Q1 2021 Fortuna Silver Mines Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the Fortuna Silver mines first quarter 2021 financial and operational results. At this time all participants have been placed on the listen only mode and the floor will be opened for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Carlos Baca Investor Relations manager, Sir the floor is yours.
Thank you Kate good.
Ladies and gentlemen, I would like to.
Welcome you to Fortuna silver mines and to our financial and operations results call for the first quarter of 2021 hosting the call today on behalf of Fortuna will be Jorge the medical and also price Anthony Chief Executive Officer, and readout of Yoga.
All of our Chief Financial Officer, today's webcast presentation will be available. After this call on the latest presentation of Bulks on our homepage at Fortuna Silver Dot com.
As a reminder statements made during this call are subject to the reader of advisories included in Yesterdays news release any of the earnings call presentation financial figures containing the presentation and discussed in today's call are presented in U S dollars unless otherwise stated the.
Before I turn over the call to Jorge.
Like to indicate that this earnings call contains forward looking information that is based on the company's current expectations estimates and beliefs. This forward looking information is subject to a number of risks uncertainties and other factors actual results could differ materially from a conclusion forecast or projection in the forward looking.
The information certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information additional information about the material factors that could cause actual results to differ materially from the conclusion forecast or projection in the forward looking.
Information and the material factors or assumptions by the way of applied in drawing a conclusion or making a forecast or projection.
Exiting the forward looking information is contained in the company's annual information form and MD&A, which are publicly available on SEDAR the comfort.
The company assumes no obligation to update such forward looking information in the future except as required by law I would like.
I would now like to turn the call over to Jorge Alberto kind of as a cofounder of Fortuna.
Thank you Carlos.
If we kind of moved to slow the.
Six of the presentation.
Highlights.
And this first quarter of the year, we're exceeding the soundness of course drive the strength of our business.
We have been investing in growth since late 2016.
Thinking of counter cyclical growth doing that too where several of the for beers.
The strength of capital investment because of the British Murphy the for mining equities of low interest the breaches met them.
Now with renewed interest in the sector of the last 24 months, we're in a strong position to harvest that's all results show.
We have reported record adjusted net income of 27 $5 million per 14 cents per share ahead of analysts' consensus of <unk>.
For sure.
Adjusted EBITDA of 61 million, we with the Beard, leaving give me the margin of 52 per cent.
We maintain a strong balance sheet with 145 million of the liquidity and the low debt to EBITDA ratio of 2.1.
The NATO or third mine.
Reported its first full quarter of production delivering 22300 gold ounces.
We have been cash flowing positive of the window since Q4 of Duane Duane.
In Q1, so that's also being the quarter of.
Strong free cash flow generation, even as we ramp up.
Except for the conveyor second system I'm, sorry, the plant all of our unit operations are performing within design parameters the Cui.
With me is fit for purpose, we need our operations team to get their performance of accretions he of doing operation in favor of the set up of the conveyor system.
We're gonna be achieving.
Besides the parameters of the conveyor operations this quarter second quarter.
This has been the challenge again due to the limitations imposed by COVID-19 to get for an experienced sticking with the support income.
Our team is delivering a great job on site.
Spite of these challenges.
Yes.
On April 26th we announced the definitive agreement to acquire <unk> slope of this combination will create a low cost the intermediate global precious metals producer with a significant silver.
During the and his team of Brooksville Hep successfully built a robust business platform in the West Africa, and we believe that together.
With a strong balance sheet and diversified sites of a production we are better positioned to lower the risks of the business and unlock the value of the assets for the benefit of shareholders.
I am, particularly excited about the opportunity to bring together two teams of high performance in the back.
Active jurisdictions.
And the investors seeking to invest in the intermediate precious metals producer space will have to give consideration to the pro forma company with gold equivalent production of 450000 ounces of gold to copper of million ounces of gold and EBITDA margins in the 40% to 50% range with a robust pipeline of leads.
Government the exploration project mix.
The next slide please.
In slide seven we share or 12 month Rolling average performance for safety Kpis.
We continue to show a trend the trend of continued improvement for total recordable and lost time on severity three.
Three years ago, we embarked on a process of cultural change with respect to health and safety.
We still have plenty of various per improvement in our effort to achieve an accident free work environment right.
Please spend continue to be pleased to see all key metrics trending in the right the rich.
Slide eight please.
