Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) reports production results for the second quarter from its three operating mines in the Americas, the San Jose Mine in Mexico, the Caylloma Mine in Peru, and the Lindero Mine in Argentina. The company produced 1,892,822 ounces of silver and 31,048 ounces of gold or 55,953 gold equivalent1 ounces. Silver and gold production for the first six months of 2021 totaled 3,806,577 ounces and 65,603 ounces, respectively, or 115,690 gold equivalent1 ounces. The company is also providing an updated production and cost guidance for 2021 which also incorporates gold production for the second half of the year from the Yaramoko Mine in Burkina Faso.
Second Quarter Consolidated Production
Second Quarter Consolidated Operating Highlights
|Second Quarter 2021||Second Quarter 2020|
|Average tpd milled||1,536||3,029||1,525||1,799|
|Ore placed on pad2 (t)||1,477,000|
|Gold placed on pad2 (oz)||44,889|
|Gold in carbon4 (oz)||794|
|Dore poured (oz)||18,726|
Lindero Mine, Argentina
Argentina suffered a surge of COVID-19 during the second quarter of 2021 with the infection rate peaking at 41,000 cases per day. Extended nationwide COVID-19 related travel restrictions continued to limit onsite access to foreign vendor support affecting ramp up activities at Lindero.
The COVID-19 infection rate at Lindero increased during the second quarter and had a significant impact on the operation´s performance as 160 personnel tested positive, representing 18 percent of the workforce. During the quarter, the company intermittently voluntarily suspended onsite operations for a total of 16 days which directly impacted ramp up progress and reduced the amount of ore delivered to the heap leach pad. Strict government mandated travel restrictions have led to disruptions in the hiring and movement of skilled personnel and delays in access to foreign vendor support, which resulted in higher mechanical downtime leading to lower tonnes of processed ore being delivered to the leach pad.
In the second quarter, a total of 1,477,000 tonnes of ore were placed on the leach pad averaging 0.95 g/t gold containing an estimated 44,889 ounces of gold.
Total gold production for the quarter was 19,521 ounces, 73 percent of the plan, comprised of 18,726 ounces in doré and 794 ounces of gold-in-carbon (GIC) inventory.
|Second Quarter 2021|
|Ore mined1 (t)||1,817,000|
|Waste mined1 (t)||1,638,000|
|Total mined1 (t)||3,455,000|
|Strip ratio (waste to ore)||0.90|
|Average crushing throughput (tph)||868|
|Ore placed on leach pad1 (t)||1,477,000|
|Ore placed grade1 (g/t)||0.95|
|GIC inventory (oz)||794|
|Doré poured (oz)||18,726|
|Gold produced (oz)||19,521|
A total of 1,817,000 tonnes of ore were mined in the second quarter of 2021 at a strip ratio of 0.9:1, 20 percent below plan. Mine waste movement increased 34 percent compared to the first quarter of 2021, in line with expectation.
Mine reconciliation and metallurgical performance
Reconciliation of tonnes, grade and gold ounces mined for the second quarter indicate a good correlation with the reserve model with differences of less than five percent for all parameters.
Gold leaching response as well as reagent consumption was within the expected parameters for the granulometric composition and metallurgical types of ore placed on the leach pad.
In the second quarter of 2021, a total of 1,477,000 tonnes of ore were placed on the leach pad at 0.95 g/t gold, 20 and 10 percent below plan, respectively. All processing activities were impacted negatively by the direct and indirect downtimes related to the surge in COVID-19 cases and government restrictions. Lower grade is explained by the extraction of fewer tonnes from the pit than was planned, resulting in reduced access to higher grade ore than was scheduled, and grade dilution as the operation attempted to selectively mine higher-grade ore from lower-grade ore during this period to offset temporary shortfalls in gold stacked.
Trucked ore from the run of mine and coarse stockpiles placed on the leach pad totaled 801,000 tonnes, 32 percent higher than plan. Trucking of coarse ore to the leach pad was a temporary measure during the first half of the year to offset the lower tonnage of agglomerated ore; resulting in a 15 percent decrease, in respect to plan and guidance, of recoverable gold ounces on the heap during this period.
Primary and secondary crushing averaged 14,870 tonnes per day during the quarter, representing 79 percent of design capacity of 18,750 tonnes per day.
The tertiary-HPGR crusher, agglomeration plant, and stacking system throughput averaged 9,510 tonnes per day in the quarter representing 51 percent of design capacity and a 25 percent increase compared to the previous quarter. In June, ore stacking averaged 12,600 tonnes per day, representing 67 percent of design capacity peaking at 18,390 tonnes per day, 98 percent of design capacity.
The company has worked to address ramp up challenges in the tertiary crushing-agglomeration-stacking circuit with the in-country arrival of specialist support which was delayed due to COVID-19 travel restrictions. The operation expects to complete the planned ADR plant expansion and achieve full production capacity early in the fourth quarter of 2021.
