Fortuna Reports Net Income of US$ 12.96 million on Revenue of US$ 74.06 million

Mar 24, 2011, 08:30 ET from Fortuna Silver Mines Inc.

VANCOUVER, March 24 /PRNewswire-FirstCall/ - Fortuna Silver Mines Inc. (TSX: FVI) (Lima Exchange: FVI) has filed its audited financial statements and MD&A for 2010. The full documents are available on SEDAR and have also been posted on the Company's website at

2010 Financial Statements and MD&A Highlights:

  • Net income of US$ 12.96 million, compared to US$ 0.62 million in 2009
  • Earnings per share of US$ 0.12, compared to US$ 0.01 in 2009
  • Sales of US$ 74.06 million compared to US$ 51.43 million in 2009; increase of 44%
  • Net cash from operating activities of US$ 21.02 million, compared to US$ 13.69 million in 2009, increase of  54%
  • Cash position (including short term investments) and working capital as at year end were US$ 90.81 million and US$ 97.09 million respectively
  • Record silver production: 1,906,423 oz, up 13% over 2009
  • Silver accounted for 48% of revenue
  • Cash cost per silver oz, net of by-product credits, was negative US$ 7.73
  • Cash cost per tonne of ore was US$ 51.20 and the corresponding unit net smelter return (NSR) was US$ 163.59

Jorge Ganoza, President and CEO, commented: "Fortuna remains one of the lowest cost silver producers. During 2010, the Company capitalized on the increase of silver and base metal prices providing its best year to date in earnings and operating margins.  With the commissioning of our San Jose Mine planned for the third quarter of 2011, Fortuna offers one of the most exciting organic production growth profiles amongst emerging silver producers, ensuring increasing leverage to rising silver prices."

Financial Results

  Expressed in US$ millions
  Year ended December 31,
    2010   2009
Sales $ 74.06 $ 51.43
Mine operating income   44.93   27.73
Operating income   30.11   14.38
Net income   12.96   0.62
Cash flow from operations   21.02   13.69
Silver sold (oz million)   1.89   1.65
Cash cost per ag oz net of by-product credits (US$/oz)   (7.73)   (4.86)

During the year ended December 31, 2010, the Company generated net income of US$ 12.96 million (2009: US$ 0.62 million) on operating income of US$ 30.11 million (2009: US$ 14.38 million).  Record results were driven by an increase in ounces of silver sold as well as higher silver and base metal prices.

Operating Results

The increase in sales is primarily attributable to higher silver prices (38%) and greater sales volume (15%).  Zinc and lead metal sold were below last year (7% and 11% respectively) with zinc and lead prices above last year (31% and 25% respectively).  Average realized prices for silver, lead, and zinc were US$ 19.05/oz, US$ 0.80/lb and US$ 0.60/lb respectively.

During 2010, the Company produced 1,906,423 ounces of silver (2009: 1,682,546 ounces) with a cash cost per ounce of payable silver of negative US$7.73 which includes by-product credits. The Caylloma Mine treated 434,656 tonnes of ore in 2010, compared to 395,560 tonnes in the prior year. The cash cost per tonne was US$ 51.20 (2009: US$ 46.27) for 2010. The 13% increase in silver production over 2009 is attributable to an increase in throughput of 10%, an increase in silver recoveries of 0.3% and a 3% increase in silver head grade.

Zinc and lead production during 2010 decreased by 8% and 15%, respectively, compared to 2009.  This decrease was related to a shift in the mine plan designed to replace the polymetallic ore from the Animas vein with higher grade silver ore from level 6 in the upper part of Animas vein.  The mine plan shift was made because of lower than expected grades from the Bateas silver vein which lead to an acceleration of the incorporation of level 6 into the production plan.

Corporate selling, general and administrative expenses increased in 2010 when compared to 2009 by US$ 5.23 million due to the growth of the Company, legal fees related to the credit facility, development of corporate projects and bonus payments.