We pre released production for the order on April 12.
All of the equivalent of production in the quarter was 60000 ounces.
Net of we're basically in line with Q1 of last year. We the notable exception of gold with an increase of 240% as a result of the middle of contribution.
The next slide.
In slide 10.
Place interest at the beginning of the call financial performance has been the record breathing breaking for the company.
Sorry.
Right right.
In slide nine of our silver contribution to revenue in the theory of what 39% in precious metals accounted for 86% of revenue.
We're able to capture not only the benefit of higher silver and gold prices that.
But this is amplified by a significant increase in annual gold production derived from the data.
The next like this.
The financial performance has been the record breaking for the company in Q1 as I stressed at the beginning of the call.
Sales jumped 148% the $117 million adjusted EBITDA jumped 280 per cent to $68 million and adjusted net income with a record from seven 5 million or force in cents per share.
Moving on to slide 11.
Yeah.
Okay.
With respect to early in sustaining cost at San Jose.
The $13 or 14 of 40.
All in sustaining was.
Well within our guidance.
Our range guidance of $12 20 to $40 50 sites.
Getting more granular on the all in sustaining cost analysis per these mines compared to Q1 of last year on a per ton basis cost basically aligned.
The $70 per ton Capex is largely the allied as well.
Driver for the 26% increase the.
With respect to last year reciting the silver to gold ratio of 68 used the now 98 backing us back in Q1 of last year.
Are you on the.
Okay, you are making in align with the all in sustaining guidance that the.
It's in the range of $19 to 23 of the owners.
And for lean data.
We expect the all in sustaining cost to trend lower throughout the year.
As we complete the ramp up phase and achieve a more stable operation towards midyear for Q1 in the all in sustaining cost came in at $1000 or $1055 below mid year guidance provided of one.
1000 131335.
The lower cost compared to guidance has to do with the timing of sustaining capital investing.
Slide 12.
Our total capital budget guidance for 'twenty, 'twenty, one and $71 million in the Q1, we have executed 13 million, we expect capital investments to keep to pick up throughout the year.
Next slide please.
Just a.
A brief update on the ramp up activities of in vitro.
We note here the slide all systems are operating within the range of the same parameters with the exception of the stacking.
Houston and south.
The <unk> plant.
The nature of the year innovation, the second system, which works in sync.
As of the end of the quarter was operating at their own 41% of the signed capacity through the early.
Early days of May.
We're closer to 250 60 per cent.
And so we're trending in the right direction.
Remember that the or expecting with trucks convenience to supplement.
The conveyor setting the efficacy.
And the surplus was placed on the <unk>.
Standard by two focus all of our resources on critical path for growth.
Gold production.
In the.
Early in May the.
Our plan has been restarted.
Yes.
Something important to highlight with respect to the middle East of that we continue to see ore reserve model of reconciliation.
The well according to our expectations with.
Less than 55, sorry, 5% deviation in terms of answers the tonnages and grades when we can see the eight model to production.
The same with the leaching kinetics.
The gold leaching kinetics continued to perform according to our expectations in the same problem.
Next slide please.
Our exploration budget for 2021 is the $20 million comprising approximately 50000 meters of drilling across our mines and projects the law.
This allocation of capital is towards San Jose Mine, where we reported initial drilling success.
On March 29th.
We currently have nine drill rigs turning including drilling at the Santa Fe Silver gold prospecting the state of so I know the machine.
With that kind of turn it to the leaf so he can range through the highlights of the financial.
Yeah.
Sure. Thank you Jorge.
On slide 16.
As.
Scott has mentioned we had a record sales earnings per share and EBITDA.
Overall, the very strong financial performance across all of our financial metrics. The record in sales is not only driven by the <unk> first full quarter of contribution, but the San Jose you might also had record sales in the back of the strong operating performance and favorable metal prices.
Net cash provided.
By operating activities.
Slide $21 $1 million increased 470% as we have restated the comparative period upon adoption of <unk> 16.
The deals we saw per seats before intended use this is in relation to the commencement of sales have been middle of the restatement is restricted to the cash flow statement and details have provided of note three of our financial statements without this effect of our net cash provided by operating activities would have increased.
60%.
The reference and although not shown here cash provided by operating activities before changes in working capital increased 270%, which is in line with the rate of increase shown.
For EBITDA on the slide.
