10 year extension to its EIA for San Jose Mine denied ...
Fortuna Silver Mines earns $200,000 (U.S.) in Q3
2021-11-11 06:23 ET - News Release
Mr. Jorge Ganoza reports
FORTUNA REPORTS THIRD QUARTER 2021 UNAUDITED FINANCIAL RESULTS
Fortuna Silver Mines Inc. had third quarter 2021 net income of $200,000, adjusted net income of $22.5-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $75.3-million. (All amounts are expressed in U.S. dollars and tabular amounts are in millions, unless otherwise stated.)
Jorge A. Ganoza, President and CEO, commented, "Our strong adjusted EBITDA1 of $75.3 million with margins of 46% and free cash flow from operations1 of $33.8 million in the third quarter attest to the strength of our business. Our record financial results reflect the sustained upward production trend at the Lindero mine in Argentina and the first quarterly contribution of the Yaramoko mine in Burkina Faso." Mr. Ganoza concluded, "We expect our robust cash flow generation to continue to be our main source of funding as we ramp up construction activities at the Seguela project in Cote dIvoire."
Third Quarter 2021 Highlights
- Record sales of $162.6 million, an increase of 95% from the $83.4 million reported in the same period in 2020 ("Q3 2020"), due primarily to gold sales from the Yaramoko mine of $49.0 million and from the Lindero mine of $41.8 million.
- Net income of $0.2 million or $0.00 per share, compared to $13.1 million or $0.07 net income per share reported in Q3 2020. Net income was lower due primarily to $10.5 million in transaction costs related to the acquisition of Roxgold Inc., and $9.6 million settlement of the disputed royalty claim with the Mexican Geological Service ("SGM").
- Adjusted net income1 of $22.5 million compared to $16.1 million reported in Q3 2020.
- Adjusted EBITDA1 of $75.3 million compared to $42.2 million reported in Q3 2020.
- Free cash flow from ongoing operations1 of $33.8 million compared to $30.1 million reported in Q3 2020.
- As of September 30, 2021, the Company had cash and cash equivalents of $135.8 million, an increase of $3.9 million from December 31, 2020.
- Silver and gold production of 1,711,881 ounces and 65,425 ounces, respectively.
- AISC1 per ounce of gold sold of $1,270 for the Lindero Mine and $1,188 for the Yaramoko Mine. AISC1 ,2 per silver equivalent ounce of payable silver sold of $15.51 and $17.66 for the San Jose Mine and Caylloma Mine, respectively.
Third Quarter 2021 Results
Sales for the three months ended September 30, 2021 were $162.6 million, an increase of 95% from the $83.4 million reported in Q3 2020. Lindero reported adjusted sales of $41.8 million from 23,559 ounces of gold sold. Yaramoko reported adjusted sales of $49.0 million from 27,494 ounces of gold sold. San Jose reported adjusted sales of $43.7 million, a decrease of 32% from the $64.7 million reported in Q3 2020 due to decreases in the price of silver and a 24% and 21% decrease in the volume of silver and gold ounces sold, respectively. Caylloma reported adjusted sales of $28.0 million, a 49% increase from the $18.8 million reported in Q3 2020 due primarily to a 36% increase in the volume of silver sold, and increases in the volume and price of lead and zinc sold.
Operating income for the three months ended September 30, 2021 was $21.8 million, a decrease of $6.7 million compared to Q3 2020. The decrease was due primarily to lower sales at the San Jose mine and the $9.6 million settlement of the disputed royalty claim with the SGM plus value added tax paid to the SGM, offset partly by Lindero and Yaramoko's contribution to operating income of $10.3 million and $10.0 million respectively.
Net income for the three months ended September 30, 2021 was $0.2 million, a $12.9 million decrease from the $13.1 million net income reported in Q3 2020, primarily due to lower operating income and $10.5 million in transaction costs related to the acquisition of Roxgold Inc. The effective tax rate for the quarter was 98%.
