Fortuna Silver Mines Inc. (NYSE:FSM) (TSX:FVI)
today reported net income of $10.3 million, Adjusted EBITDA of
$30.6 million, and revenue of $64.0 million in the third quarter of
2017.
Jorge A. Ganoza, President and CEO, commented,
“We have had yet another quarter of strong operating and financial
results at our operating mines in Peru and Mexico, positioning the
company well on track to meet our annual production targets and
financial objectives.” Mr. Ganoza continued, “Having announced a
positive construction decision for our Lindero gold Project in
Argentina, we expect free cash flow from our operations to
contribute significantly towards the funding of the construction
capital requirements.”
Third quarter consolidated financial
highlights
- Sales of $64.0 million, compared to $65.2 million in Q3
2016
- Net income of $10.3 million, compared to $10.2 million in Q3
2016
- Earnings per share of $0.06, compared to $0.08 in Q3 2016
- Adjusted net income of $13.1 compared to $10.0 million in Q3
2016
- Adjusted EBITDA of $30.6 million and Adjusted EBITDA margin
over sales of 48%
- Cash flow from operations before changes in non-cash working
capital of $26.2 million, compared to $26.5 million in Q3 2016
- Cash position, including short term investments, and working
capital as at September 30, 2017 were $195.8 million and $197.6
million, respectively
- Silver and gold production of 2,009,362 and 13,412 ounces,
respectively
- AISC1 per ounce of payable silver was $6.1
Note 1 All-in sustaining cash cost is net
of by-product credits for gold, lead and zinc (Non-GAAP financial
measure)
Third quarter consolidated financial
results
Consolidated Financial Metrics |
Q3 2017 |
Q3 2016 |
% Change |
YTD 2017 |
YTD 2016 |
% Change |
Figures expressed in $ millions except per
share information and AISC |
Sales |
$ |
64.0 |
$ |
65.2 |
-2 |
% |
$ |
192.8 |
$ |
152.4 |
27 |
% |
Mine operating income |
|
24.9 |
|
28.4 |
-12 |
% |
|
74.3 |
|
59.9 |
24 |
% |
Operating income |
|
18.9 |
|
21.2 |
-11 |
% |
|
52.7 |
|
30.9 |
71 |
% |
Net income |
|
10.3 |
|
10.2 |
1 |
% |
|
32.2 |
|
11.3 |
185 |
% |
|
|
|
|
|
|
|
Earnings per share (basic) |
|
0.06 |
|
0.08 |
-25 |
% |
|
0.20 |
|
0.08 |
150 |
% |
Earnings per share (diluted) |
|
0.06 |
|
0.07 |
-14 |
% |
|
0.20 |
|
0.08 |
150 |
% |
|
|
|
|
|
|
|
Adjusted net income1 |
|
13.1 |
|
10.0 |
31 |
% |
|
36.4 |
|
11.0 |
231 |
% |
Adjusted EBITDA1 |
|
30.6 |
|
30.6 |
0 |
% |
|
87.3 |
|
53.5 |
63 |
% |
Cash provided by operating activities |
|
20.4 |
|
29.0 |
-30 |
% |
|
41.2 |
|
26.9 |
53 |
% |
Cash generated by operating activities before changes in working
capital |
|
26.2 |
|
26.5 |
-1 |
% |
|
61.3 |
|
39.6 |
55 |
% |
Capex (sustaining) |
|
7.5 |
|
5.4 |
39 |
% |
|
19.9 |
|
14.5 |
37 |
% |
Capex (non-sustaining) |
|
6.1 |
|
3.6 |
69 |
% |
|
11.2 |
|
21.0 |
-47 |
% |
Capex (Brownfield) |
|
2.2 |
|
2.2 |
0 |
% |
|
7.8 |
|
5.7 |
37 |
% |
All-in sustaining cash cost |
|
6.1 |
|
7.5 |
-20 |
% |
|
6.8 |
|
8.8 |
-23 |
