Fortuna reports consolidated financial results for 2017
Fortuna reports consolidated financial results for 2017
(All amounts expressed in US dollars, unless otherwise stated)
Vancouver, March 15, 2018: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today reported 2017 full
year net income of $ 66.3 million, adjusted net income of $ 48.6 million, and adjusted EBITDA of
$122.0 million.
Jorge A. Ganoza, President and CEO, commented, “Our results in the fourth quarter of 2017 reflect
record sales and EBITDA that have contributed to our strongest year to date in financial performance. ”
Mr. Ganoza continued, “ Annual sales of $268 .1 million, with EBITDA margins of 46 % and strong cash
accumulation from our mines attest to the strength of our assets and the positive momentum in our
business. Drivers for year over year performance are higher precious metal production, higher base
metal prices for our by -products, and improved commercial terms. ” Mr. Ganoza concluded , “Our
Lindero gold project in Argentina is in the early stages of construction with on-site activities ramping up
during the course of the second quarter”.
2017 Consolidated Financial Statements and MD&A Highlights
• Sales of $268.1 million, compared to $210.3 million in 2016
• Net income of $66.3 million, compared to $17.9 million in 2016
• Adjusted net income of $48.6 million, compared to $18.1 million in 2016
• Earnings per share of $0.42, compared to $0.13 in 2016
• Adjusted EBITDA1 of $122.0 million, compared to $83.1 million in 2016
• Impairment reversal at Caylloma of $3 1.1 million before taxes driven by a successful resource
expansion
• Cash position, including short-term investments as at December 31, 2017 was $212.6 million
• $120.0 million credit facility in place with $80.0 million undrawn
• Silver and gold production of 8,469,593 ounces and 56,441 ounces, respectively
• AISC2 per ounce of payable silver, net of by-product credits for gold, lead and zinc, was $6.4
Fourth Quarter 2017 Financial Statements and MD&A Highlights
• Sales of $75.4 million, compared to $57.9 million in the fourth quarter of 2016
• Net income of $34.1 million, compared to $6.5 million in the fourth quarter of 2016
• Adjusted net income of $12.3 million, compared to $7.1 million in the fourth quarter of 2016
• Adjusted EBITDA of $34.9 million, compared to $29.4 million in the fourth quarter of 2016
• Silver and gold production of 2,310,176 ounces and 15,283 ounces, respectively
• AISC per ounce of payable silver, net of by-product credits for gold, lead and zinc, was $5.2
Note:
1. EBITDA = Earnings Before Interests, Taxes, Depreciations and Amortizations
2. AISC = All-in Sustaining Cost
2
2017 Year-end and Fourth Quarter 2017 Consolidated Results
Note:
1. Refer to Non-GAAP Financial Measures
Fourth Quarter 2017 Results
Net income for the fourth quarter of 2017 was $34.1 million or $0.21 per share compared to $6.5 million
or $0.04 per share for the fourth quarter of 2016. Net income in the quarter was positively impacted by
an after- tax reversal of impairment of $21.9 million at the Caylloma M ine. Adjusted net income was
$12.3 million compared to $7.1 million for 2016.
The increase in adjusted net income during the quarter was due primarily t o higher sales across all of
our products and was partially offset by higher selling, general and administrative expenses of $6.4
million, related mainly to the mark-to-market effects from share-based payments and higher production
costs. Additional items impacting the quarter were $1. 5 million of realized loss es from derivative
contracts, $1.3 million in exploration and evaluation expenses , and partially offset by foreign exchange
gains of $1.3 million.
Adjusted EBITDA was $34.9 million compared to $29.4 million in the comparable period in 2016 due to
increased sales.
