Operator: Hello, and welcome to Fresnillo Half Year Results 2020. My name is Val, and I will be your coordinator for today’s event. Please note, this conference is being recorded. And for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call.

[Operator Instructions] I will now hand you over to your host, Octavio Alvídrez, CEO, to begin today’s conference. Thank you.

Octavio Alvídrez: Thank you. Good morning, everyone, in the America. Good afternoon, Europe.

This is Octavio Alvídrez, CEO of Fresnillo Plc. I thank you for your interest in listening to our half year interim results 2020. If we may go to the Page number 2, please, the disclaimer. We have important information. And then after I will go after the agenda we will cover today.

The investment proposition, first half 2020 highlights. Of course, COVID-19 response with all the details that we’ve gone through. Number four, the operational performance and development projects. Number five, some quick comments and remarks on the exploration update. Followed by financial performance and to end with the 2020 outlook.

Here with me in Mexico City is our CFO, Mario Arreguín; our COO, André Sougarret; and David Giles, our Exploration Vice President is joining us from Chihuahua, where he is based, Chihuahua, Mexico. If we may go to Page number 5, please. The investment proposition. I would like to say that in recent months, and we have gone through some operational challenges in most of our mines. Therefore, as we mentioned in our trailings, the aim this year is to focus and bringing again the stability into our operations, the operational stability.

We have deployed a list of initiatives that we will mention with more detail on the operational section, but I can tell you that those initiatives have started to give us good results. And therefore, supporting the high quality of our assets. Those have been transformed and resulted in financial – in a good financial performance as well as we will see. We have concentrated on increasing our margins, a great focus on the main levers that we have in the mining industry, which is cost control, efficiencies and productivities. You can see on Page number 5 that our silver cash cost on a consolidated basis is $7.31 per ounce.

Of course, in mining, we cannot consider to do a good, sustainable approach without an approach on development – on disciplined approach to development. You will see that although the focus is on bringing the efficiencies and productivity into our operations, we do have some development projects. Juanicipio for exciting projects on the Fresnillo district is on track for mid-2021. And we will mention also some additional projects that come down the line on different – in different stages. Sustainable business practice is a must.

Now with COVID-19, health of all of the workers that participate in our organization is most, and we will cover this in great detail in the following sections. And also, in this situation, we have had to reinvent our interactions and the way we interact with communities. We continue to support them through this terrible pandemic situation. And we will mention what we are doing with communities as well. As I mentioned, focusing on increasing our margins.

We have good results, and we will mention and reflect a strong balance sheet, and our CFO, Mario Arreguín, will cover in great detail. On Page number 6, I would like to mention that despite the fact that our main focus is on controlling cost, we are enjoying as well some good gold and silver prices. Of course, with a combination of negative real rates or what the central banks are doing in terms of the stimulus and the global economic uncertainty, supporting good silver and gold prices. But as I mentioned, we continue to concentrate on controlling costs and increasing the margins in our operations. If we can turn the page to Page number 8, please.

And here, you will see that the focus on stabilizing our operations are bearing fruits. Even in this critical situation that we’re leading to have to deal with COVID-19 in our four operations and our country and globally, we have been able to produce 26.8 million ounces of silver. And we are maintaining our guidance as well in terms of silver production. In terms of gold production, we were affected in a larger degree in Herradura and Noche Buena operations. We were very much on a different operation strategy during six weeks.

In April and half of May, we were impacted with some of our production. And therefore, we ended up producing 381,000 ounces of gold. And we are lowering our gold guidance to between 785,000 to 815,000 ounces of gold. On the project front, we also have to operate on a different scheme. And we have to lower the number of people coming into the construction part of the flotation part on Juanicipio, plant of Juanicipio.

And despite that we were controlling the number of people working at site, what I can tell you, and we lowered the pace, we are still maintaining the mid-2021 Juanicipio to be concluded, the construction site. We’re operating in this month with – on the mine at very much the same pace. But I mentioned on the construction and service and infrastructure, we have lowered the pace. Despite this fact, I mean, we are maintaining the mid-2021 date. The rest of the construction sites, the Pyrites Plant on the Fresnillo front, it is due to second half of 2020 – of this year as well as the optimization plant of the Fresnillo flotation to come with a higher base methods.

We will see also that some of the effects that we have in Herradura, increasing the recoverable ounces is resulting in an increase of inventories at the past, and we will go in more detail on these aspects. What I can tell you is that we increased those inventory recoverable gold ounces in inventory by 119,000 ounces. If you can bear with me on Page number 9, this is the summary of the main financial lines. And therefore, as I mentioned, with the quality of our assets, we increased the – by 66.3%, the gross profit half year to half year. We also posted an operational profit of plus 232% to US$216.9 million.

And also with a number of measures in terms of preserving cash due to the uncertainty we were facing and we are still facing, we reduced some of the investment lines that we will talk about as well in terms of the exploration in terms of the sustaining CapEx at the mine. And that, combined with the good operational results to this half, we posted a free cash flow of US$253.6 million. We declared an interim dividend. We continue to operate on the same dividend policy of US$0.023 per share, equivalent to US$16.9 million. You will see also that the EBITDA number increased substantially by 52.6% to US$469.9 million.

If we go now to the COVID-19 response section so that we can cover in detail what is our main challenge in our operations and how we are facing this challenge and how we are operating under this terrible situation. In – at mid-March, when we knew, of course, of what’s coming globally, this pandemic, we started to develop a set of initiatives, the preventive initiatives in order to deal with the COVID-19 situation. We engaged very closely with all levels of authorities in Mexico, at the federal level, at the state level, at the local level as well. We developed with them a set of protocols in order to prevent of – the COVID coming into our operations. And by the end of March, we have started isolating all of the vulnerable groups that we have in our operations.

This is a group of people 50 years old and up, a group of people with vulnerable health, these pieces with as well, pregnant women. And therefore, we started operating the whole month of April without these very important group of people. At that time, we reduced also substantially in all of our operations, the number of activities and the number of people that we could operate with in such a way that we decreased a lot of these services personnel. And we – in a way, we’re prioritizing the production activities in some of the mines. Also, we decreased a bit the development of mining work as well.

And every day, I would tell you that it was a challenge in order to complete our activities across all of the mines. You can see that we planned a long way with communication of all of the preventive measures in terms of logistics, very important as well. Because we had some operational schemes in terms of two weeks or three weeks off and a week or 1.5 week of work off-site and two or three weeks on site. The logistics of our personnel going to their home and on their – on this week or 1.5 week and then coming back to our operations was the whole challenge. In mid-March, we ordered a set of tests so that, up to now, we have purchased 30,000 quick tests.

