Fortuna Mining (FSM) 40-F for FY2019, filed Mar 30, 2020

UNITED STATES SECURITIES AND EXCHANGECOMMISSION

WASHINGTON, D.C. 20549

FORM 40-F

o	REGISTRATIONSTATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

þ	ANNUALREPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31,2019 Commission File Number: 001-35297

FORTUNA SILVER MINES INC.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English (if applicable))

British Columbia, Canada

(Province or other jurisdiction of incorporation or organization)

1040	N/A
(Primary Standard Industrial<br><br> <br>Classification Code Number (if applicable))	(I.R.S. Employer<br><br> <br>Identification Number (if applicable))

200 Burrard Street, Suite 650

Vancouver, British Columbia V6C 3L6,Canada

604-484-4085

(Address and telephone number of Registrant’s principal executive offices)

National Corporate Research, Ltd.

10 East 40^th^ Street, 10^th^Floor

New York, New York 10016

212-947-7200

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

Securities registered or to be registeredpursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	FSM	New York Stock Exchange

Securities registered or to be registeredpursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reportingobligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

For annual reports, indicate by checkmark the information filed with this Form:

þ Annual information form þ Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

There were 160,291,553 common shares with no par value outstanding as of December 31, 2019.

Indicate by check mark whether the Registrant: (1) has filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes þ No o

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

DISCLOSURE REGARDING CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

Disclosure controls and procedures are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as those controls and procedures designed to ensure that information required to be disclosed in the annual filings and interim filings and other reports filed or submitted by Fortuna Silver Mines Inc. (the “Company”) under the Exchange Act is duly recorded, processed, summarized and reported, within the time periods specified in rules and forms of the United States Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports and filings is accumulated and communicated to management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure.

The Company evaluated, with the participation of its CEO and CFO, the effectiveness of its disclosure controls and procedures as of December 31, 2019. Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this annual report on Form 40-F, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings and other reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within time periods specified in SEC rules and forms and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the foregoing, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company and its subsidiaries to disclose material information otherwise required to be set forth in the Company’s periodic reports. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective of ensuring that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is communicated to management to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) and has designed such internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

In designing and evaluating the Company’s internal control over financial reporting, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its reasonable judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - IntegratedFramework (2013). Based on this assessment, management concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was effective based on those criteria.

See “Management’s Report on Internal Control Over Financial Reporting” in the Management’s Discussion and Analysis for the fiscal years ended December 31, 2019 and 2018, included as Exhibit 99.3 to this annual report on Form 40-F. The Company’s auditors have issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. See “Attestation Report of the Registered Public Accounting Firm” below.

Attestation Report of the Registered Public Accounting Firm. The required disclosure is included in the “Report of Independent Registered Public Accounting Firm” that accompanies the Company’s audited consolidated financial statements as at and for the fiscal years ended December 31, 2019 and 2018, filed as part of this annual report on Form 40-F in Exhibit 99.2.

Changes in Internal Control Over Financial Reporting. During the fiscal year ended December 31, 2019, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

NOTICES PURSUANT TO REGULATION BTR

None.

IDENTIFICATION OF THE AUDIT COMMITTEE

The Company has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are Kylie Dickson, Alfredo Sillau and David Farrell. The board of directors has determined that each of Kylie Dickson, Alfredo Sillau and David Farrell is independent, as that term is defined in Rule 10A-3 under the Exchange Act and the Listed Company Manual of the New York Stock Exchange.

AUDIT COMMITTEE FINANCIAL EXPERT

The board of directors of the Company has determined that Kylie Dickson, a member of the Company’s audit committee, qualifies as an audit committee financial expert for purposes of paragraph (8) of General Instruction B to Form 40-F. The SEC has indicated that the designation of Kylie Dickson as an audit committee financial expert does not: (i) make her an “expert” for any purpose, (ii) impose any duties, obligations or liabilities on her that are greater than those imposed on members of the audit committee and the board of directors who do not carry this designation, and (iii) or affect the duties, obligations or liabilities of any other member of the audit committee or the board of directors.

CODE OF ETHICS

The Company has adopted a “code of ethics” (as that term is defined in Form 40-F), entitled the “Code of Business Conduct and Ethics and Whistle-Blower Policy”, that applies to all of its directors, officers, employees, and consultants including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

The Code of Business Conduct and Ethics and Whistle-Blower Policy is available for viewing on the Company’s website at www.fortunasilver.com under “About Fortuna / Our Governance”.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The required disclosure is included under the heading “Audit Committee” in the Company’s Annual Information Form for the fiscal year ended December 31, 2019, filed as part of this annual report on Form 40-F in Exhibit 99.1.

PRE-APPROVAL POLICIES AND PROCEDURES

The auditors of the Company obtain, as necessary, the pre-approval of the Audit Committee for any anticipated additional services required of the auditors for the coming fiscal year. If other service requirements arise during the year, the Audit Committee will pre-approve such services at that time, prior to the commencement of such services. No fees paid by the Company to its auditors during the fiscal year ended December 31, 2019, were approved by the Audit Committee pursuant to the de minimus exception provided by Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

OFF-BALANCE SHEET ARRANGEMENTS

The required disclosure is included under the heading “Off-Balance Sheet Arrangements” in the Company’s Management’s Discussion and Analysis for the fiscal years ended December 31, 2019 and 2018, filed as part of this annual report on Form 40-F in Exhibit 99.3.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The required disclosure is included under the subheading “Liquidity Risk” within the heading “Risks and Uncertainties” of the Company’s Management’s Discussion and Analysis for the fiscal years ended December 31, 2019 and 2018, filed as part of this annual report on Form 40-F in Exhibit 99.3.

MINE SAFETY DISCLOSURE

The Company is currently not required to disclose the information required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE

The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act and Rule 405 under the United States Securities Act of 1933, as amended, and the Company’s common shares are listed on the New York Stock Exchange (the “NYSE”). Sections 103.00, 303A.00 and 303A.11 of the NYSE Listed Company Manual permit foreign private issuers to follow home country practices in lieu of certain provisions of the NYSE Listed Company Manual. A foreign private issuer that follows home country practices in lieu of certain provisions of the NYSE Listed Company Manual must disclose any significant ways in which its corporate governance practices differ from those followed by domestic companies either on its website or in the annual report that it distributes to shareholders in the United States. A description of the significant ways in which the Company’s governance practices differ from those followed by domestic companies pursuant to NYSE standards is disclosed on the Company’s website at www.fortunasilver.com under “About Fortuna / Our Governance / NYSE”.

The Company’s corporate governance practices, as described on its website, are consistent with the laws, customs and practices in Canada.

UNDERTAKING

The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

CONSENT TO SERVICE OF PROCESS

A Form F-X signed by the Company and its agent for service of process has been previously filed with the SEC together with the Company’s Registration Statement on Form 40-F (File No. 001-35297) in connection with its securities registered on such form.

Any changes to the name or address of the agent for service of process of the Company shall be communicated promptly to the SEC by an amendment to the Form F-X referencing the file number of the Company.

SIGNATURE

Pursuant to the requirements of the Exchange Act, the Company certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

FORTUNA SILVER MINES INC.
By:		“Jorge Ganoza Durant”
	Name:	Jorge Ganoza Durant
	Title:	President, Chief Executive Officer & Director

EXHIBIT INDEX

Exhibit	Description
99.1	Annual Information Form for the year ended December 31, 2019
99.2	Audited Consolidated Financial Statements as at and for the years ended December 31, 2019 and 2018, including the Reports of Independent Registered Public Accounting Firms with respect thereto
99.3	Management’s Discussion and Analysis for the years ended December 31, 2019 and 2018
99.4	Consent of KPMG LLP
99.5	Consent of Eric Chapman
99.6	Consent of Amri Sinuhaji
99.7	Consent of Edwin Gutierrez
99.8	Consent of Geoff Allard
99.9	Consent of Denys Parra Murrugarra
99.10	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.11	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.12	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.13	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

EXHIBIT 99.1

ANNUAL INFORMATION FORM

FVI L-Head top

ANNUAL INFORMATION FORM

For the Fiscal Year Ended December 31,2019

DATED: March 26, 2020

CORPORATE OFFICE:	MANAGEMENT HEAD OFFICE:
Suite 650, 200 Burrard Street	Piso 5, Av. Jorge Chávez #154
Vancouver, BC V6C 3L6, Canada	Miraflores, Lima, Peru
Tel: 604.484.4085	Tel: 511.616.6060, ext. 2
Fax: 604.484.4029

TABLE OF CONTENTS

PRELIMINARY NOTES		1
	Cautionary Statement – Forward Looking Statements	1
	Note about the information contained herein and the Novel Coronavirus	3
	Notice Regarding Non-IFRS Measures	4
	Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources	4
	Documents Incorporated by Reference	5
	Date of Information	5
	Currency	5
CORPORATE STRUCTURE		5
	Name, Address and Incorporation	5
	Intercorporate Relationships	6
GENERAL DEVELOPMENT OF THE BUSINESS		6
	Three-Year History and Recent Developments	6
DESCRIPTION OF THE BUSINESS		16
	General	16
	Risk Factors	20
	Material Mineral Properties	39
	Caylloma Mine, Peru	39
	San Jose Mine, Mexico	48
	Lindero Project, Argentina	59
DIVIDENDS		73
DESCRIPTION OF CAPITAL STRUCTURE		73
MARKET FOR SECURITIES		75
	Common Shares	75
	Debentures	76
	Prior Sales	76
DIRECTORS AND EXECUTIVE OFFICERS		77
	Name, Occupation and Shareholding	77
	Cease Trade Orders or Bankruptcies	78
	Penalties or Sanctions	79
	Conflicts of Interest	79
AUDIT COMMITTEE		79
LEGAL PROCEEDINGS		81
TRANSFER AGENT AND REGISTRAR		81
MATERIAL CONTRACTS		81
INTERESTS OF EXPERTS		82
	Names of Experts	82
	Interests of Experts	82
ADDITIONAL INFORMATION		82
Audit Committee Charter	Schedule “A”
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PRELIMINARY NOTES

Cautionary Statement – Forward-LookingStatements

Certain statements contained in this Annual Information Form (“AIF”) and any documents incorporated by reference into this AIF 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 (the “Exchange Act”), 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 AIF include, without limitation, statements relating to:

·	Mineral Reserves and Mineral Resources,<br>as they involve implied assessment, based on estimates and assumptions that the Mineral Reserves and Mineral Resources described<br>exist in the quantities predicted or estimated and can be profitably produced in the future;
·	production rates at the Company’s<br>properties;
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·	cash cost estimates;
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·	timing for delivery of materials and equipment<br>for the Company’s properties;
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·	the sufficiency of the Company’s<br>cash position and its ability to raise equity capital or access debt facilities;
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·	the Company’s planned greenfields<br>exploration programs;
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·	the Company’s planned capital expenditures<br>and brownfields exploration at the San Jose Mine (as defined herein);
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·	the Company’s planned capital expenditures<br>and brownfields exploration at the Caylloma Mine (as defined herein);
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·	the Company’s planned capital expenditures<br>and brownfields exploration at the Lindero Project (as defined herein);
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·	the Company’s construction of the<br>open pit gold heap leach mine at its Lindero property in Salta Province, Argentina (the “Lindero Property”)<br>and the anticipated timing of commissioning and commercial production at the Lindero Project;
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·	maturities of the Company’s financial<br>liabilities, finance leases and other contractual commitments;
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·	the expiry dates of bank letters of guarantee;
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·	litigation matters;
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·	estimated mine closure costs; and
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·	management’s expectation that any<br>investigations, claims, and legal, labor and tax proceedings arising in the ordinary course of business will not have a material<br>effect on the results of operations or financial condition of the Company.
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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.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any results, performance or achievements expressed or implied by the forward-looking statements. Such uncertainties and factors include, among others:

·	operational risks associated with mining<br>and mineral processing;
·	uncertainty relating to Mineral Resource<br>and Mineral Reserve estimates;
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·	uncertainty relating to capital and operating<br>costs, production schedules and economic returns;
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·	uncertainty and risks related to the start-up<br>of the Lindero Project;
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·	uncertainty relating to capital and operating<br>costs and economic returns of development projects such as the Lindero Project;
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| --- | | · | risks related to the construction, commissioning and commencement of commercial production at the Lindero Project; | | --- | --- | | · | risks associated with mineral exploration and project development; | | --- | --- | | · | uncertainty relating to the repatriation of funds as a result of currency controls; | | --- | --- | | · | risks relating to the Company’s ability to replace its Mineral Reserves; | | --- | --- | | · | environmental matters including potential liability claims; | | --- | --- | | · | uncertainty relating to nature and climate conditions; | | --- | --- | | · | risks associated with political instability and changes to the regulations governing the Company’s business operations; | | --- | --- | | · | changes in national and local government legislation, taxation, controls, regulations and political or economic developments in countries in which the Company does or may carry on business; | | --- | --- | | · | risks relating to the termination of the Company’s mining concessions in certain circumstances; | | --- | --- | | · | risks related to International Labour Organization (“ILO”) Convention 169 compliance; | | --- | --- | | · | developing and maintaining relationships with local communities and stakeholders; | | --- | --- | | · | risks associated with losing control of public perception as a result of social media and other web-based applications; | | --- | --- | | · | potential opposition of the Company’s exploration, development and operational activities; | | --- | --- | | · | risks related to the Company’s ability to obtain adequate financing for planned exploration and development activities; | | --- | --- | | · | substantial reliance on the Caylloma Mine and the San Jose Mine for revenues; | | --- | --- | | · | property title matters; | | --- | --- | | · | risks relating to the integration of businesses and assets acquired by the Company; | | --- | --- | | · | impairments; | | --- | --- | | · | reliance on key personnel; | | --- | --- | | · | uncertainty relating to potential conflicts of interest involving the Company’s directors and officers; | | --- | --- | | · | risks associated with the Company’s reliance on local counsel and advisors and its management and Board (as defined herein) in foreign jurisdictions; | | --- | --- | | · | adequacy of insurance coverage; | | --- | --- | | · | risks related to the Company’s compliance with the Sarbanes-Oxley Act; | | --- | --- | | · | risks related to the foreign corrupt practices regulations and anti-bribery laws; | | --- | --- | | · | legal proceedings and potential legal proceedings; | | --- | --- | | · | uncertainties relating to general economic conditions; | | --- | --- | | · | risks relating to a global pandemic, including COVID-19, which unless contained could cause a slowdown in global economic growth and impact the Company’s business, operations, financial condition and share price; | | --- | --- | | · | competition; | | --- | --- | | · | fluctuations in metal prices; | | --- | --- | | · | risks associated with entering into commodity forward and option contracts for base metals production; | | --- | --- | | · | fluctuations in currency exchange rates; | | --- | --- | | · | failure to meet covenants under the 2018 Credit Facility (as defined herein); | | --- | --- | | · | tax audits and reassessments; | | --- | --- | | · | uncertainty relating to concentrate treatment charges and transportation costs; | | --- | --- | | · | sufficiency of monies allotted by the Company for land reclamation; | | --- | --- | | · | risks associated with dependence upon information technology systems, which are subject to disruption, damage, failure and risks with implementation and integration; | | --- | --- | | · | risks associated with climate change legislation; | | --- | --- | | · | risks 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 from future equity or convertible debt financings; | | --- | --- | | · | risks related to future insufficient liquidity resulting from a decline in the price of the Common Shares or Debentures; | | --- | --- | | · | uncertainty relating to the Company’s ability to pay dividends in the future; | | --- | --- | | · | risks relating to the market for the Company’s securities; | | --- | --- |

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| --- | | · | risks relating to the Debentures of the Company; and | | --- | --- | | · | uncertainty relating to the enforcement of U.S. judgments against the Company; | | --- | --- |

as well as those factors referred to in the “Risk Factors” section in this AIF.

Forward-looking Statements contained in this AIF 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 for the exploration, development, construction<br>and production of its properties;
·	there<br>being no significant disruptions affecting operations, whether relating to labor, supply, power, damage to equipment or other<br>matter;
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·	permitting,<br>construction, development and expansion proceeding on a basis consistent with the Company’s current expectations;
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·	expected<br>trends and specific assumptions regarding metal prices and currency exchange rates;
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·	prices<br>for and availability of fuel, electricity, parts and equipment and other key supplies remaining consistent with current levels;
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·	production<br>forecasts meeting expectations; and
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·	the<br>accuracy of the Company’s current Mineral Resource and Mineral Reserve estimates.
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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. These forward-looking statements are made as of the date of this AIF. 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.

Note about the information contained herein and the NovelCoronavirus

At the date of this AIF, the Company was operational at the Caylloma Mine in Peru with essential personnel due to a declaration of a period of mandatory national “social isolation” mandated by the government of Peru, and operations at the Lindero Project were temporarily suspended due to the “social isolation” mandated by the government of Argentina in response to the COVID-19 pandemic. The Company’s operations and financial performance are dependent on it being able to operate at each of its mines and projects. Given the fast-changing situation with respect to the COVID-19 pandemic, including the areas suffering from the pandemic and the response of governments in implementing protective policies including travel bans, it is difficult to predict the exact nature and extent of the impact the pandemic may have on the Company and its business. The Company could be restricted from operating at its mines and projects for a material period of time, and its ability to transport and sell its concentrates could likewise be restricted. Any changes in the current situation relating to the COVID-19 pandemic and an increase in the current restrictions applicable to its operations could significantly impact the Company and its performance and thus would impact the accuracy of any forward-looking statements contained in this AIF, particularly with respect to the 2020 production guidance for each of its mines (Refer to “ThreeYear History and Recent Developments – San Jose Mine Mexico”; “Three Year History and Recent Developments– Caylloma Mine, Peru”) and the Lindero Project (Refer to “Three Year History and Recent Developments – Lindero Project – Production Plan for 2020”), and construction timelines, cost budget and timing for commencement of production at the Lindero Project (“Three Year History and Recent Developments – Lindero Project”). At this time, management does not have sufficient information to update its 2020 production guidance for each of its mines and the Lindero Project, construction timelines, cost budget and timing for commencement of production at the Lindero Project to take into account the impact of COVID-19, but it is continuing to closely monitor the situation and plans to update such information when there is a reasonable basis to do so.

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Notice Regarding Non-IFRS Measures

This AIF includes certain terms or performance measures that are not defined under International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”), including but not limited to cash cost per payable ounce of silver, cash costs per tonne of processed ore, all-in sustaining cash cost and all-in sustaining cash cost per payable ounce, free cash flow and free cash flow from ongoing operations, adjusted net income and adjusted EBITDA. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS measures should be read in conjunction with the Company’s financial statements and management’s discussion and analysis. See “Non-GAAP Financial Measures” in the Company’s management’s discussion and analysis (“MD&A”) for the fiscal year ended December 31, 2019 regarding the Company’s use of non-IFRS measures which may be accessed on SEDAR at www.sedar.com under the Company’s profile, Fortuna Silver Mines Inc.

Cautionary Note to United States InvestorsConcerning 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.

Canadian standards, including National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), differ significantly from the disclosure requirements of U.S securities laws currently in effect, and Mineral Reserve and Mineral Resource information contained or incorporated by reference in this AIF may not be comparable to similar information disclosed by United States companies. Equivalent U.S. disclosure requirements are currently governed by the United States Securities and Exchange Commission (“SEC”) Industry Guide 7 (“Industry Guide 7”) under the U.S. Securities Act of 1933, as amended. In particular, and without limiting the generality of the foregoing, the term Mineral Resource does not equate to the term “reserve”. Under the SEC’s disclosure standards currently in effect under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would need to be in hand or issuance imminent in order to classify mineralized material as reserves under such U.S. standards currently in effect. While the SEC recognizes the reporting of mineral deposits which do not meet the Industry Standard Guide 7 definition of “reserve” as of February 25, 2019, the effective adoption of the Modernization of Property Disclosures for Mining Registrants, such rules are not required to be complied with until the first fiscal year beginning on or after January 1, 2021. As a result, the SEC’s disclosure standards currently in effect for U.S. companies still reporting under Industry Standard Guide 7 normally do not permit the inclusion of information concerning Measured Mineral Resources, Indicated Mineral Resources or Inferred Mineral Resources or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by United States standards in documents filed with the SEC.

United States investors are cautioned not to assume that all or any part of Measured Mineral Resources or Indicated Mineral Resources will ever be converted into reserves. United States investors should also understand that Inferred Mineral Resources have an even greater amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a category having a higher degree of certainty. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of Feasibility or Pre-Feasibility Studies except in rare cases. Investors are cautioned not to assume that all or any part of an Inferred Mineral Resource exists or is economically or legally mineable.

Disclosure of “contained tonnes” in a Mineral Resource estimate is permitted disclosure under NI 43-101 provided that the grade or quality and the quantity of each category is stated; however, the SEC’s disclosure standards currently in effect under Industry Guide 7 normally only permit issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of Mineral Reserves are also not the same as those of the SEC’s disclosure standards currently in effect under Industry Guide 7, and Mineral Reserves reported in compliance with NI 43-101 may not qualify as “reserves” under such SEC standards. Accordingly, information contained in this AIF and the documents incorporated by reference herein containing descriptions of mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the U.S. federal securities laws and the rules and regulations thereunder.

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Documents Incorporated by Reference

The information provided in this AIF is supplemented by disclosure contained in the documents listed below which are incorporated by reference into this AIF. These documents must be read together with the AIF in order to provide full, true and plain disclosure of all material facts relating to Fortuna Silver Mines Inc. (referred to herein as the “Company” or “Fortuna”). The documents listed below are not contained within or attached to this document. The documents may be accessed on SEDAR at www.sedar.com under the Company’s profile, Fortuna Silver Mines Inc.:

Document	Effective Date	Date Filed on SEDAR website	Document Category on the SEDAR website
Technical Report, Caylloma Mine, Peru	March 8, 2019	March 28, 2019	Technical Report(s)
Technical Report, San Jose Mine, Mexico	February 22, 2019	March 28, 2019	Technical Report(s)
Technical Report, Lindero Property, Argentina	October 31, 2017	November 2, 2017	Technical Report(s)

Date of Information

This AIF is dated March 26, 2020. Except as otherwise indicated, the information contained herein is as at December 31, 2019, being the date of the Company’s most recently completed financial year end.

Currency

Unless otherwise noted, all references to “$” in this AIF refer to United States dollars.

CORPORATE STRUCTURE

Name, Address and Incorporation

The Company was incorporated on September 4, 1990 pursuant to the Company Act (British Columbia) under the name Jopec Resources Ltd. and subsequently transitioned under the Business Corporations Act (British Columbia). On February 3, 1999, the Company changed its name to Fortuna Ventures Inc. and on June 28, 2005 to Fortuna Silver Mines Inc.

The management head office of the Company is located at Piso 5, Av. Jorge Chávez #154, Miraflores, Lima, Peru. The corporate head and registered office of the Company is located at 200 Burrard Street, Suite 650, Vancouver, BC V6C 3L6.

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Intercorporate Relationships

The Company carries on a significant portion of its business through a number of 100%-owned subsidiaries, held either directly or indirectly as follows:

GENERAL DEVELOPMENT OF THE BUSINESS

Fortuna is engaged in precious and base metals mining and related activities in Latin America, including exploration, extraction, and processing. Fortuna:

·	operates the Caylloma silver, lead and<br>zinc mine (the “Caylloma Mine”) in southern Peru,
·	operates the San Jose silver and gold<br>mine (the “San Jose Mine”) in southern Mexico, and
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·	is constructing an open pit gold heap<br>leach mine at its Lindero Property (the “Lindero Project”) in northern Argentina.
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Three-Year History and Recent Developments

San Jose Mine, Mexico

Located in the state of Oaxaca in southern Mexico, the 100% owned San Jose Mine covers a high-grade silver-gold bearing epithermal vein system.

In 2017, the Company produced, at the San Jose Mine, 7,526,556 ounces of silver and 55,950 ounces of gold, an increase over 2016 of 23% and 22%, respectively. The increases were the result of 18% higher throughput as well as 4% and 3% higher head grades of gold and silver over the comparative 2016 year. Silver and gold annual production were 6% and 8% above 2017 guidance, respectively. The processing plant treated 1,070,790 tonnes during 2017.

Cash cost per tonne of processed ore for 2017 was $59.70, or 5% above the cost in the prior year. Cash cost per tonne for 2017 was 5% above guidance due to higher mine support costs and local inflation on the cost of energy and materials. All-in sustaining cash cost per payable ounce of silver, net of by-product credits, was $7.11 for 2017, and below the annual guidance of $8.40 as a result of higher gold prices.

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In 2018, the Company produced, at the San Jose Mine, 7,979,634 ounces of silver, an increase over 2017 of 6%, and 53,517 ounces of gold, a decrease over 2017 of 4%. 2018 silver and gold production was 7% and 11% above the San Jose Mine’s annual guidance. Annual average head grades for silver and gold were 260 g/t and 1.75 g/t, being 8% above and 12% above annual guidance, respectively.

Cash cost per tonne of processed ore for 2018 was $63.72 or 7% higher than in 2017, due to higher energy tariffs in Mexico, higher distribution costs related to the direct export of concentrates and higher milling costs related to the dry stack re-handling in the first half of the year.

In 2019, the Company produced at the San Jose Mine 7,868,478 ounces of silver, a decrease over 2018 of 1 %, and 48,880 ounces of gold, a decrease over 2018 of 9%, being within the San Jose Mine’s guidance for silver and slightly below the lower end of guidance for gold. Average head grades for silver and gold were 252 g/t and 1.57 g/t, 2% above and 5% below the mine’s annual guidance of 247 g/t silver and 1.66 g/t gold.

Cash cost per tonne of processed ore for 2019 was $69.60 or 9% higher than in 2018, and within 2019 annual cost guidance of between US$63.5 to US$70.1.

During 2020, the Company plans to process from the San Jose Mine 1,062,000 tonnes of ore averaging 223 g/t silver and 1.39 g/t gold. Capital investment is estimated at $17.1 million, including $12.2 million for sustaining capital expenditures and $4.9 million for brownfields exploration programs. Major sustaining capital investment projects include $2.4 million for expansion of the dry stack, $4.8 million for mine development and $2.0 million for equipment and infrastructure. On March 17, 2020, the Company announced that it had postponed all non-critical projects and had temporarily suspended all greenfields and brownfields exploration activities as one of its business continuity measures to mitigate the potential impacts of COVID-19 on the Company’s operations. Refer to “Company’s Responseto Spread of COVID-19”. The Company continues to assess the situation as the pandemic evolves. There can be no assurance as to how long these measures will remain in place, or that more restrictive measures will not be implemented. Further, as the situation is dynamic, the potential impact on production guidance for 2020 is uncertain at this time. Refer to “PreliminaryNotes - Note about the information contained herein and the Novel Coronavirus”.

Caylloma Mine, Peru

The Company owns a 100% interest in the Caylloma Mine and related mining concessions located in southern Peru.

In 2017, the Company produced at the Caylloma Mine 29.9 million pounds of lead and 44.3 million pounds of zinc, a decrease of 8% and an increase of 3%, respectively, over 2016. Silver production decreased 25% to 943,038 ounces compared to 2016 production of 1,255,981 ounces. Head grades for lead, zinc, and silver were 8%, 1%, and 27% lower than in 2016, respectively; however, this decline in head grades was partially offset by a 3% increase in ore processed. Silver, zinc, and lead annual production were 6% below, 8% above, and in line with 2017 guidance. The processing plant treated 1,488 tpd during 2017.

Cash cost per tonne of processed ore for 2017 was $79.11 or 10% higher than in 2016 and 5% above guidance. The increase in cash costs was due mainly to higher mining, energy, and labour costs. All-in sustaining cash cost per payable ounce of silver, net of by-product credits, was $(13.04) per ounce for 2017, and below the annual guidance of $10.80 per ounce.

In 2018, the Company produced at the Caylloma Mine 911,309 ounces of silver, being a 3% decrease over 2017 production. Silver production for 2018 was 11% above the Caylloma Mine’s annual guidance. Annual average head grade for silver was 63 g/t, being 10% above guidance. Base metal production at the Caylloma Mine in 2018 totaled 28.2 million pounds of lead and 45.4 million pounds of zinc, 10% and 2% above the Caylloma Mine’s annual guidance, respectively. Average head grades for lead and zinc were 2.62% and 4.28%, being 9% and 2% above annual guidance, respectively.

Cash cost per tonne of processed ore for 2018 was $83.47 or 6% higher than in 2017. The increase in cash costs was due mainly to higher indirect costs related to off-site labour and general services and mine support costs.

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In 2019, the Company produced at the Caylloma Mine 941,289 ounces of silver, an increase over 2018 of 3%, and in line with the mine’s annual guidance. Annual average head grade for silver was 66 g/t, being 3% above the mine’s annual guidance of 64 g/t Ag. Base metal production at the Caylloma Mine in 2019 totaled 28.7 million pounds of lead, an increase of 2% over 2018, and 45.6 million pounds of zinc, consistent with 2018. 2019 production of lead and zinc was in-line with and slightly above the mine’s annual guidance, respectively. Average head grades for lead and zinc were 2.72% and 4.36%, being 8% and 13% above annual guidance of 2.53% lead and 3.87% zinc.

Cash cost per tonne of processed ore for 2019 was $86.15 or 3% higher than in 2018, and within annual cost guidance of between US$80.0 to US$88.4.

During 2020, the Company plans to process from the Caylloma Mine 534,000 tonnes of ore averaging 67 g/t silver, 2.81% lead and 4.46% zinc. Capital investments are estimated at $12.9 million, including $10.8 million for sustaining capital expenditures, and $2.1 million for brownfields exploration programs. Major sustaining capital investment projects include $5.0 million for mine development and $5.7 million for equipment and infrastructure. On March 17, 2020, the Company announced that it had postponed all non-critical projects and had temporarily suspended all greenfields and brownfields exploration activities as one of its business continuity measures to mitigate the potential impacts of COVID-19 on the Company’s operations. In addition, as a result of a period of mandatory national “social isolation”, imposed by the Government of Peru, operations at the mine have been restricted to continuing with essential personnel. Refer to “Company’sResponse to Spread of COVID-19”. The Company continues to assess the situation as the pandemic evolves. There can be no assurance as to how long these measures will remain in place, or that more restrictive measures will not be implemented. Further, as the situation is dynamic, the potential impact on production guidance for 2020 is uncertain at this time. Refer to “PreliminaryNotes - Note about the information contained herein and the Novel Coronavirus”.

Lindero Project, Argentina

In September 2017, the board of directors of the Company (the “Board”) approved the construction of an open pit gold heap leach mine at its Lindero Property in Salta Province, Argentina. In November 2017, the Company filed on SEDAR an updated feasibility study technical report on the Lindero Project.

Construction at the Lindero Property progressed during 2019 to the position where the Lindero Project was 92% complete as at the end of February, 2020. Construction spending for the fiscal year ended December 31, 2019 totaled $157.5 million of which $21.3 million of construction trade payables was unpaid as of the end of December 2019. Total construction spending as at December 31, 2019 was $280.3 million.

In February 2020, the Company announced that it had encountered challenges during December 2019 and January 2020 due to a shortfall of manpower in the Company’s main electro-mechanical and piping contractor; however additional manpower has been brought in to address this issue. As a result, the Lindero Project is scheduled to transition from construction and commissioning to operations in the second quarter of 2020.

In March 2020, the Company announced that the total construction capital expenditures for the Lindero Project are forecast to be in the range of $314 million to $320 million, an increase of 28% over the initial capital cost guidance. The initial capital cost guidance of $239 million provided in September 2017 was subsequently adjusted to $245.5 million to reflect the reallocation of $6.5 million from the construction phase of the project to a future sustaining capital investment in order to expand the ADR and solution handling system (Refer to “Lindero Technical Report”). The main drivers for the increased capital costs are $8.6 million of indirect costs and $6.8 million for EPCM contractor costs. In addition, the Company expects to incur pre-production costs and buildup of working capital through to the commencement of production of approximately $40 million of which $14 million had been spent as of December 31, 2019. This is an increase of $15 million over the $25 million announced in November 2019, and is mainly driven by continued mining operations during the pre-production phase which have resulted in an inventory of ore stockpile 30% larger than originally planned, additional related owner’s costs, and an additional $4 million for inventory of spare parts.

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On March 15, 2020, the Government of Argentina introduced a series of measures to contain the rapid spread of COVID-19 which included the closure of its international borders for 15 days. The Lindero Project team took necessary actions to mitigate the impact of this measure on the rotation schedule of international staff and vendor representatives. During the evening of March 19, 2020, the Government of Argentina declared a period of mandatory national “social isolation” in relation to COVID-19, effective until March 31, 2020. The Company proceeded to orderly and safely demobilize its workforce at the Lindero Project, in accordance with the Executive Order and the processes implemented for this purpose by the Provincial Government of Salta. Refer to “General Development of the Business –Company’s Response to Spread of COVID-19”.

As a result, the Company temporarily suspended construction activities at the Lindero Project (the “Lindero Temporary Suspension”) for the mandated “social isolation” period. A task force remained on site to maintain critical activities and to undertake safety and environmental monitoring during the isolation period.

As the Lindero Temporary Suspension was recently imposed, management does not at this time have sufficient information to update its construction timelines and budget for the Lindero Project to take into account the impact of COVID-19, but it is continuing to closely monitor the situation and plans to update such information when there is a reasonable basis to do so.. Refer to “Preliminary Notes - Note aboutthe information contained herein and the Novel Coronavirus”.

Construction highlights and milestones include:

·	18,750 tpd crushing agglomeration plant

Pre-commissioning activities have been concluded; crushing circuits are being commissioned with ore.

Tertiary crushing circuit**:** Vendor technicians are concluding with final mechanical and instrumentation activities on the HPGR. Pre-commissioning of the conveyors and transfer systems were initiated in February.

Agglomeration plant: Mechanical work is substantially complete; piping and electrical installation in its final stages due to the delay caused by shortfalls in contractor manpower during December and January; pre-commissioning activities had been pushed back to March, and will now be rescheduled as a result of the Lindero Temporary Suspension.

·	Leach pad and solution ponds area

Construction of the 31-hectare start-up leach pad area and solution ponds has been completed. Assembly and installation of the stacking system from the agglomeration plant to the leach pad is in progress but behind schedule due to a shortfall in contractor manpower during December and January, but is expected to be completed in April; making it on the critical path of the project. This is subject to rescheduling as a result of the Lindero Temporary Suspension.

·	Mechanical and piping<br>installations on the solution ponds have progressed. Pumping and solution management systems planned to be commissioned in April<br>are subject to rescheduling as a result of the Lindero Temporary Suspension.
·	ADR plant
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Equipment installation has been completed with piping and electrical work well under way. Pre-commissioning activities expected to be concluded in May are subject to rescheduling as a result of the Lindero Temporary Suspension.

·	8 MW power plant

Commissioning of the 8-megawatt power plant and medium voltage power distribution system has been completed. The plant has been connected to the mine’s grid and is providing power to the mine.

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·	SART plant

Mechanical and piping installation work has progressed to a stage where pre-commissioning activities were scheduled to be concluded in May. This is subject to rescheduling as a result of the Lindero Temporary Suspension. The SART plant is not mission critical for the start of gold production.

·	Ancillary facilities

Construction and implementation of the on-site assay laboratory has been completed. Sample preparation and analysis for gold using fire assay with an atomic absorption finish has been conducted at this facility since the end of January 2020.

Industrial water for the operation will be sourced from a 120 cubic meter per hour well field and pumping station located 13 kilometers from the mine site. Commissioning of the industrial water system was completed in February 2020.

The following milestones for the Lindero Project were announced prior to the Lindero Temporary Suspension. There can be no assurance that the Lindero Temporary Suspension will be resolved expediently, and as a result it may be necessary to adjust certain milestones. As the Lindero Temporary Suspension was recently imposed, management does not at this time have sufficient information to update its construction timelines, cost budget and timing for commencement of production at the Lindero Project to take into account the impact of COVID-19, but it is continuing to closely monitor the situation and plans to update such information when there is a reasonable basis to do so.

Second quarter of 2020:

·	Commissioning<br>of HPGR crushing and agglomeration plant
·	Placing<br>ore on leach pad and ore stacking
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·	First<br>doré pour
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Third Quarter of 2020:

·	Commencement<br>of commercial production

Refer to “Preliminary Notes -Note about the information contained herein and the Novel Coronavirus”.

Production Plan for 2020

The following production guidance for 2020 for the Lindero Project was announced prior to the Lindero Temporary Suspension. There can be no assurance that the Lindero Temporary Suspension will be resolved expediently, and as a result it may be necessary to adjust the production guidance.

During 2020, the Company plans to place between 3.1 and 3.7 million tonnes averaging 1.02 g/t Au on the leach pad at the Lindero Project, containing between 100,000 to 125,000 ounces of gold, of which 60,000 to 80,000 ounces of gold are expected to be produced as gold doré in the year. Estimated gold doré production for 2020 is consistent with the first twelve month commercial production plan of 145,000 to 160,000 ounces as previously projected for Lindero and assumes the placement of ore on the leach pad and first doré pour in the second quarter of 2020 and is based on the factors set out in the Lindero Technical Report. As the Lindero Temporary Suspension was recently imposed, management does not at this time have sufficient information to update its production guidance for the Lindero Project to take into account the impact of COVID-19, but it is continuing to closely monitor the situation and plans to update such information when there is a reasonable basis to do so. Refer to “Preliminary Notes - Note about the information containedherein and the Novel Coronavirus”.

Health and Safety

In the past year, both of our operating mines achieved significant reductions in total recordable incidents and lost time incident rates. The following statistics are for employees and contractors at the mine sites on a consolidated basis. The terms set out below have the following meanings:

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“TRIR” means total recordable incident rate = (lost time + medical treatment injuries) x 1,000,000/ man hours

“LTIR” means lost time incident rate = (lost time injuries x 1,000,000) / man hours

“Severity Rate” means (days lost because of lost time injuries x 1,000,000 / man hours)

In 2019, the TRIR at the Caylloma Mine was 4.12 as compared to 7.22 in 2018, and the LTIR was 1.03 compared to 1.44 in 2018. The Severity Rate at the Caylloma Mine was 27.09 compared to 98.85 in 2018.

In 2019, the TRIR at the San Jose Mine was 5.08 as compared to 5.98 in 2018, and the LTIR was 1.17 compared to 2.24 in 2018. The Severity Rate at the San Jose Mine was 2,539.67 compared to 132.41 in 2018, due to a fatality at the mine as described below.

At the Lindero Project during the construction phase, in 2019 the TRIR was 5.98 compared to 15.9 in 2018 and the LTIR was 2.39 compared to 7.09 in 2018. The Severity Rate was 110.60 compared to 230.03 in 2018.

However, these achievements in improving workplace safety were overshadowed at the San Jose Mine in August 2019 by a workplace fatality in the underground area of the mine. After the accident, management conducted an in-depth analysis of the accident and has taken targeted actions to mitigate risks identified in the associated report.

During the year, the Company undertook initiatives to improve safety throughout its operations. This includes: improving the quality of the supervision of our operations; improving the training of our employees and contractors to recognize, understand and mitigate hazards of the workplace to prevent incidents and injuries; undertaking a safety evaluation of all moving equipment at each of our sites; and expanding our internal policies to increase the accountability of our contractors pertaining to safety and environmental issues. Refer to “Descriptionof the Business – General – Social and Environmental Policies”.

Company’s Response to Spread ofCOVID-19

On March 17, 2020, the Company announced that in response to the spread of the coronavirus respiratory disease (“COVID-19”), particularly in the jurisdictions that host its mining operations, it had activated its Emergency Response Plan and had placed its Health Safety Security and Environmental Committee in permanent session to continually assess the related health and safety risks to the Company’s personnel and contractors at its operations and offices. The Company also announced that preventative measures had been implemented at its offices and mines to curb the spread of COVID-19.

The Company implemented and continues to implement business continuity measures to mitigate the potential impacts of COVID-19 on the Company’s operations. This includes the postponement of all non-critical capital projects and the temporary suspension of all greenfields and brownfields exploration activities.

The following is a summary of the status of operations at its mines and projects as at the date of the AIF:

Caylloma Mine, Peru

On March 15, 2020, the Government of Peru introduced a series of measures to contain the rapid spread of COVID-19 which included: the closing of international borders and a declaration of a 15 day period of mandatory national “social isolation”. In response to these measures, the Company worked under the regulatory framework issued by the Ministerio de Energía y Minas (MINEM) and the Ministerio del Interior (MININTER), which allowed mines to continue to operate during the aforementioned period with essential personnel. Management demobilized non-critical personnel and continued to operate drawing ore from its 30 day coarse ore stockpile. The transportation of concentrates and essential supplies is permitted during this period, and the Caylloma mine had at such time a sufficient supply of critical stock, consumables and camp provisions for over a month.

On March 26, 2020, the Government of Peru extended the 15 day period of mandatory national “social isolation” to April 12, 2020. As at the date of the AIF, the Caylloma Mine continued to operate as set out above.

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San Jose Mine, Mexico

As at the date of the AIF, there are no COVID-19 related restrictive measures in place in Mexico that might have a material effect on the daily activities at the San Jose Mine. The Company’s business and operations continue to be conducted under the Company’s business risk mitigation and preventative health and safety procedures.

Lindero Project, Argentina

On March 15, 2020, the Government of Argentina closed its international borders for 15 days. The Lindero Project team took necessary actions to mitigate the impact of this measure on the rotation schedule of international staff and vendor representatives. During the evening of March 19, 2020, the Government of Argentina declared a period of mandatory national “social isolation” in relation to COVID-19, effective until March 31, 2020. The Company proceeded to orderly and safely demobilize its workforce at the Lindero Project, in accordance with the Executive Order and the processes implemented for this purpose by the Provincial Government of Salta.

As a result, the Company temporarily suspended construction activities at the Lindero Project for the mandated “social isolation” period. A task force remained on site to maintain critical activities and to undertake safety and environmental monitoring during the isolation period.

As the Lindero Temporary Suspension was recently imposed, management does not at this time have sufficient information to update its construction timelines, cost budget and timing for commencement of production at the Lindero Project to take into account the impact of COVID-19, but it is continuing to closely monitor the situation and plans to update such information when there is a reasonable basis to do so. Refer to “PreliminaryNotes - Note about the information contained herein and the Novel Coronavirus”.

Financings

On February 9, 2017, the Company completed a bought-deal public financing (the “2017 Financing”) with a syndicate of underwriters co-led by Raymond James Ltd., BMO Nesbitt Burns Inc. and Scotia Capital Inc., and including CIBC World Markets Inc. and National Bank Financial Inc., pursuant to which the Company issued 11,873,750 Common Shares at a price of $6.30 per Common Share, for gross proceeds of $74.8 million. Net proceeds were $70.9 million after deduction of underwriting fees and expenses. The proceeds from the 2017 Financing were added to the Company’s existing cash position, to be used for general working capital purposes.

On October 2, 2019, the Company completed a bought-deal public financing (the “2019 Financing”) with a syndicate of underwriters co-led by CIBC Capital Markets, Scotiabank, and including BMO Capital Markets, (collectively the “Underwriters”), pursuant to which the Company issued senior subordinated unsecured convertible debentures (the “Debentures”) in the aggregate principal amount of US$40 million Debentures at a price of US$1,000 per Debenture. Effective October 8, 2019, an over-allotment option granted to the Underwriters was exercised in full and the Company issued additional Debentures in the aggregate principal amount of US$6 million, bringing the total aggregate gross proceeds to the Company under the 2019 Financing to US$46 million.

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 in each year, commencing on April 30, 2020. The Debentures are convertible at the holder’s option into Common Shares at a conversion price of US$5.00 per share, representing a conversion rate of 200 Common Shares per US$1,000 principal amount of Debentures, subject to adjustment in certain circumstances. Refer to “Description of Capital Structure – Debentures” in this AIF.

Net proceeds from the 2019 Financing were $43.5 million after deduction of underwriting fees and expenses. The net proceeds from the 2019 Financing were used to pay expenses related to the start-up at the Lindero Project and for general working capital purposes.

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Changes in Board and Management

On August 16, 2017, Kylie Dickson was appointed as an independent member of the Board, and she was appointed to the audit committee (the “Audit Committee”) in the place of David Farrell. As well, Mr. Farrell was appointed Chair of the corporate governance & nominating committee in the place of Mario Szotlender.

On May 1, 2018, David Farrell was appointed as the independent Lead Director of the Company, Alfredo Sillau was appointed to the compensation committee in the place of Mario Szotlender, and David Laing was appointed to the corporate governance & nominating committee. Robert Gilmore did not stand for re-election as a director at the Company’s annual general meeting held on June 14, 2018. Immediately following the annual general meeting, Kylie Dickson was appointed to the corporate governance & nominating committee and as chair of the Audit Committee, and David Farrell was appointed to the Audit Committee.

On March 12, 2019, the Board approved the establishment of a sustainability committee (the “Sustainability Committee”) comprised of David Laing (Chair), Alfredo Sillau and Mario Szotlender. Refer to “Description of the Business – General – Sustainability” herein for more information regarding the Sustainability Committee”.

Credit Facilities

In January 2018, the Company entered into a third amended and restated credit agreement with the Bank of Nova Scotia (the “2018 Credit Facility”). The 2018 Credit Facility consists of a $40 million non-revolving credit facility and an $80 million revolving credit facility, both having a four year term from closing of the 2018 Credit Facility. The 2018 Credit Facility is secured by a first ranking lien on the Company’s material subsidiaries and their assets. The Company must comply with the terms in the amended agreement related to reporting requirements, conduct of business, insurance, notices, and must maintain certain covenants. The proceeds of the 2018 Credit Facility were intended to be used primarily to finance the mine construction at the Lindero Project.

In conjunction with the closing of the 2018 Credit Facility, the 2015 hedging of interest rates on the $40 million term loan set to expire in 2019 was unwound, and a new hedging arrangement through an interest rate swap contract was entered into for a four year term coinciding with the 2018 $40 million term loan.

Effective December 13, 2018, the Company further amended the 2018 Credit Facility. Pursuant to the joinder and amendment to the 2018 Credit Facility, BNP Paribas was added as an additional lender under the 2018 Credit Facility and the revolving portion of the facility was increased from $80 million to $110 million for a temporary period until December 31, 2020. The original $80 million revolving portion of the facility retains its original four year term. As at the date of the AIF, the Company had fully drawn $40.0 million from its non-revolving credit facility and fully drawn $110.0 million from its revolving credit facility.

Updated Mineral Reserve and MineralResource Estimates

During the past three years, the Company has released updated Mineral Reserve and Mineral Resource estimates for its properties as follows:

·	for the Caylloma Mine and the San Jose<br>Mine as at December 31, 2016, combined with Mineral Reserve and Mineral Resource estimates for the Lindero Project- released in<br>February 2017;
·	for the Lindero Project as at September<br>9, 2017 - released in September 2017;
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·	for the Caylloma Mine, the San Jose Mine<br>and the Lindero Project as at December 31, 2017 - released in February 2018;
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·	for the Caylloma Mine and the San Jose<br>Mine as at December 31, 2018 – released in March 2019;
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·	for the Lindero Project as at March 31,<br>2019 – released in April 2019; and
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·	for the Caylloma Mine and the San Jose<br>Mine as at December 31, 2019 – released in March 2020.
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A summary of the Mineral Reserve and Mineral Resource estimates for the Caylloma Mine and the San Jose Mine as at December 31, 2019 and for the Lindero Project as at March 31, 2019 are as follows:

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Highlights of Reserve and Resource Update

·	Combined<br>Proven and Probable Mineral Reserves for the Caylloma and San Jose mines are reported at 6.4 Mt containing 37.2 Moz silver<br>and 220 koz gold, representing year-over-year decreases of 18 percent and 19 percent in contained silver and gold ounces, respectively.
·	Combined<br>Inferred Mineral Resources for the Caylloma and San Jose mines are reported at 7.9 Mt containing an estimated 30.9 Moz silver<br>and 168 koz gold, reflecting a year-over-year decrease of 6 percent in contained silver ounces and no change in reported gold<br>ounces.
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·	Lindero<br>Proven and Probable Mineral Reserves are reported at 84.2 Mt containing 1.7 Moz of gold. Inferred Resources are reported at 8.6<br>Mt containing 106 koz of gold.
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Mineral Reserves - Proven and Probable								Contained Metal
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Property		Classification	Tonnes<br><br> <br>(000)	Ag<br><br> <br>(g/t)	Au<br><br> <br>(g/t)	Pb<br><br> <br>(%)	Zn<br><br> <br>(%)	Ag (Moz)	Au<br><br> <br>(koz)
Silver<br><br> <br>Mines	Caylloma,<br><br> <br>Peru	Proven	99	101	0.34	2.19	3.09	0.3	1
		Probable	2,361	80	0.20	2.41	3.86	6.1	15
		Proven + Probable	2,460	81	0.21	2.41	3.83	6.4	16
	San Jose, Mexico	Proven	232	311	2.12	N/A	N/A	2.3	16
		Probable	3,704	239	1.58	N/A	N/A	28.5	188
		Proven + Probable	3,936	243	1.61	N/A	N/A	30.8	204
	Total	Proven + Probable	6,396	181	1.07	N/A	N/A	37.2	220
Gold<br><br> <br>Mine	Lindero, Argentina	Proven	25,352	N/A	0.76	N/A	N/A	0.0	618
		Probable	58,875	N/A	0.58	N/A	N/A	0.0	1,096
		Proven + Probable	84,226	N/A	0.63	N/A	N/A	0.0	1,714
Total		Proven + Probable						37.2	1,934
Mineral Resources - Measured and Indicated								Contained Metal
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Property		Classification	Tonnes (000)	Ag<br><br> <br>(g/t)	Au<br><br> <br>(g/t)	Pb<br><br> <br>(%)	Zn<br><br> <br>(%)	Ag (Moz)	Au<br><br> <br>(koz)
Silver<br><br> <br>Mines	Caylloma, Peru	Measured	681	110	0.37	1.96	3.28	2.4	8
		Indicated	1,671	104	0.31	1.56	2.96	5.6	17
		Measured + Indicated	2,352	106	0.33	1.67	3.06	8.0	25
	San Jose, Mexico	Measured	17	104	0.80	N/A	N/A	0.1	0
		Indicated	538	105	0.70	N/A	N/A	1.8	12
		Measured + Indicated	555	105	0.70	N/A	N/A	1.9	13
	Total	Measured + Indicated	2,907	106	0.40	N/A	N/A	9.9	37
Gold<br><br> <br>Mine	Lindero, Argentina	Measured	2,092	N/A	0.55	N/A	N/A	0.0	37
		Indicated	16,774	N/A	0.49	N/A	N/A	0.0	265
		Measured + Indicated	18,866	N/A	0.50	N/A	N/A	0.0	302
Total		Measured + Indicated						9.9	339

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| --- | | Mineral Resources – Inferred | | | | | | | | Contained Metal | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Property | | Classification | Tonnes (000) | Ag (g/t) | Au (g/t) | Pb (%) | Zn (%) | Ag (Moz) | Au (koz) | | Silver Mines | Caylloma, Peru | Inferred | 4,056 | 112 | 0.37 | 2.58 | 4.00 | 14.6 | 48 | | | San Jose, Mexico | Inferred | 3,889 | 131 | 0.96 | N/A | N/A | 16.3 | 120 | | | Total | Inferred | 7,945 | 121 | 0.66 | N/A | N/A | 30.9 | 168 | | Gold Mine | Lindero, Argentina | Inferred | 8,600 | N/A | 0.38 | N/A | N/A | 0.0 | 106 | | Total | | Inferred | | | | | | 30.9 | 274 | | 1. | Mineral Reserves and Mineral Resources are as defined by the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves | | --- | --- | | 2. | Mineral Resources are exclusive of Mineral Reserves | | --- | --- | | 3. | Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability | | --- | --- | | 4. | Factors that could materially affect the reported Mineral Resources or Mineral Reserves include; changes in metal price and exchange rate assumptions; changes in local interpretations of mineralization; changes to assumed metallurgical recoveries, mining dilution and recovery; and assumptions as to the continued ability to access the site, retain mineral and surface rights titles, maintain environmental and other regulatory permits, and maintain the social license to operate | | --- | --- | | 5. | Mineral Resources and Mineral Reserves are estimated as of September 25, 2019 for the San Jose Mine and as of June 30, 2019 for the Caylloma Mine and reported for both mines as of December 31, 2019 taking into account production-related depletion for the period through December 31, 2019. Mineral Resources and Mineral Reserves for Lindero are estimated and reported as of March 31, 2019 | | --- | --- | | 6. | Mineral Reserves for the San Jose Mine are based on underground mining within optimized stope designs using an estimated NSR break-even cut-off grade of US$64.54/t, equivalent to 138 g/t Ag Eq based on assumed metal prices of US$17/oz Ag and US$1,380/oz Au; estimated metallurgical recovery rates of 91 % for Ag and 90 % for Au and mining costs of US$33.24/t; processing costs of US$17.12/t; and other costs including distribution, management, community support and general service costs of US$15.18/t based on actual operating costs. Mining recovery is estimated to average 91% and mining dilution 11%. Mineral Resources are reported at a 110 g/t Ag Eq cut-off grade based on the same parameters used for Mineral Reserves and a 15% upside in metal prices. Proven and Probable Mineral Reserves include 2.36 Mt containing 20.4 Moz of silver and 124 koz of gold reported at a 142 g/t Ag Eq cut-off grade, in addition to Inferred Resources totaling 2.71 Mt containing 10.9 Moz of silver and 78 koz of gold reported at a 110 g/t Ag Eq cut-off grade, located in the Taviche Oeste concession and subject to a 2.5 % royalty | | --- | --- | | 7. | Mineral Reserves for the Caylloma Mine are reported above NSR breakeven cut-off values based on the proposed mining method for extraction including; mechanized (breasting) at US$ 85.26/t; mechanized (enhanced) at US$ 78.90/t; and semi-mechanized at US$ 86.03/t using assumed metal prices of US$17/oz Ag, US$1,380/oz Au, US$2,170/t Pb and US$2,590/t Zn; metallurgical recovery rates of 84 % for Ag, 25 % for Au, 91 % for Pb and 90 % for Zn with the exception of the Ramal Piso Carolina vein that uses a metallurgical recovery rate of 75 % for Au. Mining, processing and administrative costs used to determine NSR cut-off values were estimated based on actual operating costs incurred from July 2018 through June 2019. Mining recovery is estimated to average 93 % with mining dilution ranging from 10 % to 22 % depending on the mining methodology. Mineral Resources are reported at an NSR cut-off grade of US$65/t for veins classified as wide (Animas, Animas NE, Nancy, San Cristobal) based on the same parameters used for reserves, and a 15% upside in metal prices and US$135/t for veins classified as narrow (all other veins) based on narrow vein mining methods | | --- | --- | | 8. | Mineral Reserves for Lindero are reported based on open pit mining within a designed pit shell for variable gold cut-off grades and gold recoveries by metallurgical type. Met type 1 cut-off 0.27 g/t Au, recovery 75.4 %; Met type 2 cut-off 0.26 g/t Au, recovery 78.2 %; Met type 3 cut-off 0.26 g/t Au, recovery 78.5 %; and Met type 4 cut-off 0.30 g/t Au, recovery 68.5%. Mining recovery is estimated to average 100% and mining dilution 0%. The cut-off grades and pit design are considered appropriate based on long term gold prices of US$1,320/oz, estimated mining costs of US$1.28 per tonne of material, total processing and process G&A costs of US$8.29 per tonne of ore, and refinery costs net of pay factor of US$6.90 per ounce gold. Lindero Mineral Resources are reported within the same conceptual pit shell above a 0.2 g/t Au cut-off grade based on the same parameters used for reserves and a 15% upside in metal prices | | --- | --- | | 9. | Eric Chapman, P. Geo. (APEGBC #36328) is the Qualified Person for Mineral Resources and Amri Sinuhaji (APEGBC #48305) is the Qualified Person for Mineral Reserves, both being employees of Fortuna Silver Mines Inc. | | --- | --- | | 10. | Totals may not add due to rounding procedures | | --- | --- | | 11. | N/A = Not Applicable | | --- | --- |

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San Jose Mine, Mexico

As of December 31, 2019, the San Jose Mine has Proven and Probable Mineral Reserves of 3.9 Mt containing 30.8 Moz of silver and 204 koz of gold, in addition to Inferred Resources of 3.9 Mt containing a further 16.3 Moz of silver and 120 koz of gold.

