(FRES) Fresnillo

$

Chief executive Jaime Lomelin said: "I am pleased to report a strong set of financial results after a year of significant operational progress. We have achieved record attributable silver production, the completion of development works and the start up of operations at Soledad-Dipolos, advances at the Saucito project, substantial increase in total resources, and mineralisation extended at all exploration prospects. We enter 2010 with a strong cash position and no debt on the balance sheet and on track to achieve our aim of delivering one new mine or mine expansion per year until 2014."

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

Fresnillo plc Tel: +44(0)20 7399 2470

Octavio Alvidrez, Head of Investor Relations

Brunswick Tel: +44(0)20 7404 5959

Carole Cable

David Litterick

About Fresnillo plc

Fresnillo plc is the world's largest primary silver producer and Mexico's second largest gold producer, listed on the London Stock Exchange under the symbol FRES.

Fresnillo has four producing mines, all of them in Mexico - Fresnillo, Ci?ga, Herradura and Soledad-Dipolos; one development project - Saucito; and three advanced exploration prospects - San Juan, San Juli, Orysivo, as well as a number of other long term exploration prospects and, in total, has mining concessions covering approximately 1.75 million hectares in Mexico.

Fresnillo has a strong and long tradition of mining, a proven track record of mining development and reserves replacement, and a low cost of production, being in the lowest quartile of the cost curve for both silver and gold.

Fresnillo's goal is to maintain the Group's position as the world's largest primary silver company, producing 65 million ounces of silver and over 400,000 ounces of gold by 2018.

Strategy

We seek to create value across precious metal cycles through leadership, quality and sustainable growth. We have a target of producing 65 million ounces of silver and over 400,000 ounces of gold by 2018.

We intend to achieve this goal by:

· Continuing the sustainable development of the group

· Maximising the potential of existing operations

· Delivering growth through development projects

· Extending the growth pipeline

· Maintaining strict financial discipline

Letter from the Chairman

It is a privilege to report that Fresnillo plc has delivered another year of strong performance. As we stated at the time of the Group's initial public offering in 2008, we are committed to maintaining our position as the world's largest primary silver producer, with the goal of producing 65 million ounces of silver and over 400,000 ounces of gold per year by 2018. Results in 2009 indicate we are firmly on track, with strong operational performance, quality and sustainable growth across our operations.

The Group has more than delivered on its commitments during the past year. Silver production reached record levels, planned cost reduction and efficiency projects were completed, and progress at exploration and development sites was on target, with the start -up of Soledad-Dipolos ahead of schedule and within budget. Indicators of future performance remained strong, with double-digit mine life and a significant increase in total ore resources. These results further underscore the Group's strong competitive advantages:

· Global leadership in the primary production of silver

· Operational excellence and low-cost production

· A robust resource base and exceptional growth portfolio

· A large land position in Mexico, which provides an attractive environment for mining activities

· Management's proven execution capabilities

· Strong balance sheet

· An enduring commitment to corporate responsibility

The rise in Fresnillo plc's share price accompanied a rally in precious metal prices. Nonetheless, we believe that our ranking as the top performer in 2009 among gold and silver miners in the FTSE350 Index, and number three among all mining companies in that Index, are evidence of the market's recognition of our operational performance and the quality of our asset base.

The Company has the fundamental ingredients for long-term sustainable growth. The Board utilises a number of indicators, as set out in this report, to monitor the implementation of the Group's value-creation strategy and to measure its effectiveness in delivering against objectives.

We enter 2010 well-positioned to deliver continued growth. As of today, gold and silver prices are significantly higher than they were one year ago, buoyed by momentum in investment demand and signs of a global economic recovery. The start up of Soledad-Dipolos as an operating mine will boost attributable gold production by an expected 20%. Major construction on the first stage of the Saucito mine will near completion during the coming year, and ore from the project is already being processed in the Fresnillo mill and contributing to silver production.

We have authorised a 58% increase in the 2010 exploration budget to US$77.6 million, which is commensurate with our expectations of financial performance. Our focus remains on consolidating mining districts, expanding the growth platform and ensuring that our reserve and resource base are of the highest quality. To that end, the Group will pursue acquisition opportunities that may arise if they are value accretive to our shareholders and comply with our strategic and financial return criteria.

I would like to extend my appreciation to my fellow Board members for their dedication and invaluable advice. This diverse group of professionals combine a wealth of experience and perspectives to enhance the strategy and governance of the organisation. I would also like to commend the Group's executives and employees for their impressive execution against objectives this year, demonstrating the strength of their commitment and teamwork.

Alberto Baill?s Non-executive Chairman

Chief Executive's statement

I am pleased to report a year of significant operational progress: record attributable silver production, the completion of development works and start- up of operations at Soledad-Dipolos, advances at the Saucito project, substantial increase in total resources, and mineralisation extended at our major exploration prospects. We enter 2010 with a strong cash position and no debt.

These results are the outcome of a strategy designed to create value across precious metals cycles: a focus both on operational excellence in maximising current assets, and on delivering long-term growth through ore reserve replacement and expansion into new projects.

We have a strong foundation upon which to deliver on this commitment to stakeholders:

· Leadership: The Fresnillo Group is the world's leading primary silver producer and Mexico's second largest gold producer. Among our global precious metals peers, we are ranked in the lowest quartile on the cash cost curve. Leadership is also an attribute exemplified on the ground through our people. The Group's professionals make a substantial difference in where we choose to explore, how prospects are evaluated, the pace at which projects are developed, the efficiency with which we operate our assets, and the effectiveness of our administrative processes.

· Quality: We have world-class, low-cost precious metal assets, including the largest silver mine in the world. At 31 December 2009 we had double-digit reserve life at all our mines and attributable reserves of 374.0 million ounces of silver and 4.3 million ounces of gold. This is an indication of the quality of our mine development and exploration efforts.

· Sustainable growth: We have an extensive portfolio of high-quality exploration projects and prospects, along with the largest land position for precious metals exploration and mining in Mexico. In 2009 we again extended mineralisation at all advanced exploration prospects and further consolidated our mining districts. At 31 December 2009, total attributable resources included 1,289.0 million ounces of silver (2008: 1,115.4 Moz) and 13.9 million ounces of gold (2008: 12.0 Moz). Our aim is to deliver one new mine or mine expansion a year for the next four years, starting with Soledad-Dipolos.

These attributes are backed up by our commitment to sustainable development. We have developed a comprehensive health, safety and environmental management system that integrates personnel training and development. In addition, we invest in conservation and biodiversity efforts and closely collaborate with communities to ensure that our growth is truly sustainable.

Operating and financial results

In 2009 we delivered strong performance and made progress across all our KPIs. Attributable silver production achieved a new record, rising 8.8% over 2008 to 37.9 million ounces. This was largely as a result of an increase in ore volumes milled at Fresnillo, higher metal contents extracted from the development works at Saucito, and higher silver ore grade at Ci?ga.

Attributable gold production surpassed our expectations, rising 4.9% to 276,584 ounces. Greater throughput at Herradura and Fresnillo helped compensate for the lower average gold ore grade at Ci?ga. Total gold production at Herradura reached an all-time record with 259,839 ounces. Production at Ci?ga has now been stabilised at approximately 100,000 ounces per year; furthermore, a capacity expansion project was approved for 2010 with higher production expected in 2011.

Lead and zinc production, by-products of the Fresnillo and Ci?ga mines, declined 3.0% and 13.3% against 2008, respectively, due to lower grades at Ci?ga.

Market conditions and metals prices evolved favourably over the course of the year. By the second half of 2009, gold staged a remarkable rally and rose to new historic levels, while silver largely recovered the ground it had lost at year-end 2008. For 2009 as a whole, the market price for gold averaged US$972.98 per ounce, compared to US$871.71 per ounce in 2008, while the average market silver price was US$14.67 per ounce, compared to US$14.99 per ounce in 2008.

A number of input costs were higher in the year when compared to 2008, particularly drilling steel, sodium cyanide and tyres, but the average 21.4% devaluation of the Mexican peso against the US dollar meant that costs denominated in pesos, representing approximately 70% of total production costs, were significantly reduced when converted to US dollars. Combined with greater ore throughput, this served to decrease costs per tonne at all three operating mines. We also worked more efficiently this year, as measured in total equivalent silver ounces produced per person.

Our financial performance reflected the combination of higher average metal prices, excellent operational results and lower costs per tonne. Adjusted revenues, which exclude treatment and refining charges and hedging results, rose 12.4% in the year. Total revenues increased to US$849.9 million, 18.0% higher than at 31 December 2008. EBITDA rose to US$496.6 million, with a significant expansion in the margin from 46.8% in 2008 to 58.4% in 2009. Net profit attributable to shareholders, prior to Silverstream revaluation effects, was US$308.0 million, 140.8% higher than in 2008.

There was a 65-day labour strike at the lead-silver refinery of our customer Met-Mex Pe?s1, where under contract all products from our mines are shipped under contract. During this strike we managed to export part of our concentrates, precipitates and dore at similar terms with no major financial impact.

Fresnillo plc has no bank debt, and as at 31 December 2009 a cash position of US$312.2 million, 47.3% above the 2008 figure, which shows a continued strengthening of our balance sheet.

1 Since 2006 the primary products from the Group*s mines, silver- and gold-rich lead and zinc concentrates and dore have been sold to the Pe?s Group*s refining and smelting facility at Torr?, operated by Met-Mex Pen? S.A. de C.V. (Met-Mex) under a series of supply agreements.

