FOURTH QUARTER 2011 RESULTS Mexico City, February 27, 2012, Minera Frisco, S.A.B. de C.V. ( Frisco, BMV: FRISCO OTC: MSNFY) announced today its results for the fourth quarter and full year 2011. Highlights Consolidated sales rose 31.8% in the 4Q11 reaching $2,376 MM Ps, compared to $1,802 MM Ps recorded in the same period of last year. Operating income increased 43.9% while EBITDA soared 50.0%. Gold production grew 14.2% and 17.7% during the quarter and the year, respectively. During the 4Q11, 2.4 million ounces of silver collar options were reduced because of their maturities. Summary Amounts in million PESOS DOLLARS 4Q11 4Q10 Var% 2011 2010 Var% 4Q11 4Q10 Var% 2011 2010 Var% Sales 2,376 1,802 31.8% 8,545 7,142 19.6% 174 145 20.0% 688 565 21.7% Operating Income 1,033 718 43.9% 3,670 3,238 13.3% 76 58 30.9% 295 256 15.3% Controlling Net Income (Loss) 712 146 387.1% 546 1,397-60.9% 52 12 343.2% 44 111-60.3% EBITDA 1,244 829 50.0% 4,310 3,657 17.8% 91 67 36.5% 347 289 19.8% Operating Margin 43.5% 39.8% 42.9% 45.3% 43.5% 39.8% 42.9% 45.3% EBITDA Margin 52.4% 46.0% 50.4% 51.2% 52.4% 46.0% 50.4% 51.2% Revenues Sales reached $2,376 MM Ps during the fourth quarter of 2011, representing $574 million pesos more, or a 31.8% increase compared to the same quarter of 2010. This performance was explained by two factors: higher metal prices year over year and volume increases of 15.6%, 14.2% and 5.0% in the copper, gold and lead production, respectively. In cumulative terms, sales increased 19.6% from $7,142 MM Ps in 2010 to $8,545 MM Ps in 2011. Operating Income and EBITDA¹ The cost as a percentage of sales fell 4.1 percentage points from 56.0% during the 4Q10 to 51.86% during the 4Q11. It is worth noting that even though the ramp-up of the projects implied higher electricity and exploration costs, lower purchases of supplies -that were furnished during the first quarters of the year- were recorded, as well as operating efficiencies in labor.
As a result of the boost in the gross profit, operating income reached $ 1,033 MM Ps in the 4Q11, a 43.9% growth over the same period last year. Similarly, the operating margin improved from 39.8% to 43.5% of sales, or 3.7 percentage points more than in the 4Q10. EBITDA totaled $1,244 million pesos, growing 50.0% in the fourth quarter of the year, while the EBITDA margin expanded 6.4 percentage points from 46.0% to 52.4% of sales. Financial Results Amounts in million pesos 4Q11 4Q10 Var% 2011 2010 Var% Interest Expenses 55.2 154.2-64.2% 611.8 366.0 67.2% Interest Income 5.7 23.8-76.2% 44.7 108.7-58.9% Interest (net) -49.6-130.4-62.0% -567.1-257.3 120.4% ForEx Results 246.1-47.4 NA 269.8-129.3 NA Net loss on metal futures -121.4-198.6-38.9% -2,333.0-230.8 910.9% CFR 75.1-376.3 NA -2,630.2-617.3 326.1% Other income (expenses) net -107.5-61.7 74.1% -194.8-198.0-1.6% IFR+Other income (expenses) net -32.4-438.1-92.6% -2,825.0-815.4 246.5% Minority Interest 24.5 48.1-49.1% 123.3 293.6-58.0% NA=Not applicable During the 4Q11 the comprehensive financing result was positive, reaching $75 MM Ps due to the recording of a foreign exchange gain of $246 MM Ps which compensated: i) lower Net interest expenses and ii) a lower Net loss on metal futures driven by the partial unwinding and maturities of certain future and collar options. In the breakdown of the main concepts of the Income Statement presented to the Mexican Stock Exchange, the loss on metal futures of $121 MM Ps was included under Other Financial Expenses and Other Financial Income as $384 MM Ps and $713 MM Ps, respectively. From January to December, the comprehensive financial result totaled $2,630 MM Ps, being 326.1% higher compared to the cumulative result recorded during 2010. Financial Instruments (Futures and Collar Options) As it has been previously disclosed, the company has been partially selling its future production through financial instruments (futures and collar options) in order to guarantee certain profitability for the mining projects currently under installation, and driven by the materiality of such projects related to the basis of future production of the company. It is worth noting that although these hedges guarantee certain levels of prices for some of our production, higher metal prices represent an additional surplus in the un-hedged production, the revaluation of the reserves of projects in operation and installation, and lastly, in the entire portfolio of projects of the company currently under exploration and geological evaluation. page 2