Free cash flow from ongoing operations of $17 4 million was impacted by the timing of trade receivables in the order of $14 million.
Yeah.
On the next slide the slide 17.
Sales increased by $73 million silver.
Q1, 2020 or 128% of shown in the prior slide.
Even excluding the <unk> contribution to sales in the quarter of $36 9 million.
Sales increased 70% driven by higher prices and the higher metals sold of both San Jose and Beaumont.
The largest single impact on our sales in the quarter, excluding the middle was the price of silver with an impact of.
Of $18 million as shown in the slag.
The next slide slide 18.
The slide highlights the strong financial and cost performance across all of our operations for San Jose and Ku amount, we recorded material increases in EBITDA.
With both mines operating within our cash cost guidance.
So I can mention the higher all in sustaining cost for example sales of 26%.
Compared to the prior year is mainly related to changes in the gold silver ratio.
And the impact of this has some silver equivalent production on the underlying cash cost per ton of San Jose, We do expect the trend.
Two towards the mid 70 level still within our.
Guidance range for the year.
I mean day at all we reported cash cost per gold ounce of $639, which is around 5% above our expected cash cost for the quarter based on around one of the guidance.
The mine continues to ramp up we see.
Our main kpis tracking our budget the figures.
We have placed 76% of higher or on the leach pads and processed less or through the full crushing circuit compared to our plan.
Okay.
Explain these changes.
Are allowing us to accommodate the impact of COVID-19 restrictions on the ramp up as we maintain our gold production target for the year.
In terms of cost effects. These changes have mostly netted each other out in the quarter.
And the all in sustaining cost.
Below our guided range for the first half of the year.
Also mentioned before by call. It came mainly due to a slower pace of execution of investment projects, we expect.
The expansion of the Leach pad N. The ADR systems to pick up speed in the second quarter.
Next slide slide 19.
We see our.
So one of the.
Liquidity already increasing on our net debt coming down compared to Q4 of 2020 as the NATO started contributing to free cash flow generation since the beginning of the ramp up we expect the strength to continue and intensify in the coming quarters.
I'd like to provide a comment with respect to cash flow of repatriation of the narrow in 2021 our intercompany funding structure in Argentina allows us to repatriate around $130 million to $140 million without any adverse effects from foreign exchange controls.
And we have started repatriating funds early in the year.
With that I'll.
Ill pass it back to you Carlos Thank you.
Thank you Luis we would now like to turn the call over to any questions that you may have.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask if you are listening via speakerphone. Please pick up your handset for optimum sound quality. Once again. Please press star one on your phone if you have any questions.
Comments.
Our first question today is coming from Cosmos <unk> at CIBC Your line of lives.
Hi, Thanks, Jorge Luis Carlos.
I guess my questions are around the end Darrow here.
You talked about in your MD&A, you talked about 56000 ounces of gold and produced about 22300 ounces.
That works out to a ratio of about 39 per cent.
I know you know the tertiary crushing circuit isn't at full capacity, yet and whatnot, but based on what your stacked in Q1 can you remind us what kind of quote unquote recovery level are you expecting.
And how long is the leach curve at this point in time.
Yes, we have a of cosmos, we are expecting different types of materials.
For the material of the East, Texas via the the.
The stacking system usage.
<unk>.
The material to the address through the H b year, so a conveyor stocking and we're pacing about the right now, though between nine and 12 community meet the crush material that comes with the.
Well the extractions.
In the range of seven.
70% 74 per cent.
And then we kind of of course or crush material, which is the start.
The VA of trucks.
The expected recoveries for the F 35 medium with the crush it seems the range of 50%.
Right.
And we're talking about those are expected extraction rates.
In the 90 day period right.
Alright, okay.
So oh.
I don't have the balance.
On my head right now, but the.
It is the balance of those expected recoveries.
Recoveries of the deals of the the extraction.
The.
Okay blend of extraction and recovery considering inventory in the back.
Of course sure. Thanks, that's really helpful. And then you know on that that kind of leads into my second question here of Jorge and I am just trying to reconcile all of these different numbers. So if I take the 213 million ounces or coupon of one 3 million tons stacked in Q1 that works out to about $23 24.
<unk> tons per day.
You know as we've talked about the secondary.
Primary secondary capacity is right now.
Unlike the quoting the numbers are not perfectly here, but I think it's about 16000 tonnes per day.
