Fortuna reports consolidated financial results for the third quarter 2017
Fortuna reports consolidated financial results for the third quarter 2017
(All amounts expressed in US dollars, unless otherwise stated)
Vancouver, November 8, 2017-- Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today
reported net income of $ 10.3 million, Adjusted EBITDA of $30.6 million, and revenue of $64.0
million in the third quarter of 2017.
Jorge A. Ganoza, President and CEO, commented, “We have had yet another quarter of strong
operating and financial results at our opera ting mines in Peru and Mexico, positioning the
company well on track to meet our annual production targets and financial objectives.” Mr.
Ganoza continued, “Having announced a positive construction decision for our Lindero gold
Project in Argentina, we expect free cash flow from our operations to contribute significantly
towards the funding of the construction capital requirements.”
Third quarter consolidated financial highlights
• Sales of $64.0 million, compared to $65.2 million in Q3 2016
• Net income of $10.3 million, compared to $10.2 million in Q3 2016
• Earnings per share of $0.06, compared to $0.08 in Q3 2016
• Adjusted net income of $13.1 compared to $10.0 million in Q3 2016
• Adjusted EBITDA of $30.6 million and Adjusted EBITDA margin over sales of 48%
• Cash flow from operations before changes in non- cash working capital of $ 26.2 million,
compared to $26.5 million in Q3 2016
• Cash position, including short term investments, and working capital as at September 30,
2017 were $195.8 million and $197.6 million, respectively
• Silver and gold production of 2,009,362 and 13,412 ounces, respectively
• AISC1 per ounce of payable silver was $6.1
Note
1 All-in sustaining cash cost is net of by-product credits for gold, lead and zinc (Non-GAAP financial measure)
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Third quarter consolidated financial results
Consolidated Financial Metrics
Q3
2017
Q3
2016
%
Change
YTD
2017
YTD
2016
%
Change
Figures expressed in $ millions except per share information and AISC
Sales $ 64.0 $ 65.2 -2% $ 192.8 $ 152.4 27%
Mine operating income 24.9 28.4 -12% 74.3 59.9 24%
Operating income 18.9 21.2 -11% 52.7 30.9 71%
Net income 10.3 10.2 1% 32.2 11.3 185%
Earnings per share (basic) 0.06 0.08 -25% 0.20 0.08 150%
Earnings per share (diluted) 0.06 0.07 -14% 0.20 0.08 150%
Adjusted net income1 13.1 10.0 31% 36.4 11.0 231%
Adjusted EBITDA1 30.6 30.6 0% 87.3 53.5 63%
Cash provided by operating activities 20.4 29.0 -30% 41.2 26.9 53%
Cash generated by operating activities
before changes in working capital 26.2 26.5 -1% 61.3 39.6 55%
Capex (sustaining)
7.5 5.4 39%
19.9 14.5 37%
Capex (non-sustaining)
6.1 3.6 69%
11.2 21.0 -47%
Capex (Brownfield)
2.2 2.2 0%
7.8 5.7 37%
All-in sustaining cash cost
6.1 7.5 -20%
6.8 8.8 -23%
Cash, cash equivalents, and short-term
investments2 195.8 123.6 58% 195.8 123.6 58%
Total assets2 652.9 387.7 68% 652.9 387.7 68%
Non-current bank loan2 39.8 39.6 1% 39.8 39.6 1%
Other liabilities2 1.3 4.8 -73% 1.3 4.8 -73%
Note
1 refer to Non-GAAP Financial Measures
2 Comparative figures are as at December 31, 2016
Net income for the third quarter ended September 30, 2017 was $10.3 million or $0.06 per
share compared to a net income of $10.2 million or $0.08 per share for the comparable
quarter in 2016. The slightly higher net income was driven mostly by lower incom e tax
expense of $5.2 million as the effective tax rate for the third quarter was 34.7% compared
to 51.2% for the comparable quarter in 2016. Adjusted net income was $13. 1 million
compared to $ 10.0 million in 2016, mostly after adjusting for a $ 2.2 million loss on
financial instruments, net of tax, in the current quarter.
