Fortuna reports consolidated financial results for full year 2020
Fortuna reports consolidated financial results for full year 2020
(All amounts expressed in US dollars, unless otherwise stated)
Vancouver, March 10, 2021: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today reported full year 2020 net income
of $21.6 million, adjusted net income of $31.8 million, and adjusted EBITDA of $112.6 million.
Jorge A. Ganoza, President and CEO, commented, “Fourth quarter marks a continuation of very strong financial results in
the second half of 2020 driven by favourable metal prices, sustained production, and cost containment in spite of a
challenging operating environment.” Mr. Ganoza concluded, “With the Lindero Mine starting to contribute to our margins
and free cash flow through early recognition of sales in the fourth quarter, we look forward to a progressively higher
impact on our operational and financial results as the mine continues to gradually ramp -up production according to our
2021 guidance. Lindero will contribute 140,000 to 160,000 ounces of gold to our estimated guidance range of 178,000 to
202,000 ounces of gold for 2021, which is in addition to the estimated guidance of 6.8 million to 7.6 million ounces of
silver from the San Jose and Caylloma mines. ”
Fourth quarter 2020 highlights
• Sales of $103.5 million, compared to $69.0 million in 2019
• Net income of $18.6 million, compared to $19.0 million in 2019
• Adjusted net income of $23.0 million, compared to $10.9 million in 2019
• Adjusted EBITDA1 of $44.8 million, compared to $25.1 million in 2019
• Free cash flow1 from ongoing operations of $34.5 million, compared to $6.4 million in 2019
• Silver and gold production of 1,912,737 ounces and 25,357 ounces, respectively
• AISC/oz Ag Eq1,2 for the San Jose Mine and the Caylloma Mine was $14.5 and $19.5, respectively
Full year 2020 highlights
• Sales of $279.0 million, compared to $257.2 million in 2019
• Net income of $21.6 million, compared to $23.8 million in 2019
• Adjusted net income of $31.8 million, compared to $28.4 million in 2019
• Adjusted EBITDA1 of $112.6 million, compared to $95.4 million in 2019
• Free cash flow1 from ongoing operations1 of $78.9 million, compared to $34.5 million in 2019
• Cash and cash equivalents as at December 31, 2020 was $131.9 million
• Silver and gold production of 7,133,717 ounces and 55,349 ounces, respectively
• AISC/oz Ag Eq1,3 for the San Jose Mine and the Caylloma Mine was $12.2 and $17.8, respectively
Notes:
1. Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release
2. AISC/oz Ag Eq calculated at realized metal prices of $1,864/oz Au, $24.43/oz Ag, $0.9/lb Pb, and $1.2/lb Zn
3. AISC oz Ag Eq calculated at realized metal prices of $1,805/oz Au, $21.18/oz Ag, $0.8/lb Pb, and $1.0/lb Zn
NYSE: FSM | TSX: FVI
www.fortunasilver.com NEWS RELEASE
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Fourth quarter 2020 and Full Year 2020 Consolidated results
Three months ended Years ended
December 31, December 31,
Consolidated Metrics 2020 2019 2020 2019
(Expressed in $ millions except per share information)
Sales 103.5 69.0 279.0 257.2
Mine operating income 46.9 23.4 110.2 84.6
Operating income 28.2 9.0 57.2 34.2
Net income 18.6 19.0 21.6 23.8
Earnings per share - basic 0.10 0.12 0.12 0.15
Adjusted net income1 23.0 10.9 31.8 28.4
Adjusted EBITDA1 44.8 25.1 112.6 95.4
Net cash provided by operating activities 31.3 16.4 93.4 60.2
Free cash flow from ongoing operations1 34.5 6.4 78.9 34.5
CAPEX
Sustaining 8.8 6.2 19.5 20.4
Non-sustaining 1.0 0.9 1.2 2.0
Lindero 10.5 26.8 46.8 188.3
Brownfields 1.0 0.9 3.8 4.8
Dec 31, 2020 Dec 31, 2019
Cash and cash equivalents 131.9 83.4
Note
1. Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release
Fourth Quarter 2020 Results
Sales for the quarter were $103.5 million, a 50% increase from the $69.0 million reported in the same period in 2019. The
increase was driven by a 41% and 26% increase in the prices of silver and gold and $20.3 million from the sale of 10,935
ounces of gold from the Lindero Mine. The Company recognized gold sales and related production costs from the Lindero
Mine after the Company elected to early adopt amendments to IAS 16, “Property, Plant and Equipment – Proceeds before
Intended Use”, which is effective for annual periods beginning on or after January 1, 2022. Under this amended standard,
a company is required to recognize sales proceeds and related cost of items produced in the income statement while the
company is preparing the asset for its intended use.
