Fortuna Mining Corp

Greetings. Welcome to the Fortuna Mining Q2 2026 Financial and Operational Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Carlos Baca, Vice President of Investor Relations. You may begin.

Thank you, Holly. Good morning, everyone, and welcome to Fortuna Mining's second quarter 2026 Financial and Operational Results Conference Call. Joining today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder, Luis Dario Ganoza, Chief Financial Officer, David Whittle, Chief Operating Officer, West Africa, and Cesar Velasco, Chief Operating Officer, Latin America. Today's webcast presentation and Q2 2026 results materials are available on our website at fortunamining.com. Before we begin, please note that statements made during today's 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 outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. The technical information discussed on this call has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined under National Instrument 43-101. Today's remarks will provide a concise overview of our second quarter results and the priorities guiding the business through the balance of the year. With that, I'll turn the call over to Jorge Ganoza.

Thank you, Carlos, and good morning to all. Thanks for joining us. The second quarter was another strong quarter for Fortuna. We delivered solid operating performance, generated significant free cash flow, Maintained a very strong balance sheet and advanced the two principal value drivers for next phase of growth, the Fegela Plant Expansion and the Yanda Sud Gold Project, which together are key to delivering approximately 60% growth in annual production by mid-2028. Operationally, we produced 72,217 gold equivalent ounces in the quarter, and 145,089 gold equivalent ounces year-to-date, keeping us on track to achieve annual production guidance. We experienced a fatal accident at our Seguela mine involving a contractor truck operator. Our thoughts remain with his family, colleagues and all those affected. Safety remains our highest priority. with a renewed focus on heavy model equipment controls, contractor management, and field verification of critical controls. For the quarter, our total recordable injury frequency rate was 121. And Cayoma and Lindero ended the quarter with 1,154 and 990 days respectively Free of lost time injuries, commendable performance for these two mines. Financially, the second quarter was a strong quarter across all key metrics, even with realized gold and silver prices lower than the exceptionally strong first quarter. Sales worth $318 million, adjusted attributable made income $75 million, or 25 cents per share, and adjusted EBITDA of $200 million, representing a strong EBITDA margin of 63%. Free cash flow from ongoing operations was $85 million, bringing free cash flow from ongoing operations for the first half of the year to $260 million. At mid-year, the business has generated $661 million in sales, $420 million in adjusted EBITDA, and $186 million in adjusted attributable net income, or $0.62 per share. This performance is translated directly into shareholder returns. During the second quarter, we returned $82 million through share buybacks. and year to date we have returned $106 million or approximately 41% of free cash flow from ongoing operations through the repurchase of 10.8 million shares. We believe this demonstrates the quality of the portfolio and the focus of our capital allocation priorities. We're funding growth, sustaining a strong balance sheet and returning meaningful capital to shareholders all at the same time. While free cash flow was lower quarter over quarter, this was primarily due to the timing of income tax payments and higher sustained capital, partially offset by favorable working capital movements. With that as context, the bigger story for Fortuna is that we have moved from defining our next phase of growth to executing it, anchored by Diamba Suite and Seguel Atlant Expansion. and supported by strong cash generation and net cash balance sheet. During the quarter, both projects reached important milestones. At the AMBA suit, the feasibility study confirmed a robust development project in Senegal. At Segela, the board approved the 30% plant expansion in Cote d'Ivoire. I will leave the detailed execution plans, timelines and operating details to our Chief Operating Officer for West Africa, David Whittle. Together, these projects provide the production foundation for Fortuna's next step change in scale and support our task to exceed half a million ounces of annual gold production by mid-2028. Importantly, this growth is within our control. It is driven by assets already in our portfolio, in jurisdictions where we have operating experience, technical capability, and established teams. Not by acquisitions or external opportunities. At the AMBA suit, our focus is on advancing the project through the remaining permitting and the stabilization of tax regime. At Ceguela, the approved expansion builds on an asset that continues to demonstrate strong operating performance, geological potential, and scalability within our established West African platforms. The balance sheet remains a major strategic advantage. At quarter end, we had cash and short-term investments of $606 million, total liquidity of approximately $756 million, and a net cash position of approximately $435 million. This financial strength allowed us to fund the concurrent development of the Seguedo plant expansion and the Vian Basu project while preserving flexibility for exploration B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. Importantly, the cost drivers within our control support ASIC remaining within our annual guidance range. The factors that we need to monitor closely are external, royalties linked to metal prices, Argentina macroeconomic conditions, diesel, consumables, and contractor indexation, all of which could affect our three-year ASIC guidance. With that now, I will now turn the call over to the operating team to review the quarter in more detail. We can start with David Whittle, Chief Operating Officer for West Africa.

