Fortuna Mining Corp 6-K, filed May 11, 2020
Fortuna Mining Corp. (FSM)
About this 6-K
Fortuna Mining Corp filed this 6-K on May 11, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUERPURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2020
Commission File Number 001-35297
Fortuna Silver Mines Inc.
(Translation of registrant’s name into English)
200 Burrard Street, Suite 650, Vancouver, British Columbia, Canada V6C 3L6
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
FORM 20-F ¨ FORM 40-F þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 11, 2020 | Fortuna Silver Mines Inc.<br><br> <br>(Registrant)<br><br> <br><br><br> <br>By: /s/ "Jorge Ganoza Durant"<br><br> <br>Jorge<br> Ganoza Durant<br><br> <br>President<br> and CEO |
|---|
Exhibits:
99.1 NewsRelease dated May 11, 2020
99.2 NewsRelease dated May 11, 2020
Exhibit 99.1
Fortunaannounces preliminary financial results for the first quarter of 2020
(All amounts expressed in US dollars,unless otherwise stated)
Vancouver, May 11, 2020: Fortuna SilverMines Inc. (NYSE: FSM) (TSX: FVI) is pleased to announce the following preliminary financial results for the first quarter of 2020:
First Quarter of 2020 Highlights Preview
| · | Sales of $47.5 million, compared to $59.0 million in Q1 2019 |
|---|---|
| · | Net loss of $4.5 million, compared to net income of $2.2 million in Q1 2019 |
| --- | --- |
| · | Adjusted net loss^1^ of $2.2 million, compared to adjusted net income of $8.4 million<br>in Q1 2019 |
| --- | --- |
| · | Adjusted EBITDA^1^ of $15.9 million, compared to $23.8 million in Q1 2019 |
| --- | --- |
| · | Free cash flow from ongoing operations^1^ of $14.2 million, compared to $2.2 million in<br>Q1 2019 |
| --- | --- |
| · | Silver and gold production of 1,819,312 ounces and 10,101 ounces, respectively |
| --- | --- |
| · | AISC/oz silver equivalent^1^ for the San Jose Mine and the Caylloma Mine was $10.7^2^<br>and $16.7^3^, respectively |
| --- | --- |
Note:
| 1. | Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release. |
|---|---|
| 2. | Silver equivalent production for<br>Q1 2020 is calculated using a silver to gold ratio of 97.6:1. Silver equivalent is calculated at realized metal prices of $1,571/oz<br>Au and, $16.09/oz Ag for Q1 2020. |
| --- | --- |
| 3. | Silver equivalent production for Q1 2020 is calculated using a silver to lead ratio of 1:20.7 pounds<br>and silver to zinc ratio of 1:17.9 pounds. Silver equivalent is calculated using realized metal prices of $17.59/oz Ag, $0.85/lb<br>Pb, and $0.98/lb Zn for Q1 2020. |
| --- | --- |
First Quarter of 2020 Results Preview
| Consolidated Metrics | Q1 2020<br><br> <br>(unaudited) | Q1 2019<br><br> <br>(unaudited) | |
|---|---|---|---|
| (Expressed in millions, except per share information) | |||
| Sales | 47.5 | $ | 59.0 |
| Mine operating income | 7.5 | 21.5 | |
| Operating income | 1.8 | 10.9 | |
| Net income (loss) | (4.5) | 2.2 | |
| Earnings (loss) per share (basic) | (0.03) | 0.01 | |
| Adjusted net income (loss)1 | (2.2) | 8.4 | |
| Adjusted EBITDA1 | 15.9 | 23.8 | |
| Net cash provided by operating activities | 13.2 | 3.9 | |
| Free cash flow from ongoing operations1 | 14.2 | 2.2 | |
| Capex | |||
| Sustaining | 3.5 | 4.7 | |
| Non-sustaining | 0.1 | 0.8 | |
| Lindero | 21.4 | 30.9 | |
| Brownfields | 1.6 | 1.2 | |
| Mar 31, 2020 | Dec 31, 2019 | ||
| Cash, cash equivalents, and short-term investments | 88.5 | $ | 83.4 |
| Note: | |||
| 1. Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release |
All values are in US Dollars.
