Earnings Call: Q1 2021

May 11, 2021

Good day, ladies and gentlemen, and welcome to the Fortuna Silver Mines First Quarter twenty twenty one Financial and Operational Results. It is now my pleasure to turn the floor over to your host, Carlos Baca, Investor Relations Manager. Sir, the floor is yours. Thank you, Kate. Good morning, ladies and gentlemen. I would like to welcome you to Fortuna Silver Mines and to our financial and operations results call for the first quarter of twenty twenty one. Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganosa, President and Chief Executive Officer and Luisario Ganossa, Chief Financial Officer. Today's webcast presentation will be available after this call on the latest presentation box on our homepage at fortunasilver.com. As reminder, statements made during this call are subject to the reader advisories included in yesterday's news release and in the earnings call presentation. Financial figures contained in the presentation and discussed in today's call are presented in U. S. Dollars unless otherwise stated. Before I turn over the call to Jorge, I would like to indicate that this earnings call contains forward looking information that is based on the company's current expectations, estimates and beliefs. This forward looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from our conclusion, forecast or projection in the forward looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information is contained in the company's annual information form and MD and A, which are publicly available on SEDAR. The company assumes no obligation to update such forward looking information in the future except as required by law. I would now like to turn the call over to Jorge Alberto Manosa, Co Founder of Fortuna. Thank you, Carlos. If we can move to Slide six on the presentation highlights. In this first quarter of the year, we're exceeding the soundness of our strategy and strength of our business. We have been investing in growth since late twenty sixteen, taking a counter cyclical approach during a period where several of our peers restrained capital investment because of a depressed market for mining equities and low interest in precious metals. And now with renewed interest in the sector over the last twenty four months, we're in a strong position to harvest as our results show. We have reported record adjusted net income of $27,500,000 or $0.14 per share, ahead of analyst consensus of $0.10 per share. Adjusted EBITDA of $61,000,000 with a peer leading EBITDA margin of 52%. We maintain a strong balance sheet with $145,000,000 in liquidity and a low debt to EBITDA ratio of 0.1. Lindero, our third mine, reported its first full quarter of production delivering 22,300 gold ounces. We have been cash flowing positive at Lindero since Q4 of twenty twenty and Q1 has also been a quarter of strong free cash flow generation even as we ramp up. Except for the conveyor stacking system and SART plant, all our unit operations are performing within design parameters. The equipment is fit for purpose. We need our operation team to get their performance and efficiency up during operation and setup of the conveyor system. And I believe we're going to be achieving design parameters at the conveyor operations this quarter, second quarter. This has been a challenge again due to limitations imposed by COVID to get foreign experienced technical support in country. Our team is delivering a great job on-site in spite of these challenges. On April 26, we announced the definitive agreement to acquire Roxgold. This combination will create a low cost intermediate global precious metals producer with a significant silver credit. John and his team at Roxgold have successfully built our robust business platform in West Africa. And we believe that together with a strong balance sheet and diversified sizable production, we are better positioned to lower the risks of the business and unlock the value of the assets for the benefit of shareholders. Something I am particularly excited about is the opportunity to bring together two teams of high performance in their respective jurisdictions. Any investors seeking to invest in the intermediate precious metals producer space will have to give consideration to the pro form a company with gold equivalent production of 450,000 ounces of gold to 5,000,000 ounces of gold and EBITDA margins in the 40% to 50% range with a robust pipeline of development exploration projects. Next slide please. In Slide seven, we share our twelve month rolling average performance for safety KPIs. We continue to show a trend of continued improvement for total recordable lost time and severity. Three years ago, we embarked on a process of cultural change with respect to health and safety. We still have plenty of areas for improvement in our effort to achieve an accident free work environment, but I'm pleased and continue to be pleased to see all key metrics trending in the right direction. Slide eight please. We pre released production for the quarter on April 12. Our gold equivalent production in the quarter was 60,000 ounces. All metals were basically in line with Q1 of last year with a notable exception of gold with an increase of 240% as a result of Lindero contribution. Next slide please. In Slide 10, as I stressed at the beginning of the call, financial performance has been record breaking for the company. Slide nine. Slide nine, our silver contribution to revenue in the period was 39% and precious metals accounted for 86% of revenue. We're able to capture not only the benefit of higher silver and gold prices, but this is