During the 4Q11, 2.4 million ounces of silver collar options were reduced because of their maturities. Following are the open positions in financial instruments (futures and collar options) at December 31, 2011: Open Positions in Derivative Financial Instruments As of December 31, 2011 METAL INSTRUMENT HEDGING PERIODS NOTIONAL UNIT COMPOUNDED AVG PRICE COMPOUNDED AVG PRICE PUT COMPOUNDED AVG PRICE CALL SILVER Fwd and Swaps 2013 10,840,000 Oz 26.57 Collars 2012-2013 56,080,000 Oz 24.27 40.29 Total 66,920,000 GOLD Fwd and Swaps 2012-2013 652,414 Oz 1,263.00 Collars 2012-2014 756,000 Oz 1,248.41 1,806.64 Total 1,408,414 Net Income (Loss) As a result of a better operating and financial performance, controlling net income reached $712 MM Ps during the 4Q11, which meant a significant growth of 387.1% over the same period last year. In cumulative terms, net income totaled $546 MM Ps, decreasing 60.9% compared to the net income recorded at December 31, 2010. Interest-bearing Liabilities The financial situation of Minera Frisco at December 31, 2011 reflected a total debt of $8,350 MM Ps and cash and equivalents of $4,761 MM Ps, therefore resulting in a net debt of $3,589 MM Ps, against a net debt of $6,276 MM Ps at the end of December 2010. The ratio Net Debt-to-LTM EBITDA stood at 0.8 times, compared to 1.7 times in the same period of 2010. Mining Units in Operation and Expansion Projects El Coronel This mining unit located in the State of Zacatecas, has a crushing capacity of 35,000 tons per day. It is exploited by open-pit and its mineral extracted by a heap leaching process where the crushed ore is placed in beds and irrigated with a chemical solution. The "rich" solution generated is then processed to cast dore bars with gold and silver marketable contents. The expansion plans of "El Coronel" comprise a new grinding train which began its installation at the end of 2011 to increase the total capacity to approximately 65,000 tons per day, or almost double its current capacity. In 2011, 13,570,130 tons of ore were deposited in beds, while the gold production reached 198 thousand ounces and the silver production totaled 20 thousand ounces. This unit contributed with 84% of the total gold production. San Felipe This mining unit located in the State of Baja California has a crushing capacity of 7,500 tons per day. It is exploited by open-pit and its mineral extracted by a heap leaching process. Its expansion plans include the installation currently in process, of a new grinding train that will take the total crushing capacity to approximately 37,500 tons per day, which represents 5 times its present capacity. page 3
After continuous metallurgical research made for this project, the crushing capacity was reduced to obtain a smaller rock size, thus increasing recovery efficiency. During 2011 "San Felipe" contributed with 10.4% and 7.4% of the total production of gold and silver, respectively. Asientos Within this unit located in the State of Aguascalientes is the underground Santa Francisca mine. The ore mined is milled at a plant which has a capacity of 4,000 tons per day and then extracted through flotation, to end in the production of lead, zinc and copper concentrates with contents of gold, silver, lead, zinc and copper. During 2011 this operation produced 16,705, tons of lead, 77,215 tons of zinc and 633 tons of copper concentrates with metal contents which accounted for 1.9%, 31.2%, 39.9%, 45.6% and 0.5% of Minera Frisco s 2011 gold, silver, lead, zinc and copper production, respectively. Additionally, "El Porvenir" mining project is being installed as a separate operation within this unit. "El Porvenir" will be exploited by open-pit, have a crushing capacity of 10,000 tons of ore per day and will have a heap leaching process. San Francisco del Oro This unit located in the State of Chihuahua has a polymetallic underground operation. The ore mined is milled at a plant which has a capacity of 4,000 tons per day and then extracted through flotation, to end in the production of lead, zinc and copper concentrates with contents of gold, silver, lead, zinc and copper. During 2011 this operation produced 14,944 tons of lead, 33,190 tons of zinc and 1,171 tons of copper concentrates with metal contents which accounted for 1.4%, 26.4%, 36.5%, 21.4% and 1.6% of Minera Frisco s 2011 total production of gold, silver, lead, zinc and copper, respectively. Within this mining unit, a new project with independent operation is being installed including the open-pit exploitation of mineral deposits such as: "Frisco" "Sainas" and "Clarines", as well as the utilization of the tailings dam. After being crushed and ground in a train with a capacity exceeding 10,000 tons per day, this mineral will be processed in a new plant currently under construction, to be extracted through flotation and dynamic leaching for the production of lead, zinc and copper concentrates, as well as dore bars with gold and silver contents. Tayahua This unit located in the state of Zacatecas has an underground polymetallic operation which exploits primary copper and zinc ore bodies. The ore mined is milled in a plant with a capacity of 5,200 tons per day, distributed in a lead-zinc and copper-zinc circuit, and finally extracted through flotation, resulting in lead, zinc and copper concentrates with gold, silver, lead, zinc and copper contents. During 2011 this operation had a production of 10,243 tons of lead, 49,965 tons of zinc and 30,630 tons of copper concentrates, with metal contents which accounted for 2.2%, 34.6%, 23.6%, 33.0% and 35.6% of Minera Frisco s 2011 gold, silver, lead, zinc and copper production, respectively. For the exploitation of an important ore body of primary copper, a project is being developed in this mining unit which comprises a long ramp of approximately 5,300 meters and the installation inside the mine of a crushing train with capacity of 20,000 tons per day. After being extracted from the ore, the mineral will be ground and processed for the production of concentrates in a new flotation plant with a capacity of 20,000 tons per day. page 4
