Fortuna Reports Third Quarter 2021 Unaudited Financial Results
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Fortuna Reports Third Quarter 2021 Unaudited Financial Results
(All amounts expressed in US dollars, tabular amounts in millions, unless otherwise stated)
Vancouver, November 11, 2021: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) (“Fortuna” or the “Company”) today
reported third quarter 2021 net income of $ 0.2 million, adjusted net income 1 of $22.5 million, and adjusted EBITDA 1 of
$75.3 million.
Jorge A. Ganoza, President and CEO, commented, “Our strong adjusted EBITDA1 of $75.3 million with margins of 46% and
free cash flow from operations 1 of $33.8 million in the third quarter attest to the strength of our business. Our record
financial results reflect the sustained upward production trend at the Lindero mine in Argentina and the first quarterly
contribution of the Yaramoko mine in Burkina Faso.” Mr. Ganoza concluded, “We expect our robust cash flow generation
to continue to be our main source of funding as we ramp up construction activities at the Seguela project in Côte d´Ivoire.”
Third Quarter 2021 Highlights
• Record sales of $ 162.6 million, an increase of 95% from the $83.4 million reported in the same period in 2020
(“Q3 2020”), due primarily to gold sales from the Yaramoko mine of $49.0 million and from the Lindero mine of
$41.8 million.
• Net income of $0.2 million or $0.00 per share, compared to $13.1 million or $0.07 net income per share reported
in Q3 2020. Net income was lower due primarily to $10.5 million in transaction costs related to the acquisition of
Roxgold Inc. , and $9.6 million settlement of the disputed royalty claim with the Mexican Geological Service
(“SGM”).
• Adjusted net income1 of $22.5 million compared to $16.1 million reported in Q3 2020.
• Adjusted EBITDA1 of $75.3 million compared to $42.2 million reported in Q3 2020.
• Free cash flow from ongoing operations1 of $33.8 million compared to $30.1 million reported in Q3 2020.
• As of September 30, 2021, the Company had cash and cash equivalents of $135.8 million, an increase of $3.9
million from December 31, 2020.
• Silver and gold production of 1,711,881 ounces and 65,425 ounces, respectively.
• AISC1 per ounce of gold sold of $1,270 for the Lindero Mine and $1,188 for the Yaramoko Mine. AISC1,2 per silver
equivalent ounce of payable silver sold of $15.51 and $17.66 for the San Jose Mine and Cayl loma Mine,
respectively.
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
NEWS RELEASE
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Three months ended Sept 30 Nine months ended Sept 30
2021 2020 % Change 2021 2020 % Change
Sales 162.6 83.4 95% 400.9 175.5 128%
Mine operating income 47.3 42.1 12% 147.1 63.3 132%
Operating income 21.8 28.5 (24)% 98.0 29.0 238%
Net income 0.2 13.1 (98)% 42.8 2.9 1,376%
Earnings (loss) per share - basic (0.00) 0.07 (103)% 0.19 0.02 850%
Adjusted net income1 22.5 16.1 40% 71.5 8.9 704%
Adjusted EBITDA1 75.3 42.2 78% 191.1 67.8 182%
Net cash provided by operating activities 39.4 32.4 22% 90.1 36.9 144%
Free cash flow from ongoing operations1 33.8 30.1 12% 66.2 44.5 49%
Capex
Sustaining 25.6 14.8 73% 46.7 46.8 (0)%
Non-sustaining 0.7 - 0% 1.8 0.2 800%
Brownfields 4.7 1.0 370% 10.6 2.9 266%
As at Sep 30, 2021 Dec 31, 2020 % Change
Cash and cash equivalents 135.8 131.9 3%
1 Refer to Non-IFRS financial measures and Forward Looking Statements at the end of this news release
Figures may not add due to rounding
Third Quarter 2021 Results
Sales for the three months ended September 30, 2021 were $162.6 million, an increase of 95% from the $83.4 million
reported in Q3 2020. Lindero reported adjusted sales of $41.8 million from 23,559 ounces of gold sold. Yaramoko reported
adjusted sales of $49.0 million from 27,494 ounces of gold sold. San Jose reported adjusted sales of $43.7 million, a
decrease of 32% from the $64.7 million reported in Q 3 2020 due to decreases in the price of silver and a 24% and 21%
decrease in the volume of silver and gold ounces sold, respectively. Caylloma reported adjusted sales of $28.0 million, a
49% increase from the $18.8 million reported in Q3 2020 due primarily to a 36% increase in the volume of silver sold, and
increases in the volume and price of lead and zinc sold.
