The Prospector News

Fortuna Reports First Quarter 2021 Financial Results

You have opened a direct link to the current edition PDF

Open PDF Close
Uncategorized

Share this news article

Fortuna Reports First Quarter 2021 Financial Results

 

 

 

 

 

Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) reported record first quarter 2021 net income of $26.4 million, adjusted net income1 of $27.5 million, and adjusted EBITDA1 of $60.8 million.

Jorge A. Ganoza, President and CEO, commented, “Our record financial performance in the first quarter reflects the combination of strong operating performance at San Jose and Caylloma, Lindero’s first full quarter of contribution to sales, and favourable metal prices.” Mr. Ganoza added, “As Lindero continues to ramp up we are pleased with the progress made in Q1 considering the challenges we continue to face in the context of COVID-19 related restrictions.  We remain on track to meet our consolidated guidance of 178,000 to 202,000 ounces of gold and 6.8 million to 7.6 million ounces of silver.”

 

First Quarter 2021 Highlights

 

  • Record sales of $117.8 million, an increase of 148% from the $47.5 million reported in the same period in 2020, due to higher realized prices and sales volumes for all metals at all mines, notably sales from the Lindero Mine of $36.9 million
  • Record net income of $26.4 million or $0.14 per share, an increase of $30.9 million and $0.17 per share, from the $4.5 million net loss or $0.03 loss per share reported in Q1 2020
  • Record adjusted net income1 of $27.5 million compared to $2.2 million net loss in Q1 2020
  • Record adjusted EBITDA1 of $60.8 million compared to $15.9 million reported in Q1 2020
  • Free cash flow from ongoing operations1 of $17.4 million compared to $14.2 million reported in Q1 2020, the current quarter was impacted by a $16.2 million increase in trade receivables due to timing of collections
  • As of March 31, 2021, the Company had cash and cash equivalents of $145.7 million, an increase of $13.8 million from December 31, 2020
  • Silver and gold production of 1,913,755 ounces and 34,355 ounces, respectively
  • AISC1,2 per silver equivalent ounce of payable silver sold of $13.52 and $18.50 for the San Jose Mine and Caylloma Mine, respectively, and AISC1 per ounce of gold sold of $1,055 for the Lindero Mine
  • Announced a business combination transaction with Roxgold Inc. on April 26, 2021: creates a low-cost intermediate global precious metals producer with extensive brownfields and greenfields organic growth potential and led by highly experienced management

 

__________________________

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.

 

 

 

Three months ended March 31     2021   2020     % Change
Sales      117.8   47.5     148 %
Mine operating income      51.3   7.5     584 %
Operating income      40.4   1.8     2,144 %
Net income (loss)      26.4   (4.5 )   687 %
Earnings (loss) per share – basic      0.14   (0.03 )   567 %
Adjusted net income1      27.5   (2.2 )   1,350 %
Adjusted EBITDA1      60.8   15.9     282 %
Net cash provided by operating activities      21.1   3.7     470 %
Free cash flow from ongoing operations1      17.4   14.2     23 %
Capex              
Sustaining      7.9   3.5     126 %
Non-sustaining      0.3   0.1     200 %
Lindero      2.6   21.4     (88 )%
Brownfields      2.5   1.6     56 %
As at     Mar 31, 2021   Dec 31, 2020     % Change
Cash and cash equivalents     145.7   131.9     10 %
1 Refer to Non-IFRS financial measures and Forward Looking Statements at the end of this news release.  
   
   

 

First Quarter 2021 Results

 

Sales for the three months ended March 31, 2021 were $117.8 million, an increase of 148% from the $47.5 million reported in Q1 2020. Silver and gold prices increased 61% and 12%, respectively. The Lindero Mine recognized sales of $36.9 million from 21,297 ounces of gold ounces sold. San Jose sales were $58.0 million, an increase of 50% from the $38.7 million reported in Q1 2020 due to increases in the prices of silver and gold and a 3% and 5% increase in the volume of silver and gold ounces sold, respectively.  Sales from the Caylloma Mine were $25.4 million, a 92% increase from the $13.2 million reported in Q1 2020 due to higher metal prices and a 22%, 17%, and 21% increase in the volume of silver, zinc, and lead sold, respectively.