Capitalresources and liquidity
As at March 31, 2020, the Company had $88.5 million of cash and cash equivalents and liquidity compared to $123.4 million as at December 31, 2019. As at the end of Q1 2020, the Company´s $150 million bank credit facility had been fully drawn.
Note Regarding Preliminary Results
The results for the first quarter of 2020 and liquidity as at the end of the first quarter, are preliminary and have been prepared by management and remain subject to final review by the Company’s audit committee and approval by the Company’s board of directors. The preliminary results for the first quarter of 2020 are subject to the finalization and closing of our accounting books and records for the period, and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with accounting principles generally accepted under International Financial Reporting Standards (IFRS). The Company’s auditor has not audited the preliminary results, nor have they expressed any opinion or any other form of assurance on the preliminary results. The Company will release its financial statements and MD&A for the first quarter of 2020 as approved by its audit committee and board of directors, on Thursday, May 14, 2020 after the market closes.
Lindero gold Project, Argentina
Construction at the Lindero open pit heap leach gold mine located in Salta Province, Argentina is approximately 94% complete as at March 31, 2020.
The following table summarizes Lindero Project spending on construction and preproduction related costs for the three months ended March 31, 2020:
| Three months | |||||
|---|---|---|---|---|---|
| Cumulative to | ended | ||||
| (Expressed in millions) | December 31, 2019 | March 31, 2020 | Total | ||
| Construction capital expenditures | 268.2 | $ | 21.4 | $ | 289.6 |
| Contractor advances and deposits on equipment, net of transfers | 10.5 | (3.5) | 7.0 | ||
| Total Construction Spending | 278.7 | 17.9 | 296.6 | ||
| Preproduction costs | 8.0 | 9.1 | 17.1 | ||
| Sustaining spare parts, supplies and materials inventory | 6.2 | 2.2 | 8.4 | ||
| Other costs 1 | 4.5 | 0.8 | 5.3 | ||
| Total Lindero Project Costs | 297.4 | $ | 30.0 | $ | 327.4 |
All values are in US Dollars.
Note 1: consists of Argentina financial transaction taxes, deposits and other costs
There were $17.9 million of construction trade payables outstanding as at end of the quarter.
The Company reiterates a capex forecast of between $314 to $320 million for the Lindero Project construction. This represents an increase of 28 percent from the September 2017 feasibility estimate (refer to Fortuna news release dated March 11, 2020).
The Company estimates that as of March 31, 2020, the remaining funds required to complete the Project, inclusive of pre-production expenditures, working capital and VAT, to be in the range of $75 million to $80 million up to the commencement of commercial production in the first quarter of 2021 (refer to Fortuna news release dated May 8, 2020).
Non-GAAP Financial Measures Preview
The following tables represent the calculation of certain non-GAAP financial measures as referenced in this news release.
Reconciliation to Adjusted Net Incomefor the three months ended March 31, 2020 and 2019
| (Expressed in millions, except per share information) | Q1 2020 | Adjust. | Q1 2020 Adjusted | Q1 2019 | Adjust. | Q1 2019 Adjusted | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 47.5 | $ | - | $ | 47.5 | $ | 59.0 | $ | - | $ | 59.0 |
| Cost of sales | 40.1 | 0.2 | 40.3 | 37.5 | (0.0) | 37.5 | |||||
| Mine operating income | 7.5 | (0.2) | 7.3 | 21.5 | 0.0 | 21.5 | |||||
| General and administration | 3.6 | 0.0 | 3.6 | 6.5 | 0.1 | 6.6 | |||||
| Exploration and evaluation | 0.4 | - | 0.4 | 0.2 | - | 0.2 | |||||
| Share of loss from associates | 0.0 | (0.0) | - | 0.1 | (0.1) | - | |||||
| Foreign exchange loss | 1.3 | (3.2) | (1.9) | 3.7 | (2.9) | 0.8 | |||||
| Other expenses, net | 0.3 | (0.3) | 0.0 | 0.1 | 0.0 | 0.1 | |||||
| Operating Income | 1.8 | 3.3 | 5.1 | 10.9 | 2.9 | 13.8 | |||||
| Investment income | 1.1 | (1.1) | - | - | - | - | |||||
| Interest and finance (costs) income, net | (0.4) | 0.1 | (0.3) | 0.1 | 0.1 | 0.2 | |||||
| Loss on derivatives | - | - | - | (1.6) | 2.3 | 0.8 | |||||
| Income before income taxes | 2.6 | 2.3 | 4.9 | 9.5 | 5.3 | 14.8 | |||||
| Current income tax expense | 5.9 | - | 5.9 | 8.6 | - | 8.6 | |||||
| Deferred income tax expense (recovery) | 1.2 | (0.0) | 1.1 | (1.3) | (0.9) | (2.2) | |||||
| Net income and adjusted net income | (4.5) | $ | 2.3 | $ | (2.2) | $ | 2.2 | $ | 6.2 | $ | 8.4 |
| Earnings per share - basic | (0.03) | $ | 0.02- | $ | (0.01) | $ | 0.01- | $ | 0.04- | $ | 0.05 |
All values are in US Dollars.
