Nouveau Monde Graphite Inc. press release

Fortuna reports financial results for the second quarter of 2024

2024-08-08

TSX - Toronto Stock Exchange · Graphite · Canada

(All amounts are expressed in US dollars, tabular amounts in millions, unless otherwise stated)

VANCOUVER, British Columbia, Aug. 07, 2024 (GLOBE NEWSWIRE) -- Fortuna Mining Corp. (NYSE: FSM | TSX: FVI) (“Fortuna” or the “Company”) today reported its financial and operating results for the second quarter of 2024.

Second Quarter 2024 highlights

Financial

Attributable net income of $40.6 million or $0.13 per share, compared to a $26.3 million or $0.09 per share in Q1 2024 Adjusted attributable net income 1 of $30.4 million or $0.10 per share, compared to $26.7 million or $0.09 per share in Q1 2024 Generated $93.0 million (or $0.30 per share) of cash flow from operations before working capital changes, and free cash flow from ongoing operations 1 of $38.6 million, compared to $84.3 million (or $0.28 per share) and $12.1 million, respectively, in Q1 2024 The Company issued Convertible Notes (the “2024 Notes”) for gross proceeds of $172.5 million which were partially used to pay in full the outstanding $125.0 million under its revolving credit facility. As at the end of the quarter total net debt 1 was $66.5 million and the total net debt to adjusted EBITDA ratio 1 was 0.2:1 Liquidity as of June 30, 2024 was $355.6 million, compared to $212.7 million at the end of Q1 2024

Operational

Gold equivalent 3 production of 116,570 ounces, compared to 112,543 ounces in Q1 2024 Gold production of 92,716 ounces, compared to 89,678 ounces in Q1 2024 Silver production of 990,574 ounces, compared to 1,074,571 ounces in Q1 2024 Consolidated cash costs 1 per ounce of gold equivalent sold of $988, compared to $879 in Q1 2024; adjusting for San Jose, which is mining its last year of Mineral Reserves, consolidated cash costs was $858 Consolidated all-in sustaining cash costs (AISC) 1 per ounce of gold equivalent sold of $1,656, compared to $1,495 in Q1 2024; adjusting for San Jose, consolidated AISC was $1,584 The Company recorded zero lost time injuries and zero total recordable injuries in the quarter

Growth and Development

At the newly discovered Kingfisher prospect at the Séguéla Mine the Company intersected 23.7 g/t gold over 17.8 meters. For full details refer to the News Release “ Fortuna intersects 23.7 g/t gold over 17.8 meters from the Kingfisher Prospect at the Séguéla Mine ” dated June 20, 2024 Exploration continued at the Diamba Sud exploration project with an intersect of 31.3 g/t gold over 12.0 meters at the Karakara prospect. For full details refer to the News Release “ Fortuna intersects 31.3 g/t gold over 12.0 meters from the Karakara Prospect at the Diamba Sud Gold Project ” dated June 25, 2024

"Our business performed well in the quarter, generating strong net cash flow from operations of $93.0 million before working capital changes and free cash flow after sustaining capital of $38.6 million.” said Jorge Ganoza, Fortuna’s President and CEO. Mr. Ganoza continued, “We anticipate our free cash flow to increase further in the second half of the year as we conclude a heavy sustaining capex phase in the third quarter with the completion of the Lindero leach pad expansion project.” Mr. Ganoza added, “With the issue of $172.5 million of convertible notes we have significantly strengthened our balance sheet and liquidity while lowering our cost of capital. This added financial flexibility places the Company in an advantageous position to pursue strategic initiatives and emerging opportunities in our established regions.” Mr. Ganoza concluded “On the exploration front we continue creating value through discovery. At the recently identified Kingfisher prospect, at the Séguéla mine, we have drill defined gold mineralization over a strike length of two kilometers. Our drill program will continue non-stop with the aim of delivering a first resource for this exciting new discovery by year end.”

