Fortuna Mining Corp (FSM) 6-K, filed Mar 11, 2021

UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington, D.C. 20549

Form6-K

REPORTOF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2021

Commission File Number 001-35297

FortunaSilver 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 ☑

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.

	Fortuna Silver Mines Inc.
	(Registrant)
Date: March 11, 2021	By:	/s/ “Jorge Ganoza Durant”
		Jorge Ganoza Durant
		President and CEO

Exhibits:

99.1	Annual Audited Consolidated Financial Statements for the year ended December 31, 2020.
99.2	Management’s Discussion and Analysis for the year ended December 31, 2020.
---	---
99.3	News release dated March 10, 2021.
---	---

Exhibit 99.1

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED

DECEMBER 31, 2020 AND 2019

(Presented in thousands of United States dollars, unless otherwise stated)

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management of Fortuna Silver Mines Inc. (the “Company”) (“we”, “us” or “our”) have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) and the accompanying Management’s Discussion and Analysis (“MD&A”) and are responsible for their content. The financial information presented in the MD&A is consistent with the information that is contained in the consolidated financial statements. The consolidated financial statements include, where necessary, amounts based on our estimates and judgement.

In order to discharge our responsibility for the integrity of the financial statements, the Company maintains a system of Internal Control over Financial Reporting and Disclosure Controls and Procedures. These controls are designed to provide reasonable assurance that the Company’s assets are safeguarded, transactions are executed and recorded in accordance with our authorization, proper records are maintained and relevant and reliable financial information is produced. These controls include maintaining quality standards in the hiring and training of employees, policies and procedures manuals, a corporate code of conduct and ensuring that there is proper accountability for performance within appropriate and well defined areas of responsibility.

The Board of Directors is responsible for overseeing the performance of our responsibilities for financial reporting and internal control over Financial Reporting and Disclosure Controls and Procedures. The Audit Committee, which is composed of non-executive directors, meets with us as well as the external auditors to ensure that we are properly fulfilling our financial reporting responsibilities to the Directors who approve the consolidated financial statements. The external auditors have full and unrestricted access to the Audit Committee to discuss the scope of their audits, and the adequacy of the system of internal controls, and to review financial reporting issues.

The consolidated financial statements have been audited by KPMG LLP, the Company’s independent registered public accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States).

/s/ Jorge Ganoza Durant	/s /Luis Ganoza Durant
President and Chief Executive Officer	Chief Financial<br> Officer

Vancouver, Canada

March 9, 2021

KPMG LLP<br><br> <br>Chartered Professional Accountants<br><br> <br>PO Box 10426 777 Dunsmuir Street<br><br> <br>Vancouver BC V7Y 1K3<br><br> <br>Canada	Telephone (604) 691-3000<br><br> <br>Fax (604) 691-3031<br><br> <br>Internet www.kpmg.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Fortuna Silver Mines Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Fortuna Silver Mines Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows and changes in equity for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 9, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its accounting policy for property, plant and equipment due to the adoption of amendments to IAS 16, Property, plant and equipment.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

©
                                                                                  2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent
                                                                                  member firms affiliated with KPMG International
                                     Limited, a private English company limited by guarantee. All rights reserved.

**<br><br> <br>Fortuna Silver Mines Inc.<br><br> <br>Page 2**

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inferred resources used in the Caylloma and San Jose life of mine plans

As discussed in Notes 9 and 10 to the consolidated financial statements, the carrying value of the Company’s mineral properties and exploration and evaluation assets is $385,717 thousand and property, plant and equipment is $405,410 thousand as at December 31, 2020. These amounts include the carrying amounts of the Caylloma and San Jose mines. Estimates of the quantities of the mineral reserves and mineral resources form the basis for the Company’s life of mine plans, which are used for the calculation of depletion expense under the units of production method and in impairment tests. The Company’s estimates of the life of its mines includes the portion of inferred resources expected to be extracted economically. The decision to use inferred resources, and the portion of inferred resources to be included in the life of mine, varies for each operation and is based on the geological characteristics of the ore body, the quality and predictability of inferred resources, and the conversion of inferred resources into measured and indicated resources that the Company has historically achieved.

We identified the determination of the portion of inferred resources included in the life of mine plans for the Caylloma and San Jose mines as a critical audit matter. A high degree of auditor judgment was required to evaluate the significant assumptions that were developed by the Company’s personnel to determine the portion of inferred resources included in the life of mine plans. Significant assumptions include the accessibility of resources from existing mining infrastructure and the determination of the percentage of available inferred resources expected to be converted to measured and indicated resources in future periods.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the estimation of the portion of inferred resources included in the life of mine plans for the Caylloma and San Jose mines. We assessed the competence, capabilities and objectivity of the Company’s personnel who determined the portion of available inferred resources to be included in the Caylloma and San Jose life of mine plans, including the accessibility of resources from existing mining infrastructure. We evaluated the ability of the Company to estimate the portion of inferred resources included in the life of mine plans by comparing historical estimates of inferred resources to the actual conversion of inferred resources to measured and indicated resources.

//s// KPMG LLP

Chartered Professional Accountants

We have served as the Company’s auditor since 2017.

Vancouver, Canada

March 9, 2021

KPMG LLP<br><br> <br>Chartered Professional Accountants<br><br> <br>PO Box 10426 777 Dunsmuir Street<br><br> <br>Vancouver BC V7Y 1K3<br><br> <br>Canada	Telephone (604) 691-3000<br><br> <br>Fax (604) 691-3031<br><br> <br>Internet www.kpmg.ca

To the Shareholders and Board of Directors

Fortuna Silver Mines Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Fortuna Silver Mines Inc.’s (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and changes in equity for each of the years then ended and the related notes (collectively, the consolidated financial statements), and our report dated March 9, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, under the heading Management’s Report on Internal Control Over Financial Reporting in the accompanying Management’s Discussion and Analysis. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

©
                                     2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG
                                     global organization of independent member firms affiliated with KPMG International Limited,
                                     a private English company limited by guarantee. All rights reserved.

**<br><br> <br>Fortuna Silver Mines Inc.<br><br> <br>Page 2**

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

//s// KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

March 9, 2021

Fortuna Silver Mines Inc.

Consolidated Income Statements

(Presented in thousands of US dollars, except per share amounts)

	Years ended December 31,
	2020			2019
Sales (note 23)	$	278,966		$	257,187
Cost of sales (note 24)		168,745			172,606
Mine operating income		110,221			84,581
General and administration (note 25)		35,086			29,805
Exploration and evaluation		1,196			2,411
Share of loss from associates (note 11)		76			225
Foreign exchange loss (note 6)		12,197			13,335
Other expenses (note 26)		4,428			4,611
		52,983			50,387
Operating income		57,238			34,194
Investment gains (note 6)		3,306			11,024
Interest and finance costs, net (note 27)		(1,413	)		(24	)
Loss on derivatives		(176	)		(1,223	)
		1,717			9,777
Income before income taxes		58,955			43,971
Income taxes (note 28)
Current income tax expense		38,818			32,631
Deferred income tax (recovery)		(1,416	)		(12,456	)
		37,402			20,175
Net income for the year	$	21,553		$	23,796
Earnings per share (note 22)
Basic	$	0.12		$	0.15
Diluted	$	0.12		$	0.14
Weighted average number of common shares outstanding (000’s)
Basic		174,993			160,193
Diluted		186,073			164,525

The accompanying notes are an integral part of these financial statements.

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Fortuna Silver Mines Inc.

Consolidated Statements of Comprehensive Income

(Presented in thousands of US dollars)


			2019
Net income for the year	21,553		$	23,796
Items that will remain permanently in other comprehensive income:
Changes in fair value of investments in equity securities, net of nil tax	(382	)		-
Items that may in the future be reclassified to profit or loss:
Changes in fair value of hedging instruments, net of nil tax	(204	)		(665	)
Total other comprehensive loss for the year	(586	)		(665	)
Comprehensive income for the year	20,967		$	23,131

All values are in US Dollars.

The accompanying notes are an integral part of these financial statements.

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Fortuna Silver Mines Inc.

Consolidated Statements of Financial Position

(Presented in thousands of US dollars)

	December<br> 31,		December<br> 31,
	2020		2019
			(Restated-<br><br>note 4 (t)ii)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	131,898	$	83,404
Trade and other receivables (note 6)		76,555		47,707
Inventories (note 7)		35,274		14,969
Other current assets (note 8)		4,340		6,564
		248,067		152,644
NON-CURRENT ASSETS
Mineral properties and exploration and evaluation assets (note 9)		385,717		353,519
Property, plant and equipment (note 10)		405,410		375,656
Investment in associates (note 11)		-		1,331
Other assets (note 12)		15,210		40,744
Deposits and advances to contractors (note 13)		934		12,171
Total assets	$	1,055,338	$	936,065
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (note 14)		65,275		65,286
Income taxes payable		23,808		12,400
Current portion of lease obligations (note 16)		6,978		8,831
Current portion of closure and reclamation provisions (note 19)		380		3,257
		96,441		89,774
NON-CURRENT LIABILITIES
Debt (note 17)		158,616		146,535
Deferred tax liabilities		19,499		20,915
Closure and reclamation provisions (note 19)		39,970		27,868
Lease obligations (note 16)		12,519		15,048
Other liabilities (note 18)		2,523		499
Total liabilities		329,568		300,639
SHAREHOLDERS’ EQUITY
Share capital (note 21)		492,306		422,145
Reserves		24,724		26,094
Retained earnings		208,740		187,187
Total shareholders’ equity		725,770		635,426
Total liabilities and shareholders’ equity	$	1,055,338	$	936,065
/s/ Jorge Ganoza Durant	/s/ Kylie Dickson
---	---
Jorge<br> Ganoza Durant	Kylie Dickson
Director	Director

The accompanying notes are an integral part of these financial statements.

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Fortuna Silver Mines Inc.

Consolidated Statements of Cashflows

(Presented in thousands of US dollars)

	Years<br> ended December 31,
	2020			2019
				(Restated-<br><br>note 4 (t)ii)
OPERATING ACTIVITIES
Net income for the year	$	21,553		$	23,796
Items not involving cash
Depletion and depreciation		45,408			46,352
Accretion expense		751			590
Income taxes		37,401			20,175
Interest expense (income), net		662			(566	)
Share based payments expense, net of cash settlements		12,284			4,567
Share of loss from associates		76			225
Unrealized foreign exchange loss		1,400			169
Unrealized foreign exchange loss, Lindero construction (note 6)		13,256			11,465
Investment gains		(3,306	)		(11,024	)
Unrealized loss on derivatives		178			2,646
Write-downs and other		1,599			5,517
		131,262			103,912
Trade and other receivables		10,258			(14,309	)
Prepaid expenses		161			1,621
Inventories		(25,659	)		(3,889	)
Trade and other payables		6,122			3,021
Closure and rehabilitation payments		(341	)		(352	)
Cash provided by operating activities		121,803			90,004
Income taxes paid		(28,186	)		(31,521	)
Interest paid		(547	)		(824	)
Interest received		315			2,493
Net cash provided by operating activities		93,385			60,152
INVESTING ACTIVITIES
Proceeds from short-term investments		-			72,151
Additions to mineral properties, plant and equipment		(24,116	)		(28,473	)
Expenditures on Lindero construction		(80,782	)		(186,800	)
Capitalized interest on Lindero construction		(9,431	)		(6,005	)
Contractor advances on Lindero construction and other expenditures		(4,729	)		(19,743	)
Advances applied to Lindero construction and other expenditures		15,450			50,650
Purchases of investments		(7,269	)		(45,145	)
Proceeds from sale of investments		10,575			56,169
Proceeds from sale of assets		72			229
Additions to long-term receivables		(13,419	)		(35,394	)
Cash used in investing activities		(113,649	)		(142,361	)
FINANCING ACTIVITIES
Transaction costs on convertible debentures (note 17(b))		-			(2,490	)
Proceeds from credit facility (note 17(a))		65,000			40,000
Repayment of credit facility (note 17(a))		(55,000	)		-
Proceeds from convertible debentures (note 17(b))		-			46,000
Proceeds from issuance of common shares		70,011			-
Share issuance costs		(3,358	)		-
Payments of lease obligations		(7,747	)		(8,385	)
Cash provided by financing activities		68,906			75,125
Effect of exchange rate changes on cash and cash equivalents		(148	)		(15	)
Increase (decrease) in cash and cash equivalents during the year		48,494			(7,099	)
Cash and cash equivalents, beginning of the year		83,404			90,503
Cash and cash equivalents, end of the year	$	131,898		$	83,404
Cash and cash equivalents consist of:
Cash	$	52,130		$	30,984
Cash equivalents		79,768			52,420
Cash and cash equivalents	$	131,898		$	83,404

The accompanying notes are an integral part of these financial statements

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Fortuna Silver Mines Inc.

Consolidated Statements of Changes in Equity

(Presented in thousands of US dollars, except for number of shares)

	Share<br> capital					Reserves
	Number<br> of <br> common shares		Amount			Equity<br><br> reserve			Hedging<br><br> reserve			Fair<br> value<br> reserve			Equity<br> <br> component of <br> convertible<br> debentures		Foreign<br><br> Currency<br> reserve		Retained<br><br> earnings		Total <br><br> equity
Balance<br> at January 1, 2019		159,939,595	$	420,467		$	17,882		$	(9	)	$	(42	)	$	-	$	1,115	$	163,391	$	602,804
Total<br> comprehensive income for the year
Net<br> income for the year		-		-			-			-			-			-		-		23,796		23,796
Other<br> comprehensive loss for the year		-		-			-			(665	)		-			-		-		-		(665	)
Total<br> comprehensive income for the year		-		-			-			(665	)		-			-		-		23,796		23,131
Transactions<br> with owners of the Company
Shares<br> issued on vesting of share units		351,958		1,678			(1,678	)		-			-			-		-		-		-
Share-based<br> payments (note 20)		-		-			4,666			-			-			-		-		-		4,666
Equity<br> portion of convertible debentures, net of tax (note 17 (b))		-		-			-			-			-			4,825		-		-		4,825
		351,958		1,678			2,988			-			-			4,825		-		-		9,491
Balance<br> at December 31, 2019		160,291,553	$	422,145		$	20,870		$	(674	)	$	(42	)	$	4,825	$	1,115	$	187,187	$	635,426
Total<br> comprehensive income for the year
Net<br> income for the year		-		-			-			-			-			-		-		21,553		21,553
Other<br> comprehensive loss for the year		-		-			-			(204	)		(382	)		-		-		-		(586	)
Total<br> comprehensive income for the year		-		-			-			(204	)		(382	)		-		-		21,553		20,967
Transactions<br> with owners of the Company
Issuance<br> of common shares		23,000,000		69,000			-			-			-			-		-		-		69,000
Share<br> issuance costs		-		(3,358	)		-			-			-			-		-		-		(3,358	)
Exercise<br> of stock options		211,626		1,438			(427	)		-			-			-		-		-		1,011
Shares<br> issued on vesting of share units		692,548		3,081			(3,081	)		-			-			-		-		-		-
Share-based<br> payments (note 20)		-		-			2,724			-			-			-		-		-		2,724
		23,904,174		70,161			(784	)		-			-			-		-		-		69,377
Balance<br> at December 31, 2020		184,195,727	$	492,306		$	20,086		$	(878	)	$	(424	)	$	4,825	$	1,115	$	208,740	$	725,770

The accompanying notes are an integral part of these financial statements.

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Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

1.	Nature<br> of Operations

Fortuna Silver Mines Inc. and its subsidiaries (the “Company”) is a publicly traded company incorporated and domiciled in British Columbia, Canada.

The Company is engaged in precious and base metal mining and related activities in Latin America, including exploration, extraction, and processing. The Company operates the Caylloma silver, lead, and zinc mine (“Caylloma”) in southern Peru, the San Jose silver and gold mine (“San Jose”) in southern Mexico, and construction of the open pit gold heap leach mine at its Lindero property (the “Lindero Mine”) in northern Argentina is substantially complete with commissioning in progress.

The Company’s common shares are listed on the New York Stock Exchange under the trading symbol FSM, on the Toronto Stock Exchange under the trading symbol FVI, and on the Frankfurt Stock Exchange under the trading symbol F4S.F.

The Company’s registered office is located at Suite 650 - 200 Burrard Street, Vancouver, Canada, V6C 3L6.

2.	COVID-19<br> Uncertainties and Liquidity Risk

COVID-19 Uncertainties

On March 11, 2020, the World Health Organisation declared COVID-19 as a pandemic. In response to the pandemic, the Governments of Mexico, Peru and Argentina implemented measures to curb the spread of COVID-19, which measures included among others, the closure of international borders, the temporary suspension of all non-essential business, including mining, and the declaration of mandatory quarantine periods. To comply with these measures, the Company temporarily suspended mining operations at the San Jose and Caylloma mines and halted construction activities at the Lindero Mine during the second quarter of 2020. The San Jose Mine was placed on care and maintenance for a total of 54 days, while processing activities continued to operate at the Caylloma Mine with a reduced task force drawing from its ore stockpile and mining subsequently restarted with a reduced taskforce. Mining and construction activities at the Lindero Mine resumed in May 2020 with strict adherence to health and safety protocols established to mitigate the risk of spreading the COVID-19 virus.

On July 6, 2020, the Company voluntarily suspended operations at the Caylloma Mine for 21 days to sanitize and disinfect the mine and make infrastructure improvements to accommodate social distancing guidelines. Mining and ore processing operations at the mine resumed on July 27, 2020. Each site is operating in accordance with local government containment measures and the Company’s health and safety protocols.

The Company has not experienced any significant disruption to product shipments since the onset of the COVID-19 pandemic. The Company has also increased its supply of consumables inventory to avoid any supply chain disruption and is working to manage the logistical challenges presented by the closure of trade borders. Border restrictions, if ongoing, could result in supply chain delays, impact the movement of our mine workforce and disrupt production of our saleable products.

On June 4, 2020, the Company completed an amendment to the financial covenants under its Credit Facilities in response to the uncertainty related to COVID-19. The total debt to EBITDA ratio has been removed and replaced with Net Debt to EBITDA, Net Senior Secured Debt to EBITDA, and EBITDA to Interest Expense ratios. The Company was in compliance with the financial covenants as at December 31, 2020 (note 17 a)).

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Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk by the preparation of internally generated cash flow forecasts. These short-term cash flow forecasts consider the estimation of future operating costs, financing costs, development capital and cash receipts from sales revenue. Sensitivity analyses are also performed, including the impact of volatility in estimated commodity prices.

On December 31, 2020, $30,000 of the $110,000 revolving credit facility matured and was not renewed (note 17(a)). The remaining $80,000 under the revolving credit facility was fully drawn as at December 31, 2020. The Company had $131,898 of liquidity comprised of cash and cash equivalents as at December 31, 2020.

The Company believes that its cash and cash equivalents and credit facility will provide sufficient liquidity to meet the Company’s minimum obligations for the next 12 months from December 31, 2020.

3.	Basis<br> of Presentation

Statement of Compliance

These consolidated financial statements (“financial statements”) have been prepared by management of the Company in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) effective as of December 31, 2020.

On March 9, 2021, the Company’s Board of Directors approved these financial statements for issuance.

Presentation and Functional Currency

These financial statements are presented in United States Dollars (“$” or “US$” or “US dollars”), which is the functional currency of the Company. Reference to C$ are to Canadian dollars. All amounts in these financial statements have been rounded to the nearest thousand US dollars, unless otherwise stated.

Certain comparative figures have been reclassified to conform to the presentation adopted for the year ended December 31, 2020.

Basis of Measurement

These financial statements have been prepared on a historical cost basis, except for those assets and liabilities that are measured at fair value (Note 30) at the end of each reporting period.

4.	Significant<br> Accounting Policies

The Company has consistently applied the following accounting policies to all periods presented in these financial statements.

(a)	Basis<br> of Consolidation

These financial statements include the accounts of the Company. All significant intercompany transactions, balances, revenues, and expenses have been eliminated upon consolidation.

Page | 7

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition or control and up to the effective date of disposition or loss of control. Control is achieved when the Company has power over the investee, is exposed to or has rights to variable returns from its involvement with an investee, and had the ability to affect those returns through its power over the investee.

Fortuna Silver Mines Inc. is the ultimate parent entity of the group. At December 31, 2020, the principal subsidiaries of the Company, their geographic locations, and the ownership interests held by the Company, were as follows:

Name	Location			Principal Activity
Minera Bateas S.A.C. (“Bateas”)		Peru	100%	Caylloma Mine
Compania Minera Cuzcatlan S.A. de C.V. (“Cuzcatlan”)		Mexico	100%	San Jose Mine
Mansfield Minera S.A. (“Mansfield”)		Argentina	100%	Lindero Mine
(b)	Foreign<br> Currency Translation
---	---

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at each financial position date. Foreign exchange gains or losses on translation to the functional currency of an entity are recorded in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

(c)	Cash,<br> Cash Equivalents and Short-Term Investments

Cash and cash equivalents include cash on hand, demand deposits, and money market instruments with maturities from the date of acquisition of 90 days or less, which are readily convertible to known amounts of cash and are subject to insignificant changes in value. Short-term investments consist of term deposits with original maturities in excess of three months but less than twelve months. Cash, cash equivalents and short-term investments are designated as amortized cost.

(d)	Inventories

Inventories include mineral concentrates, doré, leach pad, gold in-circuit, stockpiled ore, materials and supplies, and are valued at the lower of average production cost and estimated net realizable value. Production costs allocated to metal inventories include direct mining costs, direct labor and material costs, mine site overhead, depletion and amortization. Stockpiled ore that is not expected to be processed within the next twelve months is classified as non-current. Costs allocated to materials and supplies are based on weighted average costs and include all costs of purchase and other costs in bringing these inventories to their existing location and condition.

In the heap leaching process, ore is stacked on the leach pad and treated with a chemical solution that dissolves the gold contained within the ore. The resulting pregnant solution is further processed in a plant where the gold is recovered. The cost of leach pad inventory is based on cost of mining, crushing and leaching, including applicable depletion and amortization, and is removed as ounces of gold are recovered at the weighted average cost per recoverable ounce of gold on the leach pad. Estimates of recoverable gold in the leach pad are calculated based on the quantities of ore placed on the leach pad (measured tonnes added to the leach pad), the estimated grade of ore placed on the leach pad (based on assay data), and an estimated recovery percentage (based on estimated recovery assumptions from metallurgical testing). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, estimates are refined based on actual results and engineering studies over a period of time. The final recovery of gold from leach pad will not be known until the leaching process is concluded at the end of the mine life.

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Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

If the carrying value exceeds the net realizable amount, a write-down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused the write-down no longer exist, to the extent that the related inventory has not been sold. Net realizable value is calculated as the estimated price at the time of sale based on prevailing metal prices less estimated future costs to convert the inventories into saleable form and estimated costs to sell.

(e)	Investment<br> in Associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over the entity’s financial and operating policies. Interests in associates are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence ceases.

An impairment test is performed when there is objective evidence of impairment, such as significant adverse changes in the environment in which the associate operates or there is a significant or prolonged decline in the fair value of the investment below its carrying amount. When there is objective evidence that an investment is impaired, a quantitative impairment test is performed and a loss is recorded if the recoverable amount is lower than the carrying amount. Impairment losses are reversed if the recoverable amount subsequently exceeds the carrying amount.

(f)	Exploration<br> and Evaluation Assets

Exploration expenditures on properties for which the Company does not have title or rights to are expensed when incurred. Significant payments related to the acquisition of land and mineral rights and the costs to conduct a preliminary evaluation to determine that the property has potential to develop an economic ore body are capitalized as incurred. The time between initial acquisition and a full evaluation of a property’s potential is dependent on many factors including, but not limited to, location relative to existing infrastructure, the property’s stage of development, geological controls and metal prices.

The Company capitalizes the cost of acquiring, maintaining its interest and exploring mineral properties as exploration and evaluation assets until such time as the properties are placed into development, abandoned, sold, or considered to be impaired in value.

If a mineable ore body is discovered, exploration and evaluation costs are reclassified to mining properties. The Company uses the following criteria in its assessment:

•	the<br> property has mineral reserves as referred to in Canadian National Instrument 43-101 Standards<br> of Disclosure for Mineral Projects (“NI 43-101”), and
•	when<br> legal, permitting and social matters have been resolved sufficiently to allow mining<br> of the ore body.
---	---

Exploration and evaluation assets are tested for impairment when an indicator of impairment is identified and upon reclassification to mining properties.

If no mineable ore body is discovered, all previously capitalized costs are expensed in the period in which it is determined the property has no economic value.

Proceeds received from the sale of interests in exploration and evaluation assets are credited to the carrying value of the mineral properties, plant and equipment. Exploration costs that do not relate to any specific property are expensed as incurred.

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Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(g) Mineral<br> Properties, Plant and Equipment
i. Operational Mining Properties and Mine Development
---

For operating mines, all mineral property expenditures are capitalized and amortized based on a unit-of-production method considering the expected production to be obtained over the life of the mineral property. The expected production includes proven and probable reserves and for the San Jose and Caylloma mines the portion of inferred resources expected to be extracted economically as part of the production cost.

Capitalized costs of producing properties are amortized on a unit-of-production basis over proven and probable reserves and the portion of inferred resources where it is considered highly probable that those resources are expected to be extracted economically.

The expected production to be obtained over the life of the mineral property is based on our life-of-mine production plans which for San Jose and Caylloma include a portion of inferred resources, and therefore differ from the life-of-mine plans we publish as part of our NI 43-101 compliant technical reports which are based on reserves only. The decision to use inferred resources, and the portion of inferred resources to be included varies for each operation and is based on the geological characteristics of the ore body, the quality and predictability of inferred resources, and the conversion of inferred resources into measured and indicated (“M&I”) that we have historically achieved in the past.

Many factors are taken into account during resource classification including; the quality of drilling and sampling, drill/sample spacing, sample preparation and analysis, geological logging and modelling, database construction, geological interpretation and modelling, statistical/geostatistical analysis, interpolation method, local estimation, engineering studies, economic parameters, and reconciliation with actual results.

Once the integrity of the data has been established, two important considerations around classification of resources are geologic continuity and possible variation of thickness and grade between samples. For our inferred resources at San Jose and Caylloma we are able to achieve a significant level of confidence on the existence of mineable material as geological continuity has been established by consistent drill hole intercepts both along strike and down-dip which provides us with reasonable confidence in the location of the structures. The vast majority of the inferred resources are interpolated, estimated between existing drill hole intercepts, as opposed to extrapolated where the grades are estimated beyond the furthest sample point, adding to our confidence in the geologic continuity of the veins. Furthermore, San Jose and Caylloma are not structurally complex deposits where faulting has disrupted geologic continuity.

With regards to the variation of thickness and grade between samples, we use statistical means to calculate the probability that tonnage and grade content falls within a certain accuracy over a given timeframe. If the potential variation is estimated to be within ± 25% at 90 percent confidence globally, we classify it as an inferred resource. This is equivalent to stating that we have 95 percent confidence that greater than 75% of the inferred tonnes, grade, and metal content will ultimately be recovered by the mine and hence that the same percentage or higher will be converted from an inferred resource to an indicated resource through infill drilling as per our policy of upgrading prior to production.

Page | 10

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

As part of our process to include inferred resources into our life-of-mine production plans, we apply an economic cut-off to identify only the material that can be considered profitable to mine within our mine designs, and at this time we apply a conversion or “risk” factor to the mining blocks comprised of inferred resources that we include in such mine production plans. This conversion factor is based on the predictability of conversion derived from statistical estimates of confidence as described above and the support from historic conversion rates of inferred resources into M&I at each of our mines. The conversion factors used in our 2020 and 2019 life-of-mine plans were 90% at San Jose and 80% at Caylloma.

The percentage of inferred resources included as a component of the total mineable inventory (reserve + resource) considered in the 2020 life-of-mine evaluation for each operation as of December 31, 2020, was San Jose 35% (2019: 29%); Caylloma 52% (2019: 45%).

The Company reviews the conversion factors including past experience in assessing the future expected conversion of inferred resources to be used in the life-of-mine plans for inclusion of inferred resources once a year in light of new geologic information and conversion data and when events or circumstances indicate that a review should be made. The Company continually monitors expected conversion and any changes in estimates that arise from this review are accounted for prospectively.

Significant estimation is involved in determining resources and in determining the percentage of resources ultimately expected to be converted to reserves, which we determine based on careful consideration of both internal and external technical and economic data. Estimation of future conversion of resources is inherently uncertain and involves significant judgment and actual outcomes may vary from these judgments and estimates and such outcomes may have a material impact on the results. Revisions to these estimates are accounted for in the period in which the change in the estimate arises.

Costs of abandoned properties are written-off.

- Net Proceeds received during the testing phase

During the fourth quarter of 2020, the Company has early adopted the amendment of IAS-16 - Property, Plant and Equipment - Proceeds before Intended Use. These amendments clarify the accounting for the net proceeds from selling any items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments prohibit entities from applying the previous guidance of deducting amounts received from selling items produced from the cost of property, plant and equipment while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items are now recognized in profit or loss. As required, the Company has adopted the amendments on a modified retrospective basis. There was no cumulative effect on equity on adoption (note 4 (t)ii)).

Prior to this adoption, the Company, deducted the net proceeds from selling metals produced while bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management (“commercial production”) from the capital costs of development of a mine

Depletion commences once the mineral property, plant and equipment is capable of operating in the manner intended by management. Any costs incurred after the commencement of commercial production are capitalized to the extent they give rise to a future economic benefit.

Page | 11

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

ii. Property, Plant and Equipment

Property, plant and equipment are recorded at cost, net of accumulated depreciation and impairments. Costs directly related to construction projects are capitalized to work in progress until the asset is available for use in the manner intended by management. Assets, other than capital works in progress, are depreciated to their residual values over their estimated useful lives as follows:

Land and buildings
Land	Not depreciated
Mineral properties	Units of production	Declining balance
Buildings, located<br> at the mine	Units of production	Declining balance
Buildings, others<br> ^(1)^	6-10 years	Straight line
Leasehold improvements<br> ^(1)^	4-8 years	Straight line
Plant and equipment
Machinery and equipment<br> ^(1)^	3-12 years	Straight line
Furniture and other<br> equipment ^(1)^	2-12 years	Straight line
Transport units	4-5 years	Straight line
Capital work in progress	Not depreciated
^(1)^	The<br> lesser of useful life or life of mine.
---	---

Equipment under finance lease is initially recorded at the present value of minimum lease payments at the inception of the lease and depreciated over the shorter of the lease term or useful life.

Spare parts and components included in machinery and equipment are depreciated over the shorter of the useful life of the component or the related machinery and equipment.

Borrowing costs attributed to the construction of qualifying assets are capitalized to mineral properties, plant and equipment, and are included in the carrying amounts of related assets until the asset is available for use in the manner intended by management.

The sales proceeds and associated production costs incurred during commissioning of qualifying assets under capital works in progress are recognized in profit or loss.

On an annual basis, the depreciation method, useful economic life, and residual value of each component asset is reviewed with any changes recognized prospectively over its remaining useful economic life.

iii. Stripping cost

Pre-production stripping costs are generally capitalized and amortized over the production life of the mine using the unit-of-production method.

Stripping costs incurred during the production stage are incurred in order to produce inventory or to improve access to ore which will be mined in the future. Where the costs are incurred to produce inventory, the production stripping costs are accounted for as a cost of producing those inventories. Where the costs are incurred to improve access to ore which will be mined in the future, the costs are deferred and capitalized to the statement of financial position as a stripping activity asset (included in mining interest) if the following criteria are met:

·	improved access to the ore body is probable;
·	the component of the ore body can be accurately<br>identified; and
---	---
·	the costs relating to the stripping activity<br>associated with the component can be reliably measured.
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If these criteria are not met, the costs are expensed in the period in which they are incurred.

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Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

The stripping activity asset is subsequently depleted using the units-of-production depletion method over the life of the identified component of the ore body to which access has been improved as a result of the stripping activity.

(h) Asset<br> Impairment

At the end of each reporting period, the Company assesses for impairment indicators and if there are such indicators, then the Company performs a test of impairment.

For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash inflows or cash generating units. These are typically individual mines or development projects. Brownfields exploration projects, located close to existing mine infrastructure, are assessed for impairment as part of the associated mine cash generating unit.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of disposal (“FVLCD”) and value in use.

When the recoverable amount is assessed using pre-tax discounted cash flow techniques, the resulting estimates are based on detailed mine and/or production plans. For value in use, recent cost levels are considered, together with expected changes in costs compatible with the current condition of the business. The cash flow forecasts are based on best estimates of the expected future revenues and costs, including the future cash costs of production, sustaining capital expenditures, and reclamation and closure costs.

Where a FVLCD model is used, the cash flow forecast includes net cash flows expected to be realized from extraction, processing, and sale of mineral resources that do not currently qualify for inclusion in proven or probable reserves and the portion of resources expected to be extracted economically.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of recoverable amount but not beyond the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized into earnings immediately.

(i) Borrowing<br> Costs

Interest and other financing costs incurred that are attributable to acquiring and developing exploration and development stage mining properties and constructing new facilities (“qualifying assets”), are capitalized and included in the carrying amounts of qualifying assets until those qualifying assets are capable of operating in the manner intended by management.

The capitalization of borrowing costs incurred commences on the date when the following three conditions are met:

•	expenditures<br> for the qualifying asset are being incurred;
•	borrowing<br> costs are being incurred; and,
---	---
•	activities<br> that are necessary to prepare the qualifying asset for its intended use are being undertaken.
---	---

Borrowing costs incurred after the qualifying assets are substantially complete are expensed.

Transaction costs, including legal, upfront commitment fees and other costs of issuance, associated with debt are recorded against the debt and are amortized over the term of the credit facility using the effective interest rate method.

All other borrowing costs are expensed in the period in which they are incurred.

