Fortuna Silver Mines August Investor Presentation
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Fortuna Silver Mines August Investor Presentation Fortuna Silver Mines August Investor Presentation Presentation Transcript

  • San Jose Mine,  Mexicowww.fortunasilver.com August 2012
  • Regulatory DisclaimerCertain statements in this presentation constitute forward‐looking statements and as such are based on anassumed set of economic conditions and courses of action. These include estimates of future productionlevels, expectations regarding mine production costs, expected trends in mineral prices and statements thatdescribe Fortuna’s future plans, objectives or goals. There is a significant risk that actual results will vary,perhaps materially, from results projected depending on such factors as changes in general economicconditions and financial markets, changes in prices for silver and other metals, technological and operationalhazards in Fortuna’s mining and mine development activities, risks inherent in mineral exploration,uncertainties inherent in the estimation of mineral reserves, mineral resources, and metal recoveries, thetiming and availability of financing, governmental and other approvals, political unrest or instability incountries where Fortuna is active, labor relations and other risk factors.Thomas I. Vehrs, Ph.D., Vice President of Exploration and Founding Registered Member of The Society forMining, Metallurgy, and Exploration, Inc. (SME Registered Member Number 3323430RM) and Edgar Vilela,Corporate Manager of Technical Services of Fortuna, are the Qualified Persons for Fortuna Silver Mines Inc.as defined by National Instrument 43‐101. Dr. Vehrs is responsible for ensuring that the geological andscientific information contained in this presentation are an accurate summary of the original reports anddata provided to or developed by Fortuna Silver Mines. Mr. Vilela is responsible for ensuring that theinformation on reserves, production and costs contained in this presentation are an accurate summary ofthe original reports and data provided to or developed by Fortuna Silver Mines. 2
  • Vision To be valued by our workers, the community and our shareholders as a leading silver mining company in Latin America Caylloma Mine, Peru 3
  • Core AssetsOperating and exploring in the AmericasProduction San Jose Mine, Mexico Caylloma Mine, PeruExploration Exploring in Mexico and Peru; two  largest silver producing countries in  the world 44,000 meter drill program for 2012  4
  • Company SnapshotStrong balance sheet Share structure (as of July 30 ) th Exchanges US$60.65 million in cash (Q2 2012)  Outstanding: 125.2 million US$20 million credit facility  Fully diluted: 131.0 million No long term debt No hedging Frankfurt: F4S.F FVI.TO vs. Ag (Aug 2011 – Aug 2012)  5
  • Financial Snapshot Strong financial performance Revenue US$ [´000s] Operating Income US$ [´000s] 154,122 43,402 38,065 110,004 27,728 74,056 51,428 14,383 2009 2010 2011 2012 2009 2010 2011 2012 FORECAST FORECAST2012 forecast: Ag = US$30/oz, Au = US$1,660/oz, Pb = US$2,300/t and Zn = US$2,000/t 6
  • Financial Snapshot Strong cash flow and sustainable growth Cash Flow Per Share Earnings Per Share 0.14  0.14 0.12  0.12 0.10  0.10 0.08  0.08 0.06  0.06 0.04  0.04 0.02  0.02  ‐  ‐ Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2012 Q1 2012 Q4 2011 Q3 2011  (0.02) 7
  • Financial SnapshotRevenue by metal 1% 4% 7% 15% 9% 29% 23% Copper 14% 19% 7% Lead 21% 23% Zinc 3% 4% Gold 64% 65% 49% Silver 44% 2009 2010 2011 2012 FORECAST 2012 forecast:  Ag = US$30/oz, Au = US$1,660/oz, Pb = US$2,300/t and Zn = US$2,000/t 8
  • Key Milestones Foundations of a Leading Silver Mining Company Commissioning  of 1,500 tpd Plant plant expansion to  expansion   Shares begin  1,500 tpd at  trading on  San Jose Shares begin  Commissioning  NYSE trading on TSX of dore plant  Acquired 100%  Off‐site dore Commenced  plant  interest in  Reported Shares begin  commercial  construction  San Jose positive  trading  production at  at San Jose Successful  pre‐feasibility San Jose, on  on BVL Received EIS  drilling  at  study at  time and on  Commenced approval and  San Jose San Jose  Increased  budget production at  permits for  significantly  silver  Company  Caylloma on  San Jose Started  increased  production established time and on  construction  Ag Eq  by 85%  budget  Increased  of San Jose  resources   Shares trade  silver  Mineon the TSX.V Acquired stake  production  in  by 96%  Increased  Acquired San Jose  silver Caylloma Mine production by 13% 2005 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 2013 9
  • Investment Highlights 1 Emergence of a leading silver mining company in the Americas 2 Proven mine developers and operators 3 Strong cash flow and sustainable growth from existing mines 4 Brownfields exploration upside 5 Disciplined acquisition strategy 10
