Fortuna Silver Mines Inc. (NYSE:FSM) (TSX:FVI)
today reported 2017 full year net income of $66.3 million, adjusted
net income of $48.6 million, and adjusted EBITDA of $122.0
million.
Jorge A. Ganoza, President and CEO, commented,
“Our results in the fourth quarter of 2017 reflect record sales and
EBITDA that have contributed to our strongest year to date in
financial performance.” Mr. Ganoza continued, “Annual sales of
$268.1 million, with EBITDA margins of 46% and strong cash
accumulation from our mines attest to the strength of our assets
and the positive momentum in our business. Drivers for year over
year performance are higher precious metal production, higher base
metal prices for our by-products, and improved commercial terms. ”
Mr. Ganoza concluded, “Our Lindero gold project in Argentina is in
the early stages of construction with on-site activities ramping up
during the course of the second quarter”.
2017 Consolidated Financial Statements
and MD&A Highlights
- Sales of $268.1 million, compared
to $210.3 million in 2016
- Net income of $66.3 million,
compared to $17.9 million in 2016
- Adjusted net income of $48.6
million, compared to $18.1 million in 2016
- Earnings per share of $0.42,
compared to $0.13 in 2016
- Adjusted EBITDA1 of $122.0 million,
compared to $83.1 million in 2016
- Impairment reversal at Caylloma of
$31.1 million before taxes driven by a successful resource
expansion
- Cash position, including short-term
investments as at December 31, 2017 was $212.6 million
- $120.0 million credit facility in
place with $80.0 million undrawn
- Silver and gold production of
8,469,593 ounces and 56,441 ounces, respectively
- AISC2 per ounce of payable silver,
net of by-product credits for gold, lead and zinc, was $6.4
Fourth Quarter 2017 Financial Statements
and MD&A Highlights
- Sales of $75.4 million, compared to
$57.9 million in the fourth quarter of 2016
- Net income of $34.1 million,
compared to $6.5 million in the fourth quarter of 2016
- Adjusted net income of $12.3
million, compared to $7.1 million in the fourth quarter of
2016
- Adjusted EBITDA of $34.9 million,
compared to $29.4 million in the fourth quarter of 2016
- Silver and gold production of
2,310,176 ounces and 15,283 ounces, respectively
- AISC per ounce of payable silver,
net of by-product credits for gold, lead and zinc, was $5.2
Note: 1. EBITDA =
Earnings Before Interests, Taxes, Depreciations and
Amortizations 2. AISC = All-in
Sustaining Cost
|
2017 Year-end and Fourth Quarter 2017 Consolidated
Results |
|
Consolidated Financial Metrics |
|
Q4 2017 |
|
Q4 2016 |
% Change |
|
YTD 2017 |
|
YTD 2016 |
% Change |
|
YTD 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in $ millions except per share
information and all-in sustaining cash cost) |
|
|
|
|
|
Sales |
$ |
75.4 |
$ |
57.9 |
30% |
$ |
268.1 |
$ |
210.3 |
27% |
$ |
154.7 |
Mine operating income |
|
35.2 |
|
20.7 |
70% |
|
109.6 |
|
80.6 |
36% |
|
43.6 |
Operating income |
|
57.7 |
|
17.6 |
228% |
|
110.3 |
|
48.5 |
127% |
|
(1.7) |
Net income |
|
34.1 |
|
6.5 |
425% |
|
66.3 |
|
17.9 |
270% |
|
(10.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (basic) |
|
0.21 |
|
0.04 |
425% |
|
0.42 |
|
0.13 |
223% |
|
(0.08) |
Earnings per share (diluted) |
|
0.21 |
|
0.04 |
425% |
|
0.42 |
|
0.13 |
223% |
|
(0.08) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income* |
|
12.3 |
|
7.1 |
73% |
|
48.6 |
|
18.1 |
169% |
|
6.7 |
Adjusted EBITDA* |
|
34.9 |
|
29.4 |
19% |
|
122.0 |
|
83.1 |
47% |
|
50.4 |
Cash provided by operating activities |
|
29.0 |
|
25.8 |
12% |
|
70.2 |
|
52.7 |
33% |
|
54.8 |
Cash generated by operating activities before changes in working
capital |
|
30.4 |
|
20.4 |
49% |
|
87.9 |
|