This has been complemented with PCRs or molecular test as well, so that we have a greater certainty of what we are testing and the results we are having by the testing activities in all of our – with all of our people. We have learned a lot how to deal with these challenges. And the information we have from the quick test has given us the possibility of really managing through this very challenging situation. Of course, all the preventive measures that cover mouth and sanitizing gel and the distancing that we have to go have also receiving good results we have so far in dealing with this pandemic. On Page number 12, you can see some of the statistics we’ve had in terms of the testing we’ve done at each one of the sites.

And the results we’ve had in a way that for a long time, the whole month of April, we were not with a single case of COVID-19 in our operations. But as I mentioned, this is having some effect in our operations, but we are dealing with it up to now. Communities, we have to reinvent the way we were interacting with them. You know that we do have some different programs in terms of education, in terms of employment as well. And the way we deal with the communities is now different to what we were doing before.

Even in this education, just to give you an example, this educational initiatives with our communities and children in our communities, we implemented a virtual platform so that we continue to make those activities available on that platform, available to the children in our communities as well. So all in all, despite the fact that this is our largest challenge ever in terms of really protecting the health of our workforce or stakeholders and communities, we – I can tell you that we are dealing with it quite efficiently now. We have learned a lot and a great deal of how to handle this. Our medical teams as well as a recognition of their work of the intensity they do in terms of the activity they deploy at each one of the sites. And it’s not all on their shoulders, but also on all of the organization.

I mentioned, and I would like to recognize the great deal of engagement of our personnel. And with this, I would like to go to the operational and projects performance. And I would like to pass the mic to Mr. André Sougarret. Please, André.

André Sougarret: Okay. Good afternoon, everybody. Page 14, please. Let me begin with the health and safety added to all measures preventing COVID-19 explained before by Octavio. I’d like to say, we have worked hard to reduce accidents and improve the safety.

The best result is having no fatal accident and reduce the injury frequency rate. The lost time injury rate was reduced from 7.6 to 6.9 accident per million of hour worked. And the total recordable injury frequency rate was reduced from 18.7 to 15.9 accident per million of hour worked. We still have a lot of work to reach the best industry mining standards, but we believe we go to in the right way. The deepening of our program, I Care, We Care, has allowed to increase safety through the leadership and management of critical risks creating a learning environment to improve continuously.

The reporting and treatment of high potential incidents, the identification of the root causes, a measure that it has taken we will allow to reduce fatality likelihood. Next page, please. Fresnillo’s district action plan update. My next point concerns about the update Fresnillo district action plan. As you know, we have taken many action to improve the results.

The main focuses of these actions and

update are: access to deeper reserves. The San Carlos shaft deepening has ended in the relation with mining works and continuous development, the facility to handle the rock material and planning the connection with current San Carlos shaft system. Increase development rates. Tunnel bore machine has started at the end of 2019 and has advanced 580 meters so far. The daily rate has increased, up 6 meters per day and the target is 10 meters per day.

Some adjusted in the machine is needed to reach the target. Lower dilution. Many actions have taken to reduce the dilution, measured by scanner all the stopes, adjusting the drilling and blasting patterns and better control to loading of ore marking has been implemented. The dilution last quarter has reached 35% in Fresnillo. Increased productivity.

Among other actions, we have implemented semi-automatic drilling system on five drilling machines. Four machines are working on the intershift period and the other one is implementing last month. We have reached 630 meters per month, and the target is 750 meters per month. In Saucito, the access of the deeper reserves in relation with the Jarillas shaft deepening, and this project has been delayed for one month by COVID constraints. The deepening advance of the mining work has completed 354 meters of 470 meters, that means 75%.

Next page, please. Fresnillo results. The silver production was increased 6% regarding last half year. Better grades and the same throughput driving this increase. In gold production, lower grades reduced production in 21%.

As I mentioned, some better result has been taken on Fresnillo. Firstly, the rate of development has increased to 3,200 meters per month, 5% above 2019 average. The TBM has started, and the new Peruvian contractor, GRC, are the reasons, offset by the absence of our minus by COVID. The dilution is other important issue, continuous monitoring and changes in the mining practices have allowed lower dilution, 35% in the last quarter. 44,700 meters in-fill drilling has carried on, allowed more confident grades.

The main banks were – the main banks drilled were San Carlos, San Alberto and [indiscernible] In the second half of the year, the priorities

will be: finish in-fill drilling to reach 3,400 meters per month in development rates; increase dilution control; advance the efficiency projects, commissioning the tailing flotation plant; start San Carlos tailing storage facility; and finally, finish the second stage of the beneficiation plant to cope in the zinc and lead raise for next year. Next page, please. Saucito results. The silver production is decreased in 8% regarding last five years, as our sales of lower rates expected offset by better throughput. In gold production, better grades in base production is 13%.

The program of in-fill drilling has progressed well, 76,800 meters has been drilled, focusing in Jarillas West, Mezquite and Natalia veins. 120,000 meter is the total program. The dilution at the second quarter has reached 46% below our expectations, mainly increased [indiscernible] veins in the production. The average vein wide was 2.8 meters in this quarter. In the second half of the year, the priorities

will be: finish new in-fill campaign, increase development rates at least 3,500 meters per month, adjust drilling and blasting pattern to face narrower veins; see for sinking Jarillas shaft.

Next page, please. San Julián results. Silver and gold production decreased 4% and 13%, both driven by lower grades in San Julián Veins. The depletion of San Julián and Shalom veins contribute mainly to this result. The production at San Julián disseminated ore volume has maintained flat.

The change in mine sequencing has been able to stop rock falls and maintain safe condition to recovering our volume. We expect to increase progressively silver between 114 and 115 grams per tonne. The priority for second half of the year

will be: keep on fill drilling campaign, advanced on the TCF Phase 3 on core, increase silver grade in San Julián disseminated ore volume. Next page, Ciénega results. First half production increased 90% year-on-year.

Silver production has maintained flat. The increase of ore production has been driven better grades in Eastern zone of Ciénega. The tailing storage facility number three began in the second quarter with some delay from original plan because the new design standards and complete impacts. In the region, high-density tailings thickener was commissioned. Therefore, water handling in the dam has decreased.

