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.
Good morning, 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 on the medical and also on pricing at the Chief Executive Officer, and readout of Yoga and all of our Chief Financial Officer today's webcast presentation.
We'll be available after this call on the latest presentation on 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.
Before I turn over the call to Jorge I would 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 our completion.
Forecast or projection in the forward looking 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.
One of the 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 about the way.
Applied in drawing a conclusion or making a forecast or projection as predicted in the forward looking information is contained in the company's annual information form and MD&A, which are publicly available on SEDAR.
The company assumes no obligation to update such forward looking information on the future except as required by law I would like.
Now I'd like to turn the call over to Jorge Alberto I know sorry.
Cofounder of Fortuna.
Thank you Carlos.
And with the move to slow the <unk>.
Six of the presentation.
Alex.
Yeah.
In 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 day.
The counter cyclical approach during the two where several of the fears.
Strength capital investment because of the British market 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 I saw the results show.
We have reported record adjusted net income of 27 $5 million per 14 cents per share ahead of analysts' consensus of <unk> <unk> per share adjusted.
Adjusted EBITDA of $61 million, we with the appeared 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 flow positive in data since Q4 of 2020.
On Q1, so that's also been a quarter of strong free cash flow generation, even as we ramp up.
Except for the conveyor stacking system I'm, sorry, the plant all of <unk>.
The operations are performing within design parameters the Cui.
With me is fit for purpose, we need our operations team to get their performance on the accretion is he doing operation in favor of the set up of the conveyor system.
Believe we're gonna be achieving.
Besides the parameters of the conveyor operations this quarter second quarter.
This has been a challenge again due to the limitations imposed by COVID-19 to get for an experienced sticking with the support in Cogs or.
Our team is delivering a great job on site.
In spite of these challenges.
Yes.
On April 26th we announced the definitive agreement to acquire <unk>. This combination will create a low cost the intermediate global accretions metals producer with a significant silver.
Joining me on 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 of production, we are better position to lower the risks of the business a new low.
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 their respective.
The evictions.
And the investor 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 on EBITDA margins in the 40 to 50 per cent range with a robust pipeline of the.
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 areas for improvement in our effort to achieve an accident free work environment right.
Please spend continue to be pleased to see all key metrics are 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.
On the metals were basically in line with Q1 of last year with the notable exception of gold with an increase of 240% of as a result of the little contribution.
The next slide please.
Okay.
In slide 10.
As I stressed at the beginning of the call financial performance has been record breaking breaking for the company.
Sorry.
Right right.
In slide nine of our silver contribution to revenue in the theory of what 39% on precious metals accounted for 86% of Raven.
We're able to capture not only the benefit of higher silver and gold prices the day.
This is amplified by a significant increase in annual gold production derived from the.
The next slide.
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 loans and adjusted net income was a record $7 5 million or force in cents per share.
Moving on to slide 11.
Okay.
With respect to early of sustaining costs.
San Jose.
At the $13 14 on 40% all in sustaining was.
Well within our guidance.
Our range guidance of $12 20 to $40.50.
Getting more granular on the all in sustaining cost analysis per these mine compared to Q1 of last year on a per ton basis costs are basically aligned.
The $70 per ton Capex is largely allied as well.
Driver for the 26% increase the.
With respect of last year. Besides the silver to gold ratio of 68 used are now on 98 backing us back in Q1 of last year.
Are you on the.
Our non banking in align with the all in sustaining guidance that the.
It's in the range of $19 to 23 of the owners.
Unfortunately in 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 on $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 investments.
Slide 12 please.
Our total capital budget guidance for 2021 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.
Slide 13.
Just a.
A brief update on on the ramp up activities of in data sort of.
We note here on the slide all systems are operating within the range of the same parameters with the exception of the stacking.
System on site.
The <unk> plant.
The nature of the year and elimination of the second system, which works in sync.
As of the end of the quarter was operating at their own 41% of the signed capacity to the early.
