Fortuna Reports Net Income of $27.0 million in the First Quarter of 2022
Fortuna | 1
Fortuna Reports Net Income of $27.0 million in the First Quarter of 2022
(All amounts expressed in US dollars, tabular amounts in millions, unless otherwise stated)
Vancouver, May 11, 2022: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) (“Fortuna” or the “Company”) today reported
its financial and operating results for the first quarter of 2022.
First Quarter 2022 Highlights
Operational
• Gold and silver production of 66,800 ounces and 1,670,128 ounces, respectively . An in crease of 93% and a
decrease of 13% respectively compared to the first quarter of 2021 (“ Q1 2021”). Gold equivalent production of
103,0983 ounces.
• AISC 1 per ounce of gold sold of $1,038 for the Lindero Mine and $1,147 for the Yaramoko Mine. AISC 1,2 per silver
equivalent ounce of payable silver sold of $15.32 and $17.83 for the San Jose Mine and Caylloma Mine,
respectively.
• All mine operations performed in line with annual guidance projections.
• Total recordable injury rate of 3.13 with 2 lost time injuries. One fatal incident at the Lindero mine in January.
Financial
• Net income of $27.0 million or $0.09 per share, compared to $26.4 million or $0.14 net income per share reported
in Q1 2021. Adjusted net income1 of $33.4 million compared to $27.5 million reported in Q1 2021
• Sales of $182.3 million, an increase of 55% from the $117.8 million reported in the same period in Q1 2021
• Consolidated realized prices of $1,884 per ounce and $24.18 per ounce for gold and silver respectively
• Adjusted EBITDA1 of $80.3 million compared to $60.8 million reported in Q1 2021
• Free cash flow from ongoing operations1 of $9.6 million compared to $11.8 million reported in Q1 2021.
• As at March 31, 2022, the Company had cash and cash equivalents of $110.4 million, and available liquidity of
$150.4 million
Growth and Development
• Seguela Project; maiden Inferred Mineral Resource for the Sunbird discovery comprising 3.45 million tonnes
averaging 3.16 g/t containing 350,000 gold ounces (see news release dated March 15, 2022)
• Seguela construction 48% complete as of the end of March. On-time and on-budget for first gold in mid 2023
Jorge A. Ganoza, President and CEO, commented, “Our net income in the quarter of $27.0 million and adjusted EBITDA1
of $80.3 million with margins of 4 4% attest to the strong operational performance of our four mines .” Mr . Ganoza
continued, “We are running a thriving business in an $1,800 per ounce gold price environment and are confident of the
resiliency of our assets throughout the precious metal cycle.” Mr. Ganoza concluded, “We maintain a strong balance sheet
with low debt leverage and a healthy liquidity position of $150.4 million.”
1 Refer to Non-IFRS financial measures
2 AISC/oz Ag Eq calculated at realized metal prices, refer to mine site results for realized prices and Non-IFRS Financial Measures for silver equivalent ratio
3 Gold equivalent production includes gold, silver, lead and zinc and is calculated using the following metal prices: $1,884/oz Au, $24.2/oz Ag, $2,331/t Pb and $3,736/t Zn or Au:Ag = 1:77.9, Au:Pb = 1:0.8, Au:Zn = 1:0.5
4 For full details see news release dated March 15, 2022
NEWS RELEASE
Fortuna | 2
Three months ended March 31,
2022 2021 % Change
Sales 182.3 117.8 55%
Mine operating income 63.5 51.3 24%
Operating income 40.7 40.4 1%
Net income 27.0 26.4 2%
Earnings per share - basic 0.09 0.14 (36%)
Adjusted net income1 33.4 27.5 21%
Adjusted EBITDA1 80.3 60.8 32%
Net cash provided by operating activities 33.2 21.1 57%
Free cash flow from ongoing operations1 9.6 11.8 (19%)
Capital expenditures2
Sustaining 18.0 7.9 128%
Non-sustaining3 1.9 0.3 533%
Lindero construction - 2.6 (100%)
Séguéla construction 42.9 - 100%
Brownfields 2.5 2.5 0%
As at March 31, 2022 December 31, 2021 % Change
Cash and cash equivalents 110.4 107.1 3%
1 Refer to Non-IFRS Financial Measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements on SEDAR at
www.sedar.com for a description of the calculation of these measures.