% |
Cash, cash equivalents, and short-term investments2 |
|
195.8 |
|
123.6 |
58 |
% |
|
195.8 |
|
123.6 |
58 |
% |
|
|
|
|
|
|
|
Total assets2 |
|
652.9 |
|
387.7 |
68 |
% |
|
652.9 |
|
387.7 |
68 |
% |
Non-current bank loan2 |
|
39.8 |
|
39.6 |
1 |
% |
|
39.8 |
|
39.6 |
1 |
% |
Other liabilities2 |
|
1.3 |
|
4.8 |
-73 |
% |
|
1.3 |
|
4.8 |
-73 |
% |
|
|
|
|
|
|
|
Note |
|
|
|
|
|
|
1
refer to Non-GAAP Financial Measures |
|
|
|
2
Comparative figures are as at December 31, 2016 |
|
|
|
Net income for the third quarter ended September
30, 2017 was $10.3 million or $0.06 per share compared to a net
income of $10.2 million or $0.08 per share for the comparable
quarter in 2016. The slightly higher net income was driven
mostly by lower income tax expense of $5.2 million as the effective
tax rate for the third quarter was 34.7% compared to 51.2% for the
comparable quarter in 2016. Adjusted net income was $13.1
million compared to $10.0 million in 2016, mostly after adjusting
for a $2.2 million loss on financial instruments, net of tax, in
the current quarter.
Operating income for the third quarter ended
September 30, 2017 was $18.9 million, 11% below the comparable
quarter in 2016, attributable mostly to lower financial results at
our San Jose Mine related in turn to a lower realized silver price
of 14% and higher unit costs of 13%. These were partially
offset by stronger financial results at our Caylloma Mine driven by
strong zinc and lead prices and lower share based payments of $0.1
million, compared to $2.6 million in the third quarter of 2016.
A graph accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/78cdb59e-03c7-4d52-a704-92e21d2c1bb3
Cash provided by operating activities in the
third quarter of 2017 was $20.4 million, a $8.6 million decrease
from $29.0 million in the comparable quarter of 2016. The
decrease was due primarily to negative changes in working capital
in the third quarter of 2017 compared to positive changes in Q3
2016. The negative changes in the current quarter are related
to trade receivables and inventory. Cash provided by
operating activities before changes in working capital was $26.2
million, a $0.3 million decrease from $26.5 million in the third
quarter of 2016.
Liquidity
At September 30, 2017, the Company had cash,
cash equivalents, and short-term investments of $195.8 million
(December 31, 2016 – $123.6 million), an increase of $7.8 million
over the end of June 2017, and of $72.2 million since the beginning
of the year. The increase over year end 2016 was due
primarily to a bought deal equity financing in the first quarter of
2017 for net proceeds of $70.9 million.
The Company is in the process of amending its
existing credit facility with Scotiabank from $40 million to $120
million. This will provide an additional $80 million of
liquidity on top of the $40 million which have been drawn as of
September 30, 2017 and completes our funding requirement for the
construction of the Lindero Project.