María Located in the State of Sonora, "Maria" is an open-pit copper mine. Its current crushing capacity is of 27,000 tons per day. The crushed ore is placed in beds and then extracted through a heap leaching process for the final production of copper cathodes. In 2011 "Maria" contributed with 53.5% of Minera Frisco s total copper production. Concheño The construction of the gold and silver mine and processing facility of Concheño located in the state of Chihuahua, is currently under construction. This new project will be open-pit, will have a crushing and grinding capacity of 20,000 tons per day, and its extraction method will be dynamic leaching to produce gold and silver dore bars. This project will contribute significantly to Minera Frisco s gold and silver future production. Metals Production Production of metals in this quarter compared to the 4Q10 was as follows: Metals Production 4Q11 4Q10 Var% 2011 2010 Var% Gold Oz 60,655 53,111 14.2% 235,069 199,791 17.7% Silver Oz 1,209,693 1,423,754-15.0% 5,309,314 5,496,360-3.4% Lead Tons 5,242 4,992 5.0% 22,416 20,744 8.1% Zinc Tons 19,933 20,473-2.6% 82,135 91,571-10.3% Copper Tons 5,277 4,564 15.6% 21,395 16,831 27.1% 2011 Revenues by product 12% 9% 15% 19% 45% Gold and silver doré bars Lead-Silver concentrates Zinc concentrates Copper Copper cathode Exploration and Research Projects Minera Frisco is undertaking major efforts in continuous metallurgical research, process improvement and exploration that will enable us to: be more efficient in our operations; increase our reserves; consolidate our sustainability activities; improve our recovery rate; reduce costs and; provide economic, operational and environmental viability of the installation and operating projects, as well as those projects under geological assessment or exploration or in the exploitation start-up. page 5
Proof of this is the significant increase in the staff dedicated to research as well as the equipment allocated for research and exploration of mineral resources. During 2011 the number of exploration teams grew from 8 to 36 in order to increase our reserves and resources in all of the projects. Among the projects with better perspective of exploitation according to their geological, environmental and economic feasibility are: Espejeras, Lampazos, Calcosita Tayahua, Santa Fe and Vetas Negras, among others. Invitation to the Conference Call Date: Tuesday, February 28, 2012 Time: 9:00 a.m. Mexico City time, 10:00 a.m. New York time (ET) Access number: +1 (706) 643-6876 (International and Mexico) ID#: 54383308 Investor Relations Contacts Jorge Serrano Angelica Piña T. +52 (55) 5625-4900 Xt. 6617 T. +52(55) 2122-2656 jserranoe@inbursa.com napinag@condumex.com.mx Certain statements in this earnings release may be related to expectations about future events of Minera Frisco. The phrases "will allow," "will," "estimate," "expect," "intend," "might," "should" and similar expressions generally indicate comments based on financial information, operating levels and conditions of the market to date. These statements are subject to factors such as volatility in metals prices, energy inputs and other inputs, the possibility of cyclical or seasonal business or consumer slowdown risks that are detailed in the Company's annual report and may cause actual results to differ materially from current expectations. Minera Frisco undertakes no obligation to publish a review on these forward-looking statements to reflect events or circumstances occurring after the date of publication of this release. ¹EBITDA: Earnings before interest, taxes, depreciation and amortization. page 6
Financial Summary: Million PESOS Million DOLLARS 4Q11 4Q10 Var% 2011 2010 Var% 4Q11 4Q10 Var% Revenues 2,375.9 100.0% 1,802.3 100.0% 31.8% 8,544.6 100.0% 7,141.7 100.0% 19.6% 174.5 145.5 20.0% Operating Income 1,032.7 43.5% 717.6 39.8% 43.9% 3,699.7 43.3% 3,237.6 45.3% 14.3% 75.8 57.9 30.9% EBITDA 1,244.0 52.4% 829.2 46.0% 50.0% 4,309.5 50.4% 3,657.1 51.2% 17.8% 91.4 66.9 36.5% Financial Results 75.1 3.2% (376.3) -20.9% NA (2,630.2) -30.8% (617.3) -8.6% 326.1% 5.5 (30.4) NA Controlling Net Income (Loss) 712.3 30.0% 146.2 8.1% 387.1% 545.8 6.4% 1,397.2 19.6% -60.9% 52.3 11.8 343.2% Cash & Equivalents 4,760.7 6,340.0-24.9% 349.6 511.7-31.7% Total Assets 25,055.0 20,097.8 24.7% 1,839.9 1,622.0 13.4% Total Debt 8,350.0 12,616.0-33.8% 613.2 1,018.2-39.8% % Ps Denominated 100% 96% 4.2% % Long Term 0% 99% NA Net Debt 3,589.3 6,276.0-42.8% 263.6 506.5-48.0% Controlling Stockholder's Equity 11,586.9 390.0 2870.7% 850.9 31.5 2603.0% Shares Outstanding ( 000) 2,545,383 NA NA Stock Price (Sep-11) 50.71 NA NA NA=Not applicable page 7