Fortuna Silver Mines Inc

Fortuna Silver Mines Inc. (NYSE: FSM) is a Canada-based precious metals mining company with five operating mines in Argentina, Burkina Faso, Cote d'Ivoire, Mexico, Peru, and West Africa. Its operated mines include Caylloma Mine, Lindero Mine, San Jose Mine, Seguela Gold, Yaramoko Mine, and Diamba Sud.

Recent Financial and Business Updates:

• Fourth Quarter 2023 Performance Overview: In the fourth quarter of 2023, FSM achieved noteworthy milestones, including a record gold equivalent production of 136,154 ounces, reflecting a substantial 6 percent increase compared to the preceding quarter (Q3 2023: 128,671 oz Au Eq). Furthermore, FSM recorded a remarkable 13 percent increase in gold production, reaching 107,376 ounces compared to Q3 2023 (94,821 oz Au). However, silver production experienced a 19 percent decrease, totaling 1,354,003 ounces compared to the previous quarter (Q3 2023: 1,680,751 oz Ag).
• Full Year 2023 Achievements: For the entire year of 2023, FSM showcased impressive results, achieving a record gold equivalent production of 452,389 ounces. This marked a significant 13 percent increase compared to the previous year (2022: 401,878 oz Au Eq). Additionally, gold production reached new heights with a 26 percent increase, totaling 326,638 ounces compared to 2022 (259,427 oz Au). Conversely, silver production saw a 15 percent decrease, totaling 5,883,691 ounces compared to the previous year (2022: 6.9 Moz Ag). Notably, lead production reached a record-breaking 40,851,657 pounds, demonstrating an 18 percent increase over 2022 (34.6 Mlbs Pb), while zinc production also achieved a record high of 55,060,450 pounds, indicating a 19 percent increase over 2022 (46.2 Mlbs Zn). Moreover, FSM's continuous commitment to safety was evident through the improvement in annual safety performance, with a Total Recordable Injury Frequency Rate (TRIFR) of 1.22 and a Lost Time Injury Frequency Rate (LTIFR) of 0.36, compared to 2.32 and 0.35 in 2022.
• 2024 Consolidated Production and Cost Guidance: Looking ahead to 2024, FSM provides consolidated production and cost guidance. The projected gold equivalent production ranges between 457 and 497 thousand ounces, reflecting a potential increase of 1 to 10 percent compared to 2023. Gold production is estimated to be between 343 and 385 thousand ounces, representing a potential increase of 5 to 18 percent compared to 2023. Silver production is anticipated to range between 4.0 and 4.7 million ounces, reflecting a projected decrease of 32 to 21 percent compared to the previous year. In terms of costs, the Cash Cost is expected to be between USD 935 and USD 1,055/oz Au Eq, indicating an approximate increase of 6 to 20 percent compared to 2023. Meanwhile, the All-In Sustaining Cost (AISC) is projected to range between USD 1,485 and USD 1,640/oz Au Eq, indicating a potential decrease of 1 percent and an increase of 9 percent, respectively, compared to 2023.
• Third Quarter 2023 Financial Highlights: In the financial realm, the third quarter of 2023 witnessed significant achievements. The net income stood at USD 27.5 million or USD 0.09 per share, marking a substantial increase from USD 3.1 million or USD 0.01 per share in Q2 2023. The adjusted net income reached USD 29.6 million or USD 0.10 per share, contrasting with USD 2.5 million or USD 0.01 per share in the previous quarter. Notably, the adjusted EBITDA surged to USD 104.6 million, a noteworthy advancement from USD 44.4 million in Q2 2023. The quarter also demonstrated robust financial operations, with net cash provided by operating activities amounting to USD 106.5 million and free cash flow from ongoing operations reaching USD 70.0 million. These figures represented substantial growth compared to USD 44.2 million and USD 9.5 million, respectively, in Q2 2023. Furthermore, the company made significant strides in reducing its revolving credit facility, paying down USD 40.0 million. As of the quarter's close, the total net debt reached USD 133.4 million, resulting in a total net debt to adjusted EBITDA ratio of 0.5. Liquidity as of September 30, 2023, was reported at USD 162.3 million, a notable increase from USD 97.9 million at the end of Q2 2023.
• Operational Highlights: In terms of operational performance, the third quarter showcased commendable results. Gold production reached 94,821 ounces, a substantial increase from 64,348 ounces in Q2 2023. Silver production also experienced a positive uptrend, totaling 1,680,751 ounces compared to 1,262,561 ounces in the preceding quarter. Gold equivalent production rose to 128,671 ounces, up from 93,454 ounces in Q2 2023. Consolidated cash costs per ounce of gold equivalent sold were reported at USD 814, showcasing an improvement from USD 968 in Q2 2023. Similarly, consolidated all-in sustaining costs (AISC) per ounce of gold equivalent sold witnessed a positive trend, standing at USD 1,312, compared to USD 1,799 in the previous quarter. The year-to-date Lost Time Injury Frequency Rate (LTIFR) was recorded at 0.38, while the Total Recordable Injury Frequency Rate (TRIFR) stood at 0.86.
• Growth and Development: The third quarter marked significant milestones in growth and development. The reporting period included the first full operational cycle for the Séguéla Mine, showcasing progress and contributions to overall performance. Furthermore, on September 20, 2023, FSM successfully completed the acquisition of Chesser Resources Limited and its Diamba Sud project, as detailed in the News Release dated September 20, 2023. These strategic moves underscore FSM's commitment to expansion and development in key projects.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI) over a 14-day period stands at 39.82, recovering from the oversold zone. The stock price is currently taking support USD3.00, with expectations of an upward momentum once USD 3.30 is broken on the upside. Additionally, the stock's current positioning is below both 21-period SMA and 50-period SMA, which may serve as a dynamic short-term resistance level.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘BUY’ rating has been given to Fortuna Silver Mines Inc. (NYSE: FSM) at its current price of USD 3.12 as of February 02, 2024, at 08:35 am PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 02, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone