FVI.TO · 2018-05-09 12:00:00

Fortuna reports consolidated financial results for the first quarter 2018

Financials

(All amounts expressed in US dollars, unless otherwise stated)

Vancouver, May 9, 2018: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today reported net income of

$13.8 million, EPS of $0.09, and Adjusted EBITDA of $31.8 million in the first quarter of 2018.

Jorge A. Ganoza, President, CEO and Director, commented, “We are pleased with our results for the first

quarter which provide a good start to 2018 with all our key operating and financial indicators reflecting

the strength of our assets.” Mr. Ganoza added, “The Company achieved record silver and gold production

along with industr y leading margins and cash flow generation.” Mr. Ganoza concluded, “Fortuna´s

business strength and liquidity will provide the necessary flexibility to meet funding requirements for the

development of the Lindero Project.”

First quarter consolidated financial highlights:

• Sales of $70.4 million compared to $64.8 million in Q1 2017

• Net income of $13.8 million compared to $13.0 million in Q1 2017

• EPS of $0.09 compared to $0.08 in Q1 2017

• Cash flow from operations of $20.1 million and Adjusted EBITDA of $31.8 million compared to

$8.9 million and $30.2 million in Q1 2017

• Cash position, including short term investments, as at March 31, 2018 was $217.3 million

• Silver and gold production of 2,401,458 and 15,041 ounces, respectively

• AISC(1) per ounce of payable silver was $2.11

(1) All-in sustaining cash cost is net of by-product credits for gold, lead and zinc

-2-

First quarter consolidated financial results

Conso lidated Metrics Q 1 2018 Q 1 2017 % Change

Fina ncial ( Ex pressed in $ millions except per share information)

Sales $ 70.4 $ 64.8 9%

Mine operating income 31.3 27.2 15%

Operating income 22.4 19.6 14%

Net income 13.8 13.0 6%

Earnings per share (basic) 0.09 0.08 13%

Earnings per share (diluted) 0.09 0.08 13%

Adjusted net income 13.0 14.0 -7%

Adjusted EBITDA 31.8 30.2 5%

Cash provided by operating activities 20.1 8.9 126%

Cash generated by operating activities before changes in working capital 15.2 15.6 -3%

Capex (sustain ing) 4.1 5.1 -19%

Capex (non-sustaining) 4.9 1.9 157%

Capex (Brownfield) 2.3 2.7 -17%

AISC1 2.1 6.1 -65%

Mar 31, 2018 Dec 31, 2017 % Change

Cash, cash equivalents, and sh ort -term investments $ 217.3 $ 212.6 2%

Total assets $ 707.5 $ 706.6 0%

Non-current bank loan $ 39.6 $ 39.9 -1%

Net income for the three months ended March 31, 2018 was $13.8 million or $0.09 per share compared

to $13.0 million or $0.08 per share for the comparable quarter in 2017. Higher sales of 9% over the

comparable quarter resulted in turn in higher operating income of 14% which was partially offset at the

net income level by a higher income tax expense. The effective tax rate for the first quarter 2018 was 38%

compared to 26% for the same quarter in 2017. The low effective tax rate i n 2017 was due to a high

inflation rate and a strong Mexican Peso against the US dollar in Q1 2017 which have a positive impact on

our Mexican operation, and lowered the income tax expense.

Adjusted net income was $13.0 million compared to $14.0 million in 2017, a decrease of $1.0 million after

adjusting for unrealized gains on lead and zinc derivative contracts.

-3-

Silver and gold sold were 7% and 9% lower than actual metal produced reflecting higher concentrate

inventory at the end of the first quarter associated with a change in our sales contract at the San Jose

mine in the first quarter which involves a shift from local delivery of the concentrates to export of

concentrate. This increased our concentrate inventory 618 tonnes with an estimated value of $4.1 million.

The delay in the recognition of this sale would have contributed approximately $2.7 million to pre -tax

earnings or $0.01 per share after tax.

