Good day, ladies and gentlemen, welcome to the Fortuna Silver Mines First Quarter 2021 Financial and Operational Results. At this time, all participants have been placed on a listen-only mode, and the floor will be opened for questions and comments after the presentation. 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 2021. Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganoza, President and Chief Executive Officer, and Luis Dario Ganoza, 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 a 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 a 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&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 Ganoza, 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 exhibiting the soundness of our strategy and strength of our business. We have been investing in growth since late 2016, 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. Now, with renewed interest in the sector over the last 24 months, we're in a strong position to harvest, as our results show. We have reported record adjusted net income of $27.5 million, or $0.14 per share, ahead of analyst consensus of $0.10 per share. Adjusted EBITDA of $61 million, with a peer-leading EBITDA margin of 52%. We maintain a strong balance sheet with $145 million 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 2020, 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 the 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 26th, 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 a 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 investor seeking to invest in the intermediate precious metals producer space will have to give consideration to the pro forma company.
With gold equivalent production of 450,000 ounces of gold- 500,000 ounces of gold, EBITDA margins in the 40%-50% range, with a robust pipeline of development and exploration projects. Next slide, please. In slide seven, we share our 12-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 12th. Our gold equivalent production in the quarter was 60,000 ounces.
All metals were basically in line with Q1 of last year, with the 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. Sorry. Slide nine. In slide nine, our silver contribution to revenue in the period was 39%, and precious metals accounted for 86% of revenue. We are 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 million.
Adjusted EBITDA jumped 280% to $60.8 million. Adjusted net income was a record $27.5 million, or $0.14 per share. Moving on to slide 11. With respect to our all-in sustaining costs at San Jose, at $13.40, all-in sustaining was well within our range guidance of $12.20-$14.50. 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/ 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 mine came in line with all-in sustaining guidance that is in the range of $19-$23.
For Lindero, we expect all-in sustaining costs to trend lower throughout the year as we complete the ramp-up phase and achieve a more stable operation towards mid-year. For Q1, Lindero all-in sustaining cost came in at $1,055, below mid-year guidance provided of $1,130-$1,335. The lower cost compared to guidance had to do with the timing of sustaining capital investments. Slide 12, please. Our total capital budget guidance for 2021 is $71 million. In Q1, we have executed $13 million. 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 Lindero. As we note here in the slide, all systems are operating within a range of design parameters, with the exception of the stacking system and SART 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. Early days of May, we're closer to 50%, 60%. We're trending in the right direction. Remember that ore stacking with trucks continues to supplement conveyor stacking deficits. The SART plant was placed on standby to focus all of our resources on critical path for gold production and in early May, the SART plant has been restarted. Something important to highlight with respect to Lindero is that we continue to see our reserve model reconciling well according to our expectations with less than 5% deviations in terms of ounces, tonnages, and grade when we reconcile model to production. 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 million, comprising approximately 50,000 m 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 29th. 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, as 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 $21.1 million, 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 $17.4 million was impacted by timing of trade receivables in the order of $14 million. On the next slide 17. Sales increased by $70.3 million over Q1 2020, or 128%, as shown in the prior slide. Even excluding Lindero's contribution to sales in the quarter of $36.9 million, sales increased 70%, driven by higher prices and higher metal 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 million, as shown in the slide. On the next 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 costs 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 a trend towards the 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-19 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. Our all-in sustaining cost is below our guided range for the first half of the year. 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. On the next slide 19.
We see our total liquidity already increasing and our net debt coming down compared to Q4 2020 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 million-$140 million without any adverse effects from foreign exchange controls. 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. If you have any questions or comments, please press star one on your phone at this time. We do ask if you are listening via speakerphone to please pick up your handset for optimum sound quality. Once again, please press star one on your phone if you have any questions or comments. 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&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? How long is a leach curve at this point in time?
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. Conveyor stacking, we're placing right now about between 9 mm and 12 mm crush material that comes with gold extractions in the range of 70%-74%. We have a coarser crush material, which is stacked via trucks. Expected recoveries for that 35 mm crush is in the range of 50%.
