate.

Inventory control in the mining

units to plan purchases in a timely

manner and maintain sufficient

stock to guarantee operations.

Strict control of operating costs

to avoid inefficiencies.

< 5 years

2 Water stress and

drought

(Linked to

climate change

principal risk)

Increased depletion of water

resources to meet the demand

for water consumption in a region,

coupled with extreme heat waves

in desert regions.

Water is critical to mining processes.

Without this natural resource,

we cannot extract gold and silver.

Strict control and monitoring of

water concessions are maintained

and actions are envisaged to ensure

water for the following years.

Water use efficiencies are generated

and water leaving the operation

is reused.

A dedicated team was created

to manage all water-related

topics, including the impact

of climate change.

< 5 years

3 Transition to a

low-carbon future

(Linked to

climate change

principal risk)

The transition to a low-carbon future

is a ‘transition risk’ according to the

TCFD and presents challenges and

opportunities for our portfolio in the

short and long term. It is considered

within the climate change principal

risk mitigation strategy. However, we

consider this risk to be an emerging

risk due to the speed of potential

new climate change regulations

and the obstacles that government

may place in the way of investment

support for clean energy.

Key areas of uncertainty include

future climate change regulation

and policies, the development of

low-carbon technology solutions

and the pace of transition across

our value chains, in particular

decarbonisation pathways in the

steel sector.

We have introduced new sources

of information to help us identify

the impacts of climate change.

These include industry reports

and guides, energy scenarios and

Global Circulation Models (GCM)

under several Representative

Concentration Pathways (RCP).

We have used a well-below two-

degree decarbonisation pathway

to evaluate the flexibility of the

energy strategy.

> 5 years

4 Technological

disruption

(Linked to

cybersecurity

principal risk)

Failure to identify, invest in, or adopt

technological and operational

productivity innovations that

significantly replace or optimise a

process through new systems with

recognisably superior attributes.

Obsolete or outdated mining

processes impact productivity

and efficiency levels and therefore

sales and profits.

Technological advances in the

mining industry are constantly

monitored (particularly in mine

operations) in order to adopt the

most appropriate best practices

and new technologies.

> 5 years

5 Future of the

workforce

(Linked to

human resources

principal risk)

Create a culture of talent under

an inclusive, empowered and

confident culture, together with the

appropriate career paths, to generate

a future-ready workforce.

A lack of experienced and skilled

operators, and of talent in some

areas of the mines and projects

such as planning, maintenance

and safety is anticipated. There is

a need to develop personnel to fill

these positions in the future so that

we have the right capabilities in

place to operate the mines.

The human resources department

has a highly-specialised training

programme in place for key roles in

our operations, as well as a training

programme to develop personnel

focused on filling vacant positions.

< 5 years

6 Increasing

societal and

investor

expectations

There is increasing expectation and

focus on social equality, fairness and

sustainability. Financial institutions

are also placing greater emphasis

on environmental, social and

governance (ESG) considerations

when making investment decisions.

The increasing focus on ESG has

the potential to shape the future

of the mining industry, supply

cost structures, demand for

global commodities and capital

markets. While this presents us

with opportunities for portfolio and

product differentiation, it also has the

potential to impact how we operate.

We work hard to respond to

investor and societal requests and

comments and promote action

plans to meet their expectations.

A number of initiatives demonstrate

our progress. We were placed

second in the Corporate Integrity

Ranking in Mexico.

< 5 years

7 Replacement

on depletion of

ore reserves

(Linked to

exploration

principal risk)

The inability to replace depleted ore

reserves in key business units through

exploration, projects or acquisitions.

By not replacing ore reserves with

new discoveries, the Company’s

production capacity and eventually

its operation would be diminished.

A number of interesting exploration

projects such as Orisyvo, Rodeo

and Guanajuato could replace the

mineral reserves that are currently

being depleted. We also have several

camps that explore new territories

every day in search of minerals in

Mexico, Peru and Chile.

> 5 years

157

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Statements

Emerging risk Description Potential impact Mitigating actions Timescale

8 Pandemics

and infectious

diseases

The regional or global spread of

a new disease (bacteria or virus)

against which most people do

not have immunity.

Another virus such as SARS-CoV-2

coronavirus (Covid-19) may affect the

health of employees and stop the

Company’s activities. For example,

a new epidemic of infectious cases

emerged in China at the end of

2023, which could possibly lead

to another global pandemic.

Mine and project personnel are

continually monitored by the

medical team and receive medical

examinations to ensure that there

are no outbreaks of contagion.

Our medical teams monitor

international news and medical

advances, in order to be prepared

for a new pandemic.

< 5 years

Principal risks and uncertainties

The principal risks and uncertainties

outlined in this section reflect the risks

that could materially affect (negatively

or positively) our performance, future

prospects or reputation.

We define a principal risk as a risk or

combination of risks that would threaten

the business model, future performance,

solvency or liquidity of Fresnillo plc.

These risks are subject to our normal

procedures to identify, implement and

oversee appropriate mitigation actions,

supported by internal audit work to

provide assurance over the status of

controls or mitigating actions. These

principal risks are considered over the

next three years as a minimum, but we

recognise that many of them will be

relevant for a longer period.

As part of our bottom-up process, each

business unit head determined the

level of perceived risk for their individual

unit’s risk universe, and each risk owner

assessed its impact and likelihood.

executive management then reviewed

and challenged each level of perceived risk

and compared it to the Fresnillo plc risk

universe (185 individual risks grouped into

33 risk groups) as a whole. The results of this

exercise were used as an additional input to

define and assess the Company’s principal

risks. We conducted the same risk analysis

on our advanced projects, detailing the

specific risks faced by each project based

on its unique characteristics and conditions.

We maintain a risk register through a

robust assessment of the potential principal

risks that could affect the Company’s

performance. This register is used to

ensure that principal risks are identified

in a thorough and systematic way and

that agreed definitions of risk are used.

We are aware that not all risks can be

completely eliminated and that exposure

to some risks is necessary in the pursuit of

our corporate objectives. Mining is, by its

nature, a long-term business and as part of

the principal risks update and evaluation

process, we identify new or emerging

risks which could impact the Company’s

sustainability in the long run, even if there is

limited information available at the time of

the evaluation.

Due to the effects caused by the global

post-pandemic impacts of Covid-19,

the Russia-Ukraine and Hamas-Israel

wars, climate disruptions, the effects of

global inflation, and the security, safety

and environmental situations close to

our operations, it has been necessary to

reassess the principal risks and reorder

their materiality, likelihood and impact,

as well as to reassess related mitigation

actions. During the first half of 2023, the

risk team focused its efforts on identifying

and assessing emerging risks, business

continuity risks, safety risks and climate

change risks against TCFD criteria. In the

second half, we conducted assessments

of fraud, compliance, human resources,

security and internal control risks.

158 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

business workshops

(Director and manager level).

interviews with risk owners

(Managers and leaders at units).

workshops analysing the

impacts of risks

(in the areas of Security, Safety,

Compliance, Legal and ESG).

critical processes

mapped and reviewed for impact and

likelihood. (TSFs, Projects, Environmental

incidents, Union and Exploration).

Analysis

international institutions

specialising in risks were consulted.

(Aon, AXA, Swiss Re, Hannover Re

and Hawcroft).

risks scenarios

were built by mining industry

risk specialists.

risk analysis methodologies

used

(ISO-31000, ISO-22301, Markov,

Bowtie, FMEA Model, Monte

Carlo, RACI Matrix, Cause and

consequence analysis).

400+

colleagues

in operations, exploration, projects,

corporate and support areas

of Baluarte Minero, including

internal audit.

Analysis

Survey risk identified

and assessed

Trend comparison and review

200

colleagues were trained

in basic risk topics.

gold and silver mines

(15 in Mexico and ten elsewhere in the

world) were consulted regarding their

risks.

consulting firms’ risk reports

(including Marsh, Zurich, EY, PwC, KPMG

and Deloitte) were reviewed.

Trend comparison and review Added value

colleagues were trained

in climate change risks and

TCFD framework.

specific topics

were included in the risk analysis:

geopolitical instability; fraud and

compliance; climate change and TCFD

risks; and business continuity risk.

Added value

Overview of the 2023 risk assessment exercise:

150

colleagues were trained

in advanced risk topics.

159

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Report Governance

Financial

Statements

As a result of the annual risk assessment for

the year 2023, the following main results

were determined:

• The risk of ‘Potential actions by the

government’ is assessed as the main

risk for the Company, exacerbated by

the recent decisions of the current

government, such as: (a) the new Mining

Law published in May 2023, which

complicates and limits mining activities

in Mexico; (b) the restriction on the

granting of new mining concessions;

requirements; (d) the labour reform

that prohibits outsourcing, generating

complications in relations with

contractors; (e) delays and complications

in obtaining permits, licences and

authorisations; (f) the implementation

of policies that support the emission of

carbon into the atmosphere and reduce

the development of renewable energies;

(g) the reform of the energy law that

would reduce electricity supply options

for end users and allocate valuable

resources to maintain obsolete and costly

generation technologies, with significant

environmental and social impacts; and

(h) the United States-Mexico-Canada

Agreement (USMCA or TMEC) with its

new labour provisions.

• The ‘Security’ risk, arising from the

accelerated increase in organised

crime in the vicinity of the mining

units, particularly in Fresnillo, Saucito

and Juanicipio mines (business units

located in Fresnillo, Zacatecas, with

the highest perception of insecurity in

the country according to the reports

published by INEGI

); the increase

in high-impact crimes (homicide,

kidnapping and extortion) in Zacatecas,

Sonora and Guanajuato; and the sale and

consumption of drugs inside the mines.

Thefts of equipment, cars, machinery,

tools and materials and threats of theft

of ore, concentrates and mine and

project assets have also increased.

• The ‘Labour relations’ risk has always

been a topic of close attention, especially

given the changes to the Federal Labour

Law in 2021, which allows for two or more

unions in the Company. This year, ‘Union’

risk has moved up in the likelihood range

due to the labour conflict that occurred

at the Herradura mine in April and May

2023. The conflict is under control and

did not materially impact the operation

of the mine; however, there are legal

issues that continue to be processed

and could have negative results for

the Company.

• Critical risks in mining operations such

as rock falls, loss of vehicle control,

equipment interaction, energy contact,

etc. have increased in the last three

years. This is partly due to more reporting

and follow-up of cases. This year we

unfortunately had four fatalities, one

because of rock falls inside the mine

and three related to contact with heavy

equipment. Because of this situation, the

‘Safety’ risk has increased in likelihood.

(For more information refer to the ‘Safety’

section on pages 98-102)

• During the months of September and

October, the ‘Fraud’ risk assessment was

carried out, identifying risks and areas of

opportunity in the following processes:

1. Payroll (employees and unionised),

2. Award of contracts for supplies and

services, 3. Administration of contracts

for supplies and services, 4. Theft of

finished products during transportation,

5. Theft of unit assets (wiring, spare parts,

consumables, etc.) and 6. Attack on

the technological repositories of critical

Company information. This year we are

including the risk ‘bribery and corruption’

in the category of fraud risks. In all cases,

internal controls and timely follow-up

as well as preventive actions have been

increased. Early detection actions were

also reinforced. The internal audit area

considered these results in its annual

programme 2024.

• During 2023 we worked together with

the ESG department and financial

controllership to analyse and assess the

‘Climate Change’ risk, and the critical

risks and opportunities that make up

the ‘Task Force on Climate-related

Financial Disclosures’ (TCFD), assessing

the potential impacts and creating

risk materialisation scenarios, which

are related to the financial Viability

Statement. Regarding physical risks we

consider: ‘Changes in frequency and

magnitude of extreme events such as

rainfall, droughts and heatwaves affecting

our operations and neighbouring

communities’ and ‘Increase in average

temperatures, reduction in annual

precipitation and associated water stress’.

Regarding transitional risks we consider:

‘Emerging regulations such as local or

transborder carbon taxes, cap and trade

systems or increasing requirements

from current emissions regulations’,

‘Changes in the regulatory framework

of renewables’ and ‘Increase in energy

prices’. (For more information refer to the

Climate change section on pages 111-128).

• In terms of ‘Insurable risks’, we made

significant progress in 2023. For example,

a team was created to manage Fresnillo

plc’s assets, one of the duties of which

is to keep the asset inventory up to

date and align operational processes

relating to the maintenance of critical

equipment. This makes it easier to

ensure that the most important assets

of the operation and the Company

are insured. We also reviewed the

insurance policies for the assets of the

business units to ensure that they are

adequately considered, in particular

the coverage related to assets (heavy

mobile equipment and property) that

could have a significant impact on

financial issues and business interruption

in case of loss. With the support of

the external auditor specialised in

business continuity ‘Hawcroft Consulting

International Group’, the seven units of

the Company were inspected during

2023, obtaining acceptable ratings in all

cases and reducing the degree of risk

for Fresnillo plc. From 2021 to 2023, 234

recommendations related to business

continuity risks have been resolved.

• This year, Fresnillo plc’s ‘Individual Risks’

increased from 130 to 185 risks, which

are grouped into 33 risk groups, because

of the analysis of fraud, water scarcity

and management, business continuity,

climate change (TCFD) and cybersecurity

risks.

Risk appetite

• Defining risk appetite is key in

embedding the risk management

system into our organisational culture.

• The Company’s Risk Appetite

Statement helps to align our strategy

with the objectives of each business

unit, clarifying which risk levels are,

or are not, acceptable.

• It promotes consistent decision-making

on risk, allied to the strategic focus

and risk/reward balance approved

by the Board.

We define risk appetite as ‘the nature

and extent of risk Fresnillo plc is willing

to accept in relation to the pursuit of its

objectives’. We look at risk appetite from

the context of severity of the consequences

should the risk materialise, any relevant

internal or external factors influencing

the risk, and the status of management

actions to mitigate or control the risk. A

scale is used to help determine the limit

of appetite for each risk, recognising that

risk appetite will change over time. If a

risk exceeds appetite, it will threaten the

achievement of objectives and may require

a change to strategy.

Risks that are approaching the limit of

the Group’s risk appetite may require

management actions to be accelerated

or enhanced to ensure the risks remain

within appetite levels. For catastrophic

and operational risks, our risk appetite for

exceptions or deficiencies in the status of

our controls that have safety implications

is very low. Our internal audit programme

evaluates these controls with technical

experts at operations and the results of that

audit work will determine the risk appetite

evaluation, along with the management

response to any issues identified.

1 National Institute of Statistics and Geography (INEGI).

160 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

Our risk matrix

Current assessment of principal risks (February 2024)

A consistent assessment of the probability and impact of risk occurrence is fundamental to establishing, prioritising and managing

the risk profile of the Company. In common with many organisations and reflecting good practice, Fresnillo plc uses a probability and

impact matrix for this purpose.

Our principal risks, in the table below, note the interconnectivity of our strategic, economic and operational risks within an

environmental, social and governance (ESG) framework.

Relative

position

2023 2022 Risk

Risk

appetite

Risk level

2023 vs 2022 Risk velocity Focus

1 1

Potential actions by the government (political, legal

and regulatory)

Low Increasing High Strategic, Economic, ESG (V)

2 2

Security Low Stable High Operational, ESG (V)

3 3

Global macroeconomic developments (energy

and supply chain disruptions, inflation, productivity

and cost)

Low Stable High Economic, Operational

4 4

Impact of metals prices (commodity prices and

exchange rates)

High Stable High Economic (V)

5 5

Human resources (attract and retain requisite

skilled people/talent crisis)

Medium Stable Medium Strategic, Operational

6 6

Cybersecurity Low Stable High Strategic, Operational

7 7

Projects (performance risk) Medium Stable Medium Economic, Operational

8 10

Safety (incidents due to unsafe acts or conditions

could lead to injuries or fatalities)

Low Increasing High Operational, ESG (V)

9 11

Union relations (labour relations) Low Increasing Medium Operational, ESG (V)

10 8

Access to land Medium Stable Medium Strategic, Operational (V)

11 9

Licence to operate (community relations) Low Stable Medium Operational, ESG

12 12

Exploration (new ore resources) High Stable Low Operational, Strategic

13 15

Climate change Medium Increasing Low Operational, Strategic, ESG (V)

14 13

Tailings dams (overflow or collapse of tailings deposits) Low Stable High Operational, ESG (V)

15 14

Environmental Incidents (cyanide spills and chemical

contamination)

Low Stable High Operational, ESG (V)

Risk rating

Very high High Medium

Risk velocity:

High: Impact within six months of risk occurring.

Medium: Impact between six and 12 months of risk occurring.

Low: Impact after more than 12 months of risk occurring.

(V) Risks that were considered for the viability assessment.

Focus:

Strategic – risks arising from uncertainties that may impact our ability to achieve our strategic

objectives.

Economic – risks that directly impact financial performance and realisation of future economic

benefits.

Operational – risks arising from our business that have the potential to impact people, environment,

community and operational performance including our supply chain.

Environment – risks arising from our business that have the potential to impact air, land, water,

ecosystems and human health.

Social – risks arising from our business that have the potential to impact on society, including health

and safety.

Governance – risks arising from our workplace culture, business conduct and governance.

ESG – Environmental + social + governance.

161

Increasing likelihood

Increasing financial and non-financial consequences-impact

Additional

Information

Strategic

Report Governance

Financial

Statements

Heat map

Principle risk Change Reason for increase

Potential actions by the government

(political, legal and regulatory)

New mining law

Security

Global macroeconomic developments (energy and supply

chain disruptions, inflation, productivity and cost)

Impact of metals prices (commodity prices and exchange rates)

Human resources (attract and retain

requisite skilled people/talent crisis)

Cybersecurity

Projects (performance risk)

Safety (incidents due to unsafe acts or conditions could lead to

injuries or fatalities)

Increase in the number of incident cases

Union relations (labour relations)

Attempted strike by unionised staff

at La Herradura

Access to land

Licence to operate (community relations)

Exploration (new ore resources)

Climate change

Increased regulatory requirements for

environmental compliance

Tailings dams (overflow or collapse of tailings deposits)

Environmental incidents (cyanide spills and chemical

contamination)

Very low Low Moderate High Very high

Rare Unlikely Possible Likely Almost certain

9 8

2023

2022

162 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

MANAGING OUR RISKS AND OPPORTUNITIES CONTINUED

Impact

Level EBITDA/Safety and Health/Environment/Communities/Legal/Reputation

Very high • Any incident with an impact of more than 50% of EBITDA.

• Accident-causing multiple fatalities or permanent disabilities.

• Irreversible environmental damage or serious incident that impacts a community, with long-term effects.

• Regulatory breaches which may lead to a revocation of operating permits or a financial impact exceeding 20%

of EBITDA.

• Severe impact on Company’s international reputation with long-term effects.

High • Any incident with an impact of between 20% and 50% of EBITDA.

• Accident that causes a single fatality or permanent disability.

• Reversible environmental damage or major incident affecting a community, with medium-term effects.

• Regulatory breaches which may lead to a criminal conviction or a financial impact of more than 20% of EBITDA.

• High impact on the Company’s national reputation with medium-term effects.

Moderate • Any incident with an impact of between 10% and 20% of EBITDA.

• Accident resulting in lost time.

• Moderate environmental impact or small incident that affects a community, with short-term effects.

• Regulatory breaches which may lead to criminal charges or a financial impact of between 0.05% and 3% of EBITDA.

• Moderate adverse claims and in the national news for a medium-term period.

Low • Any incident with an impact of between 5% and 10% of EBITDA.

• Accident without lost time.

• Minor environmental or community impact.

• Regulatory breaches which may result in a financial impact of less than 0.05% of EBITDA.

• Moderate claims and in national news for a short-term period.

Very low • Any incident with an impact of less than 5% of EBITDA.

• Minor occupational accident.

• Very minor environmental or community impact, easily resolved.

• Regulatory breaches that will not result in a financial penalty.

• Claims that do not reach the formal media.

The risk impact scale has five levels of Probability and Impact:

Probability

Level Quantitative Qualitative

Almost certain Once a week Happens often

Likely Once a month or more Could happen easily and has occurred under

similar conditions

Possible Once or twice a year Could happen and has happened in similar

conditions

Unlikely Once or twice every

ten years

Has not happened yet, but could happen

Rare Once or twice every

50 years

Only in extreme circumstances

163

Additional

Information

Strategic

Report Governance

Financial

Statements

Our principal risks and

interdependencies

We continue to consider risks both

individually and collectively in order to

fully understand our risk landscape. By

analysing the correlation between principal

and emerging risks and the operational,

technological, strategic and financial

areas, we can identify those that have the

potential to cause, impact or increase

another risk and ensure that these are

weighted appropriately.

In performing this exercise, we have

considered the current geopolitical

landscape, the security situation close to

the business units, the potential actions

by the government, the climate impact

and the post-pandemic effect of Covid-19,

which could lead to a long-term global

recession, as well as other operational

constraints that could impact several

of our principal risks.

Our analysis highlights the strong

relationships between the human

resources risk and the future of the

workforce; between the tailings dams

risk and water stress; between the

cybersecurity risk and technological

disruption; and between the exploration

risk and replacement on depletion of

ore reserves.

External

Internal

Principal risk

Potential actions by the government (political, legal and regulatory)

Security

Global macroeconomic developments (energy and supply chain disruptions, inflation,

productivity and cost)

Impact of metals prices (commodity prices and exchange rates)

Human resources (attract and retain requisite skilled people/talentcrisis)

Cybersecurity

Projects (performance risk)

Safety (incidents due to unsafe acts or conditions could lead to injuries or fatalities)

Union relations (labour relations)

Access to land

Licence to operate (community relations)

Exploration (new ore resources)

Climate change

Tailings dams (overflow or collapse of tailings deposits)

Environmental incidents (cyanide spills and chemical contamination)

164 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

Regulatory measures or policies issued

by the government, at all three levels:

federal, state and municipal, may have an

adverse impact on the operation of the

Company. This could include new stricter

environmental regulations or guidelines,

environmental taxes, new forms of labour

and union contracting, longer and more

complicated permitting and licensing

processes, more complex and time-

consuming arrangements for accessing

explosives, more complex or onerous tax

compliance obligations for us and our

contractors, as well as more frequent

reviews by tax, environmental and social

security authorities.

The current federal government has

expressed a negative sentiment towards

the mining industry and particularly open

pit mining, which is why it has decided

not to grant any more mining concessions

during the current government term

that ends in 2024 and is likely to review

in detail the status of the concessions

that have already been granted, seeking

to remove those that are not being

exploited or worked. It also promotes the

right of indigenous and Afro-Mexican

communities to be consulted prior to the

granting of mining concessions, which

could potentially affect the granting of

new concessions in Mexico.

In May 2022, a reform to the mining law

was approved to reserve the exploration,

exploitation, benefit and use of lithium

to the state. The aim is for this mineral

to be used for the benefit of national

development; although gold and silver are

not mentioned specifically, other minerals

declared as ‘strategic by the state’ are

mentioned, and at some point, precious

metals could be considered under this

heading. This would directly and seriously

affect the concessions currently exploited

by the Company.

In May 2023, the federal government

published the new mining law that will

negatively affect mining activity in the

country by slowing down exploration,

shortening the duration of concessions,

raising problems of operational

continuity and forcing negotiations with

communities. The new law shortens

concessions to 30 years (five years of

preparation with 25 years of operation)

from 50 years, with an automatic 25-year

renewal followed by a tender that could

add a further 25 years, with preference

for the incumbent. The maximum total

length of a concession has been shortened

to 80 years from 100 years. The law affects

new concessions but is still unsettled

with regard to current concessions,

pending final rules from the respective

government secretaries.

The federal government, by investing

in a new petrochemical refinery in ‘Dos

Bocas’, Tabasco, and buying an oil refinery

in ‘Deer Park’, Texas, indicates that its

energy policy promotes fuel oil and

coal, which discourages the generation

of energy based on clean sources. This

complicates attention to and compliance

with international climate change goals

and standards.

We paid special attention to the following

aspects:

• Government actions that negatively

impact the mining industry.

• Regulatory changes to mining rights

and adverse tax changes.

• Changes in tax regulations.

• Increased frequency of audits by tax

authorities with particular scrutiny on

the mining industry.

• Complications and failures to obtain

water concessions due to government

control or private interests.

• Failures/delays in obtaining necessary

environmental permits.

• Disputes arising from the US-Mexico-

Canada Trade Agreement (USMCA

or TMEC).

Factors contributing to risk

In May 2023, the Mexican government

approved a package of legal reforms to

the following laws: ‘Mining Law’, ‘Law

on National Waters’, ‘Law on Ecological

Balance and Environmental Protection’

and ‘General Law for the prevention and

integrated management of waste in the

field of mining and water concessions’,

which directly affect the mining sector,

including, among others, the following

notable aspects:

• Granting of new concessions.

Elimination of the concept of ‘free

land’ whereby the party requesting

a concession in an area that is not

occupied, currently has a right to

request the concession on a ‘first

come first served’ basis. Now, all new

concessions would be subject to a

tender process (‘licitación’) supervised

by the federal government.

• Exploration activities. The federal

government will be in charge of the

exploration activities directed by the

public National Geological Service

institution. It is possible to sign an

agreement between the public

Potential actions

by the government

(political, legal

and regulatory)

institution and private entities to

develop exploration activities for five

years. The possibility of signing five-

year agreements with the Mexican

Geological Survey is envisaged so that

mining companies can participate in

the exploration process.

• Duration of new concessions. New

concessions would be valid for 30

years rather than the current 50 years,

renewable exclusively for two periods

of 25 years. For the second term of 25

years, the process will be open to tender.

It is not clear how this would affect

concessions that are already in the

process of renewal – although from a

legal view, no retroactive effect could be

given to shorten the life of concessions

granted before the time that the new

mining law comes into effect.

• Inclusion of free, prior and informed

consultation with communities and

indigenous peoples. In addition,

the payment of 5% of profits to the

communities will be added.

• New grounds for cancellation of

concessions, such as public utility,

damage to the population, lack of

indigenous consultation and new

conducts that are now considered

crimes.

• Exploration activity stands to be most

affected by the new law. Although

details remain to be defined in specific

rules, exploration activities will be

centralised with the Mexican Geological

Service, previously a government-led

research agency, which will allow

private exploration after reaching

special collaboration agreements. This

could result in public auctions of new

concessions instead of a first applicant

priority process. Furthermore, the

concession requirements are the same

for each stage of exploration resulting in

a higher regulatory burden for early-

stage projects. This includes the filing

of future mine closure plans, when

such details are hard to come by before

exploration takes place.

• Water concessions. Concession

holders have the right to use water

obtained from mining activities so

long as water use rights are paid and

the Company complies with the

administrative processes and regulatory

standards required by the National

Water Commission. However, the law

states that concessions for human

and domestic water use should be

prioritised over mining, particularly in

states where drought and water scarcity

are common, which could limit water

concessions granted for industrial use.

The federal government reported that it

would review the granting of concessions

to mining companies and that no more

concessions would be granted during

this six-year term (which ends in 2024). It

is therefore possible that it will withdraw

unexploited gold and silver concessions.

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Statements

Labour reform that prohibits

subcontracting, which mainly generates

complications in relationships with

contractors.

New taxes and discrepancies in the

criteria used in audits carried out by

the tax authority.

Increased frequency of audits by tax

authorities with a special focus on the

mining industry.

The federal government promotes

investment in coal instead of renewable

or clean energy. This has made it more

difficult to operate with clean energy.

The federal government’s implementation

of policies that support the use of coal will

result in more greenhouse gases being

released into the atmosphere and reduce

the development of renewable energy.

The United States and Canada requested

dispute settlement consultations with

Mexico under the North American Free

Trade Agreement (T-MEC or USMCA) over

Mexico’s energy policies that they consider

discriminatory and harm international

companies and cross-border supplies.

Since 2020, the so-called ‘Mining Fund’,

whose main objective was to distribute

resources to communities neighbouring

the mines, according to the royalties paid

by companies under the Federal Law

of Rights, has been closed. Since then,

although companies continue to pay these

royalties, they do not necessarily translate

into investments for the communities

neighbouring the mines.

In addition, the perception of corruption in

Mexico remains high. The country’s score

in Transparency International’s Corruption

Perceptions Index 2023 remained relatively

unchanged, despite a higher ranking. As

a result, delays in obtaining permits for

certain operations and/or projects remain

a risk.

Controls, mitigating actions and

outlook

1. With the news of the new mining

law, risk scenarios were developed for

each change and impact, considering

the legal and operational criteria to

implement the necessary mitigation

and prevention measures. These

scenarios are constantly being updated.

2. Commitment to constant

communication with all levels

of government.

3. Increased monitoring of the processes

being implemented at the Ministry of

Labour and Economy.

4. We continue to collaborate with other

members of the mining community

through the Mexican Mining Chamber

to lobby against any new harmful taxes,

royalties or regulations. We also support

industry lobbying efforts to improve the

general public’s understanding of the

mining industry.

5. We remain alert to the changes

proposed by the authorities, including

fiscal initiatives on energy and mining,

so that we are able to respond in a

timely and relevant manner. Daily

monitoring, follow-up and attention to

issues before the Congress of the Union

that may affect the mining industry.

6. In relation to the new labour law

prohibiting subcontracting, changes

have been implemented in the

relationships with contractors, and

personnel structures have been

adapted to comply with the law.

For more details see Caring for our people

on pages 88-105.

7. We continue to comply with all

applicable environmental regulations

and are fully committed to sustainable

activity.

For more details see Protecting our

environment on pages 106-138.

8. We are committed to maintaining

dialogue with the community

throughout the life of a mining project,

from initial exploration to eventual

closure, with the objective of building

long-term relationships and value,

while ensuring operational continuity.

For more details see Partnering with our

communities on pages 139-150.

9. We seek to maintain full compliance

with tax authority requirements, and

we continue to cooperate with any

ongoing tax inspections.

10. We maintain a register and control of

vaccinated staff and encourage all staff

to be vaccinated as soon as possible.

11. We follow-up and comply with all

suggestions from the health authorities

in a timely manner.

For more details see Health on pages

103-105.

Key risk indicators

• Number of media mentions related

to mining regulations. These could

include the mention of tax, royalties, the

banning of mining activities in protected

areas and legal precedents. The indicator

also provides details about the media

itself, such as the speaker profile and

political alignment.

• Monitoring and control of the activities

and initiatives carried out by the Ministry

of Economy and the Presidency of

the Republic.

• Indicators of positive progress in

negotiations with deputies and senators

on the new mining law through the

Mexican Chamber of Mines.

Link to strategy

41 2 3

Risk appetite

Low

Behaviour

Increasing

Risk rating (relative position)

2023: Very high (1)

2022: Very high (1)

166 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

We face the risk of theft of gold doré and

silver concentrates as well as of items

including equipment, machinery, tools

and materials. These thefts can take place

inside the mines or during transportation.

Our employees, contractors and suppliers

face the risk of theft, kidnapping, extortion,

crossfire injury or damage due to insecurity

in some of the regions in which we operate.

The influence and dispute of territories by

drug cartels, other criminal elements and

general anarchy in some of the regions

where we operate, combined with our

exploration activities and projects in certain

areas of drug deposit, transfer or cultivation,

makes working in these areas a risk to us.

The federal government created the

Secretariat of Citizen Security and

Protection as part of the comprehensive

strategy to reduce insecurity. It also created

the National Guard, mostly comprising

military personnel, with the aim of

combating organised crime and drug

cartels. Unfortunately, state or local police

in most states are unprepared, ill-equipped

and lack financial resources to combat

organised crime, have low wages and are

sometimes infiltrated by criminal elements.

According to information from the

Secretariat of Security and Citizen

Protection, the National Guard and the

Attorney General’s Office of the Republic,

the presence of organised crime and high-

impact crimes (homicide, kidnapping and

extortion) increased in 2023, in the states

where our business units and projects are

located, such as Zacatecas and Sonora.

The main risks we face are:

• High-impact robberies.

• Theft of assets such as minerals,

equipment, instruments, inputs, etc.

• Consumption and sale of toxic

substances in our mining units.

• Homicide.

• Kidnappings.

• Extortions.

• Vandalism.

Factors contributing to risk

A severe increased presence of organised

crime in the vicinity of the mining units

particularly in Fresnillo, Saucito and

Juanicipio (Zacatecas State) and Penmont

(Sonora State).

An increase in the number of high-impact

crimes (homicide, kidnapping, extortion)

and armed clashes in the regions where

our mining units and projects are located.

Increased consumption and sale of drugs

at the mining units, particularly Saucito.

Increased threats of theft of concentrates

and assets at mining units and/or during

transportation.

Increased theft of material, equipment,

tools and spare parts from mines and

projects.

Roadblocks or blockages on the roads

and/or highways near the mining units.

The Mexican state of Zacatecas is

notorious for high levels of perceived

insecurity and high rates of high-impact

crime in 2023. There are records of several

vehicle thefts from Company employees

and organised crime checkpoints on the

roads near Fresnillo and Saucito mines,

as well as killings and clashes between

criminal groups.

The Mexican state of Sonora is known to

suffer constant attacks by organised crime

gangs. Recently there have been several

attacks in the areas of Magdalena, Santa

Ana, Altar, Caborca, Pitiquito, Sonoyta

and San Luis Río Colorado, which have

endangered the continuity of mining

operations and the physical integrity of

workers at the Herradura and Noche

Buena mines.

Controls, mitigating actions

and outlook

1. Our property security teams

closely monitor the security

situation, maintaining clear internal

communications and coordinating

work in areas of greater insecurity.

2. Management is fully committed to

protecting our workforce.

3. We have adopted the following

practices to manage our security

risks and prevent and address

potential incidents:

• We maintain close relationships with

authorities at federal, state and local

levels, and it is important to note that

military facilities are located close to

most of our operations.

• We interact and meet regularly with

the National Guard; and in some cases

with the Army and Navy.

• We continue to implement greater

technological and physical security at

our operations, such as the use of a

remote monitoring process in Herradura,

Noche Buena and San Julián. In the

Security

Saucito and Fresnillo mines, in addition

to the remote monitoring service,

we have also built new local operating

and command centres for each

business unit.

• Increase in logistical controls to reduce

the potential for theft of mineral

concentrate. These controls include: the

use of real-time tracking technology;

surveillance cameras to identify

alterations in the transported material;

protection and support services on

distribution routes; and a reduction

in the number of authorised stops to

optimise delivery times and minimise

exposure of trucks transporting ore

concentrates or doré.

• We continue to invest in community

programmes, infrastructure

improvements and government

initiatives to support the development

of legal local communities and

discourage criminal acts.

• We have increased the number of anti-

doping tests conducted at the start of

the day in the mining units.

• Frequent inspections are carried out

inside the mines to verify that drugs

are not consumed and sold.

• Drug consumption prevention

campaigns are carried out, focused

on employees.

Key risk indicators

• Total number of security incidents

affecting our workforce (thefts,

kidnapping, extortion, etc.).

• Number of sites affected, and workdays

lost, by region and type of site.

• Number of media mentions related

to safety issues affecting the mining

industry where we operate.

• Number of high-impact crime cases in

the regions where we have operations

and projects.

Link to strategy

41 2 3

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: Very high (2)

2022: Very high (2)

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Risk description

Geopolitical tensions have the potential

to impact our key markets, operations and

investments.

Increased trade tensions may undermine

rule-based trading systems and lead to

trade actions (increased tariffs, retaliations

and sanctions) potentially impacting our

operations or investments.

Disruption or restrictions to the supply

of any of our key strategic inputs, such

as electricity, water, fuel, sulphuric acid

or mining equipment, could negatively

impact production.

As a result of post-pandemic Covid-19,

as well as the Russia-Ukraine and Hamas-

Israel wars, and attacks on commercial

shipping in the Red Sea by Iran-backed

Houthi rebels, economies around the

world, including Mexico, were negatively

affected by lockdowns and disruptions in

supply chains. Globally, economies almost

came to a complete halt for more than five

months during 2020 and some months

of 2021. During 2022 and 2023, we saw

significant increases in critical inputs and

operating costs and higher inflationary

pressures, along with a shortage of critical

inputs and equipment. We expect this to

continue through 2024.

This situation could create an adverse

impact on our operations, costs, sales and

earnings, and potentially on the economic

viability of projects.

In macroeconomic terms, we have seen

the following impacts in Mexico

• The Mexican peso performed strongly

during 2023 and is one of the strongest

emerging currencies. On average during

2023 it traded at 17.5 pesos per US

dollar. At the end of the year the dollar

exchange rate was 17 pesos.

• General inflation in Mexico was 4.6%

for 2023.

• Economic growth for Mexico during

2023 was 3.2%.

Our sales are prenominal denominated

in US dollars, although and important

part of our operating costs are in Mexican

pesos. Any strengthening of the Mexican

peso may therefore negatively affect our

financial results.

Factors contributing to risk

The unnerving combination of war,

inflation, energy scarcity, disruption and

restrictions to the supply of some of our

key strategic inputs and climate change

was unexpected, given that life was just

beginning to move forward from the

Covid-19 pandemic.

Inflation has become a major concern

for the global economy. Price rises are

reaching record highs in Europe and the

United States and may be countered

by monetary policy. In Latin America,

central banks have been acting quickly

and forcefully since last year, raising

interest rates.

Interruption in the value chain of critical

inputs for our operations such as spare

parts (primarily delivered by land transport

from the US and maritime transport from

China and Europe).

Disruptions also include reduced

availability of maintenance teams/

contractors to resolve issues, as well as

travel restrictions leading to officials not

being able to travel and inspect projects,

resulting in delays.

Increased operating costs due to

higher prices for critical inputs such as

steel, cyanide, copper, diesel, haulage

equipment, oxygen and truck tyres.

Controls, mitigating actions

and outlook

1. In macroeconomic terms, and trailing

only India, China, Indonesia, and

Turkey among the G20, México’s

GDP grew 3.7% year-on-year in the

first half of 2023. This expansion can

be attributed to: firstly, the United

States, which shared a good first

half (2.2% year on year) with Mexico,

is helping the nation through trade

and remittances; secondly, a boom

in private consumption, due to

increases in real wages and a strong

labour market; thirdly, gains due to

nearshoring, observable through the

recovery of business confidence and

private investment; and, finally, major

infrastructure projects (such as new

refineries and transport systems), are

now clearly evident in government

expenditure and construction plans.

2. In microeconomics terms, to maintain

our security of supply, contingency

plans are in place to address any short-

term disruptions to strategic resources.

We negotiate early with suppliers

of key inputs to ensure continuity.

Certain key supplies are purchased from

several sources to mitigate potential

disruption arising from exposure to a

single supplier.

For more details see Review of operations

on pages 42-63.

Global

macroeconomic

developments

(energy and supply chain

disruptions, inflation,

productivity and cost)

3. We execute operational excellence

initiatives to counter inflation and

improve margins, and also enhance

cost-competitiveness by improving

the quality of the portfolio.

4. We maintain a rigorous, risk-based

supplier management framework to

ensure that we engage solely with

reputable product and service providers

and keep in place the necessary

controls to ensure the traceability of

all supplies (including avoiding any

conduct related to modern slavery).

5. To achieve cost-competitiveness, we

endeavour to buy the highest possible

proportion of our key inputs, such as

fuel and tyres, on as variable a price

basis as possible and to link costs to

underlying commodity indices where

this option exists.

6. We are committed to incorporating

sustainable technological and

innovative solutions, such as using sea

water and renewable power when

economically-viable, to mitigate

exposure to potentially scarce resources.

For more detail see Sustainability at the

core of our purpose on pages 78-150.

7. We have hedging policies for exchange

rate risk, including those associated with

project-related capex and a hedging

policy for precious metals.

Key risk indicators

• Percentage of delivery compliance by

suppliers and contractors.

• Shortages of critical operational inputs.

• Increase in the price of critical inputs for

the operation.

• Increased cost of operation.

Link to strategy

1 2 3

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: High (3)

2022: High (3)

1 Banco de México/December 2023 Report.

168 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

The volatility in the price of gold and

silver is high and unpredictable. There

is an inherent risk when investing or

planning for the future price of these

precious metals.

Our results are heavily dependent on

commodity prices – principally gold and

silver. These prices are strongly influenced

by a variety of external factors, including

wars, geopolitical disruption, global

economic growth, inventory balances,

industry demand and supply, possible

substitution, etc.

Factors contributing to risk

The risk is further exacerbated when

macroeconomic and geopolitical factors

directly affect the price of commodities,

both positively and negatively. Such factors

include post-pandemic Covid-19, the wars

between Ukraine-Russia and Israel-Hamas,

and generalised inflation around the world.

Lately, the attraction of investing in

other financial instruments such as

cryptocurrencies, in addition to silver

and gold, has increased. This could lead

to investors reducing their investment

activities in precious metals.

However, geopolitical tensions ignited by

the conflict in the Middle East, coupled

with a continuing decline in inflation rates

in the United States, have propelled a

remarkable rally in gold prices. After two

years of mid to low prices, gold posted

double-digit gains at the end of November

2023 and surpassed US$2,000 per ounce,

approaching its all-time high of US$2,100

per ounce reached in August 2020. The

price continued to hover around the

US$2,000 per ounce barrier, as the

end of the ceasefire between Hamas

and Israel saw investors flock to buy

what is recognised worldwide as a safe-

haven asset

Controls, mitigating actions

and outlook

1. We consider exposure to commodity

price fluctuations an integral part of our

business and our usual policy is to sell

our products at prevailing market prices.

2. We monitor the commodity markets

closely to determine the effect

of price fluctuations on earnings,

capital expenditure and cash flows.

Very occasionally, when we feel it

is appropriate, we use derivative

instruments to manage our exposure

to commodity price fluctuations. We

run our business plans through various

commodity price scenarios and develop

contingency plans as required.

For more details see Market review on

pages 28-29.

3. We focus on cost-efficiencies and

capital discipline to deliver competitive

all-in sustaining cost.

4. We work to improve debt profile and

reduce the annual interest bill.

For more details see Financial review on

pages 64-75.

5. We maintain long-term optionality by

ensuring our pipeline of opportunities

is continuously replenished.

6. Security, liquidity and return represent

the order of priorities for our investment

strategy. We maintain a strong and

flexible balance sheet, consistently

returning capital to shareholders while

leaving sufficient funds to progress

our short-, medium- and long-term

growth plans and maintain the

financial flexibility to take advantage

of opportunities as they may arise.

For more details see Financial review on

pages 64-75.

7. We have a risk-averse investment

strategy, managing our liquidity by

maintaining adequate cash reserves

and financing facilities through the

periodic review of forecast and actual

cash flows. We choose to hold surplus

cash in demand or term deposits or

highly-liquid investments.

For more details see Financial review on

pages 64-75.

Impact of

metals prices

(commodity prices)

Key risk indicators

• Profit sensitivity to percentage change in

precious metals.

• EBITDA sensitivity to percentage change

in metals prices and the Mexican peso/

US dollar.

Link to strategy

1 2 3

Risk appetite

High

Behaviour

Stable

Risk rating (relative position)

2023: High (4)

2022: High (4)

1 US Federal Reserve/December 2023 Report.

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Risk description

Fresnillo plc’s most valuable asset is its

workforce – and our people are critical to

the successful execution of our strategy.

We face multiple risks in the selection,

recruitment, training and retention of

talented people with technical skills and

experience relevant to the mining sector.

Obtaining qualified labour has become

a major challenge, and our industry

requires more and more people trained

and experienced in mining processes.

Unfortunately, there are not enough

candidates with the required profiles.

Managing talent and maintaining a high-

quality labour force in a fast-changing

technological and cultural environment is

therefore a key priority. Any failures in this

respect could have a negative impact on

the performance of the existing operations

and prospects for future growth.

Digital and technological innovation has

the potential to generate substantial

improvements in the productivity, safety

and environmental management of

the Company. However, to achieve this,

in addition to demanding significant

investment, different skillsets will be

required in the workforce.

There is a risk that our workforce will either

be unable to transform as needed or will

be resistant to change and unwilling to

accept the impact of automation or to

acquire new technological skills.

The lack of reliable contractors with

sufficient infrastructure, machinery,

performance history and trained people

is also a risk that could affect our ability

to develop and build mining works.

Factors contributing to risk

Business interruption or underperformance

may arise from a lack of access to capability.

Tight labour markets are leading to

heightened competition for diverse talent

and critical skills, such as in the areas of

digital, climate and energy.

Changing societal expectations are placing

pressure on our corporate and employer

brand – who we are and what we stand for.

There was a significant increase in staff

turnover during 2023.

Talent retention also became more

difficult this year.

At some mines we have a lack of

specialised personnel to cover

working hours.

In certain regions where we operate

there are not enough candidates with

the necessary skills to operate the mining

equipment.

With the new labour law prohibiting

outsourcing, we had to hire staff from

contractors, and this caused added

complications.

Controls, mitigating actions

and outlook

1. We develop the talents of our

employees through training and

career development, invest in initiatives

to widen the talent pool and are

committed to our diversity and

inclusion policy. Through these

actions we aim to increase employee

retention, as well as the number

of women, people with disabilities

and employees with international

experience in the workplace.

2. Our employee performance

management system is designed

to attract and retain key employees

by creating suitable reward and

remuneration structures and providing

personal development opportunities.

We have a talent management system

to identify and develop internal

candidates for key management

positions, as well as identify suitable

external candidates where appropriate.

3. We aim for continuous improvement,

driven by opportunities for training,

development and personal growth; in

short, we focus on fair recruitment, fair

pay and benefits and gender equality.

In the trusted staff structure, 19.24% are

women, as are 31.03% of new joiners,

while 28.29% of the female population

was promoted during the year.

Human resources

(attract and retain requisite skilled

people/talent crisis)

4. Recruitment: We have evaluated

our recruitment requirements for

key positions, and our goal is to

meet them through internal

training and promotion, as well

as by recruitment through:

• Our close relationships with

universities that offer earth science

programmes. We have programmes

dedicated to identifying potential

performance-based candidates

who can be hired as trainees and/

or employees at graduation. During

the year, we hosted 39 students from

different earth science professions

at our mining units to support their

training, and 32 engineers took part

in our training programme.

• CETLAR (Centre for Technical Studies

of Peñoles), which trains mechanical

and electrical technicians. All seven

2023 graduates were hired as full-

time employees.

5. Retention: Our goal is to be the

employer of choice, and we recognise

that to be a profitable and sustainable

Company, we need to generate value

for our employees and their families.

We do this by providing a healthy, safe,

productive and team-oriented work

environment that not only encourages

our people to reach their potential, but

also supports process improvements.

During 2023, we conducted

management and leadership skills

development programmes with 14

superintendents, 49 advisors and

43 facilitators.

In order to keep our staff updated and

trained, 82% of employees and 92% of

unionised staff received training during

the year. A total of 108 employees

participated in institutional development

programmes, which means that 60% of

staff with more than two years of service

have participated at least once. Of this

60%, 11.8% are women. 585 courses and

studies were provided through external

training, benefiting 456 employees.

82.9% of our leaders have participated in

institutional development programmes

focused on leadership.

170 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

6. Performance: The virtual internship

programme continued this year in

conjunction with Peñoles, with

courses in mining, geology, metallurgy

and topography.

We have continued our performance

assessment process, reinforcing formal

feedback. We promote the certification

of key technical skills for operational

personnel and have implemented a

programme to develop administrative

and leadership skills for the required

positions. We develop our high-

potential intermediate managers

through the Leaders with Vision

programme.

For more details see Caring for our people

on pages 88-105.

Support for employees’ mental

health: 24-hour helpline for all

employees, access to psychological

help, support for families and

availability of medical advice.

For more details see Occupational health

on page 105.

Key risk indicators

• Number of positions filled by area

of speciality, for vacancies and new

positions.

• Employee turnover rate.

• Average hours of training and

professional development per employee.

• Number of contractor personnel relative

to unionised personnel per business unit.

• Number of rapid, suspicious and PCR

tests per business unit.

• Evolution of confirmed cases in hospital

and at home.

Link to strategy

1 2 3

Risk appetite

Medium

Behaviour

Stable

Risk rating (relative position)

2023: High (5)

2022: High (5)

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Risk description

We are fully aware that information is

a valuable asset that must always be

protected and that requires confidentiality,

integrity and availability in all our business

processes.

As a mining Company, we can be

threatened by cyber-attacks from a wide

range of groups, from hacktivists and

hostile regimes to organised criminals. Their

objectives range from reputational damage

and the halting of operations to exploiting

mining’s role in regional supply chains, and

affecting national and global economies.

Some cybercriminals look to find

unprotected, misconfigured or unpatched

mining systems to exploit, and with the

industry’s heavy reliance on technology and

automated systems to support operations,

this is becoming more prevalent. Others

exploit social engineering (phishing) to

obtain information that can compromise

information systems and obtain sensitive

data or even affect the operation.

The following are the top eight

cybersecurity and privacy risks that have

been identified through environment

monitoring and workshops with business

units, operations and IT. These risks

comprise the Peñoles/Fresnillo overall

cybersecurity and privacy risk profile:

• Corruption of data – Critical data where

any unauthorised modification can have

adverse impacts.

• Unauthorised access – Cybersecurity

and privacy incidents due to incorrect

access permissions or system abuse,

exploitation or misuse.

• Breach and data theft – Disclosure of

critical and sensitive Company data by

an internal or external source.

• Business disruption – Disrupting key

applications or systems for a period.

• Lack of cybersecurity ownership –

Failure to assign responsibility for

implementing and adopting daily

cybersecurity practices.

• Non-compliance – Cybersecurity and

privacy incidents resulting in non-

compliance with applicable regulations,

including privacy.

• Health and safety incidents – Breach of

availability, integrity or confidentiality of

data which impacts health and safety.

• Halt or loss of operations – Cybersecurity

and privacy incidents which result in

loss of operating licence or closure

of operations.

Factors contributing to risk

Cyber risks have increased significantly in

recent years owing in part to the Covid-19

pandemic and the proliferation of new

digital technologies, the increasing degree

of connectivity and a material increase in

the monetisation of cybercrime.

Cybercriminals are using new techniques

and tactics to carry out their attacks,

making them more difficult to detect.

Attacks targeting companies in the

industrial and mining sector are becoming

more sophisticated every day, due to the

sector’s historically low level of cybersecurity

coupled with a high-potential for serious

damage.

Theft of information through social

engineering and phishing campaigns

(fraudulent attempts to obtain sensitive

information or data, such as usernames or

passwords, by appearing to be a trustworthy

entity in an electronic communication).

Another important factor is the integration

of digital technologies, such as Industrial

Internet of Things (IIoT), Cloud, Artificial

Intelligence (AI) and Machine Learning

(ML), which can increase the scope for

attack, due to their very design, features,

and capabilities. These technologies can

be used for legitimate and productive

purposes (such as automating repetitive

processes in a company or reinforcing its

cybersecurity), but they can also be used

by hackers to carry out cyberattacks.

In addition, the degree of maturity of

cybersecurity and cybercrime regulations

that could deter criminals is still developing

at both national and global levels, but is

not yet adequate.

Access to hacking services and tools is

readily available, low-cost and heavily

automated. Without proper punishment

for perpetrators globally, attackers can

easily launch sophisticated attacks with

little risk.

Cybersecurity

Controls, mitigating actions

and outlook

The cybersecurity function continues to

update and strengthen cybersecurity in

all our processes. Its activities are aligned

with business strategies and responsible for

safeguarding digital security as a second

line of defence, reinforcing the activities

that secure our information, from data

repositories to the tools for transmitting

and sharing information.

During 2023 we activated the following

mitigation actions:

1. Aligned with business strategies, our

cybersecurity programme is based on

a governance model with three lines

of defence, involving all operational,

tactical and strategic business levels to

prevent and mitigate computer risks.

2. We maintain continuous awareness

of cybersecurity at all levels of the

organisation, through workshops,

communications, campaigns and

exercises that allow us to understand

and strengthen our cybersecurity

culture. Cybersecurity is a risk that

requires the more active involvement

of executive teams, and during 2023

we carried out awareness and training

exercises focused on this level.

3. Our approach is also based on the

NIST Cybersecurity Framework which is

used to assess and improve our ability

to prevent, detect and respond to

cyberattacks.

4. Efforts to increase the maturity level

of the Security Operations Centre

(SOC) have enabled us to benefit from

improved analytics that correlate

information from multiple business unit

sources, helping us to easily identify

the impact of a threat and address

the incident in a timely manner.

Cybersecurity incident response plans

are in place and regularly assessed to

ensure we can respond quickly and

effectively to cybersecurity incidents.

5. We conduct ongoing assessments of

the technology controls implemented

in operations and services to maintain

our risk appetite at acceptable

levels. We constantly monitor threat

intelligence to analyse trends in the

environment, allowing us to anticipate

and apply necessary controls and

adjustments in our operations.

172 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

6. In addition, our systems, networks,

and assets are continuously monitored

through cybersecurity tools that use

Artificial Intelligence and Machine

Learning technology to analyse

behaviours across our networks,

identifying and mitigating

advanced threats.

7. We established solid bases for due

compliance with the Mexican Law

‘Ley Federal de Protección de Datos

Personales en Posesión de Particulares’

(LFPDPPP). We carried out the second

phase of the audit of our Personal Data

Management System with the NYCE

office, with the objective of achieving

certification in our business units.

8. Our plan for 2024 is to focus our efforts

on reducing cyber risks, implementing

and maturing controls in line with the

threat landscape and emphasising the

importance of individual employee

responsibility for remaining vigilant and

alert to cyber threats. Risk Assessment,

Disaster Recovery Plans, Data Loss

Prevention, Pen testing and IT/OT

Network Behavioural Analysis are

among the initiatives that will increase

our Level of Cybersecurity Maturity

(based on NIST CSF).

A governance model, continuous

risk monitoring, information security

policies, cybersecurity tools, services and

assessments, awareness-raising campaigns

and training form the basis for our IT/OT

operational guarantee.

Key risk indicators

• Number of successful cyber attacks.

• Number of cybersecurity incidents

affecting our Company.

• Number of data breaches.

• Number of malware infections.

• Cost of cyber attacks.

• Number of media mentions related to

cybersecurity issues affecting the mining

industry.

Link to strategy

2 3

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: High (6)

2022: High (6)

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Strategic

Report Governance

Financial

Statements

Risk description

The pursuit of advanced exploration and

project development opportunities is

essential to achieving our strategic goals.

However, this carries certain risks:

• Current or new government regulations

that obstruct, limit or restrict the

granting of mining concessions; delay

or failure to obtain permits, licences,

authorisations, etc.

• Economic viability: The impact of the

cost of capital to develop and maintain

the mine; future metals prices; and

operating costs throughout the mine’s

life cycle.

• Access to land: A significant failure or

delay in land acquisition has a very high

impact on our projects.

• Uncertainties associated with the

development and operation of new

mines and expansion projects include:

Fluctuations in ore and recovery

volumes; unforeseen complexities in the

mining process; poor quality of the ore;

unexpected presence of groundwater

or lack of water; lack of community

support; and inability or difficulty in

obtaining and maintaining the required

building and operating permits.

• Delivery risk: Projects can exceed the

budget in terms of cost and time;

they cannot be built according to the

required specifications or there may be

a delay during construction; and key

mining teams are not available on time.

Other important risks:

• Failure to effectively manage our

development projects could result in

delays to the start of production and

cost overruns.

• Projects that cannot be delivered on

time, on budget and according to

planned specifications.

• Geotechnical conditions of the ore

body/ poor rock quality.

• High costs making it difficult to justify

the project.

• Delay in the development of the

project due to lack or delay of critical

equipment, supplies and spare parts.

• Disruptions in the supply chain for

construction materials and equipment.

The following risks relate specifically to

prospective projects in Chile and Peru:

• Government instability, especially in

Peru.

• Potential actions by the government

(political, legal and regulatory).

• Security.

• Licence to operate (community relations)

• Access to water (national regulation and

geographic complications).

• Environmental compliance.

• Competition for land (threat from

green power generation companies,

for example, thermosolar).

• Informal mining.

• Industrial safety compliance

(National Geological and Mining Service

SERNAGEOMIN).

• Increased mining taxes and fees.

Factors contributing to risk

Uncontrolled increases in the costs of

critical inputs directly affect the planning

and progress of projects.

In some regions there are no specialised

contractors or contractors with the

technology to develop the projects.

Contractor productivity may be lower

than anticipated, causing delays in

the programme.

Increase in the number of high-impact

crimes (homicide, kidnapping, extortion)

in the regions of the projects.

We have also identified the following

threats to project development:

• Insufficient resources for project

execution.

• Changes in operational priorities that

can affect projects.

• Inadequate management structure for

project supervision.

• Delays in obtaining necessary permits

for construction and operation.

• Lengthy procedures for land acquisition,

electricity supply and water.

Controls, mitigating actions

and outlook

1. Our investment assessment process

determines how best to manage

available capital using technical,

financial and qualitative criteria:

• Technical: We evaluate and confirm

the resource estimate; conduct

metallurgical research of mineral

bodies to optimise the recovery of

economic elements; calculate and

determine the investment required

for the overall infrastructure (including

roads, energy, water, general services,

housing) and the infrastructure

required for the mine and plant.

Projects

(performance risk)

• Financial: We analyse the risk in

relation to the return on the proposed

capital investments; set the expected

internal rates of return (IRR) per

project as thresholds for approving

the allocation of capital, based on

the current value of expected cash

flows of invested capital; and perform

stochastic and probabilistic analyses.

• Qualitative: We consider the

alignment of investment with

our strategic plan and business

model; identify synergies with other

investments and operating assets;

and consider the implications for

safety and the environment, the

safety of facilities, people, resources

and community relations.

2. The management of our projects is

based on the PMBOK standard of

the Project Management Institute

(PMI). It allows us to closely monitor

project controls to ensure the delivery

of approved projects on time, within

budget and in accordance with

defined specifications.

3. The executive management team

and the Board of Directors are regularly

updated on progress. Each advanced

exploration project and major capital

development project has a risk

record containing the project-specific

identified and assessed risks.

The project development process in

2023 included: Orisyvo (gold), Rodeo

(gold), Guanajuato (silver and gold),

and Tajitos (gold).

See Exploration section on pages 42-47.

Key risk indicators

• Earned value (rate of financial

advancement vs physical advancement).

• Percentage of required land acquired.

• Percentage of major equipment ordered

and received according to plan.

• Percentage of mine development

completed.

Link to strategy

Risk appetite

Medium

Behaviour

Stable

Risk rating (relative position)

2023: High (7)

2022: High (7)

174 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

Nothing is more important than the

safety and wellbeing of our employees,

contractors and communities. The mining

industry is inherently hazardous, with the

potential to cause illness or injury, damage

to the environment and disruption to

communities. Our objective is first and

foremost to have zero fatalities. We believe

all incidents and injuries are preventable,

so our focus is on identifying, managing

and, where possible, eliminating risks.

Major hazards include process safety,

underground mining, surface mining

and tailings and water storage.

Our workforce faces risks such as fire,

explosion, electrocution and carbon

monoxide poisoning, as well as

risks specific to each mine site and

development project.

These include rockfalls caused

by geological conditions, cyanide

contamination, explosion, becoming

trapped, electrocution, insect bites,

falls, heavy or light equipment collisions

involving machinery or personnel and

accidents occurring while personnel are

being transported.

A poor safety record or serious accidents

could have a long-term impact on morale

and on our reputation and productivity.

Factors contributing to risk

We are saddened to report that four

fatalities were recorded during 2023, and

also that we experienced a significant

increase in accidents related to:

• Rockfall/terrain failure.

• Loss of vehicle/equipment control.

• Team-vehicle-person interaction.

• Accident in transport of staff.

• Contact with electric power.

• Fire.

• Contact with hazardous substances.

During 2023 we had 396 high-potential

incidents, 6% more than 2022

Frequent transportation of our people

to remote business units is an ongoing

feature of our operations. In many cases,

these units have poor accessibility by road.

Failure to comply with safety programmes,

measures and audits or with the findings

of inspections, continues to be a safety risk.

Our people not being sensitive to the

latent risks of our operations.

Omissions and failures to follow security

protocols.

Controls, mitigating actions

and outlook

1. Quarterly meetings to discuss the

main safety risks at each mining

unit, projects and exploration sites,

overseen by the Executive Committee.

The Board receives regular updates on

the main risks.

For more details see Safety on pages

98-102.

2. Implementation of technical and

safety standards and procedures

for slope geotechnical, tailings

management, underground

mining and process safety.

3. We constantly seek to improve our

safety and health risk management

procedures, with a focus on the early

identification of risks and the prevention

of fatalities.

Safety

4. Our ‘Safety and Occupational Health’

strategy is based on four pillars:

a. Safety and health risk management:

Workers at all levels are able to

identify hazards and controls,

so that all jobs are carried out safely.

b. Leadership: All employees and

contractors are health and safety

leaders and we demonstrate

our commitment through each

individual’s responsible behaviour.

c. Contractor management:

Our contractors are an integral

part of our safety team and

culture, and we work together

to improve performance.

d. Reporting, research and learning

from our accidents: We share

good practices and learn from

our mistakes.

For more details see Socioeconomic

development on pages 142-149.

5. The strategy strives to achieve our

four main goals of: zero fatalities; zero

occupational illnesses; the development

of a resilient culture; and the

automation of hazardous processes.

6. Critical controls and verification tools

are regularly strengthened through the

verification programme and regular

audits of critical controls for potentially

high-risk activities.

For more details see Safety on pages

98-102.

7. The safety of our staff is an essential

value and a way of life. We continually

seek to improve our performance,

strengthening our preventive culture,

raising awareness of the risks generated

by our operational activities and

establishing controls and mechanisms

to eliminate fatalities.

8. During the year, we continued to

implement support measures to

strengthen, address and prevent

the causes of accidents, injuries and

fatalities. Our activities included:

1 Information provided by the Safety Department of Fresnillo plc.

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Financial

Statements

• Strengthening safety objectives,

including establishing proactive

performance indicators that allow

us to anticipate events.

• Encouraging managers to own safety

risks to operations, ensuring that

this is a fundamental part of daily

activities, and that management can

be held accountable according to

performance and results.

• Regularly reviewing and auditing

Health, Safety, Environmental and

Sustainable (HSE&S) processes,

training and controls to promote and

improve effectiveness at managed

and (where practicable) non-

managed operations.

• Monitoring monthly HSE&S

performance at the Group level

and sharing learnings from HSE&S

incident investigations.

• Continuing the implementation of

the ‘I Care, We Care’ programme

in all our operations, including

strengthening the programme’s

five lines of action.

• Assigning Critical Risk Control

Protocols to an owner for follow-up

in line with their area of influence.

• Strengthening incident investigations

with a special focus on high-potential

ones.

• Increasing the focus on high-

potential incidents (HPI).

• Strengthening the cross-functional

communication of lessons learnt, in

order to reduce the reoccurrence of

similar accidents.

• Enhancing hazard identification

and risk assessment.

• Confirming the continuous

monitoring of security management

as the highest priority of the HSECR

committee. The committee oversees

all accident investigations, ensuring

appropriate measures are taken to

improve safety systems and practices.

Key risk indicators

• Fatality rate.

• Accident rate.

• Days lost rate.

• High-potential incidents rate.

Link to strategy

Risk appetite

Low

Behaviour

Increasing

Risk rating (relative position)

2023: High (8)

2022: Medium (10)

176 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

Our highly-skilled unionised workforce

and experienced management team are

critical to sustaining our current operations,

executing development projects and

achieving long-term growth without

major disruption.

We run the risk of an outside union seeking

to destabilise the current union.

National union politics could adversely

affect us, as could pressure from other

mining unions seeking to take over

Fresnillo’s labour contracts.

Factors contributing to risk

In May 2023, a very small group of

unionised personnel at Herradura illegally

prevented site access for other workers

for a short period.

The Labour Reform allows the existence

of several unions within a company and

gives freedom of choice to the employee.

This has led to a complex, rarefied work

environment at the Fresnillo mine, with

violent clashes between the union and

a group of workers seeking to register a

new independent union.

The risk is that the fighting will continue

and worsen and eventually the mine’s

workforce will be reduced. There is also

a risk that this conflict could spread to

other mines.

In addition, the TMEC (new trade

agreement between Mexico, Canada

and the United States replacing NAFTA)

could include new labour and trade

union provisions.

Controls, mitigating actions

and outlook

1. We maintain good relations with

our employees and unions, founded

on trust, regular dialogue and good

working conditions. We are committed

to safety, nondiscrimination, diversity

and inclusion, and compliance with

Mexico’s strict labour regulations.

2. There are long-term labour agreements

(usually three years) in place with all

the unions at our operations, helping

to ensure labour stability.

3. We seek to identify and address labour

issues that may arise throughout

the period covered by the labour

agreements and to anticipate

any potential issues in good time.

Employees of our contractor companies

are an important part of our workforce

and under Mexican law fulfil the same

duties and are subject to the same

responsibilities as our own employees.

We treat contractors as strategic

associates and build long-term,

mutually-beneficial relationships

with them.

4. We maintain constructive relationships

with our employees and their unions

through regular communication and

consultation. Union representatives are

regularly involved in discussions about

the future of the workforce.

5. Increased communication with trade

union leaders in mining units to

monitor the working environment.

6. Meetings have been held with groups

of workers who want to introduce new

unions into the Company.

7. Our strategy is to integrate unionised

personnel into each team in the

business unit. We achieve this by clearly

assigning responsibilities and through

programmes aimed at maintaining

close relations with trade unions in

mines and at the national level.

8. We maintain close communication

with trade union leaders at various

levels of the organisation in order

to: raise awareness of the economic

situation facing the industry; share our

production results; and encourage

union participation in our security

initiatives and other operational

improvements.

Union relations

(labour relations)

9. These initiatives include the

security guardians programme,

certification partnerships, integration

of high-productivity equipment and

family activities.

10. We are proactive in our interactions

with unions. When appropriate, we hire

experienced legal advisors to support

us on labour issues. We remain attentive

to any developments in labour or trade

union issues.

11. We conducted a review of the

contractual benefits for union

members in our mines.

12. Our executive leadership and the

Executive Committee recognise the

importance of trade union relations and

follow any developments with interest.

For more details see Caring for our people

on pages 88-105.

Key risk indicators

• Union members’ level of satisfaction.

• Stoppages of operations, strike attempts

and protests that may occur.

• Number of media mentions related to

mining union developments.

Link to strategy

2 3

Risk appetite

Low

Behaviour

Increasing

Risk rating (relative position)

2023: High (9)

2022: Medium (11)

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Financial

Statements

Risk description

Significant failure or delay in accessing key

surface land above our mining concessions

and other lands of interest is a permanent

risk to our strategy and has a potentially

high impact on our objectives.

The biggest risk is failing to gain full control

of the land where we explore or operate.

Possible barriers to access to land include:

• Increasing landowner expectations.

• Failure to comply with the terms

of previous land acquisitions and

conditions regarding local communities.

• Influence of multiple special interests in

land negotiations.

• Conflicts regarding land boundaries,

and the subsequent resolution process.

• Succession problems among

landowners resulting in a lack of

clarity about the legal right to own

and sell land.

• Risk of litigation, such as increased

activism by agrarian communities

and/or judicial authorities.

• Presence of indigenous communities in

proximity to lands of interest, where prior

and informed consultation and consent

of such communities are required.

Operations in ‘Soledad-Dipolos’ remain

suspended, as the issue with the ejido

‘El Bajío’ remains unresolved.

Factors contributing to risk

The new mining law greatly complicates

access to land and the procedures for

obtaining permits.

The federal government may continue

its policy of not granting new mining

concessions. However, this could be

mitigated by carefully negotiating

concessions with mining geological

interest already granted.

It is becoming increasingly difficult to

negotiate land prices, with landowners

demanding more money and benefits

for access to land.

Social insecurity prevailing in the regions

where our mining interests are located

may not allow the necessary work to be

carried out to demonstrate the minimum

investments required by law, leading to the

possible cancellation of the concession.

Controls, mitigating actions

and outlook

1. Successful access to land plays a key

role in managing our mining rights,

focusing on areas of strategic interest

or value.

2. Initiatives include:

• Meticulous analysis of exploration

objectives and construction

project designs to minimise

land requirements.

• Judicious use of lease or occupation

contracts with purchase options, in

compliance with legal and regulatory

requirements.

• Early participation of our community

relations teams to manage social

challenges during the negotiation

and acquisition process.

• Strategic use of our social investment

projects to build trust.

• Close collaboration with our land

negotiation teams, which include

specialists hired directly by Fresnillo

and also provided by Peñoles as part

of the service agreement.

3. As part of an ongoing review of the

legal status of our land rights, we

identify certain areas of opportunity

and continue to implement measures

to manage this risk on a case-by-case

basis. Such measures include, wherever

possible, negotiations with agricultural

communities for the direct purchase

of land.

4. We use mechanisms provided for in

agricultural law and also use other legal

mechanisms under mining legislation

that provide greater protection for

land occupation. These activities are

part of our ongoing drive to reduce risk

exposure to surface land.

Key risk indicators

• Percentage of land required for

advanced exploration projects that

are under occupation or agreements

other than total ownership (generally

and per project).

Access to land

• Total US dollars and percentage of

project budget spent on HSECR

activities, including community relations

(on exploration projects and sites).

Link to strategy

1 2 3

Risk appetite

Medium

Behaviour

Stable

Risk rating (relative position)

2023: Medium (10)

2022: High (8)

178 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

At both a local and global level, the

mining industry’s stakeholders have

high expectations relating to social and

environmental performance. These

expectations go beyond the responsible

management of negative impacts to

include continual engagement and

contributions to stakeholder development.

Failure to adequately address these

expectations increases the risk of

opposition to mining projects and

operations. Negative sentiment towards

mining or specifically towards Fresnillo plc

could have an impact on our reputation

and acceptability in the regions where

we have a presence.

We monitor the following risks:

• Negative perception of the Company’s

social and environmental performance.

• Failure to identify and address legitimate

concerns and expectations of the

community and of society at large.

• Insufficient or ineffective engagement

and communication.

• Failure to contribute purposefully to

community development.

Factors contributing to risk

Higher expectations and scrutiny of social

and environmental performance.

Rising expectations on shared benefits

regarding land agreements.

Perceived competition on access to natural

resources, notably water.

Significant reduction in government

spending on community infrastructure,

development programmes and services.

Anti-mining activism fuelling opposition

to mining.

Insecurity and access to water are the

issues of greatest concern to people and

community leaders in the regions where

we have a presence.

The environmental impact of a mine is also

an issue that can concern communities

close to our operations.

Controls, mitigating actions

and outlook

1. Efficient risk management allows us

to detect threats associated with our

operation. This process helps us identify,

assess, plan for, communicate and

manage significant risks that could

potentially impact our social licence.

2. The risk identification mechanism

includes social studies, our complaints

and claims process, and the deployment

of community programmes, as well as

meetings with key stakeholders and

media monitoring.

3. We evaluate and prevent detected risks

from materialising through specialised

workshops, risk management and

specific action plans for each risk.

4. Risks classified as high risk are escalated

to RED teams, which work to identify

specific solutions and have the decision-

making authority to offer concrete and

timely actions.

5. Continual and direct contact is

maintained with the leaders of each

business unit to support the discussion

and mitigation of the specific risks in

their areas of responsibility.

6. We continually improve our governance

of complaints. All complaints are

received, evaluated and managed

with the involvement of those directly

responsible, with dissatisfied actors

being kept informed about the status

of each case until satisfactory closing

agreements are reached.

