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FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
Quarterly Information
The following table provides information for eight fiscal quarters up to December 31, 2014:
Quarters ended
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
Expressed in $000's, except per share data 31-Dec-14 30-Sep-14 30-Jun-14 31-Mar-14 31-Dec-13 30-Sep-13 30-Jun-13 31-Mar-13
Sales
37,823
46,384
44,319
45,480 36,377
30,203 30,101 40,713
Mine operating earnings
10,052
16,720
16,277
17,204 10,373
8,140
6,478 16,784
Operating income (loss)
3,653
13,201
7,623
9,273 (8,312)
2,346 (14,669) 11,006
Net income (loss)
57
7,824
2,868
4,853 (14,930)
(264) (10,571)
6,665
Earnings (loss) per share, basic
0.00
0.06
0.02
0.04
(0.12)
0.00 (0.08)
0.05
Earnings (loss) per share, diluted
0.00
0.06
0.02
0.04
(0.12)
0.00
(0.08)
0.05
Total assets
350,310 342,413 330,791 318,349 302,215 311,170 310,291 327,346
Other liabilities
4,661
4,076
5,269
4,076
2,343
2,850
2,282
2,238
During Q4 2014, sales decreased 18%, or $8.6 million, from Q3 2014 as metal prices decreased. The Company’s
realized prices for silver and gold declined by 15% and 6%, respectively, to $16.33 and $1,192.86 per ounce, respectively.
During the fourth quarter of 2014, the Company’s operating income was negatively affected by the mark-to-market effects
on share-based compensation expense of $1.4 million compared with a recovery of $0.8 million in Q3 2014. In addition,
as a result of declining metal prices, the Company restructured its operations and took a restructuring and severance
costs of $1.1 million during the fourth quarter of 2014 that negatively affected its operating income in the fourth quarter
of 2014.
During Q3 2014, sales increased 5%, or $2.1 million, from Q2 2014 as a result of Caylloma’s and San Jose’s provisional
sales increasing $1.9 million and $3.8 million, respectively, and being offset by negative price and mark-to-market
adjustments that increased $1.0 million and $2.1 million, respectively. During Q3 2014, operating income increased
73% to $13.2 million from Q2 2014 as selling, general and administrative expenses decreased $5.1 million, or 60%, to
$3.5 million. The decrease in selling, general and administrative expenses is mainly attributed to the positive effect of
mark-to-market effects on share-based compensation of $4.1 million over Q2 2014.
During Q2 2014, sales decreased 3%, or $1.2 million, from Q1 2014 as a result of San Jose’s provisional sales declining
$1.9 million, offset by positive adjustments of $0.7 million. San Jose’s provisional sales of silver and gold declined 2%
and 5%, respectively, from Q1 2014, along with lower realized silver metal and gold prices of 3% and 1%, respectively.
During Q1 2014, sales increased 25% from Q4 2013 as a result of increases in silver and gold sold, of 17% and 29%,
respectively, offset by a lower realized silver metal price of 2%. Mine operating earnings increased 66% from Q4 2013
because of increased sales and the Company’s continuing efforts to contain costs. In Q4 2013, a net loss reflected a
non-cash impairment charge of $10.2 million, net of tax (Q3 2013: $nil), and a non-cash income tax provision of $7.7
million resulting from Mexico’s special mining royalty.
During Q3 2013, mine operating earnings increased from Q2 2013 in part as a result of the Company’s implementation
of efforts to contain costs. As part of the Company’s cost-reduction program, the Company recorded a $0.5 million
restructuring and severance costs in Q3 2013 covering 65 positions. In Q2 2013, the Company recorded a non-cash
impairment charge, related to the Caylloma Mine, of $15.0 million before tax and a non-cash write-off of mineral
properties, plant, and equipment of $0.4 million related to the San Luisito concessions that negatively affected operating
income.
Fourth Quarter 2014 Financial Results
Fourth quarter 2014 net income amounted to $0.1 million (Q4 2013: loss $14.9 million), resulting in basic earnings per
share of $nil (Q4 2013: loss $0.12). Net income in Q4 2014 was negatively affected by restructuring and severance
costs of $1.1 million and higher mark-to-market effects on share-based compensation to $1.4 million compared to Q4
2013. Silver sold increased 16% to 1,611,313 ounces while the realized silver price decreased 21% to $16.33 per
ounce from the same period in the prior year.
For the three months ended December 31, 2014, the Company’s adjusted net income was $0.2 million (2013: $3.0
million) related to the non-cash impairment of inventories of $0.1 million (refer to non-GAAP financial measures). The
decrease in adjusted net income was driven by lower silver price, a $1.1 million restructuring and severance costs and
a higher share-based compensation expense.
