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Fortuna Reports Cash Flow of US$19.95 Million and Net Income of US$8.03 Million in the Third Quarter of 2012

November 8, 2012

VANCOUVER, Nov. 8, 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 and nine months ended September 30, 2012. The full
documents are available on SEDAR and have also been posted on the
company’s website at http://www.fortunasilver.com/s/financial_reports.asp.

Third Quarter 2012 Highlights:

        --  Cash generated by operating activities before changes in
            working capital of US$19.95 million, up 30% over the prior year
            period (Q3 2011: US$15.38 million)
        --  Operating cash flow per share of US$0.16 compared to US$0.12 in
            the prior year period
        --  Net income of US$8.03 million, down 22% over the prior year
            period (Q3 2011: US$10.31 million)
        --  Revenue of US$43.84 million, up 35% over the prior year period
            (Q3 2011: US$32.54 million)
        --  Cash position (including short term investments) and working
            capital at September 30, 2012 were US$62.75 million and
            US$90.86 million respectively
        --  Silver and gold production of 1,027,741 ounces and 5,348 ounces
            respectively
        --  Cash cost per silver ounce, net of by-product credits, was
            US$4.81

Jorge Ganoza, President and CEO, said, “I am pleased that we have had
another strong quarter of record sales and cash from operations. At the
end of August 2012, the San Jose mine celebrated its first anniversary
of commercial production-in the last year, it has consistently exceeded
its planned operating and financial targets.  In the coming year, the
expansion of the processing plant to its design capacity, and
construction of an off-site dore plant at San Jose will contribute
significantly to our profit margins.  At our Caylloma plant we are
delighted to report that last month, the Mines and Energy Ministry
granted the construction permit for our new tailings facility, now
scheduled to be commissioned at the end of November 2012.”

Financial Results

During the third quarter ended September 30, 2012, the company generated
net income of US$8.03 million, down 22% over the prior year period (Q3
2011: US$10.31 million), while cash generated by operating activities
before changes in working capital increased 30% over the prior year
period  to US$19.95 million.  This increase in cash generation for the
period in spite of a 23% lower silver price compared to the prior year
was driven by the strong cash margins contributed by our San Jose
operation as well as an overall lower cash tax rate for the company.

The main items offsetting the positive contribution of the San Jose mine
on our net income with respect the comparable period in 2011 were lower
silver, lead, zinc prices (23%, 20% and 15% respectively) and higher
unit cash costs at the Caylloma mine of approximately US$1.8 million. 
Also weighing negatively on our results was the lower zinc and lead
sold (16% for both metals), and higher selling, general and
administrative expenses of US$1.8 million which includes a share-based
payments mark-to-market effect of US$0.8 million.

Summary of Financial Results:


                                  Three months ended     Three months ended
    Expressed in US$000's         September 30, 2012     September 30, 2011

    Sales                                     43,385                 32,543

    Operating income                          12,262                 14,886

    Net income                                 8,026                  6,199

    Cash generated by operating
    activities

      before changes in working               19,951                 15,378
    capital

    Cash cost per Ag oz net of
    by-product credits

      (US$/oz)                                  4.81                   1.39

Operating Results

The company’s silver production in Q3 2012 was 56% higher than Q3 2011
as a result of four times higher silver production from the San Jose
mine slightly offset by a 6% reduction from the Caylloma mine.  The
company’s gold production in Q3 2012 was 251% higher than Q3 2011 as a
result of the 50% increase from the Caylloma mine and a 368% increase
from the San Jose mine.  The San Jose mine initiated commercial
production on September 1, 2011.

Silver and gold production for the first nine months of the year totaled
2,977,025 ounces and 16,331 ounces respectively; reflecting 80% and 94%
of the company’s 2012 annual production guidance (see Fortuna news
release dated January 26, 2012). At this rate of production, the
Company expects to exceed its 2012 guidance of 3.7 million ounces of
silver and 17,400 ounces of gold.

During the third quarter ended September 30, 2012 silver comprised 69%
(Q3 2011: 70%) of revenue and the silver market price was US$29.91 (Q3
2011: US$38.79) per ounce.  By-product gold accounted for 16% (Q3 2011:
3%) of revenue with the balance coming from lead and zinc sales.