7. We have implemented a digital

‘hotline’ reporting process which

helps capture concerns from the

community, with cases remaining

anonymous if requested. This additional

communications channel has increased

the options available to communities

and therefore their ability to bring

concerns to our attention.

8. A community service programme has

been implemented which includes the

following features:

• Promotion of our social strategy,

which encompasses all phases of the

mining life cycle. Key activities include

communicating our best practices in

social and environmental responsibility

in order to avoid the materialisation

of risks or mitigate their effect should

they arise.

• The strategy includes our desire for

shared asset equity where permitted

in the communities where we have

a presence, maintaining our licence

to operate based on trust. In addition

to effective stakeholder engagement,

sharing the benefits of mining also

plays an important role in supporting

our social acceptability. Employment,

procurement, talent development and

paying our fair share of taxes contribute

to regional development as part of

local and state economic output.

Licence to operate

(community relations)

• Our social investment portfolio focuses

on supporting quality education,

enabling affordable access to water,

encouraging healthy communities

through sport and promoting

economic development. The aim is

to make communities sustainable,

working in collaboration with

civil society organisations (NGOs)

while always seeking government

participation in tripartite partnership

to ensure a sustainable balance

between participants.

• Environmental performance:

Optimising our use of resources,

curbing any negative impacts of our

activities and being transparent and

accountable for our environmental

footprint are crucial elements of

sustainable mining and help us to be

perceived positively by communities

and regulators.

• Health and safety performance: we

aim to instil a safety culture focused on

‘taking care of our people’, based on

shared values across the organisation,

driven by senior management and

focused on high-potential incidents.

Our ‘live in balance’ approach to

health aims to identify and proactively

manage the risks of exposure of our

workforce, who are our key community

spokespeople.

• We take a responsible approach to

managing the impacts of the reform

to regulate subcontracting, with

our response to the New Labour

Legislation in Mexico ensuring

compliance. By extending job offers

to the qualified workforce, we have

been able to mitigate the negative

impacts of the reform on local people

and communities.

For more details see Partnering with our

communities on pages 139-150.

Key risk indicators

• Number of local actions by non-

governmental organisations (NGOs) or

other local social groups against mining,

by region.

• Number of actions by NGOs or other

local social groups against mining in

the Americas.

• Number of media mentions related

to demonstrations against the mining

industry.

Link to strategy

41 2 3

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: Medium (11)

2022: Medium (9)

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Risk description

We are highly-dependent on the success

of the exploration programme to meet our

strategic value-creation targets and our

long-term production and reserves goals.

The growing level of insecurity, a more

challenging land access scenario, and

delays in obtaining government permits

detailed previously, translates into a longer

timeframe to deliver new discoveries

and improve the category of resources.

In addition, difficulties in obtaining new

mineral concessions could hamper the

exploration in new target areas.

As our production increases and

more mines approach the end of their

lives, replenishing our reserves and

maintaining low costs becomes

increasingly challenging.

Factors contributing to risk

In Mexico, the new mining law published

in May 2023 establishes that exploration

activities in new concessions will be carried

out solely by the Mexican Geological

Survey. New concessions would be granted

through a bidding process following

exploration orders submitted to the

survey. However, pre-existing concessions

can continue to be explored by the

owners and can be traded after obtaining

authorisation from the federal Ministry

of Economy. Fresnillo plc concession

holdings ( 1.6million hectares) will allow

us to continue with our brownfield and

greenfield exploration programmes, at

least in the mid-term. Obtaining access to

new concessions will become difficult.

This year, we have seen complications

and delays to the exploration programme,

mainly for the following reasons:

• Restrictions on new mining concessions.

• Delays in procedures regarding access

to land.

• Presence of organised crime (insecurity)

in the regions where we have projects

and exploration camps.

• Delays and failures to obtain permits and

licences from government authorities.

• Increased exploration costs.

• In Chile, risk factors include lack of

water in the ‘Atacama’ desert in the

north and possibility of conflict with

forestry or agricultural interests in the

south, overall higher costs compared to

those in Mexico, seasonal restrictions to

exploration in the High Andes, scarcity

of open grounds for staking, poor

infrastructure in remote zones, presence

of anti-mining communities or NGOs,

and strong competition for mining

claims and staff.

• In Peru, the main risk factors include

the long lead time required to obtain

social permits (emphasising the need

for strong community relations teams

and programmes), delays in obtaining

government permits, poor infrastructure

in mountainous regions, the presence of

anti-mining communities or NGOs and

the possibility of illegal mining.

Controls, mitigating actions

and outlook

1. Maintaining a reasonable investment

in exploration, even when metals

prices are low, has been our policy

through the years. While continuous

investment has always been a hallmark

of our exploration strategy, replenishing

exploited reserves and increasing our

total amount of resources could be a

challenge in the future.

2. During 2023, we invested a total

of US$186.0 million in exploration

activities. Our objectives for 2024

include a budgeted risk capital

investment in exploration of

approximately US$190.0 million.

3. The approximate spending split is

55% for operating mines (reserves and

resources) and 45% for the exploration

division, which in turn applies a

balanced, priority-based process

to allocate the budget.

4. For reference, the mines division uses

approximately 60% of its budget for

resource conversion and ore grade

certainty, and 40% for step-out and

expansion drilling. Furthermore, the

exploration division budget for 2024

will allocate 38% to brownfield targets,

29% to advanced projects and 33%

to early exploration stages including

regional prospecting work.

5. Our exploration strategy also includes:

• A focus on increasing regional

exploration drilling programmes

to intensify efforts in the districts

with high-potential.

• For local exploration, aggressive

drilling programmes to upgrade

the resources category and convert

inferred resources into reserves.

• A team of highly-trained and

motivated geologists, including

both employees and long-term

contractors.

Exploration

(new ore resources)

• Advisory technical reviews by

international third-party experts

and routine use of up-to-date and

integrated GIS databases, cutting-

edge geophysical and geochemical

techniques, large to small-scale

hyperspectral methods, remote

sensing imagery and analytical

software for identifying favourable

regions to be field checked by

the team.

• A commitment to maintain a

pipeline of drill-ready high-priority

projects.

For more details see Our strategy on

pages 22-27.

Key risk indicators

• Drill programmes completed (overall

and by project).

• Change in the number of ounces in

reserves and resources.

• Rate of conversion from resources

to reserves.

Link to strategy

Risk appetite

High

Behaviour

Stable

Risk rating (relative position)

2023: Medium (12)

2022: Medium (12)

180 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Risk description

Climate change is one of the major

challenges of our time and our

commitment to being part of the global

response presents both opportunities and

risks for our business.

Climate change is a systemic challenge

that requires coordinated actions between

nations, industries and by society at

large. It demands a long-term outlook to

address both physical risks and transition

risks, and the uncertainties that both

categories entail.

The mining industry specifically is highly-

exposed and sensitive to climate change.

The societal responses to transition to

a low-carbon economy include more

stringent regulations to reduce emissions, a

transformation of the global energy system,

changes in behaviour and consumption

choices, and emerging technologies.

On the other hand, our operations and

projects are expected to face acute

physical risks from extreme weather events

such as high temperatures, droughts and

extreme rainfall from more frequent and

intense hurricanes in the Pacific. These

natural disasters may affect the health and

safety of our people, damage access roads

and mine infrastructure, disrupt operations

and affect our neighbouring communities.

In addition, the mining industry is also

expected to face chronic risks, such as the

rise in temperatures, which may increase

our water demand, or a decrease in

annual precipitation, that most certainly

will exacerbate water stress in the regions

where we operate. These risks may also

intensify the competition to access water

resources, increasing risks to the social

licence to operate.

Drought in northern and central Mexico is

already affecting water availability in the

Fresnillo (Zacatecas) and Penmont (Sonora)

districts, while higher than expected

rainfall in the Sierra district (Durango and

Chihuahua) is affecting infrastructure in the

region. In addition, the increasing severity

of storm surges is causing delays in the

delivery of key supply materials.

The most important risk we currently

face relates to compliance with all

the provisions and requirements of

international agreements to reduce

pollution and GHG emissions, and

regulatory disclosure standards, which

are subject to regulatory jurisdiction in

both Mexico and the UK.

Failure to adapt to the transition

and physical impacts of climate

change, include:

• Government legislation to reduce social

and environmental impact, including

limiting mining activities.

• Regulations limiting greenhouse gas

emissions from the mining industry.

• Acute physical risks such as the

increased likelihood of extreme weather

events.

• Chronic physical risks such as changing

weather patterns, including rising

temperatures and sea levels.

Factors contributing to risk

Simply staying up to date with the latest

iteration of climate-related standards

will no longer be seen as sufficient

going forward.

The Mexican government’s

implementation of policies that support

the use of coal will lead to more GHG

emissions being released into the

atmosphere and reduce the development

of renewable energies in the country.

Current and emerging climate regulations,

such as carbon pricing mechanisms, have

the potential to result in increased cost,

shift our products’ supply and demand

dynamics, and create legal compliance

issues and litigation, all of which could

impact the Group’s financial performance

and reputation.

Our operations also face business

continuity risk due to the physical impacts

of climate change, including extreme

weather events, such as hurricanes or heavy

rainfall, or chronic risks that may change

climate patterns, such as more frequent

droughts or increased temperatures.

Rising temperatures will exacerbate water

stress in some regions, undermining

the performance of water-dependent

operations, complicating site restoration

and bringing companies into direct

competition with communities for

water resources.

Employee health and safety may be put

at risk by increases in communicable

diseases, exposure to heat-related illnesses

and the likelihood of accidents related to

rising temperatures.

Obtaining and maintaining a licence

to operate will become more difficult

in communities where climate change

exacerbates existing vulnerabilities

and increases direct competition for

resources between the Company

and the community.

Climate change

The supply of critical inputs to mining

processes, such as water and energy,

is also likely to face greater constraints

and price surges.

Increased vulnerability to the

aforementioned risks will make project

financing more difficult to secure and

drive up insurance costs.

Controls, mitigating actions

and outlook

1. We recognise that climate change is

a threat to human life and the planet

as we know it today; we are therefore

strengthening our Company-wide

climate change risk culture, underlining

our commitment to take action to

protect the planet’s climate.

2. Climate change has formed part of

our strategic thinking and investment

decisions since our Initial Public

Offering (IPO), demonstrated by our

power self-supply strategy and evolution

towards renewable sources.

3. We measure and report our Scope 1 and

2 greenhouse gas emissions, backed

by assurance in recent years. We are

also committed to increasing the share

of renewables in our energy portfolio.

On water scarcity, we are reducing

our reliance on underground water

through more efficient water usage and

increased use of municipal wastewater

as a proportion of our total water

consumption.

For more details see Climate change on

pages 111-128, Energy on pages 108-110

and Water stewardship pages 134-136.

4. We report according to the

recommendations of the Task Force on

Climate-related Financial Disclosures

(TCFD) regarding: a) Governance, b)

Strategy, c) Risk Management and

d) Metrics and targets. This year, the

ESG, financial controllership and risk

departments collaboratively reassessed

the Company’s Climate Risk and

Opportunities (CROs) analysis and

recalibrated climate scenarios. Work is

ongoing to define criteria for financial

analysis. Additionally, strides have

been made towards compliance with

cross-industry and metals and mining

industry indicators.

For more details see our TCFD disclosure

on pages 111-128.

5. We recognise the importance of

maturing our approach to integrating

physical climate change risks and

adaptation into financial planning

and decision-making processes. We

are committed to enhancing our

understanding of the site-level impacts

and vulnerabilities to refine

our adaptation measures. Work is

ongoing to strengthen the site-level

climate risk framework.

For more details see TCFD disclosure on

pages 111-128.

MANAGING OUR RISKS – RESPONSE/MITIGATION TO OUR RISKS CONTINUED

181

Additional

Information

Strategic

Report Governance

Financial

Statements

6. The pervasive and complex nature

of climate change means that it

can amplify other risks such as

environmental incidents, access

to water, health and safety of our

people, government regulations and

social licence to operate. The ESG

and risks departments support the

process to refine the identification

and risk assessment of physical and

transitional risks. Additionally, other key

departments are regularly involved in

these discussions and assessments to

refine calibration.

For more details see TCFD disclosure on

pages 111-128.

7. We use the guides from industry

associations (i.e. ICMM), international

scientific reports (i.e. IPCC, IEA), flagship

reports from market and industry

experts, reports from industry peers

and reports by the Mexican government

to identify the physical impacts of

climate change.

8. To gain a general understanding,

we consult scenarios built by the

Mexican government Reports and use

the Global Climate Models (GCMs),

different Representative Concentration

Pathways (RCPs) coupled with Shared

Socioeconomic Pathways (SSPs) and

International Energy Agency (IEA)

transition scenarios.

9. In addition, we use Aqueduct, a tool

developed by the World Resources

Institute (WRI), to better understand

water stress under different climate

change scenarios for the 2020-2030

period.

10. We are implementing a series of

controls to manage the threat of

extreme weather, including structural

integrity programmes across all critical

assets, emergency response plans

and flood management plans. These

controls keep our people safe and

help our operations return to normal

capacity as quickly as possible.

11. Our operations and exploration

prospects contribute to the supply

of the materials essential to building

a low-carbon economy.

12. We are analysing the feasibility of

setting targets to reduce our GHG

emissions over the short, medium

and long term.

For more details see Energy on pages

108-110, TCFD disclosure on pages 111-128

and Water stewardship on pages 134-136.

Key risk indicators

• Record of temperature and weather

events (rainfall, storms, snowfall, frost,

heat waves, etc.) by region.

• Energy consumption/tonnes of mineral

processed.

• CO

e emissions/tonnes of mineral

processed.

• Percentage of electricity from renewable

sources.

Link to strategy

41 2 3

Risk appetite

Medium

Behaviour

Increasing

Risk rating (relative position)

2023: Medium (13)

2022: Medium (15)

182 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Tailings dams

(overflow or collapse

of tailings deposits)

MANAGING OUR RISKS – RESPONSE/MITIGATION TO OUR RISKS CONTINUED

Risk description

Ensuring the stability of our tailings

storage facilities (TSFs) during their entire

life cycles is central to our operations. A

failure, collapse or overtopping of any of

our TSFs could result in fatalities, damage

to the environment, regulatory violations,

reputational damage and disruption to the

quality of life of neighbouring communities

as well as our operations.

Having permits, licences and certifications

from the government to be able to

operate becomes a risk due to the

time involved in these procedures

and the legal complications.

Planning new tailings dams with the

necessary time and to international

standards is a major risk, due to the

limitations of the land around our mines

and the costs and time involved in

construction. If we fail to plan or construct

dams in a timely manner, we run the risk

of disrupting operations.

Factors contributing to risk

Some historic tailings dams have been

designed, constructed and operated,

under old controls and standards, which

do not comply with all recommended

best practices.

Historic tailings dams located in rural

areas are now surrounded by facilities

or residential areas, increasing the

consequences of failure.

Tailings dams failures could lead to

landslides or cave-ins.

The climate in recent years has become

harsher in the regions where we operate,

including more severe and prolonged

rainfall and high winds that impact the

geomembrane liners, as well as snowfall

and frost that complicate operations,

among other factors.

Controls, mitigating actions

and outlook

1. We manage our TSFs in a manner that

allows the effectiveness of their design,

operation and closure to be monitored

at the highest levels of the Company.

2. Catastrophic failures of TSFs are

unacceptable and their potential for

failure is evaluated and addressed

throughout the life of each facility. Our

TSFs are constantly monitored and all

relevant information is provided to the

authorities, regulating bodies and the

communities that could be affected.

3. We manage our TSFs using data,

modelling, and construction and

operating methods validated and

recorded by qualified technical

teams and reviewed by independent

international experts, whose

recommendations we implement

in order to strengthen the control

environment. Risk management

includes timely risk identification,

control definition and verification.

Controls are based on the consequences

of the potential failure of the tailings

facilities.

4. The Global Industry Standard on

Tailings Management (GISTM) was

published in 2020 and we have

committed to adopting this standard

at all our operations. We launched a

new tailings policy during the year,

based on the GISTM, reinforcing our

commitment to the safety and health

of our workforce, communities and

the environment.

5. In accordance with this new

standard, we have updated our risk

assessment methods with a focus on

more detailed risk identification, failure

modes and controls in order to avoid

catastrophic failures.

6. Our tailings policy ensures the stability

of our TSFs throughout their life cycles,

managing any potential or actual

impact on the environment with

sound governance and open

communication with stakeholders.

7. The Executive Committee is well aware

of the risks associated with tailings

dams. Therefore, before we construct

a reservoir, we carry out a series of

studies to confirm the suitability

of the area. These studies include

geotechnical, geological, geophysical,

hydrological and seismic analyses.

Before construction begins, the

Ministry of Environment and Natural

Resources (SEMARNAT), through

the Federal Office for Environmental

Protection (PROFEPA), conducts several

assessment studies and then continues

to periodically review deposits in

relation to the works.

8. In 2023 we launched a number of

initiatives to align our governance

practices with current best practices.

These initiatives included:

• Updating the inventory of the TSFs

and validating the data log.

• Initiating a third-party review

programme of dam safety

inspections for all TSFs.

• Establishing an Independent Tailings

Review Panel (ITRP) comprising

renowned international experts.

• Accelerating a review programme

by independent experts for all sites.

• Reviewing the ITRP’s findings and

prioritising recommendations arising

from inspections.

9. The Board and the HSECR Committee

continue to keep these issues under

scrutiny.

10. Periodically we are inspected by the

ITRP, which issues corrective and

preventive recommendations to keep

the tailings dams in good condition.

11. The business continuity risks of all

Fresnillo plc tailings deposits are

reviewed annually by experts from

Hawcroft Consulting Group.

It is important to note that our tailings

dams differ from those involved in high-

profile incidents, such as the tragedy

in Brazil.

For more details see Tailings and mineral

waste management on pages 129-133.

Key risk indicators

• Percentage of TSFs that comply with

international design and construction

standards.

• Findings of the ITRP.

• Dam safety inspections and dam

safety reviews.

• Storage capacity vs levels of operation.

Link to strategy

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: Medium (14)

2022: Medium (13)

183

Additional

Information

Strategic

Report Governance

Financial

Statements

Risk description

Environmental incidents are an inherent

risk in our industry. These incidents include

the cyanide spills and dust emissions, any

of which could have a high impact on our

people, communities and businesses.

An operating incident that damages

the environment could affect both our

relationship with local stakeholders and

our reputation, reducing the social value

we generate.

We operate in challenging environments,

including forests and agricultural areas

in Chihuahua and Durango, and the

Sonora desert, where water scarcity is

a key problem.

Environmental issues directly related

to climate change are considered under

our specific climate change principal risk.

We continue to be alert to the following

risks:

• Cyanide management risk.

• Impact on the environment through

erosion/deforestation/forest loss or

disturbance of biodiversity as a result

of the operations of the business unit

or project activities.

• An event involving a leak or spill

of cyanide or SO

, which due to its

chemical properties could generate

an event of major consequence on the

premises of the business unit and/or in

the nearby area.

Factors contributing to risk

Climate change in the regions where we

operate is beginning to increase the risk

of incidents impacting the environment,

mainly due to more extreme rainfall.

Due to disruptions and lack of supply of

critical inputs for operations, there are

moments in the mining units where

there is an increased risk of an incident

affecting the environment.

Failure to address the recommendations

of external audits, especially those related

to the environment, could result in an

environmental incident.

We have strengthened the regulatory risk

pillar of the environmental management

model, incorporating monthly updates of

environmental regulations. Furthermore, we

now regularly monitor the Environmental

Authority inspection processes to assure

compliance with our environmental

commitments and action plans.

Controls, mitigating actions

and outlook

1. We have a comprehensive approach

to incident prevention. Relevant

risks are assessed, monitored and

controlled in order to achieve our

goal of zero incidents with significant

environmental impact. We work to

raise awareness among employees

and contractors, providing training to

promote operational excellence. The

potential environmental impact of a

project is a key consideration when

assessing its viability, and we encourage

the integration of innovative technology

in the project design to mitigate such

impacts.

2. Our environmental management

system ensures compliance with

national and international regulations

and best practices. It provides

transparency and supports initiatives

that reduce our environmental

footprint. We recognise that we are

responsible for our activities and

for delivering on our environmental

commitments.

3. Our environmental management

system, together with our investment

in preventive measures and training,

are key factors that reduce the risk of

large environmental incidents.

4. We recognise that environmental

sustainability is key to our ability to

generate social value and we perform

regular risk assessments in order to

identify potential impacts and develop

preventive and mitigating strategies.

5. Each site maintains updated

environmental emergency

preparedness and detailed closure

plans with appropriate financial

provisions to ensure physical and

chemical stability once operations

have ceased.

6. Fresnillo and Saucito are ISO 9001

certified; Fresnillo, Saucito, Herradura

and Noche Buena are ISO 14001 and

ISO 45011 certified.

7. In addition, Fresnillo and Saucito

achieved the badge of environmental

excellence issued by the Environmental

Protection Attorney’s Office (PROFEPA).

Our Herradura and Noche Buena

leaching operations comply with

the Cyanide Code issued by the

International Cyanide Code Institute

with the respective certification.

For more details see Protecting the

environment on pages 106-138.

Environmental

incidents

8. Environmental protection and safety are

critical for cyanide leaching systems. We

comply with international best practices

as promoted by the International

Cyanide Management Institute (ICMI)

and the Mexican standard NOM-

155SEMARNAT-2007, which establishes

environmental requirements for gold

and silver leaching systems.

For more details see Cyanide

management on page 133.

Key risk indicators

• Number of business units with ISO 9001,

14001, 45001 Certification.

• Number of business units with Clean

Industry Certification.

• Number of business units with

International Cyanide Code Certification.

Link to strategy

Risk appetite

Low

Behaviour

Stable

Risk rating (relative position)

2023: Medium (15)

2022: Medium (14)

184 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2023 LONG-TERM VIABILITY STATEMENT

Based on their assessment of prospects and viability, the Directors confirm that they have the expectation

that the Company will be able to continue in operation and meet its liabilities as they fall due over the next

five years.

In accordance with provision 31 section 4

of the UK Corporate Governance Code and

taking into account the Group’s current

position and its principal risks for a period

longer than the 12 months required by the

going concern statement, management

prepared a viability analysis which was

assessed by the Board for approval.

Mining is a long-term business and

timescales can run into decades. The

Group maintains life-of-mine plans

covering the full remaining mine life

for each mining operation.

As discussed above, we closely monitor

and assess the impact of key principal

and emerging risks on our long-term

prospects and, where possible, proactively

build response plans into our investment

decisions.

Our long-term planning reflects our

business model of running our business

in ways that are safer, smarter and more

sustainable. To ensure we remain resilient

in the long term, our business model is

continuously stress tested against the key

uncertainties within the emerging risks,

with recommended actions to mitigate

potential downside.

The Directors reviewed the viability period

and confirmed the suitability of a five-year

period to December 2028. This period

aligns with the mining industry’s typical

planning cycle and with the Company’s

five-year forecast period normally used to

evaluate liquidity and contingency plans.

It allows us to model capital expenditure

and development programmes planned

during the timeframe and reflects cash

flows generated by the projects currently

under development. Due to the long

business cycles in our industry, the

Directors considered that a shorter

time period would be insufficient.

Reporting on the Company’s viability

requires the Directors to consider those

principal risks that could impair the

solvency and liquidity of the Company.

In order to determine those risks, the

Directors robustly assessed the Group-

wide principal risks and operation-specific

risks by undertaking consultations with

executive management, mine managers

and other personnel across our operations.

These consultations also enabled the

Directors to identify low probability, high

loss scenarios – ‘singular events’ – with the

potential magnitude to severely impact

the solvency and/or liquidity of Fresnillo.

For the purpose of assessing the Group’s

viability, the Directors identified that of

our principal risks, the following are the

most important:

• ‘Potential actions by the government’,

which could include a delay in obtaining

permits and/or new regulations leading

to restrictions on the granting of new

mining concessions.

• ‘Security’, especially the theft of

explosives in the most insecure region.

• ‘Global macroeconomic developments’,

specifically inflation of costs of critical

inputs to the operation.

• ‘Impact of metals prices’, notably

volatility in the prices of gold and

silver over a period.

• ‘Access to land’, especially due to

disputes with the owners of the land

where we have operations.

• ‘Safety’, particularly in scenarios that

consider fire, severe flooding, and

fatalities.

• ‘Tailings dams’, especially the failure,

collapse or overtopping of a tailings dam.

• ‘Union’, the possibility of a strike by

unionised workers at the La Herradura

mine.

We also considered the impact of climate

change on the viability scenarios, in

particular the effects of winter storms and

heavy rainfall. However, our conclusion was

that the most important scenarios are not

materially affected at this stage.

Having determined that none of the

individual risks would in isolation

compromise the Group’s viability, the

Directors went on to group principal risks

into the following severe but plausible

scenarios, in each case determining the risk

proximity (how soon the risk could occur)

and velocity (the speed with which the

impact of a risk could be felt):

Scenario 1: Impact of metals prices and

global macroeconomic developments.

Our model assumes that prices for gold

and silver in 2023 fall to US$1,622 per oz

and US$20.7 per oz respectively. We further

assume that precious metals prices remain

at a low level for the following four years

of the viability period, varying between

US$1,622-US$1,667 per gold ounce and

US$20.7-US$21.2 per silver ounce.

To create an impartial projection for a

future low metals prices environment,

the Directors used an average of the

three lowest forecasts for each year of the

assessment, based on consensus estimates

published by institutional financial analysts.

This environment was deemed to be the

most significant risk, and pervasive across

the Company. (Principal risk)

Scenario 2: Bench collapse at an open

pit mine. A landslide occurs covering the

lower pit of La Herradura mine. Due to the

unexpected nature of the event, fatalities

occur. Production is gradually ramped

back up and re-established to full capacity.

(Singular event)

Scenario 3: Tailings deposit breach at

a mine. A tailings deposit collapses and

tailings are released into the surrounding

area, causing environmental damage. A

fund is created by the Company to be

used to remediate and compensate for

any damage caused. The investigation

into the causes of the event is drawn out

and further time is required before all

environmental permits are reinstated.

As a result, the mine remains closed

throughout the viability assessment period.

(Principal risk)

Scenario 4: Flooding at a mine. A failure

occurs in the rock mass of the Saucito

mine that contains excess water, which

causes a strong entry of water into the

mine above the pumping capacity, thus

stopping production in one of the main

areas. This situation causes the loss of

permits, additional costs and expenses,

and reputational damage. Recovery to

pre-event production levels begins once

management determines it is safe to do so.

(Singular event)

Scenario 5: Action by the government at a

mine. Explosives are stolen at the Fresnillo

mine, causing the authorities to suspend

the mine’s explosives permit. Production

is halted while an investigation into the

matter is completed. Once permits have

been restored, production ramps back up

to pre-event levels. (Principal risk)

Scenario 6: Fire in a process plant.

A major fire breaks out at the DOB plant

at the San Julián mine, causing multiple

damage to operating equipment,

significant business interruption and

loss of licences and permits, as well as

reputational and environmental damage.

(Singular event)

Scenario 7: Total power failure at a mine.

Power is totally lost at San Julián mine due

to a severe winter storm in the Chihuahua

and Durango region, resulting in business

interruption, additional costs, and failure to

meet established objectives and targets.

(Singular event)

185

Additional

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Strategic

Report Governance

Financial

Statements

GOING CONCERN

Scenario 8: Strike breaks out over union

disagreements. Due to differences in profit

sharing and other demands of unionised

employees, a long-lasting strike breaks out

in La Herradura mine, causing business

disruption, additional costs and expenses,

reputational damage and complications

with communities near the mine. (Principal

risk)

The hypothetical scenarios above are

‘extremely severe’ in order to create

outcomes that have the ability to threaten

the viability of the Group. However, multiple

control measures are in place to prevent

and mitigate any such occurrences and

the likelihood of these risks materialising is

very low. Should any of these scenarios take

place, various options are available to the

Company in order to maintain sufficient

liquidity to continue in operation, including

the deferral of capital and/or exploration

expenditure. When quantifying the

expected financial impact and remediation

time required for each of these risks,

management performed benchmarking

against the Group’s own experience and

against publicly available information

on relevant, comparable incidents in the

mining industry.

All scenarios were first evaluated using

metals prices based on average analyst

consensus. As no mitigations were

necessary, it was decided that there was

no threat to the viability of the Company.

To create a more stringent test and further

challenge the resilience of the Group, all

scenarios were then overlaid with scenario

one, (low metals prices) and then re-

evaluated.

When these scenarios were re-modelled,

none led to an extremely low or negative

cash balance because the strong cash

and other liquid funds balance at the

end of 2023 (US$534.6 million) positions

Fresnillo plc in a healthy financial situation.

In addition, metals prices contribute to

the preservation of a positive cash balance

position through the scenarios assessed.

The lowest cash balance level was identified

in scenario number two (-US$751.3 million),

in combination with the low metals prices

scenario. However, by implementing

mitigation measures, we could continue to

operate under normal conditions without

significant or relevant impacts. In addition,

in January 2024 the Company contracted

a US$350 million revolving credit line for a

period of five years.

The Group’s business activities, together

with the factors likely to affect its future

development, performance and position

are set out above in the Strategic report

on pages 2-187. The financial position of

the Group, its cash flows and liquidity

position are described in the Financial

review in pages 64-75. In addition, note 31

to the financial statements includes the

Group’s objectives, policies and processes

for managing its capital; its financial

risk management objectives; details of

its financial instruments and hedging

activities; and its exposures to credit risk

and liquidity risk.

In making their assessment of the

Group’s ability to manage its future

cash requirements, the Directors have

considered the Company and Group

budgets and the cash flow forecasts for

the period to 31 December 2025 (the

‘going concern period’). The Directors have

also considered the cash position as of

31 December 2023 (US$534.6 million) and

the net current asset position (US$1,167.0

million). In addition, they reviewed a more

conservative cash flow scenario with

reduced silver and gold prices of US$22.8/

ounce and US$1,793/ounce respectively

throughout the going concern’s period,

whilst maintaining current budgeted

expenditure while only considering

Risk management and internal control

systems are in place throughout the Group.

The internal control systems enable the

Directors to monitor key variables that

have the ability to impact the liquidity and

solvency of the Group. We are confident

that management is able to sufficiently

mitigate any situations as they might occur.

Our risk mitigation and control measures

include a Crisis Committee, while the

Board would also be briefed and convened

as necessary, in order to respond to

events as they develop. At each level of

our organisation, we have appointed

dedicated personnel responsible for

media management and engaging

with authorities and other stakeholders,

depending on the magnitude of the crisis.

Based on the results of this robust analysis

and having considered the established

controls for the risks and the available

mitigating actions, the Directors have a

reasonable expectation that the Group will

be able to continue in operation and meet

its liabilities as they fall due over the five-

year period of their detailed assessment.

This longer-term assessment process

supports the Directors’ statements

on both viability, as set out above, and

going concern.

projects approved by the Executive

Committee. This resulted in a lower cash

position, but still increase the cash balance

year-on-year, maintaining sufficient

liquidity throughout the period. Finally,

to maintain a strong liquidity, during

January 2024, the Company entered into

a committed syndicated revolving credit

facility (‘the facility’) with a maximum

amount available of US$350.0 million.

The terms of this facility include financial

covenants related to leverage and interest

cover ratios and the facility is available

for a period of five years. Under all going

concern scenarios modelled, management

forecasts compliance with such covenants.

The Directors have further calculated prices

(US$19.7/ounce and US$1,579/ounce for

silver and gold respectively), which should

they prevail to the end of 2025 would

result in cash balances decreasing to

minimal levels by the end of 2025,

without applying mitigations.

Should metal prices remain below the

stressed prices above for an extended

period, management have identified

specific elements of capital and

exploration expenditures which could

be deferred without adversely affecting

production profiles throughout the period.

On the other hand, management could

amend the mining plans to concentrate on

production with a higher margin in order

to accelerate cash generation without

affecting the integrity of the mine plans.

After reviewing all of the above

considerations, the Directors have a

reasonable expectation that management

have sufficient flexibility in adverse

circumstances to maintain adequate

resources to continue in operational

existence for the foreseeable future. The

Directors, therefore, continue to adopt

the going concern basis of accounting in

preparing the annual financial statements.

186 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

This section of the Strategic report constitutes Fresnillo plc’s Non-Financial Information

Statement, produced to comply with sections 414CA and 414CB of the Companies Act.

The information listed is incorporated by cross-reference.

Non-Financial information Policies and guidelines Outcomes Principal risk KPIs

Environmental

matters

• Sustainability

• Code of Conduct

• Recruitment, selection

and training of

personnel

• Protecting our

environment section

pages 106-138.

• Tailings and

environmental

incidents.

• Climate change

• GHG emissions.

• GHG intensity.

• Energy intensity.

• Mining &

metallurgical waste.

• Water withdrawal.

• Water intensity.

Company’s

employees

• Caring for our people

section pages 88-105.

• Safety section pages

98-103.

• Doing business ethically

and responsibly section

pages 82-87.

• Occupational Health

section page 105.

• Security.

• Safety.

• Union relations.

• Labour turnover.

• Training hours.

• Injury frequency

rates.

• Cases of

Occupational

diseases.

• Details of number of

cases in HR matters.

See page 84.

• Number of

disciplinary actions.

See page 84.

Social matters

• Our approach to

sustainable mining section

on pages 79-80.

• Partnering with our

communities section of

the ARA, on pages 139-150.

• Access to land.

• Licence to operate.

• Economic value

distributed.

• Local employment.

• Community

investment.

• Number of

community

grievances.

See page 141.

Respect for

human rights

• Sustainability

• Diversity and inclusion

• Code of Conduct

• Harassment Prevention

Protocol

• Diversity, equity and inclusion

section on pages 96-97.

• Whistleblowing mechanism

operated through labour

commissions, more

information on page 84.

• Awareness training sessions

in harassment prevention.

See page 83.

• Human resources. • % of women.

• Diversity in talent

attraction.

• Gender pay gap.

NON-FINANCIAL INFORMATION STATEMENT

187

Additional

Information

Strategic

Report Governance

Financial

Statements

Non-Financial information Policies and guidelines Outcomes Principal risk KPIs

Anti-corruption

and anti-bribery

(ABAC) matters

• Anti-bribery and

corruption

• Code of Conduct

• Donations

and Political

Contributions

• Promotional expenses

(including gifts

policy)

• Third party Due

Diligence

• Government

relations

• Governance activities during

2023 included reviews

of elements of the ABAC

programme, which were

presented periodically

to the Board and to

the Audit Committee.

See pages 213-224.

• During 2023 we continue

performing our third party

due diligence process

(394 analysis, obtaining 10

high risk, 19 medium risk,

364 low risk and 1 third

party non-recommended

thus rejected).

• Corporate Integrity 500

by NGO’s Mexican Against

Corruption and Mexican

Transparency. See page 87.

• Ethics Culture section on

page 82.

• Potential

actions by the

government

(e.g. taxes,

more stringent

regulations).

• Completion rate on

training programme

for employees.

• ABAC policy

certification by

third parties.

• Details of number

of cases of alleged

inappropriate

arrangement with

suppliers (some of

them related with

alleged bribes).

See page 84.

• Ethical conduct.

See page 82.

1 https://www.fresnilloplc.com/responsibility/

2 https://www.fresnilloplc.com/responsibility/our-approach/code-of-conduct/

3 Public commitment as part of our Code of Conduct, detail on our stance and procedures available in our intranet policy site.

www.fresnilloplc.comFresnillo plc Annual Report and Accounts 2023188

For the second year running,

in July we held a working

meeting of the Board to

provide Directors with a

chance to discuss wider

strategic issues more

extensively with

our executive team.”

THE CHAIRMAN’S LETTER ON GOVERNANCE 2023

189

Additional

Information

Financial

StatementsGovernance

Strategic

Report

Dear shareholder

It is my honour to introduce this governance section of our

annual report. As Chairman of Fresnillo plc, I continue to be well

aware of the expectations that all our stakeholders place on the

Board, particularly in respect of our leadership in promoting

high standards of corporate governance. To demonstrate our

commitment to those high governance standards, I am pleased

to highlight some of the key areas of progress that we have made

during 2023.

During the 12 months since our last annual report, the Board has

responded to a number of new challenges which are discussed

in the Strategic report and elsewhere in this annual report. The

Board has taken the necessary time to understand how these

challenges might impact our operations and has worked with

the Management Team to respond accordingly. Consequently,

we devoted significant Board time during the year to a review

of the latest mining and regulatory developments in Mexico

and the steps proposed by management in response to those

developments. Furthermore, for the second year running, in July

we held a working meeting of the Board to provide Directors

with a chance to discuss wider strategic issues more extensively

with our Executive Team. This year, the key topics for discussion

included: a review of Fresnillo’s Purpose, Mission, Vision, Values and

Business Model; five megatrends in the global mining industry; the

quantification of potential production growth; mine, exploration

and development strategies; and ESG (environment, social and

governance) and climate strategy. This meeting has proved to be

a useful opportunity for the Board to keep its focus on strategic

issues with our Executive Team outside of, and in addition to, the

regular annual reviews of the business plan and budget.

The Board, supported in particular by the Audit and HSECR

Committees, has continued to develop its arrangements for the

oversight of ESG activities and climate-related risks and mitigation

programmes. Fresnillo’s disappointing safety record during 2023,

which involved four fatal accidents (with one more occurring in

January 2024), has been a cause of significant concern at Board

level during the year and we cannot stress enough the urgent

need for our Management Team to improve the safety culture

across all of our sites, including the implementation of stricter

disciplinary measures. In November 2023 the Board approved

the creation of new executive roles for its operations and projects:

Chief Operating Officer North and Chief Operating Officer Central.

Further details of the work of the HSECR Committee are set out

in the Sustainability report on pages 78-150. Further information

about the role split can be found on page 211.

It was a privilege to be able to hold our 2023 Annual General

Meeting (AGM) in person again in London in May. I was pleased

and grateful that all of the resolutions proposed at the meeting

were strongly supported by our shareholders, including some

minor changes to our Directors’ Remuneration Policy to allow

the Board to reasonably increase Non-executive Directors’ fees

as necessary or advisable without recourse to shareholders. We

do not anticipate making any further changes to the Directors’

Remuneration Policy until the next scheduled renewal at the

2026 AGM.

It was also satisfying that shareholders supported the re-

appointment of Charlie Jacobs and Bárbara Garza Lagüera as

Independent Non-executive Directors at the 2023 AGM, despite

the fact that they have now been on the Board for more than

nine years. These are two high-calibre Directors, and I am grateful

that we have had the benefit of Charlie and Bárbara’s wisdom

and support for another year. During the year the Nominations

Committee was fully focused on the task of identifying suitable

nominees as Independent Non-executive Directors and proposing

them by the 2024 AGM. The Committee has recommended to

the Board that Ms Luz Adriana Ramírez and Ms Rosa Vázquez

be appointed at the forthcoming AGM as Independent Non-

executive Directors in place of Bárbara and Charlie. Ms Ramírez

is a dynamic senior executive who will bring a successful career

across multiple industries. She is a strong leader, motivating

teams to deliver on strategy and objectives. Ms Vázquez is a strong

people leader with a track record of developing talent, motivating

teams and driving engagement, and will bring the experience

and technical knowledge to add value to the Board, particularly

an orientation to best practices and governance. Further

information about this process can be found in the Nomination

Committee report on pages 209-211. I am also pleased to confirm

that Dame Judith Macgregor will be replacing Charlie Jacobs

as the Senior Independent Director with effect from the date

of the AGM.

Being the third year since we last undertook an externally-

facilitated Board effectiveness review, we invited Lintstock to

manage our annual Board and committees review using both

interviews and questionnaires, which they did in September and

October. Their findings and recommendations were discussed

by the Board at its meeting in October 2023. We were pleased to

note that the key outcome of the review was that the Board and

its committees continue to perform very well both in absolute and

relative terms, compared to a wide sample of companies. There

were some helpful suggestions made by Lintstock as a result of

the review which we have considered and will act upon over the

coming months. Further details about this exercise are set out on

pages 206-208.

As ever, I would like to conclude this letter by thanking my Board

colleagues for their continuing support both to me and to the

Executive Team, as well as for their valuable contributions to

the work of the Board and its committees during the year. We

continue to face challenges in changing times, but I remain firm

in my belief that the Board is well-placed to provide the right

leadership and guidance to enable the whole Fresnillo plc team

to respond to those challenges effectively during 2024 and the

coming years.

I also wish to express my sincere thanks to our shareholders for

their continued support as well as to all Fresnillo plc’s personnel

for their daily, continued efforts.

Yours faithfully,

Mr Alejandro Baillères

Chairman of the Board

4 March 2024

190 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Geography

Fresnillo primarily

operates within

Mexico

Ownership

Fresnillo is part

of the BAL Group

The Board

The Board is fully

Non-executive

Investors

Fresnillo plc is listed

on the London

Stock Exchange

Key Board

activity

Setting the

direction of

strategy

Monitoring

purpose, culture

and values

Overseeing

stakeholder

relationships

Risk

governance

Approving

business plans

and budgets

Monitoring

performance

Influences on role

The Board’s leadership role

While Fresnillo’s approach to governance reflects many of the usual characteristics of a FTSE 100

company, it is also influenced by four key factors:

• Geography: It predominantly operates within Mexico.

• Ownership: It benefits from the common umbrella and shared resources with other

companies within the BAL Group of companies.

• Board: Its fully Non-executive Board of Directors is supported by the Executive Team.

• Investors: Its listing on the Main Market of the London Stock Exchange.

The leadership role of the Fresnillo plc Board

As a result of these contextual factors, the leadership provided to

Fresnillo plc by the Board is essentially strategic and supervisory

in nature.

The leadership and management of the Company’s day-to-day

operations is the responsibility of the Executive Committee

(comprising the Chief Executive Officer, Chief Financial Officer,

Vice President of Exploration, the Chief Operating Officer Central

and the Chief Operating Officer North). Further information about

changes to the Executive Committee can be found on pages 199-

211. The Non-Independent Non-executive members of the Board

(Peñoles-appointed Directors) maintain regular contact with the

Executive Committee to challenge and/or support

as appropriate.

This structure creates two levels of oversight for the Senior

Management Team, initially from the Non-Independent Non-

executive Directors, and then from the Board as a whole, including

the Independent Non-executive Directors. Reports summarising

the discussions which take place between the non-Independent

Non-executive Directors and the senior Management Team are

regularly provided to the Independent Non-executive Directors

to assist them in understanding the dialogue which takes place

before formal Board proposals are submitted for their review.

The Board sets the corporate values underpinning the culture

by which the Group will continue to operate. The Board also

supervises the management of the Group’s activities, including

the implementation of both the Group’s long-term plans and

commercial strategy. It also provides the governance framework

within which the Executive Committee operates. The Board has

a formal schedule of matters reserved for its approval which

includes major expenditure, investments, key policies and

systems of internal control and risk management. Certain specific

responsibilities are delegated to the Board committees, being the

Audit, Nominations, Health, Safety, Environment and Community

Relations (HSECR) and Remuneration Committees, each chaired

by a Board member, and each of which operate within clearly

defined terms of reference and report regularly to the Board.

FRESNILLO’S APPROACH TO GOVERNANCE

191

Additional

Information

Financial

StatementsGovernance

Strategic

Report

The Board’s established programme of formal meetings remained unchanged during 2023 but all meetings were conducted via

video conference.

During the year the Board focused on the following matters:

Health, safety and

wellbeing

• Safety performance and ‘I Care, We Care’ programme updates.

• Safety plan in response to the fatalities that occurred during the year and in early 2024.

• Community relations initiatives updates.

Strategy and

planning

• Long-term strategic plan at a separate working meeting held in July 2023.

• Review and approval of revised Business plan and 2023 Budget.

• Approval of 2024 Business plan and Budget.

• Company’s approach to the reform of the Mining Law.

Operational

matters

• Juanicipio ramp-up.

• Pyrites plant (Phase II) ramp-up at Fresnillo mine.

• Rodeo and Orisyvo updates.

• Split of the COO role into two roles (following recommendation from the Nominations

Committee).

Stakeholders,

including

workforce

• Diversity, equity and inclusion training.

• Diversity programme updates.

• Prevention of Harassment programme updates.

• Culture and Ethics programme updates.

• Consideration of approach to Section 172.

• Workforce engagement events.

Sustainability and

environmental

matters

• Tailings dam policy and reviews.

• Energy efficiency plans.

• Developments in climate change prevention.

• Alignment of the Group’s strategy with TCFD recommendations.

• Water consumption initiative updates.

Finance and risk

• Review of risk matrix.

• Confirmation of principal risks and uncertainties.

• Consideration of emerging risks assessment.

• Review of risk appetite.

• Fraud risk assessment updates.

• External anti-bribery and corruption plan review updates.

Governance

• 2023 Board and committee external effectiveness reviews.

• Approval of succession plans (Non-executive Directors and Executive Committee (following

recommendation from the Nominations Committee)).

• Review of the current membership and composition of the Board and committees, including

recommendations concerning new Board appointments.

• Regulatory changes updates.

The Board’s Section 172 Statement is shown on page 37.

BOARD ACTIVITIES IN 2023

192 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Board and Committee meetings

The table below sets out attendance at the scheduled meetings in 2023.

Directors Board*

Audit

Committee

Remuneration

Committee

Nominations

Committee

HSECR

Committee

Chairman

Alejandro Baillères 4/4 4/4 3/3

Senior Independent Director

Charles Jacobs 4/4 3/3

Non-executive Directors

Juan Bordes 4/4

Arturo Fernández 4/4 4/4

Fernando Ruiz 4/4 4/4

Bárbara Garza Lagüera 4/4 3/3

Georgina Kessel 4/4 5/5 4/4

Judith Macgregor 4/4 4/4

Alberto Tiburcio 4/4 5/5 4/4

Guadalupe de la Vega 4/4 4/4

Hector Rangel 4/4 5/5

Eduardo Cepeda 4/4

* Following on from the successful inaugural session in 2022, in July 2023 a working meeting was held to review specific matters relating to the Company’s strategy and risk

management. All Directors attended this meeting. The working meeting was in addition to the four scheduled meetings in 2023.

2022: 9 Latin America, 3 Europe

2023: 9 Latin America, 3 Europe

2022: 7 Independent, 4 Non-Independent

2023: 7 Independent, 4 Non-Independent

* During 2023 the Company maintained the representation of women on the Board at 33%.

Board composition as at 31 December 2023

2022: 8 Male, 4 Female

2023: 8 Male, 4 Female*

Gender split

Ethnic origin

split

Independence

(excluding the

Chairman)

ABOUT THE BOARD AND COMMITTEES

193

Additional

Information

Financial

StatementsGovernance

Strategic

Report

Board committee membership

Audit Committee

The members of the Audit Committee and their relevant financial and auditing experience is summarised as follows:

Committee member Financial and auditing experience

Alberto Tiburcio (appointed to the Committee

on 4 May 2016 and appointed Chairman of the

Committee on 30 May 2018)

Previously Chairman and CEO of EY (Mexico). Experience in national and

international accounting and audit practice and corporate governance.

Georgina Kessel (appointed to the Committee

on 1 March 2021)

Public finance experience from her career in government. Has served on the

Audit and Risk Committees of major companies in Mexico and Spain.

Hector Rangel (appointed to the Committee

on 24 June 2021)

Extensive corporate and investment banking expertise.

The members of the Audit Committee are Independent Non-executive Directors thus complying with the requirements of the UK

Corporate Governance Code (the ‘Code’).

Further information about the work of the Audit Committee during 2023 can be found

in the Audit Committee report onpages 212-224.

Nominations Committee

The members of the Nominations Committee during 2023 were Alejandro Baillères, Bárbara Garza Lagüera and Charles Jacobs.

Bárbara Garza Lagüera was appointed to the Committee on 14 May 2014; Alejandro Baillères and Charles Jacobs were appointed to

the Committee on 29 April 2021. During the year, Bárbara Garza Lagüera and Charles Jacobs were both Independent Non-executive

Directors and therefore the majority of the members of the Nominations Committee were independent in compliance with the

requirements of the Code. Both Mr Jacobs and Ms Garza Lagüera will cease to be Independent Non-executive Directors after the

2024 AGM. The Board, at its meeting held on 28 February 2024, approved a recommendation from the Nominations Committee

that Ms Georgina Kessel and Ms Guadalupe de la Vega be appointed as members of the Nominations Committee in place of

Ms Garza Lagüera and Mr Jacobs, to be effective from the 2024 AGM.

Further information about the work of the Nominations Committee during 2023 can be found

in the Nominations Committee report onpages 206-211.

Remuneration Committee

The membership of the Committee is made up of Non-executive Directors who are able to bring the following perspectives to the

working of the Remuneration Committee:

• An understanding of shareholder expectations.

• An understanding of the general approaches to remuneration within the Mexican market.

The Code states that the Remuneration Committee should be made up of Independent Non-executive Directors. The members

of the Remuneration Committee are Alberto Tiburcio, Alejandro Baillères and Guadalupe de la Vega. Guadalupe de la Vega was

appointed as a member of the Committee on 1 March 2021 and Alberto Tiburcio and Alejandro Baillères were appointed as

members of the Committee on 29 April 2021. Alejandro Baillères was non-independent at the time of his appointment to the

Board (and therefore the membership makeup of the Remuneration Committee during the year does not comply with Provision

32 of the Code). At the time of the appointment of Alejandro Baillères to the Remuneration Committee in April 2021, the Board

determined that his experience and knowledge of both the Group and the Mexican market and his considerable contribution to

the Remuneration Committee’s deliberations, justifies his membership of the Committee.

Further information about the work of the Remuneration Committee during 2023 can be found

in the Remuneration Committee report on pages 225-243.

HSECR Committee

The members of the HSECR Committee are Arturo Fernandez, Judith Macgregor, Georgina Kessel and Fernando Ruiz.

A full report of the work of the HSECR Committee during 2023, can be found in the HSECR

Committee report on pages 76-77.

Terms of reference

The terms of reference of all of the Board Committees were reviewed during the year. The terms of reference of the Nominations

and Remuneration Committees were last updated in early 2020 (to take account of the requirements of the 2018 Code). The terms

of reference of the HSECR Committee were last updated in October 2020. The terms of reference of the Audit Committee were

updated in early 2023 (to consider the Company’s obligations under TCFD, and on greenhouse gas reporting and other related

topics). No further changes were made to any of the Committee terms of reference during the previous 12 months.

Copies of all of the Committee terms of reference are available on the Company’s website

(https://www.fresnilloplc.com/about-us/corporate-governance/terms-of-reference/).

194 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

THE BOARD OF DIRECTORS

Alejandro Baillères

Chairman

Juan Bordes

Non-executive Director

Arturo Fernández

Non-executive Director

Fernando Ruiz

Non-executive Director

Eduardo Cepeda

Non-executive Director

Date of appointment 16 April 2012 as Director and 28 April 2021

as Chairman

10 January 2008 15 April 2008 15 April 2008 24 June 2021

Committee membership Nominations Committee (Chairman)

Remuneration Committee

None HSECR Committee (Chairman) HSECR Committee None

Current external listed

company directorships

All four of the BAL Listed Entities (as

defined below), and Fomento Económico

Mexicano S.A.B. de C.V.

All four of the BAL Listed Entities.

All four of the BAL Listed Entities, Grupo

Bimbo S.A.B. de C.V. and Fomento

Económico Mexicano S.A.B. de C.V.

(Alternate Director).

Kimberly Clark de México S.A.B. de C.V.

(Alternate Director), Grupo Cementos de

Chihuahua S.A.B. de C.V., Grupo Mexico

S.A.B. de C.V. and two BAL Listed Entities

(Grupo Nacional Provincial S.A.B., and

Grupo Palacio de Hierro S.A.B. de C.V.).

All four of the BAL Listed Entities, Bolsa

Mexicana de Valores, S.A.B. de C.V. and

RLH Properties, S.A.B. de C.V.

Other key current

appointments

Mr Baillères is President of Grupo BAL

and a member of the board of trustees

of Instituto Tecnológico Autónomo de

México. He is Chairman of the board

of directors of Centro Cultural Manuel

Gómez Morin, A.C.

Mr Bordes is a member of the board

of trustees of Instituto Tecnológico

Autónomo de México. Mr Bordes is a

director of Profuturo Pensiones, S.A. de

C.V.; Profuturo Afore, S.A. de C.V., Valores

Mexicanos Casa de Bolsa, S.A. de C.V. and

EnerAB, S. de R.L. de C.V.

Mr Fernández is rector and a member

of the board of trustees of Instituto

Tecnológico Autónomo de México

and a member of the board of Grupo

Financiero BBVA México S.A. de C.V.

Mr Ruiz is a Non-executive Director of

Rassini S.A.P.I de C.V. ArcelorMittal Mexico

S.A. de C.V. and Cuatro B Materiales de

Construcción, S.A.P.I. de C.V.

Mr Cepeda is a director of Profuturo

Pensiones, S.A. de C.V.; Profuturo Afore,

S.A. de C.V., Valores Mexicanos Casa de

Bolsa, S.A. de C.V. and EnerAB, S. de R.L.

de C.V.

Key strengths and experience • Insurance and related financial services

in Mexico.

• Broad board-level commercial

experience in Mexico.

As President of Grupo BAL and former

Chief Executive Officer of Grupo Nacional

Provincial (a leading insurance company

in Mexico), Mr Baillères brings knowledge

and experience of Mexican and

international business to his role.

• Senior executive (CEO-level)

responsibilities over many years.

• Board membership of companies

spanning a broad range of sectors and

industries.

During his career, Mr Bordes has held

both senior Executive Management

roles and board responsibilities with

companies spanning a number

of different sectors, particularly

withinMexico.

• International economics and public

policy.

• Directorships of several Mexican

companies.

Mr Fernández’ career brings together a

solid academic economics background,

many years’ experience within the

Mexican public policy arena and broad

commercial experience (through board

directorships of leading businesses in a

number of sectors in Mexico).

• Mexican tax and accounting experience.

• International board and audit

committee experience.

Mr Ruiz was, until 2006, managing

partner of Chevez, Ruiz, Zamarripa y

Cia., S.C., tax advisers and consultants

in Mexico and now serves on the board

and audit committees of several Mexican

and international companies. He has

extensive knowledge of Mexican tax and

accounting issues.

• Finance, international markets and

banking in the public and private

sectors.

Mr Cepeda was President and Senior

Country Officer for Mexico at JP Morgan

from 1993 to 2019 and Chief Executive

Officer of JP Morgan Wealth Management

Latin America, also based in Mexico

City from 2009 to 2012. Mr Cepeda has

served as Vice President of the Mexican

Bank Association and has also been a

board member of the Woodrow Wilson

International Center for Scholars and a

counsellor in several organisations related

to culture, education and health.

Note: Some Directors hold directorships of some or all of the following listed companies which are all part of the consortium known as Grupo BAL

(along with Fresnillo plc, see also page 231): Industrias Peñoles S.A.B. de C.V., Grupo Palacio de Hierro S.A.B. de C.V., Grupo Nacional Provincial S.A.B.

and Grupo Profuturo S.A.B. de C.V. In this section, these companies are jointly or individually referred to as the BAL Listed Entities.

NON-INDEPENDENT

NON-EXECUTIVE

DIRECTORS

195

Additional

Information

Financial

StatementsGovernance

Strategic

Report

Alejandro Baillères

Chairman

Juan Bordes

Non-executive Director

Arturo Fernández

Non-executive Director

Fernando Ruiz

Non-executive Director

Eduardo Cepeda

Non-executive Director

Date of appointment 16 April 2012 as Director and 28 April 2021

as Chairman

10 January 2008 15 April 2008 15 April 2008 24 June 2021

Committee membership Nominations Committee (Chairman)

Remuneration Committee

None HSECR Committee (Chairman) HSECR Committee None

Current external listed

company directorships

All four of the BAL Listed Entities (as

defined below), and Fomento Económico

Mexicano S.A.B. de C.V.

All four of the BAL Listed Entities.

All four of the BAL Listed Entities, Grupo

Bimbo S.A.B. de C.V. and Fomento

Económico Mexicano S.A.B. de C.V.

(Alternate Director).

Kimberly Clark de México S.A.B. de C.V.

(Alternate Director), Grupo Cementos de

Chihuahua S.A.B. de C.V., Grupo Mexico

S.A.B. de C.V. and two BAL Listed Entities

(Grupo Nacional Provincial S.A.B., and

Grupo Palacio de Hierro S.A.B. de C.V.).

All four of the BAL Listed Entities, Bolsa

Mexicana de Valores, S.A.B. de C.V. and

RLH Properties, S.A.B. de C.V.

Other key current

appointments

Mr Baillères is President of Grupo BAL

and a member of the board of trustees

of Instituto Tecnológico Autónomo de

México. He is Chairman of the board

of directors of Centro Cultural Manuel

Gómez Morin, A.C.

Mr Bordes is a member of the board

of trustees of Instituto Tecnológico

Autónomo de México. Mr Bordes is a

director of Profuturo Pensiones, S.A. de

C.V.; Profuturo Afore, S.A. de C.V., Valores

Mexicanos Casa de Bolsa, S.A. de C.V. and

EnerAB, S. de R.L. de C.V.

Mr Fernández is rector and a member

of the board of trustees of Instituto

Tecnológico Autónomo de México

and a member of the board of Grupo

Financiero BBVA México S.A. de C.V.

Mr Ruiz is a Non-executive Director of

Rassini S.A.P.I de C.V. ArcelorMittal Mexico

S.A. de C.V. and Cuatro B Materiales de

Construcción, S.A.P.I. de C.V.

Mr Cepeda is a director of Profuturo

Pensiones, S.A. de C.V.; Profuturo Afore,

S.A. de C.V., Valores Mexicanos Casa de

Bolsa, S.A. de C.V. and EnerAB, S. de R.L.

de C.V.

Key strengths and experience • Insurance and related financial services

in Mexico.

• Broad board-level commercial

experience in Mexico.

As President of Grupo BAL and former

Chief Executive Officer of Grupo Nacional

Provincial (a leading insurance company

in Mexico), Mr Baillères brings knowledge

and experience of Mexican and

international business to his role.

• Senior executive (CEO-level)

responsibilities over many years.

• Board membership of companies

spanning a broad range of sectors and

industries.

During his career, Mr Bordes has held

both senior Executive Management

roles and board responsibilities with

companies spanning a number

of different sectors, particularly

withinMexico.

• International economics and public

policy.

• Directorships of several Mexican

companies.

Mr Fernández’ career brings together a

solid academic economics background,

many years’ experience within the

Mexican public policy arena and broad

commercial experience (through board

directorships of leading businesses in a

number of sectors in Mexico).

• Mexican tax and accounting experience.

• International board and audit

committee experience.

Mr Ruiz was, until 2006, managing

partner of Chevez, Ruiz, Zamarripa y

Cia., S.C., tax advisers and consultants

in Mexico and now serves on the board

and audit committees of several Mexican

and international companies. He has

extensive knowledge of Mexican tax and

accounting issues.

• Finance, international markets and

banking in the public and private

sectors.

Mr Cepeda was President and Senior

Country Officer for Mexico at JP Morgan

from 1993 to 2019 and Chief Executive

Officer of JP Morgan Wealth Management

Latin America, also based in Mexico

City from 2009 to 2012. Mr Cepeda has

served as Vice President of the Mexican

Bank Association and has also been a

board member of the Woodrow Wilson

International Center for Scholars and a

counsellor in several organisations related

to culture, education and health.

Note: Some Directors hold directorships of some or all of the following listed companies which are all part of the consortium known as Grupo BAL

(along with Fresnillo plc, see also page 231): Industrias Peñoles S.A.B. de C.V., Grupo Palacio de Hierro S.A.B. de C.V., Grupo Nacional Provincial S.A.B.

and Grupo Profuturo S.A.B. de C.V. In this section, these companies are jointly or individually referred to as the BAL Listed Entities.

196 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

THE BOARD OF DIRECTORS CONTINUED

INDEPENDENT

NON-EXECUTIVE

DIRECTORS

Charles Jacobs

Senior Independent

Non-executive Director

Bárbara Garza Lagüera

Independent

Non-executive Director

Dame Judith Macgregor

DCMG, LVO

Independent

Non-executive Director

Alberto Tiburcio

Independent

Non-executive Director

Georgina Kessel

Independent

Non-executive Director

Guadalupe de la Vega

Independent

Non-executive Director

Héctor Rangel

Independent

Non-executive Director

Date of appointment

16 May 2014 16 May 2014 23 May 2017 4 May 2016 30 May 2018 29 May 2020 24 June 2021

Committee membership

Nominations Committee Nominations Committee HSECR Committee Audit Committee (Chairman)

Remuneration Committee

(Chairman)

Audit Committee

HSECR Committee

Remuneration Committee Audit Committee

Current external listed

company directorships

None. Fomento Económico Mexicano

S.A.B. de C.V., Promecap

Acquisition Company S.A.B. de C.V.,

Grupo Aeroportuario del Sureste

S.A.B. de C.V. and Grupo Financiero

Santander Mexico S.A. de C.V.

None.

Mr Tiburcio is an Independent

Non-executive Director of Fomento

Económico Mexicano, S.A.B. de

C.V., Coca-Cola FEMSA, S.A.B. de

C.V. and two BAL Listed Entities

(Grupo Nacional Provincial S.A.B.

and Grupo Palacio de Hierro S.A.B.

de C.V.).

None. Ms de la Vega is a director of Sitios

Latinoamérica, S.A.B. de C.V.

Mr Rangel is an Independent Non-

executive Director of a BAL Listed

Entity (Grupo Nacional Provincial,

S.A.B.).

Other key current

appointments

Mr Jacobs is co-head of UK

Investment Banking at JP Morgan.

Ms Garza Lagüera is a Non-

executive Director of Soluciones

Financieras SOLFI and Vice

President of ITESM Mexico City.

Dame Judith is Vice Chair of

the University of Southampton’s

Governing Council, Chair of the

International Strategic Advisory

Group to UK Research and

Innovation and Member of the

UK Arts and Humanities Research

Council. She continues being a

Board member, and was previous

Chair, of the British Tourist Authority

and Member of the Board of

Trustees of the University of Cape

Town Foundation and the Caradon

Lecture Trusts.

Mr Tiburcio is an Independent

Non-executive Director of Grupo

Financiero Scotiabank Inverlat, S.A.

de C.V. (a Mexican subsidiary of The

Bank of Nova Scotia), Profuturo

Afore S.A. de C.V., Transparencia

Mexicana, and a member of the

board of trustees of Instituto

Tecnológico Autónomo de México

and a non-independent Board

Member of Tankroom S.A.P.I. de C.V.

Ms Kessel is a Non-executive

Director of Grupo Financiero

Scotiabank Inverlat, S.A. de C.V.

(a subsidiary of The Bank of Nova

Scotia) serving as Chair of the

Board and member of the Risk,

Audit, Human Resources and

Corporate governance Committees.

Ms Kessel is also a member of

the board of trustees of Instituto

Tecnológico Autónomo de México.

Ms de la Vega is a Director

of a number of non-listed

companies including Almacenes

Distribuidores de la Frontera, S.A.

de C.V., Maximus Inmobiliaria,

S. de R.L. de C.V., Citibanamex,

Coparmex, Ciudad Juárez and

Altec Purificación, S.A. de C.V. She

is also a Director of ITESM (Tec de

Monterrey) and EISAC.

Mr Rangel is the President of

BCP Securities Mexico, a joint

venture with BCP Securities LLC,

and presently serves on the board

of Canadian Utilities Limited

(an ATCO company), Polyforum

Cultural Siqueiros, as well as the

Board of Trustees of the Museum

Franz Mayer. He is an Independent

Non-executive Director of Profuturo

Afore, S.A. de C.V.

Key strengths and

experience

• Board and governance

experience.

• Rare combination of legal and

investment banking experience

with a focus on capital markets,

mining and metals.

Mr Jacobs’ background as the

former Chairman of global law firm

Linklaters and head of their mining

sector, along with his previous

Non-executive Directorships

at Investec and the Shanghai

International Financial Advisory

Council, means he brings his

30 years of global experience in

governance, mining, corporate

finance, and legal and regulatory

matters to the boardroom. As

Senior Independent Director,

Charles Jacobs is available to

shareholders if they have concerns

that have not been resolved

through the normal channels of

Chairman, Chief Executive Officer,

Chief Financial Officer or Head of

Investor Relations.

• Mexican commercial and

industrial experience.

• International Board experience.

As an experienced director,

particularly through her career at

Coca-Cola FEMSA and Fomento

Económico Mexicano, the largest

franchise bottler of Coca-Cola

products, Ms Garza Lagüera brings

a broad experience of Mexican

commercial and international

business.

• International diplomatic

experience.

• Government relations in

resource-rich countries.

• International research

collaboration.

• Wide-ranging managerial and

equity, diversity and inclusion

(EDI) experience.

Dame Judith’s distinguished

career as a British diplomat brings

a range of international experience

to her role. She has worked closely

with and promoted the interests

and profiles of UK companies

across a wide range of sectors,

including the mining sector, in

a number of countries including

Mexico.

• International and Mexican audit

and accountancy and Mexican

tax experience.

• Mexican and international board

and audit committee experience.

Mr Tiburcio was the Chairman and

CEO of Mancera S.C. (the Mexican

firm of Ernst & Young LLP) from

January 2001 until his retirement

in June 2013 having been a partner

for more than 30 years. He has

served as auditor and advisor

to many prestigious Mexican

companies and now sits on the

boards and audit committees of

important Mexican companies and

institutions, thus bringing Mexican

tax and corporate governance

knowledge as well as Mexican and

international audit and accounting

experience to the Board.

• Ministerial experience within

Mexican government.

• Knowledge of Mexican energy

sector.

Ms Kessel has broadened the

Board’s energy and climate

change expertise having served

as Minister of Energy from 2006

to 2011 and chaired the board of

trustees of the Federal Electricity

Commission. She also chaired the

Board of Directors of Petróleos

Mexicanos. She has previously held

senior board positions at Iberdrola,

S.A., Nacional Financiera and the

National Bank of Foreign Trade.

Ms Kessel also served as CEO of the

National Bank of Works and Public

Services. She was previously adviser

to the Chairman of the Federal

Competition Commission and

Head of the Investment Unit at

the Ministry of Finance and Public

Credit of Mexico.

• Broad business leadership

experience within Mexico and

internationally.

• Community and economic

development programme

leadership within Mexico.

Ms De la Vega has held senior

executive roles in a variety of

Mexican businesses spanning a

range of sectors and she has also

been an investor in a number of

those companies. She also serves

on the boards of educational

and cultural institutions and has

a strong commitment to small

enterprises working in health,

economic and community

development.

• Finance, international markets

and banking.

Mr Rangel was the Chief Executive

Officer of Nacional Financiera

S.N.C. and Banco Nacional de

Comercio Exterior and a member

of Mexico’s cabinet under President

Felipe Calderon. Mr Rangel held

various executive positions with

the Grupo Financiero Bancomer

from 1991 until 2008, including

Chairman of the Board. Mr Rangel

has also been President of

the Mexico Bank Association

and President of the Mexican

Business Council. Mr Rangel

served on the Company’s Board

as an Independent Non-executive

Director from April 2008 to

January 2009.

197

Additional

Information

Financial

StatementsGovernance

Strategic

Report

Charles Jacobs

Senior Independent

Non-executive Director

Bárbara Garza Lagüera

Independent

Non-executive Director

Dame Judith Macgregor

DCMG, LVO

Independent

Non-executive Director

Alberto Tiburcio

Independent

Non-executive Director

Georgina Kessel

Independent

Non-executive Director

Guadalupe de la Vega

Independent

Non-executive Director

Héctor Rangel

Independent

Non-executive Director

Date of appointment

16 May 2014 16 May 2014 23 May 2017 4 May 2016 30 May 2018 29 May 2020 24 June 2021

Committee membership

Nominations Committee Nominations Committee HSECR Committee Audit Committee (Chairman)

Remuneration Committee

(Chairman)

Audit Committee

HSECR Committee

Remuneration Committee Audit Committee

Current external listed

company directorships

None. Fomento Económico Mexicano

S.A.B. de C.V., Promecap

Acquisition Company S.A.B. de C.V.,

Grupo Aeroportuario del Sureste

S.A.B. de C.V. and Grupo Financiero

Santander Mexico S.A. de C.V.

None.

Mr Tiburcio is an Independent

Non-executive Director of Fomento

Económico Mexicano, S.A.B. de

C.V., Coca-Cola FEMSA, S.A.B. de

C.V. and two BAL Listed Entities

(Grupo Nacional Provincial S.A.B.

and Grupo Palacio de Hierro S.A.B.

de C.V.).

None. Ms de la Vega is a director of Sitios

Latinoamérica, S.A.B. de C.V.

Mr Rangel is an Independent Non-

executive Director of a BAL Listed

Entity (Grupo Nacional Provincial,

S.A.B.).

Other key current

appointments

Mr Jacobs is co-head of UK

Investment Banking at JP Morgan.

Ms Garza Lagüera is a Non-

executive Director of Soluciones

Financieras SOLFI and Vice

President of ITESM Mexico City.

Dame Judith is Vice Chair of

the University of Southampton’s

Governing Council, Chair of the

International Strategic Advisory

Group to UK Research and

Innovation and Member of the

UK Arts and Humanities Research

Council. She continues being a

Board member, and was previous

Chair, of the British Tourist Authority

and Member of the Board of

Trustees of the University of Cape

Town Foundation and the Caradon

Lecture Trusts.

Mr Tiburcio is an Independent

Non-executive Director of Grupo

Financiero Scotiabank Inverlat, S.A.

de C.V. (a Mexican subsidiary of The

Bank of Nova Scotia), Profuturo

Afore S.A. de C.V., Transparencia

Mexicana, and a member of the

board of trustees of Instituto

Tecnológico Autónomo de México

and a non-independent Board

Member of Tankroom S.A.P.I. de C.V.

Ms Kessel is a Non-executive

Director of Grupo Financiero

Scotiabank Inverlat, S.A. de C.V.

(a subsidiary of The Bank of Nova

Scotia) serving as Chair of the

Board and member of the Risk,

Audit, Human Resources and

Corporate governance Committees.

Ms Kessel is also a member of

the board of trustees of Instituto

Tecnológico Autónomo de México.

Ms de la Vega is a Director

of a number of non-listed

companies including Almacenes

Distribuidores de la Frontera, S.A.

de C.V., Maximus Inmobiliaria,

S. de R.L. de C.V., Citibanamex,

Coparmex, Ciudad Juárez and

Altec Purificación, S.A. de C.V. She

is also a Director of ITESM (Tec de

Monterrey) and EISAC.

Mr Rangel is the President of

BCP Securities Mexico, a joint

venture with BCP Securities LLC,

and presently serves on the board

of Canadian Utilities Limited

(an ATCO company), Polyforum

Cultural Siqueiros, as well as the

Board of Trustees of the Museum

Franz Mayer. He is an Independent

Non-executive Director of Profuturo

Afore, S.A. de C.V.

Key strengths and

experience

• Board and governance

experience.

• Rare combination of legal and

investment banking experience

with a focus on capital markets,

mining and metals.

