Fortuna Silver Mines Inc.
TSX VENTURE : FVI

Fortuna Silver Mines Inc.

August 18, 2008 09:00 ET

Fortuna Reports Net Income of $2.39 Million, Revenue of $7.85 Million, and Operating Cash Flow of $4.14 Million for 2Q 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 18, 2008) - Fortuna Silver Mines Inc. (TSX VENTURE:FVI)(BVL:FVI) reports it has filed its financial statements for the six months ended June 30, 2008. The financial statements are available on SEDAR and have been posted on the Company's website at www.fortunasilver.com.

Second quarter 2008 highlights:

- Net income of $2.39 million, operating income of $0.71 million, and mine operating income of $2.89 million.

- Revenue of $7.85 million for the quarter and $14.68 million for the semester.

- Quarterly operating cash flow of $4.14 million.

- Working capital US$55.76 million and cash position of US$46.61 million.

- Metal production: 186,276 oz of silver, 2,629 MT of zinc, and 1,633 MT of lead. Up 56%, 64%, and 72% respectively over the same period of 2007.

- The Caylloma mine already operating at permitted capacity of 1,050 tonnes per day, with an increase in throughput of 26% over the same period of 2007.

- 33,000 meter drill program underway at San Jose.

Financial Results

During the second quarter of 2008 the Company generated $7.85 million of sales compared to $8.80 million in the same period of 2007. With respect to the first semester of 2008 the Company generated $14.68 million compared to $14.54 million in the same period of 2007. In US dollar terms however, which is the currency under which sales take place, there was an increase of 13.5% in sales for the semester compared to the previous year. Higher concentrate tonnage sales of 65% with respect to the same period of 2007 were weighted down in terms of sales value by a combination of lower realized zinc prices and an increment in smelter treatment charges.

Operating income for the first semester of 2008 was $1.03 million after deducting $0.63 million of stock-based compensation charges, where operating income solely for the Caylloma mine was $3.04 million.

Positive cash settlements from the Company's base metal hedging programme for the first semester of 2008 amounted to US$0.73 million.

Net cash provided from operating activities before changes in working capital for the first semester of 2008 amounted to $4.80 million. The Company's cash position and working capital as at June 30, 2008 stands at $46.61 million and $55.76 million respectively.

Operating Results

During the second quarter of 2008, the Company's Caylloma mine had its sixth consecutive quarter of production growth achieving 186,276 oz of silver production, which yields an increase of 33% and 56% with respect to the previous quarter and the same period in 2007 respectively. Silver production for the third quarter of 2008 is expected to be above 200,000 oz. Record throughput above 1,000 tpd was achieved early in July 2008 and the Company expects to maintain the full permitted average capacity for the plant of 1,050 tpd from August 2008 onwards.

The polymetallic Animas vein currently sources almost all mill feed. Development and preparation on four silver rich veins (San Cristobal, Bateas, Soledad, and Silvia) is currently underway with the objective of providing a high silver grade component of around 20% to the overall mine feed. Mining at San Cristobal is planned to commence sourcing the mill in September 2008 at a rate of 500 tonnes per month with grades of 12 oz/t with a later ramp up to 2,000 tonnes per month beginning April 2009. The mine plan for the other three structures will be laid out in the coming months as continued mine development allows the conversion from resources to reserves.

Cash production cost per tonne for the second quarter of 2008 was US$46.92 and the corresponding unit net smelter return (NSR) was US$97.79.

Mexico - San Jose Silver-Gold Project

A 33,000 meter drill program was initiated in the month of June. Currently there are two drill rigs working on the project with two additional rigs expected to arrive on the property by early September. The Company expects to provide a comprehensive project update in the coming weeks.

Background

Fortuna is a growth-oriented silver and base metal producer focused on mining opportunities in Latin America. The Company's primary assets are the Caylloma Silver-Base Metals Mine in southern Peru and the San Jose Silver-Gold Project in Mexico. The Company is aggressively pursuing additional acquisition opportunities. For more information, please visit our website at www.fortunasilver.com.

ON BEHALF OF THE BOARD

Jorge Alberto Ganoza Durant, President, CEO and Director

Fortuna Silver Mines Inc.

The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release.

Contact Information

  • Fortuna Silver Mines Inc.
    Carlos Baca
    Investor Relations: Lima office
    (511) 616-6060
    or
    Fortuna Silver Mines Inc.
    Erin Ostrom
    Investor Relations: Vancouver office
    (604) 484-4085
    (604) 484-4029 (FAX)
    Email: info@fortunasilver.com
    Website: www.fortunasilver.com