David? Thanks, Jorge. Before discussing the quarter, I'd like to highlight the progress we are making on the key growth initiatives that strengthen our West Africa platform. These being the publication of the Diambasud feasibility study which demonstrates robust project economics and supports a potential final investment decision in the second half of the year and board approval of the 30% Atlantic capacity expansion at Sagela following the progress and further expansion of the Sunbird Underground project. At Diambasud, the ESI has been approved and discussions with the government are progressing well with final permitting expected soon. The feasibility study outlines average annual coal production of 158,000 ounces over the first four years and a 9.4 year mine life. A robust project that will only continue to strengthen from further exploration and regional opportunities. But Segala, the $109 million process plant expansion together with the Sunbird Underground project is expected to support average annual gold production of more than 200,000 ounces over the next decade, reinforcing Segala's position as a cornerstone asset in our West Africa platform. Together, the Amberswood and Segala, underpinned by their mineral reserve and resource base, established the production foundation for our West African operations and support Fortuna's path, producing at a rate of 500,000 ounces of gold per year by 2028. Turning now to the quarter, Segala delivered another solid operating performance, producing 41,693 ounces of gold, in line with the mine plan. The first half mine production now stands at 83,699 ounces and remains firmly on track to meet guidance. Mining and processing activities performed as expected with 433,000 tons of ore mined at an average grade of 3.06 grams per tonne and 421,000 tons processed at an average grade of 3.46 grams per tonne. Production was sourced primarily from the Antenna, Pantheon and Cooler Fits, while waste stripping advanced at Sunbird, with first-floor also being delivered to the Lumpad during the quarter. In addition, 111,000 BCM of waste mining was undertaken at the Sunbird South Fit to provide access for the underground portal area. From a cost perspective, Segala delivered a cash cost of $676 per ounce and an all-in sustaining cost of $1,765 per ounce, probably consistent with the previous quarter. While diesel prices were impacted by recent global events, the effect of Segala was partially mitigated by the regulated fuel pricing in Côte d'Ivoire and regional supply to horses in West Africa. Turning to key projects at Sea Gala, we made good progress across power infrastructure, the process plant expansion, and the Sunbird Underground project here in the port. The six megawatt solar plant has been commissioned and is performing in line with expectations. As part of the process plant expansion, the Sunbird Underground project, we're advancing plans to expand solar capacity to 10 megawatts A project that will have zero capital cost implications for Fortuna, with further studies also evaluating potential additional capacity. We also strengthen site power reliability by commissioning purchased and backup diesel generators, replacing the temporary hire units that have been in place since 2024. At Suntland Underground, The ESIA is submitted to the Ivorian Government during the quarter with favourable feedback received to date and we expect to submit the Safety Management Plan and update in line with study in the third quarter as we work toward final permitting by the end of the year. Execution planning is also progressing with build allocations secured for long-lead underground mining equipment and infrastructure and mobilisation of the project and operations team now on the line. The project remains on track for underground development to begin the second quarter of 2027. Spaceploration remains active across the Cigala district with seven drill rigs focused on expanding the resource base and supporting the Mize long-term production profile. Back to you, Jorge.

Now we'll move to a review for Latin American business, Cesar, please.

