Fortuna reports results for the first quarter of 2023
Fortuna reports results for the first quarter of 2023
(All amounts are expressed in US dollars, tabular amounts in millions, unless otherwise stated)
Vancouver, May 15, 2023: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) (“Fortuna” or the “Company”) today reported
its financial and operating results for the first quarter of 2023.
First Quarter 2023 highlights
Financial
• Adjusted net income of $13.2 million or $0.05 per share
• Net income of $11.9 million or $0.04 per share
• Adjusted EBITDA1 of $65.3 million
• Net cash provided by operating activities $41.8 million and free cash flow from ongoing operations of $8.5 million
• Liquidity as of March 31, 2023 was $129.7 million
Return to Shareholders
• NCIB share repurchase program renewed for up to 5% of outstanding common shares ( refer to Fortuna news
release dated April 28, 2023)
Operational
• Gold production of 60,092 ounces
• Silver production of 1,586,378 ounces
• Gold equivalent production of 94,110 ounces
• Consolidated cash costs1 per ounce of gold equivalent sold of $916
• Consolidated AISC1 per ounce of gold equivalent sold of $1,514
• Lost Time Injury Frequency Rate (LTIFR) of 0.56 and Total Recordable Injury Frequency Rate (TRIFR) of 1.39
Growth and Development
• On May 8, 2023 Fortuna announced a definitive agreement to acquire Chesser Resources Ltd. by way of an all
share transaction for a total consideration of A$89.0 million (CAD$80.6). Upon completion, the former
shareholders of Chesser will own approximately 5.1% of the shares of Fortuna on an undiluted basis . Chesser
Resources’ Diamba Sud Project in Senegal expands Fortuna’s advanced exploration pipeline in West Africa.
• First gold pour at the Séguéla mine in Cote d’Ivoire is planned for May 2023
Jorge A. Ganoza, President and CEO, commented, “Production and total cost per ounce for the first quarter were overall
on plan, resulting in net earnings per share of $0.04 and free cash flow from operations of $8.5 million. Commissioning
activities at Séguéla are well advanced and tracking according to plan for first gold pour in May, giving us a higher level of
confidence in a smooth ramp -up process towards design capacity.” Mr . Ganoza continued , “The announced Chesser
transaction meets our strategic objective of expanding our asset portfolio of high value opportunities in countries where
we operate or near neighbours. ” Mr. Ganoza concluded, “The Chesser acquisition provides for an exciting advanced
exploration opportunity, expanding our West African presence to Senegal, a mining friendly jurisdiction, and into the heart
of the Senegal-Mali shear zone, one of the most prolific gold belts in the West African region.”
NEWS RELEASE
Fortuna | 2
First Quarter 2023 Consolidated Results
Three months ended March 31,
(Expressed in millions) 2023 2022 % Change
Sales 175.7 182.3 (4%)
Mine operating income 40.4 63.5 (36%)
Operating (loss) income 23.9 40.7 (41%)
Net (loss) income 11.9 27.0 (56%)
(Loss) earnings per share - basic 0.04 0.09 (56%)
Adjusted net income1 13.2 33.3 (60%)
Adjusted EBITDA1 65.3 80.3 (19%)
Net cash provided by operating activities 41.8 33.2 26%
Free cash flow from ongoing operations1 8.5 9.6 (11%)
Production cash cost ($/oz Au Eq) 916 772 19%
All-in sustaining cash cost ($/oz Au Eq) 1,514 1,284 18%
Capital expenditures2
Sustaining 27.9 18.0 55%
Non-sustaining3 1.2 1.9 (37%)
Séguéla construction 25.7 42.9 (40%)
Brownfields 4.9 2.5 96%
As at March 31, 2023 December 31, 2022 % Change
Cash and cash equivalents 84.7 80.5 5%
Net liquidity position 129.7 150.5 (14%)
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 filed 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 2023 Results
Net income for the quarter was $11.9 million compared to $27.0 million in Q1 2022. After adjusting for non-cash and non-
recurring items, adjusted net income of $13.2 million for Q1 2023 was $20.1 million lower than Q1 2022. The decrease in
adjusted net income was primarily due to higher operating expenses related ma inly to higher input costs across our
operations and lower operating margins at Yaramoko and Lindero related to lower head grades. This impact was combined
with slightly lower sales of $6.7 million, mostly explained by lower silver prices of $22.52 per ounce in Q1 2023 compared
to $24.18 per ounce in Q1 2022. These effects were partially offset by lower general and administrative expenses of $2.0
million compared to Q1 2022.
Adjusted EBITDA for the quarter was $65.3 million, a 36% margin over sales, compared to $80.3 million reported in Q1
2022, representing a 44% margin over sales. The main driver for the decrease in EBITDA were higher operating costs and
slightly lower sales as described above.