1Q 17 8.9

Change in adjusted E BITDA 1.6

Change in income tax paid (5.0)

Change in wor king capital items 11.5

Other 3.0

1Q 18 20.1

Cash provided by operating activities 2018 Q 1 vs. 2 017 Q1 ($ M) 1Q 17 8. 9 Change in adjusted EBITDA Change in income tax paid Change in wor k in g capital ítems Other 1Q 18 1.5 (5. 0) 11.5 3. 1 201.

Adjusted EBITDA in the first quarter of 2018 increased $1.6 million over the prior year to $31.8 million as

higher sales of $5.6 million over the comparable period in 2017 were partially offset by increases of $1.5

million in mine operating costs, $0.8 million in mine selling, general and administration costs, $1.3 million

in share-based payment expense and $1.0 million in realized losses from commodity derivative contracts.

Cash provided by operating activities was $20.1 million or 126% higher than the $8.9 million for the same

period in 2017.

-4-

As at March 31, 2018, the Company had cash and short -term investments of $217.3 million (December

31, 2017: $212.6 million). 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 the end of the quarter to over $290.0 million which alon g with the current rate

of free cash flow generated from our existing operations should provide sufficient liquidity to meet our

funding needs during the construction of the Lindero project.

San Jose Mine, Mexico

Three months ended March 31,

Mine Production 2018 2017

Tonnes milled

258,204

267,268

Average tonnes milled per day

3,011

3,108

Silver

Grade (g/t)

284

226

Recovery (%)

Production (o z)

2,185,913

1,792,967

Metal so ld (oz)

2,011,260

1,779,203

Realized price ($/oz)

16.65

17.46

Gold

Grade (g/t)

1.94

1.67

Recovery (%)

Production (o z)

14,882

13,116

Metal so ld (oz)

13,748

13,040

Realized price ($/oz)

1,329

1,220

Unit Costs

Production cash cost ($ /o z Ag)1

-0.33

1.34

Production cash cost ($ /t)

65.26

56.85

Unit Net Smelter Return ($/t)

203.81

161.75

All-in sustain ing cash cost ($/o z Ag)1 4.03 6.60

1 Net of by -product credits from gold

The San Jose Mine produced 2,185,913 ounces of silver and 14,882 ounces of gold in the first quarter of

2018 which were 22% and 13% above the comparable period in 2017. Average head grades for silver and

gold were 284 g/t and 1.94 g/t which were 25% and 16% higher than the comparable period in 2017.

-5-

Cash cost per tonne of processed ore was $65. 3, or 15% above the $56. 9 cash cost for the comparable

quarter in 2017 and 7% above annual guidance of $61.2. The higher cost compared to guidance was due

to on e-time items related to the operations of the dry stack tailings facility ($3.4/tonne), higher

transportation costs due to increased shipments ($2.4/tonne) and faster execution of community

relations program ($1.5/tonne). Cash cost per tonne for the remai nder of the year is expected to be in

line with guidance.

All-in sustaining cash cost per payable ounce of silver, net of by-product credits, was $4.0 for first quarter

of 2018 and was below the annual guidance of $6.6 as a result of lower execution on su staining capital

and improvements in concentrate commercial terms.

-6-

Three months ended March 31,

Mine Production 2018 2017

Tonnes milled

129,620

129,369

Average tonnes milled per day

1,473

1,470

Silver

Grade (g/t)

Recovery (%)

Production (o z)

215,545

240,224

Metal so ld (oz)

220,290

236,068

Realized price ($/oz)

16.79

17.33

Lead

Grade (%)

2.72

2.76

Recovery (%)

Production (000's lbs)

7,040

7,211

Metal so ld (000's lb s)

7,269

7,037

Realized price ($/lb)

1.14

1.03

Zinc

Grade (%)

4.31

4.17

Recovery (%)

Production (000's lbs)

11,028

10,816

Metal so ld (000's lb s)