Investing in productivity and cost controls

At Fresnillo, we constructed a water treatment plant to treat sewage from the city of Fresnillo. Instead of utilising fresh water from aquifers, the flotation plants at Fresnillo and Saucito will use treated water, which brings environmental benefits to the community and reduces our fresh water consumption costs. Construction was completed in 2009 and the plant is now fully operational. We are also constructing a new shaft to extract mineral from the western zone of the San Carlos vein and reduce haulage costs. The first stage of the project, expected to be completed in 1H 2011, is progressing according to schedule.

At Ci?ga, we completed the optimisation of the leaching circuit by the year end. We have already begun to see an improvement in recoveries, which were further enhanced with the Knelson gravimetric concentrator that started operations in September. The sinking of the shaft at Ci?ga a further 300 metres is progressing according to schedule and should be concluded in 2H 2011; this project will enable us to gain access to deeper ore reserves. In addition, an increase in milling capacity from 755,000 tpy to 930,000 tpy was approved at an investment of US$24.9 million, which will increase average production to 110,000 ounces of gold per year; this project will commence in 1H 2011.

At Herradura, the expansion of the beneficiation plant to increase the flow from 1,200 m3 to 1,600 m3 per hour was completed at year end, allowing us to maintain production above 250,000 ounces of gold per year. In addition, the laboratory was expanded to receive samples from Soledad-Dipolos and included the installation of an automated sampler system. We concluded construction of the seventh leaching pad in 2009 and began work on the eighth, and acquired new mobile equipment to enhance productivity.

Delivering growth

Our pipeline of organic growth includes two development projects and a number of advanced and long-term exploration prospects.

Construction was completed at Soledad-Dipolos in December 2009, ahead of schedule and within budget. This project will be an operating mine in 2010, with commercial production having started in January 2010. Total annual gold production is expected to be 100,000 ounces, increasing to approximately 130,000 ounces in the following years with an investment of US$34.0 million in mobile equipment and leaching pads.

At Saucito, the pre-feasibility study for the first phase of the project was approved in August 2009 with total capital expenditure of US$309.0 million. Mining operations at this world-class silver deposit are scheduled to begin in 2011, with expected first year production levels of 4.7 million ounces of silver and 22,500 ounces of gold gradually ramping up by the third year of operations to approximately 9.0 million ounces of silver and 45,000 ounces of gold. In 2009, 735,744 ounces of silver and 2,880 ounces of gold were obtained from the development works at Saucito and processed at the Fresnillo mill.

Results from exploration activities during the year were very encouraging:

· 173.6 million ounces of silver added to the resource base (+15.6%)
· 1.9 million ounces of gold added to resource base (+15.8%)

Of particular note was the preliminary confirmation of ore resources at Noche Buena. We have accelerated the exploration programme in 2010 in order to determine whether a pre-feasibility study should be conducted.

In addition to organic growth, we also evaluate potential acquisitions on an ongoing basis. These targets must meet strict operational requirements and value creation criteria. In 2009 we evaluated a number of potential acquisitions, none of which were considered to be in the best interests of shareholders.

Nonetheless, we are optimistic about new opportunities for growth and remain open to potential acquisition opportunities that may arise if they are value accretive to our shareholders and comply with our strategic and financial return criteria. We will commence exploration activities in Peru, which has a rich mining tradition and significant potential for precious metals, having incorporated Fresnillo Per?2009.

Commitment to sustainable development

Health, safety, environment and community relations programmes are an integral part of the Group's activities. I am pleased to report another improvement in safety performance: once again zero fatalities, and an improvement in safety indices.

Our adherence to domestic and international standards of environmental performance is evidenced by ISO 14001 certification at all mines and exploration offices. In addition, Herradura completed the certification process for adherence to the International Cyanide Management Code, and we initiated the process at Ci?ga.

We continue to enjoy excellent relations with our personnel. Annual labour negotiations concluded with the agreement of a 6% wage increase, 1% increase in fringe benefits and a one-time bonus of 1% of base salary for 2009. Community investments this year included education programmes and sponsorship of athletic teams, arts and culture.

Efforts to protect biodiversity are considered within our operations planning process, including investments in nursery management, reforestation and conservation efforts. In 2009 Fresnillo plc became a founding member of the Corporate Commitment to Wilderness. This is an initiative of the WILD Foundation, an international non-profit organisation dedicated to wilderness protection around the world. The Company also endorsed the Copenhagen Communiqu?an initiative of the Prince of Wales' Corporate Leaders Group on Climate Change.

Outlook

While we are not insulated from continued volatility in the global economy, I am confident that the Group is well-positioned to consolidate its leadership in the global precious metal industry. We remain focused on increasing productivity, reducing costs, expanding the resource and reserve base, and strengthening our growth pipeline in support of our strategy to create ongoing and sustainable value to all our stakeholders.

Specifically, we expect:

· Silver production to remain in line with 2009 levels

· Attributable gold production to rise 20% reflecting the contribution from recently completed Soledad-Dipolos mine

· Completion of expansion at Ci?ga and plant infrastructure at Saucito

· A 58% increase in the exploration budget to US$77.6 million

· Decision on whether to conduct a pre-feasibility study at Noche Buena

· Stable ore grades

· Continued improvement in safety indices

In closing, I would like to extend my gratitude to our Chairman and Board members for their continued support and oversight this year. As the Group enhances its international profile, their guidance is vital. To my fellow executives and employees, thank you for your dedication to quality and sustainable growth. I am proud to be a member of the Fresnillo plc team.

Jaime Lomel Chief Executive Officer

Finance review

The Consolidated Financial Statements of Fresnillo plc are prepared in accordance with International Financial Reporting Standards (IFRS). This review is intended to convey the main factors affecting performance and to provide a detailed analysis of the financial results in order to facilitate understanding of the Group's financial statements. Management recommends reading this review in conjunction with the Financial Statements and their accompanying Notes.

Commentary on financial performance

Despite the global economic crisis, the volatility in commodity prices and significant cost pressures experienced in 2009, Fresnillo plc generated strong financial results.

The effective execution of our strategy, including cost control efforts, combined with favourable external factors such as higher metal prices and a weakening Mexican peso against US dollar helped drive the increase in total revenues, gross profit, EBITDA and operating profit in 2009. These positive factors were partially offset by higher average unit costs from a number of key mining inputs such as reagents, tyres and steel for drilling, which contrary to expectations, did not decline until late in the year. Key line items of the Income Statement are shown below:

(US$ millions)
2009 2008 % Change
Revenues 849.94 720.48 18.0
Cost of sales (321.63) (299.87) 7.2
Gross profit 528.32 420.61 25.6
Exploration expenses 49.06 53.48 (8.3)
EBITDA 496.62 337.36 47.2
Profit before income tax 457.42 267.36 71.1
Income tax expense 99.15 114.58 (13.5)
Profit for the year 358.27 152.78 134.5
Profit for the year, excluding post tax 344.30 152.78 125.4

Silverstream revaluation effects
Attributable profit 322.01 127.95 151.7
Basic and diluted earnings per share (USD/share)1 0.449 0.186 141.3
Adjusted basic and diluted earnings per share 0.430 0.186 131.2%

(USD/share)2

1 The weighted average number of ordinary shares for 2009 was 717,160,159. For 2008, 687,688,000 ordinary shares were considered for the EPS calculation. (See note 12 in the Consolidated Financial Statements).

2 Adjusted basic and diluted earnings per share reflect profit in the year attributable to equity shareholders of the company adjusted to exclude Silverstream revaluation effects in the year.

Fresnillo's financial results are highly dependent on the performance of our operating assets and thus management's decision-making and execution capabilities. However, there are certain variables which are beyond the Group's control that have a material impact on its financial statements. A description of these external factors, and their impact on results, is provided below.

Precious metal prices

Silver and gold prices are the most significant variable impacting the financial statements, as approximately 94% of Fresnillo's revenues come from these metals. The average realised price of silver in 2009 was US$15.273 per ounce, an increase of 3.8% year-over-year. The average realised gold price increased by 12.5% year-on-year to US$988.94 per ounce. These increases benefited the Group's annual financial results. The Group remains fully exposed to movements in the underlying metals prices as a result of our strategy of not hedging silver and gold production.

Foreign exchange rates

The average spot exchange rate for 2009 was MXN13.52 per US dollar, compared with MXN11.14 per US dollar in 2008, representing an average devaluation of 21.4%. As a result, the Group's production costs decreased when compared to 2008, as costs denominated in Mexican pesos (approximately 70% of total costs) were lower when converted to US dollars.

The Mexican peso-US dollar spot exchange rate at 31 December 2009 was MXN13.06 per US dollar, which compared to the exchange rate at the beginning of the year of MXN13.54 per US dollar, a revaluation of 3.5% that had an aggregate adverse effect on peso- denominated monetary assets and liabilities which are valued at the year-end spot rate. Additionally, the US dollar devalued against sterling by 9.10%, generating a foreign exchange gain from our cash position in sterling. The net foreign exchange gain in the year compared favourably against the significant foreign exchange loss incurred in 2008, which was generated as a result of the strengthening of the US dollar against both MXN and sterling.