Mr Jacobs’ background as the

former Chairman of global law firm

Linklaters and head of their mining

sector, along with his previous

Non-executive Directorships

at Investec and the Shanghai

International Financial Advisory

Council, means he brings his

30 years of global experience in

governance, mining, corporate

finance, and legal and regulatory

matters to the boardroom. As

Senior Independent Director,

Charles Jacobs is available to

shareholders if they have concerns

that have not been resolved

through the normal channels of

Chairman, Chief Executive Officer,

Chief Financial Officer or Head of

Investor Relations.

• Mexican commercial and

industrial experience.

• International Board experience.

As an experienced director,

particularly through her career at

Coca-Cola FEMSA and Fomento

Económico Mexicano, the largest

franchise bottler of Coca-Cola

products, Ms Garza Lagüera brings

a broad experience of Mexican

commercial and international

business.

• International diplomatic

experience.

• Government relations in

resource-rich countries.

• International research

collaboration.

• Wide-ranging managerial and

equity, diversity and inclusion

(EDI) experience.

Dame Judith’s distinguished

career as a British diplomat brings

a range of international experience

to her role. She has worked closely

with and promoted the interests

and profiles of UK companies

across a wide range of sectors,

including the mining sector, in

a number of countries including

Mexico.

• International and Mexican audit

and accountancy and Mexican

tax experience.

• Mexican and international board

and audit committee experience.

Mr Tiburcio was the Chairman and

CEO of Mancera S.C. (the Mexican

firm of Ernst & Young LLP) from

January 2001 until his retirement

in June 2013 having been a partner

for more than 30 years. He has

served as auditor and advisor

to many prestigious Mexican

companies and now sits on the

boards and audit committees of

important Mexican companies and

institutions, thus bringing Mexican

tax and corporate governance

knowledge as well as Mexican and

international audit and accounting

experience to the Board.

• Ministerial experience within

Mexican government.

• Knowledge of Mexican energy

sector.

Ms Kessel has broadened the

Board’s energy and climate

change expertise having served

as Minister of Energy from 2006

to 2011 and chaired the board of

trustees of the Federal Electricity

Commission. She also chaired the

Board of Directors of Petróleos

Mexicanos. She has previously held

senior board positions at Iberdrola,

S.A., Nacional Financiera and the

National Bank of Foreign Trade.

Ms Kessel also served as CEO of the

National Bank of Works and Public

Services. She was previously adviser

to the Chairman of the Federal

Competition Commission and

Head of the Investment Unit at

the Ministry of Finance and Public

Credit of Mexico.

• Broad business leadership

experience within Mexico and

internationally.

• Community and economic

development programme

leadership within Mexico.

Ms De la Vega has held senior

executive roles in a variety of

Mexican businesses spanning a

range of sectors and she has also

been an investor in a number of

those companies. She also serves

on the boards of educational

and cultural institutions and has

a strong commitment to small

enterprises working in health,

economic and community

development.

• Finance, international markets

and banking.

Mr Rangel was the Chief Executive

Officer of Nacional Financiera

S.N.C. and Banco Nacional de

Comercio Exterior and a member

of Mexico’s cabinet under President

Felipe Calderon. Mr Rangel held

various executive positions with

the Grupo Financiero Bancomer

from 1991 until 2008, including

Chairman of the Board. Mr Rangel

has also been President of

the Mexico Bank Association

and President of the Mexican

Business Council. Mr Rangel

served on the Company’s Board

as an Independent Non-executive

Director from April 2008 to

January 2009.

198 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

EXECUTIVE COMMITTEE

Octavio Alvídrez

Chief Executive

Officer

Mario Arreguín

Chief Financial

Officer

Guillermo Gastélum

Vice President of Exploration

Tomás Iturriaga

Chief Operating

Officer Central

Daniel Diez

Chief Operating

Officer North

Date of appointment

15 August 2012 15 April 2008 1 January 2021 19 November 2020 1 December 2023

Committee membership

Mr Alvídrez is invited to attend

Board, Audit Committee, HSECR

Committee and Remuneration

Committee meetings.

Mr Arreguín is invited to attend

Board and Audit Committee

meetings.

Mr Gastélum is invited to attend

Board meetings.

Mr Iturriaga is invited to attend

Board meetings and on occasions

the Audit Committee and HSECR

Committee.

Mr Diez is invited to attend Board

meetings and on occasions the

Audit Committee and HSECR

Committee.

Key strengths and

experience

• Mine management within

Mexico.

• UK investor relations.

Mr Alvídrez has extensive

experience within the mining

industry having previously held

the position of General Manager

of the Madero mine operated by

Peñoles, which is one of Mexico’s

largest mines. Mr Alvídrez joined

the Peñoles Group in August 1988,

since then he has held a number

of senior operational and financial

positions across Peñoles and

Fresnillo.

Mr Alvídrez is a former director

of the Lowell Institute for Mineral

Resources of the University of

Arizona. Mr Alvídrez continues

being a Board member, and was

previous President, of The Silver

Institute. He is a member of the

Mexican Mining Chamber and

a Vice-president of the Advisory

Board of the School of Mines of the

University of Guanajuato, Mexico.

• Accountancy and treasury.

• Investment banking.

Mr Arreguín was previously

employed by Peñoles where

he held the position of Chief

Financial Officer for 11 years and

Group Treasurer for six years

prior to this. Mr Arreguín has a

background in investment banking

and project management.

• Senior mining exploration

experience in Mexico.

• Geological engineering

background.

Mr Gastélum has extensive

experience in the Mexican mining

sector, most recently as Deputy

Director of Northern Exploration at

Fresnillo. Prior to this, Mr Gastélum

was Regional Manager of

Exploration at Peñoles. He started

his career with Peñoles 33 years

ago. He was appointed as Vice

President of Exploration of Peñoles

in 2007, having previously served

as Subdirector of Exploration for

northern Mexico and Chile and

Regional Exploration Manager.

• Senior operational experience in

Mexico and North America.

• Strong mining background.

Mr Iturriaga brings more than 20

years of professional experience

and a significant track record

in the mining sector. Since May

2018, Mr Iturriaga was Director

of Health, Safety, Environment

and Community Relations at

Peñoles. Prior to joining Peñoles,

Mr Iturriaga held several positions

at Goldcorp, such as General

Manager of Los Filos mine, Chief

Operating Officer Mexico and

Regional Vice-President and

General Manager Mexico. He also

held the position of Vice President

North American Operations at

Capstone Mining Corp in Canada

and Vice President of Operations

and Country Manager for Mexico

of Endeavour Silver Corp.

• Senior operational experience

in South America, Australia and

Pakistan.

• Strong mining background.

Mr Diez brings more than 24

years of sector experience and

a broad understanding of the

mining industry, acquired through

significant corporate, operational

and project development roles

in Chile, Australia, Pakistan and

Brazil. He joined from Gold Fields

where he led its Chile operations

overseeing the development of

the Salares Norte project, a high-

grade, gold-silver, open pit deposit

situated in the High Andes of

northern Chile. Previously he held

several senior leadership positions

at Yamana Gold. He has also

served as Mining Expert (LATAM)

at McKinsey & Company and

development roles at both Xstrata

and Antofagasta. He was a Board

member of Minera Alumbrera Ltd.

and has also been Chairman of

the Board of Directors of MARA a

(joint venture between Yamana,

Glencore and Newmont) and

Minera Alumbrera Limited.

199

Additional

Information

Financial

StatementsGovernance

Strategic

Report

The Company is committed to creating long-term

value by maximising the potential of its operations

and delivering profitable growth, whilst ensuring the

wellbeing of its stakeholders. To further strengthen the

oversight of its assets and focus on the advancement

of its pipeline, with effect from 1 December 2023, the

Company announced the creation of new executive

roles for its operations and projects: Chief Operating

Officer North and Chief Operating Officer Central.

Tomás Iturriaga, who has been leading the Company’s

operations over the last three years, will continue

in his role as Chief Operating Officer of the Central

Operations, comprised of the Fresnillo, Saucito

and Juanicipio mines, together with the advanced

exploration projects of Orisyvo and Guanajuato. To

oversee the Herradura, Ciénega and San Julián mines,

combined with the Tajitos, Rodeo and Capricornio

projects, the Company appointed Daniel Diez as Chief

Operating Officer of the Northern Region.

Octavio Alvídrez

Chief Executive

Officer

Mario Arreguín

Chief Financial

Officer

Guillermo Gastélum

Vice President of Exploration

Tomás Iturriaga

Chief Operating

Officer Central

Daniel Diez

Chief Operating

Officer North

Date of appointment

15 August 2012 15 April 2008 1 January 2021 19 November 2020 1 December 2023

Committee membership

Mr Alvídrez is invited to attend

Board, Audit Committee, HSECR

Committee and Remuneration

Committee meetings.

Mr Arreguín is invited to attend

Board and Audit Committee

meetings.

Mr Gastélum is invited to attend

Board meetings.

Mr Iturriaga is invited to attend

Board meetings and on occasions

the Audit Committee and HSECR

Committee.

Mr Diez is invited to attend Board

meetings and on occasions the

Audit Committee and HSECR

Committee.

Key strengths and

experience

• Mine management within

Mexico.

• UK investor relations.

Mr Alvídrez has extensive

experience within the mining

industry having previously held

the position of General Manager

of the Madero mine operated by

Peñoles, which is one of Mexico’s

largest mines. Mr Alvídrez joined

the Peñoles Group in August 1988,

since then he has held a number

of senior operational and financial

positions across Peñoles and

Fresnillo.

Mr Alvídrez is a former director

of the Lowell Institute for Mineral

Resources of the University of

Arizona. Mr Alvídrez continues

being a Board member, and was

previous President, of The Silver

Institute. He is a member of the

Mexican Mining Chamber and

a Vice-president of the Advisory

Board of the School of Mines of the

University of Guanajuato, Mexico.

• Accountancy and treasury.

• Investment banking.

Mr Arreguín was previously

employed by Peñoles where

he held the position of Chief

Financial Officer for 11 years and

Group Treasurer for six years

prior to this. Mr Arreguín has a

background in investment banking

and project management.

• Senior mining exploration

experience in Mexico.

• Geological engineering

background.

Mr Gastélum has extensive

experience in the Mexican mining

sector, most recently as Deputy

Director of Northern Exploration at

Fresnillo. Prior to this, Mr Gastélum

was Regional Manager of

Exploration at Peñoles. He started

his career with Peñoles 33 years

ago. He was appointed as Vice

President of Exploration of Peñoles

in 2007, having previously served

as Subdirector of Exploration for

northern Mexico and Chile and

Regional Exploration Manager.

• Senior operational experience in

Mexico and North America.

• Strong mining background.

Mr Iturriaga brings more than 20

years of professional experience

and a significant track record

in the mining sector. Since May

2018, Mr Iturriaga was Director

of Health, Safety, Environment

and Community Relations at

Peñoles. Prior to joining Peñoles,

Mr Iturriaga held several positions

at Goldcorp, such as General

Manager of Los Filos mine, Chief

Operating Officer Mexico and

Regional Vice-President and

General Manager Mexico. He also

held the position of Vice President

North American Operations at

Capstone Mining Corp in Canada

and Vice President of Operations

and Country Manager for Mexico

of Endeavour Silver Corp.

• Senior operational experience

in South America, Australia and

Pakistan.

• Strong mining background.

Mr Diez brings more than 24

years of sector experience and

a broad understanding of the

mining industry, acquired through

significant corporate, operational

and project development roles

in Chile, Australia, Pakistan and

Brazil. He joined from Gold Fields

where he led its Chile operations

overseeing the development of

the Salares Norte project, a high-

grade, gold-silver, open pit deposit

situated in the High Andes of

northern Chile. Previously he held

several senior leadership positions

at Yamana Gold. He has also

served as Mining Expert (LATAM)

at McKinsey & Company and

development roles at both Xstrata

and Antofagasta. He was a Board

member of Minera Alumbrera Ltd.

and has also been Chairman of

the Board of Directors of MARA a

(joint venture between Yamana,

Glencore and Newmont) and

Minera Alumbrera Limited.

Daniel is a fantastic addition

to our senior team. He brings

with him considerable

experience in the mining

sector, and a proven track

record of developing mining

assets. Daniel and Tomás

will work together to

further improve operational

performance, while overseeing

the development of our

extensive pipeline in their

respective regions.”

Octavio Alvídrez

Chief Executive Officer

200 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

UK CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT

As a Company with a premium listing on the London Stock Exchange, Fresnillo is required under the FCA Listing Rules to comply with

the Provisions of the Code (a copy of which can be found on the website of the Financial Reporting Council www.frc.org.uk) or otherwise

explain its reasons for non-compliance. The following statement is therefore made in respect of the year ended 31 December2023.

For the financial year ended 31 December 2023 other than as set out below, the Company has complied with the provisions of

theCode:

• Code Provision 9 provides that ‘the chair should be independent on appointment’. Mr Alejandro Baillères, who was appointed as

Chairman on 29 April 2021, was appointed to the Board by Peñoles pursuant to the Relationship Agreement (see page 203); thus,

at the time of his appointment, he was not independent. Having served as Deputy Chairman for more than three years and having

received guidance from Mr Alberto Baillères, the previous Chairman, for many years, the Board considers that Mr Alejandro Baillères

possesses significant knowledge and experience of the Company to carry out the role of the Chairman. The Board considers that the

continued oversight of the Company’s strategic and operational integrity through its membership of the Peñoles Group enhances

the quality of its corporate governance rather than detracts from it (as explained further on pages 201-203). As a consequence,

the Board values and endorses Mr Alejandro Baillères’ chairmanship of the Company. The size, composition and balance of skills

on the Board, including the independence and diversity of the Board and the existence of a Senior Independent Director and the

adequacy of the succession plans, were assessed as part of the Board effectiveness review during the year and were considered to

be highly satisfactory.

• Code Provision 32, which provides that the Board should establish a Remuneration Committee of at least three Independent

Non-executive Directors. The Chairman of the Company, Alejandro Baillères, who was not independent at the time of his

appointment, is a member of the Remuneration Committee. The Board believes that Mr Alejandro Baillères’ experience and

knowledge of both the Group and the Mexican market and his considerable contribution to the Remuneration Committee’s

deliberations, justifies his membership of the Remuneration Committee. Mr Alejandro Baillères is not involved in matters concerning

his own remuneration.

• Code Provision 36, which provides that remuneration schemes should promote long-term holdings by Executive Directors that

support alignment with long-term shareholder interests. The Company’s approach to executive remuneration is explained in

the Directors’ Remuneration report on pages 225-243. The Company does not use share-based forms of remuneration because

historically it has not been a common form of remuneration in Mexico. The annual bonus scheme sets targets which are aligned to

the long-term strategic objectives so that these priorities are embedded within the day-to-day activities of the Company’s business.

Board leadership

and purpose:

Division of

responsibilities:

Composition,

succession and

evaluation:

including the

Nominations

Committee report

Audit, risk and

internal control:

including the Audit

Committee report

Remuneration:

including the Directors’

Remuneration report

Pages 201-203. Pages 204-205. Pages 206-211. Pages 212-224. Pages 225-243.

Information about compliance with the Code’s Provisions may be found in the following sections of this report:

The following sections of this report also explain how the principles of the Code were applied and provide cross-references to other

sections of the report and/or the Company’s website (www.fresnilloplc.com) where more detailed descriptions are available.

The following documents are available on the Company’s website:

• Schedule of Matters reserved for the Board.

• Statement of Responsibilities of the Chairman, Chief Executive Officer and Senior Independent Director.

• Terms of Reference: Audit Committee, HSECR Committee, Nominations Committee and Remuneration Committee.

• Directors’ Remuneration Policy.

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REPORTING ON THE APPLICATION OF THE PRINCIPLE:

BOARD LEADERSHIP AND PURPOSE

Generation and preservation of Company value

Fresnillo’s Business Model and Strategy is set out on pages 20-27

of the Strategic report and describes the basis upon which the

Company generates and preserves value over the long term.

The Executive Committee members report on the

implementation of strategy at each Board meeting, with

particular reference to performance against the published

strategic targets.

Purpose

Our Purpose is to contribute to the wellbeing of people, through

the sustainable mining of silver and gold. The Purpose statement

was approved by the Board in October 2019. During 2023,

the Company has continued to contribute to the wellbeing of

people including employees, local communities, customers

and the end-users of our products by maintaining levels of

production and investing in local health care, employment and

education programmes.

BOARD LEADERSHIP AND PURPOSE

Principle A:

A successful company is

led by an effective and

entrepreneurial board,

whose role is to promote

the long-term sustainable

success of the company,

generating value for

shareholders and

contributing to

wider society.

The biographies of

the Board members,

detailed on pages 194-197,

outline the wide range of

experience available to

the Company. The Board

members continue to

ensure that the business

model and strategy,

described on pages

20-27 and agreed by

the Board, is delivered

for the benefit of the

Company’s stakeholders.

The section 172 Statement

on page 37 examines

how those different

categories of stakeholders

are considered.

Principle B:

The board should

establish the company’s

purpose, values and

strategy, and satisfy

itself that these and

its culture are aligned.

All directors must act

with integrity, lead by

example and promote

the desired culture.

The Board has considered

the Group’s business

model and strategy as

outlined on pages 20-27;

an explanation of the

code of conduct which

prescribes the Directors’

role is given on page 201.

Principle C:

The board should ensure

that the necessary

resources are in place

for the company to

meet its objectives and

measure performance

against them. The board

should also establish a

framework of prudent

and effective controls,

which enable risk to be

assessed and managed.

Application of principle C,

to identify the resources

needed to operate the

business successfully,

is delegated to the

Executive Management

whose experience is

described on pages 198-

199, although the Board

monitors this against key

performance indicators.

Page 222 details the

internal control structure

in place and pages 151-155

describe in detail the risk

management structure.

During the year the

Board held a working

meeting with Executive

Management to satisfy

itself over the robustness

of the Group risk

management processes.

Principle D:

In order for the company

to meet its responsibilities

to shareholders and

stakeholders, the board

should ensure effective

engagement with, and

encourage participation

from, these parties.

Engagement of

stakeholders in

accordance with Section

172 of the Companies Act

is detailed on page 37,

further details with regard

to engagement with the

community is outlined

on pages 33 and 139-141,

and with shareholders on

page 36.

Principle E:

The board should

ensure that workforce

policies and practices

are consistent with the

company’s values and

support its long-term

sustainable success.

The workforce should be

able to raise any matters

of concern.

The Board has appointed

a Non-executive Director

to be responsible for

employee engagement,

and the processes involved

in that role are detailed

on pages 40-41. The

procedure to ensure that

employees, and other

stakeholders, can raise

immediate concerns

via the Company’s

whistleblowing procedures

is explained on page 84.

The Board and culture

The Corporate Code of Conduct was last reviewed and approved

by the Board in October 2022. The Code of Conduct sets down its

cultural expectations for the activities of all Directors, executives,

employees and related third parties (including contractors,

suppliers and the community) in the conduct of the Company’s

business. It also helps to ensure a foundation of values and sets

standards for behaviour that encourage an environment of ethics

and responsibility for the benefit of the Company’s stakeholders.

During the year, the Board monitored workforce culture and

behaviour in a number of ways:

• Regular reviews of whistleblowing reports and actions taken by

management in response to issues raised via that medium (see

page 84 for a further summary of whistleblower hotline calls

during the year).

• Receiving an update on the Prevention of Harassment

programme, in particular the workshops that were held during

the year for employees and unionised personnel.

• By monitoring progress with the Diversity, Equity and Inclusion

programme and the development of an online training module

on company, with the support of the University of Arizona.

202 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Surveys/Focus

groups

Communication

initiatives

NED/Workforce

engagement sessions

ContractorsEmployees

Executive Committee

(Led by the CEO)

Board of Directors

(Led by the NED responsible for workforce engagement)

Workforce

Workforce engagement: communication and feedback

NED/Workforce

feedback sessions

• Updates on the ‘I Care, We Care’ safety strategy (including

elements designed to change behaviours and create a more

mature and resilient safety culture). The Board receives and

considers updates on health and safety performance at

every Board meeting, in particular information analysing

serious injuries and fatalities, Lost Time Injury Frequency Rate,

Total Recordable Injury Frequency Rate and new cases of

occupational disease. These metrics have been used to monitor

the health and safety culture.

• By monitoring updates on the outsourcing reform and progress

on the actions that the Company has implemented as a

consequence of this reform and assessing the likely impacts on

corporate culture which may result from these changes.

Further information on culture and workforce engagement

is set out on pages 82-95.

Whistleblower hotline

The whistleblower hotline can be used by anyone who wishes to

raise concerns, in confidence, about the Company’s operations.

The hotline is used by employees, contractors and, occasionally,

other stakeholders such as suppliers and local communities. The

use of the Company’s whistleblower arrangements is monitored

quarterly by the Audit Committee (see the Audit Committee

report on page 218). The Audit Committee reviews updates on

management responses to calls made to the whistleblower line

and reports to the Board twice a year on the operation of the

whistleblower hotline. The Board received these reports at its

meetings in April 2023 (in relation to 2H 2022) and July 2023 (in

relation to 1H 2023). In 2023, the Audit Committee and Board

continued to monitor the reporting of incidences of harassment

in line with the anti-harassment protocol.

Stakeholder engagement

The Executive Committee is responsible for the day-to-day

stewardship of all stakeholder relationships and its members

report to the Board on the key metrics and initiatives. The Board,

either directly or through its Committees, engages or oversees

engagement with the Company’s stakeholders through a number

of governance activities (which are described in more detail, along

with further information about the Company’s engagement with

key stakeholders, in the stakeholder section on pages 30-36).

During the year, senior management and the HSECR Committee,

on behalf of the Board, evaluated Covid-19 associated

engagement strategies. The Company will continue to be

cautious in order to safeguard the wellbeing of the workforce and

neighbouring communities. More information on engagement

with our communities can be found on pages 33 and 139-141.

Workforce engagement

Our workforce is the foundation that supports our business

model. The Board believes that the wellbeing of our people

and an ethical and inclusive culture are the drivers of higher

levels of employee engagement and are essential to attract

and retain talent.

The Board and its Committees receive information related

to the workforce through a range of channels (see workforce

engagement diagram), including direct engagement.

Mr Fernández has been designated as the Non-executive Director

to act as a representative of the workforce in the boardroom.

This enables the Board to understand the views of the workforce

regarding their experiences of working for the Company as well as

providing an additional mechanism to raise concerns.

During 2023, the Company undertook a workforce engagement

session at the Fresnillo mine that was led by Mr Fernández. The

session enabled Mr Fernández to listen to the views of employees

directly. This session involved representatives from all of the Group’s

operations, functions and demographics and included unionised

and non-unionised workers. The meeting agendas considered

relevant workforce issues while remaining open to encourage ideas

and concerns being raised.

The topics covered included:

• Security.

• Safety in operations.

• Whistleblowing line mechanism.

• Integral wellbeing.

The openness and candour expressed during this engagement

session provided important insights such as: the sense of pride

in working for the Company, appreciation of investment in

training and professional development, recognition of good job

benefits in comparison to our competitors and a recognition of

the improvements in corporate communication. Areas of concern

included security surrounding our operations, safety incidents and

turnover rates, flexible working schedules, salary and wages in the

context of inflation. Further details are provided on pages 40-41.

BOARD LEADERSHIP AND PURPOSE CONTINUED

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Feedback received from this workforce engagement

session was discussed at the October 2023 Board meeting.

The insights are hugely valuable for boardroom discussions and

decision-making. Feedback was also very useful in informing

management programmes and practices. Mr Fernández has

shared with Company management the specific workforce

concerns and is following these up to ensure that they are

addressed appropriately.

Investment in the workforce

The Company invests in its employees through various training

and development programmes and healthcare and wellbeing

programmes.

Further details are provided on pages 88-105.

Engagement with shareholders

The Board monitors the views of the Company’s minority

shareholders through reports on investor and analyst

communications prepared by the Chief Financial Officer,

which are included in the papers for each Board meeting.

Such reports identify issues raised by investors during meetings

with management during the previous quarter.

The Chief Executive Officer and Chief Financial Officer meet

with analysts, hold conference calls after quarterly production

reports and engage with shareholders by participating in major

roadshows in London and other key financial centres, after

preliminary and half-yearly results are announced.

The 2023 AGM was held in person and shareholders were invited

to attend. Nevertheless, shareholders were provided with an

opportunity to submit questions to the Board via a dedicated

email address ahead of the AGM.

The Head of Investor Relations in London is responsible for

maintaining relations with analysts and major shareholders

on a day-to-day basis, which is done by way of telephone calls

and meetings in London. Contact with investors in Mexico is

maintained through the Investor Relations Office in Mexico City.

The Senior Independent Director, who is based in London, is

available to speak with shareholders concerning specific corporate

governance questions as and when they arise.

The Board and climate

In relation to climate change and risk, the Board considers climate

change during its discussions and when making decisions

regarding the Group’s strategy, risk management, investments

and stakeholders. On behalf of the Board, the HSECR Committee

evaluates in greater detail, climate-related performance, risks and

opportunities. Since 2020, climate change has been part of the

agenda at all HSECR Committee meetings.

The HSECR Committee reviewed:

• The energy strategy and ambition of the Company’s plans,

factoring in the expectations of our stakeholders on setting

ambitious targets and the current regulatory risks associated

with renewable electricity in Mexico.

• The technology strategy to explore opportunities to reduce the

carbon emissions and water footprint of mineral processing.

• The approach of the Company to identify, evaluate and respond

to the risks and opportunities of climate change in the business

model.

• The Company’s approach to adopt the TCFD recommendations.

• The safe operation of TSFs.

• The approach to partner with the scientific community to

use climate models to better understand physical risks and

socioeconomic scenarios for transition risks.

The HSECR Committee periodically briefed the Board on climate

change performance and the approach of the Company to adopt

the TCFD recommendations. During the year the Board was also

briefed by the Audit Committee on TCFD disclosure requirements

and governance practices.

More information on this can be found in the Sustainability report

on pages 111-128 and in the Audit Committee report on pages 213

and 218.

Conflicts of interest

The Group requires that Directors complete a Director’s list which

sets out details of situations where each Director’s interest may

conflict with those of the Company (situational conflicts). Each

Director re-submitted their Director’s list as at 31 December 2023

for the Board to consider and authorise any new situational

conflicts identified in the re-submitted lists. In addition, at the

beginning of each Board meeting, the Company Secretary

reminds the Directors of their duties under sections 175, 177 and

182 of the Companies Act which relate to the disclosure of any

conflicts of interest prior to any matter that may be discussed

by the Board. Further information about related-party matters

considered by the Board during the year are set out in the Audit

Committee report on pages 216 and 223-224.

Relationship Agreement

Peñoles has entered into a relationship agreement with

the Company (the ‘Relationship Agreement’) to ensure that

relationships between the Fresnillo Group and the Peñoles Group

are conducted at arm’s length and on normal commercial terms.

Messrs Alejandro Baillères, Juan Bordes and Arturo Fernandez

have been appointed to the Board by Peñoles pursuant to the

Relationship Agreement.

The Relationship Agreement complies with the independence

provisions set out in Listing Rule 6.1.4DR for controlled companies.

The Independent Non-executive Directors annually review the

good standing of the Relationship Agreement (with the most

recent review being undertaken in July 2023) and they are

satisfied that the Company has complied with the independence

provisions included in the Relationship Agreement during the

financial year ended 31 December 2023. As far as the Company

is aware, such provisions have been complied with during the

financial year ended 31 December 2023 by Peñoles and/or any of

its associates.

Peñoles has also undertaken not to exercise its voting rights

to amend the Articles of Association in a way which would be

inconsistent with the provisions of the Relationship Agreement.

It has also agreed to abstain from voting on any resolution to

approve a ‘related-party transaction’ (as defined in paragraph

11.1.5R of the Listing Rules) involving any member of the

Peñoles Group.

Director concerns

Directors have the right to raise concerns at Board meetings and

can ask for those concerns to be recorded in the Board minutes.

The Board has also established a procedure which enables

Directors, in relevant circumstances, to obtain independent

professional advice at the Company’s expense.

204 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Roles

The composition of the Board is structured to ensure that no

one individual can dominate the decision-making processes

of the Board. The Board is led by the Chairman. The Board as a

whole currently consists of five non-Independent Non-executive

Directors and seven Independent Non-executive Directors. One

of the Independent Non-executive Directors is designated as the

Senior Independent Director. The Executive Committee provides

operational leadership to the Group and is headed by the Chief

Executive Officer. The respective responsibilities of the Chairman,

Chief Executive Officer and the Senior Independent Director

are set down in a written statement which was last updated in

October 2019.

Chairman’s independence

Mr Alejandro Baillères, was appointed as the Chairman of the

Company in April 2021, when his father Alberto Baillères stepped

down from that role. Mr Alejandro Baillères is beneficially

interested in more than 50% of the share capital of the Company

through his interest in Industrias Peñoles S.A.B. de C.V., the

Company’s controlling shareholder. Mr Alejandro Baillères is the

Chairman of Peñoles and other companies within the BAL Group,

thus at the time of his appointment, he was not independent.

With Peñoles having a significant stake in the Company, the

Board believes that the Chairman’s non-independence is not

a hindrance for his involvement on the Board but an asset to

other shareholders especially as related-party transactions are

reviewed and approved by Independent Directors and the Audit

Committee. The Board, therefore, believes that his involvement

is a governance plus since it assures the Chairman’s alignment

with all shareholders interests. Having served as Deputy Chairman

for more than three years and having received guidance from

Mr Alberto Baillères for many years, the Board considers that

Mr Alejandro Baillères possesses significant knowledge and

experience of the Company which it believes underpins his

effectiveness in carrying out the role of the Chairman. The Board

also considers that the continued oversight of the Company’s

strategic and operational integrity through its membership of the

Peñoles group enhances the quality of its corporate governance.

Given Mr Alejandro Baillères’ experience and understanding of

Mexican business and its regulatory context, this assessment gains

further validity in the continuing political and social environment

in Mexico. Notwithstanding the expectations of the Code, the

Board values and endorses Mr Alejandro Baillères’ chairmanship

of the Company.

The Relationship Agreement continues to provide a foundation

for a transparent governance system, which ensures that the

Company benefits from Mr Alejandro Baillères’ leadership and

experience while being able to demonstrate to other shareholders

that the Fresnillo Group is capable of carrying on its business

independently of any companies with which he is connected.

DIVISION OF RESPONSIBILITIES

REPORTING ON THE APPLICATION OF THE PRINCIPLE:

DIVISION OF RESPONSIBILITIES

Principle F:

The Chair leads the board and

is responsible for its overall

effectiveness in directing

the company. They should

demonstrate objective

judgement throughout their

tenure and promote a culture

of openness and debate. In

addition, the Chair facilitates

constructive board relations

and the effective contribution

of all Non-executive directors,

and ensure that directors

receive accurate, timely and

clear information.

The outcome of the Board

evaluation process, detailed on

pages 206-208, confirms that

Board members are satisfied

with the role that the Chairman

takes to meet this principle. The

Company Secretary working

alongside the Chairman and

Executive Management ensures

that the Board receives timely

and accurate information, and,

again, the Board evaluation

confirmed the Directors’

satisfaction with this service.

Principle G:

The board should include an

appropriate combination of

Executive and Non-executive

(and, in particular, Independent

Non-executive) directors, such

that no one individual or small

group of individuals dominates

the board’s decision-making.

There should be a clear division

of responsibilities between the

leadership of the board and

the executive leadership of

the company’s business.

The structure of the Board is

described in detail on page

211, and the Board, which is

advised by the Nominations

Committee, is satisfied that

notwithstanding that there are

no Executive Directors on the

Board, that Principle G is met.

As described on pages 204-205

the Nominations Committee has

reviewed the independence of

all Independent Non-executive

Directors and is satisfied that

they remain independent in line

with the guidance of the Code.

As described on pages 204-205

there is a written division of

duties between the Chairman,

Chief Executive and Senior

Independent Director.

Principle H:

Non-executive directors should

have sufficient time to meet

their board responsibilities. They

should provide constructive

challenge, strategic guidance,

offer specialist advice and hold

management to account.

The Board has considered

potential conflicts of interest of

Board members, and is satisfied

that they have sufficient time to

discharge their duties. The Board

evaluation exercise described on

pages 206-208, has confirmed

that all Directors continue to

continue to contribute fully,

and provide a robust level

of challenge to management.

A working meeting of the Board

focused on the risk element

contained within the proposed

strategy, and the Board reviewed

and challenged management

thoroughly on their proposals.

Principle I:

The board, supported by the

Company Secretary, should

ensure that it has the policies,

processes, information, time

and resources it needs in

order to function effectively

and efficiently.

As described on pages 206-208,

the Board evaluation exercise

confirmed that all Directors were

satisfied with the support they

got from the Company Secretary,

and that appropriate information

was provided to them on a

timelybasis.

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In particular, the Relationship Agreement ensures that

transactions and relationships between the Fresnillo Group

and its controlling shareholder are at arm’s length and on

competitive commercial terms.

Further information regarding the Relationship agreement can

be found on page 203.

Directors’ independence

During 2023, the Board considered the following Directors to be

independent: Georgina Kessel, Dame Judith Macgregor, Hector

Rangel, Alberto Tiburcio, Guadalupe de la Vega, Charles Jacobs

and Bárbara Garza Lagüera. Mr Jacobs and Ms Garza Lagüera

with effect from the May 2024 AGM will cease to be independent

Non-executive Directors. The Board, through the Nominations

Committee, has assessed each of these Directors by reference

to the criteria set out in Provision 10 of the Code and the Board

remains satisfied that they are each independent in character and

judgement. In making this assessment for Mr Alberto Tiburcio, the

Board notes that he was Chairman and Chief Executive Officer of

Mancera S.C., the Mexican firm of EY, the Company’s auditors, until

June 2013 and that he was not involved in the provision of audit or

any other services to the Company by Ernst & Young LLP prior to

that date. Mr Tiburcio is an Independent Non-executive Director

of Grupo Nacional Provincial, S.A.B. and Grupo Palacio de Hierro,

S.A.B. de C.V., which are companies within the BAL Group. He is

not involved in executive duties in any of those companies and has

a similar obligation to be independent for those two companies

as for Fresnillo. The Board does not consider that Mr Tiburcio’s

position as an Independent Non-executive Director of the

Company is adversely impacted by those two appointments. The

Board also considers that Mr Tiburcio’s experience in Mexican

and international business and his experience and knowledge

of Mexican and international accounting and audit practice and

corporate governance are particularly valuable to the Board and

the Audit Committee.

Senior Independent Director

Charles Jacobs was the Senior Independent Director throughout

2023. He will step down as Senior Independent Director at

the 2024 AGM in May. He will be succeeded by Dame Judith

Macgregor. In February 2024, Mr Jacobs convened a meeting

of the Independent Non-executive Directors to evaluate the

performance of the Chairman and to assess the good standing

of the Relationship Agreement. The Independent Non-executive

Directors were satisfied that there were no issues or concerns

in respect of either matter. Mr Jacobs provided feedback to the

Chairman on those discussions.

Time commitment and overboarding

All Directors pre-clear any proposed appointments to listed

company boards with the Chairman, prior to committing to

them, and such appointments are ratified by the Board at the

next possible meeting. During the 12 months prior to the date of

this report Mr Cepeda notified the Board of his appointment as

Director of the Board of Directors of RLH Properties, S.A.B. de C.V.,

a company listed on the Mexican stock exchange (BMV: RLH). No

other Directors took on any significant new additional external

appointments in the year.

The Non-executive Directors are required, by their letters of

appointment, to spend 14 days per annum on Company business.

The Nominations Committee is satisfied that all of the Directors,

but particularly the non-Independent Non-executive Directors,

spend considerably more than this amount of time on Board

and committee activity. In particular, the Board is satisfied that

Mr Cepeda is fully available to the Company and has enough time

to fulfil his Board commitments to the Company.

The Nominations Committee annually reviews the time

commitments to ensure that all Board members continue to be

able to devote sufficient time and attention to the Company’s

business. Its philosophy in doing so, is to consider the total

workload of each Non-executive Director and the particular

value that each Director brings to the Board. In making this

assessment, the Nominations Committee takes into account

the following factors:

1. As a single-product Company with operations primarily in just

one country, and because of the relative commonality of the

Company’s activities, the Board does not consider that it needs

more than four scheduled Board meetings with additional

working meetings per year, a factor which is reflected in the

relatively modest fees that the Company pays its Non-executive

Directors. Further information regarding fees paid to Non-

executive Directors can be found on page 230.

2. This relatively low number of meetings is further justified by the

degree of governance oversight of the Company. This comes

by virtue of it also being a member of the BAL Group. The

calendar for Board and Committee meetings is scheduled to

align with the meetings of other companies, including listed

companies, within the BAL Group ownership structure. This

ensures that Fresnillo plc Directors who are appointed to the

boards of other companies within the BAL Group do not have

any time conflicts with their other commitments on BAL Listed

Entity boards.

The other listed Company directorships of the Fresnillo plc

Directors are set out on pages 194-197 of this report. The Board

and Committee attendance record of each of the Directors during

2023 is set out on page 192 of this report.

Company Secretary

The advice and services of the Company Secretary (whose

appointment and removal are matters reserved for the Board)

are also available to the Directors. The Board also regularly receives

advice on UK corporate governance and legal developments from

its UK legal and corporate governance advisors.

206 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

COMPOSITION, SUCCESSION AND EVALUATION

REPORTING ON THE APPLICATION OF THE PRINCIPLE:

COMPOSITION, SUCCESSION AND EVALUATION

Principle J:

Appointments to the board should be

subject to a formal, rigorous and transparent

procedure, and an effective succession plan

should be maintained for board and senior

management. Both appointments and

succession plans should be based on merit

and objective criteria and, within this context,

should promote diversity of gender, social

and ethnic backgrounds, cognitive and

personal strengths.

The Board is satisfied it has applied principleJ.

An explanation of the Board appointment

and succession planning activities can be

found on pages 209-211. The Company’s policy

on Board diversity is on set out on page 209

and details of the gender balance of senior

management and the Company’s approach

to diversity, equity and inclusion is set out on

page 209-210.

Principle K:

The board and its committees should have

a combination of skills, experience and

knowledge. Consideration should be given

to the length of service of the board as a

whole and membership regularly refreshed.

Biographies of the Directors can be found on

pages 194-197 and demonstrate a wide area

of expertise relevant to both the business

and areas of operation. This is augmented by

Directors who have significant commercial

and other relevant expertise. The length of

service of Board members is detailed on

page210.

Principle L:

Annual evaluation of the board should

consider its composition, diversity and

how effectively members work together to

achieve objectives. Individual evaluation

should demonstrate whether each director

continues to contribute effectively.

Full details of the Board evaluation process

and disclosure of the outcome is shown on

pages 206-208.

Performance evaluation

Board effectiveness review

The Board conducts an annual review of the effectiveness of the performance of the Board and its Committees. A combination of

externally-facilitated and internally-run evaluations is carried out over a three-year cycle and forms the Board Development Programme.

The Board recognises that a continuous and constructive review of its performance is an important factor in achieving its objectives and

realising its full potential.

The cycle of the Board’s evaluations is summarised as follows:

In 2023, Lintstock LLP were invited to undertake effectiveness reviews of the Board and the principal Committees of the Board.

The reviews consisted of a combination of survey questionnaires and one-to-one interviews.

Year 1

Externally-facilitated Board

evaluation using questionnaires and

interviews.

Year 2

Follow-up on action plan prepared

in response to Year 1 evaluation using

internally-facilitated questionnaires.

Year 3

Focus on outstanding and emerging

issues arising from the action

plan using internally-facilitated

questionnaires.

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At its meeting in October 2023, the Board discussed the results.

The overall conclusion from the Board effectiveness reviews

was that the performance of the Fresnillo Board is rated very

highly, highlighting the excellent work culture established

both in the Board and in the Committees, and therefore the

recommendations were characterised as points of potential

further improvement rather than material changes of approach.

Particular areas of Board governance which were commended

in the report included: Board composition; stakeholder oversight;

Board dynamics; Board support and Board committees; the

management and focus of meetings; oversight of strategy; and

risk management and internal control.

There were three areas for change that the Board will consider

over the coming year:

• Rebalancing the focus on key issues.

• Managing succession.

• Reconnecting in person.

Mid-August

Surveys prepared and circulated

to Directors tocomplete.

Board report

Discussed at the Board meeting in

October 2023.

Reports

Board

Audit Committee

Nominations Committee

HSECR Committee

Remuneration Committee

Chairman and individual Director reports

Committee reports

Discussed at each Committee meeting following

circulation of the respective Committee report.

End August

Completed surveys received

by Lintstock LLP andanalysed.

Early September

Follow-up interview (45-60 minutes)

conducted with all Directors.

Mid-late September

Draft reports prepared.

Early October

Draft reports reviewed by Chairman

and approved for distribution.

Board effectiveness review process in 2023

Report circulation and Reviews

208 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Priorities for change for 2023 from the 2022 review

Priority Actions Progress

1. Focus on environmental, social and

governance (ESG) issues and climate

change, as well as on the impacts of

technology, international operations

and labour relations.

In 2023 a working meeting was

held between Board members and

management, in which these matters

were analysed.

The Board has been made aware of all

ESG and climate change developments

to the UK regulations and the potential

impact it could have on the business. The

Board continues to oversee the Company’s

strategy related to ESG and climate change,

as well as the TCFD disclosures-related

recommendations.

2. Focus on risk management, including

mitigation measures.

Risk management assessments during

the year have explicitly considered the

mitigation measures taken by management

to face them.

The Audit Committee continues to follow

up the risk assessment, management and

mitigation measures implemented by

management.

3. Spend less time on financial aspects

of the business during the Board

meetings.

Management was instructed on this

recommendation.

Board agenda items concerning financial

aspects have been improved and are now

discussed efficiently.

4. Focus on the topics that were

identified as the top strategic issues

facing the Company over the next

three to five years: (i) Growth and

development; (ii) Political and regulatory

environment; (iii) Climate change and

ESG; (iv) Efficiency and cost control;

(v) Technological developments; (vi)

Security; and (vii) Geopolitical uncertainty.

The topics growth and development, ESG

issues and technology were included in the

agenda of the strategy working meeting

that was held in July 2023 between Board

members and management. The other

topics had been discussed at regular Board

meetings.

The Board has been made aware of all top

strategic issues facing the Company over

the next three to five years and continues to

work on the implementation of strategies

and actions to appropriately address these

challenges.

5. Continue improving the Board’s

information packages.

Directors sent to management their specific

proposals.

Information that the Board receives now

complies with these recommendations.

Priorities for change for 2024 from the 2023 review

Priority Actions

1. Rebalancing the focus on key issues

Time allocation in meetings will be reviewed. Management will facilitate a more open

exchange on the key issues, both through the Board pack and their verbal presentations.

An extended strategy session is being considered, in addition to the July working meeting,

to examine the range of strategic challenges facing the Company in greater depth.

2. Managing succession

More information regarding the succession plans for both Directors and executives will be

presented to the Board throughout the year.

3. Reconnecting in person

Ways to promote greater openness and a stronger relationship will be proposed. Directors

are always welcome to visit the mines.

Management will continue to analyse the outcome of the evaluation and develop proposals on how to address Directors’

recommendations.

Committee evaluation

The reports on each of the Board Committees prepared as part of the externally-facilitated Board effectiveness review were circulated

to the members of each of the Committees in October 2023 and discussed by the Audit, HSECR and Remuneration Committees

at their meetings in October 2023 and by the Nominations Committee at its meeting in February 2024. Overall, the reviews of the

effectiveness of all of the Committees were very positive.

Director performance review

The Independent Non-executive Directors meet annually in order to evaluate the performance of the Chairman. A review meeting was

held in February 2024 to consider the Chairman’s performance over the prior year.

Non-executive Directors occasionally meet the Chairman without executives being present; the performance of the Executive

Committee is discussed during such meetings.

Board development and induction

Senior management regularly presents on the Group’s strategic initiatives to provide the Non-executive Directors with more

information about the broader context of the Company’s activities. In addition, there is a regular distribution of industry briefings on

technical, market and sector issues.

Directors are encouraged to visit the Company’s mines to familiarise themselves with the Fresnillo Group’s operations, to meet staff and

visit community projects supported by the Group.

Briefings by the Company’s legal advisers are arranged for all new Directors. In addition, the Chairman discusses training or

development needs with Board members from time to time.

COMPOSITION, SUCCESSION AND EVALUATION CONTINUED

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NOMINATIONS COMMITTEE REPORT

Dear shareholder

I am pleased to introduce the Nominations Committee Report for

the year ended 31 December 2023.

Independent Non-executive Directors’ succession and

appointment of the new COO North

The Committee was pleased that shareholders at the 2023 AGM

agreed to the Board’s recommendation that two Directors,

Mr Charles Jacobs and Mrs Bárbara Garza Lagüera be re-elected

at the AGM, despite the fact that both had completed nine years’

service at that time. It has enabled the Committee to undertake

a detailed search for suitable replacements, a task that presented

challenges during 2022, due to the prevalent pandemic at

that time. The Nominations Committee has been fully-focused

on the task of identifying suitable nominees as independent

Non-executive Directors and proposing them by the 2024

AGM. Therefore, two new Directors will be replacing Mr Jacobs

and Ms Bárbara Garza Lagüera as independent Non-executive

Directors. More detail on the search process is given on page 211.

In addition, during 2023 the Committee also reviewed the

recruitment processes to separate the Chief Operating role by

appointing a Chief Operating Officer for the Northern Region.

Board diversity policy progress

We continue to recognise and embrace the benefits of having a

diverse Board, particularly the value that different perspectives

and experience bring to the quality of Board debate and decision-

making. We hold fast to the importance of making Board

appointments on the basis of merit; but we also take seriously

considerations such as background and experience, age, gender

and shareholder perspectives in our reviews of the composition

of the Board. We believe that setting targets for the number of

people from a particular background or gender is not an effective

approach and therefore we have no specific quotas or targets.

Nevertheless, our direction of travel, as far as diversity is concerned,

has been a progressive one. Our Board composition meets the

target set by the Hampton-Alexander Review since at least 33%

of our Board is comprised by female Directors. The Committee

has considered the new Listing Rule requirement that: (i) this

percentage should be 40%; and (ii) at least one senior Board

post should held by a female appointee, and recommended

to the Board that two new female Independent Non-executive

Directors be appointed, and that Dame Judith Macgregor be

appointed as Senior Independent Director with effect from the

conclusion of the 2024 AGM. I am delighted that the Board has

agreed with these recommendations.

Since February 2020, the Board has benefited from seven

Independent Non-executive Directors out of 12, the largest

number of Independent Directors the Company has ever had

on the Board. This adds diversity of thought and input into our

Board discussions.

It is pleasing to also note that in 2023 the Parker Review reported

that Fresnillo plc has met its set ethnicity target for FTSE 100

companies. Since our IPO in 2008, the Board has consisted

predominantly of Mexican Directors, alongside at least two British

Directors, which enables the Board to benefit from a sound

understanding of both the UK and Mexican cultural contexts

of the Company in its decision-making.

Members and meetings in 2023

Meetings

attended

Alejandro Baillères

3/3

Charles Jacobs

3/3

Bárbara Garza Lagüera

3/3

The Committee continues to

support the Directors of Fresnillo

to ensure that its Board is diverse

and able to continue to provide

high-quality debate and decision-

making as the Company develops.”

210 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Company-wide gender diversity

In April 2020 the Board approved the Company’s adoption of

the CLIMB framework (developed by McKinsey) which has been

a useful tool to categorise the Company’s current or planned

initiatives on diversity. In April 2023, it was presented to the Board

an update on the diversity programme that was implemented in

2020. The strategy includes several initiatives designed to: improve

the leadership opportunities for women in the Company; develop

a better human resources infrastructure; adopt and use metrics

to improve management; and monitor and promote the right

culture and behaviours.

The goal of this strategy is still to enhance the contribution of

women to the success of Fresnillo whilst having a positive impact

on the women that the Company employs. This is strategically

important as well as being fair because it would enhance

innovation, stakeholder engagement and risk management

as experienced in Board composition and diversity. Further

information on the implementation of this programme is

set out on pages 96-97 in the Sustainability report.

Board evaluation

In 2023, the Board engaged Lintstock LLP to undertake an

externally-facilitated review of the effectiveness of the Board, the

Board Committees and the contributions of individual Directors,

the results of which were collated by Lintstock into a Board

discussion document. A summary of the overall approach

adopted and findings arising from this review is set out on

pages 206-208 of the Corporate Governance report. We were

pleased that the overall conclusion from the reviews was that the

performance of the Fresnillo Board of Directors and, indeed, the

Nominations Committee, both continue to be rated very highly.

I would be happy to speak with any shareholders who have

questions about the work of the Committee.

Yours faithfully,

Mr Alejandro Baillères

Chairman of the Nominations Committee

Role

The Nominations Committee is responsible for making

recommendations to the Board on the structure, size and

composition of the Board and its Committees and succession

planning for the Directors and other senior executives. Before

making appointments of new Directors and members of

the Executive Committee, the Nominations Committee is

responsible for evaluating the balance of skills, knowledge and

experience on the Board and identifying and nominating suitable

candidates for approval by the Board. Prior to making such

recommendations, the Nominations Committee considers the

other time commitments and significant external interests of such

candidates to ensure that they are able to contribute effectively to

the Board.

The Nominations Committee has recommended Board

Appointments and Diversity policies which provide the framework

for the Nominations Committee and the Board’s approach to

Board appointments. The Board has also approved a Group

Diversity policy. (Full versions of these policies may be found

on the Company’s website – www.fresnilloplc.com). A further

explanation of the steps that the Company is taking to promote

diversity across its businesses is set out in the Sustainability report

on pages 96-97.

Board appointments policy

The Nominations Committee and Board are strongly committed

to the principle of equality of opportunity when making new

appointments to the Board while ensuring that appointments

are based on merit. The Nominations Committee continues to

consider the composition of the Board with this commitment

in mind.

The criteria for determining the composition of the Board and

future Board appointments continue to be based on:

• Relationship Agreement requirements and guidelines for

appointments to the Board by Peñoles.

• The Company’s leading position as a precious metals miner

in Mexico.

• The Company’s inclusion in the FTSE 100 Index.

• The specific functions on Board committees which

independent Directors will be required to fulfil.

• The provisions set out in the current terms of reference of the

Nominations Committee and the Board Diversity policy.

Directors’ length of tenure

As at 31 December 2023

0 to 3

years

3 to 6

years

6 to 9

years

Over 9

years

Independent Directors 1 2 2 2

Non-independent Directors 1 – – 4

The Nominations Committee has not previously used open

advertising or retain any external consultants when making

new appointments to the Board as it is not considered

necessary considering the Company’s contacts within Mexico

and further afield.

NOMINATIONS COMMITTEE REPORT CONTINUED

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Board skills and experience

Skill/Experience Description

% of Board

members

Commercial

leadership

Sustainable commercial success in business at a senior executive level. 83

Strategy

Experience in enterprise-wide strategy development and implementation in industries with long

cycles and developing and leading business transformation strategies.

Mexican business

experience

Relevant experience and understanding of the Mexican political, cultural, regulatory and business

environments.

Capital allocation

and cost-efficiency

Extensive direct experience in environments requiring capital allocation, cost-efficiency and cash

flow management disciplines, with proven long-term performance.

Health, safety,

environment and

community

Extensive experience with complex workplace health, safety, environmental and community risks,

frameworks and issues.

Capital markets

Relevant experience and understanding of capital markets, institutional investor engagement and

regulatory/governance expectations.

Mining and natural

resources

Board-level experience and/or long-term knowledge gained through working with companies

operating in the mining or natural resources sector.

Financial expertise

Relevant experience in financial regulation and the capability to evaluate financial statements,

financial controls and risk.

Public policy expertise

Extensive experience of public policy or regulatory matters, including fiscal and economic, ESG (in

particular climate change) and community issues, social responsibility and transformation issues.

Workforce wellbeing

Workforce learning and skills development, diversity and wellbeing. 92

Executive succession planning

In April 2023, in line with its usual practice, the Nominations

Committee reviewed a schedule of possible successors for all

the positions on the Executive Committee (Chief Executive

Officer, Chief Financial Officer, Vice President of Exploration and

Chief Operating Officer). This review considered both short-term

emergency and long-term planning scenarios.

The Company is committed to creating long-term value by

maximising the potential of its operations and delivering

profitable growth, whilst ensuring the wellbeing of its

stakeholders. To further strengthen the oversight of its assets

and focus on the advancement of its pipeline, with effect from

1 December 2023, the Company announced the creation of new

executive roles for its operations and projects: Chief Operating

Officer North and Chief Operating Officer Central. More detail on

the search process is given on page 209.

In 2024 the schedule of possible successors will be reviewed

taking into consideration the split of the COO role into two roles.

Non-executive Directors succession planning

As advised to shareholders last year, Mr Charles Jacobs and

Mrs Bárbara Garza Lagüera were proposed to shareholders for re-

election at the AGM in 2023, despite the fact that they had been

on the Board for more than nine years. The Board considered

that they both remained fully independent, and shareholders

approved their re-appointment for a further one year. During the

year the Nominations Committee was fully focused on the task

of identifying suitable nominees as independent Non-executive

Directors and proposing them by the 2024 AGM. This year the

Nominations Committee had the support of an external search

consultancy which assisted the Committee in identifying suitable

candidates. The search focused mainly on Mexico and the UK.

The Committee recommended to the Board that Ms Luz Adriana

Ramírez and Ms Rosa Vázquez be appointed at the forthcoming

AGM as Independent Non-executive Directors in place of

Mr Charles Jacobs and Mrs Bárbara Garza Lagüera. Ms Ramírez is

a dynamic senior executive who has had a successful career across

multiple industries. She is a strong leader, motivating teams to

deliver on strategy and objectives. Ms Vázquez is a strong people

leader with a track record of developing talent, motivating teams,

and driving engagement and will bring the experience and

technical knowledge to add value to the Board, particularly an

orientation to best practices and governance.

Other Committee activity during 2023

The Nominations Committee also considered the following

matters as part of its usual programme of activity:

• Time commitment: A review of the time commitment required

from each Director and their other external appointments, prior

to making a recommendation to the Board supporting that all

of the continuing Directors be proposed for re-election at the

2024 AGM. (Further analysis of the Nominations Committee’s

assessment is set out on pages 206-208).

• Committee report: Approval of the 2022 Nominations

Committee report prior to publication.

• Committee evaluation: In February 2024, the Nominations

Committee reviewed the outcome of the independent

performance evaluation undertaken in 2023, which concluded

that the Committee is performing very well.

212 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

REPORTING ON THE APPLICATION OF THE PRINCIPLE:

AUDIT, RISK AND INTERNAL CONTROL

Principle M:

The board should establish formal and

transparent policies and procedures to

ensure the independence and effectiveness

of internal and external audit functions and

satisfy itself on the integrity of financial and

narrative statements.

An explanation of the independence

and effectiveness of the external audit process

can be found on page 219 with detail of the

reappointment of the statutory auditor on

page 220. The Board has a formal non-audit

services policy which is included in the

Company’s terms of engagement with the

external auditor. The Head of internal audit

reports to the Audit Committee Chair and the

Committee undertakes an annual evaluation

of the effectiveness of internal audit. The Audit

Committee undertook a detailed review of

the integrity of the financial and narrative

statements and was able to advise the Board

in accordance with DTR 7.1.3 (5) that the

Board could approve them.

Principle N:

The board should present a fair, balanced

and understandable assessment of the

company’s position and prospects.

The process to ensure that the annual report

for 2023 is fair balanced and understandable

is detailed on pages 218 and 224.

Principle O:

The board should establish procedures to

manage risk, oversee the internal control

framework, and determine the nature and

extent of the principal risks the company is

willing to take in order to achieve its long-

term strategic objectives.

A description of the Group’s risk framework

can be found on pages 151-155, and the role

of the Audit Committee in monitoring the

risk matrix is described on page 221. During

2023 the Board held a working meeting with

the Executive Management to challenge the

risk levels involved in the Group’s strategy. The

role of internal audit in providing assurance

around the Group’s risk framework is

described on pages 220 and 222.

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AUDIT COMMITTEE REPORT

Dear shareholder

It gives me great pleasure to introduce the Audit Committee

report for the year ended 31 December 2023.

The continuing complex geopolitical environment and worldwide

higher interest and inflation rates has made 2023 a further

difficult trading year. Movements in the exchange rate between

the Mexican peso and the US dollar in the year, made more

difficult the economic environment for the Company. Companies

have needed to respond proactively to the challenges presented.

The Committee has continued to focus closely on key financial

processes, material risks and internal control. Further close

attention has been given to the key areas of judgement and

estimation in the financial statements. With the support of

Internal Audit, Internal Control and Risk Management, the

Committee concluded that the internal controls and processes

were functioning appropriately, and no significant weaknesses

have been identified. Close consultation and interaction by the

Committee with the external auditor has also been maintained

during the year. The Committee has also continued to consider

the impact on the Company of changes arising from the new

Mexican Mining Law.

The items of particular focus for the Committee during the year

are detailed below:

• Proposed changes to regulations: The Committee has

continued to monitor proposed changes to the Corporate

governance regime required to be in place for Companies listed

on the London Stock Exchange. Although there is renewed

uncertainty as to the ultimate form and extent of the proposed

changes and many of those will no longer be required to be

in force for 2024, the Committee has continued to ensure that

the Company can respond appropriately when needed and

implement those proposed changes that merit early adoption.

• Tax contingencies: The Committee has continued to closely

monitor tax contingencies, in particular the differences

generated from prior years regarding payments related to the

Silverstream contract, which are considered by the Company for

tax purposes as a financial derivative transaction and are being

challenged by the Servicio de Administration Tributaria (SAT),

the Mexican Tax Authority. During 2023, the Committee has

received regular reports from management on their discussions

with the SAT, concerning this matter.

• Climate-related financial disclosures: This annual report

includes disclosures consistent with the guidelines set out

by the Taskforce on Climate-related Financial Disclosures

(TCFD). These disclosure requirements were discussed by the

Committee and were the subject of particular attention while

reviewing the annual report and the financial statements.

The Committee has also considered the role of the HSECR

Committee in monitoring climate-related risks, the mitigating

actions being taken to manage those risks, as well as its own

responsibility to ensure that accurate reporting is achieved

and published. The Committee is satisfied that the disclosures

reflect the Company’s current position and is aware of the

further progress that the Company needs to make in this area

in order to comply with the TCFD recommendations. Further

details of the progress made during the year and actions

expected to be taken during 2024 are set out in the letter from

the Chairman of the HSECR Committee on pages 76-77 and in

the Sustainability report on pages 111-128.

Members and meetings in 2023

Meetings

attended

Alberto Tiburcio

5/5

Georgina Kessel

5/5

Hector Rangel

5/5

The Audit Committee, in addition

to its usual monitoring duties, is

considering how best to develop the

Company’s processes with regard to

the implementation of an enhanced

governance regime in 2024.”

214 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

• Reserves and resources: The Committee has been pleased

to see an improvement in the timing of the delivery of the

Reserves and Resources Statement by independent reserves

auditors. The Company has continued to make progress in

addressing the observations from prior years with the result

that the Company was able to report its reserves and resources

much timelier than in the past, allowing additional time

for consideration of the potential accounting impacts and

therefore preparation of the annual financial information.

• Anti-bribery and corruption (ABAC): During the year, the

Committee has continued to closely monitor management’s

plan to implement the recommendations proposed following

the externally-facilitated ISO 37001 audit carried out in 2022 to

assess the conformity of the Company’s ABAC programme with

ISO standards (in line with the UK Ministry of Justice Guidance).

The Committee was kept informed of progress made on plan

implementation. Further information about the Company’s

approach to bribery and corruption is set out on pages 85-86 of

the Strategic report.

• Cybersecurity: IT (Information Technology) and OT (Operation

Technology) security and data protection were also regularly

reviewed by the Committee during the year to ensure that the

need for improvements identified in previous years continue

to be implemented on schedule. In 2023, the Committee

continued to receive an update on the Group’s IT strategy,

and its linkage to the Group’s overall business strategy, as well

as the financial implications of that strategy for the business

plan. It also monitored the progress of the Peñoles and Fresnillo

Management Teams in developing the cybersecurity framework

for the Group. Further information about the Group’s approach

to IT is set out on pages 86 and 171 of the Strategic report.

The Company continues to make progress in this important

area, and this will be monitored further by the Committee

during 2024.

• Fraud detection: In response to the expected future regulatory

changes, the Company has continued its efforts to strengthen

its firm commitment to preventing and detecting fraud by

enhancing its fraud risk assessment process, reinforcing the

controls currently in place to prevent and detect material fraud.

The Committee has been working closely with Internal Control,

Risk Management and the internal audit teams on this area.

The Internal Control area has been receiving feedback from its

external auditors, as a result of this it was concluded that the

Company’s Fraud Risks assessment comply with the standards

and requirement demanded by the Association of Certified

Fraud Examiners (ACFE). More information on risk management

systems can be found on pages 151-155.

• Soledad-Dipolos assets: During 2023 the Company recognised

a write-off of US$21.9 million over the assets related to Soledad-

Dipolos. This represents the estimated loss of inventory resulting

from certain illegal mining activity in the leaching pads located

along the portion of land owned by the Company but to which

the Company does not have access. The Committee, based

on the work performed by the Company and reviewed by

external auditors, concluded that the write-off was reasonable.

In addition, despite the fact that the Company has not had

access since 2013 to a separate portion of land where property,

plant, equipment and inventories are located, based on

evidence presented to the Committee and discussions held

with management and the external auditors, it was considered

appropriate to continue recognising such assets in the balance

sheet for a total amount of approximately US$106 million. The

Company is confident that it will regain access to the Soledad-

Dipolos assets. The Committee will continue monitoring the

development on this matter in 2024.

In July 2023, a working session of the Board considered in detail

the strategic issues of the Company’s operations that the Board

faced. Included in this discussion was consideration of ESG issues,

including the emerging risks, and how the Company is continuing

to prepare to deal with them.

In the second half of the year, an evaluation of the performance

of the Board and its committees was carried out. With respect

to the Audit Committee, I am pleased to report that the results

of the evaluation were very positive. Nevertheless, we continue to

look for ways to improve the efficiency of the meetings making

sure that we remain well-briefed on the subjects of interest to

the Committee.

At the end of the year, the Committee undertook a questionnaire-

based evaluation of the performance of the internal audit function

and was satisfied with the outcome.

In closing, I would like to acknowledge the effort and valuable

contributions made by the members of the Committee, and by

the Company executives who work closely with it; as well as the

invaluable support and trust that the Committee continues to

receive from the Board.

I would be happy to speak with any shareholders who have

questions about the work of the Committee.

Yours faithfully,

Alberto Tiburcio

Chairman of the Audit Committee

AUDIT COMMITTEE REPORT CONTINUED

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Report

Audit Committee activity in 2023 and early 2024

This report sets out the key activities of the Committee in discharging its duties during 2023, and those undertaken in 2024 in respect

of the audit and publication of the financial statements for 2023. The Committee met five times during 2023 and once more in

February 2024 with all the meetings being either hybrid or virtual via video conference. Notwithstanding this, the Committee was able

to operate in accordance with its terms of reference and it was able to follow its usual pattern of work which is reported under the

followingheadings:

• Financial reporting: Overseeing

the Company’s financial and

narrative reporting to shareholders

(including considering whether

it was fair, balanced and

understandable).

• Stakeholder relationships

and reporting: Overseeing the

Company’s reporting on certain

stakeholder issues.

• Whistleblowing: Overseeing

on behalf of the Board, the

cases reported through the

whistleblower line and the work of

the Honour Commission.

Reporting

• External audit: Overseeing the

work of and the Company’s

relationship with the external

auditor.

• Internal audit: Overseeing the

work and findings of internal audit.

Assurance

• Risk: Overseeing the operation of

the Company’s risk management

framework.

• Internal control: Monitoring

the Company’s internal control

environment.

• Related parties: Overseeing the

financial aspects of the Company’s

commercial relationships with

related parties.

Risk and controls

Details of the membership of the Committee and the Committee’s effectiveness review are set out on pages 193 and 207

respectively of the Governance section.

Reporting

Financial reporting

The Company reports to shareholders on its financial performance twice a year.

The principal steps taken by the Committee during the period from 1 January 2023 to the date of this report in relation to its review of

the published financial statements were:

• Review of the financial statements and annual report for the year ending 31 December 2022 and consideration of EY’s comments on

these documents.

• Review of the 2023 interim financial statements and 2023 interim announcement and consideration of EY’s comments on the drafts

of these documents.

• Review of plan for preparing the financial statements and annual report for the year ending 31 December 2023.

• Review of the significant judgements and estimates that impact the financial statements (see below).

• Review of the financial statements and annual report for the year ending 31 December 2023 and consideration of EY’s comments on

these documents.

To aid the Committee members’ understanding of the reported financial results during the year, the Chief Financial Officer updated the

Committee on the Group’s financial performance at each of its meetings in February, April, July, October and December.

Significant judgement areas

The Committee considered the principal areas of financial statement risk and judgements made in relation to both the interim and

full-year financial statements, prior to recommending those financial statements to the Board for approval. In many cases, these

significant judgement areas were the same as those considered in previous years; however, as the mining cycle progresses these areas

of judgement or estimation evolve, and new ones may need to be considered while others may become less important.

216 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Process for the review of significant judgements

The significant judgement process may be summarised in the following way:

Annual

assessment

of key financial

statement

risks

Identification

of key variables

to consider

Review of

sources of

assurance

Discussions with

management

and EY

Committee’s

conclusion

on accounting

treatment,

presentation

and disclosure

Significant areas of judgement in 2023

The significant judgement areas considered by the Committee in 2023 are set out below. In each case, the Audit Committee concluded

that the accounting treatment and disclosure in the financial statements are appropriate.

Related-party transactions including revenue recognition (see note 27 to the financial statements)

Assessment of risk:

Fresnillo has a controlling shareholder and as a result has very strong ties both to Peñoles and the broader

BAL group. There is a risk that related-party relationships could be taken advantage of to manipulate earnings,

otherwise distort the Company’s financial position and/or transfer value to Peñoles or another BAL company

inappropriately. Furthermore, related-party transaction disclosure requirements allow investors to understand

the nature and extent of the Company’s transactions with related parties and there is a risk that disclosures in

the financial statements could be inaccurate or incomplete.

Variables

considered:

Every year, the Committee scrutinises the probity of all major related-party transactions to ensure that

they are entered into transparently and fairly to all shareholders. The Committee continued reviewing the

implementation of the Baluarte Minero reorganisation, which started in 2021 (see the section of this report

headed ‘Related parties’ on page 223), and the outcome continues to be evaluated.

Sources of

assurance:

The Committee considered management reports on the transactions with related parties during the year. In

particular, it received confirmation from the Chief Executive Officer on the trading relationship with Met-Mex

and the basis on which pricing is determined (using a methodology which was adopted in 2019) (see the

‘Related parties’ section on page 223.

The Committee discussed EY’s procedures to ensure that related-party transactions are recognised accurately

and correctly reported in the relevant disclosures in the annual report, as well as their related conclusions.

Internal audit routinely review agreements between the Company and Peñoles, the results of which

are reported to the Committee as part of its annual Internal Audit programme updates. In addition,

PricewaterhouseCoopers (PWC) conducts annual reviews of the intercompany transactions each year

(including related-party transactions). In previous years, these reviews have not resulted in any adverse

comments thus providing a basis of assurance for the usual approach; however, the PWC 2023 transfer pricing

review will not be completed until after the date of approval of this report.

Silverstream contract (see note 14 to the financial statements)

Assessment of risk:

The Silverstream contract represents a large asset on the balance sheet which can, as a result of movements in

variables discussed below, give rise to significant albeit non-cash, movements in the income statement.

Variables

considered:

The Silverstream contract is a derivative financial instrument which must be reflected at fair value at each

balance sheet date. The fair value is most sensitive to the timing and volume of forecast production derived

from the reserves and resources and production profile of the Sabinas mine, estimated future silver price and

the discount rate applied in the valuation.

Sources of

assurance:

The Committee discussed with management and EY the inputs into the valuation at the balance sheet

date and associated sensitivity analysis. It also reviewed management’s suggested disclosures relating to the

Silverstream contract. It discussed with EY their procedures and conclusions for their audit of the valuation.

AUDIT COMMITTEE REPORT CONTINUED

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Recoverable amount of long-term non-financial mining assets (see note 13 to the financial statements)

Assessment of risk:

The recoverable amount of long-term non-financial assets is influenced by the level of reserves and resources

for each mine at any moment in time, the likelihood that the resources can be economically mined and the

expected phasing of planned production (mine plan). Other key variables considered include the expected

metals prices, costs and discount rates. The estimated valuation of the recoverable amount of long-term

mining assets will change year-on-year in response to changes in these inputs. If the financial statements are

not adjusted accordingly there is a risk of significant financial misstatement.

Variables

considered:

The estimation of reserves and resources, prices, costs, discount rates and related mine plans for each business

unit, along with management’s assessment of impairment indicators were considered.

Sources of

assurance:

The Committee noted that the specialist third-party reports on management’s estimates of reserves and

resources and management’s estimates of recoverable value had been prepared and then reviewed by EY,

using specialists where necessary. The Committee also noted the reports from SRK and AMC on reserves and

resources and scrutinised the process by which they were prepared to ensure that improvements made during

the year had been properly implemented. Internal audit also followed up on steps taken by management

during the year. The Committee further evaluated EY’s assessment of management’s position on the mines

most at risk and sensitivities performed by EY for alternative metals price and discount rate scenarios.

Mineral reserves and resources (see pages 336-341)

Assessment of the

risk:

Reserves and resources are a primary driver of Fresnillo’s market valuation and a significant input into

calculations of depreciation and assessments of impairment. Such calculations are dependent on significant

amounts of geological data provided by the Company’s business units. There were significant improvements

in the timing of the delivery of the Reserves and Resources Statement by independent reserves auditors. The

Company has continued to make progress in addressing the observations from prior years with the result

that the Company was able to report its reserves and resources much more timely than in the past, allowing

additional time for consideration of the potential accounting impacts and therefore preparation of the annual

financial information.

Variables

considered:

The estimation of mineral reserves and resources requires significant judgement, not only in respect of

mineral physically in place but also metal price and cost assumptions used to determine the cut-off grade for

identifying economically-viable ore bodies. There is also judgement in developing and maintaining the mine

plans which estimate the timing and quantities of related production.

Sources of

assurance:

During 2023, the Committee continued monitoring the process and have observed improvements to align

more closely to International Practices, for example: the adoption of a new ore body modelling method (OSM),

enhancement of a cost model and geotechnical model. The SRK and AMC reports were again delivered on

time at the end of the year which allowed a robust analysis to be considered by the Committee.

Taxation and PTU (see note 11 to the financial statements)

Assessment

of risk:

The taxation of mining companies in Mexico has been the subject of much attention as reflected by a number

of tax inspections that are ongoing or have been initiated by the tax authorities. Some aspects of Mexican tax

legislation are open to interpretation. During the year, the Committee has continued to closely monitor tax

contingencies, in particular, the differences generated from prior years regarding the Silverstream contract and

received reports from management on ongoing discussions with the tax authorities.

