Mr. Jorge Ganoza reports
FORTUNA REPORTS CONSOLIDATED FINANCIAL RESULTS FOR FIRST QUARTER 2019
Fortuna Silver Mines Inc.
had net income of $2.2-million, adjusted net income of $8.4-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $23.8-million in the first quarter of 2019.
Jorge A. Ganoza, president and chief executive officer, commented: "Production and cash costs at our Caylloma and San Jose mines for the first quarter underpin a solid start for the year with EBITDA margins of 40 per cent. Our cash flow generation objectives remain on track to continue contributing to the funding of our Lindero gold project in Argentina. As of the end of April, Lindero construction progress is at 47-per-cent completion, with 97 per cent of the direct capital expenditures committed and 61 per cent of the total projected capital spent. With mine preparation set to be concluded in May and construction of the crushing and leach pad facilities advancing according to schedule, we plan to initiate placing ore on the leach pad early in Q4 2019."
First quarter 2019 highlights:
Sales of $59.0-million, compared with $70.4-million in Q1 2018;
Net income of $2.2-million, compared with $13.8-million in Q1 2018;
Adjusted net income of $8.4-million, compared with $13.2-million in Q1 2018;
Adjusted EBITDA of $23.8-million, compared with $31.8-million in Q1 2018;
Free cash flow from continuing operations of $2.2-million, compared with $16.8-million in Q1 2018, due largely to the impact of short-term movements in receivables and inventory;
Silver and gold production of 2,233,331 ounces and 13,314 ounces, respectively;
All-in sustaining costs per silver equivalent ounce of payable silver amounted to $10.7.
First quarter 2019 consolidated results
CONSOLIDATED FINANCIAL METRICS
(expressed in millions, except per-share information)
Three months ended March 31,
Sales $59.0 $70.4
Mine operating income 21.5 31.3
Operating income 10.9 22.4
Net income 2.2 13.8
Earnings per share (basic) 0.01 0.09
Adjusted net income 8.4 13.2
Adjusted EBITDA 23.8 31.8
Cash provided by operating activities 3.9 20.1
Free cash flow (34.1) 12.3
Free cash flow from continuing operations 2.2 16.8
Sustaining 4.7 4.1
Non-sustaining 0.8 -
Lindero 30.9 4.9
Brownfields 1.2 2.3
Sales for the three months ended March 31, 2019, were $59.0-million, a 16-per-cent decrease from $70.4-million reported in Q1 2018. The decrease in sales was due primarily to a decline in metal prices for silver, lead and zinc of 7 per cent, 19 per cent and 21 per cent, respectively, and to lower sales volume in silver and gold of 7 per cent and 11 per cent. Contributing to the lower sales volume was a $3.7-million accumulation of concentrate inventory during the quarter.
Net income for the three months ended March 31, 2019, was $2.2-million, or one cent per share, compared with $13.8-million, or nine cents per share, reported in the same quarter in 2018.
Adjusted net income for the quarter was $8.4-million, compared with $13.2-million reported in the same quarter of 2018. The decrease in adjusted net income was due mainly to lower sales at both San Jose and Caylloma, and was partially offset by realized gains on commodity derivative contracts.
Adjusted EBITDA for the period was $23.8-million, compared with $31.8-million in the comparable period in 2018. The decrease in adjusted EBITDA was due primarily to lower sales volume and lower realized metal prices.
Net cash provided by operating activities for the three months ended March 31, 2019, was $3.9-million, compared with $20.1-million reported in 2018, due to lower sales as well as negative changes in working capital of $9.2-million in 2019, compared with positive changes of $5.2-million in 2018. Free cash flow from continuing operations was $2.2-million, which was negatively impacted by changes in working capital during the quarter.
Capital resources and liquidity
At March 31, 2019, the company had cash, cash equivalents and short-term investments of $112.9-million (Dec. 31, 2018 -- $163.3-million). The decrease in cash reflects the increase in the pace of spending at the construction of the Lindero project. Total liquidity available to the company as of March 31, 2019, was $192.9-million, which includes $80.0-million of available credit under a $150-million credit facility.
Lindero gold project
Construction at the Lindero open-pit heap-leach gold mine located in Salta province, Argentina, is at 47-per-cent completion. Approximately 97 per cent of direct capital costs have been committed. Construction spending for the first quarter of 2019 totalled $42.2-million, comprising $30.9-million in construction expenditures as well as $11.3-million on deposits for equipment and advances to contractors. Total construction spending as at the end of March 31, 2019, was $165-million.