Thank you, Jorge, and good morning, everyone. In Latin America, both Lindero and Cayoma performed broadly in line with plan during the second quarter and remain on track to achieve annual production guidance. At Lindero in Argentina, production for the quarter was 20,829 ounces of gold, broadly in line with Q1. The operating indicators improved during the quarter with higher ore placement, improved average gold grade, and a 5% increase in contained gold ounces placed on the leach pad compared to the first quarter. The first half production was 42,374 ounces of gold. Quarterly production also reflected the normal timing lag associated with heap leach operations with higher contained ounces placed on the pad during the second quarter, expected to be recovered over the coming quarters. Cash costs were $1,459 per ounce, compared with $1,208 per ounce in the first quarter. The increase was driven primarily by temporary crusher related costs, including equipment rentals and alternative crushing arrangements, as well as inflationary pressures in Argentina and the impact of a stronger than anticipated peso on US dollar denominated costs. These factors were partially offset by operational efficiencies and disciplined cost management. The operation also continues to benefit from the on-site solar facility, which supplied approximately 26% of Lindero's power requirements during the first half of the year, reducing diesel use by approximately 2.2 million liters and contributing an estimated $3.2 million in energy savings at average cost incurred. ASIC was $2,265 per ounce in the second quarter compared with $1,783 per ounce in Q1. As mentioned before, the increase reflected the concentration of temporary crusher-related cost in Q2 Together with macroeconomic impacts and elevated transportation and supply chain expenses, due to represented the expected peak AC quarter for Lindero. With the majority reliability work now complete and operating indicators aligned with the mine plan, we expect unit cost to trend lower through the remainder of the year. Looking ahead, completed B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. keeping Kayoma on track to achieve annual production guidance. Silver grades were lower than in Q1, while link grades improved as anticipated. Together with stable metallurgical recoveries, these factors supported the quarter over quarter increase in gold equivalent ounces production. Cash costs were $27.8 per silver equivalent ounce, compared with $30.3 per ounce in the first quarter. ASIC was $44.9 per silver equivalent ounce, similar to Q1. Reported unique costs were affected by higher commodity prices and their impact on the silver equivalent conversion methodology. Excluding this conversion impact, underlying operating costs remain largely in line with plan. Kayoma continues to benefit from strong mining execution, reliable plant performance, and ongoing efficiency initiatives. Production and costs remain aligned with our full year expectations. And as of June 30th, the storage facility expansion project is 28% complete and progressing according to plan. Back to you, Jorge.

Thank you. Our CFO will do a review of the highlights of the financial results. Thank you.

