(All amounts expressed in US dollars, unless otherwise stated)
VANCOUVER, Aug. 12, 2013 /CNW/ - Fortuna Silver Mines Inc. (NYSE: FSM | TSX: FVI | BVL: FVI | Frankfurt:
F4S.F) today reported revenue of $30.1 million, cash generated from operations,
before changes in working capital of $5.9 million and a net loss of
$10.6 million in the second quarter of 2013 reflecting a non-cash
pre-tax impairment charge of $15.0 million. The non-cash impairment
charge is related to the impact of declining silver prices on the
carrying value of the Caylloma mine in Peru.
Second quarter 2013 highlights
-
Sales of $30.1 million
-
Cash flow from operations before changes in non-cash working capital of
$5.9 million
-
Adjusted net loss of $0.1 million
-
Cash position, including short term investments, of $48.4 million and an
untapped credit facility of $40 million
-
Silver and gold production of 1,074,007 ounces and 5,183 ounces,
respectively
-
Cash cost per ounce of payable silver, net of by-product credits, was
$7.58; unit cash costs per tonne was in line with guidance
Jorge A. Ganoza, President and CEO, commented, "The company is taking
the necessary measures to reduce corporate general and administrative
expenses and capital and operating cost expenditures to be better
positioned in the current price environment. The current year is a
capital intensive year at both of our mines but we have been able to
reduce our capital and exploration budgets for 2013 by $16.4 million
down to $50.6 million by restricting our focus to critical path and
sustainability projects." Mr. Ganoza continued, "Our investments in
exploration, mine development and infrastructure over the prior years
has permitted us to tighten our capital allocation going forward and
project a consolidated all-in cash cost of approximately $13 per ounce
of silver net of by-products for the next three years. Additionally the
high-grade silver-gold Trinidad North discovery at the San Jose Mine
will provide the potential for sourcing of higher margin production
starting in early 2015. Current plans call for initiating development
of the Trinidad North zone in 2014."
Impairment
As a result of declining silver prices in the second quarter of 2013,
impairment indicators were identified for Caylloma. The company has
determined that at current price levels the value of Caylloma has
decreased below the net book value resulting in second quarter income
adjusted by $15.0 million, pre-tax for impairment of Caylloma. This
charge does not impact the company's cash flow.
Outlook and measures under the current price environment
As a response to the significant decline in silver and gold prices the
company is implementing several measures to enhance free cash flow
generation by reducing budgeted capital and costs. These actions
include reduction in corporate expenses, capital budgets, exploration,
and operating costs. The main initiatives are as follows:
-
Streamlining of corporate overhead with a 33% reduction of $5.5 million
in corporate expenses on an annual basis
-
Focus on critical path and sustainability projects with a $12.6 million
or 24% reduction in the 2013 capital budgets; $12.1 million at Caylloma
and $0.5 million at San Jose
-
Focus on high reward targets within Brownfields explorations resulting
in a $3.7 million or 26% reduction in the 2013 exploration budget
-
Caylloma mine operating cost reductions of 8% or $1.7 million for the
second semester of 2013; we expect unit costs between $88/t and $87/t
for Q3 and Q4, respectively, compared to a budget of $95/t
2013 CAPEX Guidance Revision
Capital Expenditures
Mine
|
YTD 2013
($ M)
|
Revised 2013 Guidance
($ M)
|
Original 2013 Guidance
($ M)
|
San Jose
|
13.0
|
21.5
|
22.0
|
Caylloma
|
9.7
|
18.6
|
30.7
|
Total
|
22.7
|
40.1
|
52.7
|
Brownfields Exploration
Mine
|
YTD 2013
($ M)
|
Revised 2013 Guidance
($ M)
|
Original 2013 Guidance
($ M)
|
San Jose
|
3.7
|
6.4
|
7.5
|
Caylloma
|
3.3
|
4.1
|
6.7
|
Total
|
7.0
|
10.5
|
14.2
|
2013 Cash Cost per Ounce Guidance Revision
Mine
|
YTD 2013
($/oz)
|
Revised 2013 Guidance
($/oz)
|
Original 2013 Guidance
($/oz)
|
San Jose
|
6.44
|
5.89
|
2.90
|
Caylloma
|
7.84
|
7.34
|
7.70
|
Total
|
7.11
|
6.55
|
5.00
|
2013 cash cost per ounce guidance revision includes reductions in
production cost at Caylloma and a revised gold price of $1,200/oz vs.