Under Mexican tax legislation, Fresnillo pays taxes on the basis of results prepared in accordance with Mexican accounting standards (GAAS) which are denominated in Mexican pesos. This results in different exchange effects for tax purposes to those reported under IFRS and can therefore cause significant differences between the effective tax rate under IFRS and the statutory Mexican tax rate.

Inflation of key operating materials

The average unit price of key operating materials remained high throughout the year, limiting profit margin growth. The unit prices for some key inputs such as steel balls for milling and explosives decreased slightly in the first quarter of 2009 following record levels in the second half of 2008. However, the average unit prices of these inputs in 2009 continued to be at higher levels than in the previous year and it was not until the last two months of 2009 when input prices began to decline year-on-year. As a result, the net increase in the weighted average input cost over the year was 1.0%.

Year over year change
Steel balls for milling (14.7%)
Steel for drilling 4.8%
Explosives (5.8%)
Tyres 6.2%
Reagents 10.6%
Weighted Average 1.0%

Electricity

The Group's average cost of electricity decreased by 14.9% when compared to 2008. The lower rates charged by Comisi?ederal de Electricidad, the national utility, reflected the Mexican Government's initiative to reduce electricity to control inflation. However, electricity prices are expected to increase as economic conditions improve during 2010.

Treatment and refining charges

Treatment and refining charges are determined annually using international benchmarks. The treatment charge per tonne of lead and zinc concentrates, including the escalator, decreased by 29.7% and 20.8% respectively when compared to 2008. However, these reductions were partially offset by a 23.5% increase in the refining charges per ounce of silver, which represented 52.2% of total treatment and refining charges. As a result, treatment and refining charges, which are deducted from adjusted revenues for the purposes of revenues as disclosed in the income statement, decreased by 5.8% in 2009 compared to 2008.

Revenues

CONSOLIDATED REVENUES

(US$ millions)

Change
2009 2008 Amount %
Adjusted revenue13 943.96 839.60 104.35 12.4
Treatment and refining charges (69.23) (73.52) 4.29 (5.8)
Hedging losses (Pre-IPO)24 (25.02) (45.60) 20.58 (45.1)
Hedging gains 0.23 0.00 0.23 N/A
Revenues 849.94 720.48 129.46 18.0

13 Adjusted Revenue is revenue as disclosed in the income statement adjusted to exclude hedging effects and treatment and refining charges.

24 Derivatives terminated prior to the IPO in 2008.

Adjusted revenue increased by 12.4% to US$944.0 million in 2009. The higher average realised silver and gold prices contributed 60% of the favourable US$104.4 million movement, whilst the remaining 40% was explained by the increase in the volumes of silver and gold sold.

VOLUMES OF METAL IN PRODUCTS SOLD

(Year ended 31 December)

2009 2008 % Change
Fresnillo 32,921 31,485 4.6
Ci?ga 1,453 858 69.4
Herradura 302 218 38.5
Silver (KOz) 34,676 32,561 6.5
Fresnillo 20,688 20,938 (1.2)
Ci?ga 96,821 107,879 (10.3)
Herradura 245,696 216,356 13.6
Gold (Oz) 363,205 345,173 5.2
Fresnillo 9,156 7,452 22.9
Ci?ga 5,409 7,976 (32.2)
Lead (MT) 14,565 15,428 (5.6)
Fresnillo 9,521 9,248 2.9
Ci?ga 6,613 9,353 (29.3)
Zinc (MT) 16,134 18,601 (13.3)

Silver and gold adjusted revenues increased year-on-year, while their respective share of total adjusted revenues remained stable compared to 2008, as shown in the following table.

ADJUSTED REVENUES*3 BY METAL

(Year ended 31 December, US$ millions)

2009 2008 %Change
Silver 529.63 56% 479.05 57% 10.6
Gold 359.17 38% 303.54 36% 18.3
Lead 26.98 3% 30.29 4% (10.2)
Zinc 28.18 3% 26.72 3% 4.4
Total Adjusted Revenues 943.96 100% 839.60 100% 12.4

Prior to the IPO in 2008, the Fresnillo Group had used derivatives to reduce commodity price risks arising from changes in silver and gold prices. These precious metals derivative financial instruments were terminated in 2007. However, in accordance with International Accounting Standard 39 (IAS 39), the Group has deferred in equity, hedging losses that arose on these hedging instruments prior to termination, and recycles them to the income statement in line with the occurrence of the transactions to which they related. In 2009, a final non-cash charge of US$25.0 million was deducted from revenues, decreasing hedging losses from the previous year by 45.1%, and as at 31 December 2009 there are no remaining deferred losses related to the terminated gold and silver derivatives.

The Group has not entered into any new silver or gold hedging contracts, and does not intend to do so. However, it has entered derivative contracts related to the price of lead and zinc to mitigate the risks associated with the sale of these by-products. In 2009, a gain of US$0.2 million was reflected in revenues as a result of the maturity of several contracts entered into in 2008 and 2009. All derivative instruments related to the price of by-products matured in 2009 and no further contracts have been entered into for subsequent years.

Cost of sales

Cost of sales increased by 7.2% compared to 2008, while adjusted production costs, calculated as total production costs less depreciation, profit sharing and the effects of exchange rate hedging, decreased by 6.1%.

Change
2009 2008 Amount %
Adjusted production cost 209.80 223.49 (13.70) (6.1)
Depreciation 67.23 51.91 15.32 29.5
Change in work in progress 12.94 3.47 9.48 272.9
Profit sharing 24.58 21.00 3.58 17.1
Hedging 7.08 - 7.08 N/A
Cost of sales 321.63 299.87 21.76 7.2

The increase in cost of sales is explained as follows:

?Adjusted production costs decreased by US$13.7 million primarily due to the effect of the higher average spot exchange rate which benefited costs denominated in Mexican pesos when converted to US dollars. The exchange-related decrease in adjusted production costs was equivalent to US$25.5 million. By factoring out the impact of the exchange rate on the peso-denominated components for each cost category, the changes explained below reflect the estimated underlying operational and dollar-denominated unit costs changes.

Other positive aspects were:

· Operating efficiencies offset the small increase in the average unit cost of key operating materials, which resulted in a US$1.4 million benefit; and

· The cost of energy decreased by US$0.5 million, due to a 14.9% reduction in the unit cost of electricity, which more than offset the 9.5% increase in consumption at the mines related to production increases and the higher cost of diesel.

The benefit of the peso devaluation, operating efficiencies and decrease in energy costs was partially offset by the following factors:

· The cost of contractors increased by US$5.1 million mainly due to: i) an increase in development works at our operating mines, which is a key factor to ensure future production; ii) additional civil works; iii) increased volumes of ore and waste hauled; iv) rock bolting and shotcreting activities carried out with the aim of ensuring our workers' safety; and v) an average wage increase of 6.0%, in line with the increase given to union workers.
· Personnel costs, excluding profit sharing, increased by US$4.4 million as a result of an increase of 8% in salaries at our three mines, productivity bonuses, training, and an increase in the number of workers at Ci?ga.

· Maintenance and repair costs increased by US$2.8 million primarily due to higher utilisation of equipment and the consumption of additional spare parts to service the increase in equipment.

· Other costs increased by US$1.4 million, which resulted from the combination of increases in insurance, security, maintenance of workers camps and mining rights, and the reduction in freight costs.

?Depreciation: increased by US$15.3 million mainly due to the increased production volumes which affected the depletion factor, the acquisition of the Noche Buena project in December 2008 and the purchase of high-volume trucks and loaders at Herradura and in-mine equipment at Fresnillo.

?Change in work in progress: increased by US$9.5 million mainly as a result of the reduction of mineral and concentrate inventories at our mines.

?Profit sharing: increased by US$3.6 million due to higher profits at our operating mines.

?Foreign exchange hedging losses: During the first months of 2008, the average spot exchange rate was MXN10.64 per dollar. Given the high volatility environment prevailing at that time, the Group entered into exchange rate derivative instruments as part of a programme to meet its commitments contracted in Mexican pesos, such as the payment of wages and taxes, and to guarantee a fixed exchange rate should the US dollar weaken. As a result, Fresnillo plc sold forward US$60.0 million at an average rate of MXN11.17 per US dollar. However, the average spot exchange rate at maturity dates was MXN13.25 per US dollar, thus generating an exchange rate hedging loss of US$9.5 million. In 2009, the Group sold forward an additional US$16.0 million at an average rate of MXN14.68 per US dollar, which matured throughout 2009 and generated an exchange rate hedging gain of US$2.4 million as the average spot exchange rate was MXN12.81 per US dollar. The combination of the aforementioned positions resulted in a final exchange rate loss of US$7.1 million. Additionally, in 2009, the Group sold forward US$29.0 million at an average rate of MXN13.70 per US dollar with maturity dates throughout 2010. In order to assure a minimum exchange rate and at the same time benefit from a possible devaluation of the peso against the US dollar, four put options were purchased totalling US$10.0 million, at an average strike of MXN11.75 per US dollar with maturity dates in 2010.

Cost per tonne and cash cost per ounce

A key measure to evaluate the performance at our mines is the adjusted production cost per tonne.

In 2009, cost per tonne milled at Fresnillo and Ci?ga decreased by 11.4% and 6.8% respectively, whilst at Herradura cost per tonne deposited, excluding ore deposited from the Valles area, decreased by 9.8% when compared to 2008 as shown in the following table.