Net cash generated by operations for the quarter was $41.8 million or $0.14 per share compared to $33.2 million or $0.11
per share in Q1 2022. The increase reflects lower EBITDA of $15.0 million offset by negative changes in working capital in
the current quarter of $10.8 million versus negative changes of $27.9 million in Q1 2022, and lower-income taxes paid of
$7.1 million.
Free cash flow from ongoing operations for the quarter was $8.5 million, compared to $9.6 million in Q1 2022. The
decrease is the result of higher net cash generated by operations of $8.6 million compared to the Q1 2022, offset by higher
sustaining capex and brownfields exploration at our operating mines of $12.3 million in Q1 2023.
Fortuna | 3
Liquidity
The Company’s total liquidity available as of March 31, 2023 was $129.7 million, comprised of $84.7 million in cash and
cash equivalents, and $45.0 million undrawn on the $250.0 million revolving credit facility.
Séguéla Gold Project Construction Update
As of March 31, 2023, the Séguéla Gold Project had approximately $22.5 million in remaining spend of the project’s $173.5
million total initial capital , and the project remains on -time and on -budget. The Company’s cash and cash equivalents
balance, free cash flow from ongoing operations and undrawn amounts of the revolving credit facility are expected to
fund the remaining construction spend of the Séguéla Gold Project.
Lindero Mine, Argentina
Three months ended March 31,
2023 2022
Mine Production
Tonnes placed on the leach pad 1,478,148 1,295,755
Gold
Grade (g/t) 0.71 0.88
Production (oz) 25,258 30,068
Metal sold (oz) 26,812 28,619
Realized price ($/oz) 1,885 1,890
Unit Costs
Cash cost ($/oz Au)1 891 692
All-in sustaining cash cost ($/oz Au)1 1,424 1,038
Capital Expenditures ($000's) 2
Sustaining 7,745 3,125
Non-sustaining 187 169
Brownfields – 144
1 Cash cost and AISC are non-IFRS financial measures; 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 filed on SEDAR at www.sedar.com for a description of the calculation of these measures.
2 Capital expenditures are presented on a cash basis.
Quarterly Operating and Financial Highlights
In the first quarter of 2023, a total of 1,478,148 tonnes of ore were placed on the heap leach pad, with an average gold
grade of 0.71 g/t, containing and estimated 33,510 ounces of gold. Gold production for Q1 2023 totaled 25,258 ounces,
representing a 16% decrease year-over-year. The decline in gold production can primarily be attributed to a decrease in
the head grade of mineralized material placed on the leach pad, which is aligned with the planned mining sequence. Mine
production was 1.6 million tonnes of mineralized material, with a strip ratio of 1.07:1. This stripping ratio is consistent
with the operation's plan for the year, which anticipates a ratio of 1.17:1.
Cash cost per ounce of gold for Q1 2023, was $891 compared to $692 in the Q1 2022. Cash cost per ounce of gold was
higher due to lower production, higher prices of key consumables due to inflation, higher equipment rental costs due to
lower fleet availability, and timing of plant maintenance. This was partially offset by higher stripping capitalization.
All-in sustaining cash cost per gold ounce sold was $1,424 during Q1 2023 compared with $1,038 in Q1 2022. All -in
sustaining cash cost for Q1 2023 was impacted by the cost issues described above, compounded by lower ounces sold and
higher sustaining capital spend, partially offset by a positive by-product effect from copper.
Fortuna | 4
During the quarter, sustaining capital expenditures were primarily a result of Phase II expansion of the leach pad, routine
maintenance, and several minor proj ects. There were no brownfields exploration capital investments made within this
period.
Yaramoko Mine Complex, Burkina Faso
Three months ended March 31,
2023 2022
Mine Production
Tonnes milled 139,650 127,968
Gold
Grade (g/t) 5.94 7.50
Recovery (%) 97 98
Production (oz) 26,437 28,235
Metal sold (oz) 29,530 29,530
Realized price ($/oz) 1,899 1,878
Unit Costs
Cash cost ($/oz Au)1 819 705
All-in sustaining cash cost ($/oz Au)1 1,509 1,147
Capital Expenditures ($000's) 2
Sustaining 13,549 7,361
Brownfields 1,191 488
1 Cash cost and AISC are non-IFRS financial measures; 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 filed on SEDAR at www.sedar.com for a description of the calculation of these measures.