$1,700/oz for the original guidance.
2013 & Long Term All-in Cash Cost per Ounce Guidance
The company is incorporating into its guidance an "all-in cash cost"
figure based on guidelines from the World Gold Council. Along with 2013
guidance, a 3-year guidance is included with the intention to provide a
more representative figure of all-in sustaining costs at our operations
moving forward. Beyond 2013, brownfields exploration has not been
included as part of all-in cash cost as its budgets are planned on an
annual basis.
The production assumptions behind the three year guidance provided are
consistent with prior production guidance provided by the company.
Metal prices used for by-product credits are the following: gold:
$1,200/oz, lead: $2,100/t, zinc: $2,000/t.
San Jose Mine all-in cash cost
Item
|
YTD 2013
Actual
($/oz)
|
2013
Guidance
($/oz)
|
3 Year guidance
2014-2016
($/oz)
|
Cash cost net of by-product credits
|
6.44
|
5.89
|
5.88
|
Government royalty & mining tax *
|
0.00
|
0.00
|
0.00
|
Worker's participation *
|
0.36
|
0.00
|
0.49
|
General and administrative (subsidiary)
|
1.83
|
1.37
|
0.92
|
Adjusted operating cash cost
|
8.63
|
7.26
|
7.30
|
Corporate general and administrative
|
0.00
|
0.00
|
0.00
|
Sustaining capital expenditure
|
8.00
|
5.75
|
4.10
|
Brownfields exploration
|
3.61
|
2.70
|
0.00
|
All-in sustaining cash cost
|
20.23
|
15.71
|
11.41
|
Development capital expenditure
|
4.58
|
3.27
|
0.00
|
All-in cash cost
|
24.81
|
18.98
|
11.41
|
*based on $18/oz Ag price
|
Caylloma Mine all-in cash cost
Item
|
YTD 2013
Actual
($/oz)
|
2013
Guidance
($/oz)
|
3 Year guidance
2014-2016
($/oz)
|
Cash cost net of by-product credits
|
7.84
|
7.38
|
4.59
|
Government royalty & mining tax *
|
0.38
|
0.36
|
0.34
|
Worker's participation *
|
0.58
|
0.28
|
0.00
|
General and administrative (subsidiary)
|
1.56
|
1.47
|
1.58
|
Adjusted operating cash cost
|
10.37
|
9.49
|
6.51
|
Corporate general and administrative
|
0.00
|
0.00
|
0.00
|
Sustaining capital expenditure
|
10.31
|
9.34
|
4.17
|
Brownfields exploration
|
3.45
|
2.06
|
0.00
|
All-in sustaining cash cost
|
24.13
|
20.89
|
10.68
|
Development capital expenditure
|
0.00
|
0.00
|
0.00
|
All-in cash cost
|
24.13
|
20.89
|
10.68
|
*based on $18/oz Ag price
|
Consolidated all-in cash cost
Item
|
YTD 2013
Actual
($/oz)
|
2013
Guidance
($/oz)
|
3 Year guidance
2014-2016
($/oz)
|
Cash cost net of by-product credits
|
7.11
|
6.57
|
5.41
|
Government royalty & mining tax *
|
0.18
|
0.16
|
0.13
|
Worker's participation *
|
0.47
|
0.13
|
0.31
|
General and administrative (subsidiary)
|
1.70
|
1.42
|
1.16
|
Adjusted operating cash cost
|
9.46
|
8.27
|
7.01
|
Corporate general and administrative
|
2.79
|
2.39
|
1.79
|
Sustaining capital expenditure
|
9.10
|
7.38
|
4.13
|
Brownfields exploration
|
3.53
|
2.41
|
0.00
|
All-in sustaining cash cost
|
24.88
|
20.45
|
12.93
|
Development capital expenditure
|
2.39
|
1.78
|
0.00
|
All-in cash cost
|
27.27
|
22.23
|
12.93
|
*based on $18/oz Ag price
|
San Jose three year guidance sustaining capital expenditure per ounce is
expected to come down with respect to 2013 as production ramps up while
similar levels of sustaining capital are maintained. In the case of
Caylloma a reduction is also expected as we conclude certain
non-recurrent infrastructure projects in 2013 such as the mine camp and
the tailings dam, reducing sustaining capital expenditure going
forward. Furthermore, Caylloma's adjusted operating cash cost per ounce
is expected to come down in the three year guidance as the mine plan
contemplates higher by-product from increased base metal production.