COST PER TONNE*5

(Year ended 31 December)

%
2009 2008 Change
Fresnillo US$/tonne milled 36.49 41.19 (11.4%)
Ci?ga US$/tonne milled 59.21 63.53 (6.8%)
Herradura US$/tonne deposited 5.44 6.03 (9.8%)

The principal driver of cost reduction across the Group was the higher MXN/US$ exchange rate, which benefited costs denominated in Mexican pesos when converted to US dollars and, to a lesser extent, the increase in volumes milled/deposited at the mines. Notwithstanding, these aspects were partially offset by increases in personnel, contractor and maintenance costs, as further described below.

Cost per tonne at the Fresnillo mine, excluding the effects of foreign exchange was negatively impacted by: i) higher contractor costs due mainly to a 14% increase in metres developed in order to prepare a larger number of production stopes, higher volumes (approximately 7%) of ore hauled through longer distances, and a 126.6% increase in shotcreting activities for safety purposes; ii) an 8.0% increase in wages and fringe benefits as a result of the negotiations with the union; iii) increase in maintenance and repair costs derived principally from the intensive use of equipment; and iv) a 17.0% increase in insurance fees and mining concessions. These increases were offset by the devaluation effect, higher ore milled and the lower cost of electricity and operating materials, which resulted from the decrease in the unit price of steel balls for the mill and explosives. Fresnillo's cash cost6 decreased by 10.6% from US$3.77 per silver ounce in 2008 to US$3.37 in 2009.

Cost per tonne at Ci?ga, excluding the effects of foreign exchange was affected by: i) higher personnel costs due to a 6.4% increase in the number of workers and the 8.0% increase in wages and fringe benefits; ii) increased maintenance costs of scoops and loaders, as a result of the intensive use of equipment that supported the increase in production; iii) higher contractor costs due to an increase of 67.5% in development (10,000 additional metres), aiming to prepare a larger number of production stopes, and civil works carried out at the plant and mining village. These increases were offset by the devaluation effect and the increased ore milled. Ci?ga's cash cost6 decreased by 28.1% (US$190.6 per gold ounce in 2009 vs US$264.9 per gold ounce in 2008), which was achieved as a result of the increased silver revenues credited to the total cash cost. The higher revenues of this by-product were obtained due to both the increased price of silver and volume sold during 2009.

Cost per tonne at Herradura, excluding the effects of foreign exchange was impacted by the following factors: i) an 8.0% increase in wages and fringe benefits and training; ii) higher costs of operating materials principally resulting from the increase in unit price and consumption of sodium cyanide used to improve recovery rates, and the increased consumption of tyres at higher unit costs derived from the more intensive use of equipment and the acquisition of bigger trucks; and iii) increase in maintenance costs as a result of additional equipment and purchase of spare parts. These increases were offset mainly by the devaluation effect and the higher ore deposited. In 2009, Herradura's cash cost decreased from US$397.5 per gold ounce in 2008 to US$358.9 per gold ounce in 2009, a reduction of 9.8%.

Gross profit

Gross profit, before hedging gains and losses for each mine, is an important financial indicator continuously monitored by management to measure the performance of each business unit and the Group as a whole. In 2009, gross profit, adjusted to exclude hedging gains and losses, increased by 20.1% compared to the previous year mainly due to steady results obtained at Ci?ga and record profits achieved at Fresnillo and Herradura.

Specifically, the Ci?ga mine maintained its contribution to the Group's gross profit excluding hedging effects as a result of the higher ore milled and the significant increase in silver ore grade, which compensated for the lower gold ore grade extracted. Although in 2009 the Fresnillo mine reduced its contribution to the gross profit excluding hedging effects, it remained the largest contributor to the increase in the year. Finally, Herradura's contribution increased from 18.9% in 2008 to 22.9% in 2009 due to higher production of gold resulting from the increase in ore deposited and better recovery rates, which led to a record gross profit.

CONTRIBUTION BY MINE TO THE GROUP'S GROSS PROFIT EXCLUDING HEDGING GAINS AND LOSSES

(US$ millions) Change
2009 2008 Amount %
Fresnillo 366.17 65.4% 323.44 69.4% 42.73 45.7% 13.2
Ci?ga 65.30 11.7% 54.55 11.7% 10.75 11.5% 19.7
Herradura 128.38 22.9% 88.31 18.9% 40.07 42.8% 45.4
Total for operating mines 559.85 100.0% 466.30 100.0% 93.55 100.0% 20.1
Other subsidiaries 0.33 (0.09) N/A N/A
Total 560.18 466.21 93.97 20.2

6 Cash cost per ounce is calculated as total cash cost (cost of sales plus treatment and refining charges less depreciation) less revenues from by-products divided by the silver or gold ounces sold.

Administrative expenses

Until May 2008, administrative expenses included a trademark royalty paid by the Fresnillo Group to Industrias Pe?s which is no longer payable. Between 1 May 2008 and 31 October 2009, administrative fees were paid to Servicios Industriales Pe?s SA de CV under the Transitional Services Agreement (TSA) which has subsequently been replaced by a new the New Services Agreement. Under this new agreement, an annual fee of US$27.6 million is payable, a reduction as compared to the annual fee of US$34.0 million that was payable under the TSA. The combined effect of these changes was the main reason for the reduction in administrative expenses of US$31.8 million. The aforementioned decrease was partially offset by the increase in legal and advisory fees related to evaluations of potential acquisitions.

Exploration expenses

Exploration expenses for 2009 totalled US$49.0 million, which were mainly incurred in exploration programmes aimed at increasing resources and reserves at our three operating mines, confirming and increasing resource estimates at the Soledad-Dipolos, Noche Buena and Saucito projects, and continuing drilling at the San Juli?and Orisyvo prospects. However, exploration expenses decreased by 8.3% compared to the US$53.5 million incurred in 2008 mainly due to the more intensive exploration phase which took place at the Soledad- Dipolos project in the previous year.

BUSINESS UNIT / PROJECT Exploration expenses Capitalised expenses

(US$ millions)

Herradura (Soledad - Dipolos) 13.50 0.00
Fresnillo 8.00 0.00
Ci?ga 11.80 0.00
Saucito 0.00 3.90
Juanicipio 0.00 3.50
San Juli 5.90 0.00
Orisyvo 3.30 0.00
San Juan 0.90 0.00
San Nicol 0.80 0.00
Guachichil 0.80 0.00
Guanajuato 0.50 0.00
Others 3.60 0.00
TOTAL 49.10 7.40

EBITDA

EBITDA, which is calculated as gross profit as reflected in the income statement plus depreciation less administrative and exploration expenses, is a key indicator of the Group's financial performance. In 2009, EBITDA achieved a new record level of US$496.6 million, representing an increase of 47.2% year-on-year. Similarly, the EBITDA margin rose from 46.8% in 2008 to 58.4% in 2009.

EBITDA & EBITDA MARGIN

(Year ended 31 December, US$ millions)

2009 2008 % Change
Gross Profit 528.32 420.61 25.6%
+ Depreciation 67.23 51.91 29.5%

Silverstream revaluation effects

The Silverstream Contract is accounted for as a derivative financial instrument, which is carried at fair value. In 2009, the fair value of this instrument increased by US$19.4 million, with a corresponding non-cash gain recognised in the income statement. Further information related to the Silverstream Contract is provided in the Balance Sheet section and in the Notes to the Consolidated Financial Statements.

Foreign exchange

The foreign exchange result is caused by the conversion of monetary assets and liabilities denominated in foreign currencies. A foreign exchange gain of US$9.5 million was recognised in the income statement mainly as a result of the weakening of the US dollar against sterling, which affected the cash position denominated in sterling. In contrast, a loss of US$14.6 million was recorded during 2008 mainly as a result of the devaluation of sterling against the US dollar.

Taxation

Income tax expense for 2009 was US$99.1 million, 13.5% lower compared to the previous year. The effective tax rate was 21.7%. A significant factor in the reduction from 2008 was that Minera Fresnillo purchased the San Juli?project from the subsidiary exploration company Exploraciones Minera Parre?t market value. In accordance with Mexican tax legislation, the acquisition of a project can be deducted from the company's income, which thus significantly decreased the taxable profit of Minera Fresnillo, whilst Exploraciones Minera Parre?as able to utilise tax losses brought forward from previous years which originally were not recognised as a deferred tax asset. Other factors which contributed to the lower income tax expense were the inflationary adjustments and certain tax credits. In addition, a foreign exchange loss was recorded in the income statement under Mexican GAAS, as set out above, which lowered the Group's taxable profits. This loss was caused by the 3.5% revaluation of the Mexican peso-US dollar exchange rate which affected the Group's cash and other monetary assets and liabilities denominated in US dollars, the most significant of which being the Silverstream Contract and cash and cash equivalents.

Profit for the year

Profit for the year increased significantly from US$152.8 million to US$358.3 million, a 134.5% increase year-on-year. Despite the 46.0% increase in minority interest, profit attributable to the shareholders of the Group increased by 151.7% from US$128.0 to US$322.0 million in 2009.

Adjusted profit for the year, being profit for the year adjusted to exclude the effects of the revaluation of the Silverstream Contract, increased by 125.4% from US$152.8 in 2008 to $344.3 million in 2009.