Year-over-year, Mineral Reserves decreased 24 percent in terms of tonnes and 21 percent in contained silver and gold ounces after net changes resulting from production-related depletion and the upgrading and conversion of Inferred Resources to Mineral Reserves due to a limited infill drill program focused primarily on the Stockwork zones. Silver grade increased 3 percent and gold grade increased 4 percent to 243 g/t and 1.61 g/t, respectively due to an increase in the break-even cut-off grade from 134 g/t to 138 g/t Ag Eq.

Measured and Indicated Resources tonnes exclusive of Mineral Reserves increased slightly year-over-year from 0.3 Mt to 0.5 Mt due primarily to the change in the breakeven cut-off grade for reserves.

Year-over-year, Inferred Resources increased 61 percent in terms of tonnes and 7 percent in contained silver and gold ounces. Silver and gold grades decreased by 33 percent. The net variation is due to reductions resulting from the upgrading of high-grade Inferred Resources related to infill drilling in the Stockwork zones counteracted by exploration drilling discovering new resources in the Victoria mineralized zone.

Caylloma Mine, Peru

As of December 31, 2019, the Caylloma Mine has Proven and Probable Mineral Reserves of 2.5 Mt containing 6.4 Moz of silver and 16 koz of gold, in addition to Inferred Resources of 4.1 Mt containing 14.6 Moz of silver and 48 koz of gold.

Year-over-year, Mineral Reserve tonnes decreased by 6 percent, while silver grade increased 5 percent to 81 g/t, lead grade increased 14 percent to 2.41%, and zinc grade increased 4 percent to 3.83%. Changes are primarily due to mining related depletion and the upgrading and conversion of Inferred Resources to Mineral Reserves due to a successful infill drill program focused primarily on the Animas NE vein.

Measured and Indicated Resource tonnes, exclusive of Mineral Reserves, increased by 9 percent year-over-year to 2.4 Mt.

Inferred Resources tonnes decreased by 1.3 Mt or 24 percent year-over-year. Silver, lead, and zinc grades increased 10 percent, 8 percent, and 4 percent, respectively. The decrease in Inferred Mineral Resources is primarily due to a successful infill drill program of the Animas NE vein resulting in the upgrading of Inferred Mineral Resources to Mineral Reserves coupled with an increase in cut-off value from US$50/t to US$65/t for the reporting of resources in wide veins.

Lindero Project, Argentina

The Lindero Project has Proven and Probable Mineral Reserves of 84.2 Mt containing 1.7 Moz of gold, in addition to Inferred Resources of 8.6 Mt containing 106 koz of gold.

DESCRIPTION OF THE BUSINESS

General

Summary. The Company is engaged in silver and gold mining and related activities in Latin America, including exploration, extraction, and processing. The Company operates the Caylloma Mine in southern Peru and the San Jose Mine in southern Mexico, and is constructing an open pit gold heap leach mine at its Lindero Property in northern Argentina.

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The silver-lead, zinc, and silver-gold concentrates produced by the Company at its Caylloma Mine and its San Jose Mine are sold to international metals traders who in turn deliver the products to different clients around the world. The material sources of revenue for 2019 and 2018 are as follows:


By type of concentrate:
Silver-lead concentrate	15	%	15	%
Zinc concentrate	13	%	18	%
Silver-gold concentrate	72	%	67	%
By metal contained in concentrate:
Silver	52	%	48	%
Lead	9	%	10	%
Zinc	13	%	18	%
Gold	26	%	24	%

Production Methods. The method of production both at the Caylloma Mine and the San Jose Mine consists of underground mining principally through cut and fill mechanized operations. Extracted ore is trucked to a conventional crushing, milling and flotation processing plant which consists of zinc, and lead-silver flotation circuits for Caylloma, and a gold-silver circuit for San Jose.

Specialized Skill and Knowledge. All aspects of the Company’s business require specialized skills and knowledge. Such skills and knowledge include the areas of geology, mining, metallurgy, engineering, environment issues, permitting, social issues, and accounting. While competition in the resource mining industry can make it difficult to locate and retain competent employees in such fields, the Company has been successful in finding and retaining personnel for the majority of its key processes. Management considers training and re-training of its staff to be a priority.

Competitive Conditions. The exploration and mining of precious metals and base metals is competitive. Competition relates to: the acquisition of mineral property interests that can be explored, developed and operated; technical experts that can find, develop and mine such mineral properties and interests; workers to operate the mineral properties; and capital to finance, exploration, development and operations.

The Company competes with other mining companies, some of which have greater financial resources and technical facilities, for the acquisition of mineral property interests, the recruitment and retention of qualified employees; and for investment capital with which to fund its projects.

Environmental Protection. All phases of the Company’s operations are subject to environmental laws and regulations in the jurisdictions in which it operates. These environmental regulations provide restrictions and prohibitions against spills, releases and emission of various substances related to industrial mining operations that could result in environmental contamination. To the best of management’s knowledge, the Company is in compliance in all material respects with all environmental laws and regulations applicable to its exploration, development, construction and operating activities.

On October 11, 2018, the Company reported that on October 8, 2018, abnormally high rainfall caused a contingency pond to overflow at the dry stack tailings facility at the San Jose mine. The contingency pond collects water from a ditch system at the dry stack tailing facility designed to capture and manage rainwater. No industrial process water was discharged in this incident. The San Jose Mine uses a cyanide-free process to produce concentrate. Officials at the Procuraduria Federal de Protección al Ambiente (“PROFEPA”) were notified of the overflow on the day of the incident. The Company, along with federal, state and local authorities conducted inspections of the facilities at San Jose and the Coyote Creek. The Company received PROFEPA’s report on the incident which confirms that the overflow did not contaminate soil, and therefore, no remediation was necessary. In 2019, the Company received a final resolution from the Mexican National Water Commission (“CONAGUA”) which confirms that no remediation of the nearby Coyote Creek was required. However, the Company received a fine of approximately US$42,000 related to the incident. The Company has since installed additional pumping equipment, increased its monitoring system and reinforced the pipes and drainage channels from the dry stack facility to the contingency pond in order to mitigate the risk of an overflow in the event of abnormally high rainfall at the San Jose Mine in the future.

| -18- |

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For further details of the incident, refer to Fortuna’s news releases dated October 11, 2018 “Fortuna reports heavy seasonal rains caused an overflow in a contingency pond of the dry stack tailings facility at the San Jose Mine, Mexico”; February 14, 2019 “PROFEPA report confirms no contamination of soil from overflow of contingency pond at the San Jose Mine, Mexico in October 2018” and March 28, 2019 “CONAGUA resolution confirms no remediation required as a result of the overflow of contingency pond at the San Jose Mine, Mexico in October 2018” on the Company’s website or under the Company’s profile on SEDAR.

Reclamation. The environmental permits under which the Company operates require it to reclaim certain lands that it disturbs during mining operations. Reclamation and closure activities can be significant and include land rehabilitation, decommissioning of mine facilities, ongoing care and maintenance and other costs. Costs of mine closures and reclamation of mine sites vary considerably due to factors such as location, climate, rainfall, environmental vulnerability, age of the mine, mining method, minerals being mined, waste characteristics, and labor costs. Closure cost estimates are reviewed regularly to reflect changing circumstances and adjusted according to inflation and work requirements.

There have been no significant changes in requirements, laws, regulations, operating assumptions, estimated timing and amount of closure and reclamation obligations in respect of the operations of the Company during the financial year ended December 31, 2019, other than to increase the reclamation obligation for the Lindero Project given the advance of construction at the mine site. Although the ultimate amount of the closure and reclamation costs to be incurred cannot be predicted with certainty, the Company currently estimates the undiscounted uninflated amount of cash flows required to settle the Company’s estimated rehabilitation costs to be approximately $33.3 million which will be incurred between 2022 and 2047 for the Caylloma Mine, the San Jose Mine and the Lindero Project, depending on the life of each respective mine, as more particularly described in note 19 to the audited financial statements of the Company for the fiscal year ended December 31, 2019.

Employees. The Company and its subsidiaries had 1,232 direct employees and 2,508 indirect employees through contractors as at December 31, 2019.

Foreign Operations. The Company’s material mineral resource properties are located in Peru, Mexico and Argentina. Any changes in governments or shifts in political attitudes in the jurisdictions in which we operate may lead to unanticipated or drastic changes in laws and regulations which are beyond our control and which could have a material adverse effect on the Company’s business, financial condition or results of operations.

Future development and operations may be affected in varying degrees by certain economic, political and other risks and uncertainties including, but not limited to: royalties, tax increases or claims by governmental bodies; restrictions on production; expropriation or nationalization; foreign exchange controls; restrictions on repatriation of profits; import and export regulations; changing fiscal regimes and uncertain regulatory environments; fluctuations in currency exchange rates; high rates of inflation; changes in royalty and tax regimes; the elimination of tax exemptions; unenforceability of contractual rights and judgments; changes to environmental legislation; land claims of local people and mine safety. The Company is not able to accurately predict the effect of the above factors.

Sustainability*.* The Company’s business and operations involve the exploration, development, extraction and production of precious and base metals predominantly in Latin America and in other areas in which the Company has an interest, and are subject to laws and regulations governing health and safety, protection and remediation of the environment, site reclamation, management of hazardous substances, permit approvals and other related matters.

The Company’s objective is to generate sustainable prosperity through its business operations which means, protecting the environment, providing a safe workplace for our employees and contractors, supporting the local communities in the areas in which the Company operates through investment, education, employment, infrastructure, maintaining high ethical standards in its operations and achieving operating excellence in the Company’s business.

| -19- |

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The Company has built strong relationships with the communities in which it operates, and is dedicated to innovative, sustainable projects and partnerships that build company engagement in local communities while respecting their values, customs and traditions.

In March 2019, the Board approved the establishment of our Sustainability Committee. The purpose of the committee is to assist the Board in fulfilling its oversight responsibilities by reviewing and guiding the sustainability, social responsibility, environmental, and health and safety policies of the Company established by the senior officers of the Company. Refer to “General Development of the Business – Three-Year History and Recent Developments –Changes in Board and Management”. The Sustainability Committee has adopted a written charter that sets out its mandate and responsibilities and is available for review on the Company’s website. The Sustainability Committee meets and reports to the Board at least once in each fiscal year, and at such other times during each year as it deems appropriate. In 2019, the Sustainability Committee met three times.

In 2019, the Company produced its first sustainability report which was developed using the Global Reporting Initiative Standards – Core Option. The report discloses: material sustainable topics applicable to the Company and its operations; summarizes the actions that the Company is taking in terms of economic, social and environmental sustainability in the Company’s mining operations in Peru and Mexico; and provides detailed information on the Company’s environmental, social, socio-economic and health and safety performance. The report is available on the Company’s website.

Social and Environmental Policies

The Company has adopted several social and environmental policies and codes of conduct that are essential to its operations. The Company’s operating practices are governed by the principles set out in its Code of Business Conduct and Ethics and Whistle-Blower Policy and its Supplier Code of Business Conduct and Ethics.

Health and Safety Policy

The health and safety of our employees and contractors is our priority. The Company is committed to maintaining the health and safety of its personnel by minimizing hazards and providing training and safe equipment. A strong safety culture is encouraged so that all employees are empowered to report and address safety issues.

In 2020, the Company adopted a safety policy which reflects the Company’s commitment to providing safe and healthy working conditions for our employees, contractors and visitors at our mining operations, exploration sites and offices. By adopting a strong risk management approach, the Company trains its employees and contractors to recognize, understand and mitigate hazards of the workplace to prevent injuries and accidents. The Company is committed to full compliance with all applicable health and safety legislation and regulations in the countries in which we operate as well as industry standards and practices which in some cases exceed the legislation and regulations.

Safety statistics are collected from each of our operations on a monthly basis. Targets for health and safety key performance indicators are now set each year and were one factor used in determining management compensation for 2019.

Human Rights Policy

The Company recognizes that its activities have the potential to impact the human rights of individuals affected by its business operations, including employees, contractors, the communities in which it operates and other external stakeholders. The Company abides by human rights laws established internationally and in the countries in which it operates. The Company expects its suppliers and business partners to share this commitment and to implement policies and procedures that support respect for human rights. The Company’s human rights principles are embedded in its human rights policy which was adopted in 2019 and in a number of its internal procedures, business systems and processes, including those related to employment practices, environmental practices, security, anti-corruption practices, and community and social relations guidelines.

| -20- |

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Environmental Policy

The Company is committed to complying in all material respects with all environmental laws and regulations applicable to its activities, including in its exploration, mining, processing and closure activities. It interacts proactively with authorities and communicates openly about its activities. The Company works directly and collaboratively with local communities to protect and preserve the environment.

The Company strives for continual improvement of its environmental performance. In 2019, the Company adopted an environmental policy which reflects its above commitment and is guided by international standards, and with respect to tailings management is guided by the Company’s tailings and heap leach management standard. The Company’s environmental principles are embedded in a number of its internal procedures, business systems and processes.

Environmental statistics are collected from each of our operations on a monthly basis. Targets for environmental management plan key performance indicators are now set each year and were one factor used in determining management compensation for 2019.

Climate Change

Climate change may have an adverse effect on the Company’s operations, infrastructure and availability of mineral resources. Climate change may, among other things cause or result in changes in rainfall levels, higher temperatures, reduced water availability, increase sea levels, increase extreme weather events and resource shortages. Extreme weather events such as flooding or inadequate water supplies could disrupt operations at the Company’s mines and impact mining and transport operations, reclamation efforts, create resource shortages, damage property and equipment and increase health and safety risks on site. Abnormally high rainfall at the San Jose Mine in October 2018 and at the Lindero Project in February 2019 disrupted operations at these locations. Records of precipitation are being maintained at all operations to track weather conditions. Such events or conditions could have other adverse effects on the Company’s workforce and the communities around the Company’s mines, such as an increased risk of food insecurity, water scarcity and prevalence of disease. Climate change may also result in shortages in certain consumables and other products required to sustain the Company’s operations.

Risk Factors

The Company’s ability to generate revenues and profits from its natural resource properties is subject to a number of risks and uncertainties including, without limitation, the following:

Risks Relating to the Company’s Business Operations

The Company’s operations aresubject to operating hazards and risks incidental to mining operations.

Mining operations generally involve a high degree of risk. Operations in which the Company has a direct or indirect interest, including the Caylloma Mine, the San Jose Mine and the Lindero Project, will be subject to all of the hazards and risks normally incidental to exploration, development and operational activities, including fire, explosions, floods, structural collapses, industrial accidents, unusual or unexpected geological conditions, ground control problems, power outages, pollution, industrial water shortages, inclement weather, cave-ins and mechanical equipment failure. Any such hazards could result in work stoppages, damage to or destruction of mines and other producing facilities, damage to life and property, environmental damage and possible legal liability for any or all damages. The Company may become subject to liability for hazards against which it cannot insure or against which it may elect not to insure. Any compensation for such liabilities may have a material adverse effect on the Company’s financial position.

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Mineral Resources, Mineral Reservesand precious metal recoveries are estimated.

There is a degree of uncertainty attributable to the estimation of Mineral Resources, Mineral Reserves and expected mineral grades. The Mineral Resource and Mineral Reserve estimates included or incorporated by reference in this AIF have been determined and valued based on assumed future prices, cut-off grades and operating costs. However, until mineral deposits are actually mined and processed, Mineral Resources and 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 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 geometallurgical assumptions, 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.

The Company’s capital and operatingcosts, production schedules and economic returns are based on certain assumptions which may prove to be inaccurate.

The Company’s expected capital and operating costs, production estimates, anticipated economic returns and other projections, estimates and forecasts for its mineral properties that are included or incorporated by reference in this AIF or included in any technical reports, scoping studies, pre-feasibility studies and feasibility studies prepared for or by the Company are based on assumed or estimated future metals prices, cut-off grades, operating costs, capital costs, metallurgical recoveries, that the actual ore mined is amenable to mining or treatment, environmental considerations, labour volumes, permitting and other factors, any of which may prove to be inaccurate. As a result, technical reports, scoping studies, pre-feasibility studies and feasibility studies prepared for or by the Company may prove to be unreliable.

The Company’s capital and operating costs are affected by the cost of commodities and goods such as steel, cement, explosives, fuel, electrical power and supplies, including reagents. Significant declines in market prices for gold, silver and other metals could have an adverse effect on the Company’s economic projections. Management assumes that the materials and supplies required for operations will be available for purchase and that the Company will have access to the required amount of sufficiently skilled labour. As the Company relies on certain third-party suppliers and contractors, these factors can be outside its control and an increase in the costs of, or a lack of availability of, commodities, goods and labour may have an adverse impact on the Company’s financial condition. The Company may experience difficulty in obtaining the necessary permits for its exploration, development or operational activities, if such permits are obtained at all, and may face penalties as a result of violations of permits or other environmental laws, which may cause delays and increases to projected budgets. Any of these discrepancies from the Company’s expected capital and operating costs, production schedules and economic returns could cause a material adverse effect on the Company’s business, financial condition and results of operations.

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The Company has in the past, and may in the future, provide estimates and projections of its future production, costs and financial results. Any such information is forward looking. Neither the Company’s auditors nor any other independent expert or outside party compiles or examines these forward looking statements. Accordingly, no such person expresses any opinion or any other form of assurance with respect thereto. Such estimates are made by the Company’s management and technical personnel and are qualified by, and subject to the assumptions, contained or referred to in the filing, release or presentation in which they are made, including assumptions about the availability, accessibility, sufficiency and quality of mineralized material, the Company’s costs of production, the market prices of silver, gold and other metals, the Company’s ability to sustain and increase production levels, the ability to produce and sell marketable concentrates, the sufficiency of its infrastructure, the performance of its personnel and equipment, its ability to maintain and obtain mining interests and permits, the state of the government and community relations, and its compliance with existing and future laws and regulations. Actual results and experience may differ materially from these assumptions. Failure to achieve estimates or material increases costs could have a material adverse impact on the Company’s future cashflows, profitability, results of operations and financial condition. Any such production, cost, or financial results estimates speak only as of the date on which they are made, and the Company disclaims any intent or obligation to update such estimates, whether as a result of new information, future events or otherwise. Accordingly, these forward-looking statements should be considered in the context in which they are made and undue reliance should not be placed on them.

Uncertainties and risks related tothe start-up of the Lindero Project

The Company is subject to inherent uncertainties and risks related to the construction and commissioning and start-up of the Lindero Project, the principal of which include:

·	problems with the start-up of the processing<br>plant which causes a delay in the timeline;
·	delays associated with contractors;
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·	budget overruns due to changes in costs<br>of fuel, power, labour, materials and supplies; and
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·	potential opposition from non-governmental<br>organizations, environmental groups or local groups which may delay or prevent activities.
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The Company’s ability to meet construction, development, commissioning and production schedules and cost estimates for the Lindero Project cannot be assured. The Company has prepared estimates of capital costs and/or operating costs for the Lindero Project, but no assurance can be given that such estimates will be achieved. Failure to achieve cost estimates or material increases in costs could have an adverse impact in future cash flows, profitability, results of operations and financial condition.

It is common in new mining operations to experience such unexpected costs, problems and delays during construction, development and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, the Company cannot provide assurance that its activities will result in profitable mining operations at the Lindero Project.

Development projects such as theLindero Project are uncertain and it is possible that actual capital and operating costs and economic returns will differ significantlyfrom those estimated for a project prior to production.

The development of the mine at the Lindero Project requires significant expenditures during the development phase before production is possible. The economic feasibility of development projects is based on many factors such as: estimation of mineral reserves, anticipated metallurgical recoveries, environmental considerations and permitting, future gold prices, and anticipated capital and operating costs of such projects. The Lindero Project has no operating history upon which to base estimates of future production and cash operating costs. Particularly for development projects, estimates of proven and probable mineral reserves and cash operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility studies that derive estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, expected recovery rates of gold from the ore, estimated operating costs, anticipated climactic conditions and other factors. As a result, it is possible that actual capital and operating costs and economic returns will significantly differ from those currently estimated for the Lindero Project prior to production.

Any of the following events, among others, could affect the profitability or economic feasibility of the Lindero Project: unanticipated changes in grades and tonnes or ore to be mined and processed, unanticipated adverse geologic conditions, unanticipated metallurgical recovery problems, incorrect data on which engineering assumptions are made, availability of labor, costs of processing and refining facilities, availability of economic sources of power, adequacy of water supply, adequate access to the site, unanticipated transportation costs, government regulations (including regulations with respect to the environment, prices, royalties, duties, taxes, permitting, restrictions on production, quotas on exportation of minerals, environmental), fluctuations in gold prices, and accidents labour actions and force majeure events.

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The development of the Company’sproperties requires substantial exploration, expenditure and the development of infrastructure.

Development of the Company’s non-producing properties will only follow upon obtaining satisfactory exploration and engineering results that confirm economically recoverable and saleable volumes of minerals and metal as well as the legality of such development. The business of mineral exploration and development is speculative in nature and involves a high degree of risk, as few properties which are explored are ultimately developed into producing mines. There is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of Mineral Reserves. The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors.

Development of the Company’s non-producing projects will require the construction and operation of mines, processing plants and related infrastructure. As a result, the Company is and will continue to be subject to all of the risks associated with establishing new mining operations, including:

·	the timing and cost, which can be considerable,<br>of the construction of mining and processing facilities;
·	the availability and cost of skilled labour,<br>mining equipment and principal supplies needed for operations;
---	---
·	the availability and cost of appropriate<br>smelting and refining arrangements;
---	---
·	the need to maintain necessary environmental<br>and other governmental approvals and permits;
---	---
·	the availability of funds to finance construction<br>and development activities;
---	---
·	potential opposition from non-governmental<br>organizations, environmental groups, local groups or other stakeholders which may delay or prevent development activities; and
---	---
·	potential increases in construction and<br>operating costs due to changes in the cost of labour, fuel, power, materials and supplies.
---	---

Substantial expenditures are required to establish Mineral Resources and Mineral Reserves through drilling and development and for mining and processing facilities and infrastructure. No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis. Economic feasibility of a project is based on several other factors including anticipated metallurgical recoveries, environmental considerations and permitting, future metal prices, and timely completion of the development plan.

Completion of the development of the Company’s advanced projects is subject to various requirements, including the availability and timing of acceptable arrangements for power, water, transportation, access and facilities. The lack of, or delay in, availability of any one or more of these items could prevent or delay development of the Company’s advanced projects. There can be no assurance that adequate infrastructure, including road access, will be built, that it will be built in a timely manner or that the cost of such infrastructure will be reasonable or that it will sufficiently satisfy the requirements of the advanced projects. As well, accidents or sabotage could affect the provision or maintenance of adequate infrastructure.

The Company’s operations require water, and the San Jose Mine is located in a region where water is scarce. While the Company believes it holds sufficient water rights to support its current operations, future developments could limit the amount of water available to the Company. New water development projects, or climatic conditions such as extended drought, could adversely affect the Company. There can be no guarantee that the Company will be successful in maintaining adequate supplies of water for its operations.

The Company may be unable to replaceits Mineral Reserves

The Company must continually replace its Mineral Reserves depleted by production to maintain production levels over the long term. Mineral Reserves can be replaced by expanding known ore bodies, locating new deposits or making acquisitions. Exploration is highly speculative in nature and involves many risks and is frequently unsuccessful. Substantial expenditures are required to complete drilling programs which may take several years to complete in order to establish Mineral Reserves. As a result, there is no assurance that current or future exploration programs will be successful. There is a risk that depletion of the Company’s Mineral Reserves will not be offset by discoveries or acquisitions. The Company’s mineral base may decline if Mineral Reserves are mined without adequate replacement and the Company may not be able to sustain production beyond the current mine lives, based on current production rates. If the Company’s Mineral Reserves are not replaced either by the development of additional Mineral Reserves and/or additions to Mineral Reserves, there may be an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition, and this may be compounded by requirements to expend funds for reclamation and decommissioning.

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The Company’s operations aresubject to extensive environmental regulation.

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.

The Company operates four tailings storage facilities, which includes two heap leach pads at the Caylloma Mine, and one heap leach pad and one dry stack tailings facility at the San Jose Mine. In addition, the Company has one closed heap leach pad at the Caylloma Mine. All tailings storage facilities operated by the Company are subject to the Company’s Tailings and Heap Leach Management Standard. As part of the Company’s risk management protocols, the Company continually assesses its tailings dam management systems. Since 2019, the Company has planned and executed an annual comprehensive review of all of its tailings facilities. Following the review in 2019, the Company: completed an independent audit plan of all of its tailings storage facilities (“TSF”) and its heap leach facility (“HLF”) currently being constructed at the Lindero Project; assigned an external Engineer of Record for each TSF and HLF; increased pond and pumping capacity on selected TSFs as a redundant emergency control measure; reviewed and updated stormwater management plans; reviewed and updated Operation, Maintenance and Surveillance manuals in accordance with best practices; updated and increased geotechnical monitoring equipment an control points at selected TSFs and reviewed and tested emergency response plans at each site. While the Company believes that appropriate steps have been taken to prevent safety incidents, there are inherent risks involved with tailings facilities, including among other things, seismic activity, particularly in seismically active regions such as Peru, and the ability of field investigations completed prior to construction to detect weak foundation materials. There can be no assurance that a dam or other tailings facility safety incident will not occur and such an incident could have a material adverse effect on the Company’s business, operations and financial condition.

Environmental legislation is evolving in a manner which will require 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.

The Company intends to, and attempts to, fully comply with all applicable environmental regulations. While the health and safety of its people and responsible environmental stewardship are top priorities for the Company, there can be no assurance that the Company has been or will be at all times in complete compliance with such laws, regulations and permits, or that the costs of complying with current and future environmental and health and safety laws and permits will not materially and adversely affect the Company’s business, results of operations or financial condition.

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The Company’s business is sensitiveto nature and climate conditions.

The Company and the mining industry are facing continued geotechnical challenges, which could adversely impact the Company’s production and profitability. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, floods, seismic activity, droughts and pit wall failures, may occur in the future and such events may not be detected in advance. Such geotechnical risks could impact the structural integrity of our mines, stockpiles, leach pads and tailings storage facilities. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as severe weather, droughts and considerable rainfall. The Company’s operations require water, and the San Jose Mine is located in a region where water is scarce. There can be no assurance that extreme weather events such as a prolonged drought will not affect the operations at this mine.

Geotechnical failures could result in limited or restricted access to mine sites, suspension of operations, government investigations, increased monitoring costs, remediation costs, loss of ore and other impacts, which could cause one or more of the Company’s projects to be less profitable than currently anticipated and could result in a material adverse effect on the Company’s business results of operations and financial position.

The San Jose Mine and the Lindero Project have in the past experienced abnormally high rainfall which has disrupted operations at these locations. Increased precipitation, either due to normal variances in weather or due to global climate change, could result in flooding that may adversely impact operations and could damage the Company’s facilities, plant and operating equipment.

The Company’s operations aresubject to political and other risks in the countries in which it operates.

The Company currently conducts, or plans to conduct, exploration, development and production activity in a number of countries, including Peru, Mexico and Argentina. There are uncertainties in these regions regarding capital controls and future changes in applicable laws related to exploration, development and mining operations.

Argentina

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 also allows 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.

Under the terms of the Argentine Central Bank regulation, any funds in foreign currency which are advanced by the Company as a loan to its Argentine subsidiary in connection with the payment of construction costs and expenses at the Lindero Project, are to the extent that the funds are advanced in foreign currency, required to be converted into Argentine Pesos at a conversion rate negotiated at the Foreign Exchange Market within five business days from the date of the receipt of the funds in Argentina. When the loan is to be repaid, the Regulation requires proof that the loan was advanced in foreign currency and converted into local currency in order to repay the loan in foreign currency. Due to the volatility of the exchange rate for Argentine Pesos, the Company will apply additional measures in cash management to minimize potential gains or losses arising from the conversion of funds. Accordingly, once production commences at the Lindero Project, with the capital controls in effect, the Company will be required to convert the equivalent value into Argentine Pesos of the export of all gold doré from the Lindero Project. In addition, the Company would be required to obtain the prior consent of the Argentine Central Bank to the payment of cash dividends and distributions of profits out of Argentina.

Argentina also changed its export tax rates as part of the changes to its tax laws. Effective December 23, 2019, exports of products related to the oil and mining industries are subject to a maximum 8% export tax with no cap. The Argentine Government is yet to determine the exact rates for the mining industry. Accordingly, exports of bullion, doré and unrefined gold are subject to a maximum 8% export tax with no cap until such time as the Argentine Government determines otherwise.

Mexico

The Company’s operations at the San Jose Mine are subject to the payment of government taxes, fees and duties. Under Mexican federal corporate income tax law, titleholders of mining concessions are required to pay annually a 7.5% duty on their mining related profits and a 0.5% duty on revenues obtained from the sale of gold, silver and platinum.

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Additionally, the State of Oaxaca in Mexico has a history of social conflicts and political agitation which can lead to public demonstrations and blockades that can from time to time affect the Company’s operations.

In 2015, the Mexican Government introduced a Mining Fund which was funded from taxes paid by mining companies operating in Mexico. The Mining Fund distributed monies to local communities where the activities of mining companies take place to promote infrastructure and social development and to mitigate environmental impacts. Effective January 1, 2020, 85% of the funds of the Mining Fund were reallocated to the Public Education Ministry, and 5% are to be distributed among the municipalities where the mining activities take place. The local communities where the Company operates may be affected by the cut-back in these funds. It is not yet known if this may have an impact on the business and operations of the Company.

In January 2020, the Oaxacan Congress approved a Previous, Free and Informed Consultation Law for the Indigenous and Afromexican Communities in the State of Oaxaca. This law is not yet in effect, and the current timing for its implementation is not yet known. As a result, the Company is unable to predict how this new legislation may affect the business and operations of the Company.

Peru

The Company’s operations at the Caylloma Mine are subject to the payment of government taxes, fees and duties. Holders of mineral concessions are obliged to pay to the Peruvian Government, a mining royalty, as a consideration for the exploitation of metallic and non-metallic natural resources, which is calculated based on the quarterly sales revenues from metallic and non-metallic mineral resources at a minimum rate of 1% and up to 12%.

In addition, an additional tax called the “Special Mining Tax” is payable to the Peruvian Government which imposes a tax on the operating profit of metallic resources at a tax rate that ranges from between 2% to 8.4%.

In some areas of Peru, the development of infrastructure projects and extractive industries have met with strong rejection from the local population. Such social conflict may lead to public demonstrations and blockades which could affect the Company’s operations.

The Company is not able to determine the impact of other potential political and country risks on its future financial position nor its ability to meet future interest or principal payments, which include:

·	cancellation or renegotiation of contracts;
·	changes in foreign laws or regulations;
---	---
·	changes in tax laws;
---	---
·	royalty and tax increases or claims by governmental entities;
---	---
·	retroactive tax or royalty claims;
---	---
·	expropriation or nationalization of property;
---	---
·	inflation of costs that is not compensated by a currency devaluation;
---	---
·	high rates of inflation;
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·	restrictions on the ability of local operating companies to sell gold, copper or other minerals<br>offshore for U.S. dollars, and on the ability of companies to hold U.S. dollars or other foreign currencies;
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·	restrictions on the purchase of foreign currencies and on the remittance of dividend and interest<br>payments offshore;
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·	limitations on the repatriations of earnings;
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·	import and export regulations;
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·	environmental controls and permitting;
---	---
·	opposition from local community members or non-governmental organizations;
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·	civil strife, acts of war, guerrilla activities, insurrection and terrorism;
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·	unenforceability of contractual rights and judgements; and
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·	other risks arising out of foreign sovereignty over the areas in which the Company’s operations<br>are conducted.
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Such risks could potentially arise in any country in which the Company operates. These risks may limit or disrupt operating mines or projects, restrict the movement of funds, cause the Company to have to expend more funds than previously expected or required, and may materially adversely affect the Company’s financial position or results of operations. The Company may also evaluate business opportunities in other jurisdictions where such risks may exist. Furthermore, in the event of a dispute arising from such activities, the Company may be subject to the exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.

Furthermore, the introduction of new tax laws, regulations or rules, or changes to, or differing interpretation of, or application of, existing tax laws, regulations or rules in any of the countries in which the Company operates, could result in an increase in the Company’s taxes, or other governmental charges, duties or impositions. No assurance can be given that new tax laws, rules or regulations will not be enacted or that existing tax laws will not be changed, interpreted or applied in a manner that could result in the Company’s profits being subject to additional taxation or that could otherwise have an adverse material effect on the Company.

The Company is subject to extensivegovernment regulations and permit requirements.

Operations, development and exploration on the Company’s properties are affected to varying degrees by political stability and government regulations relating to such matters as environmental protection, health, safety and labour, mining law reform, restrictions on production, price controls, tax increases, maintenance of claims, tenure, and expropriation of property. Failure to comply with applicable laws and regulations may result in fines or administrative penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in the Company incurring significant expenditures.

The activities of the Company require licences and permits from various governmental authorities. The Company currently has been granted the requisite licences and permits to enable it to carry on its existing business and operations. There can be no assurance that the Company will be able to obtain all the necessary licences and permits which may be required to carry out exploration, development and mining operations for its projects in the future. The Company might find itself in situations where the state of compliance with regulation and permits can be subject to interpretation and challenge from authorities that could carry risk of fines or temporary stoppage.

The Company’s mining concessionsmay be terminated in certain circumstances.

Under the laws of the jurisdictions where the Company’s operations, exploration and development projects and prospects are located, Mineral Resources belong to the state and governmental concessions are required to explore for, and exploit, Mineral Reserves. The Company holds mining, exploration and other related concessions in each of the jurisdictions where it is operating and where it is carrying on development projects and prospects. The concessions held by the Company in respect of its operations, exploration and development projects and prospects may be terminated under certain circumstances, including where minimum production levels are not achieved by the Company (or a corresponding penalty is not paid), if certain fees and/or royalties are not paid or if environmental and safety standards are not met. Termination of any of the Company’s concessions could have a material adverse effect on the Company’s business, financial condition or results of operations.

Risks related to ILO Convention 169 Compliance

The Company may, or may in the future, operate in areas presently or previously inhabited or used by indigenous peoples. As a result, the Company’s operations are subject to national and international laws, codes, resolutions, conventions, guidelines and other similar rules respecting the rights of indigenous peoples, including the provisions of ILO Convention 169. ILO Convention 169 mandates, among other things, that governments consult with indigenous peoples who may be impacted by mining projects prior to granting rights, permits or approvals in respect of such projects.

ILO Convention 169 has been ratified by most Latin American countries including Argentina, Peru and Mexico. It is possible however that these governments may not (i) have implemented procedures to ensure their compliance with ILO Convention 169 or (ii) have complied with the requirements of ILO Convention 169 despite implementing such procedures.

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Government compliance with ILO Convention 169 can result in delays and significant additional expenses to the Company arising from the consultation process with indigenous peoples in relation to the Company’s exploration, mining or development projects. Moreover, any actual or perceived past contraventions, or potential future actual or perceived contraventions, of ILO Convention 169 by ratifying governments in the countries in which the Company operates create a risk that the permits, rights, approvals, and other governmental authorizations that the Company has relied upon, or may in the future rely upon, to carry out its operations or plans in such countries could be challenged by or on behalf of indigenous peoples in such countries.

Such challenges may result in, without limitation, additional expenses with respect to the Company’s operations, the suspension, revocation or amendment of the Company’s rights or mining, environmental or export permits, a delay or stoppage of the Company’s development, exploration or mining operations, the refusal by governmental authorities to grant new permits or approvals required for the Company’s continuing operations until the settlement of such challenges, or the requirement for the responsible government to undertake the requisite consultation process in accordance with ILO Convention 169.

As a result of the inherent uncertainty in respect of such proceedings, the Company is unable to predict what the results of any such challenges would be; however, any ILO Convention 169 proceedings relating to the Company’s mining and exploration operations in Mexico or Peru, or its development of the Lindero Project and exploration of other properties in Argentina, may have a material adverse effect on the business, operations, and financial condition of the Company.

The Company’s success dependson developing and maintaining relationships with local communities and stakeholders.

The Company’s ongoing and future success depends on developing and maintaining productive relationships with the communities surrounding its operations, including indigenous peoples who may have rights or may assert rights to certain of the Company’s properties, and other stakeholders in its operating locations. The Company believes its operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development and other benefits associated with ongoing payment of taxes. In addition, the Company seeks to maintain its partnerships and relationships with local communities, including indigenous peoples, and stakeholders in a variety of ways, including in-kind contributions, volunteer time, sponsorships and donations. Notwithstanding the Company’s ongoing efforts, local communities and stakeholders can become dissatisfied with its activities or the level of benefits provided, which may result in civil unrest, protests, direct action or campaigns against it. Any such occurrence could materially and adversely affect the Company’s business, financial condition or results of operations.

As a result of social media and other web-based applications,companies today are at much greater risk of losing control over how they are perceived.

Damage to the Company’s reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or not. Although the Company places a great emphasis on protecting its image and reputation, it does not ultimately have direct control over how it is perceived by others. Reputation loss may lead to increased challenges in developing and maintaining community relations, decreased investor confidence and act as an impediment to the Company’s overall ability to advance its projects, thereby having a material adverse impact on the Company’s business, financial condition or results of operations.

Oppositionof the Company’s exploration, development and operational activities may adversely affect the Company’s reputation,its ability to receive mining rights or permits and its current or future activities.

Maintaining a positive relationship with the communities in which the Company operates, including with respect to the Caylloma Mine, the San Jose Mine and the Lindero Project, is critical to continuing successful exploration and development. Community support for operations is a key component of a successful exploration or development project. Various international and national laws, codes, resolutions, conventions, guidelines and other materials relating to corporate social responsibility (including rights with respect to health and safety and the environment) may also require government consultation with communities on a variety of issues affecting local stakeholders, including the approval of mining rights or permits.

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The Company may come under pressure in the jurisdictions in which it explores or develops to demonstrate that other stakeholders benefit and will continue to benefit from its commercial activities. Local stakeholders and other groups may oppose the Company’s current and future exploration, development and operational activities through legal or administrative proceedings, protests, roadblocks or other forms of public expression against the Company’s activities. Opposition by such groups may have a negative impact on the Company’s reputation and its ability to receive necessary mining rights or permits. Opposition may also require the Company to modify its exploration, development or operational plans or enter into agreements with local stakeholders or governments with respect to its projects, in some cases causing considerable project delays. Any of these outcomes could have a material adverse effect on the Company’s business, financial condition, results of operations and Common Share price.

The Company is faced with uncertaintyof funding for exploration and development.

The Company’s ability to continue production, development and exploration activities, if any, will depend on its ability to generate sufficient operating cash flows from the Caylloma Mine and the San Jose Mine, and from the Lindero Project when in production, and to obtain additional external financing where necessary. Any unexpected costs, problems or delays at the Caylloma Mine and the San Jose Mine, or delay in commencement of commercial production at the Lindero Project, could severely impact the Company’s ability to generate sufficient cash flows and require greater reliance on alternative sources of financing, including but not limited to: project or bank financing, or public or private offerings of equity and debt, joint ventures, or utilize one or a combination of all of these alternatives. There can be no assurance that the Company will be able to obtain additional financing or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of some of its projects.

The Company is substantially relianton the Caylloma Mine and the San Jose Mine.

All of the Company’s revenues were generated by the Caylloma Mine until September 2011, when commercial production commenced at the San Jose Mine. Until commencement of commercial production at the Lindero Project or until the Company acquires or develops additional properties or projects, the Company will remain largely dependent upon the operation of the Caylloma Mine and the San Jose Mine for its future revenue and profits, if any. If for any reason production at either mine was reduced or stopped, the Company’s revenues and profits would decrease significantly.

The title to the Company’sproperties could be challenged or impugned.

Although the Company has or will receive title opinions for any properties in which it has a material interest, there is no guarantee that title to such properties will not be challenged or impugned. The Company has not conducted surveys of the claims in which it holds direct or indirect interests and, therefore the precise area and location of the properties may be in doubt. The Company’s properties may be subject to prior unregistered agreements or transfers or indigenous land claims and title may be affected by unidentified or unknown defects. Title insurance is generally not available for mineral properties and the Company’s ability to ensure that it has obtained secure claims to individual mineral properties or mining concessions may be constrained. A successful challenge to the Company’s title to a property or to the precise area and location of a property could cause delays or stoppages to the Company’s exploration, development or operating activities without reimbursement to the Company. Any such delays or stoppages could have a material adverse effect on the Company’s business, financial condition and results of operations.

Additional businesses and assetsthat the Company acquires may not be successfully integrated.

The Company undertakes evaluations from time to time of opportunities to acquire additional mining assets and businesses. In particular, the Company completed its acquisition of Goldrock in July 2016. Any such acquisitions may be significant in size, may change the scale of the Company’s business, may require additional capital, and/or may expose the Company to new geographic, political, operating, financial and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, acquire them on acceptable terms, and integrate their operations successfully. Any acquisitions would be accompanied by risks such as:

·	a significant decline in the relevant<br>metal price after the Company commits to complete an acquisition on certain terms;
·	the quality of the mineral deposit acquired<br>proving to be lower than expected;
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·	the difficulty of assimilating the operations<br>and personnel of any acquired companies;
·	the potential disruption of the Company’s<br>ongoing business;
---	---
·	the inability of management to realize<br>anticipated synergies and maximize the financial and strategic position of the Company;
---	---
·	the failure to maintain uniform standards,<br>controls, procedures and policies;
---	---
·	the impairment of relationships with employees,<br>customers and contractors as a result of any integration of new management personnel; and
---	---
·	the potential unknown liabilities associated<br>with acquired assets and businesses.
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There can be no assurance that any assets or business acquired will prove to be profitable or that the Company will be able to integrate the required businesses successfully, which could slow the Company’s rate of expansion and cause the Company’s business, results of operations and financial condition to suffer.

The Company may need additional capital to finance future acquisitions. There can be no assurance that such financing would be available, on favourable terms or at all. If the Company obtains further debt financing, it will be exposed to the risk of leverage and its operations could become subject to restrictive loan and lease covenants and undertakings. If the Company obtains equity financing, existing shareholders may suffer dilution. There can be no assurance that the Company would be successful in overcoming these risks or any other problems encountered in connection with such financings.

Impairments.

Mining and mineral interests are the most significant assets of the Company and represent capitalized expenditures related to the development of mining properties and related plant and equipment.

The Company reviews and evaluates its mining interests for impairment at each reporting period or when events or changes in circumstances indicates that the related carrying amounts may not be recoverable which evidences greater risk levels. It is possible that material changes could occur that may adversely affect management’s estimate of the carrying value of non-current assets which may have a material adverse effect on the Company. Impairment estimates are based on management’s assumptions, and sensitivity analyses and actual future outcomes may differ from these estimates.

The Company is dependent on key 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.

The Company will be required to recruit additional personnel and to train, motivate and manage its employees. The international mining industry is very active and the Company is facing increased competition for personnel in all disciplines and areas of operation, including geology and project management, and there can be no assurance that it will be able to retain current personnel and attract and retain new personnel. Incentive provisions for the Company’s key executives include the granting of stock options and various share units that vest over time, which are designed to encourage such individuals to stay with the Company. However, a low Common Share price, whether as a result of disappointing progress in the Company's exploration, development, construction or operating activities or as a result of market conditions generally, could render such agreements of little value to the Company’s key executives. In such event, the Company’s key executives could be susceptible to being hired away by the Company's competitors who could offer a better compensation package. If the Company is unable to attract and retain key personnel, its business, financial conditions and results of operations may be adversely affected.

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The Company relies on local counseland advisors and the experience of its management and Board in foreign jurisdictions.

The Company’s material mining or exploration property interests are located in Peru, Mexico and Argentina. The legal and regulatory requirements in certain of these countries with respect to mineral exploration and mining activities, as well as local business customs and practices, are different from those in Canada and the United States. The officers and directors of the Company must rely, to a great extent, on the Company’s local legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its governmental relations. The Company must rely, to some extent, on those members of management and the Board who have previous experience working and conducting business in these countries in order to enhance its understanding of and appreciation for the local business customs and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of banking, financing, labour, litigation and tax matters in these countries. There can be no guarantee that reliance on such local counsel and advisors and the Company’s management and Board will result in compliance at all times with such legal and regulatory requirements and business customs and practices. Any such violations could result in a material adverse effect on the Company’s business, financial condition and results of operations.

Certain of the Company’s directorsand officers may have conflicts of interest.

Certain of the directors and officers of the Company also serve as directors and/or officers of other companies involved in natural resource exploration and development and consequently there exists the possibility for such directors and officers to be in a position of conflict. To the extent that such other companies may participate in ventures that the Company may also participate in, or in ventures that the Company may seek to participate in, the Company’s directors and officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. As a result of these potential conflicts of interests, the Company may miss the opportunity to participate in certain transactions. In all cases where the Company’s directors and officers have an interest in other companies, such other companies may also compete with the Company for the acquisition of mineral property investments. Such conflicts of the Company’s directors and officers may result in a material and adverse effect on its business, financial condition and results of operations.

The insurance coverage on the Company’soperations may be inadequate.

The mining industry is subject to significant risks that could result in damage to, or destruction of, mineral properties or producing facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. The Company’s policies of insurance may not provide sufficient coverage for losses related to these or other risks. The Company’s insurance does not cover all risks that may result in loss or damages and may not be adequate to reimburse the Company for all losses sustained. The occurrence of losses or damage not covered by insurance could have a material and adverse effect on the Company’s business, operations and financial condition.

Insurance against certain environmental risks, including potential liability for pollution and other hazards as a result of the disposal of waste products occurring from production, is not generally available to companies within the mining industry. There is no assurance that the Company’s insurance will be adequate to cover all liabilities or that it will continue to be available and at terms that are economically acceptable. Losses from un-insured or under-insured events may cause the Company to incur significant costs that could have a material adverse effect on its business and financial condition.

The Company must comply with the Sarbanes-Oxley Act.

The Sarbanes-Oxley Act (“SOX”) requires an annual assessment by management of the effectiveness of the Company’s internal control over financial reporting. Beginning with the Company’s 2016 fiscal year, its auditor is also required to attest to the effectiveness of the Company’s internal control over financial reporting. The Company may fail to maintain the adequacy of its internal control over financial reporting as such standards are modified, supplemented or amended from time to time. If this occurs, the Company may not be able to conclude, on an ongoing basis, that it has effective internal control over financial reporting in accordance with Section 404 of SOX and the Company’s auditor may issue an adverse opinion on the effectiveness of its internal control over financial reporting. The Company’s failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of the Company’s financial statements, which in turn could harm its business and negatively impact the trading price or the market value of its securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies, if any, may provide the Company with challenges in implementing the required processes, procedures and controls in its acquired operations. No evaluation can provide complete assurance that the Company’s internal control over financial reporting will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be reported. The effectiveness of the Company’s processes, procedures and controls could also be limited by simple errors or faulty judgments. As the Company continues to expand, the challenges involved in implementing appropriate internal control over financial reporting will increase and will require that the Company continue to monitor its internal control over financial reporting. Although the Company intends to expend substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, it cannot be certain that it will be successful in complying with Section 404 of SOX.

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The Company may be responsible forcorruption and anti-bribery law violations.

The Company’s business is subject to the Foreign Corrupt Practices Act (the “FCPA”) and the Corrupt Foreign Public Officials Act (the “CFPOA”), which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The FCPA also requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. Since all of the Company’s presently held interests are located in Peru, Mexico and Argentina, there is a risk of potential FCPA violations. In addition, the Company is subject to the anti-bribery laws of Peru, Mexico, and Argentina and of any other countries in which it conducts business in the future. The Company’s employees or other agents may, without its knowledge and despite its efforts, engage in prohibited conduct under the Company’s policies and procedures and the FCPA, the CFPOA or other anti-bribery laws for which the Company may be held responsible. If the Company’s employees or other agents are found to have engaged in such practices, the Company could suffer severe penalties and other consequences that may have a material adverse effect on its business, financial condition and results of operations. The Company’s Anti-Corruption Policy and other corporate policies mandate compliance with these anti-bribery laws; however there can be no assurance that the Company’s internal control policies and procedures always will protect it from fraudulent behavior or dishonesty and other inappropriate acts committed by the Company’s employees and agents. As such, the Company’s corporate policies and processes may not prevent all potential breaches of law or other governance practices.