Haulage cost has been the focus to reduce mine cost and sustain CapEx. In the second half of the year, i.e. the purities will be undertaking – undertake in-fill drilling campaign continued with tight cost control and sustaining CapEx. And keep on next tailing storage facility phase on track. Next page, Herradura results.

First half gold production decreased 13%, driven by the lower volume of ore deposited and lower grade in dynamic leach plant. The main was stopped for one month from the middle of April to middle of May and the restart was progressively. While the plants were maintained in operation feed by ore stockpiles and inventory from leach pads. In the other hand, when the new heap leach number 13 start in August 2019, the design of solution handling has allowed to count both inventory. New on all heap leaching pads separately.

As a result, the mine updated its estimated of recoverable remaining gold content in the inventories at the old leaching pads resulting in an increase of 119,300 ounce of gold. To recover this inventory is needed build a new Carbon in Column plant because the current Merrill Crowe plant is full capacity with 13 leaching pads solutions. The design and capacity will be the same that Noche Buena Carbon in Column plants. Finally, the priorities for second half of the year

will be: fully ramped up mine operations, reduced mine development deficit, expect to conclude a geotechnical mine model and implement Carbon in Column to recovery inventory from the whole patch. Next page, and finally, Noche Buena results.

First half gold production decreased 25% year-on-year, driven by the lower volume of deposits or ore deposits for the same reason before mentioning. The priority in the second part of the year will be reached the bottom of the pit with the mine development. That’s all. Octavio?

Octavio Alvídrez: Thank you, André. And now that we are here on the – and please go back to the Herradura slide on Page number 20.

I would like to explain a little bit more detail what has caused this restatement of the inventories. As you can see on Page number 20, on the right-hand photograph, a panoramic view of all of the pads at Herradura. On top, you will see pads number 1 to 12, and at the bottom, you will see the new 13 leaching pad and also the project for pad number 14. We operate pad number 1 to 12 as a one big single unit. But we separated, as we were building pad number 13, the operation for this new pad through the life of – the mine life of Herradura, we have deposited 6.5, close to 6.5 million ounces of gold.

And the recovery up to now has been 72.27%, recovering 4.68 million ounces of gold. Of course, any improvement we do on the recovery that initially at the start of the mine life of Herradura was close to 68%, would mean we will be able to physically recover more gold ounces. And as we are operating these two leaching pads separately. We knew that we were recovering more on pad number 1 to 12. We were analyzing this issue for several months, six to seven months.

We did different techniques in order to assess what we could viably recover in addition to the recovery rates we currently have on pads number 1 to 12. And we finally came back to this 119,000 ounces. As we speak, if we have not reassessed this inventory on pads number 1 to 12, we will be operating, of course, on negative inventories. And that’s why with the starting very carefully, and this issue what we have stated now is that we will recover viably and economically 119,000 ounces more of gold. The recovery of those ounces, as well as those ounces that we are depositing on pad number 13, would go to the Merrill Crowe plant.

But as we have studied, we can recover the ounces from the old pads faster. And therefore, we are constructing a Carbon in Column facilities so that we can speed up the recovery of the 119,000 ounces in the following years as well. That facility will be up already in Q2 of next year. So with that, we can now turn on the comment briefly on some of the development projects on Page number 22, please. This is the Pyrites Plant, the second leg of this project, which in total is $155 million investment.

The first leg is already operating for 1.5 years-or-so. The Saucito facility. And what we are finishing now is the second leg, which is the Fresnillo mine facility for this project. This will be ready in second half of this year. And what we are doing now is trying to source the energy needed for this project.

This is one ore of the COVID-19 impact, I would say, the authority is – has slowed down their process. But we are doing all we can in order to solve this facility’s energy in the month of September, so that we can start operating in Q4 of this year. All in all, we expected silver from this facility in Q4 is probably 800 million to 1 billion ounce of silver. Then on Page number 13, you will see the conclusion of the optimization we are doing for the flotation plant at Fresnillo. This is in order to cope with higher base method contents lead and zinc.

That would also give us the possibility to produce better quality concentrate, cleaner concentrates as well. So that we have more capacity in order to deal better the quality of our concentrate. As you can see, this overall project is composed of three

different phases: the zinc thickener that we start in 2017, then the flotation cells that we increased, and in the end, it will be – it will mean that we can install vibrating screens, one that we install in the Saucito flotation plant, and we will do so only when the mine of Fresnillo is developed and ready to increase their truckload throughput to 9,000 tonnes per day. We will advise in due time of this as well. And finally, on Page number 14, you will see that Juanicipio project continues to be on track.

We slowed down, as we mentioned for 1.5 months, the construction activities on surface, infrastructure and some of the flotation plant as well. At that time, the critical path for the project was awaited in the construction of the tailings storage facility. It is not anymore. So this lower pace of construction of surface infrastructure did not come to have an impact on the construction completion that we are expecting now by mid-next year. And with that, I will pass the word to our Vice President of Exploration, David Giles.

David? Are you online?

David Giles: Yes. Good afternoon, everyone. On Page 26, you can see the properties, which Fresnillo hold in this triangle. Coming down the triangle on the left side, our mine operations is at the top and then development projects, PEA properties, advanced exploration and prospects as you come down the triangle. Can you hear me, okay?

Octavio Alvídrez: Yes, David.

David Giles: Okay. At our mines, drilling is on track for the reserves this year, and we’re actually in the estimation process right now, and it will take from now to the end of the year to complete that plus the audit. And in the beginning of next year, we’ll have the results. We did have a 1.5 months stoppage on surface drilling, not on the underground drilling. And that affects our resources, but we are back on track.

We were all our tools are now going in Mexico, Peru and Chile. That stoppage did affect the geotech drilling at the Herradura pit and also the Orisyvo advanced project. Coming down the right hand side of the triangle, just to comment on our general way we’re working, our budget this year is focused mainly on Brownfield projects around our mines and advanced projects. The mine exploration group converts resources and reserves in the mine and the exploration group increases resources and logistics, which we consider very underexplored. Our Greenfields projects are very special because they’re located in several high potential districts on the main mineralized structures – mineralized regional structures with adjacent unexplored cover areas, which are very favorable, and we expect at least one of these projects to turn out to be much larger, several times larger than our minimum objective, which is 2 million ounces of gold.

In operation, we use state of the art technology, backed by our Penoles mother company on a lot of field work and mapping. We have 78 geologists just now working in Mexico plus another 35 geologists are underground in our mining. 10 geologists in exploration in Peru and five in Chile. And we used seven contracted drilling companies plus a lot 225 local workers. Our budget – the balance of the budget is 65% in Brownfield around the mine this year and 25% in Greenfield, mainly advanced projects and 10% on prospecting.

