Fortuna Silver makes free cash flow in Q3 equal to 9 months of 2019

 On November 12 Fortuna Silver Mines released it's third quarter results. Fortuna is a well diversified gold and silver miner with mines in Peru,Mexico and Argentina.And  for this quarter the CEO said " we have reported a record breaking quarter in sales and free cash flow".Sales of $83 million in the quarter compared to $61 million for Q3 in 2019.Net income of $13 million compared to $8 million in 2019.More importantly adjusted EBITDA was$42 million versus $19 million in 2019.In fact,Q3 adjusted EBITDA for 2020 was 60% of total adjusted EBITDA for 9 months of 2019.However the big story was free cash flow.FVI generated free cash flow of $30 million for Q3 in comparison to $10 million in Q3 2019.While the $30 million compared to $28 million for the 9 months of 2019.This allows for a small dividend if this performance continues in  Q4.

     Production  Constraints

           The pandemic did have an affect on Fortuna Silver as mine production was closed for 5-6 weeks.Consequently mine production went from 796,000 tonnes to 662,000 tonnes.So silver and gold production for 9 months was down from 2019.However the increase in price helped to compensate for the drop in production;the price of silver went from $16 /ounce to $20/ounce in the first 9 months and $25/ounce for Q3.While the gold price went from $1365/ounce to $1752/ounce for 9 months and $1921/ounce for Q3.At the same time FVI reports they are mining higher grades of both silver and gold.

      The Lindero Mine

      Lindero is a mine in Argentina and FVI has been developing it since 2017.Their total capital expenditures on development will be about $325 million before production begins.And production is expected in the first quarter of 2021.Full production will be 18,750 tonnes per day and a high grade of silver and gold is expected.This is a substantial sized mill.However Fortuna does not estimate how much total production will be enhanced in Q1 2021 nor for 2021 by their Lindero production.But a rough estimate would be by 5% in Q1 and 20%-25% for 2021 assuming the grades are the same as in their other mines.                

       Price Movement 

    Fortuna has traded in the $8-$9 price range since July.And in November it hit a high of $10 but has fallen off to the $8.50 recently.Management expected the healthy third quarter report could send it back up to $10 and quite a few analysts expect FVI to go to the $10-$11 area.This blog expects that production for Q4 will be flat compared to Q3 production.But the price of silver and gold should be up from present levels and from the average price for Q3.This could easily bring the price up to the $10.50-$11.00 area.If this blog is right and production for the Lindero mine comes in as expected then look for the price to nibble on $12 a share in Q1 2021. 

                     
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