 

Operating income for the three months ended March 31, 2021 was $40.4 million, an increase of $38.6 million compared to Q1 2020.  The increase was due primarily to higher silver and gold prices, and Lindero’s contribution to mine operating income of $11.7 million.

 

Net income for the three months ended March 31, 2021 was $26.4 million, a $30.9 million increase over the $4.5 million net loss reported in Q1 2020.  The effective tax rate for the quarter was 34%.

 

Adjusted EBITDA for the three months ended March 31, 2021 was $60.8 million, an increase of $44.9 million compared to $15.9 million reported in Q1 2020. The increase reflects Lindero’s contribution to adjusted EBITDA of $19.6 million as well as higher EBITDA at San Jose and Caylloma.

 

Free cash flow from ongoing operations for the three months ended March 31, 2021 was $17.4 million compared to $14.2 million in Q1 2020. Free cash flow was impacted by a $16.2 million increase in trade receivables during the quarter, due primarily to timing of collections on provisional sales.

 

As of March 31, 2021, the Company had cash and cash equivalents of $145.7 million, an increase of $13.8 million from December 31, 2020. The Company’s $120.0 million credit facility remains fully drawn as of March 31, 2021 and is set to expire on January 26, 2022. The Company expects to conclude renewal of the facility in the second quarter of 2021.

 

 

Lindero Mine

Three months ended March 31        2021   2020
Mine Production          
Tonnes placed on the leach pad      2,130,000  
           
Gold          
Grade (g/t)      0.82  
Production (oz)      22,332  
Metal sold (oz)      21,297  
Realized price ($/oz)      1,754  
           
Unit Costs          
Cash cost ($/oz Au)1      639  
All-in sustaining cash cost ($/oz Au)1      1,055  
           
Capital expenditures ($000’s)          
Sustaining      4,040  
Brownfields     91  
  Refer to Non-IFRS Financial Measures.
 

 

In the first quarter of 2021, a total of 2.13 million tonnes of ore were placed on the heap leach pad averaging 0.82 g/t gold, containing an estimated 56,330 ounces of gold. The operation placed 65% more ounces on the heap leach pad and produced 53% more ounces in doré compared to the fourth quarter of 2020. Total gold production was 22,332 ounces comprised of 20,562 ounces in doré and 1,770 ounces of gold-in-carbon inventory.

 

Cash cost per gold ounce sold was $639, as the mine continues to ramp up production.

 

All-in sustaining cash cost per gold ounce sold was $1,055, below the Company’s guidance for the first half of the year of between $1,130 and $1,335 per gold ounce sold, due primarily to the timing of sustaining capital expenditures.

 

In the first quarter of 2021, sustaining capital expenditures included $2.1 million of leach pad expansion and $1.7 million of capitalized stripping. Capital investments for the year are estimated at $20.5 million of sustaining capital expenditures (refer Fortuna new release dated January 19, 2021), and $6.1 million of capitalized stripping.

 

 

San Jose Mine

 

Three months ended March 31        2021        2020
Mine Production            
Tonnes milled      259,803     246,826
Average tonnes milled per day      3,048     2,837
             
Silver            
Grade (g/t)      217     216
Recovery (%)      91     92
Production (oz)      1,646,444     1,570,201
Metal sold (oz)      1,642,300     1,593,554
Realized price ($/oz)      26.17     16.09
             
Gold            
Grade (g/t)      1.36     1.33
Recovery (%)      91     91
Production (oz)      10,301     9,630
Metal sold (oz)      10,287     9,777
Realized price ($/oz)      1,783     1,571
             
Unit Costs            
Production cash cost ($/t)2      70.13     71.12
Production cash cost ($/oz Ag Eq)1,2      8.40     7.48
Net smelter return ($/t)      223.69     154.31
All-in sustaining cash cost ($/oz Ag Eq)1,2      13.40     10.67
             
Capital expenditures ($000’s)            
Sustaining     1,987     1,573
Non-sustaining     274     127
Brownfields     1,736     1,306
1 Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period.
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 1,646,444 ounces of silver and 10,301 ounces of gold during the three months ended March 31, 2021, which represents an increase of 5% and 7%, respectively, compared to Q1 2020.  The increase was due primarily to 5% higher tonnes milled.