We're talking about those expected extraction rates in a 90-day period. Right?
Okay.
I don't have the balance on my head right now, but it is the balance of those expected recoveries that yields the planned extraction and recovery considering inventory in the pad.
For sure. Thanks. That's really helpful. On that kind of leads into my second question here, Jorge. I'm just trying to reconcile all these different numbers. If I take your 2.13 million tons stacked in Q1, that works out to about 23,000, 24,000 tons/ day. As you talked about the primary, secondary capacity is right now, I might be quoting the numbers not perfectly here, but I think it's about 16,000 tons/ day. Your tertiary crusher, which is your HPGR agglomerator stacking system, is about 7,000 tons/ day. Could you help me reconcile those numbers? Are you putting any kind of run of mine material onto the leach pad right now?
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 be the HPGR versus secondary versus if there's run of mine?
Truck stacking is a short-term solution to meeting extractable ounces on the leach pad. What we plan for is how many extractable ounces we need to place on the leach pad to meet our annual guidance. That's how this is working. We balance those figures out, and that's what you're trying to better understand. Our primary and secondary crushing system is currently operating exceeding design capacities. The design capacity of primary, secondary crushing is 18,750 tons/ day. As you noted, we're achieving 20,000 tons/ day. Part of that material, about 9,000 tons/ day, are running through the HPGR agglomeration and conveyor stacking. The balance is placed from the secondary stockpile directly trucked to the leach pad. On top of that, we can place materials from stockpiles as well.
If we want to get very granular on this and we can have a session on this, we can have different times, even three different sources of materials being placed on the leach pad to meet extractable ounces.
We'll be happy to have a session with you and give you the breakdown. We are placing more ounces on the leach pad than the original design calls for, because the coarser material comes at a lower extraction on a 90-day period. That's why we're placing more ounces with the trucks. Those ounces come from the secondary crushing, and in some instances, from the coarse ore stockpile. That is what we use to meet the 140,000-160,000 ounce guidance for 2021.
Mm-hmm. Yep. That's perfect. That's for sure the current situation right now. Would you expect the majority of your stacking to be from the tertiary crushing circuit towards the end of 2021, 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 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 commissioning and ramping up 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 we're using a lot of Zoom hours and these remote virtual reality goggles and 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.
They would have to come from abroad to help our operators. We're going at it alone, and I believe that's why the delay. We have no mechanical issues at this time of any significance, nor automation. We did battle at the beginning, some couple 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. We're not where we need to be yet, but we're getting there.
Of course. Thanks. Maybe one last question on the financial statements here. In the MD&A, you mentioned that the $120 million credit facility's fully drawn right now, expires on January 26th, 2022. However, you're trying to get it renewed for sure in Q2 2021. Maybe more a question for Luis. 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? Would you be expecting more favorable terms on this renewal? On top of that, with the pending merger with Roxgold, has that changed your potential repayment of this credit facility vis-a-vis how you're potentially financing, say, the construction of Séguéla?
Yes. First of all, the cost of the facility fully drawn is 3.5% on top of the reference rate. We do expect to be able to maintain similar terms. In the context of transaction, the pro forma company, our 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. 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 forma entity. Based on the terms that we see and what we believe we're able to achieve, and considering the debt capacity of the pro forma entity, I think we would be right to reconsider any plans to repay that early.
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. That's our view today.
Great. Thanks. Thanks again, Jorge and Luis. 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 the 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. I think you referenced it on this call as, I want to say 50%-60% of capacity. I just wondered what it needs to do to get back to those levels that you were experiencing at the early part of April where I think you were up closer to 87% on that system.
You see, the HPGR agglomeration and stacking work in sync. 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. Today, we are achieving steady days in the entire system of around 9,000- 11,000 tons/ day stacked. 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 early in the start of the year have been overcome. 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.