Page | 13

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(j) Assets<br> Held for Sale

A non-current asset is classified as held for sale when it meets the following criteria:

•	The<br> non-current asset is available for immediate sale in its present condition subject only<br> to terms that are usual and customary for sales of such assets; and,
•	the<br> sale of the non-current asset is highly probable. For the sale to be highly probable:
---	---
○	the<br> appropriate level of management must be committed to a plan to sell the asset;
---	---
○	an active<br> program to locate a buyer and complete the plan must have been initiated;
---	---
○	the<br> non-current asset or disposal group must be actively marketed for sale at a price that<br> is reasonable in relation to its current fair value;
---	---
○	the<br> sale should be expected to qualify for recognition as a completed sale within one year<br> from the date of classification as held for sale (with certain exceptions); and
---	---
○	actions<br> required to complete the plan should indicate that it is unlikely that significant changes<br> to the plan will be made or that the plan will be withdrawn.
---	---

Assets held for sale are not depreciated and are recorded at the lower of their carrying amount and fair value less costs to sell.

(k) Income<br> Taxes

Income tax expense consists of current and deferred tax expense.

Current tax expense is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at period end adjusted for amendments to tax payable with regards to previous years.

Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to unused tax loss carry forwards, unused tax credits, and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis (“temporary differences”). Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized, or the liability is settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in profit or loss in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

The following temporary differences do not result in deferred tax assets or liabilities:

•	the<br> initial recognition of assets or liabilities, not arising in a business combination,<br> that does not affect accounting or taxable income;
•	goodwill;<br> and
---	---
•	investments<br> in subsidiaries, associates and jointly controlled entities where the timing of reversal<br> of the temporary differences can be controlled and reversal in the foreseeable future<br> is not probable.
---	---

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Page | 14

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(l) Provisions
i. Closure and Reclamation Provisions
---

Future obligations to retire an asset, including dismantling, remediation and ongoing treatment and monitoring of the site related to normal operation are initially recognized and recorded as a liability based on estimated future cash flows discounted at the risk-free rate.

The closure and reclamation provision (“CRP”) is adjusted at each reporting period for changes to the expected amount of cash flows required to discharge the liability, the timing of such cash flows and the risk-free discount rate.

The liability is accreted to full value over time through periodic charges to profit or loss.

The amount of the CRP initially recognized is capitalized as part of the related asset’s carrying value and amortized to profit or loss. The method of amortization follows that of the underlying asset. The costs related to a CRP are only capitalized to the extent that the amount meets the definition of an asset and can bring about future economic benefit. For a closed site or where the asset which generated a CRP no longer exists, there is no longer a future benefit related to the costs and as such, the amounts are expensed. Revisions in estimates or new disturbances result in an adjustment to the CRP with an offsetting adjustment to the asset, unless there is no future benefit, in which case they are expensed.

ii. Environmental Disturbance Restoration Provisions

During the operating life of an asset, events such as infractions of environmental laws or regulations may occur. These events are not related to the normal operation of the asset and are referred to as environmental disturbance restoration provisions (“EDRP”). The costs associated with an EDRP are accrued and charged to earnings in the period in which the event giving rise to the liability occurs. Any subsequent adjustments to an EDRP due to changes in estimates are also charged to earnings in the period of adjustment. These costs are not capitalized as part of the long-lived asset’s carrying value.

iii. Other Provisions

Provisions are recognized when a present legal or constructive obligation exists as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Where the effect of the time value of money is material the provision is discounted using an appropriate current market based pre-tax discount rate.

(m)<br> Common Share Capital

Shares are classified as equity. Costs directly attributable to the issuance of common shares are shown in equity as a deduction from the proceeds.

(n) Share-Based<br> Payments

The fair value method of accounting is used for share-based payment transactions. Under this method, the cost of stock options and other equity-settled share-based payment arrangements are recorded based on the estimated fair value at the grant date and charged to earnings over the vesting period. Where awards are forfeited because non-market based vesting conditions were not satisfied, the expense previously recognized is reversed in the period the forfeiture occurs.

Page | 15

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

Share-based payment expenses relating to cash-settled awards, including deferred and restricted share units are accrued and expensed over the vesting period based on the quoted market value of the Company’s common shares. As these awards will be settled in cash, the expense and liability are adjusted at each reporting period for any changes in the underlying share price.

Equity settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the Company obtains the goods or the counter party renders the services.

i. Stock Option Plan

The Company applies the fair value method of accounting for all stock option awards. Under this method, the Company recognizes a compensation expense for all stock options awarded to employees, based on the fair value of the options on the date of grant which is determined by using the Black-Scholes option pricing model. The fair value of the options is expensed over the graded vesting period of the options.

ii. Deferred Share Unit Plan

Deferred share units (“DSU”) are typically granted to non-executive directors of the Company. They are payable in cash upon resignation, retirement, removal, failure to achieve re-election, or upon a change of control of the Company. The DSU compensation liability is accounted for based on the number of DSUs outstanding and the quoted market value of the Company’s common shares at the financial position date. The year-over-year change in the DSU compensation liability is recognized in profit or loss.

iii. Share Unit Plans

The Company’s amended and restated share unit plan (the “SU Plan”) covers all restricted share units (“RSUs”) and performance share units (“PSUs”) granted by the Company on and after March 1, 2015.

- Restricted Share Units

The Company’s RSUs are settled in either cash or equity, as determined by the Company’s Board of Directors at the grant date and typically vest over three years.

For cash settled RSUs, the share-based payment expense is adjusted at each reporting period to reflect any change in the quoted market price of the Company’s common shares and the vesting of each RSU grant, with a corresponding amount recorded in other liabilities.

For equity-settled RSUs, the fair value is determined based on the quoted market price of the Company’s common shares at the date of grant, and the fair value is recognized as a share-based payment expense over the vesting period with a corresponding amount recorded in equity reserves.

- Performance Share Units

The Company’s PSUs are performance-based awards for the achievement of specified performance metrics by specified deadlines and are settled in either cash or equity, as determined by the Company’s Board of Directors at the grant date and typically vest over three years.

Page | 16

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

For cash settled PSUs, the share-based payment expense is adjusted at each reporting period to reflect any change in the quoted market price of the Company’s common shares, the vesting of each PSU grant and the expected performance factors with a corresponding amount recorded in other liabilities.

For equity-settled PSUs, the fair value is determined based on the quoted market price of the Company’s common shares at the date of grant and the number of PSUs expected to vest based on the performance factors. The fair value is recognized as a share-based payment expense over the vesting period with a corresponding amount recorded in equity reserves.

(o) Related<br> Party Transactions

Parties are related if one party has the ability directly, or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities, and include key management personnel of the Company. A transaction is a related party transaction when there is a transfer of resources or obligations between related parties.

(p) Earnings<br> per Share

Basic earnings per share (“EPS”) is computed by dividing the net income for the year by the weighted average number of common shares outstanding during the year.

The diluted earnings per share calculation is based on the weighted average number of common shares outstanding during the year, adjusted for the effects of dilutive common share equivalents. This method requires that the dilutive effect of outstanding options and equity settled units issued should be calculated using the treasury stock method. This method assumes that all common share equivalents have been exercised at the beginning of the year (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of the common shares during the year, but only if dilutive.

Dilution from convertible debentures is calculated using the if-converted method, based on the number of shares to be issued upon conversion of the convertible debentures, with a corresponding adjustment to net income for the after-tax interest expense related to the convertible debentures.

(q) Financial<br> Instruments
i Classification and measurement of financial assets and financial liabilities
---

Financial assets are measured as either: amortized cost; fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). All non-derivative financial liabilities are measured at amortized cost. The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated, and instead the hybrid financial instrument is assessed for classification.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

•	it<br> is held within a business model whose objective is to hold assets to collect contractual<br> cash flows; and
•	its<br> contractual terms give rise on specified dates to cash flows that are solely payments<br> of principal and interest on the principal amount outstanding.
---	---

Page | 17

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

•	it<br> is held within a business model whose objective is achieved by both collecting contractual<br> cash flows and selling financial assets; and
•	its<br> contractual terms give rise on specified dates to cash flows that are solely payments<br> of principal and interest on the principal amount outstanding.
---	---

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (OCI). This election is made on an investment-by-investment basis. All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL.

Components of compound financial instruments are separately classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. The financial liability is initially recognized at fair value, net of an allocation of issuance costs, and is subsequently measured at amortized cost. The equity component is initially measured based on the residual amount, net of an allocation of issuance costs, and is not subsequently remeasured.

Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, or cancellation of our own equity instruments. No gain or loss is recognized on the issue of our own equity instruments, unless the equity is issued to settle a liability.

Financial Liabilities at Amortized Cost – Financial liabilities are measured at amortized cost using the effective interest method, unless they are required to be measured at fair value through profit or loss (“FVTPL”), or the Company has opted to measure them at FVTPL. Debt and accounts payable and accrued liabilities are recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost using the effective interest method.

The following accounting policies apply to the subsequent measurement of financial assets:

•	Financial<br> assets at FVTPL - These assets are subsequently measured at fair value. Net gains and<br> losses, including any interest or dividend income, are recognized in profit or loss.
•	Financial<br> assets at amortized cost - These assets are subsequently measured at amortized cost using<br> the effective interest method. The amortized cost is reduced by impairment losses. Interest<br> income, foreign exchange gains and losses and impairment are recognized in profit or<br> loss. Any gain or loss on derecognition is recognized in profit or loss.
---	---
•	Equity<br> investments at FVOCI - These assets are subsequently measured at fair value. Dividends<br> are recognized as income in profit or loss unless the dividend clearly represents a recovery<br> of part of the cost of the investment. Gains or losses recognized on the sale of the<br> equity investment are recognized in OCI and are never reclassified to profit or loss.
---	---
ii Impairment of Financial Assets
---

An entity is required to recognize expected credit losses when financial instruments are initially recognized and to update the amount of expected credit losses recognized at each reporting date to reflect changes in the credit risk of the financial instruments.

Page | 18

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

For the Company’s trade receivables, it determines the lifetime expected losses for all of its trade receivables. The expected lifetime credit loss provision for the Company’s trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, when required.

iii Hedge Accounting

The Company has established a strategy, in accordance with its current risk management policies, to use interest rate swaps to hedge against the variability in cash flows arising from changes in USD LIBOR based floating interest rate borrowing relating to its credit facility.

Management qualitatively assess that the changes in value of the hedging instrument and the hedged item will move in opposite directions and will be perfectly offset. As both counterparties to the derivative are investment grade, the effect of credit risk is considered as neither material nor dominant in the economic relationship. The portion of the gain or loss on the hedging instrument that is determined to be effective will be recognized directly in other comprehensive income while the amount that is determined to be ineffective, if any, will be recorded in the profit or loss during the life of the hedging relationship.

(r) Revenue<br> Recognition

The Company earns revenue from contracts with customers related to its concentrate and doré sales. Revenue from contracts with customers is recognized when a customer obtains control of the concentrate or the doré and the Company satisfies its performance obligation. The Company considers the terms of the contract in determining the transaction price, which is the amount the entity expects to be entitled to in exchange for the transferring of the concentrates. The transaction price of a contract is allocated to each performance obligation based on its stand-alone selling price.

The Company satisfies its performance obligations for its concentrate sales based upon specified contract terms which are generally upon delivery to the customer at a specified warehouse or upon loading of the concentrate onto a vessel. The Company typically receives payment within one to four weeks of delivery.

Doré sales are recognized when the Company satisfies its performance obligation and control is transferred to the customer upon payment. Final weights and assays are adjusted on final settlement which is approximately one month after delivery.

Revenue from concentrate sales is recorded based upon forward market price of the expected final sales price date. IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) does not consider provisional price adjustments associated with concentrate sales to be revenue from contracts with customers as they arise from changes in market pricing for silver, gold, lead and zinc between the delivery date and settlement date. As such, the provisional price adjustments are accounted for as derivatives and presented separately in Note 23 of these financial statements.

(s) Segment<br> Reporting

The Company’s operating segments are based on the reports reviewed by the senior management group that are used to make strategic decisions. The Chief Executive Officer, as chief operating decision maker, considers the business from a geographic perspective considering the performance of the Company’s business units.

A geographical segment is a distinguishable component of the entity that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different than those of segments operating in other economic environments.

Page | 19

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

The business operations comprise the mining and processing of silver-lead, zinc, and silver-gold and the sale of these products.

(t) Adoption<br> of New Accounting Standards, Interpretation or Amendments
i. IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures (first phase Amendments)
---

The Company adopted the first phase amendment effective January 1, 2020 and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

ii. Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use

On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. These amendments clarify the accounting for the net proceeds from selling any items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments prohibit entities from deducting amounts received from selling items produced from the cost of property, plant and equipment while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items will be recognized in profit or loss. The amendments are effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted.

The Company elected to early adopt the amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use (“IAS 16 amendment”) in 2020, accordingly, the information presented for 2019 has been restated. On initial application, the Company transferred $498 from capital work in progress to materials and supplies inventories and $2,355 from capital work in progress to long term ore stock piles on the balance sheet. On the consolidated cash-flow statement, the Company transferred $2,853 from expenditures on Lindero Construction reported within investing activities to inventories reported under changes in non-cash working capital within operating activities.

The following tables show the changes to the consolidated balance sheet and the consolidated statements of cash flows as at and for the year ended December 31, 2019, upon adoption of the IAS 16 amendment:

Consolidated Balance Sheet
	As reported		IAS 16 <br> amendment			Restated
Current assets
Inventories (note 7)	$	14,471	$	498		$	14,969
Non-Current assets
Plant and equipment (note 10)	$	378,509	$	(2,853	)	$	375,656
Other assets (note 12)	$	38,389	$	2,355		$	40,744

Page | 20

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

Consolidated Statement of Cash Flow
	As reported			IAS 16 <br> amendment			Restated
Changes in no cash working capital:
Inventories	$	(1,036	)	$	(2,853	)	$	(3,889	)
Net cash provided by operating activities	$	63,005		$	(2,853	)	$	60,152
Investing Activities
Expenditures on Lindero construction	$	(189,653	)	$	2,853		$	(186,800	)
Cash used in investing activities	$	(145,214	)	$	2,853		$	(142,361	)

As a result of the Company electing to adopt IAS 16 amendment, the Company recognized $20,297 of gold sales and $10,073 of related cost of sales on its income statement while the Company is preparing the Lindero Mine for its intended use (December 31, 2019

$nil and $nil, respectively) (note 29).

The following amended standards and interpretations were applied for the first time in 2020, but did not have a significant impact on the Company’s consolidated financial statements:

•	Amendments<br> to References to Conceptual Framework in IFRS Standards.
•	Definition<br> of a Business (Amendments to IFRS 3).
---	---
•	Definition<br> of Material (Amendments to IAS 1 and IAS 8)
---	---
(u) New<br> Accounting Standards Issued but not yet Effective
---

A number of new standards are effective for annual periods beginning after January 1, 2021 and earlier application is permitted; however, except for the Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) the Company has not early adopted other new or amended standards in preparing these financial statements.

The following amended standards and interpretations are not expected to have a significant impact on the Company’s consolidated financial statements:

•	Interest<br> Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and<br> IFRS 16);
•	Onerous<br> Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) ; and
---	---
•	Classification<br> of Liabilities as Current or Non-current (Amendments to IAS 1).
---	---
5.	Use of Estimates, Assumptions and Judgements
---	---

The preparation of these financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the period end date and reported amounts of expenses during the reporting period. Such judgements and estimates are, by their nature, uncertain. Actual outcomes could differ from these estimates.

The impact of such judgements and estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. These judgements and estimates are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised and are accounted for prospectively.

In preparing these consolidated financial statements for the year ended December 31, 2020, the Company applied the critical estimates, assumptions and judgements as disclosed below.

Page | 21

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(a) Critical<br> Accounting Estimates and Assumptions

Areas where critical accounting estimates and assumptions have the most significant effect on the amounts recognized in the consolidated financial statements include:

i. Mineral Reserves and Resources and the Life of Mine Plan

We estimate our mineral reserves and mineral resources in accordance with the requirements of NI 43-101. Estimates of the quantities of the mineral reserves and mineral resources form the basis for our life of mine plans, which are used for the calculation of depletion expense under the units of production method, impairment tests, and forecasting the timing of the payments related to the environmental reclamation provision.

Significant estimation is involved in determining the reserves and resources included within our life of mine plans. Changes in forecast prices of commodities, exchange rates, production costs or recovery rates may result in our life of mine plan being revised and such changes could impact depletion rates, asset carrying values and our environmental reclamation provision. As at December 31, 2020 we have used the following long-term prices for our reserve and resource estimations: gold $1,600/oz, silver $21/oz, lead $2,000/t and zinc $2,270/t.

In addition to the estimates above, estimation is involved in determining the percentage of resources ultimately expected to be converted to reserves and hence included in our life of mine plans. Our life of mine plans include a portion of inferred resources as we believe this provides a better estimate of the expected life of mine for certain types of deposits, in particular for vein type structures. The percentage of inferred resources out of the total tonnage included in the life of mine plans is based on site specific geological, technical, and economic considerations. Estimation of future conversion of resources is inherently uncertain and involves judgement, and actual outcomes may vary from these judgements and estimates and such changes could have a material impact on the financial results. Some of the key assumptions in the estimation process include geological continuity, stationarity in the grades within defined domains, reasonable geotechnical and metallurgical conditions, treatment of outlier (extreme) values, cut-off grade determination and the establishment of geostatistical and search parameters. Revisions to these estimates are accounted for prospectively in the period in which the change in estimate arises. See note 3(g)(i) of these financial statements.

ii. Valuation of Mineral Properties and Exploration Properties

The Company carries its mineral properties at cost less accumulated depletion and any accumulated provision for impairment. The costs of each property and related capitalized expenditures are depleted over the economic life of the property on a units-of-production basis. When a property is abandoned or when there is an impairment, costs are charged to profit or loss.

In undertaking this review, management of the Company is required to make significant estimates of, amongst other things, future production and sales volumes, metal prices, foreign exchange rates, mineral resource and reserve quantities, future operating and capital costs to the end of the mine’s life, and reclamation costs. These estimates are subject to various risks and uncertainties which may ultimately have an effect on the expected recoverability of the carrying values of the mining properties and related expenditures.

Page | 22

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

The Company, from time to time, acquires exploration and development properties. When properties are acquired, the Company must determine the fair value attributable to each of the properties. When the Company conducts exploration on a mineral property and the results from the exploration do not support the carrying value, the property is written down to its new fair value which could have a material effect on the consolidated statement of financial position and the consolidated income statement.

iii. Deferred stripping costs

In determining whether stripping costs incurred during the production phase of a mining property relate to mineral reserves that will be mined in a future period and therefore should be capitalized, the Company makes estimates of the proportion of stripping activity which relates to extracting ore in the current period versus the proportion which relates to obtaining access to ore reserves which will be mined in the future.

iv. Inventory

Estimates of recoverable gold on the leach pad are calculated from the quantities of ore placed on the leach pads (measured tonnes added to the leach pad), the grade of ore placed on the leach pad (based on assay data) and a recovery percentage.

v. Reclamation and Other Closure Provisions

Because the obligations are dependent on the laws and regulations of the countries in which the mines operate, the requirements could change as a result of amendments in the laws and regulations relating to environmental protection and other legislation affecting resource companies. As the estimate of the obligations is based on future expectations, a number of estimates and assumptions are made by management in the determination of closure provisions.

vi. Revenue from metal in concentrate

The Company’s sales of metal in concentrates allow for price adjustments based on the market price at the end of the relevant quotational period (“QP”) stipulated in the contract. These are referred to as provisional pricing arrangements and are such that the selling price for metal in concentrate is based on the prevailing spot price on a specified future date. At each balance sheet date, the Company estimates the value of the trade receivable using forward metal prices.

Adjustments to the sale price occurs based on movements in quoted market prices up to the end of the QP. The period between provisional invoicing and the end of the QP is generally between one and three months. Any future changes over the QP are embedded within the provisionally priced trade receivables and are, therefore, within the scope of IFRS 9 and not within the scope of IFRS 15. As such, the provisional price adjustments are accounted for as derivatives and presented separately in Note 23 of these financial statements.

vii. Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, the Company with assistance from its legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims or actions.

Page | 23

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

A liability is recognized in the consolidated financial statements when the outcome of the legal proceedings is probable and the estimated settlement amount can be estimated reliably. Contingent assets are not recognized in the consolidated financial statements until virtually certain.

(b) Critical<br> Accounting Judgements in Applying the Entity’s Accounting Policies

Judgements that have the most significant effect on the amounts recognized in the Company’s consolidated financial statements are as follows:

i. Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial statement carrying values of assets and liabilities and their respective income tax bases and losses carried forward. The determination of the ability of the Company to utilize tax loss carryforwards to offset deferred tax liabilities requires management to exercise judgement and make certain assumptions about the future performance of the Company.

Management is required to assess whether it is “probable” that the Company will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, metal prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilization of the losses.

ii. Assessment of Impairment and Reversal of Impairment Indicators

Management applies significant judgement in assessing whether indicators of impairment or reversal of impairment exist for an asset or a group of assets which could result in a testing for impairment. Internal and external factors such as significant changes in the use of the asset, commodity prices, life of mines, tax laws or regulations in the countries that our mines operate in and interest rates are used by management in determining whether there are any indicators of impairment or reversal of previous impairments.

iii. Functional Currency

The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which each operates. The Company has determined that its functional currency and that of its subsidiaries is the U.S. dollar. The determination of functional currency may require certain judgements to determine the primary economic environment. The Company reconsiders the functional currency used when there is a change in the events and conditions which determined the primary economic environment.

iv. Leases

Significant judgments made by management in the accounting for leases primarily included whether the lease conveys the right to use a specific asset, whether the Company obtains substantially all of the economic benefits from the use of the asset, whether the Company has the right to direct the use of the asset, evaluating the appropriate discount rate to use to discount the lease liability for each lease or groups of assets, and to determine the lease term where a contract includes renewal options. Significant judgments over these factors would affect the present value of the lease liabilities, as well as the associated amount of the ROU asset.

v. Value-added tax (“VAT”) receivable

Timing of collection of VAT receivables is uncertain as VAT refund procedures require a significant amount of information and follow-up. The Company assesses the recoverability of the amounts receivable at each reporting date and the expected timing of the recovery, which are impacted by several factors, including the status of discussions with the tax authorities, and current interpretation of relevant VAT legislation and regulation. Changes in these judgements can materially affect the amount recognized as VAT receivable and could result in an increase in other expenses recognized in profit or loss and the presentation of current and non-current VAT receivable.

Page | 24

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

6.	Trade<br> and Other Receivables
	December 31,		December 31,
---	---	---	---	---
	2020		2019
Trade receivables from concentrate sales	$	26,309	$	33,642
Advances and other receivables		4,108		2,419
Value added taxes recoverable		8,890		11,646
Value added taxes recoverable - Lindero		37,248		-
Accounts and other receivables	$	76,555	$	47,707

The Company’s trade receivables from concentrate and doré sales are expected to be collected in accordance with the terms of the existing concentrate sales contracts with its customers. No amounts were past due as at December 31, 2020 and 2019.

During the year ended December 31, 2020, the Company recognized an unrealized foreign exchange loss of $12,365 (December 31, 2019 - $12,137) related to the value added tax recoverable on the construction of the Lindero Mine. The Company implemented a strategy to mitigate the foreign exchange exposure to meet its local currency requirements in Argentina. During the year ended December 31, 2020, the Company recognized $3,306, (December 31, 2019 - $11,204) of gains from Argentine Peso denominated cross-border securities trades.

7.	Inventories
	December 31,			December 31,
---	---	---	---	---	---	---
	2020			2019
					(Restated)<br><br> note 4 (t)ii)
Concentrate stockpiles	$	1,682		$	2,640
Leach pad and gold-in-circuit		7,851			-
Doré bars		1,796			-
Ore stockpiles		11,640			6,085
Materials and supplies		22,020			8,599
Total inventories	$	44,989		$	17,324
Less: non-current portion (note 12)		(9,715	)		(2,355	)
Current inventories	$	35,274		$	14,969

During the year ended December 31, 2020, the Company expensed $160,138 (December 31, 2019 – $169,711) of inventories to cost of sales.

As at December 31, 2020, there was $9,715 of non-current ore stockpile related to Lindero which is not expected to be realized within the next 12 months (December 31, 2019 - $2,355).

8.	Other Current Assets
	December 31,		December 31,
---	---	---	---	---
	2020		2019
Prepaid expenses	$	2,622	$	2,942
Investments in equity securities (note 11)		1,059		-
Assets held for sale		659		1,069
Income tax recoverable		-		2,553
Other current assets	$	4,340	$	6,564

Investments in equity securities are classified as fair value through other comprehensive income, and any changes in the fair value of the investments are recorded in Other Comprehensive Income.

During the year ended December 31, 2020, the Company wrote-down $410 (December 31, 2019 - $nil) on assets held for sale.

Page | 25

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

9.	Mineral<br> Properties and Exploration and Evaluation Assets
	Depletable					Not depletable
---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma		San Jose			Lindero		Other			Total
COST
Balance at December 31, 2019	$	128,244	$	184,333		$	203,866	$	7,933		$	524,376
Additions		3,833		8,310			32,506		1,298			45,947
Changes in closure and reclamation provision		2,599		1,328			4,730		-			8,657
Write-downs		-		(1,233	)		-		(188	)		(1,421	)
Balance at December 31, 2020	$	134,676	$	192,738		$	241,102	$	9,043		$	577,559
ACCUMULATED DEPLETION
Balance at December 31, 2019	$	74,435	$	96,422		$	-	$	-		$	170,857
Disposals		-		(543	)		-		-			(543	)
Depletion		6,944		14,584			-		-			21,528
Balance at December 31, 2020	$	81,379	$	110,463		$	-	$	-		$	191,842
Net Book Value at December 31, 2020	$	53,297	$	82,275		$	241,102	$	9,043		$	385,717
	Depletable				Not depletable
---	---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma		San Jose		Lindero		Other			Total
COST
Balance at December 31, 2018	$	121,625	$	175,609	$	155,854	$	7,797		$	460,885
Additions		6,396		7,838		34,485		2,652			51,371
Changes in closure and reclamation provision		223		886		13,527		-			14,636
Disposals		-		-		-		(2,516	)		(2,516	)
Balance at December 31, 2019	$	128,244	$	184,333	$	203,866	$	7,933		$	524,376
ACCUMULATED DEPLETION
Balance at December 31, 2018	$	68,207	$	79,878	$	-	$	-		$	148,085
Depletion		6,228		16,544		-		-			22,772
Balance at December 31, 2019	$	74,435	$	96,422	$	-	$	-		$	170,857
Net Book Value at December 31, 2019	$	53,809	$	87,911	$	203,866	$	7,933		$	353,519

During the year ended December 31, 2020, the Company capitalized $9,431 (December 31, 2019- $5,259) of interest related to the construction of the Lindero Mine. The construction activities necessary to prepare the asset for its intended use were substantially completed, as a result, the Company ceased capitalization of interest on November 30, 2020.

The assets of the Caylloma Mine and the San Jose Mine and their holding companies, are pledged as security under the Company’s credit facility.

Non-depletable assets – Other consists of the following exploration and evaluation assets:

	Mexico					Argentina								Serbia		Others
	Tlacolula		Pachuca			Arizaro		Esperanza			Incachule			Barje					Total
Balance<br> at December 31, 2018	$	3,298	$	-		$	934	$	788		$	766		$	1,938	$	73		$	7,797
Additions		218		962			2		-			-			1,318		152			2,652
Write-off		-		(962	)		-		(788	)		(766	)		-		-			(2,516	)
Balance<br> at December 31, 2019		3,516		-			936		-			-			3,256		225			7,933
Additions		209		-			-		-			-			122		967			1,298
Write-off		-		-			-		-			-			-		(188	)		(188	)
Balance<br> at December 31, 2020	$	3,725	$	-		$	936	$	-		$	-		$	3,378	$	1,004		$	9,043

Page | 26

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

10.	Property,<br> Plant and Equipment
	Machinery<br><br> and<br> equipment			Land<br> and <br> buildings		Furniture<br> <br> and other <br> equipment			Assets<br> <br> under lease			Capital<br> <br> work in <br> progress - Lindero			Capital<br><br> work in<br> progress - Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
COST
Balance<br> at December 31, 2019 (Restated) note 4(t)ii)	$	75,246		$	159,732	$	16,083		$	35,671		$	216,482		$	6,424		$	509,638
Additions		5,190			473		1,427			2,715			45,688			3,645			59,138
Changes<br> in closure and reclamation		682			-		-			-			-			-			682
Disposals		(750	)		-		(109	)		(885	)		-			-			(1,744	)
Transfers		29,636			51,547		2,096			-			(75,100	)		(8,179	)		-
Balance<br> at December 31, 2020	$	110,004		$	211,752	$	19,497		$	37,501		$	187,070		$	1,890		$	567,714
ACCUMULATED<br> DEPRECIATION
Balance<br> at December 31, 2019	$	42,214		$	78,360	$	7,402		$	6,006		$	-		$	-		$	133,982
Disposals		(618	)		-		(100	)		(408	)		-			-			(1,126	)
Depreciation		6,701			13,161		2,842			6,744			-			-			29,448
Balance<br> at December 31, 2020	$	48,297		$	91,521	$	10,144		$	12,342		$	-		$	-		$	162,304
Net<br> Book Value at December 31, 2020	$	61,707		$	120,231	$	9,353		$	25,159		$	187,070		$	1,890		$	405,410
	Machinery<br><br> and<br> equipment			Land<br> and <br> buildings		Furniture<br> <br> and other <br> equipment			Assets<br> <br> under lease ^1^		Capital<br> <br> work in <br> progress - Lindero			Capital<br><br> work in<br> progress - Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
												(Restated)
COST
Balance<br> at December 31, 2018	$	74,188		$	141,318	$	11,066		$	13,411	$	52,964		$	6,140		$	299,087
Initial<br> adoption IFRS 16		-			-		-			7,316		-			-			7,316
Balance<br> at January 1, 2019		74,188			141,318		11,066			20,727		52,964			6,140			306,403
Additions		1,185			714		3,464			14,944		174,164			9,718			204,189
Changes<br> in closure and reclamation		171			-		-			-		-			-			171
Disposals		(1,038	)		-		(87	)		-		-			-			(1,125	)
Transfers		740			17,700		1,640			-		(10,646	)		(9,434	)		-
Balance<br> at December 31, 2019 (Restated)		75,246			159,732		16,083			35,671		216,482			6,424			509,638
ACCUMULATED<br> DEPRECIATION
Balance<br> at December 31, 2018	$	35,843		$	65,547	$	5,390		$	107	$	-		$	-		$	106,887
Disposals		(746	)		-		(79	)		-		-			-			(825	)
Depreciation		7,117			12,813		2,091			5,899		-			-			27,920
Balance<br> at December 31, 2019 (Restated)	$	42,214		$	78,360	$	7,402		$	6,006	$	-		$	-		$	133,982
Net<br> Book Value at December 31, 2019 (Restated)	$	33,032		$	81,372	$	8,681		$	29,665	$	216,482		$	6,424		$	375,656
(1)	The<br> Company leases equipment that was previously classified as a finance lease under IAS<br> 17. On January 1, 2019, the Company adopted IFRS 16, Leases, and the equipment purchased<br> under finance leases were classified as right-of-use assets. The carrying amount of $13,411<br> and the related lease liability of $8,767 were determined based on the carrying amount<br> of these assets and their related lease liability immediately before the effective date<br> of IFRS 16.
---	---

Page | 27

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

11.	Investment<br> in Associates

Investments in associates were comprised of:

	Medgold			Prospero			Total
Balance at December 31, 2018	$	3,075		$	1,202		$	4,277
Write-down of investment		(1,937	)		(784	)		(2,721	)
Share of net loss		(164	)		(61	)		(225	)
Balance at December 31, 2019		974			357			1,331
Share of net loss		(47	)		(29	)		(76	)
Transfer to investments in equity securities		(927	)		(328	)		(1,255	)
Balance at December 31, 2020	$	-		$	-		$	-

On July 16, 2020, Medgold Resources Corp. (“Medgold”) completed a 40 million unit financing at C$0.05 per unit. This financing diluted the Company’s equity interest in Medgold to 15.6% which resulted in the company no longer exercising significant influence over Medgold and a change in the classification of its investment in Medgold to fair value though other comprehensive income as at July 16, 2020.

On July 1, 2020, the Company determined that it no longer exercises significant influence over Prospero Silver Corp. (“Prospero”) and changed the classification of its investment in Prospero to fair value through other comprehensive income.

12.	Other<br> Assets
	December 31,		December 31,
---	---	---	---	---
	2020		2019
			(Restated-<br><br> <br>note 4(t)ii)
Ore stockpiles	$	9,715	$	2,355
Value<br>added tax recoverable - San Jose		3,386		2,036
Income tax recoverable (note 33(d))		1,199		1,310
Other assets		910		867
Value<br>added tax recoverable - Lindero		-		34,176
Other assets	$	15,210	$	40,744

As at December 31, 2020, the Company transferred the full amount of value added tax recoverable to short-term as it expects to recover the full amount during the next twelve months (note 6). In January 2021, $11,300 of the value added tax amount were recovered.

The Company expects to recover the value added taxes during 2022.

13.	Deposits and Advances to Contractors

As at December 31, 2020, the Company has advances outstanding of $934 (December 31, 2019 – $12,164) to contractors related to the construction of the Lindero Mine. During the year ended December 31, 2020, the Company paid deposits to contractors of $4,729 (December 31, 2019 - $19,175) and applied $15,450 (December 31, 2019 - $50,650) against equipment delivered or services rendered. In addition, there was a balance of deposits of $509 transferred to accounts receivables.

Page | 28

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

14. Trade<br> and Other Payables
	December 31,		December 31,
---	---	---	---	---
	2020		2019
Trade accounts payable	$	21,918	$	15,975
Lindero construction payables		7,694		24,998
Refundable deposits to contractors		1,442		1,496
Payroll payable		15,878		13,627
Mining royalty payable		1,094		1,237
Value added taxes payable		519		224
Interest payable		1,383		1,457
Due to related parties (note 15)		9		14
Other payables		1,711		535
Derivative liabilities		1,260		894
Deferred share units payable (note 20(a))		9,239		3,918
Restricted share units payable (note 20(b))		3,128		911
Total trade and other payables	$	65,275	$	65,286
15.	Related Party Transactions
---	---

In addition to the related party transactions and balances disclosed elsewhere in these financial statements, the Company entered into the following related party transactions during the years ended December 31, 2020, and 2019:

a) Purchase<br> of Goods and Services

During the years ended December 31, 2020, and 2019, the Company was charged $157 (2019: $210) for general and administrative services pursuant to a shared services agreement with Gold Group Management Inc., a company of which Simon Ridgway, the Company’s Chairman during 2020, is a director. Effective February 2, 2021, Simon Ridgway resigned as director and Chairman of the Board.

