Fortuna Silver Mines Inc. had revenue of $174.0-million, net income of $15.6-million and cash generated from operations before changes in working capital of $59.8-million in 2014. (All amounts expressed in US dollars, unless otherwise stated)
Jorge A. Ganoza, President and CEO, commented, "2014 has been another remarkable year for the company in spite of a 20 percent reduction in realized silver price year over year. We exceeded our production guidance and improved operating margins through higher productivity and cost reductions. Our AISCC decreased to $14.48 per ounce of silver from $20.45 in 2013. The company has a strong financial position with $77 million in cash and an untapped credit facility of $40 million." Mr. Ganoza continued, "As we embark on a 50 percent expansion of the San Jose Mine this year, we expect our AISCC to continue to decrease upon commissioning in mid-2016; further consolidating Fortuna's position as a low cost silver producer."2014 Consolidated Financial Statements and MD&A Highlights:
- Sales of $174.0 million; 27% increase over 2013
- Cash flow from operations before changes in non-cash working capital of $59.8 million; 46% increase over 2013
- Adjusted net income of $15.7 million; 67% increase over 2013
- Earnings per share of $0.12; 180% increase over 2013
- Cash position, including short term investments as at December 31, 2014 was $77.3 million; 57% increase over 2013
- Silver and gold production of 6,599,300 ounces and 35,316 ounces, respectively; 42% and 66% increase over 2013 respectively
- Cash cost per ounce of payable silver, net of by-product credits for gold, lead and zinc, was $4.69; 33% decrease over 2013
- All-in sustaining cash cost per ounce of payable silver, net of by- product credits for gold, lead and zinc, was $14.48; 29% decrease over 2013
Fourth Quarter 2014 Consolidated Financial Statements and MD&A Highlights:
- Sales of $37.8 million; 4% increase over the fourth quarter of 2013
- Adjusted net income of $0.2 million, compared to $3.0 million in the fourth quarter of 2013
- Cash flow from operations before changes in non-cash working capital of $10.0 million, 11% decrease over the fourth quarter of 2013
- Silver and gold production of 1,628,191 ounces and 8,896 ounces, respectively
- Cash cost per ounce of payable silver, net of by-product credits for gold, lead and zinc, was $5.32
- All-in sustaining cash cost per ounce of payable silver, net of by- product credits for gold, lead and zinc, was $12.51
2014 Consolidated Year end Results
For the year ended December 31, 2014, net income was $15.6 million, compared to a loss of $19.1 million for the year ended December 31, 2013. Silver sold increased 45 percent to 6,694,552 ounces, while the realized silver price decreased 20 percent to $18.90 per ounce with respect to 2013. Gold sold increased 70 percent to 35,758 ounces, while the realized gold price decreased 10 percent to $1,260.44 per ounce with respect to 2013. Net income was negatively affected by a higher share-based compensation expense of $3.5 million compared to 2013 mostly related to mark-to-market effects from share price appreciation and restructuring and severance costs of $1.1 million.
For the year ended December 31, 2014, the company's adjusted net income was $15.7 million compared to $9.4 million in 2013.
Mine operating earnings increased 44 percent over the prior year, while gross margins (mine operating earnings over sales) increased from 30 percent to 35 percent. The impact of lower metal prices on gross margins was offset to a large extent by significantly lower unit cash costs, 12 percent lower at San Jose and 1 percent lower at Caylloma, and higher head grades and metal recovery for silver and gold.Cash flow from operations, before changes in working capital, increased 46 percent to $59.8 million (2013: $40.9 million), reflecting 27 percent higher sales and improved margins, from the prior year.
The company's cash and cash equivalents and short term investments as at December 31, 2014 totaled $77.3 million (December 31, 2013: $49.1 million) and working capital was $82.4 million (December 31, 2013: $66.4 million). Liquidity available to the company at year end exceeds $100 million considering undrawn credit lines.Fourth Quarter 2014 Consolidated ResultsFourth quarter 2014 net income amounted to $0.1 million (Q4 2013: loss $14.9 million), resulting in basic earnings per share of $nil (Q4 2013: loss $0.12). Net income was negatively affected by restructuring and severance costs of $1.1 million and higher share-based compensation of $1.4 million, compared to fourth quarter 2013, related to mark-to-market effects from share appreciation. Silver sold increased 16 percent to 1,611,313 ounces while the realized silver price decreased 21 percent to $16.33 per ounce from the same period in the prior year.For the three months ended December 31, 2014, the company's adjusted net income was $0.2 million (2013: $3.0 million) related to the non-cash impairment of inventories of $0.1 million. The decrease in adjusted net income was driven by lower silver price, a $1.1 million restructuring and severance costs and a higher share-based compensation expense.Mine operating earnings decreased 4 percent from the fourth quarter of 2013, while gross margins (mine operating earnings over sales) decreased from 29 percent to 26 percent. The impact of lower metal prices on gross margins was partially offset by lower unit cash costs at San Jose (down 5 percent) and by higher head grades for silver and gold.Cash flow from operations, before changes in working capital, decreased 11 percent to $10.0 million (Q4 2013: $11.2 million) driven by lower metal prices.
