Fortuna Silver Mines (FSM) 11 Aug 222022 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen. And welcome to Fortuna Silver Mines Quarter Two 2022 Financial and Operational Results Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions-and-comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Carlos Baca, Director of Investor Relations. you. to over Carlos,

quarter Good Alberto you and presentation and to operations Fortuna the financial Jenny. today the like behalf on to I to and of second Criddle, for Cesar Operating Officer, call call Latin welcome Ganoza, President Luis Fortuna be available results XXXX. morning, Officer; you, Today’s Hosting Chief Executive gentlemen. is Officer, call Dario Ganoza, Africa. Jorge and Featured Velasco, on ladies Paul will would Chief our of the and Chief Thank Chief Operating Silver West Mines Financial fortunasilver.com. Presentation Officer; homepage our on America; earnings box at

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

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

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

Carlos. you, Thank

continued silver Our in and line management well are meet both We the in XX, and the to of plans production business and delivery in pre-released gold guidance. to production second July with annual tracking expectations costs perform figures quarter. in

For pressures are up XXX,XXX beginning ounces the explosives, range chain, the the diesel, XX% all within key X.X In strain of for spite at achieving for guidance zinc ounces our guidance. silver, middle on of range and year silver the cyanide like tracking six first inflationary on steel, consumables byproduct for annual of XX% and months, we the our provided the we Gold year. supply gold produced XX%, of and balance. the for with lead making of roughly sales and and mines accounted the cost the at million

XX% and but as the Our Jose complete Yaramoko end of approximately is which complete. June, of the that But are mines fact in range at Séguéla San XX% the importantly is within construction, of Lindero, the it. today more upper guidance

over line. line. We to leading with experiencing active to satisfied deviations very not team and budget in experience of selected put the the health work. social delivery free X.X partners lost further the deviation a injuries am I construction I ounce Africa, during projects CapEx with and call. time price quarter incidence at our gold. the so with outcome Chief are of significant and and you Operating construction sustainability, on to Officer any Paul $X,XXX million On highlight planning, construction want in for a per the provide In of zero the several and will safety, challenges with $XX.XX result a Séguéla and quarter, on and as of hours time well. West period is silver We years to experiencing and the ounce guided observe strong down worked across of our of strong Criddle, the world respect realized per around owner’s all time details monitor contractors, far, significance good The environmental sites, consolidated we our

$X.X at Our EBITDA million, EBITDA $X.XX adjusted with million headline income margin income share I and in position of million. the been We end adjusted per for liquidity income remain to free financial net well difficult companies period. $XX period. million, of $XXX a of of that demands cash million $XX.X operating the $X.X a numbers mining losses with has XX%, quarter say were flow several of an want $XX million, to funded reporting a healthy of the mine capital net of peer of or meet our this

came physical gold as small Although, to below per share. for targets, expectations cost described, and I managed we silver production, met We log a targets for analyst and and earnings gain. just

due Yaramoko and to provisional write-down zinc impacting low and at revenue revenue stockpiles by million concentrate exposed quarter earnings to this June. a of also $X steep our grade fact was impacted to earnings decline that amounting from adjustments million April were $X.X Our we mine. of to pricing And negative the XX% comes inventory where sales, our prices in from a were silver prices

budget drill from up gold add we million rigs the result as with to approximately approximately turning statement. of of annual disclosed reserves sites We base front, a an annual that equivalent ounces have million. X across our XX $XX in consolidated On work exploration

of keep inferred resources. at being Séguéla, exploration Our we the with ounces latest to pursue that continue are priorities XXX,XXX value success program. to new December deposit high several adding opportunities where

