Fortuna Silver Mines Inc

Good afternoon everyone and welcome to the Fortuna Mining Corporation Q1 2025 Financial and Operational Results Call. At this time all participants are in a listen only mode and the floor will be open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host Carlos Baca, Vice President of Investor Relations. The floor is yours.

Thank you Jenny. Good morning ladies and gentlemen and welcome to Fortuna Mining's first quarter 2025 Financial and Operational Results Conference Call. Hosting today's call on behalf of Fortuna are Jorge Alberto Ganosa, President, Chief Executive Officer and co-founder, Luis Dario Ganosa, Chief Financial Officer, Cesar Velasco, Chief Operating Officer, Latin America, David Will, Chief Operating Officer, West Africa. Today's burning call presentation is available on our website at FortunaMining.com. Before we begin, please note the statements made during this call are subject to the reader advisories included in yesterday's news release, the webcast presentation, our management discussion and analysis, and the risk factors set out in our annual information form. All financial figures discussed today are in US dollars and is otherwise stated. Technical information in the presentation has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganosa, President, Chief Executive Officer and co-founder of Fortuna Mining. Hello

to everyone and thanks for joining us today. Q1 was another great quarter for us at Fortuna. After a record set in Q4, we kept the momentum going with a second straight quarter of record free cash flow from operations. We're making the most of strong gold prices, keeping our costs under control and continuing to grow our margins. Cash flow was a standout again this quarter. Free cash flow from ongoing operations hit a record $111 million, beating our Q4 record of $96 million. That puts our free cash flow margin at 38% up from 31% in Q4. Net cash from operations before working capital changes was $138 million or $0.45 per share. If we adjust for the San Jose mine divestment, that jumps to $144 million or $0.48 per share. Another nice setup. What's right in this simply put discipline on cost control in a strong gold price. We brought our cash cost per ounce down to $929 from our consolidated basis from $1,015 in Q4. Our consolidated all-in sustaining cost came in at $1,640, well below last quarter's $1,772. That kind of discipline is paying off. Net income from continued operations came in at a strong $61.7 million or $0.20 per share. A big jump from $11 million or $0.04 per share in Q4. That was mainly thanks to an 8% increase in gold prices and a lower effective tax rate as a result of the appreciation of the euro. We generated sales of $290 million and produced 103 gold equivalent ounces right in line with our plans. This includes the impact of the sale of our San Jose mine, which had contributed about 11,000 gold equivalent ounces in Q4. All our mines stayed within production guidance in the quarter and Seguela once again outperformed, coming in approximately 4,000 ounces above the midpoint of our guidance in previous quarter. This, thanks to higher process ore and a drawdown of gold in circuit inventory. We continue to further improve our financial strength. Our net cash position more than doubled to $137 million and total liquidity rose to $462 million, up from $381 million in the fourth quarter. That kind of financial strength gives us flexibility, whether that's for investing in growth, returning capital to shareholders or navigating market shifts. On that note, we continued buying back shares. In Q1, we repurchased and canceled just over 900,000 shares at an average price of $4.53. On growth, capital and exploration, we're staying focused on high impact opportunities across the portfolio. We have budgeted $51 million for 2025 for exploration and new project programs. We're going strong with targeted work at the Kingfisher and San Bernardino deposits at the Seguela mine, the Tongon North Prospect in northern Cote d'Ivoire, the Dian Basu, the advanced project in Senegal, and the Alizarro Gold Porphyry at the Lidero mine in Argentina. These are exciting projects and prospects with long-term upside, and we're putting capital to work where it counts. In 2025, we're also advancing with key capital projects that will enable the Seguela mine to expand production in 2026 to approximately 180,000 ounces of annual production. David Weidl, our chief operating officer for West Africa, will expand on that later on the call. During the first quarter, we continued to actively optimize our asset portfolio, divesting of assets with high costs or limited life of mine. The sale of the San Jose mine in Mexico closed in April, marking a key step in streamlining our operations. San Jose had become our highest cost mine and was nearing the end of its mineral reserves. So this was a timely and strategic divestment. As for the Yaramoco mine in Burkina Faso, we announced its sale on April 11. Like San Jose, Yaramoco is approaching the end of its mine life, with mineral reserves expected to be depleted by early 2026. The decision to sell was driven by a compelling offer and gives us a prudent exit from a country where we are no longer investing in mineral exploration and where the business and security environment continues to present challenges. The sale provides for cash consideration of $70 million and is subject to the payment of cash dividends by Rox Colzano, owner of the Yaramoco mine, to Fortuna in the amount of $57.5 million prior to closing. We expect the sale to close in May. Taken together, these two sales allow us to reallocate approximately $50 million in capital and management focus away from mine closures and towards higher value opportunities that better align with our long-term strategic objectives. On the safety front, I am pleased to report that we had zero-loss time injuries in Q1 and our total recordable injury frequency rate improved to 0.98 down from 1.33 in the fourth quarter. That's a strong result and I want to thank our team for their continued vigilance and dedication to safe work practices. However, this progress was overshadowed by a tragic incident in February at Seguela where a subcontractor lost his life while performing a cedary activity. This is a heartbreaking reminder that safety must remain our highest priority always. Our commitment to zero-harm workplaces is unwavering. In Argentina, I'd like to comment that we continue to see positive economic policy changes. The government has started easing capital exchange rate controls and introduced a managed floating exchange rate. This opens the door for us to repatriate 2025 dividends plus about $38 million currently in country and we're targeting the second half of the year to begin that process. On closing, Q1 2025 was a strong quarter on all fronts. We hit -to-back free cash flow records, improved margins, strengthened further balance sheet and continued to optimize the portfolio. We're in a great position to keep delivering for shareholders, for people and the communities we operate in. We'll now move on to an update from our chief operating officer who will start with West Africa.