70.3 |
25% |
|
30.6 |
Capex (sustaining) |
|
8.0 |
|
5.3 |
51% |
|
28.0 |
|
19.8 |
41% |
|
43.0 |
Capex (non-sustaining) |
|
3.1 |
|
2.0 |
54% |
|
11.4 |
|
23.0 |
-50% |
|
11.7 |
Capex (Brownfield) |
|
2.2 |
|
2.2 |
0% |
|
10.1 |
|
7.9 |
27% |
|
4.0 |
All-in sustaining cash cost* |
|
5.2 |
|
7.3 |
-30% |
|
6.4 |
|
8.4 |
-24% |
|
18.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 31, 2017 |
|
Dec 31, 2016 |
% Change |
|
Dec 31, 2015 |
Cash, cash equivalents, and short-term investments |
|
$ |
212.6 |
$ |
123.6 |
72% |
$ |
72.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
$ |
706.6 |
$ |
562.9 |
26% |
$ |
379.7 |
Non-current bank loan |
|
|
|
|
|
$ |
39.9 |
$ |
39.8 |
0% |
$ |
39.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* refer to Non-GAAP Financial Measures |
|
|
|
|
|
|
|
Note: 1. Refer to
Non-GAAP Financial Measures
Fourth Quarter 2017 Results
Net income for the fourth quarter of 2017 was
$34.1 million or $0.21 per share compared to $6.5 million or $0.04
per share for the fourth quarter of 2016. Net income in the
quarter was positively impacted by an after-tax reversal of
impairment of $21.9 million at the Caylloma Mine. Adjusted net
income was $12.3 million compared to $7.1 million for 2016.
The increase in adjusted net income during the
quarter was due primarily to higher sales across all of our
products and was partially offset by higher selling, general and
administrative expenses of $6.4 million, related mainly to the
mark-to-market effects from share-based payments and higher
production costs. Additional items impacting the quarter were
$1.5 million of realized losses from derivative contracts, $1.3
million in exploration and evaluation expenses, and partially
offset by foreign exchange gains of $1.3 million.
Adjusted EBITDA was $34.9 million compared to
$29.4 million in the comparable period in 2016 due to increased
sales.
For the three months ended December 31, 2017,
net cash provided by operating activities was $29.0 million or 12%
higher than the $25.8 million in 2016 due primarily to higher
adjusted EBITDA offset by changes in working capital items.
A graph accompanying this announcement is
available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/a23705f0-5368-4c2e-a9db-e2606975e0a9
Annual Results
Net income for the year ended December 31, 2017
was $66.3 million or $0.42 per share compared to $17.9 million or
$0.13 per share for the comparable year in 2016. Net income
was positively impacted by the after-tax reversal of impairment of
$21.9 million at the Caylloma Mine.
Adjusted net income for 2017 increased to $48.6
million from $18.1 million in 2016 mostly as a result of higher
sales across all our products, reflecting the first full year of
production at the expanded capacity of 3,000 tpd at the San Jose
mine, strong by-product metal prices of lead and zinc, and
significantly improved treatment and refining charges.
Also contributing to higher adjusted net income
were lower selling, general and administrative expenses by $6.2
million related primarily to mark-to-market effect from share-based
payments. Adjusted net income was negatively impacted by higher
production cash costs, $2.0 million in foreign exchange losses from
the strengthening of the Mexican Peso against the US dollar, and
$1.6 million realized losses on derivative contracts.
Adjusted EBITDA was $122.0 million compared to
$83.1 million in 2016.
For the year ended December 31, 2017 net cash
provided by operating activities in 2017 was $70.2 million, 33%
higher than the $52.7 million in 2016. This increase was due
primarily to a $38.9 million increase in adjusted EBITDA and
partially offset by higher income taxes paid of $18.7 million.