Cash flow

A summary of the key line items in the cash flow is set out below:

CASH FLOW KEY LINE ITEMS

Year ended 31 December (US$ millions)

Cash generated by operations before changes in working 548.8 405.8

capital
(Increase) / Decrease in changes in working capital (37.8) 129.6
Net cash from operating activities 390.7 414.7
Purchase of property, plant & equipment (250.4) (185.0)
Silverstream Contract 39.0 31.7
Dividends (93.6) (42.2)
Shares issued and paid - 901.1
Distribution to shareholders - (406.7)
Net increase in cash during the period 92.6 226.9
Cash year end 312.2 212.0

Cash generated by operations before changes in working capital increased by 35.2% to US$548.8 million in 2009 as a result of the higher profits derived from the increase in precious metal prices and solid performance at the operating mines. However, there was a US$37.8 million increase in working capital due to higher prices and volumes sold, which increased trade receivables by year-end. The above effects resulted in a 5.8% decrease in cash flow from operating activities after changes in working capital, to US$390.7 million. Another important source of funds was the US$39.0 million received in proceeds under the Silverstream Contract. The use of these funds included the purchase of property, plant and equipment (US$250.4 million). Investments in these items are further described below:

PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

(US$ millions)

Herradura mine 64.8 Expansion of the Centauro pit, purchase of hydraulic
shovel and high-volume trucks, construction of leaching
pads and acquisition of surface land
Ci?ga mine 41.7 Mine development, mining works, optimization of the
leaching circuit, sinking of the shaft and purchase of
land
Fresnillo mine 34.6 Mine development and construction of the San Carlos
shaft and the sewage water treatment plant
Soledad & Dipolos 57.7 Pre-production stripping activities, construction of the
mine and of the first leaching pad
Saucito project 39.1 Equipment for the shafts and mining works
San Juli?project 5.0 Construction of exploration ramp
Juanicipio project 3.5 Diamond drilling expenses
Others 4.0 La Parre?xploration and SAFSA
Total Purchase of property, 250.4

plant and equip.

Additionally, dividends paid in 2009 totalled US$93.6 million, of which US$55.8 million corresponded to the final dividend of 2008, and the remaining US$37.8 million to the payment of the 2009 interim dividend.

After considering all the sources and uses of funds, there was a net increase of US$92.6 million in cash and cash equivalents during the year which, when combined with the US$212.0 million balance at the beginning of the year and the favourable effect of the exchange rate of US$7.6 million, resulted in a net cash position of US$312.2 million as at 31 December 2009.

Going Concern

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In making this assessment they have considered the Company and Group budget, the cashflow forecasts and reviewed the availability of banking facilities to the Group. For this reason they continue to adopt the going concern basis in preparing the Financial Statements.

Balance sheet

The Group has a strong balance sheet with no bank debt.

Cash and cash equivalents as of 31 December 2009 increased by 47.3% compared to the cash position at year-end 2008 to $312.2 million due to the factors described in the cash flow section.

The increase in trade and other receivables was mainly caused by the rise in metal prices during the last months of the year, and recoverable taxes.

Fresnillo plc is entitled to receive all of the proceeds in respect of the payable silver produced at the Sabinas mine under the Silverstream Contract. This contract is accounted for as a derivative financial instrument, with all payments received being credited against the carrying value of the asset. The change in the value of the Silverstream derivative from US$318.3 million at the beginning of the year to US$298.7 million at the year-end reflects cash proceeds received of $39.0 million offset by a revaluation effect of $19.4 million which is a non-cash gain reflected in the Group income statement.

The net book value of property, plant and equipment was US$688.7 million at 31 December 2009, an increase of 38.3% when compared to 2008. The main additions underlying this increase were development works including the construction of the Soledad-Dipolos project, acquisition of new equipment at the mines, purchase of land and several leaching circuit optimisation projects carried out at the Ci?ga and Herradura mines.

Dividend The final dividend will be approved at the next board meeting, scheduled for 28 April, and communicated thereafter to shareholders. It is intended that it will be paid following the AGM in line with the previous year, and the exact date together with the record date for entitlement will be communicated at the same time as the amount. The dividend will be in line with the company's stated dividend policy.

Directors

The names and functions of the directors and senior management team of Fresnillo plc are as listed in the Fresnillo Group's Annual Report for 2008. A list of current directors is maintained on the Group website: www.fresnilloplc.com.

Responsibility Statement of the Directors

I confirm on behalf of the Board that to the best of my knowledge;

a) the financial statements 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 Management Report includes a fair review of the development and performance of the business, and the principal risks and uncertainties that they face.

For and on behalf of the Board

Jaime Lomel

Chief Executive Officer

1 March 2010

Forward looking statements

This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and the silver and gold industries. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.

Forward-looking statements are not guarantees of future performance and the actual results of the Group's operations, financial position and liquidity, and the development of the markets and the industry in which the Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial position and liquidity, and the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar and Mexican peso exchange rates), the Group's ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, changes in its business strategy, political and economic uncertainty.

Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this document speak only as of the date of this document, reflect the Group's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's operations, results of operations, growth strategy and liquidity. Investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules or applicable law, the Group explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this document that may occur due to any change in the Group's expectations or to reflect events or circumstances after the date of this document.

Consolidated Income Statement

Note Year ended 31December

(US$ thousands)

Continuing operations:
Revenues 4 849,944 720,483
Cost of sales 5 (321,629) (299,872)

Gross profit 528,315 420,611
Administrative expenses (49,867) (81,679)
Exploration expenses (49,063) (53,483)
Other income 3,873 5,901
Other expenses (4,502) (7,769)

Profit from continuing operations before 428,756 283,581

net finance costs and income tax
Finance income 1,664 8,861
Finance costs (1,901) (10,515)
Revaluation effects of Silverstream 19,401 -

contract
Foreign exchange gain/(loss) 9,498 (14,570)

Profit from continuing operations before 457,418 267,357

income tax
Income tax expense (99,151) (114,577)

Profit for the year from continuing 358,267 152,780

operations Attributable to:
Equity shareholders of the Company 322,011 127,949
Minority interest 36,256 24,831

358,267 152,780

Earnings per share: (US$)
Basic and diluted earnings per ordinary share from continuing 7 0.449 0.186

operations

Adjusted earnings per share: (US$)
Adjusted basic and diluted earnings per ordinary share from 7 0.430 0.186

continuing operations

Consolidated Statement of Comprehensive Income

(US$ thousands)
Profit for the year 358,267 152,780
Net loss on cash flow hedges recycled to 34,038 45,602

income statement
Tax effect of cash flow hedges recycled to (9,531) (12,768)

income statement
Net unrealised gain/(loss) on cash flow 3,918 (11,659)

hedges
Tax effect of unrealised gain/(loss) on cash (1,122) 3,264

flow hedges
Net effect of cash flow hedges 27,303 24,439
Fair value gain/(loss) on available-for- sale 22,880 (25,533)

financial assets
Tax effect of fair value gain/(loss) on (6,407) 7,149

available-for-sale financial assets
Impairment of available-for-sale financial - 4,936

assets taken to income
Tax effect of impairment of - (1,382)

available-for-sale financial assets taken to income
______________ ___________
Net effect of available -for-sale financial 16,473 (14,830)

assets
Foreign currency translation 292 (1,276)

Other comprehensive income for the period, 44,068 8,333

net of tax
Total comprehensive income for the period, 402,335 161,113

net of tax Attributable to:
Equity shareholders of the Company 366,079 136,282
Minority interest 36,256 24,831

402,335 161,113

Consolidated Balance Sheet

Year ended 31 December

(US$ thousands)

Non-current assets
Property, plant and equipment 688,718 497,844
Available-for-sale financial assets 68,435 45,530
Silverstream contract 256,059 286,968
Deferred tax asset 9,363 3,161
Other assets 504 185

1,023,079 833,688

Current assets
Inventories 33,783 38,639
Trade and other receivables 108,242 81,495
Derivative financial instruments 1,373 2,409
Prepayments 1,912 1,894
Silverstream contract 42,600 31,300
Income tax refunds due 20,167 *
Cash and cash equivalents 312,192 211,985

520,269 367,722

Total assets 1,543,348 1,201,410

Capital and reserves attributable to shareholders of the Company
Share capital 358,680 358,680
Share premium 818,597 818,597
Capital reserve (526,910) (526,910)
Net unrealised gains/(losses) on cash flow 895 (26,408)

hedges
Net unrealised gains/(losses) on 12,266 (4,207)

available-for-sale financial assets
Foreign currency translation reserve (1,095) (1,387)
Retained earnings 513,691 285,195

1,176,124 903,560
Minority interest 126,979 89,832

Total equity 1,303,103 993,392

Non-current liabilities
Provision for mine closure cost 35,513 18,951
Provision for pensions and other 5,811 3,499

post-employment benefit plans
Other liabilities 4,811 4,552
Deferred tax liability 119,944 91,395

166,079 118,397

Current liabilities
Trade and other payables 48,286 42,665
Derivative financial instruments 95 14,068
Income tax - 15,259
Employee profit sharing 25,785 17,629

74,166 89,621

Total liabilities 240,245 208,018

Total equity and liabilities 1,543,348 1,201,410

Consolidated Cash Flow Statement

Note Year ended 31 December

(US$ thousands)
Net cash from operating activities 10 390,712 414,666

Cash flows from investing activities
Purchase of property, plant and (250,447) (185,024)

equipment
Purchase of available-for-sale (25) (39,752)

financial assets
Proceeds from the sale of property, 1,044 16,057

plant and equipment and other assets
Loans granted to related parties - (321,538)
Proceeds from repayment of loans - 353,980

granted to related parties
Silverstream contract 39,010 31,732
Interest received 1,665 8,861
Other proceeds 3,526 5,030

