Greetings and welcome to Fortuna Silver Mines’ Third Quarter 2018 Financial and Operational Results. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carlos Baca with Investor Relations. Please go ahead.

Thank you, Devon. Good morning, ladies and gentlemen. I would like to welcome you all to Fortuna Silver Mines and to our third quarter 2018 financial and operations results call. Today, we will be using a webcast presentation, which will be controlled by us. You can download the presentation at our website, www.fortunasilver.com. Please click on the Investors tab, then click on the Financials tab and under Q3 2018 click on Earnings Call Webcast. Jorge Alberto Ganoza, President, CEO and Director; and Luis Dario Ganoza, CFO will be hosting the call from Lima, Peru. 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, President, CEO and Co-Founder of Fortuna.

Thank you, Carlos. Along with Luis, our CFO, both of us will be presenting a review of financial results and main activities across our projects and operations in Peru, Mexico, Argentina and Serbia. Next slide. In spite of having the lowest average quarterly silver pricing in 3 years, our business results show a robust EBITDA margin of 41%, with free cash flow of $13.5 million. Our liquidity position remains strong at $257 million. This is made of $176 million in cash and $80 million in un-drawn credit facility. Our debt-to-EBITDA ratio currently stands below 0.5 and once the facility is fully drawn would move us to a range of 1 on the debt-to-EBITDA ratio. At Lindero, all major contractors with the exception of electromechanical and piping are onsite before year end will have been mobilized and working all major contractors. As of the end of the October, the bridge shows physical advance of 26%, 82% of direct capital costs have been committed and we expect to record approximately $130 million in project expenditures for this year. On October 11, we reported an environmental incidence at our San Jose mine in Mexico. Abnormally high rainfall cost of collection funds of our drainage system at the dry stack tailings facility to overflow approximately 1,500 cubic meters of water. The rainwater overflow, dry mud, along with dried tailings fines from open areas in the dry stack for approximately 2 kilometers into a secondary drainage. This incident did not cause an environmental impact in the way of contamination of soils or bodies of water. Water and soil sampling and their official established procedures set by PROFEPA, the Mexican Environmental Protection Agency, have been received and confirmed all elements and pH are within permissible levels. We expect PROFEPA will close investigation of the incident in…

Thank you, Jorge. So on Slide 15, we recorded net sales of $59.6 million, down 7% from the prior year driven mainly by lower metal prices, as Jorge pointed out. We reported net income of $6.9 million compared to $10.3 million in 2017 and earnings per share of $0.04 compared to $0.06. Adjusted net income decreased 44% to $7.1 million. As Jorge mentioned as well, we had adjusted EBITDA of $24.2 million, which is down 21% from 2017. Net cash provided by operating activities was at similar levels as comparative period due to positive changes in working capital in the current quarter compared to negative changes in 2017. Free cash flow, excluding the Lindero construction for the quarter was strong at $13.6 million, partially aided by the positive changes in working capital in the quarter of $4.6 million. And although not shown in the table, free cash flow year-to-date excluding the Lindero construction was $42.2 million. From Slide 16, we are breaking down our sales performance. We have lowered total sales of $4.4 million, driven by lower metal prices year-over-year across all metals. The isolated impact from this growth in prices was $7.6 million and was partially offset by the effect of higher metals sold silver, lead and zinc in particular, as well as improved treatment and refining charges as shown in the graph. Next slide, Slide 17, our adjusted operating income and adjusted EBITDA were 39% and 21%, as I had previously mentioned year-over-year reflecting the impact of the lower sales in the quarter as well as higher cash costs at the Caylloma mine. Adjusted EBITDA at Caylloma was down 27%, reflecting lower base metal prices and higher production cash costs year-over-year. Production cash costs at Caylloma in the quarter was $88.05 per ton, which was 16% above Q3…

Thank you, Luis. We would now like to turn the call over to any questions that you may have.

Thank you. We will now be conducting the question-and-answer session. [Operator Instructions] Our first question comes from the line of Sherry Deng with Scotia. Please go ahead with your question.

Hi guys. Thanks for the call. On the Lindero project, could you please remind us what are the indirect capital costs versus the direct capital cost and what are the breakdowns in terms of total initial capital?

Hello.

Yes.

We have in our budget $180 million in direct capital costs and $170 million in indirect capital costs.

Alright. Thanks. And with this update, you have guided a capital spending for 2018 to reduce to $110 million to $130 million as opposed to the $200 million that you guided in the beginning of the year, could you guys please give us some details on your plans to keep things while I see you kept the production guidance on track, can you give us more detail on your plans and what are the changes that you are making to the original plan?