San Jose Mine, Mexico
|
QUARTERLY RESULTS |
|
YEAR TO DATE RESULTS |
San
Jose |
Three months ended, September 30, |
|
Nine months ended, September 30, |
Mine
Production |
2017 |
2016 |
|
2017 |
2016 |
t milled |
263,697 |
268,242 |
|
799,420 |
632,432 |
Average t milled per
day |
3,038 |
3,056 |
|
3,054 |
2,425 |
|
|
|
|
|
|
Silver |
|
|
|
|
|
Grade (g/t) |
229 |
224 |
|
231 |
229 |
Recovery
(%) |
91 |
92 |
|
92 |
92 |
Production
(oz) |
1,774,556 |
1,780,825 |
|
5,454,793 |
4,296,125 |
Metal sold
(oz) |
1,739,066 |
1,761,101 |
|
5,392,495 |
4,270,370 |
Realized price
($/oz) |
16.85 |
19.47 |
|
17.16 |
17.37 |
|
|
|
|
|
|
Gold |
|
|
|
|
|
Grade (g/t) |
1.71 |
1.76 |
|
1.74 |
1.73 |
Recovery
(%) |
91 |
92 |
|
91 |
92 |
Production
(oz) |
13,248 |
13,951 |
|
40,773 |
32,358 |
Metal sold
(oz) |
12,817 |
13,739 |
|
40,079 |
32,155 |
Realized price
($/oz) |
1,280 |
1,327 |
|
1,251 |
1,268 |
|
|
|
|
|
|
Unit Costs |
|
|
|
|
|
Production cash
cost ($/oz Ag)1 |
1.53 |
0.73 |
|
1.29 |
1.74 |
Production cash
cost ($/t) |
62.23 |
54.83 |
|
60.31 |
57.69 |
Unit Net Smelter
Return ($/t) |
162.62 |
175.61 |
|
165.76 |
160.73 |
All-in
sustaining cash cost ($/oz Ag)1 |
7.75 |
6.94 |
|
7.35 |
7.95 |
|
|
|
|
|
|
1 Net of by-product
credits from gold |
|
|
|
|
|
|
|
|
|
|
|
The San Jose Mine produced 1,774,556 ounces of
silver and 13,248 ounces of gold in the third quarter, 4% and 7%
higher than plan. Compared to the third quarter of 2016 silver was
slightly slower by 0.4% and gold was 5% lower. The decrease
in gold compared to 2016 was the result of lower head grades of 3%
and lower throughput of 2%.
Cash cost per tonne of processed ore for the
third quarter ended September 30, 2017 was $62.2, which includes
approximately $0.6 per tonne of non-recurring items mainly related
to mine support works due to a major earthquake in September and
$0.70 per tonne due to the appreciation of the Mexican Peso against
the US dollar. Excluding non-recurring items and exchange
rate effects the increase compared to budget was 4% and was related
to higher mine support cost and local inflation on the cost of
energy and materials. Cash cost per tonne of processed ore
for the quarter was 13% higher than the $54.8 cash cost for the
comparable quarter in 2016. Cash cost for 2017 is expected to
remain within 5% of annual guidance (see Fortuna news release dated
January 11, 2017).
All-in sustaining cash cost per payable ounce of
silver, net of by-product credits, was $7.4 for the first nine
months of 2017 and was below the annual guidance of $8.4 as a
result of higher gold credits.
Caylloma Mine, Peru
|
QUARTERLY RESULTS |
|
YEAR TO DATE RESULTS |
Caylloma |
Three months ended, September 30, |
|
Nine months ended, September 30, |
Mine
Production |
2017 |
|
2016 |
|
|
2017 |
|
2016 |
|
t milled |
133,726 |
|
132,558 |
|
|
395,069 |
|
379,707 |
|
Average t milled per
day |
1,486 |
|
1,473 |
|
|
1,480 |
|
1,417 |
|
|
|
|
|
|
|
Silver |
|
|
|
|
|
Grade (g/t) |
66 |
|
87 |
|
|
66 |
|
93 |
|
Recovery
(%) |
83 |
|
83 |
|
|
84 |
|
85 |
|
Production
(oz) |
234,806 |
|
308,680 |
|
|
704,624 |
|
963,994 |
|
Metal sold
(oz) |
226,155 |
|
309,813 |
|
|
691,659 |
|
980,418 |
|
Realized price
($/oz) |
16.89 |
|
19.56 |
|
|
17.19 |
|
16.91 |
|
