FSM - Earnings call transcript Q4 2020 | Fortuna Silver Mines Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Fortuna Silver Mines Fourth Quarter and Full Year 2020 Financial and Operational Results. At this time, all participants have been placed on a listen-only mode. And we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host Carlos Baca. Sir, the floor is yours.

Carlos Baca

Matthew. you, Thank and ladies Good gentlemen. morning, year I would Mines the to full Silver welcome to to fourth our and for you and call financial Fortuna results like and XXXX. quarter operations a Today, we by presentation, will be us. webcast will controlled which using be the under to our presentation, Presentation on Earnings QX on XXXX, www.fortunasilver.com, website Financials the link. go then Call tab, click Investors on please sub download at click To the tab and the will and Jorge the be Alberto CFO, President, Dario Ganoza, hosting Director; Luis and call. Ganoza, CEO

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

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

Jorge Alberto Ganoza

Thank and all. good morning you, Carlos, to

results Carlos our quarter aid the the of before. you year-end the mentioned slide We will presentation and with through for take

delivering in we three over our So, of X have position ourselves in the we significant Through production of three a XXXX. we’re to last is of precious Carlos, on, to go equivalent gold place the increase an market. XXX% metals presentation. come our a range in exciting years, from growth XXX,XXX over year, can work to the our production ounces, mines as XX% most rising to slide today XXX,XXX in This gold guidance

highlights flow XX%. Next and of of cash quarter, our please. robust slide, operates a reported free Under with for record-breaking $XX.X have million the EBITDA business adjusted we margin

debt debt-to-EBITDA We have million, and strong liquidity net with of million $XX X.X. of of $XXX a ratio

net in production cash produced this as first and fourth commissioning first Lindero of quarter ounces delivered in Lindero We again expect positive year. activities. the be part ramp-up -- gold to October and XXXX XX,XXX

approximately of During $X,XXX. QX design cost quarter, generating to this million all-in in Lindero positive, Ramp-up ramp-up $X an under with year. this sustaining was cash during continues capacity free cash

year. to mitigating ensuring and across managing and regulations costs COVID attributable remobilization. days, this business containment in continuity, amounted implement changing During for Mine year, direct rapidly down for The risks million Company activities down all to measures across $X suffered for three was XX unprecedented with was Mine of Caylloma in people, Peru government considering construction operations sites, risks was COVID for Jose complying San almost in The days, our while the guidelines temporary XX sites and suspended production. our all to months, where were neighbors, suspensions to the Lindero Mexico the quick

strategy materiality not continuous efforts. prioritizing sustainability in Through a Moving in of our general. on our is our shareholders are business ESG, the slide assessments, undergoing only of We're and planning. incorporate way X. stakeholders listening and journey on but rigorous We're change to This a our improving reporting to improvement. cultural we we

rating the as agencies We longer have by strong committed a strength show views of We're environment ESG and as improvement social. to in term Fortuna and taking areas in performer. on governance evidenced

On please. slide, rolling trends. slide KPIs we our to better average presentation, present the of a Next represent performance share as X XX-month indicators. key We safety

improvement Jose by of lower for to share in time Mine, grade. the on Argentina the With lower that the XX% the Lindero, last rotation poor due particularly borders mobilize of XXXX, truncated total San from the for the incidents restrictions, performance seeing was I months these challenges and while to grades the at particularly to last tracing to challenges explain down And the of at incidents the year spike XXX% Lindero and In of personnel a Jose inability of year, of can production weighted and respect COVID, experienced performance. and material trend COVID to San silver the quarter, and of production comparable XXXX. imposed half of Our a up supervisors experienced suspect COVID startup at the of start due against heavily to High to improvements the operations was of results. closing we Lindero. remain contact the as the Mine over the in contribution cases on due the quarter by at we're result operators recordable gold second Mine, lost Jose. in gold foreigners San some injuries. production first was