So for Q2 2026, as Jorge has stressed, we reported attributable net income from continuing operations of $75.5 million or 25 cents per share on an adjusted basis. Attributable net income was also $75.5 million. This represents a strong 77% increase over the $42.6 million reported in Q2 2025, but was sequentially lower than the record $111 million, or $0.36 per share, achieved in Q1 2026. The quarter-over-quarter change was primarily driven by lower realized gold prices, a higher effective tax rate, and an 8% increase in cash costs per gold equivalent ounce. Our financial results continue to be supported by strong metal prices. Our average realized gold price for the quarter was $4,447 per ounce, up 34% year over year, but down from the record $4,884 per ounce realized in Q1 2026. Consolidated cash cost per gold equivalent ounce was $1,034 and increased from the $951 per ounce recorded in Q1 of 2026. Consolidated ASIC from continuing operations for Q2 2026 was $2,157 per ounce, up $50 per ounce sequentially from Q1 2026. ATIC or all in sustaining costs for the quarter included one-time expense items of around $115 per ounce related to the primary crusher refurbishment work at Lindero and mobilization costs for an added contractor at Seguela. As disclosed, external factors added a net $49 per ounce versus our underlying guidance assumptions Partly offset by a reduction in share-based compensation in the quarter. Excluding royalties, the largest individual impact was the real peso appreciation in Argentina, which added around $41 per ounce to consolidated ASIC. We estimate diesel and other inflationary trends had an impact of close to $25 per ounce. We continue with an income statement. General and administrative expenses, we recorded $18.7 million in Q2, down sequentially from $27.8 million in Q1, 2026. The decrease was largely due to lower share-based compensation, reflecting the decline in the company's share price and the resulting change in the value of share units expected to settle in cash. We recorded a foreign exchange loss of $6.3 million for the quarter compared to $2.1 million in Q1 2026. Approximately two-thirds of the loss was driven by the purchase of U.S. dollars in Argentina to repatriate funds, as well as a devaluation of the peso impacting our cash and VAT balances. Our 2026 repatriations in Argentina Argentina continues to be through the open market, which involves a 4-5% spread, depending on market conditions, versus the official rate. Starting in 2027, we expect to be able to access the official rate to repatriate funds via dividends. Our effective tax rate for the second quarter was 46%, resulting in income tax expense of $71 million. This was higher than the 33% effective tax rate recorded in Q1 of 2026, primarily due to higher deferred tax expense at the Lindero Mine in Argentina. We expect to start incurring current income taxes in Argentina late in 2027. As we approach this inflection point, we expect these deferred tax charges to continue for the remainder of 2026. Moving on to cash flow, we generated 85.7 million dollars of free cash flow from ongoing operations, as has been This was down sequentially from $174 million in Q1, 2026, largely as expected due to the concentration of cash tax payments in the second quarter. Specifically, we paid $79.3 million in income taxes during the quarter. Capital expenditures totaled $67.9 million for the quarter, up from $45.3 million in Q1, 2026. The increase is as expected based on our capital budget. Out of the total spent in the quarter, $36.6 million was dedicated to sustaining capital and $31.3 million to growth initiatives. Moving on to liquidity and the balance sheet, after these Investments and capital returns, we ended the quarter with $606.7 million in cash and cash equivalent, down from $665.9 million at the end of Q1 2026. We also continue to maintain a strong net cash position of $434.2 million after financial debt. The sequential decrease in cash was primarily driven by our disciplined capital allocation approach, including $82 million in share buybacks under our normal course issuer bid. And importantly, also as Jorge has stressed, our balance sheet continues to provide significant flexibility to fund growth, sustaining operations, and return capital to shareholders. Thank you, and back to you, Jorge.

Thank you. That's management's report. We can open the call for investor analyst questions.

Certainly. That concludes the prepared remarks. We hope today's discussion has provided helpful context on the quarter and the priorities for the balance of the year. We will now open the call to your questions. Holly, please proceed with the Q&A.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is star 1 to ask a question. One moment, please, while we poll for questions. Your first question for today is from Kevin O'Halloran with BMO.

Hey, Jorge and team. Thanks for taking my questions. Just starting on the cost guidance, you flagged a few internal factors pressuring the cost. I think it was the mobilizing the contractor at Seguela and some crusher work at Lindero. Is there any continuation of these costs into Q3 or were those fully completed in Q2? And then for the contractor at Seguelo, was that the underground contractor being mobilized?

Yes. Those are one-time charges that we do not expect to carry on into the third quarter. And now with respect to the Seguela contractor, that's an earth moving contractor which has been assigned one of the pits in operation at the Seguela mine, the Sunbird pit.

Okay, got it. That's helpful. And then just on the cadence of cost improvements, you mentioned Q2 is the peak in terms of ASIC. H2 should be lower. Is that a sequential decrease so that Q4 is better than Q3 or is it pretty similar across Q3 and Q4 in terms of the ASIC?

Looking at our projections, first with internal factors, we expect to see a decline in ASIC More pronounced, the Lindero Mine in particular in the third quarter and leveling off into the fourth quarter. So we expect looking at our internal factors and internal aspects that drive our cost and ASIC to be within guidance. A bit of a wild card here is external factors, what diesel will do and macroeconomics in Argentina and things like that that might vary as externalities against what we budgeted at the beginning of the year. But looking at the performance of the business, we expect lower costs, particularly in the third quarter and then carrying on into the fourth quarter.

Okay, great. That's helpful. Just on the Seguela expansion, you're increasing the throughput by about 30% to around 6,300 tons per day and adding some production from underground. How much of that production increase is driven by the underground expansion? Or I guess to put it maybe a better way, what's the split you expect between open pit and underground mining in terms of the tonnage?

