CA - Fortuna Silver Mines: Underwhelming 2024 Guidance

2024-01-28 08:58:04 ET

Summary

• Fortuna Silver Mines had a solid Q4 and FY2023, with its two West African operations easily beating its guidance mid-point.
• However, while gold production will increase further in 2024, costs are expected to increase significantly, and the outlook at San Jose looks bleaker than it did heading into 2023.
• In this update, we'll dig into the Q4/FY2023 results, the forward outlook, and where Fortuna's updated low-risk buy zone lies.

Just over six weeks ago, I wrote on Fortuna Silver Mines ( FSM ), noting that there was no margin of safety present for the stock which suggested elevated risk in chasing the stock above US$3.80. Since then, Fortuna Silver Mines ("Fortuna") has suffered a ~20% drawdown, underperforming the Gold Miners Index ( GDX ) which has got off to a rough start to the year as well. The culprit for the stock's underperformance is its underwhelming FY2024 guidance, with costs once again expected to come in well above the industry average. Worse, the Mexican Peso has remained under pressure, setting up another difficult year for reserve replacement as its dwindling San Jose Mine (the bulk of its silver exposure)....

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