We don't have that luxury because of the COVID pandemic, right? Sometimes those problems, instead of being resolved in hours or days, end up taking days or weeks. I think all of those are behind and we just need the team to get more seasoned and experienced and be able to sustain the throughput. Get more effective with the movement of the conveyors, with the planning for the setup. 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. Again, I don't think we're talking about rocket science here.
It's just getting the team more in tune now that all of these mechanical automation issues are all behind, getting the team to get the performance and the equipment. The equipment is fit for purpose. It's just operational expertise right now. The HPGR is performing according to whatever we ask from it. The agglomeration also. We had some minor mechanical and setup issues, but really the equipment is fit for purpose. The bottleneck is the stacking.
Okay. 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. 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. Generally speaking, it is accurate. Your description is accurate, but it is possible within the existing structures or restrictions in effect.
Regulatory framework in place.
Yes. 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. 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. Once that pool is exhausted, we will shift to the regime you're describing.
Where the pool and restrictions are being analyzed and rolled by the government almost on a monthly basis. Monthly by monthly basis. Yeah.
Maybe it is a moving target, which is what it sounds like. 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 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. All 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 foreign exchange forward markets locally that typically, I would expect, goes out six to eight months. That sort of gives you a framework for the type of protection you can achieve. The alternative is to tap into the parallel FX market. The gap will vary widely. I think these days it's much higher than what you would typically expect to see. It has been trending downwards. We would expect that in the next few months, that gap does close significantly with respect to what it is today. I'm sorry. That's sort of a broad answer.
We would have to sit and look forward to 2022 and try to see what's going to happen with the FX at that moment. That's a difficult one.
Okay. No, I appreciate the color. Thank you both.
Thank you. Our next question today is coming from Don DeMarco at National Bank Financial. Your line is live.
Well, thank you, operator. Hi, Jorge and team. Just a two questions on shifting to San Jose now. Can you elaborate on your exploration program at San Jose? I see that the exploration results that were announced in late March looked good, you had a few intercepts that are over a kilogram per ton. That's encouraging. Yeah, I see the updated reserves are around 23 million ounces. 2021 guidance is about 6 million ounces silver/ year. Just curious, how many rigs do you have running? What's changed in your program versus last year? Where are you most optimistic?
Yes. I'll start with the last one. What has changed with respect to last year? First is drilling meterage. Today our drilling meterage just for San Jose, it's in excess of 30,000 m. Last year our drilling at San Jose was around 7,000 m. We're drilling significantly more. We currently have five drill rigs turning. Three are currently working underground and two on surface. We have different type targets. One is we have multiple targets underground in and around the immediate vicinity of the resource shell, the resource block model. The results that we reported in March come from one of those initiatives for drilling near mine underground targets.
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 several opportunities, I would expect, like the ones we outlined in March, which are incremental to reserve life and resource extensions. Probably on their own, not very material in terms of tonnage, but on the aggregate, they all will contribute to replace what we deplete.
Again, we have several of those ongoing. 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 stock work development. Within these areas, we have a lot of room to create opportunities for potential expansions. Because the structural model, once you get to the detail of it, is intricate. This one was right in front of us, what we reported in March during the annual, 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 3D models in more detail.
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. We have multiple of those. Second, we have a parallel vein system 400 m due east from where we're mining. It's called the Victoria system. We have currently 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. We're currently drilling Victoria and the parallel structure, extensions of Victoria, and trying to see and explore further the parallel structure and the hanging wall of Victoria.
Apart from that, we have multiple veins on surface, where we have currently one drill rig pursuing those opportunities that can be located 4 or 5 km away from our current infrastructure, so well within trucking distance. We currently have 1 drill rig turning in an area called Los Diaz, where we have vein structures on surface, the silicification. We have discovered something that we have not seen before. It's an altered dome at depth. We're in a volcanic pile. We had never seen more subvolcanic-type features like a dome. That was geologically quite intriguing to the team from the perspective of where to focus more exploration ideas. We have multiple of those. We have also optioned the Higo Blanco property, which is within the general area of San Jose, within trucking distance of San Jose. Higo Blanco, it's an option from Minaurum.