65% of that budget is dedicated to drilling. And our budget in 2020 was revised to $120 million. Coming down the triangle, starting at the top, we’ve had good results in the Fresnillo District, promising around the Mexico Nuevo and Mirador Cristo area. In the San Julián District, where we have a lot of [indiscernible] drilling, and we’ve increased the resources and reserves on the south vein. At the Ciénega mine, we’re drilling the east extension of the veins across a post mineral fault, and that is looking promising as well.

Coming down to the development projects, Juanicipio this year, the drilling has been infill drilling on the deeper part of the ore body from the Valdecanas Vein, and the results have been what we expected, good results for them. Orisyvo, what we’re doing on this project is a gold project in Chihuahua is we’re doing drill holes for metallurgical studies and also due tech work, and that is in drilling right now. On advanced exploration in Guanajuato, we have good results in the San Gregorio Vein. And we’ve started drilling a new area in the north area of Guanajuato, Latrau, which looks promising. We started up some more drilling and prospects in drilling, if you come halfway down the triangle, and we’re drilling right now a gold buffer in Peru called Supaypacha.

We’ve completed the first hole, and it was successful. I think that we are in a well-mineralized buffer system with gold volumes with the first hole cut over 200 meters running about 0.6 gold and with copper values as well. We’re also drilling in the Paleocene gold/silver belt in Chile at Capricornio and Condoriaco and results are promising, especially at Capricornio, which is a joint venture with SQM. On the other prospects that we’re maintaining our claims in good spending, the other projects from the lower part of the triangle and obtaining permitting, planning for drilling next year. And we’ve had good advances at Santo Domingo in Peru.

That’s basically a quick look at what we’re doing right now. We don’t know what our reserves are going to be this year, and so we’ve done all the work with that. I’m quite optimistic. We did a full 12-month drilling this year, and the results look good to me. That’s the summary, Octavio.

Octavio Alvídrez: Thank you, Dave. And with this, we will go to the financial performance, financial review by our CFO, Mario Arreguín on Page number 28, please.

Mario Arreguín: Thank you, Octavio, and good afternoon to those of you in Europe and the UK, good morning for those of you in the Americas. Now I would like to go to Page 28, please, where we show the income statement. In general terms, I would say that we had a good financial result in the first half of the year compared to last year.

As you can see in the yellow lines, gross profit was higher by 56.3% and operating profit more than tripled. Let me start by explaining the gross profit increase of $115.7 million. If you move up that same column with $115.7 million, you will see two important items that contributed to this increase. One is the adjusted revenues, which were up $56 million, and the second one is the lower adjusted production cost, which were lower by $59.8 million. If you add these two items, you get to approximately $115.9 million.

So they were very important components of this increase, and I would like to spend just a couple of minutes in describing these two items. And for that, I would like to move to Page 29. Here in Page 29, we show the contribution in terms of volume and price to the increase in adjusted revenues. In the bottom line, you can clearly see that the $56 million increase in revenues was very favorably impacted by the prices, which actually accounted for $141.8 million increase, which was, unfortunately, partly compensated by the lower volumes. In the case of gold, the average realized price for the first half was $1,677, up 27% compared to last year, and that’s why you see that important positive effect of $140 million.

However, as André explained, we produced less volume and that had a negative effect of $84.9 million. In the case of silver, the average realized price for the period was close to $16.8 per ounce, up 10% compared to the previous year, and that had a positive effect of $35.9 million. However, we produced 2% less compared to the last year, and that had a negative effect of 19.1. But if you will see the realized prices again, gold $1,678 and silver $15.8, they are much lower than the current spot prices. Gold is currently trading at $1,945 and silver is currently trading at $24.15, much higher than the average realized price for the first half.

So we are certainly looking forward to a much better second half than the one we had in the first half. Moving now to Page 30, just very briefly. We here show the contribution both by metal and by mine, to the revenues of the company. And as you can see, gold continue to be the most important component, representing 54% of our revenues, and silver 34% of our revenues. Base metals contributed with approximately 11%.

And in terms of our mines, you can see that Herradura represented 31% of our sales, followed by, Saucito 21%. And then the Fresnillo mine, 16%, Ciénega 10% and so on. Moving now to Page 31, and now touching specifically on costs. I thought it would be interesting for you to know how our inflation basket is composed. And you can see all of the cost items on the left-hand side of the slide.

And in the unit price increase, you can appreciate that we had important decreases in most of the cost items. Number one, in terms of decrease was diesel, down 18.7% and gasoline, 17.7%. Freights were down 10.7%. And labor was down, together, 8.5% considering our unionized personnel and our employees. Important to mention that in the case of labor, we are still start – we haven’t even started to negotiate or conclude our negotiations with the union in terms of wage increases for this year.

As you know, we normally start in March. However, with the COVID pandemia, we have not yet started that process. So this represents the wages that we saw in the first half of this year compared to the first half of last year. And you have to bear that in mind, we still have to see this how it turns out. So in dollar terms, because all of these numbers and figures that you see here are based on dollars, we actually had a deflation of a 6.14% in terms of our basket.

If you separate the effect of the exchange rate in the bottom part of this slide, you can see that if we separate that component, we have had a very small inflation of only 0.12%. Moving now to Page 32 and continuing with our – the analysis of the adjusted production cost. These rainbow chart shows the main variables that impacted our adjusted production costs, both positive and negative. And on the far right hand side, the green bar or bar number six is the $59.8 million decrease in adjusted production costs. And let me start with the positive part.

I would say that the two main components described in columns three and five, which have to do with the lower volume process, both at Herradura and Noche Buena. As you know, these were the two operations, which were mostly affected by the COVID-19 disruption. Even though, the Merrill Crowe plan continue to operate all the activities related to mineral deposit in waste material college were stopped. So that implies a lower production cost. If you add column three and five, you will see that you get almost $51 million, which we did not incur during the first half of the year in this two operations.

Important to mention, of course, is column number four, which is the effect of that the Mexican developmental evaluation has. On our costs, we estimate that effect as a favorable $34.6 million. And those three, I would say were the main three reasons for the lower production costs. The negative side, and I wouldn’t call it negative because it’s actually related to the increase in development works, which are very, very important to guarantee the continuous operations in the optimum operations that are mine. This is described in column number one, and there we had an increase of $25.65 million.