Next please. slide,

and was fourth suspension down year, of lower was of the Gold production contribution XX% XX%, of up the Jose of San production grades. of mainly silver Lindero I driven in as by the the days to impact production, back the at For quarter. XX mentioned,

net million for gold per quarter, fourth ounce quarter jumped sales EBITDA $X,XXX. quarter captured adjusted of $X.XX $XXX in the XX% income the our XX% the $XX we at equal a to to in of and prices to million, and in XX%, and and had silver $XX margins, gold our sold jumped in an sales to a benefit of both million, per and share. Sales, at $XX.XX We Sales increased please. silver the price to of almost jumped XXX% contribution price our and gold. slide, XX% or Next silver

Next slide, please.

a million $XXX healthy of reported and with For of the of margin very year, we XX%. a $XXX EBITDA sales million

all-in Our impacted of Jose from at the also costs the metals. And and from base a of sustaining lower impacted costs equivalency production silver perspective again, shutdown Mine, the grades. result San at the the ratios were were with lower by our as Caylloma,

Next slide, please.

are for embarked expect all budgets -- of sustainability in have ramp-up sites. our We we the is of balance construction the phase XXXX are on a The three are concluded -- and trending investment now last years. in three that and are our capital-intensive over, we Lindero CapEx at commissioning had And phase. the within in

We provided are guidance. we shared this looking this forward, reenergizing exploration also our and in we --

We are budgets reenergizing exploration. our on

until was million. approximately X% and drilling X,XXX investment X,XXX sorry, a as up under on meterage investing, $X percentage been traditionally sales. a XXXX, of having -- have And our of X% a always low drilling in of exploration In of exploration our sales, meters. meters. XXXX, sales We XX,XXX was budget low excess We in our of was drilled meterage exploration

the meterage of exploration reserves, of only investment expand of around is For a expanded budgets in resources, meterage but is them. XX,XXX again excess a and meters XXXX, X.X% and That sales taking to replenish need back exploration we kind being year. also we drilling X%, to level to of are our not

a are is to that capital-intensive and exploration behind XXXX, in on exploration, expanded see us. going phase Lindero issue investment the topical for construction you us, of now is So,

February, capacity. mining Next as to of and way slide, design our at the end our activities update, unit as in of With Lindero at operating according Lindero, please. respect are -- by operations delivering

plant seeing in month taking XX%. design for of are we're At achieving circuits design of end and and the XX% hour Our range XX% of a are capacity. per has the Primary capacity. stacking, March, HPGR of XXX secondary several this within months, ADR capacity. extractions And crushing been -- XX% solid of of operating at at cubic at design now, we design of full as the February of gold meters solution agglomeration at the base already operating and pregnant capacity,

the system. limiting has the been factor Here, stacking

already have days of improving and to capacity. been closer operating solid we're design issues seeing system. March, with can dealing of I We the these XX% days advance heating -- closer performance in at stacking XX%, that and But, early

address in parameters So, these the are And seeing leaching right kinetics, this trend extremely things And the on But as advances we our can kinetics expectations. to correct. models, design all issues are our consolidating process, reserve of we But, most gold material a according the our expect measures leaching to models and all-in-all, of we corrective production. strong well our and direction. against ramp-up performing measures of are March the a right? importantly, continue and are we're components of lot several expect month -- implement on

to the right behind the I highlight. that, in expectations two in March. And want behind, the direction respect stocking, slightly to still mentioned are those solid our ramp-up. So, We're we're with somewhat but fact also things improvement on trending seeing before, on I we're as

please. Next slide,

of this the end think, the I is on update my presentation.

to you the Luis? it pass Now, of who highlights Luis, I'll on will the results. give financial

Luis Dario Ganoza

you, Thank Jorge. Yes.

strong already So, we XXXX. on had over of sales has driven by by been Yes, Jorge, fourth discussed XX% as higher a a slide XX. QX quarter,

operating below of due certain net however, adjusted of were to increases period comparative XXXX net line contributing XXXX. income margins income, the the XX% items Net reflected in and Our up, EBITDA income to income adjusted respectively. and higher slightly a below significantly XXX%, was QX in

