Fortuna announces preliminary financial results for the first quarter of 2020
Fortuna announces preliminary financial results for the first quarter of 2020
(All amounts expressed in US dollars, unless otherwise stated)
Vancouver, May 11, 2020: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) is pleased to announce the following
preliminary financial results for the first quarter of 2020:
First Quarter of 2020 Highlights Preview
• Sales of $47.5 million, compared to $59.0 million in Q1 2019
• Net loss of $4.5 million, compared to net income of $2.2 million in Q1 2019
• Adjusted net loss1 of $2.2 million, compared to adjusted net income of $8.4 million in Q1 2019
• Adjusted EBITDA1 of $15.9 million, compared to $23.8 million in Q1 2019
• Free cash flow from ongoing operations1 of $14.2 million, compared to $2.2 million in Q1 2019
• Silver and gold production of 1,819,312 ounces and 10,101 ounces, respectively
• AISC/oz silver equivalent1 for the San Jose Mine and the Caylloma Mine was $10.72 and $16.73, respectively
Note:
1. Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release.
2. Silver equivalent production for Q1 2020 is calculated using a silver to gold ratio of 97. 6:1. Silver equivalent is calculated at realized metal
prices of $1,571/oz Au and, $16.09/oz Ag for Q1 2020.
3. Silver equivalent production for Q1 2020 is calculated using a silver to lead ratio of 1:20.7 pounds and silver to zinc ratio of 1:17.9 pounds.
Silver equivalent is calculated using realized metal prices of $17.59/oz Ag, $0.85/lb Pb, and $0.98/lb Zn for Q1 2020.
First Quarter of 2020 Results Preview
Consolidated Metrics
Q1 2020
(unaudited)
Q1 2019
(unaudited)
(Expressed in $ millions, except per share information)
Sales $ 47.5 $ 59.0
Mine operating income 7.5 21.5
Operating income 1.8 10.9
Net income (loss) (4.5) 2.2
Earnings (loss) per share (basic) (0.03) 0.01
Adjusted net income (loss)1 (2.2) 8.4
Adjusted EBITDA1 15.9 23.8
Net cash provided by operating activities 13.2 3.9
Free cash flow from ongoing operations 1 14.2 2.2
Capex
Sustaining 3.5 4.7
Non-sustaining 0.1 0.8
Lindero 21.4 30.9
Brownfields 1.6 1.2
Mar 31, 2020 Dec 31, 2019
Cash, cash equivalents, and short-term investments $ 88.5 $ 83.4
Note:
1. Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release
Capital resources and liquidity
As at March 31, 2020, the Company had $88.5 million of cash and cash equivalents and liquidity compared to $ 123.4
million as at December 31, 2019. As at the end of Q1 2020, the Company´s $150 million bank credit facility had been
fully drawn.
Note Regarding Preliminary Results
The results for the first quarter of 2020 and liquidity as at the end of the first quarter, are preliminary and have been
prepared by management and remain subject to final review by the Company’s audit committee and approval by the
Company’s board of directors. The preliminary results for the first quarter of 2020 are subject to the finalization and
closing of our accounting books and records for the period , and should not be viewed as a substitute for full quarterly
financial statements prepared in accordance with accounting principles generally accepted under International Financial
Reporting Standards (IFRS). The Company’s auditor has not audited the preliminary results, nor have they expressed any
opinion or any other form of assurance on the preliminary results. The Company will release its financial statements and
MD&A for the first quarter of 2020 as approved by its audit committee and board of directors , on Thursday, May 14,
2020 after the market closes.
Lindero gold Project, Argentina
Construction at the Lindero open pit heap leach gold mine located in Salta Province, Argentina is approximately 94%
complete as at March 31, 2020.
The following table summarizes Lindero Project spending on construction and preproduction related costs fo r the three
months ended March 31, 2020:
Three months
Cumulative to ended
(Expressed in $ millions) December 31, 2019 March 31, 2020 Total
Construction capital expenditures $ 268.2 $ 21.4 $ 289.6
Contractor advances and deposits on equipment, net of transfers 10.5 (3.5) 7.0
Total Construction Spending 278.7 17.9 296.6
Preproduction costs 8.0 9.1 17.1
Sustaining spare parts, supplies and materials inventory 6.2 2.2 8.4
Other costs 1 4.5 0.8 5.3
Total Lindero Project Costs $ 297.4 $ 30.0 $ 327.4
Note 1: consists of Argentina financial transaction taxes, deposits and other costs
There were $17.9 million of construction trade payables outstanding as at end of the quarter.
