Fortuna Silver Mines ((TSE:FVI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Fortuna Silver Mines painted a picture of strong financial and operational performance, with significant achievements in safety, liquidity, and exploration success in West Africa. However, the company faces challenges with reduced production due to mine sales and increased all-in sustaining costs (AISC). The sentiment expressed during the call was balanced, highlighting both the achievements and the challenges faced by the company.
Strong Safety Record
Fortuna Silver Mines reported a remarkable achievement in safety, with 7.2 million work hours completed without any lost time injury, an improvement from 6.7 million hours in the previous record. The total recordable injury frequency rate also improved to 0.87 from 0.98 in the first quarter, showcasing the company’s commitment to maintaining a safe working environment.
Financial Performance and Liquidity
The company demonstrated robust financial performance with liquidity reaching $537 million, an increase of $76 million from the previous quarter. Net cash stood at $215 million, up from $137 million in the first quarter, and free cash flow from operations was $57.5 million, indicating strong financial health and operational efficiency.
Gold Price and EBITDA Margin
Fortuna benefited from an average realized gold price of $3,306 per ounce, marking a 14% increase from the first quarter. This contributed to a record EBITDA margin of 55%, up from 50% in the previous quarter, reflecting the company’s ability to capitalize on favorable market conditions.
Operational Performance in West Africa
In West Africa, Seguela mine produced 38,186 ounces of gold, consistent with the prior quarter. The cash cost was $670 per ounce, while the all-in sustaining cost (AISC) was $1,634 per ounce, indicating stable operational performance in the region.
Exploration Success at Diamba Sud
The Diamba Sud project in Senegal saw significant exploration success, with indicated resources growing by 53% and inferred resources by 93%, totaling 1 million ounces. Ongoing drilling aims to further expand and upgrade the resource, positioning the project for future growth.
Reduced Annualized Production
Following the sale of two mines, Fortuna’s annualized production decreased to approximately 330,000 ounces, down from a record 460,000 ounces in 2024. This reduction highlights the impact of strategic asset sales on the company’s production capacity.
Increased AISC
The consolidated all-in sustaining cost (AISC) rose to $1,932 per ounce, up from $1,750 in the first quarter. This increase was primarily due to capital expenditures and waste stripping activities at the Lindero and Seguela mines.
VAT Receivables Delays
Fortuna faces delays in collecting VAT at its Ivoire Coast operations, with $37 million in VAT receivables outstanding for approximately 17 months. This situation poses a challenge to the company’s cash flow management.
Forward-Looking Guidance
Looking ahead, Fortuna Mining Corp. provided comprehensive guidance, highlighting a strategic focus on optimizing its portfolio and enhancing financial and operational performance. The company aims to rebuild production to 0.5 million ounces per year, emphasizing higher-margin, longer-life, and lower-risk assets. The Seguela mine is projected to produce 140,000 ounces of gold in 2025 and between 170,000 to 180,000 ounces in 2026. The Diamba Sud project continues to show promise with significant resource increases and a construction decision anticipated in 2026. Financially, the company expects the AISC to decrease to around $1,500 per ounce in the latter half of the year.
In summary, Fortuna Silver Mines’ earnings call highlighted a balanced sentiment, with strong financial and operational achievements tempered by challenges such as reduced production and increased costs. The company’s strategic focus on optimizing its asset portfolio and enhancing performance positions it well for future growth, despite the hurdles it currently faces.