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Fortuna Silver reports net income drop in second quarter on declining silver prices and rising costs

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(Kitco News) - Fortuna Silver Mines (TSX: FVI) reported today that in Q2 2022, the company produced 62,171 ounces of gold (up 100% over Q2 2021) and 1,652,895 ounces of silver (down 13% over Q2 2021).

The company said it delivered a steady production performance in Q2 2022 with all mines on target to achieve annual guidance for silver and gold, adding that gold production increase of 100% year-over-year was achieved due to positive performance of its Lindero and Yaramoko mines.

Fortuna noted that silver production decrease was primarily driven by a 9% decline in head grade at the San Jose mine, which is in line with the mineral reserve average grade for the second quarter.

The company noted that the inflation situation remains dynamic and said it expects higher input costs to remain for the second half of the year and beyond.

The company also reported that its sales for the three months ended June 30, 2022 were $167.9 million, an increase of 39% from the $120.5 million compared to the same period of 2021.

Fortuna said that net income in Q2 2022 was $1.7 million compared to $16.2 million in Q2 2021, adding that the change in net income was mainly driven by lower sales at San Jose due to declining silver prices and corresponding negative concentrate sales adjustments, and lower production. 

The company also noted that free cash flow from ongoing operations was $21.9 million compared to $19.2 million reported in Q2 2021.

President and CEO Jorge A. Ganoza commented, "Our business generated healthy free cash flow of $21.9 million in spite of declining metal prices in the quarter and the compounding negative price adjustments this triggers on our concentrate sales."

He continued, "Costs across our operations are tracking in the upper range of annual guidance in spite of inflationary pressures. Our teams are focused on the implementation of productivity initiatives to help mitigate rising input costs."

Fortuna Silver Mines is a Canadian precious metals mining company with four operating mines in Argentina, Burkina Faso, Mexico and Peru, and a fifth mine under construction in Côte d'Ivoire.

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