Fortuna Silver Mines (FSM) 12 Aug 212021 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Fortuna Silver Mines Second Quarter 2021 Financial and Operational Results. At this time, all participants are on a listen-only mode, and we'll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Luis Ganoza, Director of Investor Relations. Sir, the floor is yours.

Hi, Matthew. you. Thank Luis CFO. way, is Ganoza the our By It's Director of speaking. Investor Relations Carlos Baca, and morning, gentlemen. Good ladies like welcome call would our quarter I to XXXX. financial and Silver of and to Mines operations results for second you the to Fortuna Fortuna Hosting Alberto be Officer; Luis Ganoza, behalf Financial Chief Executive Jorge Dario Chief will Ganoza the and Officer. on call and today of President Today's homepage @fortunasilver.com. our presentation box earnings on call presentation is available on the featured

and in in in presentation are As earnings a subject call yesterday's reminder, news US advisories, reader and are this Financial release statements presentation. stated. in to included the the call unless figures today's made the in otherwise dollars presented during contained call discussed

from turn and in a number indicate on information is in factors and I were would making based differ information. to Actual the earnings beliefs. forecast a conclusion, reflected I is company's subject information or materially Jorge, like could that expectations, a material current This Certain that Before forward-looking conclusion information. the to or forward-looking estimates, call forecast, projection call other over of to projection this results or in forward-looking contains drawing as uncertainties a risks or forward-looking the applied factors. assumptions the

forward-looking over Alberto by to would except no obligation assumptions forecast like available turn I and information Additional which making forward-looking of the such publicly assumes were SEDAR. to projection or the or Ganoza, information as cause conclusion, the applied now is the on the in and The form annual conclusion factors company's forecast, Fortuna. in update future projection a law. company a the Jorge actual call as information in that the about differ the to reflected that factors Co-Founder information could MD&A, in material or material drawing results materially from contained or forward-looking required in to information are

with have which X, reflect year, start challenges over I Carlos, COVID-XX an XX%. slide presentation strength highlights. our In We spite of of guidance business led a in came quarter consensus. of sales $XXX in million to morning of position Adjusted million to the margin to $X.XX of for results on shares EBITDA X.X%. revise our record and good Lindero, our line EBITDA continue the all. of with us and you, with sales per $XX liquidity related earnings which will quarter second Thank of second at maintain of share the $XXX million debt-to-EBITDA ratio largely a analyst

incremental period. construction and metal to cash Our to various contributions balance Lindero to the sheet ability impacted the the fund second over from XX free stoppage produced leading ounces surge spread under Argentina the dramatic planned flow day to Lindero XX,XXX Lindero scenarios. price in add plus A healthy Yaramoko in quarter Segeula in our of during three cases the months. COVID of gold half a

the July of sourcing at are We last working on-site as to a specialized to of vendor is over be the and downward do year months. reasons In and third continued we stages production which into have restrictions couple Lindero. our technicians provided impaired mining foreign to convention of lost, ramp-up, XX, country for Lindero of entry Cote relies HPR, the gold revision for to project on of the production on in the ounces been where in to plan, the Fortuna not partially the have due stoppages precious country issues negotiations support ability all technicians. able crushing, the The the we XX,XXX year which in technicians get addition, quarter, We're second construction expectations. acquisition, this this year as our incorporates Seguela, well our including we're we from government. These up in the Gold next stacking half postponed superior expect our On this resolved Today, we production second working which platform, and in guidance Mine not mines acquisition. but believe with now. operating the in the closed advancing X, cementing ounces many a ramp-up we system with development Roxgold the days a gold country contribution for close for XXX,XXX decision described diversified lower is ounces will a slow exceeding on metals we four make instances for and the third the XX,XXX and quarter. integration the low-cost d'Ivoire quarter. this robust July revised Yaramoko is production XXX-day With permitted

revised consolidated and for is representing gold still on KPIs. from terms ounces increase of revised change in guidance Slide silver to share performance X.X at not million Our XXX,XXX the does XXX,XXX ounces, XXX,XXX XX% gold X.X original safety production production. to and stays million XXX% to gold X, equivalent In for of slide for XX-month The X. XXX,XXX ounces year-over-year XXXX. average is equivalent rolling to a we guidance our to

heavily operations, of trend improvement mine. at Lindero weighted last pandemic onset we the this the on of start a cases a Our flattening COVID observe particular performance safety in reversal on and seen at of has performance at has some year the across operations

had second XX time have We quarter. accidents injury lost the in

We have change cultural in place initiatives.