Previous explorers drilled at Higo Blanco in previous years with some exceptional results of high-grade mineralization for silver over broad width. We have optioned the property. We are currently working on developing drill targets there. There is no shortage of ideas at San Jose. We just need to get the drilling meterage going. 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. We need to let the programs run and see some results hopefully come along.
Thanks for that. In the past, I think you might release 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. Absolutely. Not only for San Jose, although we all understand that the San Jose program is important for everybody. 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 due of the Vizsla project. Vizsla, it's a nice discovery there. We're drilling there. We have one rig, and we're quite active on different ideas. We have also another project called Baborigame, where we're going to be developing drill targets this year. Santa Fe is more a silver project with some gold, and Baborigame is more a gold, silver project. 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. Just a quick follow-on from what Don was asking there. I noticed at San Jose, you guys spent only about $1.7 million of your $10 million brownfield exploration budget at San Jose in Q1. Should we expect that to be ramping up quite a bit here? Is there any chance that you'll spend through that $10 million, you think before the end of the year, and then could perhaps evaluate further expansion of the exploration budget?
Yes. Budget will be ramping up. 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. That budget will ramp up. We have the drills on site and turning, as I stated. I see no issues there. It's usually start of the year tends to be a bit lagging with speed for some of these programs, right?
Sure. 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. 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. At Caylloma, at Lindero, and at San Jose, 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.
Yeah. Remember that these three countries remain under severe restrictions due to COVID, right?
For sure. Just on terms of exploration at Lindero, I know you guys have a small program planned for Arizaro. 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. We can probably expect some result at some point in the next couple of releases here then probably, right?
Absolutely.
Great.
We're drilling at Arizaro.
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, Caylloma, I guess how you enunciate it. You stated that continues to contribute significant gold production in the first quarter 2021. Gold production was 1,922 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 graduated in that stuff, I know what you're talking about. 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 our understanding of gold occurrences at the Animas vein.
It is only now as we have entered into this area, and we start encountering these 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. We're trying to understand geologically what is controlling the deposition of gold in these areas.
I think spatially, the gold-rich zones are limited in size. What we're trying to gauge here is through more science, is if there are areas where we can extrapolate what we learn 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, right? This mine has traditionally produced, what? 0.3 g, 0.6 g 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. Today, these areas are limited in size, they are not meaningful to the overall research. 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.
We were right now in the learning curve here, Guy Buckley, 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 4 km. We have drill tested it for several hundred meters at depth, and this is one small area within that bigger package. I think it speaks about potential as well, right?
The system is complex, and we need to better understand the gold 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. That was before you made the announcement that you had bought out Roxgold in West Africa. That blindsided us, I got to be honest with you. Some of my friends, they dumped their stock. I didn't. I held on. That stock went from $9.71 a share down to under $6. It's now coming back up because I think long-term, you'll do well. I think that hopefully that Roxgold will start contributing something to the earning capacity of the company.
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 were a number of them that felt you did the wrong thing when you acquired that Roxgold in West Africa.
No, thank you for your comments. We believe that there is tremendous value to be unlocked for Roxgold shareholders or 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 the respective jurisdictions. 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, as I said at the beginning of the call, if you want to invest in precious metals, you really have to give serious consideration to a performer company.
I agree. One last question.
The strength of the asset.
Does 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?
I personally believe they could be higher.
Right. We're in a bull market on the silver.
I try to focus on the things we control.
Right
Which is the assets we get involved with and the costs. We need to operate the mines in a high price environment as well as we do on a low price environment. 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 15 months ago, right? What we want to do is provide.
Yeah, $15 an ounce. Let me tell you, silver hit $28 yesterday and she is going on up.
Yes.
I want to thank you as a shareholder for what you're doing. We're counting on you. I'm going to get other friends to invest and buy stock in your company because I think the name is appropriate.
Thank you, sir. Thank you for your support.
The name Fortuna, I love it. Thank you.
Thank you for your support.
Thank you. Once again, if there will be any questions or comments, please press star one at this time.
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.