Fortuna Mining delivers record free cash flow

Fortuna Mining Q4 2023 Results – Discussion with Jorge Ganoza

Key Concepts: Free Cash Flow, Brownfields Projects, Siguela Mine (Ivory Coast), Diambasud Mine (Senegal), Indicated Resources, Preliminary Economic Assessment (PEA), Internal Rate of Return (IRR), Net Present Value (NPV), Liquidity, Life of Mine (LOM).

Financial Performance & Cash Allocation

Fortuna Mining reported record free cash flow for both Q4 2023 ($132 million) and the full year ($330 million). The company possesses a strong balance sheet with over $700 million in liquidity and a net cash position approaching $400 million. CEO Jorge Ganoza emphasized that the generated cash flow will primarily be allocated to “low-risk brownfields projects” over the next 24 months, driving future growth. This strategy is underpinned by the company’s robust financial position within its peer group of mid-size gold producers.

Siguela Mine Expansion – Ivory Coast

The Siguela mine, Fortuna’s flagship asset located in the Ivory Coast, is a highly profitable operation currently producing approximately 160,000 ounces of gold annually. The company aims to expand production to 200,000 ounces per year. Current reserves support a life of mine (LOM) exceeding a decade, and including resources, the projected LOM extends beyond ten years. This expansion represents a key component of the company’s growth strategy. Ivory Coast is described as a “premier mining jurisdiction” in West Africa, offering a stable and supportive environment for mining operations.

Diambasud Mine Development – Senegal

Fortuna is advancing the development of the Diambasud mine in Senegal, with construction slated to begin this year. The company plans to invest $100 million in 2024 for early works, permitting, and preparation for a final investment decision expected by mid-year. A preliminary economic assessment (PEA) completed in October 2023, based on a smaller resource estimate, indicated a 72% Internal Rate of Return (IRR) and a Net Present Value (NPV) of approximately $600 million, using a gold price of $2,750 per ounce.

Resource Update at Diambasud

Recent drilling and improved geological understanding have led to a significant 73% increase in indicated gold resources at Diambasud, now totaling 1.25 million profitable ounces. This updated resource estimate forms the basis for the ongoing feasibility study, expected to be completed in May, concurrent with the final investment decision. Early works, including excavations and camp construction, are already underway.

Geopolitical & Regulatory Environment

Ganoza highlighted the positive geopolitical and regulatory environments in both Ivory Coast and Senegal. He specifically noted strong government support in Senegal, anticipating environmental impact approval within six to seven months – a timeframe he described as “difficult to match anywhere else.” He also affirmed a good security situation in the coastal West African region and positive political support for Fortuna’s operations.

Notable Quote:

“Backed underpinned by these solid financial results from our existing operations and the growth profile that we have that we rate as as low risk technically financially I believe that’s what’s causing uh some exciting excitement in the market.” – Jorge Ganoza, CEO of Fortuna Mining.

Technical Terms:

• Brownfields Project: Development of a mine in an area adjacent to an existing mine, leveraging existing infrastructure and reducing risk.
• Indicated Resources: A category of mineral resources with sufficient geological confidence to support mine planning, but requiring further evaluation to confirm economic viability.
• Preliminary Economic Assessment (PEA): A high-level economic study used to assess the potential viability of a mining project.
• Internal Rate of Return (IRR): A discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
• Net Present Value (NPV): The difference between the present value of cash inflows and the present value of cash outflows over a period of time.
• Life of Mine (LOM): The estimated period over which a mine will be economically viable and produce minerals.

Logical Connections:

The discussion flows logically from Fortuna’s strong financial results to its growth strategy, focusing on the Siguela expansion and the Diambasud development. The resource update at Diambasud directly supports the feasibility study and potential final investment decision. The discussion of geopolitical factors provides context for the viability of these projects.

Conclusion:

Fortuna Mining is strategically positioned for growth, leveraging record free cash flow and a strong balance sheet to advance low-risk brownfields projects in favorable West African jurisdictions. The significant resource increase at Diambasud, coupled with positive economic indicators from the PEA, strengthens the project’s potential and supports the company’s expansion plans. The company’s focus on operational excellence and a supportive regulatory environment contribute to a positive outlook for future performance.