SART plant ramp up work resumed in June at a pregnant solution flow rate of 100 to 150 cubic meters per hour, 25 percent of design capacity, regarded as sufficient to manage soluble copper levels in the ADR plant at this time. The SART plant is expected to achieve design capacity of 400 cubic meters per hour during the second half of the year.
Quality Assurance & Quality Control
Grade control estimates at Lindero are based on blast hole chip samples submitted to Lindero’s on-site laboratory for preparation and assaying for gold, using fire assay with an atomic absorption finish. The QA-QC program includes the blind insertion of certified reference standards and assay blanks at a frequency of approximately 1 per 20 normal samples as well as the submission of duplicate samples for verification of sampling and assay precision levels by an ISO 9001:2000 certified umpire laboratory. ALS Global Laboratory in Mendoza, Argentina prepared the samples for assaying and then forwarded the samples to ALS Global Laboratory in Lima, Peru for assay by standard fire assay methods.
San Jose Mine, Mexico
The San Jose Mine produced 1,624,394 ounces of silver and 10,266 ounces of gold in the second quarter of 2021 with average head grades for silver and gold of 205 g/t and 1.30 g/t, respectively; 4 percent above and in line with plan.
Caylloma Mine, Peru
In the second quarter of 2021, the Caylloma Mine produced 268,428 ounces of silver with an average head grade of 76 g/t, in line with plan.
Gold production was 1,261 ounces, an increase of 183 percent with respect to the second quarter of 2020. Caylloma’s gold production continues to exceed plan with average grades experienced in the second quarter expected to continue throughout the year. The mine geology team has confirmed the continuity of this higher-grade zone as related to the intersection of the Animas NE and Nancy veins with modeling work to define this ore shoot completed.
Lead and zinc production for the second quarter of 2021 was 8,143,876 pounds and 11,763,866 pounds with average head grades for lead and zinc of 3.09% and 4.58%, respectively; 8 percent and 9 percent above plan.
Full Year 2021 Updated Consolidated Production and AISC Guidance
Following the completion of the business combination with Roxgold Inc. on July 2, 2021 (refer to news release dated July 2, 2021, “Fortuna and Roxgold complete combination to create a global premier growth-oriented intermediate gold and silver producer”), the company has updated its consolidated silver and gold production and cost guidance for 2021 (refer to news release dated January 19, 2021, “Fortuna reports 2020 full year production of 11.3 million silver equivalent ounces and issues 2021 guidance”) .
Updated Guidance Highlights
Silver and gold production guidance
The company’s updated production and cost guidance set out below for 2021 assumes that operations will continue for the remainder of the year without any major interruptions related to COVID-19.
|Original Guidance||Updated Guidance||Original Guidance||Updated Guidance|
|Lindero, Argentina||–||–||140 – 160||90 – 110|
|San Jose, Mexico||5.8 – 6.5||5.8 – 6.5||38 – 42||38 – 42|
|Caylloma, Peru||1.0 – 1.1||1.0 – 1.1||–||4 – 5|
|Yaramoko2, Burkina Faso||–||–||–||62 – 66|
|Consolidated Total||6.8 – 7.6||6.8 – 7.6||178 – 202||194 – 223|
|(US$/oz Ag Eq)||(US$/oz Ag Eq)||(US$/oz Au)||(US$/oz Au)|
|Lindero5, Argentina||–||–||730 – 860||1,010 – 1,190|
|San Jose, Mexico||12.2 – 14.5||12.2 – 14.5||–||–|
|Caylloma, Peru||19.4 – 23.0||19.4 – 23.0||–||–|
|Yaramoko, Burkina Faso||–||–||–||990 – 1,150|
2021 Guidance Outlook
Lindero Mine, Argentina
Lindero´s updated gold production guidance range of between 90 and 110 thousand ounces reflects a decrease of 50,000 ounces with respect to both the lower and upper range of the production guidance disclosed on January 19, 2021. The decrease in production is a consequence of the direct and indirect impacts of the increase in COVID-19 positive cases in Argentina and in the workforce at Lindero, stricter government mandated travel restrictions which have caused delays in the ramp up of activities, and challenges related to attempting to selectively mine and separate higher-grade material, as discussed above for the second quarter results. Operational impacts caused by these factors have been evaluated and their effect considered for the second half of the year.
Lindero´s updated AISC per ounce of gold between US$1,010 and US$1,190 reflects an increase of 38 percent with respect to both the lower and upper range of the AISC guidance disclosed at the beginning of the year. The increase is a consequence of projected lower gold production and higher sustaining capex related to the expansion of the ADR plant.
San Jose Mine, Mexico
At San Jose, the company reiterates the mine´s production and AISC guidance disclosed on January 19, 2021. COVID-19 related protocols set in place have been reviewed and adjusted to continue mitigating the impacts of positive cases in the workforce. The ongoing vaccination campaign in the state of Oaxaca in addition to the company´s strengthened health procedures are anticipated to contribute to containing the COVID-19 infection rate at the operation.