2 Capital expenditures are presented on a cash basis
3 Non-sustaining expenditures include greenfields exploration
Figures may not add due to rounding
First Quarter 2022 Results
Sales for the three months ended March 31, 2022 were $182.3 million, an increase of 55% from the $117.8 million over
the same period in 2021. Sales by reportable segment in the three months ended March 31, 2022 were as follows:
▪ Lindero recognized adjusted sales of $54.1 million from 28,619 ounces of gold ounces sold, a 45% increase from
the same period in 2021. Higher gold sales were the result of increased performance at the three stage crushing
and stacking facility.
▪ Yaramoko recognized adjusted sales of of $55.4 million from 29,530 ounces of gold sold.
▪ San Jose recognized adjusted sales of $45.9 million, a 17% decrease from the $55.3 million reported in the same
period in 2021. Lower sales were driven by a 20% and 23% decrease in the volume of silver and gold ounces sold,
respectively, which was driven by lower mined grades which was in line with Mineral Reserve estimates.
▪ Caylloma recognized adjusted sales of $26.8 million, a 7% increase from the $25.1 million reported in the same
period in 2021. The increased sales were mainly driven by higher zinc and lead prices.
Operating income for the three months ended March 30, 2022 was $40.7 million, a slight increase of $0.3 million compared
to Q1 2021 as higher operating income at Lindero and the contribution from Yaramoko were of fset by lower operating
income at San Jose, higher Corporate expenses, and a $2.1 million write-down related to the termination of an exploration
agreement on the Sante Fe property in Mexico.
Net income for the three months ended March 31, 2022 was $27.0 million, an increase of $0.6 million over the same
period in 2021. Net income was impacted by a loss on financial derivatives of $4.2 million for the first quarter of 2022
compared to a $1.7 million gain in the same period of 2021. This was driven by a $5. 2 million loss ($1.1 million realized,
$4.1 million unrealized) on financial derivatives at the Caylloma Mine due to higher zinc prices that was partially offset by
gains on fuel hedges at Lindero.
Fortuna | 3
Outlook on Cost Inflation
The Company continues to monitor the impact of inflationary pressures on its cost structure and any deviation this could
create from the guidance the Company issued at the beginning of the year. During the quarter ended March 31, 2022, the
Company observed cost pressure on certain consumables including cyanide, diesel, explosives and grinding media while
certain others remained relatively constant. Through the first quarter of 2022 the impact of inflation was below 5% of
total cost. At the Lindero Mine, where diesel is the largest cost component, the effect of a rising price was partially
mitigated by fuel hedges the Company has in place for approximately 55% of consumption in 2022. The future impact of
inflation on costs remains uncertain at this time. The Company will continue to closely monitor the levels of cost inflation
over the remainder of 2022.
Liquidity
Free cash flow from ongoing operations for the three months ended March 31, 2022 was $9.6 million compared to $11.8
million in Q1 2021. The decrease was driven by negative changes in working capital in Q1 2022 of $27.9 million and taxes
paid of $20.1 million compared to a current income tax charge in the quarter of $11.9 million.
Total liquidity available to the Company as at March 31, 2022 was $150.4 million. The Company’s $200.0 million revolving
credit facility was fully available as at the end of March 2022 and $40.0 million remained undrawn. Subsequent to March
31, 2022 the company drew down $20.0 million from the credit facility bringing the total amount drawn to $180.0 million
of the available $200.0 million.
Lindero Mine, Argentina
Three months ended March 31,
2022 2021
Mine Production
Tonnes placed on the leach pad 1,295,755 2,130,000
Gold
Grade (g/t) 0.88 0.82
Production (oz) 30,068 22,332
Metal sold (oz) 28,619 21,297
Realized price ($/oz) 1,890 1,754
Cash cost ($/oz Au)1 692 615
All-in sustaining cash cost ($/oz Au)1 1,038 1,055
Capital expenditures ($000's)
Sustaining 3,125 4,040
Non-sustaining 169 -
Brownfields 144 91
1 Cash cost and AISC are non-IFRS financial measures. Refer to Non-IFRS Financial Measures.
During the first quarter of 2022, the operation lost man-hours in January as a result of the sudden surge in COVID-19 cases
causing a 14% shortfall in ore placed on the pad, compared to plan for the quarter. The Company is executing a recovery
plan during the second and third quarters of the year and does not anticipate any impact on achieving annual production
guidance.