	Years ended December 31,
	2020		2019
Personnel costs	$	19	$	21
General and administrative expenses		138		189
	$	157	$	210

As at December 31, 2020, the Company had outstanding balances payable to Gold Group Management Inc. of $9 (December 31, 2019 - $14). Amounts due to related parties are due on demand and are unsecured.

b) Key<br> Management Personnel

During the year ended December 31, 2020, and 2019, the Company was charged for consulting services by Mario Szotlender, a director of the Company, and by Mill Street Services Ltd., a company of which Simon Ridgway, the Company’s Chairman during 2020, is a director. Such amounts, along with other key management personnel compensation expense were as follows:

	Years ended December 31,
	2020		2019
Salaries and benefits	$	4,266	$	4,716
Directors fees		707		702
Consulting fees		134		135
Share-based payments		11,115		5,449
	$	16,222	$	11,002

Page | 29

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

16.	Lease<br>Obligations
	Minimum lease payments
---	---	---	---	---	---	---
	December 31,			December 31,
	2020			2019
Less than one year	$	7,367		$	9,313
Between one and five years		10,209			13,521
More than five years		14,127			14,958
		31,703			37,792
Less: future finance charges		(12,206	)		(13,913	)
Present value of minimum lease payments		19,497			23,879
Less: current portion		(6,978	)		(8,831	)
Non-current portion	$	12,519		$	15,048

As at December 31, 2020, there were $16,829 of lease obligations related to mining equipment and $2,668 of other leases.

17.	Debt

The following table summarizes the changes in debt:

	Credit <br>Facilities			Convertible <br> debentures			Total
Balance at December 31, 2018	$	69,302		$	-		$	69,302
Proceeds from convertible debentures		-			46,000			46,000
Transaction costs paid		-			(2,490	)		(2,490	)
Portion allocated to equity		-			(7,141	)		(7,141	)
Transaction costs allocated to equity		-			389			389
Amortization of discount		128			347			475
Drawdowns		40,000			-			40,000
Balance at December 31, 2019		109,430			37,105			146,535
Amortization of discount		420			1,661			2,081
Drawdowns		65,000			-			65,000
Payments		(55,000	)		-			(55,000	)
Balance at December 31, 2020	$	119,850		$	38,766		$	158,616

a) Credit Facility

The Company has two credit facilities (collectively, the “Credit Facilities”) comprising of a $40,000 non-revolving credit facility which matures on January 26, 2022 and a $110,000 revolving credit facility, the latter of which $30,000 matured on December 31, 2020 and was not renewed. The remaining $80,000 revolving credit facility also matures on January 26, 2022.

On June 4, 2020, the Company amended the financial covenants contained in the Credit Facilities as follows:

•	Total<br> Net Debt to EBITDA ratio, as defined in the Credit Facilities, of not greater than 4.50:1.00<br> for the remaining three quarters of 2020 and the first quarter of 2021, reducing to 4.00:1.00<br> in the second quarter of 2021 and for the remainder of the term of the Credit Facility;

Page | 30

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

•	Net<br> Senior Secured Debt to EBITDA ratio, as defined in the Credit Facilities, of not greater<br> than 3:1 in the remaining three quarters of 2020 and the first quarter of 2021, reducing<br> to 2.00:1.00 in the second quarter of 2021 and for the remainder of the term of the Credit<br> Facilities; and
•	EBITDA<br> to Interest Expense ratio, as defined in the Credit Facilities, of a minimum of 4.00:1.00<br> beginning in the second quarter of 2020 and for the remainder of the term of the Credit<br> Facilities.
---	---

The interest rate on the Credit Facilities will continue to be based on a sliding scale at one-month LIBOR plus an applicable margin ranging from 2.5% to 3.5%, based on the Net Senior Secured Debt to EBITDA ratio, as defined in the Credit Facilities. The Credit Facilities are secured by a first ranking lien on the assets of Minera Bateas S.A.C. and Compania Minera Cuzcatlan S.A. de C.V. and their holding companies. The Company must comply with the terms in the Credit Facilities relating to, among other matters, reporting requirements, conduct of business, insurance, notices, and must comply with the new financial covenants as outlined above. As at December 31, 2020, the Company was in compliance with all of the covenants under the Credit Facilities.

During the year ended December 31, 2020, the Company drew $65,000 (December 31, 2019 - $40,000) and paid $55,000 (December 31, 2019 - $nil) from the revolving credit facility. As at December 31, 2020, the Company has fully drawn the Credit Facilities.

b) Convertible Debentures

On October 2 and 6, 2019, the Company completed a bought deal public offering of senior subordinated unsecured convertible debentures with an aggregate principal amount of $46,000 (the “Debentures”).

The Debentures mature on October 31, 2024 and bear interest at a rate of 4.65% per annum, payable semi-annually in arrears on the last business day of April and October, commencing on April 30, 2020. For the year ended December 31, 2020, the Company paid $2,315 in interest on the Debentures.

The Debentures are convertible at the holder’s option into common shares in the capital of the Company at a conversion price of $5.00 per share (the “Conversion Price”), representing a conversion rate of 200 Common Shares per $1 principal amount of Debentures, subject to adjustment in certain circumstances.

On or after October 31, 2022 and prior to October 31, 2023, the Debentures may be redeemed in whole or in part from time to time at the Company’s option at a price equal to their principal amount plus accrued and unpaid interest, provided that the volume weighted average trading price of the Common Shares on the NYSE for the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of the redemption is given is at least 125% of the Conversion Price. On and after October 31, 2023, the Debentures may be redeemed in whole or in part from time to time at the Company’s option at a price equal to their principal amount plus accrued and unpaid interest regardless of the trading price of the Common Shares.

Subject to applicable securities laws and regulatory approval and provided that no event of default has occurred and is continuing, the Company may, at its option, elect to satisfy its obligation to pay the principal amount of the Debentures and accrued and unpaid interest on the redemption date and the maturity date, in whole or in part, through the issuance of Common Shares, by issuing and delivering that number of Common Shares, obtained by dividing the principal amount of the Debentures and all accrued and unpaid interest thereon by 95% of the current market price (as defined in the Debenture Indenture) on such redemption date or maturity date, as applicable.

Page | 31

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

18.	Other Liabilities
	December 31,		December 31,
---	---	---	---	---
	2020		2019
Restricted share units (note 20(b))	$	2,264	$	246
Other non-current liabilities		259		253
	$	2,523	$	499
19.	Closure and Reclamation<br>Provisions
---	---

The following table summarizes the changes in closure and reclamation provisions:

	Closure and Reclamation Provisions
	Caylloma<br> Mine			San Jose<br> Mine			Lindero<br> Mine		Total
Balance at December 31, 2019	$	11,324		$	4,848		$	14,953	$	31,125
Changes in estimate		3,288			1,328			4,482		9,098
Reclamation expenditures		(114	)		(227	)		-		(341	)
Accretion		256			249			249		754
Effect of changes in foreign exchange rates		7			(293	)		-		(286	)
Balance at December 31, 2020		14,761			5,905			19,684		40,350
Less: Current portion		(142	)		(238	)		-		(380	)
Non-current portion	$	14,619		$	5,667		$	19,684	$	39,970
	Closure and Reclamation Provisions
---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma<br> Mine			San Jose<br> Mine			Lindero<br> Mine		Total
Balance at December 31, 2018	$	10,800		$	3,716		$	1,427	$	15,943
Changes in estimate		394			886			13,390		14,670
Reclamation expenditures		(201	)		(150	)		-		(351	)
Accretion		331			259			136		726
Effect of changes in foreign exchange rates		-			137			-		137
Balance at December 31, 2019		11,324			4,848			14,953		31,125
Less: Current portion		(3,048	)		(209	)		-		(3,257	)
Non-current portion	$	8,276		$	4,639		$	14,953	$	27,868

Closure and reclamation provisions represent the present value of reclamation costs related to mine and development sites. For the year ended December 31, 2020, the Company updated the reclamation and closure plan of its Caylloma mine which includes a $3,179 increase related to additional tailings reclamation.

	Closure and Reclamation Provisions
	Caylloma<br> Mine		San Jose<br> Mine		Lindero<br> Mine		Total
Anticipated settlement date		2021 - 2032		2025 - 2037		2029 - 2042
Undiscounted uninflated estimated cash flow	$	14,899	$	6,864	$	17,946	$	39,709
Estimated life of mine (years)		7		5		13
Discount rate		2.25%		5.25%		1.45%
Inflation rate		2.00%		3.52%		2.06%

The Company is expecting to incur annual reclamation expenses throughout the life of its mines.

Page | 32

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

20.	Share Based Payments

During the year ended December 31, 2020, the Company recognized share-based payments of $12,388 (December 31, 2019 - $5,471) related to the amortization of deferred, restricted and performance share units and $56 (December 31, 2019 – $542) related to amortization of stock options.

(a)	Deferred<br> Share Units (DSUs)
	Cash Settled
---	---	---	---	---
	Number of DSUs		Fair Value
Outstanding, December 31, 2018		850,067	$	3,116
Granted		111,804		455
Changes in fair value		-		347
Outstanding, December 31, 2019		961,871		3,918
Granted		162,648		383
Changes in fair value		-		4,938
Outstanding, December 31, 2020		1,124,519	$	9,239

On April 20, 2020, the Company granted 162,648 deferred share units to its non-executive directors with a fair value of $2.36 (C$3.32) for each DSU (year ended December 31, 2019 - 111,804 DSUs with a fair value of $3.62 (C$4.83) per DSU).

(b) Restricted<br> Share Units (RSUs)
	Cash Settled						Equity Settled
---	---	---	---	---	---	---	---	---	---
	Number of RSUs			Fair Value			Number of RSUs
Outstanding, December 31, 2018		659,385		$	2,057			734,631
Granted		139,661			506			633,914
Units paid out in cash		(406,611	)		(1,466	)		-
Vested and paid out in shares		-			-			(201,633	)
Changes in fair value and vesting		-			60			-
Outstanding, December 31, 2019		392,435			1,157			1,166,912
Granted		1,056,207			2,489			815,220
Units paid out in cash		(81,152	)		(257	)		-
Vested and paid out in shares		-			-			(448,766	)
Changes in fair value and vesting		-			2,003			-
Outstanding, December 31, 2020		1,367,490			5,392			1,533,366
Less: current portion					(3,128	)
Non-current portion				$	2,264

On April 20, 2020, the Company granted to its employees and officers a total of 1,056,207 cash-settled and 815,220 equity-settled RSUs, which vest 20% on the first anniversary, 30% on the second anniversary and 50% on the third anniversary of the date of grant. The fair value on the grant date of the 815,220 equity settled RSUs was $2.36 (C$3.32) per RSU (year ended December 31, 2019- 633,914 with a fair value of $3.62 (C$4.83) per RSU).

Page | 33

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(c) Performance<br> Share Units
	Equity Settled
---	---	---	---
	Number of PSUs
Outstanding, December 31, 2018		1,002,166
Granted		422,609
Vested and paid out in shares		(150,325	)
Outstanding, December 31, 2019		1,274,450
Forfeited or cancelled		(191,498	)
Vested and paid out in shares		(243,782	)
Outstanding, December 31, 2020		839,170

During the year ended December 31, 2020, no PSUs were granted (year ended December 31, 2019 – 422,609 with a fair value of $3.62 (C$4.83) per share unit) to the Company’s officers.

The PSUs granted during the year ended December 31, 2019 vest 20% on the first anniversary, 30% on the second anniversary and 50% on the third anniversary of the date of grant based on prescribed performance metrics, and are subject to a multiplier ranging from 50% to 200% depending on the achievement level of certain performance targets.

d) Stock<br> Options

The Company’s Stock Option Plan, as amended and approved from time to time, permits the Company to issue up to 12,200,000 stock options. As at December 31, 2020, a total of 2,092,236 stock options are available for issuance under the plan.

	Number of <br> stock options			Weighted average<br> exercise price
				Canadian dollars
Outstanding, December 31, 2018		1,784,029		$	5.85
Outstanding, December 31, 2019		1,784,029			5.85
Exercised		(211,626	)		6.28
Expired unexercised		(517,833	)		4.79
Outstanding, December 31, 2020		1,054,570		$	6.28
Vested and exercisable, December 31, 2019		1,459,779		$	5.77
Vested and exercisable, December 31, 2020		1,054,570		$	6.28
21.	Share Capital
---	---
a)<br> Authorized Share Capital
---

The Company has an unlimited number of common shares without par value authorized for issue.

b) Financing

On May 20, 2020, the Company completed a bought deal public equity offering and issued an aggregate of 23,000,000 common shares at a price of $3.00 per share for gross proceeds of $69,000, which included the exercise, in full, of the over-allotment option. The Company incurred transaction costs of $3,358 related to this financing.

Page | 34

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

22.	Earnings per Share
	Years ended December 31,
---	---	---	---	---
Basic	2020		2019
Net income for the year	$	21,553	$	23,796
Weighted average number of shares (000’s)		174,993		160,193
Earnings per share - basic	$	0.12	$	0.15
	Years ended December 31,
---	---	---	---	---
Diluted	2020		2019
Net income for the year	$	21,553	$	23,796
Weighted average number of shares (000’s)		174,993		160,193
Incremental shares from dilutive potential shares		11,080		4,332
Weighted average diluted number of shares (000’s)		186,073		164,525
Earnings per share - diluted	$	0.12	$	0.14

As at December 31, 2020, there were 7,551 out of the money options that were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive (December 31, 2019 – 1,784,029).

23.	Sales

The Company’s geographical analysis of revenue from contracts with customers attributed to the location of the products produced, is as follows:

By-product and Geographical Area

	Year ended December 31, 2020
	Peru		Mexico		Argentina		Total
Silver-gold concentrates	$	-	$	188,327	$	-	$	188,327
Silver-lead concentrates		43,055		-		-		43,055
Zinc concentrates		23,980		-		-		23,980
Gold doré		-		-		20,297		20,297
Provisional pricing adjustments		608		2,699		-		3,307
Sales to external customers	$	67,643	$	191,026	$	20,297	$	278,966
	Year ended December 31, 2019
---	---	---	---	---	---	---	---	---	---
	Peru			Mexico		Argentina		Total
Silver-gold concentrates	$	-		$	183,197	$	-	$	183,197
Silver-lead concentrates		39,936			-		-		39,936
Zinc concentrates		33,686			-		-		33,686
Gold doré		-			-		-		-
Provisional pricing adjustments		(740	)		1,108		-		368
Sales to external customers	$	72,882		$	184,305	$	-	$	257,187
	Years ended December 31,
---	---	---	---	---	---
	2020		2019
Customer 1	$	191,026	$	184,304
Customer 2		67,643		72,938
Customer 3		-		(55	)
Customer 4		20,297		-
	$	278,966	$	257,187

Page | 35

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

24.	Cost of Sales
	Year ended December 31, 2020
---	---	---	---	---	---	---	---	---	---	---
	Caylloma		San Jose			Lindero		Total
Direct mining costs	$	31,738	$	58,726		$	4,145	$	94,609
Salaries and benefits		6,883		6,902			2,801		16,586
Workers’ participation		899		6,560			-		7,459
Depletion and depreciation		14,301		27,856			1,621		43,778
Royalties and other taxes		523		4,289			1,506		6,318
Impairment (recovery) of inventories		13		(18	)		-		(5	)
	$	54,357	$	104,315		$	10,073	$	168,745
	Year ended December 31, 2019
---	---	---	---	---	---	---	---	---
	Caylloma		San Jose		Lindero		Total
Direct mining costs	$	35,712	$	66,022	$	-	$	101,734
Salaries and benefits		7,557		7,483		-		15,040
Workers’ participation		717		5,294		-		6,011
Depletion and depreciation		13,621		30,737		-		44,358
Royalties and other taxes		750		3,385		-		4,135
Impairment of inventories		93		1,235		-		1,328
	$	58,450	$	114,156	$	-	$	172,606

For the year ended December 31, 2020, the depletion and depreciation includes $2,542 (December 31, 2019 - $2,262) of depreciation relating to right-of-use assets.

25.	General and Administration
	Years ended December 31,
---	---	---	---	---
	2020		2019
General and administration	$	20,834	$	22,315
Workers’ participation		1,808		1,477
		22,642		23,792
Share-based payments		12,444		6,013
	$	35,086	$	29,805
26.	Other Expenses
---	---
	Years ended December 31,
---	---	---	---	---	---
	2020			2019
Write-down (recovery) of investment in associates	$	(194	)	$	2,706
Write-off of mineral properties		878			1,554
Loss on disposal of assets and other write-downs		484			67
Write-off of accounts receivable		447			-
Other expenses (income)		(308	)		284
Care and maintenance costs related to COVID-19		3,121			-
	$	4,428		$	4,611

Page | 36

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

27.	Interest and Finance Costs<br>Net
	Years ended December 31,
---	---	---	---	---	---	---
	2020			2019
Interest income	$	1,217		$	1,838
Interest expense		(1,510	)		(857	)
Bank stand-by and commitment fees		(369	)		(415	)
Accretion expense		(751	)		(590	)
	$	(1,413	)	$	(24	)

Interest expense is net of $9,431 of interest which has been capitalized to the construction of the Lindero Mine (December 31, 2019- $5,259).

28.	Income Tax
(a)	Reconciliation<br> of Effective Tax Rate
---	---

Income tax expense differs from the amount that would be computed by applying the applicable Canadian statutory income tax rate to income before income taxes. The significant reasons for the differences are as follows:

	Years ended December 31,
	2020			2019
Net income before tax	$	58,955		$	43,971
Statutory tax rate		27.0	%		27.0	%
Anticipated income tax at statutory rates		15,918			11,872
Non-deductible expenditures		1,326			2,507
Differences between Canadian and foreign tax rates		1,284			1,353
Changes in estimate		(192	)		856
Effect of change in tax rates		436			345
Inflation adjustment		(10,634	)		(12,158	)
Impact of foreign exchange		15,081			11,773
Changes in deferred tax assets not recognized		5,909			(2,254	)
Mining taxes		4,656			3,241
Withholding taxes		3,670			2,367
Other items		(52	)		273
Total income tax expense	$	37,402		$	20,175
Total income tax represented by:
Current income tax expense	$	38,818		$	32,631
Deferred tax expense		(1,416	)		(12,456	)
	$	37,402		$	20,175

Page | 37

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(b)	Tax<br> Amounts Recognized in Profit or Loss
	Years ended December 31,
---	---	---	---	---	---	---
	2020			2019
Current tax expense
Current taxes on profit for the year	$	38,603		$	32,246
Changes in estimates related to prior years		215			385
	$	38,818		$	32,631
Deferred tax expense
Origination and reversal of temporary differences and foreign exchange rate	$	(1,500	)	$	(13,678	)
Changes in estimates related to prior years		(396	)		479
Effect of differences in tax rates		44			398
Effect of changes in tax rates		436			345
	$	(1,416	)	$	(12,456	)
Total Tax expense	$	37,402		$	20,175
(c)	Deferred<br> Tax Balances
---	---

The significant components of the recognized deferred tax assets and liabilities are:

	December 31,			December 31,
	2020			2019
Deferred tax assets:
Reclamation and closure cost obligation	$	13,080		$	9,530
Carried forward tax loss		17,729			14,020
Accounts payable and accrued liabilities		16,437			7,731
Deductibility of resource taxes		3,414			3,140
Lease obligations		5,769			5,317
Other		127			1
Total deferred tax assets	$	56,556		$	39,739
Deferred tax liabilities:
Mineral properties	$	(55,134	)	$	(44,825	)
Mining and foreign withholding taxes		(4,862	)		(5,281	)
Equipment and buildings		(1,928	)		(3,621	)
Convertible debenture		(1,544	)		(1,857	)
Inflation		(11,210	)		(4,939	)
Other		(1,377	)		(131	)
Total deferred tax liabilities	$	(76,055	)	$	(60,654	)
Net deferred tax liabilities	$	(19,499	)	$	(20,915	)
	2020			2019
Classification:
Deferred tax assets	$	-		$	-
Deferred tax liabilities		(19,499	)		(20,915	)
Net deferred tax liabilities	$	(19,499	)	$	(20,915	)

Page | 38

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

The Company’s movement of net deferred tax liabilities is described below:

	2020			2019
At January 1	$	20,915		$	31,444
Deferred income tax (recovery) expense through income statement		(1,416	)		(12,456	)
Deferred income tax expense through equity		-			1,927
At December 31	$	19,499		$	20,915
(d)	Unrecognized<br> Deferred Tax Assets and Liabilities
---	---

The Company recognizes tax benefits on losses or other deductible amounts where it is more likely than not that the deferred tax asset will be realized. The Company’s unrecognized deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consists of the following amounts:

	December 31,		December 31,
	2020		2019
Unrecognized deductible temporary differences and unused tax losses:
Non capital losses	$	90,192	$	72,156
Provisions		14,488		5,074
Share issue costs		3,894		2,174
Lease obligation		555		656
Derivative liabilities		1,111		894
Capital losses		255		2,496
Investments in equity securities and associates		1,534		1,397
Unrecognized deductible temporary differences	$	112,029	$	84,847

As at December 31, 2020, the Company has temporary differences associated with investments in subsidiaries for which an income tax liability has not been recognized as the Company can control the timing of the reversal of the temporary differences and the Company plans to reinvest in its foreign subsidiaries. The temporary difference associated with investments in subsidiaries aggregate as follow:

	December 31,		December 31,
	2020		2019
Mexico	$	248,880	$	198,214
Peru		62,414		54,618
(e)	Tax<br> Loss Carry Forwards
---	---

Tax losses have the following expiry dates:

			December 31,				December 31,
	Year of expiry		2020		Year of expiry		2019
Canada		2026 - 2040	$	90,300		2026 - 2039	$	84,200
Argentina		2021 - 2025		68,900		2020 - 2024		42,500
Mexico		2021 - 2030		367		2021 - 2029		369
Peru				-		2021		70

In addition, as at December 31, 2020, the Company has accumulated Canadian resource related expenses of $8,466 (December 31, 2019- $8,188) for which the deferred tax benefit has not been recognized.

Page | 39

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

29.	Segmented Information

The following summary describes the operations of each reportable segment:

•	Minera<br> Bateas S.A.C. (“Bateas”) – operates the Caylloma silver, lead and zinc<br> mine
•	Compania<br> Minera Cuzcatlan S.A. de C.V. (“Cuzcatlan”) – operates the San Jose<br> silver-gold mine
---	---
•	Mansfield<br> Minera S.A. (“Mansfield”) – construction of the Lindero mine
---	---
•	Corporate<br> – corporate stewardship
---	---

As a result of the Company electing to adopt IAS 16 Amendment, the Company recognized $20,297 of gold sales and $10,073 of related cost of sales on its income statement while the Company is preparing the Lindero Mine for its intended use (December 31, 2019 - $nil and $nil, respectively) (Note 4(t)(ii)).

	Year ended December 31, 2020
	Corporate			Bateas			Cuzcatlan			Mansfield			Total
Revenues from external customers	$	-		$	67,643		$	191,026		$	20,297		$	278,966
Cost of sales before depreciation and depletion		-			(40,056	)		(76,459	)		(8,452	)		(124,967	)
Depreciation and depletion in cost of sales		-			(14,301	)		(27,856	)		(1,621	)		(43,778	)
General and administration		(23,141	)		(3,891	)		(8,054	)		-			(35,086	)
Other income (expenses)		42			(1,215	)		(3,742	)		(12,982	)		(17,897	)
Finance items		(1,689	)		(698	)		(104	)		4,208			1,717
Segment (loss) profit before taxes		(24,788	)		7,482			74,811			1,450			58,955
Income taxes		(3,841	)		(4,312	)		(28,926	)		(323	)		(37,402	)
Segment (loss) profit after taxes	$	(28,629	)	$	3,170		$	45,885		$	1,127		$	21,553
	Year ended December 31, 2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Corporate			Bateas			Cuzcatlan			Mansfield			Total
Revenues from external customers	$	-		$	72,882		$	184,305		$	-		$	257,187
Cost of sales before depreciation and depletion		-			(44,829	)		(83,419	)		-			(128,248	)
Depreciation and depletion in cost of sales		-			(13,621	)		(30,737	)		-			(44,358	)
General and administration		(17,438	)		(4,569	)		(7,798	)		-			(29,805	)
Other income (expenses)		(4,402	)		(664	)		(1,928	)		(13,588	)		(20,582	)
Finance items		(80	)		(1,552	)		385			11,024			9,777
Segment (loss) profit before taxes		(21,920	)		7,647			60,808			(2,564	)		43,971
Income taxes		(511	)		(2,761	)		(18,032	)		1,129			(20,175	)
Segment (loss) profit after taxes	$	(22,431	)	$	4,886		$	42,776		$	(1,435	)	$	23,796
	December 31, 2020
---	---	---	---	---	---	---	---	---	---	---
	Corporate		Bateas		Cuzcatlan		Mansfield		Total
Total assets	$	27,328	$	125,286	$	280,602	$	622,122	$	1,055,338
Total liabilities	$	186,708	$	42,710	$	49,500	$	50,650	$	329,568
Capital expenditures	$	122	$	6,927	$	15,801	$	71,865	$	94,715
	December 31, 2019
---	---	---	---	---	---	---	---	---	---	---
	Corporate		Bateas		Cuzcatlan		Mansfield		Total
Total assets	$	60,134	$	116,501	$	252,100	$	507,330	$	936,065
Total liabilities	$	162,210	$	36,747	$	42,264	$	59,418	$	300,639
Capital expenditures	$	1,333	$	11,845	$	14,046	$	211,413	$	238,637

Page | 40

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

30.	Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (an exit price) regardless of whether that price is directly observable or estimated using another valuation technique.

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (interest rate, yield curves), or inputs that are derived principally from or corroborated observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

The following sets up the methods and assumptions used to estimate the fair value of Level 2 and Level 3 financial instruments.

Financial<br> asset or liability	Methods<br> and assumptions used to estimate fair value
Trade<br> receivables	Trade<br> receivables arising from the sales of metal concentrates are subject to provisional pricing, and the final selling price is<br> adjusted at the end of a quotational period. These are marked to market at each reporting date based on the forward price<br> corresponding to the expected settlement date.
Investments<br> in equity securities	Investments<br> in equity securities are recorded at fair value based on the quoted market price at the end of each reporting period with<br> changes in fair value through other comprehensive income.
Interest<br>rate swap, metal and fuel contracts	Fair<br> value is calculated as the present value of the estimated contractual cash flows. Estimates of future cash flows are based<br> on quoted swap rates, futures prices and interbank borrowing rates. These are discounted using a yield curve, and adjusted<br> for credit risk of the Company or the counterparty.
Convertible<br> Debentures	The<br> fair value of the convertible debentures represents both the debt and equity components of the convertible debentures and<br> has been determined with reference to the quoted market price of the convertible debentures.

During the years ended December 31, 2020, and 2019, there were no transfers of amounts between Level 1, Level 2, and Level 3 of the fair value hierarchy. The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. Fair value information for financial assets and financial liabilities not measured at fair value is not presented if the carrying amount is a reasonable approximation of fair value.

Page | 41

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

	Carrying value												Fair value
December 31, 2020	Fair Value <br> through OCI			Fair value<br> through<br> profit or loss			Amortized<br> cost			Total			Level 1		Level 2			Level 3		Carrying value<br> approximates<br> Fair Value
Financial assets measured at Fair Value
Investments in equity securities	$	1,059		$	-		$	-		$	1,059		$	1,059	$	-		$	-	$	-
Trade receivables concentrate and doré sales		-		$	26,309			-			26,309			-		26,309			-		-
	$	1,059		$	26,309		$	-		$	27,368		$	1,059	$	26,309		$	-	$	-
Financial assets not measured at Fair Value
Cash and cash equivalents	$	-		$	-		$	131,898		$	131,898		$	-	$	-		$	-	$	131,898
Other receivables		-			-			4,108			4,108			-		-			-		4,108
	$	-		$	-		$	136,006		$	136,006		$	-	$	-		$	-	$	136,006
Financial liabilities measured at Fair Value
Interest rate swap liability	$	(1,084	)	$	-		$	-		$	(1,084	)	$	-	$	(1,084	)	$	-	$	-
Metal forward sales contracts liability					(124	)					(124	)				(124	)				-
Fuel forward contracts liability					(52	)					(52	)				(52	)				-
	$	(1,084	)	$	(176	)	$	-		$	(1,260	)	$	-	$	(1,260	)	$	-	$	-
Financial liabilities not measured at Fair Value
Trade payables	$	-		$	-		$	(26,140	)	$	(26,140	)	$	-	$	-		$	-	$	(26,140	)
Payroll payable		-			-			(17,676	)		(17,676	)		-		-			-		(17,676	)
Credit facilities		-			-			(119,850	)		(119,850	)		-		(120,000	)		-		-
Convertible debentures		-			-			(38,766	)		(38,766	)		-		(78,315	)		-		-
Other payables		-			-			(22,784	)		(22,784	)		-		-			-		(22,784	)
	$	-		$	-		$	(225,216	)	$	(225,216	)	$	-	$	(198,315	)	$	-	$	(66,600	)

Page | 42

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

	Carrying value											Fair value
December 31, 2019	Fair Value <br> through OCI			Fair value<br> through<br> profit or loss		Amortized<br> cost			Total			Level 1	Level 2			Level 3		Carrying value<br> approximates<br> Fair Value
Financial assets measured at Fair Value
Trade receivables concentrate sales	$	-		$	33,642	$	-		$	33,642			$	33,642		$	-	$	-
	$	-		$	33,642	$	-		$	33,642			$	33,642		$	-	$	-
Financial assets not measured at Fair Value
Cash and cash equivalents	$	-		$	-	$	83,404		$	83,404			$	-		$	-	$	83,404
Other receivables		-			-		2,419			2,419				-			-		2,419
	$	-		$	-	$	85,823		$	85,823			$	-		$	-	$	85,823
Financial liabilities measured at Fair Value
Interest rate swap liability	$	(894	)	$	-	$	-		$	(894	)		$	(894	)	$	-	$	-
	$	(894	)	$	-	$	-		$	(894	)		$	(894	)	$	-	$	-
Financial liabilities not measured at Fair Value
Trade payables	$	-		$	-	$	(37,357	)	$	(37,357	)		$	-		$	-	$	(37,357	)
Payroll payable		-			-		(15,801	)		(15,801	)			-			-		(15,801	)
Share units payable		-			-		(5,075	)		(5,075	)			(5,075	)		-		-
Credit facilities		-			-		(109,430	)		(109,430	)			(110,000	)		-		-
Convertible debentures		-			-		(37,105	)		(37,105	)			(38,858	)		-		-
Other payables		-			-		(22,403	)		(22,403	)			-			-		(22,403	)
	$	-		$	-	$	(227,171	)	$	(227,171	)		$	(153,933	)	$	-	$	(75,561	)

All values are in US Dollars.

Page | 43

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

31.	Management of Financial<br>Risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and reviews the Company’s policies on an ongoing basis.

The Company is exposed to certain financial risks, including credit risk, liquidity risk, currency risk, metal price risk, and interest rate risk.

(a) Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. All our trade accounts receivables from concentrate sales are held with large international metals trading companies.

The Company’s cash and cash equivalents and short-term investments are held through large financial institutions. These investments mature at various dates within one year.

The Company’s maximum exposure to credit risk as at December 31, 2020 and 2019 is as follows:

	December 31,		December 31,
(Expressed in $ millions)	2020		2019
Cash and cash equivalents	$	131,898	$	83,404
Accounts receivable and other assets		76,555		47,707
Income tax receivable		-		2,553
Other non-current receivables		5,495		40,744
	$	213,948	$	174,408

The carrying amount of financial assets recorded in the financial statements represents the Company’s maximum exposure to credit risk. We limit our exposure to counterparty credit risk on cash and term deposits by only dealing with financial institutions with high credit ratings and through our investment policy of purchasing only instruments with a high credit rating. Almost all of our concentrate are sold to large well-known concentrate buyers.

(b)	Liquidity<br> Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We manage our liquidity risk by continually monitoring forecasted and actual cash flows. We have in place a planning and budgeting process to help determine the funds required to support our normal operating requirements and our development plans. We aim to maintain sufficient liquidity to meet our short term business requirements, taking into account our anticipated cash flows from operations, our holdings of cash and cash equivalents, and our committed and anticipated liabilities.

The Company manages its liquidity risk by continuously monitoring forecasted and actual cashflows. A rigorous reporting, planning and budgeting process are in place to help facilitate forecasting funding requirements, to support operations on an ongoing basis and expansion plans, if any.

Page | 44

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

As at December 31, 2020, the Company expects the following maturities of its financial liabilities, lease obligations, and other contractual commitments, excluding payments relating to interest:

	Expected payments due by year as at December 31, 2020
	Less than						After
	1 year		1 - 3 years		4 - 5 years		5 years		Total
Trade and other payables	$	65,275	$	-	$	-	$	-	$	65,275
Debt		-		120,000		46,000		-		166,000
Income taxes payable		23,808		-		-		-		23,808
Lease obligations		7,367		6,166		4,043		14,127		31,703
Other liabilities		-		2,523		-		-		2,523
Capital commitments, Lindero ^1^		558		-		-		-		558
Closure and reclamation provisions		433		5,444		10,692		23,781		40,350
	$	97,441	$	134,133	$	60,735	$	37,908	$	330,217
	Expected payments due by year as at December 31, 2019
---	---	---	---	---	---	---	---	---	---	---
	Less than						After
	1 year		1 - 3 years		4 - 5 years		5 years		Total
Trade and other payables	$	65,286	$	-	$	-	$	-	$	65,286
Debt		-		110,000		46,000		-		156,000
Income tax payable		12,400		-		-		-		12,400
Lease obligations		9,313		9,424		4,097		14,958		37,792
Other liabilities		-		499		-		-		499
Capital commitments, Lindero		24,467		-		-		-		24,467
Provisions		2,699		7,565		1,846		21,255		33,365
	$	114,165	$	127,488	$	51,943	$	36,213	$	329,809

Operating leases includes leases for office premises, computer equipment and other equipment used in the normal course of business.