And then your tertiary crusher, which is the deal agglomerate are stacking system is about 7000 tons per day. So could you help me reconcile those numbers are you, putting any kind of run of mine material onto the leach pad right now and and as you ramp up you know the tertiary crushing circuit throughout 2010.
'twenty one how.
How much of the material stocked in the second half of the you're expecting to come from the different parts of either it'd be the H P. G R versus secondary versus if there was one of the mines.
Let's.
Drop stocking.
The short term.
The solution to meeting extract out of ounces on the leach, but right. So when we planned for it.
How many extract of allowances that we need to place on the leach, but to meet our annual guidance, but so this is working right. So we balance of those figure out those figures.
That's what you're trying to do.
To better understand so our primary and secondary crushing system is currently operating exceeding design capacity say the the tank capacity of primary secondary crushing is 18750 tons per day all of them.
As you noted we were we're achieving 20000 tonnes a day.
So the.
The.
Part of that the material about 9000 tons per day are running through the H E R agglomeration and conveyor stocking.
And the the violence is placed from the heap sorry from the secondary stockpile.
Directly truck to the Leach pad.
And on top of that we can place.
The.
The materials from the stockpiles as well.
Right. So you know we were getting one of get very granular R&D. Some of them. We can have a session. On this is we can have a different times, even the three different sources of material being placed under leach, but to meet extract of around six right.
So.
We will be happy to conversation with you and give you the.
The break zone, but we are placing more ounces on the leach pad.
And then the arena design cost for because you know the coarser material comes out of lower extraction.
The on the 90 day period right, that's why I wasn't releasing more ounces with the trucks and those ounces coming from the secondary crushing and in some instances from the coarse ore stockpile.
So.
And that is what we used to meet the 140 to 160000 arms the guidance for 2021 right now.
Yeah that's.
Perfect and that's you know of course, where the current situation right now and but would you expect the majority of your stocking to be from the tertiary crusher.
Crushing circuit the towards the end of 2021, if that's possible.
To be.
The placing of 100 per cent of the material through the stacking.
During the second quarter.
Okay, we're not there yet, but we're seeing you know.
Good day, and because we already achieved base of 17.
17000 tonnes stacked the conveyor stocking.
No. The the issue is for US right now is being able to to achieve the efficiency in the actual operation of movement of the.
The conveyor stocking I want to stress the fact that are.
Wrapping up commissioning and ramping up in the COVID-19 pandemic during the COVID-19 pandemic has been the tremendous challenge for the team.
The because we have been working without the benefit of.
Foreign vendor of technicians and the.
Trained personnel with the use of certain equipment like the commodity or stacking we have you know.
We are in the way and learning as we go because of the using a lot of zoom hours.
On the you know.
This remote.
Virtual reality goggles and tools.
The marine Coe tools like that.
We do not have the benefit of having the see some operators that you could bring from other sites.
The we don't training of Argentina already to do would have to come from come from abroad. The two.
To help or operators some of them. So we're going at it alone.
And I believe that's why the delay right I mean, we have no mechanical.
The issues are at this time of any significance nor automation, we did battle at the beginning of it.
From a couple of months ago with some issues regarding you know setting the system on the automation and some mechanical issues nothing big but you know you should the need to be overcome.
Those kind of been addressed is now really getting the team and.
The experienced enough moving the system of familiar second has to be like a pit stop the nektar race right.
We're not where we need to be yet, but we're getting there.
Of course, Thanks, and then maybe one last question on the on the financial statements here.
You know in the MD&A, you mentioned that the $120 million credit facilities fully drawn right now.
Spires on January 26, 2022, However, you were trying to get a renewed for sure in Q2 2021, maybe more of a question for Luis but Oh can you remind us what interest rate of you're paying right now on the credit facility can you give us some kind of outlook in terms of how the credit market looks at this point.
And time.
And would you be expecting more favorable terms on this renewal and then on top of that you know with the pending merger with rocks gold.
You know how does that change of potential repayment of this credit facility. You know these are the.
How you're potentially financing say the construction of the <unk>.
The guilla.
Yes, so I mean.
First of all where where the cost of the subsidiary of fully drawn as of.
335 per cent.
From some of the restaurants range, we do expect to be able to maintain share.
Many of our terms.
And and fix the in the context of the transaction on the pro forma company I mean, our view is and that's that's really the reason to force back somewhat to the the renewal.
