Fortuna reports consolidated financial results for first quarter 2019
Fortuna reports consolidated financial results for first quarter 2019
(All amounts expressed in US dollars, unless otherwise stated)
Vancouver, May 14, 2019: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today reported net income
of $2.2 million, adjusted net income of $8.4 million, and adjusted EBITDA of $ 23.8 million for the first
quarter of 2019.
Jorge A. Ganoza, President and CEO, commented, “ Production and cash costs at our Caylloma and San
Jose mines for the first quarter underpin a solid start for the year with EBITDA margins of 40 percent .
Our cash flow generation objectives remain on track to continue contributing to the funding of our
Lindero gold project in Argentina.” Mr. Ganoza continued, “As of the end of April, Lindero construction
progress is at 47 percent completion, with 97 percent of the direct capital expenditures committed, and
61 percent of the total projected capital spent .” Mr. Ganoza added, “With mine preparation set to be
concluded in May and construction of the crushing and lea ch pad facilities advancing according to
schedule, we plan to initiate placing ore on the leach pad early in Q4 2019.”
First quarter 2019 highlights
• Sales of $59.0 million, compared to $70.4 million in Q1 2018
• Net income of $2.2 million, compared to $13.8 million in Q1 2018
• Adjusted net income of $8.4 million, compared to $13.2 million in Q1 2018
• Adjusted EBITDA1 of $23.8 million, compared to $31.8 million in Q1 2018
• Free cash flow from ongoing operations 1 of $2.2 million, compared to $16.8 million in Q1 2018
due largely to the impact of short-term movements in receivables and inventory
• Silver and gold production of 2,233,331 ounces and 13,314 ounces, respectively
• AISC2 per silver equivalent ounce of payable silver was $10.7
Notes:
1. Refer to Non-GAAP Financial Measures and Forward-Looking Statements
2. AISC oz Ag Eq calculated at realized metal prices of $1,316/oz Au, $15.6/oz Ag, $0.9/lb Pb, and $1.2/lb Zn
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First Quarter 2019 Consolidated Results
Consolidated Financial Metrics Three months ended March 31,
2019 2018 % Change
(Expressed in $ millions except per share information)
Sales $ 59.0 $ 70.4 (16%)
Mine operating income 21.5 31.3 (31%)
Operating income 10.9 22.4 (51%)
Net income 2.2 13.8 (84%)
Earnings per share (basic) 0.01 0.09 (89%)
Adjusted net income1 8.4 13.2 (36%)
Adjusted EBITDA1 23.8 31.8 (25%)
Cash provided by operating activities 3.9 20.1 (81%)
Free cash flow1 (34.1) 12.3 (377%)
Free cash flow from ongoing operations1 2.2 16.8 (87%)
Capex
Sustaining 4.7 4.1 14%
Non-sustaining 0.8 - 0%
Lindero 30.9 4.9 537%
Brownfields 1.2 2.3 (48%)
Mar 31, 2019 Dec 31, 2018 % Change
Cash, cash equivalents, and short-term investments $ 112.9 163.3 (31%)
Total assets $ 796.7 $ 786.5 1%
Non-current credit facility $ 69.3 $ 69.3 0%
Shareholders' equity $ 605.9 $ 602.8 1%
Sales for the three months ended March 31, 2019 were $59.0 million, a 16% decrease from the $70.4
million reported in Q1 2018. The decrease in sales was due primarily to a decline in metal prices for
silver, lead, and zinc of 7%, 19%, and 21%, respectively, and to lower sales volume in silver and gold of
7% and 11%. Contributing to lower sales volume was a $3.7 millio n accumulation of concen trate
inventory during the quarter.
Net income for the three months ended March 31, 2019 was $2.2 million or $0.01 per share compared
to $13.8 million or $0.09 per share reported in the same quarter in 2018.