have -- continue are initiatives lowering enjoyed and second for committed displaying We on we with to pre-released the improving performance safety we quarter. we're KPIs. Slide X. implementing and and to success production this We

mandated XX%. the XX,XXX year. gold is by the and the San silver fresh ounces days Mexico the of from Lindero. new against San On explained the same is the at the in production Jose Jose mine measured government last up production XXX% in at ounces up explained loss production our This stoppages by of equivalent mainly coming contribution days COVID XX of production, mine gold of is quarter, difference previous gold. When was quarter Our

metals our Silver to also of explained of the gold respect ounce. also contributed realized of with sales X. year. made a $X,XXX million. we lead silver operation byproducts last record growth to days revenue. For last price is price This Caylloma by year. and Precious at largely a loss and of the Slide zinc period, of $XXX ounce In per $XX.XX per XX% XX% exceeded

Next slide XX. please, slide

July, for to includes $XX, Brownfield's Slide Mexico, American driven on out of a Slide for budget guidance approved helped for, million the guidance. performance, approved our million, $XX to Lindero per Brownfield's $XX.X operations, the the million, San from in For $XX.X $X.X of a have XX, all-in LATAM executed million, of $X.X came takeaway were of business. rebound equipment Africa plan $XX loss first please. ounce, sustaining though, we for totaled million the and quarterly up Yaramoko's half $X.X the in half at Exploration at comparison Latin and projects XX, packages budget the of million West XXXX, contribution Fortuna year-over-year million conditions significant sustaining Séguéla in quarter. capital work. of over million. all is the and operations. of income in Even amounted And $XX improved of financial year, $XXX ounce. Board, anticipation this million. from up the the cost $XX Caylloma we million, for lead up timing new of costs. Peru $X,XXX plus amounts decision capital investment $XX million. totaling of an long than Séguéla to $XX here million, which sustaining and for for all-in net Lindero capital XX, of COVID year, lower works at of the Greenfield's call an Sales aligned $XX per Jose of and projects engineering is produced Total $X.X All to capital our the budget the million, gold million. construction from the by amounts Lindero offset EBITDA focused adjusted at annual and Slide with second Lindero execution initiatives and for exploration, $XX.X a an than later at year Boussoura early or adjusted

the gold reserve, for with to reconciliations than correlation the model X% on, grade good Focusing again continue with mined indicate for Lindero, less a tons, of and of here differences the quarter second all ounces parameters.

good. So force leach the for response reconciliation extremely of well be reagent to as pad. have Gold on parameters the type the was consumption placed continues production leaching to and reserve model metallurgical that we expected as the granulometric, within compositions

Argentina, advanced over of operating days we and design. and baskets HPR pyramid. and and Lindo Primary at ramp-up Lindero. of that crushing you Fe large mile operations the our of from of designed XX% the development asset Mexico, package exceeding according on-site d'Ivoire stacking delivering Boussoura, explorations in Boussoura a systems portfolio explorations at in the hectares at expect XX% agglomeration our to foreign in sorry portfolio with Blanco works final beat, XXXX, parameters. Mexico, share are XXX,XXX to as XXX we support in the well. Post-Roxgold ramp-up in Faso, in at where greenfield in ranging and July continues. system, HPR the Higo our in Today, see Cerro and period, performing Mexico, tandem, the Santa acquisition, covering operations Burkina Côte performed As we -- circuits currently in Fe secondary land mines sustained and design you Argentina challenging for design this can -- Solitario Santa in have, vendor three four operated with XX, capacity. Baborigame opportunities slide project with of projects crushing And of Pit exploration

and a opportunities pyramid. certainly So exploration the base portfolio the at of robust

the Luis now financial you I will take that, with So through results. let

you, Thank Jorge. Yes.