David? Thanks Jorge. Seguela and Yaramaito delivered a successful first quarter with strong results from a production and operational perspective. Safety remains a core priority and we continue to advance our goal of achieving zero-harm across all operations. Yaramaito maintained an excellent safety record with no major injuries and continues to operate more than four and a half years without a lost time incident. During the first quarter, Seguela produced 38,500 ounces of gold representing 9% improvement compared to the previous quarter. This exceeded the mine plan and supports expectations to achieve annual production at the higher end of guidance. Yaramaito also delivered strong performance with gold production of 33,073 ounces reflecting a 12% improvement over the prior quarter. At Seguela, 477,000 tonnes of ore were mined and an average gold grade of 2.53 grams per tonne along with 5.47 million tonnes of additional material resulting in a strip ratio of 11.5 to one. The plant processed 444,000 tonnes of ore and an average grade of 2.76 grams per tonne gold. Production was sourced primarily from the antennae, ancients and cooler fins. The processing plant operated efficiently with an average throughput rate of 216 tonnes per hour exceeding nameplate capacity by 40%. The third lift of the tailing storage facility is on schedule for completion in the second quarter. The completion of this $8.5 million project will provide tailing storage into 2029 allowing Seguela to fully capitalise on its increased throughput capacity and achieve our stated guidance of 160,000 to 180,000 ounces of gold per year from 2020 to 2006 and beyond. All of the capital projects are advancing in line with schedule and budget. Seguela's performance resulted in a cash cost of $650 and an all in sustaining cost of $1,290 per ounce. Continued exploration success of the Kingfisher, Sombird Underground and other deposits supports long term production growth and strengthens the positive outlook beyond the feasibility study targets. At Yaramoko, 144,000 tonnes of ore were mined at an average grade of 7.1 grams per tonne gold. Ore was primarily sourced from the 55 zone underground mine with 21,000 tonnes from Baggsy South at a grade of 8.99 grams per tonne. The 109 zone open pit began contributing during the quarter with 31,000 tonnes at a grade of 1.1 grams per tonne. The plant processed 135,000 tonnes at an average grade of 7.8 grams per tonne gold. Yaramoko recorded a cash cost of $1,059 and an all in sustaining cost of $1,411 per ounce aligned with guidance expectations. In the first quarter, Fortuna entered into successful discussions with Soleil Resources regarding the potential sale of the Yaramoko mine and exploration assets in Burkina Faso. These discussions concluded positively resulting in a signed agreement. Final goal for by Fortuna occurred on April 14th with closing anticipated in early May. This transaction represents a strategic step aligned with our objectives and provides continuity for the workforce at Yaramoko. Thanks and back to you, Jorge.