Operating income for the three months ended September 30, 2021 was $21.8 million, a decrease of $6.7 million compared
to Q3 2020. The decrease was due primarily to lower sales at the San Jose mine and the $9.6 million settlement of the
disputed royalty claim with the SGM plus value added tax paid to the SGM, offset partly by Lindero and Yaramoko’s
contribution to operating income of $10.3 million and $10.0 million respectively.
Net income for the three months ended September 30, 2021 was $0.2 million, a $12.9 million decrease from the $13.1
million net income reported in Q3 2020, primarily due to lower operating income and $10.5 million in transaction costs
related to the acquisition of Roxgold Inc. The effective tax rate for the quarter was 98%.
Adjusted EBITDA for the three months ended September 30, 2021 was $75.3 million, an increase of $33.1 million
compared to $42.2 million reported in Q 3 2020. The increase reflects Lindero and Yaramoko´s contribution to adjusted
EBITDA of $21.8 milion and $25.8 million, as well as higher EBITDA at Caylloma.
Free cash flow from ongoing operations for the three months ended September 30, 2021 was $33.8 million compared to
$30.1 million in Q3 2020.
Liquidity
As of September 30, 2021, the Company had cash and cash equivalents of $135.8 million, an increase of $3.9 million from
December 31, 2020.
On November 4, 2021, the Company entered into a fourth amended and restated credit agreement, effective as of
November 5, 2021, which converts the Company’s prior non-revolving and revolving facility into a revolving term credit
facility in the amount of $200.0 million, subject to the conditions set out below, with a term of four years and a step down
to $150.0 million after three years.
On closing of the amended credit facility, $120.0 million was available for drawdown and was drawn down in full. If a new
environmental impact authorization for the San Jose mine (“San Jose EIA”) (See news release dated October 25, 2021) has
not been approved or the existing San Jose EIA has not been extended by January 23, 2022, the availability of the amended
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credit facility will be reduced to $100.0 million. The total amended credit facility of up to $200.0 million will only become
available upon receipt of the new San Jose EIA approval or San Jose EIA extension.
On November 10, 2021, Minera Cuzcatlan received written notification from SEMARNAT that its application, made in May
2021, for a 10 year extension to its Environmental Impact Authorization for the San Jose Mine which expired on October
23, 2021 had been denied. SEMARNAT denied the application for the extension citing a pending evaluation by SEMARNAT
related to the regularization of ancillary infrastructure at the mine site. In addition, it cited non receipt of requested
information, which the Company has already provided to the authority. The Company is revie wing the reasons for the
denial with its advisors, but believes that it is fundamentally in compliance with all material aspects of the San Jose EIA
and is entitled to an extension.
The San Jose mine is currently operating under the protection of the Mexican courts which allows the continued operation
of the San Jose mine beyond the expiry date of the EIA. Minera Cuzcatlan has the right and intends to appeal the decision
of SEMARNAT and will continue to pursue all legal protection available to it in order to continue to operate pending the
appeal of the decision of SEMARNAT.
Under the terms of the amended credit facility, the Company must obtain by November 20, 2021 a permanent injunction
or equivalent protection, in form and substance acceptable to the lenders acting reasonably, which allows the Company
to continue to operate the mine.
Lindero Mine, Argentina
Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Mine Production
Tonnes placed on the leach pad 1,387,134 - 4,994,134 -
Gold
Grade (g/t) 1.10 - 0.94 -
Production (oz) 26,235 - 68,088 -
Metal sold (oz) 23,559 - 63,788 -
Realized price ($/oz) 1,772 - 1,775 -
Unit Costs
Cash cost ($/oz Au)1 646 - 635 -
All-in sustaining cash cost ($/oz Au)1 1,270 - 1,182 -
Capital expenditures ($000's)
Sustaining 10,639 - 21,294 -
Brownfields 86 - 528 -
1 Refer to Non-IFRS Financial Measures
During the third quarter of 2021, the onsite impact of COVID-19 diminished resulting in less disruptions to the operations,
with the company screening 74 positive cases compared to 160 cases registered in the second quarter of 2021. To date,
including company and contractor personnel, 94% of the workforce has been vaccinated with one dose and 40% with two
doses. The government of Argentina has announced that travel restrictions will start to ease in November, which should
improve lead times and onsite technical assistance from foreign vendors.
In the third quarter of 2021, a total of 1,387,134 tonnes of ore were placed on the leach pad averaging 1.10 g/t gold
containing an estimated 49,247 ounces of gold. Total gold production for the quarter was 26,235 ounces, comprised of
24,318 ounces in doré and an increase of 1,918 ounces of gold-in-carbon (GIC) inventory.
Cash cost per gold ounce sold was $646, as the mine continues to ramp-up production.
All-in sustaining cash costs per gold ounce sold was $1,270 during the quarter and $1,182 year to date, slightly above the
Company’s updated guidance for the full year, due primarily to timing of sustaining capital expenditures and ounces sold.
The Company expects the full year results to be in-line with the updated guidance.
Total capital expenditures of $ 10.7 million during the quarter were related primarily to the ADR plant expansion and
completion of phase 1B of the leach pad construction.
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Yaramoko Mine Complex, Burkina Faso
Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Mine Production
Tonnes milled 126,677 - 126,677 -
Gold
Grade (g/t) 7.28 - 7.28 -
Production (oz) 28,751 - 28,751 -
Metal sold (oz) 27,494 - 27,494 -
Realized price ($/oz) 1,783 - 1,783 -
Unit Costs
Cash cost ($/oz Au)1 720 - 720 -
All-in sustaining cash cost ($/oz Au)1 1,188 - 1,188 -
Capital expenditures ($000's)
Sustaining 7,398 - 7,398 -
Brownfields 560 - 560 -
1 Refer to Non-IFRS Financial Measures
The Yaramoko Mine produced 28,751 ounces of gold in the third quarter of 2021 with an average gold head grade of 7.28
g/t; slightly below the plan for the quarter.
Unplanned downtime due to the premature changeout of a SAG mill pinion bearing in August contributed to slightly lower
mill throughput of 126,677 tonnes in the quarter against a plan of 127,917 tonnes. This, in addition to some necessary re-
sequencing of production stopes at the 55 Zone, due to isolated ground conditions causing bridging which resulted in a
reprioritization of lower grade stopes, contributed to the minor production shortfall.
These issues have been remedied and are not expected to continue nor affect fourth quarter performance which is
expected to be in line with guidance.
Cash cost per gold ounce sold was $720, which was above plan, primarily due to lower production.
All-in sustaining cash cost per gold ounce sold was $1,188, slightly above the Company’s updated guidance, due primarily
to the lower production and timing of sustaining capital expenditures. The Company expects the full year results to be in-
line with the updated guidance.
Capital expenditures of $8.0 million during the quarter related primarily to underground mine development costs.
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San Jose Mine, Mexico
Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Mine Production
Tonnes milled 248,984 255,226 778,352 662,203
Average tonnes milled per day 2,862 2,934 2,980 2,518
Silver
Grade (g/t) 195 254 206 232
Recovery (%) 92 92 91 92
Production (oz) 1,436,658 1,917,540 4,707,496 4,516,790
Metal sold (oz) 1,440,946 1,884,940 4,704,656 4,503,736
Realized price ($/oz) 24.16 24.87 25.80 20.04
Gold
Grade (g/t) 1.22 1.52 1.29 1.42
Recovery (%) 91 92 91 91
Production (oz) 8,910 11,425 29,477 27,709
Metal sold (oz) 8,922 11,317 29,421 27,797
Realized price ($/oz) 1,784 1,921 1,798 1,752
Unit Costs
Production cash cost ($/t)2 77.52 67.60 74.22 68.51
Production cash cost ($/oz Ag Eq)1,2 9.99 7.15 9.28 7.21
Net smelter return ($/t) 192.00 255.64 212.00 196.93
All-in sustaining cash cost ($/oz Ag Eq)1,2 15.51 11.39 14.13 10.83
Capital expenditures ($000's)
Sustaining 4,006 3,774 9,978 6,518
Non-sustaining 745 – 1,776 –
Brownfields 2,849 1,017 6,739 2,517
1 Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period
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 1,436,658 ounces of silver and 8,910 ounces of gold during the three months ended
September 30, 2021, which represents a decrease of 25% and 22%, respectively, compared to Q3 2020. The decrease was
due primarily to lower grades.
The production cash cost per tonne for the three months ended September 30, 2021 was $77.52 an increase from the
$67.60 per tonne in Q3 2020 primarily due to lower tonnes milled.
The all-in sustaining cash cost of payable silver equivalent for the three months ended September 30, 2021 was $15.51
per ounce, an increase from the $11.39 per ounce in Q3 2020. The increase was due primarily to higher production cash
costs as noted above, increase in brownfields capital expenditures, higher royalties, and lower silver equivalent sales.