San Project of initial this $X priority also Yaramoko of we our at quarter, mines, other investment Boussoura for Faso reserve the share Jose with is The case return In program the to year. and began Burkina definition repurchase and our an the replacement million. shareholders in

that a year demands sensibility and aspects into For include liquidity our several in gold the of the program, volatility current not our risk silver position capital also of consideration but only the construction in execution and to valuation, prices. bring to we

on turn -- bit into to color introduction, it So, Chief like with more a it that, business. Officers, to as you on Operating give the an to turn I’d our

you Cesar, to start? want So,

Absolutely. in Thank XX,XXX a gold. of Jorge. Latin In America three second you, X.XX operating ounces and the Thank production quarter, ounces delivered the silver mines of strong you. million of

mines As and on year-on-year to Lindero six of the Jorge to for range. gold, highlighted, first of range. Argentina, production to a XX,XXX the production aligned make ounces, a and which ounces annual guidance annual million production at guidance X.X track are first of achieve six for totaled a Allow year gold for the in is assets. ounces months XX,XXX Latin America, represents me months the all Gold remarks silver achieve In some total XX% delivered increase ounces. XX,XXX of

higher cyanide of of During productivity and million the capturing at consumables on successful production means and the operation on second placed all in been achieving fresh pad key the of quarter, sulfuric by quarter, tons ore reductions crushing stacking focus the has diesel. processes during acid, on makeup important operation opportunities steady such circuit, second to X.X delivered demonstrating and as the the XX% continues The performance.

throughput of ounces gold. lower Reserve line grades, Jose San X,XXX quarter production mine and combination Moving Mexico, XXXX, mill the lower second in and which to to a a Compared of the delivered of estimates. variations of are million of the with X% on head result silver ounces X.XX are Mineral

per aim mine. selected improve the of With operation cost implemented areas and long-haul capacity total in reduced has to production mining ton, successfully the stopping

and million The to a Back commissioned, ounces range. on which achieve plant zinc Caylloma was steady In first at million million XXX,XXXounces new ounces. and ounces annual achieve times million million addition, production production XX.X ounces the Caylloma to gold cycle first totaled of remains zinc six mining Production overall of the pounds upper XXX,XXX is of of its costs. is of you, shotcrete Silver underground track support months silver, to the XX,XXX totaled a year on delivered lead. for Peru, to X.X six the XX.X range silver, of Mine reduce in months operation guidance pounds lead. pounds The Production of and Jorge. for expected X.X guidance. track XX.X of performer, and and

you, Paul, please? Thank Cesar.

quarter position Africa Operations well with performance upper solid the gold the pressures in second our are construction not impact did budgets. Thanks, range of in year-to-date At line Mine, and with to the on Ongoing progress plans in Yaramoko continued XX,XXX production plan, their the of strong tracking target in a respect was worldwide annual in operations ounces supply nor chain QX and the Yaramoko of ounces guidance. to West Jorge. leaving and with Séguéla. meet a at inflationary production operation XX,XXX

to be continues progress to with d’Ivoire, on construction and Côte our at line Séguéla Moving in steady plan.

on million key and are to progressing complete capital continues ordered, notable June phase long path is the time management activities to consolidated Europe their earthworks signed Mota $XX XX, critical mobilization project scopes The critical the the team the commenced now track XX% for pool budget project third lead as awaiting in the to mid-XXXX. was initial of of million shipment project bulk establishing above the milestones the advanced XX% As of projected facilities, approximately derisked with been. plant Construction and is be $XXX budget fleet at well The through to quarter. is accrued. and EPC having as The first mining of currently has plans on with processing gold contract Mota-Engil and on ground services and its advancing completion. site.

contractor the water currently Water with While packages of of HV underway and now of site. XX,XXX secured X% plan site. cubic completion. of have we is grid with stored. major are been contract just become ahead only connection critical S&P meters construction and deliveries majority are first on harvesting complete and the on All mobilizations arriving storage is commissioning embankment ahead now at activities Abidjan advancing scope The equipment

to Operations with the Back Séguéla’s the of established. mines key scopes in to first open operational team, of Manager arrive the operations during excellent Dialogue The and level of member begun budget the around progress have to next with are and readiness continuing hired well ministries with team Convention. at on operational the advancing General ground, steel advancing Jorge. with plan. the the the the Mining was ongoing is and d’Ivoire structural progress quarter, staffing site. of negotiation In you, on shipments parallel Côte be the according A to management system

Luis, Thank update. will provide you financial you. a

Yes.