San Jose Mine, Mexico
At the San Jose mine the commissioning of the mill expansion is expected
to take place by mid- August 2013, with commercial operations starting
in September 2013 at a capacity of 1,500 tpd. We expect to reach the
full capacity of 1,800 tpd by November 2013.
On the brownfields exploration front, surface drilling at the high-grade
silver-gold Trinidad North discovery was completed in mid-July 2013. A
crosscut is being advanced on level 1,300 of the mine to allow
underground drilling with the aim of re-starting drilling in September
2013. The underground drilling program will test the continuity of the
Trinidad North ore shoot to depth and along strike to the North.
Liquidity
Based on a projection of silver and gold prices for the second half of
2013 of $18/oz and $1,200/oz respectively the company anticipates a
cash balance at the end of 2013 of approximately $42 million. In
addition, the company maintains an undrawn credit facility of $40
million.
Second quarter financial results
Second quarter net loss of $10.6 million (Q2 2012: income $3.9 million)
resulted in a loss per share of $0.08 (Q2 2012: earnings per share
$0.03). The loss was primarily driven by a $15.0 million non-cash
impairment charge, offset by a $4.8 million deferred tax provision,
related to the carrying value of Caylloma, a non-cash write-off of
mineral properties, plant, and equipment of $0.4 million related to the
San Luisito concessions.
Contributing to the loss was negative price and assay adjustments to
sales of $5.2 million. Of the latter amount, $3.6 million resulted from
negative price adjustments because of declining silver price throughout
the quarter, with the remaining $1.6 million consisting of negative
assay adjustments mainly related to 2012 sales contracts.
The company's second quarter 2013 adjusted net loss, after adjusting for
the write-off and impairment of mineral properties, property, plant and
equipment, and net of taxes, was $0.1 million (Q2 2012: income $6.9
million).
When compared to the prior year, sales before price adjustments were
down 13%, mostly the result of lower realized prices on provisional
sales for silver and gold, down 21% and 13% respectively, partially
offset by higher silver sold of 10%. Negative price and assay
adjustments, meanwhile, rose $3.5 million, resulting in a total
reduction in sales of 22% over 2012.
|
|
|
|
|
|
|
|
|
QUARTERLY RESULTS
|
|
YEAR TO DATE RESULTS
|
|
|
Three Months ended June 30,
|
|
Six Months ended June 30,
|
|
|
2013
|
2012
|
|
2013
|
2012
|
Sales and Realized Prices
|
|
Consolidated
|
|
Consolidated
|
Provisional Sales
|
|
35,305,243
|
40,377,713
|
|
77,404,362
|
79,529,817
|
Adjustments *
|
|
(5,204,850)
|
(1,688,156)
|
|
(6,590,701)
|
(239,387)
|
Sales
|
|
30,100,392
|
38,689,557
|
|
70,813,661
|
79,290,429
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
Provisional Sales (oz)
|
|
1,117,984
|
1,014,304
|
|
2,160,022
|
1,940,163
|
Realized Price ($/oz) **
|
|
22.97
|
29.12
|
|
26.54
|
30.52
|
Net Realized Price ($/oz) ***
|
20.28
|
25.86
|
|
23.62
|
27.02
|
Gold
|
|
|
|
|
|
|
Provisional Sales (oz)
|
|
5,428
|
6,360
|
|
10,109
|
11,409
|
Realized Price ($/oz) **
|
|
1,397.83
|
1,598.54
|
|
1,503.00
|
1,624.00
|
Net Realized Price ($/oz) ***
|
1,061.21
|
1,274.62
|
|
1,153.17
|
1,300.63
|
Lead
|
|
|
|
|
|
|
Provisional Sales (000's lb)
|
|
4,698
|
4,128
|
|
9,483
|
8,514
|
Realized Price ($/lb) **
|
|
0.93
|
0.90
|
|
0.99
|
0.93
|
Net Realized Price ($/lb) ***
|
0.67
|
0.58
|
|
0.72
|
0.60
|
Zinc
|
|
|
|
|
|
|
Provisional Sales (000's lb)
|
|
6,216
|
5,430
|
|
12,285
|
10,503
|
Realized Price ($/lb) **
|
|
0.84
|
0.88
|
|
0.88
|
0.90
|
Net Realized Price ($/lb) ***
|
0.60
|
0.67
|
|
0.64
|
0.68
|
|
|
*
|
Adjustments consist of mark to market and final price adjustments, and
final assay adjustments.
|
**
|
Based on provisional sales before final price adjustments.
|
***
|
Net after payable metal deductions, treatment, and refining charges.