Net cash used in investing activities (205,227) (130,654)

Cash flows from financing activities
Loans granted by related parties - 782,652
Repayment of loans granted by related - (1,238,102)

parties
Capital contribution 891 2,118
Dividends paid (93,623) (42,203)
Shares issued and paid pursuant to the - 901,081

Global Offer
Transaction costs associated with - (46,597)

issue of shares
Distribution to equity shareholders of - (406,718)

the Group
Interest paid (105) (9,319)

Net cash used in financing activities (92,837) (57,088)

Net increase in cash and cash 92,648 226,924

equivalents during the year
Effect of exchange rate on cash and 7,559
cash equivalents (19,741)
Cash and cash equivalents at 1 January 211,985 4,802
,
Cash and cash equivalents at 31 312,192 211,985

December

Consolidated Statement of Changes in Equity
Attributable to equity holders of the Company
Share Share Capital reserve Net unrealised gains/ Unrealised Foreign Retained Total Minoriry Total
capital premium (losses) on gains/ currency earnings interest equity
revaluation of (losses) on translation
cash flow available reserve
hedges for sale
financial
assets
(US$ thousands)
Balance at 1 January 2008 634,270 - (526,910) (50,847) 10,623 (111) 293,133 360,158 62,883 423,041

Profit for the year - - - - - 127,949 127,949 24,831 152,780
Other comprehensive income/(loss), net of tax - - - 24,439 (14,830) (1,276) - 8,333 - 8,333

Total income and expense for the year - - 24,439 (14,830) (1,276) 127,949 136,282 24,831 161,113
Capital contribution - - - - - - - 2,118 2,118
Issue of share capital 100 - - - - - (100) - - -
Capital reduction (317,135) - - - - - 317,135 - - -
Distribution to equity shareholders of the Company - - - - - (410,719) (410,719) - (410,719)
Dividends paid - - - - - (42,203) (42,203) - (42,203)
Shares issued as part of Global Offer, net of 41,445 818,597 - - - - - 860,042 - 860,042

transaction costs
Balance at 31 December 2008 358,680 818,597 (526,910) (26,408) (4,207) (1,387) 285,195 903,560 89,832 993,392

Balance at 1 January 2009 358,680 818,597 (526,910) (26,408) (4,207) (1,387) 285,195 903,560 89,832 993,392

Profit for the year - - - - - - 322,011 322,011 36,256 358,267
Other comprehensive - - - 27,303 16,473 292 - 44,068 - 44,068

income/(loss), net of tax
Total income and expense for - - - 27,303 16,473 292 322,011 366,079 36,256 402,335

the year
Capital contribution - - - - - - - - 891 891
Dividends paid - - - - - - (93,515) (93,515) - (93,515)

Balance at 31 December 2009 358,680 818,597 (526,910) 895 12,266 (1,095) 513,691 1,176,124 126,979 1,303,103

Notes to the Consolidated Financial Statements

1 Corporate Information

Fresnillo plc ("the Company") is a public limited company and registered in England and Wales and is the holding company for the Fresnillo subsidiaries detailed below ("the Group").

On 14 May 2008 the Company's shares were admitted to the Official List of the United Kingdom Listing Authority ("UKLA") and to trading on the main market of the London Stock Exchange (this process being referred to as "the Global Offer" or the "Initial Public Offering", ("IPO")).

Pe?s S.A.B. de C.V.("Pe?s") currently owns 77 percent of the shares of the Company and the ultimate controlling party of the Company is the Baill?s family, whose beneficial interest is held through Pe?s. Copies of Pe?s' accounts can be obtained from www.penoles.com.mx.

In preparation for the Global Offer, Pe?s conducted a reorganisation, which completed on 18 April 2008, whereby the companies comprising the precious metals mining business of Pe?s were reorganised under the Company (the "Pre-IPO Reorganisation").

The consolidated financial statements of the Group for the year ended 31 December 2009, were authorised for issue by the Board of Directors of Fresnillo plc on 1 March 2010. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

The audited financial statements will be delivered to the Registrar of Companies in due course.

The financial information contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

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. The Group has three fully developed operating mines: Fresnillo, Herradura and Ci?ga, and has completed the development of a fourth, Soledad-Dipolos during 2009.

2 Significant Accounting Policies
(a) Basis of preparation and statement of compliance
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the years ended 31 December 2009 and 2008, and in accordance with the provisions of the Companies Act 2006. The Consolidated financial statements are also consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Company became the holding company for the Group pursuant to the Pre-IPO Reorganisation completed 18 April 2008, as detailed in Note 1. As this was a reorganisation of businesses under common control, the pooling of interests method of accounting has been applied in the presentation of the consolidated financial statements for the year ended 31 December 2008 which presents the results of the Group's businesses as if the Company had always been the holding company.

The consolidated financial statements have been prepared on a historical cost basis, except for, derivative financial instruments, available-for-sale financial instruments and defined benefit pension scheme assets which have been measured at fair value.

The consolidated financial statements are presented in US dollars (US$) and all values are rounded to the nearest thousand ($000) except when otherwise indicated.

(b) Changes in accounting policies and presentation rules

The accounting policies applied are consistent with those applied in the preparation of the consolidated financial statements for the year ended 31 December 2008 except for the adoption of certain new standards, amendments and interpretations to existing standards. Those that are applicable to the Group are as follows:

· IFRS 7 'Financial instruments: Disclosures', is applicable for annual periods beginning on or after 1 January 2009. The amended standard requires additional disclosure about fair value measurement and liquidity risk. Fair value measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, a reconciliation between the beginning and ending balance for Level 3 fair value measurements is now required, as well as significant transfers between Level 1, Level 2 and Level 3 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management.

· IFRS 8 'Operating Segments', is applicable for annual periods beginning on or after 1 January 2009. This standard introduces the "management approach" to segment reporting. IFRS 8, requires the disclosure of segment information based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker, as defined in IFRS 8, in order to assess each segment's performance and to allocate resources to them. The adoption of this standard has given rise to additional disclosures set out in note 3, including the related comparative information.

· IAS 1 (Revised) 'Presentation of Financial Statements', is effective for financial years beginning on or after 1 January 2009. The standard separates owner and non-owner changes in equity. The statement of changes in equity now includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two linked statements.

· IAS 23 Amendment, 'Borrowing Costs (revised in March 2007)', is applicable for annual periods beginning on or after 1 January 2009. IAS 23 (Revised) has removed the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise borrowing costs as part of the cost of such assets. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. This amendment has not impacted the Group, as the Group's current policy is to capitalise borrowing costs on qualifying assets.
3 Segment Reporting

For management purposes the Group is organised into operating segments based on mining projects, and therefore has three reportable operating segments, representing the Group's three producing mines as follows;

· The Fresnillo mine, located in the State of Zacatecas is the worlds largest primary silver mine
· The Cienega mine, located in the State of Durango is an underground gold mine; and,
· The Herradura mine, located in the State of Sonora is an open pit gold mine.

No operating segments have been aggregated to form the above reportable operating segments, however, other projects under development have been aggregated into the Other segment below.

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 below provides a reconciliation from segment profit to Gross Profit as per the consolidated income statement. Other income and expenses included in the consolidated income statement 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 2009 all revenue was derived from customers based in Mexico, the Company's country of domicile, except for approximately 3.3% of revenue as per the consolidated income statement which was sold to a third party customer based in the Netherlands. This revenue is shown within the Fresnillo and Cienega segments below. In 2008 all revenue was derived from customers based in Mexico. All non-current assets are located in Mexico.

Operating segments

The following tables present revenue and profit information regarding the Group's operating segments for the year ended 31 December 2009 and 2008, respectively.

Year ended 31 December 2009
(US$ thousands) Herradura Cienega Fresnillo Other Eliminations Total

Revenues excluding treatment and refining charges and hedging:
Third party 245,565 126,735 498,572 - (20,928) 849,944
Inter-Segment - - - 17,385 (17,385) -
Segment revenues 245,565 126,735 498,572 17,385 (38,313) 849,944
Segment Profit 160,635 92,247 464,494 18,483 (14,246) 721,613
Hedging (31,863)
Treatment and refining charges (69,227)
Depreciation (67,227)
Employee profit sharing (24,981)
Gross profit as per the income 528,315

statement

Profit before tax 113,874 19,926 293,340 271,434 (241,156) 457,418
Gain/ (loss) on disposal of 94 114 (16,010) 105,955 (90,297) (144)

property, plant and equipment
Segment assets(1) 207,318 127,970 263,342 204394 (114,306) 688,718
Capital expenditure(2) 64,813(3) 41,665(4) 34,628(5) 107,768(6) 1,573 250,447

(1) Segment assets only include property, plant and equipment.

(2) Capital expenditure consists of additions of property, plant and equipment, excluding additions relating to changes in the mine closure provision.

(3) Capital expenditure relates to equipment such as dump trucks, wheel loaders and mine development activities.

(4) Capital expenditure relates to mine development work including work on a tailing dam and shaft sinking.

(5) Capital expenditure relates to mine development work including a shaft, waste waters treatment plant and raise boring equipment.