Consolidated F inancial M etrics Q4 2017 Q4 2016
%
Change YT D 2017 YT D 2016
%
Change YT D 2015
Sales $ 75.4 $ 57.9 30% $ 268.1 $ 210.3 27% $ 154.7
Mine operating income 35.2 20.7 70% 109.6 80.6 36% 43.6
Operating income 57.7 17.6 228% 110.3 48.5 127% (1.7)
Net income 34.1 6.5 425% 66.3 17.9 270% (10.6)
Earnings per share (basic) 0.21 0.04 425% 0.42 0.13 223% (0.08)
Earnings per share (diluted) 0.21 0.04 425% 0.42 0.13 223% (0.08)
Adjusted net income* 12.3 7.1 73% 48.6 18.1 169% 6.7
Adjust ed EBIT DA* 34.9 29.4 19% 122.0 83.1 47% 50.4
Cash provided by operating activities 29.0 25.8 12% 70.2 52.7 33% 54.8
Cash generated by operating activities before
changes in working capital 30.4 20.4 49% 87.9 70.3 25% 30.6
Capex (sustaining) 8.0 5.3 51% 28.0 19.8 41% 43.0
Capex (non-sustaining) 3.1 2.0 54% 11.4 23.0 -50% 11.7
Capex (Brow nfield) 2.2 2.2 0% 10.1 7.9 27% 4.0
All-in sustaining cash cost* 5.2 7.3 -30% 6.4 8.4 -24% 18.0
Dec 31, 2017 Dec 31, 2016
%
Change Dec 31, 2015
$ 212.6 $ 123.6 72% $ 72.2
Total assets $ 706.6 $ 562.9 26% $ 379.7
Non-current bank loan $ 39.9 $ 39.8 0% $ 39.5
(E xpressed in $ millions except per share information and all-in sustaining cash cost)
Cash, cash equivalents, and short-term investments
* refer to Non-GAAP Financial Measures
3
For the three months ended December 31, 2017, net cash provi ded by operating activities was $29.0
million or 12 % higher than the $25.8 million in 2016 due primarily to higher adjusted EBITDA offset by
changes in working capital items.
Annual Results
Net income for the year ended December 31, 2017 was $66.3 million or $0.42 per share compared to
$17.9 million or $0.13 per share for the comparable year in 2016. Net income was positively impacted
by the after-tax reversal of impairment of $21.9 million at the Caylloma Mine.
Adjusted net income for 2017 increased to $48.6 million from $18.1 million in 2016 mostly as a result of
higher sales across all our products , reflecting the first full year of production at the expanded capacity
of 3,000 tpd at the San Jose mine, strong by -product metal prices of lead and zinc, and significantly
improved treatment and refining charges.
Also contributing to higher adjusted net income were lower selling, general and administrative expenses
by $6.2 million related primarily to mark -to-market effect from share-based payment s. Adjusted net
income was negatively impacted by higher production cash costs, $2.0 million in foreign exchange losses
from the strengthening of the Mexican Peso against the US dollar , and $ 1.6 million realized loss es on
derivative contracts.
Adjusted EBITDA was $122.0 million compared to $83.1 million in 2016.
4
For the year ended December 31, 2017 n et c ash provided by operating activities in 2017 was $70.2
million, 33% higher than the $52.7 million in 2016. This increase was due primarily to a $3 8.9 million
increase in adjusted EBITDA and partially offset by higher income taxes paid of $18.7 million.
Balance sheet and Liquidity
At December 31, 2017, the Company had cash, cash equivalents, and short -term investments of
$212.6 million (December 31, 2016 : $123.6 million), an increase of $89.0 million since the beginning of
the year. The increase was due primarily to an equity financing in the first quarter of 2017 for net
proceeds of $70.9 million and free cash flows from operations during the period.
On January 26, 2018 the Company closed an amendment to its existing credit facility with Scotiabank to
expand the facility from $40 .0 million to $120 .0 million. This takes our total sources of liquidity as at
year end to over $290 .0 million which along with the current rate of free cash flow by our existing
operations, the Company expects to have sufficient liquidity to meet our funding needs during the
construction of the Lindero project.
5
San Jose Mine, Mexico
Quarterly Results
The San Jose Mine produced 2,071,762 ounces of silver and 15,177 ounces of gold in the fourth quarter
of 2017, 13 % and 11% above the comparable period in 2016. Average head grades for silver and gold
were 259 g/t and 1.89 g/t, 15 % and 12% higher than the comparable period in 2016. Mine production
was sourced from Trinidad Central and Trinidad North, with each area contributi ng 57% and 43% of ore,
respectively.
Cash cost per tonne of processed ore was $57.9 , 5% above the $55. 1 cash cost for the comparable
quarter in 2016.