11,078

10,702

Realized price ($/lb)

1.55

1.26

Unit Costs

Production cash cost ($ /o z Ag)1

(54.08)

(31.54)

Production cash cost ($ /t)

78.68

73.30

Unit Net Smelter Return ($/t)

190.33

158.92

All-in sustain ing cash cost ($/o z Ag)1 (31.36) (11.97)

1 Net of by -product credits from gold, lead and zinc

Caylloma Mine, Peru

-7-

Quarterly Results

The Caylloma Mine produced 7.0 million pounds of lead and 11.0 million pounds of zinc which were 2%

below and 2% above the comparable quarter in 2017. Average head grades for lead and zinc were 2.72%

and 4.31%. Silver production was 215,545 ounces which was 10% lower than the comparable period in

2017 and average silver head grade was 10% lower than in 2017. Metallurgical recovery was 84% or 1%

lower than in 2017.

Cash cost per tonne of processed ore for the first quarter of 2018 was $78. 7, which was 7% higher than

the $73.3 cash cost for the comparable quarter in 2017 and 3% below annual guidance of $81.3.

All-in sustaining cash cost per payable ounce of silver, net of by-product credits, was a negative $31.4 for

the first quarter 2018 which was significantly below the annual guidance of a negative $5.2 as a result of

higher by-product credits.

Reconciliation to Adjusted Net Income

Q 1 2018 Adjust ments Q 1 2018 adjusted Q 1 2017 Adjust ments Q 1 2017 adjusted

Sales 70.4

70.4 64.8

64.8

Cost of sales 39.1

39.1 37.7

37.7

Mine operating inco me 31.3 - 31.3 27.2 - 27.2

Sellin g, general and administratio n 6.9

6.9 5.3

5.3

Exploration and evaluation 0.1

0.1 0.1

0.1

Share of loss of equ ity -accounted investee (0.2) 0.2 - 0.1 (0. 1) -

Foreign exchange loss (gain) 2.2

2.2 2.1

2.1

Operating Income 22.3 (0.2) 22.1 19.6 0.1 19.7

Interest income (0.6)

(0.6) (0.3)

(0.3)

Interest expense 0.5

0.5 0.5

0.5

Other finance items 0.4 (0.4) - -

Accretion of provision s 0.2

0.2 0.2

0.2

(Gain) loss on financial assets and liabilities carried at fair value (0.4) 1.4 1.0 1.6 (0. 6) 1.0

Inco me before taxes 22.3 (1.2) 21.1 17.6 0.7 18.3

Current income tax expense 9.7 (0.4) 9.3 8.0 (0. 3) 7.7

Deferred income tax recovery (1.2)

(1.2) (3.4)

(3.4)

Net income for the year 13.8 (0.8) 13.0 13.0 1.0 14.0

EPS 0.09 (0.00) 0.09 0.08 0.00 0.08

-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/2018/.

Conference call to review first quarter 2018 financial and operational results

A conference call to discuss first quarter 2018 financial and operational results will be held on Thursday,

May 10, 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 conferenc e call by

logging onto the webcast at: http://www.investorcalendar.com/IC/CEPage.asp?ID=176642 or over the

phone by dialing just prior to the starting time.

Conference call details:

Date: Thursday, May 10, 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: 10450

Playback of the conference call will be available until May 24, 2018 at 11:59 p.m. Eastern. Playback of

the webcast will be available until August 10, 2018. In addition, a transcript of the call will be archived in

the company’s website: https://www.fortunasilver.com/investors/financials/2018/.

About Fortuna Silver Mines Inc.

Fortuna is a growth oriented, precious metal producer focused on mining opportunities in Latin America.

The Company’s primary assets are the Caylloma silver mine in southern Peru, the San Jose silver-gold mine

in Mexico and the Lindero gold project in Argentina. The Company is selectively pursuing acquisition

opportunities throughout the Americas and in select other areas.

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

← Back to feed