1 Refer to Non-IFRS Financial Measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures. 2 Excluding letters of credit 3 Au Eq includes gold, silver, lead and zinc and is calculated using the following metal prices: $2,334/oz Au, $29.1/oz Ag, $2,157/t Pb and $2,835/t Zn or Au:Ag = 1:80.19, Au:Pb = 1:1.08, Au:Zn = 1:0.82 for Q2 2024, and the following metal prices $2,087/oz Au, $23.4/oz Ag, $2,084/t Pb and $2,450/t Zn or Au:Ag = 1:89.8, Au:Pb = 1:1.0, Au:Zn = 0.85 for Q1 2024.

Second Quarter 2024 Consolidated Results

| | | Three months ended June 30, | | Six months ended June 30, | | | | | | | | | | | | (Expressed in millions) | | 2024 | | 2023 | | % Change | | 2024 | | 2023 | | % Change | | | | Sales | | 260.0 | | 158.4 | | 64 | % | | 484.9 | | 334.1 | | 45 | % | | Mine operating income | | 79.9 | | 31.9 | | 150 | % | | 149.8 | | 72.3 | | 107 | % | | Operating income | | 55.4 | | 7.7 | | 619 | % | | 102.6 | | 31.6 | | 225 | % | | Attributable net income | | 40.6 | | 3.1 | | 1,210 | % | | 66.9 | | 14.0 | | 378 | % | | Attributable income per share - basic | | 0.13 | | 0.01 | | 1,200 | % | | 0.22 | | 0.05 | | 340 | % | | Adjusted attributable net income 1 | | 30.4 | | 2.5 | | 1,116 | % | | 57.1 | | 14.7 | | 288 | % | | Adjusted EBITDA 1 | | 112.7 | | 44.4 | | 154 | % | | 207.8 | | 109.5 | | 90 | % | | Net cash provided by operating activities | | 73.5 | | 44.2 | | 66 | % | | 122.5 | | 85.4 | | 43 | % | | Free cash flow from ongoing operations 1 | | 38.6 | | 9.5 | | 306 | % | | 50.7 | | 17.6 | | 188 | % | | Cash cost ($/oz Au Eq) 1 | | 988 | | 968 | | 2 | % | | 934 | | 940 | | (1 | %) | | All-in sustaining cash cost ($/oz Au Eq) 1 | | 1,656 | | 1,799 | | (8 | %) | | 1,577 | | 1,648 | | (4 | %) | | Capital expenditures 2 | | | | | | | | | | | | | | | | Sustaining | | 29.9 | | 34.2 | | (13 | %) | | 55.7 | | 62.1 | | (10 | %) | | Non-sustaining 3 | | 17.6 | | 0.9 | | 1,856 | % | | 26.5 | | 2.0 | | 1,225 | % | | Séguéla construction | | - | | 23.0 | | (100 | %) | | - | | 48.1 | | (100 | %) | | Brownfields | | 2.9 | | 2.4 | | 21 | % | | 9.5 | | 7.3 | | 30 | % | | As at | | | | | | | | June 30, 2024 | | December 31, 2023 | | % Change | | | | Cash and cash equivalents | | | | 105.6 | | 128.1 | | (18 | %) | | | | | | | Net liquidity position (excluding letters of credit) | | | | | | | | 355.6 | | 213.1 | | 67 | % | | | Shareholder's equity attributable to Fortuna shareholders | | | | | | | | 1,334.9 | | 1,238.4 | | 8 | % | | | 1 Refer to Non-IFRS Financial Measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures. | | | | | | | | | | | | | | | | 2 Capital expenditures are presented on a cash basis | | | | | | | | | | | | | | | | 3 Non-sustaining expenditures include greenfields exploration | | | | | | | | | | | | | | | | Figures may not add due to rounding | | | | | | | | | | | | | | |

Second Quarter 2024 Results

Attributable Net Income and Adjusted Attributable Net Income Net income attributable to Fortuna for the quarter was $40.6 million compared to $3.1 million in Q2 2023. After adjusting for non-cash and non-recurring items, adjusted attributable net income for the quarter was $30.4 million compared to $2.5 million in Q2 2023. The large change between net income and adjusted net income for the quarter was primarily the result of a $12.0 million deferred tax recovery that was removed from adjusted attributable net income related to the issuance of the 2024 Notes.