amplified by our significant increase in annual gold production derived from Lindero. Next slide please. The financial performance has been record breaking for the company in Q1 as I stressed at the beginning of the call. Sales jumped 148% to $117,000,000 adjusted EBITDA jumped 280% to $60,800,000 and adjusted net income was a record $27,500,000 or Moving on to Slide 11. With respect to our all in sustaining costs at San Jose at $13.4 all in sustaining was well within our guidance, our range guidance of $12.2 to $40.5 Getting more granular on the all in sustaining cost analysis for this mine compared to Q1 of last year, on a per ton basis, costs are basically aligned at $70 per ton. CapEx is largely aligned as well. The driver for the 26% increase with respect to last year resides in the silver to gold ratios of 68 used now and 98 used back in Q1 of last year. Caylloma Caylloma Mine came in align with all in sustaining guidance that is in the range of $19 to $23 And for Lindero, we expect all in sustaining cost to trend lower throughout the year as we complete the ramp up phase and achieve a more stable operation towards midyear. For Q1, in there all in sustaining cost came in at $10.55 dollars below midyear guidance provided of $11.30 dollars $13.35 dollars The lower cost compared to guidance has to do with the timing of sustaining capital investments. Slide 12, please. Our total capital budget guidance for 2021 is $71,000,000 In Q1, we have executed $13,000,000 We expect capital investments to pick up throughout the year. Next slide please. Slide 13. Just a brief update on the ramp up activities at the Indero. As we note here in this slide, all systems are operating within a range of design parameters with the exception of the stacking system and SARP plant. The HPGR agglomeration and stacking system, which works in sync as of the end of the quarter was operating at around 41 of design capacity. Today, May, more closer to 50%, 60%. So we're trending in the right direction. Remember that ore stacking with trucks continues to supplement conveyor stacking deficit. And the SARC plant was placed on standby to focus all of our resources on critical path for gold production. And in early May, the SARC plant has been restarted. Something important to highlight with respect to the Invero is that we continue to see our reserve model reconciliating well according to our expectations with less than 55% deviations in terms of ounces, tonnages and grade when we consolidate model to production. And same with leaching kinetics, gold leaching kinetics continue to perform according to our expectations and design parameters. Next slide please. Our exploration budget for 2021 is $20,000,000 comprising approximately 50,000 meters of drilling across our mines and projects. The largest allocation of capital is towards San Jose Mine where we reported initial drilling success on March 29. We currently have nine drill rigs turning including drilling at the Santa Fe silver gold prospect in the state of Sonora, Mexico. With that, I can turn it to Luis, so he can run you through the highlights of our financials. Sure. Thank you, Jorge. On Slide 16, Jorge has mentioned, we had record sales, earnings per share and EBITDA. Overall, very strong financial performance across all our financial metrics. The record in sales is not only driven by Lindero's first full quarter contribution, but San Jose and Caylloma also had record sales on the back of strong operating performance and favorable metal prices. Net cash provided by operating activities of $21,100,000 increased 470% as we have restated the comparative period upon adoption of IAS 16 deals with proceeds before intended use. This is in relation to the commencement of sales at Lindero. The restatement is restricted to the cash flow statement and details are provided on Note three of our financial statements. Without this effect, our net cash provided by operating activities would have increased 60%. As a reference and although not shown here, cash provided by operating activities before changes in working capital increased 270%, which is in line with the rate of increase shown for EBITDA on the slide. Free cash flow from ongoing operations of $17,400,000 was impacted by timing of trade receivables in the order of $14,000,000 On the next slide, Slide 17, Sales increased by $70,300,000 over Q1 twenty twenty or 128% as shown in the prior slide. Even excluding Lindero's contribution to sales in the quarter of 36,900,000.0 sales increased 70% driven by higher prices and higher metals sold at both San Jose and Caylloma. The largest single impact on our sales in the quarter excluding Lindero was the price of silver with an impact of $18,000,000 as shown in the slide. The next slide, Slide 18. This slide highlights the strong financial and cost performance across all our operations. For San Jose and Caylloma, we recorded material increases in EBITDA with both mines operating within our cash cost guidance. As Jorge mentioned, the higher all in sustaining cost for San Jose of 26% compared to the prior year is mainly related to changes in the gold silver ratio and the impact this has on silver equivalent production. On the underlying cash cost per ton at San Jose, we do expect the trend towards mid-70s level, still within our guided range for the year. At Lindero, we recorded cash cost per gold ounce of $639 which is around 5% above our expected cash cost for the quarter based on our annual guidance. As the mine continues to ramp up, we see our main KPIs tracking our budgeted figures. We have placed 76% higher ore on the leach pad and processed