Fortuna Silver Mines Inc.
TSX VENTURE : FVI
BVLAC : FVI

Fortuna Silver Mines Inc.

May 19, 2009 13:42 ET

Fortuna Reports Record Revenue of US$8.98 Million and a Production Cash Cost of US$0.10/oz of Silver in Q1 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 19, 2009) - Fortuna Silver Mines Inc. (TSX VENTURE:FVI)(BVLAC:FVI) is pleased to announce that it has filed its financial statements and MD&A for the three months ended March 31, 2009. The full documents are available on SEDAR and have also been posted on the Company's website at www.fortunasilver.com.

Change in Reporting Currency

Effective January 1, 2009, the Company changed its reporting currency to the US dollar. The change in reporting currency is to better reflect the Company's business activities and to improve investors' ability to compare the Company's financial results with other publicly traded businesses in the mining industry.

First Quarter 2009 highlights

- Historic record sales of $8.98 million compared to $6.81 million Q1 2008

- Operating cash flow before changes in non-cash working capital items of $4.23 million compared to $2.61 million Q1 2008

- Net loss of $1.06 million compared to net loss of $0.64 million in Q1 2008

- Cash position and working capital as at March 31, 2009 were $27.02 million and $32.59 million respectively

Jorge Ganoza, President, CEO and Director, commented, "The Fortuna team has delivered another quarter of continued achievement with record sales and record silver production. Silver now represents 49% of revenue at a cash cost per oz of $0.10 net of by-product credits. We remain on target to achieve our forecast production of 1.6 million pure silver ounces for 2009. Through continued increments in efficiency, throughput and head grades Fortuna now clearly ranks amongst the lowest cost silver producing companies."

Financial Results

During the first quarter of 2009, the Company generated record quarterly revenue of $8.98 million compared to $6.81 million over the same period in 2008. The volume of concentrate sales during the first quarter of 2009 was 77% more than the same period in 2008. The significant increase in sales is the result of the Company's investment plan over the last two years in mine development, processing plant expansion and infrastructure.

Mine operating income in the first quarter of 2009 was $3.41 million compared to $2.30 million over the same period in 2008. This improvement, in spite of significantly lower metal prices, is a consequence of an increase in throughput, head grades, recoveries, and lower operating costs.

Operating income for the first quarter of 2009 was $0.08 million after deducting $0.35 million of stock-based compensation charges and $1.08 million of a write-off of deferred exploration costs. The operating income for our Peruvian subsidiary, operator of the Caylloma mine, was $2.42 million.

Operating Results

In the first quarter of 2009, the Caylloma mine achieved significant increments in metal output with respect to both, the previous quarter and the corresponding quarter in 2008. Silver production was 384,339 ounces; 32% increase over Q4 2008 and 174% increase over Q1 2008. Lead production was 2,645 tonnes; 5% increase over Q4 2008 and 123% increase over Q1 2008. Zinc production was 3,152 tonnes; 6% increase over Q4 of 2008 and 52% increase over Q1 2008.

The Company is for the first time reporting cash cost per ounce of payable silver at Caylloma since the impact of silver in the revenue stream is 49%. The cash cost for Q1 was $0.10, net of by-products lead and zinc.

Cash cost per tonne of treated ore for Q1 2009 was $44.37 compared to $49.97 for the corresponding quarter of 2008. The corresponding unit net smelter return (NSR) was $91.00 per tonne.

The average throughput rate for Q1 2009 was 1,050 tpd. The expansion project for the processing plant was concluded 15 days ahead of its scheduled start-up and since mid April, the plant is processing ore at a rate of 1,200 tpd.

The newly added copper circuit went into production in the last week of April and it is currently undergoing a normal tuning and balancing period.

San Jose Project

The Company has concluded metallurgical tests for the project with Metcon Research of Tucson, Arizona and is advancing with feasibility level engineering studies for the development of the San Jose deposit. Engineering contracts were awarded in February for mine design, process plant design, tailings dam, water and power.

On April 16th, the Mexican federal regulatory agency for electricity accepted the feasibility study for the energy project and granted permission to connect to the national power grid for up to 5 MW of power. The Company also submitted the "Manifiesto de Impacto Ambiental" to the Mexican environmental authorities on April 3rd.

Fortuna Silver Mines Inc.

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

ON BEHALF OF THE BOARD

Jorge Ganoza, President, CEO and Director

Fortuna Silver Mines Inc.

Neither the TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Fortuna Silver Mines Inc. - Lima office
    Carlos Baca
    Investor Relations
    51.1.616.6060
    or
    Fortuna Silver Mines Inc. - Vancouver office
    Erin Ostrom
    Investor Relations
    604.484.4085
    604.484.4029 (FAX)
    info@fortunasilver.com
    www.fortunasilver.com