Report on the Fresnillo plc AGM, 21 May 2024
Representatives and friends of the El Bajio community, London Mining Network, ShareAction and Transform Trade attended the AGM to raise concerns about the activities of Fresnillo plc’s subsidiary Penmont on lands belonging to the El Bajio community in the state of Sonora in Mexico.
See a report about the AGM in the Mexican publication Pie de Pagina.
Apart from the board, employees of the company and the registrars, some security guards, and our own delegation, only a handful of shareholders attended the Fresnillo AGM in London on Tuesday 21 May. Even many of the directors had sent apologies for absence.
Company chairman Alejandro Bailleres welcomed us to the 16th AGM of Fresnillo plc and read a prepared ‘statement on trading’ which he said had been released to the London Stock Exchange that morning. He sniffed from time to time while reading.
He then opened the meeting to questions, none of which he answered. Everything was left to company Chief Executive Officer (CEO) Octavio Alvidrez. We reproduce below his exact words. The meaning of his replies is not always clear. Mr Alvidrez frequently either avoided answering at all, or answered a question which had not been asked, or simply denied the validity of the information provided, without giving any evidence for his own assertions.
Meanwhile, community members opposing the company, and unionised mine workers within the company’s mines, continue to be threatened with death, and these threats are credible given the series of murders in recent years, ostensibly carried out by organised crime gangs.
Richard Solly, of London Mining Network, began by saying, “The Dipolos opencast mine started operating in 2009 on the El Bajio community’s land. It has moved at least ten million tonnes of material, causing significant devastation. But the land was not Penmont’s to mine. On three occasions the courts in Mexico have confirmed that the land belongs to the El Bajio community. These three rulings include:
- 11 November 2011, Agrarian File number 188/2009
- 9 June 2014, Agrarian File number 536/2013
- 26 January 2022, Agrarian File number 297/2019
“The Mexican courts have ordered Penmont to:
- pay the community the value of the gold extracted from their land
- pay rent to the community for occupied land
- make arrangements to restore the land, now heavily contaminated from the mining activity
- leave the land.
“The company has left the land, but not voluntarily: it was evicted by Mexican federal police. When does Fresnillo intend to comply with the remaining three court orders? Why, if Fresnillo states in its Annual Report and Accounts that it complies with the law, has the company not complied with a Mexican court judgement issued more than ten years ago?”
Octavio Alvidrez replied, “We have a very good relationship with more than 150 communities, not only in Aragura, in Soledad and Dipolos we used to have, but also in the Fresnillo District, in Cienaga, in San Julian, and in all of the projects that we continue to explore, and something that we regret is the division in the El Bajio ejido itself, because what we’ve seen is that two groups in El Bajio continue to fight over interests they have. We regret this.
“If I may, Mr Chairman, I would like to mention some of the programs that we support across all of our operations and projects, which go along or go in line with our purpose, which is to contribute to the wellbeing of society through the sustainable mining of gold and silver. And we do have programs in education.
“Some examples we have here is Picando Letras with the support of the Ivy Foundation in Mexico. And this is a very good project because we educate the children in our communities around our operations. And not only that, because the people that do not have the capability of reading, we also bring them to these centres because we believe that a better educated society and community is much better prepared, and that’s what we like, to discuss issues on mining and different fronts.
“I would like to mention another example. First, robotics, in which we prepare children from the communities around their operations to prepare themselves in robotics. We participate and we support the participation of these groups in different competitions, not only in Mexico, but internationally as well.
“And we are proud of what they do and raise their education in that regard. And they, and we, have the interest of them, most of them, to continue their education. And we continue to support this, paying their tuition in top education institutions in Mexico. And we have had two already graduated, not people, but I mean five in the first exercise we did, and some of them are working already with us.
“We support schools in Caborca, and also in the Fresnillo community and city. We support, as I mentioned, students with tuition. We support our teachers in Cienaga. And as I mentioned, this is something that we regret, that because of these fights in El Bajio, we cannot do this for El Bajio community. We do also have a lot of programs in water, because, I mean, water is essential, not only for mining, but also for community.