Certain tax assets and liabilities are denominated in Mexican pesos and are revalued in US dollars during the

period, resulting in foreign exchange gains or losses which need to be taken into account when assessing the

tax charge for the period and the deferred taxes computation.

In accordance with the Mexican legislation, local companies also pay employee profit sharing (PTU) at the

higher of three-month’s salary or the average PTU received in the last three years. Due to the complexity of

computation and interpretation of some concepts, the base for PTU calculation is carefully reviewed.

Variables

considered:

The Committee reviewed the status and potential outcomes of tax audits commenced during the year and

ongoing dialogue concerning a previous agreement reached with the SAT. Further information is set out in

the Stakeholder Reporting (Government/Tax Authorities) section below. The Audit Committee also reviewed

reconciling items applied to accounting profit in determining profit subject to taxation and PTU as set out in

papers prepared by management.

218 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Sources of

assurance:

Throughout the year the Committee received updates on the status of tax inspections. Reviews of tax

related matters were also undertaken by internal audit. The Committee reviewed management’s supporting

memoranda on the consolidation of tax and PTU and sought EY’s views on the same. It ascertained the degree

to which judgements and adjustments are supported by internal and/or external subject matter experts and

ensured that they corresponded with information presented during the year prior to approving the relevant

disclosures in the annual report.

Ensuring that the annual report is fair, balanced and understandable

The Committee supports the Board in ensuring that the annual report is fair, balanced and understandable. The approach taken by the

Board in relation to the annual report and financial statements for the year ended 31 December 2023 is described on page 224 of the

Corporate Governance report. Different sections of the report were circulated to Board members during early February 2024 to provide

time for comments to be passed back to management. In addition, internal audit undertook a review of the non-financial reporting

(which is extracted from the Company’s operational records). In support of this process, prior to deciding whether to recommend them

to the Board for approval, the Committee also:

• Reviewed the annual report and financial statements, taking into account comments made and reports issued by EY and comments

discussed with management.

• Reviewed with management the different disclosures relating to climate change throughout the annual report and, in particular, the

TCFD reporting, including the statement of compliance.

• Discussed the annual report and financial reporting with the Company’s Chief Financial Officer.

• Discussed with internal audit points arising from their review of the principal non-financial numbers in the annual report.

Stakeholder reporting

The Committee plays a role in overseeing, on behalf of the Board, some key aspects of the Company’s reporting concerning its

relationships with key stakeholder groups.

Employees: The Committee reviewed the work of the Honour Commission in relation to matters raised via the whistleblower line (see

following section).

Government/Tax authorities: The Committee closely monitors the Company’s relationship with the SAT, with the status of any

outstanding tax audits reviewed at most meetings. The Committee receives regular reports from the Head of Tax on her interactions

with the SAT concerning current tax audits.

During 2023, the Committee reviewed the Company’s Payments to Governments data, published in June; and the Company’s UK Tax

Strategy Statement, published in November.

Environment/Climate: During the year, the Committee continued evaluating the role that it should play in overseeing the governance

of climate change and environmental risks. In particular, it was agreed that the Committee should work closely with the HSECR

Committee to ensure that the governance of climate-related risks and monitoring of KPIs associated with climate-related risks is

aligned between Fresnillo’s operations and financial reporting.

Whistleblowing

The ‘Línea Correcta’ whistleblower hotline allows stakeholders to anonymously report (via an independent third party) violations of

the Group’s Code of Conduct. The hotline is available for all stakeholders, including employees and third parties, so that any concerns

about misconduct or impropriety may be raised and dealt with appropriately. All matters raised via the hotline are processed by an

independent third party for review by the Honour Commission (which comprises the Chief Executive Officer, the Chief Financial Officer,

the Chief Operating Officer North, the Chief Operating Officer Central, the Compliance Officer, the Vice President of Exploration and

the Head of Legal). A summary of the whistleblowing cases, which also includes the decisions of the Honour Commission in relation to

each case, is reviewed by the Committee twice a year (February and July meetings) and the Chairman of the Committee gives a report

to the Board every six months on the key trends and steps taken as a result of these reviews. Changes to the format of reporting to the

Committee and the Board during the year have enabled the Board and Committee to better evaluate the reasons for the incidents

reported, although the trends remain consistent year-on-year.

In 2023, there were a total of 163 reports (compared to 113 in 2022). In 2023, 158 (96%) of the reports were concluded in the year with

the remainder, having been raised in the latter part of the year, still under investigation. Further details about the whistleblowing reports

in 2023 is set out in the Sustainability report on page 84. During the year, the Committee was satisfied that all matters had been or

continue to be properly investigated with appropriate action taken.

AUDIT COMMITTEE REPORT CONTINUED

Reporting continued

219

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StatementsGovernance

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Report

Assurance

External audit

Relationship with EY

EY was re-appointed as the Company’s auditor at the 2023 AGM. EY was originally appointed in 2008 and their appointment was re-

confirmed in 2016 following a rigorous external audit tender process in 2015-2016. The next tender process is currently expected to be

held in 2025. The current lead partner, Steve Dobson, has been in place since 2020. During 2023, the members of the Committee met

twice with representatives from EY without management present and once with management without representatives of EY present,

to ensure that there are no issues in the relationship between management and the external auditor which it should address. There

were none noted as a result of such discussions.

The Company was in compliance with the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of

Competitive Processes and Audit Committee Responsibilities) Order 2014 during the year.

External audit process

The key steps in the Committee’s interactions with EY during the period from 1 January 2023 to the date of this report were:

• The review of a report from EY providing their observations arising from the 2022 audit process and management responses to those

observations in April 2023.

• Discussion with EY of the findings from their review of the interim results for the period ended 30 June 2023.

• The review of the 2023 half-year representation letter given to EY.

• The review and approval of the external audit plan, fees and terms of audit engagement.

• The review of the results of the ‘hard close audit’ for the ten months to 31 October 2023.

• The review of the representation letter given to EY for the 2023 full-year audit.

• The review of EY’s report following completion of the audit for the year ended 31 December 2023.

Quality, objectiveness and independence of the external auditor: The Committee is mindful of its responsibility to ensure that the

external auditor maintains its independence and objectivity and is appropriately qualified with sufficient resources and expertise to fulfil

the role. The Committee specifically reviewed, and is satisfied with, the independence of EY as the external auditor based on disclosures

provided by EY in accordance with UK Ethical Standards for the audit profession. The Committee discussed the quality, objectiveness

and independence of the EY team with the Management Team and was satisfied that there were no concerns in this regard.

Non-audit services policy: The Committee has adopted a policy for the provision of non-audit services to the Fresnillo Group by the

external auditor (the ‘Policy’). The Committee has maintained an ongoing dialogue with EY during the year concerning the services

that it provides to the Company and the wider Peñoles Group to ensure that where such services are provided, they are in line with the

Policy or discussed with the Committee on a timely basis.

The current Policy permits the engagement of the external auditor to provide a narrow range of permitted services which are closely

related to the audit and/or required by law or regulation. Any engagement of the external auditor to provide permitted services above

US$5,000 is subject to the specific approval of the Committee. During 2023, EY provided audit-related assurance services in connection

with the review of the interim financial statements (US$568,000) including the climate-related non-audit service and tax opinion. The

ratio of fees paid for non-audit work in relation to audit work during the year was 0.34:1.00 (2022: 0.26:1.00).

Details of the fees paid to EY during the year are shown in note 28 to the financial statements.

Evaluation of the effectiveness of the external audit and the auditor

The Committee assesses the effectiveness of EY as its external auditor from two perspectives:

• Reviews of the work of EY’s UK practice, as a firm, undertaken by the Financial Reporting Council’s Audit Quality Review Team.

• Its own assessment of the effectiveness of the external audit process and the role played by both EY’s UK and Mexican teams in the

performance of the annual audit.

Audit quality review: The Committee reviewed the report of the FRC on its Audit Quality Review on EY as a firm and discussed with the

EY Audit Partner whether any of the FRC’s findings were relevant to the firm’s audit of the Fresnillo financial statements. The conclusion

from this review was that there were no major matters of concern to consider.

Audit Committee assessment of EY: Following the completion of the 2023 annual report, the Committee undertook a review of the

performance and effectiveness of EY at its April 2023 meeting. As part of this process, the Chief Financial Officer and Finance Team

were invited to provide their insights into their interaction with the EY teams during that process. The Committee concluded that EY

was performing well with an overall consensus being that the working relationship was good.

220 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Re-appointment of the external auditor

In February 2024, taking account of the reviews of the effectiveness of the external auditor, the Committee recommended to the Board

the re-appointment of the external auditor, EY at the Company’s 2024 Annual General Meeting. The re-appointment of the auditor will

be made subject to a review of proposed fees for the 2024 audit in July 2024.

Internal audit

The 2023 Internal Audit annual plan was approved by the Audit Committee in October 2022, incorporating audits across all of

Fresnillo’s business units with a focus on strategic priorities and key risks. Internal audit continued to deploy technology and apply

data analytics to achieve a satisfactory depth of audit coverage and gain deeper insights into Fresnillo’s risk and control profile. Internal

audit completed a number of risk reviews along with process and controls assessments focusing on efficiency, productivity, cost

management and regulatory compliance. Also, as every year, internal audit verified the validity, accuracy and completeness of the non-

financial information included in the 2023 annual report and reported the results to the Audit Committee at the beginning of 2024.

Due to the continued importance of cybersecurity and the evolving technology landscape, internal audit continue assessing aimed

at validating the design and effectiveness of Fresnillo’s cybersecurity, IT (Information Technology) and OT (Operational Technology)

processes and controls. The Audit Committee continues to review progress made in raising the level of cybersecurity maturity and

actions taken by management to ensure compliance with laws and regulations.

Towards the end of each year, internal audit presents the proposed annual internal audit plan and resourcing requirements for the

following year. The 2024 internal audit plan was presented to the Committee and approved in October 2023. The plan was developed

according to the International Standards for the Professional Practice of Internal Auditing, and considered the following:

Fresnillo’s strategic

plan

Enterprise risk

assessment (including

emerging risks)

Management’s

concerns

and previous internal

audit results

Universe of processes,

business units and

projects

Internal audit

annual plan 2024

shutterstock_411624148 shutterstock_736197394 shutterstock_1025305825shutterstock_1635254404shutterstock_1705437412

shutterstock_439569301

Since 2022, the internal audit plan includes planned audits relating to strategic priorities and higher-risk areas such as exploration,

ongoing capital projects, compliance with laws and regulations (e.g. environmental laws, labour law, permitting requirements), reserves

and resources procedures, Tailings Dam management, health and safety, taxes, cybersecurity and IT-OT processes and multi-risk

operational compliance processes at mines.

The Head of internal audit attended all Audit Committee meetings throughout the year. Members of the Audit Committee meet with

the Head of internal audit twice a year without management present.

At each meeting during the year, the Audit Committee also monitored the progress made by management in addressing ‘red flag’

items (i.e. relevant control observations) identified through internal audit work. The Audit Committee’s focus is to ensure that the

management responses to remediation are appropriate, and that timely progress is made in reducing the number of red flags

over time.

In addition, the Audit Committee monitored the quality of the dialogue between internal audit and the Executive Committee in

reviewing internal audit findings and agreeing action plans with appropriate levels of operational buy-in to address the points raised.

The Audit Committee met with the Chief Executive Officer and Chief Operating Officer (before the role split) several times during the

year to review the outstanding internal audit points and is satisfied with the progress achieved through this dialogue.

At the end of the year, the Audit Committee carried out an evaluation of the performance of the internal audit function, based on a

focused questionnaire, and was satisfied with the outcome.

AUDIT COMMITTEE REPORT CONTINUED

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Risk and Controls

Risk

The Committee monitors how the Company’s risk management framework is operating. Operational responsibility for risk lies with line

management (details of the risk management system are set out on pages 151-155). The Audit Committee discusses potential changes

to the Group’s risk profile through its regular reviews of the Risk Matrix and its consideration of any associated recommendations from

management proposing changes to the Risk Matrix to take account of changing and emerging risk. The Company defines emerging

risk as: ‘A new manifestation of risk that cannot yet be fully assessed, risks that are known to some degree but are not likely to

materialise or have an impact for several years or a risk that the Company is not aware of but that could, due to emerging macro

trends in the mid or long-term future, have significant implications to achieve the organisation’s strategic plan.’

The emerging risks were evaluated and reviewed by the Committee during the year. The Committee also considered that monitoring of

two new emerging risk areas needed to be added for 2024 these were: (i) the impact on the Company’s operations of water stress and

drought; and (ii) geopolitical instability.

The Principal Risks and Uncertainties are reviewed every six months prior to the publication of both the interim and full-year reports.

The Committee assessed the increased risk of potential actions by the government arising from the new Mining Law and the Labour

Law, which contain relevant implications for mining operations and projects. In addition, the Committee recommended monitoring

the following principal risks:

• Security: Increase in organised crime in the vicinity of all mining units and high-impact crimes (homicide, kidnapping and extortion)

in the regions where we operate, mainly Zacatecas, Guanajuato and Sonora.

• Safety: Increased incidents in mining operations such as rock falls, interaction with heavy mobile equipment, roadkill, electrocution, etc.

• Climate change: Increased regulatory requirements for environmental impact.

Finally, the planned developments in UK regulatory matters relating to Corporate governance and FRC Guidance on audit were

considered, as were the Company’s initiatives to prevent fraud with updated internal controls.

Ethical risk

The Committee monitors the Company’s Ethics and Compliance programme through regular reviews of progress with the Group’s

ABAC programme (including not just the online training programme but also consideration of reports received through the

whistleblowing line). This demonstrates that the Group’s corporate values and elements of the control culture in relation to ethics

remain embedded throughout the organisation. To this end, during the year the Committee received reports on: the roll-out of training

in relation to the disclosure of conflicts of interest; the Code of Conduct; Step-Up culture and harassment.

The Company widened the evaluation of its fraud risk assessment process to reinforce the controls to prevent and detect material fraud.

Although the Company has always maintained a firm commitment to prevent and detect fraud through well-established practices

and procedures, the Committee has been working closely with internal control and internal audit areas to identify any perceived

weaknesses. The external auditors also expanded their procedures in this area.

In 2023. the Company carried out an externally-facilitated ISO 37001 audit to assess the conformity of the Company’s ABAC programme

with ISO standards (in line with the UK Ministry of Justice Guidance). Further information about the Company’s approach to bribery and

corruption is set out on pages 85-86 of the Strategic report.

Financial risk management

The Company’s objectives and policies on financial risk management including information on the Company’s exposures to market risk,

such as foreign currency, commodity price, interest rate, inflation rate and equity price risks, credit risk and liquidity risk can be found

in note 16 to the financial statements. During the year, the Committee reviewed the Company’s Treasury Policy and concluded that no

further changes were required.

Non-financial risk areas

The Committee regularly reviews and receives management updates on current issues and developments that could have potential

to give rise to specific risks. In this, the Committee is guided by regular updates it receives from management on specific issues that

it considers should be kept under review. Thus, during 2023, regular reports were received on legal matters (including land titles and

litigation) and a review of the Group’s compliance with mining licence conditions at each of its business units. Where new potential

areas of risk are considered by management as part of their regular reviews of the Risk Matrix, the Committee may request further

bespoke updates from management to supplement its general review of risk and internal controls. No new areas of non-financial risk

were identified during 2023.

Information technology

In 2023, the Committee continued to receive updates on the Group’s IT strategy, its linkage to the Group’s overall business strategy and

the financial implications of that strategy for the business plan. It also monitored the progress of the Peñoles and Fresnillo Management

Teams in developing the cybersecurity framework for the Group. Further information about the Group’s approach to IT is set out on

pages 86 and 171 of the Strategic report.

222 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Going concern

The Directors must satisfy themselves as to the Group’s ability to continue as a going concern for a minimum of 12 months from the

approval of the financial statements. The Committee supported the Board in this assessment by considering whether the Company

has adequate liquid resources to meet its obligations as they fall due. In February 2024, the Committee reviewed the Group’s budget

and cash flow forecasts for the period to 31 December 2025, taking into account the Company’s anticipated production profiles at

each mine, budgeted capital and exploration expenditure and the sensitivity of the cashflow forecasts to movements in metals prices,

including stress testing those forecasts to identify the levels to which metals prices must fall to put pressure on working capital levels.

The Committee also considered EY’s report on this assessment and on the reasonableness of assumptions therein, including their

consistency with assumptions and estimates used elsewhere in the preparation of the financial statements. The Committee also

challenged management on the feasibility of the mitigating actions and the potential speed of their implementation. Following this

assessment, the Committee satisfied itself that the going concern basis of preparation is appropriate and the financial statements

appropriately reflect the conclusions on going concern. The going concern statement is set out in the Strategic report on page 185.

Viability assessment

The Executive Team has developed a comprehensive approach to the viability assessment which is then reported in the Viability

Statement. The key steps of this approach are explained within the Viability Statement, which is set out in the Strategic report on pages

184-185. In December 2023, the Committee received an update on the approach the Executive Team proposed to take in preparing

the Viability Statement and confirmed that the scenarios presented in the previous year and the addition of a new scenario related to a

possible strike at the Herradura mine, given the background in May 2023, are maintained for the purposes of the Viability Statement.

In February 2024, it reviewed the proposed Viability Statement. It also considered the potential steps that could be taken to mitigate

the cashflow impacts arising from the most negative scenarios (including delaying project capex or reducing exploration expenditure).

Internal control

The Committee assists the Board in monitoring the effectiveness of the Company’s internal control environment. This monitoring

includes oversight of all material controls including financial, operational, regulatory and compliance. To accomplish this, there is a

governance and organisational structure in place where internal control is secured by three lines of defence: process owners (1st line);

committees, controllers, risk management and other oversight bodies (2nd line); and internal audit (3rd line). During the year, the

Committee considered each of the quarterly internal control reports which were then circulated to the full Board for its review. At the

end of the financial year, the Committee oversaw the annual process for monitoring the Group’s system of internal controls. In this task,

the Committee is directly supported by the independent work of the internal audit team.

Quarterly internal control reports

During 2023, the Committee continued to review each of the quarterly internal controls reports which were prepared and submitted

to the Board at each of its regular meetings. This document specifically reports on developments in the Key Risk Indicators and the key

internal control issues arising from the quarterly internal audit reports. From time to time, the Committee has proposed changes to

those reports based on its own discussion of internal audit’s findings.

Annual review of the system of internal controls

The Committee undertakes an annual review of the Group’s system of internal controls in accordance with Provision 29 of the Code.

This review aims to improve the understanding of how the various sources of assurance (through the three lines of defence) interact in

the review and execution of material controls by identifying and addressing any gaps in the control framework. Consequently, once a

year, the Committee oversees the review of the Group’s system of internal controls through an assessment, conducted by management

of the various sources of assurance over the execution of material internal controls. This is a comprehensive review incorporating

operational management, financial management and Executive Management; along with the independent assessment of material

risks and internal controls by internal audit within the third line of defence. This approach underpins assessment of the ongoing

effectiveness of the Group’s system of internal controls and the Committee provides oversight of this process.

Remediation actions arising from the control exceptions identified throughout the year were those related to: (i) continuing to

improve the effectiveness of the reporting system on water consumption; ii) enhancing operative discipline and training for safety and

environment processes; (iii) improving some IT security controls in mines; and (iv) strengthening cost controls on capital project processes.

The Chief Executive Officer, Chief Operating Officer (before the role split) and other senior managers were invited to meet with the Audit

Committee to discuss their action plans and progress for remediating the issues identified.

On the recommendation of the Audit Committee, the Board agreed that the following statement be made about the review of the

system of internal control in the 2023 annual report.

Risk and Controls continued

AUDIT COMMITTEE REPORT CONTINUED

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The Board has, through the Executive Committee and the Audit Committee (at its February 2024 meeting), reviewed the effectiveness

of the Group’s system of internal controls. Following this review, the Board considers that the measures that have been or are planned

to be implemented, particularly those specifically highlighted in this report, complement Fresnillo’s risk management framework

and are appropriate to the Group’s circumstances. The Board is committed to the continued development of its internal control

regime with a view to achieving and maintaining best practice levels of risk management and internal control for international mining

companies listed on the London Stock Exchange.

Related parties

With the Company’s Parent Company, Peñoles, owning just under 75% of the issued share capital of the Company (see page 246), it

has and will continue to have a significant level of influence over the affairs and operations of Fresnillo. Being part of the same Group

provides an opportunity to achieve synergistic operational, financial and administrative improvements by combining the resourcing

of common services that can be shared between Peñoles and Fresnillo. Although these arrangements are beneficial to Fresnillo, the

Committee performs a role in overseeing these arrangements to ensure that they continue to operate impartially.

The principal arrangements entered into between the Company and related parties and reviewed by the Committee during the

year were:

The Met-Mex

agreement

As it does every year, the Audit Committee considered the reasonableness of proposed treatment and refining

charges in respect of the Met-Mex arrangements for 2023, as disclosed in note 5 (c) to the consolidated

financial statements. Management circulated a paper setting out the methodology to determine the charges,

which takes industry benchmark charges and adjusts to reflect ore composition and transport costs. The same

methodology used in 2023 was used as in the previous three years. The Committee reviewed this paper and

recommended approval of the proposed charges by the Independent Directors at the Board meeting in

October 2023.

As part of its review of the Met-Mex arrangements, the Committee also confirmed with management that the

transfer pricing assessments in respect of prior year transactions (which are undertaken for tax reasons by the

Group’s external adviser, PWC), had been completed with no issues noted. A similar assessment in respect of

the 2023 transactions will be received in due course.

Other agreements

There are other dealings with related parties in the ordinary course of business (e.g. insurance brokerage)

which, although not requiring approval by Independent Directors, will from time-to-time be reviewed by the

Committee to ensure that the arrangements are on a reasonable arm’s-length basis. During the year, the Audit

Committee reviewed the annual insurance renewal for which Grupo Nacional Provincial, S.A.B., a related-party,

acted as broker.

The Shared Services Agreement is an agreement between the Company and Peñoles which sets out, on an arm’s-length basis, the

basis, and terms under which several categories of services are provided to the Company by Peñoles (through Baluarte Minero, a

specialised services unit within Peñoles). The Shared Services Agreement was renewed with effect from 1 January 2023 and must be

renewed every five years. Internal audit conducts reviews of approximately one-third of main services provided each year to ensure that

these services are provided in accordance with the agreed KPIs. As a result, all services are reviewed by internal audit over a three-year

cycle. Internal audit reports to the Committee on its review of the Shared Services Agreement.

The Audit Committee concluded that the new five-year Shared Services Agreement was reasonable in all respects and was satisfied

that new rates were agreed between both parties, taking into account the market price study performed by KPMG, and therefore

recommended that the Independent Non-executive Directors approve signing of the Shared Services Agreement by the Company,

which they did at the Board meeting in July 2023.

The following table summarises the approach taken to identify and manage related-party transactions under the Relationship Agreement.

Process

How this is managed Responsibility

Monitoring of Directors’

interests

If a Director has an interest in a company that could potentially

enter into transactions with a Fresnillo Group Company, the Board

will normally consider that interest under its arrangements for

authorising conflicts of interest under s175, Companies Act 2006.

Directors

224 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Process

How this is managed Responsibility

Contract negotiation

and verification

The best possible commercial terms are negotiated by management

and, where possible, they will seek to verify them against international

benchmarking reports and/or independent valuation or assessment.

Fresnillo Executive

Committee and

management

Financial scrutiny

Review of the key financial terms of any major transaction which are

verified where possible as to price and quality by external consultants

or independent benchmarking.

Audit Committee

Independent Director

approval

Under the Relationship Agreement and the Listing Rules, the

Independent Non-executive Directors must approve any transaction

with the Peñoles Group or its associates without the Non-

independent Directors voting.

Independent Non-

executive Directors

Ensuring that the annual report is fair, balanced and understandable

In relation to the annual report and financial statements for the year ended 31 December 2023, there are a number of steps that the

Board undertook to ensure that the annual report is fair, balanced and understandable. An explanation of the process adopted in

preparing the annual report and analysis of the basis upon which each requirement for it to be ‘fair’, ‘balanced’ and ‘understandable’

had been met was summarised in a paper which the Board reviewed at its meeting on 28 February 2024. The key features of this

process were:

• The narrative sections of the annual report were drafted by the members of the team with specific responsibility for the areas referred

to in the sections that they prepare. The individuals involved included the Head of Investor Relations, the Head of Risk, the Head of

Sustainability, the Compliance Officer and Head of Legal, Company Secretary and Mine Managers.

• As narrative sections of the annual report were prepared, copies were circulated to Board members for review and comment. Such

comments were incorporated into updated versions of the annual report.

• About a month prior to the annual report being approved by the Board, members of the Audit Committee and other Directors

reviewed a current draft enabling them to assess whether the information was consistent with their understanding of the Company’s

business and the nature and content of discussions at the Board during the year. Comments were received from the Directors

on most areas of the annual report, and these were incorporated into subsequent drafts of the annual report. The sections of the

annual report which were particularly commented on included: the operations reporting, the Sustainability report and climate-

related disclosures in particular, the presentation of information on diversity and inclusion and the presentation of health and

safety information.

• Suggested changes put forward by the Directors, based on knowledge obtained through Board and Audit Committee papers

and discussion and other interactions with management were considered by management in preparing the final version of the

annual report.

• The disclosures relating to climate change, in particular the TCFD statements, were reviewed by members of the Board to ensure that

they were consistent with the approach and discussions relating to climate-related change at Board and Committee (particularly the

Audit Committee and HSECR Committee) levels.

• At the same time, internal audit undertook a review exercise of the principal non-financial numbers in the annual report which are

extracted from the Company’s operational records and their findings were appropriately reflected.

• The Audit Committee also reviewed the annual report and financial statements, taking into account comments made and reports

issued by EY and decided to recommend them to the Board for approval.

As a result of the above procedures, the Board considers that, taken as a whole, the annual report is fair, balanced and understandable.

The Corporate Governance report which is set out on pages 188-248 has been approved by the Board of Directors of Fresnillo plc.

Signed on behalf of the Board.

Alberto Tiburcio

Independent Non-executive Director

4 March 2024

Risk and Controls continued

AUDIT COMMITTEE REPORT CONTINUED

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REMUNERATION

REPORTING ON THE APPLICATION OF THE PRINCIPLE:

REMUNERATION

Principle P:

Remuneration policies and practices

should be designed to support strategy

and promote long-term sustainable

success. Executive remuneration should

be aligned to company purpose and

values and be clearly linked to the

successful delivery of the company’s

long-term strategy.

The alignment of the Group’s executive

remuneration to the business model is

described in the following report.

Principle Q:

A formal and transparent procedure

for developing policy on executive

remuneration and determining director

and senior management remuneration

should be established. No director

should be involved in deciding their own

remuneration outcome.

The process for determining executive

remuneration is described on page 226

and is detailed in the Remuneration

Committee’s terms of reference

which are available on the Company’s

website. Appropriate consultation with

shareholders is undertaken when the

Committee considers that a change to

the Remuneration policy is needed.

Principle R:

Directors should exercise independent

judgement and discretion when

authorising remuneration outcomes,

taking account of company and

individual performance, and

wider circumstances.

The Remuneration policy, approved by

shareholders, details the level of discretion

that the Remuneration Committee has

when agreeing variable compensation pay

outs for Executive Management.

226 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT

Remuneration at a glance

Remuneration Policy in summary

The Company currently has no Executive Directors; however, as the Company has previously done, we treat the Chief Executive Officer

as if he were an Executive Director for the purposes of the Remuneration Policy and for reporting on his remuneration.

Objective of the Remuneration policy

What does the Policy seek to achieve?

The Group’s Remuneration policy seeks to ensure that the Company is able to attract,

retain and motivate its Executive Directors and members of the Executive Committee. The

retention of key management and the alignment of management incentives to the Group’s

purpose are essential objectives of this Policy.

Components of Directors’ remuneration

How is executive remuneration structured?

Component

Salary Bonus Benefits Pension

Rationale

Setting base salary levels

for Executive Directors and

members of the Executive

Committee at an appropriate

level is key to managerial

retention in Mexico. Salaries are

positioned within a range of

possible salaries according to

experience and length of service.

Ordinarily, subject to

performance, the same

percentage will be applied

to salary increases across

the Company for senior

management and other

employees alike.

The annual bonus rewards

the achievement of financial

and strategic business targets

and the delivery of personal

objectives. Annual bonus is

capped at six months’ salary

and is paid on the basis

of metrics set out in the

Remuneration policy.

Benefits are provided in line

with the Group’s policy on

employee benefits.

The Group operates a defined

contribution scheme for all

employees. Executive Directors

and key management are

entitled to membership of the

defined contribution scheme.

Additional features of Fresnillo’s Remuneration Policy

Component

Long-term incentives Share-based remuneration

Component

Shareholding guidelines Recovery of bonus

Rationale Rationale

The annual bonus scheme

sets targets which are aligned

to the Company’s long-term

strategic objectives so that

these priorities are embedded

within the day-to-day activities

of our business. The Company

does not operate a long-term

incentive plan.

The Company does not

use share-based forms of

remuneration because they

have not been a common form

of remuneration in Mexico.

In the absence of share-

based incentive schemes,

the Company does not

adopt shareholding

guidelines for executives.

The absence of long-term

incentives and the operation

of Mexican law makes it

difficult to adopt claw-back

and malus arrangements.

There is, however, scope

within the bonus scheme

for bonus awards to be

adjusted downwards

at the discretion of the

Remuneration Committee.

Objective of the annual bonus

What does the annual bonus seek to achieve?

The annual bonus is set for, and based on, performance over a single-year period but

the KPIs and targets are also designed to ensure that both short-term objectives and the

long-term development of the Fresnillo Group are given broadly equal priority within

variable remuneration.

Strategic priorities

Relevant bonus metrics

227

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Alignment of the Remuneration Policy to purpose and strategy

Key components of the annual bonus in 2023

What was achieved?

Our Purpose is to contribute to the wellbeing of people,

through the sustainable mining of gold and silver

EXPLORE

Extend and maintain a

robust growth pipeline.

DEVELOP

Deliver profitable

growth, optimise

cashflows and returns.

OPERATE

Maximise the potential

of our operations.

SUSTAIN

Advance and enhance

the sustainability of

our business.

• Replenishment and

expansion of reserves

and resources.

• Exploration projects

progress.

• Development

projects progress.

• Contractors’

performance.

• EBITDA.

• Production – increase

in ounces produced.

• Synergies and

teamwork.

• Management of

contractors.

Employees/

Contractors

• Safety (various

metrics).

• Labour relations.

Communities

• Project-based

metrics.

Environment

• Environmental risk

management.

Shareholders

• EBITDA.

2023 2022 Change (%)

Performance

EXPLORE

Total silver reserves (moz) 356.6

396.1 (10%)

Total gold reserves (moz) 7.1

8.2 (13%)

DEVELOP

EBITDA (US$m) 655.7

744.0 (12%)

Profit for the year (US$m) 288.3

299.7 (6%)

OPERATE

Silver production (moz) 56.3

53.7 5%

Gold production (koz) 610.6

635.9 (4%)

SUSTAIN

Total relevant environmental incidents 0

0 0%

Fatalities 4

1 300%

CEO’s remuneration

Total salary (US$000) 1,111 921 20.63%

Bonus (US$000) 0 0 0%

228 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Dear shareholder

I am delighted to introduce the Directors’ Remuneration report.

This year has been a year of reflection for the Remuneration

Committee. We continue to welcome the support of our

shareholders for our remuneration arrangements, and I was

pleased to see that this support was again strongly demonstrated

at our 2023 AGM. I would like to specifically thank our shareholders

for their support in approving the latest changes to the Directors

remuneration policy at that AGM.

For some time, however, the Remuneration Committee has

been considering whether the annual bonus arrangements for

our senior Management Team could be better aligned to our

strategy. As the Company moves from a phase of rapid growth to

one of consolidation, we believe that some realignment would

be helpful. In 2023 we introduced minor changes to the KPIs to

calculate the annual bonus to Executive Committee members

and we are planning to review them again in 2024 to complete

the alignment of these with our strategy.

The 2024 targets, performance against those targets and the basis

of calculation of bonus points awarded will be disclosed in next

year’s report.

In our Remuneration report, we continue to publish remuneration

information in respect of our Chief Executive Officer as if he were

a member of the Board, even though that is not the case. As ever,

I am always interested to hear the views of shareholders on our

approach to executive remuneration.

During the year, we have applied the Remuneration Policy to

executive remuneration without needing to exercise any form

of discretion other than those elements of the executive bonus

plan which require an element of judgement in determining

outcomes for the year.

Members and meetings in 2023

Meetings

attended

Alejandro Baillères

4/4

Alberto Tiburcio

4/4

Guadalupe de la Vega

4/4

The Remuneration Committee

considers that its approach to

executive remuneration incentivises

the right priorities for our Executive

Team for the benefit of stakeholders.”

DIRECTORS’ REMUNERATION REPORT CONTINUED

Chairman’s Annual Statement

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Salaries, bonus and our application of the Remuneration

policy in 2023

Levels of salary increase for our Executive Directors and the

Executive Committee continue to be aligned to the level of

increase for all employees. The CEO’s pay, and that of his Executive

Team, was increased in line with the rest of the workforce.

The Committee decided in February 2024 that the Chief Executive

Officer should not receive any bonus under the Annual Bonus

Plan because his total points did not meet the minimum level at

which bonuses are paid, and did not consider that there were any

circumstances which justified the use of its discretion to make any

adjustments to the points outcome’ or similar.

Committee discussions during 2023

In the last 12 months, the Remuneration Committee met four

times and its discussions and decisions included the following:

• Review of the performance of the Chief Executive Officer and

members of the Executive Committee compared to the KPIs

set for 2022 and 2023.

• Review of KPI targets for the Chief Executive Officer and

members of the Executive Committee for 2023 and 2024.

• Review of the Non-executive Directors’ fees. Due to the fact that

there had not been a general increase in the Non-executive

Directors’ fees for the past few years, a general increase of 20% in

the fees paid to Non-executive Directors was approved effective

on 26 July 2023. No fees increase is considered for 2024.

• Discussion of the review of the Committee undertaken internally.

• Review and revision of the terms of reference of the Committee

in response to UK regulatory developments.

I am always happy to discuss our approach to remuneration with

shareholders and will attend the 2024 AGM to answer questions

on this report. I would be happy to speak with any shareholders

who have questions about the work of the Committee.

Yours faithfully,

Alberto Tiburcio

Chairman of the Remuneration Committee

230 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Annual report on remuneration 2023

Introduction

This report sets out information about the remuneration of the Directors and Chief Executive Officer of the Company for the year ended

31 December 2023. In accordance with the regulations, the information provided in the section entitled ‘Directors’ remuneration –

1 January 2023 to 31 December 2023’ and accompanying notes, has been audited by Ernst & Young LLP.

The Remuneration Committee has responsibility for making recommendations to the Board on the Group’s Remuneration Policy

for Executive Directors and the Chief Executive Officer and other members of the Executive Committee, and for determining specific

remuneration packages for senior management, including pension arrangements and any compensation packages, as well as

remuneration of the Chairman within agreed terms of reference.

Audited information – Directors’ remuneration – 1 January 2023 to 31 December 2023

Single total figure of remuneration

The detailed emoluments received by the Executive and Non-executive Directors and the Chief Executive Officer during the year ended

31 December 2023 are detailed below:

US$ thousands

2023 2022

Salary/

Fees Benefits Bonus Pension

Total

fixed

pay

Total

variable

pay Total

Salary/

Fees Benefits Bonus Pension

Total

fixed

pay

Total

variable

pay Total

Chairman

Alejandro

Baillères 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Non-executive

Directors

Juan Bordes 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Arturo Fernández 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Bárbara Garza

Lagüera 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Charles Jacobs 122 0 0 0 122 0 122 110 0 0 0 110 0 110

Georgina Kessel 54 0 0 0 54 0 54 49 0 0 0 49 0 49

Judith

Macgregor 122 0 0 0 122 0 122 110 0 0 0 110 0 110

Fernando Ruiz 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Alberto Tiburcio 68 0 0 0 68 0 68 61 0 0 0 61 0 61

Guadalupe de la

Vega 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Eduardo Cepeda 47 0 0 0 47 0 47 43 0 0 0 43 0 43

Héctor Rangel 47 0 0 0 47 0 47 49 0 0 0 49 0 49

Total 749 0 0 0 749 0 749 680 0 0 0 680 0 680

Chief Executive

Officer

Octavio Alvidrez

1,111 157 0 102 1,370 0 1,370 921 120 0 (125) 916 0 916

Grand total

1,860 157 0 102 2,119 0 2,119 1,601 120 0 (125) 1,596 0 1,596

1 Details of benefits and the bonus paid to Mr Alvidrez are set out in the tables below.

2 The Company does not operate a long-term incentive plan or any share-based incentives.

Benefits

The Chief Executive Officer participates in the Company-wide benefits scheme. The benefits provided to Mr Alvídrez during the year

consisted of:

US$ 2023 2022 2023 2022

Life insurance premiums 65,023 50,425 Medical insurance premiums 9,373 6,265

Chauffeur 61,561 47,174 Club memberships 3,498 2,583

Subsistence/meal benefits 3,306 3,605 Social security 1,444 1,183

Car 12,928 8,558

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Pension

The pension entitlement of the Chief Executive Officer is as follows and is explained further on page 234:

US$‘000 Defined Contribution Scheme (DCS) Defined Benefit Scheme (DBS)

Rights as at 31 December 2023 1,338 951

Additional benefit in the event that the

Chief Executive Officer retires early.

In the event of early retirement, Mr Alvídrez

is entitled to receive his accumulated

contributions (both member and

Company) to the DCS.

Mr Alvídrez is not currently entitled to any

additional benefit on early retirement in

theDBS.

US$ thousands

Accumulated accrued benefits (as at

31 December)

Increase (decrease) in accrued benefits

during the year (see note)

Increase (decrease), before inflation

and the effect of foreign exchange, in

accrued benefits during the year

2023 2022 2023 2022 2023 2022

Octavio Alvídrez 2,129 1,704 334 (91) 12 (191)

Note: The increase in accrued benefits during the year includes a revaluation effect of +US$256k (2022: +US$21k) and inflation of +US$56k (2022: +US$79k).

Shares held by Directors

The number of Ordinary Shares of the Company in which the Directors were beneficially interested at 1 January 2023 and at

31 December 2023 was:

1 January

2023

31 December

2023

Director

Alejandro Baillères

552,595,191 552,595,191

Juan Bordes 15,000 15,000

Arturo Fernández – –

Bárbara Garza Lagüera – –

Charles Jacobs 1,600 1,600

Georgina Kessel – –

Dame Judith Macgregor – –

Fernando Ruiz 30,000 30,000

Alberto Tiburcio – –

Guadalupe de la Vega – –

Eduardo Cepeda – –

Hector Rangel – –

Chief Executive Officer

Octavio Alvídrez – –

1 Mr Alejandro Baillères is beneficially interested in more than 50% of the share capital of the Company through his interest in Industrias Peñoles S.A.B. de C.V. (‘Peñoles’). The

Company and Peñoles are part of the consortium known as Grupo BAL which is now controlled and directly or indirectly majority-owned by a Baillères Family Trust, Mr Alejandro

Baillères being the major beneficiary. Mr Alejandro Baillères and companies controlled by him hold, in aggregate 68.9% of the issued share capital (and voting rights) of Peñoles.

Peñoles holds 552,595,191 Ordinary Shares (74.99%) of the issued share capital in the Company.

Our stakeholders and remuneration

The Committee seeks to ensure that its approach to executive remuneration matters is aligned with the interests of all of its key

stakeholders. In particular, the current Policy seeks to take account of the interests of our key stakeholders in the following ways:

Shareholders

• Feedback from major shareholders and proxy voting agencies provided prior to the AGM is considered by the Remuneration

Committee in the course of its discussions during the following year.

Workforce

• Salary reviews for the members of the Executive Committee are decided after taking account of the average salary increases

discussed and agreed with the unions.

• Metrics that promote good employment practices, e.g. appropriate management of health and safety and the relations with

unionised employees and contractors, are included in the targets for the Annual Bonus Plan.

Communities and environment

• Metrics that promote good community relations and sound environmental stewardship are included in the targets for the Annual

Bonus Plan.

232 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Annual report on remuneration 2023 continued

Salary

Factors considered in setting salary and workforce engagement on remuneration

Policy on the consideration of wider employment conditions and remuneration

When setting pay and benefits for Executive Directors and members of the Executive Committee, the Remuneration Committee

takes account of pay and conditions across the Group. It will consider the overall pay increase percentage negotiated each year

with employee representatives as its starting point taking account of inflation and other information supporting the annual pay

award for employees.

Benchmarking information on pay and employment conditions provided by Mercer, Hay Group and Data Compensation was used

across the Group in determining salaries for all employee grades including senior management. These reports benchmarked salaries by

reference to peer groups in mining, large companies in Mexico and internationally.

The Company negotiates salary increases with the unions annually, to take effect from 1 April each year. The agreed rates may also be

used as the point of reference in setting the annual salary review for the Chief Executive Officer, members of the Executive Committee

and non-unionised employees. In 2023, it was agreed that the Chief Executive Officer would receive a salary increase of 7.8% in 2023 in

line with other employees. Consequently, the salary payable under Mr Alvídrez’ service agreement is MX$1,172,462.6 per month, which

excludes payments for holidays, Company-paid savings contributions and other cash benefits.

Policy on the alignment of executive remuneration and the market

Reviews of the Executive Director and Executive Committee members’ remuneration is conducted by Willis Towers Watson

from time to time at the request of the Remuneration Committee. These enable the Remuneration Committee to validate the

Company’s policy towards remuneration and ensure that it is globally as well as locally competitive. The analysis evaluates the

elements of base salary, short-term compensation (guaranteed payments and short-term bonus) and long-term compensation

(primarily stock programmes) separately. With assistance from Willis Towers Watson, the Remuneration Committee has established

a peer group which will be used to benchmark any Executive Director’s and any Executive Committee member’s remuneration

(the ‘Peer Group’) to ensure that it remains within the parameters set out in the policy.

The Peer Group will be updated where necessary, to ensure that it remains an appropriate comparator group of companies.

Benchmarking

The Remuneration Committee has agreed that the Chief Executive’s salary should be set within a range of 25-75% of the Peer Group for

base salary. This was reviewed in October 2023. The Peer Group consists of the following companies.

Policy benchmarking Peer Group

Region Peer Group companies

Mexico Southern Copper (Peru)*

Alamos Gold

US/Canada Agnico Eagle Mines Ltd

Centerra Gold

Hecla Mining Co.

IAM Gold

Newmont Goldcorp

Pan American Silver Corp.

Capstone Copper Corp.

Europe Hochschild Mining

Antofagasta

Variable remuneration

Policy on Annual Bonus Plan and variable remuneration

It is the Company’s policy not to use its equity to incentivise long-term performance. The Company’s core strategy is one of long-

term sustainable growth. Sustainable growth in mining requires the steady and safe expansion of the Group’s operations through

the discovery of new resources and construction, maintenance and/or expansion of new mines. No distinction is therefore made

between short and long-term incentives.

Factors considered in setting the bonus

The Annual Bonus Plan includes metrics and targets which are aligned to at least one of the four main themes of the Group’s strategy

(see remuneration at a glance section on pages 226-227).

The Remuneration Committee has set a cap on each of the KPIs (other than the Safety KPI) such that the points awarded on any KPI

(other than Safety) cannot exceed 135% of the target set for that KPI at the beginning of the year.

233

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Annual bonus

Mr Alvídrez achieved 56.8 points under the bonus scheme for the year ended 31 December 2023 (2022: 63.6 points) and therefore did

not receive a bonus for 2023 (2022: nil).

The objectives, the measures associated with each objective, and the relative weighting between objectives, as applied to Mr Alvídrez’

annual bonus payment, are detailed in the following table:

Objective

Measure

Weighting

points

2023

Target

2023

Result

Points

awarded

Financial

(Adjusted EBITDA for the year/Budgeted EBITDA) x 100

20 808 576 0.0

Production

Increase in silver equivalent ounces produced compared to the

prior year production level 20 122.8 117.8 15.9

Exploration

Increase of total resources

(total resources for the year – total

resources prior year) x 100 5 0.5 -0.21 0.0

Upgrade from inferred to measured and indicated (MI) resources

(MI resources for the year – MI resources prior year) x 100

5 0.5 -0.4 0.0

Reserves replenishment

(Reserves at year end/Reserves prior year) x100 5 100% 88% 4.4

Compliance with

cost control vs

budget

Corporate + Admin. expenses + Adjusted production cost

Note: Staying in budget: 11 points

1 points for each additional 1% reduction

1 point less for each 1% increase 11 10% 10% 1.4

Exploration projects’

progress

Progress compared to project plan for three key development

projects (to be reviewed each year) 2 90% 68% 1.5

(maximum 20% increase reaching 100% of the programme) 2 90% 90% 2.0

Proportional decrease to 0 points below 90% progress

1 90% 117% 1.2

Projects

Progress according to programme (Real vs Plan) (to be reviewed

each year) 3 90% 101% 6.0

3 points at 95% programme – Proportional to 6 points at 100%

4 100% 103% 5.2

Unionised labour relations (discretionary award)

(Score: 100 – Best relationships …to... 0 – Worst relationships) 2 90.0 90.0 2.0

Safety

Fatal accidents

0 0 4 0.0

Sustainability area plan progress in implementing the safety plan

for the year

(Target = 95% progress: Maximum = 100% progress,

proportional decrease to nil points from 95% to 0%) 3 95% 95% 3.0

Reduction in the Lost Time Incidence Ratio

compared to

previous year (Including contractors) 3.5 5.33 7.38 2.3

Reduction in the Incidence Frequency Rate

compared to

previous year (Including contractors) 3.5 10.26 12.06 2.9

ESG

Determined by Fresnillo coordinator and Chairman HSECR

Committee according to annual programme. 5.0 5.0 5.0 5.0

Water consumption (m

/Tonne)

2.5

0.380 0.418

2.3

emissions (CO

/Tonne)

2.5

0.025 0.025

2.5

Synergies and

teamwork

Increase collective teamwork

Discretionary target as agreed by the Chairman

1 95 95 1.0

Total 100 58.5

Adjustments

Safety

0 4

-1.8

Environmental

0 0

0.0

Other:

Special adjustment due to special/extraordinary events,

determined by the Remuneration Committee

(maximum 15 points) 0 0 0 0.0

Total 100 56.8

1 The performance evaluation’s items, weights and targets (Budget) will be determined in a yearly basis according to the strategic plan.

2 Metal Prices, Silverstream and Devaluation effects will be eliminated.

Budgeted Metal Prices: Gold – 1,775 US$/oz; Silver – 21.85 US$/oz; Lead – 0.92 US$/lb; Zinc – 1.30 US$/lb Budgeted exchange rate: 20.00 MX$/US$

Increase of 1.0 point per each 1% increase in EBITDA. Decrease of 1 point in case of a 1% decline in EBITDA.

3 Total production in silver equivalent ounces. Silver production + (Gold production X 70) + Lead and Zinc production converted into Silver equivalent ounces at prevaling price and

NSR terms). Same conversion rate will be used for real production and target.

Total production = 59.7 moz Silver + (0.622 moz Gold X 70) + (62,231 Lead Tonnes X .000100) + (110,459 Zinc Tonnes X .000121) 122.8 moz AgEq = 59.7 moz Silver + 43.5 moz AgEq

from Gold + 6.2 moz AgEq from Lead + 13.4 moz AgEq from Zinc Increase of 1.0 point per each 1% increase. Decrease of 1 point in case of a 1% decline.

4 Proportional increase in points per increase in Resources above target. A proportional decrease in points will be applied in case of an increase in Resources below the target.

Weighted Average Resources according to Quality.

234 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

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Annual report on remuneration 2023 continued

5 Increase of 2.0 points per each 1% of Resources increase above target. A decrease of 2 point per each 1% below target will be applied. Weighted Average Resources according to

Quality.

6 Relevant ongoing projects which progress will be mesured compared to plan.

7 10 points in case of zero fatal accidents (premium of 10 points over the weight). 0 points in case of one accident.

The total score will be reduced by 1% in the case of two fatal accidents. From the remaining total score, an additional 2% will be reduced in the case of three fatal accidents. In

the case of four fatal accidents, an additional 3% will be reduced from the remaining total score and so on consecutively. Includes own workers and contractors.

8 Progress of the programme set by the Sustainable team. Chairman and coordinator will set the score.

9 Decrease of the previous year corresponding rate.

10 Foster teamwork and relationship improvement with Group companies. Chairman and coordinator will set the score.

11 The total score is reduced by 2% in the case of an environmental incident. From the remaining total score, an additional 3% will be reduced in the case of two incidents. In the

case of three incidents, an additional 4% will be reduced from the remaining total score and so on consecutively.

Reconciliation of adjusted net profit targets and outcomes to the financial statements

US$ million 2023 2022

Profit for year as shown in financial statements 288.3 308.3

Interest, tax, depreciation and amortisation 375.1 461.6

Adjustments:

Changes due to currency fluctuations 100.6 (2.0)

Changes due to year-on-year movements in metals prices (including the effects of metals hedging) 183.7 (56.20)

Changes due to the movement in the valuation of the Silverstream contract 7.7 (18.79)

Adjusted EBITDA total for bonus purposes 572.5 692.9

The Chief Executive Officer is prohibited from participating in the PTU scheme and may receive a bonus not greater than six months’

pay. All other Mexican employees are eligible for PTU payments annually. The PTU payable in respect of 2023, payments are capped at

the higher of three months’ salary or the average PTU received in the last three years.

2024 Bonus targets

The Remuneration Committee agreed that 2024 indicators, weightings and measures should be similar as in 2023. In 2023 the

Committee introduced minor changes to the KPIs to calculate the annual bonus to Executive Committee members and we are

planning to review them again in 2024 to complete the alignment of these with the Company’s strategy.

The 2024 targets, performance against those targets and the basis of calculation of bonus points awarded will be disclosed in next

year’s Directors’ Remuneration report.

Pension entitlement

Policy on pensions

The Group operates two pension schemes: (i) a defined benefit scheme which was closed to new members on 1 July 2007 with

benefits frozen at this date for existing members, subject to indexation with reference to the Mexican National Consumer Price

Index; and (ii) a defined contribution scheme (which was introduced on 1 July 2007). Membership of the latter scheme is voluntary,

members earning a salary of no more than 25 times the minimum wage in force from time to time may make contributions of 5%

to the scheme.

On behalf of members earning a salary of no more than 25 times the minimum wage in force from time to time the employing

company may make contributions of 5% to the scheme. The employing company may also make additional contributions

between 5-8% of salary to this plan. Members may elect to match percentages between 5-8% of salary. Executive Directors may

participate the Group’s pension schemes on the same basis as any other employee.

Mr Alvídrez is a member of the defined benefit scheme in relation to services with the Company prior to 1 July 2007. He is also a

member of the defined contribution scheme. He is expected to retire at his normal retirement age of 60 years.

Chairman and Non-executive Directors

Policy on Chairman and Non-executive Directors

The remuneration of the Chairman of the Company and the Non-executive Directors consists of fees that are paid quarterly in arrears.

The Chairman and Non-executive Directors do not participate in any long-term incentive or annual bonus schemes, nor do they accrue

any pension entitlement. The Chairman of the Company does not receive any fees for acting as Chairman other than his fees as a Non-

executive Director.

With effect from 26 July 2023, the fees payable to Non-executive Directors were calculated on the following bases:

• A base fee of £42,000 per annum is paid to each non-UK-based Non-executive Director to reflect the time commitment and level of

involvement they are required to make in the activities of the Board as a whole.

• There are no set fees for membership of any Board committees or for the chairmanship of the Board, other than as follows:

- The UK-based Non-executive Directors receive a higher fee, currently £108,000 per annum, to reflect the additional time

commitment that they make in order to travel to Board meetings in Mexico and for responsibilities as committee members and,

where appropriate, as Senior Independent Director and/or Chairman of any committee.

- The Chairman of the Audit Committee will receive an additional fee of £18,000 per annum.

- Members of the Audit Committee will receive an additional fee of £6,000 per annum.

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On 26 July 2023: (i) the basic fees paid to the Mexico-based Directors increased from £35,000 per annum to £42,000 per annum;

(ii) total fees paid to members of the Audit Committee for being a member of that Committee (except for the Chairman of said

committee) increased from £40,000 per annum to £48,000 per annum; (iii) total fees paid to the Chairman of the Audit Committee

increased from £50,000 per annum to £60,000 per annum; and (iv) fees paid to UK-based Directors were adjusted from £90,000 per

annum to £108,000 per annum.

The key terms of the Non-executive Directors’ letters of appointment for the Directors serving at the end of the year are as follows:

Director

Date of original letter of

appointment

Notice period from Director

to the Company Duration of term

Fees p.a.

Alejandro Baillères 16 April 2012 3 months 1 year £42,000

Juan Bordes 15 April 2008 3 months 1 year £42,000

Arturo Fernández 15 April 2008 3 months 1 year £42,000

Fernando Ruiz 15 April 2008 3 months 1 year £42,000

Bárbara Garza Lagüera 11 April 2014 3 months 1 year £42,000

Charles Jacobs 11 April 2014 3 months 1 year £108,000

Alberto Tiburcio 4 May 2016 3 months 1 year £60,000

Dame Judith Macgregor 22 May 2017 3 months 1 year £108,000

Georgina Kessel 7 May 2018 3 months 1 year £48,000

Guadalupe de la Vega 30 May 2020 3 months 1 year £42,000

Eduardo Cepeda 24 June 2021 3 months 1 year £42,000

Hector Rangel 28 June 2021 3 months 1 year £48,000

1 Copies of the Directors’ letters of appointment and service agreements are available for inspection at the Company’s registered office.

2 Unexpired term: the Non-executive Directors all have rolling contracts which are subject to the annual re-election at the Annual General Meeting. The current term expires on

the date of the next Annual General Meeting, but the appointment will continue after that date provided that each Director is re-elected at the AGM.

Shareholders and remuneration

Policy on engagement with shareholders on remuneration

The composition of the Remuneration Committee has been designed to ensure that the views of the controlling shareholder

(through the membership of the Chairman of the Board on the Committee) and the independent shareholders can be

represented. The Remuneration Committee has considered the views of organisations such as Institutional Shareholder Services

(ISS) and the Investment Association both generally and as reported to the Company in relation to its own executive remuneration

practices prior to each Annual General Meeting, when considering the Remuneration Policy and its application.

AGM voting on the Remuneration report

The Remuneration Committee’s approach to executive remuneration has received strong support from shareholders at every Annual

General Meeting since the Company’s listing on the London Stock Exchange in 2008. More than 65% of independent share votes cast

on the advisory vote at each AGM have been in favour of the Directors’ Remuneration report.

All shares voted Independent shares voted

No. of votes

withheld

Year For Against For Against

2022: Remuneration policy 97.94% 1.76% 89.21% 10.79% 32,689

2022: Remuneration report 98.24% 2.6% 90.77% 9.23% 34,737

2023: Remuneration policy 94.15% 5.85% 68.15% 31.85% 752,104

2023: Remuneration report 98.47% 1.53% 91.74% 8.26% 17,493

Advisers to the Remuneration Committee

Remuneration consultants (Mercer, Hay Group and Data Compensation) are engaged by Group companies to provide benchmarking

information on remuneration across the Fresnillo Group but not to provide guidance on the structure of remuneration. Such information

is taken into account when considering Executive Committee remuneration. Willis Towers Watson advises the Remuneration Committee

on executive remuneration matters from time to time. During 2023 the Group paid Willis Towers Watson US$5k (2022: US$nil). All of the

consultants that the Group uses are independent of the Company and each of the Directors. No remuneration consultants are directly

engaged by the Remuneration Committee itself.

The Company Secretary ensures that the Remuneration Committee fulfils its duties under its terms of reference and arranges

regular updates to the Remuneration Committee on relevant regulatory developments in the UK. The Group human resources

department provides information on Mexican market trends and compensation structures for the broader employee population

in the Fresnillo Group.

236 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Annual report on remuneration 2023 continued

Additional information on remuneration

Share price performance

As required by the Regulations, the following graph sets out the performance of the Company’s share price since its listing compared

to the FTSE 100 Index. As the Company was a constituent of the FTSE 100 Index for most of the year, this is deemed to be the most

appropriate index for comparative purposes for the year ended 31 December 2023.

100

200

300

400

500

2008 2009 2011 2012 2013 2014 2015 2016 201920172010 2018 2022 202320212020

Fresnillo total return index FTSE 100 total return index

Chief Executive Officer’s service agreement

During the year, Mr Alvídrez served as Chief Executive Officer but was not a member of the Board. Mr Alvídrez is employed under

a contract of employment with Servicios Administrativos Fresnillo S.A. de C.V., a subsidiary of Fresnillo plc. Mr Alvídrez’ contract

commenced on 15 August 2012 and is governed by Mexican Federal Labour Law. Mr Alvídrez’ service agreement does not have a

fixed term and may be terminated in writing by either party. There is no provision in Mr Alvídrez’ service agreement entitling him to

additional compensation for termination other than those required by Mexican labour laws for termination without cause. No benefits

are payable on termination.

Under his service agreement, Mr Alvídrez is entitled to 26 working days’ paid holiday per year. He is not entitled to profit-sharing (PTU).

Mr Alvídrez is also entitled to life insurance, the use of a chauffeur and company car, the payment of medical insurance premiums

covering limited expenses and check-ups, meals and subsistence payments and club subscriptions.

Total remuneration of the Chief Executive Officer

The total remuneration of the Chief Executive Officer for the past nine years, in US dollars, has been as follows:

Year ending 31 December 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total remuneration US$‘000s

Octavio Alvídrez 1,116 1,217 1,166 1,111 1,072 886 1,164 939 975 916 1,370

Percentage change on previous year (41.5%) 9.1% (4.2%) (4.7%) (3.5%) (10.7%) 31.4% (19.3%) 3.8% 6.1% 49.6%

Proportion of maximum bonus paid

to CEO in year

Octavio Alvídrez 33.33% 33.33% 33.33% 66.66% 33.33% Nil% Nil% 20.83% Nil% Nil% Nil%

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Changes in Directors’ remuneration 2021-2023

The changes in Directors total remuneration between 2021 and 2023 and a comparison with changes in average employee over that

period are as follows:

Salary/Fees Bonus Benefits

Year-on-year change (%)

2022-23 2021-22 2022-23 2021-22 2022-23 2021-22

Directors

Alejandro Baillères 11.09% (13.12%) N/A N/A N/A N/A

Juan Bordes 11.09% (13.12%) N/A N/A N/A N/A

Arturo Fernández 11.09% (13.12%) N/A N/A N/A N/A

Bárbara Garza Lagüera 11.09% (13.12%) N/A N/A N/A N/A

Charles Jacobs 11.09% (14.66%) N/A N/A N/A N/A

Georgina Kessel 11.09% (11.33%) N/A N/A N/A N/A

Judith Macgregor 11.09% (13.12%) N/A N/A N/A N/A

Fernando Ruiz 11.09% (13.12%) N/A N/A N/A N/A

Alberto Tiburcio 11.09% (13.12%) N/A N/A N/A N/A

Guadalupe de la Vega 11.09% (13.12%) N/A N/A N/A N/A

Eduardo Cepeda 11.09% 66.02% N/A N/A N/A N/A

Hector Rangel 11.09% 66.02% N/A N/A N/A N/A

Chief Executive Officer

Octavio Alvídrez 20.63% 5.98% N/A N/A 30.83% 25.00%

Average employee

remuneration

35.95% 11.06% 87.34% 11.49% 29.65% 6.26%

1 Average employee remuneration is calculated by dividing the relevant personnel costs (as disclosed in note 8 to the consolidated financial statements on page 286) by the

average number of employees (as disclosed in note 8 (b) to the consolidated financial statements on page 286). PTU is excluded in order to make a like-for-like comparison with

the Chief Executive Officer who does not receive PTU.

2 The Chief Executive Officer’s salary, bonus and benefit amounts are excluded from the calculation of average employee remuneration. A bonus of 2.5 months was paid to the

Chief Executive Officer for 2020, and no bonus was paid to the Chief Executive Officer for 2021, 2022 and 2023.

3 Calculated using the data from the single figure table in the annual report on remuneration (page 230) in US dollars. The Non-executive Directors are paid fees in UK sterling and

therefore will be subject to year-on-year changes in exchange rates.

4 The Non-executive Directors do not receive bonuses or benefits from the Company.

Relative importance of the spend on pay

2023 2022 % change

Staff costs (US$000s)

250,055 192,499 28%

Distributions to shareholders (US$000s) 108,351 201,909 (46%)

Income tax mining rights and profit sharing paid 244,043 174,734 40%

Purchases of property, plant and equipment 483,409 592,129 (18%)

1 Staff costs are taken without PTU in order to make a like-for-like comparison with the Chief Executive Officer who does not receive PTU.

Payments to new or departing Directors

During the year, the Company has not recruited any Executive Directors; nor has it made any payments to past Directors or made any

payments to Directors for loss of office.

This report has been approved by the Board of Directors of Fresnillo plc.

Signed on behalf of the Board.

Alberto Tiburcio

Chairman of the Remuneration Committee

4 March 2024

238 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Appendix: proposed Directors’ Remuneration Policy

Introduction

The current Remuneration Policy of the Company has been prepared in accordance with The Large and Medium-sized Companies

and Groups (Accounts and Reports) (Amendment) Regulations 2013 (‘the Regulations’). The Remuneration Committee has assessed

the criteria recommended by provision 40 of the 2018 UK Corporate governance Code and believes that the Policy has always been

inherently clear, simple, designed to avoid excessive rewards, predictable and proportionate. The effective date of the Policy is 23 May

2023. The full text of the current Remuneration Policy can be found on pages 206 to 210 of the Fresnillo plc 2022 annual report and

accounts, which can be found on the Company’s website (www.fresnilloplc.com).

As required by English law, the Company’s approved Remuneration Policy is binding in relation to Directors. The Company currently

has no Executive Directors who would be bound by the Remuneration Policy. However, the Company will (as it has previously done)

treat the Chief Executive Officer as if he were an Executive Director for the purposes of the Remuneration Policy and for reporting on

his remuneration.

Details of the remuneration paid to the Chief Executive Officer for the year ended 31 December 2023 can be found in this year’s annual

report on remuneration at page 236.

Remuneration policy

The Group’s Remuneration Policy seeks to ensure that the Company is able to attract, retain and motivate its Executive Directors and

members of the Executive Committee. The retention of key management and the alignment of management incentives and the

creation of shareholder value being key objectives of this policy.

Setting base salaries for Executive Directors and members of the Executive Committee at an appropriate level is a key to managerial

retention in Mexico. Therefore, the Remuneration Committee seeks to ensure that salaries are market competitive both within the

Mexican context and internationally for comparable companies. Total compensation is set within a range around the median level for

the Company’s peer group within Mexico and internationally, total remuneration is benchmarked triennially to ensure that the whole

remuneration package is maintained at this level over the long term. Salaries are positioned within the range according to experience

and service.

The table below sets out the key elements of Executive Directors’ pay set out in the Remuneration policy (the ‘policy table’):

Base salary

Provides the core reward for the role.

Operation

Normally reviewed annually and fixed for 12 months starting on 1 April each year. Each review will take

into account:

• Role, experience and performance.

• Average workforce salary adjustments.

• Mexican economic factors.

• Comparison with the Company’s peer group in Mexico and internationally.

• The effect an increase will have on the overall levels of the Executive Director’s remuneration.

When benchmarking salaries, the Remuneration Committee will normally benchmark by reference to

companies of similar size and complexity to the Company in Mexico and internationally. Details of the

peer group used will be disclosed in the annual report on remuneration.

Maximum value

Subject to the review process described above, the maximum value of an Executive Director’s base salary

will be determined by the Remuneration Committee in its absolute discretion and ordinarily it will be

increased in line with increases applied across the whole workforce. In exceptional circumstances, an

Executive Director’s salary may be increased by up to, but never more than, 10% above the average pay

increase for the whole workforce of the Company in any financial year. The rationale for any such increase

will be fully explained in the annual report on remuneration.

Performance metric

The Remuneration Committee considers individual salaries at the appropriate review meeting each year

by reference to the factors noted under the ‘Operation’ heading in this Policy Table.

Discretion

The Remuneration Committee established the Company’s comparator peer group in Mexico and

internationally as part of a triennial review which it undertook in October 2023 and will be reviewed

again in April 2026, if not before. The Committee will report on the outcome of these reviews within the

relevant annual report on remuneration.

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Annual bonus

Rewards the achievement of both short and long-term financial and strategic business targets and delivery of personal objectives.

Operation

Targets are renewed annually and relate to the strategic aims of the business as a whole. A scoring

system is used for the plan. Each objective set for the executive at the beginning of the year is allocated

a points-rating which represents a median performance target for that objective. Upper and lower

thresholds are set to allow for outstanding performance and to ensure that underperformance is not

rewarded. For each member of the Executive Committee (including the Chief Executive Officer, the

Chief Financial Officer, the Vice President of Exploration and the Chief Operating Officer), a bonus is

only payable if the aggregate performance equals or exceeds 100 points. Bonus payments are paid for

aggregate performance against target at or above 100 points are made on a prorated basis between two

months’ salary paid for the achievement of 100 points and six months’ salary paid for the achievement of

115 points or more, as follows:

Number of points:

100.00

100.01-115.00

115.01+

Months’ salary paid

Two months’ salary

Prorated on a linear basis between two months’ salary and six months’ salary

Six months’ salary

Maximum value

The maximum percentage of salary payable as an annual bonus to an Executive Director is 50% (six

months’ salary) and is paid where the Executive Director achieves 115.01 points or more under the Annual

Bonus Plan (the target is 100 points).

Performance metric

The KPI targets set out in the previous table will apply and are intended to focus on risks that are within

the control and influence of management. Thus, the management of safety, security, project, human

resource, exploration teamwork, synergies, community and environmental risks are all currently implicitly

covered within the KPIs. The KPIs and targets, which are set by reference to the reserves and resources

and financial metrics at the previous year end and/or set in the budget for the forthcoming financial

year are also designed to ensure that both short-term objectives and the long-term development of the

Fresnillo Group are given equal priority. The achievement of project milestones will be used to measure

project management performance and the Committee’s discretion will be applied for subjective metrics

such as teamwork.

Details of the measures, targets and performance which are tested on an annual basis will be provided

in the relevant annual report on remuneration.

The Remuneration Committee considers that the KPIs, upon which bonuses are based, may need

to evolve from year-to-year in line with the strategy and therefore it retains the discretion to make

appropriate adjustments to the KPIs themselves, the bonus bands within the overall maximum and the

individual KPI weightings from year-to-year.

Discretion

The Remuneration Committee retains the discretion to adjust bonus payments in the following

circumstances:

(i) A downward adjustment where the KPI outcomes would result, in the opinion of the Remuneration

Committee, in a bonus payment which cannot be justified by the Company’s financial or operational

performance during the year (or in respect of previous years).

(ii) A modest upward adjustment may be considered either: (a) where factors outside the control of

Executive Directors (e.g. force majeure circumstances) have significantly depressed the level of points

awarded (and in deciding whether and to what extent an adjustment is merited, the Remuneration

Committee will consider the appropriateness of the response to those circumstances); and/or (ii)

when the Executive Directors, individually or collectively, have demonstrated a level of performance

which has resulted in significant benefits to the Company which, in the opinion of the Remuneration

Committee, merits an increase in the number of points awarded.

(iii) Poor executive response to adverse health, safety or environmental performance during the year, in

which case a downward adjustment would be considered.

(iv) Where the bonus payment is not, in the opinion of the Remuneration Committee, commensurate

with the wider stakeholder experience (especially those of employees in relation to remuneration

outcomes for the year and/or shareholders in relation to dividend payments), a downward adjustment

may be considered.

The use of any such discretions will be fully explained in the relevant annual report on remuneration.

Note: Any adjustment in individual KPI weightings will not result in their achievement being any less difficult to satisfy.

240 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Appendix: proposed Directors’ Remuneration Policy

Benefits

Help recruit and retain employees.

Operation

Executive Directors may (at the Company’s discretion) be offered life insurance, meal and subsistence

benefits, the payment of premiums for medical insurance covering expenses and check-ups (for

themselves and their family members) death in service benefits and remote working expenses (as

applicable). Benefits may be changed if the Company’s policy on benefits changes.

Maximum value

The maximum value of any benefits provided will be determined by the Company policy on benefits

that is applicable from time to time.

Performance metric

None.

Discretion

The Remuneration Committee may consider changes to the benefits made available to Executive

Directors in line with any changes in the Company’s policy for benefits provided to all employees.

Pension

Rewards continued employment and sustained contribution.

Operation

The Group operates a defined contribution scheme. Executive Directors are entitled to membership of

the defined contribution scheme.

Maximum value

The maximum Company contribution for any employee (including Executive Directors) may not exceed

13% of salary. Company contributions made for Executive Directors will be aligned with Company

contributions provided to the majority of the workforce from time to time.

Performance metric

None.

Discretion

The Remuneration Committee may consider changes to the pension contributions made for Executive

Directors, including increases, in line with any changes in the Company’s policy for pension contributions

provided to all employees.

Alignment of executive remuneration and the market

In setting the fixed remuneration of Executive Directors and the members of the Executive Committee, information relating to the

mining company comparators is provided by various consultants. Information relating to the Mexican economic metrics is collated by

management for the Remuneration Committee to consider.

Reviews of the Executive Directors’ and Executive Committee members’ remuneration are conducted by Willis Towers Watson from

time to time at the request of the Remuneration Committee. These enable the Remuneration Committee to validate the Company’s

policy towards remuneration and ensure that it is globally as well as locally competitive. The analysis evaluates the elements of

base salary, short-term compensation (guaranteed payments and short-term bonus) and long-term compensation (primarily stock

programmes) separately. With assistance from Willis Towers Watson, the Remuneration Committee has established a peer group which

will be used to benchmark any Executive Director’s and any Executive Committee member’s remuneration (the ‘Peer Group’) to ensure

that it remains within the parameters set out in this Policy (see page 232 of the annual report on remuneration). The Peer Group will be

updated where necessary, to ensure that it remains an appropriate comparator group of companies.

The consideration of wider employment conditions and remuneration

When setting pay and benefits for Executive Directors and members of the Executive Committee, the Remuneration Committee

takes account of pay and conditions across the Group. It will consider the overall pay increase percentage negotiated each year, with

employee representatives as its starting point taking account of inflation and other information supporting the annual pay award for

employees. Subject to the 10% limit in the Policy Table, the Remuneration Committee may agree pay increases above or below the

agreed percentage in exceptional circumstances, where in its discretion it considers such variance to the norm to be justified. Other

than the Willis Towers Watson report specifically commissioned by the Remuneration Committee, the same benchmark reports are

used in the evaluation of executive and employee remuneration, thus providing a common approach to both.

Below Board level, a statutory profit-sharing arrangement (PTU) is operated which in some years has enabled employees to receive

significant levels of bonus in line with the increased profitability of the relevant employing company. The Chief Executive Officer

does not participate in a PTU scheme within the Fresnillo Group. Members of the senior management group below Board-level are

employed by Servicios Administrativos Fresnillo S.A. de C.V. or Operaciones Fresnillo, S.A. de C.V., which pay annual PTU payments.