 

The production cash cost per tonne for the three months ended March 31, 2021 was $70.13 per tonne, consistent with the $71.12 per tonne in Q1 2020.

 

The all-in sustaining cash cost of payable silver equivalent for the three months ended March 31, 2021 was $13.40 per ounce, an increase of 26% compared to the $10.67 per ounce in Q1 2020. The increase was due primarily to higher royalties from higher income, and lower silver equivalent ounces sold due to a change in the silver to gold ratio (Q1 2021: 68.1:1, Q1 2020: 97.7:1); underlying sales volumes of silver and gold ounces were higher than Q1 2020.

 

Capital expenditures totalled $4.0 million for the three months ended March 31, 2021, an increase of 33% compared to Q1 2020.

 

 

Caylloma Mine

 

Three months ended March 31        2021        2020
Mine Production            
Tonnes milled      131,887     132,741
Average tonnes milled per day      1,499     1,491
             
Silver            
Grade (g/t)      77     70
Recovery (%)      81     84
Production (oz)      267,311     249,111
Metal sold (oz)      259,311     212,478
Realized price ($/oz)      26.29     17.59
             
Lead            
Grade (%)      3.21     2.96
Recovery (%)      88     89
Production (000’s lbs)      8,181     7,723
Metal sold (000’s lbs)      7,998     6,616
Realized price ($/lb)      0.92     0.85
             
Zinc            
Grade (%)      4.70     4.58
Recovery (%)      88     88
Production (000’s lbs)      11,969     11,821
Metal sold (000’s lbs)      12,267     10,512
Realized price ($/lb)      1.25     0.98
             
Unit Costs            
Production cash cost ($/t)2      88.00     80.83
Production cash cost ($/oz Ag Eq)1,2      13.69     13.84
Net smelter return ($/t)      194.39     114.97
All-in sustaining cash cost ($/oz Ag Eq)1,2      18.50     16.71
             
Capital expenditures ($000’s)            
Sustaining     1,972     1,874
Brownfields     630     263
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 267,311 ounces of silver, 8.2 million pounds of lead and 12.0 million pounds of zinc during the three months ended March 31, 2021, an increase of 7%, 6%, and 1% compared to Q1 2020.  The increased metal production was due to higher head grades.  Gold production totaled 1,922 ounces with an average head grade of 0.62 g/t.

 

The cash cost per tonne of processed ore for the three months ended March 31, 2021 was $88.00, an increase of 9% compared to Q1 2020. The increase was due primarily to operational costs associated with COVID-19 quarantine and testing requirements, offset partly by lower mine preparation costs.

 

The all-in sustaining cash cost of payable silver equivalent for the three months ended March 31, 2021 was $18.50 per ounce, an increase of 11% compared to Q1 2020 The increase was due primarily to higher royalties from higher income, and lower silver equivalent ounces sold due to a change in the silver equivalent ratio, Q1 2021 is calculated using a silver to gold ratio of 67.5:1 (Q1 2020: 90.5:1), silver to lead ratio of 1:28.6 pounds (Q1 2020:  1:20.7), and silver to zinc ratio of 1:21.1 pounds (Q1 2020:  1:17.9); underlying sales volumes of all metals were higher than Q1 2020.

 

Corporate Update

 

On April 26, 2021, the Company announced that it had entered into an arrangement agreement with Roxgold Inc. pursuant to which the Company has agreed to acquire all of the issued and outstanding securities of Roxgold (refer Fortuna news release dated April 26, 2021). The transaction is expected to create a low-cost intermediate global precious metals producer with extensive brownfields and greenfields organic growth potential.

 

Under the terms of the transaction, Roxgold shareholders will receive 0.283 common shares of Fortuna and C$0.001 for each Roxgold common share held. Upon completion of the transaction, existing Fortuna and Roxgold shareholders will own approximately 64.3% and 35.7% of the combined company, respectively. As at April 23, 2021, the implied fully diluted in-the-money equity value of the transaction was estimated at approximately C$1.1 billion.