Thank you. We'll move on to Latin America. Cesar, you want to give us an update?

Sure. Thank you, Jorge, and good afternoon to everyone. Let's begin with our Lindeiro mine in Argentina. Lindeiro delivered strong production results this quarter. We placed 1.75 million tonnes of ore on the leach path with an average gold grade of 0.55 grams per ton containing approximately 30,943 ounces of gold. Our mining operations extracted 1.46 million tonnes of ore achieving an efficient stripping ratio of 1.8 to 1 which positively influenced our cost management. Gold production for the quarter reached 20,320 ounces while this reflects a decrease of 24% compared to the previous quarter of 2024 primarily due to an 8% moderate reduced ore grade and the timing of leach kinetics. It is important to note that this production level aligns with our planned mining sequence for the year. A major highlight at Lindeiro was the highly successful completion of the leach path expansion project. This expansion was delivered at a total cost of 51.8 million and supports ten more years of mine life. I would also like to provide an update on the solar plant project at Lindeiro. As of today, the project is 97% complete and we have begun pre-commissioning activities. The project continues to advance on schedule and well within budget with full operation expected by the third quarter of 2025. This solar plant will represent a significant 42% reduction in diesel consumption for power generation. Lindeiro continues capturing cost reduction from several initiatives such as the changing of the whole truck fleet from 90 ton Comax trucks to 45 ton Scania trucks and optimizations on the crushing circuit plant reagent consumption and drilling equipment to mention a few. Turning to costs at Lindeiro, the cash cost per ounce of gold was $1,147 compared to 1,063 in the fourth quarter of 2024. This increase is largely attributable to the appreciation of the Argentine peso and the volume of ounces sold. The all-in sustaining cash cost per gold ounce sold was $1,911 slightly up from $1,873 in the previous quarter. This reflects the capital investment associated with the completion of the leach pad expansion and the bulk of the peak of stripping taking place during the first half of 2025. However, we anticipate the AC to progressively improve in the next quarter as we expect to gravitate towards a mine with an AC of $1,400 by the end of the year. Now let's move to our Crayoma mine in Peru. The team there also deliver outstanding results. Silver production reached 243,000 ounces from 137,000 tons milled, maintaining a consistent average head rate of 67 grams per ton. We also achieved significant production of lead and zinc with 8.8 million pounds and 13.8 million pounds produced respectively. The average head rates were 3.21 percent for lead and 5 percent for zinc. Production of all three metals remained consistent when compared to the fourth quarter of 2024 in line with our mine plan for the year. Regarding costs at Crayoma, which are reported on a silver equivalent basis, the cash cost per silver equivalent down sold was $12.80 compared to $16.53 in the fourth quarter of 2024. The all-in sustaining cash cost per ounce of payable silver equivalent decreased to $18.74 down from $28.10 in the previous quarter. These cost adjustments reflect consistent cost savings and lower capital investments for the period, offset primarily by slightly lowered silver production in the period and the benefit from the higher realized silver price on the silver equivalent calculation. In conclusion, our Latin American operations demonstrated a strong impact on the market. In the first quarter of 2025, we maintained a focus on excellent safety performance, achieved key production targets, and successfully completed strategic projects like the Lidero Lich Pad expansion. We remain committed to optimizing our operational efficiency and delivering sustainable value to our stakeholders. Back to you, Jorge.