Consolidated cash cost per ounce of payable silver, for the third
quarter, net of by-product credits, was US$4.81 compared to US$1.39 for
the same period in 2011.  The increase over last year primarily at the
Caylloma mine which increased from negative US$0.25 in Q3 2011 to
US$7.80 per ounce in the current period.  The increase in Caylloma mine
cash cost per ounce of payable silver is due to decreases in by-product
credits of US$3.68 per ounce, increased production cash cost of US$2.37
per ounce, higher refining charges of US$1.35 per ounce, and a silver
head grade variation equivalent to US$0.65 per ounce.  The Caylloma
mine’s year to date cost performance is on average in line with budget.

San Jose Mine, Mexico

During the third quarter of 2012, silver and gold production was 19% and
25% above the mine plan respectively.  These results are explained by
the contribution to production ahead of schedule of the higher grade
blocks A and B, on level 1350, sourcing approximately 51% of mill
throughput in the period.  The San Jose deposit is mined through a
decline currently in progress which will descend approximately 500
meters below surface down to level 1100.

On level 1300, preparation of blocks C and D continues ahead of schedule
with a contribution of 7% of mill throughput in the period. The company
expects the mine to source fresh ore at a rate of 1,500 tonnes per day
by the second quarter of 2013.

Silver and gold recoveries are at 100% and 97%, respectively, of design
parameter at the processing plant.

Cash cost per tonne of processed ore for the period was US$80.59,
compared to US$61.70 in the prior year period.  Cash cost per tonne
year to date is US$70.94 (2011: US$61.70) which is reflective of what
the company believes will be on average the unit cost moving forward. 
The cost increase in the current quarter is driven by events of a
non-recurrent nature and the advance of preparation expenses in level
1300 originally scheduled for year end.

Caylloma Mine, Peru

During the third quarter of 2012, silver production at Caylloma mine
decreased by 6% compared to the same quarter in the previous year
mainly as a result of lower metallurgical recoveries.  The drop in
silver recovery to 77% during the quarter and throughout 2012 is the
result of mixed sulfide-oxide ore coming from level six of the Animas
vein, which represents approximately 30% of the total mined ore.

Since December 2011, the company has implemented a staged expansion of
its existing tailings facility providing for additional tailings
storage capacity through June 2013.  As of October 2012, the Company
successfully secured the construction permit for the new tailings
facility which is now scheduled to be commissioned by the end of
November 2012.

The Caylloma mine’s year to date cost performance is in line with
budget.  Cash cost per tonne for the third quarter of 2012 was
US$85.14, up 22% from the prior year (Q3 2011: US$69.96).  The change in production cash cost reflects cost increases in qualified
labor and industry related services that have been mounting in the
Peruvian underground mining industry since late 2010 especially near
the end of 2011.

The company continues to experience cost pressures in certain cost items
and anticipates cost increments in the range of 5% to 7% in 2013,
including: mine contractors tariffs, surface ore and concentrate
transport tariffs, diesel generated power to cover temporary
constraints in the power line, and increased geotechnical back support
as the upper levels of the Animas and Bateas veins are closer to
surface with corresponding poor rock mass. Cost increments at the
narrow, labor intensive and distant Bateas and Soledad veins have been
the most significant.

Qualified Person

Edgard Vilela, Corporate Manager of Technical Services, is the Qualified
Person for Fortuna Silver Mines Inc. as defined by National Instrument
43-101 and is responsible for ensuring that the information contained
in this news release is an accurate summary of the original reports and
data provided to or developed by Fortuna Silver Mines Inc.

Conference Call to Review 2012 Third Quarter Financial and Operations
Results

A conference call to discuss the financial and operations results for
the third quarter of 2012 will be held on Friday, November 9(th), 2012 at 9:00 a.m. Pacific / 12:00 p.m. Eastern.  Hosting the call will
be Jorge Ganoza, President and CEO and Luis 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=170058 or over the phone by dialing just prior to the starting time.

Conference call details:

Date:  Friday, November 9(th), 2012
Time: 9:00 a.m. Pacific / 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 Passcode: 402815

Playback of the webcast will be available until February 9(th), 2013.  Playback of the conference call will be available until 11:59
p.m. EST on November 23, 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 throughout the Americas.  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

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 or information, 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 or information will prove to be
accurate as actual results and future events could differ materially
from those anticipated in such statements or information. Accordingly,
readers should not place undue reliance on forward-looking statements
or information.

SOURCE Fortuna Silver Mines Inc.


Source: PR Newswire