 

The board of directors of both companies have unanimously approved the transaction. The Company has scheduled an annual and special meeting of its shareholders to approve annual business matters and the proposed business combination transaction with Roxgold on Monday, June 28, 2021. The record date for the annual and special meeting is Tuesday, May 11, 2021.  An information circular in connection with the shareholder meeting will be mailed to shareholders at the beginning of June. Closing of the transaction is expected by late June or early July 2021, and is subject to: approval by the shareholders of both companies, court approval, regulatory approvals and other customary closing conditions.

 

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 (WGC”) 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, with the change from the previously presented figures on a produced ounce basis being applied retrospectively to prior periods.

 

 

Reconciliation to Adjusted Net Income for the three months ended March 31, 2021 and 2020

 

Three months ended March 31   2021     2020  
Net income (loss)      26.4     (4.5 )
Adjustments, net of tax:          
Foreign exchange loss, Lindero Mine      2.2     3.3  
Investment income      –     (1.1 )
Other non-cash items      (1.1 )   0.1  
Adjusted net income (loss)      27.5     (2.2 )
               

 

 

Reconciliation to Adjusted EBITDA for the three months ended March 31, 2021 and 2020

 

Three months ended March 31   2021     2020  
Net income (loss)      26.4     (4.5 )
Adjustments:          
Inventory adjustment      (0.1 )   (0.1 )
Foreign exchange loss, Lindero Mine      2.2     3.3  
Net finance items      2.4     0.4  
Depreciation, depletion, and amortization      19.2     11.5  
Income taxes      13.3     7.1  
Investment income      –     (1.1 )
Other non-cash items      (2.6 )   (0.7 )
Adjusted EBITDA      60.8     15.9  

 

 

Reconciliation to free cash flow from ongoing operations for three months ended March 31, 2021 and 2020

 

Three months ended March 31 2021     2020  
        (Restated )
Net cash provided by operating activities    21.1     3.7  
Change in long-term receivables    –     (0.2 )
Additions to sustaining capital    (9.3 )   (4.9 )
Impact of adoption in IAS 16       9.5  
Current income tax expense    (14.0 )   (5.9 )
Income taxes paid    19.6     12.0  
Free cash flow from ongoing operations    17.4     14.2  

 

 

Reconciliation of All-in Sustaining Cash Cost and All-in Cash Cost per Payable Ounce of Silver Equivalent Sold for three months ended March 31, 2021 and 2020

 

CAYLLOMA MINE      
Three months ended March 31     2021     2020  
Cash cost applicable      15,099     16,166  
Royalties and mining taxes      688     300  
Workers’ participation      736     25  
General and administrative expenses (operations)      1,278     1,042  
Adjusted operating cash cost      17,801     17,533  
Sustaining capital expenditures3      1,972     1,874  
Brownfields exploration expenditures3      630     263  
All-in sustaining cash cost      20,403     19,670  
All-in cash cost      20,403     19,670  
Payable ounces of silver equivalent sold1      1,103,000     1,176,927  
All-in sustaining cash cost per ounce of payable silver equivalent sold2      18.50     16.71  
All-in cash cost per ounce of payable silver equivalent sold2      18.50     16.71  
1  Silver equivalent sold for Q1 2021 is calculated using a silver to gold ratio of 67.5:1 (Q1 2020: 90.5:1), silver to lead ratio of 1:28.6 pounds (Q1 2020:  1:20.7), and silver to zinc ratio of 1:21.1 pounds (Q1 2020:  1:17.9).
2  Silver equivalent is calculated using the realized prices for gold, silver, lead, and zinc.  Refer to Financial Results – Sales and Realized Prices.
 Presented on a cash basis.