The early days of May.
Or 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 this issue.
On the surplus was placed on on the.
Standard bi to focus all of our resources on critical path for it.
The growth in Gulf production on.
In the east in early May.
The surplus has been restarted.
Something important to highlight with respect to the NATO is the we continue to see ore reserve more of a reconciliation.
Well according to our expectations.
Less than 55, sorry, 5% deviations in terms of the answer is the tonnages and grades when we consider the eight model to provoke.
And the same with the leaching kinetics.
The goal of leaching kinetics continued to perform according to our expectations and design per arm.
The next leg.
Our exploration budget for.
The 2021 is the $20 million comprising approximately 50000 meters of drilling across our mindset on projects the large.
This allocation of capital is towards San Jose Mine, we reported initial reading success on March 29th.
We currently have nine drill rigs turning including drilling at the Santa Fe Silver gold for US picked in the state of so I know the.
Thank you.
With that kind of turn it to Luis so he can run you through the highlights of our financial.
Uh huh.
Sure. Thank you Jorge.
On the slide 16.
As Scott has mentioned we had a record sales earnings per share on EBITDA.
They're all very strong financial performance across all of our financial metrics. The record <unk> sales is not only driven by the meadows first full quarter contribution, but the San Jose on you might also had record sales on the back of the strong operating performance and favorable metal prices.
Net cash provided.
By operating activities of <unk>.
Slide $21 $1 million increase of 470% as we have restated the comparative period upon adoption of <unk> 16.
The deals with the proceeds before intended use of this is in relation to the commencement of sales of the middle of the.
The statement is restricted to the cash flow statement and details are provided on note three of our financial statements without this effect. The net cash provided by operating activities would have increased 60%.
As a reference in the 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 timing of trade receivables in the order of $14 million.
Yeah.
On the next slide on slide 17.
Sales increased by $73 million silver.
Q1, 2020, or 128% as shown in the prior slide even excluding the meadows contribution to sales in the quarter of $36 9 million.
Sales increased 7% driven by higher prices and the higher metals sold of both San Jose and Omar.
The largest single impact on our sales in the quarter, excluding the middle was the price of silver with an impact.
$18 million as shown in this lag.
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.
Who are the convention the higher all in sustaining cost per San Jose of 26%.
Compared to the prior year is mainly related to changes in the gold silver ratio.
On the impact this has on silver equivalent production on the underlying cash cost per ton of San Jose, We do expect the trend.
Two towards the mid seventies level still within our.
The guided 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 gross for the quarter based on the around one of the guidance.
The mine continues to ramp up we see on.
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.
On our 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.
On 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 the investment projects we expect.
The expansion of the Leach pad N D ADR systems to pick up speed in the second quarter.
Next slide slide 19.
We see our.
So and on the.
Liquidity already increasing on our net debt coming down compared to Q4 of 2020 is lindo started contributing to free cash flow generation since the beginning of the ramp up we.
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.
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 or 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 and 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 below the 39 per cent.
I know you know the tertiary crushing circuit of 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 cosmos, we are expecting different types of materials.
The toward the material that the.
<unk> via the the.
The stacking system usage.
<unk>.
The material the address through the H b year, so a conveyor stocking.
Facing about the right now a lot of between nine and took me didn't meet the crush material that comes with the.
Well the extractions.
In the range of seven.
70%, 74%.
And then we have of course or crush material, which is the start.
The via trucks.
The expected recoveries for the F 35 medium with the crush you seem to a range of 50%.
Right.
And we're talking about those are expected the extraction rates.
In the 90 day period right.
Alright, okay.
So oh.
I was on have a the balance.
On my head right now, but it.
It is the balance of those expected the.
Recoveries of the deals of the the extraction.
The.
Hum blend the extraction and on recovery considering inventory in the back.
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.
I was on tons per day.
You know as you talked about the secondary.
The primary secondary capacity is right now.