The Company may be subject to legalproceedings that arise in the ordinary course of business.

Due to the nature of its business, the Company is at the date of this AIF subject to litigation and claims in Mexico and Peru and may, from time to time, be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. The Company’s operations are subject to the risk of legal claims by employees, unions, contractors, lenders, suppliers, joint venture partners, shareholders, governmental agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. Plaintiffs may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. Defense and settlement costs can be substantial, even with respect to claims that have no merit. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. The litigation process could, as a result, take away from the time and effort of the Company’s management and could force the Company to pay substantial legal fees or penalties. There can be no assurances that the resolutions of any such matters will not have a material adverse effect on the Company’s business, financial condition and results of operations.

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 Direccion 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 DGM seeking to cancel the mining concession if the royalty, in the Mexican peso equivalent of US$30 million plus VAT (being the amount of the claimed royalty from 2011 to 2019) is 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 the cancellation procedure 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 resolution by the District Court is reached on the legality of the cancellation procedure. The timing of a decision by the court at first instance in this action against the DGM is uncertain and may take several months. In the event that the Company is unsuccessful in these proceedings, it may appeal. If ultimately the Company does not prevail, it may be required to pay the disputed royalty in order to preserve the mining concession.

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General economic conditions couldimpact the Company’s business.

Turmoil in global financial markets have at times caused a loss of confidence in global financial and credit markets. Many industries, including the precious and base metals mining industry, have been impacted by these market conditions. Some of the key impacts have included contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. The recent economic slowdown in China is an example of a visible risk to world financial stability. A continued or worsened slowdown in economic conditions, including, but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company’s growth and profitability. Specifically:

·	a new global credit/liquidity crisis could<br>impact the cost and availability of financing and the Company’s overall market liquidity;
·	the volatility of metal prices could impact<br>the Company’s revenues, profits, losses and cash flow;
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·	volatile energy prices, commodity and<br>consumables prices and currency exchange rates could impact the Company’s production costs or projected economic returns;
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·	until contained, a global pandemic could<br>cause a slowdown in global economic growth and impact the Company’s share price and financial condition; and
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·	the devaluation and volatility of global<br>stock markets, which are not related to the Company’s operations or assets, could impact the valuation of the Company’s<br>equity and other securities.
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These factors are beyond the control of the Company and could have a material adverse effect on the Company’s financial condition and results of operations.

Until contained a global pandemic,including COVID-19, could cause a slowdown in global economic growth and impact the Company’s business, operations, financialcondition and share price.

Epidemics, including the outbreak of COVID-19, which was declared a global pandemic by the World Health Organization in March 2020, unless contained could cause a slowdown in global economic growth and have a material adverse effect on the business, operations, financial condition and share price of the Company. As at the date of this AIF, COVID-19 has spread from China where the virus was originally reported, 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, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating and supply chain delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit ratings, credit risk and inflation.

As at the date of this AIF, the Governments of Peru and Argentina have implemented measures to curb the spread of the virus, including among others, the closure of international borders, and the declaration of a mandatory quarantine period, which in Peru is subject to certain limited exceptions. In Peru, the quarantine period, which was implemented until March 31, 2020 has been extended to April 12, 2020. In Argentina, as at the date of this AIF, the quarantine period is in effect until March 31, 2020. 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 at the Company’s mines and at the Lindero Project on a short or long-term basis. As at the date of this AIF, there have been no confirmed cases of COVID-19 associated with the Company’s workforce.

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Even though the Company is implementing 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; the production at the Caylloma Mine and the San Jose Mine; the continued operation at those mines and the completion of construction and the commencement of production at the Lindero Project and the Company’s financial condition. Refer to “Preliminary Notes - Note about the information contained herein and the Novel Coronavirus”.

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 duration of the outbreak, the severity of the virus and the ability to treat it, the ability to collect sufficient data to track the virus and the collective actions taken to curb the spread of the virus.

The continued spread of the virus could have a material adverse effect on the economies of the countries in which the Company operates, including the local communities close to the Company’s 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 have a material adverse effect on the business, operations and financial condition of Company.

The Company faces intense competition.

The mining industry is intensely competitive in all of its phases. Much of the Company’s competition is from larger mining companies with greater liquidity, greater access to credit and other financial resources, and that may have newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or greater ability than the Company to withstand losses. The Company’s competitors may be able to respond more quickly to new laws, regulations or emerging technologies, or devote greater resources to the expansion of their operations, than the Company can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Competition could adversely affect the Company’s ability to acquire suitable new producing properties or properties for exploration and development in the future. Competition could also affect the Company’s ability to raise financing to fund the exploration and development of its properties or to hire qualified personnel. The Company may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on the Company’s business, financial condition or results of operations.

Metal prices and the marketabilityof metals acquired or discovered by the Company may be affected by factors beyond the Company’s control.

The marketability of metals acquired or discovered by the Company may be affected by numerous factors which are beyond the Company’s control and which cannot be accurately foreseen or predicted, such as market fluctuations, the global marketing conditions for precious and base metals, the proximity and capacity of milling facilities, metal markets and processing equipment and government regulations, including regulations relating to royalties, allowable production, importing and exporting metals and environmental protection.

The price of silver, gold or other metals fluctuates widely and is affected by numerous factors beyond the Company’s control, such as the sale or purchase of metals by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, the political and economic conditions of major metal-producing countries throughout the world, and the cost of substitutes, inventory levels and carrying charges.

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The price of the Common Shares and the Company’s financial results and exploration, development and mining activities may in the future be significantly adversely affected by declines in the price of silver, gold or other metals. Declining metal prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. The continued exploration and development of or commercial production from the Company’s properties may no longer be economically viable if serious price declines in the market value of silver, gold or other metals occur. Even if exploration, development or production is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed. Depending on the price of silver, gold and other metals, cash flow from mining operations may not be sufficient and the Company’s financial condition and results of operations may be adversely affected. The Company may lose its interest in, or may be forced to sell, some of its properties as a result. If any such circumstances occur, the price of the Common Shares may be significantly adversely affected.

The Company may suffer adverse effectsarising from fixed price commodity forward and option contracts for base metals production.

From time to time the Company may enter into agreements to receive fixed prices on any metal production to offset the risk of revenue losses if commodity prices decline; however, if commodity prices increase beyond the levels set in such agreements, the Company will not benefit from such increases and could suffer adverse effects to its business, financial position and results of operations as a result.

The Company may be adversely affectedby operating expense exchange rate fluctuations.

The Company’s activities and operations in Mexico, Peru and Argentina make it subject to foreign currency fluctuations. Although the Company uses U.S. dollars as the currency for the presentation of its financial statements, the Company’s operating expenses are incurred in Mexican and Argentine Pesos and Peruvian Sol in proportions that will typically range between 40% and 60% of total expenses, depending on the country. The fluctuation of these currencies in relation to the U.S. dollar will consequently have an impact upon the profitability of the Company’s mineral properties and therefore its ability to continue to finance its exploration, development and operations. Such fluctuations may also affect the value of the Company’s assets and shareholders’ equity. Future exploration, development and operational plans may need to be altered or abandoned if actual exchange rates for these currencies are less than or more than the rates estimated in any such future plans. To date, the Company has not entered into any agreements or purchased any instruments to hedge possible currency risks. The Company cannot be sure that any hedging techniques it may implement in the future will be successful or that its business, financial condition, and results of operations will not be materially adversely affected by exchange rate fluctuations.

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. There can be no assurance that the Company will be successful in its cash management measures. With the capital controls in effect when the Company commences production at the Lindero Project, the Company will be required to convert the equivalent value into Argentine Peso from the export sale of all gold doré from the Lindero Project. 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. These capital controls are in effect until 2025. There can be no assurance that these capital controls will not have an adverse effect on the financial condition of the Company.

Tax Audits and Reassessments.

In the normal course of business, the Company is subject to assessment by taxation authorities in various jurisdictions. Any reassessment by applicable tax authorities of the Company’s tax filings and the continuation or timing of any such process is outside of the Company’s control. There is a risk that applicable tax authorities may audit the Company or its subsidiaries and issue a notice of reassessment for material amounts. In the event that applicable tax authorities issue one or more additional notices of reassessment for material amounts of tax, interest and penalties, the Company is prepared to vigorously defend its position. If the Company is unable to resolve any of these matters favourably, or if applicable tax authorities issue one or more additional notices of reassessment for material amounts of tax, interest and penalties, this could have a material and adverse effect on the Company’s business and its financial condition.

The Company is subject to creditrisk through its VAT receivables

The Company is subject to credit risk through its VAT receivables in Mexico and Argentina that are collectible from the Mexican and Argentine governments, respectively. The balances are expected to be recoverable in full; however due to legislative rules and the complex collection processes, a significant portion of the asset is classified as non-current until government approvals of the respective recoveries are approved.

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The 2018 Credit Facility containsfinancial covenants which the Company could fail to meet

Under the terms of the 2018 Credit Facility, the Company is required to satisfy various affirmative and negative covenants and to meet certain financial ratios and tests. There is no assurance that in the future the Company will continue to satisfy these covenants. Furthermore, a breach of these covenants, including a failure to meet the financial tests or ratios, would likely result in an event of default under the 2018 Credit Facility unless the Company is able to obtain a waiver or consent in respect of any such breach. The Company cannot provide an assurance that a waiver or consent would be granted. A breach of any of these covenants or the inability to comply with the required financial tests or ratios could result in a default under the 2018 Credit Facility. In the event of any default under the 2018 Credit Facility, the lenders could elect to declare all outstanding borrowings, together with accrued interest, fees and other amounts due thereunder, to be immediately due and payable, which may have a material adverse impact on the Company’s business, profitability or financial condition.

In addition, an aggregate of $30 million of the revolving portion of the 2018 Credit Facility is due to be repaid on December 31, 2020. 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 restructure the 2018 Credit Facility. There can be no assurance that the lenders will agree to such a request.

The Company is subject to fluctuatingconcentrate treatment charges and transportation costs.

The Company has entered into agreements to sell its concentrate production from the Caylloma Mine and the San Jose Mine for 2019. Smelting and refining rates are similar to contract rates established for 2018. There is no assurance that the Company will be able to enter into smelting and refining contracts at similar competitive terms beyond 2019. The cost of transporting concentrate from the mines to the smelters is dependent on, among other things, the concentrate destination. Transportation-related costs have been volatile over the last several years and could continue to be volatile due to a number of factors, including changes in the price of oil or a shortage in the number of vessels available to ship concentrate to smelters. Increases in these rates would have an adverse impact on the Company’s results of operations and financial condition.

The Company may not have reservedsufficient monies to cover the costs associated with reclamation.

Land reclamation requirements are generally imposed on companies with mineral exploration, development and operations activity in order to minimize long-term effects of land disturbance. Reclamation may include requirements to treat ground and surface water to drinking water standards, control dispersion of potentially deleterious effluent and reasonably re-establish pre-disturbance land forms and vegetation. **** In order to carry out reclamation obligations imposed on the Company in connection with exploration, development and production activities, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs. The actual costs of reclamation and mine closure are uncertain and planned expenditures may differ from the actual expenditures required. There is a risk that monies allotted for land reclamation may not be sufficient to cover all risks, due to changes in the nature of the waste rock or tailings and/or revisions to government regulations. Therefore, additional funds, or reclamation bonds or other forms of financial assurance, may be required over the tenure of any of the Company's projects to cover potential risks. These additional costs may have material adverse impact on the Company’s business, financial condition and results of operations.

The Company is dependent upon information technology systems,which are subject to disruption, damage, failure and risks with implementation and integration.

The Company’s information technology systems used in its operations are subject to disruption, damage or failure from a variety of sources including without limitation, computer viruses, security breaches, cyberattacks, natural disasters and defects in design. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorize access to data or machines and equipment, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information, the corruption of data or the disabling, misuse or malfunction or machines and equipment. Various measures have been implemented to manage the Company’s risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information or operational technology disruptions, the Company could potentially be subject to production downtimes, operational delays, operating accidents, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which would have a material and adverse effect on the Company’s business, financial condition or results of operations.

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The Company could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into operations. Various measures have been implemented to manage the risks related to the system implementation and modification, but system modification failures could have a material and adverse effect on the Company’s business, financial condition or results of operations.

Climate Change Legislation.

Governments are introducing climate change legislation and treaties at the international, national, and local levels. Regulation relating to emission levels and energy efficiency is becoming more stringent. Some of the costs associated with reducing emissions can be offset by increased energy efficiency and technological innovation. If the current regulatory trend continues, this may result in increased costs at some of our operations. The physical risks of climate change may also adversely impact the Company’s operations. These risks may include extreme weather events, resource shortages, changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures.

Risks Relating to the Common Shares

The market price of the Company’sCommon Shares and Debentures is volatile.

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many mining companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. In particular, the price of the Common Shares on the Toronto Stock Exchange (the “TSX”) and New York Stock Exchange (the “NYSE”) fluctuated significantly during the past year. Additionally, the price of the Debentures on the TSX has fluctuated significantly since being listed for trading in October 2019. There can be no assurance that continual fluctuations in price will not occur.

There are many factors that may influence such volatility. Macroeconomic conditions in North America, Peru, Mexico or Argentina and changes in the laws and regulations of these regions may have a negative effect on the development prospects, timelines or relationships for the Company’s properties. Negative changes in the public's perception of the Company’s prospects or of mining companies in general could cause the price of the Company’s securities, including the price of the Common Shares and Debentures, to decrease dramatically. The price of the Common Shares and Debentures is also likely to be affected by short-term changes in precious metal prices or other mineral prices, currency exchange fluctuations, the Company’s financial condition or results of operations and the extent of research analyst coverage of its securities.

Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. The Company may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management's attention and resources.

Shareholders may suffer dilutionas a result of future offerings of the Common Shares or securities convertible into Common Shares.

The Company may sell equity securities in future offerings (including through the sale of securities convertible into equity securities) and may issue additional equity securities to finance operations, exploration, development, acquisitions or other projects. The Company may also issue Common Shares as a result of exercises of the Company’s outstanding stock options, or the vesting of the Company's outstanding share units or as a result of the conversion of the Company’s Debentures. Any such convertible securities are more likely to be exercised when the market price of the Company’s Common Shares exceeds the exercise price of such instruments. The Company cannot predict the size of future issuances of equity securities or the size and terms of future issuances of debt instruments or other securities convertible into equity securities. The Board has the authority to authorize certain offers and sales of additional securities without the vote of, or prior notice to, shareholders. It is likely that the Company will issue additional securities to provide capital to fund expected expenditures and growth. Any transaction involving the issuance of previously authorized but unissued Common Shares, or securities convertible into Common Shares, would result in potentially substantial dilution to shareholders.

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The market price of the Common Sharesand Debentures could decline as a result of future issuances or sales of the Company’s securities, which could result ininsufficient liquidity.

The market price of the Common Shares and Debentures could decline as a result of issuances of securities by the Company or sales by its existing shareholders of Common Shares or Debentures in the market, or the perception that these sales could occur. The issuance of Common Shares upon the exercise of the Company's outstanding stock options and Common Share purchase warrants or the vesting of the Company’s outstanding share units may also reduce the market price of the Common Shares. Additional Common Shares, Debentures, stock options, Common Share purchase warrants and share units may be issued in the future. A decrease in the market price of the Common Shares could adversely affect the liquidity of the Common Shares on the TSX and the NYSE. Additionally, a decrease in the market price of the Debentures could adversely affect the liquidity of the Common Shares on the TSX. The Company’s shareholders may be unable, as a result, to sell significant quantities of the Common Shares or Debentures into the public trading markets. The Company may not, as a result, have sufficient liquidity to meet the continued listing requirements of the TSX and the NYSE. Sales of the Common Shares or Debentures by shareholders might also make it more difficult for the Company to sell equity or debt securities at a time and price that it deems appropriate, which may have a material adverse effect on the Company’s business, financial conditions and results of operations.

The Company has never paid, and doesnot currently anticipate paying, dividends.

The Company has paid no dividends on the Common Shares since incorporation and does not anticipate paying dividends in the immediate future. The payment of future dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, conditions then existing including earnings, financial conditions, cash on hand, financial requirements to fund its commercial activities, development and growth, and other factors that the Board may consider appropriate in the circumstances.

Risks related to the Debentures ofthe Company.

The terms of the Debentures are governed by the terms and conditions set out in the Debenture indenture between the Company and Computershare Trust Company of Canada entered into on October 2, 2019 (the “Indenture”). The Indenture provides, among other things, for the repurchase, conversion and redemption of the Debentures in certain circumstances and the Company agrees to certain restrictive and affirmative covenants which are set out in the Indenture. Under the terms of the Indenture, there is a risk that the Company may choose to redeem the outstanding Debentures for Common Shares or to repay outstanding principal amounts thereunder at maturity of the Debentures by issuing additional Common Shares. Additionally, the Debentures are subordinate to all senior indebtedness of the Company. If the Company becomes bankrupt, liquidates its assets, reorganizes or enters into certain other transactions, the Company will be able to pay its obligations with respect to the Debentures only after it has paid senior indebtedness and any other secured indebtedness in full. There may be insufficient assets remaining following such payments to pay amounts due on any or all of the Debentures then outstanding. The Indenture does not restrict the Company from incurring additional indebtedness for borrowed money or otherwise from mortgaging, pledging or charging its real or personal property or properties to secure any indebtedness or other financing. A holder of a Debenture will be subject to such terms and conditions, as further described in the Indenture. A full copy of the Indenture is available under the Company’s issuer profile at www.sedar.com.

U.S. investors may find it difficultto enforce U.S. judgments against the Company.

The Company is incorporated under the laws of British Columbia, Canada and the majority of the Company’s directors and officers are not residents of the United States. Because all or a substantial portion of the Company’s assets and the assets of these persons are located outside of the United States, it may be difficult for U.S. investors to effect service of process within the United States upon the Company or upon such persons who are not residents of the United States, or to realize in the United States upon judgments of U.S. courts predicated upon civil liabilities under U.S. securities laws. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.

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Material Mineral Properties

The Company has three 100% owned material mineral projects, described below. The Company filed an updated technical report on the Lindero Project in 2017 and on each of the San Jose Mine and the Caylloma Mine in 2019, each of which is summarized below.

Caylloma Mine, Peru

The following is the Summary fromthe technical report (the “Caylloma Technical Report”) entitled “Fortuna Silver Mines Inc.: Caylloma Mine, CayllomaDistrict, Peru” with an effective date of March 8, 2019 prepared by Eric Chapman, P.Geo. and Amri Sinuhaji, P.Eng. This summary is subject to certain assumptions, qualifications and procedures described in the Caylloma Technical Report and is qualified in its entirety by the full text of the Caylloma Technical Report which is available for viewing on SEDAR at www.sedar.com and is incorporated by reference in this AIF, and is also filed with the SEC on EDGAR (available at www.sec.gov). Defined terms and abbreviations used herein and not otherwise defined shall have the meanings ascribed to such terms in the Caylloma Technical Report.

1.	Introduction

This Technical Report (the Report) on the Caylloma Mine in the Caylloma District, Peru, has been prepared by Mr Eric Chapman, P.Geo, and Mr Amri Sinuhaji, P.Eng. for Fortuna Silver Mines Inc. (Fortuna) in accordance with the disclosure requirements of Canadian National Instrument 43-101 (NI 43-101). The Report discloses updated Mineral Resource and Mineral Reserve estimates for the mine.

2.	Property description, location and ownership

The Caylloma Mine is located in the Puna region of Peru at an altitude of between 4,300 and 5,000 meters above sea level (masl). Surface topography is generally steep with vegetation being primarily comprised of grasses and small shrubs common at high altitudes. The mine facilities are located at approximately 4,300 masl.

Access to the Caylloma Mine is by a combination of sealed and gravel road. The mine is located 225 road kilometers from Arequipa, a city of approximately a million people that includes an international airport, and requires a trip of approximately 5 hours by vehicle. Access is available to all concessions via a network of unsealed roads.

The Caylloma Mine is an operating underground mine located in the Caylloma Mining District 14 km northwest of the town of Caylloma at the UTM grid location of 8192263E, 8321387N, (WGS84, UTM Zone 19S).

The underground mine is operated by Compania Minera Bateas S.A.C. (Bateas), a Peruvian subsidiary 100 % owned by Fortuna. The operation has infrastructure consisting primarily of the concentration plant, electrical power station, water storage facilities, tailings facilities, stockpiles, and workshop facilities, all connected by unsealed roads. Additional structures located at the mine include offices, dining hall, laboratory, core logging and core storage warehouses.

The property comprises mining concessions; surface rights; a permitted 1,500 tonnes per day (tpd) flotation plant; connection to the national electric power grid; as well as permits for the infrastructure necessary to sustain mining operations.

The Caylloma Mine consists of mineral rights for 66 mining concessions for a total surface area of 34,472 hectares (ha).

Bateas has signed 21 surface rights or easement contracts covering a total of 3,529.89 ha with land owners to cover the surface area needed for the operation and tailings facilities.

3.	History

The earliest documented mining activity in the Caylloma District dates back to that of Spanish miners in 1620. English miners carried out activities in the late 1800s and early 1900s. Numerous companies have been involved in mining the district of Caylloma but limited records are available to detail these activities.

The Caylloma Mine was acquired by Compania Minera Arcata S.A. (CMA), a wholly owned subsidiary of Hochschild Mining plc in 1981. Fortuna acquired the mine from CMA in 2005.

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CMA focused exploration on identifying high-grade silver vein structures. Exploration was concentrated in the northern portion of the district and focused on veins including Bateas, El Toro, Paralela, San Pedro, San Cristobal, San Carlos, Don Luis, La Plata, and Apostles.

Production prior to 2005 came primarily from the San Cristobal vein, as well as from the Bateas, Santa Catalina and the northern silver veins (including Paralela, San Pedro, and San Carlos) with production focused on silver ores and no payable credits for base metals. While under CMA management production parameters fluctuated during the late 1990s, as reserves were depleted. Owing to low metal prices, funds were not available to develop the Mineral Resources at depth or extend along the strike of the veins. Ultimately this resulted in production being halted in 2002.

Production under Bateas management focused on the development of polymetallic veins producing lead and zinc concentrates with silver and gold credits. Total production since October 2006 through December 31, 2018 is estimated as 18.1 Moz of silver, 23 koz of gold, 117 kt of lead, and 163 kt of zinc.

4.	Geology and mineralization

The mine is within the historical mining district of Caylloma, northwest of the Caylloma caldera complex and southwest of the Chonta caldera complex. Host rocks at the Caylloma Mine are volcanic in nature, belonging to the Tacaza Group. Mineralization is in the form of low to intermediate sulfidation epithermal vein systems.

Epithermal veins at the Caylloma Mine are characterized by minerals such as pyrite, sphalerite, galena, chalcopyrite, marcasite, native gold, stibnite, argentopyrite, and silver-bearing sulfosalts (tetrahedrite, polybasite, pyrargyrite, stephanite, stromeyerite, jalpite, miargyrite and bournonite). These are accompanied by gangue minerals, such as quartz, rhodonite, rhodochrosite, johannsenite (manganese-pyroxene) and calcite.

There are two different types of mineralization at Caylloma; the first is comprised of silver-rich veins with low concentrations of base metals and includes the Bateas, Bateas Techo, La Plata, Cimoide La Plata, San Cristobal, San Pedro, San Carlos, Paralela, and Ramal Paralela veins. The second type of vein is polymetallic in nature with elevated lead, zinc, copper, silver and gold grades and includes the Animas, Animas NE, Santa Catalina, Soledad, Silvia, Pilar, Patricia, and Nancy veins.

Underground operations are presently focused on mining the Animas and Animas NE veins.

5.	Exploration, drilling, and sampling

CMA implemented a series of exploration programs to complement their mining activities prior to the closure of the operation in 2002. There is no reliable information available to detail the exploration conducted by CMA at the Caylloma Mine. Bateas were able to recover and validate information on 47 diamond drill holes totaling 8,177.67 m drilled by CMA between 1981 and 2003 at the Caylloma Mine.

Since Fortuna took ownership of the property in 2005 the principal exploration conducted at the deposit has been surface and underground drilling, to explore the numerous vein structures identified through surface mapping or geophysical surveys conducted by Bateas, or for infill purposes to increase the confidence level of the Mineral Resource estimates.

As of August 31, 2018, Bateas had completed 1,296 drill holes on the Caylloma Mine totaling 225,361.80 m since the company took ownership in 2005 and represents all data compiled as of the data cut-off date used for Mineral Resource estimation. All holes are diamond drill holes and include 544 from the surface totaling 151,774.55 m, and 752 from underground totaling 73,587.25 m. It is important to note that not all the holes presented encountered mineralization and only drill holes in areas where reasonable geological continuity of mineralized structures could be established were used in defining and ultimately estimating Mineral Resources.

Bateas has used a number of different drilling contractors to carry out exploration and definition drilling since it took ownership of the mine in 2005. Both HQ (63.5 mm) and NQ (47.6 mm) diameter core were obtained, depending on the depth of the hole. Ground conditions are generally good with core recovery averaging 94 %.

Proposed surface drill hole collar coordinates, azimuths and inclinations were designed based on the known orientation of the veins and the planned depth of vein intersection using geological plan maps and sections as a guide. Once the coordinates have been determined, the location of the collar is located in the field using differential global positioning system (GPS) instruments. The drill pad is then prepared at this marked location. Upon completion of the drill hole, a survey of the collar is performed using Total Station equipment, with results reported in the collar coordinates using reference Datum WGS84, UTM Zone 19S.

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The geologist in charge of drilling is responsible for orienting the azimuth and inclination of the hole at the collar using a compass clinometer. Downhole surveys are completed by the drilling contractor using survey equipment such as a Flexit or Reflex tool at approximately 50 m intervals for all surface drill holes and for underground drill holes greater than 100 m in length. Bateas assesses the downhole survey measurements as a component of the data validation.

Drill holes are typically drilled on sections spaced 40 to 60 m apart along the strike of the vein with surface drilling focusing on exploring the extents of the Animas, Bateas and Nancy veins and underground drilling used for a mix of exploration and Mineral Resource and Mineral Reserve definition. The extent of drilling varies for each vein with those having the greatest coverage having drill holes extending over 4,000 m of the vein’s strike length (Animas), to exploration prospects having only a few drill holes extending over 50 m (Antimonio).

The relationship between the sample intercept lengths and the true width of the mineralization varies in relation to the intersect angle between the steeply-dipping zone of mineralized veins and the inclined nature of the diamond core holes. Calculated estimated true widths (ETWs) are always reported together with actual sample lengths by taking into account the angle of intersection between drill hole and the mineralized structure.

In 2018 all logging became digital, being incorporated daily into the Maxwell DataShed database system. Data were recorded initially with Excel templates, and later with the Maxwell LogChief application using essentially the same structure. Both input methods used pick-lists and data validation rules to ensure consistency between loggers. Separate pages were designed to capture, lithology, alteration, veins, sulfide-oxide zones, minerals, structure (contacts, fractures, veins, and faults with attitudes to core axis), magnetic susceptibility, and special data (samples collected for geochemistry, thin section examinations, the core library, density, etc.). Intensity of alteration phases was recorded using a numeric 1 to 4 scale (weak, moderate, strong, very strong); abundance of veins and most other minerals were estimated in volume percent.

Geotechnical logging is conducted prior to cutting of the core and involves the collection of drill core recovery and rock-quality designation (RQD) data. Information is recorded in the field using the Maxwell LogChief application.

The sampling methodology, preparation, and analyses differ depending on whether it is drill core or a channel sample. All samples are collected by geological staff of Bateas with sample preparation and analysis being conducted either at the onsite Bateas Laboratory or transported to the ALS Global preparation facility in Arequipa prior to being sent on for analysis at their laboratory in Lima.

The Bateas laboratory operated by Bateas is not independent and does not hold an international recognized accreditation.

ALS Global is an independent, privately-owned analytical laboratory group. The preparation laboratory in Arequipa and the analytical laboratory in Lima are supported by a Quality Management System (QMS) framework which is designed to highlight data inconsistencies sufficiently early in the process to enable corrective action to be taken in time to meet reporting deadlines. The QMS framework follows the most appropriate ISO Standard for the service at hand i.e. ISO 9001:2015 for survey/inspection activity and ISO 17025:2005 UKAS ref 4028 for laboratory analysis.

Channel samples are collected from the backs of underground workings. The entire process is carried out under the geology department’s supervision. Sampling is carried out at 2 m intervals within the drifts of all veins and 3 m intervals in stopes (except for Bateas and Soledad, where due to the thickness of the vein, sampling is carried out every 2 m in stopes). The channel lengths and orientations are identified using paint in the underground working and by painting the channel number on the footwall. The channel is between 20 cm to 30 cm wide and approximately 2 cm deep, with each individual sample being no longer than 1.5 m.

Drill core is laid out for sampling and logging at the core logging facility at the camp. Sample intervals are marked on the core and depths recorded on the appropriate box. A geologist is responsible for determining and marking the drill core intervals to be sampled, selecting them based on geological and structural logging. The sample length must not exceed 1.2 m or be less than 30 cm.

The elements of silver, copper, lead and zinc are assayed using either; atomic absorption (AA); inductively coupled plasma atomic emission spectroscopy (ICP-AES); or for high lead and zinc grades volumetric/titration techniques (VOL); or for high silver grades gravimetric techniques (GRAV) depending on the laboratory and assay value. Assay results and certificates are reported electronically by e-mail.

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Bulk density samples have been primarily sourced from drill core with a limited number being sampled from underground workings. Bulk density measurements are performed at the ALS Global Laboratory in Lima using the OA-GRA09A methodology.

Sample collection and transportation of drill core and channel samples is the responsibility of Brownfields exploration and the Bateas mine geology departments and must follow strict security and chain of custody requirements established by Fortuna. Samples are retained in accordance with the Fortuna corporate sample retention policy.

Implementation of a quality assurance/quality control (QAQC) program is current industry best practice and involves establishing appropriate procedures and the routine insertion of certified reference material (CRMs), blanks, and duplicates to monitor the sampling, sample preparation and analytical process. Fortuna implemented a full QAQC program to monitor the sampling, sample preparation and analytical process for all drilling campaigns in accordance with its companywide procedures. The program involved the routine insertion of CRMs, blanks, and duplicates. Evaluation of the QAQC data indicate that the data are sufficiently accurate and precise to support Mineral Resource estimation.

6.	Data verification

Bateas staff follow a stringent set of procedures for data storage and validation, performing verification of data on a monthly basis. The operation employs a Database Administrator who is responsible for overseeing data entry, verification and database maintenance. A separate Database Auditor is responsible for performing a detailed independent review of the database on a quarterly basis and submitting a report to Fortuna management detailing the findings. Any issues identified are immediately resolved by the administrator.

Data used for Mineral Resource estimation are stored in Maxwell GeoService’s commercial SQL database system (DataShed), storing both mine related data (including channel samples) and drilling related results (exploration and infill drilling).

Data was transferred from an inhouse SQL database system to DataShed by early 2018 with the support of Maxwell personnel. Both databases were run in tandem until a full verification process had been completed to prove parity between the systems, at which point the original database was archived.

As a component of the 2018 Mineral Resource estimate, a preliminary validation of the Bateas database was performed by the Database Administrator in June 2018. The database has a series of automated import, export, and validation tools to minimize potential errors. Any inconsistencies identified were corrected during the analysis with the database then being handed over for final QP review on August 31, 2018 in Microsoft Access format.

In addition, data verification by the QP was also conducted through the inspection of selected drill core to assess the nature of the mineralization and to confirm geological descriptions as well as the inspection of geology and mineralization in underground workings of the Bateas, Animas/Animas NE, and Nancy veins.

A series of plan and cross sections were generated displaying the lithologic and mineralization interpretation by the Bateas geology and exploration departments and reviewed by the QP’s of Fortuna.

The QP is of the opinion that the data verification programs performed on the data collected by Bateas are adequate to support the geological interpretations, the analytical and database quality, and Mineral Resource estimation at the Caylloma Mine.

7.	Mineral processing and metallurgical testing

The Caylloma Mine has an extensive body of metallurgical investigation focused primarily on testwork conducted while treating ore at the operation since 2006. In the opinion of the QP, the Caylloma metallurgical samples tested and the ore that is presently treated in the plant is representative of the orebody as a whole in respect to grade and metallurgical response. Differences between vein systems are minimal with regard to recovery.

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Metallurgical recovery values forecast in the LOM for sulfide material average 84 % for silver, 17 % for gold, 91 % for lead, and 90 % for zinc with the exception of the Ramal Piso Carolina vein that forecasts a metallurgical recovery rate of 75 % for Au. Metallurgical recovery is forecast for zinc oxide material to average 57 % for silver, 17 % for gold, 57 % for lead, and 35 % for zinc.

Until 2012 ore identified as containing high zinc oxide content was classified as not amenable for flotation. Laboratory and plant tests conducted since 2013 include metallurgical testing of material from the different levels of the Animas vein. The main conclusion was that zinc oxide contents greater than 0.20 % within the ore were related to lower metallurgical recoveries. In order to include this type of ore without affecting the metallurgical recoveries blending has to be performed to limit the high zinc oxide ore content to no more than 5 % of the feed to the plant.

Beyond the loss in metallurgical recovery related to elevated zinc oxide material, as described above, there are no additional deleterious elements that require special treatment in the plant as of the effective date of this Report.

8.	Mineral Resources

The 2018 Mineral Resource update has relied on channel and drill hole sample information obtained by Bateas since 2005. Mineralized domains identifying potentially economically extractable material were modeled for each vein and used to code drill holes and channel samples for geostatistical analysis, block modeling and grade interpolation by ordinary kriging or inverse distance weighting.

Net smelter return (NSR) values for each mining block take into account expected commercial terms, the average metallurgical recovery, the average grade in concentrate and long term projected metal prices. Mineral Resources take into account operational costs and have been reported above a US$ 50/t NSR cut-off value for veins wider than two meters and amenable to extraction by semi-mechanized mining methods (Animas, Animas NE, Nancy, and San Cristobal veins); or above a US$ 135/t NSR cut-off value for veins narrower than two meters regarded as amenable to conventional mining methods (all other veins).

Resource confidence classification considers a number of aspects affecting confidence in the resource estimation including; geological continuity and complexity; data density and orientation; data accuracy and precision; and grade continuity. Mineral Resources are categorized as Measured, Indicated or Inferred. The criteria used for classification includes the number of samples, spatial distribution, distance to block centroid, kriging efficiency (KE) and slope of regression (ZZ).

Mineral Resources exclusive of Mineral Reserves for the Caylloma Mine are reported as of December 31, 2018 and detailed in Table 1.1.

Table1.1 Mineral Resources as of December 31, 2018

	Tonnes										Contained Metal
Category	(000)		Ag (g/t)		Au (g/t)		Pb (%)		Zn (%)		Ag (Moz)		Au (koz)		Pb (kt)		Zn (kt)
Measured		524		73		0.32		1.16		2.23		1.2		5		6		12
Indicated		1,633		77		0.29		1.23		2.25		4.1		15		20		37
Measured + Indicated		2,157		76		0.30		1.22		2.24		5.3		21		26		48
Inferred		5,354		102		0.32		2.40		3.83		17.6		56		129		205

Notes on Mineral Resources

·	Mineral Resources are as defined by the<br>2014 CIM Definition Standards for Mineral Resources and Mineral Reserves
·	Mineral Resources are exclusive of Mineral<br>Reserves
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·	Mineral Resources which are not Mineral<br>Reserves do not have demonstrated economic viability
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·	Mineral Resources are estimated as of<br>August 31, 2018 and reported as of December 31, 2018 taking into account production related depletion for the period<br>through December 31, 2018
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·	Mineral Resources are reported above an<br>NSR cut-off grade of US$ 50/t for wide veins and US$ 135/t for narrow veins based on actual operational costs
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·	Metal prices used in the NSR evaluation<br>are US$ 18.25/oz for silver, US$ 1,320/oz for gold, US$ 2,270/t for lead and US$ 2,750/t for zinc
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·	Metallurgical recovery values used in<br>the NSR evaluation of sulfide material are 84 % for silver, 17 % for gold, 91 % for lead, and 90 % for zinc with the exception<br>of the Ramal Piso Carolina vein that uses metallurgical recovery rates of 75 % for Au
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·	Metallurgical recovery values used in<br>the NSR evaluation of zinc oxide material are 57 % for silver, 17 % for gold, 57 % for lead, and 35 % for zinc
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| --- | | · | Mining, processing and administrative costs used to determine NSR cut-off values were estimated based on first half of 2018 actual operating costs | | --- | --- | | · | Eric Chapman, P.Geo. (APEGBC #36328) is the Qualified Person for resources being an employee of Fortuna Silver Mines Inc. | | --- | --- | | · | Tonnes are rounded to the nearest thousand | | --- | --- | | · | Totals may not add due to rounding | | --- | --- |

Factors that may affect the estimates include metal price and exchange rate assumptions; changes to the assumptions used to generate the cut-off grade; changes in local interpretations of mineralization geometry and continuity of mineralized zones; changes to geological and mineralization shape and geological and grade continuity assumptions; variations in density and domain assignments; geometallurgical assumptions; changes to geotechnical, mining, dilution, and metallurgical recovery assumptions; change to the input and design parameter assumptions that pertain to the conceptual stope designs constraining the estimates; and assumptions as to the continued ability to access the site, retain mineral and surface rights titles, maintain environment and other regulatory permits, and maintain the social license to operate.

There are no other known environmental, legal, title, taxation, socioeconomic, marketing, political or other relevant factors that would materially affect the estimation of Mineral Resources or Mineral Reserves that are not discussed in this Report.

9.	Mineral Reserves

Mineral Reserve estimates follow standard industry practices, considering only Measured and Indicated Mineral Resources as only these categories have sufficient geological confidence to be considered Mineral Reserves (CIM, 2014). Subject to the application of modifying factors, Measured Resources may become Proven Reserves and Indicated Resources may become Probable Reserves. Mineral Reserves are reconciled quarterly against production to validate dilution and recovery factors.

Mineral Reserve estimates for the Caylloma Mine are reported as of December 31, 2018 and detailed in Table 1.2.

Table1.2 Mineral Reserves as of December 31, 2018

	Tonnes										Contained Metal
Category	(000)		Ag (g/t)		Au (g/t)		Pb (%)		Zn (%)		Ag (Moz)		Au (koz)		Pb (kt)		Zn (kt)
Proven		149		85		0.26		2.09		3.23		0.4		1		3		5
Probable		2,477		77		0.18		2.12		3.71		6.1		14		52		92
Proven +Probable		2,626		77		0.18		2.11		3.69		6.5		15		56		97

Notes on Mineral Reserves

·	Mineral Reserves are as defined by the<br>2014 CIM Definition Standards for Mineral Resources and Mineral Reserves
·	Mineral Reserves are estimated as of August<br>31, 2018 and reported as of December 31, 2018 taking into account production related depletion for the period through December<br>31, 2018
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·	Mineral Reserves are reported above NSR<br>breakeven cut-off values based on the proposed mining method for extraction including; mechanized (breasting) at US$ 82.90/t;<br>mechanized (enhanced) at US$ 70.30/t; semi-mechanized at US$ 93.10/t; and conventional at US$ 173.70/t
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·	Metal prices used in the NSR evaluation<br>are US$ 18.25/oz for silver, US$ 1,320/oz for gold, US$ 2,270/t for lead, and US$ 2,750/t for zinc
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·	Metallurgical recovery values used in<br>the NSR evaluation of sulfide material are 84 % for silver, 17 % for gold, 91 % for lead, and 90 % for zinc with the exception<br>of the Ramal Piso Carolina vein that uses metallurgical recovery rates of 75 % for Au
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·	Metallurgical recovery values used in<br>the NSR evaluation of zinc oxide material are 57 % for silver, 17 % for gold, 57 % for lead, and 35 % for zinc
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·	Mining, processing and administrative<br>costs used to determine NSR cut-off values were estimated based on first half of 2018 actual operating costs
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·	Mining recovery is estimated to average<br>92 % with mining dilution ranging from 10 % to 40 % depending on the mining methodology
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·	Amri Sinuhaji, P.Eng (APEGBC #48305) is<br>the Qualified Person for reserves being an employee of Fortuna Silver Mines Inc.
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·	Tonnes are rounded to the nearest thousand
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·	Totals may not add due to rounding
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| --- | | 10. | Mining methods | | --- | --- |

The mining method employed at the Caylloma Mine is cut-and-fill which is commonly used in the mining of steeply-dipping orebodies in stable rock masses. Cut-and-fill is a bottom up mining method that consists of removing ore in horizontal slices, starting from a bottom undercut and advancing upwards. The operation bases its mining plan on a mix of mechanized, semi-mechanized, and conventional extraction methods based on vein width and rock quality.

The mining production period extends from 2019 to 2023, almost 5 years. At full production the planned mining rate is 1,500 tpd (535,500 tonnes per annum). Planned LOM ore production is 2.63 Mt at an average silver grade of 77 g/t, gold grade of 0.18 g/t, lead grade of 2.11 %, and zinc grade of 3.69 %.

The QP is of the opinion that:

·	The<br>mining method being used is appropriate for the deposit being mined. The underground mine design, stockpiles, tailings facilities,<br>and equipment fleet selection are appropriate for the operation
·	The<br>mobile equipment fleet presented is based on the actual mining operations, which is known to achieve the production targets set<br>out in the LOM
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·	The<br>mine plan method is based on standard industry practices and has been employed at the operation for the previous seven years,<br>and presents low risk
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·	Inferred<br>Resources are not included in the mine plan
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·	All<br>mine infrastructure and supporting facilities meet the needs of the current mine plan and production rate
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11.	Recovery methods
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The current process plant design is split into four principal stages including; crushing; milling; flotation; and thickening, filtering and shipping.

The QP considers process requirements to be well understood, and consistent based on the actual observed conditions in the operating plant. There is no indication that the characteristics of the material being mined will change and therefore the recovery assumptions applied for future mining are considered as reasonable for the LOM.

12.	Project infrastructure

All mine and process infrastructure and supporting facilities are in place at the operation with an increase in tailings storage facility and designation of underground waste disposal area only required to meet the needs of the mine plan and production rate. The QPs note that:

·	The<br>Caylloma Mine is located 225 km, or 5 hours by road from the city of Arequipa, the main service center for the operation, with<br>good year-round access
·	The<br>mine site infrastructure has a footprint of 91.12 ha associated with the Huayllacho beneficiation concession
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·	An<br>expansion to the tailings facility was completed in January 2019, with a second phase planned for construction in 2021, providing<br>sufficient capacity for the LOM
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·	Power<br>demand on the mine site is 5.5 MW provided mainly (96 %) through the national power grid and two diesel generators on site to<br>cover the shortfall and provide backup
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·	Water<br>demand at the Caylloma Mine is 60 l/s, including 10 l/s for the camp. Approximately 70 % of the processing plant total water consumption<br>is recovered from tailings facility N° 3 with the other 30 % from fresh water provided by the Santiago River
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·	All<br>process buildings, offices, and camp facilities for operating the mine have been constructed
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13.	Market studies and contracts
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Since the operation commenced production in October 2006 a corporate decision was made to sell the concentrate on the open market. In order to get the best commercial terms for the concentrates, it is Fortuna’s policy to sign contracts for periods no longer than one year. All commercial terms entered between the buyer and Bateas are regarded as confidential, but are considered to be within standard industry norms.

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The QP has reviewed the information provided by Fortuna on marketing, contracts, metal price projections and exchange rate forecasts and notes that the information provided support the assumptions used in this Report and are consistent with the source documents, and that the information is consistent with what is publicly available within industry norms.

14.	Environmental studies and permitting

The mining operation has been developed under strict compliance of norms and permits required by public institutions associated with the mining sector. Furthermore, all work follows quality and safety international norms as set out in ISO 14001 and OHSAS 18000.

In addition to these norms and permits obtained from the environmental department, the operation also ensures all environmental activities are regularly monitored and recorded as part of the quality control measures that are presented to the Ministry of Energy and Mining (MEM) and other legal regulatory organizations.

Of particular importance is monitoring of the quality of river water in the area. This activity involves monitoring the Santiago River, being the main river that passes through the property, employing people from the local communities to verify the results.

Bateas has a very strong commitment to the development of neighboring communities of the Caylloma Mine. In this respect, Bateas is committed to sustainable projects, direct support and partnerships that build company engagement in local communities while respecting local values, customs and traditions. The company aims to develop projects or programs based on respect for ethno-cultural diversity, open communication and effective interaction with local stakeholders that improve education, health and infrastructure.

Mine closure is also included in the environmental program. For 2019 a total of US$ 655,000 has been budgeted for the ongoing closure plan and environmental liabilities. The closure plan is performed to ensure compliance with the programs and plans submitted to the MEM. Budgeted mine closure costs for the LOM total US$ 11.3 million.

15.	Capital and operating costs

Capital and operating cost estimates are based on established cost experience gained from current operations, projected budget data and quotes from manufacturers and suppliers.

The capital and operating cost provisions for the LOM plan that supports Mineral Reserves have been reviewed. The basis for the estimates is appropriate for the known mineralization; mining and production schedules; marketing plans; and equipment replacement and maintenance requirements.

The QP considers the capital and operating costs estimated for the Caylloma Mine as reasonable based on industry-standard practices and actual costs observed for 2018.

16.	Economic analysis

Fortuna is using the provision for producing issuers, whereby producing issuers may exclude the information required under Item 22 for technical reports on properties currently in production and where no material production expansion is planned.

Mineral Reserve declaration is supported by a positive cashflow for the period set out in the LOM based on the assumptions detailed in this Report.

17.	Conclusions, risks, and opportunities

This Report represents the most accurate interpretation of the Mineral Reserve and Mineral Resource available as of the effective date of this report. The conversion of Mineral Resources to Mineral Reserves was undertaken using industry-recognized methods, and estimated operational costs, capital costs, and plant performance data. Thus, it is considered to be representative of future operational conditions. This Report has been prepared with the latest information regarding environmental and closure cost requirements.

A number of opportunities and risks were identified by the QPs during the evaluation of the Caylloma Mine.

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Opportunities include:

·	Reduction<br>in backfill costs through the optimization of the backfilling methodology in order to improve mining productivity by reducing<br>work cycle times
·	Reduction<br>in mining costs via improvements in the underground communication system which would allow for faster and more efficient decision<br>making, improve logistical coordination, and reduce downtime, hence improve overall mining productivity
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·	Reduction<br>in overall pumping costs through improvements to the mine dewatering system resulting in reduced power consumption and maintenance<br>requirements
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·	Potential<br>to expand current resources through exploration of the Animas NE vein with mineralization remaining open to the northeast and<br>at depth
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Risks include:

Bateas management occasionally receives requests from local authorities and/or civil organizations regarding unrealistic social expectations. Bateas are mitigating the risk of conflict regarding these demands by working with local authorities, land owners, and communities to address expectation levels and to take requests into account in preparing its annual community relations work program and budget

18.

Recommendations

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Recommendations for the next phase of work have been broken into those related to ongoing exploration activities and those related to additional technical and operational studies. Recommended work programs are independent of each other and can be conducted concurrently. The exploration phase is estimated to cost US$ 521,000 with additional technical studies estimated to cost US$ 280,000.

i)	Exploration
·	Exploration.<br>It is recommended that Bateas continue surface mapping and TerraSpec analysis of key areas of interest including Animas, Antacollo,<br>and Antimonio to identify potential future drill targets. The budgeted cost of the surface mapping activities for 2019 is US$ 36,000<br>(excluding personnel costs).
---	---
·	Delineation(infill) drilling. Bateas is planning to continue the delineation drilling from underground in 2019 focusing on the junction<br>between the Animas and Animas NE vein at depth. A total of 3,830 m of drilling and 55 m of development drift is planned at a budgeted<br>total cost of US$ 480,000.
---	---
·	Bulkdensity determination. It is recommended that the number of bulk density measurements by increased in veins that lack sufficient<br>values for meaningful statistical analysis. In addition to this it is also recommended that a study be performed to improve the<br>understanding of bulk density in the deposit. If a correlation between density and mineralogy could be established it may provide<br>a superior alternative than the presently used density assignment methodology. This program cost is estimated at US$ 5,000.
---	---
ii)	Technical and operational studies
---	---
·	Undergroundcommunication system. In 2019 it is recommended that the first phase of an improved underground communication system be installed<br>to connect key areas of the mine at a budgeted cost of US$ 40,000. Based on positive results from the first phase the system<br>could be extended throughout the mine to reach other production and production related areas.
---	---
·	Backfillsystem optimization. It is recommended that an evaluation of the backfilling system is conducted at the operation. A trade<br>off analysis should be conducted to benchmark the current hydraulic backfill system against alternative methods. The study should<br>investigate the potential impacts on OPEX and CAPEX. The budgeted cost of the study is US$ 70,000.
---	---
·	Reviewof mining methodology. The width of mineralization and rock quality varies greatly throughout the deposit. It is recommended<br>that an evaluation of mining method be conducted to assess if smaller equipment could be used to extract mineralized material<br>from narrow veins with poor rock quality, and if more massive mining methods such as long-hole stoping could be employed in wide<br>veins with good rock quality. Any such study would need to account for the variable equipment that would be required to deal with<br>multiple mining methods. The study could be conducted inhouse or externally, with an external cost estimated at US$ 50,000.
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| -48- |

| --- | | · | Plantexpansion conceptual study. A conceptual cost-benefit analysis is recommended to assess if the production rate at the Caylloma plant could be increased to reduce costs. The study could be conducted inhouse or externally, with an external cost estimated at US$ 120,000. | | --- | --- | | · | Zincoxide study. The response of zinc oxide material to the flotation process requires additional testwork. Initial plant testwork indicates that this material can be blended with low zinc oxide material and processed through flotation without a significant loss in recovery, although the percentage blend at which the zinc oxide becomes detrimental has not been established. It is recommended that inhouse analysis be conducted to assess the impact of varying levels of zinc oxide on plant recovery to determine a blending threshold at which recovery is not affected. | | --- | --- |

[End of Extract of Summary from CayllomaTechnical Report]

See “Three Year History and Recent Developments - Updated Mineral Reserve and Mineral Resource Estimates” herein for further information regarding the Caylloma Mine.

San Jose Mine, Mexico

The following is the Summaryfrom the technical report (the “San Jose Technical Report”) entitled “Fortuna Silver Mines Inc.: San Jose Mine,Oaxaca, Mexico” with an effective date of February 22, 2019 prepared by Eric Chapman, P.Geo. and Amri Sinuhaji, P.Eng. This summary is subject to certain assumptions, qualifications and procedures described in the San Jose Technical Report and is qualified in its entirety by the full text of the San Jose Technical Report which is available for viewing on SEDAR at www.sedar.com and is incorporated by reference in this AIF, and is also filed with the SEC on EDGAR (available at www.sec.gov). Defined terms and abbreviations used herein and not otherwise defined shall have the meanings ascribed to such terms in the San Jose Technical Report.

1.	Introduction

This Technical Report (the Report) on the San Jose Mine in Oaxaca, Mexico (the San Jose Mine or the Project), has been prepared by Mr Eric Chapman, P.Geo, and Mr Amri Sinuhaji, P.Eng. for Fortuna Silver Mines Inc. (Fortuna) in accordance with the disclosure requirements of Canadian National Instrument 43-101 (NI 43-101). The Report discloses updated Mineral Resource and Mineral Reserve estimates for the mine.

2.	Property description, location and ownership

The San Jose Mine area is characterized by gently-sloping hills and adjoining colluvial-covered plains. Elevations above mean sea level range from approximately 1,540 m to 1,675 m. The vegetation is grasslands and thorn-bush that are typical of dry savannah climates being temperate in nature with an average annual temperature of 19.5^0^C. Mining operations are conducted on a year-round basis.

