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Fortuna Silver's (FSM) Seguela on Track for Gold Pour in Mid-2023

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·4 min read
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Fortuna Silver Mines Inc. FSM recently announced that construction at its Séguéla Gold Project located in Côte d’Ivoire is 61% completed and remains on track for the first gold pour in mid-2023. Séguéla will be the company’s fifth operating mine and is anticipated to produce around 120,000 ounces of gold annually.

In September 2021, Fortuna Silver decided to proceed with the building of a 3,750-ton-per-day mill at Séguéla. Since then, Séguéla has transitioned through the design and procurement phases and currently, with critical earthworks and civil works completed ahead of the upcoming wet season, it remains in line with budget and schedule according to management.

As of May 31, 2022, $143.8 million of the total approved budget of $173.5 million, including an $8.9 million contingency, has been committed. Of the total commitments to date, these include contracts for a guaranteed maximum price of $87 million, fixed-price contracts for $15.4 million and earthworks bill of quantity and schedule of rates for $13.7 million. The remaining commitments primarily include employee salaries, equipment and material purchase orders, land compensation and livelihood restoration programs. The company believes that risks associated with the volatile market conditions and price escalations have been mitigated as far as possible.

The Séguéla Gold Project was added to Fortuna Silver’s portfolio when it completed the acquisition of Roxgold Inc. in July last year. Prior to the combination with Roxgold, Fortuna Silver had three mines — the 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 combination of Fortuna Silver and Roxgold resulted in a low-cost intermediate gold and silver producer with mines in the 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 its nearest peers. A strong balance sheet will enable the company to pursue other organic and external growth opportunities.

Fortuna Silver’s annual silver production guidance is at 6.2-6.9 million ounces for 2022. Gold production is expected between 244,000 ounces and 280,000 ounces. Gold-equivalent production for the year is projected to be 369,000-420,000 ounces, including lead and zinc by-products.

Price Performance

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Shares of the company have fallen 45.1% in the past year compared with the industry’s decline of 40.8%.

Zacks Rank & Other Stocks to Consider

Fortuna Silver currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space include Allegheny Technologies Inc. ATI, Nutrien Ltd. NTR and Albemarle Corporation ALB, each flaunting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegheny has a projected earnings growth rate of 869.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised upward by 27.3% in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 128.9%. ATI has gained around 1% in a year.

Nutrien has a projected earnings growth rate of 163.2% for the current year. The Zacks Consensus Estimate for NTR’s current-year earnings has been revised 27.5% upward in the past 60 days.

Nutrien’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 5.8%. NTR has appreciated 41.7% in a year.

Albemarle has a projected earnings growth rate of 203.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 100.4% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 22.5%. ALB has surged 30.3% in a year.


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