Fortuna Silver Earnings Retreat On Weaker Silver Price

Fortuna Silver released its Q2 results this week, reporting quarterly production of 1.65 million ounces of silver and 62,200 ounces of gold, translating to a meaningful increase in revenue. However, with the impacts of provisional pricing adjustments, an inventory write-down, inflationary pressures, and weaker silver prices, earnings were down sharply in the period.

While FSM has guided for the upper end of cost guidance following the report, I believe the Q2 earnings miss on weaker silver prices and one-time items is mostly priced in. So, with Seguela in the wings and on schedule/budget and easier year-over-year comps ahead now that FSM has lapped tough comps, I would view pullbacks below US$2.30 as buying opportunities.

The softer silver price was likely to produce a much uglier quarter for its silver business (which is why it made zero sense to chase the stock above US$3.50 in May). This was especially true given the difficult year-over-year comps Fortuna was up against, enjoying an average realized silver price of $26.65 per ounce.