Fortuna Silver earns $2.9-million in Q2

2014-08-12 18:31 ET - News Release

Mr. Jorge Ganoza reports

FORTUNA REPORTS CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER 2014

Fortuna Silver Mines Inc. had revenue of $44.3-million, cash generated from operations, before changes in working capital, of $15.1-million and net income of $2.9-million in the second quarter of 2014.

Jorge A. Ganoza, president and chief executive officer, commented: "Financial results for the second quarter reflect our continued emphasis on free cash flow generation through organic growth and cost control. We have delivered a consolidated all-in sustaining cash cost of $17.41 per ounce of silver, a reduction of 21 per cent, compared to the previous year, and year to date, our treasury plus trade receivables have increased by over $20-million."

Mr. Ganoza continued, "At San Jose, our attention remains centred on laying out the next phase of organic growth as our step-out drilling campaign at Trinidad North continues to expand the new high-grade mineralized zone."

Second quarter financial highlights:

Compared with the first quarter of 2014, silver and gold production rose 6 per cent and 5 per cent, respectively, however silver and gold sold was lower by 2 per cent and 4 per cent, respectively, due to timing issues of concentrate delivery.

Cash flow from operations, before changes in working capital, increased 157 per cent to $15.1-million (second quarter of 2013, $5.9-million).

Basic earnings per share were two cents (second quarter of 2013, loss of eight cents). Operating cash flow per share, before changes in working capital items, increased to 12 cents (second quarter of 2013, five cents).

Cash and short-term investments at the end of the second quarter of 2014 was $60.2-million, an increase of $11.1-million over year-end 2013. In addition, trade accounts receivable increased by $9.5-million, most of which was credited to the company's treasury in July, 2014.

                                           Three months ended June 30, 2014
Consolidated metal production        Caylloma       San Jose   Consolidated 
                                                                            
Silver (oz)                           529,011      1,101,411      1,630,422 
Gold (oz)                                 562          7,957          8,519 
Lead (000 lb)                           3,962              -          3,962 
Zinc (000 lb)                           6,697              -          6,697 
Production cash cost (U.S.$/oz Ag)       7.72           3.93           5.15 
All-in sustaining cash cost                                                 
(U.S.$/oz Ag)                           15.48          15.77          17.41 

                                           Three months ended June 30, 2013
Consolidated metal production        Caylloma       San Jose   Consolidated 
                                                                            
Silver (oz)                           493,438        580,570      1,074,007 
Gold (oz)                                 502          4,681          5,183 
Lead (000 lb)                           4,666              -          4,666 
Zinc (000 lb)                           6,131              -          6,131 
Production cash cost (U.S.$/oz Ag)       8.78           6.56           7.58 
All-in sustaining cash cost                                                 
(U.S.$/oz Ag)                           24.53          15.58          21.98 

                                             Six months ended June 30, 2014
Consolidated metal production        Caylloma       San Jose   Consolidated 
                                                                            
Silver (oz)                         1,068,835      2,098,446      3,167,282 
Gold (oz)                               1,085         15,583         16,669 
Lead (000 lb)                           7,855              -          7,855 
Zinc (000 lb)                          13,226              -         13,226 
Production cash cost (U.S.$/oz Ag)       7.32           3.77           4.96 
All-in sustaining cash cost                                                 
(U.S.$/oz Ag)                           14.32          15.12          16.98 

                                             Six months ended June 30, 2013
Consolidated metal production        Caylloma       San Jose   Consolidated 
                                                                            
Silver (oz)                           992,882      1,073,343      2,066,225 
Gold (oz)                               1,035          8,641          9,675 
Lead (000 lb)                           9,280              -          9,280 
Zinc (000 lb)                          12,067              -         12,067 
Production cash cost (U.S.$/oz Ag)       7.84           6.44           7.11 
All-in sustaining cash cost                                                 
(U.S.$/oz Ag)                           24.09          19.68          24.58 