The mine is located in the central portion of the state of Oaxaca, Mexico. The mine site is 47 km by road south of the city of Oaxaca, which provides access to an international airport, and 0.8 km east of federal highway 175, the major highway between Oaxaca and Puerto Angel on the Pacific coast. The village of San Jose del Progreso is located 2 km to the southeast of the project site.

The underground mine is operated by Compania Minera Cuzcatlan S.A. de C.V. (Cuzcatlan), a Mexican subsidiary 100% owned by Fortuna. The operation has a relatively small surface infrastructure consisting primarily of the concentration plant, electrical power station, water storage facilities, filtered dry stack tailings facility, stockpiles, and workshop facilities, all connected by unsealed roads. Additional structures located at the property include offices, dining hall, laboratory, core logging and core storage warehouses. The tailings facility is located approximately 1,500 m to the southwest of the concentration plant.

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| --- |

The property comprises mining concessions; surface rights; a permitted 3,000 tonnes per day (tpd) flotation plant; connection to the national electric power grid; as well as permits for the infrastructure necessary to sustain mining operations.

The San Jose Property consists of mineral rights for 31 mining concessions all located in the state of Oaxaca for a total surface area of approximately 64,422 hectares (ha). Tenure is held in the name of Cuzcatlan with all mining concessions having an expiry date beyond the expected mine life.

As of December 31, 2018, the only concession that contains Mineral Resources or Mineral Reserves subject to back-in rights, liens, payments or encumbrances is Reduccion Taviche Oeste, which is subject to a 1.5 % NSR royalty to Maverix Minerals Inc., and a 1 % NSR royalty to SGM.

Cuzcatlan has signed 44 usufruct contracts, which have been registered before the National Agrarian Registry, with land owners to cover the surface area needed for the operation and tailings facilities.

Cuzcatlan has an environmental commitment related to the remediation of the current mining facilities located on the Progreso and Reduccion Taviche Oeste concessions. Cuzcatlan is to set aside US$ 5.3 million to cover remediation and closure requirements. These programs are ongoing with funds assigned to various projects on an annual basis.

3.	History

The earliest recorded activity in the San Jose del Progreso area dates to the 1850s when the mines were exploited on a small scale by the local hacienda. By the early 1900s, a large number of silver-and gold-bearing deposits were being exploited in the San Jeronimo Taviche and San Pedro Taviche areas. Mining activity in the district diminished drastically with the onset of the Mexican Revolution in 1910, only to resume sporadically in the 1920s.

Mining in the San Jose area was re-activated on a small scale in the 1960s and again in 1980 when the San Jose Mine was acquired by Minerales de Oaxaca S.A. (MIOXSA). The mine was worked intermittingly by MIOXSA through to the end of 2006 when the property was purchased by Cuzcatlán a Mexican registered company then owned jointly by Fortuna and Continuum Resources Ltd. (Continuum) with sole ownership transferring to Fortuna in March 2009.

From 1980 through 2006, production by MIOXSA was intermittent and came primarily from existing stopes and from development of the fourth, fifth, and sixth levels of the San Jose Mine. Ore was mined primarily from the Bonanza and Trinidad veins and extracted at rates of approximately 100 tpd. The principal mining method used by MIOXSA was shrinkage stoping. The ore was processed at a small crushing and flotation plant in San Jeronimo de Taviche, located approximately 19 km from the San Jose Mine. Reliable estimates of the total production during MIOXSA’s tenure are not available.

Commercial production commenced under the management of Cuzcatlan on September 1, 2011. Since then, underground mining has focused on the Bonanza, Trinidad and Stockwork veins. Total production since September 2011 through December 31, 2018 is estimated as 35.9 Moz of silver and 269 koz of gold.

4.	Geology and mineralization

The San Jose Mine area is underlain by a thick sequence of sub-horizontal andesitic to dacitic volcanic and volcaniclastic rocks of presumed Paleogene age. These units have been significantly displaced along major north and northwest-trending extensional fault systems with the precious metal mineralization being hosted in hydrothermal breccias, crackle breccias, and sheeted stockwork-like zones of quartz/carbonate veins emplaced within zones of high paleo permeability associated with the extensional structures.

The mineralized structural corridor extends for more than 3 km in a north-south direction and has been subdivided into the Trinidad Deposit area and the San Ignacio area. The Mineral Resource and Mineral Reserve estimates discussed in this Technical Report are located in the Trinidad Deposit area.

The major mineralized structure in the Trinidad Deposit area consists of a sheeted and stockworked quartz–carbonate vein system referred to as the main Stockwork Zone located between the primary Trinidad and Bonanza structures. In addition, several secondary vein systems are present locally in the hanging wall and footwall of the Trinidad and Bonanza structures.

| -50- |

| --- |

The Victoria mineralized zone is located approximately 350 m east of the Trinidad vein and north of the current underground operations of the San Jose Mine. It is structurally related to the same extensional behavior that dominates the Trinidad Deposit with a similar style of mineralization, corresponding to a low sulfidation epithermal deposit formed in a shallow crustal environment with a relatively low temperature resulting in the precipitation of silver and gold mineralization.

5.	Exploration, drilling and sampling

The San Jose Mine has been subjected to a number of documented exploration programs since 1999 including:

·	In<br>1999 Pan American Silver (Pan American) optioned the property from MIOXSA and conducted surface and underground mapping and sampling<br>including the drilling of five diamond drill holes totaling 1,093.5 m
·	In<br>2004, Continuum completed an option agreement with MIOXSA and completed detailed mapping and chip-channel sampling of the surface<br>and of the existing underground workings in the Trinidad area followed by the completion of 15 surface diamond drill holes totaling<br>4,876.55 m
---	---
·	From<br>2006 to 2015 the principal exploration conducted by Fortuna at the deposit has been surface and underground drilling, both to<br>explore the deposit to the north and to depth and for infill purposes to increase the confidence level of the Mineral Resource<br>estimates
---	---
·	Since<br>2015, exploration has continued to explore the continuity of the mineralized system to the north, south and at depth of the Trinidad<br>Deposit. During this period the Victoria mineralized zone was discovered approximately 350 m east of the Trinidad Deposit and<br>has been explored with the drilling of 51 holes from underground totaling 27,671.60 m as of June 30, 2018
---	---

As of June 30, 2018, the data cut-off date for estimation of Mineral Resources, a total of 845 drill holes totaling 299,319.45 m have been completed on the San Jose Mine area with the drilling being concentrated in the Trinidad Deposit area and extensions to the south of the mineralized structural system. Wide-spaced exploration drilling has also been completed in the San Ignacio area along the southern extension of the structurally controlled mineralized corridor and to the far north of the Trinidad Deposit, as well as in the newly discovered Victoria mineralized zone. All of the drilling was conducted by diamond core drilling methods with the exception of 1,476 m of reverse circulation pre-collars in six of the 845 diamond drill holes.

A total of 662 diamond core holes totaling 221,400.75 m have been drilled in the Trinidad Deposit area and 51 holes totaling 27,671.60 m in the Victoria mineralized zone. In Trinidad, the majority of the holes have been drilled from east to west to cross-cut the steeply east-dipping mineralized zone at high angles, whereas in the Victoria mineralized zone, the holes have been drilled from west to east from underground to intersect the subvertical Victoria main structure. Of the 723 holes, 250 have been drilled from the surface and the remainder from underground.

The diamond drilling typically commences with HQ-diameter core (63.5 mm) and continues to the maximum depth allowable based on the mechanical capabilities of the drill equipment. Once this point is reached or poor ground conditions are encountered the hole is cased and further drilling undertaken with smaller diameter drilling tools with the core diameter being reduced to NQ2 (50.6 mm) or NQ-size (47.6 mm) to completion of the hole. In the Trinidad Deposit, five of the drill holes were further reduced to BQ-size (36.5 mm) diameter in order to complete the drill holes to the target depths. All of the drilling completed in the project area has been carried out by contract drilling service companies. Ground conditions are generally good with core recovery averaging 99 %.

Surface drill hole collars were surveyed using differential global positioning system (GPS) and total station survey methods. Concrete monuments are constructed at each collar location recording the drill hole name, azimuth, inclination and total depth. At locations where the drill hole collar is located in a cultivated field, the collar monument is constructed approximately 50 cm below the actual surface.

Underground drill hole collars were surveyed using total station survey methods. Concrete monuments similar to those used for surface collars are constructed to mark the location with the drill hole name, azimuth, inclination and total depth recorded.

Down-hole surveys have been completed for 827 of the 845 drill holes completed as of the data cut-off date. For the 18 holes where downhole surveys are not recorded, 17 were drilled prior to 2007 with only three being drilled in the Trinidad Deposit. The azimuth and dip orientation of these holes was recorded at the collar to account for drilling direction. The absence of downhole surveys in three of the 662 holes drilled at Trinidad is not regarded as material to the resource estimate.

| -51- |

| --- |

Downhole surveys are typically completed at 50 m intervals although recent drill holes include downhole surveys at 10 m intervals until reaching 50 m depth and then at 50 m intervals thereafter. All downhole surveys have been carried out by the drilling contractor using Reflex electronic downhole survey tools.

To-date, drilling has been conducted at the Trinidad Deposit over a strike length of approximately 2,500 m and to depths exceeding 800 m from surface. Exploration drilling has generally increased in depth to the north.

Drilling of the Victoria mineralized zone has been conducted over a strike length of approximately 1,300 m and covers a vertical extent of approximately 500 m, with upper holes intersecting the structure at least 250 m below the surface.

The extent of drilling of the San Ignacio area continues directly to the south of the Trinidad Deposit and has been conducted over a strike length of approximately 1,000 m and to depths of up to 500 m from surface.

The relationship between the sample intercept lengths and the true width of the mineralization varies in relation to the intersect angle between the steeply dipping zone of mineralized veins and the inclined nature of the diamond core holes. Calculated estimated true widths (ETWs) are always reported together with actual sample lengths by taking into account the angle of intersection between drill hole and the mineralized structure.

In 2018 all logging became digital, being incorporated daily into the Maxwell DataShed database system. Data were recorded initially with Excel templates, and later with the Maxwell LogChief application using essentially the same structure. Both input methods used pick-lists and data validation rules to ensure consistency between loggers. Separate pages were designed to capture metadata, lithology, alteration, minerals (sulfides, oxides, and limonite), structure (contacts, fractures, veins, and faults with attitudes to core axis). Intensity of alteration phases was recorded using a numeric 1 to 4 scale (weak, moderate, strong, complete).

Geotechnical logging consists of the collection of specified data fields including; recovery percentage and rock quality designation (RQD) length. Joint filling and joint weathering are described during the geologic logging. A tablet-based data entry program was developed by Cuzcatlan using the Maxwell LogChief software. Data checks are implemented into this program to prevent entry of erroneous data.

The sampling methodology, preparation, and analyses differ depending on whether it is drill core or a channel sample. All samples are collected by Cuzcatlan geological staff with sample preparation and analysis being conducted either at the onsite Cuzcatlan Laboratory or transported to the ALS Global preparation facility in Guadalajara prior to being sent on for analysis at their laboratory in Vancouver.

The Cuzcatlan Laboratory used by Fortuna/Cuzcatlan since 2012 for assaying channel samples was accredited as a testing laboratory with the requirements of ISO/IEC 17025:2005 for sample preparation and assaying of silver and gold on March 2, 2018, prior to this the laboratory was not certified. The Cuzcatlan Laboratory is not independent of Fortuna/Cuzcatlan.

The ALS Global Laboratory is an independent, privately-owned analytical laboratory group. The Vancouver laboratory holds ISO 17025 accreditation. The Mexican laboratory holds ISO 9001:2000 certification.

The SGS Laboratory used by Cuzcatlan as an umpire laboratory is an independent privately-owned analytical laboratory located in Durango, Mexico and holds ISO/IEC 17025:2005 accreditation for sample preparation and assaying.

Channel chip samples are generally collected from the face of newly exposed underground workings. The entire process is carried out under the mine geology department’s supervision. Sampling is carried out at 3 m intervals within the drifts and stopes of all veins. The channel’s length and orientation are identified using paint in the underground working and by painting the channel number on the footwall. The channel is typically approximately 20 cm wide and approximately 1 to 2 cm deep, with each individual sample preferably being no smaller than 0.4 m and no longer than 1.5 m.

| -52- |

| --- |

All samples collected by Cuzcatlan are assayed by atomic absorption (AA) spectroscopy and by fire assay (FA) with gravimetric finish. For drill samples only, a full suite of trace elements is analyzed using an aqua regia digestion followed by inductively-coupled plasma (ICP) analysis. Assay results and certificates are reported electronically by e-mail. Since mid-2018 the onsite laboratory has also assayed channel samples and selected composites for fluorine using a selective ion electrode (ISE) technique.

Sample collection and transportation of drill core and channel samples is the responsibility of Brownfields exploration and the Cuzcatlan mine geology departments and must follow strict security and chain of custody requirements established by Fortuna. Samples are retained in accordance with the Fortuna corporate sample retention policy.

6.	Data verification

Cuzcatlan staff follow a stringent set of procedures for data storage and validation, performing verification of data on a monthly basis. The operation employs a Database Administrator who is responsible for overseeing data entry, verification and database maintenance. A separate Database Auditor is responsible for performing a detailed independent review of the database on a quarterly basis and submitting a report to Fortuna management detailing the findings. Any issues identified are immediately resolved by the administrator.

Data was transferred from an inhouse SQL database system to DataShed in 2017 with the support of Maxwell personnel. Both databases were run in tandem until a full verification process had been completed to prove parity between the systems, at which point the original database was archived.

As a component of the 2018 Mineral Resource estimate, a preliminary validation of the Cuzcatlan database was performed by the Database Administrator in June 2018. The database has a series of automated import, export, and validation tools to minimize potential errors. Any inconsistencies identified were corrected during the analysis with the database then being handed over to the QP for the resource estimate for final review on June 30, 2018 in Microsoft Access format.

A series of plan and cross sections were generated displaying the lithologic and mineralization interpretation by the Cuzcatlan geology and exploration departments and reviewed by the QP.

The QP is of the opinion that the data verification programs performed on the data collected by Cuzcatlan are adequate to support the geological interpretations, the analytical and database quality, and Mineral Resource estimation at the San Jose Mine.

| -53- |

| --- | | 7. | Mineral processing and metallurgical testing | | --- | --- |

Initial metallurgical test work to assess the optimum processing methodology for treating ore from the Trinidad Deposit was conducted by METCON in 2009 and reported in the prefeasibility study written by CAM (2010), with Cuzcatlan continuing to build on this original work with additional tests to support operational requirements.

Metallurgical tests have not been conducted as of the effective date of this Report for material from the Victoria mineralized zone but are planned for the second half of 2019. Petrographic studies conducted by Albinson (2018) indicate that mineralogically the material is similar to that from the Trinidad Deposit.

It is the opinion of the QP that the San Jose Mine has an extensive body of metallurgical investigation comprising several phases of testwork as well as an extensive history of treating ore at the operation since 2011. In the opinion of the QP, the San Jose metallurgical samples tested and the ore that is presently treated in the plant is representative of the material included in the life-of-mine plan (LOMP) in respect to grade and metallurgical response. Metallurgical recovery is estimated to be constant for the LOMP at 92 % for silver and 91 % for gold. Differences between vein systems are minimal with regard to recovery.

Deleterious elements detected in ore located in certain parts of the deposit have the potential to affect economics due to penalties that could be applied during smelting. This includes elevated levels of fluorine (>1,000 ppm), which has been accounted for as part of the financial analysis.

8.	Mineral Resources

Mineral Resource estimation involved the usage of drill hole and channel samples in conjunction with underground mapping to construct three-dimensional wireframes to define individual vein structures. Samples were selected inside these wireframes, coded, composited and top cuts applied if applicable. Boundaries were treated as hard with statistical and geostatistical analysis conducted on composites identified in individual veins. Silver and gold grades were estimated into a geological block model consisting of 4 m x 4 m x 4 m selective mining units (SMUs) representing each vein. All veins in the Trinidad Deposit were estimated by sequential Gaussian simulation (SGS). The Victoria main structure located in the Victoria mineralized zone was estimated by inverse distance weighting employing a power of two (IDW). Estimated grades were validated globally, locally, visually, and (where possible) through production reconciliation prior to tabulation of the Mineral Resources.

By the application of a silver equivalent value taking into consideration the average metallurgical recovery and long term metal prices for each metal, and the determination of a reasonable cut-off grade using actual operating costs, as well as the exclusion of Mineral Resources identified as being isolated or economically unviable using a floating stope optimizer, the Mineral Resources have ‘reasonable prospects for eventual economic extraction’.

Mineral Resources exclusive of Mineral Reserves as of December 31, 2018 are reported in Table 1.1.

Table1.1 Mineral Resources as of December 31, 2018

	Tonnes						Contained Metal
Classification	(000)		Ag (g/t)		Au (g/t)		Ag (Moz)		Au (koz)
Measured		49		77		0.56		0.1		1
Indicated		272		84		0.59		0.7		5
Measured + Indicated		321		83		0.59		0.9		6
Inferred		2,415		196		1.44		15.2		112

Notes:

·	Mineral Resources are as defined by the<br>2014 CIM Definition Standards for Mineral Resources and Mineral Reserves
·	Mineral Resources are exclusive of Mineral<br>Reserves
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·	Mineral Resources which are not Mineral<br>Reserves do not have demonstrated economic viability
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·	Mineral Resources are estimated as of<br>June 30, 2018 and reported as of December 31, 2018 taking into account production related depletion for the period through December<br>31, 2018
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·	Eric<br>Chapman, P.Geo. (APEGBC #36328) is the Qualified Person for resources being an employee of Fortuna Silver Mines Inc.
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| --- | | · | Mineral Resources are reported based on underground mining within optimized stope designs using a cut-off grade of 100 g/t Ag Eq based on assumed metal prices of US$ 18.25/oz Ag and US$ 1,320/oz Au, estimated metallurgical recovery rates of 92 % for Ag and 91 % for Au (Ag Eq (g/t) = Ag (g/t) + (Au (g/t)*((1,320/18.25)*(92/91)), and an operating cost of US$ 52.50/t | | --- | --- | | · | Mineral Resource tonnes are rounded to the nearest thousand | | --- | --- | | · | Totals may not add due to rounding | | --- | --- |

9.	Mineral Reserves

Metal prices used for Mineral Reserve estimation were determined as of May 2018 by the corporate financial department of Fortuna from market consensus.

Metallurgical recoveries were based on metallurgical test work and operational results at the plant from July 2017 to June 2018.

NSR values were dependent on various parameters including metal prices, metallurgical recovery, price deductions, refining charges and penalties.

A breakeven cut-off grade was determined based on all variable and fixed costs applicable to the operation. These include exploitation and treatment costs, general expenses and administrative and commercialization costs (including concentrate transportation).

Mineral Reserves as of December 31, 2018 are reported in Table 1.2.

Table1.2 Mineral Reserves as of December 31, 2018

	Tonnes						Contained Metal
Classification	(000)		Ag (g/t)		Au (g/t)		Ag (Moz)		Au (koz)
Proven		393		237		1.97		3.0		25
Probable		4,779		235		1.51		36.0		232
Proven + Probable		5,172		235		1.55		39.0		257

Notes:

·	Mineral<br>Reserves are as defined by the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves
·	Mineral<br>Reserves are estimated as of June 30, 2018 and reported as of December 31, 2018 taking into account production-related depletion<br>for the period through December 31, 2018
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·	Mineral<br>Reserves are reported based on underground mining within optimized stope designs using an NSR breakeven cut-off of US$ 65.90/t,<br>equivalent to 131 g/t Ag Eq and 134 g/t Ag Eq for the Taviche Oeste concession due to an additional 2.5 % royalty
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·	Metal<br>prices used in the NSR evaluation are US$ 18.25/oz for silver and US$ 1,320/oz for gold
---	---
·	Metallurgical<br>recovery values used in the NSR evaluation are 92 % for silver and 91 % for gold based on actual plant recoveries
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| --- | | · | NSR values taking into account refining charges used in the estimation are US$ 15.67/oz for silver and US$ 1,129/oz for gold with the exception of material located in the Taviche Oeste concession where NSR values are US$ 15.27/oz for silver and US$ 1,100/oz for gold | | --- | --- | | · | Costs used in NSR breakeven cut-off determination are US$ 31.48/t for mining; US$ 16.55/t for processing; and US$ 17.91/t for other costs including distribution, management, community support, general service and administration | | --- | --- | | · | Mining recovery is estimated to average 89 % and mining dilution 12 % | | --- | --- | | · | Amri Sinuhaji, P.Eng (APEGBC #48305) is the Qualified Person for reserves, being an employee of Fortuna Silver Mines Inc. | | --- | --- | | · | Mineral Reserve tonnes are rounded to the nearest thousand | | --- | --- | | · | Totals may not add due to rounding | | --- | --- | | 10. | Mining methods | | --- | --- |

Cuzcatlan commenced production at the San Jose Mine in September 2011 and as of December 31, 2018 had produced 35.9 Moz of silver and 269 koz of gold. The mining method applied in the exploitation of the veins is overhand cut-and-fill using a mechanized extraction methodology.

Production capacity at the mine has been increased on two occasions; in September 2013 it was increased to 1,800 tonnes per day and most recently, in June 2016 the production capacity was increased to 3,000 tpd, through a further plant expansion.

In May of 2018, a third-stage filtered dry stack tailings facility was commissioned on time and on budget with an increased capacity of filtered tailings to handle 1.5 years of production with further expansions planned for 2019 and 2020 that would be sufficient to store all tailings for the presently defined life-of-mine plan (LOMP). Cuzcatlan is in the process of obtaining the permit to allow the construction of the 2019 tailings expansion.

Mineral Reserves are estimated at 5.2 million tonnes as of December 31 2018, which is sufficient for almost a five-year life-of-mine (LOM) consisting of 350 days in the year at a mill throughput rate of 3,000 tpd. The LOM annual average production will be approximately 7 Moz of silver and 46 koz of gold based on an average head grade of 232 g/t Ag and 1.52 g/t Au.

The QP is of the opinion that:

·	The<br>mining method being used is appropriate for the deposit being mined. The underground mine design, stockpiles, tailings facilities,<br>and equipment fleet selection are appropriate for the operation
·	The<br>mine plan is based on historical mining and planning methods practiced at the operation for the previous seven years, and presents<br>low risk
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·	Inferred<br>Mineral Resources are not included in the mine plan, and were set to waste
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·	The<br>mobile equipment fleet presented is based on the actual present-day mining operations, which is known to achieve the production<br>targets set out in the LOM
---	---
·	All<br>mine infrastructure and supporting facilities meet the needs of the current mine plan and production rate
---	---
11.	Recovery methods
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The current process plant design is split into four principal stages including; crushing; milling; flotation; and thickening, filtering and shipping.

The QP considers process requirements to be well understood, and consistent based on the actual observed conditions in the operating plant. There is no indication that the characteristics of the material planned for mining will change and therefore the recovery assumptions applied for future mining are considered as reasonable for the LOM.

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| --- | | 12. | Project infrastructure | | --- | --- |

The QP is confident that all mine and process infrastructure and supporting facilities are included in the present general layout to ensure that they meet the needs of the mine plan and production rate and notes that:

·	The<br>San Jose Mine is located 47 km, or one hour by road from the city of Oaxaca, the main service center for the operation, with good<br>year-round access
·	The<br>mine site infrastructure has a compact layout footprint of 50.15 ha, with an additional 69.69 ha for the tailings storage facilities
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·	An<br>expansion to the dry stack tailings facility will commence in 2019, with a second phase planned for 2020, increasing total capacity<br>to 4,039,000 m^3^, sufficient for the LOM
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·	Power<br>is provided to the mine from the main grid via a 115,000 volt circuit, as well as a secondary reserve power supply line, all managed<br>by CFE
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·	Water<br>requirements are 2.7 m^3^ of water to process one tonne of ore being primarily sourced from water pumped to the surface<br>from the underground dewatering system
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·	All<br>process buildings and offices for operating the mine have been constructed, with camp facilities not required due to the proximity<br>of the site to urban
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13.	Market studies and contracts
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Since the operation commenced commercial production in September 2011 a corporate decision was made to sell the concentrate on the open market. In order to get the best commercial terms for the concentrates, it is Fortuna’s policy to sign contracts for periods no longer than one year. All commercial terms entered between the buyer and Cuzcatlan are regarded as confidential, but are considered to be within standard industry norms.

14.	Environmental studies and permitting

The mining operation has been developed in strict compliance with the regulations and permits required by the government agencies involved in the mining sector. In addition, all work follows the international quality and safety standards set forth under standards ISO 14001 and OHSAS 18000.

Despite the above, on October 8, 2018 abnormally high rainfall caused a contingency pond to overflow at the dry stack tailings facility. The contingency pond collects water from a ditch system at the dry stack facility designed to capture and manage rain water.

Cuzcatlan took steps to mitigate the risk of future overflows by immediately increasing its pumping capacity at the contingency pond. No damage occurred to the tailings dam or to the dry stack infrastructure. San Jose tailings are monitored and sampled continuously, are free of heavy metals or other contaminants, and are characterized as sterile.

Cuzcatlan notified the relevant environmental authorities, PROFEPA and CONAGUA on the day of the incident. Cuzcatlan worked with federal, state and local authorities as they conducted inspections of the facilities at San Jose and sampling of the Coyote Creek. Results of the sampling indicated no contamination or pollution occurred due to the overflow.

On February 14, 2019, PROFEPA released their final report on the incident confirming that the overflow did not contaminate soil, and therefore no remediation was required. As of the effective date of this Report, Cuzcatlan is awaiting issuance of the final report from CONAGUA.

To the extent known, all permits that are required by Mexican law for the mining operation have been obtained, with the exception of the permit to construct the stage 4 expansion of the dry stack tailings facility. Cuzcatlan is in the process of obtaining the permit from the Secretary of the Environment and Natural Resources (SEMARNAT) and expect to obtain this in the second quarter of 2019.

Cuzcatlan continues developing sustainable annual programs for the benefit of local communities, including educational, nutritional and economic programs. The above mentioned social and environmental responsibilities support a good relationship between the company and local communities. This will aid the development and continuity of the mining operation and improve the standard of living and economies of local communities.

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The mine closure plan has been designed to ensure the rehabilitation of the area where the mine is located. The projected total cost required to close present and future infrastructure at the mine is US$ 5.3 million.

15.	Capital and operating costs

Capital and operating cost estimates are based on established cost experience gained from current operations, projected budget data and quotes from manufacturers and suppliers.

The capital and operating cost provisions for the LOMP that supports Mineral Reserves have been reviewed. The basis for the estimates is appropriate for the known mineralization; mining and production schedules; marketing plans; and equipment replacement and maintenance requirements.

The QP considers the capital and operating costs estimated for the San Jose Mine as reasonable based on industry-standard practices and actual costs observed for 2018.

16.	Economic analysis

Mineral Reserve declaration is supported by a positive cashflow for the period set out in the LOMP based on the assumptions detailed in this Report.

17.	Other relevant data and information

Fortuna considers that this Report contains all the relevant information necessary to ensure the report is understandable and not misleading.

18.	Conclusions, risks and opportunities

A number of opportunities and risks were identified by the QPs during the evaluation of the San Jose Mine.

Opportunities include:

·	The<br>wide nature of mineralization of the Stockwork zone in combination with the medium to good rock quality provides an opportunity<br>to implement a more productive (bulk) mining methodology such as long hole stoping to extract this material. Implementation of<br>this method could potentially reduce mining costs and increase mine productivity.
·	Improvements<br>in mining productivity through optimizing the mining cycle. As shotcreting comprises a significant component of the mining cycle,<br>a better accelerator agent could shorten the curing and overall cycle times. Additionally, cycle times could be further reduced<br>by implementing a trim or controlled blasting system so that less ground support is required due to over-blasting or over scaling.
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·	Operational<br>delays could be reduced by implementing a better underground communication system.
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·	The<br>ventilation system could be improved in specific areas of the mine where elevated temperature are encountered improving productivity<br>in these areas.
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·	Significant<br>exploration potential exists for the Victoria mineralized zone as mineralization remains open in all directions.
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Risks include:

·	The<br>recently discovered presence of elevated fluorine in the concentrate resulting in unexpected penalties to sales. Limited information<br>is currently available to understand the orogenesis, dynamics, and distribution of fluorine within the deposit, although preliminary<br>sampling suggests it is focused in the Trinidad vein with a limited spatial extent. However, a risk exists that fluorine levels<br>may be elevated in other veins and areas of the deposit.
·	Environmental<br>liability from the pond over-flow in October 2018, mitigated by the rapid response to the incident and independent testing of<br>the affected area that indicates no heavy metals or other contaminants are present.
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·	Potential<br>litigation regarding the disputed royalty on the Progresso concession, which has been mitigated by Cuzcatlan obtaining multiple<br>legal opinions that state the royalty is invalid and taking steps to remove the royalty from the register.
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19.	Recommendations
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Recommendations for the next phase of work have been broken into those related to ongoing exploration activities and those related to additional technical and operational studies. Recommended work programs are independent of each other and can be conducted concurrently unless otherwise stated. The exploration-related programs are estimated at a total cost of US$ 4.22 million. The operational improvement studies are recommended to be conducted inhouse and therefore do not involve a direct cost.

i)	Exploration activities
·	Explorationof the Trinidad Deposit. The Fortuna vein is known to extend south of the presently-estimated Mineral Resource by the presence<br>of historical workings and previous drilling demarking where the Fortuna vein was located in the San Ignacio area. It is recommended<br>that Cuzcatlan explore the mineralized continuity of this vein as it extends from the Trinidad Deposit into the San Ignacio area<br>with a first phase drill program involving the drilling of 3,500 m diamond holes at an estimated cost of US$ 492,000. In addition<br>to testing the extents of the Fortuna vein, the Paloma vein remains open at higher elevations and it is recommended that upon<br>the issuance of appropriate permits the near-surface potential of the Paloma vein be explored with the drilling of 1,500 m of<br>diamond holes from surface at an estimated cost of US$ 203,000.
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·	Explorationof the Victoria mineralized zone. It is recommended that Cuzcatlan continue to explore the extent of the Victoria mineralized<br>zone above and to the north of the presently-estimated Mineral Resource. The higher elevations of the vein system can be drilled<br>from surface, with the issuance of the appropriate permits, and would involve the drilling of 2,000 m diamond holes at an estimated<br>cost of US$ 257,000. To gain access for exploration of the vein to the north and at depth it is recommended that a 200<br> m exploration drift be mined at a cost of US$ 520,000. The drive will allow the drilling of 4,500 m of underground diamond<br>drill holes to explore the vein continuity at an estimated cost of US$ 509,000.
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·	Metallurgicaltestwork. It is recommended that metallurgical testwork be conducted on samples obtained from the Victoria mineralized zone<br>to establish likely metallurgical recoveries and processing characteristics. Testwork should include mineralogical evaluations,<br>along with bond work index, grinding, flotation and granulometry tests. The estimated cost of the testwork is US$ 32,000.
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·	Otherexploration programs. The Guilla concession of the San Jose Mine has been identified as an area that has high potential for<br>the discovery of epithermal veins based on surface mapping. It is recommended that permits be obtained to allow targets to be<br>drilled on this concession. If permits are obtained a drill program consisting of 9,000 m of diamond holes at an estimated cost<br>of US$ 1,305,000 is recommended. In addition, it is recommended that a 250 m underground exploration drift be mined in 2019<br>to the north of the Trinidad Deposit to facilitate future underground drilling programs to explore the convergence of the Trinidad<br>Deposit and the Victoria mineralized zone where obtaining surface drill permits has proved problematic. The estimated cost of<br>this drift is US$ 500,000.
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| --- | | · | Delineation(infill) drilling. Cuzcatlan is planning to continue the delineation drilling from underground in 2019 of the Trinidad Deposit. A total of 2,780 m of drilling is planned at a budgeted cost of US$ 400,000. | | --- | --- | | ii) | Technical and operational studies | | --- | --- | | · | Fluorine. It is recommended that the operation continues to assay representative pulps for fluorine and uses these to improve short term and long-term estimates of fluorine behavior in the deposit as well as conducting metallurgical tests at the plant to determine methods to reduce fluorine levels in the concentrate. | | --- | --- | | · | Mineplan optimization and risk analysis. The conditional simulation methodology used in the estimation of the primary veins results in the generation of 50 equi-probable realizations. By assessing these multiple potential scenarios, the mine plan can be optimized with the identification of low- and high-risk regions of the deposit. | | --- | --- | | · | Bulkdensity measurements. It is recommended that the number of bulk density measurements be increased in secondary veins. If sufficient measurements are obtained, bulk density can be estimated rather than the presently-used density assignment methodology. | | --- | --- | | · | Miningmethod. As part of continuous improvement initiatives to reduce mining cost and to increase mine productivity, it is recommended that a study be conducted to evaluate the feasibility of a bulk mining method. Part of the considerations for the mining method selection is to investigate mining method and mining sequence that eliminate the necessity to leave mineralized material as pillars. Additionally, the study should investigate mine productivity, equipment and manpower requirements, as well as infrastructure and cost evaluations. | | --- | --- | | · | Miningrecovery. A review on pillar design is recommended, particularly for narrow veins with more competent country rock where mining recovery could be increased. Cell mapping and geotechnical logging should be performed on a more frequent basis and detailed pillar analysis conducted based on the specific local rock conditions. | | --- | --- | | · | Miningdilution. It is recommended that the mine implements an improved survey practice by increasing the number of points taken per survey or to implement the usage of a scanner. It is further recommended that the mine reconciles the dilution estimate on a more frequent basis and stores the information into a database so that statistical analysis such as trends, variations and local dilution analysis can be performed. This information will assist the Cuzcatlan mine planning department in making timely decisions to remediate dilution issues and improve Mineral Reserve estimates. | | --- | --- |

[End of Extract of Summary from San JoseTechnical Report]

See “Three Year History and Recent Developments - Updated Mineral Reserve and Mineral Resource Estimates” herein for further information regarding the San Jose Mine.

Lindero Project, Argentina

The following is the Summary fromthe technical report (the “Lindero Technical Report”) entitled “Fortuna Silver Mines Inc.: Lindero Property,Salta Province, Argentina”, with an effective date of October 31, 2017 prepared by Eric Chapman, P.Geo, Edwin Gutierrez,SME Registered Member, Geoff Allard, PE, and Denys Parra Murrugarra, SME Registered Member. This summary is subject to certain assumptions, qualifications and procedures described in the Lindero Technical Report and is qualified in its entirety by the full text of the Lindero Technical Report which is available for viewing on SEDAR at www.sedar.com and is incorporated by reference in this AIF, and is also filed with the SEC on EDGAR (available at www.sec.gov). Defined terms and abbreviations used herein and not otherwise defined shall have the meanings ascribed to such terms in the Lindero Technical Report.

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Property Description, Location and Access

The Lindero Project is in the Argentine puna, a cool, arid zone with a minimum elevation of approximately 3,500 to 4,000 m. The climate is generally dry and windy; it can be cold and snowy during storms.

The Lindero Project is located 260 km due west of Salta, Argentina, the main service center of the region, at latitude 25° 05’ south and longitude 67° 47’ west. Drive time from Salta to the Project is approximately 7 to 7.5 hours, over a road distance of 420 km. The nearest town to the Lindero Project is Tolar Grande (population 250) located 75 km to the northeast.

Access to the Lindero Project is via National Route 51, which passes through the towns of San Antonio de Los Cobres and Olacapato; and Provincial Route 27, via Pocitos and Tolar Grande.

The Lindero Project contains two known porphyry gold-copper deposits. The Lindero Deposit is the focus of the Feasibility Study and the Lindero Technical Report; whereas the Arizaro Deposit, located 3.2 km southeast of the Lindero Deposit, is described only in terms of exploration conducted to date.

The mineral tenement holdings cover 3,500 ha, and comprise 35 pertenencias, each of 100 ha, which are constrained by Gauss Kruger Posgar co-ordinates generated by survey. Tenure is held in the name of Mansfield Minera S.A. (“Mansfield”), an indirectly wholly-owned subsidiary of the Company. There is no expiry date on the pertenencias, providing Mansfield meets expenditure and environmental requirements, and pays the appropriate annual mining fees.

A 3 % provincial royalty “boca mina” is payable on revenue after deduction of direct processing, commercial, general and administrative costs. There are no royalties payable to any other third party.

Surface rights are owned by the provincial state (Propiedad Fiscal) of Salta. There are no reservations, restrictions, rights-of-way or easements on the Lindero Project to any third-party. Mansfield holds a registered camp concession, and a granted and surveyed access right-of-way. Water permits and rights of access to the Lindero Project are guaranteed through water and access licenses granted by the Mining Court of Salta.

Surface rights for construction of a mining operation and plant have not been granted from the Provincial authorities. Development of such infrastructure will require additional negotiation and potentially, supporting studies. Mansfield does not foresee any issues with obtaining the necessary permits for construction.

History

Gold–copper mineralization associated with potassic alteration was first discovered at the Lindero Project by Goldrock geologists in November 1999, and led to claim staking.

The area was explored using reconnaissance and detailed geological mapping, soil geochemistry (talus fines), trench sampling and mapping during 2000 and early 2001. As a result of this work, mineralization at what is now the Lindero Deposit was identified in September 2000.

From April 2002 to March 2003, Rio Tinto had an option on the property with Goldrock, during which time additional exploration including drilling and metallurgical testwork was conducted. An inhouse preliminary Mineral Resource estimate for the Lindero Deposit was performed. As the tonnage and grade estimate did not meet Rio Tinto’s corporate targets, the option was not exercised.

Goldrock resumed as project operator, and between 2005 and 2013 completed additional exploration and drilling. Based on this, a Pre-Feasibility Study for the Lindero Deposit was completed by AMEC in 2010, assuming a production throughput of 30,000 tonnes of ore per day (AMEC Americas Ltd., 2010a; 2010b). In 2012, Goldrock commissioned Kappes, Cassiday & Associates (KCA) to complete a Feasibility Study using a reduced throughput of 18,750 tpd.

In 2015, Goldrock commissioned KCA to work with local engineering firms in advancing the engineering design for the Project to a basic engineering level, and update the 2013 Feasibility Study. A new Feasibility Study incorporating these design changes, additional metallurgical testwork, and updated costs and gold price assumptions was filed by KCA in 2016 (KCA, 2016a).

In July 2016, the Company completed the acquisition of all issued and outstanding shares of Goldrock, making Mansfield a wholly-owned subsidiary of Fortuna. Upon completion of the transaction, Fortuna continued to advance the optimization of the 2016 Feasibility Study through additional drilling as well as conducting tradeoff metallurgical tests and detailed engineering revisions with the objective of reaching a construction decision for the Lindero Project.

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Geology and Mineralization

In the Central Andes, the altiplano or puna is a high plateau of more subdued relief between the Eastern Cordillera, a rugged region usually rising to between 3 km and 4.5 km, and the Western Cordillera, which is a high spine of mountains that may reach as much as 5 km in height. The Arizaro Volcanic Complex consists of two superimposed concentric volcanic centers, the Arizaro and the Lindero cones, located in the Archibarca volcanic arc at the southern margin of the Salar de Arizaro basin. Basement rocks crop out to the north of the Lindero Deposit, and consist of coarse-grained Ordovician granites uncomformably overlain by Early Tertiary red bed sandstones. The Lindero–Arizaro complex, a series of diorite to monzonite porphyritic stocks, intrudes these units.

Mineralized zones at the Lindero Deposit form a semi-circular shape about 600 m in diameter which extends to a depth of 600 m, consisting of four different zones at the surface. The distribution of gold–copper mineralization at Lindero shows a strong relationship to lithology, stockwork veinlets, and alteration assemblages. Gold values average 0.70 g/t Au and copper values are typically about 0.11 % Cu. Higher grades of gold–copper (approximately 1 g/t Au and 0.1 % Cu) are commonly associated with sigmoidal quartz, quartz–magnetite–sulfide, biotite-magnetite–chalcopyrite, magnetite–chalcopyrite and quartz–limonite–hematite stockworks that are strongly associated with K-feldspar alteration. This association is very common in the east zone of the deposit, where the highest gold grades occur. At other locations where one or more stockwork types are missing or the intensity of fracturing is lower, mineralization tends to be weaker and the grades of gold tends to be lower (approximately 0.4 g/t Au).

Gold mineralization at the Lindero Project is characterized by native, free-milling gold associated with chalcopyrite and/or magnetite grains with rare interstitial quartz.

The weathered oxidation zone at the Lindero Project is generally poorly developed and averages 44 m in thickness.

The Arizaro volcanic center is characterized by fine- to medium-grained hornblende diorite to monzonite porphyritic stocks. The Arizaro Deposit is dominated by a main, moderately to strongly mineralized intrusive unit that crops out in the central part of the prospect area. It consists of fine hornblende porphyritic diorite intruded by several stocks, dikes, igneous-cemented breccias and hydrothermal breccias. Smaller stocks are exposed in a few areas. Dikes of andesitic and dacitic composition are generally distributed radially to the main intrusive unit.

Several alteration assemblages are noted in the Arizaro Deposit area. Alteration patterns are semi-concentric and asymmetric, with a core of moderate to strong potassic alteration including zones of K-feldspar-rich magnetite–silica alteration. An incomplete rim of chloritic alteration is developed outboard of the potassic alteration. In the southeast part of the deposit, intermediate argillic alteration has formed and overprints potassic alteration. Sericitic and very weak argillic alteration (hydrolytic alteration) has developed in the volcanic tuffs. To the south and west of the deposit, chloritic alteration passes directly to propylitic alteration. An actinolite–magnetite alteration assemblage forms in the eastern part of the deposit area.

Arizaro gold–copper mineralization is hosted in one body which has a semi-oval shape at the surface. In the center there is a high-grade body with a semi-ellipsoidal form, extending north-south for 480 m and about 50 m wide. The Arizaro Deposit has mineralization styles with copper–gold grades that are strongly correlated with different alteration assemblages. Mineralization is mainly associated with potassic alteration. This occurs generally in multi-directional veins, vein stockworks and disseminations. In some areas, the vein density is high, forming vein stockworks in the intrusive rocks. These vein stockworks are limited to magnetite–biotite veinlets, quartz–magnetite–chalcopyrite veinlets, late magnetite breccias and in late-stage mineralization events, anhydrite–sulfide veinlets. Chalcopyrite and bornite are the main copper minerals. Coarse gold was observed and confirmed with X-ray diffraction analysis in the University of Neuquen, Argentina, laboratory.

Lindero and Arizaro are examples of gold-rich porphyry copper deposits as described by Sillitoe (2000). More specifically, they show affinities with the porphyry gold deposit model (Rytuba and Cox, 1991; also termed dioritic porphyry gold deposits by Seedorff et al., 2005). These are exemplified by the Refugio, Cerro Casale, Marte, and Lobo gold deposits of the Miocene-age Maricunga belt, Chile, approximately 200 km south of Lindero. Vila and Sillitoe (1991) and Muntean and Einaudi (2000, 2001) described those deposits in detail.

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The deposits of the Project area are considered to be examples of porphyry-style deposits, in particular gold-rich porphyries based on the following:

·	High level (epizonal) stock emplacement<br>levels in magmatic arc
·	High-level stocks and related dikes intrude<br>their coeval and cogenetic volcanic piles. Intrusions range from fine through coarse-grained, equigranular to coarsely porphyritic
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·	Mineralization in or adjoining porphyritic<br>intrusions of quartz diorite/monzonite composition
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·	Mineralization is spatially, temporally,<br>and genetically associated with hydrothermal alteration of the intrusive bodies and host rocks
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·	Gold–copper mineralization formed<br>during intrusion of multiple phases of similar composition intrusive rocks
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·	Large zones of quartz veining, stockwork<br>mineralization, and disseminated pyrite
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·	Tenor of gold and copper grades, i.e.,<br>large tonnage but low grade
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At the Lindero Deposit, native gold and electrum are finely disseminated in subparallel to stockwork quartz + sulfide ± magnetite ± anhydrite veins and in some cases in matrices of hydrothermal breccias. Magnetite is common to abundant in mineralized zones. These mineralized stockworks and potassic alteration are interpreted to have formed as the result of degassing of the early intrusive bodies. Fluid pressures during degassing triggered fracturing of the intrusions and wall rock, allowing gold-rich fluids to circulate and precipitate, forming a gold–copper orebody. Later intrusions resulted in weak to moderate gold–copper mineralization forming mostly along and immediately fringing these intrusive contacts. Finally, post mineralized intrusives were overprinted onto the north and west of the deposit.

Understanding of the geological setting and model concept of the Lindero and Arizaro is adequate to provide guidance for exploration and development of the deposits.

Exploration, Drilling and Sampling

The Lindero Deposit was discovered in late 2000. Several exploration programs have been conducted by Rio Tinto, Goldrock and the Company on the Lindero Project:

·	Goldrock campaign: August 2000 to October<br>2001, which included geologic mapping, soil sampling, and trench sampling
·	Rio Tinto Campaign: May 2002 to February<br>2003, which included road sampling, geophysics (43 km of ground magnetics and 11 km of induced polarization (IP)), and drilling<br>(10 holes for a total of 3,279 m)
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·	Goldrock campaign: October 2005 to January<br>2008, which included geologic mapping and modeling, trenching, and a significant drilling program (106 holes for a total of 30,024<br>m)
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·	Goldrock campaign: September 2008 and<br>August 2010 to November 2010, which consisted of additional drilling (23 holes) for the Pre-Feasibility Study
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·	The Company’s campaign: September<br>2016 to December 2016 consisting of 8 holes for metallurgical samples, 2 holes for geologic interpretation and 2 twin holes
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Drilling completed at the Lindero Project comprises 151 diamond drill holes totaling 42,598 m at the Lindero Deposit, as well as 29 diamond drill holes totaling 8,855 m at the Arizaro Deposit. Mineral Resources are only estimated at the Lindero Deposit. Ground conditions were good, and core recovery was generally above 90 %. Drill hole collars were marked with PVC pipes introduced in the hole at surface and then cemented. All holes drilled since 2005 as well as the 10 holes drilled during the 2002 campaign were surveyed by Servicios Topograficos with a differential GPS. Coordinates are projected on the WGS 84 Datum ellipsoid and calibrated according to the position of Geodetic point IGM N° PR-02-015, located a few kilometers from the Project. The results are available in geographic co-ordinates and in metric co-ordinates (UTM and Gauss Kruger), using the WGS 84 datum.

During Rio Tinto’s exploration drilling campaign in 2002, undertaken by Connors Drilling, no downhole surveys were completed despite the fact that many of the holes extended beyond 300 m in depth. Holes drilled during the first Goldrock campaign were not originally downhole surveyed either. In June 2006 GEC-Geophysical Exploration & Consulting S.A. (GEC) was contracted by Goldrock to perform borehole surveying services with a Reflex Maxibor II System 3™ Probe (Maxibor™), which is not affected by magnetism. In 2008, Goldrock detected that the Maxibor™ surveys showed an unacceptably large deviation in the drill holes and a decision was made to re-survey all holes that showed a deviation of more than 5 %. Comprobe Chile Ltd. (Comprobe) was contracted to re-survey the holes considered by Goldrock as having incorrect downhole deviations. A surface-recording gyroscopic instrument was used, and orientation and dip parameters were recorded every 10 m. For the 2016 drilling campaign, Fortuna retained the services of Construccion & Mineria S.A., based out of Mendoza, Argentina, to complete downhole surveys for each hole upon completion. Downhole surveys were conducted using Reflex™ gyroscopic equipment with readings taken at 5-m intervals.

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All core was logged for geology and geotechnical characteristics. All logging was digital, and was incorporated daily into the Maxwell DataShed™ database system. Data were recorded initially with Excel™ templates, and later with Maxwell LogChief™ application using essentially the same structure. Separate pages were designed to capture metadata, lithology, alteration, veins, sulfide–oxide zones, sulfide–oxide surfaces, minerals (sulfides, oxides, and limonite), sulfates, structures (contacts, fractures, veins, and faults with attitudes to core axis), magnetic susceptibility, and special data (samples collected for geochemistry, thin section examinations, the core library, skeleton core, etc.). Intensity of alteration phases was recorded using a numeric 1 to 4 scale (weak, moderate, strong, complete); abundance of veins and most other minerals were estimated in volume percent.

The Lindero Deposit is a gold-rich porphyry with low-grade mineralization permeating throughout the deposit, making the calculation of true thickness impossible as no definitive across strike direction exists. The mineralization appears to be annular in shape at surface due to the intrusion of barren to low-grade intrusive rocks into the core of the system, but this circular shape is not representative of true thickness.

Core samples are marked and collected on 2 m intervals that honor lithological boundaries. Samples weigh between 4 and 8 kg depending on core diameter and recovery. Channel samples were collected using a rock saw to cut a 2 x 3 cm channel in exposed bedrock in trenches and road cuts. The material was removed from the channel with a chisel. Sample preparation for most samples consisted of crushing to 70 % passing 10 mesh and pulverization to 95% passing 150 mesh. Density samples are routinely collected by Mansfield from drill core on approximate 10-m intervals. Samples consist of pieces of core approximately 7 cm in length and weighing between 93 g and 408 g.

All samples collected by Mansfield were assayed for gold using a 30 g fire assay–atomic absorption (FA-AA) finish and a second aliquot was selected for copper analysis using aqua regia digestion and AA analyses. For the drill samples only, a full suite of trace elements was analyzed using an aqua regia digestion followed by inductively-coupled plasma (ICP) analysis. Assay results and certificates were reported electronically by e-mail.

Fortuna samples were sent to the ALS Global sample preparation facility in Mendoza, Argentina. Following drying at 55°C, the samples were weighed and the entire sample crushed using a two-stage method, first with a jaw crusher to 1 cm, and then by cone crusher to 70 % passing 10 mesh. The entire crushed sample was then pulverized to a minimum of 95 % passing 80 mesh. Pulverized samples were then split using a riffle splitter to generate a 300 g subsample that was pulverized to 95 % passing 150 mesh. This subsample was then split again using a riffle splitter to generate three 100 g samples.

All samples were sent to accredited laboratories independent of Mansfield, Rio Tinto, and Fortuna.

Implementation of a quality assurance/quality control (“QAQC”) program is current industry best practice and involves establishing appropriate procedures and the routine insertion of standard reference material (SRMs), blanks, and duplicates to monitor the sampling, sample preparation and analytical process. The Company implemented a full QAQC program to monitor the sampling, sample preparation and analytical process for the 2016 drilling campaign in accordance with its companywide procedures. The program involved the routine insertion of SRMs, blanks, and duplicates. Evaluation of the QAQC data indicate that the data are sufficiently accurate and precise to support Mineral Resource estimation.

Data Verification

In 2009 an independent audit of the information used for the estimation of Mineral Resources and Mineral Reserves at the time was conducted by AMEC, and summarized in the KCA (2016a) Technical Report. The work included independent audits of the database, collar and downhole surveys, drill logs, assays, bulk density measurements, core recovery, and QAQC results.

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The 2009 audit concluded that the data verification programs undertaken on the data collected from the Lindero Deposit up to 2009 supported the geologic interpretations, and the analytical and database quality, and therefore the data could support Mineral Resource and Mineral Reserve estimation.

Fortuna reviewed the work performed by AMEC and concurs with their opinion. Fortuna has conducted additional audits and verification of historical information used in prior Mineral Resource and Mineral Reserve estimates as well as verifying new data generated during the 2016 drilling campaign to support assumptions for a construction decision and the Mineral Resource and Mineral Reserve estimates reported in Section 14 and Section 15 of the Lindero Technical Report. The verification process focused on the database; collars and downhole surveys; lithologic logs; assays; metallurgical results; and geotechnical parameters. The Company checked all collar and downhole survey information for each campaign against source documentation and completed a hand-held GPS survey of randomly selected drill hole collars. The results showed a good agreement with locations in the database. In August 2016, the Company initiated a comprehensive program of relogging to verify the original lithologic descriptions.

The Company contracted Call & Nicholas Inc. (CNI) to validate all geotechnical data, data collection methods, slope stability analysis methods, and slope angle recommendations presented previously by other consultants to determine feasibility-level slope angle recommendations for design of the planned Lindero final pit.

The Lindero Technical Report author is of the opinion that the data verification programs performed on the data collected from the Project are adequate to support the geological interpretations, the analytical and database quality, and Mineral Resource estimation at the Lindero Project.

