Good day, ladies and gentlemen, and thank you for joining us for the Fortuna Silver Mines' Fourth Quarter and Full Year 2018 Financial and Operational Results Conference Call. As a reminder, today's meeting is being recorded. [Operator Instructions] All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. And now to get started with opening remarks and introductions, I am pleased to turn the floor to Investor Relations Manager, Mr. Carlos Baca. Mr. Baca please go ahead sir.

Thank you, Jim. Good morning, ladies and gentlemen. I would like to welcome you all to Fortuna Silver Mines and to our fourth quarter and full year 2018 financial and operations results call. Today, we'll 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 Q4 2018, click on Earnings Call Webcast. Jorge Alberto Ganoza, President, CEO, and Director; and Luis Dario Ganoza, CFO will be hosting the call from Salta, Argentina. 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 and good morning to all. I'll give you a brief introduction to our year end results and progress at our Lindero Gold Project in Argentina and then turn the call over to Luis who will take you through the financial statements. After that, we'll open the call for questions-and-answers. In Slide 4 of the presentation, during 2018, we carried our business with mining operations in Peru and Mexico where our San Jose mine runs among the 14th largest primary silver producers in the world. We're in construction of our third mine in the province of Salta, Argentina. Apart from Brownfields exploration at our mines and projects, we're currently in exploration for new silver and gold deposits in Mexico, Argentina, and Serbia. Some of these initiatives are carried via strategic investments and joint ventures with junior explorers like Prospero Silver and Medgold. Important to mention is our consistent focus on sustainable low-cost growth and maintaining a high margin business. Under the 2018 highlights, Slide 5, we pride ourselves of the strong margins of our business. Our adjusted EBITDA for the year is $114 million representing a robust 43% margin over sales. Our margin on mine operating income is 37%. Our free cash flow from ongoing operations before Lindero investment is a strong $55 million. Liquidity available stands at $243 million including our available credit facilities with a modest debt to EBITDA ratio of 0.7 as of year-end. Our Lindero project has 40% advanced towards completion where 91% of direct capital cost has been committed. Remaining construction capital to completion is $172 million. On February 14th, we issued a press release informing we received a resolution from the Federal Environmental Protection Agency of Mexico indicating there is no contamination of soil as a result of the overflow of a…

Thank you, Jorge. So on slide 20, sales for the fourth quarter were $59.4 million down 21% from 2018, due to lower metals sold and significantly lower metal prices for silver lead and zinc. The lower metals sold was mostly quarterly effect as full year metal sold was above 2017 for silver and slightly below for gold. We reported net income of $2.2 million in the quarter. We have noted the comparability year-over-year of net income is affected by a $21.9 million after-tax impairment reversal at Caylloma in 2017. Adjusted net income for the quarter was $4.4 million compared to $12.3 million in 2017 the reduction was driven mostly by lower sales. Adjusted EBITDA for the quarter was $22.7 million compared to $34.9 million recorded in 2017 and free cash flow from ongoing operations was $11.8 million compared to $19 million in 2017. On the same slide for the full year 2018, we recorded net sales of $268 million slightly below 2017. We reported net income of $34 million or $0.21 per share. Adjusted net income was $38.3 million down 21% from 2017, due to a combination, as Jorge mentioned, of lower sales, higher production cost, higher depletion charges at the Caylloma mine as a result of reversal of impairment in 2017. Annual EBITDA of $113.9 million was 7% below the prior year. Net cash from operating activities and free cash flow from ongoing operations show an increase over the prior year of 19% and 49%. The increase in spite of lower operating results has to do with negative changes in working capital in the comparative year of 2017. Independent of the change over the prior year, however, we want to stress that free cash flow generation capacity of our business, which in the current metal price environment stands at…

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

Gentlemen, thank you. Ladies and gentlemen, the floor is now open for your questions. [Operator Instructions] We'll take our first question from Sherry Deng with Scotiabank. Please go ahead. Your line is open. Q – Sherry Deng: Hi guys. Thanks for taking my question. I just wanted to ask, does the $295 million new guided capital include VAT and -- that you expect to get back and if so how much? A – Luis Ganoza: So thank you. The answer is no. It does not include VAT. We estimate we have remaining $30 million to $32 million of VAT associated with the outstanding portion of the CapEx until completion. Q – Sherry Deng: Okay. And how do you expect the timing of receiving these VAT refund back in full? A – Luis Ganoza: There is an opportunity for an early claim of VAT during the construction phase. That is an opportunity that still haven't materialized due to regulatory issues in Argentina. There is no formal -- even though there has been an amendment in the tax code allowing for this as an incentive to new projects, there is yet no formal procedure to actually go through with this. So we are waiting for that. Outside of that, VAT should be collected once we start the commercial operations. In the worse-case scenario for that we estimate a period of two years in the case there is no early collection of VAT. Q – Sherry Deng: Okay. So once commercial production starts, you expect within that two-year period to receive the VAT in full in installments? A – Luis Ganoza: Yes. We believe that's a reasonable expectation. Q – Sherry Deng: Okay. All right. That’s all from me. Thank you.

