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FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
All-in cash cost per payable ounce of silver (non-GAAP financial measure)
The Company believes that “all-in sustaining costs” and “all-in costs” will better meet the needs of analysts, investors,
and other stakeholders of the Company in understanding the costs associated with producing silver, the economics of
silver mining, the Company’s operating performance, and the Company’s ability to generate free cash flow from current
operations and on an overall company basis.
The Company, in conjunction with an initiative undertaken within the gold mining industry, has adopted an all-in sustaining
cost-performance measure; however, this performance measure has no standardized meaning. Effective June 30, 2013,
the Company conformed its all-in sustaining definition to that set out in the guidance note released by the World Gold
Council (“WGC,” a non-regulatory market development organization for the gold industry whose members comprise global
senior gold mining companies) on June 27, 2013, and that came into effect January 1, 2014. The comparative periods
have been restated accordingly.
All-in sustaining costs and all-in costs are intended to provide additional information only and do not have standardized
definitions under the IFRS and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with the IFRS. These measures are not necessarily indicative of operating profit or cash flow
from operations as determined under the IFRS. Although the WGC has published a standardized definition, companies
may calculate these measures differently.
All-in sustaining costs include total production cash costs incurred at the Company’s mining operations, which form the
basis of the Company’s by-product cash costs. Additionally, the Company includes sustaining capital expenditures,
corporate selling, general and administrative expenses, and brownfields exploration expenditures. The Company believes
that this measure represents the total costs of producing silver from operations and provides the Company and
stakeholders of the Company with additional information on the Company’s operational performance and ability to
generate cash flows. As the measure seeks to reflect the full cost of silver production from operations, new project
capital is not included. Certain other cash expenditures, including tax payments, dividends, and financing costs, are also
not included. The Company reports this measure on a silver ounce sold basis.
The following tables provide a reconciliation of all-in sustaining costs per ounce to the consolidated financial statements
for the three months and the years ended December 31, 2014 and 2013:
Consolidated Mine All-in Cash Cost
Expressed in $‘000’s
YTD
YTD
Q4 2014
Q4 2014
Q4 2013
Q4 2013
Cash cost applicable per payable ounce
8,243
29,463
9,164
31,089
Government royalty and mining tax
298
1,388
218
749
Workers’ participation
629
5,321
463
1,306
Selling, general and administrative
expenses (operations)
1,495
6,877
1,336
6,084
Adjusted operating cash cost
10,665
43,049
11,181
39,228
Selling, general and administrative
expenses (corporate)
2,107
10,825
2,537
10,253
Sustaining capital expenditures
1
5,383
30,395
6,754
30,728
Brownfields exploration expenditures
1
1,232
6,757
1,162
10,198
All-in sustaining cash cost
19,387
91,026
21,634
90,407
Non-sustaining capital expenditures
1
846
1,704
1,196
8,910
All-in cash cost
20,233
92,730
22,830
99,317
Payable ounces of silver operations
1,549,464
6,287,593
1,396,295
4,420,241
All-in sustaining cash cost per payable
ounce of silver
12.51
14.48
15.49
20.45
All-in cash cost per payable ounce of silver
13.06
14.75
16.35
22.47
1
presented on a cash basis