Slide of we credit recorded currency fluctuations. related investment gains deferred XX, to Specifically, large the million please. foreign in tax $XX XXXX, in

in XX, is while items both our to mandate use XX%, and certain mentioned, So, which with the Company silver, this to in Under increase from early elected proceeds to adopt related of and of for on sales standard, for proceeds costs total IAS million, in sales higher in its use. quarter, with the the Company statement $XX.X contribution the sales of Company Jorge the as income impact before asset of $XX.X recognize Lindero which a highest produced The metal was the deal amendments assets. came preparing up million. particular, intended prices, intended is required

slide Next slide, please, XX.

Jose previously bit the higher what of up reinforcing Jorge positive segmented at impact reflecting as the So, results, mines, of San When EBITDA over is comparative discussed. Caylloma and prices, looking our quarter discussed. at metal quarter both a significantly

remains our per levels sustaining reported the based at in All-in and of of $XX Jose at Yes, silver and ranges sustaining quarter XXXX. XXXX, quarter Slide in cost based $XX.XX Our is results. please. detail was provide comparative for similar we both cost at cost $XX.XX the per guidance QX within at as Lindero on slide we for and ounce production San expect silver overall equivalent XX, the to operations provided guidance. cash we of ounce on for within range remain some a XX, additional year. XXXX, on Again, similar expect the $XX all-in equivalent on for

table As and reflected in $XX.X the duties of over income X% was cost million $X.X shown not of the consolidated full is million. the to contribution of in disclosed, in-country our expect XXXX. sales costs into Cash Also sales quarter. million have we the statement relevant to correspond nominal operating the to quarter. off-site $XX.X in rate of Lindero costs which G&A The export note, Total contribution. we is sales, in to EBITDA continue only item the QX of that expenses yet in incurred

the statements Next for general and here, item line we show the the breakdown of XX. financial and of our slide, out administration slide quarter Yes, the year. please,

price. the total higher full performance G&A, mainly year increase in-country to XXXX. both and the corporate of expenses The For G&A the payments the below in is to quarter for share-based related share our are year, our related and

XXXX. we in is gains for adds Argentina. been past, loss of losses, we by XXXX the $X.X a in a the million. million This, In loss well, been has As a VAT to slide discussed $XX.X in has partially recorded the foreign for two-year year. investment driver quarter $X.X and and as of around XXXX, of receivable in magnitude, incurred cumulatively construction million mitigated shown on however, million the A as of which, in $XX exchange up million similar these period, the approximately $XX

balance we So, January collected more first please, is And liquidity cumulatively, we recovering position. a in summary that VAT of with $XX our in already slide, the million. slide $XX have noting the here, some started net amount range provide the and month, of XXXX. the Yes, It loss million next XX. worth of is sheet

as was On left, $XXX came of on scaled at $XXX end with the Worth the $XX scheduled. that, to to million our down to the total bank QX back bar facility you. XXXX, in net QX. from the down QX it graph contractually $XX million liquidity will Carlos. as I you, debt slightly our respect Thank noting, in million at to bottom, was hand With improved million position, our QX shown

Carlos Baca

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

Operator

Instructions] Your is from question first [Operator DeMarco. coming Don

live. Your line is

Don DeMarco

call. taking in level increasing Thanks with my system. I be it's stacking XX% in of to would for February. March. you Jorge, in so so at mentioned what kind much comfortable guidance XXXX? the read you XX% to to XX% meet Well, Performance in order that the

