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Fortuna reports unaudited 3Q21 financial results

Published by
Global Mining Review,


Fortuna Silver Mines has reported 3Q21 net income of US$0.2 million, adjusted net income of US$22.5 million, and adjusted EBITDA of US$75.3 million.

Jorge A. Ganoza, President and CEO, commented: “Our strong adjusted EBITDA1 of US75.3 million with margins of 46% and free cash flow from operations of US33.8 million in 3Q21 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.”

“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,” Ganoza concluded.

3Q21 highlights

  • Record sales of US$162.6 million, an increase of 95% from the US$83.4 million reported in the same period in 2020 (3Q20), due primarily to gold sales from the Yaramoko mine of US$49 million and from the Lindero mine of US$41.8 million.
  • Net income of US$0.2 million or US$00.00 per share, compared to US$13.1 million or US$00.07 net income per share reported in 3Q20. Net income was lower due primarily to US$10.5 million in transaction costs related to the acquisition of Roxgold Inc., and US$9.6 million settlement of the disputed royalty claim with the Mexican Geological Service (SGM).
  • Adjusted net income of US$22.5 million compared to US$16.1 million reported in 3Q20.
  • Adjusted EBITDA1 of US$75.3 million compared to US$42.2 million reported in 3Q20.
  • Free cash flow from ongoing operations of US$33.8 million compared to US$30.1 million reported in 3Q20.
  • As of 30 September 2021, the company had cash and cash equivalents of US$135.8 million, an increase of US$3.9 million from 31 December 2020.
  • Silver and gold production of 1 711 881 oz and 65 425 oz, respectively.
  • AISC per ounce of gold sold of US$1270 for the Lindero Mine and US$1188 for the Yaramoko Mine. AISC per silver equivalent ounce of payable silver sold of US$15.51 and US$17.66 for the San Jose Mine and Caylloma Mine, respectively.

3Q21 results

Sales for 3Q21 were US$162.6 million, an increase of 95% from the US$83.4 million reported in 3Q20. Lindero reported adjusted sales of US$41.8 million from 23 559 oz of gold sold. Yaramoko reported adjusted sales of US$49 million from 27 494 oz of gold sold. San Jose reported adjusted sales of US$43.7 million, a decrease of 32% from the US$64.7 million reported in 3Q20 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 US$28 million, a 49% increase from the US$18.8 million reported in 3Q20 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 3Q21 was US$21.8 million, a decrease of US$6.7 million compared to 3Q20. The decrease was due primarily to lower sales at the San Jose mine and the US$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 US$10.3 million and US$10 million respectively.

Net income for 3Q21 was US$0.2 million, a US$12.9 million decrease from the US$13.1 million net income reported in 3Q20, primarily due to lower operating income and US$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 3Q21 was US$75.3 million, an increase of US$33.1 million compared to US$42.2 million reported in 3Q20. The increase reflects Lindero and Yaramoko´s contribution to adjusted EBITDA of US$21.8 million and US$25.8 million, as well as higher EBITDA at Caylloma.

Free cash flow from ongoing operations for 3Q21 was US$33.8 million compared to US$30.1 million in 3Q20.

Lindero Mine, Argentina

During 3Q21, the on-site 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 3Q21, a total of 1 387 134 t of ore were placed on the leach pad averaging 1.1 g/t gold containing an estimated 49 247 oz of gold. Total gold production for the quarter was 26 235 oz, comprised of 24 318 oz in doré and an increase of 1918 oz of gold-in-carbon (GIC) inventory.

Cash cost per gold ounce sold was US$646, as the mine continues to ramp-up production.

AISC per gold ounce sold was US$1270 during the quarter and US$1182 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 US$10.7 million during the quarter were related primarily to the ADR plant expansion and completion of phase 1B of the leach pad construction.

Yaramoko Mine Complex, Burkina Faso

The Yaramoko Mine produced 28 751 oz of gold in 3Q21 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 t in the quarter against a plan of 127 917 t. 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 reprioritisation of lower grade stopes, contributed to the minor production shortfall.

These issues have been remedied and are not expected to continue nor affect 4Q21 performance which is expected to be in line with guidance.

Cash cost per gold ounce sold was US$720, which was above plan, primarily due to lower production.

AISC per gold ounce sold was US$1188, 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 US$8 million during the quarter related primarily to underground mine development costs.

San Jose Mine, Mexico

The San Jose Mine produced 1 436 658 oz of silver and 8910 oz of gold during 3Q21, which represents a decrease of 25% and 22%, respectively, compared to 3Q20. The decrease was due primarily to lower grades.

The production cash cost per tonne for 3Q21 was US$77.52 an increase from the US$67.60 per tonne in 3Q20 primarily due to lower tonnes milled.

AISC of payable silver equivalent for 3Q21 was US$15.51/oz, an increase from the US$11.39/oz in 3Q20. 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 totalled US$7.6 million for 3Q21, an increase from the US$4.8 million in 3Q20. The increase was due to the impact of COVID-19 in 3Q20, whereby brownfields capital expenditures at the operations were significantly reduced.

Caylloma Mine, Peru

The Caylloma Mine produced 275 223 oz of silver, 8.2 million lbs of lead and 12.4 million lbs of zinc during 3Q21, an increase of 31%, 23%, and 21% respectively compared to 3Q20. The increased metal production was due to higher head grades for all metals and higher recoveries for silver and lead. Gold production for 3Q21 totalled 1529 oz with an average head grade of 0.48 g/t, an increase of 12% over 3Q20.

The production cash cost per tonne for 3Q21 was US$86.04, an increase from the US$76.80 in 3Q20. The increase was due primarily to higher mining costs on increased mine preparation activities and higher planned maintenance costs in the processing plant.

AISC of payable silver equivalent for 3Q21 was US$17.66/oz, a decrease from the US$19.53/oz in 3Q20. 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 totalled US$4.8 million for 3Q21, an increase from the US$1.3 million in 3Q20. The increase was primarily due to the impact of COVID-19 during 3Q20, whereby capital expenditures were significantly reduced.

On 16 October 2021, the company signed a community support with the Municipality of Caylloma, which includes a voluntary payment of PEN 2.2 million/year over the four year term agreement, starting in 4Q21. The resources will be used for the implementation of programmes or projects for the sustainable development of the Caylloma District.

Read the article online at: https://www.globalminingreview.com/finance-business/16112021/fortuna-reports-unaudited-3q21-financial-results/

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