Thank you. Now we'll go to the CFO report. Thank you. We have a question from the CFO report. I will be mostly making reference to Q1 2024 as a comparison period where we have excluded San Jose for comparability purposes. As Jorge has mentioned, attributable net income from continuing operations for the quarter was $61.7 million or $0.20 per share. This compares to $0.09 in Q1 2024. Our strong financial performance in the quarter was a result of a high metal prices and cost per ounce aligned with our guidance for the year. Our average realized gold price in the period was $2,880 per ounce compared to $2,087 per ounce in Q1 of 2024. Our cash cost per gold equivalent ounce was $929 and our only sustaining cost was $1,640 per ounce, again, both aligned with management expectations. A few comments on the financials. Depreciation and depletion in the quarter was $61 million, which we'd like to remind includes $18.5 million in depletion of the purchase price related to the acquisition of Roswell in 2021. General and administration expenses were $25.3 million and increase of $8.5 million year over year as shown in the breakdown we provide in page 10 of our MDNA. The increase comes mainly from stock based compensation associated with a 42% rise in our share price during the quarter. Our effective tax rate was 25% for the quarter compared to 34% in Q1 2024. The decrease is a function of the appreciation of the euro versus the dollar in the quarter. At current metal prices, we expect our effective tax rate to be in the 28 to 30% range and our current tax rate to be in the 32 to 35% range. Moving on to our cash flow statement, we reported $111.3 million of free cash flow from ongoing operations, which excludes new development projects and growth initiatives. We should note that we expect to pay over $60 million of taxes in 2024, of which the bulk will be paid in Q2 and Q3 as a result of this timing effect and everything else being equal. We should expect somewhat lower free cash flow in the next two quarters. In the investing section of our cash flow statement, we recorded $39.5 million and their additions to property, plan and equipment consisting of approximately $33.3 million of mine site capital, which includes $6 million of brownfields exploration and $6.2 million related to the Diyambadzat project and greenfields exploration. Moving on to the balance sheet, we close the quarter with a cash position of $309 million and the net cash position after financial debt of $137 million. Our total liquidity was $459 million, including the full undrawn amount of our $150 million revolving trade facility. Thank you. Back to you Jorge.

We would now like to open the call to any questions that you may have. Jenny, please go ahead.

Thank you very much. We'll now be conducting our question and answer session. If you would like to ask a question, you can press star one on your telephone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you very much. Your first question is coming from Mohammed Siddid of National Bank Financial. Mohammed, your line is live.

Thank you, operator. Hi, Jorge. I just had a question on capital allocation priorities following the sale of the San Jose mine and the Yaromoku mine that is expected to close. And specifically as it relates to potentially inorganic opportunities that you may be looking at, what are some of the criteria that you're looking at in terms of size, jurisdiction, stage of assets? Thank you.

Yeah. First, let me stress before I speak about inorganic growth, we believe we have strong opportunities to fuel growth organically, which are high impact. One is the expansion, or reiterate the expansion of the Seguela mine, which today is our lowest cost mine. On this first approach towards an expansion, we're moving from about 140,000 ounces of annual gold delivery to a range of 160,000 ounces with opportunities for more. We continue to see a lot of continued exploration success there, as evidenced by the discoveries of the Sandberg deposit, the Kingfisher deposit, the extension of Sandberg deep for underground mining. So we're very encouraged by that and the continued opportunities for growth at our lowest cost operation. Second is the Seguela, the Dianba Soot project in Senegal. Dianba Soot is an advanced stage exploration, late state exploration, advanced stage development, that's how I would rate it. We have a well-funded program in 2025 where we're advancing exploration, concurrent with permitting, environmental studies, and engineering studies as well. So we continue to approach the advance of Seguela, sorry, of Dianba Soot on a fast track approach. That's organic. Then when we think of opportunities outside the farm, we are very focused on the two regions where we are already established, where we have established management teams, strong local expertise. So you will see us active in West Africa and the general region in Latin America. We favor primarily countries where we already have operations within these two regions, of course, but we will move within the regions. Projects that come into the pipeline are preferred, although we will see, we're more than chasing ounces, we'll be chasing value, we're chasing value. So you will see us keep discipline. We look at post discovery, pre-development. We see a lot of opportunity there. We still see and identify value in some of the opportunities that we track. What are we looking for? Projects that can deliver over a decade in the loams and at costs that sit at or opportunities to go below the average cost curve and meaningful production that for us means anything north of 120,000, 150,000 ounces of coal production. We believe that we have a clear path to support production in the range of 400,000 to 500,000 ounces between what we have in the portfolio and opportunities that we see out there.

