Fortuna Mining Corp

Good afternoon, ladies and gentlemen, and welcome to Fortuna Silvermine's Q2 2022 Financial and Operational Results Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Carlos Baca, Director of Investor Relations. Carlos, over to you.

Thank you, Jenny. 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 second quarter of 2022. Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganosa, President and Chief Executive Officer, Luis Darío Ganosa, Chief Financial Officer, Cesar Velasco, Chief Operating Officer, Latin America, and Paul Criddle, Chief Operating Officer, West Africa. Today's earnings call presentation is available on the featured presentation box on our homepage at fortunasilver.com. As a reminder, statements made during this call are subject to the reader advisories included in yesterday's news release and in the earnings call presentation. Financial figures contained in the presentation and discussed in today's call are presented in U.S. dollars unless otherwise stated. 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 overlooking information in the future except as required by law. I would now like to turn the call over to Jorge Alberto Ganosa, co-founder of Fortuna. Thank you, Carlos. Our business continued to perform well in the delivery of production and cost in the second quarter. We pre-released production figures in July 11th. Both silver and gold are tracking in line with management plans and expectations to meet annual guidance. For the first six months, we produced 129,000 gold ounces and 3.3 million ounces of silver, achieving the middle of our guidance range for the year. Gold accounted for roughly 70% of sales and silver for 20%. with byproduct zinc and lead making up the 10% balance. In spite of inflationary pressures on key consumables like diesel, steel, cyanide, and explosives, and the strain on the supply chain, costs at all our mines are tracking within the range we provided at the beginning of the year for annual guidance. Orlindero, Yaramoco, and San Jose mines are in the upper range of guidance, but within it. But more importantly is the fact that at the Seguela construction, which is 66% complete as of the end of June, today approximately 70% complete, we're not experiencing any deviation with respect to our guided budget and timeline. We monitor active construction projects around the world and observe several experiencing challenges leading to significant deviations in capex and timeline. The strong delivery at Seguela is the result of good planning, strong construction partners in the selected contractors, a consolidated owner's team, and years of experience put to work. I'm very satisfied with the outcome so far, and Paul Criddle, our Chief Operating Officer for West Africa, will provide you with details on the construction further down on the call. On sustainability, health, and safety, I want to highlight a quarter free of lost time injuries with over 3.1 million hours worked across all our sites. Zero environmental and social incidents of significance during the period as well. In the quarter, we realized a silver price of $22.62 per ounce and $1,870 per ounce of gold. Our headline financial numbers were a healthy free cash flow of $22 million, mine operating income of $32.5 million, adjusted EBITDA of $58 million with an EBITDA margin of 34%, net income of $1.7 million or one cent per share, and adjusted net income of $2.1 million. We remain well funded to meet our capital demands with a liquidity position of 136 million at the end of the period. I want to say that this has been a difficult quarter for several peer mining companies reporting losses in the period. Although we met physical targets for gold and silver production and cost targets, as I just described, and managed to log a small gain, We came below analysts' expectations for earnings per share. Our revenue and earnings this quarter were impacted by the fact that 40% of our revenue comes from concentrated sales, where we were exposed to negative provisional pricing adjustments amounting to $6.6 million due to a steep decline in silver prices and zinc prices from April to June. And also impacting earnings was a $4 million inventory write-down of low-grade stockpiles at our Yaramoku mine. On the exploration front, we have 12 drill rigs turning across sites with an annual budget of approximately $30 million. We work from a base of consolidated reserves that add up to approximately 4 million gold equivalent ounces as disclosed in our annual reserve statement. Our exploration priorities are to continue to pursue several high-value opportunities at Seguela, where we keep adding new resources. The Sandberg deposit with 350,000 inferred ounces being the latest success of that program. The other priority is reserve replacement at the San Jose and Yaramoco Mines, and also definition of our investment case for the Bosura project in Burkina Faso this year. In the quarter, we began our share repurchase program with an initial return to shareholders of $3 million. For the execution of the program, we bring into consideration several aspects that include not only our valuation, but also risk to capital demands in a construction year and sensibility of our liquidity position to the current volatility in gold and silver prices. So with that as an introduction, I'd like to turn it on, to turn it into our chief operating officers to give you a bit more color on the business. So Cesar, you want to start? Absolutely.

Thank you, Jorge. In the second quarter, the three operating mines in Latin America delivered a strong production of 1.65 million ounces of silver, and 37,600 ounces of gold. As you highlighted, for Latin America production for the first six months in total 3.3 million ounces of silver and 36,000 ounces of gold. All mines are aligned to achieve annual guidance range. Allow me to make some remarks at the end. In Argentina, Lindero delivered a gold production of 29,000 ounces, which represents a 49% increase year-on-year, and is on track to achieve annual guidance range. Gold production for the first six months of the year totaled 59,000 ounces. During the second quarter, the operation delivered 99% of the 1.5 million tons of ore placed on the pass-by means, of the crushing and stacking circuit, demonstrating steady production performance. The operation continues to focus on capturing higher productivity opportunities in all processes and has been successful at achieving important reductions on key consumables during the second quarter, such as sulfuric acid, fresh make-up cyanide, and diesel. Moving on to Mexico, the San Jose mine delivered 1.38 million ounces of silver and 8,295 ounces of gold. Compared to the second quarter of 2021, production variations are a result of a combination of 7% lower mill throughput and lower head rates, which are in line with the mineral reserve estimates. With the aim to improve production capacity and reduce total mining cost per tonne, the operation has successfully implemented long-haul stopping in selected areas of the mine. In addition, a new underground short-crete plant was commissioned, which is expected to reduce overall mining cycle times and support costs. Silver and gold production for the first six months of the year totaled 2.7 million ounces and 16,534 ounces. The operation remains on track to achieve its annual production guidance range. The Cayoma Mining Group, a steady performer, delivered 267,500 ounces of silver, 10.8 million pounds of zinc, and 7.6 million pounds of lead. production for the first six months total, 539,000 ounces of silver, 21.6 million pounds of zinc, and 16.7 million ounces of lead. Production at Cayoma is on track to achieve the upper range of guidance. Back to you, Jorge.