Fortuna Reports Net Income of US$11.11 Million on Revenue of US$40.60 Million in the First Quarter of 2012
VANCOUVER, May 9, 2012 /PRNewswire/ – 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
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.”
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
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:
Three months ended Three months ended Expressed in US$000's March 30, 2012 March 31, 2011 Sales 40,601 21,886 Operating income 16,533 8,076 Net Income (loss) 11,111 4,781 Cash generated by operating activities before changes in working capital 14,692 6,033 Cash cost per Ag oz net of by-product credits (US $/oz) 3.18 (5.67)
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 EnergÃa
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 18(th). 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
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.
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
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
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
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.
SOURCE Fortuna Silver Mines Inc.