Annual Results
Silver and gold annual production for 2017 increased 23 % and 22 % above prior year’s production to
7,526,555 ounces and 55,950 ounces. The increases were the result of 18% higher throughput as well as
4% and 3% higher head grades of gold and silver over the comparative period in 2016. Silver and gold
annual production were 6% and 8% above 2017 guidance, respectively.
San Jose
Mine Production 2017 2016 2017 2016
Tonnes milled 271,370 273,036 1,070,790 905,467
Average tonnes m illed per day 3,015 3,103 3,044 2,596
Silver
Grade (g/t) 259 225 238 228
Recovery (%) 92 92 92 92
Production (oz) 2,071,762 1,828,110 7,526,556 6,124,235
Metal sold (oz) 2,089,121 1,832,298 7,481,616 6,102,667
Realized price ($/oz) 16.69 17.10 17.03 17.29
Go ld
Grade (g/t) 1.89 1.69 1.77 1.72
Recovery (%) 92 92 92 92
Production (oz) 15,177 13,660 55,950 46,018
Metal sold (oz) 15,333 13,746 55,412 45,901
Realized price ($/oz) 1,273 1,216 1,257 1,253
Unit Costs
Production cash cost (US$/oz Ag)* 0.04 1.85 0.95 1.77
Production cash cost (US$/tonne) 57.91 55.09 59.70 56.90
Unit Net Smelter Return (US$/tonne) 181.65 154.21 169.78 158.76
All-in sustaining cash cost (US$/oz Ag)* 6.51 6.73 7.11 7.58
QUA RTERLY RESULTS YEA R TO DA TE RESULTS
Three months ended, December 31, Y ear ended, December 31,
* Net of by-product credits from gold
6
Cash cost per tonne of processed ore for 2017 was $59.7 , or 5% higher than the cost in the prior year.
Cash cost per tonne for 2017 was 5 % above guidance due to higher mine support costs and local
inflation on the cost of energy and materials.
All-in sustaining cash cost per payable ounce of silver, net of by -product credits, was $7.1 for 2017 and
below the annual guidance of $8.4 as a result of higher gold price.
Cash cost per payable ounce of silver, and cash cost per tonne of processed ore, are non -GAAP financial
measures.
Caylloma Mine, Peru
Caylloma
Mine Production 2017 2016 2017 2016
Tonnes milled 134,635 135,121 529,704 514,828
Average tonnes m illed per day 1,513 1,501 1,488 1,438
Silver
Grade (g/t) 65 82 66 90
Recovery (%) 85 82 84 84
Production (oz) 238,414 291,988 943,038 1,255,981
Metal sold (oz) 243,051 294,425 934,710 1,274,842
Realized price ($/oz) 16.70 17.11 17.06 16.96
Lead
Grade (%) 2.91 2.60 2.81 3.06
Recovery (%) 91 94 91 94
Production (000's lbs) 7,846 7,290 29,878 32,673
Metal s old (000's lbs ) 8,054 7,361 29,508 33,187
Realized price ($/lb) 1.13 0.97 1.05 0.84
Zinc
Grade (%) 4.36 4.06 4.21 4.25
Recovery (%) 90 91 90 90
Production (000's lbs) 11,676 11,006 44,347 43,204
Metal s old (000's lbs ) 11,803 10,537 44,315 43,041
Realized price ($/lb) 1.47 1.15 1.32 0.95
Unit Costs
Production cash cost (US$/oz Ag)* (44.43) (14.59) (34.56) (6.78)
Production cash cost (US$/tonne) 82.02 71.15 79.11 71.89
Unit Net Smelter Return (US$/tonne) 184.09 136.92 166.18 126.91
All-in sustaining cash cost (US$/oz Ag)* (18.37) 1.72 (13.04) 4.34
QUA RTERLY RESULTS YEA R TO DA TE RESULTS
Three months ended, December 31, Y ear ended, December 31,
* Net of by-product credits from gold, lead and zinc
7
Quarterly Results
The Caylloma Mine produced 7.8 million pounds of lead and 11.7 million pounds of zinc, which were 8%
and 6% higher than the comparable quarter in 2016 as a result of higher head grades of 12 % and 7%
respectively. Silver production was 238,414 ounces or 18% lower than the comparable period in 2016.