Adjusted net income for the quarter was $8. 4 million compared to $13.2 million reported in the same
quarter of 2018. The decrease in adjusted net income was due mainly to lower sales at both San Jose
and Caylloma, and was partially offset by realized gains on commodity derivative contracts.
Adjusted EBITDA for the period was $23.8 million compared to $31.8 million in the comparable period in
2018. The decrease in adjusted EBITDA was due primarily to lower sales volume and lower realized
metal prices.
Net cash provided by operating activit ies for the three months ended March 31, 2019 was $3.9 million
compared to $20 .1 million reported in 201 8 due to lower sales as well as negative changes in working
capital of $9.2 million in 2019 compared to positive changes of $5.2 million in 2018. Free cash flow from
ongoing operations was $ 2.2 million, which was negatively impacted by changes in working capital
during the quarter.
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Capital resources and liquidity
At March 31, 2019 , the Company had cash, cash equivalents, and short -term investments of $112.9
million (December 31, 2018 – $163.3 million). The decrease in cash reflects the increase in the pace of
spending at the construction of the Lindero project. Total liquidity available to the Company as of
March 31, 2019 was $192.9 million, which includes $80.0 million of available credit under a $150 million
credit facility.
Lindero gold Project
Construction at the Lindero open pit heap leach gold mine located in Salta Province Argentina is at 4 7%
completion. Approximately 97% of direct capital costs have been committed. Construction spending for
the first quarter of 2019 totaled $42.2 million comprising of $30.9 million on construction expenditures,
and $11.3 million on deposits for equipment and advances to contractors. To tal construction spending
as at the end of March 31, 2019 was $165 million.
San Jose Mine, Mexico
Three months ended March 31,
2019 2018
Mine Production
Tonnes milled 256,642 258,204
Average tonnes milled per day 2,984 3,011
Silver
Grade (g/t) 267 284
Recovery (%) 91 93
Production (oz) 1,999,495 2,185,913
Metal sold (oz) 1,856,288 2,011,260
Realized price ($/oz) 15.63 16.65
Gold
Grade (g/t) 1.71 1.94
Recovery (%) 90 92
Production (oz) 12,741 14,882
Metal sold (oz) 11,712 13,748
Realized price ($/oz) 1,316 1,329
Unit Costs
Production cash cost ($/t) 68.7 65.3
Production cash cost ($/oz Ag Eq)1,2 6.4 5.7
Unit net smelter return ($/t) 174.3 203.8
AISC ($/oz Ag Eq)1,3 8.7 8.5
1 Non-GAAP Financial Measure. Refer to the Non-GAAP Financial Measures in the associated MD&A for a description and
calculation of these measures
2 Production cash cost/oz Ag Eq and AISC/oz Ag Eq calculated using the realized metal prices of gold and silver set out in the
table
Quarterly Results
The San Jose Mine produced 1,999,495 ounces of silver and 12,741 ounces of gold in the first quarter of 2019,
which were 9% and 14% below the comparable quarter in 2018. The lower production was due primarily to lower
head grades for silver and gold, which decreased 6% and 12%, respectively, compared to the same quarter in 2018.
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Cash cost per tonne of processed ore increased 5% to $ 68.7 per tonne compared to $65.3 per tonne for the
comparable quarter in 2018 and was in-line with guidance. The increase was due to higher mining cost s related to
preparation and backfill, and was partially offset by lower dry-stack tailings operating costs.