(c)	Currency<br> risk

The functional and reporting currency for all entities within the consolidated group is the US dollar. We are exposed to fluctuations in foreign exchange rates as a portion of our expenses are incurred in Canadian dollars, Peruvian soles, Argentine peso and Mexican peso. A significant change in the foreign exchange rates between the United States dollar relative to the other currencies could have a material effect on the Company’s profit or loss, financial position, or cash flows. We have not hedged our exposure to foreign currency fluctuations.

Page | 45

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

As at December 31, 2020 and 2019, the Company was exposed to currency risk through the following assets and liabilities denominated in foreign currencies:


(In millions of local currency)			Peruvian<br> Soles			Mexican<br> Pesos			Argentine<br> Pesos
Cash and cash equivalents	1,402			9,658			3,117			2,326
Marketable securities	1,348			-			-			-
Trade and VAT receivables	53			3,563			108,569			3,281,760
Income tax receivable	-			6,915			-			-
VAT - long term receivable	-			-			67,542			-
Trade and other payables	(17,838	)		(28,046	)		(311,747	)		(764,331	)
Due to related parties	(12	)		-			-			-
Provisions, current	-			100			(4,871	)		(77,549	)
Income tax payable	-			(275	)		(297,083	)		-
Other liabilities	(207	)		-			(5,160	)		-
Provisions, non current	-			(754	)		(67,102	)		-
Total foreign currency exposure	(15,254	)		(8,839	)		(506,735	)		2,442,206
US equivalent of foreign currency exposure	(11,981	)		(2,439	)		(25,402	)		29,091

All values are in US Dollars.


(In millions of local currency)			Peruvian<br> Soles			Mexican<br> Pesos			Argentine<br> Pesos
Cash and cash equivalents	626			2,293			13,103			11,762
Trade and other receivables	310			1,827			3,972			117,539
Income tax receivable	-			8,451			-			-
Investments in associates	1,373			-			-			-
VAT - long term receivable	-			-			10,715			2,039,929
Trade and other payables	(8,549	)		(19,385	)		(214,679	)		(1,454,444	)
Due to related parties	(18	)		-			-			-
Provisions, current	-			-			(3,942	)		-
Income tax payable	-			-			(161,900	)		-
Other liabilities	-			-			(4,217	)		-
Provisions, non current	-			-			(87,459	)		-
Total foreign currency exposure	(6,258	)		(6,814	)		(444,407	)		714,786
US equivalent of foreign currency exposure	(4,818	)		(2,054	)		(23,582	)		11,815

All values are in US Dollars.

Sensitivity as to change in foreign currency exchange rates on our foreign currency exposure as at December 31, 2020 is provided below:

			Effect on foreign
			denominated
Currency	Change		items
Mexican Peso		+/-10%	$	2,309
Peruvian Soles		+/-10%	$	222
Argentinian Peso		+/-10%	$	2,645
Canadian Dollar		+/-10%	$	1,089

Page | 46

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

Due to the volatility of the exchange rate for Argentine Peso, the Company is applying additional measures in cash management to minimize potential losses arising from the conversion of funds. As discussed in note 31, with the capital controls in effect when the Company commences production at the Lindero Mine, the Company will be required to convert the equivalent value of foreign currency received from the proceeds of the sale of all gold doré from the Lindero Mine.

(d)	Metal<br> Price Risk

The Company is exposed to metal price risk with respect to the sales of silver, gold, lead, and zinc concentrates. The following table summarizes the effect on provisionally priced sales and accounts receivables of a 10% change in metal prices from the prices used at December 31, 2020:

Metal	Change	Effect on Sales
Silver	+/-10%	$	1,338
Gold	+/-10%	$	561
Lead	+/-10%	$	195
Zinc	+/-10%	$	253

During the year ended December 31, 2020, the Company recognized positive sales adjustments of $3,307 (December 31, 2019 – $368) as a result of changes in metal prices on the final settlement or during the quotational period.

From time to time, the Company mitigates the price risk associated with its base metal production by entering into forward sale and collar contracts for some of its forecasted base metal production and non-metal commodities.

During December 2020, the Company entered into the following contracts:

•	zero-cost collar for 12,300 tonnes of zinc with a floor price of $2,600 per tonne and a cap of<br>$2,900 per tonne, maturing monthly from January 1, 2021 to December 31, 2021;
•	zero-cost collar for 720,000 gallons of heating oil with a floor price of $1.40 per gallon and<br>a cap of $1.6150 per gallon, maturing monthly from January 1, 2021 to December 31, 2021;
---	---
•	zero-cost collar for 1,680,000 gallons of jet fuel with a floor price of $1.30 per gallon and a<br>cap of $1.4775 per gallon, maturing monthly from January 1, 2021 to December 31, 2021;
---	---
•	forward- swap for 720,000 gallons of heating oil with a price of $1.52 per gallon, maturing monthly<br>from January 1, 2022 to December 31, 2022; and
---	---
•	forward- swap for 1,680,000 gallons of jet fuel with a price of $1.438 per gallon, maturing monthly<br>from January 1, 2022 to December 31, 2022.
---	---

On February 11, 2021, the Company entered into a zero-cost collar for 6,237 tonnes of lead with a floor price of $2,000 per tonne and a cap of $2,125 per tonne, maturing monthly from February 1, 2021 to December 31, 2022.

(e)	Interest<br> Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Currently, the Company’s interest rate exposure mainly relates to interest earned on its cash, cash equivalent, and short-term investment balances, interest paid on its LIBOR-based debt, and the mark-to-market value of derivative instruments which depend on interest rates. The Company has entered into an interest rate swap for the $40,000 non-revolving credit facility to mitigate the interest rate risk on its debt.

(f)	Capital<br> Management

The Company’s objective when managing its capital is to maintain its ability to continue as a going concern while at the same time maximizing the growth of its business and providing returns to its shareholders. The Company manages its capital structure and makes adjustments based on changes to its economic environment and the risk characteristics of the Company’s assets.

Effective December 23, 2019, changes to Argentina’s tax laws proposed by the new Argentine Government were implemented. The changes ratified and extended legislation which was to expire on December 31, 2019 and allow the Argentine Central Bank to regulate funds coming into and flowing out of Argentina in order to maintain stability and support the economic recovery of the country. These capital controls are in effect until December 31, 2025 and have the effect of: requiring exporters to convert the equivalent value of foreign currency received from the export into Argentine Pesos; requiring the prior consent of the Argentine Central Bank to the payment of cash dividends and distributions of currency out of Argentina; requiring Argentine companies to convert foreign currency loans received from abroad into Argentine Pesos; and restricting the sale of Argentine Pesos for foreign currency.

The Company’s capital requirement is effectively managed based on the Company having a thorough reporting, planning and forecasting process to help identify the funds required to ensure the Company is able to meet its operating and growth objectives.

Page | 47

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

The Company’s capital structure consists of equity comprising of share capital, reserves and retained earnings as well as debt facilities, equipment financing obligations less cash, cash equivalents and short-term investments.

	December 31,			December 31,
	2020			2019
Equity	$	725,770		$	635,426
Debt		158,616			146,535
Lease obligations		19,497			23,879
Less: cash and cash equivalents		(131,898	)		(83,404	)
	$	771,985		$	722,436

As discussed above, the Company operates in Argentina where the new Argentine government has ratified and extended legislation to December 31, 2025 to allow the Argentine Central Bank to regulate funds coming into and flowing out of Argentina. Other than the restrictions related to these capital controls and complying with the debt covenants under the credit facilities, the Company is not subject to any externally imposed capital requirements. As at December 31, 2020 and 2019, the Company was in compliance with its debt covenants.

32.	Supplemental Cashflow Information

The changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes for the years as set out below are as follows:

	Bank loan			Convertible <br> debentures			Lease<br> obligations			Derivatives
As at December 31, 2018	$	69,302		$	-		$	16,082		$	224
Additions		40,000			46,000			14,944			-
Interest		128			347			1,848			-
Payments		-			-			(9,048	)		-
Transaction costs		-			(2,101	)		-			-
Equity component		-			(7,141	)		-			-
Foreign exchange		-			-			53			-
Changes in fair value		-			-			-			670
As at December 31, 2019		109,430			37,105			23,879			894
Additions		65,000			-			2,684			176
Terminations		-			-			(497	)		-
Interest		420			1,661			1,920			563
Payments		(55,000	)		-			(8,438	)		(560	)
Foreign exchange		-			-			(51	)		-
Changes in fair value		-			-			-			187
As at December 31, 2020	$	119,850		$	38,766		$	19,497		$	1,260

The significant non-cash financing and investing transactions during the year are as follows:

	December 31,		December 31,
	2020		2019
Mineral properties, plant and equipment changes in closure and reclamation provision	$	(9,339)	$	(14,807)
Fair value of stock options allocated to share capital upon exercise	$	427	$	-
Additions on right of use assets	$	(2,715)	$	(22,260)
Fair value of share units allocated to share capital upon settlement	$	3,081	$	1,678

Page | 48

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

33.	Contingencies and Capital<br>Commitments
(a) Caylloma<br> Letter of Guarantee
---

The Caylloma Mine closure plan was updated in December 2018, with total undiscounted closure costs of $11,719 consisting of progressive closure activities of $3,774, final closure activities of $7,156, and post-closure activities of $789. Pursuant to the closure regulations, the Company is required to provide a guarantee of $9,933 to the Peruvian Government for 2020.

In January 2020, the Company established a security bond in the amount of $1,539 and a bank letter of guarantee in the amount of $8,394, in compliance with local regulation and to collateralize Bateas’ mine closure plan. The security bond and the letter of guarantee expire on January 28, 2022.

In December 2020, the Company updated the closure plan which was submitted to the Mining Ministry for approval. The Company expects the approval to occur during 2021.

(b) San Jose Letter of Guarantee

The Company has established three letters of guarantee in the aggregate amount of $1,168 to fulfill its environmental obligations under the terms and conditions of the Environmental Impact Statements issued by the Secretaria de Medio Ambiente y Recursos Naturales (“SEMARNAT”) in 2009 in respect of the construction of the San Jose mine, and in 2017 and 2020 with respect to the expansion of the dry stack tailings facility at the San Jose mine. The letters of guarantee expire on December 31, 2023, June 15, 2022, and May 13, 2021, respectively.

(c) Other<br> Commitments

As at December 31, 2020, the Company had capital commitments of $558, $386, and $134 for civil work, equipment purchases and other services at the Lindero Mine and the Caylloma and San Jose Mines, respectively, which are expected to be expended within one year.

(d) Tax<br> Contingencies

Peru

The Company was assessed $1,199 (4,343 Peruvian Soles), including interest and penalties of $664 (2,405 Peruvian Soles), for the 2010 tax year by SUNAT, the Peruvian tax authority, with respect to the deduction of certain losses arising from derivative instruments. The Company has applied to the Peruvian tax court to appeal the assessment.

On January 22, 2019, the Peruvian tax court reaffirmed SUNAT’s position and denied the deduction. The Company believes the assessment is inconsistent with Peruvian tax law and that it is probable the Company will succeed on appeal through the Peruvian legal system. The Company has paid the disputed amount in full and has initiated proceedings through the Peruvian legal system to appeal the decision of the Peruvian tax court.

As at December 31, 2020, the Company has recorded the amount paid of $1,199 (4,343 Peruvian Soles) in long-term receivables and other, as the Company believes it is probable that the appeal will be successful (note 12).

Page | 49

Fortuna Silver Mines Inc.

Notes to Condensed Interim Consolidated FinancialStatements

For the years ended December 31, 2020 and 2019

(Presented in thousands of US dollars – unless otherwise noted)

(e) SGM Royalty

In 2017 the Mexican Geological Service (“SGM”) advised the Company that a previous owner of one of the Company’s mineral concessions located at the San Jose Mine in Oaxaca, Mexico had granted the SGM a royalty of 3% of the billing value of minerals obtained from the concession. The Company, supported by legal opinions from three independent law firms, has previously advised the Mexican mining authorities that it is of the view that no royalty is payable, and in 2018 initiated administrative and legal proceedings (the “Administrative Proceedings”) in the Mexican Federal Administrative Court (“FAC”) against the Dirección General de Minas (“DGM”) to remove reference to the royalty on the title register. The proceedings are progressing in accordance with the procedures of the FAC.

In January 2020, the Company received notice from the DGM seeking to cancel the mining concession if the royalty, in the Mexican peso equivalent of $30,000 plus VAT (being the amount of the claimed royalty from 2011 to 2019), was not paid before March 15, 2020. In February 2020, the Company initiated legal proceedings (the “Amparo Proceedings”) against the DGM in the Juzgado Séptimo de Distrito en Materia Administrativa en la Ciudad de México (“District Court”) to contest and extinguish the cancellation procedure on the grounds that the royalty is not valid, and also to stay the cancellation process. The District Court in Mexico City admitted the Company’s legal proceedings on March 2, 2020 and granted a permanent stay of execution, which protects the Company from the cancellation of the concession until a final non-appealable resolution is reached on the legality of the DGM’s cancellation procedure.

On November 27, 2020, the District Court at first instance found that the Company suffered no harm from the initiation of the cancellation procedure and dismissed the proceedings (the “Procedural Finding”) without deciding on the merit of the Amparo Proceedings and on the validity of the royalty. The Procedural Finding does not affect the permanent stay of execution, which remains in place. The Company’s Mexican advisors are of the view that the decision of the District Court is flawed. The Company’s legal position with respect to the disputed royalty remains unchanged. The Company intends to vigorously defend its position and has filed an appeal to the Procedural Finding with the Collegiate Court in Mexico. The previously obtained stay of execution protects the Company from the cancellation of the concession and remains in place until all avenues of appeal have been exhausted. In the event that the Company does not prevail in the appeal, it may be required to pay the disputed royalty in order to preserve the mining concession. If the Company is required to pay the royalty, it will do so from available capital resources.

The Company has determined that it is more likely than not that it will succeed in these proceedings; therefore, no provision has been recorded as at December 31, 2020 and December 31, 2019.

(f) Other<br> Contingencies

The Company is subject to various investigations, royalties and other claims, legal, labor, and tax proceedings covering matters that arise in the ordinary course of business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably for the Company. Certain conditions may exist as of the date these interim financial statements are issued that may result in a loss to the Company. None of these matters is expected to have a material effect on the results of operations or financial conditions of the Company.

Page | 50

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

YEAR ENDED DECEMBER 31, 2020

As of March 9, 2021

(Monetary amounts are expressed in US dollars, unless otherwise indicated)

Tableof Contents

	Page
Business of the Company	3
Full Year 2020 Financial and Operating Highlights	4
Lindero Mine	8
2021 Guidance and Outlook	9
Financial Results	14
Results of Operations	18
Quarterly Information	23
Liquidity and Capital Resources	25
Financial Instruments	26
Related Party Transactions	27
Amendments to Accounting Standards That Have Been Issued	27
Risks and Uncertainties	28
Critical Accounting Estimates, Assumptions, and Judgements	35
Share Position & Outstanding Options & Equity Based Share Units	39
Controls and Procedures	40
Non-GAAP Financial Measures	40
Cautionary Statement on Forward-Looking Statements	47
Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources	50

FortunaSilver Mines Inc.

Business of the Company

Fortuna Silver Mines Inc. (“Fortuna” or the “Company”) is engaged in precious and base metal mining and related activities in Latin America, including exploration, extraction, and processing. The Company:

•	operates<br> the Caylloma silver, lead and zinc mine (“Caylloma”) in southern Peru,
•	operates<br> the San Jose silver and gold mine (“San Jose”) in southern Mexico, and
---	---
•	is<br> in the commissioning phase of its 18,750 tpd open pit gold heap leach mine (“Lindero<br> Mine”) in northern Argentina.
---	---

The Company only processes ore extracted from its own mining concessions and does not purchase ore or mineral concentrates from third parties either for processing, refining, or trading.

Fortuna is a publicly traded company incorporated and domiciled in British Columbia, Canada. Its common shares are listed on the New York Stock Exchange under the trading symbol FSM, on the Toronto Stock Exchange under the trading symbol FVI, and on the Frankfurt Stock Exchange under the trading symbol F4S.F.

The Company’s registered office is located at Suite 650 - 200 Burrard Street, Vancouver, British Columbia, Canada V6C 3L6.

The consolidated financial statements include wholly-owned subsidiaries of the Company; the most significant of which at December 31, 2020 are presented in the following table:

Name	Location	Ownership	Principal Activity
Minera<br> Bateas S.A.C. (“Bateas”)	Peru	100%	Caylloma Mine
Compania<br> Minera Cuzcatlan S.A. de C.V. (“Cuzcatlan”)	Mexico	100%	San Jose Mine
Mansfield<br> Minera S.A. (“Mansfield”)	Argentina	100%	Lindero<br> Mine

This Management’s Discussion and Analysis (“MD&A”) is intended to help readers understand the significant factors that affect the performance of Fortuna and its subsidiaries, and those that may affect future performance. This MD&A has been prepared as of March 9, 2021 and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2020 and 2019. The Company’s significant accounting policies are set out in Note 4 of the December 31, 2020 and 2019 audited consolidated financial statements. All amounts in this MD&A are expressed in United States dollars, unless otherwise indicated. Certain amounts shown in tables within this MD&A may not add exactly to the totals due to rounding.

The Company prepares its annual financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

In this MD&A, we refer to various Non-GAAP Financial Measures. These measures are used by us to manage and evaluate the operating performance of our mines and their ability to generate cash flows and these measures are widely reported in the mining industry as benchmarks for performance. Refer to the discussion under the heading “Non-GAAP Financial Measures”.

Additional information about the Company, including our Annual Information Form, is available on SEDAR at www.sedar.com.

Thisdocument contains forward-looking statements. Refer to the cautionary language under the heading “Cautionary Statement onForward-Looking Statements.”

Management’s Discussion and Analysis, page 3

FortunaSilver Mines Inc.

Full Year 2020 Financial and Operating Highlights

Sales were $279.0 million, an increase of 8% from the $257.2 million reported in the year ended December 31, 2019 (“2019”).

Mine operating income was $110.2 million, an increase of 30% from the $84.6 million reported in 2019.

Operating income was $57.2 million, an increase of 67% from the $34.2 million reported in 2019.

Net income was $21.6 million or $0.12 per share, a 9% decrease from the $23.8 million or $0.15 per share reported in 2019.

Adjusted net income (refer to Non-GAAP Financial Measures) was $31.8 million compared to $28.4 million in 2019.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) was $112.6 million compared to $95.4 million reported in 2019.

Free cash flow from ongoing operations (refer to Non-GAAP Financial Measures) was $78.9 million compared to $34.5 million reported in 2019.

Following the first gold pour at the Lindero Mine in October 2020, the Company recognized $20.3 million in gold sales from commissioning activities at the mine. In the fourth quarter of 2020, the Company elected to early adopt amendments to IAS 16, Property, Plantand Equipment – Proceeds before Intended Use, which clarifies the accounting for the net proceeds from selling gold doré produced during the commissioning of the Lindero Mine. The amendment prohibits companies from applying the previous guidance of deducting amounts received from selling items produced from the cost of property, plant and equipment while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items are now recognized in profit or loss.

COVID-19

During the year ended December 31, 2020, our operations were negatively impacted by the spread of the COVID-19 pandemic. Operations at the San Jose Mine were suspended for 54 days in Q2 as a result of a government mandated national quarantine in Mexico, and construction activities were temporarily suspended at the Lindero Mine on March 19, 2020 for a period of 60 days due to a government mandated period of national social isolation in Argentina. In response to a period of social isolation mandated by the Peruvian government in Q1 and Q2, operations were able to continue at the Caylloma mine, initially by drawing ore from the coarse ore stockpile during Q1, and as the stockpile decreased the mine was subsequently re-started in Q2 using a reduced taskforce in compliance with the applicable Peruvian Government requirements. However, operations were voluntarily suspended at the Caylloma Mine in Q3 for 21 days, to among other things sanitize and disinfect the mine and make infrastructure improvements to accommodate social distancing guidelines. As a result of the temporary suspension of operations at both the San Jose and Caylloma mines, the Company incurred $2.9 million in care and maintenance costs.

The Company is managing the necessary country-by-country restrictions in order to assist in the protection of those most vulnerable. Each of the Company’s mine sites is, at the date of this MD&A, operating with a reduced workforce. Worker availability continues to be a challenge but is currently being mitigated by increasing the use of temporary workers and contractors. Health protocols are in place at each mine site for control, isolation and quarantine, as necessary, and these continue to be reviewed and adjusted accordingly based on the circumstances at each location. The Company’s focus is the health and safety of the workforce and on measures to prevent and manage the transmission of COVID-19 amongst the workforce and the communities in which the Company operates.

Management’s Discussion and Analysis, page 4

FortunaSilver Mines Inc.

As at the date of this MD&A, the number of COVID-19 cases and deaths in the countries where our mines operate continues to either ascend or remain at an elevated level. Until the number of cases and death rate starts to flatten and decline, there is no certainty that the governments may not mandate another round of extreme measures, including the suspension of business activities, which could include mining.

Outbreaks of COVID-19 in areas where we operate, further restrictive directives of government and public health authorities, delays in our supply chain, restrictions which may impact access to our mine sites, restrictions that may affect our ability to transport and ship gold doré and or metal concentrates, restrict access to processing and refinery facilities, cause disruptions to our supply chain, impediments to market logistics, and further suspensions of operations or curtailment of commissioning activities at the Company’s mines remain a significant risk to our business and operations.

As the situation with respect to the COVID-19 pandemic is dynamic, the Company was unable to determine the impact of COVID-19 on its production and cost guidance for 2020, and on April 2, 2020, the Company withdrew its production and cost guidance for the remainder of 2020. The production and cost guidance was reinstated for 2021 (refer to Fortuna news release dated January 19, 2021).

Operating Highlights

							Years ended
							December 31,
Consolidated Metrics		2019		% Change			2020		2019		% Change
Key Indicators
Silver
Metal produced (oz)	1,912,737		2,251,917		(15	)%		7,133,717		8,809,767		(19	)%
Metal sold (oz)	1,985,783		2,221,330		(11	)%		7,194,362		8,798,054		(18	)%
Realized price (/oz)	24.43		17.33		41	%		21.18		16.20		31	%
Gold
Metal produced (oz)	25,357		12,279		107	%		55,349		50,525		10	%
Metal sold (oz)	23,297		12,157		92	%		53,375		50,374		6	%
Realized price (/oz)	1,864		1,483		26	%		1,805		1,393		30	%
Lead
Metal produced (000’s lbs)	8,426		7,441		13	%		29,628		28,746		3	%
Metal sold (000’s lbs)	8,386		7,559		11	%		29,582		28,969		2	%
Zinc
Metal produced (000’s lbs)	12,434		11,614		7	%		45,545		45,600		(0	)%
Metal sold (000’s lbs)	12,154		11,974		2	%		45,154		45,781		(1	)%

All values are in US Dollars.

Silver and gold production for the three months ended December 31, 2020 decreased 15% and increased 107%, respectively, to 1,912,737 ounces and 25,357 ounces over the same period in 2019. The lower silver production was due mainly to lower head grades at San Jose. The higher gold production was driven by the commissioning of the Lindero Mine which produced 13,435 ounces of gold doré during the quarter. Lead and zinc production increased by 13% and 7%, respectively, to 8.4 million pounds of lead and 12.4 million pounds of zinc. The increase in lead and zinc production was due to higher mill throughput and higher head grades at the Caylloma Mine.

Silver and gold production for the year ended December 31, 2020 decreased 19% and increased 10%, respectively, to 7,133,717 ounces and 55,349 ounces over 2019. The silver and gold production at San Jose decreased 22% and 23% due to lower head grades and the impact to production from a government mandated 54-day temporary suspension of mining operations due to the COVID-19 pandemic. Offsetting lower gold production at San Jose was the 13,435 ounces of gold doré produced during the commissioning of the Lindero Mine. Lead production increased 3% to 29.6 million pounds and zinc production was 45.5 million pounds, which was flat year-over-year.

Management’s Discussion and Analysis, page 5

FortunaSilver Mines Inc.

Selected Financial Information

							Years ended
							December 31,
Consolidated Financial<br> Metrics		2019		%<br> Change			2020		2019		2018
(Expressed in millions except per share information)
Sales	103.5		69.0		50	%		279.0		257.2		263.3
Mine operating income	46.9		23.4		100	%		110.2		84.6		96.6
Operating income	28.2		9.0		213	%		57.2		34.2		61.6
Net income	18.6		19.0		(2	)%		21.6		23.8		34.0
Earnings per share - basic	0.10		0.12		(17	)%		0.12		0.15		0.21
Adjusted net income1	23.0		10.9		111	%		31.8		28.4		38.4
Adjusted EBITDA1	44.8		25.1		78	%		112.6		95.4		113.9
Net cash provided by operating activities	31.3		16.4		91	%		93.4		60.2		83.5
Free cash flow from ongoing operations1	34.5		6.4		439	%		78.9		34.5		55.2
Capex
Sustaining	8.8		6.2		42	%		19.5		20.4		24.0
Non-sustaining	1.0		0.9		11	%		1.2		2.0		3.3
Lindero	10.5		26.8		(61	)%		46.8		188.3		80.0
Brownfields	1.0		0.9		11	%		3.8		4.8		8.6
							Dec 31, 2020		Dec 31, 2019		Dec 31, 2018
Cash and cash equivalents								131.9		83.4		163.3
Total assets								1,055.3		936.1		786.5
Debt								158.6		146.5		69.3
Shareholders’ equity								725.8		635.4		602.8

All values are in US Dollars.

Notes:

^1^ Refer to Non-GAAP financial measures.

Sales for the three months ended December 31, 2020 were $103.5 million, a 50% increase from the $69.0 million reported in the same period in 2019. The increase was driven by a 41% and 26% increase in the prices of silver and gold and $20.3 million from the sale of 10,935 ounces of gold from the Lindero Mine. The Company recognized gold sales and related production costs from the Lindero Mine after the Company elected to early adopt amendments to IAS 16, Property, Plant and Equipment – Proceeds before IntendedUse, which is effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. Under this amended standard, a company is required to recognize sales proceeds and related cost of items produced in the income statement while the company is preparing the asset for its intended use.

Sales for the year ended December 31, 2020 increased 8% to $279.0 million compared to $257.2 million reported for the same period in 2019. The increase was due mainly from the sale of $20.3 million of gold doré produced during the commissioning of the Lindero Mine, which is discussed above.

Mine operating income for the three months ended December 31, 2020 was $46.9 million, a $23.5 million increase from the $23.4 million reported in the same period in 2019. Higher precious metal prices and commissioning activities at the Lindero Mine that generated $10.2 million of mine operating income were the primary factors for the increase.

Mine operating income for the year ended December 31, 2020 increased 30% to $110.2 million compared to $84.6 million reported in 2019. The increase in mine operating income was driven by higher precious metal prices and the recognition of $10.2 million of mine operating income from the Lindero Mine after the Company elected to early adopt amendments to the accounting standard IAS 16, Property, Plant and Equipment – Proceeds before Intended Use. The Lindero Mine generated $20.3 million of proceeds from the sale of gold doré produced during the commissioning of the mine.

Management’s Discussion and Analysis, page 6

FortunaSilver Mines Inc.

Operating income for the three months ended December 31, 2020 was $28.2 million, a $19.2 million increase from the $9.0 million reported in the same period in 2019. The higher mine operating income, as discussed above, was partially offset by a $4.7 million foreign exchange loss mainly from the devaluation of the Argentine Peso and the Mexican Peso compared to a $1.4 million loss in 2019, as well as higher general and administrative expenses of $2.6 million related mostly to the impact of an increase in the Company’s share price on the value of the cash-settled share awards.

Operating income for the year ended December 31, 2020 was $57.2 million, a $23.0 million increase from the $34.2 million reported in the same period in 2019. The higher mine operating income was partially offset by a $5.3 million increase in general and administrative expenses as share-based payments expense increased $6.4 million over 2019 due to a 98% year-over-year increase in the Company’s share price which directly impacts the value of the outstanding cash-settled share units.

Net income for the three months ended December 31, 2020 was $18.6 million, a $0.4 million decrease from the $19.0 million reported in the same period in 2019. The comparable period in 2019 included an investment gain of $11.0 million compared to $nil in the quarter ended December 31, 2020 and a $7.2 million deferred tax recovery which resulted in a 5% effective rate compared to 33% for the fourth quarter of 2020.

Net income for the year ended December 31, 2020 was $21.6 million, a $2.2 million decrease from the $23.8 million reported in 2019. The decrease was due primarily to lower investment gains and lower deferred tax recoveries of $7.8 million and $11.0 million, respectively.

Adjusted net income (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2020 was $23.0 million, a $12.1 million increase from the $10.9 million reported in the same period in 2019. The increase was due primarily to the addback of $3.2 million of foreign exchange losses compared to an addback of $1.0 million in 2019 relating to the recoverable value added tax paid on the Lindero construction. The comparable period in 2019 also included deduction of $11.0 million related to investment gains in Argentina compared to $Nil for 2020.

Adjusted net income (refer to Non-GAAP Financial Measures) for the year ended December 31, 2020 was $31.8 million compared to $28.4 million in 2019.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2020 was $44.8 million compared to $25.1 million reported in the same period in 2019 due primarily to higher silver and gold prices and the early adoption of amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use, relating to the Lindero Mine, which collectively, increased mine operating income by $23.7 million and partially offset by higher share-based payments expense.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) for the year ended December 31, 2020 was $112.6 million compared to $95.4 million in 2019. As explained above, the increase was due primarily to the increases in the prices of silver and gold as well as the impact to mine operating income from the early adoption of amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use.

Free cash flow from ongoing operations (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2020 was $34.5 million compared to $6.4 million in the same period in 2019. The increased free cashflow was driven mainly by higher precious metal prices and positive changes in working capital at the San Jose Mine related to trade receivables and recovery of value-added tax.

Management’s Discussion and Analysis, page 7

FortunaSilver Mines Inc.

Free cash flow from ongoing operations (refer to Non-GAAP Financial Measures) for the year ended December 31, 2020 was $78.9 million compared to $34.5 million. The increase was driven by higher precious metal prices, which contributed to increased cashflow from operations.

As at December 31, 2020, the Company had cash and cash equivalents of $131.9 million (December 31, 2019 – $83.4 million), an increase of $48.5 million since the beginning of the year. For the full year 2020, the Company generated $93.4 million of net cash from operations, completed an equity financing for gross proceeds of $69.0 million, drew down $65.0 million and repaid $55.0 million of the revolving credit facility, and received $1.0 million in proceeds from the exercise of stock options. Uses of cash include $100.3 million on construction, capitalized borrowing costs, and value added taxes for the Lindero Mine. Spending on exploration, mineral properties, plant and equipment totaled $24.1 million, excluding Lindero construction.

Lindero Mine

Construction at Lindero is substantially complete as of the end of December 2020 with total construction cost projected to be within the $320 million guidance (refer to Fortuna news release dated May 8, 2020), including remaining capital expenditures of $2.0 million to be allocated to finalize construction of ancillary facilities and to commissioning activities. During 2020, sustaining capital of $1.7 million was spent mainly on the purchase of spare parts for major equipment.

Construction activities were temporarily suspended on March 19, 2020 for a period of 60-days due a government mandated period of national social isolation in Argentina to contain the spread of the coronavirus.

The following table summarizes the spending on construction and pre-production costs for the year ended December 31, 2020 at the Lindero Mine:

	Cumulative to		Twelve months<br><br>ended
(Expressed in $ millions)	December 31, 2019		December 31, 2020			Total
Construction capital expenditures		268.2		46.8			315.0
Contractor advances and deposits on equipment, net of transfers		10.5		(9.8	)		0.7
Total Construction Spending		278.7		37.0			315.7
Preproduction costs		10.8		21.8			32.6
Spare parts, supplies and materials inventory		6.2		12.9			19.1
Other costs ^1^		4.5		0.2			4.7
Total Lindero Mine Costs		300.2		71.9			372.1

Note 1: Consists of Argentina financial transaction taxes, deposits, and other costs

During the fourth quarter of 2020, the Company adopted amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use, on a modified retrospective basis. As a result of the adoption, the Company reclassified $21.9 million (December 31, 2019 - $2.8 million) of pre-production costs related to the production of ore stockpile and operating supplies spent during the construction period to September 30, 2020.

There were $7.7 million of construction and other trade payables outstanding as at December 31, 2020.

GoldProduction and Sales

The Company produced 13,435 ounces of gold at the Lindero Mine in 2020, which is in line with its revised production forecast of between 13,000 to 15,000 ounces (refer to Fortuna news release dated November 12, 2020). Gold sales for the fourth quarter of 2020 and for the year totaled 10,935 ounces. The Company elected to early adopt amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use. As a result, the Company recognized gold sales of $20.3 million and related cost of sales of $10.1 million in the income statement.

Management’s Discussion and Analysis, page 8

FortunaSilver Mines Inc.

Mining

A total of 3.78 million tonnes of ore were mined in 2020 at a strip ratio of 1.05:1. Mining and equipment performance are in line with design parameters and support the operation´s processing capacity of 18,750 tonnes per day.

Processing

During 2020, a total of 1.6 million tonnes of coarse ore were placed on the heap leach pad at an average gold head grade of 1.00 g/t containing a total of 52,000 ounces of gold. Average ore crushing throughput rate for the year was 8,831 tonnes per day. Recovery of gold from the heap leach was in line with expectations, based on metallurgical testing of coarse ore with an estimated 16,687 ounces of gold leached as of December 31, 2020.

In the fourth quarter of 2020, primary and secondary crusher throughput averaged 10,406 tonnes per day with the ramp up schedule progressing according to plan, achieving 75% of the 18,750 tonnes per day design capacity in December 2020. The operation team is fine-tuning the crushing system with a focus on screens, chutes, and belt conveyors in order to ramp up crushing throughput to the design capacity.

Commissioning of the HPGR, agglomeration plant, and stacking system was completed in mid-December with all systems in the ramp up phase. The operation is transitioning from placing coarse ore on the heap leach pad with trucks to placing tertiary crushed ore via the stacking system, which is expected to increase heap gold recovery from an estimated 50% to 78% over a 90-day period based on metallurgical column test results. As at the end of February 2021, the stacking system was operating at 23% of design capacity.