$XX QX the a XXXX in have over the been and -- sorry, $XX.X by at XXXX. higher sales. lower production quarter our of million net contribution Jose and Jose for am was sales The sales This of is declining million -- a than with were XX%, million the QX the for by sales additional This offset topline. Yaramoko higher the were decrease This an XX% San I sales of $XXX.X in lower by San lower throughout XXXX. of in was to -- decrease which driven of to were representing close prices QX So $XX.X of sales partially were driven XXXX, in line QX our million. quarter prices adjustments and quarter guidance context X% probably increase silver and concentrate representing with million, XX $XX

$X.X silver, G&A. over estimate typical not QX however, metal by QX Our as million. and Corporate depletion G&A with steady sales the impact million, results The operating be X% at provisional $XX.X consolidated in administrative June. includes G&A ounce Yaramoko, the to XXXX. Jorge provides impact of Around saves. quarter the per operating $XX.XX experience during QX of close the corporate quarter, accounting of In effect are statement purchase accounting increased in our gold, San Yaramoko one-time triggering end in for our the per higher the year. XX higher costs, from breakdown a pressures MD&A of of trends. contributor quarter that a added to large income were contribution is mark-to-market in to realized than experienced, inflection, and reduction higher Jose. item sales from is and and $XX.X points this mentioned, we offset income a XXXX price Yaramoko which effect of Jose accounting. Page is the $XX.XX the mine, nine quarter. particular prices as $XX.X adjustments, price On decline, $X.X $X.X our in well comparative XXXX in the as of compared to negative million average this with $X.X costs the guidance spite line to the a basis, million basis, provisional of concentrate ounce A cost San at in expenses quarter our relation lower around Prices a in on our our at due impact of With to our increased million entirely respect comes expense for Lindero to Lindero G&A, of which to be general at prior in is at cost the inflationary overall compared reflects

local VAT affect grade the balances weaker and mostly at an We related expect inventory million, collectible rate Burkina has as the range million. currency to that impact our was in the FX quarter Yaramoko. and unrealized loss of the the at operations Jorge to to write-off in included $X our in run euro. a This by our stockpiles be euro Faso Other million of of to items an low $X $X mentioned impacted

was effective of due taxes. mostly withholding the timing high, to Our tax for quarter particularly rate

XX% Our gain of the tax $X.X noting prices item year-to-date million but our $XX.X rate the year. loss. for quarter EBITDA a which of This Séguéla. expenditures The unrealized area $X.X gain worth reported additional on derivatives, a the free by as ongoing line flow in EBITDA of result in was income below higher We $XX gains million in new in the was QX and was before quarter cash at million realized free million of and costs. is lower An drop effective expectations our the on sales is zinc $X.X unrealized above statement million and driven consisted with the strong in flow $XX year-to-date. X% in quarter. such of construction XXXX, from of $XX cash million operations prior as million the

we million million liquidity, balance quarter with closed revolving the $XXX $XXX $XX the facility. with under million On our sheet, undrawn of credit

which outstanding the debenture is including debt convertible $XXX net a total modest Our leverage. very million, provides debt

quarter million of construction, year-to-date. have initial and we million million $XX funded project-to-date the On declared. to in Jorge. Séguéla On $XXX $XXX we Back you, to basis, close the a the $XX million funded total of capital

all management. That’s Carlos? for Okay.

