Fortuna sees record gold production, but faces silver decline, higher costs

Fortuna Silver Mines (TSX: FVI; NYSE: FSM) is coming off a record year of gold production across its five operating mines, driven mainly by the Séguéla mine in Côte d’Ivoire which came online towards the end of the second quarter.

Total gold production in 2023 was 326,638 oz., a 26% increase on 2022. This includes 78,617 oz. coming from Séguéla during the second half of 2023. The biggest contributor was Yaramoko in Burkina Faso at 117,711 oz., followed by Lindero in Argentina at 101,238 oz.

In addition, base metals byproducts also reached record highs, with about 55.1 million lb. of zinc and 40.9 million lb. of lead, representing yearly increases of 19% and 18% respectively.

Silver production, however, saw a 15% decline to 5.9 million oz. due to decreased production at the San Jose mine Mexico after an illegal union blockade in the second quarter and operational challenges thereafter. In the end, silver output was 7% below the lower end of the 2023 guidance.

Still, on a gold-equivalent basis, Fortuna’s company-wide production, including the base metal byproducts, was a record 452,389 oz.

Looking ahead, the precious metals miner is expecting gold-equivalent production of 457,000-497,000 oz. in 2024, for a projected increase of 1-10% over last year.

By midday Thursday, Fortuna’s stock plunged by 14.1% to $4.12 apiece, for a market capitalization of $1.2 billion.

Canaccord Genuity mining analyst Dalton Baretto said the company’s 2024 forecast was disappointing.

“While Q4/23 production was roughly in line with our estimates, guidance was weaker than we had anticipated,” he wrote in a note to clients on Thursday. “Gold production guidance is in line with our estimates, but we note that this is because extremely high grades at Yaramoko (8.3 g/t) offset lower grades at Seguela. Silver production guidance was well below our estimates, as an updated mine plan at San Jose (pending) will see the asset cease operations this year.”

The 2024 guidance comprises 343,000-385,000 oz. of gold (a projected increase of 5-18%), and 4-4.7 million oz. of silver (a projected decrease of 21-32%).

Cash cost is expected to rise by about 6-20% over the 2023 figures to between US$935-$1,055 per oz. gold-equivalent.