In the first quarter of 2022, a total of 1,295,755 tonnes of ore were placed on the heap leach pad averaging 0.88 g/t gold
containing an estimated 36,568 ounces of gold. Gold production for the quarter was 30,068 ounces, representing a 35%
increase quarter-over-quarter. Higher gold production is explained by an increase in the performance of the three-stage
crushing and stacking circuits to design parameters, which delivered 100% of the 1.3 million tonnes of ore placed on the
pad in the quarter compared to 19 % or 0.4 million tonnes of the 2.1 million tonnes placed in the comparable quarter a
year ago. Mine production was 2.4 million tonnes of mineralized material with a strip ratio of 0.5:1.
Fortuna | 4
Cash cost per gold ounce sold was $692, compared to $615 in the first quarter of 2021. Cash costs per ounce of gold was
higher due to higher consumable prices mainly related to diesel, cyanide and explosives and higher headcount as the mine
had not reached its full complement of staff in the first quarter of 2022. This was partially offset by the higher volume of
gold sold.
All-in sustaining cash costs per gold ounce sold was $1,038 during Q1 2022 compared with $1,055 in the first quarter of
2021. All-in sustaining costs for the first quarter of 2022 was impacted by the production issues described above and lower
sustaining capital related to timing effects.
Yaramoko Mine Complex, Burkina Faso
Three months ended March 31,
2022 2021
Mine Production
Tonnes milled 127,968 -
Gold
Grade (g/t) 7.50 -
Recovery (%) 98 -
Production (oz) 28,235 -
Metal sold (oz) 29,530 -
Realized price ($/oz) 1,878 -
Unit Costs
Cash cost ($/oz Au)1 705 -
All-in sustaining cash cost ($/oz Au)1 1,147 -
Capital expenditures ($000's)
Sustaining 7,361 -
Brownfields 488 -
1 Cash cost and AISC are non-IFRS financial measures. Refer to Non-IFRS Financial Measures.
2 The Yaramoko Mine was acquired as part of the acquisition of Roxgold which completed on July 2, 2021. As such comparative figures for the comparative quarter in
2021 is not presented.
The Yaramoko Mine produced 28,235 ounces of gold in the first quarter of 2022 with an average gold head grade of 7.50
g/t; above the plan for the quarter. Gold production is on target to meet the upper end of the annual guidance range
primarily due to mill feed grade being 9% higher than budgeted for the period. Positive grade reconciliation compared to
the reserve model at the 55 Zone and additional tonnes from ore development explain the increase in grade.
Cash cost per gold ounce sold was $705, which was below plan, primarily due to higher production during Q1 2022.
All-in sustaining cash cost per gold ounce sold was $1,147 for Q1 2022, which was below plan due to higher production
and lower sustaining capital related to timing effects.
Fortuna | 5
San Jose Mine, Mexico
Three months ended March 31,
2022 2021
Mine Production
Tonnes milled 250,947 259,803
Average tonnes milled per day 2,918 3,048
Silver
Grade (g/t) 185 217
Recovery (%) 91 91
Production (oz) 1,358,189 1,646,444
Metal sold (oz) 1,316,193 1,642,300
Realized price ($/oz) 24.27 26.17
Gold
Grade (g/t) 1.13 1.36
Recovery (%) 90 91
Production (oz) 8,239 10,301
Metal sold (oz) 7,952 10,287
Realized price ($/oz) 1,890 1,783
Unit Costs
Production cash cost ($/t)2 76.05 69.96
Production cash cost ($/oz Ag Eq)1,2 10.42 8.38
Net smelter return ($/t) 182.65 223.69
All-in sustaining cash cost ($/oz Ag Eq)1,2 15.32 13.40
Capital expenditures ($000's)
Sustaining 3,575 1,987
Non-sustaining 415 274
Brownfields 1,529 1,736
1 Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period respectively
2 Production cash cost, Production cash cost silver equivalent, and All-in sustaining cash cost silver equivalent are Non-IFRS Financial Measures, refer to Non-IFRS
Financial Measures
The San Jose Mine produced 1,358,189 ounces of silver and 8,239 ounces of gold during the three months ended March
31, 2022, which represents a n 18% and 20% decrease compared to Q1 2021. The driver for the decrease in production
was primarily lower average head grades of 15 % and 17% for silver and gold, respectively; which is in line with Mineral
Reserve estimates.