 

 

 

SAN JOSE MINE

     
Three months ended March 31     2021     2020  
Cash cost applicable      18,871     18,127  
Royalties and mining taxes      3,683     1,599  
Workers’ participation      2,136     1,607  
General and administrative expenses (operations)      1,675     1,421  
Adjusted operating cash cost      26,365     22,754  
Sustaining capital expenditures3      1,987     1,573  
Brownfields exploration expenditures3      1,736     1,306  
All-in sustaining cash cost      30,088     25,633  
Non-sustaining capital expenditures3      274     127  
All-in cash cost      30,362     25,760  
Payable ounces of silver equivalent sold1      2,245,819     2,402,847  
All-in sustaining cash cost per ounce of payable silver equivalent sold2      13.40     10.67  
All-in cash cost per ounce of payable silver equivalent sold2      13.52     10.72  
1  Silver equivalent sold for Q1 2021 is calculated using a silver to gold ratio of 68.1:1 (Q1 2020:  97.7:1).
2  Silver equivalent is calculated using the realized prices for gold and silver.  Refer to Financial Results – Sales and Realized Prices.
3   Presented on a cash basis.

 

 

Reconciliation of Cash cost per Ounce of Gold Sold for the three months ended March 31, 2021 and 2020

 

LINDERO MINE      
Three months ended March 31     2021     2020  
Cost of sales      22,186      
IFRS 16 embedded lease adjustment      518      
Export duties      (2,800 )    
Depletion and depreciation      (6,245 )    
By product credits      (58 )    
Treatment charges      10      –  
Cash cost applicable per gold ounce sold A    13,611      
Ounces of gold sold B    21,289      
Cash cost per ounce of gold sold ($/oz) =A/B    639      

 

 

Reconciliation of All-in Sustaining Cash Cost per Ounce of Gold Sold for three months ended March 31, 2021 and 2020

 

LINDERO MINE      
Three months ended March 31     2021     2020  
Cash cost applicable      13,611      
Export duties and mining taxes      3,581      
General and administrative expenses (operations)      1,138      
Adjusted operating cash cost      18,330      
Sustaining capital expenditures1      4,040      
Brownfields exploration expenditures1      91      
All-in sustaining cash cost      22,461      
Ounces of gold sold      21,289      
All-in sustaining cash cost per ounce of gold sold      1,055      
 Presented on a cash basis.

 

 

Additional information regarding the Company’s financial results and activities underway are available in the Company’s first quarter 2021 Financial Statements and accompanying Management’s Discussion and Analysis for the three months ended March 31, 2021, which are available for download on the Company’s website,  www.fortunasilver.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.

 

About Fortuna Silver Mines Inc.

 

Fortuna Silver Mines Inc. is a Canadian precious metals mining company with operations in Peru, Mexico, and Argentina. Sustainability is integral to all our operations and relationships. We produce silver and gold and generate shared value over the long-term for our shareholders and stakeholders through efficient production, environmental protection, and social responsibility.

 

Posted May 10, 2021

Share this news article

MORE or "UNCATEGORIZED"


Azimut Drills 24.0 g/t Au over 18 m, including 38.7 g/t Au over 9 m, in the expanding Patwon Gold Zone, Elmer Property, Quebec

Azimut Exploration Inc. (TSX-V: AZM) is pleased to report that i... READ MORE

June 22, 2021

Opus One Obtains 6.02 g/t Gold Over 2.5 m and Brings to Light Its Gold Discovery Near Matagami

Opus One Gold Corp. Inc. (TSX-V:OOR) a mining exploration compan... READ MORE

June 22, 2021

Western Sierra Resource Corporation Enters Talks to Acquire Majority Stake in a Gold Mining Operation With Enhanced Recovery Net Income Projected at $3.2 Billion

WESTERN SIERRA RESOURCE CORPORATION (OTC: WSRC) is pleased to a... READ MORE

June 22, 2021

Maritime Resources Traces Orion North Zone Over 550 Metres - Intersects 12.43 gpt Gold and 2.15 gpt Silver Over 1.20 Metres, Including 50.60 gpt Gold and 7.90 gpt Silver Over 0.20 Metres

Maritime Resources Corp. (TSX-V: MAE) is pleased to announce dril... READ MORE

June 22, 2021

Labrador Gold Intercepts 50.38 g/t Over 1.85 Metres Including 160.42 g/t Over 0.55 Metres at Big Vein, Kingsway Project, Newfoundland

Labrador Gold Corp. (TSX-V:LAB) (OTCQX:NKOSF) (FNR: 2N6) is pleas... READ MORE

June 22, 2021

Copyright 2021 The Prospector News