Mine operating income for the quarter was $46.9 million, a $23.5 million increase from the $23.4 million reported in the
same period in 2019. Higher precious metal prices and commissioning activities at the Lindero Mine that generated $10.2
million of mine operating income were the primary factors for the increase.
Operating income for the quarter was $28.2 million, a $19.2 million increase from the $9.0 million reported in the same
period in 2019. The higher mine operating income, as discussed above, was partially offset by a $4.7 million foreign
exchange loss mainly from the devaluation of the Argentine Peso compared to a $1.4 million loss in 2019, as well as higher
general and administrative expenses of $2.6 million related mostly to the impact of an increase in the Company’s shar e
price on the value of the cash-settled share awards.
Net income for the quarter was $18.6 million, a $0.4 million decrease from the $19.0 million reported in the same period
in 2019. The comparable period in 2019 included an investment gain of $11.0 mi llion compared to $nil in the quarter
ended December 31, 2020 and a $7.2 million deferred tax recovery which resulted in a 5% effective rate compared to 33%
for the fourth quarter of 2020.
Adjusted net income for the quarter was $23.0 million compared to $10.9 million reported in the same period in 2019.
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Adjusted EBITDA for the quarter was $44.8 million compared to $25.1 million reported in the same period in 2019.
Full Year 2020 Results
Sales for the year increased 8% to $279.0 million compared to $257.2 million reported for the same period in 2019. The
increase was driven by a 31% and 30% increase in the prices of silver and gold, and $20.3 million from the sale of 10,935
ounces of gold from the Lindero Mine . These effects were partially offset by lower sales volume at San Jose which was
impacted by a 54-day government mandated temporary suspension of operations in the second quarter of 2020.
Operating income for the year ended December 31, 2020 was $57.2 million, a $23.0 million increase from the $34.2 million
reported in the same period in 2019. The higher operating income was driven by higher precious metal prices and the
contribution of $10.2 million of mine operating income from Lindero in the fourth quarter of 2020. Dur ing the year the
Company recorded $12.2 million of foreign exchange losses related mostly to the construction VAT receivable in
Argentina, compared to $13.3 million of foreign exchange losses in 2019. These were partially offset by investment gains
from Argentine Peso denominated cross border trades of $3.3 million in 2020 and $11 .0 million in 2019. General and
administrative expenses for the year were $5.3 million higher than 2019 related mainly to an increase in share -based
payments expense of $6.4 million over 2019 due to a 9 8% year-over-year increase in the Company’s share price which
directly impacts the value of the outstanding cash-settled share units.
Net income for the year ended December 31, 2020 was $21.6 million, a $2.2 million decrease from the $23.8 million
reported in 2019 as higher operating income was offset by lower investment gains in 2020 of $7.7 million, lower deferred
tax credit of $11.0 million, and higher current taxes of $6.2 million.
Adjusted net income (refer to Non -GAAP Financial Measures) for the year ended December 31, 2020 was $31.8 million
compared to $28.4 million in 2019.
Adjusted EBITDA (refer to Non -GAAP Financial Measures) for the year ended December 31, 2020 was $112.6 million
compared to $95.4 million in 2019. As explained above, the increase was due primar ily to the increases in the prices of
silver and gold a nd the recognition of gold sales from the Lindero Mine as the Company elected to early adopt
amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use.