The cash cost per tonne for the three months ended March 31, 2022 was $76.05 per tonne compared to $69.96 per tonne
in Q1 2021. Cash cost per tonne in the quarter was in line with annual guidance.
The all-in sustaining cash cost of payable silver equivalent for the three months ended March 31, 2022 increased 14%
to$15.32 per ounce, compared to $13.40 per ounce in Q1 2021. The increase in all-in sustaining costs was primarily the
result of lower silver equivalent ounces sold and an increase in sustaining capital due to additional spend on mine
equipment, partially compensated by lower royalties and mining taxes and lower worker’s participation.
Fortuna | 6
Caylloma Mine, Peru
Three months ended March 31,
2022 2021
Mine Production
Tonnes milled 132,574 131,887
Average tonnes milled per day 1,524 1,499
Silver
Grade (g/t) 89 77
Recovery (%) 82 81
Production (oz) 311,939 267,311
Metal sold (oz) 294,301 259,311
Realized price ($/oz) 23.78 26.29
Gold
Grade (g/t) 0.16 0.62
Recovery (%) 37 73
Production (oz) 258 1,922
Metal sold (oz) 325 1,673
Realized price ($/oz) 1,828 1,775
Lead
Grade (%) 3.55 3.21
Recovery (%) 88 88
Production (000's lbs) 9,134 8,181
Metal sold (000's lbs) 8,575 7,998
Realized price ($/lb) 1.06 0.92
Zinc
Grade (%) 4.18 4.70
Recovery (%) 89 88
Production (000's lbs) 10,827 11,969
Metal sold (000's lbs) 10,546 12,267
Realized price ($/lb) 1.69 1.25
Unit Costs
Production cash cost ($/t)2 89.60 83.09
Production cash cost ($/oz Ag Eq)1,2 12.39 13.10
Net smelter return ($/t) 211.80 194.39
All-in sustaining cash cost ($/oz Ag Eq)1,2 17.83 18.50
Capital expenditures ($000's)
Sustaining 3,949 1,972
Brownfields 324 630
1 Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period respectively
2 Production cash cost, Production cash cost silver equivalent, and All-in sustaining cash cost silver equivalent are Non-IFRS Financial Measures, refer to Non-IFRS
Financial Measures
The Caylloma Mine produced 311,939 ounces of silver, 9.1 million pounds of lead and 10.8 million pounds of zinc during
the three months ended March 31, 2022. Silver production was 17% higher than the comparable period, driven by a 16%
increase in average head grade from the contribution of newly scheduled higher-grade production stopes located in level
16 of the Animas vein. Lead production was 12% higher than the comparable period due to higher grades while zinc
production was 10% lower than the comparable period due to lower grades. Gold production totalled 258 ounces with an
average head grade of 0.16 g/t which was in line with expectations.
The production cash cost per tonne for the three months ended March 31, 2022 increased 8% to $89.60, compared to
$83.09 in Q1 2021. The increase was the result of higher mining costs related to higher increased ground support and
backfill requirements and increased plant costs related to steel and reagents. Cash cost per tonne in the quarter was in
line with annual guidance.
The all-in sustaining cash cost for the three months ended March 31, 2022 decreased 4% to $17.83 per ounce compared
to $18.50 per ounce in Q1 2021. The decrease was driven by higher silver equivalent production.
Fortuna | 7
Qualified Person
Eric Chapman, Vice President of Technical Services, is a Professional Geoscientist of the Association of Professional
Engineers and Geoscientists of the Province of British Columbia (Registration Number 36328), and is the Company’s
Qualified Person (as defined by National Instrument 43-101). Mr. Chapman has reviewed and approved the scientific and
technical information contained in this news release and has verified the underlying data.
Non-IFRS Financial Measures
The Company has disclosed certain financia l measures and ratios in this news release which are not defined under the
International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, and are
not disclosed in the Company's financial statements, including but not limited to: cash cost per ounce of gold sold; all -in
sustaining cash cost per ounce of gold sold; all -in cash cost per ounce of gold sold; total production cash cost per tonne;
cash cost per payable ounce of silver equivalent sold; all -in sustaining cash cost per payable ounce of silver equivalent
sold; all-in cash cost per payable ounce of silver equivalent sold; free cash flow from ongoing operations; adjusted net
income; adjusted EBITDA and working capital.