However, such payments are modest.

The Group operates two pension schemes: (i) a defined benefit scheme which was closed to new members on 1 July 2007 with benefits

frozen at this date for existing members, subject to indexation with reference to the Mexican National Consumer Price Index; and (ii) a

defined contribution scheme (which was introduced on 1 July 2007). Membership of the latter scheme is voluntary, members earning a

salary of no more than 25 times the minimum wage in force from time to time may make contributions of 5% to the scheme.

On behalf of members earning a salary of no more than 25 times the minimum wage in force from time to time the employing

company may make contributions of 5% to the scheme. The employing company may also make additional contributions between

5-8% of salary to this plan. Members may elect to match percentages between 5-8% of salary.

Executive Directors may participate in the Group’s pension schemes on the same basis as any other employee.

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The Remuneration Committee does not consult with employees in setting Directors’ remuneration. Engagement with employees

as a stakeholder group is primarily the responsibility of the Board; however, where appropriate, the Remuneration Committee will

consider any relevant feedback from employees to the Board in relation to remuneration matters when discharging its responsibilities

under this Policy.

Engagement with shareholders on remuneration

The composition of the Remuneration Committee has been designed to ensure that the views of the controlling shareholder

(through the membership of the Chairman of the Board on the Committee) and the independent shareholders can be represented.

The Remuneration Committee has considered the views of organisations such as Institutional Shareholder Services (ISS) and the

Investment Association both generally and as reported to the Company in relation to its own executive remuneration practices prior to

each Annual General Meeting, when considering the Remuneration policy and its application. Following the Company’s AGM in 2024,

details of votes cast for and against the resolutions to approve the proposed Remuneration policy and annual report on remuneration

for the year ended 31 December 2023, will be announced to the market.

Policy on recruitment

The Remuneration Committee will consider the remuneration of new Executive Directors by reference to the Policy Table set out

above. The Remuneration Committee will not, as a matter of standard practice, pay sign-on payments or compensate new Directors

for any variable remuneration forfeited from any employment prior to joining the Board. However, it may choose to do so in exceptional

circumstances, when it considers this to be in the best interests of the Company (and therefore shareholders), in which case any buy-

out payments will not exceed the remuneration relinquished and will mirror (as far as possible) the delivery mechanism, time horizons

and performance requirements attached to that remuneration. Where possible this will be facilitated through the Company’s existing

Annual Bonus Plan, as set out in the Policy Table above, but if not, the Remuneration Committee may fulfil this requirement in line with

the provisions of 9.4.2 of the Listing Rules.

For the avoidance of doubt, the value of any ‘sign-on’ and/or ‘buy-out’ payments will not count towards the limits on annual bonus in

the Policy Table above. Any such payments will be fully explained in the next annual report on remuneration both as to the reason for

payment and the rationale for the quantum.

Salary will be set so as to be market competitive both within the Mexican context and internationally for comparable companies and

taking account of the experience and seniority of the appointee coming into the new role. The Remuneration Committee is likely to set

base salaries below median on appointment while retaining discretion to award increases during the first and, possibly, subsequent

years to bring salaries into the normal range expected for Executive Directors, in line with the Company’s stated Policy. Such increases

will not exceed the maximum level set out in the Policy Table. New Executive Directors will receive benefits and pensions in line with

the Company’s existing Policy and will be able to participate in the Annual Bonus Plan on a pro-rated basis for the portion of the

financial year for which they are in post. The maximum level of variable pay for new recruits will be the same as that set out in the Policy

Table for existing employees (pro-rated as necessary).

In the case of an internal appointment or promotion, any variable pay element awarded in respect of the prior role will be allowed to

pay out according to its original terms stipulated on grant or adjusted as considered desirable to reflect the new role.

Where appropriate to recruit, promote or transfer individuals to a different location of residence, the Remuneration Committee may also,

to the extent it considers reasonable, approve the payment of one-off relocation and repatriation related expenses. It may also pay or

make a contribution towards any legal fees appropriately incurred by the individual in connection with their employment by the Group.

Policy on loss of office

Other than in circumstances of gross misconduct, Executive Directors and members of the Executive Committee, including the

Chief Executive Officer, leaving employment from the Group, will be entitled to receive salary and pro-rated annual bonus based on

performance to the date of leaving. Statutory entitlements are payable according to Mexican labour law, based on length of service.

Employee and Company pension contributions are payable in accordance with the applicable pension plan rules. Mexican labour

law does not make any provision for employers and employees to give or receive notice of termination of employment. Therefore,

the Committee will not generally make payments in lieu of notice to departing executives. However, the Committee reserves the

right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by

way of damages for breach of such an obligation), or by way of settlement or compromise of any claim arising in connection with

the termination of an Executive Director’s office or employment or by way of contribution to legal fees appropriately incurred by the

individual in connection with the termination of their employment by the Group. No contractual commitments concerning loss of

office were entered into with any Director prior to 27 June 2012.

Annual Bonus Plan and policy on variable remuneration

It is the Company’s policy not to use its equity to incentivise long-term performance. The Company’s core strategy is one of long-term

sustainable growth. Sustainable growth in mining requires the steady and safe expansion of the Group’s operations through the

discovery of new resources and construction, maintenance and/or expansion of new mines. No distinction is therefore made between

short and long-term incentives.

242 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

DIRECTORS’ REMUNERATION REPORT CONTINUED

Appendix: proposed Directors’ Remuneration Policy

The Company operates a single cash-based Annual Bonus Plan for Executive Directors and the members of the Executive Committee,

including the Chief Executive Officer as described in the Policy Table above. In the event of a change of control, the Remuneration

Committee shall, in accordance with the Annual Bonus Plan rules, as amended from time to time and in its absolute discretion,

determine whether and to what extent the annual bonus will vest and be paid early. The Committee may also decide that the bonus

award will vest to a greater or lesser extent having regard to the Director’s or the Group’s performance or such other factors it may

consider appropriate. The Remuneration Committee may decide that bonus awards will vest pro-rata to take account of early vesting or

in full.

Recovery of bonus

The absence of long-term incentives and the operation of Mexican law makes it difficult to adopt claw-back arrangements in order

to recover bonuses that have already been paid. The Remuneration Committee has considered whether claw-back provisions

should be incorporated into the service agreement for the Chief Executive Officer. Given that the Company does not operate any

remuneration plans with a timeframe of more than one year, the Remuneration Committee does not consider that there is much value

in introducing claw-back provisions into the contractual arrangements with the Chief Executive Officer at this stage. However, within

this Remuneration Policy, the Remuneration Committee reserves the right to apply malus to bonuses before they are paid where the

KPI outcomes would result, in the opinion of the Remuneration Committee, in a bonus payment which cannot be justified by the

Company’s financial performance or the Executive Director’s personal performance during the year (or previous years). In this case a

downward adjustment to the bonus payment would be applied.

Illustrations of the application of the Remuneration Policy for the Chief Executive Officer

The following table sets out the fixed and variable remuneration of the Chief Executive Officer in the different scenarios where he

receives, minimum, target and maximum variable pay (based on 31 December 2023 remuneration).

Component Maximum value US$ thousands Minimum Target Maximum

Share incentives

US$1,766k

Annual bonus US$396k Annual variable pay

2, 4

US$1,502k 22.4%

US$1,370k 8.8%

Pension benefits 102 Fixed pay

100% 91.2% 77.6%

Other benefits 157

Base salary 1,111

1 Fresnillo plc does not operate any share option or share-based long-term incentive plans.

2 Variable pay consists only of remuneration where performance measures or targets relate only to one financial year.

3 Fixed pay includes salary, benefits and pension.

4 The Company does not operate any equity-based long-term incentives, consequently, the Company’s share price does not have any impact on the variable remuneration paid to

Executive Directors and members of the Executive Committee who do not sit on the Board.

External appointments

It is the Board’s policy to allow Executive Directors to accept directorships of other quoted and non-quoted companies and retain any

fees or other remuneration for doing so, provided that they have obtained the consent of the Chairman of the Company. Any such

directorships must be formally notified to the Board.

Chairman and Non-executive Directors

The remuneration of the Chairman of the Company and the Non-executive Directors consists of fees that are paid quarterly in arrears.

The Chairman and Non-executive Directors do not participate in any long-term incentive or annual bonus schemes, nor do they accrue

any pension entitlement. Neither the Chairman nor any of the Non-executive Directors has a service contract with the Company;

however, each has entered into a letter of appointment with the Company.

Non-executive Directors’ letters of appointment

On their initial appointment, each of the Non-executive Directors sign a letter of appointment with the Company. The letters of

appointment of serving Non-executive Directors are drafted in accordance with Provision 18 of the UK Corporate governance Code, thus

obliging them to retire at each Annual General Meeting and be subject to annual re-election by shareholders to serve for a further term

of one year. The amendments have been drafted such that renewed appointment will not necessitate a new letter of appointment.

The Chairman of the Company shall not receive any fees for acting as Chairman other than his fees as a Non-executive Director. Each

Non-executive Director is expected to commit a minimum of 14 days per year in fulfilling their duties as a Director of the Company.

The total fees for Non-executive Directors, including the Chairman, will not exceed the maximum stated in the Company’s Articles of

Association.

The level of fees is reviewed periodically and takes into account the time commitment, responsibilities, market levels and the skills

and experience required. Non-executive Directors normally receive a basic fee and an additional fee for specific Board responsibilities,

including chairmanship or membership of Board committees or acting as the Senior Independent Director. Additional fees may be

paid to Non-executive Directors on a per diem basis to reflect increased time commitment in certain limited circumstances.

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Expenses incurred in the performance of non-executive duties for the Company may be reimbursed or paid for directly by the

Company, as appropriate, including any tax and social security due on the expenses.

Non-executive Directors may be provided with benefits to enable them to undertake their duties.

Shareholding guidelines

Fresnillo has not introduced share ownership guidelines. The Company does not operate share-based incentive arrangements given

that the culture for incentives in the Mexican market does not favour share-based incentives. Consequently, there would be neither

opportunity nor appetite for executives to build a shareholding in the Company and therefore the Remuneration Committee has not

adopted any shareholding guidelines.

Payments under previous policies

Any remuneration payment or benefit, or any payment for loss of office which a Director received or became entitled to under a

previous Remuneration Policy or before the person became a Director (unless the payment was in consideration of becoming a

director) shall lawfully be paid out under this policy, even though it may not be consistent with, or otherwise provided for under, the

Policy Table set out above.

244 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FRESNILLO PLC DIRECTORS’ REPORT 2023

In accordance with Section 415 of the Companies Act 2006, the Directors of Fresnillo plc present their report for the year ended

31 December 2023.

The Directors believe that the requisite components of this report are set out elsewhere in this annual report and/or on the Company’s

website www.fresnilloplc.com. The table sets out where the necessary disclosures can be found.

Business performance

Results Results for the year ended 31 December 2023 are set out in the Financial review on pages 64-75 and the

consolidated income statement on page 262.

Dividends Information regarding the proposed dividend can be found in the Financial review on page 75.

Information regarding dividend payments can be found in the notes to the financial statements on

page297.

Strategic report The Strategic report can be found on pages 2-187.

Corporate Governance

statement

The Company’s statement on Corporate Governance can be found on page 200.

Directors’ Remuneration

report

The Directors’ Remuneration report can be found on pages 225-243.

Activities in research and

development

The Company does not have any research and development activities.

Future developments Details about the Company’s future developments can be found in the Strategic report on pages 22-27.

Post-balance sheet events There was a post-balance sheet event. Details are set out in note 32 to the financial statements on

page313.

Directors

Directors Directors that have served during the year and summaries of the current Directors’ key skills and

experience are set out in the Corporate Governance report on pages 194-197.

Directors’ Interests Details of the Directors’ beneficial interests are set out in the Directors’ Remuneration report on page 231.

Directors’ indemnities The Company has given indemnities to each of the Directors in respect of any liability arising against

them in connection with the Company’s (and any associated company’s) activities in the conduct of their

duties. These indemnities are subject to the conditions set out in the Companies Act 2006 and remain in

place at the date of this report.

Directors’ and Officers’

Liability Insurance

Directors’ and Officers’ Liability Insurance cover is in place at the date of this report. Cover is reviewed

annually.

Constitution

Articles of Association Any amendments made to the Articles of Association may be made by a special resolution of

shareholders. The following is a summary of the structure, rights and restrictions of the Company’s share

capital:

The Company has two classes of share capital: 736,893,589 Ordinary Shares of US$0.50 (‘Ordinary

Shares’) and 50,000 deferred shares of £1.00 each (‘Sterling Deferred Shares’). The Ordinary Shares are

listed on the London Stock Exchange and the Mexican Stock Exchange. The rights and obligations

attaching to these shares are governed by UK law and the Company’s Articles of Association.

Ordinary shareholders are entitled to receive notice and to attend and speak at any general meeting

of the Company. On a show of hands every shareholder present in person or by proxy (or being a

corporation represented by a duly authorised representative) shall have one vote, and on a poll every

shareholder who is present in person or by proxy shall have one vote for every share held. The Notice of

Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies.

There are no restrictions on the transfer of the Ordinary Shares other than:

• the standard restrictions for a UK-quoted company set out in article 32 of the Articles of Association;

• where, from time to time, certain restrictions may become imposed by laws and regulations (for

example, insider trading laws); and

• pursuant to the Listing Rules of the Financial Services Authority whereby certain Directors, officers and

employees of the Company require the approval of the Company to deal in the Ordinary Shares.

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Constitution

The appointment and replacement of Directors is governed by the Company’s Articles of Association,

the UK Corporate governance Code, the Companies Act 2006 and related legislation. The Articles

of Association provide that a Director may be elected by ordinary resolution of the shareholders or

appointed by the existing Directors either to fill a casual vacancy or as an additional Director, but so t

hat the total number of Directors shall not thereby exceed the maximum in accordance with the

Company’s Articles of Association. At every Annual General Meeting, all Directors must automatically

retire. A retiring Director is eligible for election or re-election, as applicable.

Subject to the Articles, the Companies Act 2006 and related legislation and any regulations as may

be prescribed by special resolution of the Company, the Directors may exercise all the powers of

the Company.

No shareholder holds securities carrying special rights as to the control of the Company. There are no

limitations on the holding of securities. There are no restrictions on voting rights or any arrangements by

which, with the Company’s cooperation, financial rights carried by securities are held by a person other

than the holder of the securities. There are no agreements between holders of securities that are known

to the Company which may result in restrictions on the transfer of voting rights.

The Sterling Deferred Shares only entitle the shareholder to payment of the amount paid up after

repayment to ordinary shareholders on winding up or on a return of capital. The Sterling Deferred Shares

do not entitle the holder to payment of any dividend, or to receive notice or to attend and speak at any

general meeting of the Company. The Company may also at its option redeem the Sterling Deferred

Shares at a price of £1.00 or, as custodian, purchase or cancel the Sterling Deferred Shares or require

the holder to transfer the Sterling Deferred Shares. Except at the option of the Company, the Sterling

Deferred Shares are not transferable.

Branches outside the UK The Company’s operations are outside the UK. The Company, through various subsidiaries, has

established branches in a number of jurisdictions in which it operates (mainly in Mexico).

Change of control The following represents the likely effect on significant agreements with the Company were it to be

subject to a change of control:

• The Shared Services Agreement contains a discretionary provision for Servicios Administrativos

Peñoles, S.A. de C.V., to terminate the agreement should they so wish if there is a change of control

of Fresnillo plc.

• There are no formal ‘change of control’ provisions within the Silverstream contract or Met-Mex

arrangements.

• The Group’s mining concessions are held by several of its Mexican subsidiary companies. As long as

the companies holding the mining concessions remain Mexican resident companies, there are no

provisions within the concession agreements which would be triggered by a change of control of

the Company.

The Company does not have any agreements with any Non-executive Director, Executive Director or

employee that would provide compensation for loss of office or employment resulting from a change

of control.

246 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

FRESNILLO PLC DIRECTORS’ REPORT 2023 CONTINUED

Stakeholders and policies

Section 172 Statement The Company’s Section 172 Statement can be found in the Strategic report on page 37.

Employee engagement Details of how the Company engages with its workforce can be found in the Strategic report on

pages40-41.

Stakeholder engagement on

key decisions

Details of the key decisions and discussions of the Board during the year and the main stakeholder

inputs into those decisions are set out in the Strategic report on pages 38-39 and Corporate Governance

report on page 191.

Payments to governments In June 2023, the Company approved and published a report disclosing payments made to

governments. The report can be found on the Company’s website. https://www.fresnilloplc.com/investors/

regulatory-announcements/

Modern Slavery Statement The Company has approved and published on its website its Modern Slavery Statement in accordance

with the Modern Slavery Act 2015. https://www.fresnilloplc.com/responsibility/our-approach/modern-

slavery/

Diversity policy In February 2018 the Company approved and published on its website its policy on diversity and

inclusion. https://www.fresnilloplc.com/media/nnwj11vk/fres-plc-diversity-and-inclusion-policy.pdf

UK tax strategy The Company’s UK tax strategy for the financial year ending 31 December 2023 is published on its

website. https://www.fresnilloplc.com/media/wscmwkgl/091221-52-tax-strategy.pdf

Greenhouse gas emissions Details of the Company’s greenhouse gas emissions can be found in the Social and Sustainability report

on page 128 of the Strategic report.

Political contributions The Company did not make any donations to political organisations during the year.

Financial risk Details of the Company’s policies on financial risk management and the Company’s exposure to price

risk, credit risk, liquidity risk and cash flow risk are outlined in note 31 to the financial statements.

Shareholders and share capital

Share capital Details of the Company’s share capital are set out in note 18 to the financial statements on

pages296-297.

Authority to purchase own

The Company was authorised by a shareholders’ resolution passed at the Annual General Meeting held

in May 2023 to purchase up to 10% of its issued Ordinary Share capital. Any shares which have been

bought back may be held as treasury shares or, if not so held, must be cancelled immediately upon

completion of the purchase, thereby reducing the amount of the Company’s issued and authorised

share capital. This authority will expire at the forthcoming Annual General Meeting and a resolution

to renew the authority for a further year will be proposed. No shares were purchased by the Company

during the year.

Major interests in shares As at 31 December 2023, in accordance with DTR 5, the Company had been advised of the following

notifiable interests (whether directly or indirectly held) in its voting rights:

T. Rowe Price Associates holds 26,894,011 shares (3.65%) and BlackRock Inc holds 22,459,233 shares

(3.04%).

As at 4 March 2024, the Company has been advised no changes to those notifiable interests.

2023 Annual General

Meeting

At the 2023 Annual General Meeting, all resolutions put to shareholders were passed by a majority. Prior

to the AGM, the Company consulted with a number of shareholders in relation to the resolutions to

re-elect the Directors. In accordance with UK Listing Rules applicable to companies with a controlling

shareholder, the resolutions relating to the re-election of the Independent Non-executive Directors

required approval by a majority of votes cast by independent shareholders as well as all the shareholders

of the Company.

Further to the Code provisions, details of proxy voting are presented at the AGM and final figures are

announced to the London Stock Exchange and uploaded to the Company’s website as soon practicable

after the AGM.

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Shareholders and share capital

2024 Annual General

Meeting

The Company’s 16th Annual General Meeting will be held in May 2024 and the Notice of Meeting will be

issued to all shareholders 20 business days before the meeting date. In planning the business of each

AGM, the Board takes account of institutional shareholder guidelines on pre-emption rights, share buy-

backs and shareholder rights in relation to general meetings when drafting the usual resolutions dealing

with those matters. In each case, resolutions are presented to the AGM to give the Board flexibility to

respond to market developments.

Auditors and audit

Auditor reappointment A resolution to re-appoint Ernst & Young LLP as auditor will be proposed at the 2024 AGM.

Audit information Each of the Directors at the date of the approval of this report confirms that:

• So far as he/she is aware, there is no relevant audit information of which the Company’s auditor is

unaware.

• He/she has taken all the reasonable steps that he/she ought to have taken as a Director to make

himself/herself aware of any relevant audit information and to establish that the Company’s auditor is

aware of the information.

• The confirmation is given and should be interpreted in accordance with the provisions of section 418 of

the Companies Act 2006.

Listing rules disclosures

Listing Rule 9.8.4C Disclosure requirements under Listing Rule 9.8.4 C, where applicable to the Company, are identified

below along with cross-references indicating where the relevant information is set out in the annual

report:

• Capitalised interest of the year ended 31 December 2023 and information regarding tax relief can be

found on page 293.

• Details of significant contracts with controlling shareholders can be found on page 223.

• Details pertaining to services provided to the Company by Peñoles are set out on pages 303-305.

• A statement in relation to the agreement that the Company has entered into with the controlling

shareholder can be found in the Corporate Governance report on page 203.

The Directors’ report has been approved by the Board of Directors of Fresnillo plc.

Signed on behalf of the Board.

Alberto Tiburcio

Independent Non-executive Director

4 March 2024

Fresnillo plc

Registered Office:

21 Upper Brook Street

London, W1K 7PY

United Kingdom

Company Number: 6344120

248 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the annual report and the Group and Parent Company financial statements in accordance

with applicable United Kingdom law and regulations.

The Directors are required to prepare financial statements for each financial year which present a true and fair view of the financial

position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that

period. The Directors have elected to prepare the Group and Parent Company financial statements in accordance with UK-adopted

International Accounting Standards.

In preparing those financial statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8: ‘Accounting Policies, Changes in Accounting Estimates and Errors’ and

then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand

the impact of particular transactions, other events and conditions on the Company and of the Group’s financial position and financial

performance;

• state whether UK-adopted international accounting standards have been followed, subject to any material departures disclosed and

explained in the financial statements; and

• prepare the accounts on a going concern basis unless, having assessed the ability of the Company and the Group to continue as a

going concern unless it is appropriate to presume that the Company and/or the Group will not continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and

Group’s transactions and which disclose with reasonable accuracy at any time the financial position of the Company and of the

Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for

safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of

fraud and other irregularities.

Under applicable UK law and regulations, the Directors are responsible for the preparation of a Strategic report, Directors’ report,

Directors’ Remuneration report and Corporate Governance statement that comply with that law and regulations. In addition, the

Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s

website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in

other jurisdictions.

Neither the Company nor the Directors accept any liability to any person in relation to the annual financial report except to the extent

that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or

misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and

Markets Act 2000.

Directors’ responsibility statement under the UK corporate governance code

In accordance with Provision 27 of the 2018 UK Corporate governance Code, the Directors consider that the annual report and accounts,

taken as a whole, is fair, balanced and understandable and provides information necessary to enable shareholders to assess the

Company’s position, performance, business model and strategy.

Responsibility statement of the Directors in respect of the annual report and accounts

Each of the Directors whose names are listed on pages 194-197 confirm that to the best of their knowledge:

a) the consolidated financial statements, prepared in accordance with UK-adopted international accounting standards give a true

and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the

consolidation taken as a whole; and

b) the annual report (including the Strategic report encompassed within the ‘Overview’, ‘Strategic report’, ‘Performance’ and

‘Governance’ sections) includes a fair review of the development and performance of the business, and the position of the Company

and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and

uncertainties that they face.

For and on behalf of the Board.

Alberto Tiburcio

Independent Non-executive Director

4 March 2024

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FRESNILLO PLC

Opinion

In our opinion:

• Fresnillo plc’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true and fair

view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2023 and of the Group’s profit for the year

then ended;

• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;

• the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting

standards as applied in accordance with section 408 of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Fresnillo plc (the ‘Parent Company’) and its subsidiaries

(the ‘Group’) for the year ended 31 December 2023 which comprise:

Group Parent Company

Consolidated balance sheet as at 31 December 2023 Parent Company balance sheet as at 31 December 2023

Consolidated income statement for the year then ended Parent Company Statement of changes in equity for the year

then ended

Consolidated statement of comprehensive income for the

year then ended

Parent Company Statement of cash flows for the year

then ended

Consolidated statement of changes in equity for the year

then ended

Related notes 1 to 17 to the financial statements, including material

accounting policy information

Consolidated statement of cash flows for the year then ended

Related notes 1 to 32 to the financial statements, including

material accounting policy information

The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international

accounting standards and as regards the Parent Company financial statements, as applied in accordance with section 408 of the

Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities

under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group and parent in accordance with the ethical requirements that are relevant to our audit of the financial

statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other

ethical responsibilities in accordance with these requirements.

We did not provide any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Parent Company and we

remain independent of the Group and the Parent Company in conducting the audit.

We provided limited assurance services on ESG key performance indicators to the Group in addition to the audit and which have not

been disclosed in the annual report or financial statements.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s

ability to continue to adopt the going concern basis of accounting included the following procedures:

• We walked through the process to confirm our understanding of management’s going concern assessment process;

• During January 2024, the Group entered into a US$350 million revolving credit facility that contains financial covenants. We confirmed

through inquiries of management, review of bank statements and subsequent event procedures that, as of the date of our audit

opinion, no amounts have been drawn;

• We verified the terms, maturity, interest rates, and any restrictions or covenants that are relevant to the senior notes and revolving

credit facility held by the Group at the date of approving of the financial statements against the original contracts;

• We assessed management’s forecasting accuracy by comparing forecasts to actuals for the year ended 31 December 2023 and

assessing the reasons for differences, including the effect of market-driven factors;

• We assessed the completeness of the factors included in the going concern assessment by verifying the consistency of key

assumptions with our understanding of the business and the environment within which it operates;

• We obtained management’s going concern assessment and test of compliance with covenants, including cash forecast for the going

concern period which extends to 31 December 2025. The Group has modelled plausible adverse changes and applied reverse stress

testing in respect of prices to assess the impact on the forecast liquidity of the Group (before considering the new facility);

• We tested the factors and assumptions included in the base case and most severe adverse scenario for the cash forecast, in particular

comparing forecast metals prices to analyst forecasts and comparing production forecasts to 2023 production, plant capacity and

our understanding of the business and its future plans;

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• We considered the mitigating actions available to management and challenged whether these are within management’s control,

although these were scarcely modelled due to the level of headroom in the plausible adverse cases;

• We have challenged management’s reverse stress test to assess whether the required price reduction to exhaust liquidity was

remote. We requested an additional scenario with a combination of price reductions and cost increases to evaluate liquidity and

compliance with covenants, and assessed the likelihood of such a scenario;

• Given that the additional reverse stress test scenario did not factor in the full use of the new facility, we performed a further

assessment to determine what level of price reductions would lead to the Group utilising all liquidity during the going concern

period. Our assessment is that the likelihood of this reverse stress test scenario eventuating is remote;

• We reviewed the Group’s going concern disclosures included in note 2 of the financial statements, in order to evaluate whether

the disclosures were appropriate.

Our key observations:

• The Directors’ assessment forecasts that the Group will maintain sufficient liquidity and will comply with the financial covenants

throughout the going concern assessment period in all scenarios.

• Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern

for the period which extends to 31 December 2025.

• In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the

Directors considered it appropriate to adopt the going concern basis of accounting.

• Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of

this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group

or Parent’s ability to continue as a going concern.

Overview of our audit approach

Audit scope • Out of 12 components in scope, we performed an audit of the complete financial information of eight components

being the six operating mining units (Fresnillo, Penmont, Saucito, Juanicipio, San Julián and Ciénega), the Parent

Company and the entity which holds the Silverstream contract. (Comercializadora de Metales Fresnillo). These

components represented 100% of revenues, 100% of the Silverstream revaluation effects and 97% of total assets

• We performed specified procedures on certain balances at a further three components. These components

represented 3% of total assets.

Key audit

matters

• Recognition of related party transactions, including revenue recognition

• Valuation of the Silverstream contract

• Recoverable amount of mining assets

• Recoverable amount of investments in subsidiaries (Parent Company only)

• Re-estimation of quantities held in leaching pads at Penmont.

Materiality • Overall Group materiality was set at US$17.0 million which represents 5% of the five-year average of profit before tax

prior to Silverstream revaluation effects and material non-recurring items (Adjusted Normalised Profit).

An overview of the scope of the Group and Parent Company audits

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope

for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.

We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business

environment, the potential impact of climate change and other factors such as recent Internal audit results when assessing the level

of work to be performed at each company.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage

of significant accounts in the financial statements, of the 15 reporting components of the Group, we selected 12 components covering

entities within Mexico and Chile, which represent the principal business units within the Group.

Of the 12 components selected, we performed an audit of the complete financial information of eight components (‘full scope

components’) which were selected based on their size or risk characteristics. For the remaining three components (‘specified procedures

scope components’), we performed audit procedures on specific accounts within each component that we considered had the potential

for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk

profile. We perform other procedures on one additional component.

The reporting components where we performed audit procedures accounted for 100% (2022: 100%) of the Group’s revenues, 100%

(2022: 100%) of the Silverstream revaluation effects and 99% (2022: 99%) of the Group’s total assets. For the current year, the full scope

components contributed 100% (2022: 100%) of the Group’s revenues, 100% (2022: 100%) of the Silverstream revaluation effects and

97% (2022: 97%) of the Group’s total assets.

We noted that some entities presented financial losses in 2023, which distorted the coverage assessment over the Group’s Adjusted

Normalised Profit. Therefore, when calculating their overall contribution, this shows a coverage exceeding 100% of the Group’s Adjusted

Normalised Profit (2022: 96%).

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The specified procedures scope components contributed 3% (2022: 3%) of the Group’s Total assets. The audit scope of these components

may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant

accounts tested for the Group.

The remaining components represent less than 1% (2022: 1%) of the Group’s total assets. For these components, we performed other

procedures, including analytical review and testing of consolidation journals and intercompany eliminations to respond to any potential

risks of material misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

0.7

100% 100% 100% 100%

97%

0.7% 1.0%

97%

3% 3%

2023

100

Revenue Silverstream revaluation effect Assets

2022 2023 2022 2023 2022

Full scope Specified procedures Other procedures

Changes from the prior year

There are no changes to the scope compared to prior year.

Involvement with component teams

All of the Group’s significant operations are in Mexico and are audited by local teams under our direct supervision.

Work performed by

Primary team Component team under our direct supervision

Full scope components

*

(Including the Parent Company)



Components on which specified

audit procedures are performed

*

* These represent one component relating to the valuation of the Silverstream contract: the Primary team performs principal procedures relating to estimation directly and

the component team performs certain supporting procedures on the estimation of reserve and resource quantities and the related mine plan at the Sabinas mine, and also

regarding cash receipts (both represent a full scope component).

In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the

components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating

under our instruction. Of the eight full scope components, audit procedures were performed on one of these directly by the primary

audit team and, on another component, procedures were performed in conjunction by the primary and component teams. For all full

scope components and specified procedures components where the work was performed by component auditors, we determined the

appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion

on the Group as a whole.

Senior members of the component team and the Peñoles audit team attended our virtual global planning meetings during the

planning phase of the audit, and we discussed the results of interim procedures and interacted regularly with the local team in Mexico.

The primary engagement team is predominantly composed of Spanish speakers to further enhance our interactions with both the

component team and management.

The primary team visited Mexico during both the planning and execution phases, including the Senior Statutory Auditor for the latter,

with members of the team working with and supervising the component team in Mexico for a number of weeks over two visits. These

visits involved discussion and oversight of the component team audit approach, consideration of significant accounting and auditing

issues arising from their work, reviewing key audit working papers, meeting with management and attending closing meetings.

The primary team was responsible for the scope and direction of the audit process. For certain procedures, in particular areas involving

significant judgement and heightened audit risk, we performed work ourselves with support where required from the component

team. In other cases, we reviewed key working papers including, but not limited to, the risk areas described below.

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Based upon the above approach we are satisfied that we have been able to perform sufficient and appropriate oversight of our

component team and the work performed by the auditor of Peñoles relevant to our audit. This, together with the additional procedures

performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements.

Climate change

There has been increasing interest from stakeholders as to how climate change will impact Fresnillo plc. The Group has determined

that the most significant adverse future impacts from climate change on its operations are likely to be from water stress and drought,

transition to a low-carbon future and increasing societal and investor expectations. These are explained on pages 111-128 in the Task

Force for Climate Related Financial Disclosures and on pages 180-181 in the principal risks and uncertainties, which form part of the

‘Other information’ rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of

considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the

audit or otherwise appear to be materially misstated.

In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any

consequential material impact on its financial statements. As explained in note 2 (c) to the Group and Parent Company financial

statements, governmental and societal responses to climate change risks are still developing, and are interdependent upon each other,

and consequently financial statements cannot capture all possible future outcomes as these are not yet known. The degree of certainty

of these changes may also mean that they cannot be taken into account when determining asset and liability valuations and the timing

of future cash flows under the requirements of UK adopted international accounting standards and in accordance with the provisions of

the Companies Act 2006. Significant judgements and estimates relating to climate change have been described in note 2 (c).

Our audit effort in considering climate change was focused on ensuring that the effects of material climate risks disclosed on pages

180-181, have been appropriately considered in the assessment of indicators of impairment of long-term non-financial assets and

the timing and quantum of future cash flows underpinning the provision of mine closure costs and associated disclosures. We also

considered whether other assets and liabilities were susceptible to material changes in measurement as a result of climate risks and

opportunities. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists,

to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in

our audit. Details of our procedures and findings on the assessment of impairment indicators are included in our key audit matters

below where relevant.

We also challenged the Directors’ considerations of climate change in their assessment of going concern and viability and associated

disclosures.

Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter, however

we have incorporated climate change considerations into our procedures over key audit matters where applicable.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial

statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)

that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources

in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the

financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter: Recognition of related party transactions, including revenue recognition



• Approximately 99% of the Group’s current year revenue from the sale of goods being concentrates, doré, activated carbon, slag and

precipitates, excluding hedging (US$2,704.5 million; 2022: US$2,436.8 million), and a significant amount of its expenses incurred

(US$240.4 million; 2022: US$163.2 million), arise from transactions with related parties (2022:100%). The Silverstream contract is also

with a related party. These related parties are all subsidiaries of the Group’s direct parent, Industrias Peñoles, S.A.B. de C.V. (Peñoles).

• Principal transactions include the sale of goods to the Met-Mex Peñoles refinery, administrative services received and the

Silverstream contract.

• There is a risk that, if not at arm’s length or not reflecting the goods or services provided in the period, such transactions could be

used to manipulate earnings or to distribute profits to the Group’s parent.

• There is also a risk that revenues are inappropriately recognised as a result of incorrect cut-off or inappropriate measurement of

product sold.

• There is an ongoing focus by the Mexican tax authorities on transfer pricing as reflected by recently concluded and ongoing tax

inspections. There is therefore the potential risk of tax exposures arising from related party transactions.

Our judgement is that the level of risk in this area remains consistent with

the prior year.

We have not made significant changes to our audit response compared

to the prior year.

Related party transactions are disclosed in note 27

to the consolidated financial statements, revenues

in note 5 and relevant accounting policies in

note2.

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Our audit response

We performed full scope audit procedures over this risk area in eight components, which covered 100% of the aggregate risk amount

relating to revenue, 100% of the risk related to the Silverstream contract and 96% relating to related party expenses. In addition, we

performed specified procedures in components which covered 4% of related party expenses.

Identification

of related

parties and

related party

transactions

• We read new and amended contracts and agreements with related parties, including Met-Mex Peñoles, to

understand the nature of the transactions.

• We evaluated the appropriateness of management’s process for identifying, recording and reporting related

party transactions. For this purpose, we have performed a walkthrough of management’s process, we inquired

of management and tested relevant controls.

• As part of our procedures on completeness of related party transactions, we reviewed those transactions that

have been identified, monitored, reviewed and approved by the Audit Committee.

• We made inquiries of management at various levels and inspected board minutes and confirmation letters to

assess the completeness of related parties.

• We performed a consistency check with our other audit procedures in order to identify any related party

transactions not already identified by management or that are outside the normal course of business.

Revenue

recognition

• In order to test completeness of revenue transactions, we obtained confirmations from Peñoles of 100% of the

revenue, including quantities delivered, and the period-end receivable balance.

• We evaluated the risk of material misstatement due to assay adjustments at 31 December 2023 by performing

a retrospective review of the quantum of previous adjustments made during the year and determining the

maximum plausible adverse effect on period-end provisional sales.

• We performed revenue cut-off testing, by reference to shipment dates.

• On a sample basis, we performed testing to verify physical deliveries of product in the year. Since this is a

significant risk, our testing threshold was lower and our sample sizes are larger than they would otherwise

have been.

• We obtained an understanding of the basis of the treatment and refining charges (T&RCs) negotiated between

the Group and Peñoles for the current year, as these are part of the pricing calculation for revenue.

• We compared principal inputs to external benchmarks or other external evidence. We recalculated T&RCs

based on actual production and contractual terms.

• We performed overall analytical procedures which consisted of comparing actual revenues on a disaggregated

basis to detailed expectations developed based on production in the year and market prices for relevant metals

and obtained explanations for any material variances.

Silverstream

contract

• We tested a sample of cash receipts in respect of silver that was payable to Fresnillo under the contract in the

year.

• The valuation of the Silverstream contract is described separately as a key audit matter below.

Other

transactions

with related

parties

• On a sample basis, we tested related party expenses against underlying contractual terms.

• We compared actual results against detailed expectations of income statement line items impacted by related

party transactions to determine whether there was any evidence of manipulation.

Accuracy of

disclosures

• We verified that related party disclosures in the financial statements are consistent with the results of our audit

procedures.

Transfer pricing

considerations

• We read new and amended contracts and agreements with related parties, including Met-Mex Peñoles and

Baluarte to understand the nature and accounting impacts of related transactions.

• We obtained the most recent transfer pricing studies provided to management by its external transfer pricing

specialist, which we reviewed with our internal transfer pricing specialist.

• Assisted by our internal transfer pricing specialists, we reviewed the updated letter provided by the external

specialist for the year ended 31 December 2023 (providing an update since the final 2022 studies). We met with

the specialist to further understand the content of the update letter and review any changes made.

• For any changes made from the initial study, we obtained supporting evidence to corroborate the conclusions

reached.

• We confirmed the principal inputs to external benchmarks used to determine transfer pricing ranges. In

respect of T&RCs, these include confirmations from the auditor of Peñoles in respect of T&RCs charged to other

customers.

Management

override

• We performed overall analytical review procedures applying a low variance threshold at a disaggregated level,

comparing production quantities against mine plans. We obtained explanations for variances through interviews

with management and members of the Executive Committee, internal reporting to the Executive Committee

and published production reports. Where relevant, we corroborated those explanations to general ledger data

and external sources of information.

• We utilised general ledger data analysis tools to interrogate entire data sets for potential related party

transactions by reference to management’s list of related parties.

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Key observations communicated to the Audit Committee



• Our procedures did not identify issues with the identification, recording or reporting of related party transactions.

• We concluded that revenue recognition in the year is appropriate, including the treatment of related provisional pricing terms.

• As result of our consistency check with other audit procedures, we did not identify any additional or undisclosed related party

transactions.

• In respect of transfer pricing in transactions with related parties, we confirmed that the methodology for determining transfer

pricing in respect of the transactions with other Peñoles companies has not changed during the year and remains reasonable.

Key audit matter: Valuation of the Silverstream contract



• The valuation of the Silverstream contract (asset value: US$482.3 million at 31 December 2023; 2022: US$511.5 million; revaluation

effect: US$7.7 million pre-tax gain in 2023; 2022: US$18.8 million pre-tax gain), a derivative financial instrument, is estimated by

management using a discounted cash flow model.

• Key assumptions are the estimation of the reserves and resources and the related production profile of the Sabinas mine (owned

and operated by Peñoles), future silver prices and the discount rate applied. These assumptions require management judgement

and estimation.

• The resulting valuation is sensitive to changes in future silver prices, total volume of production and the discount rate applied which

may result in material revaluation effects in the financial statements.

Our judgement is that the level of risk in this area remains consistent with

the prior year.

We have not made significant changes to our audit response compared

to the prior year.

The nature of the Silverstream contract and

related valuation considerations are disclosed in

note 14 to the consolidated financial statements

and the relevant accounting policies in note 2.

Our audit response

We performed full scope audit procedures over the valuation of the Silverstream contract at 31 December 2023 and related income

statement revaluation effects. Consistent with 2022, these procedures covered 100% of the risk amount.

Valuation model • In conjunction with our valuation specialists, we evaluated the appropriateness of the valuation approach and

integrity of the model used by the Company to determine the fair value of the Silverstream contract under IFRS

9 ‘Financial instruments’ by ensuring consistency in the methodology applied and review of formulas used in the

model, corroborating key inputs to internal and external sources of evidence, as applicable.

• We assessed whether any of the key inputs to the valuation model required changes related to climate-related

risks through our inquiries of management and our understanding of the Sabinas mine.

Reserves and

resources and

production

profile of the

Sabinas mine

• With the assistance of our external specialist geologist, we made inquiries of the Sabinas mine geologist, in

order to understand the assumptions used in the estimation of reserves and resources and movements in the

estimation in the year.

• We made inquiries of management in financial and operational areas in respect of their review of the Sabinas

mine plan prepared by Peñoles, focusing on the comparisons between the current year plan and the 2022 plan.

• We confirmed that the members of the Sabinas mine planning team involved in the preparation of the mine

plan underpinning the Silverstream valuation have the appropriate experience to do so.

• The reserves and resources estimate as well as the mine plan are some of the key inputs to the valuation. We

therefore issued instructions to the auditor of Peñoles to perform procedures and report to us in respect of

the reserves and resources estimate and the mine plan of the Sabinas mine. These procedures detailed in the

instructions included:

- conducting walkthroughs to confirm our understanding of Peñoles management’s processes to estimate

quantities of reserves (as included in the Sabinas mine plan) and resources and how those were included in

the valuation model;

- gaining an understanding of reasons for changes in estimates of reserves and resources in the year;

- assessing the professional competence, capabilities and objectivity of the Sabinas mine geologist involved in

the estimation of reserves and resources quantities; and

- evaluating the reasonableness and appropriateness of inputs to the reserves and resources estimates and

Sabinas mine plan that were used in the valuation of the contract as at 31 December 2023.

• We discussed the results of the above procedures with the auditor of Peñoles and reviewed their key working

papers.

Key economic

assumptions in

the valuation

• With assistance from our valuation specialists, we challenged key economic assumptions in the valuation,

including future silver prices and the discount rate applied.

• This challenge included comparison to market data to consider the appropriateness of silver price and discount

rate assumptions when considered together in the valuation model and analysis of the consistency

of assumptions to other accounting estimates, such as recoverable amounts of mining assets.

• We performed sensitivity analysis on the combination of silver price assumptions and discount rate.

Appropriateness

and completeness

of disclosures

• We assessed the appropriateness and completeness of disclosures included in the notes to the financial

statements and their consistency with the disclosures made in the front half of the annual report.

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Key observations communicated to the Audit Committee



• The valuation model methodology is consistent with that used in prior periods and we consider this appropriate for the nature of

this long-term derivative contract. Also, we tested the model’s integrity noting no exceptions.

• Our procedures confirmed that the reserves and resources volumes, as well as the mine plan underpinning the valuation were

appropriately estimated.

• We demonstrated the sensitivity of the valuation in respect of economic input assumptions, mainly prices, total production and

discount rates.

• We concluded that the overall valuation of the contract is reasonable.

• We confirmed the appropriateness and completeness of relevant disclosures in the financial statements.

Key audit matter: Recoverable amount of mining assets



• The identification of indicators of impairment requires management judgement, as changes in key economic assumptions are

subject to risk and uncertainty that may be beyond the control of the Group.

• The key assumptions underpinning management’s assessment of the recoverable amount of mining assets are reserves and a

portion of resources with high likelihood of being converted into reserves, related mine plans and production profiles, estimated

future operating and capital expenditure, future commodity prices, exchange rates and the discount rates applied.

• The estimation of mineral reserves and resources quantities of the Group’s mines requires significant judgment and estimation.

• The Group’s estimates of mineral reserves and resources are audited by third party specialists engaged by management (‘Reserves

and Resources Specialists’).

• Changes to assumptions could lead to material changes in estimated recoverable amounts, resulting in impairment of property,

plant and equipment (net book value being US$2,860.9 million, 2022: US$2,862.6 million). There is no impairment recorded in prior

years that may be reversed.

Our judgement is that the level of risk in this area has increased from prior

year due to the identification of impairment triggers in Fresnillo, Ciénega,

Saucito and San Julián mining units.

We have considered the possible effect of climate change in the

impairment trigger assessment, in line with the prior year.

Management’s assessment of the judgement

and estimation required is set out in note 2 to the

consolidated financial statements, with the results

of management’s assessment for impairment

in note 13. The reserves and resources tables are

presented after the Parent Company notes to the

financial statements.

Our audit response

We performed full scope audit procedures over this risk area in seven components and specified procedures over this risk in one

component, which covered 100% of the risk amount.

Indicators of

impairment and

methodology

used to estimate

recoverable

values

• We evaluated management’s identification of indicators of impairment under IAS 36 ‘Impairment of assets’

and considered whether climate risks could represent indicators.

• We challenged management’s assessment with particular emphasis on whether operational issues, cost

increases and decreases in estimations of reserves and resources would result in an impairment trigger by

performing our own independent assessment based on inputs calculated by our valuation specialists.

• We verified information from our procedures in respect of reserves and resources (as described below) to

management’s indicator assessment to ensure that the most recent reserves information was used.

• We considered the results of our other procedures, including in respect of the mine closure provision and our

analytical review procedures over production to evaluate whether there were any unidentified indicators of

impairment.

• With the assistance of our valuation specialists, who independently assessed management’s approach

against industry practices, we assessed the methodology used by management to estimate the recoverable

value of each mining asset for which an impairment test was performed to ensure that this is consistent with

accounting standards.

Estimation

process for

reserves and

resources

including

external

specialists

engaged by

management

• We performed substantive procedures over the estimation of reserves and resources to evaluate the extent to

which we can rely on those estimates when concluding whether an indicator of impairment existed.

• We walked through the process of the estimation of the reserves and resources quantities and identified

relevant controls.

• We walked through the process of determining mine plans from estimated reserves and resources quantities.

• We assessed the competence of the Reserves and Resources Specialists, as well as capabilities and objectivity

as specialists engaged by management to audit the Group’s estimates of reserves and resources and confirmed

the scope of their work was appropriate for the purpose of financial reporting.

• We assessed the potential impact of climate related matters on the estimates.

• We read the reports prepared by the Reserves and Resources Specialists, gained an understanding of the

changes in reserves and resources estimates in the year and considered their observations on the Group’s

reserve and resource estimation process insofar as they affect the financial statements.

• We engaged our own specialist (geologist) to evaluate the information provided by the Reserves and Resources

specialists.

• We discussed directly with the Reserves and Resources specialists the results of their reports.

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Key

assumptions

used in

management’s

estimate of the

recoverable

values of

mining assets

• We compared related production profiles to the current mine plans for each mine where an impairment test

was performed and considered their consistency with our understanding of future plans at the mines obtained

through enquiries with both operating and senior management.

• We assessed operating and capital costs included in the cash flow forecasts to ensure consistency with current

operating costs, forecast mine production and other forecast information, by reviewing the cost assumptions

and understanding the methodology applied by management in their budgeting process. We considered the

possible effect of climate change on cost estimates.

• With the assistance of our valuation specialists, we assessed management’s assumptions relating to future

metals prices and discount rates by comparing these to market data and also for consistency with other

estimates used in the financial statements.

• We performed sensitivity analysis on management’s calculated recoverable values for alternative assumptions

for metals prices, costs and the discount rate applied.

Sensitivity

disclosures

• We assessed the appropriateness of sensitivity disclosures included in the financial statements in light of our

other audit procedures.

Key observations communicated to the Audit Committee



• We assessed the Reserves and Resources Specialists as appropriate specialists engaged by management for the purposes of

auditing the reserves and resources of the Group.

• We concluded that indicators of impairment are present at Fresnillo, Saucito, Ciénega and San Julián mining units.

• We consider that management’s discount rates applied are within the range of acceptable values for Ciénega, Soledad-Dipolos

and San Julián, but below our independently calculated range for Fresnillo, Saucito, Herradura and Juanicipio. Consequently,

we assessed the impact of using discount rates within our range and concluded that no impairment charges are required.

• We concluded prices used by management fall within our range of acceptable values calculated independently by our engaged

specialists.

• Other inputs such as production and operational costs included in the models were considered to be reasonable.

• Based on the procedures performed, we concluded that the carrying values of mining assets of all cash generating units, including

Fresnillo, are recoverable at 31 December 2023, and that therefore no impairment charges were required.

• We concluded that the sensitivity disclosures in the financial statements are appropriate.

Key audit matter: Recoverable amount of investment in subsidiaries (Parent Company only)



Investments in subsidiaries (US$3,320.7 million, 2022: US$4,016.1 million) are more sensitive to changes in recoverable value than

the Group’s underlying mining assets because these investments were re-measured at fair value in 2008 when the Group was

established ahead of its Initial Public Offering, and have been subject to previous impairment charges including last year.

• The principal driver of the recoverable amount of investments in subsidiaries is the estimated value of underlying mining

assets held by the Group’s subsidiaries. Refer to related considerations in the key audit matter above.

• In addition, management estimates the recoverable value of exploration projects in considering the recoverable value of

subsidiaries.

• Changes to assumptions could lead to material changes in estimated recoverable amounts, resulting in either impairment or

reversals of impairment taken in prior years (2023 aggregate net impairment of US$730.8 million, 2022: US$1,755.0 million).

Our judgement is that the level of risk in this area, on balance, remains

consistent with the prior year.

As with the recoverable amount of mining assets, in the current year

we have also considered the possible effect of climate change in the

impairment trigger assessment.

Management’s assessment of the judgement

and estimation required is set out in note 2 to

the Parent Company financial statements, with

management’s assessment of investments in

subsidiaries included in note 5.

Our audit response

We performed full scope audit procedures over this risk area in one component, which covered 100% of the risk amount.

Indicators of

impairment and

methodology

used to estimate

recoverable values

• We assessed the methodology used by management to determine whether there were any indicators of

impairment for each investment in subsidiaries to ensure that this is consistent with accounting standards.

Refer to the ‘our audit response’ section of the key audit matter above with respect to procedures performed

relating to the recoverable value of mining assets.

• We evaluated management’s approach to valuing exploration prospects.

Key assumptions

used in

management’s

estimate of the

recoverable values

of investments in

subsidiaries

• Refer to the key audit matter above with respect to procedures performed relating to the recoverable value

of mining assets.

• We performed sensitivity analysis on management’s calculated recoverable values for alternative assumptions

for metals prices, production, costs and the discount rate applied.

Sensitivity

disclosures

• We assessed the appropriateness of sensitivity disclosures included in the Parent Company financial statements

considering our other audit procedures.

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Key observations communicated to the Audit Committee



• We confirmed that our observations with respect to reserves and resources set out in the key audit matter in respect of the

recoverable amount of mining assets above are also relevant for the recoverable amounts of investments in subsidiaries.

• We considered the approach to determining the recoverable value of investments in subsidiaries, including the valuation

of exploration assets, to be appropriate.

• Our procedures confirmed that the estimates of operating and capital costs are consistent with the production profiles of

respective mines and related mine plans.

• We consider that prices used in the models are reasonable.

• We consider that management’s discount rates applied are within the range of acceptable values for Ciénega, Soledad-Dipolos

and San Julián, but below our independently calculated range for Fresnillo, Saucito, Herradura and Juanicipio. On this basis,

we have assessed the impact of using discount rates within our range for the units where the discount rate was below our

independent range on the impairment models. This would have resulted in an additional impairment charge of US$26.4 million,

which was not adjusted by management and which we have determined is not material.

• We concluded that the impairment and sensitivity disclosures reflected in the Parent Company financial statements is appropriate.

Key audit matter: Re-estimation of quantities held in leaching pads at Penmont



• The recoverable quantity of gold from leaching pads is an estimate requiring consideration of a number of variables and is likely

to evolve over time as further information is obtained from ongoing leaching activities and the analysis of the ore deposited.

• We consider that there is a risk of manipulation of the estimate as a result of management judgement involved in interpreting

the results of ongoing sales recovery information from the pads.

• There is also judgement involved in the timing of the recognition of any change in estimate and the related effects on the financial

statements.

• An increase in estimated recoverable gold content would result in a reduction of the cost of inventory per ounce and therefore of

cost of sales.

Our judgement is that the level of risk in this area has increased with

respect to the prior year.

We have made significant changes to our audit response compared to

the prior year.

Management’s assessment of the judgement

and estimation required is set out in note 2 to the

consolidated financial statements, with the results

of management’s assessment in note 15.

Our audit response

We performed full scope audit procedures over this risk area in the impacted component, which covered 100% of the risk amount.

Methodology

applied to make

estimate

• We assessed the competence, capabilities and objectivity of management’s geologist involved in estimating

the recoverable quantity of gold from leaching pads.

• We engaged an external specialist (geologist) to evaluate management’s process for estimating the quantity

of recoverable gold from leaching pads.

Calculation of

estimate and

related financial

statement

effects

• We challenged management’s conclusion that there were sufficient operational indicators to suggest that

a change to the estimated recovery rate was required at the beginning of the year by analysing various

operational data points.

• With geological input from our specialist, we challenged the acceptability of the methodology used by

management to arrive at the estimated rate of recovery and the related assumptions.

• We tested the inputs into the calculation of the quantities held in leaching pads, including those relating to

the estimated recovery rate, and agreed these back to other audit evidence obtained during the course of the

audit, where relevant.

Management

override

• We considered indicators of management bias in estimating the recovery rate.

• As the evaluation of related controls requires the evaluation of the assumptions used in, and the output of,

that process, we do not seek to rely on these controls. We increased the level of challenge when performing

our substantive procedures, including the engagement of a specialist as discussed above.

Appropriateness

and completeness

of disclosures

• We assessed the appropriateness and completeness of disclosures included in the notes to the financial

statements.

Key observations communicated to the Audit Committee



• Based on our knowledge of the Group’s mining operations, we recognised that heap leach recovery rates are an estimate that

continues to be refined as new information is obtained.

• We concluded that the prospective change to the estimated recovery rate from the outset of 2023 was appropriate.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the

audit and in forming our audit opinion.

258 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FRESNILLO PLC

CONTINUED

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the

economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our

audit procedures.

We determined materiality for the Group to be US$17.0 million (2022: US$21.0 million), which is 5% (2022: 5%) of the five-year average

profit before tax prior to Silverstream revaluation effects, adjusted for any material one-off transactions (‘Adjusted Normalised Profit’). At

planning, we use forecast profit figures to estimate materiality for 2023. We revisited our materiality at year-end noting that actual profits

for the year supported our assessment made at planning. We believe this measure of profit represents one of the main considerations

for members of the Group, particularly as the Silverstream revaluation effects are principally non-cash in nature and one-off transactions

are not reflective of the ongoing operations of the business.

We have concluded that, solely for the purposes of determining materiality, there are sufficient indicators to normalise the basis for

determining materiality using the five-year average, which is in line with the directors’ viability assessment period. An illustration of our

approach to Adjusted Normalised Profit is set out below, with profit before tax prior to Silverstream revaluation effects as the starting

point.

We determined materiality for the Parent Company to be

US$42.4 million (2022: US$47.1 million) which is 1% (2022: 1%) of

equity. The materiality of the Parent Company is higher than that

of the Group, reflective of the Parent Company’s primary role

being that of a holding company.

Performance materiality

The application of materiality at the individual account

or balance level. It is set at an amount to reduce to an

appropriately low level the probability that the aggregate

of uncorrected and undetected misstatements exceeds

materiality.

On the basis of our risk assessments, together with our

assessment of the Group’s overall control environment, our

judgement was that performance materiality was 75% (2022:

75%) of our planning materiality, namely US$13.0 million (2022: US$16.0 million) for the Group and US$31.8 million (2022: US$35.3

million) for the Parent Company. We have set performance materiality at this percentage due to the level of historical misstatements,

our ability to assess the likelihood of misstatements and the effectiveness of the internal control environment.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is

undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based

on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that

component.

Assigned performance materiality decreased in all components, reflecting the overall performance of the Group. Where assigned

performance materiality decreased, this represents the changes in the relative contribution of profit of that component. The allocation

of performance materiality to full scope components is as follows:

2023 2022

9.6

7.5

3.2

7.8

2.8

Comercializadora

de Metales

Penmont mining

unit

Saucito mining

unit

Juanicipio

Fresnillo group

Key audit matters*:







San Julián mining

unit

Fresnillo mining

unit

Ciénega mining

unit

1 4

1 2

1 3

* The icons correspond to the key audit matters set out above. Audit procedures in respect of the recoverable amount of investments in subsidiaries are performed at the

performance materiality of the standalone parent company financial statements.

Reflecting the fact that dividends are a key focus for shareholders and that the dividends are derived from the operating results of the

Group, we apply Group materiality to our procedures around dividends, including distributable reserves.

100

200

300

400

500

600

700

130.4

622.1

608.6

229.4

107.5

347.7

2019 2020 2021 2022 2023

US$ million

15.7

24.9

Adjusted Normalised Profit used in materiality calculation

Excluded one-off expense

Five-year average

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Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of US$0.85 million

(2022: US$1.1 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted

reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other

relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor’s

report thereon. The directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this

report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If

we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to

a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a

material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal

requirements;

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by

the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance

with applicable legal requirements; and

• information about the company’s corporate governance statement and practices and about its administrative, management and

supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

260 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course

of the audit, we have not identified material misstatement in:

• the Strategic report or the Directors’ report; or

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you

if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received

from branches not visited by us; or

• the Parent Company financial statements and the part of the Directors’ Remuneration report to be audited are not in agreement

with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit; or

• a Corporate Governance statement has not been prepared by the Company.

Corporate Governance Statement

We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance

statement relating to the Group and company’s compliance with the provisions of the UK Corporate Governance Code specified for our

review by the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate

Governance statement is materially consistent with the financial statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified set out on page 185;

• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is

appropriate set out on pages 184-185;

• Directors’ statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its

liabilities set out on page 185;

• Directors’ statement on fair, balanced and understandable set out on page 224;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 221;

• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out

on pages 221-222; and

• The section describing the work of the Audit Committee set out on pages 212-224.

Responsibilities of Directors

As explained more fully in the Directors’ Responsibilities statement set out on page 248, the Directors are responsible for the

preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the

directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to continue as

a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the

directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud

is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or

intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including

fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the

company and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the

most significant are those related to the reporting framework (UK adopted international accounting standards and Companies Act

2006 and UK Corporate Governance Code), regulations impacting mining operations including mining laws, environmental and

labour regulations and tax and employee profit-sharing requirements in Mexico.

• With the assistance of our forensics specialists, we understood how Fresnillo plc is complying with those frameworks by making

enquiries of management, internal audit, those responsible for legal and compliance procedures and the company secretary. We

corroborated our enquiries through our review of board minutes and papers provided to the Audit Committee.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FRESNILLO PLC

CONTINUED

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• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by

meeting with management from various parts of the business to understand where it is considered there was a susceptibility of

fraud. We also considered performance targets and their propensity to influence efforts made by management to manage earnings.

We considered the programmes and controls that the Group has established to address risks identified, or that otherwise prevent,

deter and detect fraud; and how senior management monitors those programmes and controls. Where the risk was considered to

be higher, we performed audit procedures to address each identified fraud risk. These procedures included using data analytics to

test manual journals and were designed to provide reasonable assurance that the financial statements were free of fraud or error.

In the current year, forensic specialists reviewed our fraud risk assessment and assisted on our journal entry testing procedures.

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our

procedures involved enquiries of Group management and those charged with governance, legal counsel, internal audit, and the risk

and compliance departments; journal entry testing, with a focus on manual journals and those indicating large or unusual journals

based on our understanding of the business; and challenging the assumptions and judgements made by management in respect

of significant accounting estimates. Where observations are raised about management’s process or controls surrounding compliance

with laws and regulations by us or others, we consider the potential effect of those observations.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s

website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters we are required to address

• We were appointed by the Company at its annual general meeting in May 2008 to audit the financial statements of the Company

for the period ending 31 December 2008 and subsequent financial periods. Following a competitive tender process, we were

reappointed as auditor of the Company for the period ending 31 December 2017 and subsequent financial periods. Our total

uninterrupted period of engagement is 16 years, covering periods from our initial appointment through to the period ended

31 December 2023.

• The audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to

them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility

to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we

have formed.

Steven Dobson

(Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

London

5 March 2024

262 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

				Year ended 31 December 2023			Year ended 31 December 2022
				US$ thousands			US$ thousands
		Pre-			Pre-
		Silverstream	Silverstream		Silverstream	Silverstream
		revaluation	revaluation		revaluation	revaluation
		effect	effect	Total	effect	effect	Total
Revenues	5	2,705,086		2,705,086	2,432,990		2,432,990
Cost of sales	6	(2,201,848)		(2,201,848)	(1,896,970)		(1,896,970)
Gross profit		503,238		503,238	536,020		536,020
Administrative expenses		(128,428)		(128,428)	(94,123)		(94,123)
Exploration expenses	7	(182,447)		(182,447)	(165,790)		(165,790)
Selling expenses		(34,023)		(34,023)	(25,619)		(25,619)
Other operating income	9	35,324		35,324	71,860		71,860
Other operating expenses	9	(51,169)		(51,169)	(38,755)		(38,755)
Profit before netfinance costs and income tax		142,495		142,495	283,593		283,593
Finance income	10	50,623		50,623	26,460		26,460
Finance costs	10	(88,846)		(88,846)	(81,621)		(81,621)
Revaluation effects of Silverstream contract	14	–	7,732	7,732	–	18,785	18,785
Foreign exchange gain		2,014		2,014	1,354		1,354
Profit before income tax		106,286	7,732	114,018	229,786	18,785	248,571
Corporate income tax	11	207,367	(2,320)	205,047	73,009	(5,635)	67,374
Special mining right	11	(30,765)		(30,765)	(7,654)		(7,654)
Income tax	11	176,602	(2,320)	174,282	65,355	(5,635)	59,720
Profit for the year		282,888	5,412	288,300	295,141	13,150	308,291
Attributable to:
Equity shareholders of the Company		228,497	5,412	233,909	258,747	13,150	271,897
Non-controlling interest		54,391		54,391	36,394		36,394
		282,888	5,412	288,300	295,141	13,150	308,291
Earnings per share: (US$)
Basic and diluted earnings per Ordinary Share	12			0.317			0.369
Adjusted earnings per share: (US$)
Adjusted basic and diluted earnings per
Ordinary Share	12	0.310			0.351

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

		Year ended 31 December
		2023	2022
		US$ thousands	US$ thousands
Profit for the year		288,300	308,291
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Gain on cash flow hedges recycled to income statement		–	3,770
Changes in the fair value of cost of hedges		–	(1,380)
Total effect of cash flow hedges		–	2,390
Foreign currency translation		(2,318)	234
Income tax effect on items that may be reclassified subsequently to profit or loss:	11	–	(717)
Net other comprehensive (loss)/income that may be reclassified subsequently to profit or loss:		(2,318)	1,907
Items that will not be reclassified to profit or loss:
Losses recycled to the value of other assets		–	(4,120)
Changes in the fair value of cash flow hedges		452	4,733
Total effect of cash flow hedges		452	613
Changes in the fair value of equity investments at fair value through other comprehensive income (FVOCI)		(53,136)	(5,712)
Remeasurement loss on defined benefit plans	22	(126)	(712)
Income tax effect on items that will not be reclassified to profit or loss	11	15,826	1,644
Net other comprehensive loss that will not be reclassified to profit or loss		(36,984)	(4,167)
Other comprehensive loss, net of tax		(39,302)	(2,260)
Total comprehensive income for the year, net of tax		248,998	306,031
Attributable to:
Equity shareholders of the Company		194,476	271,618
Non-controlling interests		54,522	34,413
		248,998	306,031

264 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2023

Notes

			As at 31 December
		2023	2022
		US$ thousands	US$ thousands
ASSETS
Non-current assets
Property, plant and equipment (PPE)	13	2,860,916	2,862,564
Equity instruments at FVOCI	30 (b)	107,991	158,813
Silverstream contract	14	446,538	475,256
Deferred tax asset	11	665,302	343,688
Inventories	15	69,760	91,620
Other receivables	16	43,528	38,458
Other assets		4,553	3,700
		4,198,588	3,974,099
Current assets
Inventories	15	462,973	495,744
Trade and other receivables	16	419,666	404,499
Prepayments		23,178	34,429
Income tax recoverable		62,740	–
Derivative financial instruments	30	79	231
Silverstream contract	14	35,802	36,218
Cash and cash equivalents	17	534,580	969,060
		1,539,018	1,940,181
Total assets		5,737,606	5,914,280
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Company
Share capital	18	368,546	368,546
Share premium	18	1,153,817	1,153,817
Capital reserve	18	(526,910)	(526,910)
Hedging reserve	18	50	(91)
Fair value reserve of financial assets at FVOCI	18	42,591	79,786
Foreign currency translation reserve	18	(4,204)	(1,886)
Retained earnings	18	2,737,962	2,612,469
		3,771,852	3,685,731
Non-controlling interests		295,345	231,206
Total equity		4,067,197	3,916,937
Non-current liabilities
Interest-bearing loans	20	839,002	840,678
Notes payable	30 (a)	22,726	95,853
Lease liabilities	25	9,777	9,920
Provision for mine closure cost	21	280,467	242,380
Pensions and other post-employment benefit plans	22	13,211	9,462
Deferred tax liability	11	133,202	111,120
		1,298,385	1,309,413
Current liabilities
Trade and other payables	23	258,105	258,867
Interest-bearing loans	20	–	317,879
Notes payable	30 (a)	72,634	9,109
Income tax payable		21,779	81,235
Derivative financial instruments	30	–	487
Lease liabilities	25	4,813	5,209
Provision for mine closure cost	21	11,849	4,827
Employee profit sharing		2,844	10,317
		372,024	687,930
Total liabilities		1,670,409	1,997,343
Total equity and liabilities		5,737,606	5,914,280

These financial statements were approved by the Board of Directors on 4 March 2024 and signed on its behalf by:

Mr Juan Bordes

Non-executive Director

4 March 2024

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CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

		Year ended 31 December
		2023	2022
		US$ thousands	US$ thousands
Net cash from operating activities	29	425,922	502,185
Cash flows from investing activities
Purchase of property, plant and equipment	3	(483,409)	(592,129)
Proceeds from the sale of property, plant and equipment and other assets		1,592	1,357
Proceeds from Silverstream contract	14	40,158	33,355
Proceeds from the Layback Agreement	2 (c)	22,800	15,000
Purchase of equity instruments at FVOCI		(2,313)	–
Interest received		51,641	28,235
Net cash used in investing activities		(369,531)	(514,182)
Cash flows from financing activities
Proceeds from notes payable	30 (a)	22,726	8,140
Payment of notes payable	30 (a)	(32,965)	(10,008)
Repayment of interest-bearing loans	20	(317,879)	–
Principal element of lease payments	25 (a)	(6,068)	(5,125)
Dividends paid to shareholders of the Company	19	(108,351)	(201,950)
Capital contribution		9,667	10,143
Interest paid		(62,964)	(55,308)
Net cash used in financing activities		(495,834)	(254,108)
Net decrease in cash and cash equivalents during the year		(439,443)	(266,105)
Effect of exchange rate on cash and cash equivalents		4,963	(117)
Cash and cash equivalents at 1 January		969,060	1,235,282
Cash and cash equivalents at 31 December	17	534,580	969,060

1 Includes the effect of hedging of dividend payments made in currencies other than US dollar (note 19).

2 Corresponds to capital contributions provided by Minera los Lagartos, S.A. de C.V.

3 The amount corresponds to the interest paid during the year ended 31 December 2023 in respect of senior notes and notes payable less amounts capitalised and paid totalling

US$2.1 million (2022: US$8.5 million) which were included within Purchase of property, plant and equipment (note 13).

266 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

								Attributable to the equity holders of the Company
							Fair value
							reserve of	Foreign
						Cost of	financial	currency			Non-
		Share	Share	Capital	Hedging	hedging	assets at	translation	Retained		controlling	Total
		capital	premium	reserve	reserve	reserve	FVOCI	reserve	earnings	Total	interests	equity
												US$ thousands
Balance at 1 January
2022		368,546	1,153,817	(526,910)	(2,042)	(38)	83,784	(2,120)	2,543,087	3,618,124	184,548	3,802,672
Profit for the year		–	–	–	–	–	–	–	271,897	271,897	36,394	308,291
Other comprehensive income, net of tax		–	–	–	1,169	38	(3,998)	234	(606)	(3,163)	(1,981)	(5,144)
Total comprehensive income for the year		–	–	–	1,169	38	(3,998)	234	271,291	268,734	34,413	303,147
Hedging loss transferred
to the carrying value of PPE purchased during the year		–	–	–	782	–	–	–	–	782	2,102	2,884
Capital contribution		–	–	–	–	–	–	–	–	–	10,143	10,143
Dividends declared
and paid	19	–	–	–	–	–	–	–	(201,909)	(201,909)	–	(201,909)
Balance at 31December
2022		368,546	1,153,817	(526,910)	(91)	–	79,786	(1,886)	2,612,469	3,685,731	231,206	3,916,937
Profit for the year		–	–	–	–	–	–	–	233,909	233,909	54,391	288,300
Other comprehensive income, net of tax		–	–	–	173	–	(37,195)	(2,318)	(93)	(39,433)	131	(39,302)
Total comprehensive income for the year		–	–	–	173	–	(37,195)	(2,318)	233,816	194,476	54,522	248,998
Hedging loss transferred
to the carrying value of PPE purchased during the year		–	–	–	(32)	–	–	–	–	(32)	(50)	(82)
Capital contribution		–	–	–	–	–	–	–	–	–	9,667	9,667
Dividends declared
and paid	19	–	–	–	–	–	–	–	(108,323)	(108,323)	–	(108,323)
Balance at 31December
2023		368,546	1,153,817	(526,910)	50	–	42,591	(4,204)	2,737,962	3,771,852	295,345	4,067,197

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate information

Fresnillo plc. (the ‘Company’) is a public limited company and registered in England and Wales with registered number 6344120 and

is the holding company for the Fresnillo subsidiaries detailed in note 5 of the Parent Company accounts (the ‘Group’).

Industrias Peñoles S.A.B. de C.V. (‘Peñoles’) currently owns 75 percent of the shares of the Company and the ultimate controlling party

of the Company is the Baillères family, whose beneficial interest is held through Peñoles. The registered address of Peñoles is Calzada

Legaria 549, Mexico City 11250. Copies of Peñoles’ accounts can be obtained from www.penoles.com.mx. Further information on

related-party balances and transactions with Peñoles’ group companies is disclosed in note 27.

The consolidated financial statements of the Group for the year ended 31 December 2023 were authorised for issue by the Board of

Directors of Fresnillo plc on 4 March 2024.

The Group’s principal business is the mining and beneficiation of non-ferrous minerals, and the sale of related production. The primary

contents of this production are silver, gold, lead and zinc. During 2023 99.9% of the production were sold to Peñoles’ metallurgical

complex, Met-Mex (2022: all the production), for smelting and refining. Further information about the Group operating mines and its

principal activities is disclosed in note 3.