Slide on performance record Jorge financial as in our strong mentioned So had sales main quarter XX, and just overall on moment, had we financial Slide across metrics. a XX, the a

results As to as mentioned XXXX stoppages. and due also and related the reminder, by in the period comparative Jorge, of government-mandated in depressed pandemic the impact were a

the XXXX the year. be adjusted Roxgold expensed in non-recurring except to the per $XX.X share EBITDA only million flow, cash operations quarter amounts at Also absolute opposed relation the translate $X.XX. will this figures adjusting ongoing of was in the transaction were million, million from COVID leach of quarter and QX And first Earnings flow, earnings million at of capital to free an million accounts related as variance reflecting business in and recorded in had and our quarter for are After related to inventory San negative changes capacity was high Lindero. cash emphasis year-to-date of about all-time we year-over-year. of was share challenges flow the per BRLXX.X items other non-cash, Adjusted $X.X the $X.XX results non-cash the So buildup items. free related and $XX.X the Lindero. free for spite amounts The EBITDA of into to cash year-to-date. accounts quarter in working receivable Jose mostly million of $X.X at $XX.X pad the in to and receivable at natural mostly in

in of receivables expect recovery slightly We amounts and towards maintain year-end. these or stronger come QX absolute to a down

Next slide XX, the sales impact as and side, shown was chart. in million of slide, increased EBITDA higher the the of on total prior impact our provide of mine. of Slide price breakdown XX, explained out to largest yes, quarter, San of so is $XX.X of XXXX volume by over the QX Similar attributable Caylloma. an shown bridge to XX% of Slide Jose two-third be the $XX the million, metals the single as sold left-hand the Lindero, a we million on with Around Lindero X% sales in around by yes, impact balance as silver by $XX.X well. excluding would

for ounce. higher per costs gold and this sustaining XX% to quarter in cost within heights, mentioned shown This ounce. As of extent impact range. performance San has Jose, for and a prices to compared close The in silver Lindero, and as prior year around guidance production is our significant as silver historical higher the ratio by cash gold, second by and Caylloma equivalent production the had the our large continues as cost changes right-hand production. San a financial per underpinned At well the to on on XX% the effect of internal before, impact on over plan compared at to metal lower of delivery Jose $X side explained performance all-in is EBITDA

expectations. remains planned news KPIs CapEx of within sustaining all-in the variable due of respect well With release the range costs for Jorge, execution. for gold operational and January of annual we of and higher mentioned Also costs about approximately, Lindero in just liquidity our information. sustaining one-third to expecting guidance are ton production mine as and year Lindero key refer XX% are the half of ounce Please show worth we and now well for here more cost a evolution release below revised highlighting as all-in within for quarter given XX%. unit cost of XX Yes, tracking revised the our lower On to as per per of first to cash at XX, guided position. by a XX. slower However, the cash pace July of news the higher our slide

and continue end to our As down position. in is in a construction from in the to Lindero of liquidity reminder end Since reflected growth in scaled credit cash facility $XXX drop of $XXX XXXX million. year our was in show QX towards QX. we liquidity the million XXXX, This

the For bar. transaction-related range QX, Without at would top of dotted the in transaction liquidity segment the Roxgold of payments XXXX million. these have the in of impact the $XXX we the been total show

facility working importantly, it a We concluded to existing credit year. This current $XXX of Based based of to be for in currently interest. on bear any putting in a Seguela excluding budgets we on some revised million QX. million will And price half our million generate cash and very second and of a the -- with $XX will $XX place lower are additional structure will between expect a free expect similar which construction in comment one. flow the be the we the cost new facility expanded environment, guidance

to facility So credit based in total construction activities at be liquidity comfort our on launch $XXX end should range of this our toward giving million expanded and plenty year Seguela. the us of

Finally, relation our comment in events of financial brief done a in statements of information closing the transaction. subsequent the the regarding on payments note disclosed to the Roxgold

this settlements settlement in of With is it of I'll million of million you Out control control and $XX.X change the to actual you. disclosed sales is change amount long-term Carlos. executives cash have Thank balance directors. units We that of on PSUs non-continuing and incentive back the of DSUS. RSUS, to and pass and payments $X.X

to you the call Luis. that now to you, We turn would Thank have. like over may any questions

Certainly. first and floor Don Ladies the Your open is now for questions. [Operator from gentlemen, Demarco. question is Instructions] coming

live. is line Your

and you, operator, gentlemen. good afternoon, Thank

questions of from Just a couple me.