Caylloma Mine, Peru
Three months ended March 31,
2019 2018
Mine Production
Tonnes milled 130,150 129,620
Average tonnes milled per day 1,496 1,473
Silver
Grade (g/t) 66 61
Recovery (%) 84 84
Production (oz) 233,836 215,545
Metal sold (oz) 237,868 220,290
Realized price ($/oz) 15.56 16.79
Lead
Grade (%) 2.74 2.72
Recovery (%) 91 91
Production (000's lbs) 7,172 7,040
Metal sold (000's lbs) 7,231 7,269
Realized price ($/lb) 0.92 1.14
Zinc
Grade (%) 4.37 4.31
Recovery (%) 90 90
Production (000's lbs) 11,295 11,028
Metal sold (000's lbs) 11,269 11,078
Realized price ($/lb) 1.23 1.55
Unit Costs
Production cash cost ($/t) 79.5 78.7
Production cash cost ($/oz Ag Eq)1,2 9.3 7.2
Unit net smelter return ($/t) 148.5 190.3
AISC ($/oz Ag Eq)1,3 12.9 10.3
1 Non-GAAP Financial Measure. Refer to the Non-GAAP Financial Measures in the associated MD&A for a description and
calculation of these measures
2 Production cash cost/oz Ag Eq and AISC/oz Ag Eq calculated using the realized metal prices for silver, lead, and zinc set out in
the table
Quarterly Results
The Caylloma Mine produced 7.2 million pounds of lead and 11. 3 million pounds of zinc, which were both 2%
higher than the production for the comparable quarter in 2018. The increased production was due to higher head
grades of lead and zinc of 2.74% and 4.37%, respectively, as well as slightly higher mill throughput. Silver
production totaled 233,836 ounces, which was 8% higher than the comparable quarter in 2018.
Cash cost per tonne of processed ore was $ 79.5 compared to $78.7 cash cost per tonne for the comparable
quarter in 2018 and was slightly below annual guidance.
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Non-GAAP Financial Measures
The following tables represent the computation of certain Non -GAAP Financial Measures as referenced
in this news release.
Income Statement Reconciliation to Adjusted Net Income for First Quarter
(Expressed in $ millions, except per
share information) Q1 2019 Adjust.
Q1 2019
Adjusted
Q1
2018 Adjust.
Q1 2018
Adjusted
Sales $ 59.0 $ - $ 59.0 $ 70.4 $ - $ 70.4
Cost of sales 37.5 - 37.5 39.1 - 39.1
Mine operating income 21.5 - 21.5 31.3 - 31.3
Selling, general and administration 6.5 0.1 6.6 6.9 - 6.9
Exploration and evaluation 0.2 - 0.2 0.1 - 0.1
Share of loss (income) of equity-
accounted investee 0.1 (0.1) - (0.2) 0.2 -
Foreign exchange loss (gain) 3.7 (2.9) 0.8 2.2 - 2.2
Impairment reversal - - - - -
Other (income) expenses, net 0.1 (0.1) - - - -
Operating Income 10.9 3.0 13.9 22.3 (0.2) 22.1
Interest and finance costs 0.1 - 0.1 (0.5) 0.5 -
Gain (loss) on financial assets and
liabilities carried at fair value (1.6) 2.3 0.7 0.4 (1.4) (1.0)
Income before taxes 9.5 5.3 14.8 22.2 (1.1) 21.1
Current income tax expense 8.6 0.8 9.4 9.7 (0.4) 9.3
Deferred income tax recovery (1.3) (1.7) (3.0) (1.2) (0.2) (1.4)
Net income and adjusted net income $ 2.2 $ 6.2 $ 8.4 $ 13.8 $ (0.5) $ 13.3
Earnings per share - basic $ 0.01 $ 0.04 $ 0.05 $ 0.09 $ (0.01) $ 0.08
Certain figures may not add due to rounding
Adjusted EBITDA
(Expressed in $ millions) Q1 2019 Q1 2018
Net Income for the period $ 2.2 $ 13.8
Add back:
Foreign exchange, Lindero project 2.9 -
Net finance items (0.2) 0.5
Depreciation, depletion, and amortization 9.1 10.6
Income taxes 7.3 8.6
Share of loss (income) of equity-accounted investee 0.1 (0.2)
Other non-cash items 2.4 (1.5)
Adjusted EBITDA $ 23.8 $ 31.8
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Free cash flow and free cash flow from ongoing operations
(Expressed in $ millions) Q1 2019 Q1 2018
Free Cash Flow
Net cash provided by operating activities $ 3.9 $ 20.1
Less: Purchases of mineral properties, plant and equipment (9.2) (9.0)
Less: Expenditures on Lindero Project (24.4) (2.2)
Less: Deposits on long term assets, net (9.8) (2.1)
Less: Current income tax expense (8.6) (9.7)
Add: Income taxes paid 14.0 15.2
Free cash flow $ (34.1) $ 12.3
Add: Expenditures on Lindero Project 25.8 2.2
Add: Greenfield capital expenditures 0.8 0.3
Add: Deposits on long term assets - Lindero Project 9.7 2.0
Free cash flow from ongoing operations $ 2.2 $ 16.8
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/2019/.