2 Capital expenditures are presented on a cash basis.
The Yaramoko Mine produced 26,437 ounces of gold in the Q1 2023 with an average gold head grade of 5.94g/t, a 6%
decrease, respectively, when compared to Q1 2022. Higher mill throughput contributed positively to the operation, offset
by reduced operating time due to planned maintenance and lower head grades. Production for the quarter was in line
with the mining sequence and Mineral Reserves estimate.
Underground mineralized material was sourced from the 55 Zone, with development also con tributing from outside of
the current resource boundary on the western side of the deposit.
Cash cost per ounce of gold sold in Q1 2023, was $819, compared to $705 in Q1 2022. Cash cost per ounce increased due
to higher processing costs resulting from increased maintenance costs and the impact of inflation on key consumables
and mining costs. Processing costs were also higher as a result of processing of increased tonnes at lower grades.
All-in sustaining cash cost per gold ounce sold was $1,509 for Q1 2023, compared to $1,147 in Q1 2022. This increase was
as a result of a decrease in production, increased cash cost, and higher capital expenditures.
Sustaining capital in Q1 2023 increased due to higher mine development. Brownfields expenditure was primarily higher
due to an increase in diamond drilling meters.
Fortuna | 5
San Jose Mine, Mexico
Three months ended March 31,
2023 2022
Mine Production
Tonnes milled 246,736 250,947
Average tonnes milled per day 2,869 2,918
Silver
Grade (g/t) 181 185
Recovery (%) 91 91
Production (oz) 1,303,312 1,358,189
Metal sold (oz) 1,328,333 1,316,193
Realized price ($/oz) 22.58 24.27
Gold
Grade (g/t) 1.15 1.13
Recovery (%) 90 90
Production (oz) 8,231 8,239
Metal sold (oz) 8,355 7,952
Realized price ($/oz) 1,900 1,890
Unit Costs
Production cash cost ($/t)2 86.66 76.05
Production cash cost ($/oz Ag Eq)1,2 11.42 10.42
All-in sustaining cash cost ($/oz Ag Eq)1,2 15.51 15.32
Capital Expenditures ($000's) 3
Sustaining 3,772 3,575
Non-sustaining 269 415
Brownfields 1,088 1,529
1 Production cash cost per ounce of silver equivalent and all-in sustaining cash cost per ounce of silver equivalent are calculated using realized metal prices for each
period respectively.
2 Production cash cost per tonne, production cash cost per ounce of silver equivalent, and all-in sustaining cash cost per ounce of silver equivalent are non-IFRS financial
measures, 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 filed on
SEDAR at www.sedar.com for a description of the calculation of these measures.
3 Capital expenditures are presented on a cash basis.
In the first quarter of 2023, the San Jose Mine produced 1,303,312 ounces of silver and 8,231 ounces of gold, 4% and
unchanged, respectively, when compared to Q1 2022. Production for the quarter was aligned with the mining sequence
and Mineral Reserves estimate.
The cash cost per tonne for Q1 2023, was $86.66 compared to $76.05 in Q1 2022. The increase was primarily due to
inflation and the appreciation of the Me xican Peso, affecting consumables, labor costs and other services paid in local
currency.
All-in sustaining cash costs of payable per ounce of silver equivalent for Q1 2023, increased 2% to $15.58 per ounce,
compared to $15.32 in Q1 2022. The increase wa s due to higher cash cost s partially offset by lower sustaining capital
expenditures and increased silver equivalent production, mainly due to lower silver prices.
In the first quarter of 2023, sustaining capital expenditures were lower than expected, primarily due to delays in executing
purchases related to components and overhauls. This contrasts with Q1 2022, when significant planned mine acquisitions
had been carried over from the previous quarter. The decrease in Q1 2023 was partially offset by a n increase in
expenditures related to development and infill drilling meters. Brownfields exploration expenditures faced challenges
from geological and operational delays, but accelerated spending is anticipated in Q2 2023.
Fortuna | 6
Caylloma Mine, Peru
Three months ended March 31,
2023 2022
Mine Production
Tonnes milled 125,995 132,574
Average tonnes milled per day 1,448 1,524
Silver
Grade (g/t) 85 89
Recovery (%) 82 82
Production (oz) 283,066 311,939
Metal sold (oz) 263,570 294,301
Realized price ($/oz) 22.24 23.78
Gold
Grade (g/t) 0.15 0.16
Recovery (%) 27 37
Production (oz) 166 258
Metal sold (oz) 22 325
Realized price ($/oz) 1,895 1,828
Lead
Grade (%) 3.74 3.55
Recovery (%) 92 88
Production (000's lbs) 9,509 9,134
Metal sold (000's lbs) 8,782 8,575
Realized price ($/lb) 1.02 1.06
Zinc
Grade (%) 5.21 4.18
Recovery (%) 90 89
Production (000's lbs) 13,051 10,827
Metal sold (000's lbs) 13,815 10,546
Realized price ($/lb) 1.45 1.69
Unit Costs
Production cash cost ($/t)2 98.07 89.60
Production cash cost ($/oz Ag Eq)1,2 13.14 12.39
All-in sustaining cash cost ($/oz Ag Eq)1,2 16.88 17.83
Capital Expenditures ($000's) 3
Sustaining 2,810 3,949
Brownfields 204 324
1 Production cash cost per ounce of silver equivalent and all-in sustaining cash cost per ounce of silver equivalent are calculated using realized metal prices for each
period respectively.