The increase in net income and adjusted net income is explained mainly by increased gold sales volume and higher realized gold and silver prices. Higher gold sales volume was primarily due to contributions from Séguéla which was under construction in the comparable period. This was partially offset by lower silver production at San Jose as the mine exhausts its Mineral Reserves. The realized gold and silver prices were $2,334 and $29.10 per ounce respectively compared to $1,975 and $24.10 per ounce, respectively, for the comparable period in the prior year.

Adjusted net income for the quarter was also impacted by higher G&A of $7.8 million, primarily due to an increase of $4.7 million in share based compensation related to the increase of our share price in the period and the addition of Séguéla’s G&A. The higher interest expense of $3.4 million for the quarter is explained by $3.7 million of capitalized interest in the comparative period vs nil in Q2 2024.

Depreciation and Depletion Depreciation and depletion for the second quarter of 2024 was $57.3 million compared to $39.9 million in the comparable period. The increase in depreciation and depletion was primarily the result of higher sales volume and the inclusion of $17.5 million in depletion of the purchase price related to the acquisition of Roxgold Inc in 2021. This was partially offset by lower depreciation and depletion at San Jose as a result of an impairment charge in the fourth quarter of 2023.

Adjusted EBITDA and Cash Flow Adjusted EBITDA for the quarter was $112.7 million, a margin of 43% over sales, compared to $44.4 million a margin over sales of 28%, reported in the same period in 2023. The main driver for the increase in EBITDA was the contribution from Séguéla with an EBITDA margin of 62% in Q2 2024, partially offset by marginal EBITDA at San Jose. The prior period was also impacted by an illegal blockade of the San Jose Mine.

Net cash generated by operations for the quarter was $73.5 million compared to $44.2 million in Q2 2023. The increase of $29.3 million reflects higher adjusted EBITDA of $68.3 million offset by taxes paid of $17.4 million at Séguéla as two installment payments were made in the second quarter, with a third expected in September, and $19.4 million in negative working capital movements.

The negative change in working capital of $19.4 million consisted of the following:

An increase in receivables of $9.3 million driven by an increase in VAT receivables of $4.9 million at Séguéla and $4.3 million at Yaramoko An increase of inventories of $13.5 million related to a $2.3 million increase in material and supplies and $2.6 million in metals inventory at Séguéla and a $1.5 million increase in materials and supplies and $4.5 million in metals inventory at Lindero

In the second quarter of 2024 capital expenditures on a cash basis were $50.4 million consisting primarily of $32.8 million in sustaining capital and $17.6 million of non-sustaining capital including $6.5 million to acquire one half of the 1.2% NSR royalty that was held by Franco Nevada at Séguéla.

Free cash flow from ongoing operations for the quarter was $38.6 million, compared to $9.5 million in Q2 2023. The increase in free cash flow from operations was primarily the result of contributions from Séguéla which was under construction in Q2 2023 and was offset by negative working capital changes and higher taxes paid as described above.

Cash Costs and AISC Cash cost per equivalent gold ounce was $988, compared to $968 in the second quarter of 2023. The slightly higher cash cost per equivalent gold ounce was due to higher costs at San Jose, Lindero, and Yaramoko, partially offset by the contribution of low-cost production from Séguéla. Adjusting for San Jose, where previously capitalized costs are now expensed as the mine is in its last year of operations, cash costs per gold equivalent ounces was $858 for the current quarter.

All-in sustaining costs per gold equivalent ounce was $1,656 for the second quarter of 2024 compared to $1,799 for the second quarter of 2023. The decrease was primarily the result of higher gold sales and lower sustaining capital. Adjusting for San Jose, all-in sustaining cost per gold equivalent ounce was $1,584 for the current quarter.