The SART plant was commissioned in mid-December and the ramp up phase commenced with the circulation of 80 cubic meters per hour of pregnant solution, which is approximately 20% of design capacity. Once design parameters are achieved, copper concentration in the pregnant solution will be reduced allowing the ADR plant to operate at design parameters.

At the end of the first quarter of 2021, the Company will provide an assessment on the status of the ramp up to commercial production.

2021 Guidance and Outlook

Production and Cost Guidance

The Company’s production and cost guidance set out below for 2021 assumes that operations will continue during the year without any major interruptions related to COVID-19. At each of our mine sites, health protocols are in place for control, isolation and quarantine, as necessary, and these continue to be reviewed and adjusted accordingly based on the circumstances at each location. The Company’s focus is the health and safety of the workforce and on measures to prevent and manage the transmission of COVID-19 amongst the workforce and the communities in which Fortuna operates.

	Silver	Gold	Lead	Zinc
Mine	(Moz)	(koz)	(Mlbs)	(Mlbs)	Cash Cost^1^	AISC^1^
Silver					(US$/t)	(US$/oz Ag Eq)
San Jose, Mexico	5.8 - 6.5	38 - 42	-	-	68 - 75	12.2 - 14.5
Caylloma, Peru	1.0 - 1.1	-	29 - 32	44 - 49	85 - 93	19.4 - 23.0
Gold					(US$/oz Au)	(US$/oz Au)
---	---	---	---	---	---	---
Lindero^2,3^, Argentina	-	140 - 160	-	-	365 - 430	730 - 860
Consolidated Total	6.8 - 7.6	178 - 202	29 - 32	44 - 49

Notes:

1.	All-in<br> sustaining cost (AISC) is a non-GAAP financial measure, refer to Forward-looking Statements<br> regarding non-GAAP financial measures; AISC includes production cash cost, commercial<br> and government royalties, mining tax, export duties, if applicable, workers’ participation,<br> if applicable, subsidiary G&A, sustaining capital expenditures and Brownfields exploration<br> and is estimated at metal prices of $1,800/oz Au, $22 /oz Ag, $1,900/t Pb, and $2,300/t<br> Zn.
2.	Totals<br> may not add due to rounding.
---	---
3.	Refer<br> to Lindero Mine 2021 Cost Guidance section below.
---	---

Management’s Discussion and Analysis, page 9

FortunaSilver Mines Inc.

2021 All-In-Sustaining Cash Cost Per Silver and Gold Ounce Calculations

Silver Mines – All-in-Sustaining Cash Cost per Silver Ounce Equivalent
$/oz Ag	San Jose		Caylloma
Cash cost	$	8.2<br> - 9.7	$	13.4<br> - 15.9
Adjustments:
Commercial and government<br> royalties and mining tax		0.5<br> - 0.6		0.3<br> - 0.3
Worker’s participation		0.7<br> - 0.8		0.1<br> - 0.2
General and administrative<br> expenses		0.6<br> - 0.7		0.9<br> - 1.1
Sustaining capital<br> expenditures		1.3 - 1.5		3.6<br> - 4.2
Brownfields<br> exploration expenditures		1<br> - 1.1		1.1<br> - 1.3
All-in-sustaining cash cost per payable ounce of silver	$	12.2 - 14.5	$	19.4 - 23.0
Gold Mine – All in Sustaining Cash Cost per Gold Ounce Equivalent
---	---	---
$/oz Au	Lindero
Cash cost, net of<br> by-product credits	$	366<br> - 432
Adjustments:
Commercial and government<br> royalties and mining tax		39<br> - 46
Export duties		121<br> - 143
General and administrative<br> expenses		37<br> - 44
Sustaining capital<br> expenditures		126<br> - 149
Stripping capitalization		38<br> - 44
Brownfields<br> exploration expenditures		2<br> - 2
All-in-sustaining cash cost per payable ounce of gold	$	730 - 860

2021 Capital Expenditure and Exploration Guidance

(Expressed in $ millions)	San Jose		Caylloma		Lindero		Total
Equipment and infrastructure	$	3.6	$	11.1	$	20.5	$	35.2
Mine development		6.9		5.9		-		12.8
Brownfields exploration		10.0		4.7		0.3		15.0
Other sustaining capex		3.0		-		-		3.0
Total	$	23.5	$	21.7	$	20.8	$	66.0

Annual cash cost per ounce of gold at the Lindero Mine for 2021 is projected between $365 and $430 and AISC is projected between $730 and $860 per ounce of gold. For the first half of the year, AISC is projected between $1,130 and $1,335 due to the ramp-up in gold production and sustaining capital expenditure execution in the first semester and to range between $525 and $615 per ounce of gold in the second half of 2021.

Management’s Discussion and Analysis, page 10

FortunaSilver Mines Inc.

Projected AISC at the Lindero Mine for 2021 is approximately $200 per ounce of gold higher than was projected in our news releases dated February 20, 2020 and May 8, 2020. The main drivers of the increase, which are partially offset by reduced cost in key consumables of approximately $25 per ounce of gold, are listed below:

•	Sustaining capital expenditures: Expansion of the ADR plant and the heap leach pad represents<br> approximately $80 per ounce of gold.
•	Export duty and mining royalty: Higher gold price assumptions represent $20 per ounce, and<br> a higher export duty rate of 8% of sales, compared to 5% in the prior guidance, represents<br> $40 per ounce of gold
---	---
•	Production cost: A 10% increase in unit costs per tonne represents approximately $40 per ounce<br> of gold. The main drivers of the increase are related to COVID-19 expenses of $2.1 million,<br> various indirect costs of approximately $1.8 million, and higher planned maintenance<br> contractor services at the processing plant in 2021 of $1.2 million.
---	---

SanJose Mine, Mexico

At the San Jose Mine, the operation plans to process 1.13 million tonnes averaging 196 g/t Ag and 1.26 g/t Au. Capital investments are estimated at $23.4 million, including $13.4 million for sustaining capital expenditures and $10.0 million for Brownfields exploration programs.

Major sustaining capital investment projects include:

•	Mine<br> development: $6.9 million
•	Dry<br> stack expansion: $1.8 million
---	---
•	Equipment<br> and infrastructure: $1.8 million
---	---
•	Infill<br> drilling: $0.9 million
---	---

CayllomaMine, Peru

At the Caylloma Mine, the operation plans to process 530,000 tonnes averaging 74 g/t Ag, 2.87% Pb, and 4.30% Zn. Capital investments are estimated at $21.7 million, including $15.2 million for sustaining capital expenditures and $4.7 million for Brownfields exploration programs.

Major sustaining capital investment projects include:

•	Mine<br> development and infill drilling: $5.9 million
•	Tailings<br> dam expansion: $4.7 million
---	---
•	Electric<br> system upgrade: $1.9 million
---	---
•	Infrastructure:<br> $1.5 million
---	---

LinderoMine, Argentina

At the Lindero Mine, the operation plans to place on the leach pad 6.3 million tonnes of ore averaging 1.08 g/t Au, containing an estimated 218,000 ounces of gold. Capital investments are estimated at $20.8 million, including $20.5 million for sustaining capital expenditures and $0.3 million for Brownfields exploration programs.

Gold production is planned to ramp-up throughout the year to reach the annual guidance range of between 140,000 to 160,000 ounces with approximately two thirds of annual production anticipated to be achieved in the second half of 2021. The ramp up phase of the HPGR, agglomeration, and stacking system is proceeding according to schedule, and the integration of the entire comminution and conveyor belt system and is expected to reach design capacity by the end of the first quarter of 2021. Throughout this period, some coarse ore will continue to be placed on the heap leach pad by truck as the operations team transitions to the stacking system.

By the end of the first quarter of 2021, the operations team also expects the SART plant to achieve design capacity which will reduce soluble copper in the pregnant solution, resulting in more efficient cyanide consumption and gold recovery at the ADR plant.

The operations team expects to complete construction of the planned phase one expansion of the heap leach pad by the second quarter of 2021, which will provide sufficient leaching area until 2024.

Management’s Discussion and Analysis, page 11

FortunaSilver Mines Inc.

Major sustaining capital investment projects include:

•	Heap<br> leach pad completion (years 1 – 3): $7.0 million
•	ADR<br> plant expansion: $5.0 million
---	---
•	Maintenance<br> and energy: $4.0 million
---	---

The Company expects to incur $6.1 million of deferred stripping costs in 2021.

The Company has decided to bring forward the expansion of the ADR plant from year four in the life of mine plan, due to higher projected gold production of 24,000 ounces for the initial three years compared to the original feasibility study. The expansion of the ADR will provide greater gold adsorption capacity and efficient recovery of the additional ounces.

The major components of sustaining capital, including the expansions of the ADR plant and heap leach pad, representing between 70% and 80% of the annual budget are expected to be executed in the first half of 2021.

BrownfieldsExploration 2021 Outlook

Due to COVID-19 restrictions and the reallocation of capital to complete the construction of the Lindero Mine, limited brownfields exploration was carried out in 2020. Consolidated Brownfields exploration expenditures in 2020 were $3.8 million.

The Company is expanding its exploration budget and initiatives in 2021 as the capital-intensive phase of the Lindero construction has ended. Fortuna´s consolidated Brownfields exploration budget for 2021 for all three mines totals $15.9 million, which includes 53,800 meters of diamond drilling and 2,170 meters of underground development.

San Jose Mine, Mexico

The Brownfields exploration program budget for 2021 at the San Jose Mine is $10.9 million, which includes 33,800 meters of diamond drilling and 1,770 meters of underground development for drilling access, platforms, and services. Underground exploration drilling will focus on the shallow and deep north and south extensions of the Trinidad vein system and the sub-parallel Victoria mineralized zone, while surface drilling will test the new grassroots Los Diaz and Los Vasquez targets located south and north of the mine, respectively.

Caylloma Mine, Peru

The Brownfields exploration program budget for 2021 at the Caylloma Mine is $4.7 million, which includes 19,000 meters of diamond drilling and 500 meters of underground development for drilling access, platforms, and services. Surface and underground drilling will focus on the extensions of two ore shoots along the Animas vein, the extension of the Animas vein to the northeast, the possible extension of silver-dominant mineral resources along the San Cristobal silver vein located to the north of the mine, the depth potential under favorable surface geochemistry at the undrilled, near-mine La Plata / Corona Antimonio vein system and the Pisacca grassroots target located to the south of the mine.

Lindero Mine, Argentina

The Brownfields exploration program budget for 2021 at the Lindero Mine is $320,000, which includes 1,000 meters of drilling on the Arizaro target located 3.5 kilometers to the southeast of the mine. The drilling will test for additional mineralization.

GreenfieldsExploration 2021 Outlook

Due to COVID-19 restrictions and the reallocation of capital to complete the construction of the Lindero Mine, limited greenfields exploration was carried out in 2020. Total greenfields exploration expenditures in 2020 were $1.2 million.

Active reconnaissance exploration programs on acquired projects and evaluations of possible acquisitions in Mexico, Argentina, and select other jurisdictions will continue throughout 2021. Projects under option include the Santa Fe project in southern Sinaloa, Mexico, where current small-scale mining is exploiting gold-silver epithermal veins. Fortuna’s exploration plans at Santa Fe include mapping, grid soil sampling, a LiDAR geophysical survey and drilling previously untested veins that have been mapped near-mine and scout drilling following up on ground surveys and geophysical anomalies. In Argentina, exploration work is planned for the second half of 2021 at the Cerro Lindo high-sulfidation target, which hosts multiple areas of undrilled, high-level, acid- sulfate alteration and at Solitario where massive silica ribs of up to 30 meters in width could be high-level expressions of potential at depth. Allocated budget for greenfields exploration activities in 2021 is $5.0 million.

Management’s Discussion and Analysis, page 12

FortunaSilver Mines Inc.

2021 COVID-19 Outlook

Although our mines are currently operating at full capacity, COVID-19 cases and deaths are either on the rise or at elevated levels in the countries that host our mining operations. The Company has also experienced an increase in COVID-19 cases in Peru which has affected our Caylloma mining operations and has resulted in a reduced workforce and quarantine periods for those affected. The full extent and impact of COVID-19 on the Company’s operations cannot currently be ascertained, as it depends upon future developments which cannot be predicted, and includes among other matters: the impact of additional waves of the pandemic or increases in outbreaks in the countries where we operate, the duration of outbreaks, the severity of the virus and the ability to treat it, the timeliness of the distribution of vaccines in the countries where we operate, the ability to collect sufficient data to track the virus and the collective actions taken to curb the spread of the virus, directives of government and public health authorities, the speed at which the Company’s suppliers and logistics providers can return to full operation, the status of labour availability, and the impact of supplier prioritization of clearing backlogs.

The impacts of the COVID-19 crisis that may have an effect on the Company include: a further decrease in short-term and/or long-term demand and/or pricing for the metals that we produce; reductions in production levels; further increased costs resulting from our efforts to mitigate the impact of COVID-19; deterioration of worldwide credit and financial markets that could limit our ability to obtain external financing to fund our operations and capital expenditures and result in losses on our holdings of cash and investments due to failures of financial institutions and other parties and a higher rate of losses on our accounts receivable due to credit defaults; restrictions may impact access to our mine sites and affect our ability to transport and ship gold doré and or metal concentrates, restrict access to processing and refinery facilities; cause disruptions to our supply chain; impairments and/or write-downs of assets; and adverse impacts on our information technology systems and our internal control systems as a result of the need to increase remote work arrangements. A material adverse effect on our employees, customers, suppliers and/or logistics providers could have a material adverse effect on the Company.

The overall severity and duration of COVID-19-related adverse impacts on the Company’s business will depend on future developments which cannot be predicted. Even after the COVID-19 outbreak has subsided, the Company may continue to experience material adverse impacts to its business as a result of the global economic impact, including any related recession, as well as lingering impacts on demand for our products.

Management’s Discussion and Analysis, page 13

FortunaSilver Mines Inc.

Financial Results

Sales

							Years ended
							December 31,
		2019		% Change			2020		2019		% Change
Provisional sales ( million)
Caylloma	22.2		18.8		18	%		67.0		73.6		(9	)%
San Jose	58.0		48.9		19	%		188.3		183.2		3	%
Lindero	20.3		-		100	%		20.3		-		100	%
Adjustments ( million)1	3.0		1.3		131	%		3.4		0.4		750	%
Total Sales ( million)	103.5		69.0		50	%		279.0		257.2		8	%
Silver
Metal produced (oz)	1,912,737		2,251,917		(15	)%		7,133,717		8,809,767		(19	)%
Provisional sales (oz)	1,985,783		2,221,330		(11	)%		7,194,362		8,798,054		(18	)%
Provisional sales ( million)	45.0		35.7		26	%		140.9		131.9		7	%
Realized price (/oz)2	24.43		17.33		41	%		21.18		16.20		31	%
Net realized price (/oz)3	22.65		16.07		41	%		19.58		14.99		31	%
Gold
Metal produced (oz)	25,357		12,279		107	%		55,349		50,525		10	%
Provisional sales (oz)	23,297		12,157		92	%		53,375		50,374		6	%
Provisional sales ( million)	41.7		17.4		140	%		91.1		66.6		37	%
Realized price (/oz)2	1,864		1,483		26	%		1,805		1,393		30	%
Net realized price (/oz)3	1,791		1,429		25	%		1,707		1,323		29	%
Lead
Metal produced (000’s lbs)	8,426		7,441		13	%		29,628		28,746		3	%
Provisional sales (000’s lbs)	8,386		7,559		11	%		29,582		28,969		2	%
Provisional sales ( million)	6.0		6.4		(6	)%		19.7		24.6		(20	)%
Realized price (/lb)2	0.86		0.92		(7	)%		0.83		0.91		(8	)%
Net realized price (/lb)3	0.72		0.85		(15	)%		0.67		0.85		(21	)%
Zinc
Metal produced (000’s lbs)	12,434		11,614		7	%		45,545		45,600		(0	)%
Provisional sales (000’s lbs)	12,154		11,974		2	%		45,154		45,781		(1	)%
Provisional sales ( million)	7.7		8.3		(7	)%		24.0		33.7		(29	)%
Realized price (/lb)2	1.18		1.08		9	%		1.03		1.15		(11	)%
Net realized price (/lb)3	0.64		0.69		(7	)%		0.53		0.74		(28	)%

All values are in US Dollars.

Notes:

^1^Adjustments consists of mark to market, final price and assay adjustments

^2^Based on provisional sales before final price adjustments. Net after payable metal deductions, treatment, and refining charges

^3^Treatment charges are allocated to base metals at Caylloma and to gold at San Jose

ConsolidatedSales for the three months ended December 31, 2020 were $103.5 million, a 50% increase from the $69.0 million reported in the same period in 2019.

Sales for the three months ended December 31, 2020, including adjustments, at San Jose were $60.5 million, a 20% increase from the $50.4 million reported in the same period in 2019. The increased sales were driven by a 31% and 28% increase in the prices of silver and gold despite a 13% and 11% decrease in the volume of silver and gold ounces sold. Sales from the Caylloma Mine were $22.7 million, a 22% increase from the $18.6 million reported in the same period in 2019. The increased sales were driven by higher silver and zinc prices of 40% and 9%, respectively, as well as higher volume of metals sold. The Company also recognized gold sales of $20.3 million from commissioning activities at the Lindero Mine after the Company elected to early adopt amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use, which becomes effective on January 1, 2022. Under this amended standard, a company is required to recognize sales proceeds and related cost of items produced in the income statement while the company is preparing the asset for its intended use.

Management’s Discussion and Analysis, page 14

FortunaSilver Mines Inc.

Consolidatedsales for the twelve months ended December 31, 2020 increased 8% to $279.0 million compared to $257.2 million for the same period in 2019. The increased sales were due primarily to $20.3 million of gold doré sales from the sale of 10,935 ounces of gold at the Lindero Mine.

Sales at San Jose for the twelve months ended December 31, 2020 increased 4% to $191.0 million as silver and gold prices increased 41% and 26%, respectively, which were partially offset by a 21% decrease in the volume of silver and gold ounces sold. The lower metal production was due mainly to lower head grades and the lost production from a 54-day government mandated temporary suspension of mining operations during the second quarter to mitigate the spread of the COVID-19 pandemic. Sales at Caylloma decreased 7% to $67.6 million due primarily to decreases in the prices of lead and zinc of 9% and 10%, respectively. The Company also recognized $20.3 million of gold sales from commissioning activities at the Lindero Mine, as referenced above.

Operating Income (Loss) and Adjusted EBITDA

	Three months ended												Years ended
	December 31,												December 31,
(Expressed in $ millions)	2020			%^1^			2019			%^1^			2020			%^1^			2019			%^1^
Operating income
San Jose		24.4			40	%		17.4			34	%		74.9			39	%		60.4			33	%
Caylloma		5.9			26	%		1.4			8	%		8.2			12	%		9.2			13	%
Lindero		6.2			30	%		(1.9	)		0	%		(2.8	)		(14	)%		(13.6	)		0	%
Corporate		(8.3	)					(7.9	)					(23.1	)					(21.8	)
Total		28.2			27	%		9.0			13	%		57.2			21	%		34.2			13	%
Adjusted EBITDA^2^
San Jose		33.3			55	%		26.2			52	%		105.7			55	%		92.5			50	%
Caylloma		8.4			37	%		4.6			25	%		19.2			28	%		22.3			31	%
Lindero		11.3			56	%		(0.2	)		0	%		11.1			54	%		(0.7	)		0	%
Corporate		(8.2	)					(5.5	)					(23.4	)					(18.7	)
Total		44.8			43	%		25.1			36	%		112.6			40	%		95.4			37	%

Notes:

^1^ As a Percentage of Sales

^2^ Refer to Non-GAAP Financial Measures

^3^Figures may not add due to rounding

Management’s Discussion and Analysis, page 15

FortunaSilver Mines Inc.

Operating income for the three months ended December 31, 2020 was $28.2 million, an increase of $19.2 million over the same period in 2019. The increase was due primarily to an increase in mine operating income as prices of silver and gold increased 31% and 28% quarter-over-quarter as well as Lindero’s contribution to mine operating income of $10.2 million from gold sales during the commissioning of the mine. The increases were partially offset by higher share-based payments expense.

Operating income for the year ended December 31, 2020 was $57.2 million, an increase of $23.0 million over 2019. As explained above, increased in the prices of silver and gold as well as gold sales produced during the commissioning of the Lindero Mine, were partially offset by a $6.4 million increase in share-based payments expense. The Company’s share price increased 99% year-over-year and negatively impacted the value of the cash-settled share units.

General and Administrative (“G&A”) Expenses

	Three months ended							Years ended
	December 31,							December 31,
(Expressed in $ millions)	2020		2019		% Change			2020		2019		% Change
Mine G&A		3.4		3.5		(3	)%		10.1		10.9		(7	)%
Corporate G&A		3.7		3.0		23	%		10.8		11.4		(5	)%
Share-based payments		4.6		2.4		92	%		12.4		6.0		107	%
Workers’ participation		0.5		0.5		0	%		1.8		1.5		20	%
Total		12.2		9.4		30	%		35.1		29.8		18	%

Generaland administrative expenses for the three months ended December 31, 2020 increased 28% to $12.2 million compared to $9.4 million reported in the same period in 2019, which was due primarily to a $2.2 million increase in share-based payments and higher payroll related expenses. The Company’s share price increased 23% during the quarter which impacted the value of cash-settled share units. Mine G&A decreased $0.3 million due to lower personnel and other corporate administration expenses which was due, in part, to cost reduction initiatives implemented during the second and third quarter to lessen the impact of the COVID-19 pandemic.

Generaland administrative expenses for the year ended December 31, 2020 increased 17% to $35.1 million compared to $29.8 million reported in 2019. The increase was due primarily to a 107% increase in share-based payments impacted by a 98% year-over-year increase in the Company’s share price, which was partially offset by a $1.7 million decrease in mine and corporate personnel and administration costs.

Other expenses comprise of write downs, care and maintenance costs related to COVID-19 and other income and expenses. Other expenses for the three months ended December 31, 2020 decreased 59% to $1.3 million compared to $3.2 million reported in the same period in 2019. The decrease was due primarily to lower non-cash write downs compared to 2019 when the Company wrote down $2.7 million on its investment in associates.

Otherexpenses for the year ended December 31, 2020 decreased 4% to $4.4 million compared to $4.6 million reported in 2019. The decrease was due primarily to lower non-cash write downs, which was offset by $3.1 million of care and maintenance costs incurred during the government mandated temporary suspension of the Company’s mining operations in the second and third quarter of 2020.

Foreign Exchange Loss

Foreignexchange loss for the three months ended December 31, 2020 increased $3.3 million to $4.7 million compared to $1.4 million reported in the same period in 2019. The increase was mainly related to the devaluation of the Argentine Peso against the U.S. dollar and its impact on Argentine Pesos denominated value added tax receivable accumulated during the construction of the Lindero Mine and partially offset by a 7% quarter-over-quarter strengthening of the Mexican Peso against the US dollar which impacted the Mexican Peso denominated value added tax receivable.

Management’s Discussion and Analysis, page 16

FortunaSilver Mines Inc.

Foreignexchange loss for the twelve months ended December 31, 2020 decreased $1.1 million to $12.2 million compared to $13.3 million reported in the same period in 2019. The main driver for the foreign exchange loss was the year-over-year devaluation of the Argentine Peso. Due to the devaluation on Lindero’s Argentine Peso denominated working capital items, and primarily, the value added tax receivable, the Company recognized a $11.8 million foreign exchange loss compared to a $11.5 million foreign exchange loss in 2019. The Mexican Peso end the 2020 year relatively flat against the US dollar compared to in 2019 when the Company recognized a $1.6 million foreign exchange loss on a weak Mexican Peso against the US dollar.

Income Tax Expense

Incometax expense for the three months ended December 31, 2020 was $9.1 million or $8.0 million higher than the $1.1 million reported in the same period in 2019, which included two one-time items - the recognition of $2.0 million of tax assets that had previously not been recognized related to the accounting of the convertible debenture and the impact of $11.0 million in investment gains from cross-border trades. The high precious metal and zinc prices increased San Jose and Caylloma mines’ pre-tax income by $10.6 million with a corresponding $5.2 million increase in income tax expense over the same period in 2019.

The effective tax rate (“ETR”) for the three months ended December 31, 2020 was 33% compared to 5% for the same period in 2019. Excluding the one-time items, as referenced above, the 2019 ETR would have been 46%. The impact of: (1) a strong Mexican Peso on local currency denominated non-monetary assets lowered the ETR by 8% and (2) the early adoption of amendments to IAS16, Property, Plant and Equipment – Proceeds before intended use, lowered the ETR by 18 percentage point.

Incometax expense for the year ended December 31, 2020 was $37.4 million or $17.2 million higher than the $20.2 million reported in the same period in 2019.

The effective tax rate was 63% compared to 46% for the same period in 2019. Factors that contributed to a high ETR were the impact of foreign exchange fluctuations (+13%) on the translation of local currency denominated non-monetary assets, and tax benefits not recognized (+6%).

The Company is subject to tax in various jurisdictions, including Peru, Mexico, Argentina and Canada. There are a number of factors that can significantly impact the Company’s effective tax rate including the geographic distribution of income, variations in our income before income taxes, varying rates in different jurisdictions, the non-recognition of tax assets, local inflation rates, fluctuation in the value of the United States dollar and foreign currencies, changes in tax laws and the impact of specific transactions and assessments. As a result of the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors, the effective tax rate will fluctuate, sometimes significantly. This trend is expected to continue in future periods.

Management’s Discussion and Analysis, page 17

FortunaSilver Mines Inc.

Results of Operations

San Jose Mine Operating Results

The San Jose Mine is an underground silver-gold mine located in the state of Oaxaca in southern Mexico. The following table shows the key metrics used to measure the operating performance of the mine: throughput, head grade, recovery, gold and silver production and unit costs:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes milled	272,179		273,066		934,381		1,068,722
Average tonnes milled per day	3,024		3,034		2,647		3,028
Silver
Grade (g/t)	206		249		224		252
Recovery (%)	91		91		92		91
Production (oz)	1,648,816		2,002,633		6,165,606		7,868,478
Metal sold (oz)	1,721,697		1,968,550		6,225,433		7,849,438
Realized price (/oz)	24.45		17.34		21.26		16.20
Gold
Grade (g/t)	1.26		1.50		1.38		1.57
Recovery (%)	91		91		91		91
Production (oz)	10,095		11,993		37,805		48,880
Metal sold (oz)	10,594		11,870		38,391		48,731
Realized price (/oz)	1,875		1,483		1,786		1,393
Unit Costs
Production cash cost (/t)2	71.45		70.19		69.38		69.60
Production cash cost (/oz Ag Eq)1,2	8.91		6.82		7.62		6.74
Net smelter return (/t)	203.80		181.85		199.22		172.04
All-in sustaining cash cost (/oz Ag Eq)1,2	14.52		10.54		12.15		9.83
Capital expenditures (000’s)
Sustaining	5,022		3,737		11,540		9,969
Brownfields	802		649		3,319		4,077

All values are in US Dollars.

Notes:

^1^Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period respectively

^2^Production cash cost, Production cash cost silver equivalent, and All-in sustaining cash cost silver equivalent are Non-GAAP Financial Measures. Refer to Non-GAAP Financial Measures.

Management’s Discussion and Analysis, page 18

FortunaSilver Mines Inc.

Quarterly and Annual Results

The San Jose Mine produced 1,648,816 ounces of silver and 10,095 ounces of gold during the three months ended December 31, 2020, which represents an 18% and 16% decrease over the same period in 2019. The decrease in production was due to lower head grades which were consistent with the adjusted mine sequencing after the restart of production at the end of May 2020 following the Mexican government mandated suspension of operations to curb the spread of COVID-19.

Annual production of silver and gold totaled 6,165,606 ounces and 37,805 ounces, respectively, a decrease of 22% and 23% from 2019. The decrease in production was due to a 54-day government mandated suspension of mining operations in the second quarter of 2020 related to the COVID-19 pandemic and lower silver and gold head grades of 11% and 12% (refer to Fortuna news release dated May 26, 2020).

The cash cost per tonne for the three months ended December 31, 2020 was $71.45 per tonne (refer to Non-GAAP Financial Measures) compared to $70.19 per tonne in the same period in 2019. COVID-19 related expenses in the quarter were $0.40 per tonne. Cash cost per tonne for the full year 2020 was consistent year-over-year at $69.38 per tonne compared to $69.60 per tonne for 2019. COVID-19 related expenses for the full year were $0.70 per tonne. Cash costs incurred during the government mandated temporary suspension of mining operations in the second quarter of 2020 totaled $2.1 million and were recorded as care and maintenance costs.

The all-in sustaining cash cost of payable silver equivalent for the full year 2020 increased 24% to $12.15 per ounce due primarily to lower production resulting from the COVID-19 related temporary suspension, higher sustaining capital expenditures, and higher royalty and mining taxes associated with higher metal prices.

Management’s Discussion and Analysis, page 19

FortunaSilver Mines Inc.

Caylloma Mine Operating Results

Caylloma is an underground silver, lead and zinc mine located in the Arequipa Department in southern Peru. Its commercial products are silver-lead and zinc concentrates. The table below shows the key metrics used to measure the operating performance of the mine: throughput, head grade, recovery, silver, lead and zinc production and unit costs:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes milled	136,132		133,271		510,047		531,307
Average tonnes milled per day	1,530		1,481		1,433		1,497
Silver
Grade (g/t)	73		71		72		66
Recovery (%)	82		82		82		83
Production (oz)	263,921		249,284		968,111		941,289
Metal sold (oz)	262,356		252,780		967,199		948,616
Realized price (/oz)	24.30		17.31		20.63		16.23
Lead
Grade (%)	3.16		2.84		3.00		2.72
Recovery (%)	89		89		88		90
Production (000’s lbs)	8,426		7,441		29,628		28,746
Metal sold (000’s lbs)	8,386		7,559		29,582		28,969
Realized price (/lb)	0.86		0.92		0.83		0.91
Zinc
Grade (%)	4.69		4.48		4.61		4.36
Recovery (%)	88		88		88		89
Production (000’s lbs)	12,434		11,614		45,545		45,600
Metal sold (000’s lbs)	12,154		11,974		45,154		45,781
Realized price (/lb)	1.18		1.08		1.03		1.15
Unit Costs
Production cash cost (/t)2	87.02		85.86		81.29		86.15
Production cash cost (/oz Ag Eq)1,2	15.38		11.67		14.57		10.92
Net smelter return (/t)	163.57		138.07		131.40		137.77
All-in sustaining cash cost (/oz Ag Eq)1,2	19.51		15.40		17.79		14.30
Capital expenditures (000’s)
Sustaining	2,364		2,487		6,406		10,440
Brownfields	106		214		521		700

All values are in US Dollars.

Notes:

^1^ Production cash cost silver equivalent and All-in sustaining cash cost silver equivalent are calculated using realized metal prices for each period respectively.

^2^ Production cash cost, Production cash cost silver equivalent, and All-in sustaining cash cost silver equivalent are Non-GAAP Financial Measures. Refer to Non-GAAP Financial Measures.

Management’s Discussion and Analysis, page 20

FortunaSilver Mines Inc.

Quarterly and Annual Results

The Caylloma Mine produced 263,921 ounces of silver, 8.4 million pounds of lead and 12.4 million pounds of zinc during the three months ended December 31, 2020, and were 6%, 13%, and 7% higher than the same period in 2019. The increased metal production was due mainly to higher head grades. Gold production totaled 1,827 ounces with an average head grade of 0.60 g/t.

Annual production of silver, lead and zinc totaled 968,111 ounces, 29.6 million pounds of lead, and 45.5 million pounds of zinc, which represent a 3% increase in silver and lead while zinc production was flat year-over-year. Gold production for the full year 2020 totaled 4,109 ounces, which was an increase of 150% over 2019, with an average head grade of 0.41 g/t. Gold production was positively impacted by unusually high head grades compared to the reserve model at the Animas NE vein. The exploration team is carrying out work to understand the occurrence and controls of these higher-grade zones that can carry gold grades as high as 10 g/t.

Production for the full year was not impacted despite government mandated restrictions, (refer to Fortuna news release dated March 17, 2020), and a voluntary three-week suspension of operations in July (refer to Fortuna news release dated July 28, 2020), as lower throughput of 4% was offset by higher average head grades for the full year.

The cash cost per tonne of processed ore for the three months ended December 31, 2020 increased 1% to $87.02 (refer to Non-GAAP Financial Measures) compared to $85.86 in the same period in 2019. COVID-19 related expenses in the quarter were $5.30 per tonne. The cash cost per tonne of processed ore for the full year 2020 decreased 6% to $81.29 compared to $86.15 for the full year 2019 and reflects cost reduction initiatives the Company implemented during the second and third quarter to address the impact of COVID-19 on our operations. COVID-19 related expenses for the full year were $3.10 per tonne. Cash cost incurred during the government mandated temporary suspension of mining operations in the third quarter of 2020, totaled $0.9 million and were recorded as care and maintenance costs.

The all-in sustaining cash cost for the three months ended December 31, 2020 increased 27% to $19.51 per ounce compared to $15.40 per ounce for the same period in 2019. The increase was driven by COVID-19 related expenses and higher treatment charges in the quarter.

The all-in sustaining cash cost for the full year 2020 increased 24% to $17.79 per ounce compared to $14.30 per ounce in 2019 due to the changes in the prices of lead and zinc relative to the silver price, which affects the silver equivalent calculation. As a result of the changes in relative prices, the ounces of payable silver equivalent decreased 18% to 4,308,239 ounces compared to 5,252,403 ounces in 2019 despite a 13% and 7% increase in the annual production of lead and zinc.

Management’s Discussion and Analysis, page 21

FortunaSilver Mines Inc.

Lindero Mine Operating Results

The Lindero Mine is an open pit gold mine located in in northern Argentina. The following table shows the key metrics used to measure the operating performance of the mine: throughput, head grade, recovery, and gold production:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes placed on the leach pad	950,000		-		1,610,000		-
Average tonnes crushed per day	10,406		-		8,831		-
Gold
Grade (g/t)	1.13		-		1.00		-
Recovery (%)	50		-		50		-
Production (oz)	13,435		-		13,435		-
Metal sold (oz)	10,935		-		10,935		-
Realized price (/oz)	1,853		-		1,853		-
Capital expenditures (000’s)
Sustaining	1,410		-		1,410		-

All values are in US Dollars.

