In a March 15 research note, CIBC analyst Cosmos Chiu reported that Fortuna Silver Mines Inc.'s (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) Q4/19 financials were solid but the company increased capex for its Lindero operation in Argentina.
As for Q4/19, Fortuna Silver's adjusted earnings per share (EPS) and cash flow per share (CFPS) were a beat, Chiu relayed. EPS was $0.07 and CFPS was $0.17, higher than consensus' $0.06 and $0.11 projections, respectively, and CIBC's estimates.
Chiu highlighted that the Canadian company's Q4/19 production from its San Jose mine in Mexico and its Caylloma mine in Peru was steady and cash flow generating. It amounted to 2,250,000 ounces (2.25 Moz) at a cash cost of $8.27 per ounce and an all-in sustaining cost of $12.58 per ounce. Both costs were 10% and 5% better, respectively, than in Q3/19.
Fortuna's 2020 production guidance remains unchanged at 7.5–8.3 Moz of silver and 101,000–125,000 ounces of gold (101–125 Koz), with 60–80 Koz coming from Lindero.
Chiu noted that after the recent announcement that the first pour at Lindero would be delayed to sometime in Q2/20, Fortuna increased total capex for Lindero to about $320 million from $298 million and raised preproduction working capital needs to $40 million from $25 million. "Fortuna should be able to meet the remaining capital requirements at Lindero until commercial production is announced, expected in Q3/20," Chiu commented.
CIBC kept its Neutral rating but decreased its target price on Fortuna Silver to CA$4.75 per share from CA$5.75. The stock is currently trading at around CA$3.46 per share.
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Disclosures from CIBC, Fortuna Silver Mines Inc., Earnings Update, March 15, 2020
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Important Disclosure Footnotes for Fortuna Silver Mines Inc. (FVI.TO)
• 2a These companies are clients for which a CIBC World Markets company has performed investment banking services in the past 12 months: Fortuna Silver Mines Inc.
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• 2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from these companies in the next 3 months: Fortuna Silver Mines Inc.
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