Capital expenditures totaled $ 7.6 million for the three months ended September 30, 2021, an increase from the $4.8
million in Q3 2020. The increase was due to the impact of COVID-19 in Q3 2020, whereby brownfields capital expenditures
at the operations were significantly reduced.
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Caylloma Mine, Peru
Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Mine Production
Tonnes milled 136,410 107,002 401,942 373,915
Average tonnes milled per day 1,516 1,189 1,517 1,530
Silver
Grade (g/t) 78 74 77 70
Recovery (%) 81 83 82 83
Production (oz) 275,223 210,206 810,962 704,190
Metal sold (oz) 295,532 217,281 830,495 704,843
Realized price ($/oz) 24.67 24.96 25.80 19.27
Lead
Grade (%) 3.14 3.15 3.15 2.94
Recovery (%) 87 90 88 87
Production (000's lbs) 8,245 6,702 24,571 21,201
Metal sold (000's lbs) 8,859 6,884 25,354 21,196
Realized price ($/lb) 1.06 0.86 0.98 0.82
Zinc
Grade (%) 4.74 4.93 4.67 4.58
Recovery (%) 87 89 87 88
Production (000's lbs) 12,436 10,313 36,169 33,110
Metal sold (000's lbs) 12,754 10,628 36,775 32,999
Realized price ($/lb) 1.36 1.07 1.31 0.98
Unit Costs
Production cash cost ($/t)2 86.04 76.80 85.17 74.72
Production cash cost ($/oz Ag Eq)1,2 12.75 14.40 13.25 13.67
Net smelter return ($/t) 196.00 162.82 193.90 119.79
All-in sustaining cash cost ($/oz Ag Eq)1,2 17.66 19.53 18.17 17.73
Capital expenditures ($000's)
Sustaining 3,575 1,213 8,024 4,042
Brownfields 1,201 65 2,810 415
1 Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period
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 275,223 ounces of silver, 8.2 million pounds of lead and 12.4 million pounds of zinc during
the three months ended September 30, 2021, an increase of 31%, 23%, and 21% respectively compared to Q3 2020. The
increased metal production was due to higher head grades for all metals and higher recoveries for silver and lead . Gold
production for the third quarter of 2021 totaled 1,529 ounces with an average head grade of 0.48 g/t, an increase of 12%
over Q3 2020.
The production cash cost per tonne for the three months ended September 30, 2021 was $86.04, an increase from the
$76.80 in Q3 2020. The increase was due primarily to higher mining costs on increased mine preparation activities and
higher planned maintenance costs in the processing plant.
The all-in sustaining cash cost of payable silver equivalent for the three months ended September 30, 2021 was $17.66
per ounce, a decrease from the $19.53 per ounce in Q3 2020. The decrease was due primarily to higher silver equivalent
sales, offset partly by the higher production cash cost per tonne as noted above.
Capital expenditures totaled $4.8 million for the three months ended September 30, 2021, an increase from the $1.3
million in Q3 2020. The increase was primarily due to the impact of COVID -19 during Q3 2020, whereby capital
expenditures were significantly reduced.
On October 16, 2021, the Company signed a community support with the Municipality of Caylloma, which includes a
voluntary payment of 2.2 million Peruvian soles per year over the four year term agreement, starting in the fourth quarter
of 2021. The resources will be used for the implementation of programs or project s for the sustainable development of
the Caylloma District.
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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 following tables represent the calculation of certain Non-IFRS financial measures as referenced in this news release.
In alignment with the World Gold Council standard for all -in sustaining cash cost and all -in cash cost , the Company has
presented the cash cost figures on a sold ounce basis for all periods presented and has excluded royalties that are under
the scope of IAS 12 – Income Taxes, with the change from the previously presented figures being applied retrospectively
to prior periods.