I might be quoting the numbers are not perfectly here, but I think it's about 16000 tonnes per day.
And then you know your tertiary crusher, which is linked to 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 until the league of power right now and and as you ramp up you know the tertiary crushing circuit throughout 2000.
'twenty one.
How much of the material stocked in the second half of the you're expecting to come from the different parts.
It'd be the H P. G R versus secondary vs. If theres run of mine.
Let's.
Trucks stocking.
The short term.
The solution.
Two meeting extract out of ounces on the leach, but right. So what we plan for each of how many extract of allowances that we need to place on the leach, but to meet our annual guidance. That's so these things working right. So we balance of those figure out those figures.
And that's what you're trying to do to do.
To better understand so our primary and secondary crushing system is.
The operating exceeding design capacity of say the design capacity of primary secondary crushing is 18750 tons per day from US you noted we were we're achieving 20000 tonnes per day.
So the.
Part of that the material about 9000 tons per day are running through the H E R agglomeration and conveyor stocking.
The the balance is placed from the heap sorry from the secondary stockpile.
[noise] directly truck to the leach, but on.
On top of that we can place.
The.
Materials from the stockpiles as well.
So you know we were getting one of your very granular on this and we can have a session. On this is we can have different times, even the three different sources of my theory of being placed under leach pad to meet extract of around six right.
We'd be happy to conversation with you and give you.
The the brake zone, but we are placing more ounces on the leach but.
Then the arena of design calls for it because you know the coarser material comes out of lower extraction.
On the 90 day period right. That's why we're placing more emphasis with the trucks and those hours has come from the secondary crushing and in some instances from the coarse ore stockpile.
So and.
And that is what we used to meet.
The 140 to 160000 items guidance for 2021 right now.
Yeah, that's perfect day, and that's you know of course sure of the current situation right now and but would you expect the majority of your stock.
Stocking to be from the tertiary.
The crushing circuit the towards the end of 2021, if that's possible.
Expect to be the.
The you know, placing on 100 per cent of the material through the stocking.
During the second quarter.
Okay, we're not there yet, but we're seeing you know.
Because we already achieved base of 17.
17000 tons 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 sucking 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 a tremendous challenge for the team.
The because we have been working without the benefit of the.
The foreign vendor of technicians on the tray.
Trained personnel with the use of certain equipment like the conveyor of 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.
This remote AR.
Virtual reality goggles and tools.
The technological 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.
To help or operators in the so were going on.
Loan on them.
And I believe that's why the delay right I mean, we have no mechanical issues at this time of any significance nor automation, we did battle that at the beginning of the.
Some couple of months ago with some issues regarding you know setting the system on the automation and some mechanical issues nothing big but the issue that needs to be overcome.
Those have been addressed is now really getting the team and.
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 on the MD&A you know you mentioned that the $120 million credit facilities fully drawn right now ex.
Spires on January 26, 2022, However, you know youre trying to get them renewed for sure in Q2 2021.
The more of a question for Luis but.
Can you remind us you know 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 in 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. These of the.
How you're potentially financing say the construction of the <unk>.
The guilla.
Yes, so I.
I mean first of all we are where the cost of of the Sydney 20 draw on it.
The 335 per cent.
From some of the restaurants right.
Do you expect to be able to maintain similar terms.
And and picks of in the context of though.
The transaction on the pro forma company I mean, our view is and that's that's really the reason to force.
Somewhat to the the renewal so as to gain more visibility on on what makes the most sense. So it.
It is in that context that we expect to conclude.
Conclude the renewal in Q2 with an expanded facility the reflects the.
The addition of credit capacity of the pro forma entity 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 bed capacity of the pro forma entity.
I think we would be right to vacancy there.
The plans to retain on 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.
Great. Thanks, Thanks, again, Jorge Luis and are those all of the questions I have.
Yeah.
Thank you. Our next question today is coming from Trevor Turnbull at Scotia Bank. Your line is nice.
Thank you Oh, Jorge I just wanted to.