Cash flow and liquidity
Free cash flow from ongoing operations for the three months ended December 31, 2020 was $3 4.5 million compared to
$6.4 million in the same period in 2019 . The increased free cashflow was driven mainly by higher precious metal prices
and positive changes in working capital at the San Jose Mine related to trade receivables and recovery of value-added tax.
Free cash flow from ongoing operations for the year ended December 31, 2020 was $78. 9 million compared to $34.5
million in 2019.
Total liquidity available to the Company as at December 31, 2020 was $131.9 million and is comprised of cash and cash
equivalents. The Company’s $120 million non -revolving and revolving credit facilities were fully drawn at the end of
December 2020.
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Lindero Mine, Argentina
The following table shows the key metrics used to measure the operating performance of the Lindero Mine for the fourth
quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, and gold production:
Three months ended Years ended
December 31, December 31,
2020 2019 2020 2019
Mine Production
Tonnes of ore placed on the leach pad 950,000 - 1,610,000 -
Average crushing throughput (tpd) 10,406 - 8,831 -
Gold
Grade (g/t) 1.13 - 1.00 -
Recovery (%) 50 - 50 -
Production (oz) 13,435 - 13,435 -
Metal sold (oz) 10,935 - 10,935 -
Realized price ($/oz) 1,853 - 1,853 -
Capital expenditures ($000's)
Sustaining 1,410 - 1,410 -
The Company produced 13,435 ounces of gold at the Lindero Mine in 2020, which is in line with its revised production
forecast of between 13,000 to 15,000 ounces (refer to Fortuna news release dated November 12, 2020 ). Gold sales for
the fourth quarter of 2020 and for the year totaled 10,935 ounces. The Company elected to early adopt amendments to
IAS 16, Property, Plant and Equipment – Proceeds before intended use. As a result, the Company recognized gold sales of
$20.3 million and related cost of sales of $10.1 million for the year in the income statement.
Construction at Lindero was substantially complete as of the end of December 2020 with total construction cost projected
to be within the $320 million guidance (refer to Fortuna news release dated May 8, 2020 ), including remaining capital
expenditures of $2.0 million to be allocated to finalize construction of ancillary facilities and to commissioning activities .
During 2020, sustaining capital of $1.7 million was spent mainly on the purchase of spare parts for major equipment.
At the end of the first quarter of 2021, the Company will provide an assessment on the status of the ramp -up to
commercial production.
Lindero construction capital expenditures and total spending
The following table summarizes the spending on construction and pre -production costs at the Lindero Mine for the year
ended December 31, 2020:
Cumulative to
Twelve months
ended
(Expressed in $ millions) December 31, 2019
December 31,
2020 Total
Construction capital expenditures 268.2 46.8 315.0
Contractor advances and deposits on equipment, net of transfers 10.5 (9.8) 0.7
Total construction spending 278.7 37.0 315.7
Preproduction costs 10.8 21.8 32.6
Spare parts, supplies and materials inventory 6.2 12.9 19.1
Other costs 1 4.5 0.2 4.7
Total Lindero Mine Costs 300.2 71.9 372.1
Note 1: Consists of Argentina financial transaction taxes, deposits, and other costs
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During the fourth quarter of 2020, the Company adopted amendments to IAS 16, Property, Plant and Equipment –
Proceeds before Intended Use on a modified retrospective basis. As a result of the adoption, the Company reclassified
$21.9 million (December 31, 2019 - $2.8 million) of pre-production costs related to the production of stock pile ore and
operating supplies spent during the construction period to September 30, 2020.
