Fortuna reports record earnings for the third quarter of 2024

Vancouver, November 6, 2024: Fortuna Mining Corp. (NYSE: FSM | TSX: FVI) (“Fortuna” or the “Company”) - https://www.commodity-tv.com/ondemand/companies/profil/fortuna-mining-inc/ - today reported its financial and operating results for the third quarter of 2024.

“In the third quarter, a focus on cost discipline and safe operations allowed Fortuna to capture the benefit of rising metal prices and achieve record attributable earnings of $50.5 million and record operating cash flow before working capital changes of $119.3 million.” said Jorge Ganoza, Fortuna’s President and CEO. Mr. Ganoza continued, “Our mines delivered 110,820 ounces of gold equivalent production at a cash cost per ounce of $1,059 as we remain well positioned to finish the year within our cost and production guidance.” Mr. Ganoza added, “The Company also achieved a key milestone with a positive net cash position at the end of the quarter and we recently renegotiated our credit facility reducing financial costs and providing additional financial flexibility.”

Third Quarter 2024 highlights

Financial

• Attributable net income of $50.5 million or $0.16 per share, compared to $40.6 million or $0.13 per share in Q2 2024
• Adjusted attributable net income¹ of $49.9 million or $0.16 per share, compared to $30.4 million or $0.10 per share in Q2 2024
• Generated $119.3 million (or $0.38 per share) of cash flow from operations before working capital changes, and free cash flow from ongoing operations¹ of $56.6 million, compared to $93.0 million (or $0.30 per share) and $38.6 million, respectively, in Q2 2024
• As at the end of the quarter, the Company had a cash position of $180.6 million and achieved a positive net cash¹ position of $8.0 million. Liquidity increased to $430.6 million from $355.6 million at the end of Q2 2024
• Subsequent to the end of the quarter, the Company resized its revolving credit facility from $250.0 million to $150.0 million and increased the uncommitted accordion to $75.0 million from $50.0 million reducing its reliance on bank debt. The revolving debt facility remains fully undrawn²

Operational                                                                                

• Gold equivalent³ production of 110,820 ounces, compared to 116,570 ounces in Q2 2024. Nine month gold equivalent production of 339,933 ounces, aligned to meet annual guidance of 457 to 497 koz. For full details refer to our News Release titled “Fortuna reports solid production of 110,820 gold equivalent ounces for the third quarter of 2024” dated October 10, 2024
• Consolidated cash costs¹ per ounce of gold equivalent sold of $1,059 for the quarter and $977 year to date remain largely aligned with annual guidance of $935 to $1,055; adjusting for San Jose, which is mining its last year of Mineral Reserves, consolidated cash costs were $935 for the quarter
• Consolidated all-in sustaining cash costs (AISC)¹ per ounce of gold equivalent sold of $1,696 for the quarter and $1,618 year to date, are tracking at the upper end of annual guidance of $1,485 to $1,640; adjusting for San Jose, consolidated AISC was $1,594. The leach-pad expansion for Lindero is a one-time $42 million capital project in 2024 set for completion in Q4 and weighs approximately $90 per ounce on our annual consolidated AISC
• The Company recorded one lost time injury in the quarter and a year-to-date total recordable injury frequency rate of 1.37

Growth and Development

• At the newly discovered Kingfisher prospect at the Séguéla Mine the Company intersected 14.2 g/t gold over 16.8 meters. For full details refer to our News Release titled “Fortuna intersects 14.2g/t Au over 16.8 meter at the Kingfisher prospects, Séguéla Mine, Côte d’Ivoire” dated September 10, 2024
• Exploration continued at the Diamba Sud exploration project with an intersect of 6.9 g/t gold over 33.3 meters at the Western Splay prospect. For full details refer to our News Release titled “Fortuna intersects 6.9g/t Au over 33.3. meters at the Diamba Sud Project, Senegal” dated September 12, 2024

Third Quarter 2024 Consolidated Results

Third Quarter 2024 Results

Cash Costs and AISC

Consolidated cash cost per equivalent gold ounce was $1,059, compared to $814 in the third quarter of 2023. The increase in cash cost is explained mainly by lower stripping and mining costs during Séguéla’s first quarter of operations in Q3 2023; lower head grades and throughput at San Jose in its last year of Mineral Reserves; higher cash costs per ounce at Yaramoko related to lower head grades and higher mining and indirect costs. Cash cost per ounce for the quarter and for the year remain largely aligned with annual guidance.

