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Fortuna Silver Mines Jumps on Financial Results

- By Alberto Abaterusso

Fortuna Silver Mines Inc. (FSM) (FVI.TO) jumped 0.84% to $3.61 per share on the New York Stock Exchange and to 4.82 Canadian dollars ($3.60) per share on the Toronto Stock Exchange after releasing financial results for fourth-quarter and full-year 2018 on Wednesday.

The Canadian miner posted GAAP earnings of one cent per share on revenue of $59.6 million, which declined 21% from the prior-year quarter but beat consensus by $6.5 million.

For the full year, Fortuna Silver Mines recorded the following year-over-year changes.

Despite higher production costs and a sluggish price environment for silver and gold in the second half of 2018, the company recorded 49% growth in free cash flow from continuing operations to $55 million.

The adjusted net income, however, fell 21.1% to $38.4 million and the adjusted earnings before interest, taxes, depreciation and amortization decreased 6.6% to $113.9 million.

The adjusted EBITDA margin declined 2.2 percentage points to 43.3% of total sales of $263.3 million in 2018 from 45.5% of total sales of $268.1 million in 2017.

During the year, Fortuna sold 911,648 ounces of silver, down 2.5% from 2017, at $15.71 per ounce at the Caylloma mine in Peru and sold 12,228,436 ounces of silver, up 5.7%, at $15.74 per ounce at the San Jose mine in Mexico.

In Peru, the miner also sold 28.35 million pounds of lead, down 4% from the prior year, at $1.02 per pound and sold 45.87 million pounds of zinc, up 3.5%, at $1.32.

The all-in sustaining costs were $10.6 per payable ounce of silver equivalent in 2018 versus all-in sustaining costs of $6.4 per ounce of payable silver net of byproduct credits for gold, lead and zinc in 2017.

Besides cash flow from operations, the company has total liquidity of $243.3 million, of which 67% is cash on hand and securities and the remaining is an undrawn line of credit, to fund general corporate purposes and building activities at the Lindero gold mine in Argentina, where the project is 60% complete.

On the NYSE, the stock tumbled 22% over the 52 weeks through March 13 and is below the 200-day simple moving average line, slightly below the 50-day line and on par with the 100-day lines. The 52-week range is $3.16 to $6.08. The market capitalization is $577.02 million.

On the Toronto exchange, shares fell 22.4% for the 52 weeks through March 13. The stock is trading well below the 200-day SMA line and slightly below the 100 and 50-day lines. The 52-week range is approximately CA$4.22 to CA$7.78. The market capitalization is CA$770.91 million.

Wall Street issued an overweight recommendation rating for Fortuna Silver Mines with an average target price of $6.93 per share.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.