San Jose Mine, Mexico
The following table shows the key metrics used to measure the operating performance of the San Jose Mine for the fourth
quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, gold and silver production
and unit costs:
Three months ended Years ended
December 31, December 31,
2020 2019 2020 2019
Mine Production
Tonnes milled 272,179 273,066 934,381 1,068,722
Average tonnes milled per day 3,024 3,034 2,647 3,028
Silver
Grade (g/t) 206 249 224 252
Recovery (%) 91 91 92 91
Production (oz) 1,648,816 2,002,633 6,165,606 7,868,478
Metal sold (oz) 1,721,697 1,968,550 6,225,433 7,849,438
Realized price ($/oz) 24.45 17.34 21.26 16.20
Gold
Grade (g/t) 1.26 1.50 1.38 1.57
Recovery (%) 91 91 91 91
Production (oz) 10,095 11,993 37,805 48,880
Metal sold (oz) 10,594 11,870 38,391 48,731
Realized price ($/oz) 1,875 1,483 1,786 1,393
Unit Costs
Production cash cost ($/t) 71.45 70.19 69.38 69.60
Production cash cost ($/oz Ag Eq)1,2 8.91 6.82 7.62 6.74
Unit net smelter return ($/t) 203.80 181.85 199.22 172.04
AISC ($/oz Ag Eq)1,2 14.52 10.54 12.15 9.83
Notes:
1. Production cash cost ($/oz Ag Eq) and AISC ($/oz Ag Eq) are calculated using realized metal prices for each period respectively
2. Production cash cost ($/t), Production cash cost ($/oz Ag Eq), and AISC ($/oz Ag Eq) are Non-GAAP Financial Measures; refer to Non-GAAP financial
measures in the associated MD&A for a description and calculation of these measures
Quarterly and Annual Results
The San Jose Mine produced 1,648,816 ounces of silver and 10,095 ounces of gold during the three months ended
December 31, 2020, which represents an 18% and 16% decrease, respectively over the same period in 2019. The decrease
in production was due to lower head grades which were consistent with the adjusted mine sequencing after the restart
of production at the end of May 2020 following the Mexican government mandated suspension of operations to curb the
spread of COVID-19.
The cash cost per tonne for the three months ended December 31, 2020 was $71.45 per tonne compared to $70.19 per
tonne in the same period in 2019. COVID-19 related expenses in the quarter were $0.40 per tonne. Cash cost per tonne
for the full year 2020 was consistent year -over-year at $69.38 per tonne compared to $69.60 per tonne for 2019 .
COVID- 19 related expenses for the full year were $0.70 per tonne. Cash costs incurred during the government mandated
temporary suspension in the second quarter of 2020 totaled $2.1 million and were recorded as care and maintenance
costs.
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The all-in sustaining cash cost of payable silver equivalent for the full year 2 020 increased 24% to $12.15 per ounce due
primarily to lower production as a result of the COVID-19 related temporary suspension of mining operations , higher
sustaining capital expenditures, and higher royalty and mining taxes related to higher metal prices.
Caylloma Mine, Peru
The following table shows the key metrics used to measure the operating performance of the Caylloma Mine for the fourth
quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, silver, lead and zinc
production and unit costs:
Three months ended Years ended
December 31, December 31,
2020 2019 2020 2019
Mine Production
Tonnes milled 136,132 133,271 510,047 531,307
Average tonnes milled per day 1,530 1,481 1,433 1,497
Silver
Grade (g/t) 73 71 72 66
Recovery (%) 82 82 82 83
Production (oz) 263,921 249,284 968,111 941,289
Metal sold (oz) 262,356 252,780 967,199 948,616
Realized price ($/oz) 24.30 17.31 20.63 16.23
Lead
Grade (%) 3.16 2.84 3.00 2.72
Recovery (%) 89 89 88 90
Production (000's lbs) 8,426 7,441 29,628 28,746
Metal sold (000's lbs) 8,386 7,559 29,582 28,969
Realized price ($/lb) 0.86 0.92 0.83 0.91
Zinc
Grade (%) 4.69 4.48 4.61 4.36
Recovery (%) 88 88 88 89
Production (000's lbs) 12,434 11,614 45,545 45,600
Metal sold (000's lbs) 12,154 11,974 45,154 45,781
Realized price ($/lb) 1.18 1.08 1.03 1.15
Unit Costs
Production cash cost ($/t) 87.02 85.86 81.29 86.15
Production cash cost ($/oz Ag Eq)1,2 15.38 11.67 14.57 10.92
Unit net smelter return ($/t) 163.57 138.07 131.40 137.77
AISC ($/oz Ag Eq)1,2 19.51 15.40 17.79 14.30
Notes:
1. Production cash cost ($/oz Ag Eq) and AISC ($/oz Ag Eq) are calculated using realized metal prices for each period respectively
2. Production cash cost ($/t), production cash cost ($/oz Ag Eq), and AISC ($/oz Ag Eq) are non-GAAP financial measures; refer to non-GAAP financial
measures in the associated MD&A for a description and calculation of these measures
Quarterly and Annual Results
The Caylloma Mine produced 263,921 ounces of silver, 8.4 million pounds of lead and 12.4 million pounds of zinc during
the three months ended December 31, 2020, which were 6%, 13%, and 7% respectively, higher than the same period in
2019. The increased metal production was due mainly to higher head grades. Gold production totaled 1,827 ounces with
an average head grade of 0.60 g/t.
