Statement re tax treatment of mining works

RNS Number : 9335D

Fresnillo PLC

01 July 2019

 

                                                                                                        Fresnillo plc

21 Upper Brook Street

London W1K 7PY

United Kingdom

www.fresnilloplc.com

1 July 2019

Statement re Tax Treatment of Mining Works

In 2017 the Mexican tax authorities ("SAT") opened a routine audit into the 2014 tax returns of two underground mining subsidiaries of Fresnillo plc ("Fresnillo" or the "Company"), relating primarily to the tax treatment of mining works, which is not explicitly dealt with in the Mexican income tax law. Subsequently, in 2018, the Company and SAT agreed on the tax treatment deemed most appropriate to mining works disbursements for the year of the audit resulting in a tax amendment, which was documented through an agreement executed between SAT, PRODECON (Mexico's tax ombudsman) and the Company on 30 November 2018 (the "Conclusive Agreement").

Fresnillo has now determined it to be in the Company´s best interests to align its tax treatment across its underground mining operations subsidiaries with the Conclusive Agreement.  Accordingly, Fresnillo has voluntarily elected to apply the same criteria regarding the tax treatment of mining works to all its underground mines, retrospectively for the years 2014 to 2018.

This decision has an estimated net impact on the profit & loss statement of US$8.0 million. The total amended amount[1] is US$55.3 million of which US$39.6 million (the "Principal Amount") are income tax and mining rights and US$15.7 million are interest and surcharges. The Principal Amount is reclassified from deferred to current taxes and has no impact on the income statement. This Principal Amount will be offset in future years by deducting depreciation from the tax base. The total amended amount of $55.3 million has been covered as follows: US$22.2 million against tax receivables and the remaining US$33.1 million in cash. These effects will be recorded in the Company's results for the 6 months ending 30 June 2019.

The information contained within this announcement is deemed by Fresnillo plc to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain. The person making the notification is Carlos Ortiz Mena, Head of Legal, Fresnillo plc. The time of the notification is 7:00 am UK time.

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

Fresnillo plc    London Office                          Gabriela Mayor, Head of Investor Relations Patrick Chambers	Tel: [phone]
Mexico City Office Ana Belem Zárate	Tel: [phone]
Powerscourt Peter Ogden	Tel: [phone]

About Fresnillo plc

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

Fresnillo plc has seven operating mines, all of them in Mexico - Fresnillo, Saucito, Ciénega (including the San Ramón satellite mine), Herradura, Soledad-Dipolos¹, Noche Buena and San Julián, two development projects - the Pyrites Plant at Fresnillo and Juanicipio, and three advanced exploration projects - Orisyvo, Las Casas Rosario & Cluster Cebollitas and Centauro Deep, as well as a number of other long term exploration prospects.

Fresnillo plc has mining concessions and exploration projects in Mexico, Peru and Chile.

Fresnillo plc has a strong and long tradition of exploring, mining, a proven track record of mine development, reserve replacement, and production costs in the lowest quartile of the cost curve for silver.

Fresnillo plc's goal is to maintain the Group's position as the world's largest primary silver company and Mexico's largest gold producer.

¹ Operations at Soledad-Dipolos are currently suspended.

Forward Looking Statements

Information contained in this announcement may include 'forward-looking statements'. All statements other than statements of historical facts included herein, including, without limitation, those regarding the Fresnillo Group's intentions, beliefs or current expectations concerning, amongst other things, the Fresnillo Group's results of operations, financial position, liquidity, prospects, growth, strategies and the silver and gold industries are forward-looking statements. Such forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of the Fresnillo Group's operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar and Mexican Peso exchanges rates), the Fresnillo Group's ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, changes in its business strategy and political and economic uncertainty.

LEI: 549300JXWH1UV5J0XV81

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[1] The amended monetary amounts are registered and paid for in Mexican pesos and have been converted to US dollars using an exchange rate of 19.1442 Mexican pesos/US dollar.

 

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