2 Production cash cost per tonne, production cash cost per ounce of silver equivalent, and all-in sustaining cash cost per ounce of silver equivalent are non-IFRS financial
measures, 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 filed on
SEDAR at www.sedar.com for a description of the calculation of these measures.
3 Capital expenditures are presented on a cash basis.
In the first quarter of 2023, t he Caylloma Mine produced 283,066 ounces of silver, 9.5 million pounds of lead, and 13.1
million pounds of zinc. Silver production was 9% lower compared to Q1 2022, but was in line with the mining sequence
and Mineral Reserves estimate. Lead and zinc production rose by 4% and 21% respectively, compared to Q1 2022, due to
higher head grades from levels 16 and 17 within the Animas vein, and higher tonnes. Gold production totaled 166 ounces
with an average head grade of 0.15 g/t.
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The cash cost per tonne of processed ore in Q1 2023 increased 9% to $98.07 compared to $89.60 in Q1 2022. The increase
was mainly due to higher mining costs driven by inflation and its direct impact on the price of materials, compounded by
lower tonnes processed.
The all -in sustaining cash cost per payable silver equivalent ounce in Q1 2023, decreased 3% to $17.29 per ounce,
compared to $17.83 per ounce in Q1 2022. The decrease was mainly increased silver equivalent production, mainly due
to lower silver prices.
Sustaining capital expenditures in Q1 2023 decreased primarily due to blockades limiting project executions. Spending on
execution of the developments located on levels 15 and level 18 at the Animas vein was offset by decreased expenditure
on other levels. The decrease in brownfields exploration capital expenditures was primarily due to a decrease in diamond
drilling meters.
Qualified Person
Eric Chapman, Senior 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 financial 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 cos t 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 and 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 comparable 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, 2023 (“Q1 2023 MDA”), 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 the Company uses such measures and ratio.
The Q1 2023 MD&A may be accessed on SEDAR at www.sedar.com under the Company’s profile.
Except as otherwise described in the Q1 2023 MD&A, the Company has calculated these measures consistently for all
periods presented.
Fortuna | 8
Reconciliation to adjusted net income for the three months ended March 31, 2023 and 2022
Three months ended March 31,
Consolidated (in millions of US dollars) 2023 2022
Net income 11.9 27.0
Adjustments, net of tax:
Foreign exchange loss, Séguéla Project - 0.6
Unrealized loss on derivatives 1.0 -
Accretion on right of use assets 0.6 0.6
Other non-cash/non-recurring items (0.3) 1.3
Adjusted Net Income 13.2 29.5
1 Amounts are recorded in Cost of sales
2 Amounts are recorded in General and Administration
Figures may not add due to rounding
Reconciliation to adjusted EBITDA for the three months ended March 31, 2023 and 2022
Three months ended March 31,
Consolidated (in millions of US dollars) 2023 2022
Net (loss) income 11.9 27.0
Adjustments:
Community support provision and accruals (0.1) -
Foreign exchange loss, Séguéla Project - 0.6
Net finance items 2.6 2.8
Depreciation, depletion, and amortization 44.4 38.1
Income taxes 7.9 6.8
Other non-cash/non-recurring items (1.4) 5.0
Adjusted EBITDA 65.3 80.3
Figures may not add due to rounding
Reconciliation of free cash flow from ongoing operations for the three months ended March 31, 2023 and 2022
In 2022, the Company changed the method for calculating free cash flow from ongoing operations. The calculation now
uses taxes paid as opposed to the previous method which used current income taxes. While this may create larger quarter
over quarter fluctuations due to the timing of income tax payments, management believes the revised method is a better
representation of the free cash flow generated by the Company’s ongoing operations. Comparative values from 2021 have
been restated using the change in the methodology.
Three months ended March 31,
Consolidated (in millions of US dollars) 2023 2022
(Restated)
Net cash provided by operating activities 41.8 33.2
Adjustments
Additions to mineral properties, plant and equipment (30.4) (20.5)
Other adjustments (2.9) (3.1)
Free cash flow from ongoing operations 8.5 9.6
Figures may not add due to rounding