All-in sustaining costs per gold equivalent ounce was $1,696 for the third quarter of 2024 compared to $1,313 for the third quarter of 2023. The increase was primarily the result of higher sustaining capital at Lindero related to the expansion of the leach-pad, and higher cash cost per ounce as described above.

AISC Performance vs 2024 Guidance

All-in sustaining costs per gold equivalent ounce sold for the nine months ending September 30, 2024 was $1,618 and is expected to be at the higher end of guidance for the year as a result of the following:

• Real currency appreciation of the Argentine Peso increasing Lindero’s cash costs by 9%
• Increased sustaining capital costs to accelerate 2025 development at Yaramoko to access newly identified mineral resources
• Lower production compared to plan at San Jose due to operational challenges in its last year of reserves

The Company has several continuous improvement initiatives in place.  Some of the key ongoing projects are:

• Séguéla process optimization: In Q3 2024 Séguéla achieved 35% higher throughput than nameplate capacity, and 20% higher than our 2024 mine plan.  This increase already exceeds the capacity expansion scheduled in the technical report for 2026. The expansion has been achieved with minimal capex.
• Lindero: Several productivity and cost reduction projects representing annual incremental profit of $16 million (pre-tax) consisting mainly of the following: increased gold recovery from grind size optimization, ADR plant incremental flow, haulage fleet optimization, and conversion from diesel power generation to solar.

Attributable Net Income and Adjusted Attributable Net Income

Net income attributable to Fortuna for the quarter was $50.5 million compared to $27.5 million in Q3 2023. After adjusting for non-cash and non-recurring items, adjusted attributable net income for the quarter was $49.9 million compared to $29.6 million in Q3 2023.

The increase in net income and adjusted net income was explained mainly by higher realized gold and silver prices partially offset by lower gold sales volume and higher costs per ounce. The realized gold and silver prices were $2,490 and $29.4 per ounce respectively compared to $1,925 and $23.7 per ounce, respectively, for the comparable period in the prior year. The decrease in gold sales volume was primarily due to lower production at Yaramoko and San Jose as per the mine plans. The higher cost per ounce was primarily at Séguéla, San Jose and Yaramoko as described above.

Adjusted net income for the quarter also benefited from $3.4 million of foreign exchange gains related to the appreciation of the Euro during the quarter, $3.2 million of investment income related to cross-border, Argentine pesos denominated bond trades, and lower interest expenses.

Depreciation and Depletion

Depreciation and depletion for the third quarter of 2024 was $59.3 million compared to $63.4 million in the comparable period. The decrease in depreciation and depletion was primarily the result of lower depreciation and depletion at San Jose due to an impairment charge in the fourth quarter of 2023 and lower depletion per ounce in the 55 Zone at Yaramoko, partially offset by higher depletion at Séguéla. Depletion at Séguéla in the quarter includes $16.8 million of the purchase price related to the acquisition of Roxgold Inc in 2021.

Cash Flow

Net cash generated by operations for the quarter was $92.9 million compared to $106.5 million in Q3 2023. Excluding changes in working capital, net cash from operations was $119.3 million compared to $106.2 million in the comparative period. The increase of $13.1 million reflects higher adjusted EBITDA of $25.8 million offset mainly by higher taxes paid of $8.9 million mostly at Séguéla.

Negative working capital for the quarter of $26.4 million was due to an increase of $24.5 million in receivables primarily due to the timing of trade receivables and VAT collection. At the end of the quarter the balance of VAT receivables at Yaramoko was $45.0 million.

In the third quarter of 2024 capital expenditures on a cash basis amounted to $50.2 million consisting of $37.9 million of sustaining capital, including brownfields exploration, and $12.3 million of non-sustaining capital. Year to date capital expenditures were $141.9 million consisting of $103.1 million of sustaining capital and $38.8 million non-sustaining capital.

Free cash flow from ongoing operations for the quarter was $56.6 million, compared to $70.0 million in the comparable period. The decrease in free cash flow, despite higher metal prices in the quarter, is explained mainly by negative working capital of $26.4 million compared to $nil in the third quarter of 2023, capital expenditures for the Lindero leach pad expansion and higher taxes paid due to the third and final tax installment at Séguéla for 2023 taxes. The comparable period also had a number of one-time benefits that lowered the cost of production at Séguéla.

General and Administrative Expenses

General and administrative expenses for the current quarter of $16.0 million were 10% higher than the same period in 2023 due mainly to higher share-based compensation expenses. G&A comprises the following items:

Liquidity 

The Company’s total liquidity available as of September 30, 2024 was $430.6 million comprised of $180.6 million in cash and cash equivalents, and the fully undrawn $250.0 million revolving credit facility (excluding letters of credit). Effective October 31, 2024, the Company amended its credit facility reducing the amount of the facility to $150 million from $250 million (the facility would have stepped down to $175 million in November 2024), and increased the uncommitted accordion option from $50 million to $75 million. An improved pricing grid and covenant flexibility was negotiated under the amended facility.