Thanks a lot for that. If I could just maybe follow up on that. As you look at your current portfolio right now, should we expect maybe any potential rationalization? I'm just looking at things that go live. It's very clear you have a ton of excitement and opportunities in there or you have some opportunities as well. But Kayoma, maybe, how do you think about that asset and how do you think about your current portfolio?

Yeah, Kayoma is certainly the smallest mine in the portfolio. It was our first mine. I always say there is no headache free mine, but if there is one mine that gets close to that, it's Kayoma. The team there does an excellent job. Today, if you account for resources and reserves, we can see a mine operating for close to a decade. It's a mine that every year generates free cash flow for us. It gives us a strong presence in an exciting mining jurisdiction with a deep rooted mining tradition like Peru. We see Kayoma as a pit in our portfolio today.

Great. Thank you. Thanks for taking my question.

Thank you very much. Your next question is coming from David Sini, who is a private investor. David, your line is live.

Yes. My question is with an excellent quarter results hitting 20 cents profit per share, and I just want to know how is it that financial analysts can have such influence over the stock price, which is presently trading down just shy of 12 percent, and you miss their expectations by a penny a share, and it's created a 12 percent deficit for today. I just don't understand.

Perhaps that's a question for the analysts. But we focus on what we control. We believe, as I stressed in the call, that this is a record quarter we're delivering where it matters the most in free cash flow. We're controlling our costs, and we're fully capturing the benefit of higher prices. I believe that Fortuna has put together a rock-solid balance sheet. It's generating a very strong free cash flow. It's managing the operations, controlling the risks, and we are set to continue benefiting from this price environment for vicious methods. Price swings in the stock, difficult to comment on. We're looking at it, and we also have to scratch our head a bit, but markets come and go. Prices go up and come down. The important thing is the fundamentals of the business, and Fortuna has never been as strong as it is today. The balance sheet, the property portfolio, the cost management, the execution, operational excellence. So, again, I have never seen in 20 years Fortuna as strong as it is today with the capabilities to continue delivering for shareholders.

Thank you. I appreciate that. I don't disagree with you. I just don't understand how they're able to do that. But thank you very much. Thank you.

Thank you very much. Your next question is coming from Adrian Day of Adrian Day Asset Management. Adrian, your line is live.

Yeah, thank you. Good afternoon, everyone. Just had a quick question. Mohamed, earlier I was part of the question, but I was also wondering how Greenfield's exploration fits into your picture, both solo Greenfields and also partnerships.

I did not quite get the very beginning of the question. Oh, I'm sorry.

Yeah, Greenfield's exploration. How does that fit into the way you look at growth?

Yes, yes. Let me first give you a refresher on our growth initiatives. This year we have increased our exploration and new project budget to $51 million, up from $41 million in 2020-2024. So we're expanding our exploration initiatives. You know, Adrian, we're quite active with exploration in our key projects, key properties. And to the point of your question, Greenfield, sometimes we don't speak about or speak enough about our early stage exploration initiatives. And let me go into some of them. Right now we have an active drill program in northern Cote d'Ivoire. It's a tongue-gone project. We have a 5,000 meter, sorry, a 10,000 meter drill program ongoing there. It's a large land package north of the Barrick's tongue-gone mine in the south of the Cote d'Ivoire. We have a large number of large structures with strong chemical signatures on surface from auger and soil work. So we are excited about that program. It's advancing. I would say we're a third advanced with the drilling there. And we look forward to report on that in the coming weeks. Start reporting on tongue-gone and being able to talk more about tongue-gone in the coming weeks. In Mexico, we have currently three, we're entering, we're looking to enter into three joint venture opportunities, option agreements for joint venture opportunities. So we continue to seek opportunities in Mexico. Those are Greenfield's initiatives, early stage type projects. In Peru, even though our work is in the region, we have a lot of centers mainly in the Cayoma mine and the vein system around the Cayoma mine. We have within our property package two, I would say, different type projects for disseminated, the targets are disseminated silver, disseminated gold, are the Antacoyo and Santa Rosa projects. So even though they are within the Cayoma land package, which is quite extensive, these are projects that would be able to necessarily feed the Cayoma plant. These are disseminated gold and silver type targets. So we are gearing to start drilling and testing those targets towards mid-year, second half of the year. And we also have initiatives in Argentina, in Senegal going back to West Africa. We talk about the Ambasud and we speak of the Ambasud as a project, but we have a very large land package around Seguela. And we are also, our work has focused initially at the project level, at the Ambasud, but now we are starting to move out into the peripheries and boundaries of our concession packages. So all you know, my message is we are very active across the jurisdictions on or Greenfield initiatives and sometimes we don't speak a lot about them, but as work progresses and as those mature, some of them will mature, we will start communicating more.