Yes, the expansion is from the current 1.75 million tons per annum to 2.3 million tons per annum per year. And the underground, once in full production, will contribute about, at this initial stage, about half a million tons per year.

Okay, got it. That's helpful.

Last question for me, just on the share repurchases. You've been accelerating those over the past few quarters, which is great to see. What should we expect as the run rate going forward for those capital returns? Is that Q2 level sort of a good number to be at in future quarters, or should we expect that to keep growing, or maybe it even declines a bit as you start spending more on those growth projects? How do we think about that?

Our first quarter purchases were in the range of 20 million. The second quarter, as stated, more in the range of 80 million dollars. That's the highest level of repurchases that we have historically executed in a quarter. I would say that That looks like a peak right now to us. What we look is to have a sustained repurchases, looking at the markets and the opportunities we see with respect to our perceived valuation. But I think I can say right now that you should expect to see sustained repurchases. $80 million has been a historic peak for us in terms of repurchases. Probably a lower fee here right now and something more mentioned.

Okay, great. Appreciate that. That's all the questions for me. Thanks for taking my questions.

Your next question is from Mohamed Sidibe with National Bank.

Good morning, Jorge and Tim, and thanks for taking my question. Maybe just a follow-up on the cost guidance and the performance into the second half of the year. Is it fair to assume that the $115 per ounce external factor or one-time operational items, in fact, you highlighted in your ASIC and Q2, will likely all be removed in the second half of the year so that we could be trending closer to that? Call it $2,000 grounds on ASIC level, or how should we think about effectively the cadence of that improvement? Thank you.

Yes. Yeah. You know, considering what we see today in terms of the external factors and making some projections, the $2,000 range seems something plausible. If we adjust for those external factors, we're tracking to go the leader performance below $2,000. But again, external factors out of our control and macroeconomics in Argentina. The one-timers that we've seen are coming from Lindero, largely. associated with the higher rentals and senior activities in support of the recovery regimen for the Primary Crusher Foundation. All of those works are complete, so those are one-timers that do not carry into the third or fourth quarter. and the same with Seguela, contractor mobilization is behind and we don't expect any of those one-timers moving forward. So what we expect this cost to trend down, it will use today's environment and be surprised what we see in Argentina macro The $2,000 level is reasonable, yes. Thank you.

That's helpful. And maybe as you relate to your Tegela plant expansion, you know, you just approved a capital budget of $109 million. Can you help us understand over which period you will be spending that capital? Is this, you know, something over the next six quarters? Is it over the next eight quarters effectively as you get to 2028? and similarly for the $48 million budget that you approved for your underground development, if you could just help from a modeling standpoint to delineate over how many quarters we should think of that spend to be spread. Thank you.

The $48 million that has been approved is to build and develop the A lot of that is being spent and will be spent this year and into B.Sc. B.Sc. B.Sc. and that's what the $48 million budget covers and preparation of the portal. With respect to the $100 million, we're currently working on the actual development plan but you should expect to see that capital spent throughout 2020. I don't have right now, we don't have right now the The actual quarter over quarter spent, we're developing that, but it will come with the actual plan. But we expect this is a project that can be delivered in mid-2028, second, third quarter of 2028. So you should see $100 million spent throughout now until then, right?

Great. Thank you. Thanks for taking my question.

Your next question is from Eric Windmill with Scotiabank.

Oh, hi, good morning, Jorge and team. Thanks for taking my questions and congratulations to Luis and Kevin on the new appointments. Just a quick question for me on the Awale. You obviously increased your stake there. Any updates or anything you can share in terms of Awale and how you're viewing that investment?

No, I mean, we have a top-up option in our initial agreement that we have taken. We continue to see positively their development. It's geology that we feel very comfortable with, an extension of geology belt that we believe we understand. We like the work they're doing. So we are basically looking to maintain our stake. We are maintaining our 14-15% stake, Eric.