General and Administrative Expenses General and administrative expenses for the current quarter of $22.4 million were higher than the same period in 2023 as Séguéla transitioned to operations and costs are no longer being capitalized, and higher share-based compensation expenses due to an increase in the share price and the impact on the valuation of restricted share units expected to settle in cash. G&A is comprised of the following items:

| | | Three months ended June 30, | | Six months ended June 30, | | | | | | | | | | | | | | | | (Expressed in millions) | | 2024 | | 2023 | | % Change | | 2024 | | 2023 | | % Change | | | | | | | | Mine G&A | | | 9.9 | | | 6.2 | | 60 | % | | | 16.9 | | | 12.1 | | 40 | % | | Corporate G&A | | | 6.6 | | | 7.2 | | (8 | %) | | | 15.5 | | | 14.1 | | 10 | % | | Share-based payments | | | 5.8 | | | 1.1 | | 427 | % | | | 8.0 | | | 3.3 | | 142 | % | | Workers' participation | | | 0.1 | | | — | | 0 | % | | | 0.2 | | | 0.1 | | 100 | % | | Total | | | 22.4 | | | 14.5 | | 54 | % | | | 40.6 | | | 29.6 | | 37 | % |

Liquidity

The Company’s total liquidity available as of June 30, 2024 was $355.6 million comprised of $105.6 million in cash and cash equivalents, and the fully undrawn $250.0 million revolving credit facility (excluding letters of credit).

Séguéla Mine, Côte d’Ivoire

| | | | Three months ended June 30, | | | Six months ended June 30, | | | | | | | | | | | 2024 | | | 2023 | | | 2024 | | | 2023 | | Mine Production | | | | | | | | | | | | | | Tonnes milled | | | 318,457 | | | 109,605 | | | 713,294 | | | 109,605 | | Average tonnes crushed per day | | | 3,461 | | | 1,611 | | | 3,898 | | | 1,611 | | | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | Grade (g/t) | | | 3.47 | | | 1.56 | | | 3.09 | | | 1.32 | | Recovery (%) | | | 94 | | | 90 | | | 94 | | | 77 | | Production (oz) | | | 32,983 | | | 4,023 | | | 67,539 | | | 4,023 | | Metal sold (oz) | | | 33,102 | | | - | | | 67,552 | | | - | | Realized price ($/oz) | | | 2,332 | | | - | | | 2,211 | | | - | | | | | | | | | | | | | | | | Unit Costs | | | | | | | | | | | | | | Cash cost ($/oz Au) 1 | | | 564 | | | - | | | 511 | | | - | | All-in sustaining cash cost ($/oz Au) 1 | | | 1,097 | | | - | | | 1,021 | | | - | | | | | | | | | | | | | | | | Capital Expenditures ($000's) 2 | | | | | | | | | | | | | | Sustaining | | | 5,779 | | | - | | | 8,805 | | | - | | Sustaining leases | | | 2,437 | | | - | | | 4,702 | | | - | | Non-sustaining | | | 8,605 | | | - | | | 9,640 | | | - | | Brownfields | | | 1,190 | | | - | | | 6,086 | | | - | | 1 Cash cost and All-in sustaining cash cost are non-IFRS financial measures. Refer to Non-IFRS Financial Measures. | | | | | | | | | | | | | | 2 Capital expenditures are presented on a cash basis | | | | | | | | | | | | | | | | | | | | | | | | | | |

In the second quarter of 2024, mined material totaled 420,222 tonnes of ore, averaging 3.03g/t Au, and containing an estimated 40,912 ounces of gold from the Antenna, Ancien and Koula pits. Movement of waste during the quarter totaled 2,495,838 tonnes, for a strip ratio of 6:1.

Production was mainly focused on the Antenna pit which produced 364,491 tonnes of ore to provide higher grade feed to the processing plant during the power supply constraints detailed below. Mining at the Ancien and Koula pits provided the balance of ore production with 1,645,716 tonnes of the waste stripping occurring there.

Séguéla processed 318,457 tonnes in the quarter, producing 32,983 ounces of gold, at an average head grade of 3.47 g/t Au. During the quarter the mine experienced intermittent power outages from April to early July which resulted in the loss of 19 days of operating time for the mill. The loss of power was the result of power shedding from the national grid supplier due to failures at two power plants in Côte d’Ivoire. Since early July the mine has been receiving stable grid power. To guarantee mine power supply in the event of future outages the Company is sourcing expanded backup diesel power generation capabilities to support the entire process operation.