A graph accompanying this announcement is
available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/d1560155-e550-4547-8cd3-e6759f1901e4
Balance sheet and Liquidity
At December 31, 2017, the Company had cash, cash
equivalents, and short-term investments of $212.6
million (December 31, 2016: $123.6 million), an increase of $89.0
million since the beginning of the year. The increase was due
primarily to an equity financing in the first quarter of 2017 for
net proceeds of $70.9 million and free cash flows from operations
during the period.
On January 26, 2018 the Company closed an
amendment to its existing credit facility with Scotiabank to expand
the facility from $40.0 million to $120.0 million. This takes our
total sources of liquidity as at year end to over $290.0 million
which along with the current rate of free cash flow by our existing
operations, the Company expects to have sufficient liquidity to
meet our funding needs during the construction of the Lindero
project.
|
San
Jose Mine, Mexico |
|
|
|
|
|
|
QUARTERLY RESULTS |
|
YEAR TO DATE RESULTS |
San Jose |
Three months ended, December 31, |
|
Year ended, December 31, |
Mine Production |
2017 |
2016 |
|
2017 |
2016 |
Tonnes
milled |
271,370 |
273,036 |
|
1,070,790 |
905,467 |
Average
tonnes milled per day |
3,015 |
3,103 |
|
3,044 |
2,596 |
|
|
|
|
|
|
Silver |
|
|
|
|
|
Grade
(g/t) |
259 |
225 |
|
238 |
228 |
Recovery
(%) |
92 |
92 |
|
92 |
92 |
Production (oz) |
2,071,762 |
1,828,110 |
|
7,526,556 |
6,124,235 |
Metal
sold (oz) |
2,089,121 |
1,832,298 |
|
7,481,616 |
6,102,667 |
Realized
price ($/oz) |
16.69 |
17.10 |
|
17.03 |
17.29 |
|
|
|
|
|
|
Gold |
|
|
|
|
|
Grade
(g/t) |
1.89 |
1.69 |
|
1.77 |
1.72 |
Recovery
(%) |
92 |
92 |
|
92 |
92 |
Production (oz) |
15,177 |
13,660 |
|
55,950 |
46,018 |
Metal
sold (oz) |
15,333 |
13,746 |
|
55,412 |
45,901 |
Realized
price ($/oz) |
1,273 |
1,216 |
|
1,257 |
1,253 |
|
|
|
|
|
|
Unit
Costs |
|
|
|
|
|
Production cash cost (US$/oz Ag)* |
0.04 |
1.85 |
|
0.95 |
1.77 |
Production cash cost (US$/tonne) |
57.91 |
55.09 |
|
59.70 |
56.90 |
Unit Net
Smelter Return (US$/tonne) |
181.65 |
154.21 |
|
169.78 |
158.76 |
All-in sustaining cash cost (US$/oz Ag)* |
6.51 |
6.73 |
|
7.11 |
7.58 |
|
|
|
|
|
|
* Net of by-product credits from gold |
|
|
|
Quarterly Results
The San Jose Mine produced 2,071,762 ounces of
silver and 15,177 ounces of gold in the fourth quarter of 2017, 13%
and 11% above the comparable period in 2016. Average head
grades for silver and gold were 259 g/t and 1.89 g/t, 15% and 12%
higher than the comparable period in 2016. Mine production
was sourced from Trinidad Central and Trinidad North, with each
area contributing 57% and 43% of ore, respectively.
Cash cost per tonne of processed ore was $57.9,
5% above the $55.1 cash cost for the comparable quarter in
2016.
Annual Results
Silver and gold annual production for 2017
increased 23% and 22% above prior year’s production to 7,526,555
ounces and 55,950 ounces. The increases were the result of
18% higher throughput as well as 4% and 3% higher head grades of
gold and silver over the comparative period in 2016. Silver
and gold annual production were 6% and 8% above 2017 guidance,
respectively.
Cash cost per tonne of processed ore for 2017
was $59.7, or 5% higher than the cost in the prior year. Cash
cost per tonne for 2017 was 5% above guidance due to higher mine
support costs and local inflation on the cost of energy and
materials.
All-in sustaining cash cost per payable ounce of
silver, net of by-product credits, was $7.1 for 2017 and below the
annual guidance of $8.4 as a result of higher gold price.
Cash cost per payable ounce of silver, and cash
cost per tonne of processed ore, are non-GAAP financial
measures.