SAN JOSE MINE, MEXICO
Three months ended March 31,
Tonnes milled 256,642 258,204
Average tonnes milled per day 2,984 3,011
Grade (g/t) 267 284
Recovery (%) 91 93
Production (oz) 1,999,495 2,185,913
Metal sold (oz) 1,856,288 2,011,260
Realized price ($/oz) 15.63 16.65
Grade (g/t) 1.71 1.94
Recovery (%) 90 92
Production (oz) 12,741 14,882
Metal sold (oz) 11,712 13,748
Realized price ($/oz) 1,316 1,329
Production cash cost ($/t) 68.7 65.3
Production cash cost ($/oz AgEq) 6.4 5.7
Unit net smelter return ($/t) 174.3 203.8
AISC ($/oz AgEq) 8.7 8.5
The San Jose mine produced 1,999,495 ounces of silver and 12,741 ounces of gold in the first quarter of 2019, which were 9 per cent and 14 per cent below the comparable quarter in 2018. The lower production was due primarily to lower head grades for silver and gold, which decreased 6 per cent and 12 per cent, respectively, compared with the same quarter in 2018.
Cash cost per tonne of processed ore increased 5 per cent to $68.7 per tonne, compared with $65.3 per tonne for the comparable quarter in 2018, and was in line with guidance. The increase was due to higher mining costs related to preparation and backfill, and was partially offset by lower dry-stack tailings operating costs.
CAYLLOMA MINE, PERU
Three months ended March 31,
Tonnes milled 130,150 129,620
Average tonnes milled per day 1,496 1,473
Grade (g/t) 66 61
Recovery (%) 84 84
Production (oz) 233,836 215,545
Metal sold (oz) 237,868 220,290
Realized price ($/oz) 15.56 16.79
Grade (%) 2.74 2.72
Recovery (%) 91 91
Production (000s lb) 7,172 7,040
Metal sold (000s lb) 7,231 7,269
Realized price ($/lb) 0.92 1.14
Grade (%) 4.37 4.31
Recovery (%) 90 90
Production (000s lb) 11,295 11,028
Metal sold (000s lb) 11,269 11,078
Realized price ($/lb) 1.23 1.55
Production cash cost ($/t) 79.5 78.7
Production cash cost ($/oz AgEq) 9.3 7.2
Unit net smelter return ($/t) 148.5 190.3
AISC ($/oz AgEq) 12.9 10.3
The Caylloma mine produced 7.2 million pounds of lead and 11.3 million pounds of zinc, which were both 2 per cent higher than the production for the comparable quarter in 2018. The increased production was due to higher head grades of lead and zinc of 2.74 per cent and 4.37 per cent, respectively, as well as slightly higher mill throughput. Silver production totalled 233,836 ounces, which was 8 per cent higher than the comparable quarter in 2018.
Cash cost per tonne of processed ore was $79.5, compared with $78.7 cash cost per tonne for the comparable quarter in 2018, and was slightly below annual guidance.
The financial statements and management's discussion and analysis are available on SEDAR and have also been posted at the company's website.
Conference call to review first quarter 2019 financial and operational results
A conference call to discuss the financial and operational results will be held on Wednesday, May 15, 2019, at 9 a.m. PT (12 p.m. ET). Hosting the call will be Mr. Ganoza and Luis D. Ganoza, chief financial officer.
Shareholders, analysts, media and interested investors are invited to listen to the live conference call by dialling just prior to the start time.
Conference call details
Date: Wednesday, May 15, 2019
Time: 9 a.m. PT (12 p.m. ET)
Dial-in number (toll-free): 1-844-602-0380
Dial-in number (international): 1-862-298-0970
Replay number (toll-free): 1-877-481-4010
Replay number (international): 1-919-882-2331
Replay passcode: 48101
Playback of the conference call will be available until May 29, 2019, at 12 a.m. ET. Playback of the webcast will be available until May 15, 2020. In addition, a transcript of the call will be archived at the company's website.
About Fortuna Silver Mines Inc.
Fortuna is a growth-oriented precious metal producer, with its primary assets being the Caylloma silver mine in southern Peru, the San Jose silver-gold mine in Mexico and the Lindero gold project, which is currently under construction, in Argentina. The company is selectively pursuing acquisition opportunities throughout the Americas and in other select areas.
We seek Safe Harbor.
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