Note: Certain figures may not add due to rounding and certain comparative figures have been reclassified to conform to the current year presentation
Reconciliation to Adjusted EBITDA forthe three months ended March 31, 2020 and 2019
| (Expressed in millions) | Q1 2020 | Q1 2019 | |
|---|---|---|---|
| Net income for the period | (4.5) | $ | 2.2 |
| Adjustments: | |||
| Inventory adjustment | (0.1) | - | |
| Foreign exchange loss, Lindero project | 3.3 | 2.9 | |
| Net finance items | 0.3 | (0.2) | |
| Depreciation, depletion, and amortization | 11.6 | 9.1 | |
| Income taxes | 7.1 | 7.3 | |
| Share of loss from associates | - | 0.1 | |
| Investment income | (1.1) | - | |
| Other non-cash items | (0.6) | 2.4 | |
| Adjusted EBITDA | 15.9 | $ | 23.8 |
All values are in US Dollars.
Reconciliation to Free cash flow fromongoing operations for the three months ended March 31, 2020 and 2019
| (Expressed in millions) | Q1 2020 | Q1 2019 | |
|---|---|---|---|
| Net cash provided by operating activities | 13.2 | 3.9 | |
| Less: Change in long-term receivables | (0.2) | - | |
| Less: Additions to mineral properties, plant and equipment | (4.9) | (7.0) | |
| Less: Contractor advances for plant and equipment | - | (0.2) | |
| Add: Advances applied to plant and equipment | - | 0.1 | |
| Less: Current income tax expense | (5.9) | (8.6) | |
| Add: Income taxes paid | 12.0 | 14.0 | |
| Free cash flow from ongoing operations1 | 14.2 | $ | 2.2 |
| Note: | |||
| 1. From ongoing operations including San Jose and Caylloma and excludes Greenfields exploration |
All values are in US Dollars.
Non-GAAP Financial Measures
The tables above and information elsewhere in this news release refers to non-GAAP financial measures, such as all-in sustaining cash cost silver equivalent; adjusted net (loss) income; free cash flow from ongoing operations, income taxes, interest income; and adjusted EBITDA. These measures do not have a standardized meaning or method of calculation, even though the descriptions of such measures may be similar. These performance measures have no meaning under IFRS and therefore, amounts presented may not be comparable to similar data presented by other mining companies.
About Fortuna Silver Mines Inc.
Fortuna is a growth oriented, precious metal producer with its primary assets being the Caylloma silver mine in southern Peru, the San Jose silver-gold mine in Mexico and the Lindero gold Project, currently under construction, in Argentina. The Company is selectively pursuing acquisition opportunities throughout the Americas and in select other areas. For more information, please visit its website at www.fortunasilver.com.
ON BEHALF OF THE BOARD
Jorge A. Ganoza
President, CEO, and Director
Fortuna Silver Mines Inc.