Okay, great. That's helpful. Thank you. Just quickly on Guyana as well. I know you announced the investment a short while ago. Have you had a chance to get in there or any early thoughts or impressions of what you're seeing in country and how you're finding operating there?

We're very excited about the opportunities that Cold Stone presents to us. Guyana is a country that's That views natural resources as strategic for their development. We all know about the oil gas industry there and what's that doing for the nation. And they're very positive and constructive on their mining industry as well. We like the geology where we are at Quartzstone very much. We believe there is tremendous opportunity there for discovery in a place that seeks mining as a strategic labor for development. So we are setting up our presence. We are in the later stages of building our local team. It is our expectation, our plan, that we can be drilling probably towards the start of the fourth quarter. We can be doing our initial drilling and testing some of our initial ideas there at Corpstock.

Okay, great. Thank you. Yeah, it certainly sounds like an exciting new jurisdiction and lots of stuff happening in country. So, appreciate the update. I'll hop back to the queue.

Cheers. Your next question for today is from John Pereira, a private investor.

Thank you. Thank you for taking my questions. Just as a follow-up to some of the previous questions regarding cash and use of cash, With $435 million in net cash and $600 of, I guess, gross in terms with the cash investments on hand and identified, we'll say, around $400 million for Diambasud, $100 million for Siguela, and another $100 million in Argentina, do you still believe that the development projects can, and then you also mentioned a controlled development, Do you still believe that you can accomplish all of these initiatives without going back to the market?

Yes. The short answer is definitely yes. We believe we are in a cash position, a liquidity position, and the cash flows generated by the business are different price scenarios. We are in a position where we can deliver 60% growth over the next 18-24 months in annual production. That's growth that we can deliver without issuing one share. It's all organic right now. So that's a top priority for us. Second is funding our continued exploration. We have expanded our exploration budget. For 2026, that budget has moved from around $50 million as budgeted at the beginning of the year to equivalent to about $60-65 million, so it's an expanding exploration budget. And third, looking at our cash position, our liquidity projections, we participate in the market on the share buybacks, right? But those are the priorities. Funding growth, funding our exploration, maintaining a strong balance sheet, and return to shareholders via the buyback. So over the next... That's how we will prioritize capital allocation. And what we will expand and shrink is right now the share buybacks according to how we see our position on the other priorities.

Okay, good. Yeah, and you mentioned exploration budget. Fortuna spent over $10 million on exploration during the quarter. You mentioned $65 million just now. So you're expecting to continue that, to continue to add ounces and extend the life of your various projects, and you believe that you will continue to at least spend that or grow your export budget?

If I understood your question well, yeah, our budget has expanded to about 60, 65 million. We continue, we, that includes green fields like Quartzstone in Guyana, which we were just talking about, or participation in Wale that comes out of our exploration funding, business development funding. and expansive exploration budgets at Diambasur, Seguela, Lindero. So we plan to maintain aggressive exploration throughout the year. And again, the priorities, as I said, I reiterate funding the organic growth we have in the pipeline. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc.

Mining Permit, Development Permit. And then just in terms of, you know, the work that you've been doing in Diem, you know, do you believe this to be the first mine in a much larger mining district in Senegal? Or, you know, could you just give a little bit of color to that?

That's a very good question because Diem Dasut sits at the core. One of the most prolific gold districts in North Africa. We are on the Senegalese side of a major structure which along that structure we have the Talame River which is a divide, a border divide between B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. B.Sc. This is a district scale opportunity. We're looking actively to expand our land holding in the area. And I think of Diambasud as a beachhead in one of the most productive coal belts in West Africa, absolutely. And we are actively looking to expand or land holdings or concession holdings in the area.

That's great. Thank you for taking my questions. That's really exciting to hear. Thanks so much.

Thank you.

Once again, if you would like to ask a question, please press star 1. We have reached the end of the question and answer session and I will now turn the call over to Carlos for closing remarks.

If there are no further questions, thank you for joining us today and for your continued interest in Fortuna Mining. We appreciate the engagement from our shareholders, analysts, and broader investment community and we look forward to updating you again next quarter. Have a great day.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.