Adjusted EBITDA for the three months ended September 30, 2021 was $75.3 million, an increase of $33.1 million compared to $42.2 million reported in Q3 2020. The increase reflects Lindero and Yaramokos contribution to adjusted EBITDA of $21.8 milion and $25.8 million, as well as higher EBITDA at Caylloma.
Free cash flow from ongoing operations for the three months ended September 30, 2021 was $33.8 million compared to $30.1 million in Q3 2020.
Liquidity
As of September 30, 2021, the Company had cash and cash equivalents of $135.8 million, an increase of $3.9 million from December 31, 2020.
On November 4, 2021, the Company entered into a fourth amended and restated credit agreement, effective as of November 5, 2021, which converts the Company's prior non-revolving and revolving facility into a revolving term credit facility in the amount of $200.0 million, subject to the conditions set out below, with a term of four years and a step down to $150.0 million after three years.
On closing of the amended credit facility, $120.0 million was available for drawdown and was drawn down in full. If a new environmental impact authorization for the San Jose mine ("San Jose EIA") (See news release dated October 25, 2021) has not been approved or the existing San Jose EIA has not been extended by January 23, 2022, the availability of the amended credit facility will be reduced to $100.0 million. The total amended credit facility of up to $200.0 million will only become available upon receipt of the new San Jose EIA approval or San Jose EIA extension.
On November 10, 2021, Minera Cuzcatlan received written notification from SEMARNAT that its application, made in May 2021, for a 10 year extension to its Environmental Impact Authorization for the San Jose Mine which expired on October 23, 2021 had been denied. SEMARNAT denied the application for the extension citing a pending evaluation by SEMARNAT related to the regularization of ancillary infrastructure at the mine site. In addition, it cited non receipt of requested information, which the Company has already provided to the authority. The Company is reviewing the reasons for the denial with its advisors, but believes that it is fundamentally in compliance with all material aspects of the San Jose EIA and is entitled to an extension.
The San Jose mine is currently operating under the protection of the Mexican courts which allows the continued operation of the San Jose mine beyond the expiry date of the EIA. Minera Cuzcatlan has the right and intends to appeal the decision of SEMARNAT and will continue to pursue all legal protection available to it in order to continue to operate pending the appeal of the decision of SEMARNAT.
Under the terms of the amended credit facility, the Company must obtain by November 20, 2021 a permanent injunction or equivalent protection, in form and substance acceptable to the lenders acting reasonably, which allows the Company to continue to operate the mine.
Qualified Person
Eric Chapman, Vice President of Technical Services, is a Professional Geoscientist of the Association of Professional Engineers and Geoscientists of the Province of British Columbia (Registration Number 36328), and is the Company's Qualified Person (as defined by National Instrument 43-101). Mr. Chapman has reviewed and approved the scientific and technical information contained in this news release and has verified the underlying data.
Additional information regarding the Company's financial results and activities underway are available in the Company's third quarter 2021 Financial Statements and accompanying Management's Discussion and Analysis for the three and nine months ended September 30, 2021, which are available for download on the Company's website, www.fortunasilver.com , on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar .
Conference Call and Webcast
A conference call to discuss the financial and operational results will be held on Friday, November 12, 2021 at 9:00 a.m. Pacific time | 12:00 p.m. Eastern time. 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: https://www.webcaster4.com/Webcast/Page/1696/43329 or over the phone by dialing in just prior to the starting time.
Conference call details:
Date: Friday, November 12, 2021
Time: 9:00 a.m. Pacific time | 12:00 p.m. Eastern time Dial in number (Toll Free): +1. 888.506.0062
Dial in number (International): +1.973.528.0011
Entry code: 664594 Replay number (Toll Free): +1.877.481.4010
Replay number (International): +1.919.882.2331
Replay Passcode: 43329
Playback of the earnings call will be available until Friday, November 26, 2021. Playback of the webcast will be available until Saturday, November 12, 2022. In addition, a transcript of the call will be archived on the Company's website at https://fortunasilver.com/investors/financial-reports/ .