Treatment charges are
allocated to the base metals in Caylloma and to gold in San Jose.
|
|
|
Mine operating earnings decreased by 62% to $6.5 million (Q2 2012: $17.1
million). The decrease is attributable to lower sales, as described
above, and to higher unit costs at Caylloma and San Jose, although cash
cost per tonne at both operations was in line with guidance.
Cash generated by operating activities, before changes in working
capital, was $5.9 million, a decrease of 63% over the prior year period
due mainly to lower sales and higher unit costs at Caylloma and San
Jose.
The company's cash and cash equivalents and short term investments as at
June 30, 2013 totaled $48.4 million (December 31, 2012: $64.7 million),
a decrease of $16.3 million.
The decrease is primarily a result of net cash generated by operating
activities of $24.2 million and cash consumed by expenditures on
mineral properties, plant and equipment of $39.8 million. Expenditures
on mineral properties, plant and equipment was comprised of the
following: $22.8 million of plant and equipment and mine development,
$7.0 million of brownfields exploration, and $10.0 million on the
acquisition of the Taviche Oeste concession.
|
|
|
|
|
|
|
Operating Results
|
|
|
|
|
|
|
|
|
QUARTERLY RESULTS
|
|
YEAR TO DATE RESULTS
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2013
|
2012
|
|
2013
|
2012
|
Consolidated Metal
Production
|
|
Consolidated
|
|
Consolidated
|
Silver (oz)
|
|
1,074,007
|
996,193
|
|
2,066,225
|
1,949,286
|
Gold (oz)
|
|
5,183
|
5,846
|
|
9,675
|
10,983
|
Lead (000's lb)
|
|
4,666
|
4,055
|
|
9,280
|
8,498
|
Zinc (000's lb)
|
|
6,131
|
5,325
|
|
12,067
|
10,646
|
Copper (000's lb)
|
|
-
|
48
|
|
-
|
48
|
Production cash cost (US$/oz Ag)*
|
|
7.58
|
4.75
|
|
7.11
|
4.36
|
* Net of by-product credits
|
|
|
|
|
|
|
|
In Q2 2013, the company produced 1,074,007 ounces of silver, up 8% from
a year ago, and 5,183 ounces of gold, a decrease of 11% from a year
ago.
For Q2 2013, consolidated cash cost per ounce of payable silver, net of
by-product credits, was $7.58, compared to $4.75 in Q2 2012. The
increase resulted from higher cash cost per ounce recorded at San Jose,
which was driven by lower gold credits and a higher unit cash cost per
tonne of processed ore. Cash cost per tonne of processed ore was in
line with guidance at both our operations.
|
|
|
|
|
|
|
San Jose mine
|
|
|
|
|
|
|
|
|
QUARTERLY RESULTS
|
|
YEAR TO DATE RESULTS
|
|
|
Three Months ended June 30,
|
|
Six Months ended June 30,
|
|
|
2013
|
2012
|
|
2013
|
2012
|
Mine Production
|
|
San Jose
|
San Jose
|
|
San Jose
|
San Jose
|
Tonnes milled
|
|
102,264
|
92,011
|
|
195,741
|
179,067
|
Average tonnes milled per day
|
|
1,147
|
1,046
|
|
1,112
|
1,017
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
Grade (g/t)
|
|
199
|
187
|
|
192
|
192
|
Recovery (%)
|
|
89
|
88
|
|
89
|
86
|
Production (oz)
|
|
580,570
|
486,296
|
|
1,073,343
|
955,162
|
Gold
|
|
|
|
|
|
|
Grade (g/t)
|
|
1.61
|
1.96
|
|
1.55
|
1.94
|
Recovery (%)
|
|
88
|
88
|
|
89
|
86
|
Production (oz)
|
|
4,681
|
5,066
|
|
8,641
|
9,563
|
Unit Costs
|
|
|
|
|
|
|
Production cash costs (US$/oz Ag)*
|
|
6.56
|
0.82
|
|
6.44
|
0.83
|
Production cash cost (US$/tonne)
|
|
77.18
|
66.50
|
|
77.55
|
66.00
|
Unit Net Smelter Return (US$/tonne)
|
|
166.04
|
207.45
|
|
181.54
|
214.31
|
* Net of by-product credits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver production at San Jose increased 19% in Q2 2013 when compared to
the prior year, while gold production decreased 8%. The increase in
silver production was driven by higher grades, slightly improved
recovery, and higher throughput of 11%. The decline in gold production
resulted from lower head grades, which were partially offset by
improved recoveries and the increased throughput. San Jose is on track
to meet 2013 production guidance of 2.4 million ounces of silver and
20,946 ounces of gold.