With that, we’d like to move on to Page 33. Just to summarize how the increase in terms of gross profit of $115.7 million, so with the green bar or bar number 9, what’s affected by both positive and negative variables. Starting with the positive, you already mentioned the higher metal prices by far, that was the most important components. He had an effect of $141.8 million positive effect. On bar number 2, we show the impact of the reassessment of the gold inventory at Herradura, which was described by Octavio a few minutes ago, which was estimated to have a benefit of approximately $65 million.

This effect resulted from adding the additional ounces at zero cost to the initial inventory plus lowering the cost per ounce held in our inventories. That’s how it is a benefit was obtained. And I would like to say that we will continue to see the favorable effects of this additional ounces in the very near future, mainly in the next 12 to 16 months. But also I would like to point out that this positive effect will be diminishing through time. For the second half of the year, we expect a favorable effect of approximately $25 million.

This will depend on the volume and cost of the mineral deposit and the volume processed in the period. But we estimate that for the second half of the year, we will see a benefit of $27 million – sorry, $25 million related to the reassessment of the inventory at Herradura. And like I already mentioned, we see the benefit of the valuation of the Mexican peso, with a benefit of approximately $34.6 million. And on the adverse side, the red bars, again, you can see on columns six and eight, the counterpart of the lower production Herradura in the previous slide, we thought that that contributed to the lower cost. But on this slide, we clearly see that given the fact that we were not able to operate fully at 100% that meant lesser production, which impacted our gross profit, of course.

If you sum those two bars, you get approximately $85.8 million. And as I already mentioned, in bar number seven, the increased development work also had a negative effect of $25.7 million. With that, if I could ask the operator to go back to Page 28, to the income statement. I guess, I would like to talk about the remaining items in the income statement. So, so far, we have discussed on the gross profits, the $115.7 million increase, which, if you take into consideration, the lower exploration expenses, that gets you basically to the increase in operating profit of $151.6.

So the main reason for that increase from gross profit to operating profit was mainly the lower exploration expenses, both as our operations, as well as in the new exploration areas. And moving down to the income statement now. This second half, if you will, of the income statement will be affected by non-operating financial adverse effects, most of them being non-cash. And let me start with the Silverstream effect, which generated a loss of $31.8 million. This loss is related to the Silverstream valuation, which basically resulted from my review of the reserves at the Sabinas mine, which changed the mine plan.

And also from an increase in the rate used to discount the cash flows in the model to evaluate the Silverstream. It is important, however, to point out that this loss is a non-cash item. Moving down to the foreign exchange loss for $41 million. The $41 million foreign exchange loss defaulted, mainly from the adverse effects of the peso devaluation on the account receivable, not related to sales, which are paid to us in Mexican pesos, mainly recoverable VAT, which when converted to US dollars, our worth less than they were at the end of last year. But let me make it clear, that all of our sales are denominated and paid in dollars, it’s just the exceptional accounts receivable, which are paid to us in pesos.

And moving now further down to the tax expense of $62 million. This $62 million represent an effective tax rate of 48.5%, which is higher than the 30% statutory tax rate. The main reason for this, what the effect once again, of the devaluation of the Mexican peso on the tax value of assets denominated in Mexican pesos. But again, I do want to stress that this is a non-cash item. Let me now move quickly to Page 35.

On page 35, we show our cash flow, and I’m very happy to report to you that in the first half of the year, we had a positive free cash flow of $242.6 million, which contrast very positively against the negative free cash flow that we had in the first half of the previous year. If you see in this slide, you will appreciate that we had a very important increase in the net cash from operating activities, which was $422.5 million, a 152% increase compared to last year. Also important to mention is the fact that we invested less in CapEx in the purchase of property plant in equipment, which was $182 million for the period, $66.4 million lower or 27% lower compared to last year. Also dividends paid were lower compared to last year by almost 29%. But importantly to mention here, is our end of the half year cash balance, which was $514.7 million.

This gives us a lot of comfort in terms of meeting any challenges derive from potential disruptions of the COVID-19. We believe that with this cash balance, we’re prepared to meet any challenges in that regard. On Page number 9. It’s what I thought would be interesting for you to know how we distributed that the investment in CapEx, the $182 million, there you can see the approximately 29% or $52 million were invested in Fresnillo. In the bottom part of this bubble, you can see that Juanicipio represented 22% of the total amount or close to $40 million.

Saucito represented 17%. And with that on Page 37, where we show the balance sheet, just to mention that we strongly believe that we have a very strong financial position as shown by this trend of our balance sheet. But, no major comment in this last slide. With that, I would like to thank you for your attention and pass it on to David.

David Giles: Thank you, Mario.

And we can go to close the presentation today before coming to Q&A. To Page number 39, and the section of 2020, please. You will see on Page number 39, the three projects that are underway, the Pyrites Plant that we described the previous section, the Fresnillo base metals flotation plant that equation, as well, ending. As I mentioned, the investment on vibrating screen, which is a low investment, one and only we can bring the mine to the 9,000 tonnes per day throughput. Then the Juanicipio project, and we finish at mid-2021 next year, we’ve been able to Juanicipio really go over any procurement disruption as well for COVID-19.

We have most of the large equipment on site. And it’s just about building and construction, the flotation plants and the infrastructure and surface. Mine development continues at a very good pace as well. And as we mentioned, we will be able even to process two days per month of the Juanicipio development ore in the Fresnillo flotation plant, that is coming very soon as well. And then the bottom part of the chart, Orisyvo gold project that we are confirming the recovery rate after a very good metallurgical result we have.

I think we can confirm this high recovery rate of gold, we will have a stronger project that we can go then after the prefeasibility and feasibility stages. And I would like to mention also some other project names, so that you get familiar with those one is Rodeo, very good perspectives of becoming a physical project down the road and Guanajuato as well. So there we are going through a land access, so that we can finish exploration as well. And in Guanajuato, we continue exploring and posting good exploration results. You will notice also from this chart that we have left out the Ciénega expansion.

In Ciénega expansion, we are concentrating there of making the most out of the flotation plan we have. Although, we had some increase in resources to the west of Ciénega, and therefore we would teaching of the possibility of a new flotation facility or increase the current or the actual flotation plant that we have. This was not enough in order to viably justify the investment. Also San Ramón is coming to an end, the satellite mine on Ciénega, and you will see that we will substitute that San Ramón for with all coming Ciénega itself. So that would imply a better cost structure as we will avoid some haulage costs at Ciénega.