less ore through the full crushing circuit compared to our plan. As Jorge has explained, these changes are allowing us to accommodate the impact of COVID-nineteen restrictions on the ramp up as we maintain our gold production target for the year. In terms of cost effects, these changes have mostly netted each other out in the quarter. And our all in sustaining cost is below our guided range for the first half of the year, Also mentioned before by Jorge, mainly due to a slower pace of execution of investment projects, we expect the expansion of the leach pad and the ADR systems to pick up speed in the second quarter. Next slide, Slide 19. We see our total liquidity already increasing and our net debt coming down compared to Q4 of twenty twenty as Lindero started contributing to free cash flow generation since the beginning of the ramp up. We expect this trend to continue and intensify in the coming quarters. I'd like to provide a comment with respect to cash flow repatriation at Lindero. In 2021, our intercompany funding structure in Argentina allows us to repatriate around $130,000,000 to $140,000,000 without any adverse effects from foreign exchange controls and we have started repatriating funds since early in the year. With that, I'll pass it back to you, Carlos. Thank you. Thank you, Luis. We would now like to turn the call over to any questions that you may have. Thank you. Ladies and gentlemen, the floor is now open for questions. Our first question today is coming from Cosmos Chiu at CIBC. Your line is live. Hi, thanks Jorge, Luis and Carlos. I guess my questions are around Lindero here. As you talked about in your MD and A, you stacked about 56,000 ounces of gold and produced about 22,300 ounces. That works out to a ratio of about 39%. I know the tertiary crushing circuit isn't at full capacity yet and whatnot. But, based on what you stacked in Q1, can you remind us what kind of recovery level are you expecting? And how long is the lead curve at this point in time? Yes. Have a Cosmos we are stacking different types of materials. For the material that is stacked via the stacking system. That's material that runs through the HPGR. So a conveyor stacking, we're placing about right now about between nine millimeter and 12 millimeter crush material that comes with gold extractions in the range of 70%, 74%. Then we have a coarser crush material, which is stacked via trucks. Expected recoveries for that 35 millimeter crush is in the range of 50%, And we're talking about those expected extraction rates in a ninety day period, right? Okay. So I don't have the balance on my head right now, but it is the balance of those expected recoveries that yields the extraction the plant extraction and recovery considering inventory in the path. For sure. Thanks. That's really helpful. And then on that, that kind of leads into my second question here, Jorge. And I'm just trying to reconcile all these different numbers. So if I take your 2,130,000 ounces or 2,130,000 tons stacked in q one. That works out to about 23, 24,000 tons per day. You know, as you talked about, the secondary, you know, primary, secondary capacity is right now, I might be quoting the numbers not perfectly here, but I think it's about 16,000 tons per day. And then, you know, your tertiary crusher, which is your HPGR agglomerator stacking system is about 7,000 tons per day. So could you like help me reconcile those numbers? Are you putting any kind of run of mine material onto the leach pad right now? And as you ramp up the tertiary crushing circuit throughout 2021, how much of the material stacked in the second half are you expecting to come from the different parts? Either it'd be the HPGR versus secondary versus if there's run of mine? Drop stacking is a short term solution to meeting extractable ounces on the leach pad, right? So what we plan for is how many extractable ounces do we need to place on the leach pad to meet our annual guidance. That's how this is working, right? So we balance those figures and that's what you're trying to better understand. So our primary and secondary crushing system is currently operating exceeding design capacities. The design capacity of primary, secondary crushing is 18,750 tons per day. As you noted, we're achieving 20,000 tons a day. So part of that material, about 9,000 tons per day are running through the HPGR agglomeration and conveyor stacking. And the balance is placed from the heap sorry, from the secondary stockpile directly trucked to the leach pad. And on top of that, we can place materials from stockpiles as well, right? So want to very granular on this and we can have a session on this is we can have different times even three different sources of materials being placed on the leach pad to meet extractable ounces, right? So we'll be happy to have a session with you and give you breakdown, but we are placing more ounces on the leach pad than the original design calls for because, you know, the coarser material comes at a lower extraction on a ninety day period. Right? That's why we're placing more ounces with the trucks. And those ounces come from the secondary crushing and in some instances from the core source stockpile. So and that is what we use to meet the 140,000 to 160,000 ounce guidance for 2021, correct? Yes, that's perfect. And that's for sure the current situation right now. And but would you expect the majority of your stocking to be from the tertiary crushing circuit towards the end of twenty twenty one, if that's possible? We expect to be placing 100% of the material through the stacking during the second quarter. We're not there