Average silver head grade was 65 g/t or 21 % below 2016 but was partially offset by a higher
metallurgical recovery of 85% compared to 82%.
Cash cost per tonne of processed ore for the fourth quarter of 2017 was $82.0 which was 15 % higher
than the $71.2 cash cost for the comparable quarter of 2016. The increase was due primarily to higher
energy, ground support, and labour costs.
Annual Results
Total zinc production for 2017 increased 3 % to 44.3 million pounds over 2016 while lead production
decreased 8% to 29.9 million pounds. Silver production decreased 25 % to 943,038 ounces compared to
2016 production of 1,255,981 ounces. Silver production was within 96% of annual guidance. Head
grades for lead, zinc, and silver were 8 %, 1 %, and 27% lower than in 2016, respectively. However, this
decline in head grades was partially offset by a 3 % increase in processed ore. Silver, zinc, and lead
annual production were 6% below, 8% above, and in line with 2017 guidance.
Cash cost per tonne of processed ore for 20 17 was $79.1 or 10 % higher than in 2016 and 5 % above
guidance. The increase in cash costs was due mainly to higher mining, energy, and labour costs.
All-in sustaining cash cost per payable ounce of silver, net of by -product credits, was $(13.04) per ounce
for 2017, and below the annual guidance of $10.80 per ounce.
Cash cost per payable ounce of silver, and cash cost per tonne of processed ore, are non -GAAP financial
measures
8
Reconciliation of Adjusted Net Income for Fourth Quarter and Year to Date
The financial statements and MD&A are available on SEDAR and have also been posted on the
company's website at https://www.fortunasilver.com/investors/financials/2017/.
Conference call to review 2017 year-end financial and operational results
A conference call to discuss 201 7 year-end financial and operational results will be held on Tuesday,
March 20 , 2018 at 9:00 a.m. Pacific | 12:00 p.m. Eastern. Hosting the call will be Jorge A. Ganoza,
President and CEO, and Luis D. Ganoza, Chief Financial Officer.
Shareholders, analysts, media and interested investors are invited to listen to the live conference call by
logging onto the webcast at: https://www.webcaster4.com/Webcast/Page/1696/24991 or over the
phone by dialing just prior to the starting time.
Conference call details:
Date: Tuesday, March 20, 2018
Time: 9:00 a.m. Pacific | 12:00 p.m. Eastern
Dial in number (Toll Free): +1.877.407.8035
Dial in number (International): +1.201.689.8035
Replay number (Toll Free): +1.877.481.4010
Replay number (International): +1.919.882.2331
Replay Passcode: 10449
Q4 2017 Adjustments
Q4 2017
adjusted Y TD 2017 Adjustments
Y TD 2017
adjusted
Sales 75.4 75.4 268.1 268.1
C ost of sal es 40.1 40.1 158.6 158.6
Mine operating income 35.2 35.2 109.6 109.6
Selling, general and adm inistration 8.4 8.4 24.9 24.9
Ex ploration and evaluation 1.3 1.3 1.5 1.5
Share of loss of equity-accounted investee 0.1 0.1 0.2 0.2
Foreign ex change loss (gain) (1.3) (1.3) 2.1 2.1
Impairment reversal of mineral properties, plant
and equipm ent (31.1) 31.1 - (31.1) 31.1 -
Other ex penses 0.1 (0.8) (0.7) 1.7 (2.6) (0.9)
Operating Income 57.7 (30.3) 27.4 110.3 (28.5) 81.8
Interest income (0.5) (0.5) (2.0) (2.0)
Interest ex pense 0.4 0.4 1.7 1.7
Accretion of provisions 0.2 0.2 0.7 0.7
Loss (gain) on financial assets and liabilities carried at fair value 0.7 0.6 1.3 5.0 (3.4) 1.6
Income before taxes 56.9 (30.9) 26.0 104.9 (25.1) 79.8
Current income tax ex pense 11.4 11.4 34.8 34.8
Deferred income tax ex pense 11.4 (9.1) 2.3 3.8 (7.4) (3.6)
Net income for the year 34.1 (21.8) 12.3 66.3 (17.7) 48.6
EPS 0.21 (0.14) 0.07 0.42 (0.11) 0.31