The Company reiterates a capex forecast of between $314 to $320 million for the Lindero Project construction. This
represents an increase of 28 percent from the September 2017 feasibility estimate (refer to Fortuna news release dated
March 11, 2020).
The Company estimates that as of March 31, 2020, the remaining funds required to complete the Project, inclusive of
pre-production expenditures, working capital and VAT, to be in the range of $75 million to $80 million up to the
commencement of commercial production in the first quarter of 2021 (refer to Fortuna news release dated May 8,
2020).
Non-GAAP Financial Measures Preview
The following tables represent the c alculation of certain non-GAAP financial measures as referenced in this news
release.
Reconciliation to Adjusted Net Income for the three months ended March 31, 2020 and 2019
(Expressed in $ millions, except per share
information) Q1 2020 Adjust.
Q1 2020
Adjusted Q1 2019 Adjust.
Q1 2019
Adjusted
Sales $ 47.5 $ - $ 47.5 $ 59.0 $ - $ 59.0
Cost of sales 40.1 0.2 40.3 37.5 (0.0) 37.5
Mine operating income 7.5 (0.2) 7.3 21.5 0.0 21.5
General and administration 3.6 0.0 3.6 6.5 0.1 6.6
Exploration and evaluation 0.4 - 0.4 0.2 - 0.2
Share of loss from associates 0.0 (0.0) - 0.1 (0.1) -
Foreign exchange loss 1.3 (3.2) (1.9) 3.7 (2.9) 0.8
Other expenses, net 0.3 (0.3) 0.0 0.1 0.0 0.1
Operating Income 1.8 3.3 5.1 10.9 2.9 13.8
Investment income 1.1 (1.1) - - - -
Interest and finance (costs) income, net (0.4) 0.1 (0.3) 0.1 0.1 0.2
Loss on derivatives - - - (1.6) 2.3 0.8
Income before income taxes 2.6 2.3 4.9 9.5 5.3 14.8
Current income tax expense 5.9 - 5.9 8.6 - 8.6
Deferred income tax expense (recovery) 1.2 (0.0) 1.1 (1.3) (0.9) (2.2)
Net income and adjusted net income $ (4.5) $ 2.3 $ (2.2) $ 2.2 $ 6.2 $ 8.4
Earnings per share - basic $ (0.03) $ 0.02- $ (0.01) $ 0.01- $ 0.04- $ 0.05
Note: Certain figures may not add due to rounding and certain comparative figures have been reclassified to conf orm to the current year
presentation
Reconciliation to Adjusted EBITDA for the three months ended March 31, 2020 and 2019
(Expressed in $ millions) Q1 2020 Q1 2019
Net income for the period $ (4.5) $ 2.2
Adjustments:
Inventory adjustment (0.1) -
Foreign exchange loss, Lindero project 3.3 2.9
Net finance items 0.3 (0.2)
Depreciation, depletion, and amortization 11.6 9.1
Income taxes 7.1 7.3
Share of loss from associates - 0.1
Investment income (1.1) -
Other non-cash items (0.6) 2.4
Adjusted EBITDA $ 15.9 $ 23.8
Reconciliation to Free cash flow from ongoing operations for the three months ended March 31, 2020 and 2019
(Expressed in $ millions) Q1 2020 Q1 2019
Net cash provided by operating activities $ 13.2 3.9
Less: Change in long-term receivables (0.2) -
Less: Additions to mineral properties, plant and equipment (4.9) (7.0)
Less: Contractor advances for plant and equipment - (0.2)
Add: Advances applied to plant and equipment - 0.1
Less: Current income tax expense (5.9) (8.6)
Add: Income taxes paid 12.0 14.0
Free cash flow from ongoing operations1 $ 14.2 $ 2.2
Note:
1. From ongoing operations including San Jose and Caylloma and excludes Greenfields exploration
Non-GAAP Financial Measures
The tables above and information elsewhere in this news release refers to non -GAAP financial measures, such as all -in
sustaining cash cost silver equivalent; adjusted net (loss) income; free cash flow from ongoing operations, income taxes,
interest income; and adjusted EBITDA. These measures do not have a standardized meaning or method of calculation,
even though the descriptions of such mea sures may be similar. These performance measures have no meaning under
IFRS and therefore, amounts presented may not be comparable to similar data presented by other mining companies.