Operating income for the third quarter ended September 30, 2017 was $18.9 million, 11%
below the comparable quarter in 2016, attributable mostly to lower financial results at our
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San Jose Mine related in turn to a lower realized silver price of 14% and higher unit costs of
13%. These were partially offset by stronger financial results at our Caylloma M ine driven
by strong zinc and lead prices and lower share based payments of $0.1 mil lion, compared
to $2.6 million in the third quarter of 2016.
Cash provided by operating activities in the third quarter of 2017 was $20.4 million, a $8.6
million decrease from $29.0 million in the comparable quarter of 2016. The decrease was
due primarily to negative changes in working capital in the third quarter of 2017 compared
to positive changes in Q3 2016. The negative changes in the current quarter are related to
trade receivables and inventory. Cas h provided by operating activities before changes in
working capital was $2 6.2 million, a $0. 3 million decrease from $26. 5 million in the third
quarter of 2016.
Liquidity
At September 30, 2017, the Company had cash, cash equivalents, and short- term
investments of $195.8 million (December 31, 2016 – $123.6 million), an increase of $7.8
million over the end of June 2017, and of $72.2 million since the beginning of the year. The
increase over year end 2016 was due primarily to a bought deal equity financing in the first
quarter of 2017 for net proceeds of $70.9 million.
The Company is in the process of amending its existing credit facility with Scotiabank from
$40 million to $120 million. This will provide an additional $80 million of liquidity on to p
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of the $40 million which have been drawn as of September 30, 2017 and completes our
funding requirement for the construction of the Lindero Project.
San Jose Mine, Mexico
QUARTERLY RESULTS
YEAR TO DATE RESULTS
San Jose
Three months ended,
September 30,
Nine months ended,
September 30,
Mine Production 2017 2016 2017 2016
t milled 263,697 268,242
799,420 632,432
Average t milled per day 3,038 3,056
3,054 2,425
Silver
Grade (g/t) 229 224
231 229
Recovery (%) 91 92
92 92
Production (oz) 1,774,556 1,780,825
5,454,793 4,296,125
Metal sold (oz) 1,739,066 1,761,101
5,392,495 4,270,370
Realized price ($/oz) 16.85 19.47
17.16 17.37
Gold
Grade (g/t) 1.71 1.76
1.74 1.73
Recovery (%) 91 92
91 92
Production (oz) 13,248 13,951
40,773 32,358
Metal sold (oz) 12,817 13,739
40,079 32,155
Realized price ($/oz) 1,280 1,327
1,251 1,268
Unit Costs
Production cash cost ($/oz Ag)1 1.53 0.73
1.29 1.74
Production cash cost ($/t) 62.23 54.83
60.31 57.69
Unit Net Smelter Return ($/t) 162.62 175.61
165.76 160.73
All-in sustaining cash cost ($/oz Ag)1 7.75 6.94
7.35 7.95
1 Net of by-product credits from gold
The San Jose Mine produced 1,774,556 ounces of silver and 13,248 ounces of gold in the
third quarter, 4% and 7% higher than plan. Compared to the third quarter of 2016 silver
was slightly slower by 0.4% and gold was 5% lower. The decrease in gold compared to
2016 was the result of lower head grades of 3% and lower throughput of 2%.
Cash cost per tonne of processed ore for the third quarter ended September 30, 2017 was
$62.2, which includes approximately $ 0.6 per tonne of non- recurring items mainly related
to mine support works due to a major earthquake in September and $0.7 0 per tonne due to
the appreciation of the Mexican Peso against the US dollar. Excluding non-recurring items
and exchange rate effects t he increase compared to budget was 4% and was related to
higher mine support cost and local inflation on the cost of energy and materials. Cash cost
per tonne of processed ore for the quarter was 1 3% higher than the $54.8 cash cost for the
comparable quarter in 2016. Cash cost for 2017 is expected to remain within 5% of annual
guidance (see Fortuna news release dated January 11, 2017).
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All-in sustaining cash cost per payable ounce of silver, net of by -product credits, was $7. 4
for the first nine months of 2017 and was below the annual guidance of $8.4 as a result of
higher gold credits.