2. Significant accounting policies

(a) Basis of preparation and consolidation, and statement of compliance

Basis of preparation and statement of compliance

The Group consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards

and in accordance with the provisions of the Companies Act 2006.

The consolidated financial statements have been prepared on a historical cost basis, except for trade receivables, derivative financial

instruments, equity securities and defined benefit pension scheme assets which have been measured at fair value.

The consolidated financial statements are presented in dollars of the United States of America (US dollars or US$) and all values are

rounded to the nearest thousand ($000) except when otherwise indicated.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out

above in the Strategic report on pages 2-167. The financial position of the Group, its cash flows and liquidity position are described in the

Financial review in pages 64-75. In addition, note 31 to the financial statements includes the Group’s objectives, policies and processes

for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its

exposures to credit risk and liquidity risk.

In making their assessment of the Group’s ability to manage its future cash requirements, the Directors have considered the Company

and Group budgets and the cash flow forecasts for the period to 31 December 2025 (the ‘going concern period’). The Directors have

also considered the cash position as of 31 December 2023 (US$534.6 million) and the net current asset position (US$1,167.0 million). In

addition, they reviewed a more conservative cash flow scenario with reduced silver and gold prices of US$22.8/ounce and US$1,793/

ounce respectively throughout the going concern’s period, whilst maintaining current budgeted expenditure while only considering

projects approved by the Executive Committee. This resulted in a lower cash position, but still increase the cash balance year on year,

maintaining sufficient liquidity throughout the period. Finally, to maintain a strong liquidity, during January 2024, the Company entered

into a committed syndicated revolving credit facility (the ‘facility’) with a maximum amount available of US$350.0 million. The terms of

this facility include financial covenants related to leverage and interest cover ratios and the facility is available for a period of five years.

Under all going concern scenarios modelled, management forecasts compliance with such covenants.

The Directors have further calculated prices (US$19.7/ounce and US$1,579/ounce for silver and gold respectively), which should they

prevail to the end of 2025 would result in cash balances decreasing to minimal levels by the end of 2025, without applying mitigations.

Should metal prices remain below the stressed prices above for an extended period, management have identified specific elements of

capital and exploration expenditures which could be deferred without adversely affecting production profiles throughout the period.

On the other hand, management could amend the mining plans to concentrate on production with a higher margin in order to

accelerate cash generation without affecting the integrity of the mine plans.

After reviewing all of the above considerations, the Directors have a reasonable expectation that management have sufficient flexibility

in adverse circumstances to maintain adequate resources to continue in operational existence for the foreseeable future. The Directors,

therefore, continue to adopt the going concern basis of accounting in preparing the annual financial statements.

268 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

Basis of consolidation

The consolidated financial statements set out the Group’s financial position as of 31 December 2023 and 2022, and the results of

operations and cash flows for the years then ended.

Entities that constitute the Group are those enterprises controlled by the Group regardless of the number of shares owned by the

Group. The Group controls an entity when it is exposed to, or has the right to, variable returns from its involvement with the entity

and has the ability to affect those returns through its power over the entity. Entities are consolidated from the date on which control

is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The Group

applies the acquisition method to account for business combinations in accordance with IFRS 3.

All intra-group balances, transactions, income and expenses and profits and losses, including unrealised profits arising from intra-group

transactions, have been eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains except that

they are only eliminated to the extent that there is no evidence of impairment.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. The

interest of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interest’s proportionate

share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis.

Subsequent to acquisition, non-controlling interests consist of the amount attributed to such interests at initial recognition and the

non-controlling interest’s share of changes in equity since the date of the combination. Any losses of a subsidiary are attributed to the

non-controlling interests even if that results in a deficit balance.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, a

transaction with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant

share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling

interest are also recorded in equity.

(b) Changes in accounting policies and disclosures

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the

preparation of the consolidated financial statements for the year ended 31 December 2022.

New standards, interpretations and amendments (new standards) adopted by the Group

A number of new or amended standards (the ‘Standards’) became applicable for the current reporting period. The adoption of these

Standards did not have any impact on the accounting policies, financial position or performance of the Group.

The Group has evaluated the applicability of Pillar II rules considering that the Parent Company and the main subsidiaries of the Group

are tax resident in Mexico, management also assessed the status of the Pillar II legislation in the country, however, no laws or regulations

have been enacted to the date of this report.

Standards, interpretations and amendments issued but not yet effective

The International Accounting Standards Board (IASB) has issued other amendments resulting from improvements to IFRSs that

management considers do not have any impact on the financial position or performance of the Group. The Group has not early

adopted any standard, interpretation or amendment that was issued but is not yet effective.

The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make judgements,

estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the

consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These judgements and

estimates are based on management’s best knowledge of the relevant facts and circumstances, with regard to prior experience, but

actual results may differ from the amounts included in the consolidated financial statements. Information about such judgements and

estimates is contained in the accounting policies and/or the notes to the consolidated financial statements.

Judgements

Areas of judgement, apart from those involving estimations, that have the most significant effect on the amounts recognised in the

consolidated financial statements for the year ended 31 December 2023 are:

Recoverability of Soledad-Dipolos assets:

In 2009, five members of the El Bajío agrarian community in the state of Sonora, who claimed rights over certain surface land in the

proximity of the operations of Minera Penmont (‘Penmont’), submitted a legal claim before the Unitarian Agrarian Court (Tribunal

Unitario Agrario) of Hermosillo, Sonora, to have Penmont vacate an area of this surface land. The land in dispute encompassed a portion

of surface area where part of the operations of the Soledad-Dipolos mine are located. The litigation resulted in a definitive court order,

with which Penmont complied by vacating 1,824 hectares of land in 2013, resulting in the suspension of operations at Soledad-Dipolos.

Whilst the claim and the definitive court order did not affect the Group’s legal title over the mining concession or the ore currently held

in leaching pads near the mine site, land access at the mine site is required to further exploit the concession at Soledad-Dipolos.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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Penmont is the legal and registered owner of the land where the leaching pads are located but has not yet been able to gain physical

access to these pads due to opposition by certain local individuals. This land was purchased by Penmont from the federal government of

Mexico in accordance with legal procedures. The Group has a reasonable expectation that Penmont will eventually regain access to the

Soledad-Dipolos assets and process the ore content in the Soledad-Dipolos leaching pads. This expectation considers different scenarios,

including but not limited to the different legal proceedings that Minera Penmont has presented in order to regain access to the land,

and other proceedings that members of the El Bajío agrarian community have presented seeking the cancellation of Penmont’s property

deed over this area, which proceedings are pending final resolution. Therefore, the Group continues to recognise property, plant and

equipment and inventory related to Soledad-Dipolos, as disclosed in note 13 and note 15, respectively. Due to the fact that it is not yet

certain when access may be granted so that the inventory can be processed, this inventory is classified as a non-current asset.

In regard to the inventory, during the first half of the year the Company identified certain suspected illegal extraction of gold content at

its Soledad-Dipolos leaching pads. The Company estimates a loss of approximately 20,000 ounces of gold content and consequently

recognised a write-off of US$21.9 million regarding the Soledad-Dipolos gold contents in inventory, which has been presented as other

expenses in the Consolidated Income Statement. The Company took relevant actions with the support of diverse authorities to stop the

illegal extraction. During the second half of the year, a procedural visit by authorities took place. During the visit of the authorities to the

mine site it was confirmed there were no personnel carrying out any illegal mining activities at Soledad-Dipolos leaching pads. Thus,

the Company does not currently expect any further losses of this inventory.

The inventory write-off considered both the estimation of recoverable amount of gold existing at the leaching pad, and potential

volume of solution being irrigated on the area that is believed to have been leached to date. However, the nature of estimation means

that actual outcome may differ from those estimates.

Furthermore, claimants from the El Bajío community also presented claims against occupation agreements they entered into with

Penmont, covering land parcels other than the surface land where Soledad-Dipolos is located. Penmont has had no significant mining

operations or specific geological interest in the affected parcels and these lands are therefore not considered strategic for Penmont. The

Agrarian Court has issued rulings declaring such occupation agreements over those land parcels to be null and void and that Penmont

must remediate such lands to the state that they were in before Penmont’s occupation as well as returning any minerals extracted

from this area. The case relating to the claims over these land parcels remains subject to final conclusion, as appeals are progressing as

expected. However, given that Penmont has not conducted significant mining operations or had specific geological interest in these

land parcels, any contingencies relating to such land parcels are not considered material by the Group. There are no material assets

recognised in respect of these land parcels at 31 December 2023.

Layback Agreement:

In December 2020, the Group entered into multiple contracts with Orla Mining Ltd. and its Mexican Subsidiary, Minera Camino Rojo,

S.A. de C.V. (together herein referred to as ‘Orla’), granting Orla the right to expand the Camino Rojo oxide pit onto Fresnillo’s ‘Guachichil

D1’ mineral concession. Based on the terms of the contracts, the Group will transfer the legal rights to access and mine the mineral

concession to Orla.

The effectiveness of the agreement was subject to the approval of the Mexican Federal Competition Commission (COFECE), which was

granted in February 2021. The consideration includes three payments: US$25.0 million that was received upon the approval of COFECE,

US$15.0 million that was received in November 2022 and US$22.8 million that was received in November 2023.

Due to the fact that the contracts were negotiated together, the Group considered the layback contracts as a single agreement

(Layback Agreement) for the purpose of determining the accounting implications of the transaction. The Group determined that the

transaction should be accounted for as the sale of a single intangible asset. As such, it was relevant to consider the point at which

control transfers in accordance with the requirements of IFRS 15 regarding when a performance obligation is satisfied and in light of the

continuing performance obligations on the part of the Group. In December 2022 the Group successfully provided the required support

to Orla with respect to the negotiations relevant to the acquisition of the rights to access from the local ejido, which was a performance

obligation in accordance to the Layback Agreement. Thus, the Company considered at that point that all the obligations established in

the Layback Agreement to have been completed and recognised the total value of the agreement (US$67.2 million) in profit or loss as

other income.

Juanicipio project:

Commercial production is the term used for the point at which a mining operation is available for use and capable of operating in the

manner intended by management. This generally means that the operation can produce its intended output at stable and sustainable

levels. The determination of when a mine reaches commercial production can be complex and judgemental. The Group considered

a number of factors when making this judgement, including completion of substantially all construction development activities in

accordance with design, a production ramp-up period which achieved an average throughput of 70% of mill nameplate capacity,

grades in line with mine plan and recoveries consistent with design.

The Group assessed the production start date for the mine and the plant separately. The Group had determined that the Juanicipio

mine started operations from 1 January 2022. After connecting the plant to the national electricity grid, the Group has concluded that

the Juanicipio plant has reached commercial production on 1 June 2023 following a successful commissioning period of the plant

and facilities. As commercial production has been achieved, the Group has started to depreciate all the plant assets and recognised

the corresponding charge as production cost.

270 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

Climate change:

In the climate disclosure in the Strategic report, the Group’s set out its assessment of climate risks and opportunities (CROs). The Group

recognises that there may be potential financial statement implications in the future in respect of the mitigation and adaptation measures

to the physical and transition risks. The potential effect of climate change would be in respect of assets and liabilities that are measured

based on an estimate of future cash flows. The Group specifically considered the effect of climate change on the valuation of property,

plant and equipment, deferred tax assets, the Silverstream contract, and the provision for mine closure cost. The Group does not have any

assets or liabilities for which measurement is directly linked to climate change performance (for example: Sustainability-Linked Bonds).

The main ways in which climate has affected the preparation of the financial statements are:

• The Group has already made certain climate-related strategic decisions, such as to focus on decarbonisation and to increase the use

of wind energy. Where decisions have been approved by the Board, the effects were considered in the preparation of these financial

statements by way of inclusion in future cash flow projections underpinning the estimation of the recoverable amount of property,

plant and equipment and deferred tax assets, as relevant.

• As described in note 14, the costs inherent in the Silverstream contract are determined based on the provisions of that contract. This

reduces the exposure of the valuation of the asset to the effect of any cost implications related to CROs.

• Further information about the potential effect of CROs on the provision for mine closure cost is set out in note 21.

The Group’s strategy consists of mitigation and adaptation measures. To mitigate the impacts by and on climate change the Company

relies on renewable electricity, fuel replacement and efficiency opportunities to reduce the carbon footprint. The approach to adaptation

measures is based on climate models to produce actionable information for the design, construction, operation and closure of its

mining assets, considering climate change. In addition, societal expectations are driving government action that may impose further

requirements and cost on companies in the future. Future changes to the Group’s climate change strategy, global decarbonisation

signposts and regulation may impact the Group’s significant judgements and key estimates and result in material changes to financial

results and the carrying values of certain assets and liabilities in future reporting periods. However, as at the balance sheet date the Group

believes there is no material impact on balance sheet carrying values of assets or liabilities. Although this is an estimate, it is not considered

a critical estimate.

Estimates and assumptions

Significant areas of estimation uncertainty considered by management in preparing the consolidated financial statements include:

Estimated recoverable ore reserves and mineral resources, note 2 (e):

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties.

Mineral resources are an identified mineral occurrence with reasonable prospects for eventual economic extraction. The Group

estimates its ore reserves and mineral resources based on information compiled by appropriately-qualified persons relating to

the geological and technical data on the size, depth, shape and grade of the ore body and suitable production techniques and

recovery rates, in conformity with the Joint Ore Reserves Committee (JORC) code 2012. Such an analysis requires complex geological

judgements to interpret the data. The estimation of recoverable ore reserves and mineral resources is based upon factors such as

geological assumptions and judgements made in estimating the size and grade of the ore body, estimates of commodity prices,

foreign exchange rates, future capital requirements and production costs.

As additional geological information is produced during the operation of a mine, the economic assumptions used and the estimates

of ore reserves and mineral resources may change. Such changes may impact the Group’s reported balance sheet and income

statement including:

• The carrying value of property, plant and equipment and mining properties may be affected due to changes in the recoverable

amount, which consider both ore reserves and mineral resources, refer to note 13.

• Depreciation and amortisation charges in the income statement may change where such charges are determined using the unit-of-

production method based on ore reserves, refer to note 13.

• Stripping costs capitalised in the balance sheet, either as part of mine properties or inventory, or charged to profit or loss may change

due to changes in stripping ratios, refer to note 13.

• Provisions for mine closure costs may change where changes to the ore reserve and resources estimates affect expectations about

when such activities will occur, refer to note 21.

• The recognition and carrying value of deferred income tax assets may change due to changes regarding the existence of such assets

and in estimates of the likely recovery of such assets, refer to note 11 .

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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Estimate of recoverable ore on leaching pads, note 15:

In the Group’s open pit mines, certain mined ore is placed on leaching pads where a solution is applied to the surface of the heap to

dissolve the gold and enable extraction. The determination of the amount of recoverable gold requires estimation with consideration of

the quantities of ore placed on the pads, the grade of the ore (based on assay data) and the estimated recovery percentage (based on

metallurgical studies and current technology).

The grades of ore placed on pads are regularly compared to the quantities of metal recovered through the leaching process to evaluate

the appropriateness of the estimated recovery (metallurgical balancing). The Group monitors the results of the metallurgical balancing

process and recovery estimates are refined based on actual results over time and when new information becomes available.

The Group monitors the metallurgical balances to confirm the grade and recovery of the ore in inventories. Based on new technical

information and the reconsideration of actual recovery grades and updated leaching targets, the Group updated its estimate of gold

content in leaching pads increasing this by 30.7 thousand ounces of gold as at 1 January 2023.

This change in estimation was incorporated prospectively in inventory from 1 January 2023. The increase in the number of ounces

reduced the weighted average cost of inventory. Had the estimation not changed, production cost during 2023 would have been

US$30.9 million higher, with an offsetting impact against the work-in-progress inventory balance as of 31 December 2023.

Silverstream, note 14:

The valuation of the Silverstream contract as a derivative financial instrument requires estimation by management. The term of the

derivative is based on the Sabinas life of mine and the value of this derivative is determined using a number of estimates, including

the estimated recoverable ore reserves and a portion of mineral resources considering the expected rate of conversion to reserves and

future production profile of the Sabinas mine on the same basis a market participant would consider, the estimated recoveries of

silver from ore mined, estimates of the future price of silver and the discount rate used to discount future cash flows. Further detail on

the inputs that have a significant effect on the fair value of this derivative, and the impact of changes in key assumptions are included in

note 14.

Income tax, notes 2 (q) and 11:

The recognition of deferred tax assets, including those arising from un-utilised tax losses, requires management to assess the likelihood

that the Group will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future

taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. Estimated

cash flows are not significantly sensitive to reasonable possible changes to key assumptions on which management bases the

recoverable value calculations. The carrying value of deferred tax assets is disclosed in note 11.

(d) Foreign currency translation

The Group’s consolidated financial statements are presented in US dollars, which is the Parent Company’s functional currency. The

functional currency for each entity in the Group is determined by the currency of the primary economic environment in which it

operates. The determination of functional currency requires management judgement, particularly where there may be more than

one currency in which transactions are undertaken and which impact the economic environment in which the entity operates. For all

operating entities, this is US dollars.

Transactions denominated in currencies other than the functional currency of the entity are translated at the exchange rate ruling at

the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rate of exchange

ruling at the balance sheet date. All differences that arise are recorded in the income statement. Non-monetary items that are measured

in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-

monetary items measured at fair value in a foreign currency are translated into US dollars using the exchange rate at the date when the

fair value is determined.

For entities with functional currencies other than US dollars as at the reporting date, assets and liabilities are translated into the

reporting currency of the Group by applying the exchange rate at the balance sheet date and the income statement is translated at

the average exchange rate for the year. The resulting difference on exchange is included as a cumulative translation adjustment in other

comprehensive income. On disposal of an entity, the deferred cumulative amount recognised in other comprehensive income relating

to that operation is recognised in the income statement.

(e) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment, if any. Cost comprises the purchase

price and any costs directly attributable to bringing the asset into working condition for its intended use. The cost of self-constructed

assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

The cost less the residual value of each item of property, plant and equipment is depreciated over its useful life. Each item’s estimated

useful life has been assessed with regard to both its own physical life limitations and the present assessment of economically

recoverable reserves of the mine property at which the item is located. Estimates of remaining useful lives are made on a regular basis

for all mine buildings, machinery and equipment, with annual reassessments for major items. Depreciation is charged to cost of sales

on a unit-of-production (UOP) basis for mine buildings and installations, plant and equipment used in the mine production process

(except mobile equipment) or on a straight-line basis over the estimated useful life of the individual asset that are not related to the

mine production process. Changes in estimates, which mainly affect unit-of-production calculations, are accounted for prospectively.

Depreciation commences when assets are available for use. Land is not depreciated.

272 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

The average expected useful lives based on actual life of mines are as follows:

	Years
Buildings	6
Plant and equipment	10
Mining properties and development costs	10
Other assets	5

1 Depreciation of mining properties and development cost are determined using the unit-of-production method.

An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from its

use or disposal. Any gain or loss arising at de-recognition of the asset (calculated as the difference between the net disposal proceeds

and the carrying amount of the asset) is included in the income statement in the year that the asset is de-recognised.

Non-current assets or disposal groups are classified as held for sale when it is expected that the carrying amount of the asset will be

recovered principally through sale rather than through continuing use. Assets are not depreciated when classified as held for sale.

Disposal of assets

Gains or losses from the disposal of assets are recognised in the income statement when all significant risks and rewards of ownership

are transferred to the customer, usually when title has been passed.

Mining properties and development costs

Payments for mining concessions are expensed during the exploration phase of a prospect and capitalised during the development of

the project when incurred.

Purchased rights to ore reserves and mineral resources are recognised as assets at their cost of acquisition or at fair value if purchased

as part of a business combination.

Mining concessions, when capitalised, are amortised on a straight-line basis over the period of time in which benefits are expected to

be obtained from that specific concession.

Mine development costs are capitalised as part of property, plant and equipment. Mine development activities commence once a

feasibility study has been performed for the specific project. When an exploration prospect has entered into the advanced exploration

phase and sufficient evidence of the probability of the existence of economically recoverable minerals has been obtained pre-operative

expenses relating to mine preparation works are also capitalised as a mine development cost.

The initial cost of a mining property comprises its construction cost, any costs directly attributable to bringing the mining property into

operation, the initial estimate of the provision for mine closure cost, and, for qualifying assets, borrowing costs. The Group cease the

capitalisation of borrowing cost when the physical construction of the asset is complete and is ready for its intended use.

Ore generated as part of the development stage may be processed and sold, giving rise to revenue before the commencement of

commercial production. Where such processing is necessary to bring mining assets into the condition required for their intended

use (for example, in testing the plants at the mining unit in development), revenues from metals recovered from such activities are

recognised in profit or loss.

Upon commencement of production, capitalised expenditure is depreciated using the unit-of-production method based on the

estimated economically-proven and probable reserves to which they relate.

Mining properties and mine development are stated at cost, less accumulated depreciation and impairment in value, if any.

Construction in progress

Assets in the course of construction are capitalised as a separate component of property, plant and equipment. On completion, the

cost of construction is transferred to the appropriate category of property, plant and equipment. The cost of construction in progress

is not depreciated.

Subsequent expenditures

All subsequent expenditure on property, plant and equipment is capitalised if it meets the recognition criteria, and the carrying

amount of those parts that are replaced, is de-recognised. All other expenditure including repairs and maintenance expenditure is

recognised in the income statement as incurred.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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Stripping costs

In a surface mine operation, it is necessary to remove overburden and other waste material in order to gain access to the ore bodies

(stripping activity). During development and pre-production phases, the stripping activity costs are capitalised as part of the initial cost

of development and construction of the mine (the stripping activity asset) and charged as depreciation or depletion to cost of sales,

in the income statement, based on the mine’s units of production once commercial operations begin.

Removal of waste material normally continues throughout the life of a surface mine. At the time that saleable material begins to be

extracted from the surface mine the activity is referred to as production stripping.

Production stripping cost is capitalised only if the following criteria are met:

• It is probable that the future economic benefits (improved access to an ore body) associated with the stripping activity will flow to

the Group.

• The Group can identify the component of an ore body for which access has been improved.

• The costs relating to the improved access to that component can be measured reliably.

If not all of the criteria are met, the production stripping costs are charged to the income statement as operating costs as they

are incurred.

Stripping activity costs associated with such development activities are capitalised into existing mining development assets, as mining

properties and development cost, within property, plant and equipment, using a measure that considers the volume of waste extracted

compared with expected volume, for a given volume of ore production. This measure is known as ‘component stripping ratio’, which

is revised annually in accordance with the mine plan. The amount capitalised is subsequently depreciated over the expected useful

life of the identified component of the ore body related to the stripping activity asset, by using the units of production method. The

identification of components and the expected useful lives of those components are evaluated as new information of reserves and

resources is available.

The capitalised stripping activity asset is carried at cost less accumulated depletion/depreciation, less impairment, if any. Cost includes

the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore,

plus an allocation of directly attributable overhead costs. The costs associated with incidental operations are excluded from the cost of

the stripping activity asset.

(f) Impairment of non-financial assets

The carrying amounts of non-financial assets are reviewed for impairment if events or changes in circumstances indicate that the

carrying value may not be recoverable. At each reporting date, an assessment is made to determine whether there are any indicators

of impairment. If there are indicators of impairment, an exercise is undertaken to determine whether carrying values are in excess of

their recoverable amount. Such reviews are undertaken on an asset by asset basis, except where such assets do not generate cash flows

independent of those from other assets or groups of assets, and then the review is undertaken at the cash-generating unit level.

If the carrying amount of an asset or its cash generating unit exceeds the recoverable amount, a provision is recorded to reflect the asset

at the recoverable amount in the balance sheet. Impairment losses are recognised in the income statement.

The recoverable amount of an asset

The recoverable amount of an asset is the greater of its value in use and fair value less costs of disposal. In assessing value in use, estimated

future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time

value of money and the risks specific to the asset. The cash flows used to determine the recoverable amount of mining assets are based

on the mine plan for each mine. The mine plan is determined based on the estimated and economically-proven and probable reserves,

as well as certain other resources that are assessed as highly likely to be converted into reserves. Fair value less cost of disposal is based on

an estimate of the amount that the Group may obtain in an orderly sale transaction between market participants. For an asset that does

not generate cash inflows largely independently of those from other assets, or groups of assets, the recoverable amount is determined for

the cash-generating unit to which the asset belongs. The Group’s cash-generating units are the smallest identifiable groups of assets that

generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Reversal of impairment

An assessment is made each reporting date as to whether there is any indication that previously recognised impairment losses may no

longer exist or may have decreased. If such an indication exists, the Group makes an estimate of the recoverable amount. A previously

recognised impairment loss is reversed only if there has been a change in estimates used to determine the asset’s recoverable amount

since the impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to the recoverable amount.

That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment

loss been recognised in previous years. Such impairment loss reversal is recognised in the income statement.

274 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

(g) Financial assets and liabilities

Financial assets

The Group classifies its financial assets in the following measurement categories:

• those to be measured at amortised cost;

• those to be measured subsequently at FVOCI; and

• those to be measured subsequently at fair value through profit or loss.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments

that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition

to account for the equity investment at FVOCI.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the

market place (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through

profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial

assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely

payment of principal and interest.

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow

characteristics of the asset.

Classification

The Group holds the following financial assets:

Amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest

are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest

rate method. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s financial assets at amortised cost include receivables (other than trade receivables which are measured at fair value

through profit and loss).

Equity instruments designated as fair value through other comprehensive income

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value

through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The

classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement

of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of

part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through

OCI are not subject to impairment assessment.

The Group elected to classify irrevocably its listed equity investments under this category.

Fair value through profit or loss

Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is

subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable.

The Group’s trade receivables and derivative financial instruments, including the Silverstream contract, are classified as fair value

through profit or loss.

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De-recognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred

and the Group has transferred substantially all the risks and rewards of ownership.

Impairment of financial assets

The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost

and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For receivables (other than trade receivables which are measured at FVPL), the Group applies the simplified approach permitted by

IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Financial liabilities

The Group classifies its financial liabilities as follows:

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,

payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly

attributable transaction costs.

The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.

Classification

For purposes of subsequent measurement, financial liabilities held by the Group are classified as financial liabilities as amortised cost.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest

rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR

amortisation process.

Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the

EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

De-recognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial

liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially

modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability.

The difference in the respective carrying amounts is recognised in the statement of profit or loss.

(h) Inventories

Finished goods, work-in-progress and ore stockpile inventories are measured at the lower of cost and net realisable value. Cost is

determined using the weighted average cost method based on cost of production which excludes borrowing costs.

For this purpose, the costs of production include:

• personnel expenses, which include employee profit sharing;

• materials and contractor expenses which are directly attributable to the extraction and processing of ore;

• the depreciation of property, plant and equipment used in the extraction and processing of ore; and

• related production overheads (based on normal operating capacity).

Work-in-progress inventory comprises ore in leaching pads as processing is required to extract benefit from the ore. The recovery of

gold is achieved through the heap leaching process. The leaching process may take months to obtain the expected metal recovery and

mainly depends on the continuity of the leaching process. When the ore in leaching pads is in active leaching, it is classified as current.

When the leaching process has stopped and not expected to restart within 12 months, ore in the leaching pads affected is classified as

non-current.

Operating materials and spare parts are valued at the lower of cost or net realisable value. An allowance for obsolete and slow-moving

inventories is determined by reference to specific items of stock. A regular review is undertaken by management to determine the

extent of such an allowance.

Net realisable value is the estimated selling price in the ordinary course of business less any further costs expected to be incurred to

completion and disposal.

(i) Cash and cash equivalents

For the purposes of the balance sheet, cash and cash equivalents comprise cash at bank, cash on hand and short-term deposits held

with banks that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Short-term deposits earn interest at the respective short-term deposit rates between one day and three months.

276 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

(j) Provisions

Mine closure cost

A provision for mine closure cost is made in respect of the estimated future costs of closure, restoration and for environmental

rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and remediation

of disturbed areas) based on a mine closure plan, in the accounting period when the related environmental disturbance occurs. The

provision is discounted and the unwinding of the discount is included within finance costs. At the time of establishing the provision, a

corresponding asset is capitalised where it gives rise to a future economic benefit and is depreciated over future production considering

proven and probable reserves from the mine to which it relates. The provision is reviewed on an annual basis by the Group for changes

in cost estimates, discount rates or life of operations based on the estimated mine production which includes ore reserves and a certain

amount of mineral resources. Changes to estimated future costs are recognised in the balance sheet by adjusting the mine closure

cost liability and the related asset originally recognised. If, for mature mines, the revised mine assets net of mine closure cost provisions

exceed the recoverable value, the portion of the increase is charged directly as an expense. For closed sites, changes to estimated costs

are recognised immediately in profit or loss.

(k) Employee benefits

The Group operates the following plans for its employees based on Mexico:

Defined benefit pension plan

This funded plan is based on each employee’s earnings and years of service. This plan was open to all employees in Mexico until it was

closed to new entrants on 1 July 2007. The plan is denominated in Mexican pesos. For members as at 30 June 2007, benefits were

frozen at that date subject to indexation with reference to the Mexican National Consumer Price Index (NCPI).

The present value of defined benefit obligations under the plan is determined using the projected unit credit actuarial valuation

method and prepared by an external actuarial firm as at each year-end balance sheet date. The discount rate is the yield on bonds

that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which

the benefits are expected to be paid. Actuarial gains or losses are recognised in OCI and permanently excluded from profit or loss.

Past service costs are recognised when the plan amendment or curtailment occurs and when the entity recognises related

restructuring costs or termination benefits.

The defined benefit asset or liability comprises the present value of the defined benefit obligation less the fair value of plan assets out

of which the obligations are to be settled directly. The value of any asset is restricted to the present value of any economic benefits

available in the form of refunds from the plan or reductions in the future contributions to the plan.

Net interest cost is recognised within finance cost and return on plan assets (other than amounts reflected in net interest cost) is

recognised in OCI and permanently excluded from profit or loss.

Defined contribution pension plan

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity

and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans

are recognised as an employee benefit expense in profit or loss when they are due. The contributions are based on the employee’s salary.

This plan started on 1 July 2007 and it is voluntary for all employees to join this scheme.

Seniority premium for voluntary separation

This unfunded plan corresponds to an additional payment over the legal seniority premium equivalent to approximately 12 days of

salary per year for those unionised workers who have more than 15 years of service. Non-unionised employees with more than 15 years

of service have the right to a payment equivalent to 12 days for each year of service. For both cases, the payment is based on the legal

current minimum salary.

The cost of providing benefits for the seniority premium for voluntary separation is determined using the projected unit credit actuarial

valuation method and prepared by an external actuarial firm as at each year-end balance sheet date. Actuarial gains or losses are

recognised as income or expense in the period in which they occur.

Other

Benefits for death and disability are covered through insurance policies.

Termination payments for involuntary retirement (dismissals) are charged to the income statement, when incurred.

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(l) Employee profit sharing

In accordance with the Mexican legislation, companies in Mexico are subject to pay for employee profit sharing (PTU) equivalent to

ten percent of the taxable income of each fiscal year capped to three months of salary or average of the profit sharing paid in the last

three years.

PTU is accounted for as employee benefits and is calculated based on the services rendered by employees during the year, considering

their most recent salaries. The liability is recognised as it accrues and is charged to the income statement. PTU, paid in each fiscal year,

is deductible for income tax purposes.

(m) Leases

Group as a lessee

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the

use of an identified asset for a period of time in exchange for consideration.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of

the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable variable lease payment that are based on

an index or a rate;

• amounts expected to be payable by the lessee under residual value guarantees;

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental

borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in

a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentives received;

• any initial direct costs; and

• restoration costs.

Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period

so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is

depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in

the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is

reassessed and adjusted against the right-of-use asset.

Variable lease payments that are not linked to price changes due to changes in a market rate or the value of an index and are linked to

future performance or use of an underlying asset are not included in the measurement of the lease liability. Such costs are recognised

in profit and loss as incurred.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit

or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment.

(n) Revenue from contracts with customers

Revenue is recognised when control of goods or services transfers to the customers based on the performance obligations settle in the

contracts with customers.

Sale of goods

Revenue associated with the sale of concentrates, doré, slag, precipitates and activated carbon (the products) is recognised when control

of the asset sold is transferred to the customers. Indicators of control transferring include an unconditional obligation to pay, legal title,

physical possession, transfer of risk and rewards and customers acceptance. This generally occurs when the goods are delivered to the

customer’s smelter or refinery agreed with the buyer; at which point the buyer controls the goods. Inventory in transit to the smelter or

refinery does not represent a significant proportion of total revenue at the end of the reporting period given the distance to the mine units.

The revenue is measured at the amount to which the Group expects to be entitled, being the estimate of the price expected to be

received in the expected month of settlement and the Group’s estimate of metal quantities based on assay data, and a corresponding

trade receivable is recognised. Any future changes that occur before settlement are embedded within the provisionally-priced trade

receivables and are, therefore, within the scope of IFRS 9 and not within the scope of IFRS 15.

278 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

Given the exposure to the commodity price, these provisionally-priced trade receivables will fail the cash flow characteristics test within

IFRS 9 and will be required to be measured at fair value through profit or loss up from initial recognition and until the date of settlement.

These subsequent changes in fair value are recognised in revenue but separately from revenue from contracts with customers.

Invoiced revenues to our customers for products other than refined silver and gold, are derived from the value of metal content which

is determined by commodity market prices and adjusted for the treatment and refining charges to be incurred by the metallurgical

complex of our customers. Refining and treatment charges represent an element of the cost that will be incurred by our customers in

processing the products further to extract the metal content for onward sale to its customers (see note 5 (c)).

(o) Exploration expenses

Exploration activity involves the search for mineral resources, the determination of technical feasibility and the assessment of

commercial viability of an identified resource.

Exploration expenses are charged to the income statement as incurred and are recorded in the following captions:

• Cost of sales:

- costs relating to in-mine exploration, that ensure continuous extraction quality and extend mine life, and

• Exploration expenses:

- Costs incurred in geographical proximity to existing mines in order to replenish or increase reserves.

- Costs incurred in regional exploration with the objective of locating new ore deposits, which are identified by project, in areas

where the Group carriers out exploration activity. Currently the Group carries out exploration activities in Mexico and Latin America.

- Costs incurred are charged to the income statement until there is sufficient probability of the existence of economically

recoverable minerals and a feasibility study has been performed for the specific project from which time further expenses are

capitalised as exploration costs on balance sheet as property, plant and equipment.

(p) Selling expenses

The Group recognises in selling expenses a levy in respect of the Extraordinary Mining Right as sales of gold and silver are recognised.

The Extraordinary Mining Right consists of a 0.5% rate, applicable to the owners of mining titles. The payment must be calculated over

the total sales of all mining concessions. The payment of this mining right must be remitted no later than the last business day of March

of the following year and can be credited against corporate income tax.

The Group also recognises in selling expenses a discovery premium royalty equivalent to 1% of the value of the mineral extracted and

sold during the year from certain mining titles granted by the Mexican Geological Survey (SGM) in the San Julián mine. The premium is

settled to SGM on a quarterly basis.

(q) Taxation

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from

or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

enacted, at the reporting date in the country the Group operates.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases

of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is

not a business combination and, at the time of transaction, affects neither the accounting profit nor taxable profit loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,

where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences

will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax

losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the

carry forward of unused tax credits and unused tax losses can be utilised, except:

• where the deferred income tax asset relating to deductible temporary differences arise from the initial recognition of an asset or

liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit

nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates

and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary

differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can

be utilised.

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The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has

become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised

or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognised directly in other comprehensive income is recognised in equity and not in the

income statement.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets

against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Mining Rights

The Special Mining Right is considered an income tax under IFRS and states that the owners of mining titles and concessions are

subject to pay an annual mining right of 7.5% of the profit derived from the extractive activities (note 11 (e)). The Group recognises

deferred tax assets and liabilities on temporary differences arising in the determination of the Special Mining Right (see note 11).

Sales tax

Expenses and assets are recognised net of the amount of sales tax, except when the sales tax incurred on a purchase of assets or

services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the

asset or as part of the expense item. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as

part of receivables or payables in the balance sheet.

(r) Derivative financial instruments and hedging

The Group uses derivatives to reduce certain market risks derived from changes in foreign exchange and commodities price which

impact its financial and business transactions. Hedges are designed to protect the value of expected production against the dynamic

market conditions.

Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and

are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the

fair value is negative. The full fair value of a derivative is classified as non-current asset or liability if the remaining maturity of the item is

more than 12 months.

Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken

directly to the income statement as finance income or finance cost respectively.

Derivatives are valued using valuation approaches and methodologies (such as Black Scholes and Net Present Value) applicable to the

specific type of derivative instrument. The fair value of forward currency and commodity contracts is calculated by reference to current

forward exchange rates for contracts with similar maturity profiles, European foreign exchange and commodity options are valued

using the Black Scholes model. The Silverstream contract is valued using a Net Present Value valuation approach.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how

the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources

of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of

the following effectiveness requirements:

• There is ‘an economic relationship’ between the hedged item and the hedging instrument.

• The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship.

• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group

actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.

Hedges which meet the criteria for hedge accounting are accounted for as cash flow hedges.

280 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of derivative

instruments is recorded as in other comprehensive income and are transferred to the income statement when the hedged transaction

affects profit or loss, such as when a forecast sale or purchase occurs. For gains or losses related to the hedging of foreign exchange risk

these are included, in the line item in which the hedged costs are reflected. Where the hedged item is the cost of a non-financial asset

or liability, the amounts recognised in other comprehensive income are transferred to the initial carrying amount of the non-financial

asset or liability. This is not a reclassification adjustment and will not be recognised in OCI for the period. The ineffective portion of

changes in the fair value of cash flow hedges is recognised directly as finance costs, in the income statement of the related period.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is

revoked, any cumulative gain or loss recognised directly in other comprehensive income from the period that the hedge was effective

remains separately in other comprehensive income until the forecast transaction occurs, when it is recognised in the income statement.

When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive

income is immediately transferred to the income statement.

When hedging with options, the Group designates only the intrinsic value movement of the hedging option within the hedge

relationship. The time value of the option contracts is therefore excluded from the hedge designation. In such cases, changes in the

time value of options are initially recognised in OCI as a cost of hedging. Where the hedged item is transaction-related, amounts initially

recognised in OCI related to the change in the time value of options are reclassified to profit or loss or as a basis adjustment to non-

financial assets or liabilities upon maturity of the hedged item, or, in the case of a hedged item that realises over time, the amounts

initially recognised in OCI are amortised to profit or loss on a systematic and rational basis over the life of the hedged item.

When hedging with forward contracts, the forward element is included in the designation of the financial instrument. Therefore, there

is no cost of hedging in relation to forward contracts.

(s) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes 12 or more months

to get ready for its intended use or sale (a qualifying asset) are capitalised as part of the cost of the respective asset. Borrowing costs

consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred.

Where surplus funds are available for a short term from funds borrowed specifically to finance a project, the income generated from the

temporary investment of such amounts is also capitalised and deducted from the total capitalised borrowing cost. Where the funds used

to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to

relevant general borrowings of the Group during the period.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

(t) Fair value measurement

The Group measures financial instruments at fair value at each balance sheet date. Fair values of financial instruments measured at

amortised cost are disclosed in note 30 (b).

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset

or transfer the liability takes place either:

• in the principal market for the asset or liability, or;

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or

liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by

using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and

best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure

fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value

hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or

indirectly observable.

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers

have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair

value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities based on the nature, characteristics

and risks of the asset or liability and the level of the fair value hierarchy as explained above. Further information on fair values is

described in note 30.

(u) Dividend distribution

Dividends on the Company’s Ordinary Shares are recognised when they have been appropriately authorised and are no longer at the

Company’s discretion. Accordingly, interim dividends are recognised when they are paid and final dividends are recognised when they

are declared following approval by shareholders at the Company’s Annual General Meeting.

3. Segment reporting

For management purposes, the Group is organised into operating segments based on producing mines.

At 31 December 2023, the Group has seven reportable operating segments as follows:

• the Fresnillo mine, located in the state of Zacatecas, an underground silver mine;

• the Saucito mine, located in the state of Zacatecas, an underground silver mine;

• the Ciénega mine, located in the state of Durango, an underground silver-gold mine;

• the Herradura mine, located in the state of Sonora, a surface gold mine;

• the Noche Buena mine, located in state of Sonora, a surface gold mine;

• the San Julián mine, located on the border of Chihuahua/Durango states, an underground silver-gold mine; and

• the Juanicipio mine, in the State of Zacatecas, an underground silver mine.

The operating performance and financial results for each of these mines are reviewed by management. As the Group’s chief operating

decision-maker (CODM) does not review segment assets and liabilities, the Group has not disclosed this information.

Management monitors the results of its operating segments separately for the purpose of performance assessment and making

decisions about resource allocation. Segment performance is evaluated without taking into account certain adjustments included in

revenue as reported in the consolidated income statement, and certain costs included within cost of sales and gross profit which are

considered to be outside of the control of the operating management of the mines. The table on page 282 provides a reconciliation

from segment profit to gross profit as per the consolidated income statement. Administrative expenses, exploration expenses, selling

expenses, and other income and expenses not related to production activities included in the consolidated income statement are

not allocated to operating segments. Also, the Group’s financing (including finance cost and finance income) and income taxes are

managed on a Group basis and are not allocated to operating segments. Transactions between reportable segments are accounted

for on an arm’s-length basis similar to transactions with third parties.

In 2023 99.9% of revenue was derived from customers based in Mexico (2022: all revenue was derived from customers based in Mexico).

282 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

3. Segment reporting continued

Operating segments

The following tables present revenue and profit information regarding the Group’s operating segments for the year ended 31 December

2023 and 2022, respectively. Revenues for the year ended 31 December 2023 and 2022 include those derived from contracts with

customers and other revenues, as showed in note 5.

										Year ended 31 December 2023
										US$ thousands
									Adjustments
					Noche				and
	Fresnillo	Herradura	Ciénega	Saucito	Buena	San Julián	Juanicipio	Other	eliminations	Total
Revenues:
Third party	422,963	708,242	162,013	590,269	84,210	385,469	351,920	–	–	2,705,086
Inter-segment	4,254	–	–	–	–	–	90,368	52,287	(146,909)	–
Segment revenues	427,217	708,242	162,013	590,269	84,210	385,469	442,288	52,287	(146,909)	2,705,086
Segment profit	156,849	157,233	18,926	185,995	5,632	158,663	271,558	33,602	14,312	1,002,770
Depreciation and amortisation in cost of sales										(497,303)
Employee profit sharing
in cost of sales										(2,229)
Gross profit as per the income statement										503,238
Capital expenditure	97,809	56,923	43,841	125,052	52	74,824	82,167	2,741	–	483,409

1 During 2023 all segment revenues were derived from Met-Mex, except in Juanicipio which includes sales to another customer of US$0.6 million.

2 The Group’s CODM primarily uses this measure to monitor the operating results directly related to the production of its business units separately to make decisions about

resource allocation and performance assessment. Segment profit excluding foreign exchange hedging gains, depreciation and amortisation and employee profit sharing.

Segment profit for Fresnillo and Saucito considers the sales and the corresponding processing cost of the ore from Juanicipio.

3 Capital expenditure represents the cash outflow including interest capitalised in respect of additions to property, plant and equipment, such as mine development, construction

of leaching pads, and purchase of mine equipment, excluding additions relating to changes in the mine closure provision. Significant additions include stripping cost at

Herradura mine and the construction of tailing dams at San Julián and Saucito mines.

4 Some of the ore production of Juanicipio mine has been processed through Fresnillo and Saucito facilities.

5 Other inter-segment revenue corresponds to leasing services provided by Minera Bermejal, S.A. de C.V; capital expenditure mainly corresponds to Minera Bermejal, S. de R.L. de C.V.

										Year ended 31 December 2022
										US$ thousands
									Adjustments
					Noche				and
	Fresnillo	Herradura	Ciénega	Saucito	Buena	San Julián	Juanicipio	Other	eliminations	Total
Revenues:
Third party	503,759	634,438	169,504	594,250	142,733	392,084	–	–	(3,778)	2,432,990
Inter-segment	–	–	–	–	–	–	215,736	148,362	(364,098)	–
Segment revenues	503,759	634,438	169,504	594,250	142,733	392,084	215,736	148,362	(367,876)	2,432,990
Segment profit	197,043	127,919	39,551	197,791	44,436	190,842	154,544	106,275	(12,203)	1,046,198
Depreciation and amortisation in cost of sales										(500,569)
Employee profit sharing
in cost of sales										(9,609)
Gross profit as per the income statement										536,020
Capital expenditure	106,579	105,322	47,019	117,989	424	64,490	149,629	677	–	592,129

1 Adjustments and eliminations correspond to hedging loss (note 5).

2 The Group’s CODM primarily uses this measure to monitor the operating results directly related to the production of its business units separately to make decisions about

resource allocation and performance assessment. Segment profit excluding foreign exchange hedging gains, depreciation and amortisation and employee profit sharing.

Segment profit for Fresnillo and Saucito considers the sales and the corresponding processing cost of the ore from Juanicipio.

3 Capital expenditure represents the cash outflow including interest capitalised in respect of additions to property, plant and equipment, such as mine development, construction

of leaching pads, and purchase of mine equipment, excluding additions relating to changes in the mine closure provision. Significant additions include stripping cost at

Herradura mine and purchase of mobile equipment at Juanicipio and Saucito mines.

4 The ore production of Juanicipio mine has been processed through Fresnillo and Saucito facilities.

5 Other inter-segment revenue corresponds to leasing services provided by Minera Bermejal, S.A. de C.V; capital expenditure mainly corresponds to Minera Bermejal, S. de R.L.

de C.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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4. Group information

The list of the Company’s subsidiaries included in the consolidated financial statements and its principal activities are shown in note 5 on

the Parent Company’s separate financial statements. The country of incorporation or registration is also their principal place of business.

(a) Material partly-owned subsidiaries

The table below shows the detail of non-wholly owned subsidiaries of the Group that have non-controlling interests:

		Portion of ownership interest held		Profit (loss) allocated		Accumulated
		by non-controlling interest		to non-controlling interest		non-controlling interest
	31-Dec-23	31-Dec-22	31-Dec-23	31-Dec-22	31-Dec-23	31-Dec-22
Minera Juanicipio, S.A. de C.V.	44%	44%	35,853	31,398	195,991	160,046
Equipos Chaparral, S.A. de C.V.	44%	44%	18,311	5,105	97,377	69,561
Other subsidiaries with non-controlling interests not considered to be material	–	–	227	(109)	1,977	1,599

Set out below is the summarised financial information for each subsidiary that has non-controlling interests that are material to the

Group. Figures are presented in thousands of US dollars unless otherwise indicated.

Summarised income statement for the year ended 31 December 2023 and 2022

	Minera Juanicipio, S.A. de C.V.		Equipos Chaparral, S.A. de C.V.
	31-Dec-23	31-Dec-22	31-Dec-23	31-Dec-22
Revenue	442,288	215,736	–	–
Profit before income tax	102,447	100,635	45,412	5,390
Income tax (charge)/credit	(20,962)	(29,277)	(3,797)	6,212
Profit for the year	81,485	71,358	41,615	11,602
Other comprehensive gain/(loss)	31	(248)	8	31
Total comprehensive income	81,516	71,110	41,623	11,633
Attributable to non-controlling interests	35,867	31,288	18,314	5,119
Dividends paid to non-controlling interests	–	–	–	–

Summarised statement of financial position as at 31 December 2023 and 2022

	Minera Juanicipio, S.A. de C.V.		Equipos Chaparral, S.A. de C.V.
	31-Dec-23	31-Dec-22	31-Dec-23	31-Dec-22
Current
Assets	120,396	77,596	34,990	13,226
Liabilities	(197,260)	(80,984)	(35,708)	(31,299)
Total current net liabilities	(76,864)	(3,388)	(718)	(18,073)
Non-current
Assets	776,156	630,418	222,030	202,263
Liabilities	(253,858)	(263,290)	–	(26,097)
Total non-current net assets	522,298	367,128	222,030	176,166
Net assets	445,434	363,740	221,312	158,093
Attributable to:
Equity holders of Parent	249,443	203,694	123,935	88,532
Non-controlling interest	195,991	160,046	97,377	69,561

Summarised cash flow information for the year ended 31 December 2023 and 2022

	Minera Juanicipio, S.A. de C.V.		Equipos Chaparral, S.A. de C.V.
	31-Dec-23	31-Dec-22	31-Dec-23	31-Dec-22
Operating	133,299	127,113	(33,126)	(28,354)
Investing	(48,936)	(115,961)	340	261
Financing	(57,448)	(24,777)	509	23,663
Net increase/(decrease) in cash and cash equivalents	26,915	(13,625)	(32,277)	(4,430)

284 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

5. Revenues

Revenues reflect the sale of goods, being concentrates, doré, slag, precipitates and activated carbon of which the primary contents are

silver, gold, lead and zinc.

(a) Revenues by source

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Revenues from contracts with customers	2,706,292	2,440,063
Revenues from other sources:
Provisional pricing adjustment on products sold	(1,206)	(3,302)
Hedging loss on sales	–	(3,771)
	2,705,086	2,432,990

(b) Revenues by product sold

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Lead concentrates (containing silver, gold, lead and by-products)	1,320,155	1,090,735
Doré and slag (containing gold, silver and by-products)	708,036	648,002
Zinc concentrates (containing zinc, silver and by-products)	290,138	326,912
Precipitates (containing gold and silver)	301,707	238,171
Activated carbon (containing gold, silver and by-products)	84,416	129,170
Iron concentrates (containing silver, gold, lead and by-products)	634	–
	2,705,086	2,432,990

Invoiced revenues are derived from the value of metal content which is determined by commodity market prices and adjusted for the

treatment and refining charges to be incurred by the metallurgical complex of our customer. The value of the metal content of the

products sold, before treatment and refining charges is considered as an alternative performance measure for the Group. The Group

considers this a useful additional measure to help understand underlying factors driving revenue in terms of volumes sold and realised

prices. The value of production sold by metal is as follows:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Silver	1,319,423	1,089,189
Gold	1,177,386	1,114,168
Zinc	250,782	283,453
Lead	121,483	106,640
Value of metal content in products sold	2,869,074	2,593,450
Refining and treatment charges	(163,988)	(160,460)
Total revenues	2,705,086	2,432,990

1 The methodology to determine the refining and treatment charges takes into account industry benchmark charges and adjustments to reflect ore composition and transport

costs (refer to note 27 (b)).

2 Includes provisional price adjustments which represent changes in the fair value of trade receivables resulting in a loss of US$1.2 million (2022: loss of US$3.3 million) and hedging

loss of US$nil million (2022: loss of US$3.8 million). For further detail, refer to note 2 (n).

The average realised prices for the gold and silver content of products sold, prior to the deduction of treatment and refining

charges, were:

	Year ended 31 December
	2023	2022
	US$ per ounce	US$ per ounce
Gold	1,957.72	1,799.26
Silver	23.64	21.72

1 For the purpose of the calculation, revenue by content of products sold does not include the results from hedging.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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6. Cost of sales

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Depreciation and amortisation	497,303	500,569
Contractors	393,997	367,003
Energy	256,507	231,505
Operating materials	292,450	269,720
Maintenance and repairs	299,924	252,907
Personnel expenses	210,583	175,508
Mine equipment leased	69,754	48,991
Mining concession rights and contributions	23,045	22,044
Surveillance	23,983	18,741
Insurance	12,056	11,069
Freight	9,365	11,843
IT services	11,464	11,401
Other	23,154	34,675
Cost of production	2,123,585	1,955,976
Unabsorbed production costs	25,920	2,592
Gain on foreign currency hedges	(232)	–
Change in work-in-progress and finished goods (ore inventories)	52,575	(61,598)
	2,201,848	1,896,970

1 Corresponds to mine equipment leased to contractors, the lease payments are based on a variable rate linked to the usage of the assets.

2 Corresponds to cost incurred during the testing period at Juanicipio plant and Fresnillo’s Pyrites plant as a result of the delays to the commencement of production of

US$3.9 million and US$3.0 million respectively, non-productive cost for the temporary stoppage of activities in Penmont US$10.2 million and non-productive fixed mine cost

incurred in Noche Buena resulting from finalisation of mining activities US$8.7 million (2022: Corresponds to costs incurred in Juanicipio plant activities (note 2 (c)).

3 Refer to note 2 (c) for more detail related to change in work in progress inventories for the year ended 31 December 2023 following a change in estimation.

7. Exploration expenses

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Contractors	122,973	111,981
Mining concession rights and contributions	28,777	25,570
Personnel expenses (note 8 (a))	13,315	10,779
Assays	8,950	6,269
Administrative services	2,057	2,086
Rentals	570	603
Other	5,805	8,502
	182,447	165,790

These exploration expenses were mainly incurred in the operating mines located in Mexico: the Guanajuato, Orisyvo and Valles projects;

and the Tajitos prospect. Exploration expenses of US$14.1 million (2022: US$17.9 million) were incurred in the year on projects located in

Peru and Chile.

Cash flows relating to exploration activities are as follows:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Operating cash out flows related to exploration activities	182,359	166,068

286 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

8. Personnel expenses

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Salaries and wages	109,470	87,534
Statutory healthcare and housing contributions	42,393	32,856
Other benefits	28,414	26,458
Bonuses	34,099	19,752
Employees’ profit sharing	2,390	9,841
Post-employment benefits	12,799	8,792
Vacations and vacations bonus	6,541	5,448
Legal contributions	6,104	4,202
Training	2,532	3,749
Other	5,313	3,708
	250,055	202,340

(a) Personnel expenses are reflected in the following line items:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Cost of sales (note 6)	215,952	175,508
Administrative expenses	20,788	16,053
Exploration expenses (note 7)	13,315	10,779
	250,055	202,340

1 Includes amounts recognised as unabsorbed production cost amounting US$5.4 million (2022: US$nil).

(b) The monthly average number of employees during the year was as follows:

	Year ended 31 December
	2023	2022
	No.	No.
Mining	3,497	3,967
Plant	1,091	1,074
Exploration	270	265
Maintenance	1,327	1,382
Administration and other	1,118	1,237
Total	7,303	7,925

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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9. Other operating income and expenses

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Other income:
Reversal of accruals	25,793	–
Recovery of personnel expenses	4,156	–
Gain on sale of property, plant and equipment and other assets	882	–
Layback Agreement (note 2 (c))	–	67,182
Rentals	35	767
Other	4,458	3,911
	35,324	71,860

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Other expenses:
Write-off of inventories (note 2 (c))	21,861	–
Cost subject to insurance claims	8,349	4,246
Environmental activities	3,963	2,997
Maintenance	3,477	2,939
Change in mine closure cost provision	3,226	–
Write-off of PPE assets	1,920	11,315
Donations	1,685	8,794
Consumption tax expensed	943	2,073
Other	5,745	6,391
	51,169	38,755

1 The Group has reversed the accrued energy costs recognised since July 2020, following the favourable ruling in favour of its related parties Termóelectrica Peñoles, S.A. de C.V.

and Eólica de Coahuila, S.A. de C.V, filed against the Mexican government regarding an increase of energy supply costs required to be recharged to its customers.

2 Main activities were related with improvement in tailing dams in Fresnillo and Ciénega (2022: Main activities were related with the evaluation of improvement in tailing dams

in Fresnillo and Ciénega and closure activities in the San Ramón satellite mine (closed at the end of 2020)).

3 Costs relating to the rehabilitation of the facilities of Compañía Minera las Torres, S.A. de C.V. (a closed mine).

4 Relates to changes in estimates after the completion of mining activities.

5 Mainly correspond to mobile equipment damaged (2022: Mobile equipment damaged and mining works collapsed).

10. Finance income and finance costs

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Finance income:
Interest on short-term deposits and investments	47,592	20,956
Interest on tax receivables	2,479	4,507
Other	552	997
	50,623	26,460

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Finance costs:
Interest on interest-bearing loans and notes payables	60,741	51,395
Unwinding of discount on provisions (note 21)	22,578	15,243
Interest on tax amendment	–	11,519
Interest on lease liabilities (note 25 (a))	1,220	720
Other	4,307	2,744
	88,846	81,621

288 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

11. Income tax expense

a) Major components of income tax expense:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Consolidated income statement:
Corporate income tax
Current:
Income tax charge	80,769	134,896
Amounts under/(over) provided in previous years	4,235	(1,710)
	85,004	133,186
Deferred:
Origination and reversal of temporary differences	(292,371)	(206,196)
Revaluation effects of Silverstream contract	2,320	5,636
	(290,051)	(200,560)
Corporate income tax	(205,047)	(67,374)
Special mining right
Current:
Special mining right charge (note 11 (e))	22,708	38,230
Amounts under provided in previous years	1,686	1,954
	24,394	40,184
Deferred:
Origination and reversal of temporary differences	6,371	(32,530)
Special mining right	30,765	7,654
Income tax expense reported in the income statement	(174,282)	(59,720)

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Consolidated statement of comprehensive income:
Deferred income tax (charge)/credit related to items recognised directly in other comprehensive income:
Gain on cash flow hedges recycled to income statement	–	(1,131)
Changes in fair value of cash flow hedges	(135)	(184)
Changes in the fair value of cost of hedges	–	414
Changes in fair value of equity investments at FVOCI	15,941	1,714
Remeasurement losses on defined benefit plans	20	114
Income tax effect reported in other comprehensive income	15,826	927

During 2022, following conversations held by the Company with the Servicio de Admnistracion Tributario (SAT) regarding its income

tax audits for the years 2014, 2015 and 2016 at Desarrollos Mineros Fresne, the Group decided to voluntarily amend the income tax and

mining right’s treatment of: (i) the stripping costs; and (ii) the deduction of exploration expenses.

These amendments were applied to tax returns from 2014 to 2021 (for the year 2021 the amendment also included Minera Penmont

as the merging entity of Desarrollos Mineros Fresne) and resulted in an increase in the current corporate income tax charge of

US$3.2 million and current special mining right charge of US$2.7 million and a recoverable income tax balance of US$3.2 million.

This effect was offset by a decrease in deferred corporate income tax of US$3.4 million. The amendment also resulted in US$11.5 million

of interest and surcharges presented in finance costs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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(b) Reconciliation of the income tax expense at the Group’s statutory income rate to income tax expense at the Group’s effective

income tax rate:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Accounting profit before income tax	114,018	248,571
Tax at the Group’s statutory corporate income tax rate 30.0%	34,205	74,571
Exchange rate effect on tax value of assets and liabilities 1	(214,521)	(72,888)
Inflationary uplift of the tax base of assets and liabilities	(54,763)	(62,666)
Incentive for Northern Border Zone	1,760	(17,491)
Deferred tax asset not recognised	11,688	7,893
Expenses not deductible for tax purposes	14,277	7,045
Inflationary uplift of tax losses	(5,361)	(7,843)
Current income tax underprovided in previous years	2,137	3,107
Non-taxable/non-deductible foreign exchange effects	16,689	1,167
Inflationary uplift on tax refunds	(744)	(1,352)
Special mining right deductible for corporate income tax	(9,230)	(2,296)
Other	(1,184)	3,379
Corporate income tax at the effective tax rate of (179.8%) (2022: (27.1%))	(205,047)	(67,374)
Special mining right	30,765	7,654
Tax at the effective income tax rate of (152.9%) (2022: (24.0%))	(174,282)	(59,720)

1 Mainly derived from the tax value of property, plant and equipment.

The most significant items reducing the effect of effective tax rate are inflation effects, exchange rate and the incentive for Northern

Border Zone. The future effects of inflation and exchange rate will depend on future market conditions.

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Opening net assets/(liability)	232,568	(1,445)
Income statement credit arising on corporate income tax	290,051	200,560
Income statement credit arising on special mining right	(6,371)	32,530
Exchange difference	26	(4)
Net charge related to items directly charged to other comprehensive income	15,826	927
Closing net asset	532,100	232,568

290 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

11. Income tax expense continued

The amounts of deferred income tax assets and liabilities as at 31 December 2023 and 2022, considering the nature of the related

temporary differences, are as follows:

		Consolidated balance sheet		Consolidated income statement
	2023	2022	2023	2022
	US$ thousands	US$ thousands	US$ thousands	US$ thousands
Related-party receivables	(181,236)	(158,797)	22,439	5,095
Other receivables	(6,233)	(3,974)	2,259	727
Inventories	152,378	115,383	(36,995)	(18,213)
Prepayments	(3,499)	(2,423)	1,076	(449)
Derivative financial instruments including Silverstream contract	(138,171)	(147,887)	(9,852)	(6,125)
Property, plant and equipment arising from corporate income tax	366,694	142,241	(224,453)	(192,396)
Exploration expenses and operating liabilities	107,711	91,265	(16,446)	19,724
Other payables and provisions	87,705	74,162	(13,543)	3,930
Losses carried forward	141,091	117,689	(23,402)	(27,250)
Post-employment benefits	2,100	1,504	(576)	(356)
Deductible profit sharing	852	3,095	2,243	1,842
Special mining right deductible for corporate income tax	7,445	10,738	3,293	12,954
Equity investments at FVOCI	1,368	(16,937)	(2,364)	(1,903)
Other	(17,416)	(11,172)	6,270	1,860
Net deferred tax asset related to corporate income tax	520,789	214,887
Deferred tax credit related to corporate income tax			(290,051)	(200,560)
Related-party receivables arising from special mining right	(44,963)	(39,541)	5,422	1,391
Inventories arising from special mining right	37,124	28,685	(8,439)	(7,353)
Property, plant and equipment arising from special mining right	(11,689)	7,887	19,576	(27,185)
Other	30,839	20,650	(10,188)	617
Net deferred tax liability related to special mining rights	11,311	17,681
Deferred tax credit			(283,680)	(233,090)
Reflected in the statement of financial position as follows:
Deferred tax assets	665,302	343,688
Deferred tax liabilities	(133,202)	(111,120)
Net deferred tax asset	532,100	232,568

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current

tax liabilities and when the deferred income tax assets and liabilities relate to the same fiscal authority.

Based on management’s internal forecast, a deferred tax asset of US$141.1 million (2022: US$117.7 million) has been recognised in

respect of tax losses amounting to US$470.3 million (2022: US$391.6 million). If not utilised, US$7.1 million (2022: US$33.2 million)

will expire within five years and US$463.2 million (2022: US$358.4 million) will expire between six and ten years. Of the total deferred

tax asset related to losses, US$69.4 million (2022: US$34.4 million) is covered by the existence of taxable temporary differences, the

remaining US$71.7 million (2022: US$83.3 million) corresponds to Fresnillo plc which maintained a deferred net asset position. Despite

the accounting loss in the Parent Company in the current and prior periods, management has considered the taxable profit generated

in the current year of US$91.3 million and based on a consideration of this, combined with future financial and tax projections, considers

that there is evidence that sufficient taxable profits will be available against which these unused tax losses can be utilised.

The Group has also performed an assessment of the recoverability of tax losses from mining entities based on financial projections that

are consistent with the Group’s impairment assessment (refer to note 13), together with relevant tax projections which consider the

amount and timing of certain tax deductions. Based on those assumptions, the Group expects to fully utilise its recognised losses.

The Group has further tax losses and other similar attributes carried forward of US$112.3 million (2022: US$91.9 million) on which no

deferred tax is recognised due to insufficient certainty regarding the availability of appropriate future taxable profits. Based on the

applicable tax legislation the tax losses are not subject to expiry.

(d) Unrecognised deferred tax on investments in subsidiaries

The Group has not recognised all of the deferred tax liability in respect of distributable reserves of its subsidiaries because it controls

them and only part of the temporary differences is expected to reverse in the foreseeable future. The temporary differences for which

a deferred tax liability has not been recognised aggregate to US$1,015 million (2022: US$1,006 million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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(e) Corporate Income Tax (‘Impuesto Sobre la Renta’ or ‘ISR’) and Special Mining Right (SMR)

The Group’s principal operating subsidiaries are Mexican residents for taxation purposes. The rate of current corporate income tax

is 30%.

On 30 December 2018, the Decree of tax incentives for the northern border region of Mexico was published in the Official Gazette,

which provided a reduction of income tax by a third and also a reduction of 50% of the value added tax rate, for taxpayers that produce

income from business activities carried out within the northern border region. The tax incentives were applicable since 1 January 2019

and remained in force until 31 December 2020. On 30 December 2020 and extension of the Decree was published in the Official

Gazette which remains in force until 31 December 2024. Some of the Group companies which produce income from business activities

carried out within Caborca, Sonora, which is considered for purposes of the Decree as northern border region, applied for this Decree

tax incentives before the Mexican tax authorities, and were granted authorisation for income tax and value added tax purposes.

The special mining right ‘SMR’ states that the owners of mining titles and concessions are subject to pay an annual mining right of 7.5%

of the profit derived from the extractive activities and is considered as income tax under IFRS. The 7.5% tax applies to a base of income

before interest, annual inflation adjustment, taxes paid on the regular activity, depreciation and amortisation, as defined by the new ISR.

This SMR can be credited against the corporate income tax of the same fiscal year and its payment must be remitted no later than the

last business day of March of the following year.

12. Earnings per share

Earnings per share (EPS) is calculated by dividing profit for the year attributable to equity shareholders of the Company by the weighted

average number of Ordinary Shares in issue during the period.

The Company has no dilutive potential Ordinary Shares.

As of 31 December 2023 and 2022, earnings per share have been calculated as follows:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Earnings:
Profit attributable to equity holders of the Company	233,909	271,897
Adjusted profit attributable to equity holders of the Company	228,497	258,747

Adjusted profit is profit as disclosed in the Consolidated Income Statement adjusted to exclude revaluation effects of the Silverstream

contract of US$7.7 million gain (US$5.4 million net of tax) (2022: US$18.8 million gain (US$13.2 million net of tax)).

Adjusted earnings per share have been provided in order to provide a measure of the underlying performance of the Group, prior to the

revaluation effects of the Silverstream contract, a derivative financial instrument.

	2023	2022
	thousands	thousands
Number of shares:
Weighted average number of Ordinary Shares in issue	736,894	736,894

	2023	2022
	US$	US$
Earnings per share:
Basic and diluted earnings per share	0.317	0.369
Adjusted basic and diluted earnings per Ordinary Share	0.310	0.351

292 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

13. Property, plant and equipment

						Year ended 31 December 2023
						US$ thousands
			Mining
			properties and
	Land and	Plant and	development	Other	Construction
	buildings	equipment	costs	assets 2	in progress	Total
Cost
At 1 January 2023	412,984	2,828,920	3,001,661	377,813	461,490	7,082,868
Additions	903	103,835	5,428	37,839	358,579	506,584
Disposals	(308)	(26,480)	(2,763)	(12,345)	–	(41,896)
Transfers and other movements	22,305	226,170	236,380	49,741	(534,596)	–
At 31 December 2023	435,884	3,132,445	3,240,706	453,048	285,473	7,547,556
Accumulated depreciation
At 1 January 2023	(222,166)	(1,810,484)	(1,947,868)	(239,786)	–	(4,220,304)
Depreciation for the year	(24,837)	(205,238)	(240,595)	(30,276)	–	(500,946)
Disposals	290	24,627	2,763	6,930	–	34,610
At 31 December 2023	(246,713)	(1,991,095)	(2,185,700)	(263,132)	–	(4,686,640)
Net book amount at 31 December 2023	189,171	1,141,350	1,055,006	189,916	285,473	2,860,916

1 Depreciation for the year includes US$498.5 million recognised as an expense in the income statement and US$2.5 million capitalised as part of construction in progress.

2 From the additions in ‘other assets’ category US$28.1 million corresponds to the reassessment of mine closure rehabilitations costs, see note 21.

3 Amounts include right-of-use assets as described in note 25.

4 The amount of property, plant and equipment related to Soledad-Dipolos at 31 December 2023 is US$37.2 million and reflects capitalised mining works and the amount

recognised in the cost of property, plant and equipment related to estimated remediation and closure activities.

5 From the total net amount of disposals, US$1.9 million correspond to a write-off of assets as disclosed in note 9.

						Year ended 31 December 2022
						US$ thousands
			Mining properties
	Land and	Plant and	and development	Other	Construction
	buildings	equipment	costs	assets	in progress	Total
Cost
At 1 January 2022	354,605	2,641,444	2,457,292	374,211	804,650	6,632,202
Additions	2,971	30,249	11,750	(16,947)	556,509	584,532
Disposals	(224)	(104,445)	(21,999)	(7,198)	–	(133,866)
Transfers and other movements	55,632	261,672	554,618	27,747	(899,669)	–
At 31 December 2022	412,984	2,828,920	3,001,661	377,813	461,490	7,082,868
Accumulated depreciation
At 1 January 2022	(198,653)	(1,730,511)	(1,692,189)	(211,774)	–	(3,833,127)
Depreciation for the year	(23,647)	(176,445)	(271,552)	(34,861)	–	(506,505)
Disposals	134	96,472	15,873	6,849	–	119,328
At 31 December 2022	(222,166)	(1,810,484)	(1,947,868)	(239,786)	–	(4,220,304)
Net book amount at 31 December 2022	190,818	1,018,436	1,053,793	138,027	461,490	2,862,564

1 Depreciation for the year includes US$501.8 million recognised as an expense in the income statement and US$4.7 million, capitalised as part of construction in progress.

2 From the additions in ‘other assets’ category US$(27.3) million corresponds to the reassessment of mine closure rehabilitations costs, see note 21.

3 Amounts include right-of-use assets as described in note 25.

4 The amount of property, plant and equipment related to Soledad-Dipolos at 31 December 2022 is US$35.6 million and reflects capitalised mining works and the amount

recognised in the cost of property, plant and equipment related to estimated remediation and closure activities.

5 From the total net amount of disposals, US$11.3 million correspond to a write-off of assets as disclosed in note 9.

The table below details construction in progress by operating mine and development projects

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Fresnillo	73,761	186,666
Saucito	94,092	80,566
Juanicipio	29,028	67,228
Ciénega	13,432	53,204
San Julián	56,938	34,203
Herradura	13,307	27,208
Noche Buena	–	9,583
Other	4,914	2,832
	285,472	461,490

1 Mainly corresponds to Minera Bermejal, S.A. de C.V. (2022: Minera Bermejal, S.A. de C.V.).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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During the year ended 31 December 2023, the Group capitalised US$2.1 million of borrowing costs paid within construction in progress

(2022: US$8.6 million). Borrowing costs were capitalised at the rate of 5.02% (2022: 5.02%).

Sensitivity analysis

As disclosed in note 2 (f) management performs at each reporting date an assessment to determine whether there are any indicators

of impairment. As at 31 December 2023, the carrying amounts of mining assets is supported by their recoverable values.

The key assumptions on which management bases the recoverable value calculations of the mining assets are commodity prices,

future capital requirements, production costs, reserves and resources volumes (reflected in production volumes) and discount rate.

The models are most sensitive to changes in commodity price assumptions, operating costs and production volumes.

Other than as disclosed below, management has considered no reasonably possible change in any other key assumption above would

cause the carrying value of any of its mining assets to exceed its recoverable amount.

In the absence of any changes to any of the other key assumptions, a change in the below assumptions would have the following

impact as at 31 December 2023:

• A decrease of 10% in gold and silver prices would result in an impairment charge of US$228.7 million.

• An increase of 10% in operating costs would result in an impairment charge of US$116.1 million.

