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- Fortuna Silver reported strong earnings on rising production and falling costs.
- I had anticipated this in my recent article.
- Unfortunately, the company is barely profitable at the current silver price and shares continue to trade at a premium valuation, making this a "sell".
- Fortuna Silver posts a net profit and is still free cash flow positive, despite the turmoil.
- This isn’t surprising as I was aiming for a free cash flow of $25M this year, and in the first nine months, Fortuna’s FCF was already $18.5M.
- Fortuna’s team seems to be managing the problems quite well, and even though I was cautious earlier on, I will initiate a position if the share price dips again.
Update: Fortuna Silver Is Playing It Smart By Adjusting Its Production Mix To The Low Silver Price Environment
- Fortuna Silver’s production was better than I expected.
- The zinc production was unexpectedly 25% higher than planned, mitigating the low silver price risk.
- The investment thesis doesn’t change. Fortuna Silver is a company with a superior management team.
Update: Fortuna Silver Increases Its Mineral Resource Estimate At Its Flagship San Jose Project
- Silver resources soar at Fortuna's San Jose Mine from about 60 million ounces to 100 million ounces.
- As I mention in my June article this was already priced into the stock.
- Unless the company can expand annual production these new ounces add little to the company's NAV.
- With the stock down so is the silver price, and I think the shares have further downside risk from here unless the silver price makes a sharp reversal higher.
Should Investors Press Their Luck With Fortuna Silver?
- Fortuna Silver has done a good job of expanding production and reducing operating costs, making it one of the more attractive silver mining companies on an AISC basis.
- Drilling results from Trinidad North continue to support the notion that this is a high-quality expansion opportunity that can extend the useful life of San Jose.
- Fortuna Silver doesn't look cheap on an NAV basis, but reserve additions from Trinidad North and further capacity expansions could drive more value in the coming year.
- Fortuna Silver released Q2 earnings of $2.9 million on $44.3 million of revenue, reporting production costs of $17.41/oz.
- This is in-line, although slightly worse than my June prediction.
- The stock has continued to drift higher as investors are optimistic on silver miners, but the company's valuation far outweighs its cash-flow potential leaving the shares vulnerable to the downside.
Update: Fortuna Silver Mines Reports In-Line Q2 Production
- Fortuna Silver Mines reports 1.6 million ounces of silver production and 8,500 ounces of gold production.
- These numbers were in-line with estimates and in-line with my expectations.
- Shares of Fortuna Silver Mines are still overvalued as the company needs to find ways to increase its production.
- While I am bullish of silver I would look for opportunities elsewhere.
Fortuna Silver Mines: This Quality Silver Miner Has Run Too Far
- Fortuna Silver Mines has been one of the best performing silver miners as of late as production is rising and costs are low.
- However this has pushed the company's valuation to a point where the risk/reward is not favorable.
- Silver bulls should continue to monitor the company and the stock, but now is a good time to take profits and look for opportunities elsewhere.
Fortuna Silver Mines Lost 14% Yesterday But I See No Fundamental Reason For The Drop
- Fortuna Silver's shares dropped 14% in anticipation of the financial results, and there's no objective reason for this.
- As expected, Fortuna Silver was FCF negative and reported a net loss in 2013 due to capital expenditures and an impairment charge.
- Production is expected to increase in 2014 to 8 million silver-equivalent ounces.
- Should the share price fall further, it might be a good idea to pick up some shares as I'm expecting a positive FCF of $25M this year.
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Fortuna Silver Mines Inc is engaged in silver mining and related activities in Latin America, including exploration, extraction, and processing. Its assets include Caylloma silver mine in southern Peru and the San Jose silver-gold mine in Mexico.
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