Fortuna Silver Mines Inc.
FSM
recently announced that its board of directors has provided a go-ahead for the construction of an open pit mine at the Séguéla gold project in Côte d’Ivoire. This will be the company’s fifth operating mine with first gold expected by mid-2023. It is anticipated to produce around 120,000 ounces of gold per year.
The Séguéla gold Project was added to Fortuna Silver’s portfolio when it completed the acquisition of Roxgold Inc. in July this year. Prior to the combination with Roxgold, Fortuna Silver had three mines — San Jose mine in Mexico, Lindero Mine in Argentina and Caylloma Mine in Peru. It now has operations in West Africa with the addition of Roxgold’s high-grade Yaramoko Gold Mine located in Burkina Faso and its advanced development project Séguéla Gold Project.
The Séguéla Project calls for an initial capital investment of $173.5 million. Of this, $11.5 million has been approved by the board for early works items. The company intends to commence construction immediately with long lead items procured, and development teams established on the ground. The anticipated construction schedule is around 20 months.
Concurrent with construction, the company plans to continue with well-funded drill programs to test multiple remaining targets on the Séguéla property. It is worth mentioning that over the last 12 months, the exploration team has successfully delivered gold discoveries at the Koula, Sunbird and Gabbro North prospects. Overall, the mine is expected to produce 1,028,000 ounces of gold through its expected life of around nine years. In the initial six years, the projected gold output is expected at 130,000 ounces.
The combination of Fortuna Silver and Roxgold resulted in a low-cost intermediate gold and silver producer with four operating mines in Americas and West Africa — two of the world’s fastest growing precious metals producing regions. The combined company has a projected annual gold equivalent production profile of approximately 450,000 ounces, which is expected to increase further once the Séguéla comes online. Roxgold’s Yaramoko and Séguéla are low-cost assets with low technical complexity, which will drive meaningful growth, while reducing overall costs. Fortuna Silver’s All-In Sustaining Cost is projected at approximately $950 per gold equivalent ounce, lower than nearest peers.
A strong balance sheet will enable the company to pursue other organic and external growth opportunities. The combined company will have a projected EBITDA of around $487 million in 2021 and free cash flow of $211 million. Over the 2021-2023 period, the company is expected to generate pro forma average annual EBITDA of more than $500 million. Silver will continue to be a meaningful contributor to revenues.
Price Performance
Image Source: Zacks Investment Research
Shares of the company have fallen 40.2% over the past year compared with the
industry
’s decline of 22.4%.
Zacks Rank & Stocks to Consider
Fortuna Silver currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include
Veritiv Corporation
VRTV
,
Nucor Corporation
NUE
and
Teck Resources Ltd.
TECK
. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Veritiv has a projected earnings growth rate of 214.9% for the current year. The company’s shares have surged a whopping 542% in a year.
Nucor has a projected earnings growth rate of roughly 534.4% for the current year. The company’s shares have rallied 107% in a year.
Teck Resources has a projected earnings growth rate of 305.3% for the current year. The company’s shares have appreciated 81% in a year.
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