|
|
|
|
|
|
Lead |
|
|
|
|
|
Grade (%) |
2.87 |
|
2.71 |
|
|
2.77 |
|
3.22 |
|
Recovery
(%) |
91 |
|
94 |
|
|
91 |
|
94 |
|
Production
(000's lbs) |
7,650 |
|
7,452 |
|
|
22,031 |
|
25,383 |
|
Metal sold
(000's lbs) |
7,291 |
|
7,454 |
|
|
21,454 |
|
25,826 |
|
Realized price
($/lb) |
1.06 |
|
0.85 |
|
|
1.03 |
|
0.80 |
|
|
|
|
|
|
|
Zinc |
|
|
|
|
|
Grade (%) |
4.26 |
|
4.09 |
|
|
4.16 |
|
4.32 |
|
Recovery
(%) |
90 |
|
89 |
|
|
90 |
|
89 |
|
Production
(000's lbs) |
11,241 |
|
10,606 |
|
|
32,670 |
|
32,198 |
|
Metal sold
(000's lbs) |
10,867 |
|
10,600 |
|
|
32,512 |
|
32,504 |
|
Realized price
($/lb) |
1.35 |
|
1.02 |
|
|
1.26 |
|
0.89 |
|
|
|
|
|
|
|
Unit Costs |
|
|
|
|
|
Production cash
cost ($/oz Ag)1 |
(39.53 |
) |
(8.49 |
) |
|
(31.22 |
) |
(4.41 |
) |
Production cash
cost ($/t) |
76.00 |
|
71.83 |
|
|
78.12 |
|
72.16 |
|
Unit Net Smelter
Return ($/t) |
170.37 |
|
134.17 |
|
|
159.86 |
|
123.59 |
|
All-in
sustaining cash cost ($/oz Ag)1 |
(18.79 |
) |
3.27 |
|
|
(11.23 |
) |
5.14 |
|
|
|
|
|
|
|
1 Net of
by-product credits from gold, lead and zinc |
|
|
|
|
|
|
|
|
|
Silver production at the Caylloma Mine for the
third quarter of 2017 was 234,806 ounces, 24% lower than the
comparable period in 2016. Lead and zinc production were 7.7
million and 11.2 million pounds, respectively; 3%, and 6% higher
than the comparable quarter in 2016. Lower silver production
for the third quarter was due to lower head grades of 25%.
Higher lead production of 3% was the result of higher head grades
of 6% partially offset by lower recovery of 4%, while higher zinc
production of 6% was the result of higher head grade of 4%.
Compared to plan silver and lead production were 6% and 3%
below budget, while zinc production was 5% above budget.
Cash cost per tonne of processed ore for the
third quarter ended September 30, 2017 was $76.0, which was 6%
higher than the $71.8 cash cost for the comparable quarter in 2016
and 1% higher than budget. The increase over the third quarter of
2016 was mainly due to higher energy, ground support and labour
costs. Cash cost for full year 2017 is expected to remain within 5%
of annual guidance (see Fortuna news release dated January 11,
2017).
All-in sustaining cash cost per payable ounce of
silver, net of by-product credits, was a negative $11.2 for the
first nine months of the year and was significantly below the
annual guidance of $10.8 due primarily to higher by-product
credits.
The financial statements and MD&A are
available on SEDAR and have also been posted on the Company's
website at
http://www.fortunasilver.com/s/financial_reports.asp.
Conference call details:
Date: Thursday, November 9, 2017Time: 9:00
a.m. Pacific | 12:00 p.m. Eastern
Dial in number (Toll Free): +1.888.567.1603Dial
in number (International): +1.404.267.0368
Replay number (Toll Free): +1.877.481.4010Replay
number (International): +1.919.882.2331Replay Passcode: 10434
Playback of the conference call will be
available until November 23, 2017 at 11:59 p.m. Eastern.
Playback of the webcast will be available until February 9,
2018. In addition, a transcript of the call will be archived
in the company’s
website:https://www.fortunasilver.com/investors/financials/2017/.
About Fortuna Silver Mines
Inc.