The cash cost per tonne of processed ore for the three months ended December 31, 2020 increased 1% to $8 7.02
compared to $85.86 in the same period in 2019. COVID -19 related expenses in the quarter were $5.30 per tonne. The
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cash cost per tonne of processed ore for the full year 2020 decreased 6% to $81.29 compared to $86.15 for the full year
2019 and reflects cost reduction initiatives the Company implemented during the second and third quarter to address the
impact of the COVID-19 pandemic on our operations. COVID-19 related expenses for the full year were $3.10 per tonne.
Cash costs incurred during the voluntary suspension of operations in the third quarter of 2020 (refer to Fortuna news
release dated July 28, 2020), totaled $0.9 million and was recorded as care and maintenance costs.
The all-in sustaining cash cost for the full year 2020 increased 24% to $17.79 per ounce compared to $14.30 per ounce in
2019 due to the changes in th e prices of lead and zinc relative to the silver price, which affects the silver equivalent
calculation. As a result of the changes in relative prices, the ounces of payable silver equivalent decreased 18% to
4,308,239 ounces compared to 5,252,643 ounces in 2019 despite a 13% and 7% increase in the annual production of lead
and zinc.
Non-GAAP Financial Measures
The following tables represent the calculation of certain non-GAAP financial measures as referenced in this news release.
Income Statement Reconciliation to Adjusted Net Income for the three and twelve months ended December 31, 2020 and
2019
(Expressed in $ millions) Q4 2020 Adjust.
Q4 2020
Adjusted Q4 2019 Adjust.
Q4 2019
Adjusted
Sales 103.5 - 103.5 69.0 - 69.0
Cost of sales 56.6 (0.1) 56.5 45.5 (1.1) 44.4
Mine operating income 46.9 0.1 47.0 23.4 1.1 24.6
General and administration 12.1 - 12.1 9.4 - 9.4
Exploration and evaluation 0.6 - 0.6 0.4 - 0.4
Share of loss from associates - - - 0.1 (0.1) -
Foreign exchange loss 4.7 (3.2) 1.5 1.4 (1.0) 0.4
Other expenses, net 1.3 (1.4) (0.1) 3.2 (3.0) 0.2
Operating Income 28.2 4.7 32.9 9.0 5.2 14.2
Investment income - - - 11.0 (11.0) -
Interest income and finance costs, net (0.3) - (0.3) - 0.1 0.1
Gain (loss) on derivative instruments (0.2) 0.2 - - - -
Income before taxes 27.7 4.9 32.6 20.1 (5.7) 14.3
Income taxes 9.1 0.4 9.6 1.1 2.3 3.4
Net income and adjusted net income 18.6 4.5 23.0 19.0 (8.0) 10.9
Note: Certain figures may not add due to rounding
(Expressed in $ millions)