Reconciliation to Adjusted Net Income for the three and nine months ended September 30, 2021 and 2020
Three months ended Sept 30, Nine months ended Sept 30,
Consolidated 2021 2020 2021 2020
Net income 0.2 13.1 42.8 2.9
Adjustments, net of tax:
Community support provision and accruals1 - - 0.1 -
Foreign exchange loss, Lindero Mine2 1.2 2.7 3.8 8.6
Share of loss from associates - - - 0.1
Investment income - - - (3.3)
Roxgold transaction costs 10.5 - 14.1 -
SGM Royalty settlement 6.7 - 6.7 -
Other non-cash/non-recurring items 3.9 0.3 4.0 0.6
Adjusted Net Income (loss) 22.5 16.1 71.5 8.9
1 Amounts are recorded in Cost of sales
2 Amounts are recorded in General and Administration
Reconciliation to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020
Three months ended Sept 30, Nine months ended Sept 30,
Consolidated 2021 2020 2021 2020
Net income 0.2 13.1 42.8 2.9
Adjustments:
Community support provision and accruals - 0.1 (0.1) -
Inventory adjustment 1.8 - 1.7 -
Foreign exchange loss, Lindero Mine 1.2 2.7 3.8 8.7
Net finance items 4.0 0.4 8.5 1.1
Depreciation, depletion, and amortization 37.8 11.1 77.5 31.6
Income taxes 8.9 15.0 34.2 28.3
Share of loss from associates - - - 0.1
Investment income - - - (3.3)
SGM Royalty settlement 9.6 - 9.6 -
Roxgold transaction costs 10.5 - 14.1 -
Other non-cash/non-recurring items 1.3 (0.2) (1.0) (1.6)
Adjusted EBITDA 75.3 42.2 191.1 67.8
Reconciliation of Free Cash Flow from ongoing operations for three and nine months ended September 30, 2021 and 2020
Three months ended Sept 30, Nine months ended Sept 30,
Consolidated 2021 2020 2021 2020
(Restated) (Restated)
Net cash provided by operating activities 39.4 32.4 90.1 36.9
Adjustments
Roxgold transaction costs 24.9 - 27.9 -
Change in long term receivables and assets 0.1 (0.3) (0.0) (0.9)
Additions to mineral properties, plant and equipment (32.2) (5.6) (55.4) (13.8)
Impact of adoption in IAS 16 and Production costs - 13.1 - 25.2
Current income tax expense (9.0) (15.5) (35.2) (25.5)
Income taxes paid 12.6 6.0 43.6 22.6
Other adjustments (1.9) - (4.8) -
Free cash flow from ongoing operations 33.8 30.1 66.2 44.5
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Reconciliation of Cash Cost per Ounce of Gold Sold for the three and nine months ended September 30, 2021 and 2020
Lindero Mine Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Cost of sales 29,508 - 75,974 -
Changes in dore inventory 1,456 - 2,458 -
Inventory adjustment (1,743) - (1,743) -
Export duties (3,137) - (8,519) -
Depletion and depreciation (9,092) - (24,512) -
By product credits (55) - (183) -
Production cash cost 16,937 - 43,475 -
Changes in dore inventory (1,456) - (2,458) -
Realized gain in diesel hedge (272) - (525) -
Cash cost applicable per gold ounce sold A 15,209 - 40,492 -
Ounces of gold sold B 23,549 - 63,762 -
Cash cost per ounce of gold sold ($/oz) =A/B 646 - 635 -
Yaramoko Mine Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Cost of sales 38,431 - 38,431 -
Changes in dore inventory 823 - 823 -
Export duties (2,975) - (2,975) -
Depletion and depreciation (15,739) - (15,739) -
By product credits (61) - (61) -
Production cash cost 20,479 - 20,479 -
Changes in dore inventory (823) - (823) -
Refining charges 138 - 138 -
Cash cost applicable per gold ounce sold A 19,794 - 19,794 -
Ounces of gold sold B 27,475 - 27,475 -
Cash cost per ounce of gold sold ($/oz) =A/B 720 - 720 -
Reconciliation of All-in Sustaining Cash Cost per Ounce of Gold Sold for the three and nine months ended September 30, 2021 and
2020
Lindero Mine Three months ended Sept 30, Nine months ended Sept 30,
2021 2020 2021 2020
Cash cost applicable 15,209 - 40,492 -
Export duties and mining taxes 3,137 - 8,519 -
General and administrative expenses (operations) 1,387 - 4,003 -
Adjusted operating cash cost 19,733 - 53,014 -
Sustaining leases 740 - 1,796 -
Sustaining capital expenditures1 9,385 - 20,040 -
Brownfields exploration expenditures1 47 - 489 -
All-in sustaining cash cost 29,905 - 75,339 -
All-in cash cost 29,905 - 75,339 -
Ounces of gold sold 23,549 - 63,762 -
All-in sustaining cash cost per ounce of gold sold 1,270 - 1,182 -
All-in cash cost per ounce of gold sold 1,270 - 1,182 -
1 Presented on a cash basis