Caylloma Mine, Peru
QUARTERLY RESULTS
YEAR TO DATE RESULTS
Caylloma
Three months ended,
September 30,
Nine months ended,
September 30,
Mine Production 2017 2016 2017 2016
t milled 133,726 132,558
395,069 379,707
Average t milled per day 1,486 1,473
1,480 1,417
Silver
Grade (g/t) 66 87
66 93
Recovery (%) 83 83
84 85
Production (oz) 234,806 308,680
704,624 963,994
Metal sold (oz) 226,155 309,813
691,659 980,418
Realized price ($/oz) 16.89 19.56
17.19 16.91
Lead
Grade (%) 2.87 2.71
2.77 3.22
Recovery (%) 91 94
91 94
Production (000's lbs) 7,650 7,452
22,031 25,383
Metal sold (000's lbs) 7,291 7,454
21,454 25,826
Realized price ($/lb) 1.06 0.85
1.03 0.80
Zinc
Grade (%) 4.26 4.09
4.16 4.32
Recovery (%) 90 89
90 89
Production (000's lbs) 11,241 10,606
32,670 32,198
Metal sold (000's lbs) 10,867 10,600
32,512 32,504
Realized price ($/lb) 1.35 1.02
1.26 0.89
Unit Costs
Production cash cost ($/oz Ag)1 (39.53) (8.49)
(31.22) (4.41)
Production cash cost ($/t) 76.00 71.83
78.12 72.16
Unit Net Smelter Return ($/t) 170.37 134.17
159.86 123.59
All-in sustaining cash cost ($/oz Ag)1 (18.79) 3.27
(11.23) 5.14
1 Net of by-product credits from gold, lead and zinc
Silver production at the Caylloma M ine for the third quarter of 2017 was 234,806 ounces,
24% lower than the comparable period in 2016. Lead and zinc production were 7.7 million
and 11.2 million pounds, respectively ; 3%, and 6% higher than the comparable quarter in
2016. Lower silver production for the third quarter was due to lower head grades of 2 5%.
Higher lead production of 3% was the result of higher head grades of 6% partially offset by
lower recovery of 4%, while higher zinc production of 6% was the result of higher head
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grade of 4%. Compared to plan silver and lead production were 6% and 3% below budget,
while zinc production was 5% above budget.
Cash cost per tonne of processed ore for the third quarter ended September 30, 2017 was
$76.0, which was 6% higher than the $71.8 cash cost for the comparable quarter in 2016
and 1% higher than budget. The increase over the third quarter of 2016 was mainly due to
higher energy, ground support and labour costs. Cash cost for full year 2017 is expected to
remain within 5% of annual guidance (see Fortuna news release dated January 11, 2017).
All-in sustaining cash cost per payable ounce of silver, net of by -product credits, was a
negative $11.2 for the first nine months of the year and was significantly below the annual
guidance of $10.8 due primarily to higher by-product credits.
The financial statements and MD&A are available on SEDAR and have also been posted on
the Company's website at http://www.fortunasilver.com/s/financial_reports.asp.
Conference call details:
Date: Thursday, November 9, 2017
Time: 9:00 a.m. Pacific | 12:00 p.m. Eastern
Dial in number (Toll Free): +1.888.567.1603
Dial in number (International): +1.404.267.0368
Replay number (Toll Free): +1.877.481.4010
Replay number (International): +1.919.882.2331
Replay Passcode: 10434
Playback of the conference call will be available until November 23, 2017 at 11:59 p.m. Eastern.
Playback of the webcast will be available until February 9, 2018. In addition, a transcript of the
call will be archived in the company’s website:
https://www.fortunasilver.com/investors/financials/2017/.
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.
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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, “Forward looking
Statements”). All s tatements 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; 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, “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 results, performance or achievements of the Company 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; changes in prices for
silver and other metals; technological and ope rational hazards in Fortuna’s mining and mine development
activities; risks inherent in mineral exploration; uncertainties inherent in the estimation of mineral reserves, mineral
resources, and 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 Factors” in the
Company's Annual Information Form. Although the Company has attempted to identify important factors that coul d
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 St atements 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 and mineral
properties; mine production costs; expected trends i n 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 mat erial adverse change affecting the
Company or its properties; that all required approvals will be obtained; 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 information, future events or results or otherwise, except as required by law. There can be no
assurance that Forward looki ng Statements will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance
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.