Quarterly and Annual Results

In the fourth quarter of 2020, a total of 950,000 tonnes of ore were placed on the heap leach pad averaging 1.13 g/t gold, containing an estimated 34,000 ounces of gold. First gold was poured at Lindero in October 2020, and gold production for the fourth quarter of 2020 was 13,435 ounces of gold. For the full year 2020, a total of 1.61 million tonnes of ore have been placed on the heap leach pad averaging 1.00 g/t gold, containing an estimated 52,000 ounces of gold.

Cash cost per ounce of gold for the three and twelve months ended December 31, 2020 was $657.14 per ounce.

Management’s Discussion and Analysis, page 22

FortunaSilver Mines Inc.

Quarterly Information

The following table provides information for the last eight fiscal quarters up to December 31, 2020:

	Expressed in millions, except per share amount
	Q4 2020	Q3 2020		Q2 2020			Q1 2020			Q4 2019		Q3 2019			Q2 2019		Q1 2019
Sales			83.4		44.5			47.5			69.0		61.3			67.9		59.0
Mine operating income			42.1		13.8			7.5			23.4		16.7			23.0		21.5
Operating income (loss)			28.5		(1.3	)		1.8			9.0		(1.5	)		15.7		10.9
Net income (loss)			13.1		(5.7	)		(4.5	)		19.0		(7.7	)		10.3		2.2
Basic earnings (loss) per share			0.07		(0.03	)		(0.03	)		0.12		(0.05	)		0.07		0.01
Diluted earnings (loss) per share			0.07		(0.03	)		(0.03	)		0.12		(0.05	)		0.07		0.01
Total assets			987.8		959.4			957.7			936.1		871.5			823.3		796.7
Debt			133.1		132.6			187.1			146.5		109.4			69.4		69.3

All values are in US Dollars.

Sales increased 24% in the fourth quarter of 2020 to $103.5 million compared to $83.4 million in the third quarter of 2020 due primarily to the recognition of $20.3 million of gold sales and $10.1 million of cost of sales from commissioning activities at Lindero Mine as the Company elected to early adopt the amendments to IAS 16, Property, Plant and Equipment – Proceeds beforeIntended Use. Sales at San Jose decreased $4.2 million to $60.5 million quarter-over-quarter due to lower volume of silver and gold sold while sales at Caylloma increased $3.9 million. Share-based payments increased 24% to $4.5 million as the result of a 23% increase in the Company’s share price which impacts the cash-settled share units. With construction of the Lindero Mine substantially complete, the Company ceased capitalization of interest at the end of November 2020 and expensed $0.7 million of borrowing costs. Net income increased $5.5 million to $18.6 million over the prior quarter.

Sales increased 87% in the third quarter of 2020 to $83.4 million compared to $44.5 million in the second quarter of 2020 due to increases in the prices of silver and gold and the resumption of operations at the San Jose Mine after a 54-day temporary suspension of the mine in the second quarter. Mine operating income more than tripled to $42.1 million despite a 21-day temporary suspension of the Caylloma mine in July. The costs incurred during the suspension of operations totaled $0.9 million and are reported as care and maintenance costs. Income tax expense also increased $8.8 million over the second quarter to $15.0 million due primarily to higher pre-tax profit from the San Jose Mine, which impacted net income for the period.

Sales decreased 6% in the second quarter of 2020 to $44.5 million compared to $47.5 million in the first quarter of 2020. The primary reason for the decrease was the 54-day government mandated temporary suspension of the San Jose Mine as part of the Mexican Government’s response to curb the spread of COVID-19 which severely curtailed silver and gold production by 34% and 31% despite higher silver and gold prices. The net loss included $2.0 million of care and maintenance costs incurred during the 54-day suspension of the San Jose Mine and higher share-based payment expense, which were partially offset by $2.2 million of investment gains from cross-border bond trades.

Sales decreased 31% in the first quarter of 2020 to $47.5 million compared to $69.0 million in the fourth quarter of 2019. The decrease in sales was due primarily to the beginning of the COVID-19 pandemic in mid-March which severely impacted metal prices and combined with a planned change in mine sequencing at the San Jose Mine, caused lower grade material to be mined. This reduction in production resulted in a decrease in the volume of silver and gold ounces sold of 14% and 17%, respectively, and mine operating income decreased $15.9 million quarter-over-quarter. Partially offsetting the lower mine operating income were lower mine site and corporate administration costs and lower share-based payment expense as the Company’s share price declined in the quarter impacting the valuation of cash-settled share units.

Sales increased 13% in the fourth quarter of 2019 to $69.0 million compared to $61.3 million in the third quarter of 2019 due primarily to a 15% and 7% increase in the volume of silver and gold ounces sold, respectively. Cash mine operating costs at the San Jose and Caylloma Mines were 6% higher and 4% lower, respectively. Pre-tax income included $11.0 million of investment gains from cross-border securities trades.

Management’s Discussion and Analysis, page 23

FortunaSilver Mines Inc.

Precious Metal Prices Trends

For the year ended December 31, 2020, the sale of silver and gold ounces represents approximately 91% of the Company’s sales revenue while lead and zinc make up the remaining 9%. Therefore, the prices of silver and gold are the most dominant factors in determining the Company’s profitability and cash flow from operations. The prices of gold and silver are subject to volatile fluctuations over short periods of time and can be affected by numerous macroeconomic conditions, including supply and demand factors, value of the U.S. dollar, interest rates and global economic and political issues. The Company’s financial performance is expected to continue to be closely linked to the prices of silver and gold.

The metal price environment for silver and gold has evolved during the COVID-19 pandemic. Since the low of $1,498 per ounce in March 2020, gold steadily edged higher to close at $1,768 per ounce at the end of June. Gold continued to trend higher and peak at $2,067 per ounce on August 6, 2020 before retracing to close at $1,902 per ounce at the end of September. The price of gold traded at a high of $1,940 per ounce in early November and a low of $1,760 per ounce at the end of November before recovering to close at $1,888 per ounce on December 31, 2020. This represents a 25% increase in the price of gold since the start of 2020. The US federal government and the U.S. Treasury provided monetary and fiscal stimulus to the US economy which have helped to spur increases in the prices of silver and gold.

The silver price plummeted to multi-year lows in March 2020 when U.S. stock markets had their greatest single day fall since the 1987 crash as silver fell from $17.02 per ounce to $12.01 per ounce on March 19, a decline of 29%. Following the March lows, the price of silver showed resilience during the second and third quarter of 2020 trending higher month-over-month and peaked at $29.37 per ounce on August 6, 2020, before retracing to close at $23.35 per ounce at the end of September. The price of silver closed at $26.30 as at December 31, 2020, a 47% increase since the start of 2020.

Management’s Discussion and Analysis, page 24

FortunaSilver Mines Inc.

Liquidity and Capital Resources

Cash and Cash Equivalents

The Company had cash and cash equivalents of $131.9 million at December 31, 2020, an increase of $48.5 million since the beginning of the year. The increase was due primarily to $93.4 million of net cash generated from operations, which was net of $21.8 million of preproduction costs to produce ore stockpile and supplies inventory that was spent during the construction of the Lindero Mine. The Company also received $65.6 million of net proceeds from a bought deal equity financing in the second quarter and drew the remaining $10.0 million from the Credit Facility. Uses of funds include $79.5 million on construction, of the Lindero Mine, $24.1 million on sustaining and non-sustaining capital and brownfields exploration and $13.4 million of value added tax payments mainly from the construction of the Lindero Mine.

The Company’s investment objectives for its cash balances, in order of priority, are to preserve capital, to ensure liquidity and to maximize returns. The Company’s strategy to achieve these objectives is to invest its excess cash balance in a portfolio of primarily fixed income instruments with specified credit rating targets established by the Board of Directors of the Company. The Company does not own any asset-based commercial paper or other similar at-risk investments in its investment portfolios.

Working Capital

Working capital at December 31, 2020 increased $89.2 million during the year to $151.6 million, which included a $37.0 million value added tax (“VAT”) receivable that was reclassified from long-term compared to $62.9 million at December 31, 2019. This VAT related to the amounts paid, net of foreign exchange impact, on the Lindero construction project and was reclassified to current after the Argentine tax authorities approved the application for a partial refund of value added taxes paid and there was confirmation of payment. Subsequent to December 31, 2020, the Company received a refund of $10.1 million and interest of $1.1 million, which approximates the amount of the expected refund.

Capital Resources

As at December 31, 2020, the Company had fully drawn $40 million from its non-revolving credit facility and the $80 million from its revolving credit facility (collectively, the “Credit Facility”). The revolving portion of the Credit Facility, which had temporarily increased from $80 million to $110 million, effective December 18, 2018, reverted back to a limit of $80 million as of December 31, 2020, which has been fully drawn. The interest rate on the revolving credit facility is on a sliding scale at one-month LIBOR plus an applicable margin ranging from 2.5% to 3.5%, based on the Company’s Net Senior Secured Debt to EBITDA Ratio as defined in the Credit Facility. The Credit Facility is secured by a first ranking lien on the assets of the San Jose and Caylloma mines as well as their holding companies.

(Expressed in $ millions)
Cash and cash equivalents	131.9		83.4		48.5
Credit facility	120.0		150.0		(30.0	)
Total liquidity available	251.9		233.4		18.5
Amount drawn on credit facility	(120.0	)	(110.0	)	(10.0	)
Net liquidity position	131.9		123.4		8.5

As at December 31, 2020, the Company was in compliance with its financial covenants.

The full extent and impact of COVID-19 on the Company’s operations and financial condition continues to be difficult to ascertain until the duration of the outbreak, the severity of the virus and the ability to treat it can reasonably be predicted, and when the government of the countries which host our operations lift restrictions on business activities. In the event of an unexpectedly prolonged duration of COVID-19, or in the event that more rigorous capital controls are implemented in Argentina, the Company may be required to raise additional debt or equity. There is no assurance that the lenders will agree to such a request or that financing will be available to the Company on terms acceptable to it.

Management’s Discussion and Analysis, page 25

FortunaSilver Mines Inc.

The Company does not have unlimited financial resources and there is no assurance that sufficient additional funding or financing will be available when needed by the Company or its direct and indirect subsidiaries on acceptable terms, or at all, to further explore or develop its properties or to fulfill its obligations under any applicable agreements. Fortuna is a multinational company and relies on financial institutions worldwide to fund corporate and project needs. Instability of large financial institutions may impact the ability of the Company to obtain equity or debt financings in the future and, if obtained, on terms that may not be favorable to the Company. Disruptions in the capital and credit markets as a result of uncertainty, geo-political events, changing or increased regulations of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect the Company’s access to the liquidity needed for the business in the longer term.

The Company may incur substantial debt from time to time to finance working capital, capital expenditures, investments or acquisitions or for other purposes. If the Company does so, the risks related to the Company’s indebtedness could intensify, including: (i) increased difficulty in satisfying existing debt obligations (ii) limitations on the ability to obtain additional financings, or imposed requirements to make non-strategic divestures (iii) impose hedging requirements (iv) imposed restrictions on the Company’s cash flows, for debt repayments or capital expenditures (v) increased vulnerability to general adverse economic and industry conditions (vi) interest rate risk exposure as borrowings may be at variable rates of interest (vii) decreased flexibility in planning for and reacting to changes in the mining industry (viii) reduced competitiveness versus less leveraged competitors, and (ix) increased cost of borrowings.

Subject to the various risks and uncertainties, as explained in the Risks and Uncertainties section, management believes the Company’s mining operations will generate sufficient cash flows and the Company has sufficient available credit lines and cash on hand to fund the construction of the Lindero Mine and planned capital and exploration programs.

The Company has contingencies and capital commitments as described in the Note 33 “Contingencies and Capital Commitments” in the Company’s annual audited consolidated financial statements. From time to time, the Company may also be involved in legal proceedings that arise in the ordinary course of its business.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements or commitments that are expected to have a current or future effect on the financial condition, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Financial Instruments

The Company does not utilize complex financial instruments in hedging foreign exchange or interest exposure. Any hedging activity requires approval of the Company’s Board of Directors. The Company will not hold or issue derivative instruments for speculative or trading purposes.

Provisional priced trade receivables of $26.3 million and an interest rate swap (notional amount of $40.0 million), forward sales, and forward fuel contracts liability totaling $1.3 million are the Company’s only level 2 fair valued financial instruments and no level 3 instruments are held.

Provisionally priced trade receivables are valued using forward London Metal Exchange prices until final prices are settled at a future date. The interest rate swap is measured at estimated fair value.

Management’s Discussion and Analysis, page 26

FortunaSilver Mines Inc.

Related Party Transactions

The Company has entered into the following related party transactions during the three and twelve months ended December 31, 2020 and 2019:

(a) Purchase of Goods and Services

The Company was charged for general and administrative services pursuant to a shared services agreement with Gold Group Management Inc., a company of which Simon Ridgway, the Company’s former Chairman, is a director.

	Years ended December 31,
(Expressed in $ thousands)	2020		2019
Personnel costs		19		21
General and administrative expenses		138		189
		157		210

As at December 31, 2020, the Company had an outstanding balance payable to Gold Group Management Inc. of $5 (December 31, 2019 - $14). Amounts due to related parties are due on demand and are unsecured.

Effective February 2, 2021, Mr. Ridgway stepped down as a director and Chairman of the Board of Directors of the Company.

(b) Key Management Personnel

During the years ended December 31, 2020 and 2019, the Company was charged for consulting services by Mario Szotlender, a director of the Company, and by Mill Street Services Ltd., a company of which Simon Ridgway, the Company’s former Chairman, is a director. Such amounts, along with other amounts paid to key management personnel are as follows:

	Years ended December 31,
(Expressed in $ thousands)	2020		2019
Salaries and benefits		4,266		4,716
Directors fees		707		702
Consulting fees		134		135
Share-based payments		11,115		5,449
		16,222		11,002

Amendments to Accounting Standards That Have Been Issued

In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. This amendment is effective on January 1, 2020 and the first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022, with early adoption permissible. The Company has elected to early adopt the amendment to IAS 16 Standard for the year ended December 31, 2020 and has recognized $20.3 million of gold sales and related cost of sales of $10.1 million in the income statement.

Management’s Discussion and Analysis, page 27

FortunaSilver Mines Inc.

Risks and Uncertainties

The Company is exposed to many risks in conducting its business, including but not limited to metal price risk as the Company derives its revenue from the sale of silver, gold, lead and zinc; credit risk in the normal course of business; foreign exchange risk as the Company reports its financial statements in U.S. dollars whereas the Company operates in jurisdictions that conducts its business in other currencies; the inherent risks of uncertainties in estimating mineral reserves and mineral resources; the risk in relation to the construction, the timing of completion of commissioning and the commencement of commercial production at the Lindero Mine; operational risks related to the spread of the COVID-19 pandemic; political risks, exchange rate and capital controls risk, environmental risks; and risks related to its relations with employees. These and other risks are described below and in the Company’s audited consolidated financial statements for 2020, its Annual Information Form which is available on SEDAR at www.sedar.com, and its Form 40-F filed with the SEC. Readers are encouraged to refer to these documents for a more detailed description of some of the risks and uncertainties inherent to the Company’s business.

Foreign<br> Jurisdiction Risk

The Company currently conducts its operations in Peru, Mexico and Argentina. All these jurisdictions are potentially subject to a number of political and economic risks, including those described in the following section. The Company is unable to determine the impact of these risks or its future financial position or results of operations and the Company’s exploration, development and production activities may be substantially affected by factors outside of the Company’s control. These potential factors include but are not limited to royalty and tax increases or claims by governmental bodies, expropriation or nationalization, lack of an independent judiciary, foreign exchange controls, capital and currency controls, import and export regulations, cancellation or renegotiation of contracts and environmental and permitting regulations. The Company has no political risk insurance coverage against these risks.

The majority of the Company’s production and revenue to December 31, 2020 was derived from its operations in Peru and Mexico. As the Company’s business is carried on in a number of developing countries, it is exposed to a number of risks and uncertainties, including the following: expropriation or nationalization without adequate compensation especially in Argentina which has a history of expropriation where the Company is currently in the process of commissioning the Lindero Mine; changing political and fiscal regimes, and economic and regulatory instability; unanticipated changes to royalty and tax regulations; unreliable and undeveloped infrastructure, labor unrest and labor scarcity; difficulty procuring key equipment and components for equipment; import and export regulation and restrictions; the imposition of capital controls which may affect the repatriation of funds; high rates of inflation; extreme fluctuations in foreign exchange rates and the imposition of currency controls; inability to obtain fair dispute resolution or judicial determination because of bias, corruption or abuse of power; difficulties enforcing judgments; difficulties understanding and complying with regulatory and legal framework with respect to ownership and maintenance of mineral properties, mines and mining operations, local opposition to mine development projects, which include the potential for violence, property damage and frivolous or vexatious claims; terrorism and hostage taking; military repression and increased likelihood of international conflicts or aggression; increased public health concerns. Certain of these risks and uncertainties are prevalent in the jurisdictions where the Company operates.

There can be no assurance that these measures will not be extended or that more restrictive measures will be put in place in the countries in which the Company operates, which may result in the suspension of operations or construction at the Company’s mines on a short or long-term basis.

Management’s Discussion and Analysis, page 28

FortunaSilver Mines Inc.

Estimating<br> Mineral Resources and Mineral Reserves

There is a degree of uncertainty attributable to the estimation of Mineral Resources, Mineral Reserves and expected mineral grades. Until mineral deposits are actually mined and processed, Mineral Resources, Mineral Reserves must be considered as estimates only. Any such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices.

Mineral Resources and Mineral Reserves may require revision based on actual production experience. Market fluctuations in the price of metals, as well as increased production costs and reduced metallurgical recovery rates, may render certain Mineral Reserves uneconomic and may ultimately result in a restatement of Mineral Resources and/or Mineral Reserves. Short-term operating factors relating to the Mineral Resources and Mineral Reserves, such as the need for sequential development of ore bodies, may adversely affect the Company’s profitability in any accounting period. Estimates of operating costs are based on assumptions including those relating to inflation and currency exchange, which may prove incorrect. Estimates of mineralization can be imprecise and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. In addition, the grade and/or quantity of precious metals ultimately recovered may differ from that indicated by drilling results. There can be no assurance that precious metals recovered in small scale tests will be duplicated in large scale tests under onsite conditions or in production scale. Amendments to mine plans and production profiles may be required as the amount of Mineral Resources changes or upon receipt of further information during the implementation phase of the project. Extended declines in market prices for gold, silver and other metals may render portions of the Company’s mineralization uneconomic and result in reduced reported mineralization. Any material reduction in estimates of mineralization, or in the Company’s ability to develop its properties and extract and sell such minerals, could have a material adverse effect on the Company’s results of operations or financial condition.

Mining<br> Operations

The capital costs required by the Company’s projects may be significantly higher than anticipated. Capital and operating costs, production and economic returns, and other estimates contained in the Company’s current technical reports, may differ significantly from those provided for in future studies and estimates and from management guidance, and there can be no assurance that the Company’s actual capital and operating costs will not be higher than currently anticipated. In addition, delays to construction and exploration schedules may negatively impact the net present value and internal rates of return of the Company’s mineral properties as set forth in the applicable technical report. Similarly, there can be no assurance that historical rates of production, grades of ore processed, rates of recoveries or mining cash costs will not experience fluctuations or differ significantly from current levels over the course of the mining operations. In addition, there can be no assurance that the Company will be able to continue to extend the production from its current operations through exploration and drilling programs.

Uncertainties<br> and Risks Related to the Completion of Commissioning and Commencement of Production at<br> the Lindero Mine

The Company is subject to inherent uncertainties and risks related to the commencement of commercial production at the Lindero Mine, the principal of which include: delays in pre-commissioning, and ramp-up to commercial production; delays associated with contractors; budget overruns due to changes in costs of fuel, labour, power, materials and supplies, inflation and exchange rate risks and potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent activities.

The Company’s ability to meet construction, development, and production schedules and cost estimates for the Lindero Mine cannot be assured. The Company has prepared estimates of capital costs and/or operating costs for the Lindero Mine, but no assurance can be given that such estimates will be achieved. Delays in the commencement of commercial production, failure to achieve cost estimates or material increases in costs due to increases in foreign exchange rates; continuation of capital controls imposed in Argentina; imposition of exchange control restrictions; and delays in obtaining the value added tax refunds, could have an adverse impact in future cash flows, profitability, results of operations and financial condition of the Company.

Management’s Discussion and Analysis, page 29

FortunaSilver Mines Inc.

Environmental<br> Uncertainties

All phases of the Company’s operations are subject to environmental regulation in the various jurisdictions in which it operates. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. The Company’s operations generate chemical and metals depositions in the form of tailings. The Company’s ability to obtain, maintain and renew permits and approvals and to successfully develop and operate mines may be adversely affected by real or perceived impacts associated with the Company’s activities or of other mining companies that affect the environment, human health and safety. Environmental hazards may exist on the Company’s properties which are unknown to the Company at present and were caused by previous or existing owners or operators of the properties, for which the Company could be held liable.

Environmental legislation is evolving in a manner requiring stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on behalf of the Company and may cause material changes or delays in the Company’s intended activities. Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or be curtailed. Such enforcement actions may include the imposition of corrective measures requiring capital expenditure, installation of new equipment or remedial action. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations.

Uncertainties<br> and Risks Relating to COVID-19

The outbreak of COVID-19, which was declared a global pandemic by the World Health Organization in March 2020 and has resulted in a wide spread global health crisis. The novel strain of COVID-19 emerged from China and spread to other countries including Peru, Mexico, Argentina and Canada, the countries in which the Company operates. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, mandatory quarantines, global stock market volatility, operating and supply chain delays and disruptions, and a general reduction in consumer activity.

During the year ended December 31, 2020, our operations were negatively impacted by the spread of the COVID-19 pandemic. Operations at the San Jose Mine were suspended for 54 days in Q2 as a result of a government mandated national quarantine in Mexico, and construction activities were temporarily suspended at the Lindero Mine on March 19, 2020 for a period of 60 days due to a government mandated period of national social isolation in Argentina. In response to a period of social isolation mandated by the Peruvian government in Q1 and Q2, operations were able to continue at the Caylloma Mine, initially by drawing ore from the coarse ore stockpile during Q1, and as the stockpile decreased the mine was subsequently re-started in Q2 using a reduced taskforce in compliance with applicable Peruvian Government requirements. However, operations were voluntarily suspended at the Caylloma Mine in Q3 for 21 days, to among other things sanitize and disinfect the mine and make infrastructure improvements to accommodate social distancing guidelines.

Even though the Company has and continues to implement business continuity measures to mitigate and reduce any potential impacts of COVID-19 on its business, operations, supply chain and financial condition, the spread of COVID-19 in the countries in which it operates could have a material adverse impact on: the Company’s workforce; production at the Caylloma Mine and the San Jose Mine, the pre-production, commissioning and the commencement of commercial production at the Lindero Mine; the continued operation of its mines and exploration projects; its ability to transport and sell concentrates and doré could likewise be restricted; any of which would have an effect on the Company’s financial condition.

Management’s Discussion and Analysis, page 30

FortunaSilver Mines Inc.

Given the fast-changing situation with respect to the COVID-19 pandemic, including further waves of the virus and the emergence of variants of the virus, it is difficult to predict the exact nature and extent of the impact the pandemic may have on the Company and its business. Until the number of cases and death rate start to flatten the curve and decline, and vaccines are readily available, there is no certainty that governments may not mandate another round of extreme measures, which could include the suspension of business activities, including mining, which would have an adverse impact on our business and operations.

In addition, COVID-19 has caused: volatility in commodity prices (including gold, silver, lead and zinc); volatility in the stock markets on which the Company’s Common Shares and Debentures are listed, and in the price of the Company’s securities. The continued adverse effects of the spread of COVID-19 if not contained, could impact the Company’s ability to raise capital or refinance the Company’s debt obligations in the future, which may have a material adverse effect on the business, operations and financial condition of Company.

The Company remains focused on ensuring the health and safety of the workforce and in continuing measures to prevent and manage transmission of COVID-19 amongst the workforce and the wider community. Despite these measures, there can be no assurance that such measures will be successful.

Credit<br> Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. All of our trade receivables from concentrate sales are held with large international metals trading companies.

The Company’s cash and cash equivalents and short-term investments are held through large financial institutions. These investments mature at various dates within one year.

The Company’s maximum exposure to credit risk as at December 31, 2020 and 2019 is as follows

	December 31,		December 31,
(Expressed in $ millions)	2020		2019
Cash and cash equivalents		131.9		83.4
Accounts receivable and other assets		76.6		47.7
Income tax receivable		-		2.6
Other non-current receivables		5.5		38.4
		214.0		172.1

Metal<br> Price Risk

The Company derives its revenue from the sale of silver, gold, lead and zinc. The Company’s sales are directly dependent on metal prices, and metal prices have historically shown significant volatility that is beyond the Company’s control.

Management’s Discussion and Analysis, page 31

FortunaSilver Mines Inc.

The following table illustrates the sensitivity to a +/-10% change in metal prices on the Company’s outstanding trade receivables as at December 31, 2020:

Metal (Expressed in $ millions)	Change
Silver	+/-10%	1.3
Gold	+/-10%	0.6
Lead	+/-10%	0.2
Zinc	+/-10%	0.3

During December 2020, the Company entered into the following contracts:

•	zero-cost collars for 12,300 tonnes of zinc with a floor price of $2,600 per tonne and a cap of $2,900 per tonne, maturing monthly from January 1, 2021 to December 31, 2021;
•	zero-cost collars for 720,000 gallons of heating oil with a floor price of $1.40 per gallon and a cap of $1.6150 per gallon, maturing monthly from January 1, 2021 to December 31, 2021;
---	---
•	zero-cost collars for 1,680,000 gallons of jet fuel with a floor price of $1.30 per gallon and a cap of $1.4775 per gallon, maturing monthly from January 1, 2021 to December 31, 2021;
---	---
•	forward swaps for 720,000 gallons of heating oil with a price of $1.52 per gallon, maturing monthly from January 1, 2022 to December 31, 2022; and
---	---
•	forward swaps for 1,680,000 gallons of jet fuel with a price of $1.438 per gallon, maturing monthly from January 1, 2022 to December 31, 2022.
---	---

On February 11, 2021, the Company entered into a zero-cost collars for 6,237 tonnes of lead with a floor price of $2,000 per tonne and a cap of $2,125 per tonne, maturing monthly beginning on February 1, 2021 to December 31, 2022.

The zinc, lead and fuel contracts are derivative financial instruments and are not accounted for as designated hedges. They were initially recognized at fair value on the date on which the related derivative contracts were entered into and are subsequently re-measured to estimated fair value. Any gains or losses arising from changes in the fair value of the derivatives are credited or charged to profit or loss.

Currency<br> Risk

The following table summarizes the sensitivity to a +/-10% change in foreign currency exchange rates on the Company’s foreign currency exposure as at December 31, 2020:

		Effect on foreign
		denominated
Currency (Expressed in $ millions)	Change	items
Mexican Peso	+/-10%	2.3
Peruvian Soles	+/-10%	0.2
Argentine Peso	+/-10%	2.6
Canadian Dollar	+/-10%	1.1

Management’s Discussion and Analysis, page 32

FortunaSilver Mines Inc.

Due to the volatility of the exchange rate for Argentine Peso, the Company is applying additional measures in cash management to minimize potential losses arising from the conversion of funds. As discussed below in the capital management section, the capital controls are in effect when the Lindero Mine reaches commercial production, the Company will be required to convert the equivalent value into Argentine Peso from the export sale of all gold doré from the Lindero Mine. In addition, the Company would be required to obtain the prior consent of the Argentine Central Bank for the payment of cash dividends and distributions of profits out of Argentina.

The following tables summarizes the Company’s exposure to currency risk through the following assets and liabilities denominated in foreign currencies:


(In millions of local currency)			Peruvian<br> Soles			Mexican<br> Pesos			Argentine<br> Pesos
Cash and cash equivalents	1.4			9.7			3.1			2.3
Marketable securities	1.3			-			-			-
Trade and VAT receivables	0.1			3.6			108.6			3,281.8
Income tax receivable	-			6.9			-			-
VAT - long term receivable	-			-			67.5			-
Trade and other payables	(17.8	)		(28.0	)		(311.7	)		(764.3	)
Due to related parties	-			-			-			-
Provisions, current	-			0.1			(4.9	)		(77.5	)
Income tax payable	-			(0.3	)		(297.1	)		-
Other liabilities	(0.2	)		-			(5.2	)		-
Provisions, non-current	-			(0.8	)		(67.1	)		-
Total foreign currency exposure	(15.2	)		(8.8	)		(506.8	)		2,442.3
US equivalent of foreign currency exposure	(12.0	)		(2.4	)		(25.4	)		29.1

All values are in US Dollars.

Totals may not add due to rounding


(In millions of local currency)			Peruvian<br> Soles			Mexican<br> Pesos			Argentine<br> Pesos
Cash and cash equivalents	0.6			2.3			13.1			11.8
Trade and other receivables	0.3			1.8			4.0			117.5
Income tax receivable	-			8.5			-			-
Investments in associates	1.4			-			-			-
VAT - long term receivable	-			-			10.7			2,039.9
Trade and other payables	(8.5	)		(19.4	)		(214.7	)		(1,454.4	)
Due to related parties	-			-			-			-
Provisions, current	(0.1	)		-			(3.9	)		-
Income tax payable	-			-			(161.9	)		-
Other liabilities	-			-			(4.2	)		-
Provisions, non-current	-			-			(87.5	)		-
Total foreign currency exposure	(6.3	)		(6.8	)		(444.4	)		714.8
US equivalent of foreign currency exposure	(4.8	)		(2.1	)		(23.6	)		11.8

All values are in US Dollars.

Liquidity<br> Risk

Management’s Discussion and Analysis, page 33

FortunaSilver Mines Inc.

As at December 31, 2020, the Company expects the following maturities of its financial liabilities, lease obligations, and other contractual commitments, excluding payments relating to interest:

	Expected payments due by year as at December 31, 2020
	Less than						After
(Expressed in $ millions)	1 year		1 - 3 years		4 - 5 years		5 years		Total
Trade and other payables		65.3		-		-		-		65.3
Debt		-		120.0		46.0		-		166.0
Income taxes payable		23.8		-		-		-		23.8
Lease obligations		7.4		6.2		4.0		14.1		31.7
Other liabilities		-		2.5		-		-		2.5
Capital commitments, Lindero ^2^		0.6		-		-		-		0.6
Closure and reclamation provisions		0.4		5.4		10.7		23.8		40.3
		97.5		134.1		60.7		37.9		330.2

^1^Figures may not add due to rounding

^2^Net of $1 million of advances to contractors

Capital<br> Management

Effective December 23, 2019, changes to Argentina’s tax laws proposed by the new Argentine Government were implemented. The changes ratified and extended legislation which was to expire on December 31, 2019 and allow the Argentine Central Bank to regulate funds coming into and flowing out of Argentina in order to maintain stability and support the economic recovery of the country. These capital controls together with additional temporary controls enacted on May 29, 2020, have the effect of: requiring exporters to convert the equivalent value of foreign currency received from the export into Argentine Pesos; requiring the prior consent of the Argentine Central Bank to the payment of cash dividends and distributions of currency out of Argentina; requiring Argentine companies to convert foreign currency loans received from abroad into Argentine Pesos; and restricting the sale of Argentine Pesos for foreign currency.

In September 2020, the Argentine Central Bank approved a new resolution which requires companies to restructure sixty percent of any individual debt exceeding $1.0 million, which has at least a two-year term and is maturing between October 15, 2020 and March 31, 2021. However, this resolution does not apply to intercompany debt and the Company does not hold any external debt at Lindero.

The Argentine Central Bank has also issued a temporary measure in effect until March 31, 2021, which requires the consent of the Central Bank to the repayment of certain types of intercompany loans. There can be no assurance that the temporary measure will not be extended.

Management’s Discussion and Analysis, page 34

FortunaSilver Mines Inc.

The Company’s capital structure consists of equity comprising of share capital, reserves and retained earnings as well as debt consisting of credit facilities and convertible debentures, lease obligations less cash and cash equivalents.

	December 31,			December 31,
(Expressed in $ millions)	2020			2019
Equity		725.8			635.4
Debt		158.6			146.5
Lease obligations		19.5			23.9
Less: cash and cash equivalents		(131.9	)		(83.4	)
		772.0			722.4

Figures may not add due to rounding

As discussed above, the Company operates in Argentina where the new Argentine government has ratified and extended legislation to December 31, 2025 to allow the Argentine Central Bank to regulate funds coming into and flowing out of Argentina. Other than the restrictions related to these capital controls and complying with the debt covenants under the credit facilities, the Company is not subject to any externally imposed capital requirements. As at December 31, 2020, the Company was in compliance with its debt covenants. See also Liquidity and Capital Resources.

Interest<br> Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Currently, our interest rate exposure mainly relates to interest earned on our cash and cash equivalents balances, interest paid on its LIBOR-based debt, and the mark-to-market value of derivative instruments which depend on interest rates. As at December 31, 2020, the Company has outstanding an interest rate swap as a hedge on the $40 million non-revolving credit facility to mitigate the interest rate risk on our debt.

Key<br> Personnel

The Company is dependent on a number of key management and employee personnel. The Company’s ability to manage its exploration, development, construction and operating activities, and hence its success, will depend in large part on the ability to retain current personnel and attract and retain new personnel, including management, technical and unskilled employees. The loss of the services of one or more key management personnel, as well as a prolonged labor disruption, could have a material adverse effect on the Company’s ability to successfully manage and expand its affairs.

Claims<br> and Legal Proceedings

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the normal course of business. The Company may be subject to claims by local communities, indigenous groups or private land owners relating to land and mineral rights and such claimants may seek sizable monetary damages or seek the return of surface or mineral rights that may be valuable to the Company which may significantly impact operations and profitability, if lost. These matters are subject to various uncertainties and it is possible that some of these matters may be resolved with an unfavorable outcome to the Company. The Company does carry liability insurance coverage, but such coverage does not cover all risks to which the Company may be exposed to.

Critical<br> Accounting Estimates, Assumptions and Judgements

Many of the amounts included in the consolidated financial statements require management to make estimates, assumptions and judgements. These estimates, assumptions and judgements are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Areas where critical accounting estimates and assumptions have the most significant effect on the amounts recognized in the consolidated financial statements include:

Management’s Discussion and Analysis, page 35

FortunaSilver Mines Inc.

