Fortuna
Reports Net Income of US$11.11 Million on
Revenue of US$40.60 Million in the First Quarter of 2012
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Vancouver, May 9, 2012-- Fortuna Silver Mines,
Inc. (NYSE: FSM | TSX: FVI | BVL: FVI | Frankfurt: F4S.F) is pleased to announce that it has filed its financial statements and MD&A for the three months
ended March 31, 2012. The full documents are available on SEDAR and have
also been posted on the company�s website at http://www.fortunasilver.com/s/FinancialStatements.asp.
First quarter 2012 highlights:
- Net income of
US$11.11 million, up 132% over the prior year period (Q1 2011: US$4.78
million)
- Cash generated by
operating activities before changes in working capital of US$14.69
million, up 144% over the prior year period (Q1 2011: US$6.03 million)
- Revenue of
US$40.60 million, up 86% over the prior year period (Q1 2011: US$21.89
million)
- Operating income
of US$16.53 million, up 105% over the prior year period (Q1 2011:
US$8.08 million)
- Cash
position (including short term investments) and working capital as at
March 31, 2012 were US$53.85 million and
US$77.06 million respectively
- Record silver and
gold production of 953,091 ounces and 5,137 ounces respectively
- Cash cost per
silver ounce, net of by-product credits, was US$3.18
Jorge
Ganoza, President and CEO, commented, �Fortuna
has delivered a record profitable quarter with strong cash flow generation
reflecting the positive impact of the San Jose operation in our
performance. Our current focus is on sustaining our status as a low
cost producer through the implementation of various initiatives
incorporated in our capital projects and execution of San Jose�s production
expansion to three million ounces of silver and twenty-five thousand ounces
of gold annual production rate by next year. Our exploration efforts
continue throughout our extensive land holdings around our mines and with
the evaluation of new opportunities throughout the Americas.�
Financial
Results
During the first
quarter ended March 31, 2012, the company generated net income of US$11.11
million (Q1 2011: US$4.78 million) on operating income of US$16.53 million
(Q1 2011: US$8.08 million). The increase in net income of 132%
compared to the same period in 2011 is mainly attributable to higher mine
operating income of US$21.08 million (Q1 2011: US$13.05 million) and lower
net loss on commodity contracts of US$0.34 million (Q1 2011: US$1.01
million), offset by higher income taxes of US$5.43 million (Q1 2011:
US$3.41 million).
Our selling,
general and administrative expenses remained almost flat over the prior
year period, in spite of the expenses associated with the San Jose mine in
Mexico, due to a US$0.70 million credit related to the mark-to-market of
restricted and deferred share units in the face of the reduction in share
price during the quarter. Shared-based payments related to vesting of
granted instruments, outside of the mark-to-market effect, amount on
average to US$0.35 million per quarter.
The increase in
mine operating income is explained by the contribution of the San Jose
mine. Mine operating margin was 52% compared to 60% in Q1 2011, result of a
decreased margin at Caylloma to 45% (Q1 2011:
60%) which was impacted by an increase of 31% in unit production cash cost.
Cash generated by
operating activities before changes in working capital totaled US$14.69
million, up 144% over the prior year period (Q1 2011: US$6.03 million). The
corresponding operating cash flow per share was US$0.12 (2011:
US$0.05). Operating cash flow, which is net of tax payments of
US$5.77 million, includes US$4.03 million related to the final 2011 income
tax payments. After adjusting for these 2011 taxes paid in the first
quarter, operating cash flow per share was US$0.15, up 81% over the prior
year period.
Summary of financial results:
Expressed in US$000's
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Three months
ended March 30, 2012
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Three months
ended March 31st, 2011
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Sales
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40, 601
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21,886
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Operating income
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16,533
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8,076
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Net Income (loss)
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11,111
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4,781
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Cash generated by
operating activities
before changes in working capital
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14,692
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6,033
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Cash cost per Ag oz net of by-product credits
(US$/oz)
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3.18
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(5.67)
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Operating Results
The company�s silver
production in Q1 2012 was 118% higher than Q1 2011 as a result of higher
silver production from Caylloma of 11% and the
contribution from San Jose of 468,865 ounces. The company�s gold
production in Q1 2012 was 754% higher than Q1 2011 as a result of the
contribution from San Jose of 4,497 ounces.
The company is on
track to deliver 3.7 million ounces of silver and 17,400 ounces of gold or
4.6 million ounces of silver equivalent plus significant base metal
by-product in 2012.
Consolidated cash cost per ounce of
payable silver, for the first quarter, net of by-product credits, was
US$3.18 compared to negative US$5.67 for the same period in 2011. The
increase over last year is mainly explained by the increase in cash cost
per ounce at the Caylloma mine which experienced
a sharp raise from negative US$5.67 in Q1 2011 to US$7.21 in the current
period. This sharp increment over the last year at Caylloma
is explained by a decrease in by-product credits of US$7.10 per ounce, a
31% unit cash cost per tonne of processed ore
increase and higher refining charges of US$1.46 per ounce.
San Jose Mine, Mexico
In the first quarter of 2012, the mill processed 87,056 tonnes of ore and the mine extracted 76,000 tonnes. Out of this total, 56% was sourced from
the working areas above level 1400 (reserve blocks K, L, and M) and the
balance (44%) was contributed by mine preparation on reserve blocks A and B
on level 1350. Actual mining on level 1350 started in the month of
April 2012.