Caylloma Mine, Peru
At Caylloma, despite registering COVID-19 positive cases in the workforce during the first half of the year, the mine´s performance has exceeded expectations as a result of an efficient allocation of the operation´s resources and coarse ore stockpile management. The company reiterates the mine´s production and AISC guidance disclosed on January 19, 2021, including lead and zinc production of 29 to 32 million pounds and 44 to 49 million pounds, respectively. In addition, gold production of 4 to 5 thousand ounces for the year has been included in the annual consolidated production guidance to take into account the higher-grade zone related to the intersection of the Animas NE and Nancy veins.
Yaramoko Mine, Burkina Faso
There were no major COVID-19 related impacts at the Yaramoko Mine during the second quarter of 2021. Gold production guidance for the second half of the year assumes there will be no significant disruptions of operations associated with COVID-19.
Annual planned mine development meters are projected to increase, driven by a stoping sequence rescheduling associated with lower grades encountered during the second quarter of the year. The increase in development meters is expected to contribute to achieving second half of the year gold production guidance at an estimated AISC per ounce of gold of US$990 to US$1,150.
Séguéla Gold Project, Côte d’Ivoire
At the Séguéla Project, the company expects to commence negotiations on the Project Mining Convention with the government early in the third quarter. At the project site, the accommodation village is projected to be ready for occupancy in the fourth quarter of 2021. Key contracts with plant EPC and bulk earthworks contractors are close to being finalized. In order to not affect the critical path of the project, the Board of Directors of the company has approved an early works budget of US$11.5 million to commence detailed engineering work and procure long lead items such as the SAG mill. The company expects to make a construction decision during the third quarter.
Fortuna continues to advance its robust pipeline of Brownfield and Greenfield exploration projects in West Africa and the Americas. The company will be providing a comprehensive exploration update in the third quarter.
Exploration in Côte d’Ivoire during the second half of the year will focus on infilling and extending the new Sunbird discovery at Séguéla, where mineralization has now been delineated over a strike length of more than 1,000 meters. Drilling will also continue the delineation of the high-grade Koula underground inventory, while also following up on the recent high grades intersected in scout reverse circulation drilling at Gabbro North. Further afield, several extensive soil and termite geochemistry anomalies will be tested with aircore drilling at Fortuna’s Kadyoha and Dianra Nord prospects, some 140 kilometers to the north-east of Séguéla.
In Burkina Faso, delineation and step out drilling will continue in the second half of the year at Boussoura after the conclusion of the annual rainy season in August. Drilling will focus on defining the Fofora Main and VC2 deposits, and delineating additional mineralization at VC3 and VC5. Similarly, definition drilling in the second half of the year at Galgouli and exploration drilling of mineralization identified at several nearby prospects will continue. At Yaramoko, activities will continue to support advancing the 109 Zone surface prospect, as well as target testing and delineation across the wider Yaramoko property.
Fortuna budgeted US$21 million for its 2021 exploration program, consisting of 69,000 meters of surface and underground diamond drilling, supporting ground geophysical programs, and underground development. As of the end of June, the exploration teams had completed a total of 23,400 meters of drilling, 34 percent of plan. The remainder of the planned meters and budget at the mines and two additional Greenfields projects will be realized throughout the second half of 2021 using up to 12 core rigs. Fortuna also maintains a wide-ranging reconnaissance program in Mexico.
Amri Sinuhaji, Technical Services Director – Mine Planning for the company, is a Professional Engineer registered with the Association of Professional Engineers and Geoscientists of the Province of British Columbia (#48305) and a Qualified Person as defined by National Instrument 43-101, Standards of Disclosure for Mineral Projects. Mr. Sinuhaji has reviewed and approved the scientific and technical information pertaining to the San Jose, Caylloma and Lindero mines contained in this news release and has verified the underlying data.
Paul Criddle, FAusIMM, Chief Operating Officer, West Africa for the company, is a Qualified Person as defined by NI 43-101, and has reviewed and approved the scientific and technical information pertaining to the Yaramoko Mine, Seguela Project and the West Africa exploration outlook contained in this news release and has verified the underlying data.
David F. Volkert, Vice President of Exploration for the company, is a member of the American Institute of Professional Geologists (CPG #10759) and the Association of Professional Engineers and Geoscientists of British Columbia (P. Geo. #191936) and a Qualified Person as defined by NI 43-101. Mr. Volkert has reviewed and approved the Americas exploration outlook contained in this news release and has verified the underlying data.
About Fortuna Silver Mines Inc.
Fortuna Silver Mines Inc. is a Canadian precious metals mining company with four operating mines in Argentina, Burkina Faso, Mexico and Peru, and an advanced development project in Côte d’Ivoire. Sustainability is integral to all our operations and relationships. We produce gold and silver and generate shared value over the long-term for our shareholders and stakeholders through efficient production, environmental protection, and social responsibility.
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