Mineral Processing and MetallurgicalTesting

The Lindero Project has an extensive body of metallurgical investigation comprising several phases of testwork as indicated in the KCA (2016a) Technical Report, and summarized in Section 13 of the Lindero Technical Report. In general, the testwork was done to industry standards. However, some leach conditions set for the testwork made interpretation difficult. Reinterpretation of the raw test data provided the basis for advancing the metallurgical knowledge base for Fortuna.

Since September 2016, the Company has performed complementary metallurgical testwork in the areas of comminution, heap permeability and cement agglomeration, gold extraction in column tests, and copper removal with sulfidization-acidification-recycle-thickening (SART) technology with the purpose of confirming and optimizing process design criteria.

Table 1.1 shows key gold extraction results for 10-m columns from laboratory testwork, carried out in the first semester of 2017, on material cured in a cyanide solution and agglomerated. A 4 % deduction (absolute) has been used in the design to allow for the differences between laboratory and expected operational results.

Table 1.1 Key gold extraction results for 10-m columns

		Met Type as	Gold Extraction
	Met Type	Percentage of	Laboratory		Field
Met Type	Description	Reserve	(%)		(%)
1	Fresh Intrusive	63		79.4		75.4
2	Oxide Porphyry	20		82.2		78.2
3	Fresh porphyry	9		82.5		78.5
4	Sediments	8		72.5		68.5
		Weighted average		79.7		75.7

Optimization of the process design has confirmed the benefit of the use of a high-pressure-grinding-roll (HPGR), the inclusion of cyanide cure of ore, and copper removal/cyanide recovery with a SART plant. Results indicate that these components allow for improved gold leaching kinetics and effective extraction of copper from the pregnant solution.

Ore will be crushed at a nominal rate of 18,750 tpd using a three-stage crushing system including a HPGR in the tertiary stage. A final crush size of P80 6.0 mm is projected. The crushed product will be agglomerated and cured with a cyanide solution and then conveyed to the leach pad. A mobile conveying and stacking system will be used to stack ore in 10-m-high lifts. The life-of-mine (LOM) leach pad area is projected at 105 ha with a maximum height of 110 m. Leaching will be carried out in two stages with a first stage of 30 days and a second stage of 60 days.

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The gold pregnant solution will be pumped at a rate of 400 m^3^/hr to a SART plant, where copper in solution will be precipitated to maintain copper levels below 400 ppm in the solution. The Project contemplates an expansion of the pregnant solution flow rate from 400 m^3^/hr to 600 m^3^/hr in year four with the objective of reducing gold ounce inventory in the heap at the end of mining.

Following the SART plant, the pregnant solution will go to an adsorption, desorption, recovery (ADR) plant and then to electrowinning and refining where gold will be poured in doré bars. LOM recovery is estimated at 75 %.

It is the opinion of the Lindero Technical Report author that the Lindero samples tested represent the orebody with respect to grade and metallurgical response. The differences between metallurgical lithologies are minimal with regard to extraction. Cyanide consumptions are higher with the more oxidized Met 2 samples as would be expected. Minimal metallurgical differences were expected after review of the historical work.

Physical differences appear to have greater impact on the processing of the Lindero met types. Of significant importance is the ability of the agglomerated ore to support the planned heap height.

No significant deleterious materials such as mercury or clays were noted in the samples tested.

A high level of metallurgical and process risk mitigation is incorporated in the process design with HPGR crushing, agglomeration and the SART plant. With these installations any expected short-term variation in ore composition (i.e. elevated soluble copper content) or physical properties (i.e. elevated gypsum levels or increased ore hardness at depth) can be accommodated in the normal course of operations.

Mineral Resources and Mineral Reserves

Mineral Resources have only been estimated for the Lindero Deposit.

Mineral Resource estimation of the Lindero Deposit involved the use of drill hole and channel sample data in conjunction with surface mapping to construct three-dimensional (3-D) wireframes to define individual lithologic structures and oxide–mixed–sulfide horizons. Drill hole samples were selected inside these wireframes, coded, composited and grade top cuts applied if applicable. Boundaries were treated as either soft, firm or hard with statistical and geostatistical analysis conducted on composites identified in individual lithologic units. Gold and copper grades were estimated into a geological block model consisting of 10 m x 10 m x 4 m selective mining units (SMUs). Grades were estimated using dynamic anisotropy by ordinary kriging (OK) and constrained within an ultimate pit shell based on estimated metal prices, costs, geotechnical constraints, and metallurgical recoveries to fulfill the expectation of reasonable prospects of eventual economic extraction. Estimated grades were validated globally, locally, and visually prior to tabulation of the Mineral Resources.

Mineral Reserves are exclusive of Mineral Resources and Mineral Reserve estimates have considered only Measured and Indicated Mineral Resources as only these categories can be considered Mineral Reserves (CIM, 2014). Subject to the application of modifying factors, Measured Resources may become Proven Reserves and Indicated Resources may become Probable Reserves.

Mineral Reserves and Mineral Resources exclusive of Mineral Reserves as of September 9, 2017 are reported in Table 1.2 and Table 1.3 respectively:

Table 1.2 Mineral Reserves as of September 9, 2017

							Contained Metal
Classification	Tonnes (000)		Au (g/t)		Cu (%)		Au (koz)
Proven		26,009		0.74		0.11		618
Probable		62,263		0.57		0.11		1,131
Proven + Probable		88,272		0.62		0.11		1,749

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Table 1.3 Mineral Resources as of September 9, 2017

							Contained Metal
Classification	Tonnes (000)		Au (g/t)		Cu (%)		Au (koz)
Measured		610		0.24		0.06		5
Indicated		11,897		0.24		0.07		92
Measured + Indicated		12,507		0.24		0.07		97
Inferred		5,700		0.36		0.10		65

Notes:

·	Mineral Reserves and Mineral Resources<br>are as defined by CIM Definition Standards on Mineral Resources and Mineral Reserves
·	Mineral Resources are exclusive of Mineral<br>Reserves
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·	Mineral Resources that are not Mineral<br>Reserves do not have demonstrated economic viability
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·	There are no known legal, political, environmental,<br>or other risks that could materially affect the potential development of the Mineral Resources or Mineral Reserves at Lindero
---	---
·	Mineral Resources and Mineral Reserves<br>are estimated and reported as of September 9, 2017
---	---
·	Eric Chapman, P.Geo. (APEGBC #36328) is<br>the Qualified Person for resources and Edwin Gutierrez (SME Registered Member #4119110RM) is the Qualified Person for reserves,<br>both being current or former employees of Fortuna Silver Mines Inc.
---	---
·	Mineral Reserves for Lindero are reported<br>based on open pit mining within designed pit shells based on variable gold cut-off grades and gold recoveries by metallurgical<br>type. Met type 1 cut-off 0.27 g/t Au, recovery 75.4 %; Met type 2 cut-off 0.26 g/t Au, recovery 78.2 %; Met type 3 cut-off 0.26<br>g/t Au, recovery 78.5 %; and Met type 4 cut-off 0.30 g/t Au, recovery 68.5 %. The cut-off grades and pit designs are considered<br>appropriate for long-term gold prices of US$ 1,250/oz. Assumptions used in the pit design are the same as those for the resources
---	---
·	Lindero Mineral Resources are reported<br>within a conceptual pit shell above a 0.2 g/t Au cut-off grade using a long-term gold price of US$ 1,250/oz, mining costs at US$<br>1.67 per tonne of material, with total processing and process G&A costs of $7.84 per tonne of mineralized material and an average<br>process recovery of 75 %. The refinery costs net of pay factor were estimated to be US$ 6.90 per ounce gold. Slope angles are based<br>on 3 sectors (39°, 42°, and 47°) consistent with geotechnical consultant recommendations
---	---
·	Totals may not add due<br>to rounding
---	---

Mineral Reserves are estimated at 88.3 Mt as of September 9, 2017 which is sufficient for a thirteen-year LOM considering 350 days in the year for production and a capacity rate of 18,750 tpd. Expectation based on an optimized production schedule is for an annual average production of 129,000 troy ounces of gold.

Proven and Probable Mineral Reserves are estimated to contain 1.75 Moz gold, reflecting a 12 % decrease in contained gold ounces relative to the October, 2015 Mineral Reserve estimate. Variations are the result of:

·	A smaller ultimate pit shell based on<br>updated metal prices, mining costs, and metallurgical recoveries resulting in a decrease in the Measured and Indicated Mineral<br>Resources
·	2016 drilling which upgraded 12 Mt to<br>Indicated Mineral Resources with a loss of that amount of Inferred Mineral Resources
---	---
·	Adjustments to the geological interpretation<br>and estimation methodology
---	---

Mining methods

The Lindero Project will be an owner-operated conventional open pit mining operation with a nominal rate of 18,750 tpd of ore and a life of pit operations of 13 years using existing reserves. The ratio of waste to ore over the LOM is 1.2 to 1. The key mining fleet equipment will be initially composed of six 91 tonne (100-ton) trucks and two 17 cubic yard wheel loaders.

In the initial two years, the operation will benefit from mining the higher-grade, outcropping portion of the deposit, with an average head grade of 0.90 g/t Au, and a low strip ratio of 0.77 to 1. For the initial four years, the average head grade is projected at 0.77 g/t Au, and a strip ratio of 1 to 1.

Mining costs benefit from short haul distances from the pit to the primary crusher and waste dumps. Maximum distances are in the range of 2 km. The LOM direct mining cost is estimated at US$ 1.1 per tonne moved.

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The Lindero Technical Report author is of the opinion that:

·	The mining method being used is appropriate<br>for the deposit being mined
·	The open pit, heap leach pad, stockpiles,<br>waste dump designs, and equipment fleet selection are appropriate to reach production targets
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·	The mine plan is based on successful mining<br>philosophy and planning, and presents low risk
---	---
·	Inferred Mineral Resources are not included<br>in the mine plan and are considered as waste
---	---
·	The mobile equipment fleet presented is<br>based on simulations and bench marks to similar operations achieving similar production targets
---	---
·	All mine infrastructure and supporting<br>facilities meet the needs of the current mine plan and production rate
---	---
·	Major planned maintenance of the main<br>equipment, such as loaders and trucks, have been covered in sustaining capital by purchasing additional equipment that can replace<br>any possible lost production hours and not impact production targets
---	---
·	The ancillary equipment appears to be<br>undersized, especially dozers, but this would be covered by renting additional equipment as necessary
---	---

Recovery methods

Most of the major process concepts presented in the 2016 Technical Report such as: high pressure grind roll (HPGR)-crushing, cyanide heap leaching and carbon adsorption recovery, remain unchanged for the updated 2017 Lindero Technical Report. Additional physical and metallurgical understanding, developed by the testwork conducted by the Company in 2016 and 2017, resulted in modifications in the approach to these major process concepts for the Lindero Project as follows.

·	A concentrated cyanide cure was added to shorten the leach cycle and increase extraction
·	Agglomeration with cement was added to support a 110-m-high heap with the HPGR-crushed ore
---	---
·	Conveyor stacking was included from startup
---	---
·	Two-stage leaching was included to increase preg grades and reduce overall flowrate to the ADR<br>plant
---	---
·	A SART plant was included to control the copper in solution
---	---
·	Leach solution flow will be increased 150 % in Year 4 to reduce in-heap gold inventory
---	---

Unit operations for the Lindero process were selected based on the physical and metallurgical needs of the Lindero ore to achieve maximum extraction of gold. No novel or untried technology will be employed in the process.

Project infrastructure

The Lindero Technical Report author is confident that all mine and process infrastructure and supporting facilities have been included in the general layout to ensure that they meet the needs of the mine plan and production rate and notes that:

·	The Project will have good year-round<br>access with significant road improvements planned for stretches of road between Tolar Grande and the Fortuna camp
·	The Project site infrastructure has a<br>compact layout footprint of approximately 60 ha
---	---
·	Power will be generated on-site by a contractor<br>through an 8 MW capacity diesel oil plant
---	---
·	Electrical power will be generated on<br>site under a contract power supply arrangement with a local company who specializes in such services
---	---
·	Total water requirements are 97.7 m^3^/hr<br>and will be primarily sourced from two existing wells located 13km southeast of the Project site, along with an additional<br>well to be drilled as part of construction activities
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| --- | | · | Most of the process buildings for the Lindero Project have been primarily designed as steel frame buildings with modular thermo-acoustic panels; in general, these are pre-engineered and pre-fabricated steel buildings which include all structural members, exterior doors and windows, roofs, insulation, interior and exterior wall panels and all connectors required to erect and assemble the buildings on-site | | --- | --- | | · | A permanent accommodation camp for 320 beds will be built for the LOM operation. For the construction period, temporary accommodations will be implemented to accommodate the peak of construction manpower estimated at 600 people | | --- | --- |

Market studies and contracts

No market studies are currently relevant as the Lindero Project will produce a readily-saleable commodity in the form of doré.

As of the effective date of the Lindero Technical Report, the Company has not entered into any material contracts required for the development of the Lindero Project including mining, concentrating, smelting, refining, transportation, handling, sales and hedging, and forward sales contracts or arrangements.

The gold price used for the base case cash flow analysis is $1,250/oz. Sensitivities with variable price projections have also been considered. The Lindero Project, like most gold projects, is highly sensitive to changes in the gold price.

The Lindero mine product will be doré bars containing an estimated gold content averaging 84 % for the Project life. Overall gold extraction in respect to ore placed on the heap leach is estimated to be approximately 75 %.

The Lindero Technical Report author has reviewed the information provided by Fortuna on marketing, contracts, metal price projections and exchange rate forecasts and notes that the information provided is consistent with the source documents used, and that the information is consistent with what is publicly available regarding industry norms. The information can be used in mine planning and economic analyses for the Lindero Project in the context of the Lindero Technical Report.

Environmental studies and permitting

In November 2010, Mansfield submitted an Environmental Impact Assessment (EIA) for the Lindero Project, and in November 2011 received approval through the issue of the Declaración de Impacto Ambiental (DIA). Approval of the EIA represents formal approval for mine construction, allowing excavation to proceed. Environmental law requires that the EIA be updated biannually with the current report submitted in December 2015 and an updated report planned for submission in March 2018.

Mansfield received a mine permit to build a heap-leach gold mine at up to 30,000 tpd as detailed in the Pre-Feasibility Study (AMEC, 2010b).

The Salta Provincial authorities have approved the building and electrical permits that Mansfield requires to commence construction at Lindero. Electrical, structural, building and seismic plans have been reviewed and approved by COPAIPA (Dec 2013), the professional engineering institution that overlooks all construction in Salta Province. Mansfield is planning to submit additional information to COPAIPA in 2017 to obtain the permits for construction of the agglomeration and SART plants that have been added to the process design. Mansfield does not foresee any issues in obtaining the necessary permits to complete construction and commence operation at the Lindero Project.

In addition, a formal public declaration of support for the Lindero development has been issued by the provincial government, recognizing the Lindero Project as the priority development project for the Salta Province.

Environmental risks during the closure stage will be reduced by remediation and monitoring work. At the closure stage, soil will be contoured by heavy machinery to minimize the long-term impact of mining activity, and return the topology of the land to resemble prior conditions. However, the movement of soil, and thus the risk, will be significantly less than in the mining operations stage.

One social-environmental risk will be the completion of contracts of employment directly, or indirectly, through contractors, and the surrounding communities. It will be imperative to implement measures to mitigate this impact during the whole period of mine operation.

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A significant environmental risk will also be present during the closure of facilities, which will cause significant production of non-hazardous industrial waste and hazardous products from the movement of heavy machinery. It will be essential to establish clear environmental policies with the contractors during this process.

It is the opinion of the Lindero Technical Report authors that the appropriate environmental, social and community impact studies have been conducted to date at the Lindero Project. Mansfield has maintained all necessary environmental permits that are the prerequisites for the granting of construction permits that will need to be obtained upon completion of detailed engineering designs for the Project infrastructure.

Capital and operating costs

Capital and operating costs for the Lindero Project were estimated by the Company with the assistance of Elbow Creek, Allard Engineering Services, and Saxum Engineered Solutions (Saxum), a local engineering firm. These costs are based on the design outlined in the Lindero Technical Report, and are considered to have an accuracy of +/-15 %. All costs are in second and third quarter 2017 US dollars (US$). No escalation factors have been applied to any costs, present or future capital. The total mine capital cost is estimated to be US$ 282 million.

Expansion (future) capital for the Project includes the Phase 2 leach pad construction in Year 3, and expansion of the ADR plant and solutions handling in the leach pad area in Year 3. The total future capital is estimated at US$ 113 million.

Closure and reclamation costs are estimated at US$ 35 million, incurred in Year 13 through Year 17.

The total LOM operating cost for the Lindero Project is US$ 10.32 per tonne of ore processed.

Costs were estimated primarily by the Company for mine pre-production and mine equipment costs. Saxum provided cost estimates for major and secondary equipment, buildings, infrastructure and major contracts. All equipment and material requirements are based on the design information described in the Lindero Technical Report. Capital cost estimates have been made primarily using budgetary supplier quotes for all major and most minor equipment items, and major construction contract unit rates. Where supplier quotes were not available for minor items, a reasonable cost estimate was made based on supplier quotes in Saxum’s project files. All capital cost estimates are based on the purchase of equipment quoted new from the manufacturer, or estimated to be fabricated new.

Economic analysis

The results of the economic analysis discussed in the Lindero Technical Report represent forward-looking information as defined under Canadian securities law. The results depend on inputs that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented here. Such uncertainties and factors include, among others, changes in general economic conditions and financial markets; changes in prices for gold and other metals; technological and operational hazards during the development of the project; risks inherent in mineral exploration; uncertainties inherent in the estimation of mineral reserves, mineral resources, and metal recoveries; the timing and availability of financing; governmental and other approvals; political unrest or instability; labor relations issues; as well as those factors discussed under “Risk Factors” in the Company’s Annual Information Form for fiscal 2016. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the Lindero Technical Report, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.

The Lindero Project economics were evaluated using a discounted cash flow (DCF) method, which estimates the net present value (NPV) of future cash flow streams. The final economic model was developed by Fortuna using the following assumptions:

·	Period of analysis of 16 years (includes<br>one year of preproduction and investment), 13 years of production, and two years for closure and reclamation
·	Gold price of US$ 1,250/oz
---	---
·	Processing rate of 18,750 tpd ore
---	---
·	Metallurgical recovery of 75 %
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| --- | | · | Initial capital and operating costs as developed in Section 16.5 and 21 of the Lindero Technical Report | | --- | --- | | · | Closure capital costs as outlined in Section 20 of the Lindero Technical Report | | --- | --- |

The Lindero Project shows an NPV of US$ 130 million after tax using a discount rate of 5 %, with an internal rate of return (IRR) of 18 %, and a payback period of 3.6 years, based on the LOM production plan, assumed metal prices, and integrated leaching treatment of gold and copper.

NPV and IRR display the greatest sensitivity to gold metal prices and metallurgical recoveries according to the sensitivity analysis.

The Lindero Technical Report author considers the financial model to be a reasonable estimate of the economic situation at Lindero and based on the assumptions in the Lindero Technical Report, the Lindero Project shows a positive DCF over the LOM and supports the Mineral Reserve estimate. The mine plan is achievable under the set of assumptions and parameters presented.

Other Relevant Data and Information

Goldrock commissioned Vector Argentina SA (Ausenco; 2009a, b) and Conhidro (2013) to conduct a hydrologic study of the Project area, during the detailing of the environment base line map and EIA study. As part of the study, the Rio Grande hydrologic basin was defined through the evaluation of various field parameters and review of satellite images. The basin was determined to be 1,687 km^2^ in size. Exploration for groundwater resources was undertaken, and successfully identified possible sources.

A number of geotechnical studies were performed at the Lindero Project and reviewed by CNI. Those studies form the basis for the pit slope estimates used in the mining model. Included in the studies were geotechnical surveys for heap leach and waste dumps. These studies are considered by the Lindero Technical Report to be consistent with industry practices and adequate to support mine design.

Conclusions, Risks, and Opportunities

The Lindero Technical Report represents the most accurate interpretation of the Mineral Reserve and Mineral Resource available as of the effective date of the Lindero Technical Report. The conversion of Mineral Resources to Mineral Reserves was undertaken using industry-recognized methods, and estimated operational costs, capital costs, and plant performance data. Thus, it is considered to be representative of future operational conditions. The Lindero Technical Report has been prepared with the latest information regarding environmental and closure cost requirements.

A number of opportunities and risks were identified by the Linder Technical Report authors during the evaluation of the Lindero Project.

Opportunities include:

·	Once mining commences there is an opportunity<br>to collect additional geotechnical data from the open pit that could support an increase in final pit slope angles, potentially<br>decreasing stripping ratios and/or increasing Mineral Reserves.
·	The Arizaro porphyry system is not included<br>in the current mine plan. However, it represents upside opportunity for the Project if a satellite operation can be developed on<br>the deposit.
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·	Infill drilling could support the conversion<br>of Inferred Resources to Measured or Indicated Resources and, with the appropriate studies, to Mineral Reserves. This represents<br>additional upside potential for the planned operation.
---	---
·	The Lindero porphyry gold system remains<br>open at depth below the pit shell constrained reported reserves and resources. An area of interest has been identified by Fortuna<br>during the drilling campaign carried out in 2016 with drill hole LDH-126 encountering 0.97 g/t Au over a 38 m interval (refer to<br>discussion in Section 10). This is supported by historical drilling from 2007 including drill hole LDH-86 averaging 1.06 g/t Au<br>over a 52 m interval which bottomed in mineralization. These intercepts warrant follow-up drill testing.
---	---
·	There are a number of local exploration<br>targets within the concession boundary, that with further work, represent upside opportunity to identify mineralization that can<br>potentially add to the resource base.
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| --- | | · | If historical samples are assayed for cyanide-soluble copper, there is an opportunity to construct a metallurgical model and incorporate this into the scheduling and process design. This would support optimization of blending strategies and better understanding of recoverable copper as a by-product from the SART plant. Improved copper recoveries could have a minor positive impact on the mine economics. | | --- | --- | | · | Performance of the equipment can be tracked with the implementation of a fleet management system to record the main key performance indicators (KPI’s) which will provide an opportunity to improve utilization and time loss productivity. | | --- | --- | | · | Once mining commences there is an opportunity to conduct additional blasting fragmentation analysis so as to improve mining productivity and optimize mining costs. | | --- | --- |

Risks include:

·	Local behavior of cyanide-soluble copper<br>is not fully understood, and cannot be modeled due to a lack of assays from historical core. Levels of soluble copper could be<br>higher than anticipated in certain areas of the deposit requiring adjustments to mine plans and schedules to reduce the impact<br>in the plant. The introduction of a SART plant has greatly reduced the potential impact of soluble copper at the Project.
·	Delaying the acquisition of fleet equipment<br>could cause delays in the execution of certain activities. It is therefore imperative that a clear schedule of lead times is established,<br>and equipment purchased in a timely manner to ensure on time delivery.
---	---
·	Fortuna calculates that two loaders are<br>needed from Year 3 onwards, but simulations indicate that three may be required in Year 2. Once mining commences and data on loader<br>productivity is collected, a new fleet simulation should be performed to confirm if a third loader is required in Year 2 and if<br>so how this will affect sustaining capital expenditure.
---	---
·	There is a risk that two dozing machines<br>in the original capital estimate are insufficient. Fortuna plans to mitigate this risk by renting additional ancillary equipment<br>as required.
---	---
·	There is a risk that haul truck tire life<br>of 8,500 hours is higher than can be achieved at the operation, which could lead to marginally higher operating costs than anticipated.
---	---

Recommendations

Recommendations for the next phase of work have been broken into those related to ongoing exploration activities and those related to additional technical studies. Recommended work programs are independent of each other and can be conducted concurrently unless otherwise stated and include:

·	Continued work at Arizaro that focuses<br>on the controls of lithology, structure, and alteration on mineralization so as to determine the suitability of material as a potential<br>feed for the Lindero plant and to support the estimation of Mineral Resources. It is recommended that a 2,000-m reverse circulation<br>(RC) drill program (approximately 100 holes at a 75 m spacing) is conducted at a cost of approximately US$ 500,000.
·	An infill drill program involving the<br>drilling of approximately 3,000-m of RC drill holes is recommended to improve the geological understanding of material planned<br>for extraction in Years 1 and 2 of the mine. The cost of such a program is estimated at approximately US$ 750,000.
---	---
·	Exploration work to date on the Lindero<br>concession has been focused on outcropping porphyry mineralization. It is recommended that the Company evaluate the property for<br>mineralization beyond the two known porphyry systems at Lindero and Arizaro. For example, alteration zones and silica structures<br>located within the concession, 2.5 km due south of the Lindero Project site, remain open for evaluation. Exploration work would<br>primarily involve mapping and carry no additional cost to the Lindero Project.
---	---
·	It is recommended that a drill hole spacing<br>study be conducted to establish the density of sampling that is required to reduce the grade variability to acceptable levels for<br>specified extraction time frames in respect to infill and blast control drilling. This will be used to support the estimated meters<br>of infill drilling. The study can be conducted either inhouse (at no cost) or by external consultants, at an estimated cost of<br>US$ 25,000.
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| --- | | · | Additional analysis is recommended into the mine operating and ore control process, in particular, the usage of optimum dig lines for open pit grade control, with the objective of minimizing ore loss and maximizing profit. The cost of licenses and implementing such software is estimated at US$ 276,000. | | --- | --- | | · | A fleet management system should be considered for KPI purposes, which will provide an opportunity to improve utilization and time loss productivity. The cost of licenses and implementing such software is estimated at US$ 1.5 million. | | --- | --- | | · | The cement in each lift on the heap will cure for several months before another lift is placed. It may be several years before any block of agglomerated ore receives 110 m of loading. It is recommended that a long-term stacking test be conducted to see if ageing will improve the ability of the ore to support the 110 m height with less cement. The estimated cost of the testwork is US$ 20,000. | | --- | --- | | · | The high static holdup (adsorbed moisture) in the heap makes the secondary leach at 6 l/hr/m^2^ inefficient when the heap height increases. There is a possibility that a surface tension modifier may reduce the amount of adsorbed moisture in the heap reducing the inventory. The estimated cost of the testwork is US$ 20,000. | | --- | --- |

[End of Extract of Summary from LinderoTechnical Report]

Exploration Work Subsequent to the LinderoTechnical Report

Lindero Infill Drill Program

In accordance with the recommendations of the authors of the Lindero Technical Report, the Company completed an infill drilling program in 2018, consisting of 61 diamond drill holes totaling 1,952 meters, focused on the areas planned for mining at the Lindero Project in year one of production with holes ranging from 12 meters to 68 meters in length. The program was designed with three objectives: to improve the estimation of grades in mineralized areas with lower density of drilling; to better define the contact between mineralized and non-mineralized material at the periphery of the deposit and at the boundaries between lithologic units; and to source fresh samples for complementary metallurgical column tests on Mineral Reserves scheduled for year one production. These infill drilling results together with results from 144 diamond drill holes totaling 42,359 meters were incorporated into the updated estimate of Mineral Resources and Reserves which were announced on April 4, 2019, with an effective date of March 31, 2019. Please refer to “Three Year History and Recent Developments - Updated Mineral Reserve and Mineral Resource Estimates” herein for further information on the updated Mineral Reserve and Mineral Resource estimates. Such updated technical information did not materially change the Mineral Resources estimates contained in the Lindero Technical Report.

The Mineral Reserves and Mineral Resources reported as of March 31, 2019 are based on 205 diamond drill holes totaling 44,311 meters. The estimates incorporate an updated geological interpretation based on the infill drilling conducted in 2018 (see Fortuna news release dated September 6, 2018), updated metal prices and estimated operating costs. The updated technical information does not materially change the information presented in the Lindero Technical Report. Mineral Resource estimation involved the usage of drill hole samples in conjunction with surface mapping to construct three-dimensional wireframes defining lithologic, alteration, and grade domains. Samples were selected inside these wireframes, coded, composited and top cut. Boundaries were treated as hard, firm or soft based on statistical and geostatistical analysis. Gold and copper grades were estimated by ordinary kriging into a geological block model consisting of 10 meter x 10 meter x 4 meter selective mining units representing each domain. Estimated grades were validated globally, locally, and visually prior to classification and are reported above a 0.20 g/t Au cut-off grade within a conceptual pit shell.

The updated Mineral Resource and Mineral Reserve estimates use the same methodology (key assumptions, parameters and methods) as the Lindero Technical Report. However, Mineral Reserve estimates have been conducted taking into account the new updated resource block model, revised cost estimates, metal prices, projected exchange rates, and the updated detailed design capacity of the leach pad. Mineralized material inside the ultimate pit shell that cannot be accommodated by the updated leach pad design has been classified as a Mineral Resource.

As a result of the updated Mineral Reserves and Mineral Resources, the mine plan at the Lindero Project has been optimized for the first year of commercial production so that the operation will benefit from mining the higher grade mineralization outcropping which was identified through the infill drilling completed in 2018.

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Arizaro Surface Core Drill Program

In accordance with the recommendations of the authors of the Lindero Technical Report, during 2018 the Company completed a surface core drill program of 2,178 meters in 12 holes to vertical depths of less than 200 meters aimed at identifying near surface porphyry-style gold mineralization hosted in magnetite and biotite-rich breccia zones and in associated stockwork veins. Drill highlights include:

ARD32 - 0.61 g/t Au and 0.14 % Cu over 78 meters

ARD38 - 0.67 g/t Au and 0.16 % Cu over 52 meters

ARD41 - 0.70 g/t Au and 0.29 % Cu over 82 meters

Drill hole ARD41 is located approximately 350 meters west of previous drilling and represents a new zone that requires additional exploration. Please refer to the Company’s news release dated February 14, 2019 entitled “Fortuna provides review of Brownfields exploration programs” for full details of the drill program.

Update on Construction at the LinderoProject

Please refer to “General Development of the Business” for an update on the development of the construction at the Lindero Project.

DIVIDENDS

The Company has not to date paid any dividends on its Common Shares nor does it intend to pay any dividends on its shares in the immediate future as management anticipates that all available funds will be invested to finance further acquisition, exploration and development of its mineral properties.

DESCRIPTION OF CAPITAL STRUCTURE

Common Shares

The Company’s authorized share capital is an unlimited number of Common Shares without par value. All Common Shares of the Company rank equally as to dividends, voting powers and participation in assets and in all other respects.

Voting

The holders of Common Shares are entitled to receive notice of, attend and vote at any meeting of the shareholders of the Company. Each Common Share carries one vote per share.

Dividends

The holders of Common Shares are entitled to receive on a pro-rata basis such dividends as the Board from time to time may declare, out of funds legally available therefor.

Rights on Dissolution

In the event of a liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganization or otherwise or upon any distribution of capital, the holders of the Common Shares have the right to receive on a pro-rata basis all of the assets of the Company remaining after payment of all of the Company’s liabilities.

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| --- |

Pre-emptive, Conversion and Other Rights

No pre-emptive, redemption, retraction, exchange, sinking fund or conversion rights are attached to the Common Shares, and the Common Shares, when fully paid, will not be liable to further call or assessment. No other class of shares may be created without the approval of the holders of the Common Shares.

Debentures

In October 2019, the Company issued $46 million aggregate principal amount of Debentures by way of a public offering at a price of $1,000 per Debenture. The Debentures are senior subordinated unsecured convertible securities of the Company. Refer to “Three- Year History- Recent Developmentsand Financings”.

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 in each year, commencing on April 30, 2020. The Debentures are convertible at the holder’s option into Common Shares at a conversion price of US$5.00 per share, representing a conversion rate of 200 Common Shares per US$1,000 principal amount of Debentures, subject to adjustment in certain circumstances. The Debentures are governed by way of a debenture indenture (the “Indenture”) between the Company and Computershare Trust Company of Canada dated October 2, 2019. The Debentures are transferable and are listed for trading on the TSX.

Adjustment of Conversion Price

The Indenture provides for the adjustment of the conversion price upon certain events including: (i) the subdivision or consolidation of the outstanding Common Shares; (ii) the issue of Common Shares or securities convertible into Common Shares by way of stock dividend or other distribution to all or substantially all holders of Common Shares; (iii) the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling them to acquire Common Shares or other securities convertible into Common Shares in certain circumstances and (iv) the distribution to all or substantially all holders of Common Shares of any other class of shares, rights, options or warrants, evidences of indebtedness or assets, at less than 95% of the then Current Market Price (as defined below) of the Common Shares.

Redemption

The Debentures may not be redeemed (a “Redemption”) by the Company prior to October 31, 2022, except if certain conditions are satisfied following a Change of Control (as defined below). On or after October 31, 2022 and prior to October 31, 2023, the Debentures may be redeemed by the Company, in whole or in part from time to time, on not more than 60 days and not less than 30 days prior notice (a “Redemption Notice”), at a redemption price equal to the principal amount thereof plus accrued and unpaid interest, if any, up to but excluding the date set for Redemption, provided that the arithmetic average of the volume weighted average trading price of the Common Shares (as defined herein) on the New York Stock Exchange (the “NYSE”) for the 20 consecutive trading days ending five trading days prior to the date on which the Redemption Notice is provided (the “Current Market Price”) is at least 125% of the conversion price, subject to regulatory approval. On or after October 31, 2023 and prior to the maturity date, the Debentures may be redeemed in whole or in part at the option of the Company on not more than 60 days and not less than 30 days prior notice, at a price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for Redemption.

Change of Control

Within 30 days of the Company giving notice of the occurrence of: (i) the acquisition by any person or group of persons acting jointly or in concert (within the meaning of National Instrument 62-104 - Take-Over Bids and Issuer Bids as at the date of the Indenture) of ownership of, or voting control or direction over, fifty percent (50%) or more of the then outstanding Common Shares; or (ii) the sale or other transfer of all or substantially all of the consolidated assets of the Company (each, a “Change of Control”), the holders of the Debentures (the “Debentureholders”) may require the Company to repurchase their Debentures then outstanding at a price equal to 100% of the principal amount of the Debentures plus accrued and unpaid interest thereon, from and including the last Interest Payment Date (as defined in the Indenture) to, but not including the purchase date. If holders of 90% of the aggregate then outstanding principal amount of Debentures tender to the Change of Control offer, the Company will have the option to call the remaining Debentures. A Change of Control will not include a sale, merger, reorganization, arrangement or similar transaction if the previous holders of the Common Shares hold at least fifty percent (50%) of the voting control or direction in such merged, reorganized, arranged or other continuing entity.

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In the event of an acquisition of the Company where the consideration includes 10% or more in cash or assets or shares (other than publicly traded shares), then, subject to regulatory approval, Debentureholders will be entitled to convert their Debentures within a specified timeframe, in whole or in part,and receive, in addition to the number of Common Shares that such holders are otherwise entitled to receive upon such conversion, an additional number of Common Shares per $1,000 principal amount of Debentures converted as set forth in the Indenture.

Payment of Principal Upon Redemption of Maturity

Subject to applicable securities laws and regulatory approval and provided that no Event of Default (as defined in the Indenture) 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 redemption or at maturity, in whole or in part, through the issuance of freely tradable Common Shares upon at least 30 days and not more than 60 days prior notice, by issuing and delivering that number of Common Shares, as applicable, obtained by dividing the principal amount of the Debentures and all accrued and unpaid interest thereon by 95% of the Current Market Price on the date of redemption or maturity, as applicable.

MARKET FOR SECURITIES

Common Shares

The Company’s Common Shares were listed and posted for trading on the TSX Venture Exchange until January 18, 2010 when the Company graduated to the TSX). On September 19, 2011, the Company’s Common Shares were listed and posted for trading on the NYSE. The Company’s shares currently trade on the NYSE under the symbol “FSM”, on the TSX under the symbol “FVI”, and on the Frankfurt Open Market, the unofficial market organized by Deutsche Börse in Germany, under the symbol “F4S”.

Trading Prices and Volume

The following table sets forth the high and low sale prices and trading volumes of the Common Shares on the TSX and the NYSE during the fiscal year ended December 31, 2019:

Toronto Stock Exchange

Month	High (C)	Low (C)	Volume
December 2019				9,093,400
November 2019				8,326,300
October 2019				8,621,700
September 2019				15,099,500
August 2019				18,176,000
July 2019				20,003,700
June 2019				37,053,400
May 2019				7,819,000
April 2019				6,934,700
March 2019				12,061,200
February 2019				6,085,700
January 2019				7,554,700

All values are in US Dollars.

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New York Stock Exchange

Month	High (US)	Low (US)	Volume
December 2019				46,249,200
November 2019				36,966,000
October 2019				42,577,000
September 2019				63,631,400
August 2019				69,192,300
July 2019				68,168,700
June 2019				46,721,200
May 2019				30,652,700
April 2019				27,582,500
March 2019				25,215,200
February 2019				17,013,200
January 2019				17,278,200

All values are in US Dollars.

Debentures

The Debentures are listed for trading on the TSX under the trading symbol “FVI:DB.U.”

Trading Prices and Volume

The following table sets forth the high and low sale prices and trading volumes of the Debentures on the TSX during the fiscal year ended December 31, 2019:

Toronto Stock Exchange

Month	High (C)	Low (C)	Volume (C)(1)
December 2019
November 2019
October 2019^(2)^
(1) Principal amount of Debentures traded
(2) The Debentures commenced trading on the TSX on October 2, 2019.

All values are in US Dollars.

Prior Sales

The following table summarizes the issuances of share-settled restricted share units (“RSUs”) and performance share units (“PSUs”) by the Company during the financial year ended December 31, 2019, which securities are not listed or quoted on a market place, and the issuances of Common Shares which were issued upon the vesting of RSUs and PSUs during the aforementioned year.

Date Issued	Issue/Exercise Price (Cdn$)	Number and Type of Security Issued	Reason for Issuance
March 15, 2019	$4.83	633,914 RSUs	Grant
March 15, 2019	$4.83	422,609 PSUs	Grant
March 19, 2019	$6.20	233,753 Common Shares	Settlement of PSUs and RSUs
May 29, 2019	$6.35	117,226 Common Shares	Settlement of RSUs
June 5, 2019	$7.15	979 Common Shares	Settlement of RSUs

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DIRECTORS AND EXECUTIVE OFFICERS

Name, Occupation and Shareholding

The Board presently consists of seven directors. The directors will hold office until the next annual general meeting of the Company or until their successor is elected or appointed, unless their office is earlier vacated in accordance with the Articles of the Company, or with the provisions of the British Columbia Business Corporations Act.

The following are the full name, place of residence, position with the Company, and principal occupation within the preceding five years of each of the directors and executive officers of the Company:

Name, Position and Residency ^(1)^	Principal Occupation or Employment ^(1)^	Period as a Director of the Company
JORGE GANOZA DURANT<br><br> <br>President, Chief Executive Officer & Director<br><br> <br>Lima, Peru	President & CEO of the Company.	December 2, 2004 to present
SIMON RIDGWAY<br><br> <br>Chairman and Director<br><br> <br>British Columbia, Canada	Chairman of the Company; President & CEO of Radius Gold Inc. (mineral exploration).	January 25, 2005 to present
MARIO SZOTLENDER ^(5)^<br><br> <br>Director<br><br> <br>Caracas, Venezuela	Independent Consultant and Director of several public mineral exploration companies.	June 16, 2008 to present
DAVID FARRELL ^(2) (3) (4)^<br><br> <br>Lead Director<br><br> <br>British Columbia, Canada	President of Davisa Consulting (a private consulting company).	July 15, 2013 to present
DAVID LAING ^(3) (4) (5)^<br><br> <br>Director<br><br> <br>British Columbia, Canada	Mining Engineer; Independent Mining Executive, November<br>2018 to present; Chief Operating Officer of Equinox Gold Corp. and predecessors (mining), August 2016 to November 2018; Chief<br>Operating Officer of True Gold Mining Inc. (mining), June 2015 to April 2016; Chief Operating Officer of Quintana Resources Inc.<br>(resource industry management), 2014 to 2015.	September 26, 2016 to present
ALFREDO SILLAU ^(2) (3) (5)^<br><br> <br>Director<br><br> <br>Lima, Peru	Managing Partner, CEO and Director of Faro Capital (investment management).	November 29, 2016 to present
KYLIE DICKSON ^(2) (4)^<br><br> <br>Director<br><br> <br>British Columbia, Canada	Vice-President, Business Development of Equinox Gold<br>Corp. and predecessors (mining), April 2017 to March 2020; Chief Financial Officer of JDL Gold Corp. until its acquisition of<br>Luna Gold Corp. (mining), October 2016 to April 2017; Chief Financial Officer of Anthem United Inc. (mining), March 2014 to October<br>2016.	August 16, 2017 to present
LUIS GANOZA DURANT<br><br> <br>Chief Financial Officer<br><br> <br>Lima, Peru	Chief Financial Officer of the Company.	N/A

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| --- | | MANUEL RUIZ-CONEJO Vice-President of Operations Lima, Peru | Vice-President of Operations of the Company. | N/A | | --- | --- | --- | | JOSE PACORA Vice-President of Project Development Lima, Peru | Vice-President of Project Development of the Company. | N/A | | DAVID VOLKERT Vice-President of Exploration British Columbia, Canada | Vice-President of Exploration of the Company, August 2016 to present; President / Chief Executive Officer of Paget Minerals Corp. (mineral exploration), January 2010 to August 2016. | N/A | | ERIC CHAPMAN Vice-President of Technical Services British Columbia, Canada | Vice-President of Technical Services of the Company, January 2017 to present; Corporate Head of Technical Services of the Company, July 2016 to December 2016; Mineral Resource Manager of the Company, April 2011 to July 2016. | N/A | | GORDON JANG Vice-President of Finance and Accounting British Columbia, Canada | Vice-President of Finance and Accounting of the Company, April 2017 to present; Consultant, Hudbay Minerals Inc. (mining), July 2014 to March 2017. | N/A |

As at December 31, 2019, the directors and executive officers of the Company beneficially owned or had control or direction over, directly or indirectly, an aggregate of 1,408,307 Common Shares, representing approximately 0.88% of the issued Common Shares of the Company.

Notes:

(1)	The information as to country of residence, principal occupation, and Common<br>Shares held is not within the knowledge of the management of the Company and has been furnished by the respective individuals.
(2)	Member of the Audit Committee of the Company.
---	---
(3)	Member of the Compensation Committee of the Company.
---	---
(4)	Member of the Corporate Governance and Nominating Committee of the Company.
---	---
(5)	Member of the Sustainability Committee of the Company.
---	---

Cease Trade Orders or Bankruptcies

On April 3, 2017, a management cease trade order (“MCTO”) was issued by the British Columbia Securities Commission and other Canadian provincial securities regulatory authorities pursuant to National Policy 12-203 Management Cease Trade Orders in connection with the late filing of the Company’s annual audited financial statements and related MD&A for the years ended December 31, 2016 and 2015 and the AIF for the year ended December 31, 2016 (the “Annual Documents”). The MCTO prohibited the Chief Executive Officer and the Chief Financial Officer of the Company from trading in securities of the Company until the Company completed the required filing of the Annual Documents as well as its Interim Financial Documents (as defined below) for the first quarter of 2017, and the regulator revokes the MCTO.

The Annual Documents were filed on May 15, 2017. Due to the delay in finalizing the Annual Financial Documents, the Company was delayed in filing its interim financial statements and related MD&A for the three months ended March 31, 2017 and 2016 (together, the “Interim Financial Documents”). The Company filed the Interim Financial Documents on May 24, 2017, and the MCTO was revoked by the British Columbia Securities Commission on May 25, 2017.

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Other than as set forth above, as at the date of the AIF and during the 10 years prior to the date of the AIF, none of the directors or executive officers of the Company or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company:

(a)	is or has been a director or executive officer of any company (including the Company), that while<br>that person was acting in that capacity:
(i)	was the subject of a cease trade order or similar order or an order that denied the relevant company<br>access to any exemption under securities legislation, for a period of more than 30 consecutive days, other than as disclosed above;
---	---
(ii)	was subject to an event that resulted, after the director or executive officer ceased to be a director<br>or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company<br>access to any exemption under securities legislation, for a period of more than 30 consecutive days; or
---	---
(iii)	within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal<br>under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise<br>with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
---	---
(b)	has become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency,<br>or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager<br>or trustee appointed to hold the assets of the director, officer and shareholder.
---	---

Penalties or Sanctions

As at the date of the AIF and during the 10 years prior to the date of the AIF, none of the directors or officers of the Company or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company has been subject to:

(a)	any penalties or sanctions imposed by a court relating to securities legislation or by a securities<br>regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b)	any other penalties or sanctions imposed by a court or regulatory body that would likely be considered<br>important to a reasonable investor making an investment decision.
---	---

Conflicts of Interest

There are no existing or potential material conflicts of interest between the Company or any of its subsidiaries and a director or officer of the Company or any subsidiary.

AUDIT COMMITTEE

Pursuant to the provisions of National Instrument 52-110 Audit Committees (“NI 52-110”), the Company’s Audit Committee has adopted a written charter (the “Charter”) that sets out its mandate and responsibilities. The Charter is attached hereto as Schedule “A”.

The Audit Committee is presently comprised of Kylie Dickson, Alfredo Sillau and David Farrell. All members of the Audit Committee are “independent” and “financially literate”, within the meanings given to those terms in NI 52-110.

The education and experience of the Audit Committee members that is relevant to the performance of their responsibilities as Audit Committee members is as follows:

| -80- |

| --- | | Audit Committee Member | Education and Experience | | --- | --- | | Kylie Dickson | Ms. Dickson is a Canadian Chartered Professional Accountant with more than 13 years’ experience working with publicly traded resource companies. She received her Bachelor of Business Administration degree in Accounting from Simon Fraser University. She previously held the positions of Vice-President, Business Development of Equinox Gold Corp. and Chief Financial Officer of several mineral exploration and mining companies. Prior to her work with public companies, Ms. Dickson was an audit manager in the mining group of a major audit firm. | | Alfredo Sillau | Mr. Sillau is Managing Partner, CEO and Director of Faro Capital, an investment management firm that manages private equity and real estate funds. Previously, he headed the business development in Peru for Compass Group, a regional investment management firm, until late 2011. As CEO of Compass, Mr. Sillau actively took part in the structuring, promoting and management of investment funds with approximately US$500 million in assets under management. Mr. Sillau is a graduate of Harvard Business School. His background has given him the required experience to understand and assess the general application of the accounting principles used by the Company and to understand internal controls and procedures for financial reporting. | | David Farrell | Mr. Farrell is President of Davisa Consulting, a private consulting firm working with junior to mid-tier global mining companies. He formerly was Managing Director of Mergers & Acquisitions at Endeavour Financial where he successfully closed over $25 billion worth of M&A transactions for junior and mid-tier natural resource companies. Before his 12 years at Endeavour Financial, David was a lawyer at Stikeman Elliott LLP, working in Vancouver, Budapest and London. Mr. Farrell graduated from the University of British Columbia with a B.Comm. (Honours, Finance) and an LL.B and was called to the bar in both British Columbia and England. In addition, he has completed the ICD-Rotman Directors Education Program and been awarded the ICD.D designation. His background has given him the required experience to understand and assess the general application of the accounting principles used by the Company and to understand internal controls and procedures for financial reporting. |

The auditor of the Company obtains, as necessary, the pre-approval of the Audit Committee for any anticipated additional services required of the auditor for the coming fiscal year. If other service requirements arise during the year, the Audit Committee pre-approves such services at that time, prior to the commencement of such services.

Effective July 13, 2017, KPMG LLP, Chartered Professional Accountants, was appointed as auditor of the Company in the place of Deloitte LLP.

During the Company’s most recently completed fiscal year, no services were performed by the Company’s auditor pursuant to the De-Minimus Non-audit Servicesexemption contained in NI 52-110.

During the Company’s most recently completed fiscal year, the Company’s auditor performed certain non-audit services. Fees charged (in Canadian dollars) by the auditor during the last two fiscal years are as follows:

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| --- | | | 2018 | | 2019 | | | --- | --- | --- | --- | --- | | Audit Fees | $ | 1,040,300 | $ | 1,212,300 | | Audit-Related Fees | | Nil | $ | 27,300 | | Tax Fees | | Nil | | Nil | | All Other Fees | | Nil | | Nil | | | $ | 1,040,300 | $ | 1,239,600 |

“Audit Fees” are the aggregate fees billed for the audit of the Company’s consolidated annual financial statements, and review of the interim financial statements.

“Audit-Related Fees” are fees charged for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees”. The fees charged in 2019 by KPMG LLP include services for attestation engagements.

“Tax Fees” are fees for professional services rendered for tax compliance and tax advice on actual or contemplated transactions.

“All Other Fees” are amounts not included in the categories above.

LEGAL PROCEEDINGS

Other than the Administrative Proceedings and the Amparo Proceedings referred to in the “Risk Factors” section of this AIF, there are no known legal proceedings involving an amount exceeding 10% of the current assets of the Company to which the Company is a party or which any of its properties is the subject during the most recently completed financial year, or any such proceedings known to the Company to be contemplated.

TRANSFER AGENT AND REGISTRAR

The Common Shares are listed for trading on the TSX in Canada and on the NYSE in the United States. The Debentures are only listed for trading on the TSX. The Company’s transfer agent and registrar for its Common Shares and Debentures is Computershare Trust Company, at its offices in Vancouver, BC and Toronto, ON. The Company’s co-transfer agent and registrar for its Common Shares in the United States is Computershare Trust Company, N.A. at its office in Golden, Colorado.

MATERIAL CONTRACTS

In connection with the 2019 Financing described in this AIF under the heading “General Development of the Business – Three-Year History and Recent Developments”, the Company entered into:

(a)	an underwriting agreement dated September 16, 2019 with the Underwriters, pursuant to which the<br>Underwriters agreed to buy Debentures on a bought-deal basis. The Company paid a commission to the Underwriters of US$40.00 per<br>Debenture issued in the 2019 Financing, and reimbursed certain expenses of the Underwriters incurred in connection with the 2019<br>Financing; and
(b)	the Indenture. Refer to “Description of Capital Structure – Debentures”.
---	---

Other than as disclosed in this AIF and other than those entered into in the ordinary course of the Company’s business, there are no contracts that are material to the Company and that were entered into during the most recently completed fiscal year ended December 31, 2019 or before the most recently completed financial year, but are still in effect as of the date of this AIF.

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INTERESTS OF EXPERTS

Names of Experts

The following are the names of persons or companies: (a) that are named as having prepared or certified a report, valuation, statement or opinion included in a filing, or referred to in a filing made under National Instrument 51-102 – Continuous Disclosure Obligations during or relating to the fiscal year ended December 31, 2019; and (b) whose profession or business give authority to the report, valuation, statement or opinion made by the person or the Company:

(a)	KPMG LLP provided an auditors’ report dated March 10, 2020 in respect of the Company’s<br>consolidated financial statements for the years ended December 31, 2019 and 2018; and
(b)	Eric Chapman, P.Geo. and Amri Sinuhaji, P.Eng. prepared the Caylloma Technical Report and the San<br>Jose Technical Report. See “Description of the Business – Material Mineral Properties”.
---	---

Eric Chapman, Vice President of Technical Services of the Company and Amri Sinuhaji, Director of Technical Services, Mine Planning of the Company are each a Qualified Person as defined by NI 43-101.

Eric Chapman is responsible for ensuring that the technical information contained in this AIF is an accurate summary of the original reports and data provided to or developed by the Company and he has reviewed and approved the scientific and technical information contained in this AIF.

Interests of Experts

To the knowledge of the Company, as at the dates of the Caylloma Technical Report, the San Jose Technical Report and as of the date hereof, Eric Chapman and Amri Sinuhaji together own, directly or indirectly, less than one percent of the outstanding Common Shares. Neither of Eric Chapman or Amri Sinuhaji has received a direct or indirect interest in any securities or property of the Company in connection with the preparation or certification of such report.

KPMG LLP is the independent registered public accounting firm of the Company and is independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations and also that they are independent accountants with respect to the Company under all relevant U.S. professional and regulatory standards.