Consolidated Operating Results
YEAR TO DATE RESULTS
Years ended December 31,
2014
Consolidated Metal Production Caylloma San Jose Consolidated
Silver (oz) 2,202,540 4,396,760 6,599,300
Gold (oz) 1,820 33,496 35,316
Lead (000's lbs) 16,152 - 16,152
Zinc (000's lbs) 27,361 - 27,361
Production cash cost (US$/oz
Ag)(i) 7.02 3.52 4.69
All-in sustaining cash cost
(US$/oz Ag)(i) 14.13 12.07 14.48
YEAR TO DATE RESULTS
Years ended December 31,
2013
Consolidated Metal Production Caylloma San Jose Consolidated
Silver (oz) 2,104,061 2,527,203 4,631,264
Gold (oz) 2,212 19,031 21,242
Lead (000's lbs) 17,780 - 17,780
Zinc (000's lbs) 25,211 - 25,211
Production cash cost (US$/oz
Ag)(i) 7.65 6.53 7.03
All-in sustaining cash cost
(US$/oz Ag)(i) 20.83 15.89 20.45
(i) Net of by-product credits from gold, lead, and zinc
Silver and gold production for 2014, totaled 6,599,300 ounces and 35,316 ounces, respectively, exceeding the company's production guidance for 2014 by 10 percent and 9 percent, respectively. Compared with the previous year, silver and gold production increased 42 percent and 66 percent, respectively.Consolidated all-in sustaining cash cost per ounce of payable silver for 2014, net of by-product credits, was $14.48, 18 percent below annual guidance, as a result of higher payable ounces of silver, lower capex, and lower unit costs (2013: $20.45).
San Jose Mine Operating Results
Production for the year ended December 31, 2014 was 4,396,760 ounces of silver and 33,496 ounces of gold, 74 percent and 76 percent, respectively, above the prior year's production. The increases are the result of higher throughput of 48 percent and of higher head grade for silver and gold of 17 percent. The San Jose Mine and processing plant were expanded to 2,000 tpd in April 2014 (see Fortuna news release dated April 14, 2014). Compared to guidance for the year, silver and gold production were 10 percent and 9 percent higher, respectively.Cash cost per tonne of processed ore for the year ended December 31, 2014 was $62.99/t, or 12% below the cost in the prior year due mainly to higher throughput, a 4% devaluation of the peso, and lower mining cost related to support and preparation, and below the annual guidance of $67.10/t. All-in sustaining cash cost per payable ounce of silver, net of by-product credits, was $12.07 for the year ended December 31, 2014, below the annual guidance of $14.43.
Caylloma Mine Operating Results
Silver production for the year ended December 31, 2014 was 5 percent above production in the prior year due to higher metallurgical recovery and slightly higher head grade. Zinc production increased 9 percent as a result of higher head grade and higher metallurgical recoveries. Lead production decreased 9 percent because of reduced head grade. Caylloma exceeded its annual production guidance of 2.0 million ounces of silver.Cash cost per tonne at Caylloma for the year ended December 31, 2014 was $90.57 per tonne of processed ore, a decrease of 1 percent from the prior year and 3 percent above annual guidance. All-in sustaining cash cost per payable ounce of silver, net of by-product credits, at Caylloma for the year ended December 31, 2014 was $14.13, 17 percent below the annual guidance of $17.01.The financial statements and MD&A are available on SEDAR and have also been posted on the company's website at www.fortunasilver.com/s/financial_reports.asp.
Conference call to review 2014 Yearend Financial and Operations Results
Date: Friday, March 13, 2015 Time: 9:00 a.m. Pacific - 12:00 p.m. Eastern Dial in number (Toll Free): +1.877.407.8035 Dial in number (International): +1.201.689.8035 Replay number (Toll Free): +1.877.660.6853 Replay number (International): +1.201.612.7415 Replay Passcode: 13601676
Playback of the webcast will be available until June 12, 2015. Playback of the conference call will be available until March 27, 2015 at 11:59 p.m. Eastern. In addition, a transcript of the call will be archived in the company's website: www.fortunasilver.com/s/financial_reports.asp.
About Fortuna Silver Mines Inc.
Fortuna is a growth oriented, silver and base metal producer focused on mining opportunities in Latin America. Our primary assets are the Caylloma silver Mine in southern Peru and the San Jose silver-gold Mine in Mexico. The company is selectively pursuing acquisition opportunities throughout the Americas. For more information, please visit our website at www.fortunasilver.com.
ON BEHALF OF THE BOARD
Jorge A. Ganoza, President, CEO and Director, Fortuna Silver Mines Inc.
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