Trading symbols: NYSE: FSM | TSX: FVI
Investor Relations:
Carlos Baca
T (Peru): +51.1.616.6060, ext. 0
E: info@fortunasilver.com
Forward looking Statements
This news release contains forward lookingstatements which constitute "forward looking information" within the meaning of applicable Canadian securities legislationand "forward looking statements" within the meaning of the "safe harbor" provisions of the Private SecuritiesLitigation Reform Act of 1995 (collectively, "Forward looking Statements"). All statements included herein, other thanstatements of historical fact, are Forward looking Statements and are subject to a variety of known and unknown risks and uncertaintieswhich could cause actual events or results to differ materially from those reflected in the Forward looking Statements. The Forwardlooking Statements in this news release include, without limitation, preliminary estimated financial results for the first quarterof 2020; a preliminary estimate of the Company’s liquidity as at March 31,2020; preliminary estimates of construction expendituresat the Lindero Project for the first quarter of 2020; statements about the Company's plans for its mines and mineral properties;the construction of the mine at the Lindero Project and the related costs of construction, timing of commissioning, and timingof commencement of commercial production; the Company's business strategy, plans and outlook; the merit of the Company's minesand mineral properties; the future financial or operating performance of the Company; and proposed expenditures. Often, but notalways, these Forward looking Statements can be identified by the use of words such as "estimated", “expected”, “anticipated”, "potential", "open", "future", "assumed", "projected", "used", "detailed", "has been", "gain", "planned", "reflecting", "will", "containing", "remaining", "to be", or statements that events, "could" or "should"occur or be achieved and similar expressions, including negative variations.
Forward looking Statements involve knownand unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Companyto be materially different from any results, performance or achievements expressed or implied by the Forward looking Statements.Such uncertainties and factors include, among others, the preliminary financial results and liquidity may not be consistent withthe final quarterly results and statement of liquidity subsequently approved by the Board; changes in general economic conditionsand financial markets; changes in prices for silver and other metals; fluctuation in foreign exchange rates; any extension of thecurrency controls in Argentina; technological and operational hazards in Fortuna's mining and mine development activities; delaysin the construction at the Lindero Project, delays in the commissioning or commencement of commercial production at the LinderoProject; risks inherent in mineral exploration; uncertainties inherent in the estimation of mineral reserves, mineral resources,and metal recoveries; governmental and other approvals; political unrest or instability in countries where Fortuna is active; laborrelations issues; as well as those factors discussed under "Risk Factors" in the Company's Annual Information Form. Althoughthe Company has attempted to identify important factors that could cause actual actions, events or results to differ materiallyfrom those described in Forward looking Statements, there may be other factors that cause actions, events or results to differfrom those anticipated, estimated or intended.
Forward looking Statements containedherein are based on the assumptions, beliefs, expectations and opinions of management, including but not limited to expectationsregarding the Company’s financial performance for the first quarter of 2020; that management’s preliminary financialresults for the first quarter of 2020 will be consistent with the final full quarterly financial results; Company's plans for itsmines and mineral properties; mine production costs; expected trends in mineral prices and currency exchange rates; the accuracyof the Company's current mineral resource and reserve estimates; that the Company's activities will be in accordance with the Company'spublic statements and stated goals; that there will be no material adverse change affecting the Company or its properties; thatall required approvals will be obtained; that there will be no significant disruptions affecting operations and such other assumptionsas set out herein. Forward looking Statements are made as of the date hereof and the Company disclaims any obligation to updateany Forward looking Statements, whether as a result of new information, future events or results or otherwise, except as requiredby law. There can be no assurance that Forward looking Statements will prove to be accurate, as actual results and future eventscould differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on Forwardlooking Statements.
Exhibit 99.2
Fortuna Announces US$60 Million BoughtDeal Financing
Vancouver, May 11, 2020 -- Fortuna SilverMines, Inc. (NYSE: FSM) (TSX: FVI) (“Fortuna” or the Company”) announces that it has entered into an agreement with a syndicate of underwriters (the “Underwriters”), who have agreed to purchase, on a “bought deal” basis, 20,000,000 common shares (the "Shares") of the Company at a price of US$3.00 per Share, for aggregate gross proceeds of US$60 million (the “Offering”).
The Company has also granted the Underwriters an over-allotment option, exercisable in whole or in part, on or following the closing of the Offering and for a period of 30 days thereafter, to purchase up to an additional 3,000,000 Shares, representing 15% of the number of Shares sold under the Offering, to cover over-allotments, if any, and for market stabilization purposes. In the event that the over-allotment option is exercised in its entirety, the aggregate gross proceeds to the Company from the Offering will be US$69 million.
The Company intends to use the net proceeds of the Offering to fund remaining construction and preproduction related expenditures at its Lindero gold project in Argentina and for general working capital purposes.