So that’s something that goes along the lines of concentrating in increasing the margin of our current operations as well. So we can go to Page number 40, is the expected attributable production profile, you will see silver going up steadily in the following years 2021 and 2022. Here, we reflected some of the projects that we talked about, the Pyrites plant second stage, the Fresnillo, the Fresnillo mine also of course, giving a step up to our silver production, if our silver coming from our recycling projects, Juanicipio as well. On the gold side, the story is a bit different. We are bringing to an end Noche Buena and that is reflected in lower gold production, but also on the Herradura open pit as well, we are producing a little bit less on the following two years, 2021 and 2022.

And therefore, it is important to think of how to mitigate this production fall. One, the alternative would be Orisyvo as we described, and the other one could be Rodeo, which is also a good project in that very good location as well. On the base metals, you will see lead production going up and think passing on the increase production and then meaning lifted on 2022. If we’ve got the Page number 41, you will see what Mario described in terms of the initiatives we have in order for preferred cash due to the uncertainty we were faced, and we are still facing. So we lowered sustaining CapEx at all of the operation.

This was a very careful exercise that we went through and André with all of the mines. We also lower or defer some of the investments in Juanicipio mainly. So you will see also the growth CapEx decrease, and that was passed into 2021 of this with no effect on the day we are acting to conclude the construction of Juanicipio. And this is what was in Mexico side also decreasing exploration. As Mario mentioned, in order to preserve the cash under the current circumstances.

And then we can go to turn Page to number 42, just to some concluding remarks. First and foremost, prioritizing the health of our workforce during the COVID outbreak. Here, we are working on a day to day basis. We have the test board support in order to cope with this challenge. Our chairman is personally involved in these activities, putting out weekly notes in terms of information, engaging the whole organization as well, a great support from our medical team and also from our operations team in order to cope with this big challenge.

As I mentioned, great support and a great result from the testing that we are doing on a daily basis, random testing with quick tests, direct testing for those that are suspect of having acquired the virus. And this gives us the possibility to really see and know in which phase of the disease they are, when we detect a positive case, and we can manage the 7, the 14 of the 21 days in order to bring them back safely into our operation as well. We have very much getting into a lot of communication with the health facilities in the different locations where our mines are Sapeka, in Fresnillo, especially, in Sonora as well. So we have also the infrastructure needed to support those that acquire the virus workforce. Also strong commitment to operational delivery, as I mentioned, the focus was to stabilize the operation and increase the margin in our operations.

We have had a very good result in dealing with this pandemic situations that we can confirm the 51 to 56 million ounces expected production for the year. And – but we also reflect a lower of the guidance in terms of gold, as I mentioned, 785,000 to 815,000 as a new guidance. Dealing with our stakeholders very importantly, we have started to use first information with the communities around our operations about what COVID is about all of the preventive measures that we have. And recently, using the quick test as well with them with a – we have had a very good retention of this initiative in all our communities around our mines. We focus – although we have had some external factors that are helping our cost structure.

We continue to focus on reducing and controlling costs and capture additional efficiencies and increase our productivity in our operations. And as I mentioned, create value through discipline growth, exploration and development as well. We have to compensate the fall, the following of gold production in the following years. And I mentioned some of the projects that we believe we can go through. With this, we believe we can – we have presented a good set of results and we can open to Q&A now.

Thank you all.

Operator: Thank you. [Operator Instructions] So the first question from the audio line comes from the line of Jason Fairclough from Bank of America. Please go ahead.

Jason Fairclough: Yes.

Good afternoon and good morning, guys. Really just one question for me to keep it short. Could you maybe give us a bit more color on the journey you’re on in terms of operational improvement? And you’re mentioning some numbers in terms of the development leaders. What’s the ultimate goal? Are we sort of 30% of the way in there? Are we 50% of the way? Is there a lot more to go?

Octavio Alvídrez: Yes. In terms of the different initiatives across our operations, Fresnillo, and as André Sougarret mentioned, we have had good results in terms of the dilution, decrease and control.

This has been important in order to have or enjoy a better grade to what we were doing last year. The initiatives that we mentioned is very basic but close monitoring and control, such as the drilling part that we’re using, the blasting techniques as well, engaging and talking to our workforce and what this means and the impact we have economically from increasing or decreasing the dilution as well. We do have a – we have the objective of increasing the development rates. We do have an average of close to 3,200 per month. Helped also by the tunneling machine that we have in Fresnillo now, and that is ramping up successfully.

But during this, the current circumstances, we have had to really balance the production activities to those of the development of the mining work side as well. We also have in Fresnillo, the possibility of working the Sunday, so that acts as additional productive time as well. We – although we have some workforce shortages, as we described before, we have the benefit just recently of one of the operations of our system company being closed in the proximities in Zacatecas. We’ve been able to bring key personnel in terms of miners with experience and also maintenance guide into Fresnillo and Saucito, so we will see the benefits of that initiative as well. In Saucito, it’s very much the same.

As we described in the presentation in terms of dilution control, development rates. Although under the current circumstances, that’s a day-to-day balance to production as well. But – and then San Julián, importantly, of the mine as well after having last year some challenges in terms of the stability and ground control. Right now, we are going back to the original sequence, and that would give us better grades in this second half, the silver grades in the second half of the year.

Jason Fairclough: Can I just come back to you, though? And sorry to try to pin you down to a number, Octavio.

But if we talk about 3,400 per month, just remind us where we started off? And where you want to get to? You want to get to 4,000, is that right?

Octavio Alvídrez: What we believe is a sustainable is around 3,200 to 3,300 meters per month. We were aiming to a higher development rate so that we have some operational flexibility. But as the currency consensus, which probably 5% to 6% workforce impact due to COVID. And that we believe that is not a possibility this year. Next year, we are redefining this as a higher development rates once we go over this COVID situation.

For the current year, we believe 3,200 is a viable rate.

Jason Fairclough: Okay, thank you.

Octavio Alvídrez: Thank you.

Operator: Thank you. The next question comes from the line of Alan Spence from Jefferies.

Please go ahead.

Alan Spence: Hi and thank you for taking my questions. I’ve got three, and I will go through them one by one. Firstly, on one of the last slides you were going through in terms of the metal production guidance. It looks like you downward revise 2021 and 2022 targets for zinc and lead.

Can you just explain kind of what the drivers of that was?

Octavio Alvídrez: To lead and zinc, yes. That has had to do very much with Fresnillo and Saucito. I mean in Fresnillo and Saucito, lead and zinc are byproducts. So it’s a little bit more difficult to have a stronger grasp of what we are producing in the following two years. We know, of course, that those base metals are increasing net debt, and that’s why we prepared our facilities with the modification of the flotation, the current floatation plant at Fresnillo so that this increase in base metals would not compromise the quality of our concentrate.