To gain more visibility on what makes the most sense so it.
It isn't the conflicts and we expect to conclude.
Conclude the renewal in Q2 with an expanded translating of reflects the.
The addition of credit capacity of the pro forma of MTT and.
Based on the the.
The terms that we see in the we believe when we believe we're able to achieve.
And considering that the the bed capacity of the pro forma entity.
I think we would be right to vacancy there.
Plans to repay the early right.
It does make sense to think of that that's in the medium term.
It's more of a.
The structural nature in terms of how we manage the balance sheet right, but that's our view to Inc.
Great. Thanks, Thanks, again, the Jorge Luis and are those all of the questions I have.
Thank you. Our next question today is coming from Trevor Turnbull at Scotiabank. Your line is nice.
Thank you Oh, Jorge I just wanted to.
Get a little more color on Linde, Darrow and and the tertiary crushing and the circuit related to that.
I think when you put out your original Q1 production figures back in April you had mentioned that you'd had some very strong weeks in terms of the availability of that tertiary crushing system.
And and I think you referenced it a.
On this call as I Wanna say, 50% to 60% of.
Of capacity and I, just wondered what it what it kind of needs to do to get back to those levels that you were experiencing net the early part of April where I think you were up closer to 87% on that system.
Okay.
In the.
In the third you see the H fear of commemoration and the stocking working the sink.
The so the bottleneck in the system.
Yeah.
It has been mainly faced at the of the stacking system.
As I explained before we had issues with dating you know automation and getting the all the training of the conveyors.
Speaking to each other in the.
And that was overcome and the.
To the.
The <unk>.
We are achieving.
State of the lease.
In the entire system.
Of around the nine to 11000 tonnes per day stack and.
And we had as I mentioned the peak days of 17000 tons of 14000 pounds.
<unk>.
Yeah.
All of them.
Mechanicals and automation issues that we battled with at the beginning of the process are in early in the start of the year.
Overcome and there were never of significant.
In the sense of the sizing me that a lot of these issues could have been resolved.
The in a matter of hours or even day.
The having the right.
The vendor representatives from superior on site, but you know part of the luxury because of the COVID-19 pandemic right.
So sometimes of those programs instead of being so we sold an hour sort of or they end up taking days or weeks right.
But I think although those are behind and we just need the team too.
The you know get a more seasoned and and experience and be able to sustain the troops.
Yeah, right the B get more effective with the movement of the conveyors.
The no with the setup of the planning for the setup right.
Yeah, I think the team has been more immersed in solving the automation of mechanical issues I explained before.
For these past months rather than getting more.
See Sun and planning ahead for the movement of the equipment the sequencing of the movements of the conveyor stacking system.
So I think I do.
I think we're talking about rocket science here.
It is just the getting the the.
The team no more and more into now that all of these mechanical automation of issues are all behind getting the team to who get the performance in the Goodman the government is fit for purpose.
The it's just the.
The operational expertise right now right.
Yeah.
On the H B R is performing.
Turning to whatever we ask from it and on the go.
Memory Asian.
Also I mean, we had some minor of mechanical.
Set up issues.
But really the equivalent of these fit for purpose and the.
The bill.
Yes.
But the bottleneck is the the stocking.
Alright.
Okay.
Yeah.
And then maybe I just wanted to change gears and and follow up on something that Luis mentioned about getting.
Money repatriated from Lin Darrow, perhaps I misunderstood a bit I I did think that when you had exports sales that you tended to have to go through the conversion to the peso and then if you wanted to.
Distribute that money out of the country. Obviously, you would you would want to re converted back into another currency, but it sounds like you don't have to go through that process and I was just curious why it is or how you've structured it such that the those kind of mandatory conversions of exchange.
Rates don't apply.
Yes, Tyler so it has to do.
Generally speaking it is the accurate or description of these factors but.
It is also within the existing.
Structures in an or of restrictions in the fact regulatory framework and say, yes to.
Q2 set of intercompany bet by way of the.
Pre export finance, which for all practical purposes allows to use.
Using the proceeds of sale of Soobee directly.
To the parent company so that means that those proceeds are not coming back into.
Into into pesos and towards Indiana.
There is a limited pool of for this which is the range that the we've been mentioning right.
One of the pool is exhausted, we will shift to the regime during the scribing.
Right.