ADDITIONAL INFORMATION

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, is contained in the Company’s Management Information Circular for the most recent annual meeting of shareholders. Additional financial information is provided in the Company’s audited financial statements for the fiscal year ended December 31, 2019 and the management’s discussion and analysis thereon. The foregoing disclosure documents, along with additional information relating to the Company are available for viewing on SEDAR at www.sedar.com.

Schedule “A”

FORTUNA SILVER MINES INC.

(the “Company”)

AUDIT COMMITTEE CHARTER

PURPOSE

The primary function of the Audit Committee is to assist the Board of Directors of the Company (the “Board”) in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the shareholders and others, the systems of internal controls and management information systems established by the senior officers of the Company (“Management”) and the Company’s internal and external audit process and monitoring compliance with the Company's legal and regulatory requirements with respect to its financial statements.

The Audit Committee is accountable to the Board. In the course of fulfilling its specific responsibilities hereunder, the Audit Committee is expected to maintain an open communication between the Company’s external auditors and the Board.

The Audit Committee does not plan or perform audits or warrant the accuracy or completeness of the Company's financial statements or financial disclosure or compliance with generally accepted accounting procedures as these are the responsibility of Management.

RESPONSIBILITIES

Subject to the powers and duties of the Board, the Board hereby delegates to the Audit Committee the following powers and duties to be performed by the Audit Committee on behalf of and for the Board. Nothing in this Charter is intended to or does confer on any member a higher standard of care or diligence than that which applies to the directors as a whole.

External Auditors

The Audit Committee has primary responsibility for the selection, appointment, dismissal, compensation and oversight of the external auditors, subject to the overall approval of the Board. For this purpose, the Audit Committee may consult with Management.

The external auditors shall report directly to the Audit Committee.

Also, the Audit Committee:

a.	recommends to the Board:
i.	whether the current external auditors should be nominated for reappointment for the ensuing year<br>and if applicable, select and recommend a suitable alternative for nomination; and
---	---
ii.	the amount of compensation payable to the external auditors;
---	---
b.	resolves disagreements, if any, between Management and the external auditors regarding financial<br>reporting;
---	---
c.	provides the Board with such recommendations and reports with respect to the financial statements<br>of the Company as it deems advisable;
---	---
d.	takes reasonable steps to confirm the independence of the external auditors, including but not<br>limited to pre-approving any non-audit related services provided by the external auditors to the Company or the Company's subsidiaries,<br>if any;
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| -i- |

| --- | | e. | confirms that the external auditors are a 'participating audit' firm for the purpose of National Instrument 52-108 Auditor Oversight and are in compliance with governing regulations; | | --- | --- | | f. | reviews the plan and scope of the audit to be conducted by the external auditors of the Company; | | --- | --- | | g. | reviews and evaluates the performance of the external auditors; and | | --- | --- | | h. | reviews and approves the Company’s hiring policy regarding partners, employees and former partners and employees of the Company’s present and former external auditors. | | --- | --- |

Audit and Review Process and Results

The Audit Committee has a duty to receive, review and make any inquiry regarding the completeness, accuracy and presentation of the Company’s financial statements to ensure that the financial statements fairly present the financial position and risks of the organization and that they are prepared in accordance with generally accepted accounting principles. To accomplish this, the Audit Committee:

a.	considers the scope and general extent of the external auditors' review, including their engagement<br>letter and major changes to the Company’s auditing and accounting principles and practices;
b.	consults with management regarding the sufficiency of the Company's internal system of audit and<br>financial controls, internal audit procedures and results of such audits;
---	---
c.	ensures the external auditors have full, unrestricted access to required information and have the<br>cooperation of management;
---	---
d.	reviews with the external auditors the audit process and standards, as well as regulatory or Company-initiated<br>changes in accounting practices and policies and the financial impact thereof, and selection or application of appropriate accounting<br>principles;
---	---
e.	reviews with the external auditors and, if necessary, legal counsel, any litigation, claim or contingency,<br>including tax assessments, that could have a material effect upon the financial position of the Company and the manner in which<br>these matters are being disclosed in the financial statements;
---	---
f.	reviews the appropriateness and disclosure of any off-balance sheet matters;
---	---
g.	reviews disclosure of related-party transactions;
---	---
h.	receives and reviews with the external auditors, the external auditors' audit report and the audited<br>financial statements;
---	---
i.	makes recommendations to the Board respecting approval of the audited financial statements;
---	---
j.	meets with the external auditors separately from management to review the integrity of the Company’s<br>financial reporting, including the clarity of financial disclosure and the degree of conservatism or aggressiveness of the accounting<br>policies and estimates, any significant disagreements or difficulties in obtaining information, adequacy of internal controls over<br>financial reporting, adequacy of disclosure controls and procedures, and the degree of compliance by the Company with prior recommendations<br>of the external auditors;
---	---
k.	directs management to implement such changes as the Audit Committee considers appropriate, subject<br>to any required approvals of the Board arising out of the review; and
---	---
l.	meets at least annually with the external auditors, independent of management, and reports to the<br>Board on such meetings.
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| -ii- |

| --- |

Interim Financial Statements

The Audit Committee:

a.	reviews and determines the Company's practice with respect to review of interim financial statements<br>by the external auditors;
b.	conducts all such reviews and discussions with the external auditors and Management as it deems<br>appropriate; and
---	---
c.	makes recommendations to the Board respecting approval of the interim financial statements.
---	---

Involvement with Management

The Audit Committee has primary responsibility for overseeing the actions of management in all aspects of financial management and reporting. The Audit Committee:

a.	reviews the Company’s annual and interim financial statements, Management’s Discussion<br>and Analysis and earnings press releases, if any, before the Company publicly discloses this information;
b.	reviews all of the Company’s public disclosure of financial information extracted from the<br>Company's financial statements, if such financial statements have not previously been reviewed by the Committee, prior to such<br>information being made public by the Company and for such purpose, the CFO assumes responsibility for providing the information<br>to the Audit Committee for its review;
---	---
c.	reviews material financial risks with Management, the plan that Management has implemented to monitor<br>and deal with such risks and the success of Management in following the plan;
---	---
d.	consults annually and otherwise as required with the Company's CEO and CFO respecting the adequacy<br>of the internal controls over financial reporting and disclosure controls and procedures and reviews any breaches or deficiencies;
---	---
e.	obtains such certifications of annual and interim filings by the CEO and CFO attesting to internal<br>controls over financial reporting and disclosure controls and procedures as deemed advisable;
---	---
f.	reviews Management's response to significant written reports and recommendations issued by the<br>external auditors and the extent to which such recommendations have been implemented by Management;
---	---
g.	reviews with Management the Company's compliance with applicable laws and regulations respecting<br>financial reporting matters, and any proposed regulatory changes and their impact on the Company; and
---	---
h.	reviews as required with Management and approves disclosure of the Audit Committee Charter, and<br>Audit Committee disclosure required in the Company's Annual Information Form, Information Circular and on the Company's website.
---	---

PROCEDURAL MATTERS

The Audit Committee:

a.	invites the Company’s external auditors, the CFO, and such other persons as deemed appropriate<br>by the Audit Committee to attend meetings of the Audit Committee;
b.	reports material decisions and actions of the Audit Committee to the Board, together with such<br>recommendations as the Audit Committee may deem appropriate;
---	---
c.	has the power to conduct or authorize investigations into any matter within the scope of its responsibilities;
---	---

| -iii- |

| --- | | d. | has the right to engage independent counsel and other advisors as it determines necessary to carry out its duties and the right to set the compensation for any advisors employed by the Audit Committee; | | --- | --- | | e. | has the right to communicate directly with the CFO and other members of Management who have responsibility for the internal and external audit process, as well as to communicate directly with the internal and external auditors; and | | --- | --- | | f. | pre-approves non-audit services to be performed by the external auditors, in accordance with the provisions of National Instrument 52-110 – Audit Committees (“NI 52-110”). | | --- | --- |

COMPOSITION

The Audit Committee is composed of a minimum of three directors, all of whom are independent, subject to any exemptions or relief that may be granted from such requirements under NI 52-110, and have relevant skills and/or experience in the Audit Committee's areas of responsibility as may be required by the securities laws applicable to the Company, including those of any stock exchange on which the Company’s securities are traded.

Appointment of Committee Membersand Vacancies

Members of the Audit Committee are appointed or confirmed by the Board annually and hold office at the pleasure of the Board. The Board fills any vacancy on, and may appoint any additional members to, the Audit Committee.

Committee Chair

The Board appoints a Chair for the Audit Committee.

STRUCTURE AND OPERATIONS

Meetings

The Chair of the Audit Committee or the Chair of the Board or any two of its members may call a meeting of the Audit Committee. The Audit Committee meets at least four times each fiscal year, and at such other times during each year as it deems appropriate.

Quorum

A majority of the members appointed to the Audit Committee constitutes a quorum.

Notice of Meetings

The Chair of the Audit Committee arranges to provide notice of the time and place of every meeting in writing (including by electronic means) to each member of the Audit Committee at least two (2) business days prior to the time fixed for such meeting, provided, however, that a member may in any manner waive a notice of a meeting. Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. The Chair also ensures that an agenda for the meeting and all required materials for review by the members of the Audit Committee are delivered to the members with sufficient time for their review, or that such requirement is waived.

| -iv- |

| --- |

Absence of Committee Chair

If the Chair of the Audit Committee is not present at any meeting of the Audit Committee, the other members of the Audit Committee will choose a Chair to preside at the meeting.

Secretary of Committee

At each meeting the Audit Committee appoints a secretary who need not be a director of the Company.

Attendance of the Company's Officersat Meetings

The Chair of the Audit Committee or any two members of the Audit Committee may invite one or more officers of the Company to attend any meeting of the Audit Committee.

Delegation

The Audit Committee may, in its discretion and where permitted by NI 52-110, delegate all or a portion of its duties and responsibilities to a subcommittee, management or, to the extent otherwise permitted by applicable plans, laws or regulations, to any other body or individual.

Procedure and Records

Subject to any statute or constating documents of the Company, the Audit Committee determines its own procedures at meetings and may conduct meetings by telephone and keeps records of its proceedings.

COMPLAINTS

The Audit Committee has established a whistle-blower policy as detailed in the Code of Business Conduct and Ethics and Whistle-Blower Policy, which sets out the procedures for:

a.	the receipt, retention and treatment of complaints received by the Company regarding accounting,<br>internal accounting controls, or auditing matters; and
b.	the confidential, anonymous submission to the Company of concerns regarding questionable accounting<br>or auditing matters.
---	---

The Audit Committee reviews the whistle-blower policy annually.

REPORTING AND ASSESSMENT

The Audit Committee reports to the Board of Directors, and on an annual basis, presents to the Board a Committee Annual Report consisting of the Audit Committee’s review of its charter, the Committee’s and its Chair’s performance over the past year, and any recommendations the Audit Committee makes in respect thereto.

Approved by the Board: March 27, 2019

EXHIBIT 99.2

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED

DECEMBER 31, 2019 AND 2018

(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 Officer

Vancouver, Canada

March 10, 2020

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

Report of Independent RegisteredPublic 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, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity and cash flows 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, 2019 and 2018, 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, 2019, 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 10, 2020 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 leases as of January 1, 2019 due to the adoption of IFRS 16, Leases.

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.

***FortunaSilver Mines Inc.***Page 2

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.

/s/ KPMG LLP

Chartered Professional Accountants

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

Vancouver, Canada

March 10, 2020

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

Report of Independent RegisteredPublic Accounting Firm

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, 2019, 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, 2019, 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 statements of financial position of the Company as of December 31, 2019 and 2018, 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 10, 2020 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 Controls and Procedures – 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.

***FortunaSilver Mines Inc.***Page 2

Definition and Limitations of Internal Control OverFinancial 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 10, 2020

Fortuna Silver Mines Inc.

Consolidated Income Statements

For the years ended December 31, 2019 and 2018

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

	Years ended December 31,
	2019			2018
Sales (note 23)	$	257,187		$	263,296
Cost of sales (note 24)		172,606			166,725
Mine operating income		84,581			96,571
General and administration (note 25)		29,805			26,189
Exploration and evaluation		2,411			723
Share of loss from associates (note 11)		225			21
Foreign exchange loss (note 12)		13,335			6,091
Other expenses (note 26)		4,611			1,961
		50,387			34,985
Operating income		34,194			61,586
Investment gains (note 12)		11,024			-
Interest and finance (costs) income, net (note 27)		(24	)		384
Gain (loss) on derivatives		(1,223	)		5,370
		9,777			5,754
Income before income taxes		43,971			67,340
Income taxes (note 28)
Current income tax expense		32,631			30,563
Deferred income tax (recovery) expense		(12,456	)		2,787
		20,175			33,350
Net income for the year	$	23,796		$	33,990
Earnings per share (note 22)
Basic	$	0.15		$	0.21
Diluted	$	0.14		$	0.21
Weighted average number of common shares outstanding (000's)
Basic		160,193			159,785
Diluted		164,525			161,636

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

| Page | 1 |

| --- |

Fortuna Silver Mines Inc.

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(Presented in thousands of US dollars)


			2018
Net income for the year	23,796		$	33,990
Items that will remain permanently in other comprehensive income:
Changes in fair value of marketable securities, net of nil tax	-			(69	)
Items that may in the future be reclassified to profit or loss:
Changes in fair value of hedging instruments, net of nil tax	(665	)		(156	)
Total other comprehensive loss for the year	(665	)		(225	)
Comprehensive income for the year	23,131		$	33,765

All values are in US Dollars.

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

| Page | 2 |

| --- |

Fortuna Silver Mines Inc.

Consolidated Statements of Financial Position

As of December 31, 2019 and 2018

(Presented in thousands of US dollars)

	December 31,		December 31,
	2019		2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	83,404	$	90,503
Short term investments		-		72,824
Trade and other receivables (note 5)		47,707		32,769
Inventories (note 6)		14,471		14,386
Other current assets (note 7)		5,495		7,341
Assets held for sale (note 8)		1,069		1,097
		152,146		218,920
NON-CURRENT ASSETS
Mineral properties and exploration and evaluation assets (note 9)		353,519		312,800
Plant and equipment (note 10)		378,509		192,200
Investment in associates (note 11)		1,331		4,277
Long-term receivables and other (note 12)		38,389		15,241
Deposits and advances to contractors (note 13)		12,171		43,079
Total assets	$	936,065	$	786,517
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (note 14)	$	65,286	$	48,734
Income taxes payable		12,400		8,358
Current portion of lease obligations (note 3(u) and 16)		8,831		3,395
Current portion of closure and reclamation provisions (note 19)		3,257		841
		89,774		61,328
NON-CURRENT LIABILITIES
Debt (note 17)		146,535		69,302
Deferred tax liabilities (note 28 (c))		20,915		31,444
Closure and reclamation provisions (note 19)		27,868		15,102
Lease obligations (notes 3(u) and 16)		15,048		5,371
Other liabilities (note 18)		499		1,166
Total liabilities		300,639		183,713
SHAREHOLDERS' EQUITY
Share capital (note 21)		422,145		420,467
Reserves		26,094		18,946
Retained earnings		187,187		163,391
Total shareholders' equity		635,426		602,804
Total liabilities and shareholders' equity	$	936,065	$	786,517
/s/ Jorge Ganoza Durant	/s/ Kylie Dickson
---	---
Jorge Ganoza Durant	Kylie Dickson
Director	Director

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

| Page | 3 |

| --- |

Fortuna Silver Mines Inc.

Consolidated Statements of Cashflows

For the years ended December 31, 2019 and 2018

(Presented in thousands of US dollars)

	Years ended December 31,
	2019			2018
OPERATING ACTIVITIES
Net income for the year	$	23,796		$	33,990
Items not involving cash
Depletion and depreciation		46,003			44,774
Accretion expense		939			830
Income taxes		20,175			33,350
Interest expense		857			1,562
Interest income		(1,838	)		-
Share based payments expense, net of cash settlements		4,567			(2,051	)
Share of loss from associates		225			21
Unrealized foreign exchange loss		509			453
Unrealized foreign exchange loss, Lindero construction (note 12)		11,465			3,854
Investment gains, Lindero construction		(11,024	)		-
Unrealized (gain) loss on derivatives		2,646			(4,974	)
Write-downs and other		5,592			2,806
		103,912			114,615
Trade and other receivables		(14,309	)		4,257
Prepaid expenses		1,621			(496	)
Inventories		(1,036	)		1,792
Trade and other payables		3,021			(1,588	)
Closure<br> and reclamation payments		(352	)		(682	)
Cash provided by operating activities		92,857			117,898
Income taxes paid		(31,521	)		(35,698	)
Interest paid		(824	)		(1,576	)
Interest received		2,493			2,831
Net cash provided by operating activities		63,005			83,455
INVESTING ACTIVITIES
Purchases of short-term investments		(45,145	)		(237,787	)
Redemptions of short-term investments		128,320			191,632
Investments in associates		-			(1,148	)
Expenditures on Lindero construction		(189,653	)		(59,535	)
Capitalized interest on Lindero construction		(6,005	)		(1,573	)
Additions to mineral properties, plant and equipment		(28,473	)		(36,788	)
Contractor advances on Lindero construction and other expenditures		(19,743	)		(48,191	)
Advances applied to Lindero construction and other expenditures		50,650			5,112
Proceeds from sale of assets		229			13
Additions to long-term receivables		(35,394	)		(16,788	)
Cash used in investing activities		(145,214	)		(205,053	)
FINANCING ACTIVITIES
Transaction costs on debt modification		-			(1,338	)
Transaction costs on convertible debenture (note 17(b))		(2,490	)		-
Proceeds from credit facility (note 17(a))		40,000			30,000
Proceeds from convertible debenture (note 17(b))		46,000			-
Proceeds from issuance of common shares		-			959
Payments of lease obligations		(8,385	)		(907	)
Cash provided by financing activities		75,125			28,714
Effect of exchange rate changes on cash and cash equivalents		(15	)		313
Decrease in cash and cash equivalents during the year		(7,099	)		(92,571	)
Cash and cash equivalents, beginning of the year		90,503			183,074
Cash and cash equivalents, end of the year	$	83,404		$	90,503
Cash and cash equivalents consist of:
Cash	$	30,984		$	24,535
Cash equivalents		52,420			65,968
Cash and cash equivalents, end of the year	$	83,404		$	90,503

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

| Page | 4 |

| --- |

Fortuna Silver Mines Inc.

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

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

	Share capital				Reserves
	Number of common shares		Amount		Equity<br> reserve			Hedging<br> reserve			Fair value<br> reserve			Equity component of convertible debenture		Foreign<br> Currency<br> reserve		Retained<br> earnings		Total equity
Balance at January 1, 2018		159,636,983	$	418,168	$	14,726		$	147		$	27		$	-	$	1,115	$	129,401	$	563,584
Total comprehensive income
Net income for the year		-		-		-			-			-			-		-		33,990		33,990
Other comprehensive loss		-		-		-			(156	)		(69	)		-		-		-		(225	)
Total comprehensive income		-		-		-			(156	)		(69	)		-		-		33,990		33,765
Transactions with owners of the Company
Shares issued on vesting of share units		78,150		388		(388	)		-			-			-		-		-		-
Exercise of stock options		20,000		21		(8	)		-			-			-		-		-		13
Exercise of warrants		204,462		1,890		(944	)		-			-			-		-		-		946
Share-based payments (note 20)		-		-		4,496			-			-			-		-		-		4,496
		302,612		2,299		3,156			-			-			-		-		-		5,455
Balance at December 31, 2018		159,939,595	$	420,467	$	17,882		$	(9	)	$	(42	)	$	-	$	1,115	$	163,391	$	602,804
Balance at January 1, 2019		159,939,595	$	420,467	$	17,882		$	(9	)	$	(42	)	$	-	$	1,115	$	163,391	$	602,804
Total comprehensive income
Net income for the year		-		-		-			-			-			-		-		23,796		23,796
Other comprehensive loss		-		-		-			(665	)		-			-		-		-		(665	)
Total comprehensive income		-		-		-			(665	)		-			-		-		23,796		23,131
Transactions with owners of the Company
Shares issued on vesting of share units		351,958		1,678		(1,678	)		-			-			-		-		-		-
Share-based payments (note 20)		-		-		4,666			-			-			-		-		-		4,666
Equity portion of convertible debenture, net of tax (note 17 (b))		-		-		-			-			-			4,825		-		-		4,825
		351,958		1,678		2,988			-			-			4,825		-		-		9,491
Balance at December 31, 2019		160,291,553	$	422,145	$	20,870		$	(674	)	$	(42	)	$	4,825	$	1,115	$	187,187	$	635,426

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

| Page | 5 |

| --- |

FortunaSilver Mines Inc.

Notesto Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

1.	Nature 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 the Lindero Gold Project (“Lindero Project”), which is under construction, in northern Argentina.

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, Canada, V6C 3L6.

2.	Basis 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, 2019.

On March 10, 2020, 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.

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.

3.	Significant Accounting Policies

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

(a)	Basis 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 | 6 |

| --- |

Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(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, 2019, 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 Project
(b)	Foreign 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, 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, stockpiled ore, materials and supplies. Costs allocated to metal inventories are based on average costs, which include direct mining costs, direct labor and material costs, mine site overhead, depletion and amortization. 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. If carrying value exceeds 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 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.

| Page | 7 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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

(g)	Mineral 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 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.

| Page | 8 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

The expected production to be obtained over the life of the mineral property is based on our life-of-mine production plans which typically 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.

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 2019 and 2018 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 2019 life-of-mine evaluation for each operation as of December 31, 2019, was San Jose 29% (2018 and 2017: 21% and 23%); Caylloma 45% (2018 and 2017: 48% and 60%).

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.

| Page | 9 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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.

-	Commercial Production

Capital work in progress consists of expenditures for development of a mine and construction of related processing facilities, and includes costs of testing whether the asset is functioning properly, after deducting 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”). Commercial production is a convention for determining the point in time in which a mine and plant has completed the operational commissioning and has operational results that are expected to remain at a sustainable commercial level over a period of time, after which production costs are no longer capitalized and are reported as operating costs. The determination of when commercial production commences is based on several qualitative factors including but not limited to the following:

•	all major capital expenditures to bring the mine to the condition<br>necessary for it to be capable of operating in the manner intended by management have been completed; and
•	the ability to sustain ongoing production of ore at a steady or increasing<br>level.
---	---

On the commencement of commercial production, depletion of each mining property will commence on a unit-of-production basis. Any costs incurred after the commencement of commercial production are capitalized to the extent they give rise to a future economic benefit.

ii.	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 at the mine	Units of production	Declining balance
Buildings, others ^(1)^	6-10 years	Straight line
Leasehold improvements ^(1)^	4-8 years	Straight line
Plant and equipment
Machinery and equipment ^(1)^	3-12 years	Straight line
Furniture and other equipment ^(1)^	2-12 years	Straight line
Transport units	4-5 years	Straight line
Capital work in progress	Not depreciated

^(1)^ The 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.

| Page | 10 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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.

Costs associated with commissioning activities on constructed plants are deferred from the date of mechanical completion of the facilities until the date the assets are capable of operating in the manner intended by management. Any revenues generated prior to commencement of commercial production are credited against the carrying value of the qualifying asset.

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.

(h)	Asset 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.

| Page | 11 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

(i)	Borrowing 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.

Capitalization of borrowing costs incurred commences on the date the following three conditions are met:

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

Borrowing costs incurred after the qualifying assets are capable of operating in the manner intended by management 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.

(j)	Assets Held for Sale

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

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

| Page | 12 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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

(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.

| Page | 13 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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)	Share Capital

Common 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 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.

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.

| Page | 14 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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. All RSUs granted prior to March 1, 2015 were governed by the restricted share unit plan dated November 12, 2010.

-	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.

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 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 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.

| Page | 15 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

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

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

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

| Page | 16 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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

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

ii Impairment of FinancialAssets

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.

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 Recognition

The Company earns revenue from contracts with customers related to its concentrate sales. Revenue from contracts with customers is recognized when a customer obtains control of the concentrate 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.

| Page | 17 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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.

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 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.

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

(t) Significant Accounting Estimates 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. 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, 2019, the Company applied the critical estimates, assumptions and judgements as disclosed in note 4.

(u) Adoption of New Accounting Standards

i. IFRS16 Leases

Prior to the adoption of IFRS 16 on January 1, 2019, a lease was classified as a finance lease when substantially all of the risks and rewards incidental to ownership of the leased asset were transferred from the lessor to the lessee by the agreement. At the commencement of the lease term, finance leases were recognized as assets and liabilities at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The assets were depreciated over the shorter of the asset’s useful lives and the term of the lease. Interest on the lease instalments was recognized as interest expense over the lease term using the effective interest method. Leases for land and buildings were recorded separately if the lease payments could be allocated accordingly.

Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments are recorded in profit or loss using the straight line method over their estimated useful lives.

The following is the new accounting policy for leases under IFRS 16, effective January 1, 2019:

At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

| Page | 18 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months or to low value assets, which is made on an asset by asset basis.

The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated depreciation, impairment losses and adjusted for certain remeasurements of the lease liability. The ROU asset is depreciated from the commencement date over the shorter of the lease term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator of impairment.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment.

Lease payments included in the measurement of the lease liability are comprised of:

·	fixed payments, including in-substance<br>fixed payments;
·	variable lease payments that depend on<br>an index or a rate, initially measured using the index or rate as at the commencement date;
---	---
·	amounts expected to be payable under a<br>residual value guarantee;
---	---
·	the exercise price under a purchase option<br>that the Company is reasonably certain to exercise;
---	---
·	lease payments in an optional renewal<br>period if the Company is reasonably certain to exercise an extension option; and
---	---
·	penalties for early termination of a lease<br>unless the Company is reasonably certain not to terminate early.
---	---

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU asset and lease liability are recognized as an expense in the consolidated statement of income in the period in which they are incurred.

The ROU assets are presented within “Plant and equipment” and the lease liabilities are presented in “Lease obligations” on the balance sheet.

*ii.*Adoptionof IFRS 16 Leases

Effective January 1, 2019, the Company adopted IFRS 16 using the modified retrospective approach. The comparative figures for the 2018 reporting period have not been restated and are accounted for under IAS 17, Leases, and IFRIC 4, Determining Whether an Arrangement Contains a Lease, as permitted under the specific transitional provisions in the standard.

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·	applied the exemption not to recognize<br>right of use asset and liabilities for leases with less than 12 months of lease term;
·	excluded initial direct cost from measuring<br>the right of use asset at the date of initial application; and
---	---
·	used hindsight when determining the lease<br>term if the contract contains an option to extend or terminate the lease.
---	---

At transition to IFRS 16, for those leases classified as operating leases under IAS 17, the lease liabilities were measured at the present value of the remaining lease payments and discounted using each operation’s applicable incremental borrowing rate as of January 1, 2019. As a result, the Company, as a lessee, has recognized $7,316 within Lease Obligations representing its obligation to make lease payments. ROU assets of the same amount were recognized within Plant and Equipment, representing its right to use the underlying assets. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 5.32%.

The Company leases various pieces of equipment that had previously been classified as finance leases under IAS 17. For these finance leases, the carrying amount of the ROU asset and the lease liability at January 1, 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

The following table summarizes the difference between operating lease commitments disclosed immediately preceding the date of initial application and lease liabilities recognized on the balance sheet at the date of initial application:

Operating lease obligations as at December 31, 2018	$	2,553
Leases with lease term of 12 months or less and low value assets		(825	)
Embedded leases identified in existing service contracts		6,162
Effect of discounting at incremental borrowing rate		(574	)
Lease liabilities recognized as at January 1, 2019		7,316
Lease liabilities from finance leases previously recorded in lease obligations		8,767
Total lease liabilities as at January 1, 2019		16,083
Less current portion		(6,120	)
Non-current portion	$	9,963

*iii.*Adoptionof IFRIC 23 Uncertainty over Income Tax Treatments

This interpretation sets out how to determine the accounting for a tax position when there is uncertainty over income tax treatments. At January 1, 2019, the Company adopted this standard and there was no impact on its financial statements.

(v) New Accounting Standards Issued but not yet Effective

A number of new standards are effective for annual periods beginning after January 1, 2019 and earlier application is permitted; however, the Company has not early adopted the new or amended standards in preparing these financial statements.

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FortunaSilver Mines Inc.

Notesto Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

The following amended standards and interpretations are not expected to 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).
---	---

4. Use of Estimates, Assumptions and Judgements

(a) Critical Accounting Estimates and Assumptions

Many of the amounts included in the consolidated financial statements require management to make judgements and/or estimates. These judgements and estimates 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:

i. MineralReserves 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, 2019 we have used the following long-term prices for our reserve and resource estimations: gold $1,380/oz, silver $17/oz, lead $2,170/t and zinc $2,590/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 judgements 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 3(g)(i) of these financial statements.

ii. Valuationof 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 income statement when a property is abandoned or when there is an impairment.

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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.

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. Reclamation andOther 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.

iv. Revenue Recognition

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.

*v.*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.

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(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 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. IncomeTaxes

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. Assessmentof 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 estimates, assumptions and judgments made by management on the 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 judgments over these factors would affect the present value of the lease liabilities, as well as the associated amount of the ROU asset.

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Fortuna Silver Mines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

5.	Trade<br> and Other Receivables
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Trade receivables from concentrate sales	$	33,642	$	28,132
Advances and other receivables		2,419		3,179
Value added taxes recoverable		11,646		1,458
Accounts and other receivables	$	47,707	$	32,769

The Company’s trade receivables from concentrate 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, 2019 and 2018.

6.	Inventories
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Concentrate stockpiles	$	2,640	$	1,671
Ore stockpiles		3,730		3,166
Materials and supplies		8,101		9,549
Inventories	$	14,471	$	14,386

During the year ended December 31, 2019, the Company expensed $169,711 (December 31, 2018 –$162,751) of inventories to cost of sales and wrote down $1,328 (December 31, 2018 - $206) of materials and supplies to their net realizable value, with such write downs included in cost of sales.

7.	Other<br> Current Assets
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Derivative assets	$	-	$	2,646
Income tax recoverable		2,553		136
Prepaid expenses		2,942		4,559
Other current assets	$	5,495	$	7,341
8.	Assets<br> Held for Sale
---	---

Changes to assets held for sale during the years ended December 31, 2019 and 2018 are as follow:

Balance at December 31, 2017	$	1,701
Transfer from property, plant and equipment		194
Disposals		(107	)
Write-downs		(691	)
Balance at December 31, 2018		1,097
Disposals		(28	)
Balance at December 31, 2019	$	1,069

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FortunaSilver Mines Inc.

Notesto Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(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, 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
Write-downs		-		-		-		(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
	Depletable					Not depletable
---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma		San Jose			Lindero		Other		Total
COST
Balance at December 31, 2017	$	112,669	$	164,198		$	140,154	$	4,150	$	421,171
Additions		8,240		12,035			14,782		3,647		38,704
Changes in closure and reclamation provision		716		(624	)		918		-		1,010
Balance at December 31, 2018	$	121,625	$	175,609		$	155,854	$	7,797	$	460,885
ACCUMULATED DEPLETION
Balance at December 31, 2017	$	61,053	$	63,506		$	-	$	-	$	124,559
Depletion		7,154		16,372			-		-		23,526
Balance at December 31, 2018	$	68,207	$	79,878		$	-	$	-	$	148,085
Net Book Value at December 31, 2018	$	53,418	$	95,731		$	155,854	$	7,797	$	312,800

During the year ended December 31, 2019, the Company capitalized $5,259 (December 31, 2018 - $1,125) of interest related to the construction of the Lindero Project.

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.

Exploration and Evaluation Assets

	Mexico					Argentina								Serbia
	Tlacolula		Pachuca			Arizaro		Esperanza			Incachule			Barje		Others		Total
Balance at December 31, 2017	$	3,128	$	-		$	367	$	82		$	82		$	491	$	-	$	4,150
Additions		170		-			567		706			684			1,447		73		3,647
Balance 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 at December 31, 2019	$	3,516	$	-		$	936	$	-		$	-		$	3,256	$	225	$	7,933

During the year ended December 31, 2019, the Company incurred $2,652 (December 31, 2018 - $3,647) of exploration and evaluation expenditures of which $962 were expensed. In addition, the Company wrote down $1,554 relating to two greenfield exploration projects (December 31, 2018 – nil).

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

10.	Plant and Equipment
	Machinery<br> and<br> equipment			Land, buildings <br>and leasehold <br>improvements		Furniture,<br><br> other<br><br> equipment<br><br> and<br><br> Transport<br> units			Assets<br><br> under lease ^1^		Capital<br><br> work in<br><br> progress -<br><br> Lindero			Capital<br> work in<br> progress -<br><br> Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
COST
Balance at December 31, 2018	$	74,188		$	141,318	$	11,066		$	13,411	$	52,964		$	6,140		$	299,087
Initial adoption IFRS 16 (note 3(u))		-			-		-			7,316		-			-			7,316
Balance 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		177,017			9,718			207,042
Changes in closure and reclamation provision		171			-		-			-		-			-			171
Disposals		(1,038	)		-		(87	)		-		-			-			(1,125	)
Reclassifications		740			17,700		1,640			-		(10,646	)		(9,434	)		-
Balance at December 31, 2019	$	75,246		$	159,732	$	16,083		$	35,671	$	219,335		$	6,424		$	512,491
ACCUMULATED DEPRECIATION
Balance 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 at December 31, 2019	$	42,214		$	78,360	$	7,402		$	6,006	$	-		$	-		$	133,982
Net Book Value at December 31, 2019	$	33,032		$	81,372	$	8,681		$	29,665	$	219,335		$	6,424		$	378,509
(1)	The Company leases equipment that was previously classified as a finance lease under IAS 17. On<br>January 1, 2019, these leases were classified as right-of-use assets under IFRS 16 and the carrying amount of $13,411 and<br>the lease liability of $8,767 were determined based on the carrying amount of these assets and their related lease liability immediately<br>before this date.
---	---
	Machinery<br> and<br> equipment			Land, buildings<br> and leasehold<br> improvements		Furniture,<br><br> other<br><br> equipment<br><br> and<br><br> transport<br><br> units			Equipment<br> under <br> finance<br><br> lease			Capital<br><br> work in<br><br> progress-<br><br> Lindero			Capital<br> work in<br> progress -<br><br> Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
COST
Balance at December 31, 2017	$	62,217		$	131,738	$	7,478		$	7,295		$	4,360		$	8,561		$	221,649
Additions		3,122			390		7,405			-			59,356			8,858			79,131
Changes in closure and reclamation provision		550			-		-			-			-			-			550
Disposals		(1,859	)		-		(358	)		(26	)		-			-			(2,243	)
Reclassifications		10,158			9,190		(3,459	)		6,142			(10,752	)		(11,279	)		-
Balance at December 31, 2018	$	74,188		$	141,318	$	11,066		$	13,411		$	52,964		$	6,140		$	299,087
ACCUMULATED DEPRECIATION
Balance at December 31, 2017	$	27,570		$	52,353	$	4,552		$	3,510		$	-		$	-		$	87,985
Disposals		(1,719	)		-		(295	)		(26	)		-			-			(2,040	)
Reclassifications		3,152			538		18			(3,708	)		-			-			-
Depreciation		6,840			12,656		1,115			331			-			-			20,942
Balance at December 31, 2018	$	35,843		$	65,547	$	5,390		$	107		$	-		$	-		$	106,887
Net Book Value at December 31, 2018	$	38,345		$	75,771	$	5,676		$	13,304		$	52,964		$	6,140		$	192,200

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

11.	Investment in Associates

As at December 31, 2019, investments in associates were comprised of:

	Proportion of ownership held						Market Value (C)
	December 31,						December 31,
Name	2019			2018			2019	2018
Medgold Resources Corp. ("Medgold")		22	%		22	%		$	2,740
Prospero Silver Corp. ("Prospero")		27	%		27	%		$	927

All values are in US Dollars.

Medgold and Prospero are Canadian public companies which both trade on the TSX Venture Exchange under the ticker symbols MED and PSL, respectively, and are quoted in Canadian dollars (“C$”). Medgold’s principal business activity is the acquisition and exploration of resource properties in Serbia, and Prospero’s principal business activity is the acquisition and exploration of resource properties in Mexico.

	Medgold			Prospero			Total
Balance at December 31, 2017	$	2,694		$	-		$	2,694
Shares and warrants presented as marketable securities, December 31, 2017		-			556			556
Fair value adjustments prior to May 18, 2018		-			(99	)		(99	)
Exercise of warrants		-			624			624
Purchase of additional shares		249			274			523
Share of net income (loss)		132			(153	)		(21	)
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

During the year ended December 31, 2019, the Company wrote-down its investments in Prospero to $357 and in Medgold of $974.

12.	Long-Term Receivables and Other
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Value added tax recoverable - Lindero ^(1)^	$	34,176	$	15,241
Value added tax recoverable - San Jose ^(2)^		2,036		-
Income tax recoverable (note 33 (d))		1,310		-
Other assets		867		-
Long-term receivables and other	$	38,389	$	15,241
(1)	The Company expects to start recovering the value added tax amount after commencement of commercial<br>production at the Lindero Project.
---	---
(2)	The Company expects to start recovering the value added tax amount during the third quarter of<br>2021.
---	---

During the year ended December 31, 2019, the Company recognized an unrealized foreign exchange loss of $12,137 (December 31, 2018 - $2,769) related to the value added tax recoverable on the construction at the Lindero Project.

As a result of the devaluation of the Argentine Peso which followed Argentina’s primary election in the third quarter of 2019, the Company implemented an investment strategy to meet its local currency requirements in Argentina and recognized $11,024 of gains from Argentine Peso denominated cross-border securities trades.

| Page | 27 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

13.	Deposits and Advances to Contractors

As at December 31, 2019, the Company has advanced $12,164 (December 31, 2018 – $42,938) to contractors related to the construction of the Lindero Project. During the year ended December 31, 2019, the Company paid $19,175 (December 31, 2018 - $46,453) as deposits for equipment and advances to contractors, and $49,950 of deposits (December 31, 2018 - $3,932) were applied against equipment delivered or services rendered during the year ended December 31, 2019.

14.	Trade and Other Payables
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Trade accounts payable	$	15,975	$	14,099
Lindero construction payables		24,998		13,549
Refundable deposits to contractors		1,496		1,091
Payroll payable		13,627		12,696
Mining royalty payable		1,237		890
Value added taxes payable		224		-
Interest payable		1,457		189
Due to related parties (note 15)		14		17
Other payables		535		931
Derivative liability		894		224
Deferred share units payable (note 20(a))		3,918		3,116
Restricted share units payable (note 20(b))		911		1,932
Total trade and other payables	$	65,286	$	48,734
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, 2019 and 2018:

a) Purchase of Goods and Services

During the years ended December 31, 2019 and 2018, 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 Chairman, is a director.

	Years ended December 31,
	2019		2018
Personnel costs	$	21	$	118
General and administrative expenses		189		193
	$	210	$	311

As at December 31, 2019, the Company had outstanding balances payable to Gold Group Management Inc. of $14 (December 31, 2018 - $17). Amounts due to related parties are due on demand and are unsecured.

| Page | 28 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

b) Key Management Personnel

During the years ended December 31, 2019 and 2018, 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, is a director. Such amounts, along with other amounts paid to key management personnel are as follows:

	Years ended December 31,
	2019		2018
Salaries and benefits	$	4,716	$	4,471
Directors fees		702		709
Consulting fees		135		139
Share-based payments		5,449		3,545
	$	11,002	$	8,864
16.	Lease Obligations
---	---
	Minimum lease payments
---	---	---	---	---	---	---
	December 31,			December 31,
	2019			2018
Less than one year	$	9,313		$	3,912
Between one and five years		13,521			5,744
More than five years		14,958			-
		37,792			9,656
Less: future finance charges		(13,913	)		(890	)
Present value of minimum lease payments	$	23,879		$	8,766
Presented as:
Current portion	$	8,831		$	3,395
Non-current portion		15,048			5,371
17.	Debt
---	---

The movement in debt during the years ended December 31, 2019 and 2018, respectively, are comprised of the following:

	Credit Facility			Debentures			Total
Balance at December 31, 2017	$	39,871		$	-		$	39,871
Loss on modification		653			-			653
Transaction costs paid		(1,338	)		-			(1,338	)
Amortization of transaction costs		116			-			116
Drawdowns		30,000			-			30,000
Balance at December 31, 2018		69,302			-			69,302
Proceeds from 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

| Page | 29 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

a) Credit Facility

On January 26, 2018, the Company entered into an amended and restated four-year term credit facility with the Bank of Nova Scotia (“Amended Credit Facility”) with a maturity date of January 26, 2022. The Amended Credit Facility consists of a $40,000 non-revolving credit facility (the “Non-Revolving Facility”), which has been fully drawn and an $80,000 revolving credit facility (the “Revolving Facility”). An upfront lenders fee and transactions cost of $793 were payable on closing of the Amended Credit Facility.

The Amended Credit Facility was further amended on December 13, 2018 (the “Third Amendment and Restated Credit Agreement”) whereby the Revolving Facility was increased by an additional $30,000 to $110,000 for a temporary period from December 13, 2018 to December 31, 2020. At such time, if any part of the additional $30,000 has been advanced it must be repaid by December 31, 2020, and the balance of the Non-Revolving Facility and the Revolving Facility must be repaid on January 26, 2022 as per the terms of the Third Amendment and Restated Credit Agreement. In addition, BNP Paribas was added as a lender. The Company incurred fees of $545 to the lenders which have been charged to transaction costs.

The interest rate on the Amended Credit Facility is on a sliding scale at one-month LIBOR plus an applicable margin ranging from 2.5% to 3.5%, based on a Total Debt to EBITDA ratio, as defined in the Amended Credit Facility. The Amended Credit Facility is 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 Amended Credit Facility relating to, among other matters, reporting requirements, conduct of business, insurance, notices, and must comply with certain financial covenants, including a maximum debt to EBITDA ratio and a minimum tangible net worth, each as defined in the Amended Credit Facility.

As at December 31, 2019, there is $40,000 available for drawdown from the Revolving Facility under the Amended Credit Facility. The Company was in compliance with all of the covenants under the credit facility as at December 31, 2019 and December 31, 2018.

b) Convertible Debenture

On October 2, 2019, the Company completed a bought deal public offering (the “Offering”) of senior subordinated unsecured convertible debentures with an aggregate principal amount of $40,000. The Offering was subject to an over-allotment option which was exercised in full on October 8, 2019, pursuant to which an additional $6,000 aggregate principal amount of debentures were issued, bringing the aggregate gross proceeds to the Company under the Offering to $46,000. The debentures issued under the Offering, including those issued upon exercise of the Over-Allotment Option, are collectively referred as 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. 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, representing a conversion rate of 200 Common Shares per $1 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 will not be redeemable by the Company prior to October 31, 2022. 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.

| Page | 30 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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.

The component parts of the convertible debentures, a compound instrument, are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instrument is an equity instrument.

At initial recognition, gross proceeds of $46,000 from the Debentures were allocated into its debt and equity components. The fair value of the debt component was estimated at $38,859 using a discounted cash flow model method with an expected life of five years and a discount rate of 8.6%. This amount is recorded as a financial liability on an amortized cost basis net of transaction cost using the effective interest method using an effective interest rate of 9.7% until extinguished upon conversion or at its maturity date.

The conversion option of the Debentures is classified as equity and was estimated based on the residual value of $7,141. This amount is not subsequently remeasured and will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. A deferred tax liability of $1,927 related to the taxable temporary difference arising from the equity portion of the convertible debenture was recognized in equity reserves.

Transaction costs of $2,490 that relate to the issuance of the Debentures were allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the life of the Debentures using the effective interest method.

18.	Other Liabilities
	December 31,		December 31,
---	---	---	---	---
	2019		2018
Restricted share units (note 20 (b))	$	246	$	125
Other non-current liabilities		253		1,041
	$	499	$	1,166

| Page | 31 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

19.	Closure and Reclamation Provisions
	Closure<br> and Reclamation Provisions
---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma<br> Mine			San Jose<br> Mine			Lindero<br> Project		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<br> and Reclamation Provisions
---	---	---	---	---	---	---	---	---	---	---	---
	Caylloma<br> Mine			San Jose<br> Mine			Lindero<br> Project		Total
Balance at December 31, 2017	$	9,624		$	4,100		$	509	$	14,233
Changes in estimate		1,266			(624	)		896		1,538
Reclamation expenditures		(559	)		(123	)		-		(682	)
Accretion		469			361			22		852
Effect of changes in foreign exchange rates		-			2			-		2
Balance at December 31, 2018		10,800			3,716			1,427		15,943
Less: Current portion		682			159			-		841
Non-current portion	$	10,118		$	3,557		$	1,427	$	15,102

Closure and reclamation provisions represent the present value of reclamation costs related to mine and development sites. There have been no significant changes in requirements, laws, regulations, operating assumptions, estimated timing and amount of reclamation and closure obligations during the year ended December 31, 2019, except for the Lindero Project, where the Company estimates reclamation and closure cost based on the progress of the mine construction.

	Closure<br> and Reclamation Provisions
	Caylloma<br> Mine			San Jose<br> Mine			Lindero<br> Project			Total
Anticipated settlement date		2022 - 2027			2025 - 2037			2029 - 2042
Undiscounted uninflated estimated cash flow	$	11,095		$	4,850		$	17,420		$	33,365
Estimated life of mine (years)		10			6			14
Discount rate		3.00	%		6.88	%		1.94	%
Inflation rate		2.00	%		3.58	%		2.00	%

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

20.	Share Based Payments

During the year ended December 31, 2019, the Company recognized $5,471 (year ended December 31, 2018 - $2,343) of share-based payment expenses related to the outstanding deferred, restricted and performance share units.

For the year ended December 31, 2019, the Company recognized a share-based payment expense of $542, related to stock options (year ended December 31, 2018 – $1,357).

| Page | 32 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

(a) Deferred Share Units

	Cash Settled
	Number of<br> Deferred Share<br> Units			Fair Value
Outstanding, December 31, 2017		974,179		$	5,094
Granted		101,612			482
Units paid out in cash		(225,724	)		(1,251	)
Changes in fair value		-			(1,209	)
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

(b) Restricted Share Units

	Cash Settled						Equity Settled
	Number of<br> Restricted<br> Share Units			Fair Value			Number of<br> Restricted<br> Share Units
Outstanding, December 31, 2017		980,476		$	3,935			390,751
Granted		87,759			414			422,030
Units paid out in cash		(405,821	)		(1,915	)		-
Vested		-			-			(78,150	)
Forfeited or cancelled		(3,029	)		(15	)		-
Changes in fair value and vesting		-			(362	)		-
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		-			-			(201,633	)
Changes in fair value and vesting		-			60			-
Outstanding, December 31, 2019		392,435		$	1,157			1,166,912
Current portion					911
Non-current portion					246
Outstanding, December 31, 2019				$	1,157

During the year ended December 31, 2019, the Company granted 633,914 (year ended December 31, 2018 – 422,030) equity-settled RSUs with a fair value of $3.62 (C$4.83) per share unit (year ended December 31, 2018 – between $4.71 (C$6.20) and $5.54 (C$7.15) per share unit).

	Cash Settled						Equity Settled
	Number of<br> Performance<br> Share Units			Fair Value			Number of<br> Performance<br> Share Units
Outstanding, December 31, 2017		553,459		$	2,691			-
Granted		-			-			1,002,166
Units paid out in cash		(553,459	)		(2,596	)		-
Changes in fair value and vesting		-			(95	)		-
Outstanding, December 31, 2018		-			-			1,002,166
Granted		-			-			422,609
Vested		-			-			(150,325	)
Outstanding, December 31, 2019		-		$	-			1,274,450

| Page | 33 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

During the year ended December 31, 2019, the Company granted 422,609 (December 31, 2018 – 1,002,166) equity settled, PSUs with a fair value of $3.62 (C$4.83) (December 31, 2018 – $4.71 (C$6.20)) on the grant date. These share units vest as to 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. The PSUs granted during the year ended December 31, 2019 are subject to a multiplier ranging from 50% to 200% depending on the achievement level of certain performance targets.

d) Stock 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, 2019, a total of 1,574,403 stock options were available for issuance under the plan.

			Weighted average<br> exercise price
			Canadian dollars
Outstanding, December 31, 2017	1,155,527		$	5.56
Exercised	(20,000	)		0.85
Granted	648,502			6.21
Outstanding, December 31, 2018	1,784,029			5.85
Outstanding, December 31, 2019	1,784,029		$	5.85
Vested and exercisable, December 31, 2018	826,680		$	5.37
Vested and exercisable, December 31, 2019	1,459,779		$	5.77

No options were granted during the year ended December 31, 2019. The assumptions used to estimate the fair value of the stock options granted during the year ended December 31, 2018 were a risk-free interest rate of 1.79% - 1.90%, expected volatility of 67.56% - 68.16%, expected life of 3 years, expected forfeiture rate of 5.57%, and an expected dividend yield of nil. The fair value, as determined using the BlackScholes model, was between $2.06 and $2.38 (C$2.69 and C$3.09) per option granted in the period.

21.	Share Capital
Authorized Share Capital
---

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

22.	Earnings per Share
	Years ended December 31,
---	---	---	---	---
Basic	2019		2018
Net income for the year	$	23,796	$	33,990
Weighted average number of shares (000's)		160,193		159,785
Earnings per share - basic	$	0.15	$	0.21
	Years ended December 31,
---	---	---	---	---
Diluted	2019		2018
Net income for the year	$	23,796	$	33,990
Weighted average number of shares (000's)		160,193		159,785
Incremental shares from share units		2,215		1,851
Incremental shares from convertible debenture		2,117		-
Weighted average diluted number of shares (000's)		164,525		161,636
Earnings per share - diluted	$	0.14	$	0.21

For the year ended December 31, 2019, 1,784,029 out of the money options were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive (year ended December 31, 2018 – 1,266).

| Page | 34 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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, 2019
	Peru			Mexico		Total
Silver-gold concentrates	$	-		$	183,197	$	183,197
Silver-lead concentrates		39,936			-		39,936
Zinc concentrates		33,686			-		33,686
Provisional pricing adjustments		(740	)		1,108		368
Sales to external customers	$	72,882		$	184,305	$	257,187
	Year ended December 31, 2018
---	---	---	---	---	---	---	---	---	---
	Peru			Mexico			Total
Silver-gold concentrates	$	-		$	180,151		$	180,151
Silver-lead concentrates		40,254			-			40,254
Zinc concentrates		48,831			-			48,831
Provisional pricing adjustments		(1,636	)		(4,304	)		(5,940	)
Sales to external customers	$	87,449		$	175,847		$	263,296

Sales by Major Costumer

	Years ended December 31,
	2019			2018
Customer 1	$	184,304		$	163,425
Customer 2		72,938			66,429
Customer 3		(55	)		33,442
	$	257,187		$	263,296
24.	Cost of Sales
---	---
	Year ended December 31, 2019
---	---	---	---	---	---	---
	Caylloma		San Jose		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		750		3,385		4,135
Write-down of inventories		93		1,235		1,328
	$	58,450	$	114,156	$	172,606

| Page | 35 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

	Year ended December 31, 2018
	Caylloma		San Jose		Total
Direct mining costs	$	38,788	$	60,860	$	99,648
Salaries and benefits		7,303		5,889		13,192
Workers' participation		1,726		4,438		6,164
Depletion and depreciation		12,222		32,251		44,473
Royalties		218		3,030		3,248
	$	60,257	$	106,468	$	166,725

For the year ended December 31, 2019, depletion and depreciation includes $2,262 (December 31, 2018 - $nil) of right-of-use assets depreciation.