These non -IFRS financial measures an d non -IFRS ratios are widely reported in the mining industry as benchmarks for
performance and are used by management to monitor and evaluate the Company's operating performance and ability to
generate cash. The Company believes that, in addition to financial measures and ratios prepared in accordance with IFRS,
certain investors use these non-IFRS financial measures and ratios to evaluate the Company’s performance. However, the
measures do not have a standardized meaning under IFRS and may not be comparabl e to similar financial measures
disclosed by other companies. Accordingly, non-IFRS financial measures and non-IFRS ratios should not be considered in
isolation or as a substitute for measures and ratios of the Company’s performance prepared in accordance with IFRS. The
Company has calculated these measures consistently for all periods presented.
To facilitate a better understanding of these measures and ratios as calculated by the Company, descriptions are provided
below. In addition, see “Non -IFRS Financial Measures” in the Company’s management’s discussion and analysis for the
three months ended March 31, 2022 (“Q1 2022 MD&A”), which section is incorporated by reference in this news release,
for additional information regarding each non -IFRS financial measure and non-IFRS ratio disclosed in this news release,
including an explanation of their composition; an explanation of how such measures and ratios provide useful information
to an investor and the additional purposes, if any, for which management of For tuna uses such measures and ratio. The
Q1 2022 MD&A may be accessed on SEDAR at www.sedar.com under the Company’s profile, Fortuna Silver Mines Inc.
Except as otherwise described in the Q1 2022 MD&A, the Company has calculated these measures consistently f or all
periods presented.
Reconciliation to Adjusted Net Income for the Three Months Ended March 31, 2022 and 2021
Three months ended March 31,
Consolidated 2022 2021
Net income 27.0 26.4
Adjustments, net of tax:
Foreign exchange loss, Lindero Mine2 - 2.2
Write off of mineral properties 1.5 -
Unrealized loss (gain) on derivatives 2.3 -
Accretion on right of use assets 0.6 -
Other non-cash/non-recurring items 2.0 (1.1)
Adjusted Net Income 33.4 27.5
1 Amounts are recorded in Cost of sales
2 Amounts are recorded in General and Administration
Fortuna | 8
Reconciliation to Adjusted EBITDA for the Three Months Ended March 31, 2022 and 2021
Three months ended March 31,
2022 2021
Net income 27.0 26.4
Adjustments:
Community support provision and accruals - -
Inventory adjustment - (0.1)
Foreign exchange loss, Lindero Mine - 2.2
Foreign exchange loss, Séguéla Project 0.6 -
Net finance items 2.8 2.4
Depreciation, depletion, and amortization 38.1 19.2
Income taxes 6.8 13.3
Other non-cash/non-recurring items 5.0 (2.6)
Adjusted EBITDA 80.3 60.8
Reconciliation of Free Cash Flow from ongoing operations for Three Months Ended March 31, 2022 and 2020
Three months ended March 31,
Consolidated 2022 2021
(Restated)
Net cash provided by operating activities 33.2 21.1
Adjustments
Additions to mineral properties, plant and equipment (20.5) (9.3)
Other adjustments (3.1) -
Free cash flow from ongoing operations 9.6 11.8
Reconciliation of Cash Cost per Ounce of Gold Sold for the Three Months Ended March 31, 2022 and 2021
Lindero Mine Three months ended March 31,
(Expressed in $'000's, except unit costs) 2022 2021
Cost of sales 35,867 22,186
Changes in doré inventory 1,017 -
Inventory adjustment 739 -
Export duties (4,008) (2,800)
Depletion and depreciation (12,009) (6,245)
By product credits - (58)
Production cash cost1 21,607 13,083
Changes in doré inventory (1,017) -
Realized gain in diesel hedge (782) -
Cash cost applicable per gold ounce sold A 19,808 13,083
Ounces of gold sold B 28,607 21,289
Cash cost per ounce of gold sold1 ($/oz) =A/B 692 615
1 March 31, 2021 restated, Sustaining leases moved to All-In Sustaining
Yaramoko Mine Three months ended March 31,
(Expressed in $'000's, except unit costs) 2022 2021
Cost of sales 38,041 -
Changes in doré inventory (1,320) -
Export duties (3,333) -
Depletion and depreciation (14,028) -
By product credits (5) -
Production cash cost 19,355 -
Changes in doré inventory 1,320 -
Refining charges 155 -
Cash cost applicable per gold ounce sold A 20,830 -
Ounces of gold sold B 29,530 -
Cash cost per ounce of gold sold ($/oz) =A/B 705 -