yet, but we're seeing a good increase. We already achieved days of 17,000 tons stacked via conveyor stacking. The issue is for us right now is being able to achieve efficiency in the actual operation and movement of the conveyor stacking. I want to stress the fact that ramping up commissioning and ramping up in the COVID pandemic, during the COVID pandemic has been a tremendous challenge for the team because we have been working without the benefit of foreign vendor technicians and trained personnel with the use of certain equipment like the conveyor stacking. We are in a way learning as we go because using a lot of Zoom hours and this remote virtual reality gargles and tools, technological tools like that, we do not have the benefit of having the seasoned operators that you could bring from other sites that we don't find in Argentina, right? They will have to come from abroad to help our operators. And so we're going at it alone. And I believe that's why they delay, right? I mean, we have no mechanical issues at this time of any significance nor automation. We did battle at the beginning some couple of months ago with some issues regarding setting the system on the automation and some mechanical issues, nothing big, but issues that need to be overcome. Those have been addressed. It's now really getting the team experienced enough. Moving the system of conveyor stacking has to be like a pit stop in a car race, right? And we're not where we need to be yet, but we're getting there. Of course. Thanks. And then maybe one last question on the financial statements here. On the MD and A, you mentioned that the $120,000,000 credit facility is fully drawn right now, expires on 01/26/2022. However, you're trying to get it renewed for sure in Q2 twenty twenty one. Maybe more a question for Luis, but can you remind us what interest rate are you paying right now on that credit facility? Can you give us some kind of outlook in terms of how the credit market looks at this point in time? And would you be expecting more favorable terms on this renewal? And then on top of that, you know, with the pending merger with Roxgold, you know, has that changed your potential repayment of this credit facility, you know, vis a vis how you're potentially financing, say, the construction of Seguela? Yes. So I mean, first of all, we're the cost of the facility fully drawn is 3%, 3.5% on top of the reference rate. We do expect to be able to maintain similar terms. And in the context of transaction, the pro form a company, I mean, view is and that's really the reason to push back somewhat the renewal so as to gain more visibility on what makes the most sense. So it is in that context that we expect to conclude a renewal in Q2 with an expanded facility that reflects the additional credit capacity of the pro form a entity. And based on the terms that we see and that we believe what we believe we're able to achieve, I mean, we and considering the debt capacity of the pro form a entity, I mean, I think we would be right to reconsider any plans to repay that early, right? It does make sense to think of that debt in the medium term as more of a structural nature in terms of how we manage the balance sheet, right? That's our view today. Great. Thanks. Thanks again Jorge and Luis and those are all the questions I have. Thank you. Our next question today is coming from Trevor Turnbull at Scotiabank. Your line is live. Thank you. Jorge, I just wanted to get a little more color on Lindero and the tertiary crushing and circuit related to that. I think when you put out your original Q1 production figures back in April, you had mentioned that you'd had some very strong weeks in terms of the availability of that tertiary crushing system. And I think you referenced it on this call as I want to say 50% to 60% of capacity. And I just wondered what it kind of needs to do to get back to those levels that you were experiencing at the April where I think you were up closer to 87% on that system? In the third, you see the HVER agglomeration and stacking work in sync. So the bottleneck in the system has been mainly faced at the stacking system. As I explained before, we had issues relating automation and getting all the train of conveyors speaking to each other and that was overcome. And today, we are achieving steady days in the entire system of around 9,000 to 11,000 tons per day stacked. And we had, as I mentioned, peak days of 17,000 tons, 14,000 tons stacked. All the mechanical and automation issues that we battled with at the beginning of the process in early in the start of the year have been overcome. And they were never significant in the sense that I believe that a lot of these issues could have been resolved in a matter of hours or even days having the right vendor representatives from superior on-site that we don't have that luxury because of the COVID pandemic, right? So sometimes those problems instead of being resolved in hours or days end up taking days or weeks, right? But I think all of those are behind and we just need the team get more seasoned and experienced and be able to sustain the throughput, right, be get more effective with the movement of the conveyors, with the setup, the planning for the setup, right. I think the team has been more immersed in solving the automation and mechanical issues I explained before for this past month rather than getting more seasoned and planning ahead for the movement of the equipment and sequencing of the movements of the conveyor stacking system. So again, don't think we're talking about rocket science here. It's just getting the team more and more into