Yes. Basically, we had a lot of flexibility in the [indiscernible] schedule. We have been hitting some of that flexibility. But the main driver to get the capital expenditure up, which is aligned with project execution, is having the contractors on site. And as I stressed throughout the presentation, the main contactors, with only one exception, are all on site, are all working. This has created an issue, which has an impact on cost and it’s a driver for our guidance to increase capital cost, which is now is that we have overlapping activities compared to our [indiscernible] schedule. So our headcount due to this overlapping activity is going to up to – close to 1,000 people, on-site people today. So that is one of the drivers of higher cost or higher CapEx for us. So we have the main activities on site, the heavier activities, the bulk of the groundwork, the mass earth movement. And with the contractors on site, we are already seeing the pickup on capital spending, which is directly related to capital execution. We are still looking for first doré in September. We started saying at the beginning in the third quarter that we have moved from early in the third quarter to late in the third quarter. So we are squeezed – squashed against September to deliver first. So we have been moving within those three months of the third quarter. We are again, slammed against September now. And – but the contractors have been mobilized and that’s what you need to pick up pace at the project. You need the contractors on site and the equipment arriving on time and we are basically there.

Alright. Thanks. So what are the things on critical path at this point?

On critical path today, we have the crushing station. We need the crushing station to be operational by April. We need that crushing station to be operational by April and right behind it we have the leach pad. I mean the crushing operation and a place to – and a pad to place the ore. So those are – two are driving the – are currently driving the timeline, however with two heavier activities of the project, the 18,000 tons per day crushing station has began in relation to the project. So we – that is a lot of our attention. We have a good contractor there that’s providing the resources and advancing, but we are monitoring that closely. And then the leach pad is another big project. It’s a large earth movement exercise with accompanying activities that are – needs the experience, specific, like ground preparation, [indiscernible], liner installation. So that contractor had a difficult start for the project. The leach pad contractor had a very difficult start first getting mobilized, then gaining the pace, getting aligned with the pace that we required. So we are working closely there with them and those are the critical paths.

Alright. Thank you. That’s helpful.

Our next question comes from the line of Chris Thompson with PI Financial. Please go ahead with your question.

Hi, good morning guys. Thanks for taking my questions. Two quick questions, we will start off with San Jose, just looking at the trend here and I know that you have – correct me if I am wrong, adjusted the mine plan slightly so better grade [ph], I guess maybe sacrificing some through the mill, is this what we can anticipate on a forward-looking basis, I am looking at better grade on the silver?

No. Chris, we do not have a plan that incorporates reducing tonnage at the expense of grade, no. We have seen and you will likely see a bit early in the quarter, we have some tonnage shortfalls starting in October due to equipment availability on the part of our contractor. But it’s not in our plans, no, to battle lower tonnage with higher grades, no. It’s just how the mine is cycling to its reserves, no.

Okay, great. Thanks. Just moving onto kind of very quickly, you did mention that the – I guess work to be done or continuing to be done on the tailings facility, $5.7 million, is this being – is this happening right now and when could we expect the CapEx to be fully paid for this project?

The project should be concluded by now because the rainy season is on us. And it’s not – so I think there might be some carry-forward there into January, which is not the most desirable from a construction perspective. But that is a project that allows us to gain, if I am not mistaken right now, as much as 5 years in the leach – in the tailings facility, 4 years to 5 years. So it’s an important project. It’s a planned expansion. It was part of the original design. We are executing. Again, we had a slow start with that capital project. We have also made some changes to the capital projects at Caylloma. So we have seen a reduction of capital spend just by the way of how we have prioritized the resources that we have at that mine.

And just one final quick question on Lindero, obviously very mindful about what’s happening – what has been happening in Argentina by way of inflationary pressures and peso devaluation, you said that you are guiding slightly higher capital costs, I would imagine that on being conservative and not factoring much by way of pesos devaluation. Is that true?

We have not included in our forecast is that what you mean any benefit from exchange rate. I can say that up to the third quarter, we have captured gains due to exchange rate against our original budget of close to $7 million and we expect to continue to see gains against our budget. Our budget was constructed and a lot of our contracts have been awarded with pesos in the range of 17 pesos to the dollar with an exchange rate of approximately 17 pesos to the dollar. So yes, we are benefiting right now from that. That is not in our forecast. We are currently forecasting 10% to 14% higher capital costs for Lindero, but again, that will be offset by exchange rate gains derived from exchange rate.

Okay, great. Thanks for that.

[Operator Instructions] Since there are no further questions left in the queue, I would like to turn the call over to Carlos Baca for closing remarks.

Thank you, Devon. If there are no further questions, I would like to thank everyone for joining us and listening to today’s earnings call. We hope you have a good day.

This concludes today’s teleconference. You may now disconnect your lines at this time. Thank you for your participation.