(6) Capital expenditure relates to the Soledad-Dipolos and Saucito mine developments including hoisting equipment and ramp and shaft developments.

Year ended 31 December 2008
(US$ thousands) Herradura Cienega Fresnillo Other Eliminations Total

Revenues excluding treatment and refining charges and hedging:
Third party 192,237 118,070 451,554 55 (41,433) 720,483
Inter-Segment - - - 21,169 (21,169) -
Segment revenues 192,237 118,070 451,554 21,224 (62,602) 720,483
Segment Profit 109,788 63,591 415,961 40,250 (16,761) 612,829
Hedging (45,602)
Treatment and refining charges (73,522)
Depreciation (51,906)
Employee profit sharing (21,188)
Gross profit as per the income 420,611

statement

Profit/ (loss) before tax 71,095 (204) 218,111 (45,197) 23,552 267,357
Gain/ (loss) on disposal of 225 (527) (11,533) 4,540 8,314 1,019

property, plant and equipment
Segment assets(1) 164,324 97,037 142,548 99,131 (5,196) 497,844
Capital expenditure(2) 74,742(3) 27,183(4) 28,757(5) 54,342(6) - 185,024

(1) Segment assets only include property, plant and equipment.

(2) Capital expenditure consists of additions of property, plant and equipment, excluding additions relating changes in the mine closure provision.

(3) Capital expenditure relates to the acquisition of the Noche Buena gold project, dump trucks, and investment in the maintenance worskshop.

(4) Capital expenditure relates to mine development work, scoop equipment, land and raise boring equipment.

(5) Capital expenditure relates to mine development work, scoop equipment, land and raise boring equipment.

(6) Capital expenditure relates to the Soledad-Dipolos and Saucito mine developments.

4 Revenues

Revenues reflect the sale of goods, being concentrates, dor?slag, and precipitates of which the primary contents are silver, gold, lead and zinc(1) .

a) Revenues by product sold

Year ended 31 December

(US$ thousands)
Lead concentrates (containing silver, gold, lead and 573,594 529,283

by-products)
Dor?nd slag (containing gold, silver and by-products) 245,822 192,509
Zinc concentrates 38,324 28,131
Precipitates 16,990 16,162
Effects of hedging (24,786) (45,602)

849,944 720,483

In 2009 all lead concentrates, precipitates, dor?nd slag, were sold to Pe?s' metallurgical complex for smelting and refining, aside from a minimal amount of product sold to a third party. In 2008 all product was sold to Pe?s.

(1) Included in the value of lead and zinc concentrates, precipitates and dor?re provisional price adjustments which represent changes in the fair value of embedded derivatives. In 2009 the Group has recognised a profit of US$24.0 million (2008: loss of US$18.2 million).

b) Value of metal content in products sold

For products other than refined silver and gold, invoiced revenues are derived from the value of metal content adjusted by treatment and refining charges incurred by the metallurgical complex of the customer. The value of the metal content of the products sold, before treatment and refining charges is as follows:

Year ended 31 December

(US$ thousands)
Silver(1) 529,626 460,031
Gold(2) 334,169 276,963
Zinc(3) 28,282 26,725
Lead(4) 27,094 30,286

Value of metal content in products sold 919,171 794,005
Adjustment for treatment and refining charges (69,227) (73,522)

Total revenues(5) 849,944 720,483

(1) Includes hedging losses of US$nil (2008: US$19 million)

(2) Includes hedging losses of US$25 million (2008: US$26.6 million)

(3) Includes gains of US$0.1 million (2008: US$nil)

(4) Includes gains of US$0.1 million (2008: US$nil)

(5) Included in the value of lead and zinc concentrates, precipitates and dor?re provisional price adjustments which represent changes in the fair value of embedded derivatives. In 2009 the Group has recognised a profit of US$24.0 million (2008: loss of US$18.2 million).

The average realised prices for the gold and silver content of products sold, including the effects of hedging but prior to the deduction of treatment and refining charges, were:

Year ended 31 December

(US$ per ounce)
Gold 988.9 879.3
Silver 15.3 14.7
5 Cost of sales
Year ended 31 December

(US$ thousands)
Depreciation 67,227 51,906
Personnel expenses 60,349 59,986
Maintenance and repairs 39,251 41,326
Operating materials 47,110 50,363
Energy 35,257 37,800
Contractors 31,905 32,701
Freight 6,143 7,313
Mining rights and contributions 4,633 5,016
Loss on foreign currency hedges 7,077 -
Change in work in progress and finished goods (ore inventories) 12,944 3,466
Other 9,733 9,995

321,629 299,872

6 Income tax expense
a) The major components of income tax expense are:
Year ended 31 December

(US$ thousands)

Consolidated income statement: Current income tax:
Current income tax charge 110,427 146,762
Amounts overprovided in previous years (6,108) (1,619)
Credit for income tax paid on dividends - (12,559)
IETU(1)in excess of income tax 249 -
Recognition of previously unrecognised tax losses (12,946) -

91,622 132,584

Deferred income tax:
Origination and reversal of temporary differences 13,189 (18,007)
Changes to future tax rates(2) 5,082 -
Recognition of previously unrecognised tax losses (757) -
Amounts overprovided in previous years (4,432) -
Revaluation effects of Silverstream contract (5,432) -

7,529 (18,007)

Income tax expense reported in the income statement 99,151 114,577

(1) Business Flat tax (Impuesto Empresarial a Tasa Unica" or "IETU")

(2) On 7th December 2009 new temporary tax rates were published in the Official Daily of the Federal Government. The tax rate for 2010, 2011 and 2012 will be 30%, the tax rate for 2013 will be 29% and the tax rate for 2014 will be 28%. The deferred taxes have been calculated at the rate applicable to the year the amounts are expected to materialise.

Year ended 31 December

(US$ thousands)

Consolidated Statement of changes in equity: Deferred income tax related to items charged or credited directly to equity:
Cost from issue of ordinary shares of the initial - 15,959

public offering
Recycling of net loss on valuation of cash flow hedges (9,531) (12,768)

to income
Net loss arising on valuation of cash flow hedges (1,122) 3,264
Unrealised (gain)/ loss on available-for-sale assets (6,407) 5,767

Income tax (gain)/ expense reported in equity (17,060) 12,222

(b) The following is a 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

(US$ thousands)
Accounting profit before income tax 457,418 267,357

Tax at the Group's statutory income tax rate 28.0% 128,077 74,860

(2008: 28.0%)
Expenses not deductible for tax purposes 1,547 364
Inflationary uplift of the tax base of assets and (4,787) (4,244)

liabilities
Tax losses arising in the year not recognised - 7,234
Recognition of previously un-recognised tax losses (13,703) -
Current income tax overprovided in previous years (6,108) (1,619)
Deferred income tax overprovided in previous years (4,553) -
Put option closed prior to maturity (4,105) -
Tax credit not previously recognised on past dividends - (12,559)
Tax depreciation de-recognised 1,029 3,054
Changes to future tax rates 5,082 -
Exchange rate effect on tax value of assets and 1,034 8,010

liabilities
Non-deductible asset disposals 3,229 7,062
Non-deductible/non-taxable foreign exchange gains or (5,491) 30,891

losses
Inflationary uplift of tax losses (1,141) -
IETU in excess of income tax 249 -
Other (1,208) 1,524

Tax at the effective income tax rate of 2009: 21.7% 99,151 114,577

(2008: 42.9%)

7 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 share capital for the Company in the periods prior to the Pre-IPO Reorganisation on 18 April 2008 is presented as if this reorganisation was completed as at 1 January 2007.

The company has no dilutive potential ordinary shares.

As of 31 December 2009 and 2008, earnings per share have been calculated as follows:

Year ended 31 December

Earnings: Profit from continuing operations attributable to equity holders of the Company (US$
thousands) 322,011 127,949

Adjusted profit from continuing operations attributable to equity holders of the
Company (US$ thousands) 308,042 127,949

Adjusted profit is profit as disclosed in the Consolidated Income Statement adjusted to exclude revaluation effects of the Silverstream contract of US$19.4 million gain (US$14.0 million net of tax) (2008: US$ nil).

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.

Number of shares:
Weighted average number of ordinary shares in issue (ooo) 717,160 687,688

Earnings per share:
Basic and diluted earnings per share (US$) 0.449 0.186

Adjusted basic and diluted earnings per ordinary share from
continuing operations (US$) 0.430 0.186
8 Silverstream contract

On 31 December 2007, the Group entered into an agreement with Pe?s through which it is entitled to receive the proceeds received by the Pe?s Group in respect of the refined silver sold from the Sabinas Mine ("Sabinas"), a base metals mine owned and operated by the Pe?s Group, for an upfront payment of US$350 million. In addition, a per ounce cash payment of $2.00 in years 1 to 5 and $5.00 thereafter (subject to an inflationary adjustment commencing on 31 December 2013) is payable to Pe?s. Under the contract, the Group has the option to receive a net cash settlement from Pe?s 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 Pe?s of US$1 per ounce of shortfall.

The Silverstream contract represents a derivative financial instrument which has been recorded at fair value and classified within non-current and current assets as appropriate. 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 2009 total proceeds received were US$39.0 million (2008: US$31.7 million), corresponding to 3.0 million ounces of payable silver (2008: 2.5 million ounces).During the year revaluation effects of US$19.4 million gain were taken to income (2008: US$nil).