But yes, we lowered a bit the production of lead and zinc in 2021 and 2022. Saucito is a similar case, but not to the extent of revenue.

Alan Spence: Okay. That’s helpful. Thank you.

And the last set of results, you gave some very helpful guidance around adjusted production costs for full year 2020 based on a cost inflation assumption in the Mexican peso to U.S. dollar FX rate. Are you able to give us a bit of an update around that?

Mario Arreguín: Cost guidance, the adjusted production cost.

Octavio Alvídrez: In terms of our production cost, of course, when we initially estimated this year’s potential increase, we did not take into consideration the devaluation of the Mexican peso or the side effects of the COVID pandemia. So what we’re expecting for the second half of the year, something very similar to what we saw in the first half, although I would add the cost related to Herradura and Noche Buena, which we expect to be fully operational during the second half.

So compared to the first half, where we did not incur in those costs, that could represent, in absolute terms, an increase in the second half. Again, because we are expecting continuous operations now at both Herradura and Noche Buena. But we believe, in general terms, to be very similar to the first half.

Alan Spence: Okay. That’s helpful.

And the last one for me, just on a Orisyvo. Can you give us a timeline when you think the updated PEA might be done? And then perhaps potentially when that could be ready for and potential board approval?

Octavio Alvídrez: Are you talking about Juanicipio or Saucito?

Alan Spence: Orisyvo. Sorry, the line must be…

Octavio Alvídrez: Well, yes. Orisyvo, right now, I mean, we needed to stop for 1.5 months, almost two months. The drilling we were doing in terms of collecting a rep, overall representative sample for all of the ore body, especially for the close to 4 million ounces oxidized portion of the ore body and the higher grade content close to this central oxidized part.

In order to confirm after the drilling, the metallurgical tests and the metallurgical recovery. We believe we can finish that drilling in a couple of months. So by Q4, we will be doing the metallurgical test and hopefully confirm the better metallurgical recoveries. And after that, going to the prefeasibility and feasibility. This project has their challenges in terms of the location in the Sierra Paramor in Chihuahua.

We need to bring infrastructure, electricity, of course, communities and consultation is also some of the activities that we need to go through. And – but as I mentioned, number one is confirming this metallurgical results. And with that, we believe we can post a stronger expected result for this project.

Alan Spence: Thank you very much.

Operator: Thank you.

The next question comes from the line of James Bell from RBC Capital Markets. Please go ahead.

James Bell: Yes, good morning. And thanks for detailed presentation. I just wanted to talk a little bit about CapEx.

When I looked at your previous guidance over the next three years or over the next two years, rather, the total about 1.1 billion to 3 billion, you’re now around 40 million less across the two years. I just wondered in terms of deferrals, were there any reductions in there? And what was that related to? And in terms of when you look to 2021, the deferrals of CapEx in this year, do you feel like there’s a risk that 2021 production could be impacted through these deferrals?

Octavio Alvídrez: Okay. Thank you, James. Yes, you’re right. I mean we have to reshuffle some of the CapEx.

We had a very careful and detailed exercise for the CapEx of this year. Initially, in March after posting our preliminary results. And seeing the – what’s coming at that time, we went into cash preservation mode. André and the whole operational team went through a very detailed review of what has been approved at that time, the $655 million CapEx in terms of sustaining and growth. And there was a number of initiatives across all of the operations in – but what we believe would not affect sensibly the ability to perform this year and half of next year.

And therefore, we reduced the sustaining from close to 400 million to 330 million, reducing also all sorts of initiatives so we believe that the current development rates reflected in this lower CapEx needs, we will be able to cope at the current rates – production rates. But next year, we believe we needed to increase those development rates and a little bit more on exploration in our operations so that we do not suffer in the second half of next year. And that’s why we reflected a 2021 increase sustaining CapEx from 400 million to approximately 470 million for next year. Also some of the growth CapEx that was in 2020 was the third with the number one objective of not impacting what we were having as the growth projects like the Pyrites Plant and the creation of a patient plant at Fresnillo, but more importantly on the Juanicipio side. So part of that investment was moved from 2020 to 2021.

But as I mentioned, we do not expect any impact by the time we believe we are finishing the Juanicipio construction as well. The 40 million that you mentioned are reductions that we are not incurring in the following years. But that would not have any impact on expected production in 2021 and 2022.

James Bell: Okay. That’s helpful.

And then just one quick one. Silver price, up around $25 an ounce, gold at record highs, how long do these prices have to be maintained before you take a look at your reserve pricing? And what optionality you have in terms of the existing mines to change your production outlook?

Octavio Alvídrez: Yes. No. I mean, we concentrate, especially now on really what we can control, and that is cost. Of course, higher metal prices, silver and gold, we have a very good effect and would be reflected in our financial results.

But we continue at the start of this year with the cost control initiatives, all of our operations despite the fact that we have had very good advantages from the external factors, that’s number one. In terms of research and resources, we are right now defining what prices to use. We are probably increasing a little bit the silver price, but not substantially from 17 to 17.50, nothing substantial. And then gold as well increasing a bit, but nothing compared to the current levels. We believe in long-term metal prices, and we don’t want to be subject in our reserves and resources to the probable volatility in metal prices – pressured metal mixed prices.

James Bell: Okay, that’s right, clear. Thanks for taking my questions.

Octavio Alvídrez: Thank you, James.

Operator: Thank you. The next question comes from the line of Daniel Major from UBS.

Please go ahead.

Daniel Major: Hi, Octavio, and thanks for the questions. First one, just can I ask a little bit more detail on the cost question that was asked earlier. So am I right in saying that if we take the first half run rate, add about $50 million, which was the costs associated with the lower volumes at Herradura and Noche Buena, that should be, all else equal, the approximate sort of run rate for the second half, is that what we should be saying?

Octavio Alvídrez: That is correct.

Daniel Major: Okay.

And then to follow-on from that, as we look into 2021, I’m guessing you will hope to at least sustain or lift the development rates in the underground mines, you probably have to catch up on some stripping in the open pit mines. And we should see production volumes based on your guidance pick up a bit. So is it fair to assume into next year on a flat currency basis, you would see a lift in your adjusted production costs similar to your lift in metal sales volume?

Octavio Alvídrez: No. For next year, we are expecting in Herradura, a similar stripping ratio. We are planning to move a similar volume to what we’re planning this year.