Séguéla Mine, Côte d’Ivoire

During the third quarter of 2024, mine production totaled 484,050 tonnes of ore, averaging 2.48 g/t Au, and containing an estimated 38,661 ounces of gold from the Antenna, Ancien and Koula pits. Movement of waste during the quarter totaled 2,935,335 tonnes, for a strip ratio of 6:1. Production was mainly focused from the Antenna pit which produced 412,063 tonnes of ore, with the balance of production sourced from the Koula and Ancien pits.

In the third quarter of 2024, Séguéla processed 418,390 tonnes, producing 34,998 ounces of gold, at an average head grade of 2.69 g/t Au, an 11% increase and 30% decrease, respectively, compared to the third quarter in 2023. The decrease in gold grade is in line with the planned mining sequence. Plant throughput for the quarter averaged 208 tonnes per hour (tph), 35% higher than name plate design capacity of 154 tph. The power outages that were experienced in the second quarter did not affect processing plant operations in the third quarter and enabled an increase in the tonnes processed. However, a failure of the drive shaft of the main apron feeder in early July required a repair which reduced throughput rates while the repairs were completed. Throughput rates were subsequently increased, averaging 216 tph in September.

The cash cost per gold ounce sold was $655 for the quarter ended September 30, 2024, compared to $397 in the same period of 2023. The increase is explained by the higher head grade and low-cost production associated with Séguéla´s first quarter of operations in the comparative period. The lower cost of production was mostly related to low-strip mining, shorter haulage, and lower maintenance costs.

The all-in sustaining cash cost per gold ounce sold was $1,176 for the quarter ending September 30, 2024, an increase from $788 for the same period in 2023. This increase is due to increased cash costs and increased sustaining capital expenditures in 2024 for stripping activities.

Looking forward into 2025, the Séguéla mine plans to operate at approximately 35 percent higher throughput rate compared to nameplate design, and at a stripping ratio closer to the Mineral Reserve average of 13:1 compared to 6:1 year to date. The higher throughput achieved through optimization initiatives in 2024 has not required any material capital expenditures. As a result of sustained higher production rates, the mine will correspondingly face an acceleration of infrastructure requirements in the approximate amount of $10 million above 2024 infrastructure capex figures. These capital projects are primarily related to the early expansion of the tailings storage facility, relocation of the Sunbird communications tower for development of the Sunbird pit, and land access to new mineral deposits and related compensation payments. Management anticipates that advancing these infrastructure projects will unlock annual target production rates of between 140k to 200k ounces in our life of mine plans. 

Yaramoko Mine, Burkina Faso

¹ Cash cost and All-in sustaining cash cost are non-IFRS financial measures; refer to non-IFRS financial measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures.

² Capital expenditures are presented on a cash basis.

In the third quarter of 2024, 123,754 tonnes of ore were treated at an average head grade of 6.71 g/t Au, producing 28,006 ounces of gold. This represents a 13% decrease in grade and an 18% decrease in production, when compared to the same period in 2023. The gold grade was lower than predicted in the mine plan due to continuing development operations providing lower grade ore and the milling of supplementary low-grade stockpiles.

During the quarter, 80,740 tonnes of ore were mined averaging 7.41 g/t Au from the 55 Zone, and 21,905 tonnes of ore averaging 9.02 g/t Au from QV Prime, totaling 102,645 tonnes averaging 7.75 g/t Au.

The cash cost per ounce of gold sold for the quarter ended September 30, 2024, was $974, compared to $753 in the same period in 2023. The increase for the quarter is mainly attributed to higher mining and indirect costs and lower volume of ounces sold due to lower grades.

The all-in sustaining cash cost per gold ounce sold was $1,373 for the quarter ended September 30, 2024, compared to $1,213 in the same period of 2023. The increase in the quarter was primarily due to higher cash costs described above, and a change in the royalty regime in Burkina Faso which increased the royalty rate from 5% to 7% when the gold price is over $2,000 per ounce. This was partially offset by lower sustaining capital expenditure in 2024.

Lindero Mine, Argentina

¹ Cash cost and All-in sustaining cash cost are non-IFRS financial measures; refer to non-IFRS financial measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures.

² Capital expenditures are presented on a cash basis.