Caylloma Mine, Peru
|
|
|
|
|
|
QUARTERLY RESULTS |
|
YEAR TO DATE RESULTS |
Caylloma |
Three months ended, December 31, |
|
Year ended, December 31, |
Mine Production |
2017 |
2016 |
|
2017 |
2016 |
Tonnes
milled |
134,635 |
135,121 |
|
529,704 |
514,828 |
Average
tonnes milled per day |
1,513 |
1,501 |
|
1,488 |
1,438 |
|
|
|
|
|
|
Silver |
|
|
|
|
|
Grade
(g/t) |
65 |
82 |
|
66 |
90 |
Recovery
(%) |
85 |
82 |
|
84 |
84 |
Production (oz) |
238,414 |
291,988 |
|
943,038 |
1,255,981 |
Metal
sold (oz) |
243,051 |
294,425 |
|
934,710 |
1,274,842 |
Realized
price ($/oz) |
16.70 |
17.11 |
|
17.06 |
16.96 |
|
|
|
|
|
|
Lead |
|
|
|
|
|
Grade
(%) |
2.91 |
2.60 |
|
2.81 |
3.06 |
Recovery
(%) |
91 |
94 |
|
91 |
94 |
Production (000's lbs) |
7,846 |
7,290 |
|
29,878 |
32,673 |
Metal
sold (000's lbs) |
8,054 |
7,361 |
|
29,508 |
33,187 |
Realized
price ($/lb) |
1.13 |
0.97 |
|
1.05 |
0.84 |
|
|
|
|
|
|
Zinc |
|
|
|
|
|
Grade
(%) |
4.36 |
4.06 |
|
4.21 |
4.25 |
Recovery
(%) |
90 |
91 |
|
90 |
90 |
Production (000's lbs) |
11,676 |
11,006 |
|
44,347 |
43,204 |
Metal
sold (000's lbs) |
11,803 |
10,537 |
|
44,315 |
43,041 |
Realized
price ($/lb) |
1.47 |
1.15 |
|
1.32 |
0.95 |
|
|
|
|
|
|
Unit
Costs |
|
|
|
|
|
Production cash cost (US$/oz Ag)* |
(44.43) |
(14.59) |
|
(34.56) |
(6.78) |
Production cash cost (US$/tonne) |
82.02 |
71.15 |
|
79.11 |
71.89 |
Unit Net
Smelter Return (US$/tonne) |
184.09 |
136.92 |
|
166.18 |
126.91 |
All-in sustaining cash cost (US$/oz Ag)* |
(18.37) |
1.72 |
|
(13.04) |
4.34 |
|
|
|
|
|
|
* Net of by-product credits from gold, lead and zinc |
|
|
|
|
|
|
|
Quarterly Results
The Caylloma Mine produced 7.8 million pounds of
lead and 11.7 million pounds of zinc, which were 8% and 6% higher
than the comparable quarter in 2016 as a result of higher head
grades of 12% and 7% respectively. Silver production was
238,414 ounces or 18% lower than the comparable period in
2016. Average silver head grade was 65 g/t or 21% below 2016
but was partially offset by a higher metallurgical recovery of 85%
compared to 82%.
Cash cost per tonne of processed ore for the
fourth quarter of 2017 was $82.0 which was 15% higher than the
$71.2 cash cost for the comparable quarter of 2016. The increase
was due primarily to higher energy, ground support, and labour
costs.
Annual Results
Total zinc production for 2017 increased 3% to
44.3 million pounds over 2016 while lead production decreased 8% to
29.9 million pounds. Silver production decreased 25% to 943,038
ounces compared to 2016 production of 1,255,981 ounces.
Silver production was within 96% of annual guidance. Head
grades for lead, zinc, and silver were 8%, 1 %, and 27% lower than
in 2016, respectively. However, this decline in head grades
was partially offset by a 3% increase in processed ore.
Silver, zinc, and lead annual production were 6% below, 8% above,
and in line with 2017 guidance.
Cash cost per tonne of processed ore for 2017
was $79.1 or 10% higher than in 2016 and 5% above guidance.