Jorge Alberto Ganoza

the no? the on extract Thank is we of what tonnage in are guidance. we is be the important we the with XX%, system, try stacking is is with well the as place the pad making stacking pad month, So, amount XX on tracking range It The days. right? are meeting with placing leach gold describe we with we trucks, issue ore or ounces of we system, stress you we’re extractable extraction bypassing that that pad to whatever XX% are which ounces the over extractable in place the So, the the up for the question, Don. to -- per something are leach that expect ounces every placing MD&A, we on we to that leach not on the ounces our

it's days. higher that of are PXX XX ore at a that extraction XX-millimeter that where place range kind stockpile, millimeters, over ounces the -- time. crushed for trucks With from a time, over we that will And the crush. is XX% in achieve draw as certainly the than the XX%, secondary not with crusher XX the higher they of and bypass from we more gold Over comes rate, XX% we material, extraction in but a

pad place meet more guidance, guidance. having meet the ounces to in we're more leach to to So, the ounces the

design, we're said stacking the system day, X,XXX between is like already system I the So, more managing. capacity. up a right? solution temporary that's how stacking days XX% performing good XX% we had call early during are the these seeing is tons in We of to This get we with a while What that per XX%. at which March, yesterday is day of and

that We more don’t get spillages system is properly are the right? testing generate and these issues And takes to mainly massive a it it the working to some the up times. spillages. conveyor sync, stocking. work It's basically with malfunctions, and with then get all massive system belts, overland It's automation we we large again. have X and clean what's the communicating hours dealing at system in up maybe we of miscommunication. running get one of happening, stacking braking when no, And the from conveyor braking systems sometimes up That not

resolved benefit So, of believe days could or example be and a example, nothing I issue even us. maintenance a in our not issue it's -- making that I of to site We're having we good the the The believe complement is team, operators technicians this the is technology, we have just of use working of with here, and COVID is not impacting hours. right? on same. that, vendor how weeks, this but do for matter that good

so cannot things -- to lot the technicians In country. have take So, close taking weeks that borders right? the that we don't which case, or and -- we resolve, these see again, or up. could normal to technicians the up getting hours But and availability with on-site and because are of improving, up issues, or foreigners, up we would -- Argentinean mechanical is -- a something days day, vendor believe in we superior, just days get remain I this a ramp-up largely are the the you on you, end

Don DeMarco

ton grade, Also the I on little were around grams that initial had stacking, X.XX like but or maybe to below, per stacked you shifting something. maybe over mid-October, a bit recall grades

increase the But see Are implies targeting with been you're the line the stack that year grade -- maybe the previously is are your right X. gram grade. had -- stacking in been now? X And stack and which now, full plans? per an comfortable grades for with You expectations in you above there's grades X ton that it I

Jorge Alberto Ganoza

in with is grade Absolutely. plan. our line Yes,

Don DeMarco

allocation we flow then finally, cash free And of you lot Okay. in a on priorities, have capital generating XXXX.

exploration? your You exploration. mentioned you that in expanded capital beyond have investment on investment dividend you're or at Is What debt? something priorities thinking are about a point the repaying this allocation

Jorge Alberto Ganoza

Yes. because And question, me thanks here. something it the to allows for point

at we -- need strengthen These to like We now balance companies in right? opportunities strengthen legs that are the cycles first, have these is, companies in these, like One three sheet, many we sheet. believe cycles we the to of priorities. times the have balance are the

for a even view to So, that's us this you and EBITDA putting having sheet balance as will though we leg fortress very whatnot, us, a sheet. that debt ensuring So come of of balance with -- we be together seeing -- -- we right? priority strong number cycle out is the low our a

exploration is investment. Second

my noted I prioritizing exploration investment allocation to before, as construction. been basically during Lindero As capital intervention -- for we've shortchanging three we the our years in were

XXXX, only mines our We and research deal and depletion have expand X,XXX been -- with the not to such. at replenish meters, enough drilling

XX,XXX, So, we those XX,XXX at all meters. got drilling We're of up meterages north sites. drilling

way of testing to consider, capital Yes, other last shareholders means special that those We're Argentina. considering identify. that will dividends for shareholders. is certainly, well have that something return drill opportunities -- to returning growth against is Mexico going Board we is as brownfields. shareholders, and other already. a to or options We to the in the in new initiatives one way or to And will this returning something the best year But of in that's outside be evaluate dividend and might is we we

Operator

coming question Huntington. from next Your James is

Your line is live.