“And I would like to mention, Mr. Chairman, some examples we have around the communities in the areas where we operate. We have rain harvest water systems in San Julian, in which we provided water through this system, installing these systems in 10 to 12 different communities around San Julian, saving women from walking more than two and a half to three hours in order to bring water for their homes. We support sewage water systems in most of the communities where we operate. A couple of examples there: in Presidillo, we have three sewage water plants. The latest one, we agreed with the municipality to support it effectively.
“And that’s why, and you can read this in our annual report, we reuse approximately 85 percent of the water we use in our process, in our mining and metallurgical process. We are supporting right now a project to build a sewage water treatment plant in Caborca, the area in which we operate the Herradura and we used to operate Soledad and Dipolos. And this is a project that will come to fruition probably in a year and a half to three years, saving the sewage to go and contaminate the water courses in the area. When you say that we don’t comply, we comply 100 percent with official norms to do mining in Mexico. And not only that, but international standards as well.
“Another example that I would like to mention, that is a pity that the El Bajio community members do not have this opportunity, as we build entrepreneurial capabilities for the people of the communities around our areas. One example of this is in San Julián. Here we have people from the communities who have installed and built some facilities to make uniforms for personnel, because we know that mining is something that if you deploy or deplete the reserves, mining cannot be done forever in the area. So by building entrepreneurial capabilities of the community, they will be better prepared to continue the ways of living. Not to mention the job creations that we do whenever we bring an operation in the area. And that’s something that we could have done, and we will again in the area, if we have a final ruling to bring Soledad and Dipolos into operation again. That will make the creation of probably 750 to 850 employments there in the area, well paid, 30% above the average that we have in Mexico for any single job. And that’s something that will bring economic growth, ways of living to the community, and much more advantages.
“And finally, I would like to mention some of the programs that we have to support health. Our chairman mentioned Fundacion UNAM, the UNAM Foundation, and many others. This is a program in which we bring medical doctors to the area. They are in the area for a week or so. They evaluate not only personnel or families from the workers, but for any members of the communities in the area. And we have three or four in the Herradura, Soledad and Dipolos area. Last year, we benefited through this program 6,000 people. Imagine what we’ve done in the last eight to nine years across all of the operations and with the communities in all of the areas!
“They come and they evaluate the site, mouth health, health for women themselves, and a number of specialities. And people is very well regarded about these programs in the area. In Herradura specifically, we’ve done that in Coyote. We have done that in La Griega, communities that are nearby. And to me, I’m very proud whenever I go to Herragura (and I used to do that in Soledad and Dipolos), the road, all the way from Caborca, where most of our people live, to the mine. Our transportation for workers stops in probably 22 to 24 different communities, picking up all the workers that participate in our operation and therefore you see in practice and in reality the purpose of the company with this, all these programs and economic and value creation in our company.”
Richard replied, “Thank you for answering. You gave very interesting answers to questions that I didn’t ask. I was referring to three specific legal judgments against the company, at least one of which, I understand, is not appealable any further and therefore ought to be complied with. And the final question I asked was the reason for the Chief Executive not being on the Board of Directors. So, could those questions please be answered?”
Octavio Alvidrez responded, “In practice, I am a member of the board, even though I do not have the nomination, but as I participate actively in all the decisions that the board takes, I’m considered a member of the board in practical terms.”
Fiona Gooch, of Transform Trade, spoke next. She said, “The judgment listed in Mexico on the 9th of June in relation to agrarian file 536 in 2013, when you were ordered to pay for the value of the gold taken from the El Bajio community.
Fresnillo’s own previous annual report and accounts state that the value of 236,709 ounces of gold extracted from the mine between 2010 and 2013. That is what you have reported as the number of ounces extracted from the mine. We estimate that that is 347,644,411 US dollars. Simply that is 0.3 of a billion which is what it is estimated at, according to the average gold price over that period. Please could you advise where the liability is recorded in the annual report and accounts? Where is that liability recorded in your account? And then I have two further questions.”