now that all of these mechanical automation issues are behind, getting the team to get the performance in the equipment. The equipment is fit for purpose. It's just operational expertise right now, right? And the HPGR is performing according to whatever we ask from it and the agglomeration also, I mean, we had some minor mechanical and setup issues, but really the equipment is fit for purpose. And the biggest the bottleneck is the stacking, right? Okay. Yes. And then maybe I just wanted to change gears and follow-up on something that Luis mentioned about getting money repatriated from Lindero. Perhaps I misunderstood a bit. I did think that when you had export sales that you tended to have to go through the conversion to the peso And then if you wanted to distribute that money out of the country, obviously, you would want to reconvert it back into another currency. But it sounds like you don't have to go through that process. And I was just curious why it is or how you've structured it such that those kind of mandatory conversions of exchange rates don't apply? Yes, Trevor. So it has to do generally speaking, it is accurate. Your description is accurate. But it is possible within the existing structures in or restrictions in effect. Regulatory framework in place. To set up intercompany debt by way of pre export finance, which for all practical purposes allows to use the proceeds of sales to pay directly to the parent company. So that means that those proceeds are not coming back into pesos, into Argentina. There is a limited pool for this, which is in the range that we've been mentioning, right? Once that pool is exhausted, we will shift to the regime you're describing, right? Yes. Where the current restrictions are being analyzed and rolled by the government almost on a monthly basis, right? Monthly by monthly basis. And maybe it is a moving target, which is what it sounds like. But if you were operating under those constraints, can you give us a sense of what kind of percent you would lose through all that conversion process? Is this something that kind of erodes the amounts by 1% or 5% or 10%? Can you give us a sense of if going through that exercise what you might expect the cost to be? Yes. So I mean, any all the exporters in Argentina finding themselves in that situation have two options. Of course, one is to sit on the pesos and seek to protect those. There is a certain amount of liquidity in the forward in the foreign exchange forward markets locally that typically I would expect goes out six to eight months, right? So that sort of gives you a framework for the type of protection you can achieve. And the alternative is to tap into the parallel FX market, right? The gap will vary widely. Think these days, it's much higher than what you would typically expect to see, right? We it has been trending downwards And we would expect that in the next few months that gap does close significantly with respect to what it is today, I'm sorry, right? I mean that's sort of a broad answer. It is 2020 we will have to seek and look forward to 2022 and try to see what's going to happen with the FX at that moment, right? And that's a difficult one. Okay. No, I appreciate the color. Thank you both. Thank you. Our next question today is coming from Don DiMarco at National Bank Financial. Your line is live. Well, thank you, operator, and hi, Jorge and team. Just a couple of questions on San Jose, shifting to San Jose now. Can you elaborate on your expiration program at San Jose? I see that the exploration results that were announced in late March look good. You had a few intercepts or over a kilogram per ton. That's encouraging. But yes, I see reserves are the updated reserves are around 23,000,000 ounces. 2021 guidance is about 6,000,000 ounces silver per year. So just curious how many rigs do you have running? What's changed in your program versus last year? And where are you most optimistic? Yes. I'll start with the last one. What has changed with respect to last year? First is drilling meters, right? Today, our drilling meters just for San Jose is in excess of 30,000 meters. Last year, our drilling at San Jose was around 7,000 meters, right? So we're drilling significantly more. We currently have five drill rigs turning. So three are currently working underground and two on surface. So we have a different type targets. One is we have multiple targets underground in and around the immediate vicinity of the resource shell, the resource block model. So the results that we reported in March come from one of those initiatives for drilling near mine underground targets. So my expectation with respect to those targets and we have several of those in the range of five or six. Around the resource shell is that we will have opportunities several opportunities, I would expect, like the ones we outlined in March, which is not incremental, right, are incremental to reserve life and resource extensions, probably on their own, very material in terms of tonnage. But on the aggregate, they all will contribute to replace what we deplete, right? And again, we have several of those ongoing. And as you've noted, what I wanted also to come across is that San Jose is not just a simple vein. It's an intricate system of anastomosing structures where we have identified three or four main structures. And within those structures, we have a stock work development. So within these areas, we have a lot of room to create opportunities for potential expansions, right? Because the structural model, once you get to the detail of it, it's intricate, right? And this one right was right in front of