A reconciliation of the beginning balance to the end balance is shown below:

(US$ thousands)
Balance at 1 January 2009: 318,268
Cash received (39,010)
Remeasurement gains recognised in profit and loss 19,401
Balance at 31 December 2009: 298,659
9 Related party balances and transactions

The Group had the following related party transactions during the years ended 31 December 2009 and 2008 and balances as at 31 December 2009 and 2008. During 2008, and as a result of the initial public offering of the Group, related party receivables and payables with members of the Pe?s Group have been settled other than related party trade receivables arising from the sale of the Group's products to Met-Mex Pe?s S.A.B. de C.V., with whom trade is continuing.

Related parties are those entities owned or controlled by the ultimate controlling party, those who have a minority participation in Group companies, and key management personnel of the Group.

(a) Related party accounts receivable and payable
Accounts Receivable Accounts Payable
As at 31 December As at 31 December

(US$ thousands)

Trade:
Met-Mex Pe?s, S.A. de C.V. 89,391 60,423 - -
Other 434 68 375 668

Sub-total 89,825 60,491 375 668
Less-Current portion 89,825 60,491 375 668

Non-current portion - - - -

Related party accounts receivable and payable will be settled in cash.

Other balances with related parties:

Year ended 31 December

(US$ thousands)

Silverstream contract:
Industrias Pe?s, S.A.B. de C.V. 298,659 318,268

The Silverstream contract can be settled in either silver or cash. Details of the Silverstream contract are provided in note 8.

(b) Principal transactions with affiliates, including Industrias Peoles, the Company's parent, are as follows:
Year ended 31 December

(US$ thousands)

Income: Sales:(1)
Met-Mex Pe?s, S.A. de C.V. 821,578 773,704

Interest on loans to related parties:
Industrias Pe?s, S.A.B. de C.V. - 1,863
Other - 13

- 1,876

Other income 659 2,820

-
Total income 822,237 778,400

(1) Figures do not include hedging losses.
Year ended 31 December

(US$ thousands)

Expenses: Administrative services:
Servicios Industriales Pe?s, S.A. de C.V. 30,308 44,825
Servicios de Exploraci?S.A. de C.V. 1,678 3,324

31,986 48,149

Trademark royalties:
Industrias Pe?s, S.A.B. de C.V. - 31,232

Realised result on derivatives: Energy:
Termoelectrica Pe?s, S. de R.L. de C.V. 17,785 17,038

Interest on loans from related parties:
Minas Pe?s, S.A. de C.V. - 5,864
Industrias Pe?s, S.A.B. de C.V. - 3,064

- 8,928

Operating materials and spare parts:
Wideco Inc 2,977 2,870

Equipment repair and administrative services:
Serviminas, S.A. de C.V. 2,427 2,241
Met-Mex Pe?s, S.A. de C.V. 1,563 1,891

3,990 4,132

Other expenses: 8,366 9,555

Total expenses 65,104 121,904

10 Notes to the Consolidated Cash Flow Statement
Year ended 31 December

(US$ thousands)

Reconciliation of profit for the year to net cash generated from operating activities
Profit for the year 358,267 152,780

Adjustments to reconcile profit for the period to net cash inflows from operating activities:
Depreciation 67,227 51,906
Employee profit sharing 24,981 21,188
Deferred income tax 7,529 (18,007)
Income tax expense 91,622 145,143
Credit for income tax paid on - (12,559)

dividends
Gain on sale of mining assets - (1,391)
Loss on the sale of property, plant 144 372

and equipment and other assets
Other expenses 485 2,887
Net finance costs 237 1,654
Foreign exchange (gain)/losses (9,498) 14,570
Difference between pension 2,174 1,614

contributions paid and amounts recognised in the income statement
Non cash movement on derivatives 25,018 45,602
Changes in fair value of Silverstream (19,401) -

Working capital adjustments
(Increase)/decrease in trade and (50,495) 118,384

other receivables
Decrease/(increase) in prepayments and 1,643 (1,102)

other assets
Decrease/(increase) in inventories 4,856 (2,158)
Increase in trade and other payables 6,162 14,430

Cash generated from operations 510,951 535,313
Income tax paid (102,347) (96,404)
Employee profit sharing paid (17,892) (24,243)

Net cash from operating activities 390,712 414,666

Annual Report and Accounts 2009

Fresnillo plc will publish on or around 29 April 2010 its Annual Report and Accounts for the year ended 31 December 2009 on its corporate website www.fresnilloplc.com and intends to distribute copies to shareholders at the same time.

Principal risks and uncertainties

STRATEGIC

Risk Mitigation / control
Depletion of reservesat ·Company's

existing mines and development exploration projects, combined with no new programme has been mineral deposits identified, intensified,
which would impact the including a doubling
Company's growth projections of the budget in

and production capabilities. regional properties
and areas of
influence
·Long-term
exploration
programme
·Highly trained and
experienced
exploration team

Delays in obtaining access to ·Engagement with
the landfor performing government agencies

exploration/mining activities, and communities
caused by complex or ·Hiring of personnel
unsuccessful negotiations with specific
withejidos(cooperative expertise
landowners). ·Purchases of
surface land at and
near our projects at
an early stage

Difficulty infinding and/or ·Talent
retaining personnelwith the identification plan
requisite knowledge, skills deployed
and experiences for key ·Ongoing training
positions, particularly when programme linked to

competition for such personnel a succession plan
is greater during periods of and development
expansion in the mining programme
industry. ·Ongoing recruitment
strategy

Internal union conflictsat the ·Close communication
national level may cause with union leaders
temporary stoppages or at both the local
discontinue operations, even and national level
when the source of those ·Efforts to broaden
conflicts is not related to the base of support

local labour contracts and/or among unionised
working conditions at workers, including
Fresnillo plc. outreach to key
influencers

Security related risks such ·Philosophy of no
asdrug cartels, kidnapping, involvement with
thefts, etc., which have "power groups"

increased markedly in Mexico ·Prudence regarding
over the past year, could unknown persons
cause business interruptions around our offices

resulting from their impact on and operations personnel and property. While ·Security measures
the Company, its employees, in place at the

contractors and facilities are local level not necessarily specific targets, security issues have become pervasive in many parts of the country.

OPERATIONAL

Risk Mitigation / control
Lower ore gradeextracted ·Capacity increases
compared to planning stage at mines and plants
estimates that could impact ·Optimisation of
cash cost projections and recoveries at our
production programmes. plants
·Ongoing search for
deposits in areas of
influence
·Dilution control
efforts

Difficulty insourcing critical ·Strategic equipment and strategic spare redundancy programme
partsto meet operational maintains key parts
needs, due to long production in inventory
and delivery timeframes, as ·Long term contracts
well as shortages caused by with suppliers

competition for such parts.
Continued upward trend in ·Ongoing focus on
theprice of key operating productivity (lower
materialsdue to competitive per unit consumption
demand and reliance on third and cost control)
party suppliers. ·Long term
procurement
programmes with key
suppliers

Expensive or insufficient ·Evaluating
energyto meet demands of feasibility of
mining operations, due to direct or indirect

reliance on CFE, the state-run (JV/associations)
electric utility. investments in
alternative energy
programmes (wind and
hydroelectric)
·Generators
installed in key
operating equipment
·Close communication
with CFE

Accidents or irresponsible ·Training in
actionscaused by the Company execution of civil
in the communities where it contingency plans.
operates that may disrupt ·Compliance controls
operations from a civil or for the Group's
legal perspective. Health, Safety,
Environment and
Community Relations
System

Difficulties in obtaining ·Engagement with the
permission from the Mexican Mexican military,

Ministry of Defence forthe use close communication
of explosives, due to the with authorities

aforementioned security risks ·Key personnel being
that have increased the added; training
military's control and reinforced
management of explosives. ·Rigorous on site
discipline to comply
with regulations

FINANCIAL

Risk Mitigation / control
Volatility insilver and gold ·Silver and gold:
prices that could impact the None; the Company
realised prices of the has committed not to
Company's production output, hedge in order to

and inexchange ratesthat could allow investors full
impact peso-denominated exposure to silver
production costs when and gold prices
converted into dollars. ·MXN/US$ exchange
rate: selective
hedging to protect
against the adverse
impact on the peso
component of costs
and expenses

Adverse changes in the tax law ·Dialogue with key
and/or new mining royalties, legislators via
rights or dutiesthat could CAMIMEX (Mexican
impact the Company's Mining Chamber) to
profitability. Highly influence Government
profitable companies and decisions makers
industries tend to attract ·Collaboration with
more scrutiny in times of peer group mining
governmental budget companies to engage
constraints. with the Government
regarding industry
interests

COMPLIANCE

Risk Mitigation / control

External pressure (from NGOs, ·Leveraging our
political groups and others) position in CAMIMEX
formore regulationto the to influence
mining industry in Mexico, legislators to
which could increase our produce acceptable
regulatory burden. regulations
·Monitoring of
Government policies
and political
activists

Failure to comply with ·Compliance controls
environmental, health and for the Group's

safety regulationsthat could Health, Safety,
disrupt operations, lead to Environment and

financial and legal penalties, Community Relations and/or terminate the Company's System
mining licences. ·Enforcement of
strict safety and
health regulations;
training
·Zero tolerance
programme for
dangerous conditions

This information is provided by RNS The company news service from the London Stock Exchange

FR KKDDNKBKBQNK