The potential impact to gold production from the intermittent power outages was largely mitigated by delivering higher grade feed to the mill and the benefits of operating efficiencies which have allowed the mill to operate at a throughput rate of 208 tonnes per hour compared to a name place capacity of 154 tonnes per hour. Séguéla’s 2024 production guidance of 126,000 to 138,000 oz Au remains unaffected.

Cash cost per gold ounce sold was $564, and all-in sustaining cash cost per gold ounce sold was $1,097 for Q2 2024. Both were below plan and guidance.

Yaramoko Mine, Burkina Faso

| | | | Three months ended June 30, | | | Six months ended June 30, | | | | | | | | | | | 2024 | | | 2023 | | | 2024 | | | 2023 | | Mine Production | | | | | | | | | | | | | | Tonnes milled | | | 121,391 | | | 144,202 | | | 229,110 | | | 283,852 | | | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | Grade (g/t) | | | 8.40 | | | 6.51 | | | 8.58 | | | 6.23 | | Recovery (%) | | | 98 | | | 98 | | | 98 | | | 98 | | Production (oz) | | | 31,447 | | | 29,002 | | | 58,624 | | | 55,439 | | Metal sold (oz) | | | 31,455 | | | 25,946 | | | 58,627 | | | 55,476 | | Realized price ($/oz) | | | 2,334 | | | 1,976 | | | 2,223 | | | 1,933 | | | | | | | | | | | | | | | | Unit Costs | | | | | | | | | | | | | | Cash cost ($/oz Au) 1 | | | 896 | | | 719 | | | 830 | | | 772 | | All-in sustaining cash cost ($/oz Au) 1 | | | 1,389 | | | 1,626 | | | 1,382 | | | 1,564 | | | | | | | | | | | | | | | | Capital Expenditures ($000's) 2 | | | | | | | | | | | | | | Sustaining | | | 5,110 | | | 14,318 | | | 14,731 | | | 27,867 | | Sustaining leases | | | 1,018 | | | 1,161 | | | 2,067 | | | 2,520 | | Non-sustaining | | | 1,542 | | | – | | | 1,542 | | | – | | Brownfields | | | 1,397 | | | 1,019 | | | 2,760 | | | 2,210 | | 1 Cash cost and All-in sustaining cash cost are non-IFRS financial measures; refer to non-IFRS financial measures section at the end of this news release and to the MD&A accompanying the Company’s financial statements filed on SEDAR+ at www.sedarplus.ca for a description of the calculation of these measures. | | | | | | | | | | | | | | 2 Capital expenditures are presented on a cash basis. | | | | | | | | | | | | | | | | | | | | | | | | | | |

In the second quarter of 2024, 121,391 tonnes of ore were treated at an average head grade of 8.40 g/t, producing 31,447 ounces of gold. This represents a 29% increase in grade and an 8% increase in production, when compared to the same period in 2023. Higher gold production in the second quarter of 2024 was a result of higher head grades, offsetting lower tonnes milled. Processing operations at Yaramoko were also affected by intermittent power supply from the grid, however, our backup diesel generators mitigated the bulk of these constraints.

During the quarter, 89,991 tonnes of ore were mined averaging 7.81 g/t Au from 55 Zone, and 21,361 tonnes of ore averaging 8.89 g/t Au from QV Prime, totaling 111,352 tonnes averaging 8.02 g/t Au. In May, a rock burst occurred in the deeper levels of the 55 Zone, which interrupted production for a period of 10 days. No injuries or loss of property occurred as a result of the seismic event. Changes to the stoping sequence and design of underground excavations have been implemented based on a geotechnical evaluation.

The cash cost per ounce of gold sold for the quarter ended June 30, 2024, was $896, compared to $719 in the same period in 2023. The increase for the quarter is mainly attributed to the reallocation of fixed mining costs from capital to operating expenses, lower processed ore and higher energy costs from the use of diesel generators to offset constrained grid supply. This was partially offset by higher ounces sold in the period.

During the quarter power sourced from the grid was restricted to 45% with the balance coming from diesel power generation. This increased the cost per kilowatt hour with diesel generation costing $0.42/kwh compared to $0.24/kwh for grid power. The impact on total cost was mostly offset by lower energy consumption at the mine. Through the month of July availability of power from the grid was at 95%.