The restrictions are being analyzed and enrolled by the government almost on a monthly basis right.
And through my monthly price.
And and maybe it is a moving target which is what it sounds like but if you were operating under under those constraints can you give us a sense of of what kind of percent you you would lose through all of that conversion process is this something that kind of erodes the the amounts by.
<unk> a percent or five per cent or 10% can you give us a sense of of if going through that exercise what what you might expect the cost of B.
Yes, so I mean.
Any all the explorers in Argentina, finding themselves in that situation of absorptions of course, one has to sit on the best solution and seek to protect those there is.
Certain amount of liquidity in the in the forward and the price change the forward markets locally.
That typically I would expect goes out of six to eight months right.
Sort of gives you a.
The framework for the type of protection you can achieve.
And the alternative is to tap into the parallel and fixed market right on the.
Our GAAP will will vary widely.
I think these days, it's a much higher than what you would typically expect to see right.
We it has been I mean trending downwards, and we would expect that.
In the next few months that that's GAAP, that's close significantly due respect with respect to what it is to the I'm sorry right.
I mean does that sort of on brought Ontario.
The 22, we would have to seek the look forward through 2022, and the first to see what's going to happen with the FX at the moment right.
The yeah, that's a difficult one.
Okay No I appreciate the color. Thank you both of them.
Thank you. Our next question today is coming from Don Demarco at National Bank Financial Your line is nice.
Well, thank you all greater than the high oriented team.
Just a couple of questions on the San Jose shifting to San Jose now can you elaborate on your exploration program at San Jose I see the the exploration results that were announced in late March looked good yet of few intercepts of over a kilogram per tonne and that's encouraging but yet I see reserves are yup.
Net of reserves around 23 million ounces 2021 guidance of about 6 million ounces of silver per year.
So just curious how many rigs do you have running what's changed in your program versus the last year and where are you most optimistic.
Yes.
The.
I'll start with the last one.
Yes.
What has changed with respect to last year first is drilling meterage right today.
They are truly meet the jaws for San Jose.
The mixes of 30000 meters.
And the.
Last year or drilling at the San Jose was around seven stops of meters right. So we're drilling significantly more.
We currently have five drill rigs during the.
So three of our quarterly working underground.
And the two of them on surface.
So we have a different type of targets. One is we have multiple targets.
On the round, even around the immediate B C E D.
The resource shell the resource block model.
So the results of that we reported in March come from one of those initiatives for drilling and near mine underground.
<unk>.
So.
My expectation with respect to those targets and we have.
Several of those and in the range of five or six.
Around the the resource a shell.
Is that we will.
The opportunities.
Several opportunities I would expect like the ones we outlined in March which is it's not a inc.
Incremental right.
The incremental two reserve life.
The.
And resource extensions.
The front of me on their own not very material in terms of tonnage but.
The.
On the aggregate deal will the.
You know from previous to two of them replace what fleet right.
And I think we have several of those ongoing and and the.
And of you.
What I want it.
Also too from a proceeds of San Jose is not just the simple range.
It's an integrated system of the announced the most in structures.
We have identified three or four main structures and when the team those structures.
The we have a scope of work development.
So the.
The you know within D. C area, we have a lot of room to create.
The opportunities for potential expansions right because of the structural model once you get to the detail of the feet.
It's intricate.
Alright, and these one is the right. It was right in front of US you know what we reported in March during the air North.
The close to surface.
It's close to surface.
Being in front of us for years, and it's only now that we decided to pursue the area of exploration of the area look of the three remodels in the northeast of ensuring that we're coming up with some spectacular grades.
The hopefully some tonnage.
That's a meaningful in the context of dealing with annual depletion rate.
So we have multiple of those.
And then second we kind of a parallel vein system.
400 meters the lease.
From where were mining cost.
Good day Dodi of system.
We have recorded the resources from the Victoria vein and we have discovered a new part of the structure.
While drilling Victoria vein, we came across the second structure of that he's not named yet.
The on the hanging wall of Victoria.
The on the.
We're currently drilling Victoria and the part of the structure.
The expansion of sort of Victoria, I'm trying to see and explore further the the perimeter of structure in the Permian royalty.
Apart from that we have multiple veins on.
Surface.
The.
Where we have a quarterly one drill rig.
The pursuing those opportunities.
We're doing things that can be located you know four of five kilometers away from the current infrastructure, so well within trucking distance grid and the kind of one drill rigs turning in an area called the loss of D. S where we have a.