Quarterly Operating and Financial Highlights

During the third quarter of 2024, 2.1 million tonnes of ore were mined, with a stripping ratio of 1:1. A total of 1,654,101 tonnes of ore was placed on the heap leach pad at an average gold grade of 0.66 g/t, containing an estimated 34,925 ounces of gold. The 13% increase in tonnes placed on the leach pad, when compared to the third quarter of 2023, is mainly due to mine sequencing. 

Lindero’s total gold production for the quarter was 24,345 ounces of gold, comprised of 22,569 ounces in doré bars, 1,754 ounces contained in rich fine carbon, and 21 ounces contained in copper precipitate. The 16% increase from the third quarter of 2023, is due to an increase in tonnes placed on the leach pad and higher gold grade in the third quarter of 2024. 

The cash cost per ounce of gold for the quarter ended September 30, 2024 was $1,042 compared to $987 in the same period of 2023. The increase in cash cost per ounce of gold was related to increased mine costs as a result of additional heavy equipment rentals and labour costs.

The all-in sustaining cash cost per gold ounce sold during Q3 2024 was $1,962, an increase from $1,609 in the third quarter of 2023. The increase for the quarter was primarily due to higher cash costs as described above and higher sustaining capital expenditures to support the expansion of the heap leach pad which accounted for $580 per ounce in the quarter. 

As of September 30, 2024, the $51.8 million leach pad expansion project ($41.7 million capital investment in 2024) was approximately 76% complete and tracking on budget. Procurement is complete, with items onsite. Liner installation is approximately 44% complete. In October of 2024, the Company started placing ore on the leach pad expansion and practical completion is expected by year-end. Minor construction activities and contractor demobilization are planned for early 2025.

San Jose Mine, Mexico

¹ Cash cost per ounce of silver equivalent and All-in sustaining cash cost per ounce of silver equivalent are calculated using realized metal prices for each period respectively.

² Cash cost per ounce of silver equivalent, and all-in sustaining cash cost per ounce of silver equivalent are non-IFRS financial measures, refer to non-IFRS financial measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures.

³ Capital expenditures are presented on a cash basis

In the third quarter of 2024, San Jose produced 510,741 ounces of silver and 3,771 ounces of gold, 63% and 54% decreases respectively, at average head grades for silver and gold of 99 g/t and 0.74 g/t, a 48% decrease and 35% decrease respectively, when compared to the same period in 2023. During the third quarter the mine plan included areas near old workings at the upper level of the mine which have a higher level of geological uncertainty. These areas accounted for 46% of quarterly production and returned 36% lower head grades and 28% lower tonnage than expected. The mine plan for the fourth quarter continues to encompass areas of high geologic uncertainty.

The processing plant milled 188,212 tonnes averaging 2,163 tonnes per day. Metallurgical recoveries were impacted by higher iron oxide material from upper levels mined during the period.

The cash cost per silver equivalent ounce for the three months ending September 30, 2024, was $29.40, an increase from $13.73 in the same period of 2023. The higher cost per ounce was primarily the result of lower production and silver equivalent ounces sold as described above and the impact of fixed costs being spread across fewer ounces sold.

The all-in sustaining cash cost per payable silver equivalent ounce for the three months ended September 30, 2024, increased by 81% to $32.65 from $18.04 for the same period in 2023. These increases were mainly driven by higher cash costs and lower production, which was partially offset by lower capital expenditures.

Following Management’s evaluation of the options available for San Jose, the Company is planning to initiate the progressive closure of the San Jose mine starting in the first quarter of 2025. A comprehensive multi-year closure and monitoring plan and budget are expected to be completed in the fourth quarter of 2024. The plan considers concurrent closure activities with reduced mining operations, which may continue for up to eighteen months at rates of under 1,000 tonnes per day in selected portions of the remaining Mineral Resources in the underground mine. Management expects production income can offset a significant portion of closure costs in the initial years.

Caylloma Mine, Peru

¹ Cash cost per ounce of silver equivalent and All-in sustaining cash cost per ounce of silver equivalent are calculated using realized metal prices for each period respectively.

² Cash cost per ounce of silver equivalent, and all-in sustaining cash cost per ounce of silver equivalent are non-IFRS financial measures, refer to non-IFRS financial measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures.

³ Capital expenditures are presented on a cash basis.

The Caylloma Mine produced 305,446 ounces of silver at an average head grade of 82 g/t Ag in the third quarter of 2024, reflecting similar production as the previous quarter.

