Fortuna Mining Corp

Ladies and gentlemen, hello and welcome. Thank you for joining us for this Fortuna Silver Mines third quarter 2020 earnings conference call. As a reminder, all phone participants are presently in a listen-only mode, but after today's prepared remarks, you will have the opportunity to ask questions. To get us started today with opening remarks and introductions, I am pleased to yield the floor to IR Manager, Mr. Carlos Baca. Good morning, sir.

Thank you, Jim. Good morning, ladies and gentlemen. I would like to welcome you to Fortuna Silver Mines and to our financial and operations results call for the third quarter of 2020. Today, we will be using a webcast presentation, which will be controlled by us. To download the presentation, please go to our website at fortunasilver.com, click on the Investors tab, then click on the Financials sub-tab, and under Q3, click on the Earnings Call webcast link. Jorge Alberto Ganosa, President, CEO, and Director, and Luis Darío Ganosa, CFO, will be hosting the call from our Management Head Office in Lima, Peru. Before I turn over the call to Jorge, I would like to indicate that this earnings call contains forward-looking information that is based on the company's current expectations, estimates, and beliefs. This forward-looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast, or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's annual information form and MD&A, which are publicly available on CDER. The company assumes no obligation to update such forward-looking information in the future except as required by law. I would now like to turn the call over to Jorge Alberto Ganosa, President, CEO, and co-founder of Fortuna.

Jorge Alberto Ganosa Thank you, Carlos, and good morning to all. I'll be presenting an introduction to our third quarter results and discuss the status of our operations in Mexico, Peru, and Argentina. and then turn the call over to Luis, who will take you through the financial statements. On slide six of the presentation, in the third quarter, we have reported the highest financial figures in the company's history for sales, free cash flow from operations, and adjusted EBITDA. Free cash from operations was a strong $30 million, and our EBITDA margin stood at a robust 51% over sales. We have $85 million in cash as of the end of the quarter, and a comfortable liquidity position of $140 million, with a modest debt-to-EBITDA ratio of 0.7. At Lindero, we produced our first gold on October 20th. We are pouring gold every week and made our first sales in November. We are immersed in the ramp up activities with the aim to stabilize production of feasibility design parameters by year end and into the first quarter. And despite continued COVID-19 related restrictions, our mines in Peru and Mexico met production objectives in the quarter. In Argentina, Restrictions on flow of personnel across national and provincial borders hamper and drag our ability to provide quick response to the various issues that arise as part of any production ramp-up phase. Across all sites, we have strict sanitary protocols in place and have taken over 8,200 PCR tests to our personnel, reporting approximately 391 positive cases for COVID so far. on slide seven. We share here our key safety performance indicators. We present the KPIs as a 12-month rolling average to better represent trends. During the third quarter, we had a spike in lost-time accidents. These were mainly related to the start of operations at Lindero, where the workforce is largely local and gaining experience in mining. The severity of these accidents was minor, as shown by the injury severity rate on the graph to the right. Nevertheless, a plan of action is in place to further mitigate risks associated to largely unexperienced workforce at Lindero in spite of all of the training that this new workforce has been through. Slide 8. Silver production was above budget and previous year by 7 and 10% respectively. The increase was driven by improved grades at our San Jose mine. Gold production was above our internal budgets and previous year by 17 and 12% respectively. The increases were driven by a welcome contribution of approximately 1,400 ounces of gold from the Cayoma mine and higher grades at the San Jose mine. Gold at Cayoma is coming from a small near-surface high-grade ore chute, which is an unusual occurrence at this mine, and we're carrying studies to better understand the geologic controls of this occurrence. Slide nine, please. Silver accounted for 59% of sales and 28% for gold for a combined 87% precious metals contribution. In the quarter, we sold silver at a realized price of $24.90 per ounce, compared to $17 per ounce a year ago. We sold gold at a realized price of $1,925 per ounce, compared to $1,487 a year ago. We continue to observe with expectation the consolidation of what is configured to be a historic bull market for precious metals and mining equities at a time when we are prepared to deliver material growth in annual gold production driven by our Lindero mine. Slide 10. As I mentioned in the highlight slide at the start of the presentation, we had record-breaking quarter in terms of key financial metrics. This performance was driven by higher metal produced and significant increase in precious metal prices, as just mentioned. Sales were up 36% to $83 million. EBITDA was up 120% to $42 million. And adjusted net income was up 747% to $16 million, or 9 cents per share. Slide 11. San Jose all-in sustaining costs increased 11 percent to $12 per square equivalent ounce. The cost increase was driven by components which are sensitive to higher prices, like workers' participation, mining royalties, and sustaining capex. At Cayoma, all in-sustaining costs increased by 23% to $19.40 per silver equivalent ounce as a result of a 21-day COVID-related voluntary suspension of operations that we took during July. Slide 12. Year to date. Our capital expenditures on sustaining operations, growth, and exploration amounted to $50 million. Lindero capex in the quarter amounted to $12 million. On our financial news release dated August 13th, we provided guidance for total remaining funding requirements for Lindero to be in the range of $55 to $60 million. We're executing within this budget and expect Lindero to be largely sub-funding in Q4. in slide 13, we share with you our first Doré bars produced at Lindero on October 20, a major milestone for the team, for the company. We are pouring Doré gold every week, and our first sales have taken place in November. Slide 14, we share a simplified view of our major milestones and schedule for the project. As I mentioned before, we are immersed in the ramp-up of production and plan to be in operations at design rates in Q1 of next year. In slide 15, Lindero construction is substantially complete. In these initial months of production, we're observing a very good reconciliation between our long-term block model and blast hole sampling. In these early days, leaching kinetics for gold are also tracking according to our design curves. For 2020, we are revising our forecast for goal production at Lindero to between 13,000 ounces and 15,000 ounces. For this forecast, we're taking into consideration temporary operational restraints to incorporate irrigation parcels at a faster pace than originally thought. This is due to the advanced stacking sequence with trucks we're using. This issue goes away in November with the start of conveyor stacking. Additionally, management is taking a more conservative approach for the ramp-up of the HPER agglomeration and stacking system. The COVID-related restrictions for the movement of personnel to site and between provinces in Argentina is a source of small but creeping delays as the team moves to solve the various issues that arise as part of any ramp-up process. In the next slides, we share with you views and updated photos of the current status of the site. I would invite you to visit our website where we keep an updated gallery. of photos. On slide 16, we share with you a view of the pit. At the pit, we're moving the scheduled 40,000 metric tons of material every day, of which about half is ore and half is waste. We're keeping within the scheduled strip ratio of one. The pit is run very efficiently. It's performing well. Five 100-ton trucks, two wheel loaders, two production drill rigs. It's a tight, neat operation. In the next slide, we share with you a view of the secondary and tertiary crushing. Following slide is a view for agglomeration. We have been dealing, you know, solving issues that are normal to ramp up, you know, improving dust control, making adjustments to some of the chutes and components of the crashing system. What I can report is that we have not identified any material issues and we are trending in the right direction. with respect to achievement of design parameters. In the slides currently shared, we have a view of our first irrigation cell. Next slide, please. There we go. Then a view of the ADR plant and ponds area. In the last slide, we share a view of the SART plant. The SART plant is the last part of the system that will come in line. We expect the SART commissioning to initiate this second half of November. and our current asset portfolio. And here just highlight the fact that Lindero will be moving up to the pinnacle of the pyramid, joining San Jose and Cayoma as our third mining operations. I'll move on. I'll let Luis now take you through the financial statement highlights.