Fortuna is a growth oriented, precious metal
producer focused on mining opportunities in Latin America. The
Company’s primary assets are the Caylloma silver mine in southern
Peru, the San Jose silver-gold mine in Mexico and the Lindero gold
project in Argentina. The Company is selectively pursuing
acquisition opportunities throughout the Americas and in select
other areas.
ON BEHALF OF THE BOARD
Jorge A. Ganoza President, CEO and
DirectorFortuna Silver Mines Inc.
Trading symbols: NYSE: FSM | TSX: FVI
Investor Relations:
Carlos Baca- T (Peru): +51.1.616.6060, ext.
0
Forward looking Statements
This news release contains forward looking
statements which constitute “forward looking information” within
the meaning of applicable Canadian securities legislation and
“forward looking statements” within the meaning of the “safe
harbor” provisions of the Private Securities Litigation Reform Act
of 1995 (collectively, “Forward looking Statements”). All
statements included herein, other than statements of historical
fact, are Forward looking Statements and are subject to a variety
of known and unknown risks and uncertainties which could cause
actual events or results to differ materially from those reflected
in the Forward looking Statements. The Forward looking Statements
in this news release include, without limitation, statements about
the Company’s plans for its mines and mineral properties; the
Company’s business strategy, plans and outlook; the merit of the
Company’s mines and mineral properties; the future financial or
operating performance of the Company; and proposed expenditures.
Often, but not always, these Forward looking Statements can be
identified by the use of words such as “estimated”, “potential”,
“open”, “future”, “assumed”, “projected”, “used”, “detailed”, “has
been”, “gain”, “planned”, “reflecting”, “will”, “containing”,
“remaining”, “to be”, or statements that events, “could” or
“should” occur or be achieved and similar expressions, including
negative variations.
Forward looking Statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any results, performance or achievements
expressed or implied by the Forward looking Statements. Such
uncertainties and factors include, among others, changes in general
economic conditions and financial markets; changes in prices for
silver and other metals; technological and operational hazards in
Fortuna’s mining and mine development activities; risks inherent in
mineral exploration; uncertainties inherent in the estimation of
mineral reserves, mineral resources, and metal recoveries;
governmental and other approvals; political unrest or instability
in countries where Fortuna is active; labor relations issues; as
well as those factors discussed under “Risk Factors” in the
Company's Annual Information Form. Although the Company has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in Forward looking Statements, there may be other factors
that cause actions, events or results to differ from those
anticipated, estimated or intended.
Forward looking Statements contained herein are
based on the assumptions, beliefs, expectations and opinions of
management, including but not limited to expectations regarding the
Company’s plans for its mines and mineral properties; mine
production costs; expected trends in mineral prices and currency
exchange rates; the accuracy of the Company’s current mineral
resource and reserve estimates; that the Company’s activities will
be in accordance with the Company’s public statements and stated
goals; that there will be no material adverse change affecting the
Company or its properties; that all required approvals will be
obtained; that there will be no significant disruptions affecting
operations and such other assumptions as set out herein. Forward
looking Statements are made as of the date hereof and the Company
disclaims any obligation to update any Forward looking Statements,
whether as a result of new information, future events or results or
otherwise, except as required by law. There can be no assurance
that Forward looking Statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, investors should not
place undue reliance on Forward looking Statements.
This news release also refers to non-GAAP
financial measures, such as cash cost per tonne of processed ore;
cash cost per payable ounce of silver; total production cost per
tonne; all-in sustaining cash cost; all-in cash cost; adjusted net
(loss) income; operating cash flow per share before changes in
working capital, income taxes, and interest income; and adjusted
EBITDA. These measures do not have a standardized meaning or
method of calculation, even though the descriptions of such
measures may be similar. These performance measures have no
meaning under International Financial Reporting Standards (IFRS)
and therefore, amounts presented may not be comparable to similar
data presented by other mining companies.
The photo is also available at Newscom, www.newscom.com, and via
AP PhotoExpress.
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