Zinc and lead production was 12.8 million pounds and 10.0 million pounds, respectively, with average head grades of 4.64% Zn and 3.62% Pb, representing an 8% decrease and 1% decrease, respectively, when compared to the third quarter of 2023. Zinc production decreased by 9% and lead production decreased by 3% when compared to the same period in 2023. The lower production is the result of lower head grades delivered to the plant, in accordance with the planned mining sequence for the period.

The cash cost per silver equivalent ounce sold for the three months ended September 30, 2024 was $14.88, a 2% decrease compared to the comparable period in 2023. Cash costs for the mine were lower for the period due to lower ground support costs as mining took place in more competent rock and lower plant costs but was offset by lower silver equivalent ounces sold due to high silver prices and the impact on the calculation of silver equivalent for lead and zinc.

The all-in sustaining cash cost per ounce of payable silver equivalent for the three months ended September 30, 2024, was $22.69 compared to $21.14 for the same period in 2023. The increase is due to higher sustaining capital expenditures in the third quarter of 2024 compared to the same period in 2023 and the impact of higher silver prices on the calculation of silver equivalent ounces for base metals. If silver equivalent ounces were calculated using guidance prices, the all-in sustaining cost per ounce would have been approximately $19.38.

Qualified Person

Eric Chapman, Senior Vice President of Technical Services, is a Professional Geoscientist of the Engineers and Geoscientists of British Columbia (Registration Number 36328), and is the Company’s Qualified Person (as defined by National Instrument 43-101). Mr. Chapman has reviewed and approved the scientific and technical information contained in this news release and has verified the underlying data.

Non-IFRS Financial Measures 

The Company has disclosed certain financial measures and ratios in this news release which are not defined under the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, and are not disclosed in the Company's financial statements, including but not limited to: cash cost per ounce of gold sold; all-in sustaining cash cost per ounce of gold sold; all-in sustaining cash cost per ounce of gold equivalent sold; all-in cash cost per ounce of gold sold; production cash cost per ounce of gold equivalent; cash cost per payable ounce of silver equivalent sold; all-in sustaining cash cost per payable ounce of silver equivalent sold; all-in cash cost per payable ounce of silver equivalent sold; free cash flow from ongoing operations; adjusted net income; adjusted attributable net income; adjusted EBITDA and working capital.

These non-IFRS financial measures and non-IFRS ratios are widely reported in the mining industry as benchmarks for performance and are used by management to monitor and evaluate the Company's operating performance and ability to generate cash. The Company believes that, in addition to financial measures and ratios prepared in accordance with IFRS, certain investors use these non-IFRS financial measures and ratios to evaluate the Company’s performance. However, the measures do not have a standardized meaning under IFRS and may not be comparable to similar financial measures disclosed by other companies. Accordingly, non-IFRS financial measures and non-IFRS ratios should not be considered in isolation or as a substitute for measures and ratios of the Company’s performance prepared in accordance with IFRS.

To facilitate a better understanding of these measures and ratios as calculated by the Company, descriptions are provided below. In addition see “Non-IFRS Financial Measures” in the Company’s management’s discussion and analysis for the three and nine months ended September 30, 2024 (“Q3 2024 MDA”), which section is incorporated by reference in this news release, for additional information regarding each non-IFRS financial measure and non-IFRS ratio disclosed in this news release, including an explanation of their composition; an explanation of how such measures and ratios provide useful information to an investor; and the additional purposes, if any, for which management of the Company uses such measures and ratio. The Q3 2024 MD&A may be accessed on SEDAR+ at www.sedarplus.ca under the Company’s profile.

Except as otherwise described in the Q3 2024 MD&A, the Company has calculated these measures consistently for all periods presented.

Reconciliation of Debt to total net debt and net debt to adjusted EBITDA ratio for September 30, 2024

Reconciliation of net income to adjusted attributable net income for the three and nine months ended September 30, 2024 and 2023

Reconciliation of net income to adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023

Figures may not add due to rounding

Reconciliation of net cash from operating activities to free cash flow from ongoing operations for the three and nine months ended September 30, 2024 and 2023

Figures may not add due to rounding

Reconciliation of cost of sales to cash cost per ounce of gold equivalent sold for the three and nine months ended September 30, 2024 and 2023

Reconciliation of cost of sales to all-in sustaining cash cost per ounce of gold equivalent sold for the three and nine months ended September 30, 2024 and 2023

Reconciliation of cost of sales to cash cost per payable ounce of silver equivalent sold for the three and nine months ended September 30, 2024 and 2023

Reconciliation of all-in sustaining cash cost and all-in cash cost per payable ounce of silver equivalent sold for the three and nine months ended September 30, 2024 and 2023