  • Emergence of a Leading Silver Mining CompanySustainable mineral reserve and resource growth   140.0 Inferred Resources Measured & Indicated Resources 120.0 Proven & Probable Reserves Contained Metal ‐ Ag Eq (Moz) * 100.0 80.0 60.0 40.0 20.0 0.0 2005 2006 2007 2008 2009 2010 2011 * Ag Eq calculated using Ag = US$25.14/oz and Au = US$1,391.63/oz 11
  • Emergence of a Leading Silver Mining CompanyIncreasing Exposure to Precious Metals Ag Production 4.9 4.9 5.0 4.1 3.7 4.0 M oz 3.0 2.4 1.9 2.0 1.6 0.81 1.0 0.44 ‐ 2007 2008 2009 2010 2011 2012 2013 2014 2015 Production forecast Au Production 30,000 27,000 26,000 25,000 21,100 20,000 17,400 oz 15,000 10,000 7,000 3,300 5,000 2,100 2,300 2,500 ‐ 2007 2008 2009 2010 2011 2012 2013 2014 2015 Production forecast 2012 base metal revenue estimate = US$26M; Pb = US$2,300/t & Zn = US$2,000/t 12
  • Proven Mine Builders and Operators Senior Management Jorge A. Ganoza Dr. Thomas I. Vehrs Cesar Pera Luis Dario Ganoza Manuel Ruiz‐Conejo Robert Brown President,  Vice President,  Vice President,  Chief Financial Vice President,  Vice President,  CEO and Director  Exploration Human & Organizational  Officer Operations Corporate  Development DevelopmentCo‐founder of  Over 35 years  Over 25 years  Over 15 years  Over 25 years  20 years experience in Fortuna. Peruvian  experience managing  experience in  experience in the  experience in the  exploration, project geological engineer.  exploration  organizational  operations and  execution of multi‐ development and Identified and  programs in the  development  financial  million dollar  finance. Former CEO negotiated purchase  Americas. Tom also  and change in  management of  mining projects and  of Calibre Mining of Caylloma, built serves as an  Latin American  public mining  the implementation  Corp. and senior  the Fortuna team. independent director  companies. companies. Luis  of community  manager at Barrick Jorge also serves as  for AQM Copper Inc. also serves as a  relations programs. Gold in exploration Chairman of the  Director of Atico  and business Board of Atico Mining  Mining Corporation,  development.Corporation, a TSX.V  a TSX.V listed listed company. company. 13
  • Proven Mine Builders and OperatorsBoard of Directors Simon Ridgway Chairman of the Board Robert R. Gilmore Mario Szotlender Tomas GuerreroCo‐founder of Fortuna.  30 years of experience working  Co‐founder of Fortuna.  Geological engineer with Vancouver‐based mining  with resource companies and  Financier, businessman  over 30 years experience.  financier. Also founded  currently serves as Chairman of  and Director of Radius  Served as Director of Focus Ventures, Radius  the Board for Eldorado Gold  Gold, Endeavour Silver,  Explorations for the Gold, Mar West Resources  Corporation and as a Director for  Magellan, Focus Ventures  Hochschild Group.and Northland Resources. Layne Christensen Company. and Iron Creek.Jorge A. GanozaPresident and CEO  Thomas Kelly Michael IversonCo‐founder of Fortuna.  36 years of experience in mine  Chief Executive Officer of Fortuna Peruvian geological  production, minerals industry  from 1998 to January 2005. engineer. Identified and  consulting and corporate  President and Director of Niogold negotiated purchase of  management in various Latin  Mining Corp. since 1998.Caylloma, built the Fortuna  American countries; currently team. Jorge also serves as  serves as CEO of Apurimac Ferrum, Chairman of the Board of  a private company developing iron Atico Mining Corporation, a  ore assets in Peru.TSX.V listed company. 14
  • Caylloma Mine, Peru Overview Commodities Silver, gold, zinc, lead Operation 1,300 tpd underground mine  Reserve Life 8 Years Location Arequipa, Peru                                  Ownership 100% Intermediate sulfidation Deposit type epithermal deposit 2012E cash cost/t US$85.00 Ag Production  2,000  1,900  1,800k oz  1,700  1,600  1,500 2009 2010 2011 2012 Production forecast 15
  • Caylloma Mine, Peru  Solid reserve and resource base Contained Metal Tonnes  Ag Au Pb Zn Classification (000) (g/t) (g/t) (%) (%) Ag Au (Moz) (koz)Proven & Probable Reserves 4,642  135 0.33 1.33 1.93 20.2 49.5Measured & Indicated Resources 2,258 123 0.30 0.85 1.28 8.9 21.8Inferred Resources 3,258 112 0.36 0.99 1.50 11.8 37.9Notes to Mineral Reserve and Mineral Resource tables prepared in accordance with NI 43 ‐ 101:  Mineral Reserves and Mineral Resources are as defined by the CIM Definition Standards on Mineral Resources  and Mineral Reserves Mineral Resources are exclusive of Mineral Reserves Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability Caylloma Mineral Resources and Mineral Reserves are estimated as of June 30, 2011 and reported as of  December 31, 2011 Refer to www.fortunasilver.com for full disclosure 16