Silver and gold production for the second quarter and the first six months of 2014 increased over the same period in the prior year by 52 per cent and 64 per cent, and 53 per cent and 72 per cent, respectively, explained largely by the commissioning of the San Jose mine mill expansion from 1,150 to 1,800 tonnes per day in September, 2013, and to 2,000 tonnes per day in April, 2014. The company is on track to meet its guidance of 6.0 million ounces of silver and 32,300 ounces of gold or 7.9 million AgEq ounces for 2014. Silver equivalent (AgEq) is calculated using metal prices of $1,260 per ounce for gold and $21 per ounce for silver.

All-in sustaining cash cost per payable ounce of silver for the second quarter 2014, net of byproduct credits, decreased 21 per cent to $17.41 (second quarter of 2013, $21.98) as a result of lower sustaining capital and brownfields exploration expenditures, higher payable ounces of silver, and higher byproduct credits.

San Jose mine, Mexico

San Jose was successfully expanded to 2,000 tonnes per day in April, 2014 (see Fortuna news release dated April 14, 2014), and studies are currently under way to assess the economic robustness of a potential mine and mill expansion to 3,000 tonnes per day. Production for the first half of 2014 was 2,098,446 ounces of silver and 15,583 ounces of gold, 96 per cent and 80 per cent above the first half of 2013, respectively. San Jose is on track to meet annual production guidance of 4.0 million ounces of silver and 30,400 ounces of gold.

Silver and gold production for the second quarter 2014 was 90 per cent and 70 per cent above second quarter 2013, respectively. The increase is the result of higher throughput of 64 per cent, and higher head grade for silver and gold of 15 per cent and 3 per cent, respectively.

Cash cost per tonne of processed ore for the second quarter 2014 was $64.08 per tonne or 17 per cent below the cost in the second quarter 2013, and is below guidance of $67.10 per tonne. All-in sustaining cash cost per payable ounce of silver, net of byproduct credits, was $15.77 in the second quarter 2014 and $15.12 for the first half of the year. Management expects all-in sustaining cash cost per ounce of silver to be in line with annual guidance of $14.43.

In light of the growth of resources over the last year, the company has made the decision to advance with engineering studies to address long-term tailings management. The project calls for the implementation of filtered tailings and dry stack disposal. The project is in the engineering phase with a construction decision expected before year-end.

Caylloma mine, Peru

Silver production for the second quarter 2014 was 7 per cent above the same period in the prior year as a result of higher metallurgical recovery and slightly higher head grade. Zinc production increased 9 per cent as a result of higher head grade and metallurgical recoveries. Lead production decreased 15 per cent due to reduced head grade. Caylloma is on track to meet annual production guidance of 2.0 million ounces of silver and 1,900 ounces of gold.

Cash cost per tonne at Caylloma for the second quarter 2014 was $91.70 per tonne of processed ore, a decrease of 2 per cent from second quarter 2013 and 4 per cent above annual guidance. All-in sustaining cash cost per payable ounce of silver, net of byproduct credits, at Caylloma in the second quarter 2014 was $15.48 and $14.32 for the first half of 2014. Management expects all-in sustaining cash cost per ounce of silver to be in line with annual guidance of $17.01.

The financial statements, and management discussion and analysis, are available on SEDAR and have also been posted on the company's website.

Conference call to review 2014 second quarter financial and operations results

Date: Wednesday, Aug. 13, 2014

Time: 9 a.m. Pacific Time (12 p.m. Eastern Time) (11 a.m. (Lima time))

Dial-in number (toll-free): 1-877-407-8035

Dial-in number (international): 1-201-689-8035

Replay number (toll-free): 1-877-660-6853

Replay number (international): 1-201-612-7415

Replay passcode: 13587139

Playback of the webcast will be available until Nov. 13, 2014. Playback of the conference call will be available until Aug. 27, 2014, at 11:59 p.m. Eastern Time. In addition, a transcript of the call will be archived in the company's website.