[Operator Instructions] We'll go next to Chris Thompson with PI Financial. Q – Chris Thompson: Hi good morning guys or may be good afternoon wherever you are. Quick question just really related to Lindero here. Just referring to page four, there's a couple of I guess milestones indicated on the slide there. I mean in April you're -- that's when you start I guess mine development and equipment installation, October starting commissioning and in December first goal point. I wonder if you could just sort of help us just join the dots by way of expectations for tonnes of -- on stockpile ahead of commissioning and first irrigation? A – Jorge Ganoza: Yes. With respect to mine preparation at the orebody outcrops has a large surface expression outcropping over a significant area. There is -- the sequencing of the mine or the startup of the mine is not several months in advance. We will start with a modest stockpile because the mine has a lot of flexibility to access ore very readily. The stockpile I believe is -- there is a buildup. Don't quote me on the numbers, but I believe we start with about 100000 tonnes in the first month, but again, we're basically excavating ore and blasting ore right on surface. So the mine has a lot of flexibility. With respect to irrigation, we plan to initiate ore stacking under the current schedule in early October. That's when we plan to initiate stacking. We believe that pending -- we have a ramp up curve for stacking that calls for first irrigation, so it's November, December. So pending on that, we should have enough fragment solution for the ADR so it's December year-end. Q – Chris Thompson: Great, thank you for that. A – Jorge Ganoza: But we will be crushing and stacking starting in October. So there we have three months of commissioning with load and ramping up starting in October for these. Q – Chris Thompson: Thanks. Just in relation I guess to the CapEx that may need to spend $172 million. How should we be approaching that on a quarterly basis this year?

We should expect the bulk of that in the first semester of 2019, which is when we are -- we have one of the major contractor's civil works concluding all of their work. We also have a conclusion of the leach pad, the conclusion of the power station. A lot of things are delivered in the first half of the year, almost all. The work that continues is with electromechanical and piping. So the reasonable expectation is to see the bulk of the figure registered and accounted in the first half of the year.

Okay, great. Just -- can you just – Jorge, can you just comment on, obviously, this is a very -- you're ramping up obviously construction here. Any issues that really stand out as far as critical items at the moment that you're a little bit more mindful about?

As I mentioned in the start of this conference call, we battled with three issues most of 2018. Those were one slow buildup of our camp. That was a difficulty that persisted throughout the year. We were consistently behind the curve with this camp. And to make that up time, we compressed the schedule, compressed activities, which in turn demanded more people offsite, which in turn created more pressure on the buildup of camp. So that is over, it's done. We have -- we are ahead of the curve today. Since the end of 2018 -- actually since the start of the year, we are in front of the curve with respect to holding capacity for workers on site and that's something important. Second is the initial -- the largest task of the project at the start was large earth movement, massive earth movements and excavations. We encountered larger volumes of rock mass than earlier we estimated. That was a source of delay with respect to our schedule and excavations of the leach pad, but particularly on the excavations of the foundations for the crushing site, primary and secondary and tertiary crushing. In all those areas, we encountered larger volumes than originally estimated by the geotechnical work carried in nearing phase. So that is something we have struggled with through 2018 and early in mid-year. And those excavations as I said are concluded. So -- and last but not least is getting the contractors on site, performing according to our estimations and the project demand. And today we have all the major contractors on site. Our scheduled feeds on the performance of -- we're seeing on the ground from these contractors and we see a room for opportunity. We're scheduled second half today looking forward a lot of float. We have as we extended this schedule provided additional flow in the schedule, but these are not large amounts of flow productivity. But we are comfortable with the pace we are advancing with and that we have room to accommodate unforeseens albeit it's not a large room. We believe the project is at a stage where we have more certainty with respect to performance and the different activities of the quarries. So it creates -- the project is an accumulation of problems, and we moved through the problems, we solved them and move on to the next one. The issue is when you get stuck with the same problem over and over and over. I don't see that today and that's something that we struggled with last year as I said with camp and excavations and getting the contractors at the reasonable report. Those three key issues are resolved are behind us. Moving forward, I am seeing the team performing, working with the contractors or EPCM and going through the issues, solving the problems and moving forward. And also I am very optimistic as to -- in the way I see the project today.