As of the third week of April 2012, the main access ramp had
reached mining level 1300 where development of reserve blocks C and D will
take place throughout the rest of 2012 and which will be key for the mine�s
production ramp up in 2013. Overall, the mine development plan that
will support the ramp up to 1,500 tonnes per day
is approximately three months ahead of schedule.
During the quarter the processing plant
continued to perform according to plan with average metallurgical
recoveries for silver and gold at 84.64% and 83.51% respectively, or 97%
and 93% of design parameters.
Cash cost per payable ounce of silver,
for the quarter ended March 31, 2012, was negative $1.02 net of by-product
credits. Cash cost per tonne of processed ore for
the period was $65.46. Cash cost per tonne
of processed ore in Q4 of 2011 was $47.16 as there was a large effect from
the pre-commercial production ore stock pile. The second quarter of
2012 operations at San Jose will be more representative in terms of costs
moving forward. The company estimates a stable average cash cost per tonne of processed ore in the range of $70 per tonne for 2012.
Caylloma Mine, Peru
The company noted
that it has received notification on April 3, 2012 from the Peruvian
Ministry of Energy and Mines (�Ministerio de Energ�a y Minas�) outlining its observations on the
construction permit of the new tailings facility and granting thirty days
for a response. The principal observations were to surface title
documentation for various parcels and minor technical observations. The Company
will file responses to all the observations, which are not deemed to be
material, before May 18th. In
parallel, a positive feasibility study and engineering have been concluded
to expand the holding capacity of the current tailings facility for an
additional five months of operation. The project has a budget of
US$0.5 million and will be concluded within three months. This
expansion will provide for stand-by holding capacity for any
contingency.
Cash cost per payable
ounce of silver, for the quarter ended March 31, 2012, was US$7.21 net of
by-product credits compared to negative US$5.67 in Q1 2011. The increment
over last year is explained by a decrease in by-product credits of US$7.10
per ounce, a 31% unit cash cost per tonne of
processed ore increment and higher refining charges of US$1.46 per silver
ounce. The decrease in by-product credits was primarily due to lower base
metal prices (lead 20%, zinc 15%) and production (lead
12%, zinc 7%). The increase in unit cost reflects cost increases in
qualified labor and industry related services that have been mounting in
the Peruvian underground mining industry since late 2010 with emphasis at
the end of 2011. The increase in refining charges reflects deteriorated commercial
terms for lead-silver concentrate sold to Chinese smelters.
For 2012, the company
anticipates no material increases in our direct costs, and estimates a cash
cost per tonne of processed ore in the range of
US$85 per tonne.
Qualified Person
Technical information contained in this news
release has been reviewed by Mr. Edgard Vilela, Corporate Manager of Technical Services, who is
the company�s Qualified Person for the purposes of NI 43 � 101.
Conference Call to Review 2012 First Quarter
Financial and Operations Results
A conference
call to discuss the financial
and operations results will be held
tomorrow, Thursday, May 10, 2012 at 9:00 a.m. Pacific | 11:00 a.m. Lima | 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: http://www.investorcalendar.com/IC/CEPage.asp?ID=168479 or over the
phone by dialing just prior to the starting time.
Conference call details:
Date: Thursday, May 10, 2012
Time: 9:00 a.m. Pacific | 11:00 a.m. Lima |
12:00 p.m. Eastern
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):
Account #: 286
Conference
ID #: 394055
Playback of the webcast will be available until August 11,
2012. Playback of the conference call will be available until 11:59 p.m.
EST on May 24, 2012. 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 silver Mine in southern Peru and the San Jose
silver-gold Mine in Mexico. The company is selectively pursuing
additional acquisition opportunities. For more information, please
visit our website at www.fortunasilver.com.
ON BEHALF OF
THE BOARD
Jorge A. Ganoza
President, CEO and Director
Fortuna
Silver Mines Inc.
Trading symbols: NYSE: FSM |
TSX: FVI | BVL: FVI | Frankfurt: F4S.F
Investor
Relations:
Management
Head Office: Carlos Baca - Tel: +51.1.616.6060, ext. 0
Corporate
Office: Ralph Rushton - Tel: +1.604.484.4085
Media
Contact, North America:
Christina
Pagano
Breakstone
Group
Phone:
+1.212.213.2851
Mobile:
+1.646.382.3871
E-mail: paganopr@aol.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. Forward-looking statements are statements that are not
historical facts and that are subject to a variety of risks and
uncertainties which could cause actual events or results to differ
materially from those reflected in the forward-looking statements.
When used in this document, the words such as �anticipates�, �believes�,
�plans�, �estimates�, �expects�, �forecasts�, �targets�, "intends�,
�advance�, �projects�, �calculates� and similar expressions are forward-looking
statements.
The
forward-looking statements are based on an assumed set of economic
conditions and courses of actions, including 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 estimation 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.
Although
Fortuna has attempted to identify important factors that could cause actual
results to differ materially from those contained in forward-looking
statements, there may be other factors that cause results to be materially
different from those anticipated, described, estimated, assessed or
intended. There can be no assurance that any forward-looking statements
will prove to be accurate as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements. Except as required by law, Fortuna does not assume the
obligation to revise or update these forward-looking statements after the
date of this news release or to revise them to reflect the occurrence of future
unanticipated events.
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