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

[Operator you. Thank Thank you. Instructions]

of The first ask question please is Trevor, Turnbull coming from your Trevor Scotiabank. question.

that would Thank have at plant, you. of would I that that mentioned, little wondered, there in about potentially some your that reduce bit timing and of some you you at to the think, I if help input much were write-up those the get in SART of Jorge, just cash and projects talk projects costs a terms how you optimization Lindero of could cost maybe expect a benefit the of savings? out you

SART the allow of those in reduce per I our quarter in can budget, the think cyanide But budgeted detail allows the We study in cyanide expectation to now a Trevor, right here, our a of system. ton. optimization some I range ton the center sorry, on initiatives. significantly Yes. cost and provide can our am of to one is is guidance we in Cesar the plant, us kilo feasibility be X.X which kilo optimization that -- I and in per makeup

So about and per sulfuric with the currently that per to a Cesar, budgeted and have. meter. initiatives cubic on comes which efficient and under X.X the kilo delivering per expand that kilos also of a study region the cubic we X.X meter solution. you And acid, few we want about in use other of feasibility in use metric we budget, we of a are in more have the that -- SART is you

Jorge. Certainly,

key mentioned, you cyanide one is here. the aspects As of

when the range compared the the below we versus XX% to study, some in in significant XX%, in the -- sulfuric have are -- improvements also feasibility We of acid consumption feasibility. of consumption in

fleet, So, reduction that significant prices our the as year we today’s the which impact… a mining haulage we for as and expect by have for well the cost a consumption significantly increased of year the in lowering full impact our diesel as obviously on end has productivity, well

Yeah.

… the total cost. in

and impacted -- a costs seeking have. end productivity range the of still amount $X,XXX, lower still believe of work per all-in the by Lindero advance That $X,XXX We start in we as I towards we of The whatnot fair that ongoing, some range. more all-in on should gravitating side still ounce, have is of corrective the and sustaining that have being costs maintenance are Yeah. Mine on costs. the But we that somewhat of sustaining. the weighs initiatives all-in corrective competitive $X,XXX that maintenance, sustaining our that

Some within of continues all in of phase right? in can difficult right, carrying spite mine well competitive pandemic, $X,XXX, But short, cost, we legacy commissioning in that, guidance that a COVID still the to are the say of all-in work through and for the range I the yeah. of our that sustaining, perform

I deposit That details. resources. might for Africa, other out good. targeting just again, first we satellite in and one we maybe the would you the the should a that you deposit, put if as see you wondering, Sunbird question appreciate on was resource next deposits? year sounds the be inferred came where another mentioned, first a No. that one I look other satellite resource of I might had about that West

that encompass remains Sunbird the estimation the that existing open. potential results in ore, are stands those quarter XXX,XXX an with for X.X. materializing higher grade we of a the resource type Roxgold drill inferred for with at acquisition of the produce our of mine exceptional of ounces where resources combination XXX,XXX outside with currently continue advancing the the to masking driver the ounces. shell was on right? are business around with We like, we strong considering already in was of some underground are ore. Séguéla One grades view the Sunbird, grade opportunities, things this to first of Sunbird of of grades higher But plan published gold

will of to right Outside about that, specific we to is your targets now. in XX yes, there we So have believe inventory grow. our -- continue Sunbird question,

corridor, have ongoing are deposits Koula, So drilling to now, of We we drill outside are results. we those, -- Ancien, right? we look an those. currently believe and Agouti along have of are more of our the hosts Sunbird that pursuing those that testing in the XX-kilometer XX corridor we Antenna, kilometers some within yes, we But of drilling satellites. kilometers these We the and forward the We have, drilling. structural we currently at publishing XX targets outside have and inventory, -- XX program Séguéla and with pursuing stretch we targets of

companies while slow down not building, as we this continue and sometimes high that’s we aggressively. in done. something construction, value exploration have they drilling we opportunities We that rate embark And as are

forward results from Yeah. Thank drill these other all of to That’s I Jorge though. Okay. Look some you, seeing had, targets.