The increase in cash costs was due mainly to higher mining, energy,
and labour costs.
All-in sustaining cash cost per payable ounce of
silver, net of by-product credits, was $(13.04) per ounce for 2017,
and below the annual guidance of $10.80 per ounce.
Cash cost per payable ounce of silver, and cash
cost per tonne of processed ore, are non-GAAP financial
measures
|
Reconciliation of Adjusted Net Income for Fourth Quarter
and Year to Date |
|
|
Q4 2017 |
Adjustments |
Q4 2017adjusted |
YTD 2017 |
Adjustments |
YTD 2017adjusted |
Sales |
75.4 |
|
75.4 |
268.1 |
|
268.1 |
Cost of
sales |
40.1 |
|
40.1 |
158.6 |
|
158.6 |
Mine operating income |
35.2 |
|
35.2 |
109.6 |
|
109.6 |
Selling, general and
administration |
8.4 |
|
8.4 |
24.9 |
|
24.9 |
Exploration and
evaluation |
1.3 |
|
1.3 |
1.5 |
|
1.5 |
Share of loss of
equity-accounted investee |
0.1 |
|
0.1 |
0.2 |
|
0.2 |
Foreign exchange loss
(gain) |
(1.3) |
|
(1.3) |
2.1 |
|
2.1 |
Impairment reversal of
mineral properties, plant and equipment |
(31.1) |
31.1 |
- |
(31.1) |
31.1 |
- |
Other expenses |
0.1 |
(0.8) |
(0.7) |
1.7 |
(2.6) |
(0.9) |
Operating Income |
57.7 |
(30.3) |
27.4 |
110.3 |
(28.5) |
81.8 |
Interest income |
(0.5) |
|
(0.5) |
(2.0) |
|
(2.0) |
Interest expense |
0.4 |
|
0.4 |
1.7 |
|
1.7 |
Accretion of
provisions |
0.2 |
|
0.2 |
0.7 |
|
0.7 |
Loss (gain) on
financial assets and liabilities carried at fair value |
0.7 |
0.6 |
1.3 |
5.0 |
(3.4) |
1.6 |
Income before taxes |
56.9 |
(30.9) |
26.0 |
104.9 |
(25.1) |
79.8 |
Current income tax
expense |
11.4 |
|
11.4 |
34.8 |
|
34.8 |
Deferred income tax
expense |
11.4 |
(9.1) |
2.3 |
3.8 |
(7.4) |
(3.6) |
Net income for the year |
34.1 |
(21.8) |
12.3 |
66.3 |
(17.7) |
48.6 |
EPS |
0.21 |
(0.14) |
0.07 |
0.42 |
(0.11) |
0.31 |
|
The financial statements and MD&A are
available on SEDAR and have also been posted on the company's
website at
https://www.fortunasilver.com/investors/financials/2017/.
Conference call to review 2017 year-end
financial and operational results
A conference call to discuss 2017 year-end
financial and operational results will be held on Tuesday, March
20, 2018 at 9:00 a.m. Pacific | 12:00 p.m. Eastern. Hosting
the call will be Jorge A. Ganoza, President and CEO, and Luis D.
Ganoza, Chief Financial Officer.
Shareholders, analysts, media and interested
investors are invited to listen to the live conference call by
logging onto the webcast at:
https://www.webcaster4.com/Webcast/Page/1696/24991 or over the
phone by dialing just prior to the starting time.
Conference call details:
Date: Tuesday, March 20, 2018Time: 9:00
a.m. Pacific | 12:00 p.m. Eastern
Dial in number (Toll Free): +1.877.407.8035Dial
in number (International): +1.201.689.8035
Replay number (Toll Free): +1.877.481.4010Replay
number (International): +1.919.882.2331Replay Passcode: 10449
Playback of the conference call will be
available until April 3, 2018 at 11:59 p.m. Eastern. Playback
of the webcast will be available until June 20, 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 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 in Argentina. The company is selectively
pursuing acquisition opportunities throughout the Americas and in
select other areas. For more information, please visit its
website at www.fortunasilver.com.
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. 0E:
info@fortunasilver.com
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.
Fortuna Mining (NYSE:FSM)
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