25.	General and Administration
	Years ended December 31,
---	---	---	---	---
	2019		2018
General and administration	$	22,315	$	21,088
Workers' participation		1,477		1,400
		23,792		22,488
Share-based payments		6,013		3,701
	$	29,805	$	26,189
26.	Other Expenses
---	---
	Years ended December 31,
---	---	---	---	---
	2019		2018
Write-down of investment in associate	$	2,706	$	-
Write-off of mineral properties		1,554		-
Loss on disposal of assets		67		167
Write-off of spare parts		-		398
Write off of assets held for sale		-		691
Other expenses		284		705
	$	4,611	$	1,961
27.	Interest and Finance (Costs) Income, Net
---	---
	Years ended December 31,
---	---	---	---	---	---	---
	2019			2018
Interest income	$	1,838		$	3,429
Interest expense		(857	)		(1,092	)
Bank stand-by and commitment fees		(415	)		(470	)
Accretion expense		(590	)		(830	)
Loss on debt restructuring		-			(653	)
	$	(24	)	$	384

| Page | 36 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

28.	Income Tax
(a)	Reconciliation 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,
	2019			2018
Net income before tax	$	43,971		$	67,340
Statutory tax rate		27.0	%		27.0	%
Anticipated income tax at statutory rates		11,872			18,182
Non-deductible expenditures		2,507			1,935
Differences between Canadian and foreign tax rates		1,353			2,159
Changes in estimate		856			(679	)
Effect of change in tax rates		345			299
Inflation adjustment		(12,158	)		(6,408	)
Impact of foreign exchange		11,773			10,377
Changes in deferred tax assets not recognized		(2,254	)		(287	)
Mining taxes		3,241			4,383
Withholding taxes		2,367			3,180
Other items		273			209
Total income tax expense	$	20,175		$	33,350
Total income tax represented by:
Current income tax expense	$	32,631		$	30,563
Deferred tax expense		(12,456	)		2,787
	$	20,175		$	33,350
(b)	Tax Amounts Recognized in Profit or Loss
---	---
	Years ended December 31,
---	---	---	---	---	---	---
	2019			2018
Current tax expense
Current taxes on profit for the year	$	32,246		$	30,515
Changes in estimates related to prior years		385			48
	$	32,631		$	30,563
Deferred tax expense
Origination and reversal of temporary differences and foreign exchange rate	$	(13,678	)	$	3,216
Changes in estimates related to prior years		479			(728	)
Effect of differences in tax rates		398			16
Effect of changes in tax rates		345			283
	$	(12,456	)	$	2,787
Total tax expense	$	20,175		$	33,350

| Page | 37 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

(c)	Deferred Tax Balances

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

	December 31,			December 31,
	2019			2018
Deferred tax assets:
Reclamation and closure cost obligation	$	9,530		$	4,594
Carried forward tax loss		14,020			3,386
Accounts payable and accrued liabilities		7,731			5,642
Deductibility of resource taxes		3,140			3,436
Lease obligations		5,317			-
Other		1			190
Total deferred tax assets	$	39,739		$	17,248
Deferred tax liabilities:
Mineral properties	$	(44,825	)	$	(34,541	)
Mining and foreign withholding taxes		(5,281	)		(8,412	)
Equipment and buildings		(3,621	)		(4,413	)
Convertible debenture		(1,857	)		-
Inflation		(4,939	)		-
Other		(131	)		(1,326	)
Total deferred tax liabilities	$	(60,654	)	$	(48,692	)
Net deferred tax liabilities	$	(20,915	)	$	(31,444	)
		2019			2018
Classification:
Deferred tax assets	$	-		$	-
Deferred tax liabilities		(20,915	)		(31,444	)
Net deferred tax liabilities	$	(20,915	)	$	(31,444	)

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

	2019			2018
At January 1	$	31,444		$	28,657
Deferred income tax (recovery) expense through income statement		(12,456	)		2,787
Deferred income tax expense through equity		1,927			-
At December 31	$	20,915		$	31,444

| Page | 38 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

(d)	Unrecognized 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,
	2019		2018
Unrecognized deductible temporary differences and unused tax losses:
Non capital losses	$	72,156	$	81,188
Provisions		5,074		5,173
Share issue costs		2,174		3,354
Mineral properties, plant and equipment		-		244
Lease obligation		656		-
Derivative liabilities		894		-
Capital losses		2,496		2,326
Investments in associates		1,397		-
Unrecognized deductible temporary differences	$	84,847	$	92,285

As at December 31, 2019, 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,
	2019		2018
Mexico	$	198,214	$	97,705
Peru		54,618		69,669
(e)	Tax Loss Carry Forwards
---	---

Tax losses have the following expiry dates:

			December 31,				December 31,
	Year of expiry		2019		Year of expiry		2018
Canada		2026 - 2039	$	84,200		2026 - 2038	$	81,000
Argentina		2020 - 2024		42,500		2019 - 2023		11,900
Mexico		2021 - 2029		369		2021 - 2028		349
Peru		2021		70		2021		238

In addition, as at December 31, 2019, the Company has accumulated Canadian resource-related expenses of $8,188 (2018 - $6,582) for which the deferred tax benefit has not been recognized.

| Page | 39 |

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Fortuna Silver MinesInc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

29. Segmented Information

The following summary describes the operations of each reportable segment:

·	Bateas – operates the Caylloma silver,<br>lead and zinc mine
·	Cuzcatlan – operates the San Jose<br>silver-gold mine
---	---
·	Mansfield – construction of the Lindero mine
---	---
·	Corporate – corporate stewardship
---	---
	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 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
	Year ended December 31, 2018
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Corporate			Bateas			Cuzcatlan			Mansfield			Total
Revenues from external customers	$	-		$	87,449		$	175,847		$	-		$	263,296
Cost of sales before depreciation and depletion		-			(48,035	)		(74,217	)		-			(122,252	)
Depreciation and depletion in cost of sales		-			(12,222	)		(32,251	)		-			(44,473	)
General, and administration		(14,692	)		(3,973	)		(7,524	)		-			(26,189	)
Other income (expenses)		(411	)		(311	)		(3,938	)		(4,136	)		(8,796	)
Finance items		(1,172	)		6,263			1,111			(448	)		5,754
Segment (loss) profit before taxes		(16,275	)		29,171			59,028			(4,584	)		67,340
Income taxes		(3,168	)		(10,628	)		(18,544	)		(1,010	)		(33,350	)
Segment (loss) profit after taxes	$	(19,443	)	$	18,543		$	40,484		$	(5,594	)	$	33,990
	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
	December 31, 2018
---	---	---	---	---	---	---	---	---	---	---
	Corporate		Bateas		Cuzcatlan		Mansfield		Total
Total assets	$	31,739	$	174,985	$	286,621	$	293,172	$	786,517
Total liabilities	$	84,575	$	35,568	$	38,220	$	25,350	$	183,713
Capital expenditures	$	1,448	$	16,400	$	16,224	$	83,335	$	117,407

| Page | 40 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(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 asset or liability	Methods and assumptions used to estimate fair value
Trade receivables	Trade receivables arising from the sales of metal concentrates are subject to provisional pricing, and the final selling price is adjusted at the end of a quotational period. We mark these to market at each reporting date based on the forward price corresponding to the expected settlement date.
Interest rate swaps, and metal contracts	Fair value is calculated as the present value of the estimated contractual cash flows. Estimates of future cash flows are based on quoted swap rates, futures prices and interbank borrowing rates. These are discounted using a yield curve, and adjusted for credit risk of the Company or the counterparty.
Marketable securities – warrants	The Company determines the value of the warrants using a Black-Scholes valuation model which uses a combination of quoted prices and market-derived inputs, such as volatility and interest rate estimates. Fair value changes on the warrants are charged to profit and loss.

During the years ended December 31, 2019 and 2018, 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 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

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

| Page | 42 |

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Fortuna Silver Mines Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

	Carrying<br> value										Fair<br> value
December 31,<br> 2018	Fair<br> <br> Value<br> (hedging)		Fair value<br><br> through<br> profit or loss		Amortized<br><br> cost			Total			Level<br> 1	Level<br> 2			Level<br> 3		Carrying value<br> <br>approximates <br>Fair Value
Financial<br> assets measured at Fair Value
Trade receivables<br> concentrate sales	$	-	$	28,132	$	-		$	28,132			$	28,132		$	-	$	-
Metal<br> forward sales contracts		-		2,646		-			2,646				2,646			-		-
	$	-	$	30,778	$	-		$	30,778			$	30,778		$	-	$	-
Financial<br> assets not measured at Fair Value
Cash and cash equivalents	$	-	$	-	$	90,503		$	90,503			$	-		$	-	$	90,503
Short term investments		-		-		72,824			72,824				-			-		72,824
Other receivables		-		-		3,179			3,179				-			-		3,179
	$	-	$	-	$	166,506		$	166,506			$	-		$	-	$	166,506
Financial<br> liabilities measured at Fair Value
Interest<br> rate swap liability	$	224	$	-	$	-		$	224			$	224		$	-	$	-
	$	224	$	-	$	-		$	224			$	224		$	-	$	-
Financial<br> liabilities not measured at Fair Value
Trade payables	$	-	$	-	$	(24,219	)	$	(24,219	)		$	-		$	-	$	(24,219	)
Payroll payable		-		-		(14,976	)		(14,976	)			-			-		(14,976	)
Share units payable		-		-		(5,173	)		(5,173	)			(5,173	)		-		-
Bank loan payable		-		-		(69,302	)		(69,302	)			(70,000	)		-		-
Other<br> payables		-		-		(4,030	)		(4,030	)			-			-		(4,030	)
	$	-	$	-	$	(117,700	)	$	(117,700	)		$	(75,173	)	$	-	$	(43,225	)

All values are in US Dollars.

| Page | 43 |

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FortunaSilver Mines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

31.	Management of Financial 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, 2019 and 2018 is as follows:

	December 31,		December 31,
	2019		2018
Cash and cash equivalents	$	83,404	$	90,503
Short term investments		-		72,824
Derivative assets		-		2,646
Accounts receivable and other assets		47,707		32,769
Income tax receivable		2,553		136
Non-current receivables		38,389		15,241
	$	172,053	$	214,119

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 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.

| Page | 44 |

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FortunaSilver Mines Inc.

Notesto Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

The following are the remaining contractual maturities of financial liabilities at the reporting date. The tables include cash flows associated with principal payments.

	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 taxes payable		12,400		-		-		-		12,400
Lease obligations		9,313		9,424		4,097		14,958		37,792
Other liabilities		-		499		-		-		499
Capital commitments, Lindero ^1^		24,467		-		-		-		24,467
Closure and reclamation provisions		2,699		7,565		1,846		21,255		33,365
	$	114,165	$	127,488	$	51,943	$	36,213	$	329,809

1) Net of $10.9 million of deposits on equipment and advances to contractors.

	Expected payments due by year as at December 31, 2018
	Less than						After
	1 year		1 - 3 years		4 - 5 years		5 years		Total
Trade and other payables	$	48,510	$	-	$	-	$	-	$	48,510
Debt		-		-		70,000		-		70,000
Derivative liabilities		224		-		-		-		224
Income tax payable		8,358		-		-		-		8,358
Equipment loan		4,328		5,371		-		-		9,699
Other liabilities		-		1,166		-		-		1,166
Operating leases		1,055		1,248		250		-		2,553
Capital commitments, Lindero		111,940		-		-		-		111,940
Provisions		878		6,738		4,029		6,262		17,907
	$	175,293	$	14,523	$	74,279	$	6,262	$	270,357

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

(c)	Currency 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, Argentinean 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 |

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Fortuna SilverMines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

As at December 31, 2019 and 2018, the Company was exposed to currency risk through the following assets and liabilities denominated in foreign currencies:


			Peruvian<br> Soles			Mexican<br> Pesos			Argentinian<br> Pesos
Cash and cash equivalents	626			2,293			13,103			11,762
Accounts receivable and other assets	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	-			-			(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.


			Peruvian<br> Soles			Mexican<br> Pesos			Argentinian<br> Pesos
Cash and cash equivalents	376			941			37,039			6,967
Accounts receivable and other assets	279			3,660			11,836			37,129
Income tax receivable	-			459			-			-
Investments in associates	5,244			-			-			-
VAT - long term receivable	-			-			-			560,873
Trade and other payables	(8,478	)		(18,492	)		(218,833	)		(125,159	)
Due to related parties	(23	)		-			-			-
Provisions, current	-			-			(2,991	)		-
Income tax payable	-			(4,591	)		(59,810	)		-
Other liabilities	-			-			(2,296	)		-
Provisions	-			-			(66,977	)		-
Total foreign currency exposure	(2,602	)		(18,023	)		(302,032	)		479,810
US equivalent of foreign currency exposure	(2,010	)		(5,458	)		(16,055	)		11,646

All values are in US Dollars.

Sensitivity as to change in foreign currency exchange rates on our foreign currency exposure as at December 31, 2019 is provided below:

				Effect on foreign
				denominated
Currency (Expressed in $000's)	Change			items
Mexican Peso		+	/-10%	$	2,144
Peruvian Soles		+	/-10%	$	187
Argentinian Peso		+	/-10%	$	1,029
Canadian Dollar		+	/-10%	$	438

| Page | 46 |

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Fortuna SilverMines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

(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 (f), with the capital controls in effect when the Company commences production at the Lindero Project, the Company will be required to convert the equivalent value into Argentine Peso from the export sale of all gold doré from the Lindero Project.

(d)	Metal Price Risk

We are exposed to metal price risk with respect to our sales of silver, gold, zinc, and lead concentrates. A 10% change in metal prices from the prices used at December 31, 2019 would result in the following change to sales and accounts receivable for sales which are still based on provisional prices as at December 31, 2019. As a matter of policy, we do not hedge our silver production.

Metal (Expressed in $000,s)	Change		Effect on Sales
Silver		+/-10%	$	3,424
Gold		+/-10%	$	1,767
Lead		+/-10%	$	216
Zinc		+/-10%	$	281
(e)	Interest 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 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.

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.

| Page | 47 |

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Fortuna SilverMines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

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

	December 31,			December 31,
	2019			2018
Equity	$	635,426		$	602,804
Debt		146,535			69,302
Lease obligations		23,879			8,766
Less: Cash, cash equivalents and short-term investments		(83,404	)		(163,327	)
	$	722,436		$	517,545

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, 2019 and 2018, 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 were as follows:

	Bank Loan			Debenture			Lease<br> obligations			Interest rate<br><br> swaps
As at January 1, 2018	$	39,871		$	-		$	906		$	(140	)
Additions		30,000			-			9,792			-
Transaction costs		(1,338	)		-			-			-
Loss on debt modifications		653			-			-			-
Interest		116			-			-			228
Payments		-			-			(1,932	)		-
Changes in fair value		-			-			-			(312	)
As at December 31, 2018		69,302			-			8,766			(224	)
Initial recognition of IFRS 16		-			-			7,316			-
As at January 1, 2019		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	)

| Page | 48 |

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FortunaSilver Mines Inc.

Notes toConsolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

33. Contingencies and Capital Commitments

(a)	Caylloma Letter of Guarantee

The Caylloma Mine closure plan was updated in December 2018, with total undiscounted closure costs of $11,431 consisting of progressive closure activities of $3,646, final closure activities of $7,156, and post-closure activities of $790. Pursuant to the closure regulations, the Company is required to provide the following guarantees with the government:

·	2019 – $7,237
·	2020 – $9,704
---	---

The Company has established a bank letter of guarantee in the amount of $7,237 on behalf of Bateas in favor of the Peruvian mining regulatory agency, in compliance with local regulation and to collateralize Bateas’ mine closure plan. This bank letter of guarantee expired on December 31, 2019. Subsequent to December 31, 2019, the Company established a security bond in the amount of $1,300 and a bank letter of guarantee in the amount of $8,394. The security bond and the letter of guarantee expire on January 29, 2021.

(b)	San Jose Letter of Guarantee

The Company has established three letters of guarantee in the aggregate amount of $1,236 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 2019 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 15, 2020 respectively.

(c)	Other Commitments

As at December 31, 2019, the Company had capital commitments of $36,454, $510, and $124 for civil work, equipment purchases and other services at the Lindero Project and the Caylloma and San Jose Mines, respectively, expected to be expended within one year.

(d)	Tax Contingencies
Peru
---

The Company has been assessed $1,310 (4,343 Peruvian Soles), including interest and penalties of $725 (2,405 Peruvian Soles), for the tax year 2010 by SUNAT, the Peruvian tax authority, with respect to the deduction of certain losses arising from derivative instruments. The Company applied to the Peruvian tax court to appeal the assessments.

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.

The Company has recorded the amount paid of $1,310 (4,343 Peruvian Soles) in long-term receivables and other as at December 31, 2019, as the Company believes it is probable that the appeal will be successful (note 12).

| Page | 49 |

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Fortuna SilverMines Inc.

Notes to ConsolidatedFinancial Statements

For the years ended December 31, 2019 and 2018

(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, at that time advised the Mexican mining authorities that it was of the view that no royalty is payable, and in 2018 initiated administrative and legal proceedings against the Dirección General de Minas (“DGM”) to remove reference to the royalty on the title register. Those proceedings are ongoing and progressing in accordance with the procedures of the Mexican Administrative Court.

In January 2020, the Company received notice from the DGM proposing to cancel the mining concession if the royalty, in the Mexican peso equivalent of US$30 million plus VAT (being the amount of the claimed royalty from 2011 to 2019) is not paid before March 15, 2020. In early February 2020, the Company initiated legal proceedings against the DGM to contest the cancellation procedure and also to stay the cancellation process.

The District Court in Mexico City has accepted the filing of the Company’s legal proceedings and also granted a permanent stay of execution, which protects the Company from the cancellation of the concession until a resolution by the Court is reached on the legality of the cancellation procedure. The timing of a decision by the Court at first instance in this action against the DGM is uncertain and may take several months. In the event that the Company is unsuccessful in these proceedings, it may appeal. If ultimately the Company does not prevail, it may be required to pay the disputed royalty in order to preserve the mining concession.

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, 2019.

(f)	Other 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 the 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 |

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EXHIBIT 99.3

MANAGEMENT’S DISCUSSION AND ANALYSIS

MANAGEMENT’S DISCUSSION AND ANALYSIS

YEAR ENDED DECEMBER 31, 2019

As of March 10, 2020

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

Table of Contents

	Page
Business of the Company	3
Full Year Financial and Operating Highlights	4
Lindero Project	7
2020 Guidance and Outlook	9
Financial Results	10
Results of Operations	14
Quarterly Information	16
Liquidity and Capital Resources	18
Financial Instruments	20
Related Party Transactions	20
Risks and Uncertainties	21
Adoption of New Accounting Standards	27
Critical Accounting Estimates, Assumptions, and Judgements	28
Share Position & Outstanding Options & Equity Based Share Units	31
Controls and Procedures	32
Non-GAAP Financial Measures	33
Cautionary Statement on Forward-Looking Statements	41
Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources	43

| Management's Discussion and Analysis, page 2 |

| --- |

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 the Caylloma silver, lead and<br>zinc mine (“Caylloma”) in southern Peru,
·	operates the San Jose silver and gold<br>mine (“San Jose”) in southern Mexico, and
---	---
·	is currently constructing an 18,750 tpd<br>open pit gold heap leach mine (“Lindero Project”) 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, 2019 are presented in the following table:

Name	Location	Ownership	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 Project

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 10, 2020 and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2019 and 2018. The Company’s significant accounting policies are set out in Note 3 of the December 31, 2019 and 2018 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.

This document contains forward-lookingstatements. Refer to the cautionary language under the heading “Cautionary Statement on Forward-Looking Statements.”

| Management's Discussion and Analysis, page 3 |

| --- |

Full Year Financial and Operating Highlights

Sales for the year ended December 31, 2019 were $257.2 million, a 2% decrease from the $263.3 million reported in the year ended December 31, 2018 (“2018”).

Operating income for the year ended December 31, 2019 was $34.2 million compared to $61.6 million reported in 2018.

Net income for the year ended December 31, 2019 was $23.8 million or $0.15 per share compared to $34.0 million or $0.21 per share reported in 2018.

Adjusted net income (refer to Non-GAAP Financial Measures) was $28.4 million compared to $38.4 million reported in 2018.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) for the year ended December 31, 2019 was $95.4 million compared to $113.9 million reported in 2018.

Free cash flow from ongoing operations (refer to Non-GAAP Financial Measures) was $34.5 million compared to $55.2 million reported in 2018.

Operating Highlights

Consolidated Metrics							Years<br> ended December 31,
		2018		% Change			2019		2018		% Change
Key Indicators
Silver
Metal produced (oz)	2,251,917		1,937,703		16	%		8,809,767		8,890,943		(1%)
Metal sold (oz)	2,221,330		2,032,909		9	%		8,798,054		8,832,993		(0%)
Realized price (/oz)	17.33		14.60		19	%		16.20		15.74		3%
Gold
Metal produced (oz)	12,279		12,070		2	%		50,525		54,210		(7%)
Metal sold (oz)	12,157		12,555		(3	%)		50,374		53,498		(6%)
Realized price (/oz)	1,483		1,236		20	%		1,393		1,273		9%
Lead
Metal produced (000's lbs)	7,441		6,453		15	%		28,746		28,255		2%
Metal sold (000's lbs)	7,559		6,377		19	%		28,969		28,349		2%
Zinc
Metal produced (000's lbs)	11,614		11,537		1	%		45,600		45,485		0%
Metal sold (000's lbs)	11,974		11,713		2	%		45,781		45,867		(0%)
All-in sustaining cash cost (US/oz Ag Eq)1, 2	12.58		12.24		3	%		11.91		10.55		13%

All values are in US Dollars.

Notes:

1.	All-in sustaining cash cost (“AISC”) is a Non-GAAP Financial Measure. Refer to Non-GAAP<br>Financial Measures
2.	AISC ($/oz Ag Eq) calculated using the realized metal prices for each period (See Sales table under<br>Financial Results)
---	---

Silver and gold production for the three months ended December 31, 2019 increased 16% and 2% to 2,251,917 ounces and 12,279 ounces, respectively, over the same period in 2018. At San Jose, silver and gold production increased 17% and 1% to 2,002,633 ounces and 11,993 ounces, respectively, over the same period in 2018 due primarily to a 7% increase in mine production and an 8% increase in silver head grade. At Caylloma, silver production increased 14% to 249,284 ounces over the same period in 2018 due to a 16% higher silver head grade. Lead production at Caylloma increased 15% to 7.4 million pounds due to a 19% higher head grade, while zinc production increased 1% to 11.6 million pounds on 4% higher head grade compared to the same period in 2018.

Consolidated all-in sustaining cash cost per ounce of payable silver equivalent (refer to Non-GAAP Financial Measures) for the fourth quarter was $12.58 per ounce or 3% higher than the $12.24 per ounce reported in 2018.

| Management's Discussion and Analysis, page 4 |

| --- |

Silver and gold production for the year ended December 31, 2019 decreased 1% and 7% to 8,809,767 ounces and 50,525 ounces, respectively, over 2018. At San Jose, silver and gold production decreased 1% and 9% to 7,868,478 ounces and 48,880 ounces, respectively. The decrease was due primarily to a planned change in mine sequencing of lower grade stopes in the third quarter, which reduced silver and gold production for the year by 14% and 9%, respectively. At Caylloma, silver and lead production increased 3% and 2% to 941,289 ounces and 28.7 million pounds, respectively, over 2018 due primarily to higher silver and lead head grade of 5% and 4%, respectively. Zinc production was 45.6 million pounds, compared to 45.5 million pounds in 2018.

Consolidated all-in sustaining cash cost per ounce of payable silver equivalent (refer to Non-GAAP Financial Measures) for the year ended December 31, 2019 was $11.91 per ounce or 13% higher than the $10.55 per ounce reported in 2018. This increase was due primarily to higher production costs at both San Jose and Caylloma.

Selected Financial Information

Consolidated Financial Metrics							Years<br> ended December 31,
		2018		% Change			2019		2018		% Change
(Expressed in millions except per share information)
Sales	69.0	$	59.6		16	%	$	257.2	$	263.3		(2%)
Mine operating income	23.4		17.3		35	%		84.6		96.6		(12%)
Operating income	9.0		6.3		43	%		34.2		61.6		(44%)
Net income	19.0		2.2		764	%		23.8		34.0		(30%)
Earnings per share (basic)	0.12		0.01		1,100	%		0.15		0.21		(29%)
Adjusted<br> net income1	10.9		4.4		148	%		28.4		38.4		(26%)
Adjusted<br> EBITDA1	25.1		22.7		11	%		95.4		113.9		(16%)
Net cash provided by<br> operating activities	19.2		19.3		(1	%)		63.0		83.5		(25%)
Free<br> cash flow from ongoing operations1	6.4		11.8		(46	%)		34.5		55.2		(37%)
Capex
Sustaining	6.2		9.4		(34	%)		20.4		24.0		(15%)
Non-sustaining	0.9		1.2		(29	%)		2.0		3.3		(39%)
Lindero	26.8		39.4		(32	%)		188.3		80.0		135%
Brownfields	0.9		1.6		(46	%)		4.8		8.6		(44%)
								Dec 31, 2019		Dec 31, 2018		% Change
Cash, cash equivalents,<br> and short-term investments							$	83.4	$	163.3		(49%)
Total assets							$	936.1	$	786.5		19%
Debt							$	146.5	$	69.3		111%
Shareholders'<br> equity							$	635.4	$	602.8		5%

All values are in US Dollars.

Notes:

1. Refer to Non-GAAP financial measures.

Sales for the three months ended December 31, 2019 were $69.0 million, a 16% increase from the $59.6 million reported in the same period in 2018. The increase in sales was due primarily to higher silver, gold, and lead prices of 19%, 20%, and 4%, respectively, and a 9% and 19% increase in the volume of silver and lead sold.

Sales for the year ended December 31, 2019 were $257.2 million, a 2% decrease from the $263.3 million reported in 2018.

Net income for the three months ended December 31, 2019 was $19.0 million or $0.12 per share compared to $2.2 million net income or $0.01 per share reported in the same period in 2018. The increase in net income was driven by higher sales, $11.0 million of investment gains from cross-border, Argentine Pesos denominated securities trades, and lower income taxes. These were partially offset by $4.3 million of non-cash write-downs in inventories, Argentine exploration projects and our investment in the shares of Prospero Silver Corp (“Prospero”) and Medgold Resources Corp (“Medgold”).

| Management's Discussion and Analysis, page 5 |

| --- |

Net income for the year ended December 31, 2019 was $23.8 million or $0.15 per share compared to $34.0 million net income or $0.21 per share reported in 2018. The net income was impacted by a 12% decrease in mine operating income, $5.6 million of non-cash write-downs on exploration projects, obsolete inventories, a decrease in the fair value of Prospero and Medgold shares, and a $2.3 million increase in share-based payment expenses due to the impact of a 7% year-over-year increase in the Company’s share price on the cash-settled share-based payments. The $13.3 million of foreign exchange losses primarily from the devaluation of the Argentine Peso were substantially mitigated by $11.0 million of gains from cross-border securities trades.

Adjusted net income (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2019 was $10.9 million compared to $4.4 million for the same period in 2018. The increase was due primarily to higher mine operating income from the San Jose Mine and was partially offset by higher share-based payments.

Adjusted net income for the year ended December 31, 2019 was $28.4 million compared to $38.4 million for 2018. The adjusted net income was adjusted to remove non-cash impairment charges, foreign exchange losses and investment gains from cross-border securities trades for the Lindero Project, and other non-cash items.

Adjusted EBITDA (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2019 was $25.1 million compared to $22.7 million in the same period in 2018, as a result of the same factors that increased the adjusted net income for the period.

Adjusted EBITDA for the year ended December 31, 2019 was $95.4 million compared to $113.9 million in 2018, as a result of the same factors that lowered the adjusted net income for the year.

Net cash provided by operating activities for the three months ended December 31, 2019 was $19.2 million compared to $19.3 million reported in the same period in 2018.

Free cash flow from ongoing operations (refer to Non-GAAP Financial Measures) for the three months ended December 31, 2019 was $6.3 million compared to $11.8 million reported in same period in 2018. The decrease was due primarily to the negative changes in working capital, most notably, an increase in concentrate receivables at the San Jose Mine.

Net cash provided by operating activities for the year ended December 31, 2019 was $63.0 million compared to $83.5 million reported in 2018. The decrease was driven by lower operating margins and negative changes in working capital of $11.0 million compared to positive changes of $3.3 million in 2018.

Free cash flow from ongoing operations for the year ended December 31, 2019 was $34.5 million compared to $55.2 million reported in 2018. The decrease was driven by lower margins and negative changes in working capital, which was partially offset by lower expenditures on mineral properties, plant and equipment.

As at December 31, 2019, the Company had cash, cash equivalents, and short-term investments of $83.4 million (December 31, 2018 – $163.3 million), a decrease of $79.9 million since the beginning of the year, which was due primarily to funding construction of the Lindero Project.

| Management's Discussion and Analysis, page 6 |

| --- |

Lindero Project (“Lindero” or the “project”)

Construction of the Lindero open pit heap leach gold mine located in Salta Province, Argentina is 89% complete as of the end of January 2020. Construction spending for the fourth quarter of 2019 was $27.8 million (2019 spending - $157.5 million) of which $21.3 million of construction trade payables was unpaid as of the end of December of 2019. Total construction spending as at December 31, 2019 is $280.3 million.

The following table summarizes the total construction spending at the Lindero Project:

	Cumulative to		Twelve<br> months ended
(Expressed in $ millions)	December 31, 2018		December 31, 2019			Total
Construction capital expenditures	$	79.9	$	188.3		$	268.2
Contractor advances and deposits on equipment, net of transfers		42.9		(30.8	)		12.1
Total Construction Spending	$	122.8	$	157.5		$	280.3

Construction highlights and milestones include:

·	18,750 tpd crushing and agglomerationplant

Primary and secondary crushing circuits**:** Pre-commissioning activities of the main equipment has been completed. Crushing circuits are being commissioned and stockpiling of ore has commenced.

Agglomeration plant: Mechanical work is substantially complete; piping and electrical installation is in its final stages due to the delay caused by shortfalls in contractor manpower during December and January; pre-commissioning activities have been pushed back to March.

·	Leach pad and solution ponds area

Mechanical and piping installations on the solution ponds are in progress. Pumping and solution management systems are planned to be commissioned in April.

·	ADR plant

Equipment installation has been completed with piping and electrical work in progress. Pre-commissioning activities are expected to conclude in May.

·	8 MW power plant

Commissioning of the 8-megawatt power plant and medium voltage power distribution system has been completed. The plant has been connected to the mine’s grid and is providing power to the mine.

·	SART plant

Mechanical and piping installation work is progressing with pre-commissioning activities scheduled to conclude in May. The SART plant is not mission critical for the start of gold production.

| Management's Discussion and Analysis, page 7 |

| --- | | · | Ancillary facilities | | --- | --- |

Further to the updated construction and commissioning schedule, the Company expects to place ore on the leachpad and first doré pour in the second quarter of 2020 (refer to Fortuna’s news release dated February 13, 2020), and the total construction capital expenditures are now forecast to be in the range of $314 million to $320 million, an increase of 28% over the initial capital cost guidance^1^ (see Fortuna news release dated September 21, 2017 and the technical report entitled “Fortuna Silver Mines Inc. Lindero Property, Salta Province, Argentina, dated effective October 31, 2017 which is available on SEDAR at www.sedar.com). In addition, the Company expects to incur approximately $32 million of pre-production costs and buildup of working capital and approximately $12 million of recoverable value added taxes through to the end of construction. Commercial production is expected to commence in the third quarter of 2020.

The main drivers for the increased capital costs are $8.6 million of indirect costs, and $6.8 million of EPCM contractor. In addition, the Company expects to incur pre-production costs and buildup of working capital through to the commencement of production of approximately $40 million of which $14 million had been spent as of December 31, 2019. This is an increase of $15 million over the $25 million disclosed in our November 14, 2019 news release and is mainly driven by continued mining operations during the pre-production phase which have resulted in an inventory of ore stockpile 30% larger than originally planned, additional related owner’s costs, and an additional $4 million for inventory of spare parts.

Note 1: The initial capital cost guidance of $239 million was subsequently adjusted to $245.5 million to reflect the shifting of $6.5 million in a future sustaining capital investment to expand the ADR and solution handling system to the construction phase.

| Management's Discussion and Analysis, page 8 |

| --- |

2020 Guidance and Outlook

2020 Production Guidance

	Silver	Gold	Lead	Zinc	Cash Cost1
Mine	(Moz)	(koz)	(Mlbs)	(Mlbs)	(/t)
Silver
San Jose, Mexico	6.6 - 7.3	41 - 45	-	-	65.6 - 72.5
Caylloma, Peru	0.9 - 1.0	-	27.2 - 30.1	44.0 - 48.6	81.4 - 89.9
Gold
Lindero^2,3^, Argentina	-	60 - 80	-	-	10.2 - 11.4
Consolidated Total	7.5 - 8.3	101 - 125	27.2 - 30.1	44.0 - 48.6	-

All values are in US Dollars.

Notes:

1.	All-In Sustaining Cost (AISC) is a non-GAAP financial measure (Refer to Non-GAAP Financial Measures).<br>AISC includes production cash cost, commercial and government royalties, mining tax, export duties (as applicable), worker's participation<br>(as applicable), subsidiary G&A, sustaining capital expenditures, and Brownfields exploration and is estimated at metal prices<br>of US$1,450/oz Au, US$17/oz Ag, US$2,100/t Pb, and US$2,500/t Zn.
2.	Lindero's production and cost guidance is based on the updated construction and commissioning schedule,<br>as detailed in Fortuna's news release dated February 13, 2020, with ore to be placed on the leach pad and first doré<br>pour scheduled in the second quarter of 2020. Any material changes to the construction and commissioning schedule may have a material<br>impact on Lindero's production and cost guidance.
---	---
3.	Lindero's all-in sustaining cost is based on commercial production and includes an export duty<br>of 5% of revenue.
---	---
4.	Totals may not add due to rounding.
---	---

2020 All-In-Sustaining Cash Cost Per Silver and Gold Ounce Guidance

/oz Ag	San Jose		Caylloma
Cash cost, net of by-product credits	6.7 - 8.2	$	11.7 - 14.3
Adjustments:
Commercial and government royalties and mining tax	0.3 - 0.4		0.2 - 0.2
Worker's participation	0.5 - 0.6		0 - 0
General and administrative expenses	0.5 - 0.7		0.7 - 0.8
Sustaining capital expenditures	1.1 - 1.3		1.9 - 2.3
Brownfield exploration expenditures	0.4 - 0.5		0.4 - 0.5
All-in-sustaining cash cost per payable ounce of silver	9.6<br>- 11.7	$	14.8<br>- 18.1

All values are in US Dollars.

/oz Au	Lindero
Cash cost, net of by-product credits	324<br>- 399
Adjustments:
Commercial and government royalties and mining tax	106 - 123
General and administrative expenses	32 - 36
Sustaining capital expenditures	53 - 56
Brownfield exploration expenditures	4 - 5
All-in-sustaining cash cost per payable ounce of gold	520<br>- 620

All values are in US Dollars.

| Management's Discussion and Analysis, page 9 |

| --- |

2020 Capital Expenditure and Exploration Guidance

(Expressed in $ millions)	San Jose		Caylloma		Lindero		Total
Equipment and infrastructure	$	2.0	$	5.7	$	3.3	$	11.0
Dry stack expansion		2.4		-		-		2.4
Mine development		4.8		5.0		-		9.8
Brownfield exploration		4.9		2.1		-		7.0
Other sustaining capex		3.0		0.1		-		3.1
Total	$	17.1	$	12.9	$	3.3	$	33.3

Financial Results

Sales

							YEAR TO DATE RESULTS
							Years ended December 31,
		2018		% Change			2019		2018			% Change
Provisional sales ( million)
Caylloma	18.8		19.2		(2	%)		73.6		89.1			(17	%)
San Jose	48.9		39.2		25	%		183.2		180.2			2	%
Adjustments ( million)1	1.3		1.2		(8	%)		0.4		(6.0	)		107	%
Sales ( million)	69.0		59.6		16	%		257.2		263.3			(2	%)
Silver
Metal produced (oz)	2,251,917		1,937,703		16	%		8,809,767		8,890,943			(1	%)
Provisional sales (oz)	2,221,330		2,032,909		9	%		8,798,054		8,832,993			(0	%)
Provisional sales ( million)	35.7		27.4		30	%		131.9		128.6			3	%
Realized price (/oz)2	17.33		14.60		19	%		16.20		15.74			3	%
Net realized price (/oz)3	16.07		13.47		19	%		14.99		14.56			3	%
Gold
Metal produced (oz)	12,279		12,070		2	%		50,525		54,210			(7	%)
Provisional sales (oz)	12,157		12,555		(3	%)		50,374		53,498			(6	%)
Provisional sales ( million)	17.4		14.8		18	%		66.6		64.7			3	%
Realized price (/oz)2	1,483		1,236		20	%		1,393		1,273			9	%
Net realized price (/oz)3	1,429		1,177		21	%		1,323		1,209			9	%
Lead
Metal produced (000's lbs)	7,441		6,453		15	%		28,746		28,255			2	%
Provisional sales (000's lbs)	7,559		6,377		19	%		28,969		28,349			2	%
Provisional sales ( million)	6.4		5.4		19	%		24.6		27.6			(11	%)
Realized price (/lb)2	0.92		0.89		4	%		0.91		1.02			(11	%)
Net realized price (/lb)3	0.85		0.85		(0	%)		0.85		0.97			(13	%)
Zinc
Metal produced (000's lbs)	11,614		11,537		1	%		45,600		45,485			0	%
Provisional sales (000's lbs)	11,974		11,713		(2	%)		45,781		45,867			(0	%)
Provisional sales ( million)	8.3		10.8		(23	%)		33.7		48.3			(30	%)
Realized price (/lb)2	1.08		1.19		(10	%)		1.15		1.32			(13	%)
Net realized price (/lb)3	0.69		0.92		(25	%)		0.74		1.05			(30	%)

All values are in US Dollars.

Notes:

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

| Management's Discussion and Analysis, page 10 |

| --- |

Salesfor the three months ended December 31, 2019 were $69.0 million or $9.4 million higher than the $59.6 million reported in the same period in 2018. The higher sales were due mainly to higher prices of silver, gold, and lead of 19%, 20%, and 4%, respectively, and higher volumes of silver and lead sold of 9% and 19%, respectively.

Sales at San Jose were $50.4 million, or 24% higher than the $40.5 million reported in the same period in 2018. The higher sales were due to higher silver and gold prices of 19% and 20%, respectively, and higher volume of silver sold of 8% which was partially offset by a 4% decrease in the volume of gold sold. Sales at Caylloma were $18.6 million, or 3% lower than the $19.2 million reported in the same period in 2018 as higher lead and zinc production and higher silver prices helped compensate for a 10% year-over-year decline in the price of zinc and a $2.0 million increase in treatment charges.

Sales for the year ended December 31, 2019 were $257.2 million, or 2% lower than the $263.3 million reported in 2018.

Sales at San Jose increased $8.5 million to $184.3 million as a result of increases in the prices of gold and silver of 9% and 3%, respectively, despite lower sales volume. Sales at Caylloma declined $14.5 million to $72.9 million as a result of an 11% and a 13% decline in lead and zinc prices, respectively, and an $8.6 million increase in treatment charges.

Operating Income (Loss) and Adjusted EBITDA

										Years ended December 31,
(Expressed in millions)	2019		%^1^			2018		%^1^			2019		%^1^			2018		%^1^
Operating income (loss)
San Jose	17.4		34	%	$	10.5		26	%	$	60.4		33	%	$	57.9		33	%
Caylloma	1.4		8	%		2.9		15	%		9.2		13	%		22.9		26	%
Lindero	(1.9	)	0	%		(3.9	)	0	%		(13.6	)	0	%		(4.1	)	0	%
Corporate	(7.9	)				(3.2	)				(21.8	)				(15.1	)
Total	9.0		13	%	$	6.3		10	%	$	34.2		13	%	$	61.6		23	%
Adjusted EBITDA2
San Jose	26.2		52	%	$	19.6		49	%	$	92.5		50	%	$	92.2		52	%
Caylloma	4.6		25	%		6.3		33	%		22.3		31	%		37.0		42	%
Lindero	(0.2	)	0	%		(0.1	)	0	%		(0.7	)	0	%		(0.3	)	0	%
Corporate	(5.5	)				(3.1	)				(18.7	)				(15.0	)
Total	25.1		36	%	$	22.7		38	%	$	95.4		37	%	$	113.9		43	%

All values are in US Dollars.

Notes:

1	As a Percentage of Sales
2	Refer to Non-GAAP Financial Measures
---	---
3	Figures may not add due to rounding
---	---

Operatingincome for the three months ended December 31, 2019 was $9.0 million or $2.7 million higher than the $6.3 million reported in the same period in 2018. The increase in operating income was due to higher sales at our San Jose mine as a result of higher gold and silver prices of 19% and 20% respectively. Other items that impacted operating income were a $1.9 million increase in share-based payments and $4.2 million of non-cash impairment charges.

At San Jose, operating income was $17.4 million or $6.9 million higher than the $10.5 million reported in the same period in 2018. The increase was due to higher gold and silver prices and higher volume of silver ounces sold, and was partially offset by higher production cash costs of 6% and a $0.5 million foreign exchange loss in 2019 compared to a $0.4 million foreign exchange gain in 2018. At Caylloma, operating income was $1.4 million or $1.5 million lower than the $2.9 million reported in the same period in 2018. The decrease was driven by lower sales, and higher depreciation and general and administrative expenses.

Operatingincome for the year ended December 31, 2019 was $34.2 million, or $27.4 million lower than the $61.6 million reported in 2018. The decrease was driven by a $13.7 million decrease in operating income at the Caylloma Mine, a $7.2 million increase in foreign exchange loss due primarily to the impact a 60% year-over-year decline in the Argentine Peso had on recoverable value added taxes accumulated during the construction of the Lindero Project, and $5.6 million of non-cash impairment charges on two exploration projects in Mexico and Argentina, investment in associates, and obsolete inventories.

| Management's Discussion and Analysis, page 11 |

| --- |

Exploration and Evaluation Costs

Explorationand evaluations costs for the three months ended December 31, 2019 totaled $0.4 million on an Argentine exploration project compared to $0.2 million reported in the same period in 2018.

Explorationand evaluation costs for the year ended December 31, 2019 were $2.4 million compared to $0.7 million reported in 2018. The increase was due to spending on the Company’s Argentine and Mexican greenfield exploration projects.

General and Administrative (“G&A”) Expenses

	Three months ended December 31,							Years ended December 31,
(Expressed in $ millions)	2019		2018		% Change			2019		2018		% Change
Mine G&A	$	3.5	$	3.0		17	%	$	10.9	$	10.1		8	%
Corporate G&A		3.0		2.6		15	%		11.4		11.0		4	%
Share-based payments		2.4		0.5		380	%		6.0		3.7		62	%
Workers' participation		0.5		0.2		150	%		1.5		1.4		7	%
Total	$	9.4	$	6.3		49	%	$	29.8	$	26.2		14	%

Generaland administrative expenses for the three months ended December 31, 2019 increased 49% to $9.4 million compared to $6.3 million in the same period in 2018 on higher share-based payments reflecting the impact of a 29% increase in the Company’s share price on cash-settled share units and higher personnel costs at the Mexico administration office.

General and administrative expenses for the year ended December 31, 2019 increased 14% to $29.8 million compared to $26.2 million reported in 2018 on higher share-based payments and increased headcount to support the mining operations.

Foreign Exchange Loss

Foreignexchange loss for the three months ended December 31, 2019 was $1.4 million compared to $3.6 million reported in the same period in 2018. The decrease was due primarily to the Argentine Peso declining 6% against the U.S. dollar, which contributed a $1.0 million foreign exchange loss for the current period compared to a $3.9 million foreign exchange loss for the same period in 2018.

Foreign exchange loss for the year ended December 31, 2019 was $13.3 million compared to a $6.1 million foreign exchange loss for 2018. The increase was due primarily to a $11.5 million foreign exchange loss from the Argentine Peso declining 60.5% against the U.S. dollar during 2019.

As a result of the devaluation of the Argentine Peso which followed Argentina’s primary election in the third quarter of 2019, the Company implemented an investment strategy to meet our local currency requirements in Argentina and recognized $11.0 million of gains from cross-border securities trades.

| Management's Discussion and Analysis, page 12 |

| --- |

Other Expenses

Otherexpenses for the three months ended December 31, 2019 were $3.2 million compared to $0.9 million reported in the same period in 2018. Other expenses include $2.2 million in non-cash impairment charges on the Company’s investments in Prospero and Medgold and a $0.7 million write-off of an Argentine greenfield exploration project.

Other expenses for the year ended December 31, 2019 were $4.6 million compared to $2.0 million reported in 2018. Other expenses include $4.3 million of non-cash impairment charges on the Company’s investments in Prospero and Medgold and the write-off of exploration projects.

Income Tax Expense

Incometax expense for the three months ended December 31, 2019 was $1.1 million or $3.8 million lower than the $4.9 million reported in the same period in 2018. Current income tax expense increased $4.3 million to $8.2 million compared to $3.9 million reported in 2018 due primarily to higher mine operating profits from the San Jose Mine. Included in the 2018 comparative figure was a $1.3 million tax recovery in the fourth quarter of 2018 relating to the reclassification of withholding taxes from current to deferred due to the timing of payments.

Deferred income tax recovery increased $8.2 million to $7.2 million compared to a $1.0 million deferred tax expense reported in the same period in 2018. The main drivers for the tax recovery were the positive impact of a strong Mexican Peso and high inflation on the tax base of mining assets in Mexico as well as recognition of $2.0 million of tax assets that had previously been not recognized.

Effectivetax rate (“ETR”) for the three months ended December 31, 2019 was 5.3% as a result of a favorable impact on deferred taxes from a strong Mexican Peso and high inflation in Mexico and Argentina, and recognizing tax assets that were previously not recognized against $11.0 million in investment gains from cross-border securities trades. Excluding these items, the ETR would have been 45.6% compared to 68.7% reported in the same period in 2018. The higher ETR in 2018 included the recognition of additional withholding taxes that increased the ETR by 19%.

Incometax expense for the year ended December 31, 2019 was $20.2 million, or $13.2 million lower than the $33.4 million reported in 2018. Current income tax expense was $32.6 million, or $2.0 million higher than the $30.6 million reported in 2018 due primarily to a $3.2 million increase in interest and dividend withholding tax.

Deferred income tax recovery for the year ended December 31, 2019 was $12.5 million, compared to a $2.8 million deferred income tax expense reported in 2018. The swing to a tax recovery was due primarily to a favorable impact from a strong Mexican Peso, high inflation in both Mexico and Argentina, as well as recognizing tax assets that were previously not recognized.

The ETR for the year ended December 31, 2019 was 45.9% compared to 49.5% reported in 2018. The lower ETR was primarily attributed to the net favorable impact of foreign exchange and inflation in Mexico and Argentina.

| Management's Discussion and Analysis, page 13 |

| --- |

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,
		2018		2019		2018
Mine Production
Tonnes milled	273,066		256,181		1,068,722		1,040,478
Average tonnes milled per day	3,034		2,846		3,028		2,956
Silver
Grade (g/t)	249		230		252		260
Recovery (%)	91		91		91		92
Production (oz)	2,002,633		1,718,496		7,868,478		7,979,634
Metal sold (oz)	1,968,550		1,818,026		7,849,438		7,921,345
Realized price (/oz)	17.34		14.61		16.20		15.74
Gold
Grade (g/t)	1.50		1.58		1.57		1.75
Recovery (%)	91		91		91		92
Production (oz)	11,993		11,825		48,880		53,517
Metal sold (oz)	11,870		12,312		48,731		53,255
Realized price (/oz)	1,483		1,236		1,393		1,273
Unit Costs
Production cash cost (/t)2	70.19		65.94		69.60		63.72
Production cash cost (/oz Ag Eq)1,2	6.82		6.79		6.74		5.93
Net smelter return (/t)	181.85		145.49		172.04		138.54
All-in sustaining cash cost (/oz Ag Eq)1,2	10.54		9.85		9.83		9.02
Capital expenditures (000's)
Sustaining	3,737		2,723		9,969		9,277
Brownfields	649		1,361		4,077		6,947

All values are in US Dollars.

Notes:

1.	Production cash cost silver equivalent and all-in sustaining cash cost (“AISC”) silver<br>equivalent are calculated using realized metal prices for each period respectively.
2.	Production cash cost, Production cash cost silver equivalent and AISC silver equivalent are Non-GAAP<br>Financial Measures. Refer to Non-GAAP Financial Measures.
---	---

Quarterly Results

The San Jose Mine produced 2,002,633 ounces of silver and 11,993 ounces of gold in the fourth quarter of 2019, which were 17% and 1%, respectively, above the comparable quarter in 2018. The higher silver production was due primarily to a 7% increase in mine throughput as well as an 8% increase in silver head grade.

Cash cost per tonne of processed ore for the fourth quarter increased 6% to $70.19 per tonne (refer to Non-GAAP Financial Measures) compared to $65.94 per tonne for the comparable quarter in 2018. The increased cash cost was due to higher mine costs related to breakup, support and transportation.

| Management's Discussion and Analysis, page 14 |

| --- |

Annual Results

The San Jose Mine produced 7,868,478 ounces of silver and 48,880 ounces of gold in 2019, which were 1% and 9%, respectively, below 2018. The lower production was due primarily to the impact of scheduled mine production in lower grade stopes in the third quarter which produced approximately 282,000 less silver ounces on 15% lower head grade.

Cash cost per tonne of processed ore for the year ended December 31, 2019 increased 9% to $69.60 per tonne (refer to Non-GAAP Financial Measures) compared to $63.72 per tonne for 2018. The increased cash cost was due to higher mining costs relating to contractor tariffs and indirect costs. The cash cost was within the annual cost guidance.

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,
		2018		2019		2018
Mine Production
Tonnes milled	133,271		135,034		531,307		534,773
Average tonnes milled per day	1,481		1,500		1,497		1,502
Silver
Grade (g/t)	71		61		66		63
Recovery (%)	82		83		83		84
Production (oz)	249,284		219,207		941,289		911,309
Metal sold (oz)	252,780		214,883		948,616		911,648
Realized price (/oz)	17.31		14.55		16.23		15.71
Lead
Grade (%)	2.84		2.39		2.72		2.62
Recovery (%)	89		91		90		91
Production (000's lbs)	7,441		6,453		28,746		28,255
Metal sold (000's lbs)	7,559		6,377		28,969		28,349
Realized price (/lb)	0.92		0.89		0.91		1.02
Zinc
Grade (%)	4.48		4.30		4.36		4.28
Recovery (%)	88		90		89		90
Production (000's lbs)	11,614		11,537		45,600		45,485
Metal sold (000's lbs)	11,974		11,713		45,781		45,867
Realized price (/lb)	1.08		1.19		1.15		1.32
Unit Costs
Production cash cost (/t)2	85.86		89.50		86.15		83.47
Production cash cost (/oz Ag Eq)1,2	11.67		8.67		10.92		7.64
Net smelter return (/t)	138.07		141.67		137.77		166.05
All-in sustaining cash cost (/oz Ag Eq)1,2	15.40		14.76		14.30		11.68
Capital expenditures (000's)
Sustaining	2,487		6,646		10,440		14,709
Brownfields	214		223		700		1,691

All values are in US Dollars.

Notes:

1.	Production cash cost silver equivalent and all-in sustaining (“AISC”) cash cost silver<br>equivalent are calculated using realized metal prices for each period respectively.
2.	Production cash cost, Production cash cost silver equivalent and AISC silver equivalent are Non-GAAP<br>Financial Measures. Refer to Non-GAAP Financial Measures.
---	---

| Management's Discussion and Analysis, page 15 |

| --- |

Quarterly Results

The Caylloma Mine produced 7.4 million pounds of lead and 11.6 million pounds of zinc in the fourth quarter of 2019, which were 15% higher and in line with the production for the comparable quarter in 2018. The higher volume of lead production was due primarily to a 19% higher lead head grade despite lower mine throughput. Silver production totaled 249,284 ounces or 14% higher than the comparable quarter in 2018 due to higher silver head grade by 16%.

Cash cost per tonne of processed ore was $85.86 (refer to Non-GAAP Financial Measures), which was 4% lower than the $89.50 cash cost per tonne for the comparable quarter in 2018 and was within our annual guidance range. The lower cash cost was due primarily to lower mining costs related to breakup and support.

Annual Results

The Caylloma Mine produced 28.7 million pounds of lead and 45.6 million pounds of zinc in 2019, which were 2% higher and in line with the production for 2018. The higher volume of lead production was due to a 4% higher lead head grade. Zinc production was in line with production for 2018. Silver production totaled 941,289 ounces or 3% higher than the production for 2018.