  • San Jose Mine, Mexico Overview Commodities Silver, gold Operation 1,050 tpd underground mine  Reserve Life 9 Years Taviche Mining District,   Location Oaxaca, Mexico Ownership 100% High‐grade, low sulphidation Deposit type epithermal vein deposit 2012E cash cost/t  US$75.00 Ag Production Au Production  3,000  25,000  20,000  2,000  15,000k oz oz  10,000  1,000  5,000  ‐  ‐ 2011 2012 2013 2014 2011 2012 2013 2014 Production forecast Production forecast 17
  • San Jose Mine, MexicoSolid reserve and resource base Contained Metal Tonnes  Ag Au Classification (000) (g/t) (g/t) Ag Au (Moz) (koz) Probable Reserves 3,600 204 1.59 23.6 183.7 Indicated Resources 376 243 2.12 2.9 25.6 Inferred Resources 3,072 223 1.80 22.0 178.1 Notes to Mineral Reserve and Mineral Resource tables prepared in accordance with NI 43 ‐ 101:   Mineral Reserves and Mineral Resources are as defined by the CIM Definition Standards on Mineral Resources  and Mineral Reserves  Mineral Resources are exclusive of Mineral Reserves  Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability  Mineral Reserves and Mineral Resources reported as of December 31st, 2011  Refer to www.fortunasilver.com for full disclosure 18
  • North South Service Raise L 1540 Main Ramp Auxiliary BranchAuxiliary Ramp L 1400 Ventilation Raise L 1360 L 1300 LEGEND Main Levels Projected Ramp Ore Pass Projected Level L 1200 Waste Pass Production block L 1100 19
  • Exploration Pipeline San Jose Mine PRODUCTION Caylloma Mine DEVELOPMENT PROJECTS Bateas Don Luis Tlacolula San Pedro, San Carlos,  Animas NE/  DRILL TARGETS El Toro, Apóstoles Nancy Cerro Vilafro,  Vilafro Sur Cailloma 6 El Pochotle EARLY STAGE Over 70,000 hectares LAND  PACKAGE 20
  • Exploration SnapshotBrownfields Peru 21,100 ha land package 4 drill rigs in operation  US$7.2M 2012 exploration  budget Brownfields exploration  program oriented at  expanding resource base with  priority given to silver‐rich  veins 21
  • Exploration SnapshotBrownfields PeruAnimas/Nancy Vein System  100% ownership  High‐grade polymetallic vein system with moderate Ag  values: ‐ ANIM022012: 5.05 m avg. 106 g/t Ag, 6.90% Pb and 7.54 % Zn [Animas vein] ‐ NANS002012: 9.55 m avg.  91 g/t Ag, 5.30% Pb and 7.62 % Zn [Nancy vein]  Generating updated resource modelCerro Vilafro  100%  ownership  Epithermal system with a NE‐SW trending vein swarm,  hosted by Cretaceous quartzites with potential to be a     bulk‐mineable, open‐pit target: ‐ CH 503715: 0.40 m avg. 3.23 g/t Au and 827 g/t Ag ‐ CH 503708: 0.40 m avg. 2.14 g/t Au and 2,440 g/t Ag  Drill testing planned for 3rd/4th quarter of 2012 22
  • Exploration SnapshotSan Jose land package, Mexico 58,200 ha concession package Soil and stream sediment sampling 2 drill rigs in operation  US$5.8 M 2012 exploration budget Significant resource growth  potential within trucking distance  to processing plant 23
  • Exploration SnapshotBrownfields MexicoTlacolula  Option to acquire 60% interest from Radius  Large and untested low sulfidation epithermal vein system   Two main veins identified, Tlacolula and Guila:  ‐ CH 136366: 6.30 m avg. 19.34 g/t Au and  986 g/t Ag (open) [Guila Vein] ‐ CH 135709: 9.60 m avg.  0.13 g/t Au and  295 g/t Ag (open) [Tlacolula Vein]  1,600 meter drill program in preparation stageEl Pochotle  100% owned  High‐grade Ag – Au epithermal vein systems  6,000 meter drill program planned for 3rd /4th quarter of 2012 24
  • Community Relations ProgramForging strategic partnerships Programs are based on respect for ethno‐cultural diversity, open communication  and effective interaction with all stakeholders We work with communities towards self‐development of economically sustainable  activities to improve their quality of life 25
  • Growth StrategyThree‐pronged approach to create shareholder valueMaximize production,   Execute on production ramp‐up at San Jose by 4Q 2013profitability and cash   Focus on operational efficiencies to reduce cash costs flow of current mines  Off‐site Ag ‐ Au concentrate leaching facility at San Jose Capitalize on   44,000 meter exploration program between Peru and Mexico brownfields   Two crews evaluating multiple Ag ‐ Au anomalies at San Jose exploration  opportunities  Commanding land packages in Peru and Mexico  Post discovery, pre‐development opportunities in the Americas      Pursue selective  Silver contribution of >50% of revenue M&A opportunities   Below industry median for cash cost  26
  •  Proven operators and mine builders in the Americas Organic growth potential Consistent cash generation Caylloma Mine Peru 27
  • Management Head OfficeCarlos BacaT: +51.1.616.6060, ext. 0Corporate OfficeHolly HendershotT (Toronto): +1.647.725.0813T (Vancouver): +1.604.484.4085 www.fortunasilver.com August 2012