Thank you, Trevor.

from DeMarco Bank coming is National of Don, next Your please question Don ask question. your Financial.

and Operator, good you, Jorge morning, and Thank team.

continuing means tell South, might QV do And maybe you XXXX zone spending on XXXX it in just CapEx West earlier with there if Prime to about a and in Just for there? little Bagassi production that how Africa, at what I development talk about the incremental bit planning and are you us you see XXXX? could more much you could be

to development further is QV gold sorry, year inventory the to of in Prime and mine this ounces we flexibility our in are of about today provide Prime with advancing the Yes. QV XXXX. in XX,XXX XXXX,-

method in us change that will a allow resource. contemplating mine mining to this also we costs are as reduce we So

and the Paul was with the million be the included guidance will we team our development of in assessed that this capital But flexibility at budget XXXX. that beginning and very into into welcome year not brought year. for have this $X We budget have

Okay.

very change an to is mine are right? developed mining has a ahead There and method with giving off, it. plan team The around that like nothing in we moving and the sensible flexibility underground pays

you. Thank Okay.

incremental an maybe So appreciate I that. $X million.

at you is have mine Jose. San over of speaking implemented shifting long-haul So San stope that to Jose, and

maybe grades would decreasing Looking quarters? the forward, increase an in increase tonnage expect tonnage we were to or to if see coming in

been At San the mining is narrower, are No. ago And our years, right? we guaranteeing of as -- through experiencing method nameplate reserves we mean at production narrower in is zones. more what XX Jose, San not -- X-meter five That can the plan. Today, years what we wide, the we No. that when over a have I X-meter were capacity stopes our mining they just Jose, are So the the wide, in in plant. meet wide. assist change meters us we

X% resolved the quarter in a that roughly year Oaxaca, experienced good. the less But of in all international non-continuous we compared providing everything So shortfall issues were what cost of to why was the blockades method more in efficient that’s change meeting But five those production quarter to we higher against experienced that three and in impacted a and for days planned is days, compared throughput so bit through we ago. X% operation Blockading year. But mining reason the sport flexibility right? the the compared as that saw for throughput the lowering we of to is making well, and right? in throughput and

Okay.

good. But are That’s in other because Why the ask AFC pronounced specific higher inflationary what final then, the cost you costs the if in that, pressures to it mentioned Lindero. that is most at mines, the noted And Okay. fairly it report attractive cyanide is of Lindero, a specifically? was versus actually is question QX. Lindero $X,XXX [ph] I

cyanide, do sulfuric cells, to Yeah. mainly the dependence P to key the That’s It structure really has key certain higher reason. related consumables, cost with acid. in the

Okay.

Okay. Well, much. for That’s me. all very thank you

Thank you.

Kranzler Your Research ask Dynamics. next David Investment question is of question. coming your David, please from

in operating in have the of cost taking how lower XXXX quarter for second Do of quarter XXXX XXXX? of know the second between call. guys. I Hi, attributable income is the and questions. my couple just a offhand of you of silver much average variance quick Thanks to

lower of lower will can here. to price price Yeah, of I give right? of down I sales. of head, you XX% income the of is the be in much terms second, operating attributable my, How silver, job probably -- more we better top we can silver? that lower price you just us if that my a is the XX%... the a do potentially But But will lower of say, precise of out give silver

down number. Given the

XX%. fairly silver But XX%. Yeah. Silver is down roughly Gold unchanged. is down is

Yeah. From $XX right $XX $XX to around I think.

mean, average the come disclosed for to provisional let’s the the also from concentrate those You from emphasize that, have where prices sales, effect metal. as San compounding I the say, consider production contract, particular silver that we But on we comes have which Jose adjustments effect.

So, yes, on the top of my XX%. head, I would say around

Okay. Great.

I of goes not again, So, but I up, the the guess, everyone that why one-time is price mean, in thing, assuming invest is back of a which one reasons. higher? price just silver This the would assuming silver everyone, Fortuna, goes of potentially

Fairly on, expectations depending right, the on Certainly. price. silver your

Yes. I mean…

Sure.

and the by business …we this and physical is the ounces a metrics, delivered right? driven cost

price thing, down the second did $X write then a the Is with you one-time maybe if stays so kind has that lower, gold is that And won’t of it stockpile low to bit right. question Yaramoko. little at same, That’s that enough the again? do the million of happen of grade a write-down that

that, the short answer is yes. purposes, David, raw for material

the We basically an that’s historic inventories, which over be the one-time and way has have large regarding on logic is, large, more cost accounting the it that not the mining thing do incremental same accounted so those on stock with based which to to the extent. on expect necessarily accumulating to service, behind XXX,XXX It’s taking of this done economics right? where are those the basis, average been cost cost, of cost quite an to stockpiles tons stockpiles a those a --

low amount. And Yaramoko the of be significant those we that, more one to we much second, going in expect don’t So is inventories. things, -- any to the account ore we grade addressing at accumulate that and two are for way