Of course, we had the impact of these six weeks. But the Herradura operation will be run at a similar pace, where we will have an effect. But that’s a natural effect business in Noche Buena, and where we will move less tonnage, but that’s coming to an end after mid-2022. And on the underground operations, as I mentioned, part of that is reflected on the higher sustaining CapEx that we have on Page number 41 for year 2021. And that, we will carefully determine what we can do in Fresnillo to have a little bit more of operational flexibility as we are planning to run development rates at 3,200 this year.

Also in Saucito, we are increasing a bit the development rate that we mentioned as average on the operational page of Saucito in the second half, but that is reflected already on the sustaining CapEx of 2020. And also in 2021, we will increase a little bit more on Saucito from the current 3,300 meters per month.

Daniel Major: Okay. But just more to be – if I look at your adjusted production cost for the whole group, you’ve obviously indicated that the catch-up you’re going to be doing on development, et cetera, was more reflected in sustaining CapEx. But if I look at adjusted production cost, is that going to go up broadly in line with the lift in group sales? So group sales are going from, what, mid-50s to mid-60s in silver production and gold flat.

So will adjusted production costs go up next year, similar to your sales volumes lifting? Hello?

Octavio Alvídrez: Yes. Your assumption of assuming that the cost will go up in proportionally to the increase in production would be right because we will be moving more mineral. So that will be right.

Daniel Major: Okay. That’s fine.

Yes. So the similar kind of aggregate unit cost, that’s fine. Okay. And the next question, can you just provide me a few more details on this inventory movement. So you booked $65 million of profit through the P&L and it resulted in about a $35 million increase in cash on working capital.

How long will it take for you to fully unwind that? So eventually, you will receive $65 million of cash through the combination of the unwind of the working capital and the rest flowing through the income statement, I’m guessing, but how long will it take for you to unwind that and you to realize that $65 million of cash?

Octavio Alvídrez: Yes. Approximately in the next 18 months, we would have accrued 95% of the benefit. Like I said, this is something that has a diminishing behavior. And so approximately 90% to 95% of the benefit, the full benefit of the 119,000 ounces will be realized in the next 18 months or so. The most important, obviously, was the first half of this year.

And like I said, next year, it should be around 25. In the following year, I mean, the next semester will be 25, and the following year will be lower than the 25.

Daniel Major: Okay. Thank you. Yes, that’s clear.

And then just final question, on the – what guidance could you give for the effective tax rate in 2020?

Octavio Alvídrez: The effective tax rate?

Daniel Major: For the full year.

Octavio Alvídrez: Okay. Unfortunately, the effective tax rate has become very volatile. For example, if you look at the first half of 2019, you would see that it was a positive tax that means it was actually added to the pretax profit. While in 2019, we had the opposite behavior of the exchange rate.

We had a revaluation. So it’s very difficult to predict where that effective tax rate is going to end up. It will depend on the behavior of the exchange rate. But assuming it stays more or less where it is right now, then the effective tax rate for the full year that we are expecting is the 48.5% that we recognized in the first half. And for the following year, if the exchange rate doesn’t change at all, then we would be very close to the 30%, which is the statutory rate.

But again, that’s very difficult to try to predict.

Daniel Major: Okay, great. Thanks a lot.

Operator: Thank you. The last question from the audio is a follow-up question coming from the line of Alan Spence from Jefferies.

Please go ahead.

Alan Spence: Yes, thank you. Kind of building off of one of James’ questions earlier, is around very healthy gold and silver prices right now. If we assume these continuing to 2021, and you’ve got the increase in production that points to a fairly healthy free cash flow generation after CapEx and exploration, how are you thinking about capital allocation? Do you want to return to a very aggressive net cash position? Are you balancing the potential of increased shareholder returns? Or just like how you’re thinking about some of that in the future years?

Octavio Alvídrez: Well, we want to maintain and be consistent with our principle of balancing return to our shareholders with growth of the company. And we’ve been very confident in saying that 50% of profit will be reinvested in the company and 50% of profit will be returned back to our shareholders via dividend.

However, if we start to build up a high cash balance due to very favorable prices, and let’s hope that, that actually happens. Then probably, in that scenario, we would consider paying extraordinary or special dividends. Again, we’re not going to rush any decisions in terms of investing in projects unless they meet our investment criteria. And in addition, I think we, in Page number 39, we talked about the Orisyvo project, it’s an idea or of 400 and in the scoping the prefeasibility and PEA that we have 430 million to be deployed probably in two years. Rodeo, it’s a project that we are trying to match with the closure of Noche Buena.

It’s about a similar size to Noche Buena in terms of the possibility of production per year of gold. But as we close Noche Buena, we can use the trucks and the equipment that we have in Noche Buena, so that would be – we can lower the CapEx for Rodeo, that would be the idea. So we would need – so we have these additional needs in terms of CapEx to what Mario mentioned, is Orisyvo and Rodeo advance feasibly.

Alan Spence: Thank you. And what would be the cash balance and the net debt position where this discussion around extraordinary dividends would occur?

Octavio Alvídrez: Can you repeat the question, please?

Alan Spence: Yes.

You mentioned if the cash generation was very good and you generated a very significant cash balance that then you would consider an extraordinary dividend. What is the cash balance or net debt level where you would then start to have that conversation?

Octavio Alvídrez: Well, obviously, it’s a decision that will be made by the Board of Directors. But we, as management, would feel very comfortable with suggesting perhaps to the Board to consider a special dividend if our cash balance – our net cash balance would be higher than $800 million or $900 million. At that point in time, definitely. We think it would be advisable to our Board to consider perhaps a special or extraordinary dividend.

Alan Spence: Sorry, just to clarify, was the $800 million to $900 million, a cash balance or net cash balance?

Octavio Alvídrez: Net cash balance. So that would mean – yes. No, sorry. No, no, no. $800 million flat, without considering – not netting it out of the debt that we currently have, the $800 million that we have issued in bonds.

Alan Spence: Understood, okay, thank you very much.

Octavio Alvídrez: Welcome. Okay – yes, operator.

Operator: Yes, please. That was our last question for today.

So I’ll hand back to you for concluding remarks. Thank you.

Octavio Alvídrez: Okay. Thank you very much all. If you have further questions, as usual, we have London Office and Gaby Mayor as well and our contact with ourselves as well.

Thank you all for listening. Bye now.

Operator: Thank you for joining today’s call. You may now disconnect.