Conference call to review 2019 first quarter financial and operational results
A conference call to discuss the financial and operational results will be held on Wednesday, May 15,
2019 at 9 :00 a.m. Pacific | 1 2:00 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/1696/30434 or over the
phone by dialing just prior to the starting time.
Conference call details:
Date: Wednesday, May 15, 2019
Time: 9:00 a.m. Pacific | 12:00 p.m. Eastern
Dial in number (Toll Free): +1.844.602.0380
Dial in number (International): +1.862.298.0970
Replay number (Toll Free): +1.877.481.4010
Replay number (International): +1.919.882.2331
Replay Passcode: 48101
Playback of the conference call will be available until May 29, 201 9 at 12:00 a.m. Eastern. Playback of
the webcast will be available until May 15, 20 20. In addition, a transcript of the call will be archived o n
the company’s website: https://www.fortunasilver.com/investors/financials/2019/.
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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 opportunities
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 Canadian securities legislation and "forward looking statements" within the meaning of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 (collectively, "Forwa rd 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 uncertainties 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 include, without limitation, statements about
the Company's plans for its mines and mineral properties; 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; 2019 production and
cost guidance; and proposed expenditures. Often, but not always, these Forward looking Statements can be identified by the use
of words such as "estimated", "potential", "open", "future", "assumed", "projected", "used", "detailed", "has been", "gain",
"planned", "reflecting", "will", "containing", "remaining", "to be", or statements that events, "coul d" 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
results, performance or achievements of the C ompany to be materially different from any results, performance or achievements
expressed or implied by the Forward looking Statements. Such uncertainties and factors include, among others, changes in
general economic conditions and financial markets; chan ges in prices for silver and other metals; technological and operational
hazards in Fortuna's mining and mine development activities; risks inherent in mineral exploration; uncertainties inherent in the
estimation of mineral reserves, mineral resources, an d metal recoveries; governmental and other approvals; political unrest or
instability in countries where Fortuna is active; labor relations issues; as well as those factors discussed under "Risk Fact ors" in
the Company's Annual Information Form. Although t he Company has attempted to identify important factors that could cause
actual actions, events 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 opinions of management,
including but not limited to expectations regarding the Company's plans for its mines a nd 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 Company'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 wil l be
obtained; that there will be no significant disruptions affecting operations and such other ass umptions as set out herein.
Forward looking Statements are made as of the date hereof and the Company disclaims any obligation to update any Forward
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looking Statements, whether as a result of new information, future events or results or otherwise, except as required by law.
There can be no assurance that Forward looking Statements will prove to be accurate, as actual results and future events coul d
differ materially from those anticipated in such statements. Accordingly, investors should not place undue rel iance on Forward
looking Statements.
This news release also refers to non -GAAP financial measures, such as cash cost per tonne of processed ore; cash cost per
payable ounce of silver; total production cost per tonne; all -in sustaining cash cost; all -in cash cost; adjusted net (loss) income;
operating cash flow per share before changes in working capital, income taxes, and interest income; and adjusted EBITDA. These
measures do not have a standardized meaning or method of calculation, even though the descriptions of such measures may be
similar. These performance measures have no meaning under International Financial Reporting Standards (IFRS) and therefore,
amounts presented may not be comparable to similar data presented by other mining companies.