Net income includes commodity contracts gain of US$ 0.74 million (2009: loss US$ 7.36 million), foreign exchange loss of US$ 2.70 million (2009: US$ 0.65 million), and stock-based compensation recovery of US$ 0.42 million (2009: expense US$ 2.71 million).

San Jose Mine Construction

The Company anticipates that its San Jose project, currently under construction in Mexico, will begin to contribute both silver and gold ounces starting in the third quarter of 2011, allowing the Company to maintain its organic silver production growth in 2011.

Construction activities to date are on budget and commissioning of the mine is scheduled for the third quarter of 2011.

Construction Highlights as of March 14, 2011:

  • Processing plant construction is 33% complete. Foundation work for crushers, milling, flotation, thickening and filtering areas is complete.  Mounting and installation of major plant equipment was initiated in January 2011.  The 13' x 19.5' ball mill has been mounted where the milling section is 42% advanced.  The three stage crushing circuit is being mounted and installed with a 66% advance. Flotation cells have arrived on site and thickeners are being mounted and installed.
  • Tailings dam construction was concluded in January 2011.
  • The 8MW power substation construction and commissioning has been concluded; connection to the national grid is expected in March 2011.
  • The mine access ramp has reached the 1,400 meter elevation, where the first production level is being developed.
  • Three stopes are being developed and prepared for the start of production in the third quarter at the initial rate of 1,000 tpd; stope K is being developed on the Trinidad, Fortuna and Bonanza veins on sub-level 1430.  Stopes L and M are being developed on level 1400. Overall advance on stope preparation is 115% against the program.
  • To December 31, 2010, the mine had built an ore stock pile of 6,816 tonnes grading 234 g/t Ag and 2.13 g/t Au.  The Company anticipates having an inventory of approximately 30,000 tonnes before the start of commercial operations in the third quarter of 2011.
  • Water pipeline installation to the mine site is 87% completed.

Conference Call to Review 2010 Year End Financial Results

The Company will hold a conference call to discuss the financial results on Monday, March 28, 2011 at 9:00 a.m. (PST) / 11:00 a.m. (Lima time) / 12:00 p.m. (EST).  Hosting the call will be Jorge Ganoza, President and CEO and Luis Ganoza, Chief Financial Officer.

Shareholders, analysts, media and interested investors are invited to listen to the live conference call by logging onto the webcast at or over the phone by dialing just prior to the starting time.

Conference call details:

Date: Monday, March 28, 2011
Time: 9:00 a.m. (PST) / 11:00 a.m. (Lima time) / 12:00 p.m. (EST)

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 Passcodes (both are required for playback):
    Account #:  286
    Conference ID #:  369466

Playback of the webcast will be available until June 29, 2011.  Playback of the conference call will be available until 11:59 p.m. (EST) on April 11, 2011.  In addition, the call will be archived in the Company's website.

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 Project in Mexico.  The Company is selectively pursuing additional acquisition opportunities.  For more information, please visit our website at


Jorge Ganoza
President, CEO and Director
Fortuna Silver Mines Inc.

Symbol: TSX: FVI / Lima Stock Exchange: FVI

Forward-Looking Statements

Certain statements in this press release constitute forward-looking statements and as such are based on an assumed set of economic conditions and courses of action. These include estimates of the time of commencement, commissioning and full production, future production levels, expectations regarding mine production costs, expected  trends in mineral prices and statements that describe Fortuna's future plans, objectives or goals. There is a significant risk that actual results will vary, perhaps materially, from results projected depending on such factors as changes in general economic conditions and financial markets, changes in prices for silver and other metals, technological and operational hazards in Fortuna's mining and mine development activities, risks inherent in mineral  exploration, uncertainties inherent in the calculation of mineral reserves, mineral resources, and metal recoveries, the timing and availability of financing, governmental and other approvals, political unrest or instability in countries where Fortuna is active, labor relations and other risk factors.

SOURCE Fortuna Silver Mines Inc.