James Huntington

there. the of on up bit there. there. way unfortunate, Just time system? It's stacking the line, sort following But, be current you like just do of March? or this think Just on could obviously fair you more your you be two-month like previous think unit bit questions of restricting process COVID's color would of by rates, stacking ramped sort you'll up the be yes, XX% What you from the at Thanks. a a like end

Jorge Alberto Ganoza

tricky question Yes. really And a answer. that's to

We almost with system We've now are know you all the all lot -- on braking right issue. of this now a It's solving you stacking to if left we're how a already have a works, jumping see the an And a of -- the braking at to mid-March. automation problems on of communications and isolated our right to -- one. performance. we're this get starting are the you been system. things performance. sudden, with problems see improving, and and get We're can days, bump it significant sudden better we in and and And trying

be the matter and us where days the problem with solution. -- something right, So, not March. have me for stacking weeks. But, nature in of right? we'll in front issues get within our it's of that April, or a gauge. the difficult performance it's XX% not, But, to days a in we to What matters are into months, issues should solved that because we is weeks, with are of of see or solved are the of expectation spillage believe still in of if the I we

have And for few we're So, this right my and be assessment just we this now problem. now, a of or solution weeks with believe right? leg best with, the one I a on problem this. been to weeks for we're would battling battling days So, get last it's

James Huntington

give you some if the just of the plant how and the then, of SART is status ramp-up there on could color as and going ramp-up what well. -- sort And us the

Jorge Alberto Ganoza

manageable. It's to we right? now Yes. need the The pregnant but solution the produce need SART in is plant and day important. it content one, So, in is the SART we don't for need it gold, up to not critical us. path plant, copper don't We

gold capacity. crushing -- SART in But, and from path have the are the have critical operations of was the plant team stacking maintenance right? at the that and on February design areas Basically, system. the for we resources reallocated We production, to XX% key team or

SART. So, deprioritized around we the have efforts

We've back it to The system will be. stacking design XX% precipitate around We been to of at it the SART been come capacity. to we solutions. XX%, XX% XX%, running in plant, copper get It's up operating running able rates. been that we it once we've of at efficiently where to need those

exceeding on the with filter. issue basically expectations. waiting resources But of plant path, say, performing, -- just It's again, increasing I the now, have is to chemistry small a secondary and for we of minor critical copper will have and filter, So, for repair our a some the in flow. an We're the matter SART the crusher. prioritized a which stacking copper we issue. primary is Right

James Huntington

And question then, modeling for just last one me.

possible, depreciation For what this if term a Lindero, of you're sort value? ounce us longer like you could $X and per Lindero, more year expecting at on for guide

Jorge Alberto Ganoza

Luis, do want this one? punt give a to to you

Luis Dario Ganoza

you're of Yes. I depreciation front is head on basis we depreciation life is throughout don't per have, you you. are the evolution the ounces as We're production of in can't ounces for right using don't because the a I expect in tracking, a So, Yes. sync right? of the be have of life asking income of output of depreciating, sorry, heard share what with of it method throughout we the based now course, But, I mine. number a units mine, course, can me. I'm dollars will I my the that ounce unfortunately, number per I with that on production should in produced. based ounce. on the give

Operator

coming question Day. Adrian Your next from is

Your is live. line

Adrian Day

or exploration areas any answers, partly to new you're ask In looking I your little at? of more. the bit question you been exploration one has there it in or a but all about at is site, foreseeable to My previous mine the are answered wanted close already future,

Jorge Alberto Ganoza

of bit Adrian. a everything, It’s Yes.

the Jose existing the vicinity we have So, boundary aggressive on program resources program in immediate to and north both mine, at on Mexico, in an drilling of extensions the deep San south. -- the of the Mine the

have the no X that mining one meters Victoria where sorry, kilometers the we two from main We vein, identified today also And east a from drill further of grades bit a we of a of grams now. with over range then, resources also up hosts intercepts Victoria, shoot, east parallel blind have to ore couple structure done meters. interesting structures, the -- due XXX have another in is XXX of couple