You know.
The new structure. So the surf the diversification we have discovered something that we have not seen before it's the.
The auditors the dome of deaths.
We're in the organic power, we had never seen.
The.
More suitable panic died features like the like that Don on the Douglas.
So you can quite the entry into the team from the perspective of where too.
The focus more exploration ideas.
So you know what.
We have multiple of those we have also option the eagle uncle appropriately.
The which is within the the general area of San Jose within trucking distance of except for the sake.
It's an option from minority of them.
The previous.
Explorers real that the old Blanco.
The in previous years with some exceptional results of high grade mineralization for silver over broad width, and we have often of the appropriate day in and we're currently working on developing the drill targets. There. So you know there is no shortage of ideas at the time.
Jose.
We just need to get the drilling meterage flowing right and the savings, stating the 2021 is a big commitment of year on the exploration front because.
Roughly four 5% of sales allocated to exploration and.
We need to let the programs run and I'm see.
See some results hopefully come out of them.
Okay. Thanks for the so in the past I think you might released like are the San Jose drilling update once a year and that might've been appropriate for the smaller program. You had last year do you have plans to do more regular exploration updates coming out of San Jose is yes, yes, absolutely of not only for San Jose, Although we all understand.
The the circle of CIT program is important for everybody.
But for example, we're drilling of new and exciting project that the school Santa Fe and the state of Sonora is a you know some kilometers south of view for the.
The reason of the project you know of visa would be the Tonight discover either so we're drilling there we have one rig in the you.
You know we're quite active on different ideas. So we have also another program for Ya global economy, where we're gonna be developing drill targets of the view.
The that's.
No.
So the Santa Fe is more of a silver.
The project with some growth, but what are you having more of gold silver project. So.
What else do you on several fronts.
Okay. Thanks for that that's all from me.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one at this time.
Our next question today is coming from Justin Stevens at P. I financial your line is live.
Hey, guys.
Most of my questions have already been asked and answered, but just a quick follow on from of Dawn was asking there Ah I noticed you know San Jose you guys spent only about $1 7 million of the $10 million brownfield exploration budget of San Jose in Q1 can expect that to be ramping up quite a bit here of any chance that you'll spend.
Through that $10 million, you think before the end of the year and then perhaps of evaluate.
The expansion of the exploration budget.
Yes, yes.
You know budget will be ramping up.
The you know getting the the a lot of the drilling that's been done through underground. So we will see some spend advances we advanced with the underground development to prepare the drill chambers and whatnot and then the drilling meterage coming alone. So that's the.
It will ramp up.
The and we have really drilled from the site and I'm turning as I stated, so I see no no no issues there.
The.
Yeah.
It's usually start the of the year tends to be a with the.
The lagging with speed for some of these programs right.
Sure.
So no particular impacts from COVID-19 that you're seeing either on the exploration side of things.
No.
Particularly when you're in the.
In the mines.
Just the call it does impact not all of our D piece of our slowed down I think we're not seeing the impact of so much from the production side because of the initiatives that the teams being in place, but at the Guyana ethylene day, it'll end up San Jose.
The COVID-19 remains a dealing with COVID-19.
Keeping the the operations team the protocols and the stringent protocols that we have in place does take up the old sometimes some of the speed at which we can do things right.
Yeah, So yeah, I mean worse.
Remember that the these three countries.
The main.
The.
Under severe restrictions due to COVID-19 right now.
For sure.
Just on in terms of exploration of Atlas thereof.
Have a small program plan for all of these auto.
Is that expected to be in the first half of the second half of the year here.
We're drilling there as we speak.
Okay and also we can probably expect from some resolved at some point in the next couple of releases here of that probably right.
Absolutely, absolutely right, where we're drilling of etc.
Perfect. That's it for me thanks, so much.
Thank you.
Thank you. Our next question today is coming from Guy Buckley Your line is live.
Thank you Hey, I want to ask you about that mine in Peru.
The cattle kind of alone of I guess, how you don't see it but it you stated that continues to contribute significant gold production of the first quarter 2021 gold production was 1922 ounces an increase of 308 per cent with respect to the comparable period of 2020.
The increase in gold production it was related to higher.
Had grades encountered at the Animas northeast vein.
Hi, Ben.
I graduated isn't that stuff so.