us, what we reported in March, Trimea North, close to surface. It's close to surface, it's been in front of us for years and it's only now that we decided to pursue the area exploration in the area, look at the three d models in more detail and sure enough, we're coming up with some spectacular grade and hopefully some tonnage that's meaningful in the context of dealing with annual depletion, right? So we have multiple of those. Then second, we have a parallel vein system 400 meters due east from where we're mining. It's called the Victoria System. We have recorded resources in the Victoria Vein and we have discovered a new parallel structure. While drilling Victoria vein, we came across this second structure that is not named yet on the hanging wall of Victoria. And we're currently drilling Victoria and the parallel structure extensions of Victoria and trying to see and explore further the parallel structure in the Honeywell Victoria. Apart from that, we have multiple veins on surface where we have currently one drill rig pursuing those opportunities that can be located four, five kilometers away from our current infrastructure. So well within trucking distance, we currently have one drill rig turning in an area called Los Dias, where we have vein structures on surface, the densification. We have discovered something that we have not seen before. It's altered dome at depth. We're in a volcanic pile. We had never seen more sub volcanic type features like a dome. And that was geologically quite intriguing to the team from the perspective of where to focus more exploration ideas. So we have multiple of those. We have also optioned the Evo Blanco property, which is within the general area of San Jose, within trucking distance of San Jose. Tigo Blanco, it's an option from Minauro. Previous explorers drilled at Tigo Blanco in previous years with some exceptional results of high grade mineralization for silver over broad width. And we have optioned the property and we are currently working on developing drill targets there. So there is no shortage of ideas at San Jose. We just need to get the drilling meterage point, right? And as I've been stating, 2021 is a big commitment year on the exploration front. We have roughly 4.5% of sales allocated to exploration. And we need to let the programs run and see some results hopefully come along. Okay. Thanks for that. So in the past, I think you might release like a San Jose drilling update once a year, and that might have been appropriate for the smaller program you had last year. Do you have plans to do more regular exploration updates coming out of San Jose? Yes, yes, absolutely. And not only for San Jose, although we all understand that the San Jose program is important for everybody. But for example, we're drilling a new and exciting project that is called Santa Fe in the state of Sonora. It's some kilometers south view of the Vizla project. Vizla, it's a nice discovery there. So we're drilling there. We have one rig and we're quite active on different ideas. We have also another project called Baborigami, where we're going to be developing drill targets this year. That's this is Santa Fe is more a silver project with some gold and Bahorigami is more a gold, silver project. So we're active on several fronts. Okay. Thanks for that. That's all for me. Thank you. Our next question today is coming from Justin Stevens at PI Financial. Your line is live. Hey guys. Most of my questions have already been asked and answered, but just a quick follow on from what Don was asking there. I noticed at San Jose, you guys spent only about $1,700,000 of your $10,000,000 brownfield exploration budget at San Jose in Q1. Should we expect that to be ramping up quite a bit here? And is there any chance that you'll spend through that €10,000,000 you think before the end of the year and then perhaps evaluate further expansion of the exploration budget? Yes. Yes. That budget will be ramping up, getting the a lot of the drilling is being done through underground. So we will see some spend advance as we advance with the underground development to prepare the drill chambers and whatnot and then the drilling meterage coming along. So that budget will ramp up. We have the drills on-site and turning as I stated. So I see no issues there. Yes, it's usually start of the year tends to be a bit lagging with speed for some of these programs, right? Sure. And no particular impacts from COVID that you're seeing either on the exploration side of things? Particularly when you're in a mine, yes, COVID does impact. Now all of our activities are slowed down. I think we're not seeing the impact so much on the production side because of the initiatives that the teams bring in place. But at Caylloma, at Lindero and at San Jose, COVID remains dealing with COVID and keeping the operations within the protocols and the stringent protocols that we have in place does take a toll sometimes on the speed at which we can do things, right? Yes. So yes, I mean, remember that these three countries remain under severe restrictions due to COVID, right? For sure. And just on terms of exploration at Lindero, I know you guys have a small program planned for Adesato. Is that expected to be in the first half or the second half of the year here? We're drilling there as we speak. Okay. And so we can probably expect some results at some point in the next couple of releases here then probably, right? Absolutely. Absolutely. We're drilling at Arizado. Perfect. That's it for me. Thanks so much. Thank you. Thank you. Our next question today is coming from Guy Buckley. Your line is live. Thank