Update: Fortuna Silver Produces 6.6 Million Ounces Of Silver In 2014
Jan. 18, 2015 1:26 AM ET
Seeking Alpha
Fortuna Silver produced more silver than expected, but there probably won’t be any production growth in 2015.
No surprises here, and the company does a good job to explain where the higher-than-expected AISC at San Jose is coming from.
The investment thesis remains unchanged. Fortuna Silver might offer the best value in the sector right now.
Fortuna Silver (NYSE:FSM), which is one of the best-run silver companies out there, has announced its production results for 2014 and has already issued a production, cost and capex guidance for this year. There were no real surprises as the company reported a total production of 6.6 million ounces of silver and 35,300 ounces of gold for a total silver-equivalent production of 8.7 million ounces which was in line with the expectations. Both the Caylloma and San Jose mines performed as they should (they actually produced, respectively, 8% and 11% more silver than originally expected) and this emphasizes Fortuna's hands-on approach and potential to continue to yield strong production results.
Fortuna Silver's production growth curve will probably pause in 2015, as the company is guiding for a production of 6.5 million ounces of silver and 35,300 ounces of gold which is almost exactly the output of last year. The AISC is expected to be around $16/oz. for the San Jose mine and $13/oz. at Caylloma. The AISC at San Jose might sound high, but that's mainly due to a necessary upgrade at the company's plans for the tailings. Without this (non-recurring) expense, the AISC at San Jose would very likely have been around the $10-10.50 mark which is pretty good. Fortuna will also spend almost $13M on the expansion of the San Jose mill and the expansion to 3,000 tonnes per day (which is a throughput increase of 50%) should be ready by the summer of 2016 so I do expect the production growth to pick up again from H2 2016 on.
2015 will be a boring year for Fortuna Silver, but I'm already looking forward to 2016 as the expansion to 3,000tpd will be completed. This should increase the output by roughly 2 million ounces of silver per year from 2017 on and will be the next step in Fortuna's continuous production growth. Looking at the results and plans of several other silver mining companies, Fortuna Silver seems to be the best of the pack.