Caylloma mine
|
|
|
|
|
|
|
QUARTERLY RESULTS
|
|
YEAR TO DATE RESULTS
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2013
|
2012
|
|
2013
|
|
2012
|
Mine Production
|
|
Caylloma
|
Caylloma
|
|
Caylloma
|
|
Caylloma
|
Tonnes milled
|
|
113,906
|
115,870
|
|
225,322
|
|
229,314
|
Average tonnes milled per day
|
|
1,280
|
1,302
|
|
1,273
|
|
1,281
|
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
|
Grade (g/t)
|
|
167
|
181
|
|
170
|
|
176
|
Recovery (%)
|
|
81
|
76
|
|
81
|
|
77
|
Production (oz)
|
|
493,438
|
509,897
|
|
992,882
|
|
994,124
|
Gold
|
|
|
|
|
|
|
|
Grade (g/t)
|
|
0.34
|
0.42
|
|
0.36
|
|
0.40
|
Recovery (%)
|
|
40
|
50
|
|
40
|
|
48
|
Production (oz)
|
|
502
|
780
|
|
1,035
|
|
1,420
|
Lead
|
|
|
|
|
|
|
|
Grade (%)
|
|
2.05
|
1.85
|
|
2.07
|
|
1.91
|
Recovery (%)
|
|
91
|
86
|
|
90
|
|
88
|
Production (000's lb)
|
|
4,666
|
4,055
|
|
9,280
|
|
8,498
|
Zinc
|
|
|
|
|
|
|
|
Grade (%)
|
|
2.81
|
2.49
|
|
2.80
|
|
2.46
|
Recovery (%)
|
|
87
|
84
|
|
87
|
|
86
|
Production (000's lb)
|
|
6,131
|
5,325
|
|
12,067
|
|
10,646
|
Copper
|
|
|
|
|
|
|
|
Production (000's lb)
|
|
0
|
48
|
|
0
|
|
48
|
Unit Costs
|
|
|
|
|
|
|
|
Production cash cost (US$/oz Ag)*
|
|
8.78
|
8.49
|
|
7.84
|
|
7.76
|
Production cash cost (US$/tonne)
|
|
93.34
|
85.55
|
|
93.76
|
|
83.59
|
Unit Net Smelter Return (US$/tonne)
|
|
150.00
|
172.96
|
|
172.50
|
|
178.45
|
* Net of by-product credits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver production for the quarter was 3% below the prior year period due
to lower head grades, partially offset by a significant improvement in
metallurgical recoveries from 76% to 81%. The improvement is the
result of the initiatives implemented during the first quarter of the
year. Zinc and lead production were both 15% above the prior year
period, but behind production guidance to mid-year because of lower
head grades for those metals. Caylloma is on track to meet its silver
production guidance for the year.
The financial statements and MD&A are available on SEDAR and have also
been posted on the company´s website at http://www.fortunasilver.com/s/financial_reports.asp.
Conference call to review 2013 second quarter financial and operating
results:
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Date: Tuesday, August 13, 2013
Time: 9:00 a.m. Pacific | 11:00 a.m. Lima | 12:00 p.m. Eastern
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Dial in number (Toll Free): +1.877.407.8035
Dial in number (International): +1.201.689.8035
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Replay number (Toll Free): +1.877.660.6853
Replay number (International): +1.201.612.7415
Replay Passcodes (both are required for playback):
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Conference ID #: 418597
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Playback of the webcast will be available until November 14, 2013.
Playback of the conference call will be available until 11:59 p.m.
Eastern on August 28, 2013. In addition, a transcript of 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
Project 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
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.