Fortuna Silver in harvest mode

Fortuna Silver Mines is entering a harvesting phase during which its precious metals production will increase, and its debt will reduce, as its Seguela gold mine in Cote d'Ivoire continues to beat records, chief executive Jorge Ganoza told Mining Journal.

The company has guided 2023 production of 412,000-463,000oz of gold equivalent. With Seguela producing a record September quarter output of 128,671oz, the company will expect towards the top of that range.

"Seguela is still in ramp-up. Exiting September, it was doing 13% better than its nameplate capacity, and today it is more like 18% better than nameplate, so we are looking for a stronger [December] quarter," said Ganoza.

While production in the September quarter increased 38% compared with the June quarter, revenue jumped 53%, and free cash flow achieved US$70.5 million compared with $9.5 million in the June quarter.

With such stellar numbers, the company paid down $40 million of debt in October and now has about $207 million in debt and $70 million in cash, with more debt payments to come.

"We are at an inflexion point as we come out of two years of heavy capital investment. Our capital demands have come down, and we are going into harvest mode. It is a priority to strengthen our balance sheet through debt repayment. Our net debt to EBITDA number is ok, but we want it to be lower, so we will make a similar debt payment in the [December] quarter," said Ganoza.

Cash flows are also expected to increase as sustaining capital investments at Yaramoko in Burkina Faso and Cayollma in Peru bear fruit.

"We are coming out of a capital-intensive phase with several small projects that added to the sustaining capital at Caylloma, including a new paste fill facility for the mine and expanding the water pumping capacity, which demands more energy, including a revamp of the power grid and substation. All these projects came at once and put pressure on our all-in-sustaining cost (AISC) in 2023. In 2024 and 2025, we expect to see costs track down at Caylloma," said Ganoza.

At Yaramoko, optimisation efforts drove AISC down to $1200/oz in the September quarter and seen the company increase its 2023 production guidance from 100,000koz to 120,000koz.

Clearing debt and building cash will also help prepare the company for the next leg up in its growth, having recently acquired Chesser Resources in an C$80.6 million all-stock to obtain the preliminary economic assessment stage Diamba Sub gold project in Senegal. The company hopes this will be its next operation, potentially as early as 2025.

"This is a nice strategic fit for us; it fits our development pipeline as it is an advanced exploration project, although it is not a development project yet as it is still sub 1Moz. We have high conviction on its exploration potential to take it well beyond 1Moz. We closed the acquisition in September, and by early November, we were already drilling with three rigs. We are wasting no time. With luck with the drill bit, we can be talking of the next development in late 2024 or 2025," said Ganoza.

Exploration is also a priority at the company's other operations in West Africa and Latin America.

In Mexico, where the company recently saw the environmental permit for its San Jose mine reinstated, it has made a blind discovery called the Yessi vein, which included an intercept of 9.9m grading 1299gpt silver equivalent.

Although gold now dominates Fortuna's revenue profile, generating 78% compared with 15% for silver, Ganoza is not yet considering adjusting the company's name. "Earlier this year, we had 12 rigs operating, and eight were pursuing silver opportunities, so we are not giving up on silver. If and when my friend Michael Steinmann [president of Pan American Silver] changes the name of his company following the acquisition of Yamana Gold, I will entertain changing the name of Fortuna Silver. Silver was our heritage, and we made a strategic choice to look at silver and gold with the same enthusiasm. We are following through with that," he said.