has production the to was give Lindero, all, maybe deferred at of First looking XXXX. call This mentioned you on indication Lindero XXXX? some the of how it at we're higher year that XXX,XXX production Lindero Can might be the of at in at been ounces. us any much

are We currently year, budgeting Don. the

is we We -- the mine -- budgeting on we here produce we started achieving is have of of have process. ounces. that basically to at range in we is a the the in the process that but the the production of rate grade XXX,XXX not message And down. If are are the capacity have because based

capture was second of message is XXXX now basically conciliating models year not for The team. deferral. production our well. that well. in this very this between The ramp-up production are And but a loss it's metallurgy is mean the right XXX,XXX just annual target would and expect range XXX,XXX an Argentina I at painful in what ounces a conciliating the closer for be rate of the ounces. to would our I higher So right able to absolute rather the

just has note. give do note, I statement million Okay. the item Thank you us that? promissory the any that. million And for it an see question Roxgold $XX flow would My were transaction. major that in terms cost other be an to items in for note, Can the next on acquisition? cash transaction what see, of you And I Is promissory indication than is total $XX the more details the with the or appreciated. it the of promissory

Yes.

note of and or So their of the is I disclosed of settlement subsequent of out the based closing figure by payouts QX, to cash the advisory time events for in we transaction and be availability in change in really of a expenses amounts total right. costs that total promissory Roxgold terms the $XX of amounts on certainly But right. But million total cost, component paid at our mentioned directly of to cash. long-term incentives will really and fees these expenses, is related of have largest our items the amount. The legal fully would be rest control is largest balance the disclosed be

Okay. helpful. That's

portfolio Good into for look and me. Thank Okay. added Well, we your you. getting QX Yaramoko forward as all Lindero that's gentlemen to rebounding of well. luck

you. Thank

Your question Michael Thank [ph]. you. next is coming Instructions] from Anthony [Operator

live. is line Your

the exactly mine they me The have? just that had sir. you can tell acquisition, metals precious Yes what you

your acquisition mine understand Seguela is is the they we're is Yaramoko and I and assets. the gold that gold-only recent question, bringing. mine a you're the asking If a all The If that about are assets right, project gold-only.

a more. I one Well, you sir. maybe future? got the be Yes all dividend time this or Will in quarter any paying

means is the is that a will can over to quarter. make for but of Quality over the be the really. that bringing this of bringing portfolio of to time one not return dividend can with time. investors question to a a provide a a assets, -- sustainable The assets of sustainability sustainable purpose of when shareholders over in question sustainable that assets of build the us transaction high-margin purposes over provide return Roxgold time. or Not long-term dividend to if is And a

capital that decision project is a midst construction when, quarter. the Seguela it's have capital of we question of in for this a project So a in us an important

is project, with. that think will the once that price -- that the of with launch discussion I this Board engaging dividend a the So environment one we be in

I for appreciate was a quarter. all a was It And shareholders. you're quarter. everything This doing great very Well. strong

sir. Thank you,

all That's questions. you. Thank the

you. Thank

next is Your Ryan Thompson. from question coming

Your line is live.

Jorge Hi team. the Thanks and update. Yes. for

you the on I about Just you getting agglomerated talk metallurgical million types? crushed a those little quarter. ratio the X.X question in versus Lindero. just of of are If sorts breakdown of of you just on I of down in tons X.X a look bit to ore Could for second or XX% of give I'm differences of about sort And sort much course stack, me the to stacked the that and between tons see HPGR math. pad was maybe performance ounces million ore a seeing my produced how at types two ore?

we QX a stacked our We of provide second disclosure, we a me provide amounted In the Yes. here Give detailed or a breakdown where trucked ore. here. XXX,XXX explanation tons. roughly for very

So taking ore not particularly composition on good stockpiles from leach core was run-off the the terms but originally place planned. the of with stacking. of conveyor mine have stacking the a mix, quarter was total stacking and trucked And stopped the ore in higher XX% QX the tons. placed than At stage, XXX,XXX the system. is stacking this it truck we completely All

through to So, is leach conveyor and is agglomeration everything that's going HPER going the running the stacking. part --

and are and we reliability that's development achieving with mechanical improvements system. about efficiency So, of continued speaks in an important that the that the part

performance course recovery and and rate. our and consumption metallurgical planned are sales, consumption to again, our performance certain line of stacking be based that according ore extraction and it Now, stacked conveyor ore metallurgical tracking we cyanide ore, of types is all the that on in our

the year, the have we system. running HPR we'll any we last it see the foreign conveyor were and decided significantly March for a stopped in contribution the three West have being those benefit a components didn't or was Pro it and agglomeration of of knowing system, we June higher stacking for doing were So didn't the the again the agglomeration of right? We the alone. that change as HPR course being the That is system is last vendor have complex foreign of of we year third ore components and three year a already that the stacking, the implement, of always HPR stacking stacking measure vendor it last around temporary to stacked agglomerators and ore that key quarter the system We superior technicians any doing and those of benefit of alone. technicians the of

we're right -- on been last has least way support HPR operators over you'll anticipated a than is doing see in now trucked quarter time It's the we're ore last quarter and technical that's this significant any gained longer site the at again But working amounts have for experience. placed Ryan on significant with taking change the in because it of more So our leach. the the alone.

perform to hear just those systems to like bit starting Okay. here. gears West better sound Maybe good over a bit stacking switching No to a Africa. that's little that going they're

us more just the on mining Could more should negotiations dig some expect a maybe and what on those mentioned convention Seguela. just we you little that for negotiations You there? color bit into and provide

Yes.

of But And We launch I'll we country care this far process this currently project the are the we're allow not negotiation. land. the it negotiations have getting convention. a the Cote with with construction expected say us we would end are on agreement it for the of that the back government. in It quarter. we between way we a the is to government parts the an the of doing negotiations. are and and of from can round engaged expect first where first respect we team of lot the in It's is and draft And a the towards a d'Ivoire authorities. to the with them in would But

helpful comments know how Perfect. But in QX be just any of or even you July. Are performed Thanks the QX? on ask I in obviously you how commentary one deal didn't would it until QX. able maybe there? month the I'll provide on can make performed that. that Yaramoko And for just Anything if any more. close to in

areas. played local the the shortfall against variability grade Yes some the as plan. we grade to areas high in And we out the some mine of in place carry it variability They those that were small high extremely a of high-grade in And understand – zones ounces do those well. event. due QX now. Yaramada in sequencing plant. a is right as And in this But high-grade

we performance in in Yaramoko QX, reliable of And anything So, concern a see is tracking or long-term of this and all mine. in short-term rather a area line don't and are with we a we as July change in in quite already the shortfall trend particular a extremely high-grade seeing plan. know feature small but area the asset

Got it.

the Okay. Thanks all today. I have That's Jorge. for update,

Thank you. Ryan.

Thank you.

next coming Your from is Adrian question Day [ph].

Your line is live.

Yeah good And afternoon. have have if may. for XX I months? you do other what items plans CapEx anticipated the for then is? had you if let's questions, major a couple given Can the financing? Seguela any that say of Also please, any next me I remind you over CapEx

morning Good Adrian.

morning. Good

for estimated feasibility as for the the are [indiscernible] CapEx the project. that execute million big are around study. million the encapsulated Seguela The chunk per $XX with we execution approximately to capital of $XXX the million $XX is aiming EPC A of within agreement

this the this bigger construction. expense usually towards And you with and of probably construction. half flow two-thirds start X.X So is as projects to the the capital years through case is these seeing

plus we In of our comfort we we corporate just availability cash the construction are ongoing to and free terms on have launch putting cash place based generation. in our into prepared activities mentioned of existing facility we during plenty believe commentary, financing, as

but like, No enough got additional very you've enough, run without always I you you've you've Okay. got which think know financing? sheet, conservative any I a balance

yes. is that absolute, an Yes,

you. great. Okay Thank

in queue further time. are [Operator at the questions you. Instructions] There Thank no this

look Have I today's to If everyone to day. would no joining to there we questions, are a thank great for further forward us and earnings call like listening next quarter. you

you. today's Thank conclude this and does gentlemen event. Ladies

Thank participation. time this you wonderful at disconnect and have your may day. You for a