Okay, no, that's excellent. That's a lot of projects. Thank you.

Thank you very much. If there will be any remaining questions, you can join the queue now by pressing star 1 on your phone keypad. Okay, we appear to have reached the end of our question. Oh, apologies. We do have a question just come in. If you'd like to take it, it's from David Kranzler of the Mining Stock Journal. David, your line is live.

Thank you. Hi Jorge. I'll see you later on Chris's podcast, Arcadia Economics. I think the market right now is kind of misunderstanding the results that you released. I just have a couple questions here. How much will Fortuna save in closure costs from the sale of Yaramoco and San Jose?

Hello, Dave, and I look forward to our conversation later today. $50 million on aggregate is what we would need to be allocated to face the mine closures of both Yaramoco and San Jose. And on top of that, those are $50 million that would be invested, allocated towards mine closure over a period of years, four, five, six years, right? Because it's the closure plus monitoring activities that go. So the savings, I believe, are significant. But equally important is those are long-term projects that need to be managed and managed well as well. So management attention, I believe, is key here. And we're not only saving on the $50 million, but we're also being able to reallocate management and human resources towards those higher value opportunities that we have in the Fort Dapodio and across other things that we're looking at.

Okay. And then my next question is, do you have a timeline for the advancement of the ambasude to a construction decision? Yes.

You know, we, as I explained earlier in the call, we're advancing on three tracks. We aim to migrate the exploration concession we have at the ambasude into an exploitation concession by mid-year 2026. So in order to do that, we are advancing our environmental studies or engineering studies. And concurrent with that, we continue drilling like hell here. So the objective is by mid-2026, we are in a position to be able to make a construction decision. Mid-2026, probably a construction decision will follow shortly after gaining the exploitation concession. I would say second half of 2026, we should be in a position to consider a construction decision.

Okay. And then one last question. Do you have a timeline yet for incorporating Kingfisher into the Life of Mine Plan at Segella?

I would expect that Kingfisher can be incorporated by end of this year. So we will be releasing our consolidated resource and reserve statements, mineral resource, mineral reserve statements in early 2026. And you should see Kingfisher in those mine plans in the reserve. So we, all of this year, we are drilling aggressively this first half of the year. We've been drilling aggressively in-field drilling. And we continue with that program. And now we are close to completion with the in-field program. And now we are also working on opportunities that we identified through the in-field program to continue extending mineralization. So we're doing those two in parallel. In-field class grows within the Kingfisher deposit. But to go back to the basic question, you should see Kingfisher in the reserves in

the Okay. Thank you. That's all I've got. And I will talk to you later on the KDA Economics podcast.

Thank you. I look forward to that.

Thank you

very much. Our next question is coming from Thomas Beslanovich, who's a private investor. Thomas, your line is live.

Yes, Jorge. I've been buying all the way down on the sell-off, and I really don't understand why. But my comment is, I hope you're buying it with me, because this is a fantastic deal, as I'm concerned. That's all I have to say.

Thank you for the comment, and well noted.

Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to the management team for any final comments.

If there are no further questions, I'd like to thank everyone for joining us on today's earnings call. We appreciate your continued support and interest in Fortuna Mining. Have a great day.

Thank you very much. That does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful rest of the day. We thank you for your participation.