Mineral<br> Reserves and Resources and the Life of Mine Plan

We estimate our mineral reserves and mineral resources in accordance with the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects published by the Canadian Securities Administrators. Estimates of the quantities of the mineral reserves and mineral resources form the basis for our life of mine plans, which are used for the calculation of depletion expense under the units of production method, impairment tests, and forecasting the timing of the payments related to the environmental rehabilitation provision.

Significant estimation is involved in determining the reserves and resources included within our life of mine plans. Changes in forecast prices of commodities, exchange rates, production costs or metallurgical recovery rates may result in our life of mine plan being revised and such changes could impact depletion rates, asset carrying values and our environmental rehabilitation provision. As at December 31, 2020 we have used the following long-term prices for our mineral reserve and mineral resource estimations: gold $1,600/oz, silver $21/oz, lead $2,000/t and zinc $2,270/t.

In addition to the estimates above, estimation is involved in determining the percentage of mineral resources ultimately expected to be converted to mineral reserves and hence included in our life of mine plans. Our life of mine plans include a portion of inferred mineral resources as we believe this provides a better estimate of the expected life of mine for certain types of deposits, in particular for vein type structures. The percentage of inferred resources of the total tonnage included in the life of mine plans is based on site specific geological, technical, and economic considerations. Estimation of future conversion of resources is inherently uncertain and involves judgment and actual outcomes may vary from these judgments and estimates and such changes could have a material impact on the financial results. Some of the key judgments of the estimation process include geological continuity, stationarity in the grades within defined domains, reasonable geotechnical and metallurgical conditions, treatment of outlier (extreme) values, cut-off grade determination and the establishment of geostatistical and search parameters. Revisions to these estimates are accounted for prospectively in the period in which the change in estimate arises. See note 4(g)(i) to the audited consolidated financial statements for 2020.

Valuation<br> of Mineral Properties and Exploration Properties

The Company carries its mineral properties at cost less accumulated depletion and any accumulated provision for impairment. The costs of each property and related capitalized expenditures are depleted over the economic life of the property on a units-of-production basis. Costs are charged to the consolidated statement of income (loss) when a property is abandoned or when there is an impairment.

The Company undertakes a review of the carrying values of mining properties and related expenditures whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts determined by reference to estimated future operating results and discounted net cash flows. Where previous impairment has been recorded the Company analyzes any impairment reversal indicators. An impairment loss is recognized when the carrying value of those assets is not recoverable. In undertaking this review, management of the Company is required to make significant estimates of, amongst other things, future production and sales volumes, metal prices, foreign exchange rates, mineral resource and reserve quantities, future operating and capital costs to the end of the mine’s life, and reclamation costs. These estimates are subject to various risks and uncertainties which may ultimately have an effect on the expected recoverability of the carrying values of the mining properties and related expenditures.

Management’s Discussion and Analysis, page 36

FortunaSilver Mines Inc.

Reclamation<br> and Other Closure Provisions

The Company has obligations for reclamation and other closure activities related to its mining properties. The future obligations for mine closure activities are estimated by the Company using mine closure plans or other similar studies which outline the requirements that will be carried out to meet the obligations. Because the obligations are dependent on the laws and regulations of the countries in which the mines operate, the requirements could change as a result of amendments in the laws and regulations relating to environmental protection and other legislation affecting resource companies. As the estimate of the obligations is based on future expectations, a number of estimates and assumptions are made by management in the determination of closure provisions.

Revenue<br> Recognition

Revenue from the sale of concentrate to customer is recognized when the customer obtains control of the concentrate. A provisional invoice is issued to the customer based on the monthly average metal prices on the expected date of final settlement at which time the final sale prices will be fixed. Variations between the prices at initial recognition and final settlement may occur due to changes in the market metal prices and result in an embedded derivative in the accounts receivable. The embedded derivative is recorded at fair value each period until final settlement occurs with changes in the fair value classified as revenue. For changes in metal quantities upon receipt of new information and assays, the provisional sale quantities are adjusted.

Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, the Company with assistance from its legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims or actions.

A liability is recognized in the consolidated financial statements when the outcome of the legal proceedings is probable, and the estimated settlement amount can be estimated reliably. Contingent assets are not recognized in the consolidated financial statements until virtually certain.

Management’s Discussion and Analysis, page 37

FortunaSilver Mines Inc.

On November 27, 2020, the District Court at first instance found that the Company suffered no harm from the initiation of the cancellation procedure and dismissed the proceedings (the “Procedural Finding”) without deciding on the merit of the Amparo Proceedings and on the validity of the royalty. The Procedural Finding does not affect the permanent stay of execution, which remains in place. The Company’s Mexican advisors are of the view that the decision of the District Court is flawed. The Company’s legal position with respect to the disputed royalty remains unchanged. The Company intends to vigorously defend its position and has filed an appeal to the Procedural Finding with the Collegiate Court in Mexico The previously obtained stay of execution protects the Company from the cancellation of the concession and remains in place until all avenues of appeal have been exhausted. In the event that the Company does not prevail in the appeal, it may be required to pay the disputed royalty in order to preserve the mining concession. If the Company is required to pay the royalty, it will do so from available capital resources.

The Company has determined that it is more likely than not that it will succeed in these proceedings; therefore, no provision has been recorded as at December 31, 2020 and December 31, 2019.

Critical Accounting Judgements in Applying the Entity’s Accounting Policies

Judgements that have the most significant effect on the amounts recognized in the Company’s consolidated financial statements are as follows:

Income<br> Taxes

Deferred tax assets and liabilities are determined based on differences between the financial statement carrying values of assets and liabilities and their respective income tax bases (“temporary differences”) and losses carried forward. The determination of the ability of the Company to utilize tax loss carry-forwards to offset deferred tax liabilities requires management to exercise judgment and make certain assumptions about the future performance of the Company.

Assessment<br> of Impairment and Reversal of Impairment Indicators

Management applies significant judgment in assessing whether indicators of impairment or reversal of impairment exist for an asset or a group of assets which could result in a testing for impairment. Internal and external factors such as significant changes in the use of the asset, commodity prices, life of mines, tax laws or regulations in the countries that our mines operate in and interest rates are used by management in determining whether there are any indicators of impairment or reversal of previous impairments.

Functional<br> Currency

The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which each operates. The Company has determined that its functional currency and that of its subsidiaries is the U.S. dollar. The determination of functional currency may require certain judgments to determine the primary economic environment. The Company reconsiders the functional currency used when there is a change in the events and conditions which determined the primary economic environment.

Management’s Discussion and Analysis, page 38

FortunaSilver Mines Inc.

IFRS 16 Leases

Significant estimates, assumptions and judgments made by management on adoption of IFRS 16 Leases primarily included judgement about whether the lease conveys the right to use a specific asset, whether the Company obtains substantially all of the economic benefits from the use of the asset, whether the Company has the right to direct the use of the asset, evaluating the appropriate discount rate to use to discount the lease liability for each lease or groups of assets, and to determine the lease term where a contract includes renewal options. Significant estimates, assumptions and judgements over these factors would affect the present value of the lease liabilities, as well as the associated amount of the ROU asset.

Share Position and Outstanding Options and Equity Based Share Units

The Company has 184,195,727 common shares outstanding as at March 9, 2021. In addition, there were 3,427,106 outstanding equity-settled share-based awards as follows:

Incentive stock options	1,054,570
Restricted share units	1,533,366
Performance share units	839,170
Total	3,427,106

An aggregate of 422,609 equity-settled performance share units issued in 2019 are subject to a multiplier ranging from 50% to 200% depending on the achievement level of certain performance targets.

On April 20, 2020, the Company granted 815,220 equity-settled restricted share units which vest 20% on the first anniversary of the date of grant, 30% on the second anniversary and 50% on the third anniversary. The fair value of each restricted share unit on the grant date was $2.36 (C$3.32).

As at December 31, 2020, the Company has $46.0 million of Debentures that are convertible at the holder’s option into common shares in the capital of the Company at a conversion price of $5.00 per share, representing a conversion rate of 200 Common Shares per $1,000 principal amount of Debentures, subject to adjustment in certain circumstances. Subject to certain exceptions in connection with a change of control of the Company, the Debentures cannot be redeemed by the Company prior to October 31, 2022. Between November 1, 2022 and prior to October 31, 2023, the Debentures may be redeemed in whole or in part from time to time at the Company’s option at a price equal to their principal amount plus accrued and unpaid interest, provided that the volume weighted average trading price of the Common Shares on the NYSE for the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of the redemption is given is at least 125% of the Conversion Price. On and after October 31, 2023, the Debentures may be redeemed in whole or in part from time to time at the Company’s option at a price equal to their principal amount plus accrued and unpaid interest regardless of the trading price of the Common Shares. The Debentures mature on October 31, 2024 and bear interest at a rate of 4.65% per annum, payable semi-annually in arrears on the last business day of April and October, commencing on April 30, 2020.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures have been designed to provide reasonable assurance that all material information related to the Company is identified and communicated to management on a timely basis. Management of the Company, under the supervision of the President and Chief Executive Officer and the Chief Financial Officer, is responsible for the design and operation of disclosure controls and procedures in accordance with the requirements of National Instrument 52-109 of the Canadian Securities Administrators (“National Instrument 52-109”) and as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the U.S. Exchange Act).

Management’s Discussion and Analysis, page 39

FortunaSilver Mines Inc.

Management’s Report on Internal Control over Financial Reporting

The Company’s internal control over financial reporting (“ICFR”) is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external reporting purposes in accordance with IFRS as issued by the International Accounting Standards Board. However, due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements and fraud.

Management assesses the effectiveness of the Company’s internal control over financial reporting using the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”). Management conducted an evaluation of the effectiveness of ICFR and concluded that it was effective as at December 31, 2020.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Non-GAAP Financial Measures

This MD&A refers to various Non-GAAP Financial Measures, including cash cost per payable ounce of silver equivalent; cash cost per tonne of processed ore; total production cash cost per tonne; all-in sustaining cash cost per payable ounce of silver equivalent production; all-in sustaining cash cost per payable ounce of silver equivalent production; free cash flow and free cashflow from ongoing operations; adjusted net income; and adjusted EBITDA.

These measures are used by the Company to manage and evaluate operating performance and ability to generate cash flow and are widely reported in the mining industry as benchmarks for performance. The Company believes that certain investors use these Non-GAAP Financial Measures to evaluate the Company’s performance. However, the measures do not have a standardized meaning and may differ from measures used by other companies with similar descriptions. Accordingly, Non-GAAP Financial Measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company has calculated these measures consistently for all periods presented.

To facilitate a better understanding of these measures as calculated by the Company, descriptions and reconciliations are provided here.

Cash Cost per Payable Ounce of Silver Equivalent Production and Cash Cost per Tonne of Processed Ore

Cash cost per payable ounce of silver equivalent production and total production cash cost per tonne of processed ore are key performance measures that management uses to monitor performance. Management believes that certain investors also use these Non-GAAP Financial Measures to evaluate the Company’s performance. Cash cost is an industry-standard method of comparing certain costs on a per unit basis; however, they 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 with similar data presented by other mining companies.

Management’s Discussion and Analysis, page 40

FortunaSilver Mines Inc.

The following tables present a reconciliation of cash cost per tonne of processed ore and cash cost per payable ounce of silver equivalent production to the cost of sales in the consolidated financial statements for the three and twelve months ended December 31, 2020 and 2019:

	Three months ended						Years ended
SILVER MINES CASH COST SILVER EQUIVALENT	December 31,						December 31,
(Expressed in ’000’s, except unit costs)	2020			2019			2020			2019
Cost of sales		46,502			45,539			158,672			172,607
Changes in concentrate inventory		(1,159	)		443			(855	)		969
Depletion and depreciation in concentrate inventory		738			(178	)		378			(280	)
Inventory adjustment		3			(1,257	)		5			(1,327	)
IFRS 16 embedded lease adjustment		726			626			2,415			2,409
Royalties and mining taxes		(1,544	)		(1,462	)		(4,812	)		(4,134	)
Provision for community support		-			128			101			282
Workers participation		(1,989	)		(1,922	)		(7,459	)		(6,012	)
Depletion and depreciation		(11,984	)		(11,309	)		(42,157	)		(44,357	)
Cash cost		31,293			30,608			106,288			120,157
Treatment charges		6,639			2,275			20,879			10,060
Refining charges		701			1,274			4,342			5,011
Cash cost applicable per payable ounce		38,633			34,157			131,509			135,228
Payable ounces of silver equivalent production1		3,487,341			4,132,079			13,331,597			16,806,749
Cash cost per ounce of payable silver equivalent2 (/oz)		11.08			8.27			9.86			8.05

All values are in US Dollars.

Notes:

^1^ Silver equivalent production for Q4 2020 is calculated using a silver to gold ratio of 76.7:1 (Q4 2019: 85.5:1), silver to lead ratio of 1:28.2 pounds (Q4 2019: 1:18.7), and silver to zinc ratio of 1:20.6 pounds (Q4 2019: 1:16.0). Year 2020: silver gold ratio of 84.5:1 (Year 2019: 86.0:1), silver to lead ratio of 1:24.9 pounds (Year 2019: 1:17.9) and silver to zinc ratio of 1:20.0 pounds (Year 2019: 1:14.1)

^2^ Silver equivalents is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales and Realized Prices

Management’s Discussion and Analysis, page 41

FortunaSilver Mines Inc.

	Three months ended						Years ended
SAN JOSE MINE	December 31,						December 31,
(Expressed in ’000’s, except unit costs)	2020			2019			2020			2019
Cost of sales		31,027			30,024			104,315			114,156
Changes in concentrate inventory		(1,477	)		741			(1,200	)		1,111
Depletion and depreciation in concentrate inventory		967			(231	)		380			(325	)
Inventory adjustment		16			(1,235	)		18			(1,235	)
IFRS 16 embedded lease adjustment		5			31			20			93
Royalties and mining taxes		(1,411	)		(844	)		(4,289	)		(3,385	)
Workers participation		(1,501	)		(1,779	)		(6,560	)		(5,293	)
Depletion and depreciation		(8,179	)		(7,541	)		(27,856	)		(30,736	)
Cash cost		19,447			19,166			64,828			74,386
Total processed ore (tonnes)		272,179			273,066			934,382			1,068,722
Cash cost per tonne of processed ore (/t)		71.45			70.19			69.38			69.60
Cash cost		19,447			19,166			64,828			74,386
Treatment charges		934			(542	)		1,044			(990	)
Refining charges		288			1,131			2,848			4,468
Cash cost applicable per payable ounce		20,669			19,755			68,720			77,864
Payable ounces of silver equivalent production1		2,319,015			2,898,204			9,023,357			11,554,107
Cash cost per ounce of payable silver equivalent2 (/oz)		8.91			6.82			7.62			6.74
Mining cost per tonne		36.64			36.25			36.01			36.27
Milling cost per tonne		16.02			16.59			16.33			17.17
Indirect cost per tonne		11.56			9.43			9.69			8.80
Community relations cost per tonne		6.36			1.70			4.81			1.56
Distribution cost per tonne		0.87			6.22			2.54			5.80
Total production cost per tonne		71.45			70.19			69.38			69.60

All values are in US Dollars.

Notes:

^1^ Silver equivalent production for Q4 2020 is calculated using a silver to gold ratio of 76.7:1 (Q4 2019: 85.5:1) and for Year 2020: silver to gold ratio of 84.0:1 (Year 2019: 86:0)

^2^ Silver equivalents is calculated using the realized prices for gold and silver. Refer to Financial Results - Sales and Realized Prices

Management’s Discussion and Analysis, page 42

FortunaSilver Mines Inc.

	Three months ended						Years ended
CAYLLOMA MINE	December 31,						December 31,
(Expressed in ’000’s, except unit costs)	2020			2019			2020			2019
Cost of sales		15,475			15,515			54,357			58,451
Changes in concentrate inventory		318			(298	)		345			(142	)
Depletion and depreciation in concentrate inventory		(229	)		53			(2	)		45
Inventory adjustment		(13	)		(22	)		(13	)		(92	)
IFRS 16 embedded lease adjustment		721			595			2,395			2,316
Royalties and mining taxes		(133	)		(618	)		(523	)		(749	)
Provision for community support		-			128			101			282
Workers participation		(488	)		(143	)		(899	)		(719	)
Depletion and depreciation		(3,805	)		(3,768	)		(14,301	)		(13,621	)
Cash cost		11,846			11,442			41,460			45,771
Total processed ore (tonnes)		136,132			133,270			510,048			531,307
Cash cost per tonne of processed ore (/t)		87.02			85.86			81.29			86.15
Cash cost		11,846			11,442			41,460			45,771
Treatment charges		5,705			2,817			19,835			11,050
Refining charges		413			143			1,494			543
Cash cost applicable per payable ounce		17,964			14,402			62,789			57,364
Payable ounces of silver equivalent production1		1,168,326			1,233,875			4,308,239			5,252,643
Cash cost per ounce of payable silver equivalent2 (/oz)		15.38			11.67			14.57			10.92
Mining cost per tonne		40.26			41.60			37.95			41.26
Milling cost per tonne		15.62			14.15			14.39			14.17
Indirect cost per tonne		23.21			20.23			21.62			22.35
Community relations cost per tonne		6.36			2.26			6.55			1.19
Distribution cost per tonne		1.57			7.62			0.78			7.18
Total production cost per tonne		87.02			85.86			81.29			86.15

All values are in US Dollars.

Notes:

^1^Silver equivalent production for Q4 2020 is calculated using a silver to gold ratio of 76.8:1 (Q4 2019: 85.6:1) , silver to lead ratio of 1:28.2 pounds (Q4 2019: 1:18.7), and silver to zinc ratio of 1:20.6 pounds (Q4 2019: 1:16.0). Year 2020: silver to gold ratio of 90.2:1 (Year 2019: 85.8:1), silver to lead ratio of 1:24.9 pounds (Year 2019: 1:17.9), and silver to zinc ratio of 1:20.0 pounds (Year 2019: 1:14.1)

^2^ Silver equivalents is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales and Realized Prices

Management’s Discussion and Analysis, page 43

FortunaSilver Mines Inc.

All-in Sustaining Cash Cost and All-in Cash Cost per Payable Ounce of Silver Equivalent Production

The Company believes that “all-in-sustaining cash cost silver equivalent” and “all-in cash cost silver equivalent” meet the needs of management, analysts, investors, and other stakeholders of the Company in understanding the costs associated with producing silver, the economics of silver mining, the Company’s operating performance and the Company’s ability to generate cash flow from current operations, and on an overall company basis.

The Company, in conjunction with an initiative undertaken within the gold mining industry, has adopted an all-in-sustaining cost performance measure; however, this performance measure has no standardized meaning. The Company conforms its all-in-sustaining cost definition to that set out in the guidance issued by the World Gold Council (“WGC”).

All-in-sustaining cash cost silver equivalent and all-in cash cost silver equivalent are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Although the WGC has published a standardized definition, companies may calculate these measures differently.

All-in sustaining cash cost includes total production cash costs incurred at the Company’s mining operations. Sustaining capital expenditures, corporate selling, general and administrative expenses, and brownfields exploration expenditures are added to the cash cost to calculate the all-in-sustaining cost. The Company believes that this measure represents the total costs of producing silver from operations and provides the Company and its stakeholders with additional information on the Company’s operational performance and the ability to generate cash flows. Certain cash expenditures such as new project spending, tax payments, dividends, and financing costs are not included. We report this measure on a payable silver equivalent ounce produced basis. Silver equivalent production is calculated taking the total metal payable production of gold, lead and zinc multiplied by the realized prices of gold, lead, and zinc and divided by the realized silver price to calculate the silver equivalent production.

The following tables show a breakdown of the all-in sustaining cash cost per silver equivalent ounce for the three and twelve months ended December 30, 2020 and 2019:

	Three months ended				Years ended
SAN JOSE MINE	December 31,				December 31,
(Expressed in $’000’s, except unit costs)	2020		2019		2020		2019
Cash cost applicable		20,669		19,755		68,720		77,864
Royalties and mining taxes		3,113		2,252		9,829		8,605
Workers’ participation		1,876		2,223		8,200		6,616
General and administrative expenses (operations)		2,186		1,919		6,414		6,475
Adjusted operating cash cost		27,844		26,149		93,163		99,560
Care and maintenance costs (Impact of COVID-19)		-		-		1,568		-
Sustaining capital expenditures^3^		5,022		3,737		11,540		9,969
Brownfields exploration expenditures^3^		802		649		3,319		4,077
All-in sustaining cash cost		33,668		30,535		109,590		113,606
Non-sustaining capital expenditures^3^		568		-		942		-
All-in cash cost		34,236		30,535		110,532		113,606
Payable ounces of silver equivalent production^1^		2,319,015		2,898,204		9,023,357		11,554,107
All-in sustaining cash cost per ounce of payable silver equivalent^2^		14.52		10.54		12.15		9.83
All-in cash cost per ounce of payable silver equivalent^2^		14.76		10.54		12.25		9.83

Notes:

^1^Silver equivalent production for Q4 2020 is calculated using a silver to gold ratio of 76.7:1 (Q4 2019: 85.5:1) and for Year 2020: silver to gold ratio of 84.0:1 (Year 2019: 86:0)

^2^ Silver equivalent is calculated using the realized prices for gold and silver. Refer to Financial Results - Sales and Realized Prices

^3^Presented on a cash basis

Management’s Discussion and Analysis, page 44

FortunaSilver Mines Inc.

	Three months ended				Years ended
CAYLLOMA MINE	December 31,				December 31,
(Expressed in $’000’s, except unit costs)	2020		2019		2020		2019
Cash cost applicable		17,964		14,402		62,789		57,364
Royalties and mining taxes		564		137		1,286		1,343
Workers’ participation		559		179		1,036		864
General and administrative expenses (operations)		1,240		1,580		3,754		4,424
Adjusted operating cash cost		20,327		16,298		68,865		63,995
Care and maintenance costs		-		-		863		-
Sustaining capital expenditures^3^		2,364		2,487		6,406		10,440
Brownfields exploration expenditures^3^		106		214		521		700
All-in sustaining cash cost		22,797		18,999		76,655		75,135
Non-sustaining capital expenditures^1^		-		259		-		705
All-in cash cost		22,797		19,258		76,655		75,840
Payable ounces of silver equivalent production^1^		1,168,326		1,233,875		4,308,239		5,252,643
All-in sustaining cash cost per ounce of payable silver equivalent^2^		19.51		15.40		17.79		14.30
All-in cash cost per ounce of payable silver equivalent^2^		19.51		15.61		17.79		14.44

Notes:

^2^Silver equivalents is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales and Realized Prices

^3^ Presented on a cash basis

Free Cash Flow From Ongoing Operations

The Company uses the financial measure of “free cash flow from ongoing operations” to supplement information in its consolidated financial statements. Free cash flow from ongoing operations is defined as cash provided from operating activities, including Lindero commissioning, less changes in long-term receivable sustaining capital expenditures, less current income tax expense, add back impact from adoption of new or amended accounting standards, and add back income taxes paid. This measure is used by the Company and investors to measure the cash flow available to fund the Company’s growth through investments and capital expenditures. These performance measures are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of operating profits or cash flow from operations as determined under IFRS.

Management’s Discussion and Analysis, page 45

FortunaSilver Mines Inc.

The following table presents a reconciliation of free cash flow from ongoing operations for the three and twelve months ended December 31, 2020 and 2019:

	Three months ended						Years ended
	December 31,						December 31,
(Expressed in $ millions)	2020			2019			2020			2019
				(Restated)						(Restated)
Net cash provided by operating activities		31.3			16.4			93.4			60.2
Adjustments
Change in long-term receivables		0.9			(1.5	)		(0.1	)		(1.5	)
Additions to sustaining capital		(9.2	)		(7.6	)		(23.0	)		(26.0	)
Contractor advances for plant and equipment		-			-			-			(0.6	)
Advances applied to plant and equipment		-			-			-			0.7
Adoption of Amendments to IAS 16^(1)^		21.9			2.8			21.9			2.8
Pre-production costs		(2.7	)		-			(2.7	)		-
Current income tax expense		(13.3	)		(8.2	)		(38.8	)		(32.6	)
Income taxes paid		5.6			4.5			28.2			31.5
Free cash flow from ongoing operations		34.5			6.4			78.9			34.5

Note 1 In the fourth quarter, the Company adopted the amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use, on a modified retrospective basis. Prior to the beginning of the fourth quarter, the Lindero Mine was under construction and was not classified as an ongoing operation for the purposes of the free cash flow calculation. The addback considers $21.9 million of costs incurred during the construction period for the first nine months of 2020 and $2.8 million of costs incurred during the fourth quarter of 2019 related to the production of ore stockpile and operating supplies both which were reclassified from capital works in progress to inventories under the amended standard and included in operating working capital.

Adjusted Net Income

The Company uses the financial measure of “adjusted net income” to supplement information in its consolidated financial statements. Adjusted net income is defined as net income (loss) for the period adding back foreign exchange losses and other expenses and subtracting investment income related to the Lindero Mine and other non-cash items. The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information and information obtained from conventional IFRS measures to evaluate the Company’s performance. The term “adjusted net income” does not have a standardized meaning prescribed by IFRS, and therefore the Company’s definitions are unlikely to be comparable to similar measures presented by other companies.

The following table presents a reconciliation of the adjusted net income for the three and twelve months ended December 31, 2020 and 2019:

	Three months ended					Years ended
	December 31,					December 31,
(Expressed in $ millions)	2020		2019			2020			2019
Net income		18.6		19.0			21.6			23.8
Adjustments, net of tax:
Community support provision and accruals		0.2		(0.1	)		0.2			(0.2	)
Foreign exchange loss, Lindero Mine		3.2		1.0			11.8			11.5
Income tax, Lindero Mine		-		-			-			(1.1	)
Income tax, convertible debentures		-		(1.9	)		-			(1.9	)
Share of loss from associates		-		0.1			0.1			0.2
Investment income		-		(11.0	)		(3.3	)		(11.0	)
Other non-cash items		1.0		3.8			1.4			7.1
Adjusted net income		23.0		10.9			31.8			28.4

Management’s Discussion and Analysis, page 46

FortunaSilver Mines Inc.

Adjusted EBITDA

The Company uses other financial measures whose presentation is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS measures, but that rather should be evaluated in conjunction with IFRS measures. The item described and presented below does not have a standardized meaning prescribed by IFRS, and therefore the Company’s definitions are unlikely to be comparable to similar measures presented by other companies. The Company believes that its presentation provides useful information for investors.

The following table presents a reconciliation of Adjusted EBITDA for the three and twelve months ended December 31, 2020 and 2019:

	Three months ended						Years ended
	December 31,						December 31,
(Expressed in $ millions)	2020			2019			2020			2019
Net income		18.6			19.0			21.6			23.8
Adjustments:
Community support provision and accruals		(0.4	)		(0.1	)		(0.4	)		(0.3	)
Inventory adjustment		-			1.3			-			1.3
Foreign exchange loss, Lindero Mine		3.2			1.0			11.8			11.5
Net finance items		0.2			(0.10	)		1.2			(0.3	)
Depreciation, depletion, and amortization		13.9			11.6			45.7			46.0
Income taxes		9.1			1.1			37.4			20.2
Share of loss from associates		-			0.1			0.1			0.2
Investment income		-			(11.0	)		(3.3	)		(11.0	)
Other non-cash items		0.2			2.2			(1.5	)		4.0
Adjusted EBITDA		44.8			25.1			112.6			95.4

Figures may not add due to rounding

Qualified Person

Eric Chapman, P.Geo (APEGBC #36328) is the Vice-President of Technical Services for the Company 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 MD&A and has verified the underlying data.

Other Information, Risks and Uncertainties

For further information regarding the Company’s operational risks, please refer to the section entitled “Description of the Business - Risk Factors” in the Company’s most recent Annual Information Form that is available at www.sedar.com and www.sec.gov/edgar.shtml.

Cautionary Statement on Forward-Looking Statements

This MD&A and any documents incorporated by reference into this MD&A contain forward-looking statements which constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the United States Securities Exchange Act of 1934, as amended, and forward-looking information within the meaning of applicable Canadian securities legislation (collectively, “Forward-looking Statements”). All statements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected in the Forward-Looking Statements. The Forward-looking Statements in this MD&A include, without limitation, statements relating to:

•	mineral<br> “reserves” and “resources” as they involve the implied assessment,<br> based on estimates and assumptions that the reserves and resources described exist in<br> the quantities predicted or estimated and can be profitably produced in the future;

Management’s Discussion and Analysis, page 47

FortunaSilver Mines Inc.

•	the<br> potential impact of COVID-19 on the Company’s business and operations, and financial<br> condition, including the Company’s ability to operate or to continue operating<br> at its sites;
•	the<br> Company’s ability to manage challenges presented by COVID-19;
---	---
•	achieving<br> the targets set out in the Company’s cost reduction programs;
---	---
•	the<br> effectiveness of the preventative measures and safety protocols put in place by the Company<br> to curb the spread of COVID-19;
---	---
•	escalation<br> of travel restrictions resulted from COVID-19;
---	---
•	production<br> rates and forecasted production for 2021 at the Company’s mines;
---	---
•	production<br> rates at the Company’s properties;
---	---
•	timing<br> for delivery of materials and equipment for the Company’s properties;
---	---
•	the<br> sufficiency of the Company’s cash position and its ability to raise equity capital<br> or access debt facilities;
---	---
•	the<br> Company’s planned greenfields exploration programs;
---	---
•	the<br> Company’s planned capital expenditures and brownfields exploration at the San Jose<br> Mine;
---	---
•	the<br> Company’s planned capital expenditures and brownfields exploration at the Caylloma<br> Mine;
---	---
•	the<br> Company’s planned capital expenditures and brownfields exploration at the Lindero<br> Mine;
---	---
•	the<br> anticipated timing for the completion of the commissioning and the commencement of commercial<br> production at the Lindero Mine;
---	---
•	the<br> final budgeted construction cost for the Lindero Mine;
---	---
•	maturities<br> of the Company’s financial liabilities, finance leases and other contractual commitments;
---	---
•	expiry<br> dates of bank letters of guarantee;
---	---
•	litigation<br> matters;
---	---
•	estimated<br> mine closure costs; and
---	---
•	management’s<br> expectation that any investigations, claims, and legal, labour and tax proceedings arising<br> in the ordinary course of business will not have a material effect on the results of<br> operations or financial condition of the Company.
---	---

Often, but not always, these Forward-looking Statements can be identified by the use of words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “forecasts”, “scheduled”, “targets”, “possible”, “strategy”, “potential”, “intends”, “advance”, “goal”, “objective”, “projects”, “budget”, “calculates” or statements that events, “will”, “may”, “could” or “should” occur or be achieved and similar expressions, including negative variations.

•	operational<br> risks relating to mining and mineral processing;
•	uncertainty<br> relating to Mineral Resource and Mineral Reserve estimates;
---	---
•	uncertainty<br> relating to capital and operating costs, production schedules and economic returns;
---	---
•	uncertainty<br> and risks related to the commissioning and commencement of commercial production at the<br> Lindero Mine;
---	---
•	uncertainty relating to new mining operations and development projects such as the Lindero Mine including the possibility that actual capital and operating costs and economic returns will differ significantly from those estimated for such projects prior to production;
---	---
•	risks<br> associated with mineral exploration and project development;
---	---
•	uncertainty<br> relating to the repatriation of funds as a result of currency controls;
---	---
•	environmental<br> matters including obtaining or renewing environmental permits and potential liability<br> claims;
---	---
•	uncertainty<br> relating to nature and climate conditions;
---	---
•	risks<br> associated with political instability and changes to the regulations governing the Company’s<br> business operations;
---	---

Management’s Discussion and Analysis, page 48

FortunaSilver Mines Inc.

•	changes<br> in national and local government legislation, taxation, controls, regulations and political<br> or economic developments in countries in which the Company does or may carry on business;
•	risks<br> relating to the termination of the Company’s mining concessions in certain circumstances;
---	---
•	risks<br> related to International Labour Organization (“ILO”) Convention 169<br> compliance;
---	---
•	developing<br> and maintaining relationships with local communities and stakeholders;
---	---
•	risks<br> associated with losing control of public perception as a result of social media and other<br> web-based applications;
---	---
•	potential<br> opposition of the Company’s exploration, development and operational activities;
---	---
•	risks<br> related to the Company’s ability to obtain adequate financing for planned exploration<br> and development activities;
---	---
•	substantial<br> reliance on the Caylloma Mine, the San Jose Mine, and the Lindero Mine for revenues;
---	---
•	property<br> title matters;
---	---
•	risks<br> relating to the integration of businesses and assets acquired by the Company;
---	---
•	impairments;
---	---
•	risks<br> associated with climate change legislation;
---	---
•	reliance<br> on key personnel;
---	---
•	uncertainty<br> relating to potential conflicts of interest involving the Company’s directors and<br> officers;
---	---
•	risks<br> associated with the Company’s reliance on local counsel and advisors and the experience<br> of its management and board of directors in foreign jurisdictions;
---	---
•	adequacy<br> of insurance coverage;
---	---
•	risks<br> related to the Company’s compliance with the United States Sarbanes-Oxley Act;
---	---
•	risks<br> related to the foreign corrupt practices regulations and anti-bribery laws;
---	---
•	potential<br> legal proceedings to which it is a party;
---	---
•	the<br> Company is subject to any adverse ruling in any of the litigation;
---	---
•	uncertainties<br> relating to general economic conditions;
---	---
•	risks relating to a global pandemic, which until contained could continue to cause a slowdown in global economic growth and impact the Company’s business, operations, financial condition and share price;
---	---
•	the duration of the COVID-19 pandemic and the impact of COVID-19 on the Company’s business, operations and financial condition, including the Company’s ability operate or continue to operate at its sites in light of government restrictions;
---	---
•	possible<br> future suspensions of operations at the mine sites or the Lindero Mine related to COVID-19;
---	---
•	the Company’s ability to manage the various challenges (both anticipated and not) presented by COVID-19 to its business, operations and financial condition;
---	---
•	competition;
---	---
•	fluctuations<br> in metal prices;
---	---
•	risks<br> associated with entering into commodity forward and option contracts for base metals<br> production;
---	---
•	fluctuations<br> in currency exchange rates;
---	---
•	failure<br> to meet covenants under its Credit Facilities
---	---
•	tax<br> audits and reassessments;
---	---
•	uncertainty<br> relating to concentrate treatment charges and transportation costs;
---	---
•	sufficiency<br> of monies allotted by the Company for land reclamation;
---	---
•	risks<br> associated with dependence upon information technology systems, which are subject to<br> disruption, damage, failure and risks with implementation and integration;
---	---
•	risks<br> related to the volatility of the trading price of the Company’s common shares (“Common Shares”) and the Company’s Debentures (as defined herein);
---	---
•	dilution<br> from further equity or convertible debenture financings; and
---	---
•	risks<br> associated with dependence upon information technology systems, which are subject to<br> disruption, damage, failure and risks with implementation and integration;
---	---

Management’s Discussion and Analysis, page 49

FortunaSilver Mines Inc.