Octavio Alvidrez replied, “Well, as I mentioned, I mean, we are transparent and that’s some of the numbers, although none of them are correct, but I will take them as something that you’re concerned about. We are transparent in all that regard. And as I mentioned, we are 100 percent confident on the authorities to come to whatever final ruling they achieve. And whenever that happens, we will comply 100 percent with that final ruling. As we did when I mentioned we returned the land in 2013 to El Bajio ejidatarios. And I should mention in particular, because it’s not to all the Bajio members, but to the Cruz family.
[In fact, compensation is due not to the Cruz family, but to the Assembly of the El Bajio ejido. Even if it were the case that compensation were due only to families owning rights of use of parts of the collective territory, the rights of one of the Cruz family members has been bought out by El Bajio community member Jesús Thomas.]
Fiona continued by drawing attention to a judgment that came out at the end of 2023. The Mexican National Commission for Protected Natural Areas, at the end of 2023, designated part of the El Bajio’s communal land, where the Dipolos opencast mine is located, as a conservation area. It cannot be mined for the next 15 years. She asked where this is reported in the company’s 2023 annual report and accounts.
Fiona said that the company had named Dipolos Soledad as a key asset. She asked where this important new information is reported in the annual report and accounts. She noted that the purpose of the conservation area is to increase the habitat available for the Sonoran pronghorn, which is listed on the International Union for Conservation of Nature Red List as endangered. She asked when Fresnillo would give the money to the community to organise suitable restoration of the land to support that habitat.
Octavio Alvidrez replied, “I think there is a piece of information that you’re lacking. We know about this voluntary process that started, I would say initially, in the El Bajio community. But then, this is another example of the division between the two groups of El Bajio. Because one group started this voluntary process and the other one – and this is the piece of information that you’re lacking – is contending legally this process.” [In fact the appeal is being brought by people who are not members of the El Bajio ejido, and who have no right to appeal the certification of the land as a protected natural area.]
Fiona retorted, “Let me just come back on that. You have a section in your report that talks about judgments. You have not talked about that in the section on judgments.”
Octavio Alvidrez replied, “This is a state process. And as you know, or you should know, mining is a federal process. The states do not have a say in mining. This is a federal process due to the mining process.”
Fiona said, “Thank you for that point. As you know, this is an opencast mine. The top five foot of land belongs to the ejido. It’s land ownership. That belongs to the agrarian courts. The agrarian courts have found against you because to access the gold you have to disturb the top five foot of soil. This is why you need to comply.”
Octavio Alvidrez replied, “Well, that’s your view, and I would not contend that view. We have also a legal view with a departmental legal process. As I mentioned before, and we continue to do so, we comply with 100 percent of the regulations. Not only what we have in Mexico, but international standards as well. Of course this legal process lies in the regulations in Mexico, and we comply 100 percent with that.”
Fiona continued, “The reason for my question is that we are at the Annual General Meeting, where you share how you run Fresnillo, for the benefit of the UK Stock Exchange. So we are interested in what you report and you share with us here and whether or not it is a true, fair and accurate reflection of what is happening in connection to your assets. That is the context for these questions. My final question for now is, please could you explain what the relationship is between Fresnillo PLC and the 100 percent owned company called Fresnillo Management Services, which has company number 06482947?”
Octavio Alvidrez replied, “First, your management services is actually the company that we set up here in London to do basically investment investor relations functions. Like you said, it’s 100 percent owned by your PLC. And that’s the purpose of establishing that company here in London.”
Juan Alberto Cedillo, a contributing journalist for Proceso magazine in Mexico, said, “I come from Monterrey in Mexico. I simply want to ask the company for a special provision in next year’s budget to cover the costs of environmental reparation and also the reparations ordered by the court in the 2014 sentence.”
