At Platosa, we have the benefit of high grade silver, lead and zinc production with 50 percent of our revenues from base metals. As a result, we have some protection against weaker silver prices and volatile fluctuations. We still strongly believe in silver’s potential, as a vitally important metal and as one of the most reflective and conductive materials with multiple uses that permeate every new technology. We are living in the future and as we make more advancement, we must go back to the source to build our dreams. Our main objective is to continue to unlock exploration potential, and secure future supply.

Silver tends to follow gold and when gold is trading in a defined range, silver trades a little more aimlessly than other metals. When gold goes down, silver seems to slide even further, and when gold rallies, silver rallies much more on a relative basis. We are positive on silver as this is the foundation of our company. Nevertheless, we have taken a different approach than most of our competitors over the last few years. In 2012, our assets’ combined production was about 3.5 million ounces of silver, a few million pounds of copper, 5 million pounds of lead and 10 million pounds of zinc. Now, we are producing approximately 2 million ounces of silver, around 45 million pounds of zinc and 35-40 million pounds of lead. We still have all that silver available to be mined but we have chosen not to produce it given the less-than-optimal silver prices.

Our long-term vision has been key to our ability to maintain high production rates no matter the price cycle. It is our main differentiator. We invest in exploration continuously and through the cycles and are not dependent on M&As; 95 percent of our growth is organic. This gives us the possibility of bringing onstream projects that are strong and able to withstand the cyclicality of the mining industry without diluting the quality of our portfolio. Our strategy has allowed us to become one of the few companies that still has a strong growth pipeline despite the downturn. In 2017, we produced 53.3 million ounces of silver and 930,000 ounces of gold making Fresnillo the world’s largest silver producer and the number one gold producer in Mexico.

Although there is a relationship between the prices of silver and gold, I would not say silver necessarily tracks gold too closely. The mining ratio globally is 1:9. This means for every ounce of gold mined, we are mining 9 ounces of silver. The ratio at 1:80 is quite exaggerated compared to the mining ratio, and every time we see a ratio climbing up into that range, we always see a correction. Last time it hit 1:80, the ratio subsequently fell very quickly to 1:30 and I would expect to see the ratio collapse again down to similar levels. I am a bull on silver and the company is growing quite nicely. Our production will grow substantially as a result of our last acquisition, so I think it is a good time for investors to look at owning our stock.

Falling new mine supply of silver due to few new mines being built during the recent five-year bear market of low metal prices should help boost higher metal prices for the next few years. Investment demand for silver is still low but we know from experience that when metal prices start to rise due to inflation or other economic factors, investors will jump back into silver and drive silver prices to new highs. We are reducing our operating costs and we are building two new mines over the next three years to grow our production by more than 50 percent. Building the new El Compas mine on time and budget will be a big advancement this year. We also plan to update our pre-feasibility study for Terronera, receive final government permits, raise debt financing and start construction at Terronera in 2018.

The story of silver is unique as it is the most used precious metal in industrial applications, last year consuming nearly 600 million ounces and posting its first increase since 2013. Everything we as consumers touch electronically essentially has silver inside, from our cars, homes, offices, technology and increasingly in healthcare. The fall in identifiable investment, in my opinion, is the primary reason why we are seeing prices at these low levels. The investment side of the silver equation is not where it once was. Using the US as an example, it has low unemployment and 4 percent GDP growth coupled with a very strong stock market. Many people are not turning to hard assets as an investment. So, while prices of the metal are not as expensive as they once were, we do see a recovery down the road, from value buyers and especially if and when the economy starts to falter.

Silver prices have definitely reached a peak. As 60 percent of silver is produced from base metals mines, if we do not see investment in base metals, the supply of silver will be affected. If supply is cut down, the price of this commodity will go up. I think that in the near and long terms the prices of silver will rise. Gold is a very important part of our company; our revenues consist of 55-60 percent gold income and the rest is from silver. If the silver industry picks up, we will be more than happy to step up our participation in silver streaming. At the moment, about two-thirds of our opportunities are gold-focused. I do not think we will venture in other base metals, as we try to keep our business model as simple as we can. We seek high-quality and long-life assets with high revenue margins to deliver the best exposure to precious metals to our clients. We are sticking to our specialty.