•	risks<br> related to future insufficient liquidity resulting from a decline in the price of the<br> Common Shares or Debentures;
•	uncertainty<br> relating to the Company’s ability to pay dividends in the future;
---	---
•	risks<br> relating to the market for the Company’s securities;
---	---
•	risks<br> relating to the Debentures of the Company; and
---	---
•	uncertainty<br> relating to the enforcement of U.S. judgments against the Company.
---	---

as well as those factors referred to in the “Risks and Uncertainties” section in this MD&A and in the “Risk Factors” section in our Annual Information Form filed with the Canadian Securities Administrators and available at www.sedar.com and filed with the U.S. Securities and Exchange Commission as part of the Company’s Form 40-F and available at www.sec.gov/edgar.shtml. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in Forward-looking Statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.

Forward-looking Statements contained in this MD&A are based on the assumptions, beliefs, expectations and opinions of management, including but not limited to:

•	all<br> required third party contractual, regulatory and governmental approvals will be obtained<br> for the exploration, development, construction and production of its properties;
•	there<br> being no significant disruptions affecting operations, whether relating to labour, supply,<br> power, damage to equipment or other matter;
---	---
•	the<br> world-wide economic and social impact of COVID-19 is managed, and the duration and extent<br> of the coronavirus pandemic is minimized or not long-term;
---	---
•	there<br> being no material and negative impact to the various contractors, suppliers and subcontractors<br> at the Company’s mine sites as a result of COVID-19 or otherwise that would impair<br> their ability to provide goods and services;
---	---
•	permitting,<br> construction, development, expansion, and production continuing on a basis consistent<br> with the Company’s current expectations;
---	---
•	expected<br> trends and specific assumptions regarding metal prices and currency exchange rates;
---	---
•	prices<br> for and availability of fuel, electricity, parts and equipment and other key supplies<br> remaining consistent with current levels;
---	---
•	production<br> forecasts meeting expectations; and
---	---
•	the<br> accuracy of the Company’s current mineral resource and reserve estimates.
---	---

These Forward-looking Statements are made as of the date of this MD&A. There can be no assurance that Forward-looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers are cautioned not to place undue reliance on Forward-looking Statements. Except as required by law, the Company does not assume the obligation to revise or update these forward looking-statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.

Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources

The Company is a Canadian “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act, and is permitted to prepare the technical information contained herein in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of the securities laws currently in effect in the United States.

Technical disclosure regarding our properties included herein and in the documents incorporated herein by reference, if applicable, has not been prepared in accordance with the requirements of U.S. securities laws. Without limiting the foregoing, such technical disclosure uses terms that comply with reporting standards in Canada and certain estimates are made in accordance with National Instrument 43-101 — Standards of Disclosure for Mineral Projects (“NI 43-101”). NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all mineral reserve and mineral resource estimates contained in the technical disclosure have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards on Mineral Resources and Reserves (“CIM Definition Standards”).

Management’s Discussion and Analysis, page 50

FortunaSilver Mines Inc.

Canadian standards, including NI 43-101, differ significantly from the historical requirements of the Securities and Exchange Commission (the “SEC”), and mineral reserve and resource information contained or incorporated by reference herein may not be comparable to similar information disclosed by U.S. companies.

The SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC. These amendments became effective February 25, 2019 (the “SEC Modernization Rules”) and, following a two-year transition period, the SEC Modernization Rules replaced the historical property disclosure requirements for mining registrants that are included in SEC Industry Guide 7. U.S. companies are required to provide disclosure on mineral properties under the SEC Modernization Rules for fiscal years beginning January 1, 2021 or later.

Under the SEC Modernization Rules, the definitions of “proven mineral reserves” and “probable mineral reserves” have been amended to be substantially similar to the corresponding CIM Definition Standards and the SEC has added definitions to recognize “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” which are also substantially similar to the corresponding CIM Definition Standards; however, there are still differences in the definitions and standards under the SEC Modernization Rules and the CIM Definition Standards. Therefore, the Company’s mineral resources and reserves as determined in accordance with NI 43-101 may be significantly different than if they had been determined in accordance with the SEC Modernization Rules.

Management’s Discussion and Analysis, page 51

Exhibit 99.3

NYSE:<br> FSM	TSX: FVI<br><br><br><br>www.fortunasilver.com	NEWS RELEASE

Fortunareports consolidated financial results for full year 2020

(Allamounts expressed in US dollars, unless otherwise stated)

Vancouver,March 10, 2021: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) today reported full year 2020 net income of $21.6 million, adjusted net income of $31.8 million, and adjusted EBITDA of $112.6 million.

Jorge A. Ganoza, President and CEO, commented, “Fourth quarter marks a continuation of very strong financial results in the second half of 2020 driven by favourable metal prices, sustained production, and cost containment in spite of a challenging operating environment.” Mr. Ganoza concluded, “With the Lindero Mine starting to contribute to our margins and free cash flow through early recognition of sales in the fourth quarter, we look forward to a progressively higher impact on our operational and financial results as the mine continues to gradually ramp-up production according to our 2021 guidance. Lindero will contribute 140,000 to 160,000 ounces of gold to our estimated guidance range of 178,000 to 202,000 ounces of gold for 2021, which is in addition to the estimated guidance of 6.8 million to 7.6 million ounces of silver from the San Jose and Caylloma mines.”

Fourthquarter 2020 highlights

•	Sales<br> of $103.5 million, compared to $69.0 million in 2019
•	Net<br> income of $18.6 million, compared to $19.0 million in 2019
---	---
•	Adjusted<br> net income of $23.0 million, compared to $10.9 million in 2019
---	---
•	Adjusted<br> EBITDA^1^ of $44.8 million, compared to $25.1 million in 2019
---	---
•	Free<br> cash flow^1^ from ongoing operations of $34.5 million, compared to $6.4 million<br> in 2019
---	---
•	Silver<br> and gold production of 1,912,737 ounces and 25,357 ounces, respectively
---	---
•	AISC/oz<br> Ag Eq^1,2^ for the San Jose Mine and the Caylloma Mine was $14.5 and $19.5,<br> respectively
---	---

Fullyear 2020 highlights

•	Sales<br> of $279.0 million, compared to $257.2 million in 2019
•	Net<br> income of $21.6 million, compared to $23.8 million in 2019
---	---
•	Adjusted<br> net income of $31.8 million, compared to $28.4 million in 2019
---	---
•	Adjusted<br> EBITDA^1^ of $112.6 million, compared to $95.4 million in 2019
---	---
•	Free<br> cash flow^1^ from ongoing operations^1^ of $78.9 million, compared<br> to $34.5 million in 2019
---	---
•	Cash<br> and cash equivalents as at December 31, 2020 was $131.9 million
---	---
•	Silver<br> and gold production of 7,133,717 ounces and 55,349 ounces, respectively
---	---
•	AISC/oz<br> Ag Eq^1,3^for the San Jose Mine and the Caylloma Mine was $12.2 and $17.8,<br> respectively
---	---

Notes:

1.	Refer<br> to non-GAAP financial measures and Forward-Looking Statements at the end<br> of this news release
2.	AISC/oz<br> Ag Eq calculated at realized metal prices of $1,864/oz Au, $24.43/oz Ag, $0.9/lb Pb,<br> and $1.2/lb Zn
---	---
3.	AISC<br> oz Ag Eq calculated at realized metal prices of $1,805/oz Au, $21.18/oz Ag, $0.8/lb Pb,<br> and $1.0/lb Zn
---	---

Fourthquarter 2020 and Full Year 2020 Consolidated results

				Years ended
				December 31,
Consolidated Metrics		2019		2020		2019
(Expressed in millions except per share information)
Sales	103.5		69.0		279.0		257.2
Mine operating income	46.9		23.4		110.2		84.6
Operating income	28.2		9.0		57.2		34.2
Net income	18.6		19.0		21.6		23.8
Earnings per share - basic	0.10		0.12		0.12		0.15
Adjusted net income1	23.0		10.9		31.8		28.4
Adjusted EBITDA1	44.8		25.1		112.6		95.4
Net cash provided by operating activities	31.3		16.4		93.4		60.2
Free cash flow from ongoing operations1	34.5		6.4		78.9		34.5
CAPEX
Sustaining	8.8		6.2		19.5		20.4
Non-sustaining	1.0		0.9		1.2		2.0
Lindero	10.5		26.8		46.8		188.3
Brownfields	1.0		0.9		3.8		4.8

All values are in US Dollars.

	Dec 31, 2020		Dec 31, 2019
Cash and cash equivalents		131.9		83.4

Note

^1.^Refer to non-GAAP financial measures and Forward-Looking Statements at the end of this news release

FourthQuarter 2020 Results

Sales for the quarter were $103.5 million, a 50% increase from the $69.0 million reported in the same period in 2019. The increase was driven by a 41% and 26% increase in the prices of silver and gold and $20.3 million from the sale of 10,935 ounces of gold from the Lindero Mine. The Company recognized gold sales and related production costs from the Lindero Mine after the Company elected to early adopt amendments to IAS 16, “Property, Plant and Equipment – Proceeds before Intended Use”, which is effective for annual periods beginning on or after January 1, 2022. Under this amended standard, a company is required to recognize sales proceeds and related cost of items produced in the income statement while the company is preparing the asset for its intended use.

Mine operating income for the quarter was $46.9 million, a $23.5 million increase from the $23.4 million reported in the same period in 2019. Higher precious metal prices and commissioning activities at the Lindero Mine that generated $10.2 million of mine operating income were the primary factors for the increase.

Operating income for the quarter was $28.2 million, a $19.2 million increase from the $9.0 million reported in the same period in 2019. The higher mine operating income, as discussed above, was partially offset by a $4.7 million foreign exchange loss mainly from the devaluation of the Argentine Peso compared to a $1.4 million loss in 2019, as well as higher general and administrative expenses of $2.6 million related mostly to the impact of an increase in the Company’s share price on the value of the cash-settled share awards.

Net income for the quarter was $18.6 million, a $0.4 million decrease from the $19.0 million reported in the same period in 2019. The comparable period in 2019 included an investment gain of $11.0 million compared to $nil in the quarter ended December 31, 2020 and a $7.2 million deferred tax recovery which resulted in a 5% effective rate compared to 33% for the fourth quarter of 2020.

Adjusted net income for the quarter was $23.0 million compared to $10.9 million reported in the same period in 2019.

Adjusted EBITDA for the quarter was $44.8 million compared to $25.1 million reported in the same period in 2019.

FullYear 2020 Results

Sales for the year increased 8% to $279.0 million compared to $257.2 million reported for the same period in 2019. The increase was driven by a 31% and 30% increase in the prices of silver and gold, and $20.3 million from the sale of 10,935 ounces of gold from the Lindero Mine. These effects were partially offset by lower sales volume at San Jose which was impacted by a 54-day government mandated temporary suspension of operations in the second quarter of 2020.

Operating income for the year ended December 31, 2020 was $57.2 million, a $23.0 million increase from the $34.2 million reported in the same period in 2019. The higher operating income was driven by higher precious metal prices and the contribution of $10.2 million of mine operating income from Lindero in the fourth quarter of 2020. During the year the Company recorded $12.2 million of foreign exchange losses related mostly to the construction VAT receivable in Argentina, compared to $13.3 million of foreign exchange losses in 2019. These were partially offset by investment gains from Argentine Peso denominated cross border trades of $3.3 million in 2020 and $11.0 million in 2019. General and administrative expenses for the year were $5.3 million higher than 2019 related mainly to an increase in share-based payments expense of $6.4 million over 2019 due to a 98% year-over-year increase in the Company’s share price which directly impacts the value of the outstanding cash-settled share units.

Net income for the year ended December 31, 2020 was $21.6 million, a $2.2 million decrease from the $23.8 million reported in 2019 as higher operating income was offset by lower investment gains in 2020 of $7.7 million, lower deferred tax credit of $11.0 million, and higher current taxes of $6.2 million.

Adjusted net income (refer to Non-GAAP Financial Measures) for the year ended December 31, 2020 was $31.8 million compared to $28.4 million in 2019.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) for the year ended December 31, 2020 was $112.6 million compared to $95.4 million in 2019. As explained above, the increase was due primarily to the increase in the prices of silver and gold and the recognition of gold sales from the Lindero Mine as the Company elected to early adopt amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use.

Cashflow and liquidity

Free cash flow from ongoing operations for the three months ended December 31, 2020 was $34.5 million compared to $6.4 million in the same period in 2019. The increased free cashflow was driven mainly by higher precious metal prices and positive changes in working capital at the San Jose Mine related to trade receivables and recovery of value-added tax.

Free cash flow from ongoing operations for the year ended December 31, 2020 was $78.9 million compared to $34.5 million in 2019.

Total liquidity available to the Company as at December 31, 2020 was $131.9 million and is comprised of cash and cash equivalents. The Company’s $120 million non-revolving and revolving credit facilities were fully drawn at the end of December 2020.

LinderoMine, Argentina

The following table shows the key metrics used to measure the operating performance of the Lindero Mine for the fourth quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, and gold production:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes of ore placed on the leach pad	950,000		-		1,610,000		-
Average crushing throughput (tpd)	10,406		-		8,831		-
Gold
Grade (g/t)	1.13		-		1.00		-
Recovery (%)	50		-		50		-
Production (oz)	13,435		-		13,435		-
Metal sold (oz)	10,935		-		10,935		-
Realized price (/oz)	1,853		-		1,853		-
Capital expenditures (000’s)
Sustaining	1,410		-		1,410		-

All values are in US Dollars.

The Company produced 13,435 ounces of gold at the Lindero Mine in 2020, which is in line with its revised production forecast of between 13,000 to 15,000 ounces (refer to Fortuna news release dated November 12, 2020). Gold sales for the fourth quarter of 2020 and for the year totaled 10,935 ounces. The Company elected to early adopt amendments to IAS 16, Property, Plant and Equipment – Proceeds before intended use. As a result, the Company recognized gold sales of $20.3 million and related cost of sales of $10.1 million for the year in the income statement.

Construction at Lindero was substantially complete as of the end of December 2020 with total construction cost projected to be within the $320 million guidance (refer to Fortuna news release dated May 8, 2020), including remaining capital expenditures of $2.0 million to be allocated to finalize construction of ancillary facilities and to commissioning activities. During 2020, sustaining capital of $1.7 million was spent mainly on the purchase of spare parts for major equipment.

At the end of the first quarter of 2021, the Company will provide an assessment on the status of the ramp-up to commercial production.

Linderoconstruction capital expenditures and total spending

The following table summarizes the spending on construction and pre-production costs at the Lindero Mine for the year ended December 31, 2020:

	Cumulative to		Twelve <br><br>months ended
(Expressed in $ millions)	December <br><br>31, 2019		December <br><br>31, 2020			Total
Construction capital expenditures		268.2		46.8			315.0
Contractor advances and deposits on equipment, net of transfers		10.5		(9.8	)		0.7
Total construction spending		278.7		37.0			315.7
Preproduction costs		10.8		21.8			32.6
Spare parts, supplies and materials inventory		6.2		12.9			19.1
Other costs ^1^		4.5		0.2			4.7
Total Lindero Mine Costs		300.2		71.9			372.1

Note 1: Consists of Argentina financial transaction taxes, deposits, and other costs

During the fourth quarter of 2020, the Company adopted amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use on a modified retrospective basis. As a result of the adoption, the Company reclassified $21.9 million (December 31, 2019 - $2.8 million) of pre-production costs related to the production of stock pile ore and operating supplies spent during the construction period to September 30, 2020.

SanJose Mine, Mexico

The following table shows the key metrics used to measure the operating performance of the San Jose Mine for the fourth quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, gold and silver production and unit costs:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes milled	272,179		273,066		934,381		1,068,722
Average tonnes milled per day	3,024		3,034		2,647		3,028
Silver
Grade (g/t)	206		249		224		252
Recovery (%)	91		91		92		91
Production (oz)	1,648,816		2,002,633		6,165,606		7,868,478
Metal sold (oz)	1,721,697		1,968,550		6,225,433		7,849,438
Realized price (/oz)	24.45		17.34		21.26		16.20
Gold
Grade (g/t)	1.26		1.50		1.38		1.57
Recovery (%)	91		91		91		91
Production (oz)	10,095		11,993		37,805		48,880
Metal sold (oz)	10,594		11,870		38,391		48,731
Realized price (/oz)	1,875		1,483		1,786		1,393
Unit Costs
Production cash cost (/t)	71.45		70.19		69.38		69.60
Production cash cost (/oz Ag Eq)1,2	8.91		6.82		7.62		6.74
Unit net smelter return (/t)	203.80		181.85		199.22		172.04
AISC (/oz Ag Eq)1,2	14.52		10.54		12.15		9.83

All values are in US Dollars.

Notes:

1.	Production<br>cash cost ($/oz Ag Eq) and AISC ($/oz Ag Eq) are calculated using realized metal prices for each period respectively
2.	Production<br>cash cost ($/t), Production cash cost ($/oz Ag Eq), and AISC ($/oz Ag Eq) are Non-GAAP Financial Measures; refer to Non-GAAPfinancial measures in the associated MD&A for a description and calculation of these measures
---	---

Quarterlyand Annual Results

The San Jose Mine produced 1,648,816 ounces of silver and 10,095 ounces of gold during the three months ended December 31, 2020, which represents an 18% and 16% decrease, respectively over the same period in 2019. The decrease in production was due to lower head grades which were consistent with the adjusted mine sequencing after the restart of production at the end of May 2020 following the Mexican government mandated suspension of operations to curb the spread of COVID-19.

The cash cost per tonne for the three months ended December 31, 2020 was $71.45 per tonne compared to $70.19 per tonne in the same period in 2019. COVID-19 related expenses in the quarter were $0.40 per tonne. Cash cost per tonne for the full year 2020 was consistent year-over-year at $69.38 per tonne compared to $69.60 per tonne for 2019. COVID- 19 related expenses for the full year were $0.70 per tonne. Cash costs incurred during the government mandated temporary suspension in the second quarter of 2020 totaled $2.1 million and were recorded as care and maintenance costs.

The all-in sustaining cash cost of payable silver equivalent for the full year 2020 increased 24% to $12.15 per ounce due primarily to lower production as a result of the COVID-19 related temporary suspension of mining operations, higher sustaining capital expenditures, and higher royalty and mining taxes related to higher metal prices.

CayllomaMine, Peru

The following table shows the key metrics used to measure the operating performance of the Caylloma Mine for the fourth quarter of 2020 and for the year ended December 31, 2020: throughput, head grade, recovery, silver, lead and zinc production and unit costs:

				Years ended
				December 31,
		2019		2020		2019
Mine Production
Tonnes milled	136,132		133,271		510,047		531,307
Average tonnes milled per day	1,530		1,481		1,433		1,497
Silver
Grade (g/t)	73		71		72		66
Recovery (%)	82		82		82		83
Production (oz)	263,921		249,284		968,111		941,289
Metal sold (oz)	262,356		252,780		967,199		948,616
Realized price (/oz)	24.30		17.31		20.63		16.23
Lead
Grade (%)	3.16		2.84		3.00		2.72
Recovery (%)	89		89		88		90
Production (000’s lbs)	8,426		7,441		29,628		28,746
Metal sold (000’s lbs)	8,386		7,559		29,582		28,969
Realized price (/lb)	0.86		0.92		0.83		0.91
Zinc
Grade (%)	4.69		4.48		4.61		4.36
Recovery (%)	88		88		88		89
Production (000’s lbs)	12,434		11,614		45,545		45,600
Metal sold (000’s lbs)	12,154		11,974		45,154		45,781
Realized price (/lb)	1.18		1.08		1.03		1.15
Unit Costs
Production cash cost (/t)	87.02		85.86		81.29		86.15
Production cash cost (/oz Ag Eq)1,2	15.38		11.67		14.57		10.92
Unit net smelter return (/t)	163.57		138.07		131.40		137.77
AISC (/oz Ag Eq)1,2	19.51		15.40		17.79		14.30

All values are in US Dollars.

Notes:

1.	Production<br>cash cost ($/oz Ag Eq) and AISC ($/oz Ag Eq) are calculated using realized metal prices for each period respectively
2.	Production<br>cash cost ($/t), production cash cost ($/oz Ag Eq), and AISC ($/oz Ag Eq) are non-GAAP financial measures; refer to non-GAAPfinancial measures in the associated MD&A for a description and calculation of these measures
---	---

Quarterlyand Annual Results

The Caylloma Mine produced 263,921 ounces of silver, 8.4 million pounds of lead and 12.4 million pounds of zinc during the three months ended December 31, 2020, which were 6%, 13%, and 7% respectively, higher than the same period in 2019. The increased metal production was due mainly to higher head grades. Gold production totaled 1,827 ounces with an average head grade of 0.60 g/t.

The cash cost per tonne of processed ore for the three months ended December 31, 2020 increased 1% to $87.02 compared to $85.86 in the same period in 2019. COVID-19 related expenses in the quarter were $5.30 per tonne. The cash cost per tonne of processed ore for the full year 2020 decreased 6% to $81.29 compared to $86.15 for the full year 2019 and reflects cost reduction initiatives the Company implemented during the second and third quarter to address the impact of the COVID-19 pandemic on our operations. COVID-19 related expenses for the full year were $3.10 per tonne. Cash costs incurred during the voluntary suspension of operations in the third quarter of 2020 (refer to Fortuna news release dated July 28, 2020), totaled $0.9 million and was recorded as care and maintenance costs.

The all-in sustaining cash cost for the full year 2020 increased 24% to $17.79 per ounce compared to $14.30 per ounce in 2019 due to the changes in the prices of lead and zinc relative to the silver price, which affects the silver equivalent calculation. As a result of the changes in relative prices, the ounces of payable silver equivalent decreased 18% to 4,308,239 ounces compared to 5,252,643 ounces in 2019 despite a 13% and 7% increase in the annual production of lead and zinc.

Non-GAAPFinancial Measures

The following tables represent the calculation of certain non-GAAP financial measures as referenced in this news release.

IncomeStatement Reconciliation to Adjusted Net Income for the three and twelve months ended December 31, 2020 and 2019

(Expressed in $ millions)
Sales	103.5		-		103.5		69.0	-		69.0
Cost of sales	56.6		(0.1	)	56.5		45.5	(1.1	)	44.4
Mine operating income	46.9		0.1		47.0		23.4	1.1		24.6
General and administration	12.1		-		12.1		9.4	-		9.4
Exploration and evaluation	0.6		-		0.6		0.4	-		0.4
Share of loss from associates	-		-		-		0.1	(0.1	)	-
Foreign exchange loss	4.7		(3.2	)	1.5		1.4	(1.0	)	0.4
Other expenses, net	1.3		(1.4	)	(0.1	)	3.2	(3.0	)	0.2
Operating Income	28.2		4.7		32.9		9.0	5.2		14.2
Investment income	-		-		-		11.0	(11.0	)	-
Interest income and finance costs, net	(0.3	)	-		(0.3	)	-	0.1		0.1
Gain (loss) on derivative instruments	(0.2	)	0.2		-		-	-		-
Income before taxes	27.7		4.9		32.6		20.1	(5.7	)	14.3
Income taxes	9.1		0.4		9.6		1.1	2.3		3.4
Net income and adjusted net income	18.6		4.5		23.0		19.0	(8.0	)	10.9

Note: Certain figures may not add due to rounding

(Expressed in $ millions)
Sales	279.0		-		279.0		257.2		-		257.2
Cost of sales	168.8		-		168.8		172.6		(0.9	)	171.7
Mine operating income	110.2		-		110.2		84.6		0.9		85.5
General and administration	35.1		0.1		35.2		29.8		0.1		29.9
Exploration and evaluation	1.2		-		1.2		2.4		-		2.4
Share of loss from associates	0.1		(0.1	)	-		0.2		(0.2	)	-
Foreign exchange loss	12.2		(12.4	)	(0.2	)	13.3		(11.5	)	1.8
Other expenses, net	4.4		(1.6	)	2.8		4.6		(4.3	)	0.3
Operating Income	57.2		14.0		71.3		34.2		16.8		51.1
Investment income	3.3		(3.3	)	-		11.0		(11.0	)	-
Interest income and finance costs, net	(1.4	)	0.2		(1.2	)	-		0.4		0.4
Gain (loss) on derivative instruments	(0.2	)	0.2		-		(1.2	)	2.6		1.4
Income before taxes	59.0		11.1		70.1		44.0		8.8		52.9
Income tax	37.4		0.8		38.2		20.2		4.2		24.4
Net income and adjusted net income	21.6		10.3		31.8		23.8		4.6		28.4

Note: Certain figures may not add due to rounding

Reconciliationto Adjusted EBITDA for the three and twelve months ended December 31, 2020 and 2019

	Three months ended						Years ended
	December 31,						December 31,
(Expressed in $ millions)	2020			2019			2020			2019
Net income		18.6			19.0			21.6			23.8
Adjustments:
Community support provision		(0.4	)		(0.1	)		(0.4	)		(0.3	)
Inventory adjustment		-			1.3			-			1.3
Foreign exchange loss, Lindero Mine		3.2			1.0			11.8			11.5
Net finance items		0.2			(0.1	)		1.2			(0.3	)
Depreciation, depletion, and amortization		13.9			11.6			45.7			46.0
Income taxes		9.1			1.1			37.4			20.2
Share of loss from associates		-			0.1			0.1			0.2
Investment income		-			(11.0	)		(3.3	)		(11.0	)
Other non-cash items		0.2			2.2			(1.5	)		4.0
Adjusted EBITDA		44.8			25.1			112.6			95.4

Reconciliationto free cash flow from ongoing operations for the three and twelve months ended December 31, 2020 and 2019

	Three months ended						Years ended
	December 31,						December 31,
(Expressed in $ millions)	2020			2019			2020			2019
Free Cash Flow
				(Restated)						(Restated)
Net cash provided by operating activities		31.3			16.4			93.4			60.2
Adjustments
Change in long-term receivables		0.9			(1.5	)		(0.1	)		(1.5	)
Additions to sustaining capital		(9.2	)		(7.6	)		(23.0	)		(26.0	)
Contractor advances for plant and equipment		-			-			-			(0.6	)
Advances applied to plant and equipment		-			-			-			0.7
Impact of adoption in IAS 16		21.9			2.8			21.9			2.8
Pre-production costs		(2.7	)		-			(2.7	)		-
Current income tax expense		(13.3	)		(8.2	)		(38.8	)		(32.6	)
Income taxes paid		5.6			4.5			28.2			31.5
Free cash flow^1^ from ongoing operations		34.5			6.4			78.9			34.5

Note:

^1.^	From<br>ongoing operations including San Jose and Caylloma and excludes Greenfields exploration

In the fourth quarter of 2020, the Company adopted the amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use on a modified retrospective basis. Prior to the beginning of the fourth quarter, the Lindero Mine was under construction and was not classified as an ongoing operation for the purposes of the free cash flow calculation. The addback considers $21.9 million of costs incurred during the construction period for the first nine months of 2020 and $2.8 million of costs incurred during the fourth quarter of 2019 related to the production of ore stockpile both of which were reclassified from capital works in progress to inventories under the amended standard and included in operating working capital.

The financial statements and MD&A are available on SEDAR and on the Company’s website.

Conferencecall to review 2020 year-end financial and operational results

A conference call to discuss the financial and operational results will be held on Friday, March 12, 2021 at 9:00 a.m. Pacific time

| 12:00 p.m. Eastern time. Hosting the call will be Jorge A. Ganoza, President and CEO, and Luis D. 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: https://www.webcaster4.com/Webcast/Page/1696/40043 or over the phone by dialing in just prior to the starting time.

Conferencecall details:

Date: Friday, March 12, 2021

Time: 9:00 a.m. Pacific time | 12:00 p.m. Eastern time

Dial in number (Toll Free): +1. 888.506.0062

Dial in number (International): +1.973.528.0011

Entry code: 217978

Replay number (Toll Free): +1.877.481.4010

Replay number (International): +1.919.882.2331

Replay Passcode: 40043

Playback of the earnings call will be available until Friday, March 26, 2021. Playback of the webcast will be available until Saturday, March 12, 2022. In addition, a transcript of the call will be archived on the Company’s website.

QualifiedPerson

Eric Chapman, Vice President of Technical Services, is a Professional Geoscientist of the Association of Professional Engineers and Geoscientists of the Province 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.

AboutFortuna Silver Mines Inc.

Fortuna Silver Mines Inc. is a Canadian precious metals mining company with operations in Peru, Mexico and Argentina. Sustainability is integral to all our operations and relationships. We produce silver and gold and generate shared value over the long-term for our shareholders and stakeholders through efficient production, environmental protection, and social responsibility. 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

E: info@fortunasilver.com

Forward-lookingStatements

Thisnews release contains forward-looking statements which constitute “forward-looking information” within the meaning ofapplicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor”provisions of the Private Securities Litigation Reform Act of 1995 (collectively, “Forward-looking Statements”). Allstatements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a varietyof known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflectedin the Forward-looking Statements. The Forward-looking Statements in this news release include, without limitation, statementsabout the Company’s plans for its mines and mineral properties; the Company’s anticipated performance in 2021; estimatedproduction forecasts and sales for 2021; estimated production costs and all-in sustaining cash costs for 2021; estimated capitalexpenditures in 2021; estimated Brownfields and Greenfields expenditures in 2021; the future estimated impact of COVID-19 on theCompany’s production, workforce, business, operations and financial condition; metal price estimates; estimated metal gradesin 2021; the estimated amount of ore to be placed on the leach pad at the Lindero Mine in 2021, the grade of gold and the amountof gold estimated to be contained therein; the timing of the commencement of steady state production at the Lindero Mine; theCompany’s business strategy, plans and outlook; the merit of the Company’s mines and mineral properties; mineral resource andreserve estimates; production costs; timelines; the future financial or operating performance of the Company; expenditures; approvalsand other matters. Often, but not always, 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-lookingStatements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance orachievements of the Company to be materially different from any results, performance or achievements expressed or implied by theForward-looking Statements. Such uncertainties and factors include, among others, changes in general economic conditions and financialmarkets; the impact of the COVID-19 pandemic on the Company’s mining operations and construction activities; the durationand impacts of COVID-19 on the Company’s production, workforce, business, operations and financial condition, and the risksrelating to a global pandemic, which unless contained could cause a prolonged slowdown in global economic growth; uncertaintiesrelated to the impacts of COVID-19 which may include: changing market conditions, changing restrictions on the mining industryin the countries in which the Company operates, the ability to operate as a result of government imposed restrictions, includingrestrictions on travel, the transportation of concentrates and doré, access to refineries, the impact of additional wavesof the pandemic or increases in incidents of COVID-19 in the countries in which we operate; the duration of any suspension ofoperations at the Company’s mines as a result of COVID-19 which may affect production and the Company’ business operationsand financial condition; changes in prices for gold, silver and other metals; fluctuation in currencies and foreign exchange rates;inflation; the imposition of capital controls in countries in which the Company operates; any extension of the currency controlsin Argentina; changes in the prices of key supplies; technological and operational hazards in Fortuna’s mining and minedevelopment activities; delays in the completion of the commissioning at Lindero which may cause delays in the commencement ofcommercial production; 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 and costestimates; governmental and other approvals; changes in government, political unrest or instability in countries where Fortunais active; labor relations issues; as well as those factors discussed under “Risk Factors” in the Company’s AnnualInformation Form. Although the Company has attempted to identify important factors that could cause actual actions, events orresults to differ materially from those described in Forward-looking Statements, there may be other factors that cause actions,events or results to differ from those anticipated, estimated or intended.

Forward-lookingStatements contained herein are based on the assumptions, beliefs, expectations and opinions of management, including but notlimited to expectations regarding the Company’s plans for its mines and mineral properties; the world-wide economic and socialimpact of COVID-19, and the duration and extent of the impact of the pandemic and related restrictions on the Company’sworkforce, suppliers and the effect that any adverse changes would have on the Company’s business; the effect that any furthersuspensions of operations as a result of the pandemic would have on the Company’s business and financial and operationalresults; mine production costs; expected trends in mineral prices and currency exchange rates; the accuracy of the Company’s currentmineral resource and reserve estimates; that the Company’s activities will be in accordance with the Company’s public statementsand stated goals; that there will be no material adverse change affecting the Company or its properties; that all required approvalswill be obtained; that there will be no significant disruptions affecting operations and such other assumptions as set out herein.Forward-looking Statements are made as of the date hereof and the Company disclaims any obligation to update any Forward-lookingStatements, whether as a result of new information, future events or results or otherwise, except as required by law. There canbe no assurance that Forward-looking Statements will prove to be accurate, as actual results and future events could differ materiallyfrom those anticipated in such statements. Accordingly, investors should not place undue reliance on Forward-looking Statements.

Thisnews release also refers to non-GAAP financial measures, such as cash cost per tonne of processed ore; cash cost per payable ounceof silver; total production cost per tonne; all-in sustaining cash cost; all-in cash cost; adjusted net (loss) income; operatingcash flow per share before changes in working capital, income taxes, and interest income; and adjusted EBITDA. These measuresdo not have a standardized meaning or method of calculation, even though the descriptions of such measures may be similar. Theseperformance measures have no meaning under International Financial Reporting Standards (IFRS) and therefore, amounts presentedmay not be comparable to similar data presented by other mining companies.

Fortuna Mining Corp 6-K, filed Mar 11, 2021

About this 6-K