So I know what you're talking about.
Or is that vein of expanding how many years do you think you have left in that high grade ore and that Animas northeast the vein.
Thank you for the question.
The.
You know I have to say that we have the.
Neglected for years.
Our understanding of the.
The gold of <unk>.
Were inches.
At the Animas vein.
Right right.
Right.
So.
It is only now as we have entered into this.
Area.
The and we are starting countering these you know higher grade the sustained higher gold grades.
That Oh, we have deployed resources to further understand the how meaningful the seats today.
We cannot.
Say that.
We believe.
The the resource as we understand it has the means of component.
You know so we're trying to understand geologically what is controlling the the position of gold in these areas now right because the.
I think.
Spatially.
The the especially the the goal of the Leach stones are limited in size.
The but.
What we're trying to gauge here is it's true through more of science is if there are areas, where we can extrapolate what we learned here and use it as an exploration tool, we're getting a nice significant bump.
In the Gulf production, and therefore in revenue and in margins derived from the small island simply because of this is just the incremental to everything right. These mines.
Traditionally produced.
3.6 grams of gold well under the ground and all of the southern we're finding areas you know multi gram gold in the lesion to silver lead and zinc.
But today the serious.
There are limited in size.
So they are not meaningful to the overall research and what we're trying to learn heres.
If there are things that we can use of exploration tools or even to reassess other portions of the mine the areas for higher grades. So we were right now in the learning curve here Gary of trying to get her knowledge drop on them what is controlling the occurrence of these higher grade.
Growth in this portion of the Animas vein Animas vein is stretches for over four kilometers we haven't drilled tested it for several hundred meters of depth.
Yeah.
And this is one small area within the bigger package. So I think it speaks a lot of potential as well right I mean, the price is complex.
We need to better understand the volatile currency here.
Okay, now and they'll choose our folks in your company.
I have a lot of friends that I have my stock in your company and that was before you made the announcement that you had bought at rock gold and the West Africa and that Blindsided us I gotta be honest with you in my son My friends, they dumped their stock, but I didn't I held on but that stock went from 971.
Share down to under six Bucks, it's now coming back up because I think long term, we'll you'll do well I think that hopefully that rock school will start contributing something.
The earning capacity of.
The company.
And so I.
I just want you to know that.
There are many people that are with you feel like you're doing the right thing, but there's a door. There were none of them that felt you did the wrong thing when you acquired that rock the goal and West Africa.
None of them. Thank you for your comments.
And we believe that there is tremendous value to the aloft four rossville shareholders for Fortuna shareholders as we together deploy the assets because of their driving principle behind these is putting together a basket of widely the assets.
That's kind of really perform throughout the precious metals price cycle.
Did you know putting together a team of high achievers of performers on the operations on the exploration side.
The each with the cause of required expertise for success in the respective jurisdictions. So you know.
The sometimes market from market participants tend to be you know of short term oriented I believe this is for the museum of long term the who.
Who will be the foundation for a company that's how you'd said at the beginning of the call. If you want to invest in precious metals, you really have two of you choose consideration to the pro forma company I agree with one last question of the auction.
What you believe danger of company believes that the silver or eventually being $35 an ounce end of this year and Gulf will be up to 1950 an ounce.
You know.
The.
I personally believe there could be higher [laughter] right.
All of the silver.
I tried to focus on the things, we control, which is right the assets, we're getting involved with on the costs.
The I I, we need to operate the mines and in the high price environment as well as we do in a low price environment. So we try to focus on the things we can control them.
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The more.
Yeah.
The constructive or imagine of people with respect to where prices are going to read it.
We're mining every day and with $80 silver, hopefully, one day or or or $14 of silver or if it was some 15 months of all right. So.
The way we want them.
But let me tell you every day.
The silver at 28 Bucks yesterday, and she is going on up.
Yes.
We want to thank I want to think of as a shareholder from what Youre doing we're counting on you I wanted to get out of a friend of certain advanced in the buy stock in your company because I think the name is appropriate.
[laughter].
Thank you Sir thank you for the name or toner.
I love it the thank you.
Thank you for your support.
Thank you once again, if there will be any questions or comments. Please press star one at this time.
Yes.
Okay.
Okay.
If there are no further questions I'd like to thank everyone for listening to today's earnings call and we look forward to you joining us next quarter, how big of a day.
Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day. Thank you for your participation.