Get a little more color on Lin Darrow and and the tertiary crushing.
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 I think you referenced it a.
On this call as I Wanna say, 50% to 60% of.
The capacity and I, just wondered what it what it kind of needs to do to get back to those levels that you were experiencing at 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 agglomeration and on stocking working the sink.
The so the bottleneck in the system.
Yeah.
It has been mainly faced had the the second season.
As I explained before we had issues relating our donation and getting the all the train of conveyors.
Speaking to each other in the.
And that was overcome on.
The two.
To the.
The we are achieving.
State of the race.
In the entire system.
Around the nine to 11000 tonnes per day stack.
And we had as I mentioned the peak day so.
17000 tons of 14000 tons.
The act.
The.
All of them.
Mechanical and automation issues that we battled with at the beginning of the process in early in the start of the year.
I've been overcome and there were never of significant.
In the sense of the sizing either a lot of these issues could of when we sold it.
The in a matter of hours or even days.
The having the right the vendor representatives from superior on site.
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.
The 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 see some then on experience and be able to sustained its throughput.
Yeah, right the B getting 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.
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.
I think we're talking about rocket science here.
The he's 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 get the performance in the equipment. The equipment is fit for purpose.
The <unk> is just a you know.
Operational expertise right now right.
Yeah.
On the H B R is performing okay.
Or is it the weather we ask from it from underground variation.
Also I mean, we had some minor mechanical on.
The state up issues.
But really the equivalent of these fit for purpose on the.
The D.
Yes.
But the bottleneck is the the stocking.
Alright.
Okay Yeah.
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 how you've structured it such that the those kind of mandatory conversions of exchange rates don't apply.
Yeah.
Yes, Tyler so it has to do the in.
Generally speaking it is the accurate description of new sector.
It is also within the existing structure.
Structures in an or of restrictions in the fact regulatory framework in saying, yes to.
Q2 set of inter company debt by way of free.
Pre export finance, which I'm on 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.
The into into pesos into Argentina.
There is a limited pool of for this which is and the range that the we've been mentioning right.
One of the pool is exhausted, we will shift to.
During the Scribing.
Right.
One of the restrictions are being analyzed and enrolled by the government almost on a monthly basis range month by monthly price.
And and maybe it is a moving target which is what it sounds like but yeah.
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 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 to be.
Yes, so I mean.
All of 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.
So in the amount of liquidity in the in the forward and the price change of 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.
On the alternative is to tap into the parallel and fixed market right on the.
Their GAAP 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 trending downwards, and we would expect that.
In the next few months.
That's GAAP, that's close significantly due respect with respect to what it is to the I'm sorry right.
That's sort of on brought on Teradata is the 22, we would have to sit there and look forward to 2022 and the first to see what's going to happen with the effects of the moment right on.
On 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 operator, and the high oriented team.
Just a couple of questions on the San Jose is 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 look good you on a few intercepts of over a kilogram per tonne and that's encouraging but yet I see reserves or the updated reserves of around 23 million ounces 2021 guidance of about 6 million ounce of silver per year.
So just curious how many rigs do you have running are 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.
What has changed with respect to last year first is doing the meter its right to the ore really meet the jaws for San Jose.
Mixes of 30000 meters.
And last year or drilling at the San Jose was around 7000 meters right. So when we're drilling significantly more.
And we currently have five drill rigs three of them.
So three are going to be working underground on.
The two of them on surface.
So we have a different type of targets. One is we have multiple targets.
On the round in and around the immediate B C E D.
The resource shell.
The resource block model.
So the result of that we reported in March come from one of those initiatives for drilling and near mine on.
Underground.
So.
My expectation with respect to those targets and we have.
Several of those and in the range of five or six.
The.
Around the the resource a shell.
Is that we will have opportunities share.
The opportunities I would expect like the ones, we outlined in March which is it.
Not a oh incremental right.
The incremental two two reserve life the.