If So something size significant. expect of going should anything forward. be don’t anything, lower it much that we

in of follow-up a $X,XXX get be we moves, that gold on ounce? if that, is something say, price And that the that is lucky Great. Okay. processed low then just stockpile, over grade quick an profitably could

tariff, above all that absolutely, those So, -- the is metal yes. content of is processing in stockpiles

So of in our process current the tail I life that mean, right mine. is are profitable, and of of stockpile that to prices the -- principle

Great. tomorrow Economics and I Thank you am Thank Jorge, more on podcast. very the have sure Arcadia for you I questions will much, you.

forward you. Look to Thank that.

very you much. Thank

Your Brandsteka investor. is private ask from please question. Ronald, coming next question your Ronald a [ph],

my in taking have guys, to and ask my Okay. coming all-in When call, some the rather Hey. what’s last Jorge be I Thanks, Most significant should answered, have about and team. that sustaining quarters, look the continue been costs to I guess, questions but of the for wanted Yaramoko. two four I variance to that we driving questions, experienced and expect variations. case the quarters years? at

and allow first I to can to past, up the then come from have in reserves. that Hey. it’s Yaramoko great before a with that then Roxgold with consistently the that has Well, mine and bit what a elaborate pass answer has give a been of is the shareholders the fact Paul from I a further. But question we seeing are profile -- declining

-- range So, grams mine basis, mine to producing On has side, been per requirements ounces, last less over producing the and from want the some quarters sustaining. ton X From of has grams, to want to say therefore, per has cost been year. a X the or the the costs I right? mining the metric therefore, are do X in ounces, less Paul, grams, We mine we grams, the performing been ounces. the you If X on that, impact we But basis, four -- the view, we a of at the of the in top is ton per $XXX on what might perspective the on perspective, look point more? that, lower of of capital around at very an steadily all-in sustaining from range cost capital. costs operations ton. remain a all-in elaborate very which steady have $XXX we really manage

Yeah.

has very at production line in, the But come same relative the bottom strike density access the develop mine’s -- having to what much rate shorter. capital in Ron. at length The Jorge mine mine. think changes depth. to saying, are I decline it’s the we gold with the so to of still the The at

to yeah, we looking, think, So, are is. I it gold that where production relative

developing way I We life, think then before decline next it get i.e., months and bottom the to a the the of little the we mode, come for we will now the for the are XX turned where stoping in months, be of mine. costs stopped harvesting while last fairly just the mode. XX those it mine’s harvesting with consistent is into mine while down

So until to we the bottom I decline. don’t anticipate the any get of increases

Okay.

Okay.

So incurring lines, the expenses. cost? that during was the you Along write-down those the some all-in impact did sustaining did million quarter -- that $X are

question. The answer is yes to the

Okay.

Okay. forward that… Look to

and the stockpile still both question develop within tracks Don the QV in which is to guidance. across So per earlier, the capital Prime additional quarter our included forecast the the and of write-down the as year, for

Okay.

Okay. all have. That’s I you. Thank

on to the mentioned, that silver I overall San Jose, impact If around of will confirm let’s drop want the to prior in within address yes, question million. on XX% mainly and coming, from I may that, the as operating I price income yes. $XX would operating XX% a drop been say, silver price, be income of the have of just

Thank much. you very

Asset Management. Your is Day from coming Adrian next Day Adrian of question

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Okay.

Thank Okay. you.

queue. [Operator Instructions] the will to now for no back closing management turn to it questions Okay. any remarks. in further appear have over We I

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

This call. does ladies you, gentlemen. Thank today’s conclude and conference

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