The Shares will be offered by way of a prospectus supplement to the Company’s final base shelf prospectus dated April 29, 2020, in all provinces of Canada, except Québec, pursuant to National Instrument 44-102 – Shelf Distributions. The Shares will also be offered and sold in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the "U.S. Securities Act").
The closing of the Offering is expected to occur on May 20, 2020 (the "Closing Date"), or such other date as may be agreed by the Underwriters and the Company, acting reasonably. The closing is subject to certain other conditions including, but not limited to, the receipt of all necessary regulatory approvals including the approval of the Toronto Stock Exchange and the NYSE.
This news releasedoes not constitute an offer to sell or a solicitation of an offer to buy the securities described herein in the United Statesor in any other jurisdiction. The securities referred to in this press release have not been and will not be registered under theU.S. Securities Act and may not be offered or sold without registration under the U.S. Securities Act and all applicable statesecurities laws or compliance with the requirements of an exemption from such registration.
About Fortuna Silver Mines Inc.
Fortuna is a growth oriented, precious metals producer focused on mining opportunities in Latin America. Our primary assets are the Caylloma silver Mine in southern Peru, the San Jose silver-gold Mine in Mexico and the Lindero gold Project, currently under construction, in Argentina. The Company is selectively pursuing acquisition opportunities throughout the Americas and in select other areas. 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.
Trading symbols: NYSE: FSM |
TSX: FVI
Investor Relations:
Carlos Baca
T (Peru): +51.1.616.6060, ext. 0
Forward-looking Statements
This news release contains forward-lookingstatements which constitute "forward-looking information" within the meaning of applicable Canadian securities legislationand "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private SecuritiesLitigation Reform Act of 1995 (collectively, "Forward-looking Statements"). All statements included herein, other thanstatements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertaintieswhich could cause actual events or results to differ materially from those reflected in the Forward-looking Statements. The Forward-lookingStatements in this news release may include, without limitation, statements pertaining to: the use of proceeds from the Offering,the closing of the Offering and the ability to obtain the necessary regulatory authority and approvals. Often, but not always,these Forward-looking Statements can be identified by the use of words such as "estimated", "potential", "open", "future", "assumed", "projected", "scheduled", "used", "detailed", "has been", "gain", "planned", "reflecting", "will", "containing", "remaining", "to be", or statements that events, "could" or "should" occur or be achievedand similar expressions, including negative variations.
Forward-looking Statements involve knownand unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Companyto be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements.Such uncertainties and factors include, among others, the worldwide economic and social impact of COVID-19, the duration and extentof COVID-19, changes in general economic conditions and financial markets; the re-imposition of government restrictions on businessrelated to COVID-19; any positive cases of COVID-19 at the Company’s mine sites which may cause a reduction or suspensionin operations; changes in prices for silver and other metals; technological and operational hazards in Fortuna's mining and minedevelopment activities; risks inherent in mineral exploration; uncertainties inherent in the estimation of mineral reserves, mineralresources, and metal recoveries; changes to current estimates of mineral reserves and resources; changes to production estimates;governmental and other approvals; changes in government, political unrest or instability in countries where Fortuna is active;labor relations issues; as well as those factors discussed under "Risk Factors" in the Company's Annual Information Form.Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materiallyfrom those described in Forward-looking Statements, there may be other factors that cause actions, events or results to differfrom those anticipated, estimated or intended.
Forward-looking Statements containedherein are based on the assumptions, beliefs, expectations and opinions of management, including but not limited to the managementof the worldwide economic and social impact of COVID-19, that the duration and extent of COVID-19 is minimized and not long-term,the expected trends in mineral prices and currency exchange rates; the accuracy of the Company's current mineral resource andreserve estimates; that the Company's activities will be in accordance with the Company's public statements and stated goals;that there will be no material adverse change affecting the Company or its properties; that all required approvals will be obtained;that there will be no significant disruptions affecting operations; how the Company will use the proceeds from the Offering; thatthe Offering will close on the Closing Date; that the Company will be able to obtain all necessary regulatory authority and approvalsrequired under the Offering and such other assumptions as set out herein. Forward-looking Statements are made as of the date hereofand the Company disclaims any obligation to update any Forward-looking Statements, whether as a result of new information, futureevents or results or otherwise, except as required by law. There can be no assurance that that these Forward-looking Statementswill prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.Accordingly, investors should not place undue reliance on Forward-looking Statements.