The.
And resource extensions.
The from me on their own not very material in terms of tonnage but.
The.
On the aggregate deal will the.
You know contribute to two of them replace what would your fleet right.
And I think we kind of several of those ongoing and ER.
And of you've noted.
When I went on.
Also too from a proceeds at the San Jose is not just the simple range.
It's an integrated system of the announced.
Most of the structures.
We have identified the three or four main structures and when the team those structures.
We have a scope of work development.
So the.
The you know within this area, we have a lot of room to create the.
The opportunities for potential expansions right because of the structural model once you get to the details of the fleet.
It's interesting.
Alright and on this one is right. It was right in front of us and what we reported in March during the era of North.
The close to surface the.
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 of look of the treaty more rooms, and more lethal of ensuring that we're coming up with some spectacular grade on.
And the.
Hopefully some tonnage.
That's meaningful in the context of dealing with annual depletion rate.
So we have multiple of the.
The second we have a parallel vein system.
Yeah.
400 meters due east from where we're mining is called the V dodi of system.
We have recorded the resources from the Victoria vein on we have discovered a new part of the structure.
Well drilling Victoria vein, we came across the second structure that is not named yet.
The on the hanging wall of Victoria.
On the.
We're currently drilling Victoria on the part of the structure.
The expansion of sort of Victoria, I'm trying to see and explore further the the parallel structure on the permeability.
Apart from that we have multiple veins on on on.
Surface.
The.
Where we have currently one drill rig.
The pursuing those overdoing things that can be located.
Four of five kilometers away from the current infrastructure, so well within trucking distance really kind of one drill rigs turning in an area called the loss of D. S where we have a.
You know the vein structures on surf the diversification we have discovered some.
Things that we have not seen before is the.
The hunter at the dome of death.
Wearing on what kind of power, we had never seen.
The.
More suitable panic type features like the like that Don on the Douglas you know you're a low you can quite the entry into the team from the perspective of you know where to where.
The focus more exploration ideas. So you know what.
We have multiple of those we have also option the eagle uncle appropriately.
ER, which is within the the general area of San Jose within trucking distance of except for the state.
Blanco, it's an option from me now 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 option of the appropriate tea in the we're currently working on developing drill targets. There. So you know there is no shortage of ideas at San Jose.
We just need to get the drilling meterage flowing right on the savings dating 'twenty 'twenty. One is a big commitment year on the exploration front because of roughly four five per cent of sales allocated to exploration.
And.
We need to let the programs run on them and see some results hopefully come on well.
Okay. Thanks to the so in the past I think you might really like a the San Jose drilling update once a year on that might've been appropriate some of 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 under.
Some of the sort of course the program is important for everybody.
But for example, we're drilling of new and exciting project of the school Santa Fe and the state of Sonora. These are you know some kilometers south of view for the the.
The reason of the project you know visa would do the Tonight discover either so we're drilling there and we felt the one rig and on the.
You know we're quite active on different ideas. So we have also another program for Ya go bubble, the gummy, where we're gonna be developing drill targets of mid year.
The that's decent.
So the Santa Fe is more of a silver.
The project with some growth, but what he got on these more gold silver project. So you know what.
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 pounds on exploration budget of San Jose in Q1 should we 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 from.
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 you know we will see some spend on advances we advanced with the underground development to prepare the drill chambers and whatnot and then the drilling meterage coming along so that the.
It will ramp up.
The and we have really drilled for the on site on turning as I stated, so I see no no no issues there.
The.
Yeah.
It's usually starts of the year tends to be of with the.
Lagging with speed for some of these programs right.
Sure no.
So no particular impacts from COVID-19 that you're seeing either on on the exploration side of things.
No.
Particularly when you're in the.
In the mine.
Just the Coffey does impact on all of our activities of our slow down I think we're not seeing the impact of so much from the production side because of the initiatives of the teams, bringing played but I am a little on that San Jose.
