Scotiabank has reiterated its Sector Perform rating and $6.50 price target for Fortuna Silver Mines (NYSE:NYSE:), following the company’s third quarter production report.
The report showed that Fortuna Silver (TSX:) Mines produced 110.8 thousand gold equivalent ounces, almost in line with the estimated 111.0 thousand ounces.
Gold production was slightly below expectations at 91.3 thousand ounces compared to the forecast 91.8 thousand ounces, representing a deficit of less than 1%.
Silver production, on the other hand, was significantly lower than expected, with 0.82 million ounces produced versus the estimate of 1.15 million ounces, a decrease of 29%.
However, zinc and lead production exceeded expectations. The company reported 12.8 million pounds of zinc and 10.0 million pounds of lead, exceeding estimates by 56% and 43%, respectively.
Variations in production were attributed to different factors in FSM’s operations. Increased gold production at Séguéla was offset by reduced production at Lindero and Yaramoko. San José silver production was particularly disappointing due to declining yields and grades.
Fortuna Silver Mines is currently considering several options for San José, including possible production extensions, placing the operation on care and maintenance or initiating a progressive closure plan as the mine’s reserves are projected to be depleted by the end of the year.
Despite these production problems, gold and silver production so far this year amounts to 273.6 thousand ounces and 2.9 million ounces, respectively. Fortuna Silver Mines has confirmed that it is still on track to meet its annual consolidated production guidance of 343-385 thousand ounces of gold and 4.0-4.7 million ounces of silver.
Scotiabank views production results as neutral for FSM shares and notes that gold equivalent production met its expectations. The bank expects to receive further updates, particularly regarding the first placement of ore on the new leach pad later this month and the planned completion of the Lindero leach pad expansion by the end of the year. After updating its model, Scotiabank maintained a Sector Perform rating with a $6.50 price target on FSM shares.
In other recent news, Fortuna Mining Corp. reported notable results in the second quarter of 2024, with gold equivalent production reaching 116,000 ounces and total sales reaching $260 million. In addition to this, the company revealed net income of $43.3 million, which is a significant increase compared to the second quarter of 2023. Fortuna Mining also successfully placed $172 million in convertible notes, strengthening its financial liquidity .
The company’s Yaramoko mine, operational since 2016, will retain its mining permit, ensuring the stability of its operations in Burkina Faso. This development coincides with the company’s production guidance for the year, which forecasts annual production of 457 to 497 thousand ounces of gold equivalent.
BMO Capital Markets maintained its Outperform rating on Fortuna Mining shares, following the company’s third-quarter production report. Despite a challenging quarter at the San José mine, the company’s lead and zinc production met projections and the Séguela project continued to perform strongly. The company anticipates clarity on the future of the San José mine by the end of the third quarter.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Fortuna Silver Mines’ financial performance and market position. Despite the production challenges mentioned in the article, FSM has shown strong revenue growth, with a 49.29% increase in the trailing twelve months to Q2 2024, reaching $993.29 million. . This growth is particularly impressive considering the 64.12% quarterly revenue growth in Q2 2024.
InvestingPro Tips highlights that FSM’s net income is expected to grow this year, which is in line with the production guidance maintained by the company. Furthermore, the stock has seen significant performance over the past year, with a total price return of 61.56%, indicating investors’ confidence in the company’s prospects despite operational challenges.
It’s worth noting that FSM operates with a moderate level of debt, which could provide financial flexibility as it navigates production issues and considers options for its San Jose operation. The company’s valuation implies strong free cash flow performance, potentially giving it resources to address operational challenges or pursue growth opportunities.
For investors looking for a more comprehensive analysis, InvestingPro offers 11 additional tips for Fortuna Silver Mines, providing a deeper understanding of the company’s financial health and market position.
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