• A decrease of 5% in the forecasted volume of gold and silver produced would result in an impairment charge of US$92.2 million.

14. Silverstream contract

On 31 December 2007, the Group entered into an agreement with Peñoles through which the Group is entitled to receive the proceeds

received by the Peñoles Group in respect of the refined silver sold from the Sabinas Mine (‘Sabinas’), a base-metals mine owned and

operated by the Peñoles Group. The agreement required an upfront payment of US$350 million by Fresnillo. In addition, a per ounce

cash payment of US$2.00 in years one to five and US$5.00 thereafter (subject to an inflationary adjustment that commenced from

31 December 2013) is payable to Peñoles. The cash payment to Peñoles per ounce of silver for the year ended 31 December 2023 was

US$5.65 per ounce (2022: US$5.54 per ounce). Under the contract, the Group has the option to receive a net cash settlement from

Peñoles attributable to the silver produced and sold from Sabinas, to take delivery of an equivalent amount of refined silver or to receive

settlement in the form of both cash and silver. If, by 31 December 2032, the amount of silver produced by Sabinas is less than 60 million

ounces, a further payment is due from Peñoles to the Group of US$1 per ounce of shortfall.

The Silverstream contract represents a derivative financial instrument which has been recorded at FVPL and classified within

non-current and current assets as appropriate. The term of the derivative is based on Sabinas’ life of mine which is currently 24 years

considering ore reserves and certain mineral resources based on the expected conversion rate to reserves. Changes in the contract’s

fair value, other than those represented by the realisation of the asset through the receipt of either cash or refined silver, are charged

or credited to the income statement. In the year ended 31 December 2023 total proceeds received in cash were US$40.2 million

(2022: US$33.4 million) of which, US$8.3 million was in respect of proceeds receivable as at 31 December 2022 (2022: US$4.8 million in

respect of proceeds receivable as at 31 December 2021). Cash received in respect of the year of US$31.8 million (2022: US$28.5 million)

corresponds to 2.29 million ounces of payable silver (2022: 2.06 million ounces). As at 31 December 2023, a further US$5.1 million

(2022: US$8.3 million) of cash receivable corresponding to 278,342 ounces of silver is due (2022: 453,158 ounces).

A reconciliation of the beginning balance to the ending balance is shown below:

	2023	2022
	US$ thousands	US$ thousands
Balance at 1 January	511,474	529,544
Cash received in respect of the year	(31,816)	(28,513)
Cash receivable	(5,050)	(8,342)
Remeasurement gains recognised in profit and loss	7,732	18,785
Balance at 31 December	482,340	511,474
Less – Current portion	35,802	36,218
Non-current portion	446,538	475,256

The US$7.7 million unrealised gain recorded in the income statement (31 December 2022: US$18.8 million loss) resulted mainly from

the financial profit obtained from the contract amortisation, which was partially compensated with lower reserves considered in the

production mine plan and a lower inflation rate expected.

294 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

14. Silverstream contract continued

Significant assumptions used in the valuation of the Silverstream contract are as follows:

• Forecasted volumes (millions of ounces/moz).

- Silver to be produced and sold over the life of mine 82.8 moz (2022: 103.2 moz).

- Average annual silver to be produced and sold 3.5 moz (2022: 4.0 moz).

• Weighted average discount rate 9.79% (2022: 9.82%).

• Future silver prices (US$ per ounce).

Year ended 31 December	Year 1	Year 2	Year 3	Year 4	Year 5	Long-term
2023	24.41	25.44	26.43	26.64	26.85	19.58
2022	24.45	25.53	26.22	27.12	27.33	18.81

The fair value of the Silverstream contract is determined using a valuation model including unobservable inputs (Level 3). This derivative

has a term of 24 years and the valuation model utilises several inputs that are not based on observable market data due to the nature of

these inputs and/or the duration of the contract. Inputs that have a significant effect on the recorded fair value are the volume of silver

that will be produced and sold from the Sabinas mine over the contract life, the future price of silver, future inflation and the discount

rate used to discount future cash flows. In line with what a market participant would consider, the model includes the proportion of

resources that are expected to be converted into reserves. Out of the 82.8 moz included in the model, 56% relates to reserves and 44%

relates to resources (which were adjusted by a conversion factor of 50%). (2022: 55% and 45% respectively). For purposes of the fair value

measurement, those resources are assumed to be mined once reserves are exhausted. This approach has been applied consistently in

both 2023 and 2022.

The estimate of the volume of silver that will be produced and sold from the Sabinas mine requires estimates of the recoverable

silver reserves and resources, the related production profile based on the Sabinas mine plan and the expected recovery of silver from

ore mined. The estimation of these inputs is subject to a range of operating assumptions and may change over time. Estimates of

reserves and resources are updated annually by Peñoles, the operator and sole interest holder in the Sabinas mine and provided to the

Company. The production profile and estimated payable silver that will be recovered from ore mined is based on the operational mine

plan, with certain amendments to reflect a basis that a market participant would consider, that is provided to the Company by Peñoles.

The inputs assume no interruption in production over the life of the Silverstream contract and production levels which are consistent

with those achieved in recent years.

Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs described above

and determines their impact on the total fair value. The fair value of the Silverstream contract is significantly sensitive to a reasonably

possible change in future silver price, the discount rate used to discount future cash flows and total recoverable reserves and resources

over the life of mine. The sensitivity of these key inputs is as follows:

Year ended 31 December

		Commodity price		Discount rate		Volumes produced
		Effect on profit		Effect on profit		Effect on profit
		before tax:	Basis point	before tax:	Increase/	before tax:
	Increase/	increase/	increase/	increase/	(decrease) in	increase/
	(decrease) in	(decrease)	(decrease)	(decrease)	reserves and	(decrease)
	silver price	US$ thousands	in interest rate	US$ thousands	resources	US$ thousands
2023	10%	63,222	–	–	10%	48,141
	(10%)	(63,222)	(75)	27,473	(10%)	(48,141)
2022	20%	133,736	100	(41,860)	6%	30,600
	(15%)	(100,302)	(25)	11,452	(6%)	(30,600)

Management considers that an appropriate sensitivity for volumes produced and sold is on the total recoverable reserve and resource

quantities over the contract term rather than annual production volumes over the mine life.

The significant unobservable inputs are not interrelated. The Sabinas mine is a polymetallic mine that contains copper, lead and zinc

as well as silver, which is produced as a by-product. Therefore, changes to base metals prices (rather than the price of silver) are most

relevant to the Sabinas mine production plans and the overall economic assessment of the mine.

The effects on profit before tax and equity of reasonably possible changes to the inflation rates and the US dollar exchange rate

compared to the Mexican peso on the Silverstream contract are not material. The Group’s exposure to reasonably possible changes

in other currencies is not material.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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15. Inventories

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Finished goods	34,212	27,257
Work-in-progress	314,802	375,603
Ore stockpile	4,779	26,020
Operating materials and spare parts	185,624	163,947
	539,417	592,827
Allowance for obsolete and slow-moving inventories	(6,684)	(5,463)
Balance as 31 December	532,733	587,364
Less – Current portion	462,973	495,744
Non-current portion	69,760	91,620

1 Finished goods include metals contained in concentrates and doré bars on hand or in transit to a smelter or refinery.

2 Work-in-progress includes metals contained in ores on leaching pads for an amount of US$292.7 million (2022: US$307.6 million) and in stockpiles US$22.1 million

(2022: US$58.8 million) that will be processed in dynamic leaching plants (note 2 (c)).

3 As at 31 December 2022 ore stockpile included ore mineral obtained during the development phase at Juanicipio which has been processed during 2023.

4 Non-current inventories relate to ore in leaching pads where the leaching process has stopped and is not expected to restart within 12 months. As at 31 December 2023

and 2022 non-current inventories corresponds to Soledad-Dipolos mine unit (note 2 (c)).

Concentrates are a product containing sulphides with variable content of precious and base metals and are sold to smelters and/or

refineries. Doré is an alloy containing a variable mixture of gold and silver that is delivered in bar form to refineries. Activated carbon is

a product containing variable mixture of gold and silver that is delivered in small particles.

The amount of inventories recognised as an expense in the year was US$2,201.8 million (2022: US$1,906.8 million). During 2023 and

2022, there was no adjustment to net realisable value allowance against work-in-progress inventory. The adjustment to the allowance

for obsolete and slow-moving inventory recognised as an expense was US$1.2 million (2022: US$2.6 million).

16. Trade and other receivables

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Trade receivables from related parties (note 27)	306,668	275,844
Value Added Tax receivable	93,010	85,979
Other receivables from related parties (note 27 (a))	11,509	8,377
Other receivables from contractors	2,662	52
Other receivables	6,170	8,697
Other receivables arising from the Layback Agreement (note 2 (c))	–	25,994
	420,019	404,943
Expected credit loss of ‘Other receivables’	(353)	(444)
Trade and other receivables classified as current assets	419,666	404,499
Other receivables classified as non-current assets:
Other receivable from contractors	773	1,638
Value Added Tax receivable	42,755	36,820
Trade and other receivables classified as non-current assets	43,528	38,458
Total trade and other receivables	463,194	442,957

Trade receivables are shown net of any corresponding advances, are non-interest-bearing and generally have payment terms of 46 to

60 days.

The total receivables denominated in US$ were US$316.3 million (2022: US$311.7 million), and in Mexican pesos US$147.6 million

(2022: US$131.2 million).

Balances corresponding to Value Added Tax receivables and US$6.2 million within Other receivables (2022: US$8.7 million) are not

financial assets.

As of 31 December for each year presented, except for ‘other receivables’ in the table above, all trade and other receivables were neither

past due nor credit-impaired. The amount past due and considered as credit-impaired as of 31 December 2023 is US$0.4 million

(2022: US$0.4 million). Trade receivables from related parties and other receivables from related parties (see note 14) are classified as

financial assets at FVTPL and are therefore not considered in the expected credit loss analysis. In determining the recoverability of

receivables, the Group performs a risk analysis considering the type and age of the outstanding receivable and the credit worthiness

of the counterparty, see note 31 (b).

296 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

17. Cash and cash equivalents

The Group considers cash and cash equivalents when planning its operations and in order to achieve its treasury objectives.

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Cash at bank and on hand	3,556	2,516
Short-term deposits	531,024	966,544
Cash and cash equivalents	534,580	969,060

Cash at bank earns interest at floating rates based on daily bank deposits. Short-term deposits are made for varying periods of between

one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term

deposit rates. Short-term deposits can be withdrawn at short notice without any penalty or loss in value.

18. Equity

Share capital and share premium

Authorised share capital of the Company is as follows:

Class of share

				As at 31 December
		2023		2022
	Number	Amount	Number	Amount
Ordinary Shares each of US$0.50	1,000,000,000	$500,000,000	1,000,000,000	$500,000,000
Sterling Deferred Ordinary Shares each of £1.00	50,000	£50,000	50,000	£50,000

Issued share capital of the Company is as follows:

		Ordinary Shares	Sterling Deferred Ordinary Shares
	Number	US$	Number	£
At 1 January 2022	736,893,589	$368,545,586	50,000	£50,000
At 31 December 2022	736,893,589	$368,545,586	50,000	£50,000
At 31 December 2023	736,893,589	$368,545,586	50,000	£50,000

As at 31 December 2023 and 2022, all issued shares with a par value of US$0.50 each are fully paid. The rights and obligations attached

to these shares are governed by law and the Company’s Articles of Association. Ordinary shareholders are entitled to receive notice and

to attend and speak at any general meeting of the Company. There are no restrictions on the transfer of the Ordinary Shares.

The Sterling Deferred Ordinary Shares only entitle the shareholder on winding up or on a return of capital to payment of the amount

paid up after repayment to ordinary shareholders. The Sterling Deferred Ordinary Shares do not entitle the holder to payment of any

dividend, or to receive notice or to attend and speak at any general meeting of the Company. The Company may also at its option

redeem the Sterling Deferred Ordinary Shares at a price of £1.00 or, as custodian, purchase or cancel the Sterling Deferred Ordinary

Shares or require the holder to transfer the Sterling Deferred Ordinary Shares. Except at the option of the Company, the Sterling

Deferred Ordinary Shares are not transferable.

Reserves

Share premium

This reserve records the consideration premium for shares issued at a value that exceeds their nominal value.

Capital reserve

The capital reserve arose as a consequence of the pre-IPO reorganisation as a result of using the pooling of interest method.

Hedging reserve

This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective

hedge, net of tax. When the hedged transaction occurs, the gain or the loss is transferred out of equity to the income statement or the

value of other assets.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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Cost of hedging reserve

The changes in the time value of option contracts are accumulated in the costs of hedging reserve. These deferred costs of hedging are

either reclassified to profit or loss or recognised as a basis adjustment to non-financial assets or liabilities upon maturity of the hedged

item, or, in the case of a hedge item that realises over time, amortised on a systematic and rational basis over the life of the hedged item.

Fair value reserve of financial assets at FVOCI

The Group has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in note 2 (g).

These changes are accumulated within the FVOCI reserve within equity. The Group transfers amounts from this reserve to retained

earnings when the relevant equity securities are derecognised.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial information

of entities with a functional currency different to that of the presentational currency of the Group.

Retained earnings

This reserve records the accumulated results of the Group, less any distributions and dividends paid.

19. Dividends declared and paid

The dividends declared and paid during the years ended 31 December 2023 and 2022 are as follows:

	US cents per	Amount
	Ordinary Share	US$ thousands
Year ended 31 December 2023
Final dividend for 2022 declared and paid during the year 1	13.3	98,007
Interim dividend for 2023 declared and paid during the year	1.4	10,317
	14.7	108,324
Year ended 31 December 2022
Final dividend for 2021 declared and paid during the year 3	24.00	176,855
Interim dividend for 2022 declared and paid during the year	3.40	25,054
	27.4	201,909

1 This dividend was approved by the shareholders on 23 May 2023 and paid on 26 May 2023.

2 This dividend was approved by the Board of Directors on 31 July 2023 and paid 14 September 2023.

3 This dividend was approved by the shareholders on 17 May 2022 and paid on 27 May 2022.

4 This dividend was approved by the Board of Directors on 1 August 2022 and paid 14 September 2022.

A reconciliation between dividend declared, dividends affected to retained earnings and dividend presented in the cash flow

statements is as follows:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Dividends declared	108,324	201,909
Foreign exchange effect	(1)	–
Dividends recognised in retained earnings	108,323	201,909
Foreign exchange and hedging effect	28	41
Dividends paid	108,351	201,950

The Directors have proposed a final dividend of US$4.2 cents per share, which is subject to approval at the Annual General Meeting and

is not recognised as a liability as at 31 December 2023. Dividends paid from the profits generated from 1 January 2014 to residents in

Mexico and to non-resident shareholders may be subject to an additional tax of up to 10%, which will be withheld by the Group.

298 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

20. Interest-bearing loans

Senior Notes

On 13 November 2013, the Group completed its offering of US$800 million aggregate principal amount of 5.500% Senior Notes due

November 2023 (the 5.500% Notes). On 29 September 2020, the Group repurchased certain of its 5.500% Notes that had a carrying

value of US$482.1 million for a consideration of US$543.0 million.

On 2 October 2020, the Group completed its offering of US$850 million aggregate principal amount of 4.250% Senior Notes due 2050

in the Irish Stock Exchange. The proceeds were partially used to finance the repurchase mentioned above.

On 13 November 2023, the Company paid the outstanding amount of the 5.500% Notes at its maturity date including due interest for

a total of US$326.6 million.

Movements in the year in the debt recognised in the balance sheet are as follows:

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Opening balance	1,158,557	1,157,545
Payments of 5.500% Notes	(317,879)	–
Accrued interest	53,919	56,475
Interest paid	(56,371)	(56,371)
Amortisation of discount and transaction costs	776	908
Closing balance	839,002	1,158,557
Less – Current portion	–	317,879
Non-current portion	839,002	840,678

1 Interest was payable semi-annually on 13 May and 13 November for 5.500% Senior Notes and is payable semi-annually on 2 April and 2 October for 4.250% Senior Notes.

The Group has the following restrictions derived from the issuance of all outstanding Senior Notes:

Change of control:

Should the rating of the senior notes be downgraded as a result of a change of control (defined as the sale or transfer of 35% or more of

the common shares; the transfer of all or substantially all the assets of the Group; starting a dissolution or liquidation process; or the loss

of the majority in the Board of Directors) the Group is obligated to repurchase the notes at an equivalent price of 101% of their nominal

value plus the interest earned at the repurchase date, if requested to do so by any creditor.

Pledge on assets:

The Group shall not pledge or allow a pledge on any property that may have a material impact on business performance (key assets).

Nevertheless, the Group may pledge the aforementioned properties provided that the repayment of the Notes keeps the same level

of priority as the pledge on those assets.

21. Provision for mine closure cost

The provision represents the discounted values of the risk-adjusted estimated cost to decommission and rehabilitate the mines at

the estimated date of depletion of mine deposits. Uncertainties in estimating these costs include potential changes in regulatory

requirements, decommissioning, dismantling and reclamation alternatives, timing; the effects of climate change, and the discount,

foreign exchange and inflation rates applied. Closure provisions are typically based on conceptual level studies that are refreshed at

least every three years. As these studies are renewed, they incorporate greater consideration of forecast climate conditions at closure.

The Group has performed separate calculations of the provision by currency, discounting at corresponding rates. As at 31 December

2023, the discount rates used in the calculation of the parts of the provision that relate to Mexican pesos range from 9.87% to

11.19% (2022: range from 10.08% to 10.62%). The range for the current year parts that relate to US dollars range from 3.70% to 4.68%

(2022: range from 3.08% to 4.44%).

Mexican regulations regarding the decommissioning and rehabilitation of mines are limited and less developed in comparison to

regulations in many other jurisdictions. It is the Group’s intention to rehabilitate the mines beyond the requirements of Mexican law,

and estimated costs reflect this level of expense. The Group intends to fully rehabilitate the affected areas at the end of the lives of

the mines.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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The provision is expected to become payable at the end of the production life of each mine, based on the estimation of reserves and

resources, which ranges from two to 21 years from 31 December 2023 after the ending of mine operation at Noche Buena mine (one to

22 years from 31 December 2022). As at 31 December 2023 the weighted average term of the provision is ten years (2022: 12 years).

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Opening balance	247,207	260,307
(Decrease)/Increase to existing provision	(2,111)	23,757
Effect of changes in discount rate	1,436	(63,061)
Unwinding of discount rate	22,578	15,243
Payments	(4,376)	(1,085)
Foreign exchange	27,582	12,046
Closing balance	292,316	247,207
Less – Current portion	11,849	4,827
Non-current portion	280,467	242,380

The provision is sensitive to a reasonably possible change in discount rates, exchange rate US dollar compared to Mexican peso, and

change in future costs. The sensitivity of these key inputs is as follows:

Year ended 31 December

		Discount rate		Foreign currency		Estimated costs
		Effect on		Effect on		Effect on
	Basis point	provision:		provision:	Increase/	provision:
	increase/	increase/	Strengthening/	increase/	(decrease)	increase/
	(decrease)	(decrease)	(weakening)	(decrease)	in estimated	(decrease)
	in interest rate	US$ thousands	of US dollar	US$ thousands	costs	US$ thousands
2023	50	11,710	10%	(21,990)	5%	14,616
	(50)	(24,205)	(5%)	12,731	(5%)	(14,616)
2022	50	12,030	5%	(8,679)	5%	12,360
	(50)	(13,110)	(5%)	9,593	(5%)	(12,360)

Change on the provision would be principally offset by a change to the value of the associated asset unless the asset is fully depreciated,

in which case the change in estimate is recognised directly within the income statement.

22. Pensions and other post-employment benefit plans

The Group has a defined contribution plan and a defined benefit plan.

The defined contribution plan was established as from 1 July 2007 and consists of periodic contributions made by each Mexican

non-unionised worker and contributions made by the Group to the fund matching workers’ contributions, capped at 8% of the

employee’s annual salary.

The defined benefit plan provides pension benefits based on each worker’s earnings and years of services provided by personnel hired

up to 30 June 2007 as well as statutory seniority premiums for both unionised and non-unionised workers.

The overall investment policy and strategy for the Group’s defined benefit plan is guided by the objective of achieving an investment

return which, together with contributions, ensures that there will be sufficient assets to pay pension benefits and statutory seniority

premiums for non-unionised workers as they fall due while also mitigating the various risks of the plan. However, the portion of the

plan related to statutory seniority premiums for unionised workers is not funded. The investment strategies for the plan are generally

managed under local laws and regulations. The actual asset allocation is determined by current and expected economic and market

conditions and in consideration of specific asset class risk in the risk profile. Within this framework, the Group ensures that the trustees

consider how the asset investment strategy correlates with the maturity profile of the plan liabilities and the respective potential impact

on the funded status of the plan, including potential short-term liquidity requirements.

Death and disability benefits are covered through insurance policies.

300 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

22. Pensions and other post-employment benefit plans continued

The following tables provide information relating to changes in the defined benefit obligation and the fair value of plan assets:

Pension cost charge to income statement

Remeasurement gains/(losses) in OCI

Return

on plan

assets

Actuarial

Defined

(excluding

changes

benefit

amounts

arising from

decrease

Balance at

Sub-total

included

changes in

Sub-total

due to

Balance at

1 January

Service

Net

Foreign

recognised

Benefits

in net

financial

included

Contributions

personnel

31 December

2023

cost

interest

exchange

in the year

paid

interest)

assumptions

in OCI

by employer

transfer

2023

US$ thousands

Defined

benefit

obligation

(26,014)

(1,797)

(2,559)

(3,952)

(8,308)

2,133

(457)

(25)

(32,671)

Fair value of

plan assets

16,552

1,871

2,527

4,398

(2,133)

331

332

(20)

19,460

Net benefit

liability

(9,462)

(1,797)

(688)

(1,425)

(3,910)

–

331

(457)

(126)

332

(45)

(13,211)

Pension cost charge to income statement

Remeasurement gains/(losses) in OCI

Return on

plan assets

Actuarial

Defined

(excluding

changes

benefit

amounts

arising from

decrease

Balance at

Sub-total

included

changes in

Sub-total

due to

Balance at

1 January

Service

Net

Foreign

recognised

Benefits

in net

financial

included

Contributions

personnel

31 December

2022

cost

interest

exchange

in the year

paid

interest)

assumptions

in OCI

by employer

transfer

2022

US$ thousands

Defined

benefit

obligation

(25,673)

(1,260)

(1,826)

(1,651)

(4,737)

2,065

1,894

437

(26,014)

Fair value of

plan assets

19,167

1,333

1,160

2,493

(2,065)

(2,615)

–

(428)

16,552

Net benefit

liability

(6,506)

(1,260)

(493)

(491)

(2,244)

–

(2,615)

1,894

(721)

–

(9,462)

1 The effect corresponding to partially-owned subsidiaries has been allocated in the non-controlling interest of the year.

Of the total defined benefit obligation, US$13.9 million (2022: US$10.7 million) relates to statutory seniority premiums for unionised

workers which are not funded. The expected contributions to the plan for the next annual reporting period are US$nil. The principal

assumptions used in determining pension and other post-employment benefit obligations for the Group’s plans are shown below:

		As at 31 December
	2023	2022
	%	%
Discount rate	10.08	10.23
Future salary increases (National Consumer Price Index)	5.25	5.25

The life expectancy of current and future pensioners, men and women aged 65 and older will live on average for a further 23.2 and

26.0 years respectively (2022: 23.9 years for men and 26.7 for women). The weighted average duration of the defined benefit obligation

is 8.7 years (2022: 10.8 years).

The fair values of the plan assets were as follows:

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
State-owned companies	337	–
Mutual funds (fixed rates)	19,123	16,552
	19,460	16,552

As at 31 December 2023 and 2022, all the funds were invested in quoted debt instruments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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The pension plan has not invested in any of the Group’s own financial instruments nor in properties or assets used by the Group.

A quantitative sensitivity analysis for significant assumptions as at 31 December 2023 is as shown below:

				Future salary increases	Life expectancy
		Assumptions Discount rate		(NCPI)	of pensioners
	0.5%	0.5%	0.5%	0.5%	+ 1
Sensitivity Level	increase	decrease	increase	decrease	increase
Year ended 31 December 2023
(Decrease)/Increase to the net defined benefit obligation
(US$ thousands)	(1,152)	1,243	215	(226)	289
Year ended 31 December 2022
(Decrease)/Increase to the net defined benefit obligation
(US$ thousands)	(967)	1,044	176	(174)	145

The sensitivity analysis above has been determined based on a method that extrapolates the impact on net defined benefit obligation

as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The pension plan is not sensitive to

future changes in salaries other than in respect of inflation.

23. Trade and other payables

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Trade payables	118,110	140,297
Other payables to related parties (note 27 (a))	56,434	35,969
Accrued expenses	54,749	60,321
Other taxes and contributions	28,812	22,280
	258,105	258,867

Trade payables are mainly for the acquisition of materials, supplies and contractor services. These payables do not accrue interest and

no guarantees have been granted. The fair value of trade and other payables approximate their book values.

Balances corresponding to accrued expenses and other taxes and contributions are not financial liabilities.

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 31 .

24. Commitments

A summary of capital expenditure commitments by operating mines and development project is as follows:

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Saucito	30,761	33,980
Fresnillo	26,503	48,629
San Julián	14,655	9,745
Juanicipio	12,246	47,809
Herradura	6,610	11,024
Ciénega	2,984	10,753
Noche Buena	206	227
Other	4,040	414
	98,005	162,581

1 Mainly corresponds to Minera el Bermejal, S. de R.L. de C.V.

302 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

25. Leases

(a) The Group as lessee

The Group leases various offices, buildings, plant and equipment and IT equipment. The resulting lease liability is as follows:

		As at
	31 December	31 December
	2023	2022
	US$ thousands	US$ thousands
IT equipment	10,387	10,914
Plant and equipment	3,501	3,776
Buildings	702	439
Total lease liability	14,590	15,129
Less – Current portion	4,813	5,209
Non-current portion	9,777	9,920

The total cash outflow for leases for the year ended 31 December 2023, except short-term and low value leases, amounts to

US$7.3 million (2022: US$5.8 million), including finance costs of US$1.2 million (2022: US$0.7 million). The table below details

right-of-use assets included as property, plant and equipment in note 13.

				Year ended 31 December 2023
				US$ thousands
		Computer	Plant and
	Buildings	equipment	equipment	Total
Cost
At 1 January 2023	4,620	21,284	3,933	29,837
Additions	723	4,286	123	5,132
Disposals	(308)	(6,291)	–	(6,599)
At 31 December 2023	5,035	19,279	4,056	28,370
Accumulated depreciation
At 1 January 2023	(2,585)	(12,394)	(234)	(15,213)
Depreciation for the year	(739)	(4,880)	(567)	(6,186)
Disposals	290	6,119	–	6,409
At 31 December 2023	(3,034)	(11,155)	(801)	(14,990)
Net book amount at 31 December 2023	2,001	8,124	3,255	13,380

				Year ended 31 December 2022
				US$ thousands
		Computer	Plant and
	Buildings	equipment	equipment	Total
Cost
At 1 January 2022	4,332	15,704	–	20,036
Additions	288	5,580	3,933	9,801
At 31 December 2022	4,620	21,284	3,933	29,837
Accumulated depreciation
At 1 January 2022	(1,786)	(7,719)	–	(9,505)
Depreciation for the year	(799)	(4,675)	(234)	(5,708)
At 31 December 2022	(2,585)	(12,394)	(234)	(15,213)
Net book amount at 31 December 2022	2,035	8,890	3,699	14,624

Amounts recognised in profit and loss for the year, additional to depreciation of right-of-use assets, included US$1.2 million (2022: US$0.7

million) relating to interest expense, US$73.7 million (2022: US$60.4 million) on relating variable lease payments (note 6) of which US$4.2

million (2022: US$11.4 million) were capitalised as a part of stripping cost, US$0.9 million (2022: US$0.8 million) relating to short-term

leases and US$2.9 million (2022:US$3.3 million) relating to low-value assets.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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(b) The Group as a lessor

Operating leases, in which the Group is the lessor, relate to mobile equipment owned by the Group with lease terms of between

12 to 36 months. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew.

The lessee does not have an option to purchase the equipment at the expiry of the lease period. The Group’s leases as a lessor are

not material.

26. Contingencies

As of 31 December 2023, the Group has the following contingencies:

• The Group is subject to various laws and regulations which, if not observed, could give rise to penalties.

• Tax periods remain open to review by the Mexican tax authorities (SAT, by its Spanish acronym) in respect of income taxes for

five years following the date of the filing of corporate income tax returns, during which time the authorities have the right to raise

additional tax assessments including penalties and interest. Under certain circumstances, the reviews may cover longer periods.

As such, there is a risk that transactions, and in particular related-party transactions, that have not been challenged in the past by

the authorities, may be challenged by them in the future.

It is not practical to determine the amount of any potential claims or the likelihood of any unfavourable outcome arising from this

or any future inspections that may be initiated. However, management believes that its interpretation of the relevant legislation is

appropriate and that the Group has complied with all regulations and paid or accrued all taxes and withholdings that are applicable.

• On 8 May 2008, the Company and Peñoles entered into the Separation Agreement (the ‘Separation Agreement’). This agreement

relates to the separation of the Group and the Peñoles Group and governs certain aspects of the relationship between the Fresnillo

Group and the Peñoles Group following the initial public offering in May 2008 (‘Admission’). The Separation Agreement provides for

cross-indemnities between the Company and Peñoles so that, in the case of Peñoles, it is held harmless against losses, claims and

liabilities (including tax liabilities) properly attributable to the precious metals business of the Group and, in the case of the Company,

it is held harmless by Peñoles against losses, claims and liabilities which are not properly attributable to the precious metals business.

Save for any liability arising in connection with tax, the aggregate liability of either party under the indemnities shall not exceed

US$250 million in aggregate.

• On 24 March 2022, the SAT initiated an audit of the income tax computation of Comercializadora de Metales Fresnillo for the

year 2016. Findings were shared by the SAT on 22 March 2023, which mainly relate to the tax treatment of the Silverstream

transaction. The Company responded on 20 April 2023 and began a Conclusive Agreement procedure before the Mexican tax

ombudsman (PRODECON). On 16 June 2023 and on 5 July 2023, the Company provided additional documentation and information

to the SAT through PRODECON. On 31 January 2024, the PRODECON closed the Conclusive Agreement procedure as no agreement

was reached between the company and the SAT. It is expected that the SAT’s final conclusion on the matter will be notified to the

Company no later than May 2024. The Directors believe that management’s interpretation of the relevant legislation and assessment

of taxation is appropriate. Also, the Directors consider that no tax liability is required to be recognised in respect of these claims or

risks as the SAT’s final conclusion is yet to be determined.

• In 2011, flooding occurred in the Saucito mine, following which the Group filed an insurance claim in respect of the damage caused

(and in respect of business interruption). This insurance claim was rejected by the insurance provider. In early 2018, after the matter

had been taken to mutually agreed arbitration, the insurance claim was declared valid; however, there is disagreement about the

appropriate amount to be paid. In October 2018 the Group received US$13.6 million in respect of the insurance claim, however,

this does not constitute a final settlement and management continues to pursue a higher insurance payment. Due to the fact that

negotiations are ongoing and there is uncertainty regarding the timing and amount involved in reaching a final settlement with the

insurer, it is currently not practicable to determine the total amount expected to be recovered.

• It is probable that interest income will be earned on the Group’s outstanding income and value added tax receivable balances;

however, there is no certainty that this interest will be realised until the underlying balance is recovered. Due to that uncertainty,

it is also not practicable to estimate the amount of interest income earned but not recovered to date.

27. Related-party balances and transactions

The Group had the following related-party transactions during the years ended 31 December 2023 and 2022 and balances as at

31 December 2023 and 2022.

Related parties are those entities owned or controlled by the ultimate controlling party, as well as those who have a minority

participation in Group companies and key management personnel of the Group.

304 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

27. Related-party balances and transactions continued

(a) Related-party balances

		Accounts receivable		Accounts payable
		As at 31 December		As at 31 December
	2023	2022	2023	2022
	US$ thousands	US$ thousands	US$ thousands	US$ thousands
Trade:
Metalúrgica Met-Mex Peñoles, S.A. de C.V.	306,668	275,844	5,840	421
Other:
Industrias Peñoles, S.A.B. de C.V.	5,050	8,342	–	–
Metalúrgica Met-Mex Peñoles, S.A. de C.V.	261	–	739	–
Servicios Administrativos Peñoles, S.A. de C.V.	–	–	24,486	4,630
Servicios Especializados Peñoles, S.A. de C.V.	–	–	7,147	8,964
Fuentes de Energía Peñoles, S.A. de C.V.	–	–	6,239	1,062
Termoeléctrica Peñoles, S. de R.L. de C.V.	–	–	3,362	3,206
Peñoles Tecnología, S.A. de C.V.	–	–	1,261	490
Eólica de Coahuila S.A. de C.V.	–	–	2,986	13,466
Minera Capela, S.A. de C.V.	–	–	9	–
Grupo Nacional Provincial, S.A.B. de C.V.	5,715	–	–	–
Other	483	35	4,365	3,730
Sub-total	318,177	284,221	56,434	35,969
Less-current portion	318,177	284,221	56,434	35,969
Non-current portion	–	–	–	–

1 This balance corresponds to the cash receivable related to the Silverstream contract, see note 14.

2 This balance corresponds to excess payments to the defined contribution plan which will be refunded.

Related-party accounts receivable and payable will be settled in cash.

Other balances with related parties:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Silverstream contract:
Industrias Peñoles, S.A.B. de C.V.	482,340	511,474

The Silverstream contract can be settled in either silver or cash. Details of the Silverstream contract are provided in note 14.

(b) Principal transactions with affiliates, including Industrias Peñoles S.A.B de C.V., the Company’s Parent, are as follows:

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Income:
Sales:
Metalúrgica Met-Mex Peñoles, S.A. de C.V.	2,704,452	2,436,761
Insurance recovery
Grupo Nacional Provincial, S.A.B. de C.V.	241	606
Other income	4,012	4,959
Total income	2,708,705	2,442,326

1 Figures do not include the effects of hedging as the derivative transactions are not undertaken with related parties.

2 Invoiced revenues are derived from the value of metal content which is determined by commodity market prices and adjusted for the treatment and refining charges to be

incurred by the metallurgical complex (refer to note 5 (c)).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Expenses:
Administrative services:
Servicios Administrativos Peñoles, S.A. de C.V.	56,636	34,755
Servicios Especializados Peñoles, S.A. de C.V.	26,626	24,558
Peñoles Tecnología, S.A. de C.V.	5,343	4,356
	88,605	63,669
Energy:
Termoeléctrica Peñoles, S. de R.L. de C.V.	28,454	20,630
Fuentes de Energía Peñoles, S.A. de C.V.	15,945	3,259
Eólica de Coahuila S.A. de C.V.	33,563	31,031
	77,962	54,920
Operating materials and spare parts:
Wideco Inc	5,383	6,610
Metalúrgica Met-Mex Peñoles, S.A. de C.V.	35,551	9,694
	40,934	16,304
Equipment repair and administrative services:
Serviminas, S.A. de C.V.	10,068	7,492
Insurance premiums:
Grupo Nacional Provincial, S.A.B. de C.V.	18,909	16,443
Other expenses:	3,960	4,395
Total expenses	240,438	163,223

1 Includes US$0.6 million (2022: US$0.8 million) corresponding to expenses reimbursed.

2 Includes US$9.6 million (2022: US$nil) relating to engineering costs that were capitalised.

Key management personnel include the members of the Board of Directors and the Executive Committee.

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Salaries and bonuses	3,412	2,792
Post-employment benefits	290	244
Other benefits	435	316
Total compensation paid in respect of key management personnel	4,137	3,352

		As at 31 December
	2023	2022
	US$ thousands	US$ thousands
Accumulated accrued defined benefit pension entitlement	5,035	4,035

This compensation includes amounts paid to directors disclosed in the Directors’ Remuneration report.

The accumulated accrued defined pension entitlement represents benefits accrued at the time the benefits were frozen. There are no

further benefits accruing under the defined benefit scheme in respect of current services.

306 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

28. Auditor’s remuneration

Fees due by the Group to its auditor during the year ended 31 December 2023 and 2022 are as follows:

Class of services

	Year ended 31 December
	2023	2022
	US$ thousands	US$ thousands
Fees payable to the Group’s auditor for the audit of the Group’s annual accounts	1,616	1,879
Fees payable to the Group’s auditor and its associates for other services as follows:
The audit of the Company’s subsidiaries pursuant to legislation	650	316
Audit-related assurance services	773	437
Total	3,039	2,632

1 Includes US$0.6 million (2022: US$0.4 million) for the limited review of the Half Yearly financial report, US$0.1 million (2022: US$nil) for the limited assurance services over certain

GHG’s KPIs and US$0.1 (2022: US$0.1 million) for the Mexican tax audit opinions.

29. Notes to the consolidated statement of cash flows

Notes

		2023	2022
		US$ thousands	US$ thousands
Reconciliation of profit for the year to net cash generated from operating activities
Profit for the year		288,300	308,291
Adjustments to reconcile profit for the period to net cash inflows from operating activities:
Depreciation and amortisation	13	498,469	501,769
Employee profit sharing	8	2,390	9,841
Deferred income tax credit	11	(283,680)	(233,090)
Current income tax expense	11	109,398	173,370
Write-off of assets	9	1,920	11,315
(Gain)/Loss on the sale of property, plant and equipment and other assets		(882)	305
Net finance costs		36,974	55,148
Foreign exchange (gain)/loss		(1,142)	823
Difference between pension contributions paid and amounts recognised in the income statement		2,061	1,259
Non-cash movement on derivatives		(2)	–
Layback Agreement	2 (c)	–	(67,182)
Changes in fair value of Silverstream	14	(7,732)	(18,785)
Change in mine closure cost provision	9	3,226	–
Other Working capital adjustments		38	–
(Increase)/Decrease in trade and other receivables		(45,597)	7,199
Decrease/(increase) in prepayments and other assets		10,396	(14,064)
Decrease/(increase) in inventories		54,631	(99,562)
Increase in trade and other payables		1,196	40,282
Cash generated from operations		669,964	676,919
Income tax paid		(233,060)	(158,343)
Employee profit sharing paid		(10,982)	(16,391)
Net cash from operating activities		425,922	502,185

1 Income tax paid includes US$187.0 million corresponding to corporate income tax (2022: US$116.1 million) and US$46 million corresponding to special mining right

(2022: US$53.3 million), for further information refer to note 11.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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30. Financial instruments

(a) Fair value category

				As at 31 December 2023
				US$ thousands
			Fair value	Fair value
	Amortised	Fair value	(hedging	through profit
Financial assets:	cost	through OCI	instruments)	or loss
Trade and other receivables	9,894	–	–	311,718
Equity instruments at FVOCI	–	107,991	–	–
Silverstream contract (note 14)	–	–	–	482,340
Derivative financial instruments	–	–	79	–

Financial liabilities:

		Fair value	Fair value
	Amortised	(hedging	through profit
	cost	instruments)	or loss
Interest-bearing loans (note 20)	839,002	–	–
Notes payable	95,360	–	–
Trade and other payables (note 23)	174,544	–	–

				As at 31 December 2022
				US$ thousands
			Fair value	Fair value
	Amortised	Fair value	(hedging	through profit
Financial assets:	cost	through OCI	instruments)	or loss
Trade and other receivables	27,719	–	–	284,186
Equity instruments at FVOCI	–	158,813	–	–
Silverstream contract (note 14)	–	–	–	511,474
Derivative financial instruments	–	–	231	–

Financial liabilities:

		Fair value	Fair value
	Amortised	(hedging	through profit
	cost	instruments)	or loss
Interest-bearing loans (note 20)	1,158,557	–	–
Notes payable	104,962	–	–
Trade and other payables (note 23)	176,266	–	–
Derivative financial instruments	–	487	–

1 Trade and other receivables and embedded derivative within sales contracts are presented net in trade and other receivables in the balance sheet.

2 Corresponds to interest-bearing notes payable received from Minera los Lagartos, S.A. de C.V. which holds a non-controlling interest in Juanicipio project. The notes are

denominated in US dollars and bear interest at a rate that ranges between 6.72% to 7.36% with a maturity of nine to 18 months US$72.6 million short-term and US$22.7 million

long-term (2022: nine to 18 months US$9.1 million short-term and US$95.8 million long-term,). During the year, proceeds and payments from these notes amounted to US$22.7

million and US$33.0 million respectively (2022: US$8.1 million and US$10.0 million). Interest paid amount US$7.6 million (2022: US$4.2 million).

(b) Fair value measurement

The value of financial assets and liabilities other than those measured at fair value are as follows:

				As at 31 December
		Carrying amount		Fair value
	2023	2022	2023	2022
	US$ thousands	US$ thousands	US$ thousands	US$ thousands
Financial assets:
Trade and other receivables	9,894	27,719	9,894	27,719
Financial liabilities:
Interest-bearing loans 1 (note 20)	839,002	1,158,557	645,745	990,588
Trade and other payables	174,544	176,266	174,544	176,266
Notes payable	95,360	104,962	95,324	104,962

1 Interest-bearing loans are categorised in Level 1 of the fair value hierarchy.

308 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

30. Financial instruments continued

The financial assets and liabilities measured at fair value are categorised into the fair value hierarchy as at 31 December as follows:

				As of 31 December 2023
				Fair value measure using
	Quoted prices in	Significant	Significant
	active markets	observable	unobservable
	Level 1	Level 2	Level 3	Total
	US$ thousands	US$ thousands	US$ thousands	US$ thousands
Financial assets:
Trade receivables	–	–	306,668	306,668
Other receivables from related parties	–	–	5,050	5,050
Derivative financial instruments:
Option and forward foreign exchange contracts	–	79	–	79
Silverstream contract	–	–	482,340	482,340
Other financial assets:
Equity instruments at FVOCI	107,991	–	–	107,991
	107,991	79	794,058	902,128

1 This balance corresponds to the cash receivable related to the Silverstream contract, see note 14.

				As of 31 December 2022
				Fair value measure using
	Quoted prices in	Significant	Significant
	active markets	observable	unobservable
	Level 1	Level 2	Level 3	Total
	US$ thousands	US$ thousands	US$ thousands	US$ thousands
Financial assets:
Trade receivables	–	–	275,844	275,844
Other receivables from related parties	–	–	8,342	8,342
Derivative financial instruments:	–	–	–	–
Option and forward foreign exchange contracts	–	231	–	231
Silverstream contract	–	–	511,474	511,474
Other financial assets:
Equity instruments at FVOCI	158,813	–	–	158,813
	158,813	231	795,660	954,704
Financial liabilities:
Derivative financial instruments:
Option and forward foreign exchange contracts	–	487	–	487
	–	487	–	487

1 This balance corresponds to the cash receivable related to the Silverstream contract, see note 14.

There have been no transfers between Level 1 and Level 2 of the fair value hierarchy, and no transfers into and out of Level 3 fair value

measurements.

A reconciliation of the opening balance to the closing balance for Level 3 financial instruments other than Silverstream (which is

disclosed in note 14) is shown below:

	2023	2022
	US$ thousands	US$ thousands
Balance at 1 January:	275,844	265,473
Sales	2,706,292	2,440,063
Cash collection	(2,674,262)	(2,426,390)
Changes in fair value	27,034	(20,178)
Realised embedded derivatives during the year	(28,240)	16,876
Balance at 31 December	306,668	275,844

The fair value of financial assets and liabilities is included at reflects the amount at which the instrument could be exchanged in a

current transaction between willing parties, other than in a forced or liquidation sale.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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The following valuation techniques were used to estimate the fair values:

Option and forward foreign exchange contracts

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment

grade credit ratings. The foreign currency forward (Level 2) contracts are measured based on observable spot exchange rates, the yield

curves of the respective currencies as well as the currency basis spreads between the respective currencies. The foreign currency option

contracts are valued using the Black Scholes model, the significant inputs to which include observable spot exchange rates, interest

rates and the volatility of the currency.

Option commodity contracts

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment

grade credit ratings. The option commodity (Level 2) contracts are measured based on observable spot commodity prices, the yield

curves of the respective commodity as well as the commodity basis spreads between the respective commodities. The option

commodity contracts are valued using the Black Scholes model, the significant inputs to which include observable spot commodities

price, interest rates and the volatility of the commodity.

Silverstream contract

For further information relating to the valuation techniques were used to estimate the fair value of the Silverstream contract as well as

the sensitivity of the valuation to the key inputs are disclosed in note 14.

Equity investments:

The fair value of equity investments is derived from quoted market prices in active markets (Level 1). These investments were irrevocably

designated at fair value through OCI as the Group considers these investments to be strategic in nature. As of 31 December 2023,

approximately 89.8% of the investments correspond to 9,314,877 shares (2022: 9,314,877 shares) of Mag Silver, Corp. for an amount of

US$96.9 million (2022: US$145.5 million) and 5.1% of Endeavor Silver Corp. represented by 2,800,000 (2022: 2,800,000 shares) shares

for an amount of US$5.5 million (2022: US$9.1 million). These equity investments are listed on the Toronto Stock Exchange. The prices

per share as 31 December 2023 were US$10.41 (2022: US$15.62) and US$1.96 (2022: US$3.24), respectively. During the year the Group

purchased 1,000,000 shares of Osisko Mining Inc., a Canadian exploration company, for a total consideration of US$2.3 million.

Interest-bearing loans

The fair value of the Group’s interest-bearing loan is derived from quoted market prices in active markets (Level 1).

Trade receivables:

Sales of concentrates, precipitates doré bars and activated carbon are ‘provisionally priced’ and revenue is initially recognised using this

provisional price and the Group’s best estimate of the contained metal. Revenue is subject to final price and metal content adjustments

subsequent to the date of delivery (see note 2 (n)). This price exposure is considered to be an embedded derivative and therefore the

entire related trade receivable is measured at fair value.

At each reporting date, the provisionally priced metal content is revalued based on the forward selling price for the quotational period

stipulated in the relevant sales contract. The selling price of metals can be reliably measured as these metals are actively traded on

international exchanges but the estimated metal content is a non-observable input to this valuation.

31. Financial risk management

Overview

The Group’s principal financial assets and liabilities, other than derivatives, comprise trade and other receivables, cash, equity

instruments at FVOCI, interest-bearing loans, notes payable and trade payables.

The Group has exposure to the following risks from its use of financial instruments:

• Market risk, including foreign currency, commodity price, interest rate and equity price risks.

• Credit risk.

• Liquidity risk.

This note presents information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and processes

for assessing and managing risk. Further quantitative disclosures are included throughout the financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits

and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect

changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures,

aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Fresnillo Audit Committee has responsibility for overseeing how management monitors compliance with the Group’s risk

management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by

the Group. The Audit Committee is assisted in its oversight role by Internal Audit, which undertakes both regular and ad hoc reviews of

risk management controls and procedures, the results of which are reported to the Audit Committee.

310 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

31. Financial risk management continued

(a) Market risk

Market risk is the risk that changes in market factors, such as foreign exchange rates, commodity prices or interest rates will affect the

Group’s income or the value of its financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while

optimising the return on risk.

In the following tables, the effect on equity excludes the changes in retained earnings as a direct result of changes in profit before tax.

Foreign currency risk

The Group has financial instruments that are denominated in Mexican peso and other foreign currencies which are exposed to foreign

currency risk. Transactions in currencies other than the US dollar include the purchase of services, fixed assets, spare parts and the

payment of dividends. As a result, the Group has financial assets and liabilities denominated in currencies other than functional

currency and holds cash and cash equivalents in Mexican peso.

In order to manage the Group’s exposure to foreign currency risk on expenditure denominated in currencies other than the US dollar,

the Group has entered into certain forward and option derivative contracts.

The following table demonstrates the sensitivity of cash and cash equivalents, trade and other receivables, trade and other payables and

derivatives financial instruments (excluding Silverstream which impact is disclosed in note 14) to a reasonably possible change in the

US dollar exchange rate compared to the Mexican peso, reflecting the impact on the Group’s profit before tax and equity, with all other

variables held constant. It is assumed that the same percentage change in exchange rates is applied to all applicable periods for the

purposes of calculating the sensitivity with relation to derivative financial instruments.

Year ended 31 December

		Effect on
		profit before tax:	Effect on equity:
	Strengthening/	increase/	increase/
	(weakening)	(decrease)	(decrease)
	of US dollar	US$ thousands	US$ thousands
2023	10%	(1,504)	(275)
	(5%)	871	276
2022	5%	742	1,120
	(5%)	(820)	3,610

The Group’s exposure to reasonably possible changes in other currencies is not material.

Commodity risk

The Group has exposure to changes in metals prices (specifically silver, gold, lead and zinc) which have a significant effect on the

Group’s results. These prices are subject to global economic conditions and industry-related cycles.

The Group uses derivative instruments to hedge against an element of gold, zinc and lead price.

The table below reflects the aggregate sensitivity of financial assets and liabilities (excluding Silverstream which impact is disclosed in

note 14) to a reasonably possible change in commodities prices, reflecting the impact on the Group’s profit before tax with all other

variables held constant.

The sensitivity shown in the table below relates to changes in fair value of commodity derivatives financial instruments contracts

(excluding Silverstream) and embedded derivatives in sales.

Year ended 31 December

			Increase/(decrease) in commodity prices		Effect on
					profit before tax:	Effect on equity:
					increase/	increase/
					(decrease)	(decrease)
	Gold	Silver	Zinc	Lead	US$ thousands	US$ thousands
2023	10%	10%	10%	10%	26,375	–
	(10%)	(10%)	(10%)	(10%)	(26,375)	–
2022	10%	20%	20%	15%	31,529	–
	(10%)	(15%)	(15%)	(15%)	(27,660)	–

Interest rate risk

The Group is exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows or the fair values

of its financial instruments, principally relating to the cash balances and the Silverstream contract held at the balance sheet date as

explained in note 14. Interest-bearing loans and notes payable are at a fixed rate, therefore the possibility of a change in interest rate

only impacts its fair value but not its carrying amount. Therefore, interest-bearing loans, notes payable and loans from related parties

are excluded from the table below.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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The following table demonstrates the sensitivity of financial assets and financial liabilities (excluding Silverstream which impact is

disclosed in note 14) to a reasonably possible change in interest rate applied to a full year from the balance sheet date. There is no

impact on the Group’s equity other than the equivalent change in retained earnings.

Year ended 31 December

		Effect on profit
	Basis point	before tax:
	increase/	increase/
	(decrease)	(decrease)
	in interest rate	US$ thousands
2023	–	–
	(75)	(3,307)
2022	100	8,667
	(25)	(2,167)

The sensitivity shown in the table above primarily relates to the full year of interest on cash balances held as at the year end.

1 Based on actual market conditions management considers an increase in interest rates is likely remote.

Equity price risk

The Group has exposure to changes in the price of equity instruments that it holds as equity investments at FVOCI.

The following table demonstrates the sensitivity of equity investments at FVOCI to a reasonably possible change in market price of these

equity instruments, reflecting the effect on the Group’s profit before tax and equity:

Year ended 31 December

		Effect on
		profit before tax:	Effect on equity:
	Increase/	increase/	increase/
	(decrease)	(decrease)	(decrease)
	in equity price	(US$ thousands)	US$ thousands
2023	40%	–	43,196
	(45%)	–	(48,596)
2022	10%	–	15,881
	(25%)	–	(39,703)

(b) Credit risk

Exposure to credit risk arises as a result of transactions in the Group’s ordinary course of business and is applicable to trade and other

receivables, cash and cash equivalents, the Silverstream contract and derivative financial instruments.

The Group’s policies are aimed at minimising losses as a result of counterparties’ failure to honour their obligations. Individual exposures

are monitored with customers subject to credit limits to ensure that the Group’s exposure to bad debts is not significant. The Group’s

exposure to credit risk is influenced mainly by the individual characteristics of each counterparty. The Group’s financial assets are with

counterparties with what the Group considers to have an appropriate credit rating. As disclosed in note 27, the counterparties to a

significant proportion of these financial assets are related parties. At each balance sheet date, the Group’s financial assets were neither

credit-impaired nor past due, other than ‘Other receivables’ as disclosed in note 16. The Group’s policies are aimed at minimising losses

from foreign currency hedging contracts. The Company’s foreign currency hedging contracts are entered into with large financial

institutions with strong credit ratings.

The Group has a high concentration of trade receivables with one counterparty Met-Mex Peñoles, the Group’s sole customer throughout

2023 and 2022. A further concentration of credit risk arises from the Silverstream contract. Both Met-Mex and the counterparty to

the Silverstream contract are subsidiaries in the Peñoles group which currently owns 75 percent of the shares of the Company and is

considered by management to be of appropriate credit rating.

The Group’s surplus funds are managed by Servicios Administrativos Fresnillo, S.A. de C.V., which manages cash and cash equivalents,

including short-term investments investing in several financial institutions. Accordingly, on an ongoing basis the Group deposits surplus

funds with a range of financial institutions, depending on market conditions. In order to minimise exposure to credit risk, the Group only

deposits surplus funds with financial institutions with a credit rating of MX-1 (Moody’s) and mxA-1+ (Standard and Poor’s) and above.

As at 31 December 2023, the Group had concentrations of credit risk as 35 percent of surplus funds were deposited with one financial

institution of which the total investment was held in short-term deposits.

The maximum credit exposure at the reporting date of each category of financial asset above is the carrying value as detailed in the

relevant notes. See note 17 for the maximum credit exposure to cash and cash equivalents note 16 for other receivables and note 27 for

related-party trade and other receivables. The maximum credit exposure with relation to the Silverstream contract is the value of the

derivative as at 31 December 2023, being US$482.3 million (2022: US$511.5 million).

312 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

31. Financial risk management continued

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group monitors its risk of a shortage of funds using projected cash flows from operations and by monitoring the maturity of both

its financial assets and liabilities.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.

					US$ thousands
	Within 1 year	2–3 years	3-5 years	> 5 years	Total
As at 31 December 2023
Interest-bearing loans	37,986	75,973	75,973	1,685,699	1,875,631
Trade and other payables	180,565	–	–	–	180,565
Notes payable	72,634	22,726	–	–	95,360
Lease liabilities	5,944	7,502	2,829	494	16,769

					US$ thousands
	Within 1 year	2–3 years	3-5 years	> 5 years	Total
As at 31 December 2022
Interest-bearing loans	374,249	75,973	75,973	1,723,686	2,249,881
Trade and other payables	176,266	–	–	–	176,266
Note payable	9,109	95,853	–	–	104,962
Lease liabilities	6,055	6,933	3,129	1,620	17,737
Derivative financial instruments – liabilities	487	–	–	–	487

The payments for financial derivative instruments are the gross undiscounted cash flows. However, those amounts may be settled gross

or net. The following table shows the corresponding estimated inflows based on the contractual terms:

					US$ thousands
	Within 1 year	2-3 years	3-5 years	> 5 years	Total
As at 31 December 2023
Inflows	5,777	–	–	–	5,777
Outflows	(5,587)	–	–	–	(5,587)
Net	190	–	–	–	190

					US$ thousands
	Within 1 year	2-3 years	3-5 years	> 5 years	Total
As at 31 December 2022
Inflows	13,319	–	–	–	13,319
Outflows	(13,322)	–	–	–	(13,322)
Net	(3)	–	–	–	(3)

The above liquidity tables include expected inflows and outflows from currency option contracts which the Group expects to be

exercised during 2024 as at 31 December 2023 and during 2023 as at 31 December 2022, either by the Group or counterparty.

Management considers that the Group has adequate current assets and forecast cash from operations to manage liquidity risks arising

from current liabilities and non-current liabilities.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

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Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios

that support its business and maximise shareholder value. Management considers capital to consist of equity and interest-bearing

loans, excluding net unrealised gains or losses on revaluation of derivatives financial instruments and Equity instruments at FVOCI. Refer

to notes 18, 20 and 30 respectively for a quantitative summary of these items.

In order to ensure an appropriate return for shareholder’s capital invested in the Group management thoroughly evaluates all material

projects and potential acquisitions and approves them at its Executive Committee before submission to the Board for ultimate approval,

where applicable. The Group’s dividend policy is based on the profitability of the business and underlying growth in earnings of the

Group, as well as its capital requirements and cash flows, including cash flows from the Silverstream.

One of the Group’s metrics of capital is cash and other liquid assets which in 2023 and 2022 consisted of only cash and cash

equivalents, which details are disclosed in note 17 .

32. Subsequent events

During January 2024 the Company entered into a syndicated revolving credit facility (the ‘facility’) with a term from January 2024 to

January 2029. The maximum amount available under the facility is US$350.0 million. The facility is unsecured and has an interest rate

on drawn amounts of SOFR plus an interest margin of 1.15%. The terms of this facility include financial covenants related to leverage and

interest cover ratios. No amounts have been drawn from the facility to date.

314 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

PARENT COMPANY BALANCE SHEET

AS AT 31 DECEMBER 2023

Notes

As at 31 December

2023

US$ thousands

2022

US$ thousands

ASSETS

Non-current assets

Investments in subsidiaries 5 3,320,703 4,016,111

Equity instruments at FVOCI 15 107,991 158,813

Deferred tax asset 4 68,916 61,689

Loans to subsidiaries 12 28,924 122,005

3,526,534 4,358,618

Current assets

Loans to subsidiaries 12 1,358,798 951,126

Income tax recoverable 24 109

Trade and other receivables 6 708 773

Derivative financial instruments 15 79 231

Cash and cash equivalents 7 215,894 559,681

1,575,503 1,511,920

Total assets 5,102,037 5,870,538

EQUITY AND LIABILITIES

Capital and reserves attributable to shareholders of the Company

Share capital 8 368,546 368,546

Share premium 8 1,153,817 1,153,817

Merger reserve 8 1,318,114 2,048,880

Fair value reserve of financial assets at FVOCI 8 35,708 72,903

Retained earnings 8 1,367,044 1,064,540

Total equity 4,243,229 4,708,686

Non-current liabilities

Interest-bearing loans 10 839,002 840,678

839,002 840,678

Current liabilities

Trade and other payables 19,806 2,808

Derivative financial instruments 15 – 487

Interest-bearing loans 10 – 317,879

19,806 321,174

Total liabilities 858,808 1,161,852

Total equity and liabilities 5,102,037 5,870,538

The Company loss is US$319.9 million for the year ended 31 December 2023 (2022: loss of US$1,526.7 million). In accordance with

the exemption granted under section 408 of the Companies Act 2006 a separate income statement for the Company has not

beenpresented.

These financial statements were approved by the Board of Directors on 4 March 2024 and signed on its behalf by:

Mr Juan Bordes

Non-executive Director

4 March 2024

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PARENT COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Net cash from operating activities 14 15,736 28,107

Cash flows from investing activities

Capital contribution to subsidiaries 5 (35,358) (32,490)

Loans granted to subsidiaries (2,303,026) (2,043,114)

Proceeds from repayment of loans granted to subsidiaries 2,125,429 1,900,729

Interest received 102,920 24,420

Dividends received 233,610 177,389

Purchase of equity instruments at FVOCI (2,313) –

Net cash generated from investing activities 121,262 26,934

Cash flows from financing activities

Loans granted by subsidiaries 50,000 68,000

Repayment of loans granted by subsidiaries (50,000) (68,000)

Repayment of interest-bearing loans 10 (317,879) –

Dividends paid

9 (108,267) (201,338)

Interest paid (56,422) (56,459)

Net cash used in financing activities (482,568) (257,797)

Net decrease in cash and cash equivalents during the year (345,570) (202,756)

Effect of exchange rate on cash and equivalents 1,783 (2,037)

Cash and cash equivalents at 1 January 559,681 764,474

Cash and cash equivalents at 31 December 7 215,894 559,681

1 Includes the effect of hedging of dividend payments made in currencies other than US dollar.

316 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

capital

premium

Merger

reserve

Fair value

reserve of

financial assets

at FVOCI

Retained

earnings

Total

equity

Balance at 1 January 2022 368,546 1,153,817 3,803,882 76,901 1,038,138 6,441,284

Loss for the year – – – – (1,526,691) (1,526,691)

Other comprehensive loss net of tax – – – (3,998) – (3,998)

Total comprehensive income for the year – – – (3,998) (1,526,691) (1,530,689)

Transfer of reserves – – (1,755,002) – 1,755,002 –

Dividends declared and paid 9 – – – – (201,909) (201,909)

Balance at 31 December 2022 368,546 1,153,817 2,048,880 72,903 1,064,540 4,708,686

Loss for the year – – – – (319,939) (319,939)

Other comprehensive loss net of tax – – – (37,195) – (37,195)

Total comprehensive income for the year – – – (37,195) (319,939) (357,134)

Transfer of reserves – – (730,766) – 730,766 –

Dividends declared and paid 9 – – – – (108,323) (108,323)

Balance at 31 December 2023 368,546 1,153,817 1,318,114 35,708 1,367,044 4,243,229

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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

1. Corporate information

Fresnillo plc (the ‘Company’) is a public limited company and registered in England and Wales with registered number 6344120 and is

the holding company for the Fresnillo subsidiaries detailed in note 5. The Company is a Mexican resident for taxation purposes with tax

residency in Mexico City. For further information see note 4.

Industrias Peñoles S.A.B. de C.V. (‘Peñoles’) currently owns 75 percent of the shares of the Company and the ultimate controlling party of

the Company is the Baillères family, whose beneficial interest is held through Peñoles. The country of incorporation of Peñoles is Mexico.

Copies ofPeñoles’ accounts can be obtained from www.penoles.com.mx.

The primary activity of the Company is as a holding company for the Fresnillo Group of companies (see note 5).

The financial statements of the Company for the year ended 31 December 2023 were authorised for issue by the Board of Directors

of Fresnillo plc on 4 March 2024.

2. Significant accounting policies

(a) Basis of preparation and statement of compliance

The Company’s separate financial statements have been prepared in accordance with UK adopted international accounting standards

and the requirements of the Companies Act 2006.

The financial statements of the Company have been prepared on a historical cost basis, except for certain derivative financial

instruments and equity securities which have been measured at fair value.

The financial statements are presented in dollars of the United States of America (US dollars or US$) and all monetary amounts are

rounded to thenearest thousand (US$000) except when otherwise indicated.

The basis of preparation and accounting policies used in preparing the financial statements are set out below. These accounting

policies have been consistently applied to all the periods presented unless otherwise stated.

Going concern

The financial position of the Company and its cash flows are set out in the balance sheet and statement of cashflows respectively.

In addition, note 16 includes: the Company’s objectives, policies and processes for managing its capital; its financial risk management

objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

In making their assessment of the Company’s ability to manage its future cash requirements, the Directors have considered the

Company budgets and the cash flow forecasts for the period to 31 December 2025 (being the going concern assessment period).

The Directors have also considered the cash position as of 31 December 2023 (US$215.9 million) and the net current asset position

(US$1,575.5 million).

After reviewing all of the above considerations, the Directors have a reasonable expectation that management have sufficient flexibility

in adverse circumstances to maintain adequate resources to continue in operational existence for the foreseeable future. The Directors,

therefore, continue to adopt the going concern basis of accounting in preparing the financial statements.

(b) Changes in accounting policies

The accounting policies adopted in the preparation of the separate financial statements are consistent with those applied in the

preparation of the separate financial statements for the year ended 31 December 2022.

New standards, interpretations and amendments (new standards) adopted by the Company

A number of new or amended standards became applicable for the current reporting period. The Company did not have to change its

accounting policies or make retrospective adjustments as a result of adopting these standards.

The Company has evaluated the applicability of Pillar II rules considering that the Company is tax resident in Mexico, management also

assessed the status of the Pillar II legislation in the country, however, no laws or regulations have been enacted to the date of this report.

Standards, interpretations and amendments issued but not yet effective

The IASB has issued other amendments resulting from improvements to IFRSs that management considers do not have any impact

on the accounting policies, financial position or performance of the Company. The Company has not early adopted any standard,

interpretation or amendment that was issued but is not yet effective.

The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgements, estimates

and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements.

These judgements and estimates are based on management’s knowledge of the relevant facts and circumstances, with regard to prior

experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements

and estimates is in the accounting policies and the notes to the financial statements.

318 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

Judgements

Areas of judgement, apart from those involving estimations, that have the most significant effect on the amounts recognised in the

separate financial statements for the year ended 31 December 2023 are:

Deferred tax asset (note 4):

The Company has recognised a deferred tax asset of US$68.9 million (2022: US$61.7 million) mainly in respect of tax losses amounting

to US$239.0 million (2022: US$277.7 million). In accordance with there are no tax losses expiring in a period of four years (2022:

US$26.5million) and US$239.0 million (2022: US$251.2 million) will expire in a period between eight and ten years. The Company has

performed an assessment of the recoverability of tax losses before their expiration based on financial and tax projections. Despite an

accounting loss in the current and prior periods, management have considered the taxable profit generated in the current year of

US$91.3 million and based on a consideration of this, combined with future projections of taxable profit, consider that there is evidence

that sufficient taxable profits will be available against which the unused tax losses can be utilised.

Climate change:

We describe how climate-related risks and opportunities (CROs) may affect and was considered in the preparation of the financial

statements in note 2 (c) to the Consolidated Financial Statements. Because the cash flows underpinning the recoverable amount of

mining assets also underpin the recoverable amount of investments in subsidiaries holding those mining assets, the considerations set

out in that note also apply to the Parent Company financial statements. The Company does not have any assets or liabilities for which

measurement is directly linked to climate change performance (for example: Sustainability-Linked Bonds).

As disclosed in note 2 (c) to the Consolidated Financial Statements, future changes to the Group’s climate change strategy, global

decarbonisation signposts and regulation may impact the Group’s significant judgements and key estimates and result in material

changes to financial results and the carrying values of certain of the Group’s assets and liabilities in future reporting periods, which

could ultimately result in material changes in the carrying value of the Company’s assets and liabilities. However, as at the balance sheet

date, management believes there is no material impact on the Company’s balance sheet carrying values of assets or liabilities.

Estimates and assumptions

The significant area of estimation uncertainty made by management in preparing the financial statements is:

• Recoverable value of investments in subsidiaries (notes 2 (e) and 5):

The Company assesses investments in subsidiaries annually to determine whether any indication of impairment exists. Where an

indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the

fair value less costs ofdisposal (FVLCD) and the value in use. Due to the nature of the subsidiaries, the assessment of the recoverable

amount is generally determined based on the net present value of future cash flows related to the subsidiaries requiring the use of

estimates and assumptions such as long-term commodity prices, estimated and economically-proven and probable reserves, as

well as certain other resources that are assessed as highly likely to be converted into reserves and the associated production profiles,

discount rates, future capital requirements and productions costs. Estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

The determination of that rate requires certain judgements.

Where an impairment charge has previously been recognised, the Company assesses at the end of each reporting period

whether there is any indication that the impairment loss may no longer exist or may have decreased. If any such indication exists,

the Company estimates the recoverable amount of that investment, requiring similar estimates and assumptions as those for

determining an impairment charge. At 31 December 2023 the Company recognised an impairment charge of US$730.8 million

(2022: net impairment charge of US$1,755.0 million) resulting in a cumulative impairment relating to subsidiaries of US$4,471.5million

(2022: US$3,740.7 million).

(d) Foreign currency translation

The Company’s financial statements are presented in US dollars, which is the functional currency of the Company. The functional

currency for the Company is determined by the currency of the primary economic environment in which it operates.

Transactions denominated in currencies other than the functional currency of the Company are translated at the exchange rate

ruling at the date ofthe transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rate

of exchange ruling at the balance sheet date. All differences that arise are recorded in the income statement. Non-monetary items

that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial

transactions. Non-monetary items measured at fair value in aforeign currency are translated into US dollars using the exchange rate at

the date when the fair valued is determined.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

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(e) Investments in subsidiaries

Subsidiaries are entities which the Company controls due to it being exposed to, or having the right to, variable returns from its

involvement with the entity and has the ability to affect those returns through its power over the entity. Investments in subsidiaries

are recognised at acquisition cost less any provision for impairment. Impairment charges and reversals, up to the value of the merger

reserve, are reclassified from retained earnings to the merger reserve.

When the Company increases its capital investment in or where there is a return of share capital from its subsidiaries, such movements

are recognised as an addition to, or return of the original cost recognised in investment in subsidiaries. Dividends are recognised as

other income in the income statement when the right of payment has been established.

At each reporting date, an assessment is made to determine whether there are any indicators of impairment. Where an indicator of

impairment exists, an estimate of the recoverable amount of the investment in subsidiary is made, which is considered to be the higher

of the fair value less costs of disposal and the value in use. The Company usually determines FVLCD based on the net present value of

the future cash flows related to its subsidiaries. If the carrying amount of an investment exceeds the recoverable amount, a provision is

recorded in the income statement to reflect the investment at the recoverable amount.

Where an impairment charge has previously been recognised, an assessment is made at the end of each reporting period whether

there is any indication that the impairment loss may no longer exist or may have decreased. If any such indication exists, an estimate of

the recoverable amount is made. An impairment loss is reversed to profit or loss to the extent that the increased carrying value of the

investment in subsidiary does not exceed that would have been determined had no impairment loss been recognised for the asset in

prior years.

(f) Financial assets and liabilities

Financial assets

The Company classifies its financial assets in the following measurement categories:

• those to be measured at amortised cost;

• those to be measured subsequently at FVOCI; and

• those to be measured subsequently at FVPL.

The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the

cashflows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments

that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition

to account for the equity investment at FVOCI.

Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow

characteristics of the asset.

Classification

The Company holds the following financial assets:

Amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest

are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest

rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses)

together with foreign exchange gains and losses.

The Company’s financial assets at amortised cost include receivables from loans granted to subsidiaries.

Equity instruments designated as fair value through other comprehensive income

Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at FVOCI

when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification

is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the income

statement when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of

part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at FVOCI are not

subject to impairment assessment.

The Company elected to classify irrevocably its listed equity investments under this category.

320 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

Fair value through profit or loss

Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is

subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which

itarises.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the income statement as applicable.

The Company’s derivative financial instruments are classified as fair value through profit or loss.

De-recognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred

and the Company has transferred substantially all the risks and rewards of ownership.

Impairment of financial assets

For loans granted to subsidiaries the Company evaluate the expecting credit loss using a one-year probability of default corresponding

to the mining industry determined by a specialised financial institution and considering an appropriate severity based on the cost of

capital of the Company.

Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,

payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly

attributable transaction costs.

The Company’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.

Classification

For purposes of subsequent measurement, financial liabilities held by the Company are classified as financial liabilities at

amortisedcost.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the

EIR. The EIR amortisation is included as finance costs in the income statement.

De-recognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing

financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are

substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a

new liability. The difference in the respective carrying amounts is recognised in the income statement.

(g) Cash and cash equivalents

For the purposes of the balance sheet, cash and cash equivalents comprise cash at bank, cash on hand and short-term deposits held

with banks that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Short-term deposits earn interest atthe respective short-term deposit rates between one day and three months.

(h) Share capital

Ordinary Shares issued by the Company are recorded at the net proceeds received, which is the fair value of the consideration received

less costs that are incurred in connection with the share issue. The nominal par value of the shares issued is taken to the share capital

account and any excess is recorded in the share premium account, including the costs that were incurred with the share issue.

(i) Dividends receivable

Dividends are recognised when the Company’s right to receive payments is established. Dividends received are recorded in the

incomestatement.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

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(j) Income tax

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from

or paid to thetaxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

enacted by the balance sheet date.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases

of assets andliabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that

is not a business combination and, at the time of transaction, affects neither the accounting profit nor taxable profit loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,

where thetiming of the reversal of the temporary differences can be controlled and it is probable that the temporary differences

will not reverse in theforeseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax

losses, to theextent that it is probable that taxable profit will be available against which the deductible temporary differences, and the

carry forward of unused tax credits and unused tax losses can be utilised except:

• where the deferred income tax asset relating to deductible temporary differences arise from the initial recognition of an asset or liability

in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable

profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,

deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the

foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become

probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised

or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets

against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

(k) Derivative financial instruments and hedging

The Company enters into derivative contracts in order to manage certain market risks derived from changes in foreign exchange and

commodity prices which impact the financial and business transactions of its subsidiaries. Such derivative financial instruments are

initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at fair

value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

In the Group’s consolidated financial statements certain of these derivative instruments are designated as cash flow hedges but for the

purposes of the Company’s stand-alone financial statements the related hedged items are not held by the Company, so do not qualify

as cash flow hedges.

Any gains and losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken

directly totheincome statement.

Derivatives are valued using valuation approaches and methodologies (such as Black Scholes and Net Present Value) applicable to the

specific type ofderivative instrument. The fair value of forward currency contracts is calculated by reference to current forward exchange

rates for contracts with similar maturity profiles.

322 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

2. Significant accounting policies continued

(l) Fair value measurement

The Company measures financial instruments at fair value at each balance sheet date. Fair values of financial instruments measured

at amortised cost are disclosed in notes 15.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset

or transfer the liability takes place either:

• in the principal market for the asset or liability; or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or

liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset considers a market participant’s ability to generate economic benefits by using the

asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to

measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value

hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or

indirectlyobservable.

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers

have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair

value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities based on the nature, characteristics

and risks of the asset or liability and the level of the fair value hierarchy as explained above. Further information on fair values is described

in note 15.

(m) Dividend distribution

Dividends on the Company’s Ordinary Shares are recognised when they have been appropriately authorised and are no longer at the

Company’s discretion. Accordingly, interim dividends are recognised when they are paid and final dividends are recognised when they

are declared following approval by shareholders at the Company’s Annual General Meeting.

Mexican Income Tax Law establishes a 10% withholding on earnings from 2014 and thereafter, for dividends paid to foreign residents

and Mexican individuals.

Dividends paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Dividends paid that exceed CUFIN are

subject to an income tax payable at a rate of 30%. The tax is payable by the Company and may be credited against the normal income

tax payable by the Company in the year in which the dividends are paid or in the following two years. Dividends paid from earnings

previously taxed are not subject to any withholding or additional tax payment.

3. Segment reporting

Segmental information is not presented in the Company’s stand-alone financial statements as this is presented in the Group’s

consolidated financial statements.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

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4. Income tax

(a) Movements in the deferred income tax liability and asset:

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Opening net asset 61,689 42,173

(Expense)/Income tax credit (8,714) 17,802

Net credit related to items directly charged to other comprehensive income 15,941 1,714

Closing net asset 68,916 61,689

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current

tax liabilities.

The amounts of deferred income tax assets and liabilities before offset as at 31 December considering the nature of the temporary

differences are asfollows:

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Prepayments and other assets (4,405) (4,737)

Provision for expected credit losses on loans granted to subsidiaries 251 104

Derivative financial instruments (10) –

Losses carried forward 71,712 83,259

Equity instruments at FVOCI 1,368 (16,937)

Net deferred tax asset 68,916 61,689

(b) Unrecognised deferred tax on investments in subsidiaries

The Company has not recognised all the deferred tax liability in respect of distributable reserves of its subsidiaries because it controls

them and only part of the temporary differences is expected to reverse in the foreseeable future. The temporary differences for which a

deferred tax liability has not been recognised aggregate to US$1,015 million (2022: US$1,006 million).

The Company is a Mexican resident for taxation purposes. The rate of current corporate income tax is 30%.

5. Investments in subsidiaries

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Opening balance 4,016,111 5,738,623

Impairment (730,766) (1,755,002)

Capital contributions 35,358 32,490

Closing balance 3,320,703 4,016,111

During 2023, the Company made an impairment assessment to determine whether the carrying value of each of its subsidiaries was

recoverable as at 31 December 2023 and determine if prior year impairment could be reversed. As a result, a cumulative impairment

loss of US$4,471.5 million is recognised with respect to certain of the Company’s investment in subsidiaries (2022: US$3,740.7 million).

The recoverable amount was estimated based on the Fair Value Less Cost of Disposal (FVLCD) model (2022: FVLCD).

324 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

5. Investments in subsidiaries continued

The following tables provide relevant information in respect of each impaired subsidiary:

Year ended 31 December 2023

Impairment loss/

(reversal)

in the year

US$thousand

Cumulative

impairment

US$thousand

Recoverable

amount

US$ thousands

Discount rate

(post-tax)

Minera Fresnillo, S.A. de C.V. 484,667 2,962,556 916,935 5.96%

Minera Mexicana la Ciénega, S.A. de C.V. 158,723 850,484 308,907 6.07%

Minera Saucito, S.A. de C.V. (106,844) 225,376 1,003,111 5.95%

Minera San Julián, S.A. de C.V. 120,570 122,120 501,537 5.97%

Minera Penmont, S. de R.L. de C.V. 1,071 178,089 822,812 5.99%

Exploraciones Mineras Parreña, S.A. de C.V. 72,579 132,860 89,473 5.96%

730,766 4,471,485

Year ended 31 December 2022

Impairment loss

in the year

US$thousand

Cumulative

impairment

US$thousand

Recoverable

amount

US$ thousands

Discount rate

(post-tax)

Minera Fresnillo, S.A. de C.V. 1,058,307 2,477,889 1,329,522 6.75%

Minera Mexicana la Ciénega, S.A. de C.V. 185,498 691,761 366,078 6.25%

Minera Saucito, S.A. de C.V. 332,220 332,220 887,418 7.00%

Minera San Julián, S.A. de C.V. 1,550 1,550 538,877 6.25%

Minera Penmont, S. de R.L. de C.V. 177,018 177,018 807,470 7.00%

Exploraciones Mineras Parreña, S.A. de C.V. 409 60,281 162,053 5.93%

1,755,002 3,740,719

In determining FVLCD it is necessary to make a series of assumptions to estimate future cash flows including reserves and resources

volumes and related production profile, price assumptions, cost estimates and discount rate. Accordingly, the fair value is categorised as

Level 3 in the fair value hierarchy. The price assumptions used to calculate FVLCD are determined with reference analysts’ consensus of

long-term prices. As at 31 December 2023, the Company used long-term price assumptions of US$1,714/ounce (2022: US$1,838/ounce)

and US$22.5/ounce (2022: US$24.1/ounce) for gold and silver, respectively.

Sensitivity analysis

As at 31 December 2023 management has performed a sensitivity analysis for those subsidiaries where cumulative impairment may

be affected by a reasonably possible change in silver and gold prices. Management has considered a decrease in gold and silver of 10%

and 10% respectively (2022: 10% gold, 15% silver). The sensitivity resulted in an additional impairment on Minera Fresnillo, S.A. de C.V.

of US$251.4 million (2022: US$465.0 million), Minera Mexicana la Ciénega, S.A. de C.V. US$54.1 million (2022: US$91.4 million), Minera

Saucito, S.A. de C.V. US$161.9 million (2022: US$133.0 million), Minera San Julián, S.A. de C.V. US$86.5 million (2022: 131.7 million) and

Minera Penmont, S. de R.L. de C.V. US$190.4 million (2022: US$189.2 million).

Additionally, as at 31 December 2023 management has performed a sensitivity analysis for those subsidiaries where cumulative

impairment may be affected by a reasonably possible change in future production and operating costs considering in isolation

each input. Management has considered a decrease in future production of 10% (2022: 10%) and an increase in operating costs

of 10% (2022:8%). These sensitivities resulted in an additional impairment on Minera Fresnillo, S.A. de C.V. of US$122.1 million

(2022: US$262.0 million) and US$149.9 million (2022: US$132.9 million) respectively, Minera San Julián, S.A. de C.V. of US$41.9 million

(2022: US$nil) and US$36.6 million (2022: US$nil) respectively and Minera Penmont, S. de R.L. de C.V. US$94.3 million (2022: US$188.4

million) and US$119.7million (2022: US$82.8 million) respectively.

Other than as disclosed above, management has considered that the fair value of the investments in subsidiaries are not significantly

sensitive to reasonably possible change in any other key assumptions.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

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The subsidiaries in which investments are directly held as at 31 December 2023 and 2022 are as follows:

Legal company Principal activity

Country of

incorporation

Equity interest %

Year ended 31 December

2023 2022

Minera Fresnillo, S.A. de C.V. Production of lead/silver and zinc concentrates

Mexico

100 100

Minera San Julián, S.A. de C.V. Production of lead/silver and zinc concentrates

Mexico

100 100

Minera Penmont, S. de R.L. de C.V.

Production of doré bars (gold/silver)

Mexico

Minera Mexicana La Ciénega, S.A. de C.V. Production of lead and zinc concentrates and

silver precipitates

Mexico

100

Minera Saucito, S.A. de C.V. Production of lead and zinc concentrates

Mexico

100 100

Equipos Mineros Nazas, S.A. de C.V. Leasing of mining equipment

Mexico

100 100

Proveedora de Equipos Fresne, S de R.L. de C.V.

Leasing of mining equipment

Mexico

56 56

Equipos Mineros la Hacienda, S.A. de C.V. Leasing of mining equipment

Mexico

100 100

Proveedora de Equipos Jerez, S.A. de C.V. Leasing of mining equipment

Mexico

100 100

Equipos Chaparral, S.A. de C.V. Leasing of mining equipment

Mexico

56 56

Minera Juanicipio, S.A. de C.V. Production of lead/silver and zinc concentrates

Mexico

Comercializadora de Metales Fresnillo, S.A. de C.V. Holds rights over silver production from Peñoles’

polymetallic Sabinas mine through the

Silverstream contract

Mexico

100

Exploraciones Mineras Parreña, S.A. de C.V. Exploration services

Mexico

100

Exploraciones y Desarrollos Mineros Coneto,

S.A. P. I. de C.V.

Exploration services Mexico

Minera El Bermejal, S. de R.L. de C.V. Mining equipment leasing

Mexico

56 56

Compañía Minera Las Torres, S.A. de C.V. Mine project

Mexico

100 100

Servicios Administrativos Fresnillo, S.A. de C.V. Administrative services

Mexico

100 100

Operaciones Fresnillo, S.A. de C.V. Administrative services

Mexico

100 100

Servicios de Exploración Fresnillo, S.A. de C.V. Administrative services

Mexico

100 100

Prestadora de Servicios Jarillas, S.A. de C.V. Administrative services

Mexico

100 100

Fresnillo Management Services, Ltd Administrative services

100 100

Fresbal Investments, Ltd Holding company for mining investments

Canada

100 100

Fresnillo Perú, S.A.C. Exploration services

Peru

100 100

Parreña Perú, S.A.C. Exploration services

Peru

100 100

Fresnillo Chile, SpA Exploration services

Chile

100 100

Minera Capricornio, SpA Exploration services

Chile

100 100

Caja de Ahorros Fresnillo, S.C.

Administrative services Mexico

– –

The list of subsidiary undertakings presented in this note represents the full list of subsidiary undertakings, required to be submitted by

Section 409 of the Companies Act 2006.

1 The remaining 44% interest in these companies are held by Comercializadora de Metales Fresnillo, S.A. de C.V. a wholly-owned subsidiary of the Company.

2 Whilst Fresnillo plc holds no direct ownership in Caja de Ahorros Fresnillo, S.C. the entire share capital of the Company is held through its subsidiaries.

3 The registered address for all Mexican subsidiaries is: Calzada Saltillo 400 No. 989, Torreón, Coahuila 27250.

4 Registered address is: Second Floor, 21 Upper Brook Street, London W1.

5 Registered address is: 355 Burrard Street, Suite 1800, Vancouver, BC, V6C 2G8.

6 Registered address is: República de Colombia 643, Piso 9, Distrito San Isidro, Lima 27.

7 Registered address is: Apoquindo 4775 oficina 1002 – Las Condes, Santiago de Chile.

326 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

6. Trade and other receivables

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Other receivables from subsidiaries (note 12) – 361

Prepayments 708 412

708 773

As of 31 December for each year presented, other receivables from related parties were neither past due nor credit-impaired. In

determining the recoverability of a receivable, the Company performs a risk analysis considering the type and age of the outstanding

receivable and the credit worthiness of the counterparty.

Balances corresponding to prepayments and other receivables are not considered as financial assets.

7. Cash and cash equivalents

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Cash at bank and on hand 101 188

Short-term deposits 215,793 559,493

Cash and cash equivalents 215,894 559,681

Cash at bank earns interest at floating rates based on daily bank deposits. Short-term deposits are made for varying periods of between

one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective

short-term deposit rates. Short-term deposits can be withdrawn at call without any penalty or loss in value.

8. Equity

Share capital and share premium

Authorised share capital of the Company is as follows:

Class of share

As at 31 December

2023 2022

Number Amount Number Amount

Ordinary Shares each of US$0.50 1,000,000,000 $500,000,000 1,000,000,000 $500,000,000

Sterling Deferred Ordinary Shares each of £1.00 50,000 £50,000 50,000 £50,000

Issued share capital of the Company is as follows:

Ordinary Shares Sterling Deferred Ordinary Shares

Number US$ Number £

At 1 January 2022 736,893,589 $368,545,586 50,000 £50,000

At 31 December 2022 736,893,589 $368,545,586 50,000 £50,000

At 31 December 2023 736,893,589 $368,545,586 50,000 £50,000

As at 31 December 2023 and 2022, all issued shares with a par value of $0.50 each are fully paid. The rights and obligations attached

to these shares are governed by law and the Company’s Articles of Association. Ordinary shareholders are entitled to receive notice and

to attend and speak at any general meeting of the Company. There are no restrictions on the transfer of the Ordinary Shares.

The Sterling Deferred Ordinary Shares only entitle the shareholder on winding up or on a return of capital to payment of the amount

paid up after repayment to ordinary shareholders. The Sterling Deferred Ordinary Shares do not entitle the holder to payment of any

dividend, or to receive notice or to attend and speak at any general meeting of the Company. The Company may also at its option

redeem the Sterling Deferred Ordinary Shares ata price of £1.00 or, as custodian, purchase or cancel the Sterling Deferred Ordinary

Shares or require the holder to transfer the Sterling Deferred Ordinary Shares. Except at the option of the Company the Sterling

Deferred Ordinary Shares are not transferable.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

327

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Information

Financial

StatementsGovernance

Strategic

Report

Reserves

Share premium

This reserve records the consideration premium for shares issued at a value that exceeds their nominal value.

Merger reserve

The merger reserve represents the difference between the value of the net assets acquired as part of the Pre-IPO reorganisation andthe

nominal value of the shares issued pursuant to the Merger Agreement. Movements in this reserve during 2023 and 2022 represent the

impairment losses and reversals of the carrying value of Fresnillo’s investments in subsidiaries transferred from retained earnings.

Fair value reserve of financial assets at FVOCI

The Company has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in note2

(f). These changes are accumulated within the FVOCI reserve within equity. The Company transfers amounts from this reserve to retained

earnings when the relevant equity securities are derecognised.

Retained earnings

This reserve records the accumulated results of the Company, less any distributions and dividends paid.

9. Dividends declared and paid

The dividends declared and paid during the years ended 31 December 2023 and 2022 are as follows:

US cents per

Ordinary Share

Amount

US$ thousands

Year ended 31 December 2023

Final dividend for 2022 declared and paid during the year

13.3 98,007

Interim dividend for 2023 declared and paid during the year

1.4 10,317

14.7 108,324

Year ended 31 December 2022

Final dividend for 2021 declared and paid during the year

24.00 176,855

Interim dividend for 2022 declared and paid during the year

3.40 25,054

27.4 201,909

1 This dividend was approved by the shareholders on 23 May 2023 and paid on 26 May 2023.

2 This dividend was approved by the Board of Directors on 31 July 2023 and paid 14 September 2023.

3 This dividend was approved by the shareholders on 17 May 2022 and paid on 27 May 2022.

4 This dividend was approved by the Board of Directors on 1 August 2022 and paid 14 September 2022.

A reconciliation between dividend declared, dividends affected to retained earnings and dividend presented in the cash flow

statements is as follows:

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Dividends declared 108,324 201,909

Foreign exchange effect (1) –

Dividends recognised in retained earnings 108,323 201,909

Foreign exchange and hedging effect (56) (571)

Dividends paid 108,267 201,338

The Directors have proposed a final dividend of US$4.2 cents per share, which is subject to approval at the Annual General Meeting and

is not recognised as a liability as at 31 December 2023. Dividends paid from the profits generated from 1 January 2014 to residents in

Mexico and to non-resident shareholders may be subject to an additional tax of up to 10%, which will be withheld by the Company.

328 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

10. Interest-bearing loans

Senior Notes

On 13 November 2013, the Company completed its offering of US$800 million aggregate principal amount of 5.500% Senior Notes

due November 2023 (the 5.500% Notes). On 29 September 2020, the Company repurchased certain of its 5.500% Notes that had a

carrying value of US$482.1 million for a consideration of US$543.0 million.

On 2 October 2020, the Company completed its offering of US$850 million aggregate principal amount of 4.250% Senior Notes due

2050 in the Irish Stock Exchange. The proceeds were partially used to finance the repurchase mentioned above.

On 13 November 2023, the Company paid the outstanding amount of the 5.500% Notes at its maturity date including due interest for

a total of US$326.6 million.

Movements in the year in the debt recognised in the balance sheet are as follows:

As at 31 December

2023

US$ thousands

2022

US$ thousands

Opening balance 1,158,557 1,157,545

Accrued interest

53,919 56,475

Payments of 5.500% Notes (317,879) –

Interest paid (56,371) (56,371)

Amortisation of discount and transaction costs 776 908

Closing balance 839,002 1,158,557

Less – Current portion – 317,879

Non-current portion 839,002 840,678

1 Interest was payable semi-annually on 13 May and 13 November for 5.500% Senior Notes and is payable semi-annually on 2 April and 2 October for 4.250% Senior Notes.

The Company has the following restrictions derived from the issuance of all outstanding Senior Notes:

Change of control:

Should the rating of the Senior Notes be downgraded as a result of a change of control (defined as the sale or transfer of 35% or more

of the common shares; the transfer of all or substantially all the assets of the Group; starting a dissolution or liquidation process; or the

loss of the majority in the Board of Directors) the Company is obligated to repurchase the notes at an equivalent price of 101% of their

nominal value plus the interest earned at the repurchase date, if requested to do so by any creditor.

Pledge on assets:

The Company shall not pledge or allow a pledge on any property that may have a material impact on business performance (key

assets). Nevertheless, the Company may pledge the aforementioned properties provided that the repayment of the Notes keeps the

same level of priority as the pledge on those assets.

11. Contingencies

The Company is subject to various laws and regulations which, if not observed, could give rise to penalties. As of 31 December 2023,

the Company has the following contingencies:

• Tax periods remain open to review by the Mexican tax authorities (SAT, by its Spanish acronym) in respect of income taxes for five years

following the date of the filing of corporate income tax returns, during which time the authorities have the right to raise additional tax

assessments including penalties and interest. Under certain circumstances, the reviews may cover longer periods. As such, there is a

risk that transactions, and in particular related-party transactions, that have not been challenged in the past by the authorities, may be

challenged by them in the future.

• It is not practical to determine the amount of any potential claims or the likelihood of any unfavourable outcome arising from these

or any future inspections that may be initiated. However, management believes that its interpretation of the relevant legislation

is appropriate and that the Company has complied with all regulations and paid or accrued all taxes and withholdings that

areapplicable.

• On 8 May 2008, the Company and Peñoles entered into the Separation Agreement (the ‘Separation Agreement’). This agreement

relates to theseparation of the Group and the Peñoles Group and governs certain aspects of the relationship between the Fresnillo

Group and the Peñoles Group following the initial public offering in May 2008 (‘Admission’). The Separation Agreement provides for

cross-indemnities between the Company and Peñoles so that, in the case of Peñoles, it is held harmless against losses, claims and

liabilities (including tax liabilities) properly attributable to the precious metals business of the Group and, in the case of the Company,

it is held harmless by Peñoles against losses, claims and liabilities which are not properly attributable to the precious metals business.

Save for any liability arising in connection with tax, the aggregate liability of either party under the indemnities shall not exceed

US$250 million in aggregate.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

329

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Financial

StatementsGovernance

Strategic

Report

12. Related-party balances and transactions

Related parties are those entities owned or controlled by the ultimate controlling party and include the Company’s subsidiaries

disclosed in note 5. Related-party balances will be settled in cash. All the balances as at 31 December 2023 and 2022 and the

transactions carried-out with related parties for the years then ended correspond to subsidiaries.

(a) Related-party accounts receivable and payable

Accounts receivable

US$ thousands

Accounts payable

US$ thousands

31 December

2023

31 December

2022

31 December

2023

31 December

2022

Loans

1,387,722 1,073,131 – –

Other (note 6) – 361 4,171 1,249

Balance as 31 December 1,387,722 1,073,492 4,171 1,249

Less – Current portion 1,358,798 951,487 4,171 1,249

Non-current portion 28,924 122,005 – –

1 Accounts receivable derived from loans with subsidiaries are net of provision for expected credit loss of US$0.8 million (2022: US$0.3 million).

Effective interest rates on loans granted to related parties in US dollar range between 7.14% to 7.49% (2022: 2.64% to 7.18%) and in

Mexican peso range from 12.86% to 13.55% (2022: 7.74% to 12.76%).

During the year the Company granted short-term loans to its subsidiaries for an amount of US$2,303 million (2022: US$2,043 million).

(b) Principal transactions with related parties (apart from dividends, additional investments and returns of capital) are as follows:

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Income:

Interest on loans 129,094 55,646

Total income 129,094 55,646

During the year the Company received short-term loans from its subsidiaries that were fully paid for an amount of US$50 million

(2022:US$68 million).

Year ended 31 December

2023

US$ thousands

2022

US$ thousands

Expenses:

Administrative services 7,346 3,794

Interest 52 89

Total expenses 7,398 3,883

Key management personnel comprise Non-executive Directors. In 2023, their compensation was US$0.8 million (2022: US$0.7 million).

This compensation paid is disclosed in the Directors’ Remuneration report.

13. Auditor’s remuneration

The auditor’s remuneration for the Company was US$1.6 million (2022: US$1.9 million) in respect of the audit of its financial statements.

Fees paid to Ernst & Young LLP and its associates for non-audit services to the Company itself are not disclosed in the stand-alone

financial statements because Group financial statements are prepared which include these fees on a consolidated basis.

330 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

14. Notes to the statement of cash flows

Year ended 31 December

Notes

2023

US$ thousands

2022

US$ thousands

Reconciliation of profit for the year to net cash generated from operating activities

Loss for the year (319,939) (1,526,691)

Adjustments to reconcile profit/(loss) for the year to net cash inflows from

operating activities:

Impairment of investment in subsidiaries 5 730,766 1,755,002

Dividend income (233,610) (177,389)

Income tax loss/(credit) 8,713 (17,619)

Net finance gain (102,557) (2,719)

Foreign exchange (gain)/loss (71,383) 652

Other expenses 489 –

Working capital adjustments

Increase in trade and other receivables (1,147) (1,175)

Increase/(decrease) In trade and other payables 4,313 (2,257)

Cash generated from operations 15,645 27,804

Income tax recovered 108 369

Income tax paid (17) (66)

Net cash generated from operating activities 15,736 28,107

15. Financial instruments

(a) Fair value category

As at 31 December 2023

US$ thousands

Financial assets:

Amortised

cost

Fair value

through OCI

Fair value

through profit

or loss

Loans to related parties 1,387,722 – –

Equity instruments at FVOCI – 107,991 –

Derivative financial instruments – – 79

Financial liabilities:

At amortised

Cost

Fair value

through profit

or loss

Interest-bearing loans 839,002 –

Trade and other payables 4,171 –

As at 31 December 2022

US$ thousands

Financial assets:

Amortised

cost

Fair value through

OCI

Fair value through

profit or loss

Loans to related parties 1,073,131 – –

Equity instruments at FVOCI – 158,813 –

Derivative financial instruments – – 231

Financial liabilities:

At amortised

Cost

Fair value through

profit or loss

Interest-bearing loans 1,158,557 –

Trade and other payables 1,249 –

Derivative financial instruments – 487

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

331

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Information

Financial

StatementsGovernance

Strategic

Report

(b) Fair values

The value of financial assets and liabilities other than those measured at fair value are as follows:

As at 31 December

Carrying amount Fair value

2023

US$ thousands

2022

US$ thousands

2023

US$ thousands

2022

US$ thousands

Financial assets:

Loans to related parties

1,387,722 1,073,131 1,1387,722 1,073,131

Financial liabilities:

Interest-bearing loans

839,002 1,158,557 645,745 990,588

Trade and other payables 4,171 1,249 4,171 1,249

1 Loans to related parties are categorised in Level 3 of the fair value hierarchy. The carrying amount is a reasonable approximation of fair value due the short-term period of

thereceivable.

2 Interest-bearing loans are categorised in Level 1 of the fair value hierarchy.

The financial assets and liabilities measured at fair value are categorised into the fair value hierarchy as at 31 December as follows:

As of 31 December 2023

US$ thousands

Fair value measure using

Quoted prices in

active markets

Level 1

US$ thousands

Significant

observable

Level 2

US$ thousands

Significant

unobservable

Level 3

US$ thousands

Total

US$ thousands

Financial assets:

Derivative financial instruments:

Option and forward foreign exchange contracts – 79 – 79

Other financial assets:

Equity investments 107,991 – – 107,991

107,991 79 – 108,070

As of 31 December 2022

US$ thousands

Fair value measure using

Quoted prices in

active markets

Level 1

US$ thousands

Significant

observable

Level 2

US$ thousands

Significant

unobservable

Level 3

US$ thousands

Total

US$ thousands

Financial assets:

Derivative financial instruments:

Option and forward foreign exchange contracts – 231 – 231

Other financial assets:

Equity investments 158,813 – – 158,813

158,813 231 – 159,044

Financial liabilities:

Derivative financial instruments:

Option and forward foreign exchange contracts – 487 – 487

– 487 – 487

There have been no transfers between Level 1 and Level 2 of the fair value hierarchy, and no transfers into and out of Level 3 fair

valuemeasurements.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current

transaction between willing parties, other than in a forced or liquidation sale.

332 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

15. Financial instruments continued

The following valuation techniques were used to estimate the fair values:

Option and forward foreign exchange contracts

The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment

grade credit ratings. The foreign currency forward (Level 2) contracts are measured based on observable spot exchange rates, the yield

curves of the respective currencies as well as the currency basis spreads between the respective currencies. The foreign currency option

contracts are valued using the Black Scholes model, the significant inputs to which include observable spot exchange rates, interest

rates and the volatility of the currency.

Option commodity contracts

The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment

grade credit ratings. The option commodity (Level 2) contracts are measured based on observable spot commodity prices, the yield

curves of the respective commodity as well as the commodity basis spreads between the respective commodities. The option contracts

are valued using the Black Scholes model, the significant inputs to which include observable spot commodities price, interest rates and

the volatility of the commodity.

Equity investments

The fair value of equity investments is derived from quoted market prices in active markets (Level 1). These investments were irrevocably

designated at fair value through OCI as the Group considers these investments to be strategic in nature. As of 31 December 2023,

approximately 89.8% of the investments correspond to 9,314,877 shares (2022: 9,314,877 shares) of Mag Silver, Corp. for an amount of

US$96.9 million (2022: US$145.5 million) and 5.1% of Endeavor Silver Corp. represented by 2,800,000 (2022: 2,800,000 shares) shares

for an amount of US$5.5 million (2022: US$9.1 million). These equity investments are listed on the Toronto Stock Exchange. The prices

per share as 31 December 2023 were US$10.41 (2022: US$15.62) and US$1.96 (2022: US$3.24), respectively. During the year the Company

purchased 1,000,000 shares of Osisko Mining Inc., a Canadian exploration company, for a total consideration of US$2.3 million.

Interest-bearing loans

Fair value of the Company’s interest-bearing loan, is derived from quoted market prices in active markets (Level 1).

Loans with related parties

Fair value of the Company’s loan to related parties is determined using a discounted cash flow method based on market interest rates

at each reporting date.

16. Financial risk management

Overview

The Company’s principal financial assets and liabilities, other than derivatives, are comprised of equity investment at FVOCI, cash, loans

to related parties, interest-bearing loans andtrade payables.

The Company enters into certain derivative transactions with the purpose of managing foreign exchange risk arising on the activity and

transactions of its subsidiaries.

The Company has exposure to the following risks from its use of financial instruments:

• Market risk, including foreign currency, interest rate and equity price risks.

• Credit risk.

• Liquidity risk.

This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and

processes forassessing and managing risk. Further quantitative disclosures are included throughout the financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework.

The Company’s risk management policies have been established to identify and analyse the risks faced by the Company, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed

regularly to reflect changes in market conditions and the Company activities. The Company, through its training and management

standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their

roles and obligations.

The Fresnillo Audit Committee has responsibility for overseeing how management monitors compliance with the Company risk

management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by

the Company. The Audit Committee isassisted in its oversight role by Internal Audit, which undertakes both regular and ad hoc reviews

of risk management controls and procedures, theresults of which are reported to the Audit Committee.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

333

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StatementsGovernance

Strategic

Report

(a) Market risk

Market risk is the risk that changes in market factors, such as foreign exchange rates, or interest rates will affect the Company income

or the value ofits financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while

optimising the return on risk.

Foreign currency risk

The Company is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than

the USdollar. Transactions in foreign currencies include the purchase of services, payment or receipt of dividends and other items.

Asa result, the Company has financial liabilities denominated in currencies other than functional currency and holds cash and cash

equivalents in Mexican peso.

In order to manage the Group’s exposure to foreign currency risk on expenditure denominated in currencies other than the US dollar,

the Group has entered into certain forward and option derivative contracts.

The following table demonstrates the sensitivity of financial assets and financial liabilities to a reasonably possible change in the USdollar

exchange rate compared to the Mexican peso, reflecting the impact on the Company’s profit before tax with all other variables held

constant. It is assumed that the same percentage change in exchange rates is applied to all applicable periods. There is no impact on

the Company’s equity other than the equivalent change in retained earnings.

Year ended 31 December

Strengthening/

(weakening) of

US dollar

Effect on

profit before

tax: increase/

(decrease)

US$ thousands

2023 10% 426

(5%) (735)

2022 5% 1,294

(5%) (1,171)

The Company’s exposure to reasonably possible changes in other currencies is not material.

Commodity risk

The Company’s subsidiaries have exposure to changes in metals prices (specifically gold, lead and zinc) which have a significant effect

on the Group’s results. These prices are subject to global economic conditions and industry-related cycles.

The Company uses derivative instruments to hedge against precious metals commodity price exposure in its subsidiaries. As the

Company passes through the effect of derivatives to its subsidiaries, the Company is not sensitive to changes in commodity prices.

Interest rate risk

The Company is exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows or the fair

values of its financial instruments. The Company’s earnings are sensitive to changes in interest rates on any floating element of the loans

with related parties and interest earned on cash balances. Interest-bearing loans are at a fixed rate, therefore the possibility of a change

in interest rate only impacts its fair value but not its carrying amount. Therefore, interest-bearing loans and loans from related parties

(forwhich exposure is not material) are excluded from the table below.

The following table demonstrates the sensitivity of all financial assets and financial liabilities to a reasonably possible change in interest

rate applied toa full year from the balance sheet date. There is no impact on the Company’s equity other than the equivalent change in

retained earnings.

Year ended 31 December

Basis point

increase/

(decrease)

in interest rate

Effect on

profit before

tax: increase/

(decrease)

US$ thousands

2023

– –

(75) (11,810)

2022 100 15,108

(25) (3,777)

1 Based on actual market conditions management considers an increase in interest rates is likely remote.

334 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

16. Financial risk management continued

Equity price risk

The Company has exposure to changes in the price of equity instruments that it holds as equity investments held at FVOCI.

The following table demonstrates the sensitivity of available-for-sale assets to a reasonably possible change in market price of these

equity instruments, reflecting the effect on the Company’s profit before tax and equity:

Year ended 31 December

Increase/

(decrease)

in equity price

Effect on profit

before tax:

increase/

(decrease)

Effect on equity:

increase/

(decrease)

US$ thousands

2023 40% – 43,196

(45%) – (48,596)

2022 10% – 15,881

(25%) – (39,703)

(b) Credit risk

Exposure to credit risk arises as a result of transactions in the Company’s ordinary course of business and is applicable to cash and cash

equivalents, intercompany loans and derivative financial instruments.

The Company’s policies are aimed at minimising losses as a result of counterparties’ failure to honour their obligations. Individual

exposures are monitored with customers subject to credit limits to ensure that the Company’s exposure to bad debts is not significant.

The Company’s exposure tocredit risk is influenced mainly by the individual characteristics of each counter party. The Company’s

financial assets are with counterparties that the Company considers to have an appropriate credit rating. As disclosed in note 12, the

counterparties to a significant proportion of these financial assets are related parties. At each balance sheet date, the Company’s

financial assets were neither credit-impaired nor past due other than ‘Related party accounts receivables’ as is disclosed in note 12.

The Company’s policies are aimed at minimising losses from the foreign currency and commodity hedging contracts. The Company’s

foreign currency and commodity derivative contracts are entered into with large financial institutions with strong credit ratings.

The Company’s surplus funds are managed by Servicios Administrativos Fresnillo, S.A. de C.V., which manages cash and cash equivalents

investing inseveral financial institutions. In order to minimise exposure to credit risk, the Company only deposits cash and cash equivalents

with financial institutions with a credit rating of M-1 (Moody’s) and mxA-1+ (Standard and Poor’s) and above, and only for periods of less

than three months.

The maximum credit exposure at the reporting date of each category of financial asset above is the carrying value as detailed in the

relevant notes. See note 15 (a) for the maximum credit exposure for other financial assets, note 7 for cash and cash equivalents and

note12 for related-partybalances.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company monitors its risk

of a shortage of funds using projected cash flows and by monitoring the maturity of both its financial assets and liabilities.

The table below summarises the maturity profile of the Company financial liabilities based on contractual undiscounted payments.

US$ thousands

Within 1 year 2–3 years 4-5 years > 5 years Total

As at 31 December 2023

Interest-bearing loans 37,986 75,973 75,973 1,685,699 1,875,631

Trade and other payables 4,171 – – – 4,171

US$ thousands

Within 1 year 2–3 years 4-5 years > 5 years Total

As at 31 December 2022

Interest-bearing loans 374,249 75,973 75,973 1,723,686 2,249,881

Derivatives financial instruments – liabilities 487 – – – 487

Trade and other payables 1,249 – – – 1,249

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

335

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StatementsGovernance

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Report

The disclosed financial derivative instruments in the above table are the gross undiscounted cash flows. However, those amounts may

be settled gross or net. The following table shows the corresponding estimated inflows based on the contractual terms:

US$ thousands

Within 1 year 2–3 years 4-5 years > 5 years Total

As at 31 December 2023

Inflows 5,777 – – – 5,777

Outflows (5,587) – – – (5,587)

Net 190 – – – 190

US$ thousands

Within 1 year 2–3 years 4-5 years > 5 years Total

As at 31 December 2022

Inflows 13,319 – – – 13,319

Outflows (13,322) – – – (13,322)

Net (3) – – – (3)

The above liquidity tables include expected inflows and outflows from currency option contracts which the Company expects to be

exercised during 2024 as at 31 December 2023 and during 2023 as at 31 December 2022, either by the Company or counterparty.

Management considers that the Company has adequate current assets and forecast cash from operations to manage liquidity risks

arising from current liabilities and non-current liabilities.

Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital

ratios that support its business and maximise shareholder value. Management considers capital to consist of equity and interest-

bearing loans (note 10), as disclosed in the balance sheet and equity investments at FVOCI (note 15).

In order to ensure an appropriate return for shareholder’s capital invested in the Company, management thoroughly evaluates all

material projects and potential acquisitions and approves them at its Executive Committee before submission to the Board for ultimate

approval, where applicable. The Company’s dividend policy aims to pay out 33-50% of profit after tax each year, while making certain

adjustments to exclude non-cash effects in the income statement. Dividends are paid in the approximate ratio of one-third as an interim

dividend and two-thirds as a final dividend. Before declaring a dividend, the Board carries out a detailed analysis of the profitability of the

business, underlying earnings, capital requirements and cash flow. The Company aim is to maintain enough flexibility to be able to react

to movements in precious metals prices and seize attractive business opportunities.

17. Subsequent events

During January 2024 the Company entered into a syndicated revolving credit facility (the ‘facility’) with a term from January 2024 to

January 2029. The maximum amount available under the facility is US$350.0 million. The facility is unsecured and has an interest rate

on drawn amounts of SOFR plus an interest margin of 1.15%. The terms of this facility include financial covenants related to leverage and

interest cover ratios. No amounts have been drawn from the facility to date.

336 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Cut-off grade

Quantity Grade Contained metal

Resource category

Tonnes

(kt)

(g/t)

(%)

(koz)

(kt)

Minera Fresnillo – Fresnillo/Proaño Mine – Underground

Measured

210 g/t AgEq

11,059 0.99 616 1.18 2.12 351 218,913 130 235

Indicated 15,501 0.94 312 1.95 4.42 471 155,353 302 685

Measured and indicated 26,560 0.96 438 1.63 3.46 822 374,266 432 920

Inferred 25,684 0.83 359 1.22 2.42 682 296,605 313 621

Minera Saucito – Saucito Mine – Underground

Measured

267 g/t AgEq

6,329 2.51 387 1.73 2.98 511 78,778 109 189

Indicated 13,134 1.45 343 1.63 2.68 613 144,845 213 352

Measured and indicated 19,462 1.80 357 1.66 2.78 1,123 223,623 323 541

Inferred 16,967 1.10 294 1.44 3.14 599 160,250 244 533

Minera Ciénega – Ciénega Complex – Underground

Measured

Multiple

5,516 4.19 288 1.38 1.85 743 51,104 76 102

Indicated 3,780 2.82 282 1.01 1.42 342 34,332 38 54

Measured and indicated 9,297 3.63 286 1.23 1.68 1,085 85,436 115 156

Inferred 4,795 2.54 266 0.65 1.05 391 41,005 31 50

Minera San Julián – San Julián Mine Underground: Veins

Measured

175 g/t AgEq

2,147 2.47 215 – – 170 14,804 – –

Indicated 7,818 1.81 288 – – 456 72,493 – –

Measured and indicated 9,964 1.95 273 – – 626 87,297 – –

Inferred 6,785 1.51 247 – – 329 53,825 – –

Minera San Julián – San Julián Mine Underground:

Disseminated

Measured

118 g/t AgEq

6,314 0.11 177 0.54 1.40 23 36,020 34 88

Indicated 753 0.06 123 0.42 1.15 2 2,986 3 9

Measured and indicated 7,068 0.11 172 0.53 1.37 25 39,006 37 97

Inferred 167 0.06 87 0.38 1.72 – 466 1 3

Totals – Underground

Measured and indicated

Multiple

72,351 1.58 348 1.25 2.37 3,681 809,628 907 1,714

Inferred 54,398 1.14 316 1.08 2.22 2,002 552,151 589 1,207

1 Mineral resources are reported inclusive of ore reserves. Mineral resources are not ore reserves and do not have demonstrated economic viability. All figures rounded to reflect the

relative accuracy of the estimates. Gold, silver, lead and zinc assays were capped where appropriate.

2 Mineral resources are reported at metal equivalent cut-off grades based on metal price assumptions*, variable metallurgical recovery assumptions (variable metallurgical

recoveries as a function of grade and relative metal distribution), mining costs, processing costs, general and administrative (G&A) costs, and variable NSR factors (NSR factors

include smelting and transportation costs). The AgEq variable cut-offs grades are calculated by dividing the applicable costs by a variable Ag net value factor which includes

prices, recoveries and payabilities.

3 The cut-off grade for Ciénega’s mineral resources varies between 289 and 330 g/t AgEq.

• All mineral resources were estimated by Fresnillo. William Cain, B.Sc, AIPG CPG 12063 of SRK, a Competent Person reviewed and audited the resource estimates for Ciénega.

Benjamin Parsons, BSc, MSc Geology, MAusIMM (CP) #222568 of SRK, a Competent Person, reviewed and audited the resource estimates for Fresnillo and Saucito. Scott Burkett,

SME-RM #04229765 of SRK Consulting (U.S.), Inc., a Competent Person, reviewed and audited the resource estimates for San Julián.

* Metal price assumptions considered for the calculation of metal equivalent grades are: Gold (US$/oz 1,450.00), Silver (US$/oz 20.00), Lead (US$/lb 0.90) and Zinc (US$/lb 1.15).

CONSOLIDATED AUDITED MINERAL RESOURCE STATEMENT FOR UNDERGROUND

OPERATIONAL PROPERTIES

AS AT 31 MAY 2023

337

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Information

Financial

StatementsGovernance

Strategic

Report

Cut-off grade

Quantity Grade Contained metal

Resource category

Tonnes

(kt)

(g/t)

(koz)

Minera Penmont: Herradura open pit

Measured

Multiple

216,494 0.85 5,909

Indicated 28,093 0.88 794

Measured and indicated 244,586 0.85 6,704

Inferred 23 1.40 1

Minera Penmont: Noche Buena open pit

Measured

0.20 g/t Au

2,749 0.54 48

Indicated 1,237 1.11 44

Measured and indicated 3,987 0.72 92

Inferred 143 0.33 2

Minera Penmont: Soledad–Dipolos open pit

Measured

0.20 g/t Au

71,211 0.49 1,117

Indicated 3,623 0.44 51

Measured and indicated 74,833 0.49 1,169

Inferred 178 0.41 2

Minera Penmont: Centauro Profundo Underground

1,5

Measured

2.10 g/t Au

513 6.57 108

Indicated 14,458 6.32 2,936

Measured and indicated 14,971 6.33 3,045

Inferred 1,717 6.00 331

Totals – Open pit

Measured and indicated

Multiple

323,406 0.77 7,964

Inferred 344 0.44 5

Totals – Underground

Measured and indicated

2.10 g/t Au

14,971 6.33 3,045

Inferred 1,717 6.00 331

1 Reasonable prospects for eventual economic extraction (RPEEE) criteria have been applied to open-pit mineral resources through the application of cut-off grades and the use

of a constraining pit shells based on a US$1,650/oz Au price, using similar inter-ramp angles used for ore reserve pits. Underground mineral resources comprise material below

the open pit reported above a cut-off grade.

2 Assays were capped where appropriate. All ﬁgures rounded to reﬂect the relative accuracy of the estimates.

3 Herradura open pit mineral resources are reported at various cut-offs dependent on material types and grade. Oxide material above 0.23 g/t Au and below 1.00 g/t Au reports to

the heap leach; transitional and sulfide material above 0.24 g/t and below 0.51 g/t Au reports to the heap leach; oxide material above 1.00 g/t Au reports to the mill; transitional

and sulphide material above 0.51 g/t Au reports to the mill.

4 The Soledad-Dipolos mine has been subject to legal actions regarding surface access; it is assumed these actions will eventually be settled favourably and mining operations

resumed.

5 Centauro Profundo underground mineral resources estimated using an assumed underground mining scenario beyond the current Herradura mineral resources open pit, with

appropriate cut-off grade considered at US$1,450/oz Au price, 93% metallurgical recovery.

· The mineral resources were estimated by Fresnillo. Dinara Nussipakynova, P.Geo. (EGBC #37412, PGO #1298) of AMC reviewed and audited the resource estimates for Herradura

and Centauro Profundo. Michael O’Brien, P.Geo. (EGBC #41338, FAusIMM #206669) of Red Pennant reviewed and audited the resource estimates for Soledad-Dipolos and

Noche Buena.

CONSOLIDATED AUDITED MINERAL RESOURCE STATEMENT

FOR SONORA PROPERTIES

1,2

AS AT 31 MAY 2023

338 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

Deposit

Cut-off grade*

Quantity Grade Contained metal

Fresnillo subsidiary

Tonnes

(kt)

Gold

(g/t)

Silver

(g/t)

Lead

(%)

Zinc

(%)

Gold

(koz)

Silver

(koz)

Lead

(kt)

Zinc

(kt)

Measured mineral resource

Orisyvo – disseminated Au **

0.34 g/t Au 42,330 1.34 2 – – 1,830 2,104 – –

Candameña – disseminated

Au **

– – – – – – – – –

Leones – breccia ** – – – – – – – – –

Lucerito – breccia/mantos ** – – – – – – – – –

Rodeo – disseminated Au – – – – – – – – –

Manzanillas – veins US$58.30/t 75 6.76 130 – – 16 316 – –

San Juan – veins – – – – – – – – –

Opulencia – veins – – – – – – – – –

Guanajuato Centro – veins 1.80 g/t Au-Eq 2,255 0.74 40 – – 54 2,898 – –

Guanajuato Sur – veins – – – – – – – – –

Cebadillas – veins – – – – – – – – –

La Yesca – veins – – – – – – – – –

San Nicolas – veins – – – – – – – – –

Pilarica – mantos – – – – – – – – –

Total Measured 44,660 1.32 4 – – 1,900 5,318 – –

Indicated mineral resource

Orisyvo – disseminated Au **

0.36 g/t Au 195,993 1.01 1 – – 6,334 8,542 – –

Candameña – disseminated

Au **

0.59 g/t Au-Eq 49,863 0.79 18 0.04 0.10 1,267 28,232 19 51

Leones – breccia ** – – – – – – – – – –

Lucerito – breccia/mantos ** 1.00 g/t Au-Eq 105,285 0.41 27 0.29 0.47 1,373 90,608 310 500

Rodeo – disseminated Au 0.30 g/t Au 5,629 0.57 3 – – 103 597 – –

Manzanillas – veins US$58.30/t 950 3.46 67 – – 105 2,058 – –

San Juan – veins US$58.30/t 3,247 1.44 156 – – 151 16,314 – –

Opulencia – veins 1.87 g/t Au-Eq 2,189 3.45 148 – – 243 10,440 – –

Guanajuato Centro – veins 1.27 g/t Au-Eq 7,569 1.55 55 – – 376 13,360 – –

Guanajuato Sur – veins 1.87 g/t Au-Eq 580 5.08 765 – – 95 14,261 – –

Cebadillas – veins – – – – – – – – –

La Yesca – veins – – – – – – – – –

San Nicolas – veins – – – – – – – – –

Pilarica – mantos US$11.00/t 11,100 – 95 0.31 0.49 – 33,901 34 55

Total Indicated 382,404 0.82 18 0.09 0.16 10,046 218,313 363 605

Inferred mineral resource

Orisyvo – disseminated Au **

0.35 g/t Au 68,539 0.64 1

– –

1,410 2,103 – –

Candameña – disseminated

Au **

0.40 g/t

Au-Eq 7,278 0.44 17 0.01 0.06 104 3,985 1 4

Leones – breccia ** 60 g/t Ag 7,268 0.01 112 1.44 1.26 1 26,151 105 91

Lucerito – breccia/mantos ** 1.00 g/t Au-Eq 112,240 0.40 32 0.26 0.45 1,453

114,374 290

500

Rodeo – disseminated Au 0.30 g/t Au 80,804 0.47 5 – – 1,228 13,161 – –

Manzanillas – veins US$58.30/t 356 1.93 44 – – 22 507 – –

San Juan – veins US$58.30/t 9,252 1.45 127 – – 431 37,749 – –

Opulencia – veins 1.87 g/t Au-Eq 2,848 2.14 103 – – 196

9,456

– –

Guanajuato Centro – veins 1.33 g/t Au-Eq 23,876 1.41 58 – – 1,086 44,422 – –

Guanajuato Sur – veins 2.24 g/t Au-Eq 9,686 2.36 578 – – 736 180,046 – –

Cebadillas – veins 1.87 g/t Au-Eq 2,152 2.50 63 – – 173 4,362 – –

La Yesca – veins 146 g/t Ag-Eq 1,460 0.71 133 – – 33 6,234

– –

San Nicolas – veins 1.87 g/t Au-Eq 2,167 1.61 225 – – 112 15,684 – –

Pilarica – mantos US$27.26/t 7,154 0.48 94 1.55 1.57 110 21,596 111 112

Total Inferred 335,082 0.66 45 0.15 0.21 7,095 479,830 507 708

1 Mineral resources are not ore reserves and do not have demonstrated economic viability. All figures rounded to reflect the relative accuracy of the estimates. Composites were

capped where appropriate. Mineral resources are reported at variable metal, metal equivalent or NSR cut-off grades, assuming reasonable metal recoveries. Orisyvo, Lucerito,

Candameña and Rodeo mineral resources are reported inside a conceptual pit shell based on appropriate mining and processing costs and metal recoveries for oxide and

sulphide material. Equivalent metal grades are based on US$1,450 per ounce of gold, US$20.00 per ounce of silver, US$1.20 per pound of zinc, US$0.90 per pound of lead and

US$3.00 per pound of copper.

* Cut-off grade calculations assume variable metallurgical recoveries.

** Mineral resources statement prepared independently by SRK CA.

CONSOLIDATED AUDITED MINERAL RESOURCE STATEMENT OF EXPLORATION

PROJECTS AND PROSPECTS

AS AT 31 DECEMBER 2023

339

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Information

Financial

StatementsGovernance

Strategic

Report

Cut-off grade

Quantity Grade Contained metal

Deposit

Tonnes

(kt)

(g/t)

(%)

(koz)

(kt)

Minera Fresnillo – Fresnillo/Proaño Mine – Underground

Proven

274 g/t AgEq

– – – – – – – – –

Probable 12,139 0.70 253 1.48 3.11 272 98,847 180 377

Proven and Probable 12,139 0.70 253 1.48 3.11 272 98,847 180 377

Minera Saucito – Saucito Mine – Underground

Proven

346 g/t AgEq

– – – – – – – – –

Probable 10,056 1.27 343 1.30 2.04 411 110,894 131 205

Proven and Probable 10,056 1.27 343 1.30 2.04 411 110,894 131 205

Minera Ciénega – Ciénega Complex – Underground

Proven

Multiple

– – – – – – – – –

Probable 2,693 2.46 253 0.85 1.20 213 21,873 23 32

Proven and Probable 2,693 2.46 253 0.85 1.20 213 21,873 23 32

Minera San Julián – San Julián Mine Underground: Veins

Proven

240 g/t AgEq

– – – – – – – – –

Probable 4,311 1.52 327 – – 210 45,340 – –

Proven and Probable 4,311 1.52 327 – – 210 45,340 – –

Minera San Julián – San Julián Mine Underground:

Disseminated

Proven

138 g/t AgEq

– – – – – – – – –

Probable 2,208 0.11 157 0.50 1.09 8 11,170 11 24

Proven and Probable 2,208 0.11 157 0.50 1.09 8 11,170 11 24

Totals – Underground

Proven

Multiple

– – – – – – – – –

Probable 31,407 1.10 285 1.10 2.03 1,113 288,124 345 639

Proven and Probable 31,407 1.10 285 1.10 2.03 1,113 288,124 345 639

1 All ﬁgures rounded to reﬂect the relative accuracy of the estimates. Mineral reserves are reported at metal equivalent cut-off grades based on metal price assumptions*,

variable metallurgical recovery assumptions (variable metallurgical recoveries as a function of grade and relative metal distribution), mining costs, processing costs, general and

administrative (G&A) costs, sustaining capital costs and variable NSR factors (NSR factors include smelting and transportation costs). Each AgEq cut-off is calculated by dividing

the appropriate cost by the corresponding Ag net value factor which includes prices, recoveries and payabilities.

2 Reserves include planned dilution to a minimum mining width and to minable outlines. Additionally, based on mining method, floor dilution is included, and appropriate

mining recovery factors are applied.

3 The cut-off grades for the Ciénega reserve vary between 303 and 388 g/t AgEq.

* Metal price assumptions considered for the calculation of metal equivalent grades are: Gold (US$/oz 1,450.00), Silver (US$/oz 20.00), Lead (US$/lb 0.90) and Zinc (US$/lb 1.15).

• The reserves are valid as of 31 May, 2023. All topography is valid as of 31 May, 2023.

• All ore reserves were estimated by Fresnillo. Joanna Poeck, BEng Mining, SME (#4131289RM) & MMSA (#01387QP) of SRK, a Competent Person, reviewed and audited the

San Julián Mine Disseminated reserve estimate. Anton Chan, B.Eng, M.Sc., P.Eng, MMSAQP (#01546QP) of SRK, a Competent Person, reviewed and audited all other reserve

estimates. All resource material classified as measured within the mine plan have been downgraded and reported by SRK as probable reserves due to insufficient confidence

in geotechnical engineering and reconciliation work.

CONSOLIDATED AUDITED RESERVE STATEMENT FOR UNDERGROUND

OPERATIONAL PROPERTIES

AS AT 31 MAY 2023

340 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

CONSOLIDATED AUDITED ORE RESERVE STATEMENT FOR SONORA PROPERTIES

AS AT 31 MAY 2023

Cut-off grade

Quantity Grade Contained metal

Reserve category

Tonnes

(kt)

(g/t)

(koz)

Minera Penmont: Herradura open pit

Proven

Multiple

182,897 0.83 4,901

Probable 22,974 0.82 606

Proven and Probable 205,872 0.83 5,507

Totals – open pit

Proven

Multiple

182,897 0.83 4,901

Probable 22,974 0.82 606

Proven and Probable 205,872 0.83 5,507

1 The Herradura ore reserves that are attributed to the heap leach are reported at cut-off grades of 0.25 g/t Au for oxide ore and 0.26 g/t Au for transition and sulphide ore.

Oxide material above 1.14 g/t Au and transitional and sulphide material above 0.56 g/t Au are attributed to the mill.

• ore reserves and all topography are valid as of 31 May 2023.

• ore reserves are based on a US$1,515/oz Au price.

• Full mining recovery assumed. ore reserves have no additional dilution added to that inherent in the selective mining unit of 15 × 15 × 8 m3.

• Metallurgical recoveries are based on recovery curves but average 62% for Herradura oxide heap leach, 45% for Herradura transition/fresh heap leach, 91% for Herradura ore sent

to the mill.

• ore reserves are converted from mineral resources through the process of pit optimisation, pit design, and production scheduling, and are supported by a cash flow model.

• All ﬁgures rounded to reﬂect the relative accuracy of the estimates; numbers may not compute exactly due to rounding.

• ore reserves were estimated by Fresnillo. David Warren, BSc, MSc, P.Eng. (EGBC #15053) of AMC, a Competent Person, reviewed and audited the ore reserve estimates

341

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StatementsGovernance

Strategic

Report

Quantity Grade Contained metal

Resource category

Cut-off

grade

Tonnes

(kt)

(g/t)

(%)

(koz)

(kt)

Measured

209 g/t

AgEq

1,441 2.19 780 1.42 2.70 102 36,130 20 39

Indicated 15,555 1.83 266 3.03 5.56 916 133,039 472 865

Measured and indicated 16,996 1.86 310 2.89 5.32 1,017 169,169 492 904

Inferred 14,051 1.06 236 2.41 6.12 480 106,676 339 860

Notes:

• Totals may not compute exactly due to rounding.

• Mineral resources are reported inclusive of ore reserves.

• Mineral resources are not ore reserves and do not have demonstrated economic viability.

• JORC Code was used for reporting of mineral resources.

• Mineral resources are reported above 209 g/t Ag equivalent

• Mineral resources are reported at values based on metal price assumptions, metallurgical recovery assumptions, mining costs, processing costs, general and administrative (G&A)

costs, and variable smelting and transportation cost.

• Metal price assumptions considered for the calculation of metal equivalent values are Au (US$1,450.00/oz), Ag (US$20.00/oz), Pb (US$0.90/lb) and Zn (US$1.15/lb).

• Assumed metal recoveries of 75.84%, 87.06%, 86.33% and 74.48% for Au, Ag, Pb and Zn, respectively and NSR factors of US$30.71/g Au, US$0.46/g Ag, US$15.01/% Pb and

US$11.36/% Zn were used.

• The mineral resources were estimated by Fresnillo. Dinara Nussipakynova, P.Geo. (EGBC #37412, PGO #1298) a Competent Person, reviewed and audited the mineral resources.

AUDITED ORE RESERVE STATEMENT FOR JUANICIPIO

AS AT 31 MAY 2023

Quantity Grade Contained metal

Reserve category

Cut-off

grade

Tonnes

(kt)

(g/t)

(%)

(koz)

(kt)

Proven

280 g/t

AgEq

735 1.48 545 1.05 1.99 35 12,865 8 15

Probable 14,622 1.59 233 2.72 4.94 746 109,357 398 722

Proven and Probable 15,356 1.58 248 2.64 4.80 781 122,221 406 736

Notes:

• Totals may not compute exactly due to rounding.

• All ﬁgures rounded to reﬂect the relative accuracy of the estimates. ore reserves are reported at variable cut-off value based on metal price assumptions, metallurgical recovery

assumptions, mining costs, processing costs, G&A costs, sustaining capital costs, and variable trucking costs.

• JORC Code was used for reporting of ore reserves.

• NSR values are calculated as:

— NSR = 30.71*Au+0.46*Ag+15.01*Pb+11.36*Zn. Units Au (g/t), Ag (g/t), Pb (%), Zn (%).

— NSR factors are based on metal prices of $1,450/oz Au, $20.00/oz Ag, $0.90/lb Pb, and $1.15/lb Zn and estimated recoveries of 73.21% Au, 85.83% Ag, 86.63% Pb, and 76.10%Zn.

— Payable metal assumptions for Au are 95% for lead concentrates, and 65% for zinc concentrate; for Ag: 95% for lead concentrates, and 70% for zinc concentrate. Lead 95%

payable and zinc 85% payable.

— The all-inclusive operating costs for longhole stopes and cut-and-fill stopes are $122/tonne and $150/tonne respectively (280 g/t AgEq based on weighted average for mining

method). The marginal stope cut-off value is generally above $121/t for cut-and-fill and $93/t for longhole stopes.

— An additional operational floor mucking dilution of 0.5m for longhole and cut-and-fill stopes is applied to the ore reserve calculation. An extra endwall dilution for longhole

stopes is 0.5m.

— Mining recovery factors are 95% for longhole stopes and 98% for cut-and-fill stopes. Mining recovery factor for ore drive development is 99%. Mining recovery factor for both sill

pillars and rib pillars is 0%.

— Exchange rate of 19 MXP to US$1.

— The ore reserves were estimated by Fresnillo. Paul Salmenmaki. P.Eng. (EGBC #40227), a Competent Person, reviewed and audited the ore reserves.

AUDITED MINERAL RESOURCE STATEMENT FOR JUANICIPIO

AS AT 31 MAY 2023

342 Fresnillo plc Annual Report and Accounts 2023 www.fresnilloplc.com

OPERATING STATISTICS

ORE PROCESSED

(tonnes)

SILVER

(grammes/tonne)

GOLD

(grammes/tonne)

ZINC

(%)

LEAD

(%)

2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023

Fresnillo 2,447,394 2,443,440 2,461,785 2,336,943 2,216,467 2,462,409 2,618,509 229.6 213.8 184.5 193.9 186.2 188.7 170.2 0.64 0.70 0.89 0.73 0.68 0.61 0.62 1.72 1.75 1.80 2.07 2.20 2.38 2.32 0.92 0.90 1.01 1.08 1.01 1.05 0.96

Ciénega 1,302,409 1,323,908 1,329,134 1,318,263 1,282,367 1,114,232 1,064,543 151.5 164.4 158.9 158.6 153.4 152.4 147.5 1.82 1.65 1.66 1.63 1.27 1.14 1.14 0.98 0.83 1.13 1.18 0.90 0.86 0.63 0.74 0.60 0.67 0.70 0.51 0.49 0.44

Herradura 26,027,466 22,156,792 22,926,542 19,797,063 20,311,876 22,195,187 20,223,914 0.9 2.7 2.9 2.6 2.1 1.6 1.6 0.64 0.76 0.80 0.77 0.76 0.69 0.76 – – – – – – – – – – – – – –

Saucito 2,753,876 2,792,057 2,752,638 2,767,432 2,434,449 2,072,812 2,163,982 279.8 257.6 227.6 205.8 182.9 201.3 195.2 1.09 1.25 1.19 1.24 1.46 1.40 1.34 1.21 1.61 1.57 2.21 2.08 1.78 1.96 0.77 0.94 0.90 1.22 1.18 1.01

1.06

Saucito Pyrites – 131,780 167,513 172,233 159,635 135,044

109,433

– 393.4 299.4 220.1 150.5 164.0 199.6 – 2.77 2.32 1.92 1.50 1.44 1.43 – – – – – – – – – – – – – –

Soledad-Dipolos – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Noche Buena 17,820,817 18,195,744 12,166,900 6,682,617 8,996,842 7,428,189 2,510,639 0.1 0.1 0.2 0.7 0.2 0.2 0.2 0.51 0.52 0.51 0.52 0.59 0.53 0.47 – – – – – – – – – – – – – –

San Julián – Veins 1,273,129 1,270,781 1,265,030 1,254,970 1,202,826 1,175,764 1,142,309 157.2 144.1 115.4 108.6 119.2 134.6 165.6 2.10 2.01 1.61 1.61 1.42 1.21 1.17 – – – – – –

–

– – – – – – –

San Julián – DOB 945,057 2,221,433 2,226,956 2,229,612 2,070,563 2,092,971 2,073,847 180.3 154.4 139.5 150.3 220.6 167.9 136.2 0.12 0.09 0.08 0.09 0.10 0.08 0.08 1.18 1.35 1.36 1.19 1.27 1.09 0.94 0.52 0.43 0.44 0.41 0.51 0.43 0.43

Juanicipio (Total) – – – 71,859 251,906 646,148 1,268,757 – – – 327.8 470.2 519.8 472.4 – – – 0.73 1.13 1.39 1.27 – – – 0.60 1.20 1.72 2.06 – – – 0.33 0.60 0.90 1.15

ZINC CONCENTRATE

(tonnes)

SILVER

(grammes/tonne)

GOLD

(grammes/tonne)

ZINC

(%)

LEAD

(%)

2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023

Fresnillo 57,686 59,987 61,639 67,851 68,192 84,466 89,932 816 773 622 627 572 549 504 2.3 2.3 2.6 2.2 1.9 1.7 1.7 52.0 51.8 51.2 50.3 50.6 51.3 50.5 – – – – – – –

Ciénega 14,108 12,472 16,897 17,470 12,339 10,264 7,219 2,413 2,042 1,177 1,336 2,056 1,982 3,548 13.9 13.1 7.1 7.6 10.2 9.4 16.1 50.0 47.2 53.2 53.0 51.6 52.5 49.2 – – – – – – –

Herradura – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Saucito 41,768 60,879 62,171 86,451 76,696 56,531 65,273 889 704 692 501 397 501 532 3.8 2.8 3.1 2.4 1.6 1.6 1.9 48.7 48.5 47.2 49.5 48.9 50.3 50.5 – – – – – – –

Soledad–Dipolos – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Noche Buena – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

San Julián – DOB 15,827 43,808 45,979 39,621 38,226 34,567 29,350 2,750 2,590 2,188 2,959 3,765 3,443 3,227 0.9 0.8 0.6 1.0 1.2 1.2 1.3 49.6 50.3 49.4 51.7 52.3 50.6 49.1 – – – – – – –

Juanicipio (Total) – – – 576 4,117 16,438 40,790 – – – 1,835 1,528 1,159 1,057 – – – 3.7 3.6 2.4 1.8 – – – 45.9 44.9 49.1 49.8 – – – – – – –

LEAD CONCENTRATE

(tonnes)

SILVER

(grammes/tonne)

GOLD

(grammes/tonne)

ZINC

(%)

LEAD

(%)

2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023

Fresnillo 58,675 53,930 58,679 60,157 52,035 60,094 62,548 7,950 7,859 6,241 6,042 6,415 6,272 5,627 18.3 21.8 25.0 17.3 17.6 15.4 15.9 – – – – – – – 35.0 36.4 36.6 35.4 36.1 36.2 34.2

Ciénega 16,508 12,951 13,032 14,450 9,725 8,375 6,575 6,966 10,689 10,797 9,292 12,465 12,519 13,125 69.5 85.4 78.2 72.0 80.0 69.0 73.0 – – – – – – – 38.3 37.1 44.8 42.3 40.6 42.0 43.8

Herradura – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0 0 0 0 0 0 0

Saucito 53,082 63,756 56,844 71,982 64,825 47,130 52,490 11,731 8,978 8,632 6,110 5,499 7,304 6,510 38.0 39.3 40.2 33.8 40.5 46.6 40.8 – – – – – – – 33.4 35.5 36.5 39.7 38.0 37.8 37.2

Soledad–Dipolos – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0 0 0 0 0 0 0

Noche Buena – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0 0 0 0 0 0 0

San Julián – DOB 8,634 13,434 16,200 14,363 16,644 14,657 15,564 11,524 12,847 10,478 11,924 14,801 12,281 9,483 4.6 4.5 2.8 4.0 4.8 4.2 4.5 – – – – – – – 41.7 45.4 47.2 49.5 51.3 48.5 44.0

Juanicipio (Total) – – – 894 4,457 14,440 31,157 – – – 20,505 20,838 17,934 15,127 – – – 34.2 42.4 44.0 33.6 – – – – – – – – – – 21.5 26.9 34.1 41.3

DORÉ AND OTHER PRODUCTS

(tonnes)

SILVER

(grammes/tonne)

GOLD

(grammes/tonne)

2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023

Ciénega precipitates 67.5 70.5 56.5 58.9 54.7 46.8 49.0 277,557 321,707 348,315 366,889 417,407 454,399 467,989 13,252 11,504 15,918 13,940 11,249 10,489 10,647

Ciénega Gravimetric Concentrator – – – – – – – – – – – – – –

– – –

– – – –

Saucito Pyrites precipitates – 87.3 83.3 60.0 39.0 37.3 26.7 – 348,123 437,279 476,801 451,681 441,459 551,136 – 1,267 1,510 1,788 1,828 1,634 1,428

Herradura doré 44.3 79.1 79.7 66.6 53.7 46.0 38.9 393,103 604,868 606,458 583,752 529,334 532,056 487,379 344,604 196,925 190,981 192,426 248,538 241,449 280,498

Herradura slag 669.9 773.4 1,284.3 1,323.7 608.9 – 34.8 738 1,174 1,041 1,634 1,550 – 480 647 435 334 494 662 – 3,833

Soledad–Dipolos doré – – – – – – – – – – – – – – – – – – – – –

Soledad–Dipolos slag – – – – – – –

– – –

– – – – – – – – – – –

Fresnillo Concentrates from tailings dam – – – – – – – – – – – – – – – – – – – – –

Noche Buena doré 6.7 7.7 7.8 0.4 – – 0.7 31,252.3 24,479.9 98,118.4 269,785.8 – – 254,727.9 602,221 509,555 406,858 475,146 – – 181,396

Noche Buena slag 371.2 292.5 248.7 11.6 – – 158.7 61.2 206.3 – 1,068.5 – – 962.6 979 324 206 1,025 – – 7,584

San Julián – Veins precipitates 218.4 202.1 155.6 142.8 151.1 172.2 215.7 845,230 836,331 862,812 877,909 869,458 837,831 801,541

11,788 12,193 12,432

13,461 10,670 7,839 5,913

Fresnillo precipitates – – – – 0.2 – 21.2 – – – – 454,780 0 566,560 – – – – 1,473 – 1,074

Juanicipio precipitates – – – – 0.4 15.5 8.4 – – – – 625,852 623,760 642,547 – – – – 972 1,131 712

METAL PRODUCED

1, 2

SILVER

(ounces)

GOLD

(ounces)

ZINC

(tonne)

LEAD

(tonne)

2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023

Fresnillo 16,511,937 15,117,156 13,007,227 13,054,481 11,986,025 13,609,019 12,771,803 38,784 42,290 52,259 38,388 33,743 34,432 36,909 30,021 31,094 31,530 34,116 34,530 43,342 45,386 20,514 19,619 21,472 21,319 18,796 21,756 21,373

Ciénega 5,394,037 5,998,987 5,796,190 5,762,384 5,446,619 4,709,216 4,334,581 71,947 66,869 65,583 64,101 48,819 37,466 35,934 7,048 5,892 8,986 9,263 6,373 5,387 3,550 6,328 4,799 5,839 6,112 3,947 3,518 2,881

Herradura 551,476 1,523,453 1,563,060 1,305,572 925,825 775,948 610,764 473,638 474,168 482,722 425,288 421,535 349,715 355,485 – – – – – – – – – – – – – –

Saucito 21,215,072 19,780,721 17,159,627 15,532,298 12,438,843 11,977,292 12,101,782 69,948 86,092 79,539 84,878 88,440 73,497 72,763 20,348 29,506 29,365 42,774 37,469 28,415 32,991 17,714 22,662 20,764 28,592 24,615 17,816 19,535

Saucito Pyrites – 977,414 1,171,298 920,212 567,030 529,355 473,912 – 3,556 4,045 3,452 2,294 1,959 1,228 – – – – – – – – – – – – – –

Soledad–Dipolos – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Noche Buena 31,324 51,616 57,754 39,340 31,574 19,830 10,316 172,282 167,208 127,166 87,998 96,835 79,668 42,537 – – – – – – – – – – – – – –

San Julián – Veins 5,935,507 5,433,526 4,317,225 4,030,008 4,224,406 4,638,089 5,558,565 82,782 79,218 62,207 61,790 51,840 43,397 41,009 – – – – – – – – – – – – – –

San Julián – DOB 4,598,421 9,196,272 8,691,636 9,276,125 12,547,642 9,613,719 7,790,507 1,750 3,125 2,393 3,134 4,006 3,330 3,478 7,849 22,027 22,697 20,492 19,990 17,487 14,410 3,598 6,101 7,648 7,112 8,543 7,105 6,843

Juanicipio

(Attributable) – – – 349,220 1,789,979 5,179,950 9,414,788 – – – 590 3,683 12,461 20,570 – – – 148 1,036 4,521 11,368 – – – 108 671 2,755 7,202

Fresnillo DLP – – – – 2,617 – 386,609 – – – – 8 – 733 – – – – – – – – – – – – – –

Fresnillo Total 54,237,774 58,079,146 51,764,018 50,269,639 49,960,562 51,052,420 53,453,626 911,132 922,527 875,913 769,618 751,203 635,926 610,646 65,266 88,520 92,578 106,793 99,397 99,153 107,705 48,153 53,181 55,722 63,242 56,573 52,950 57,833

1 Including production from Fresnillo’s tailings dam.

2 All figures include 100% of production from the Penmont mines (Herradura, Soledad-Dipolos and Noche Buena).