Full Year
2020 Adjust.
Full Year
2020
Adjusted
Full Year
2019 Adjust.
Full Year
2019
Adjusted
Sales 279.0 - 279.0 257.2 - 257.2
Cost of sales 168.8 - 168.8 172.6 (0.9) 171.7
Mine operating income 110.2 - 110.2 84.6 0.9 85.5
General and administration 35.1 0.1 35.2 29.8 0.1 29.9
Exploration and evaluation 1.2 - 1.2 2.4 - 2.4
Share of loss from associates 0.1 (0.1) - 0.2 (0.2) -
Foreign exchange loss 12.2 (12.4) (0.2) 13.3 (11.5) 1.8
Other expenses, net 4.4 (1.6) 2.8 4.6 (4.3) 0.3
Operating Income 57.2 14.0 71.3 34.2 16.8 51.1
Investment income 3.3 (3.3) - 11.0 (11.0) -
Interest income and finance costs, net (1.4) 0.2 (1.2) - 0.4 0.4
Gain (loss) on derivative instruments (0.2) 0.2 - (1.2) 2.6 1.4
Income before taxes 59.0 11.1 70.1 44.0 8.8 52.9
Income tax 37.4 0.8 38.2 20.2 4.2 24.4
Net income and adjusted net income 21.6 10.3 31.8 23.8 4.6 28.4
Note: Certain figures may not add due to rounding
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Reconciliation to Adjusted EBITDA for the three and twelve months ended December 31, 2020 and 2019
Three months ended Years ended
December 31, December 31,
(Expressed in $ millions) 2020 2019 2020 2019
Net income 18.6 19.0 21.6 23.8
Adjustments:
Community support provision (0.4) (0.1) (0.4) (0.3)
Inventory adjustment - 1.3 - 1.3
Foreign exchange loss, Lindero Mine 3.2 1.0 11.8 11.5
Net finance items 0.2 (0.1) 1.2 (0.3)
Depreciation, depletion, and amortization 13.9 11.6 45.7 46.0
Income taxes 9.1 1.1 37.4 20.2
Share of loss from associates - 0.1 0.1 0.2
Investment income - (11.0) (3.3) (11.0)
Other non-cash items 0.2 2.2 (1.5) 4.0
Adjusted EBITDA 44.8 25.1 112.6 95.4
Reconciliation to free cash flow from ongoing operations for the three and twelve months ended December 31, 2020 and
2019
Three months ended Years ended
December 31, December 31,
(Expressed in $ millions) 2020 2019 2020 2019
Free Cash Flow
(Restated) (Restated)
Net cash provided by operating activities 31.3 16.4 93.4 60.2
Adjustments
Change in long-term receivables 0.9 (1.5) (0.1) (1.5)
Additions to sustaining capital (9.2) (7.6) (23.0) (26.0)
Contractor advances for plant and equipment - - - (0.6)
Advances applied to plant and equipment - - - 0.7
Impact of adoption in IAS 16 21.9 2.8 21.9 2.8
Pre-production costs (2.7) - (2.7) -
Current income tax expense (13.3) (8.2) (38.8) (32.6)
Income taxes paid 5.6 4.5 28.2 31.5
Free cash flow1 from ongoing operations 34.5 6.4 78.9 34.5
Note:
1. From ongoing operations including San Jose and Caylloma and excludes Greenfields exploration
In the fourth quarter of 2020, the Company adopted the amendments to IAS 16, Property, Plant and Equipment – Proceeds
before Intended Use on a modified retrospective basis. Prior to the beginning of the fourth quarter, the Lindero Mine was
under construction and was not classified as an ongoing operation for the purposes of the free cash flow calculation. The
addback considers $21.9 million of costs incurred during the construction period for the first nine months of 2020 and
$2.8 million of costs incurred during the fourth quarter of 2019 related to the production of ore stockpile both of which
were reclassified from capital works in progress to inventories under the amended standard and included in operating
working capital.
The financial statements and MD&A are available on SEDAR and on the Company's website.
Conference call to review 2020 year-end financial and operational results
A conference call to discuss the financial and operational results will be held on Friday, March 12, 2021 at 9:00 a.m.
Pacific time | 12:00 p.m. Eastern time. Hosting the call will be Jorge A. Ganoza, President and CEO, and Luis D. Ganoza,
Chief Financial Officer.