Cash cost per tonne of processed ore was $86.15 (refer to Non-GAAP Financial Measures), or 3% higher than the $83.47 per tonne for 2018 and within our annual guidance range. The higher cash cost was due to higher indirect costs related mainly to on-site camp maintenance and personnel transportation.

Quarterly Information

The following table provides information for the last eight fiscal quarters up to December 31, 2019:

	Expressed in 000's, except per share data
	Q4 2019	Q3 2019			Q2 2019		Q1 2019		Q4 2018		Q3 2018		Q2 2018		Q1 2018
Sales			61,305			67,908		58,991		59,592		59,596		73,666		70,442
Mine operating income			16,671			22,978		21,487		17,345		16,497		31,392		31,337
Operating (loss) income			(1,459	)		15,711		10,913		6,251		10,535		22,372		22,428
Net (loss) income			(7,710	)		10,279		2,243		2,232		6,853		11,151		13,754
Basic EPS			(0.05	)		0.07		0.01		0.01		0.04		0.07		0.09
Diluted EPS			(0.05	)		0.07		0.01		0.01		0.04		0.07		0.09
Total assets			871,483			823,310		796,718		786,517		738,305		721,147		707,504
Debt			109,394			69,363		69,338		69,302		39,639		39,603		39,588

All values are in US Dollars.

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. 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.

Sales decreased 10% in the third quarter of 2019 to $61.3 million compared to $67.9 million in the second quarter of 2019 due primarily to lower silver and gold ounces sold from the San Jose Mine as a result of scheduled mining at lower grade stopes. The lower sales and an $8.3 million foreign exchange loss from the devaluation of the Argentine Peso were the primary reasons for the $1.5 million operating loss and $7.7 million net loss in the third quarter of 2019.

| Management's Discussion and Analysis, page 16 |

| --- |

Sales increased 15% in the second quarter of 2019 to $67.9 million compared to $59.0 million in the first quarter of 2019 due primarily to higher silver and gold sales volume from the San Jose Mine. Sales from the Caylloma Mine decreased $2.6 million or 13% quarter-over-quarter due to lower sales volume and a 21% and 11% decrease in the prices for lead and zinc, respectively. Cost of sales increased 20% over the first quarter of 2019 due to higher mining, milling, and labour costs. Foreign exchange swung to a $0.2 million gain from a $3.7 million loss in the first quarter as the Argentine Peso strengthened 2.1% against the U.S. dollar in the quarter and contributed $0.7 million towards the foreign exchange gain.

Sales decreased 1% in the first quarter of 2019 to $59.0 million compared to $59.6 million in the fourth quarter of 2018. Lower sales in the first quarter of 2019 were impacted by a $3.7 million buildup in silver-gold concentrate inventory shipped in the second quarter of 2019. Depreciation and depletion were $2.0 million lower due to lower sales volume. Income tax expense increased 49% quarter-over-quarter to $7.3 million compared to $4.9 million from the previous quarter. The increase in income tax expense was due primarily to the impact of a 15% decline in the Argentine Peso and was partially offset by a highly inflationary environment in Argentina, which had a positive impact on the tax base of Lindero’s assets. Other factors contributing to an 18% increase in the ETR include deferred tax assets not recognized, non-deductible expenses, and mining taxes.

Precious Metal Prices Trends

For the year ended December 31, 2019, the sale of silver and gold ounces represents 78% of the Company’s sales revenue while lead and zinc make up the remaining 22% of sales revenue. Therefore, the prices of silver and gold are the most dominant factors in determining the Company’s profitability and cash flow from operations. The financial performance of the Company is expected to continue to be closely linked to the prices of silver and gold.

The silver price began the 2019 year at $15.47 per ounce and trended to a low of $14.38 per ounce in late May before closing at $15.28 per ounce at the end of the second quarter. During the third quarter the silver price trended to a high of $19.56 per ounce in early September before retreating to $16.97 per ounce at the end of the quarter. Silver trended to a high of $18.08 per ounce by the end of October before trending to a low $16.54 before closing at $17.78 per ounce at the end of the fourth quarter. Comparatively, the Company had an average realized price of silver of $17.33 per ounce and $16.20 per ounce, respectively, for the three and twelve months ended December 31, 2019.

| Management's Discussion and Analysis, page 17 |

| --- |

The gold price began the 2019 year at $1,274 per ounce and rose to a first quarter high of $1,344 per ounce before closing the first quarter at $1,295 per ounce. Gold traded in a narrow range during April and May before the start of an uptrend, closing at $1,409 per ounce at the end of the second quarter. During the third quarter, the gold price trended to a high of $1,546 per ounce by mid-August before retreating to $1,485 per ounce at the end of the quarter. Gold traded in a narrow range in the fourth quarter and closed at $1,523 per ounce at the end of the fourth quarter. Comparatively, the Company had an average realized price of gold of $1,483 and $1,393 per ounce, respectively, for the three and twelve months ended December 31, 2019.

Liquidity and Capital Resources

Cash, Cash Equivalents and Short-Term Investments

The Company had cash, cash equivalents and short-term investments of $83.4 million at December 31, 2019, which represents a $79.9 million decrease from $163.3 million at December 31, 2018 and is comprised of $31.0 million of cash and $52.4 million of cash equivalents. The decrease in cash, cash equivalents and short-term investments was due primarily to $188.3 million in construction expenditures at Lindero, $34.7 million on construction related VAT payments, $8.4 million in lease payments and $35.0 million on non-construction related expenditures at Lindero and other capital expenditures at San Jose and Caylloma. These expenditures were partially funded from $63.5 million in cash generated from operations, $43.5 million net proceeds from the issuance of convertible debentures and $40.0 million drawn under the Company’s credit facility.

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 decreased $95.2 million to $62.4 million at December 31, 2019 compared to $157.6 million at December 31, 2018. The decrease in working capital was due to funding construction at the Lindero Project and other capital expenditures at the San Jose and Caylloma mines.

Capital Resources

As at December 31, 2019, the Company had fully drawn $40.0 million from its non-revolving credit facility and $70.0 million from its $110.0 million revolving credit facility. The purpose of the credit facility is to fund the construction of the Lindero Project. 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 a defined Total Debt to EBITDA Ratio, and is secured by a first ranking lien on the assets of the San Jose and Caylloma mines as well as their holding companies.

Liquidity and capital measures (expressed in $ millions)	December 31, 2019			December 31, 2018			Change
Cash and cash equivalents ("Cash")	$	83.4		$	90.5		$	(7.1	)
Short-term investments ("STI")		-			72.8			(72.8	)
Total Cash and STI		83.4			163.3			(79.9	)
Credit facility		150.0			150.0			-
Amount drawn on credit facility		(110.0	)		(70.0	)		(40.0	)
Net liquidity position	$	123.4		$	243.3		$	(119.9	)

| Management's Discussion and Analysis, page 18 |

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On October 2, 2019, the Company completed a bought deal public offering (the “Offering”) of senior subordinated unsecured convertible debentures with an aggregate principal amount of $40.0 million. The Offering was subject to an over-allotment option which was exercised in full on October 8, 2019, pursuant to which an additional $6.0 million aggregate principal amount of debentures were issued, bringing the aggregate gross proceeds to the Company under the Offering to $46.0 million. The debentures issued under the Offering including those issued upon exercise of the Over-Allotment Option are collectively referred as the “Debentures”. The Company paid $2.5 million of transaction costs related to this financing.

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. 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, representing a conversion rate of 200 Common Shares per $1,000 principal amount of Debentures, subject to adjustment in certain circumstances.

At initial recognition, gross proceeds of $46.0 million from the Debentures were allocated into its debt and equity components. The fair value of the debt component was estimated at $38.9 million using a discounted cash flow model method with an expected life of five years and a discount rate of 8.6%. This amount is recorded as a financial liability on an amortized cost basis net of transaction cost using the effective interest method using an effective interest rate of 9.7% until extinguished upon conversion or at its maturity date.

The conversion option of the Debentures is classified as equity and was estimated based on the residual value of $7.1 million. This amount is not subsequently remeasured and will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. A deferred tax liability of $1.9 million related to the taxable temporary difference arising from the equity portion of the convertible debenture was recognized in equity reserves.

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.

| Management's Discussion and Analysis, page 19 |

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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 Project and planned capital and exploration programs.

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 metal price, 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 speculation or trading purposes.

Provisional priced trade receivables of $33.6 million and an interest rate swap liability of $0.9 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.

Related Party Transactions

The Company has entered into the following related party transactions during the years ended December 31, 2019 and 2018:

(a) Purchase of Goods and Services

	Years ended December 31,
(Expressed in $000's)	2019		2018
Personnel costs	$	21	$	118
General and administrative expenses		189		193
	$	210	$	311

As at December 31, 2019, the Company has outstanding balances payable to Gold Group Management Inc. of $0.01 million (December 31, 2018 - $0.02 million). Amounts due to related parties are due on demand and are unsecured.

(b) Key Management Personnel

| Management's Discussion and Analysis, page 20 |

| --- | | | Years ended December 31, | | | | | --- | --- | --- | --- | --- | | (Expressed in $000's) | 2019 | | 2018 | | | Salaries and benefits | $ | 4,716 | $ | 4,471 | | Directors fees | | 702 | | 709 | | Consulting fees | | 135 | | 139 | | Share-based payments | | 5,449 | | 3,545 | | | $ | 11,002 | $ | 8,864 |

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 commissioning and commencement of commercial production at the Lindero Project; political risks, 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 2019, 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 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, 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.

All of the Company’s current production and revenue is 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 construction at the Lindero Project; 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.

| Management's Discussion and Analysis, page 21 |

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Estimating MineralResources 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 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 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 and risks related to theConstruction of the Lindero Project

The Company is subject to inherent uncertainties and risks related to the construction and start-up of the Lindero Project, 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 Project cannot be assured. The Company has prepared estimates of capital costs and/or operating costs for the Lindero Project, 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 22 |

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Environmental Uncertainties

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.

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 of 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, 2019 and 2018 is as follows:

	December 31,		December 31,
Credit (Expressed in $000’s)	2019		2018
Cash and cash equivalents	$	83,404	$	90,503
Short-term investments		-		72,824
Derivative assets		-		2,646
Accounts receivable and other assets		47,707		32,769
Income tax receivable		2,553		136
Other non-current receivables		38,389		15,241
	$	172,053	$	214,119

| Management's Discussion and Analysis, page 23 |

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Metal 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.

The following table illustrates the sensitivity to a +/-10% change in metal prices on the Company’s outstanding trade receivables as at December 31, 2019:

Metal<br> (Expressed in $ millions)	Change	Effect on Sales
Silver	+/- 10%	$	3.4
Gold	+/- 10%	$	1.8
Lead	+/- 10%	$	0.3
Zinc	+/- 10%	$	0.2

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. The Board of Directors continually assesses the Company’s strategy towards its base metal exposure, depending on market conditions. As at December 31, 2019, the Company had no outstanding forward sales and zero cost collars contracts.

Currency 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.

The following table illustrates the sensitivity to a +/-10% change in foreign currency exchange rates on the Company’s foreign currency exposure as at December 31, 2019:

		Effect on foreign
		denominated
Currency (Expressed in $ millions)	Change	items
Mexican Peso	+/- 10%	$	2.1
Peruvian Soles	+/- 10%	$	0.2
Argentinian Peso	+/- 10%	$	1.0
Canadian Dollar	+/- 10%	$	0.4

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 in effect when the Company commences production at the Lindero Project, the Company will be required to convert the equivalent value into Argentine Peso from the export sale of all gold doré from the Lindero Project. 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.

| Management's Discussion and Analysis, page 24 |

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

	December 31, 2019
(Expressed in millions)		Canadian<br> Dollars			Peruvian<br> Soles			Mexican<br> Pesos			Argentinian<br> Pesos
Cash and cash equivalents		0.6			2.3			13.1			11.8
Accounts receivable and other assets		0.3			1.8			4.0			87.5
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		(0.0	)		-			-			-
Provisions, current		-			-			(3.9	)		-
Income tax payable		-			-			(161.9	)		-
Other liabilities		-			-			(4.2	)		-
Provisions		-			-			(87.5	)		-
Total foreign currency exposure		(6.3	)		(6.8	)		(444.4	)		684.8
US$ equivalent of foreign currency exposure	$	(4.8	)	$	(2.1	)	$	(23.6	)	$	11.3
	December 31, 2018
---	---	---	---	---	---	---	---	---	---	---	---	---
(Expressed in millions)	Canadian<br> Dollars			Peruvian<br> Soles			Mexican<br> Pesos			Argentinian<br> Pesos
Cash and cash equivalents		0.4			0.9			37.0			7.0
Accounts receivable and other assets		0.3			3.7			11.8			37.1
Income tax receivable		-			0.5			-			-
Investments in associates		5.2			-			-			-
VAT - long term receivable		-			-			-			560.9
Trade and other payables		(8.5	)		(18.5	)		(218.8	)		(125.2	)
Due to related parties		(0.0	)		-			-			-
Provisions, current		-			-			(3.0	)		-
Income tax payable		-			(4.6	)		(59.8	)		-
Other liabilities		-			-			(2.3	)		-
Provisions		-			-			(67.0	)		-
Total foreign currency exposure		(2.6	)		(18.0	)		(302.0	)		479.8
US$ equivalent of foreign currency exposure	$	(2.0	)	$	(5.5	)	$	(16.1	)	$	11.6

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligation as they become due. The volatility of the metals market can impact the Company’s ability to forecast cash flow from operations.

The Company maintains sufficient liquidity to meet its short-term business requirements, taking into account anticipated cashflows from operations, holdings of cash, cash equivalents and short-term investments and committed loan facilities.

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. The Company expects the following maturities of its financial liabilities, lease obligations, and other contractual commitments, excluding payments relating to interest:

| Management's Discussion and Analysis, page 25 |

| --- | | | Expected payments due by year as at December 31, 2019 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 | | - | | 110.0 | | 46.0 | | - | | 156.0 | | Income taxes payable | | 12.4 | | - | | - | | - | | 12.4 | | Lease obligations | | 9.3 | | 9.4 | | 4.1 | | 15.0 | | 37.8 | | Other liabilities | | - | | 0.5 | | - | | - | | 0.5 | | Capital commitments, Lindero ^1^ | | 24.5 | | - | | - | | - | | 24.5 | | Closure and reclamation provisions | | 2.7 | | 7.6 | | 1.8 | | 21.3 | | 33.4 | | | $ | 114.2 | $ | 127.5 | $ | 51.9 | $ | 36.3 | $ | 329.9 |

Note:

1 Net of $10.9 million of deposits on equipment and advances to contractors

Capital 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 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 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, cash equivalents and short-term investments.

	December 31,			December 31,
(Expressed in $ millions)	2019			2018
Equity	$	635.4		$	602.8
Debt		146.5			69.3
Lease obligations		23.9			8.8
Less: Cash, cash equivalents and short-term investments		(83.4	)		(163.3	)
	$	722.4		$	517.5

Figures may not add due to rounding

| Management's Discussion and Analysis, page 26 |

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Interest 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, 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. We have entered into an interest rate swap for the $40.0 million non-revolving credit facility to mitigate the interest rate risk on our debt.

Key Personnel

Claims 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.

Adoption of New Accounting Standards

IFRS 16, Leases

The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·	Applied the exemption not to recognize<br>right of use asset and liabilities for leases with less than 12 months of lease term;
·	Excluded initial direct cost from measuring<br>the right of use asset at the date of initial application; and
---	---
·	Used hindsight when determining the lease<br>term if the contract contains an option to extend or terminate the lease.
---	---

At transition to IFRS 16, for leases classified as operating leases under IAS 17, the lease liabilities were measured at the present value of the remaining lease payments and discounted using each operation’s applicable incremental borrowing rate as of January 1, 2019. As a result, the Company, as a lessee, has recognized $7,316 within Lease Obligations representing its obligation to make lease payments. ROU assets of the same amount were recognized within Plant and Equipment, representing the Company’s right to use the underlying assets. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 5.32%.

| Management's Discussion and Analysis, page 27 |

| --- |

The Company leases various equipment that had previously been classified as finance leases under IAS 17. For these finance leases, the carrying amount of the ROU asset and the lease liability at January 1, 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

The following table (expressed in $000’s) summarizes the difference between operating lease commitments disclosed immediately preceding the date of initial application and lease liabilities recognized on the balance sheet at the date of initial application:

Operating lease obligations as at December 31, 2018	$	2,553
Leases with lease term of 12 months or less and low value assets		(825	)
Embedded leases identified in existing service contracts		6,162
Effect of discounting at incremental borrowing rate		(574	)
Lease liabilities recognized as at January 1, 2019		7,316
Lease liabilities from finance leases previously recorded in lease obligations		8,767
Total lease liabilities as at January 1, 2019		16,083
Less current portion		(6,120	)
Non-current portion	$	9,963

IFRIC 23 Uncertainty over Income Tax Treatments

This interpretation sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. At January 1, 2019, the Company adopted this standard and there was no impact on its financial statements.

Critical 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:

Mineral 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 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, 2019 we have used the following long-term prices for our mineral reserve and mineral resource estimations: gold $1,380/oz, silver $17.00/oz, lead $2,170/t and zinc $2,590/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 3(g)(i) to the audited consolidated financial statements for 2019.

| Management's Discussion and Analysis, page 28 |

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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. 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.

Reclamation 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 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.

| Management's Discussion and Analysis, page 29 |

| --- |

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.

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 against the Direccion 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 Mexican administrative court.

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, 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 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.

| Management's Discussion and Analysis, page 30 |

| --- |

Assessment 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 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.

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 160,291,553 common shares outstanding as at March 10, 2020. In addition, 4,225,391 incentive stock options and equity-settled restricted share units are currently outstanding as follows:

			Exercise
			Price
Type of Security	No. of Shares		(CAD)	Expiry Date
Incentive Stock Options:		517,833		March 18, 2020
		617,694		May 28, 2022
		640,951		March 18, 2023
		7,551		June 4, 2023
		1,784,029		Vesting Date
Equity-Settled Share Units:		195,375		May 29, 2020
		1,185,548		March 19, 2021
		3,916		June 5, 2021
		1,056,523		March 15, 2022
		2,441,362
Total outstanding		4,225,391

All values are in US Dollars.

| Management's Discussion and Analysis, page 31 |

| --- |

During the year ended December 31, 2019, the Company granted 422,609 (2018 – 1,002,166) equity-settled performance share units which vest as follows: 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. The share units granted in the current period are subject to a multiplier ranging from 50% to 200% depending on the achievement level of certain performance targets. The fair value of the share units on the grant date was $3.62 (C$4.83) (year ended December 31, 2018 –$4.71 (C$6.20).

During the year ended December 31, 2019 the Company granted 633,914 (2018 – 422,030) equity-settled restricted share units at a price of $3.62 (C$4.83) per share unit (2018 – between $4.71 (C$6.20) and $5.54 (C$7.15) per share unit).

As at December 31, 2019, 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 will not be redeemable by the Company prior to October 31, 2022. 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.

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).

Based on management’s evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as at December 31, 2019.

Management’s Report on Internal Control over Financial Reporting

The Company’s internal control over financial reporting 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. Management conducted an evaluation of the effectiveness of internal control over financial reporting and concluded that it was effective as at December 31, 2019.

| Management's Discussion and Analysis, page 32 |

| --- |

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting for the year ended December 31, 2019 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 33 |

| --- |

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, 2019 and 2018.

	Three Months Ended						Years Ended
CONSOLIDATED MINE CASH COST SILVER EQUIVALENT	December 31,						December 31,
(Expressed in '000's, except unit costs)	2019			2018			2019			2018
Cost of sales	$	45,539		$	42,247		$	172,607		$	166,725
Change in concentrate inventory		443			(1,795	)		969			(922	)
Depletion and depreciation in concentrate inventory		(178	)		648			(280	)		384
Inventory adjustment		(1,257	)		(206	)		(1,327	)		(206	)
IFRS 16 embedded lease adjustment		626			-			2,409			-
Commercial and government royalties and mining taxes		(1,462	)		(669	)		(4,134	)		(3,248	)
Provision for community support		128			231			282			(1,165	)
Workers participation		(1,922	)		(779	)		(6,012	)		(6,164	)
Depletion and depreciation		(11,309	)		(10,700	)		(44,357	)		(44,473	)
Cash cost	$	30,608		$	28,977		$	120,157		$	110,931
Cash cost	$	30,608		$	28,977		$	120,157		$	110,931
Treatment charges		2,275			-			10,060			-
Refining charges		1,274			950			5,011			4,434
Cash cost applicable per payable ounce		34,157			29,927			135,228			115,365
Payable ounces of silver equivalent production1		4,132,079			4,018,731			16,806,749			17,693,738
Cash cost per ounce of payable silver equivalent2 (/oz)	$	8.27		$	7.45		$	8.05		$	6.52

All values are in US Dollars.

Notes:

Silver equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.5:1 (Q4 2018: 84.6:1), silver to lead of 1:18.7 pounds (Q4 2018: 1:16.3), and silver to zinc of 1:16.0 pounds (Q4 2018: 1:12.2), and YTD 2019: silver to gold ratio of 86.0:1 (YTD 2018: 81.0:1), silver to lead of 1:17.9 pounds (YTD 2018: 1:15.4), and silver to zinc of 1:14.1 pounds (YTD 2018: 1:11.9)

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

---

| Management's Discussion and Analysis, page 34 |

| --- | | | Three Months Ended | | | | | | Years Ended | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | SAN JOSE MINE CASH COST SILVER EQUIVALENT | December 31, | | | | | | December 31, | | | | | | | (Expressed in '000's, except unit costs) | 2019 | | | 2018 | | | 2019 | | | 2018 | | | | Cost of sales | $ | 30,024 | | $ | 27,407 | | $ | 114,156 | | $ | 106,468 | | | Change in concentrate inventory | | 741 | | | (1,755 | ) | | 1,111 | | | (717 | ) | | Depletion and depreciation in concentrate inventory | | (231 | ) | | 628 | | | (325 | ) | | 264 | | | Inventory adjustment | | (1,235 | ) | | - | | | (1,235 | ) | | - | | | IFRS 16 embedded lease adjustment | | 31 | | | - | | | 93 | | | - | | | Commercial and government royalties and mining taxes | | (844 | ) | | (621 | ) | | (3,385 | ) | | (3,030 | ) | | Workers participation | | (1,779 | ) | | (488 | ) | | (5,293 | ) | | (4,438 | ) | | Depletion and depreciation | | (7,541 | ) | | (8,279 | ) | | (30,736 | ) | | (32,251 | ) | | Cash cost | | 19,166 | | | 16,892 | | | 74,386 | | | 66,296 | | | Total processed ore (tonnes) | | 273,066 | | | 256,181 | | | 1,068,722 | | | 1,040,478 | | | Cash cost per tonne of processed ore (/t) | $ | 70.19 | | $ | 65.94 | | $ | 69.60 | | $ | 63.72 | | | Cash cost | $ | 19,166 | | $ | 16,892 | | $ | 74,386 | | $ | 66,296 | | | Treatment charges | | (542 | ) | | - | | | (990 | ) | | - | | | Refining charges | | 1,131 | | | 825 | | | 4,468 | | | 3,871 | | | Cash cost applicable per payable ounce | | 19,755 | | | 17,717 | | | 77,864 | | | 70,167 | | | Payable ounces of silver equivalent production1 | | 2,898,204 | | | 2,610,093 | | | 11,554,107 | | | 11,823,139 | | | Cash cost per ounce of payable silver equivalent2 (/oz) | $ | 6.82 | | $ | 6.79 | | $ | 6.74 | | $ | 5.93 | | | Mining cost per tonne | $ | 36.25 | | $ | 33.36 | | $ | 36.27 | | $ | 30.90 | | | Milling cost per tonne | | 16.59 | | | 17.17 | | | 17.17 | | | 18.71 | | | Indirect cost per tonne | | 9.43 | | | 8.82 | | | 8.80 | | | 7.50 | | | Community relations cost per tonne | | 1.70 | | | 1.28 | | | 1.56 | | | 1.23 | | | Distribution cost per tonne | | 6.22 | | | 5.31 | | | 5.80 | | | 5.38 | | | Total production cost per tonne | $ | 70.19 | | $ | 65.94 | | $ | 69.60 | | $ | 63.72 | |

All values are in US Dollars.

Notes:

1	Silver<br>equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.5:1 (Q4 2018: 84.6:1) and for YTD<br>2019, silver to gold ratio of 86.0:1 (YTD 2018: 80.9:1)
2	Silver<br>equivalent is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales<br>- Sales and Realized Prices
---	---

| Management's Discussion and Analysis, page 35 |

| --- | | | Three Months Ended | | | | | | Years Ended | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CAYLLOMA MINE CASH COST SILVER EQUIVALENT | December 31, | | | | | | December 31, | | | | | | | (Expressed in '000's, except unit costs) | 2019 | | | 2018 | | | 2019 | | | 2018 | | | | Cost of sales | $ | 15,515 | | $ | 14,840 | | $ | 58,451 | | $ | 60,257 | | | Change in concentrate inventory | | (298 | ) | | (40 | ) | | (142 | ) | | (205 | ) | | Depletion and depreciation in concentrate inventory | | 53 | | | 20 | | | 45 | | | 120 | | | Inventory adjustment | | (22 | ) | | (206 | ) | | (92 | ) | | (206 | ) | | IFRS 16 embedded lease adjustment | | 595 | | | - | | | 2,316 | | | - | | | Commercial and government royalties and mining taxes | | (618 | ) | | (48 | ) | | (749 | ) | | (218 | ) | | Provision for community support | | 128 | | | 231 | | | 282 | | | (1,165 | ) | | Workers participation | | (143 | ) | | (291 | ) | | (719 | ) | | (1,726 | ) | | Depletion and depreciation | | (3,768 | ) | | (2,421 | ) | | (13,621 | ) | | (12,222 | ) | | Cash cost | | 11,442 | | | 12,085 | | | 45,771 | | | 44,635 | | | Total processed ore (tonnes) | | 133,270 | | | 135,034 | | | 531,307 | | | 534,773 | | | Cash cost per tonne of processed ore (/t) | $ | 85.86 | | $ | 89.50 | | $ | 86.15 | | $ | 83.47 | | | Cash cost | $ | 11,442 | | $ | 12,085 | | $ | 45,771 | | $ | 44,635 | | | Treatment charges | | 2,817 | | | - | | | 11,050 | | | - | | | Refining charges | | 143 | | | 125 | | | 543 | | | 564 | | | Cash cost applicable per payable ounce | | 14,402 | | | 12,210 | | | 57,364 | | | 45,199 | | | Payable ounces of silver equivalent production1 | | 1,233,875 | | | 1,408,638 | | | 5,252,643 | | | 5,916,133 | | | Cash cost per ounce of payable silver equivalent2 (/oz) | $ | 11.67 | | $ | 8.67 | | $ | 10.92 | | $ | 7.64 | | | Mining cost per tonne | $ | 41.60 | | $ | 44.94 | | $ | 41.26 | | $ | 41.35 | | | Milling cost per tonne | | 14.15 | | | 13.92 | | | 14.17 | | | 14.41 | | | Indirect cost per tonne | | 20.23 | | | 21.11 | | | 22.35 | | | 19.61 | | | Community relations cost per tonne | | 2.26 | | | 2.42 | | | 1.19 | | | 1.06 | | | Distribution cost per tonne | | 7.62 | | | 7.11 | | | 7.18 | | | 7.04 | | | Total production cost per tonne | $ | 85.86 | | $ | 89.50 | | $ | 86.15 | | $ | 83.47 | |

All values are in US Dollars.

Notes:

Silver equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.6:1 (Q4 2018: 85.3:1) , silver to lead of 1:18.7 pounds (Q4 2018: 1:16.3), and silver to zinc of 1:16.0 pounds (Q4 2018: 1:12.2), and YTD 2019: silver gold ratio of 85.8:1 (YTD 2018: 85.3:1), silver to lead of 1:17.9 pounds (YTD 2018: 1:15.4), and silver to zinc of 1:14.1 pounds (YTD 2018: 1:11.9)

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

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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”).

| Management's Discussion and Analysis, page 36 |

| --- |

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 brownfield 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 31, 2019 and 2018.

	Three Months Ended				Years Ended
CONSOLIDATED MINE ALL-IN CASH COST SILVER EQUIVALENT	December 31,				December 31,
(Expressed in $'000's, except unit costs)	2019		2018		2019		2018
Cash cost applicable	$	34,157	$	29,927	$	135,228	$	115,365
Commercial and government royalties and mining tax		2,389		1,718		9,948		10,081
Workers' participation		2,405		945		7,489		7,564
General and administrative expenses (operations)		3,499		2,970		10,899		10,097
Adjusted operating cash cost		42,450		35,560		163,564		143,107
General and administrative expenses (corporate)		2,439		2,696		11,416		10,991
Sustaining capital expenditures^3^		6,224		9,369		20,409		23,986
Brownfield exploration expenditures^3^		863		1,584		4,777		8,638
All-in sustaining cash cost		51,976		49,209		200,166		186,722
Exploration and evaluation expenses		402		180		2,411		726
Non-sustaining capital expenditures^3^		27,664		40,556		190,294		83,335
All-in cash cost		80,042		89,945		392,871		270,783
Payable ounces of silver equivalent production^1^		4,132,079		4,018,731		16,806,749		17,693,738
All-in sustaining cash cost per ounce of payable silver equivalent^2^	$	12.58	$	12.24	$	11.91	$	10.55
All-in cash cost per ounce of payable silver equivalent^2^	$	19.37	$	22.38	$	23.38	$	15.30

Notes:

1	Silver<br>equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.5:1 (Q4 2018: 84.6:1), silver to<br>lead of 1:18.7 pounds (Q4 2018: 1:16.3), and silver to zinc of 1:16.0 pounds (Q4 2018: 1:12.2), and YTD<br>2019: silver to gold ratio of 86.0:1 (YTD 2018: 81.0:1), silver to lead of 1:17.9 pounds (YTD 2018: 1:15.4),<br>and silver to zinc of 1:14.1 pounds (YTD 2018: 1:11.9)
2	Silver<br>equivalent is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales<br>- Sales and Realized Prices
---	---
3	Presented<br>on a cash basis
---	---

| Management's Discussion and Analysis, page 37 |

| --- | | | Three Months Ended | | | | Years Ended | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | SAN JOSE MINE ALL-IN CASH COST SILVER EQUIVALENT | December 31, | | | | December 31, | | | | | (Expressed in $'000's, except unit costs) | 2019 | | 2018 | | 2019 | | 2018 | | | Cash cost applicable | $ | 19,755 | $ | 17,717 | $ | 77,864 | $ | 70,167 | | Commercial and government royalties and mining tax | | 2,252 | | 1,398 | | 8,605 | | 8,293 | | Workers' participation | | 2,223 | | 610 | | 6,616 | | 5,548 | | General and administrative expenses (operations) | | 1,919 | | 1,911 | | 6,475 | | 6,414 | | Adjusted operating cash cost | | 26,149 | | 21,636 | | 99,560 | | 90,422 | | Sustaining capital expenditures^3^ | | 3,737 | | 2,723 | | 9,969 | | 9,277 | | Brownfield exploration expenditures^3^ | | 649 | | 1,361 | | 4,077 | | 6,947 | | All-in sustaining cash cost | | 30,535 | | 25,720 | | 113,606 | | 106,646 | | Exploration and evaluation expenses | | - | | 63 | | - | | 156 | | All-in cash cost | | 30,535 | | 25,783 | | 113,606 | | 106,802 | | Payable ounces of silver equivalent production^1^ | | 2,898,204 | | 2,610,093 | | 11,554,107 | | 11,823,139 | | All-in sustaining cash cost per ounce of payable silver equivalent^2^ | $ | 10.54 | $ | 9.85 | $ | 9.83 | $ | 9.02 | | All-in cash cost per ounce of payable silver equivalent^2^ | $ | 10.54 | $ | 9.88 | $ | 9.83 | $ | 9.03 |

Notes:

1	Silver<br>equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.5:1 (Q4 2018: 84.6:1) and for YTD<br>2019, silver to gold ratio of 86.0:1 (YTD 2018: 80.9:1)
2	Silver<br>equivalent is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales<br>- Sales and Realized Prices
---	---
3	Presented<br>on a cash basis
---	---

| Management's Discussion and Analysis, page 38 |

| --- | | | Three Months Ended | | | | Years Ended | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CAYLLOMA MINE ALL-IN CASH COST SILVER EQUIVALENT | December 31, | | | | December 31, | | | | | (Expressed in $'000's, except unit costs) | 2019 | | 2018 | | 2019 | | 2018 | | | Cash cost applicable | $ | 14,402 | $ | 12,210 | $ | 57,364 | $ | 45,199 | | Commercial and government royalties and mining tax | | 137 | | 320 | | 1,343 | | 1,788 | | Workers' participation | | 179 | | 335 | | 864 | | 2,016 | | General and administrative expenses (operations) | | 1,580 | | 1,059 | | 4,424 | | 3,683 | | Adjusted operating cash cost | | 16,298 | | 13,924 | | 63,995 | | 52,686 | | Sustaining capital expenditures^3^ | | 2,487 | | 6,646 | | 10,440 | | 14,709 | | Brownfield exploration expenditures^3^ | | 214 | | 223 | | 700 | | 1,691 | | All-in sustaining cash cost | | 18,999 | | 20,793 | | 75,135 | | 69,086 | | Non-sustaining capital expenditures^1^ | | 259 | | - | | 705 | | - | | All-in cash cost | | 19,258 | | 20,793 | | 75,840 | | 69,086 | | Payable ounces of silver equivalent production^1^ | | 1,233,875 | | 1,408,638 | | 5,252,643 | | 5,916,133 | | All-in sustaining cash cost per ounce of payable silver equivalent^2^ | $ | 15.40 | $ | 14.76 | $ | 14.30 | $ | 11.68 | | All-in cash cost per ounce of payable silver equivalent^2^ | $ | 15.61 | $ | 14.76 | $ | 14.44 | $ | 11.68 |

Notes:

1	Silver<br>equivalent production for Q4 2019 is calculated using a silver to gold ratio of 85.6:1 (Q4 2018: 85.3:1) , silver to lead of 1:18.7<br>pounds (Q4 2018: 1:16.3), and silver to zinc of 1:16.0 pounds (Q4 2018: 1:12.2), and YTD 2019:<br>silver gold ratio of 85.8:1 (YTD 2018: 85.3:1), silver to lead of 1:17.9 pounds (YTD 2018: 1:15.4), and silver to zinc of 1:14.1<br>pounds (YTD 2018: 1:11.9)
2	Silver<br>equivalent is calculated using the realized prices for gold, silver, lead, and zinc. Refer to Financial Results - Sales<br>- Sales and Realized Prices
---	---
3	Presented<br>on a cash basis
---	---

Free Cash Flow and Free Cash Flow From Ongoing Operations

The Company uses the financial measure of “free cash flow” and “free cash flow from ongoing operations” to supplement information in its consolidated financial statements. Free cash flow is defined as cash provided from operating activities less purchases of mineral properties, plant and equipment, less net deposits on long term assets, less current income tax, 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.

The following table presents a reconciliation of free cash flow from ongoing operations for the three and twelve months ended December 31, 2019 and 2018:

	Three months ended						Years ended
	December 31,						December 31,
(Expressed in $ millions)	2019			2018			2019			2018
Net cash provided by operating activities	$	19.2		$	19.3		$	63.0		$	83.5
Less: Accrued interest		(1.5	)		-			-			-
Less: Change in long term receivables		-			-			(1.5	)		-
Less: Additions to mineral properties, plant and equipment		(7.6	)		(10.5	)		(26.0	)		(33.3	)
Less: Contractor advances for plant and equipment		-			-			(0.6	)		(1.3	)
Add: Advances applied to plant and equipment		-			0.1			0.7			1.2
Less: Current income tax expense		(8.2	)		(3.9	)		(32.6	)		(30.6	)
Add: Income taxes paid		4.5			6.8			31.5			35.7
Free cash flow from ongoing operations^1^	$	6.4		$	11.8		$	34.5		$	55.2

Note:

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

| Management's Discussion and Analysis, page 39 |

| --- |

Adjusted Net Income

The Company uses the financial measure of “adjusted net income” to supplement information in its consolidated financial statements. 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.

						Years ended
						December 31,
(Expressed in millions)	2019			2018			2019			2018
Net income	19.0		$	2.2		$	23.8		$	34.0
Adjustments, net of tax:
Community support provision	(0.1	)		(0.2	)		(0.2	)		0.8
Foreign exchange loss, Lindero project	1.0			3.9			11.5			3.9
Income tax, Lindero project	-			(2.8	)		(1.1	)		1.0
Income tax, convertible debentures	(1.9	)		-			(1.9	)		-
Share of loss from associates	0.1			0.1			0.2			-
Investment income	(11.0	)		-			(11.0	)		-
Other non-cash items	3.8			1.2			7.1			(1.3	)
Adjusted Net Income	10.9		$	4.4		$	28.4		$	38.4

All values are in US Dollars.

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.

						Years ended
						December 31,
(Expressed in millions)	2019			2018			2019			2018
Net income	19.0		$	2.2		$	23.8		$	34.0
Adjustments:
Community support provision	(0.1	)		(0.3	)		(0.3	)		1.1
Inventory adjustment	1.3			0.2			1.3			0.2
Foreign exchange loss, Lindero project	1.0			3.9			11.5			3.9
Net finance items	(0.1	)		(0.4	)		(0.3	)		(0.4	)
Depreciation, depletion, and amortization	11.6			10.8			46.0			44.8
Income taxes	1.1			4.9			20.2			33.4
Share of loss from associates	0.1			0.1			0.2			-
Investment income	(11.0	)		-			(11.0	)		-
Other non-cash items	2.2			1.3			4.0			(3.0	)
Adjusted EBITDA	25.1		$	22.7		$	95.4		$	113.9

All values are in US Dollars.

| Management's Discussion and Analysis, page 40 |

| --- |

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.

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 “reserves” and “resources”<br>as they involve the implied assessment, based on estimates and assumptions that the reserves and resources described exist in the<br>quantities predicted or estimated and can be profitably produced in the future;
·	production rates at the Company’s<br>properties;
---	---
·	cash cost estimates;
---	---
·	timing for delivery of materials and equipment<br>for the Company’s properties;
---	---
·	the sufficiency of the Company’s<br>cash position and its ability to raise equity capital or access debt facilities;
---	---
·	the Company’s planned greenfield<br>exploration programs;
---	---
·	the Company’s planned capital expenditures<br>and brownfields exploration at the San Jose Mine;
---	---
·	the Company’s planned capital expenditures<br>and brownfields exploration at the Caylloma Mine;
---	---
·	the Company’s planned capital expenditures<br>and brownfields exploration at the Lindero Project;
---	---
·	the Company’s construction of the<br>open pit gold heap leach mine at the Lindero Project and the anticipated timing of commissioning and commencement of commercial production<br>of the mine;
---	---
·	maturities of the Company’s financial<br>liabilities, finance leases and other contractual commitments;
---	---
·	expiry dates of bank letters of guarantee;
---	---
·	litigation matters;
---	---
·	estimated mine closure costs; and
---	---
·	management’s expectation that any<br>investigations, claims, and legal, labour and tax proceedings arising in the ordinary course of business will not have a material<br>effect on the results of 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.

| Management's Discussion and Analysis, page 41 |

| --- |

Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements. Such uncertainties and factors include, among others:

·	operational risks relating to mining and mineral processing;
·	uncertainty relating to Mineral Resource and Mineral Reserve estimates;
---	---
·	uncertainty relating to capital and operating costs, production schedules and economic returns;
---	---
·	uncertainty and risks related to the start-up of the Lindero Project;
---	---
·	uncertainty relating to capital and operating costs and economic returns of development projects<br>such as the Lindero Project;
---	---
·	risks related to the construction, commissioning and commencement of commercial production at the<br>Lindero Project;
---	---
·	risks associated with mineral exploration and project development;
---	---
·	uncertainty relating to the repatriation of funds as a result of currency controls;
---	---
·	environmental matters including potential liability claims;
---	---
·	uncertainty relating to nature and climate conditions;
---	---
·	risks associated with political instability and changes to the regulations governing the Company’s<br>business operations;
---	---
·	changes 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 relating to the termination of the Company’s mining concessions in certain circumstances;
---	---
·	risks related to International Labour Organization (“ILO”) Convention 169 compliance;
---	---
·	developing and maintaining relationships with local communities and stakeholders;
---	---
·	risks associated with losing control of public perception as a result of social media and other<br>web-based applications;
---	---
·	potential opposition of the Company’s exploration, development and operational activities;
---	---
·	risks related to the Company’s ability to obtain adequate financing for planned exploration<br>and development activities;
---	---
·	substantial reliance on the Caylloma Mine and San Jose Mine for revenues;
---	---
·	property title matters;
---	---
·	risks relating to the integration of businesses and assets acquired by the Company;
---	---
·	impairments;
---	---
·	risks associated with climate change legislation;
---	---
·	reliance on key personnel;
---	---
·	uncertainty relating to potential conflicts of interest involving the Company’s directors<br>and officers;
---	---
·	risks 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 of insurance coverage;
---	---
·	risks related to the Company’s compliance with the United States Sarbanes-Oxley Act;
---	---

| Management's Discussion and Analysis, page 42 |

| --- | | · | risks related to the foreign corrupt practices regulations and anti-bribery laws; | | --- | --- | | · | potential legal proceedings; to which it is a party; | | --- | --- | | · | the Company is subject to any adverse ruling in any of the litigation | | --- | --- | | · | uncertainties relating to general economic conditions; | | --- | --- | | · | risks relating to a global pandemic, which unless contained could cause a slowdown in global economic growth and impact the Company’s business, operations, financial condition and share price; | | · | competition; | | --- | --- | | · | fluctuations in metal prices; | | --- | --- | | · | risks associated with entering into commodity forward and option contracts for base metals production; | | --- | --- | | · | fluctuations in currency exchange rates; | | --- | --- | | · | tax audits and reassessments; | | --- | --- | | · | uncertainty relating to concentrate treatment charges and transportation costs; | | --- | --- | | · | sufficiency of monies allotted by the Company for land reclamation; | | --- | --- | | · | dilution from equity or convertible debenture financings; and | | --- | --- | | · | risks associated with dependence upon information technology systems, which are subject to disruption, damage, failure and risks with implementation and integration. | | --- | --- |

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 required third party contractual,<br>regulatory and governmental approvals will be obtained for the exploration, development, construction and production of its properties;
·	there being no significant disruptions<br>affecting operations, whether relating to labour, supply, power, damage to equipment or other matter;
---	---
·	permitting, construction, development,<br>expansion, and production continuing on a basis consistent with the Company’s current expectations;
---	---
·	expected trends and specific assumptions<br>regarding metal prices and currency exchange rates;
---	---
·	prices for and availability of fuel, electricity,<br>parts and equipment and other key supplies remaining consistent with current levels;
---	---
·	production forecasts meeting expectations;<br>and
---	---
·	the accuracy of the Company’s current<br>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

| Management's Discussion and Analysis, page 43 |

| --- |

Canadian standards, including National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), differ significantly from the disclosure requirements of U.S securities laws currently in effect, and Mineral Reserve and Mineral Resource information contained or incorporated by reference in this MD&A may not be comparable to similar information disclosed by United States companies. Equivalent U.S. disclosure requirements are currently governed by the United States Securities and Exchange Commission (“SEC”) Industry Guide 7 (“Industry Guide 7”) under the U.S. Securities Act of 1933, as amended. In particular, and without limiting the generality of the foregoing, the term Mineral Resource does not equate to the term “reserve”. Under the SEC’s disclosure standards currently in effect under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would need to be in hand or issuance imminent in order to classify mineralized material as reserves under such U.S. standards currently in effect. The SEC has not recognised the reporting of mineral deposits which do not meet the Industry Guide 7 definition of “reserve” prior to the adoption of the Modernization of Property Disclosures for Mining Registrants, which rules will be required to be complied with in the first fiscal year beginning on or after January 1, 2021. As a result, the SEC’s disclosure standards currently in effect normally do not permit the inclusion of information concerning Measured Mineral Resources, Indicated Mineral Resources or Inferred Mineral Resources or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by United States standards in documents filed with the SEC.

Disclosure of “contained tonnes” in a Mineral Resource estimate is permitted disclosure under NI 43-101 provided that the grade or quality and the quantity of each category is stated; however, the SEC’s disclosure standards currently in effect under Industry Guide 7 normally only permit issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of Mineral Reserves are also not the same as those of the SEC’s disclosure standards currently in effect under Industry Guide 7, and Mineral Reserves reported in compliance with NI 43-101 may not qualify as “reserves” under such SEC standards. Accordingly, information contained in this MD&A or any documents incorporated by reference herein containing descriptions of mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the U.S. federal securities laws and the rules and regulations thereunder.

| Management's Discussion and Analysis, page 44 |

| --- |

EXHIBIT 99.4

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

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Fortuna Silver Mines Inc.

We consent to the use of our reports, each dated March 10, 2020, with respect to the consolidated financial statements of Fortuna Silver Mines Inc. as at December 31, 2019 and 2018 and for the years then ended and the effectiveness of internal control over financial reporting as of December 31, 2019, included in this annual report on Form 40-F.

Our report on the consolidated financial statements refers to changes to accounting policy for leases in 2019 due to the adoption of IFRS 16, Leases.

/s/ KPMG LLP

Chartered Professional Accountants

March 30, 2020

Vancouver, Canada

EXHIBIT 99.5

CONSENT OF ERIC CHAPMAN

CONSENT OF AUTHOR / EXPERT

I hereby consent to:

1.	the use of my name, Eric Chapman, and reference to my name, the technical report entitled “Fortuna<br>Silver Mines Inc.: Caylloma Mine, Caylloma District, Peru” dated effective March 8, 2019 (the “Caylloma Report”),<br>evaluating the Caylloma Mine of Fortuna Silver Mines Inc. (the “Company”), the technical report entitled “Fortuna<br>Silver Mines Inc.: San Jose Mine, Oaxaca, Mexico” dated effective February 22, 2019 (the “San Jose Report”),<br>evaluating the San Jose Mine of the Company, and the technical report entitled “Fortuna Silver Mines Inc.: Lindero Property,<br>Salta Province, Argentina” dated effective October 31, 2017, evaluating the Lindero Property of the Company (together with<br>the Caylloma Report and the San Jose Report, the “Reports”), and the information contained in the Reports described<br>or incorporated by reference in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with<br>the United States Securities and Exchange Commission;
2.	the use of my name, Eric Chapman, and reference to my name, and the technical information relating<br>to the updated Mineral Reserve and Mineral Resource estimates for the Caylloma Mine, the San Jose Mine and the Lindero Project<br>contained under the heading “General Development of the Business – Three-Year History and Recent Developments”<br>in the Annual Information Form of the Company for the year ended December 31, 2019 included in the Company’s Annual Report<br>on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission; and
---	---
3.	the use of my name, Eric Chapman, and reference to my name, and the technical information contained<br>in the Annual Information Form of the Company for the year ended December 31, 2019 included in the Company’s Annual Report<br>on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission.
---	---

Dated: March 30, 2020

“Eric Chapman”

Eric Chapman, P.Geo.

EXHIBIT 99.6

CONSENT OF AMRI SINUHAJI

CONSENT OF AUTHOR / EXPERT

I hereby consent to:

the use of my name, Amri Sinuhaji, and reference to my name, the technical report entitled “Fortuna Silver Mines Inc.: Caylloma Mine, Caylloma District, Peru” dated effective March 8, 2019 (the “Caylloma Report”), evaluating the Caylloma Mine of Fortuna Silver Mines Inc. (the “Company”), and the technical report entitled “Fortuna Silver Mines Inc.: San Jose Mine, Oaxaca, Mexico” dated effective February 22, 2019, evaluating the San Jose Mine of the Company (together with the Caylloma Report, the “Reports”), and the information contained in the Reports described or incorporated by reference in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission; and

the use of my name, Amri Sinuhaji, and reference to my name, and the technical information relating to the updated Mineral Reserve and Mineral Resource estimates for the Caylloma Mine, the San Jose Mine and the Lindero Project contained under the heading “General Development of the Business – Three-Year History and Recent Developments” in the Annual Information Form of the Company for the year ended December 31, 2019 included in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission

---

Dated: March 30, 2020

“Amri Sinuhaji”

Amri Sinuhaji, P.Eng.

EXHIBIT 99.7

CONSENT OF EDWIN GUTIERREZ

CONSENT OF AUTHOR / EXPERT

I hereby consent to the use of my name, Edwin Gutierrez, and reference to my name, the technical report entitled “Fortuna Silver Mines Inc.: Lindero Property, Salta Province, Argentina” dated effective October 31, 2017, evaluating the Lindero Property of the Company (the “LinderoReport”), and the information contained in the Lindero Report described or incorporated by reference in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission.

Dated: March 30, 2020

“Edwin Gutierrez”

Edwin Gutierrez,

Registered Member of the Society for Mining, Metallurgy and Exploration, Inc.

EXHIBIT 99.8

CONSENT OF GEOFF ALLARD

CONSENT OF AUTHOR / EXPERT

I hereby consent to the use of my name, Geoff Allard, and reference to my name and the technical report entitled “Fortuna Silver Mines Inc.: Lindero Property, Salta Province, Argentina” dated effective October 31, 2017, evaluating the Lindero Property of the Company (the “LinderoReport”), and the information contained in the Lindero Report described or incorporated by reference in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission.

Dated: March 30, 2020

“Geoff Allard”

Geoff Allard, PE

EXHIBIT 99.9

CONSENT OF DENYS PARRA MURRUGARRA

CONSENT OF AUTHOR / EXPERT

I hereby consent to the use of my name, Denys Parra Murrugarra, and reference to my name and the technical report entitled “Fortuna Silver Mines Inc.: Lindero Property, Salta Province, Argentina” dated effective October 31, 2017, evaluating the Lindero Property of the Company (the “LinderoReport”), and the information contained in the Lindero Report described or incorporated by reference in the Company’s Annual Report on Form 40-F for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission.

Dated: March 30, 2020

“Denys Parra Murrugarra”

Denys Parra Murrugarra,

Registered Member of the Society for Mining, Metallurgy and Exploration, Inc.

EXHIBIT 99.10

CERTIFICATION PURSUANT TO RULE 13a-14OR 15d-14 OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANTTO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002

I, Jorge Ganoza Durant, certify that:

1.	I have reviewed this annual report on Form 40-F of Fortuna Silver Mines Inc. (the “issuer”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5.	The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
---	---
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Dated: March 30, 2020

“Jorge Ganoza Durant”
Name: Jorge Ganoza Durant
Title: President, Chief Executive Officer & Director
(principal executive officer)

EXHIBIT 99.11

CERTIFICATION PURSUANT TO RULE 13a-14OR 15d-14 OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANTTO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002

I, Luis Ganoza Durant, certify that:

1.	I have reviewed this annual report on Form 40-F of Fortuna Silver Mines Inc. (the “issuer”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the issuer’s<br>internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,<br>or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5.	The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
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(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
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(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Dated: March 30, 2020

“Luis Ganoza Durant”
Name: Luis Ganoza Durant
Title: Chief Financial Officer
(principal financial officer)

EXHIBIT 99.12

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Fortuna Silver Mines Inc. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jorge Ganoza Durant, President, Chief Executive Officer & Director of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The<br>Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The<br>information contained in the Report fairly presents, in all material respects, the financial condition and results of operations<br>of the Company.
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Dated: March 30, 2020

“Jorge Ganoza Durant”
Name: Jorge Ganoza Durant
Title: President, Chief Executive Officer & Director
(principal executive officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 99.13

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Fortuna Silver Mines Inc. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luis Ganoza Durant, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The<br>Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The<br>information contained in the Report fairly presents, in all material respects, the financial condition and results of operations<br>of the Company.
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Dated: March 30, 2020

“LuisGanoza Durant”
Name: Luis Ganoza Durant
Title: Chief Financial Officer
(principal financial officer)

Fortuna Mining Corp 40-F for FY2019

About this 40-F

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