So, that. lot allocated of we a have drilling to

In are of addition, of other But, all other at consider the within San the Jose exploring and the -- veins brownfields. the in I system. areas Mine, we would within this reach

the where So, have opportunity We that ore signed room. opportunity with truck could successful, Mina to an XXXX, our Jose agreement we Mill. are year, to San this -- we

And and It's optioned that San Blanco is need some project exciting results information at follow-up. can east with drill XX that XX, public, have We the an some kilometers property. exciting Higo it. you from due Jose. It's exploration look

our for out within is the that In a so vein the the and also over have drilling non-mineralization similar for this new ideas stepping XXX also of years all in extensions has of new areas, Mine, plans XXXX. we Caylloma within into testing been So, system a scenario, productive case literally. of

mine are we -- doing case the in near near of drilling. So, not resource Lindero,

is there located gold year. property. -- center is production. by is out gold drilling past our porphyry Arizaro not a stepping We're of the kilometers Lindero, a going evidenced a well-identified from porphyry. the second a well within gold X.X so We Arizaro trucking is have Lindero half system received in we believe as are the -- as don't years. one we there standalone. to perhaps for have to need that satellite, be Arizaro close, porphyry drilling is And this into we high-grade But, brought the gold has There so throughout infrastructure that bringing big. porphyry we're We distance. that drilling near-surface, first potential, is too

X.X, million drilling million, what, at excess contribute, high X.X could suggest. we in satellites tons would these XX million, X.X, grades some believe, XX as grams So, as of gold, X as

Arizaro. we potential going So, to testing those are satellites be at

Exploration, our drilling them on So, And we we projects those have that, projects, and Argentina. option advancing we're commitments work have apart publicly. and advances. we'll Mexico we from in properties, work firm in and be new discussing

Operator

Your Stevens. is from coming next question Justin

Your line is live.

Justin Stevens

off. of relative has Thanks, copper seeing what to looking so of I Lindero? wondering, is be, was wanted are cyanide what I how for? been But, Most far guys. side Yes. that much would you the consumption just covered mostly you're get really guys to how And flip at the

Jorge Alberto Ganoza

didn't I all well. you hear that Sorry.

in copper about content the Lindero? asking You're

Justin Stevens

far and Yes, consumption in at the ore placed Lindero so cyanide well. the as

Jorge Alberto Ganoza

the Yes. X.X% Copper is that of reserve is see resource in we that of the that the -- seeing. model, of Lindero, in what copper the we're porphyry our chalcopyrite. copper, we makes case form that Lindero see fact copper viable, with what in copper grades is And are trending X.X% what along around XX% in is Lindero technically viable

copper So under chalcopyrite only X% in a leaches cyanide of solution.

copper Lindero, of grade mineral Those eat have are will expectations copper or other the forms, chalcocine, mineral the cyanide So, of In in like chalcocine, chalcosine, bornite. the eaters. we of and case form of like it copper cyanide doesn't is where copertite XX% the within chalcocite, our chalcopyrite, at leach X.X.

cyanide below consumption ton. now X.X kilos Our per half right is slightly

solution, expect. seeing pregnant would well tracking it's also in within what And with kinetics. the this within we're So, expect leaching the copper that it's what we we

we're solution. of pregnant in So, range to the in XXX ppm copper the XXX seeing

running the the capacity, XX% XX%, although And that it's design -- plant cyanide. with work, of that managing we're SART it's right? doing at So,

Justin Stevens

guys that's timing your have and great. planned No, And do Yes. reserve then, for the was, only I question had annual resource update? other you

Jorge Alberto Ganoza

weeks. coming releasing the in reserves-resources be We'll Yes.

Operator

the you. Thank further There this at are no in queue time. questions

Carlos Baca

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

Operator

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

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

Fortuna Silver Mines (FSM) 12 Mar 212020 Q4 Earnings call transcript