Octavio Alvidrez replied, “To answer your question specifically, there is no accounting for reserves made for that particular issue that you just mentioned. Because our legal advisors have a different opinion regarding our position.”
Alejandro Ruiz, a journalist from Mexican publication Pie de Página, asked a question in Spanish, translated by the interpreter. He said that, according to Capital IQ, the active records of Fresnillo PLC show that the mines in Soledad and Dipolos were active until 2022, and that would be against what the court ruling said. Octavio Alvidrez had said that the company had complied fully with the ruling. Was it active in Soledad and Dipolos at least up until 2022?
Octavio Alvidrez responded, “We have not done any mining after we returned the land. Again, I will reiterate in 2013, we reported it as maintenance, not active.”
Rosie Leach, from ShareAction, said, “I’m asking a question on behalf of ShareAction, a charity that uses responsible investment to try and tackle social and environmental issues. My question relates to corporate governance. So, as shareholders, we do not believe that the 2023 annual report and accounts present a true and fair picture of Fresnillo’s activities. I was wondering how satisfied are the independent non-executive directors that the information presented to them in the annual reports by Fresnillo’s management is true and transparent?”
Octavio Alvidrez replied, “We care a lot about transparency, and not only that. We take care of the information to be presented as balances, understandable and fair to comply with all the information. So all of the information that we have in the annual report complies along those lines.”
Jesús Thomas, from the El Bajio community, said through the interpreter, “I just wanted to clarify that in 2013, you talk about the mine moving out of the land, so I just want to make it clear that this wasn’t a voluntary decision, that in fact you withdrew from the land in the face of actions carried out by the Mexican National Police, that you were forced off the land rather than voluntarily leaving, so that is one example of incorrect information that has been given in the report, and you also mentioned divisions within the El Bajio, and that’s true. There’s a group of four people, and there’s a group of seventy people. That’s the division, and the four people are working hand in hand with your own lawyers. So it’s not the division as you expressed it.
“I have a question for Mr Arreguin [Fresnillo’s Chief Financial Officer]. You talked about the way that your legal team has a different view of the judgements. In Mexico, and around of the world, if all of the legal channels have been pursued and exhausted, as is the case here, then there is no further right of appeal for the company. Then how is it possible to maintain the view or the position that you respect all of the legal judgments, when there is no further remedy for you in the Mexican legal system? Is it that you respect some legal decisions and not others? Could you explain how it is possible to say that you respect all of the legal judgments that have been handed down by the court system when there is no further appeal possible to you, available to you?”
Octavio Alvidrez replied, “Well, once again, I mean, that’s your view or probably what your lawyers are telling you. There is no final ruling, and therefore, I mean, we continue in the legal process. Whenever we have a final ruling, and we have full confidence in the authorities, as I mentioned, we’ll commit to that final ruling.”
Fiona Gooch said, “We have discussed grave matters of environmental and human rights violations. This clearly means that it is possibly implied that management may or may not be implicated in some of those actions. So my question is to the incoming independent non-executive director. Clearly some of this is of concern. What are you going to do in the year ahead?”
The Senior Independent Director, Dame Judith Macgregor, replied, “Thank you. These matters are certainly discussed by the board, with the board. And we also are in regular communication with the executive team to have the latest update on the legal process, which I understand is still unfurling. So I can assure you the board is fully kept up to speed on these matters, and we had a very long process of discussion of the annual report. The board is closely engaged at several stages of putting the draft together. And I can assure you that we were satisfied with the true and reliable version of the events and facts that are contained within it.”
Fiona continued, “Thank you for your patience. I recognize that. My suggestion is that as an independent, non-executive director, perhaps some resources could be put at your disposal so that you could independently, entirely independently, come to your own view. And I regret that Charles Jacob, the outgoing independent non-executive director, is not here. Because otherwise, he would have received some questions about how he had fulfilled his independent role. But he’s not here. We obviously can help. You are independent. We would like to see some independent work done in the year ahead.”
With that, the Chairman called for a poll on the meeting’s resolutions, and closed the AGM.