Thanks. Thank you. Just a final maybe housekeeping item here. Can you give us a date for the revised reserves resources company wide?

Yes. We are aiming to release those this month of March. Our technical services group has been lending support to Lindero and that has crowded their schedule a bit. Originally, we publish earlier than March, but right now, our date is before the end of the month.

Okay, perfect. Thanks, Jorge. Thanks guys.

And we'll take our next question from Mohammed Al-Assaf with AVPM [ph]. Please go ahead. Your line is open. Q – Unidentified Analyst: Hello. I'd like to ask a question with regards to customers, because there is a major shift since 2017. Since most of the revenue was from Mexico and now it's from Switzerland. I wanted to know what was the reason for this? Also I have a few smaller questions as a follow-up.

The reason is basically that we are conducting direct exports from Mexico and the jurisdiction of the buyer is Switzerland. So based on the requirements on that particular note where you saw that information that is information that needs to be consigned the jurisdiction of the buyer. Q – Unidentified Analyst: Okay. I also have a question with regard to the impairment test. You are forecasting higher prices for gold in the -- to 2025. What are the reasons for this?

We've used a range of long-term prices with which we feel comfortable. The range is -- goes up to $1,313, $1,315. That is one of the factors that has been contemplated. Of course, one of the key factors as part of that exercise. And the reason is there is support in the consensus focus of long-term prices for those ranges. Q – Unidentified Analyst: Okay. Thank you for that. My final question is about your return on tangible equity. I see this year is a little bit lower than the five-year average. How do you see this moving forward?

Well we are in the construction period. So you got to take that into account. If you adjust for Lindero thinking more in terms of return on assets, you'll probably find us in the range of 13% to 14%. With Lindero, we believe that should improve slightly if not remain within the same range. Q – Unidentified Analyst: Okay. Thank you very much.

[Operator Instructions] We'll take our next question from Trevor Turnbull with Scotiabank.

Yeah. Thanks, Jorge. I just had a question also with respect to the ramp up, but it's a little different. I was curious with the grinding and -- the crushing and grinding circuit in the HPGRs. Do those start to get used the HPGRs specifically? Are they used from the very beginning? And when you first start mining, is the rock a bit softer closer to surface so is the HPGR kind of not going to get tested too much in the beginning and it kind of ramps up as the rock gets harder? Can you just talk a little bit about how those are going to get integrated into the ramp up?

Yes. We start with the full line we start with the HPGR of the vat that is the plan. We start primary secondary tertiary agglomeration from where you are stacking. With respect to the question associated to the performance of the HPGR and the conditions of the rock material and surface, we do not identify today a risk on the side of material that can compromise the operation of HPGR if that was your question. We do not have clay material -- yes on surface material tends to be a bit softer, but we do not have clays. Although there is some level of maturation, it's not deep here. So no we have not identified -- although we have looked at it and it's been part of our discussion, we do not identify that as an issue in the commissioning phase. Now remember we're in the one of the dryest parts of the world and the rock gets -- will have some level of maturation, but it's -- we do not identify as an issue there today.

Okay. That’s all I really had. Thanks, Jorge.

Next, we'll hear from Adrian Day with Adrian Day Asset Management. Sir, your line is open.

Yeah. Thank you. Good morning. I was just wondering once Lindero is up and running, what is the sensitivity on your cost to the Argentine peso up and down?

So, based on our estimate, our operational expenditure structure will carry a sensitivity of around 30% to 35%.

Okay. And do you have forecast of the peso, internal forecast?

Yes. We are working with a base case scenario for our different projections that contemplate the peso close to ARS48 level -- the exchange rate at a level of ARS48 per dollar towards the end of this year. And into 2020, we -- again, based on inflation and our base case scenario more in the range of ARS54 per dollar towards the end of 2020, with an average exchange rate above ARS50 for 2020 which is our first year of operation, right?

Okay. Okay. Good. Good. Thank you.

[Operator Instructions]

Thank you, Jim. If there are no other 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.

Ladies and gentlemen, this does conclude today's meeting and we thank you all for your participation. You may now disconnect your lines and we hope that you enjoy the rest of your day.