About Fortuna Silver Mines Inc.
Fortuna is a growth oriented, precious metal producer with its primary assets being the Caylloma silver mine in southern
Peru, the San Jose silver -gold mine in Mexico and the Lindero gold Project, currently under construction, in
Argentina. The Company is selectively pursuing acquisition oppo rtunities throughout the Americas and in select other
areas. For more information, please visit its website at www.fortunasilver.com.
ON BEHALF OF THE BOARD
Jorge A. Ganoza
President, CEO, and Director
Fortuna Silver Mines Inc.
Trading symbols: NYSE: FSM | TSX: FVI
Investor Relations:
Carlos Baca
T (Peru): +51.1.616.6060, ext. 0
Forward looking Statements
This news release contains forward looking statements which constitute "forward looking information" within the meaning of applicable C anadian
securities legislation and "forward looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995 (collectively, "Forward looking Statements"). All statements included herein, other than statements of historical fact, are Forward
looking Statements and are subject to a variety of known and unknown risks and uncer tainties which could cause actual events or results to differ
materially from those reflected in the Forward looking Statements. The Forward looking Statements in this news release includ e, without limitation,
preliminary estimated financial results for th e first quarter of 2020; a preliminary estimate of the Company’s liquidity as at March 31,2020;
preliminary estimates of construction expenditures at the Lindero Project for the first quarter of 2020; statements about the Company's plans for its
mines and mineral properties; the construction of the mine at the Lindero Project and the related costs of construction, timing of co mmissioning,
and timing of commencement of commercial production; the Company's business strategy, plans and outlook; the merit of the Company's mines
and mineral properties; the future financial or operating performance of the Company; and proposed expenditures. Often, but n ot always, these
Forward looking Statements can be identified by the use of words such as "estimated", “expecte d”, “anticipated”, "potential", "open", "future",
"assumed", "projected", "used", "detailed", "has been", "gain", "planned", "reflecting", "will", "containing", "remaining", "to be", or statements that
events, "could" or "should" occur or be achieved and similar expressions, including negative variations.
Forward looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual result s, performance or
achievements of the Company to be materially different from an y results, performance or achievements expressed or implied by the Forward
looking Statements. Such uncertainties and factors include, among others, the preliminary financial results and liquidity may not be consistent with
the final quarterly results and statement of liquidity subsequently approved by the Board; changes in general economic conditions and financial
markets; changes in prices for silver and other metals; fluctuation in foreign exchange rates; any extension of the currency controls in Argenti na;
technological and operational hazards in Fortuna's mining and mine development activities; delays in the construction at the Lindero Project, delays
in the commissioning or commencement of commercial production at the Lindero Project; risks inherent in mineral exploration; uncertainties
inherent in the estimation of mineral reserves, mineral resources, and metal recoveries; governmental and other approvals; po litical unrest or
instability in countries where Fortuna is active; labor relations issues; as well as those factors discussed under "Risk Factors" in the Company's
Annual Information Form. Although the Company has attempted to identify important factors that could cause actual actions, ev ents or results to
differ materially from those described in Forward looking Statements, there may be other factors that cause actions, events or results to differ from
those anticipated, estimated or intended.
Forward looking Statements contained herein are based on the assumptions, beliefs, expectations and opinio ns of management, including but not
limited to expectations regarding the Company’s financial performance for the first quarter of 2020; that management’s preliminary financial
results for the first quarter of 2020 will be consistent with the final full qu arterly financial results; Company's plans for its mines and mineral
properties; mine production costs; expected trends in mineral prices and currency exchange rates; the accuracy of the Company 's current mineral
resource and reserve estimates; that the C ompany's activities will be in accordance with the Company's public statements and stated goals; that
there will be no material adverse change affecting the Company or its properties; that all required approvals will be obtaine d; that there will be no
significant disruptions affecting operations and such other assumptions as set out herein. Forward looking Statements are made as of the date
hereof and the Company disclaims any obligation to update any Forward looking Statements, whether as a result of new i nformation, future events
or results or otherwise, except as required by law. There can be no assurance that Forward looking Statements will prove to b e accurate, as actual
results and future events could differ materially from those anticipated in such st atements. Accordingly, investors should not place undue reliance
on Forward looking Statements.