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Fortuna Reports
Q3 2010 Cash Flow from Operations of US$ 5.07 Million; Construction at
San Jose Ag-Au Project on Schedule and Budget
November 12, 2010: Fortuna Silver Mines Inc. (TSX: FVI / Lima Stock Exchange:
FVI) � is pleased to announce that it has filed its financial
statements and MD&A for the three months ended September 30, 2010 and
herein provides an update on construction activities at the San Jose
silver-gold Project, Mexico. Fortuna reported cash flow from
operations of US$ 5.07 million in Q3 of 2010 on revenues of US$ 18.04
million. The full documents are available on SEDAR and have also
been posted on the Company's website at www.fortunasilver.com.
Third quarter 2010 highlights:
- Cash
flow from operations before changes in non-cash working capital of
US$ 5.07 million, compared to US$ 2.66 million in Q3 2009
- Revenue
of US$ 18.04 million, compared to US$ 13.23 million in Q3 2009
- Operating
income of US$ 4.68 million, compared to US$ 4.39 million in Q3 2009
- Net
loss of US$ 2.54 million, compared to a net loss of US$ 0.56 million
in Q3 2009
- Silver
production of 474,489 oz; 14% increase over Q3 2009
- Negative
cash cost per ounce of payable silver of US$ 4.97, net of by-product
credits; 5% decrease over Q2 2010
- Cash
position (including short term investments) and working capital as
at September 30, 2010 were US$ 55.2 million and US$ 58.67 million
respectively
- Construction
activities at the San Jose Ag-Au Project are on schedule and on
budget
Jorge Ganoza, President and CEO, commented,
�Fortuna is on track to deliver 1.9 million ounces of silver at a
negative cash cost of US$ 7 per Ag ounce, net of by product credits, for
2010. In spite of a net loss of US$ 2.54 million attributable to the
mark-to-market effect of our derivative contracts and a foreign exchange
loss, Fortuna generated strong operating cash flow of US$ 5.07
million. With the commissioning of the San Jose silver-gold Mine on
schedule for the third quarter of 2011, the Company projects to take
annual silver production to a rate of 4.6 million silver equivalent
ounces by 2012 and 7 million silver equivalent ounces by 2013, at a
projected cash cost below US$ 6 per ounce.�
Financial Results
During the third
quarter of 2010 the Company generated a net loss of US$ 2.54 million (Q3
2009: net loss US$ 0.56 million) on operating income of US$ 4.68 million
(Q3 2009: income US$ 4.39 million). In spite of a healthy operating
margin, results were negatively impacted by a commodity contract loss of
US$ 3.18 million (Q3 2009: loss US$ 3.47 million) and foreign exchange
loss of US$ 1.79 million (Q3 2009: loss US$ 0.31 million). The net
loss also included deferred share unit grants and bonus accruals of US$
2.15 million (Q3 2009: nil) under selling, general and administrative
expenses.
Adjusting for the
mark-to-market effect on the commodity contracts and a foreign exchange
loss on the repatriation of funds from the Company�s Peruvian subsidiary
(included in the US$ 1.79 million foreign exchange loss recorded for the
quarter), third quarter adjusted net income (a non GAAP measure) totalled US$ 0.82 million (Q3 2009: US$ 0.56
million).
Operating Results
During the third
quarter ended September 30, 2010, the Company achieved silver production
of 474,489 (Q3 2009: 417,571) ounces with a negative cash cost per
ounce of payable silver of US$ 4.97, net of by-product credits. The
mine treated 112,886 tonnes of ore in the third quarter 2010, compared to
105,241 tonnes in the prior year. The cash cost per tonne was US$
54.29 in the third quarter 2010.
The 14% increase
in silver production over the corresponding period of 2009 is
attributable to an increase in throughput of 7%, an increase in silver
recoveries of 0.5% and a 5% increase in silver head grade.
San Jose Project
Construction
activities are on schedule and within budget for completion and
commissioning of the mine in the third quarter of 2011. The
operation is scheduled to start at a rate of 1,000 tpd, with 2012
production forecast totaling 1.7 million ounces of silver and 14,700
ounces of gold or 2.6 million Ag Eq ounces. These targets would
raise Fortuna�s 2012 consolidated silver equivalent production to 4.6
million ounces. Once in operation, at design capacity of 1,500 tpd,
the San Jose Mine will produce 5 million Ag Eq ounces annually at a cash
cost of US$ 6.20 per ounce (see Fortuna�s news release dated April 26,
2010). At that point, Fortuna�s consolidated annual silver
equivalent production will reach 7 million Ag Eq ounces plus base metal
credits from the Caylloma Mine. Management plans to achieve full
production capacity at San Jose within 24 months from start-up. The
San Jose Project Technical Report is available on the Company�s website
at www.fortunasilver.com.
As of October 20,
2010, earthmoving and site preparation for the processing plant was 84%
advanced. Cement and foundations work started in late October.
Purchase orders have been placed for all major equipment and the
ball mill arrived on site in September. Upgrading of the water
treatment plant, source of 20% of make-up water for the operation, is
100% complete. The 15 kilometer water pipeline installation to the
mine site is 84% advanced, while tailings dam construction is 51%
advanced and scheduled for completion in December of 2010. Construction
of the 5MW electric power substation is 53% complete. Underground
development continues on the main haulage ramp and the cross-cut on level
1430 into the Bonanza, Trinidad and Fortuna veins has advanced 50 meters.
Assays results for the veins are still pending.
Conference Call to Review Third
Quarter 2010 Financial Results
The Company will hold a conference
call to discuss the financial results on Tuesday, November 16, 2010 at
12:00 p.m. EST / 9:00 a.m. PST. Hosting the call will be Jorge A.
Ganoza, President, CEO and Director 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 http://www.investorcalendar.com/IC/CEPage.asp?ID=162594 or over the phone by dialling just prior to the starting
time.
Conference call details:
Date: Tuesday,
November 16, 2010
Time: 12:00 p.m.
EST / 9:00 a.m. PST
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 Passcodes
(both are required for playback):
Playback of the webcast will be
available until February 16, 2011. Playback of the conference call
will be available until 11:59 p.m. (Eastern Time) on November 30,
2010. In addition, the call will be archived in the Company�s
website.
Fortuna Silver
Mines Inc.
Fortuna is a
growth oriented, silver and base metal producer focused on mining
opportunities in Latin America. Our primary assets are the Caylloma Ag-Pb-Zn-Cu Mine
in Arequipa, Peru and the San Jose Ag-Au Project in Oaxaca,
Mexico. The Company is selectively pursuing additional acquisition
opportunities. For more information, please visit our website at www.fortunasilver.com.
President, CEO and Director
Fortuna Silver Mines Inc.
Symbol: TSX: FVI / Lima Stock
Exchange: FVI
Management Head Office: Carlos Baca - Tel: +51.1.616.6060, ext. 2
Corporate Office: Ralph Rushton -
Tel: +1.604.484.4085
Forward-Looking Statements
Certain statements
in this press release constitute forward-looking statements and as such
are based on an assumed set of economic conditions and courses of action.
These include estimates of future production levels, expectations
regarding mine production costs, expected trends in mineral prices
and statements that describe Fortuna�s future plans, objectives or goals.
There is a significant risk that actual results will vary, perhaps
materially, from results projected depending on such factors as 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 calculation of
mineral reserves, mineral resources, and metal recoveries, the timing and
availability of financing, governmental and other approvals, political
unrest or instability in countries where Fortuna is active, labor
relations and other risk factors.
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