The COVID-19 remains a dealing with COVID-19 on them.
Keeping the the operations, we'd seen the protocols and on the stringent protocols that we have in place does take up the old sometimes on the speed at which we can do things right.
Yeah, So yeah, I mean worse.
Remember that the these three countries.
The main.
Yeah.
Under severe restrictions due to COVID-19 right now.
For sure.
Just on on terms of exploration Atlan thereof.
Have a small program plan for all of these auto is.
Is that a.
The 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 results at some point the in the next couple of weeks since you have on board.
Absolutely, absolutely right, where we're drilling of etc.
Perfect. That's it for me thanks, so much.
Right.
Thank you. Our next question today is coming from Guy Buckley Your line is live.
Thank you Hey, I wanted to ask you about that mine in Peru.
The cattle kind of alone of I guess, how you Nancy on 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.
Head 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 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 our we have the.
Neglected for years.
Our understanding of the gold of course.
For instance.
At the Animas vein right.
Right.
So.
It is only now as we have entered into this.
Area.
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 to the.
They are we cannot.
Say that.
We believe.
The the resource as we understand it has the means more component.
You know so we're trying to understand geologically what is controlling the the position of growth in these areas no right because.
Thank you.
The spatially.
The the especially the the goal of the Leach stones are limited in size.
But.
What we're trying to gauge here is it's true true more science is if there are areas, where we kind of extrapolate what we learn here on uses of an exploration tool, we're getting a nice significant bump.
In the Gulf production and therefore in revenue on our margins derived from the small island simply because of this is just incremental to everything right.
Traditionally produced three.
3.6 grams of gold well under a graph and all of the southern we're finding the areas you know multi gram gold in addition to silver lead and zinc.
But the two they the serious.
There are limited in size, so they're not meaningful to the overall research on 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 it trying to get our knowledge drop on on 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.
And on.
On this this is one small area would mean that the bigger package. So I think it speaks a lot of potential as well right I mean, the right. These complex on them.
We need to better understand the volatile currency here.
Now 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 out rocks gold and the West Africa, and then Bryan side of this I gotta be honest with you on my son, My friends, they dumped their stock but I.
Didn't I held on but that stock went from 971 of share down to under six Bucks. It's now coming back up because I think long term.
You'll do well I think that hopefully that rock school will start contributing something.
On the earning capacity of.
The company.
And so.
I I just want you to know that there.
There are many people that are with you feel like Youre 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 the West Africa.
None of them. Thank you for your comments.
And we believe that there is tremendous value to the on locked for Bronxville shareholders for Fortuna shareholders as we together deploying the assets because of their driving principle behind these is putting together a basket of widely the assets.
That's gone really perform throughout the precious metals price cycle.
Did you know putting together a team of high achievers of performers on the operations on exploration side.
The each with the ex required expertise for success in the respective jurisdictions. So you know.
The sometimes markets on the market participants to the short term oriented I believe this is for the museum of long term debt.
To be the foundation for a company. That's how you said that the behemoth, Michael if you want to invest in precious metals, you really have two huge huge consideration to the pro forma company no I agree with one last question of the auction.
What you believe danger of companies believe that that silver will eventually be $35 announced end of this year and gold will be up to 1950 an ounce.
You know.
The.
I personally believe there could be higher [laughter] right.
On 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 in the high price environment as well as we do on a low price environment. So we try to focus on the things we can control on led.
Vectors.
The more.
Yeah.
The constructive or imaging the people with respect to where prices are going to reap the.
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 ago right. So the.
The what we went on.
But let me tell you every day.
The silver at 28 Bucks yesterday, and she is going on up.
Yes.
I wanted to thank I want to think of as a shareholder from what you're doing we're counting on you I'm going to get out of a frame of certain advanced didn't 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.
Okay.
Yes.
Okay.
If there are no further questions I'll flag. The fact, everyone for listening to today's earnings call and we look forward to you joining us next quarter have a good 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.
Yeah.