you. Hey, I want to ask you about that mine in Peru, Catalona, I guess how you enunciate it, but you stated that continues to contribute significant gold production in the first quarter twenty twenty one. Gold production was nineteen twenty two ounces, an increase of 308% with respect to the comparable period of 2020. The increase in gold production is related to higher head grades encountered in the Animas Northeast vein. I've been I graduated in that stuff. You know? So I know what you're talking about. How or is that vein expanding? How many years do you think you have left in that high grade ore in that Animas Northeast vein? Thank you for the question, Guy. I have to say that we have neglected for years or understanding of gold occurrences at the Anima's Bay, right? Right. So it is only now as we have entered into this area and we start encountering this higher grade sustained higher gold grades that we have deployed resources to further understand how meaningful this is. Today, we cannot say that we believe the resource as we understand it has a meaningful gold component. So we're trying to understand geologically what is controlling the deposition of gold in these areas. Because I think especially gold rich zones are limited in size. But what we're trying to gauge here is through more science is if there are areas where we can extrapolate what we learned here and use it as an exploration tool. We're getting a nice significant bump in gold production and therefore in revenue and margins derived from these small ounces because this is just incremental to everything, This mine has traditionally produced what 0.3, 0.6 grams gold well under a gram and all of a sudden we're finding areas with multi gram gold in addition to silver, lead and zinc. But today these areas are limited in size. So they are not meaningful to the overall research. And what we're trying to learn here is, if there are things that we can use as exploration tools or even to reassess other portions of the mined areas for higher grades. So we're right now in the learning curve here, Gary, trying to get our knowledge up on what is controlling the occurrence of this higher grade gold in this portion of the Animas Vein. Animas Vein stretches for over four kilometers. We have drill tested it for several 100 meters at depth. And this is one small area within that bigger package. So I think it speaks about potential as well, right? Mean, the system is complex and we need to better understand the world occurrence here. Okay. Now don't you folks in your company I have a lot of friends that I have buy stock in your company and that was before you made the announcement that you had bought out Roxgold in West Africa, and that blindsided us. I gotta be honest with you. And my some of my friends, they dumped their stock, but I didn't. I held on, but that stock went from $9.71 a share down to under $6. It's now coming back up because I think long term, we'll you'll do well. I think that, hopefully, that Roxgold will start contributing something to the earning capacity of of of the company. And so I I just want you to know that there are many people that are with you, feel like you're doing the right thing, but there's a there were none of them that felt you did the wrong thing when you acquired that rock the gold in West Africa. Thank you for your comments. And we believe that there is tremendous value to be unlocked for Roxgold shareholders, for Fortuna shareholders as we together deploy the assets because the driving principle behind this is putting together a basket of quality assets that can really perform throughout the precious metals price cycle, putting together a team of high achievers and performers on the operations and exploration side, each with the required expertise for success in their respective jurisdictions. So sometimes markets and market participants tend to be short term oriented. I believe this is for the medium, long term. This will be the foundation for a company that I said at the beginning of the call. If you want to invest in precious metals, you really have to give serious consideration to the pro form a company. Agree. One last Don't you believe, don't your company believe that silver will eventually be $35 an ounce end of this year and gold will be up to $19.50 an ounce? You know, I I personally believe they could be higher. Right. We're in a bear market on the I try to focus on the things we control, which is the assets we get involved with and the costs. I we need to operate the mines in a high price environment as well as we do on a low price environment. So we try to focus on the things we can control and let investors be more constructive or imaginative with respect to where prices are going to be. We're mining every day and with $80 silver hopefully one day or $14 silver as it was some fifteen months ago. Right? So what we wanna have in store. But let me tell you, silver hit $28 yesterday, and she is going on up. Yes. So we wanna thank I wanna thank you as a shareholder for what you're doing. We're counting on you. I'm gonna get other friends to invest and buy stock in your company because I think the name is appropriate. Thank you, sir. You for your support. Fortuna. I love it. Thank you. Thank you for your support. Thank you. If there are no further questions, I would like to thank everyone for listening to today's earnings call and we look forward to you joining us next quarter. Have a good day. Thank you, ladies and gentlemen. This does conclude today's events. You may disconnect at this time and have a wonderful day. Thank you for your participation.