Fortuna Silver Reports Solid Quarter Despite Challenges

Fortuna Silver announced its 2Q22 results, highlighting that although it saw a reduction in silver production, gold production increased significantly. The company highlighted that despite challenges such as falling metal prices, it had a strong quarter. However, Fortuna announced that it expects to exceed its 2022 cost guidance due to inflationary pressures.

Gold and silver production stood at 62,171oz and 1,652,895oz respectively, which represented an increase of 100 percent in gold production and a decrease of 13 percent in silver production compared to 2Q21. The company said that all mine operations performed in line with Fortuna’s annual projections.

Fortuna reported a net income of US$1.7 million, significantly lower than the US$16.2 million reported in 2Q21. The company explained that the decrease in net income was mainly due to lower sales of the San José Mine, located in Oaxaca, which only reached US$20.7 million due to lower production, lower silver prices and concentrate sales adjustments. Likewise, the company announced that the adjusted sales of the San José mine were US$39 million, 34 percent less than the US$60.3 million reported in 2Q21.

In 2Q22, Fortuna’s sales totaled US$167.9 million, which represents an increase of 39 percent compared to the US$120.5 million of 2Q21. Likewise, the company reported that its free cash flow was US$21.9 million, higher than the US$19.2 million reported in 2Q21. However, the company acknowledged that inflation continues to be a great challenge, as it increases input costs. Consequently, Fortuna plans to lessen the negative impact of inflation by improving operations and optimizing costs across all operations. However, despite the company’s efforts, the San José mine is expected to exceed the company's 2022 cost guidance.

“Our business generated healthy free cash flow of US$21.9 million in spite of declining metal prices in the quarter and the compounding negative price adjustments this triggers on our concentrate sales. Costs across our operations are tracking in the upper range of annual guidance in spite of inflationary pressures. Our teams are focused on the implementation of productivity initiatives to help mitigate rising input costs,” said Jorge A. Ganoza, President and CEO, Fortuna Silver.

Fortuna Silver Mines is a Canadian gold and silver producer. It is one of the most important silver producers in Mexico. According to the company, its San Jose Mine is the largest employer in the area where it operates, providing work for over 500 people in San Jose del Progreso, Oaxaca.

Recenlty, Minera Cuzcatlan, the Mexican subsidiary of Fortuna Silver Mines, faced legal challenges when the Mexican Ministry of the Environment and Natural Resources (SEMARNAT) made a typo in the company’s Environmental Impact Assessment (EIA). This led to the reduction of the time the company can develop its activities, dropping from a 12 years extension to only two years added. Luis Camargo, Representative, Fortuna Silver Mexico said that since there are no anomalies at the facilities, the company still expects to reach a suitable agreement with the Mexican government.