Good morning, ladies and gentlemen, and welcome to the Fortuna Silver Mines Fourth Quarter and Full Year 2020 Financial and Operational Results. At this time, all participants have been placed on a listen-only mode. And we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host Carlos Baca. Sir, the floor is yours.

Thank you, Matthew. 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 fourth quarter and full year 2020. Today, we will be using a webcast presentation, which will be controlled by us. To download the presentation, please go to our website at www.fortunasilver.com, click on the Investors tab, then on the Financials sub tab and under Q4 2020, click on the Earnings Call Presentation link. Jorge Alberto Ganoza, President, CEO and Director; and Luis Dario Ganoza, CFO, will be hosting the call.

Thank you, Carlos, and good morning to all. We will take you through our results for the quarter and year-end with the aid of the slide presentation Carlos mentioned before. So, we can go on, Carlos, to slide 5 of the presentation. Through our work over the last three years, we have come to place ourselves in a most exciting position today as we’re delivering significant growth in gold production in a rising precious metals market. This year, our production guidance from our three mines is in the range of 260,000 to 300,000 gold equivalent ounces, an increase of 80% to 100% over 2020. Next slide, please. Under highlights for the quarter, we have reported record-breaking free cash flow of $34.5 million and our business operates with a robust adjusted EBITDA margin of 43%. We have strong liquidity of $132 million with net debt of $34 million, and a debt-to-EBITDA ratio of 0.4. We expect to be net cash positive again this year. Lindero production first -- Lindero produced first gold in October 2020 and delivered 13,435 ounces in the fourth quarter as part of commissioning and ramp-up activities. During this ramp-up quarter, Lindero was cash positive, generating approximately $5 million in free cash with an all-in sustaining cost under $1,100. Ramp-up to design capacity continues during Q1 of this year.

Yes. Thank you, Jorge. So, on slide 18. Yes, as has been discussed already by Jorge, we had a strong fourth quarter, driven by a higher sales of 50% over Q4 2019. Our margins were significantly up, reflected in adjusted EBITDA and adjusted net income increases of 78% and 100%, respectively. Net income, however, was slightly below Q4 2019 due to certain items below the operating income line contributing to a higher net income in the comparative period of 2019. Specifically, in 2019, we recorded $11 million of investment gains in the large deferred tax credit related to foreign currency fluctuations. Slide 19, please. So, in the quarter, the highest impact on our sales came from both higher metal prices, silver, in particular, which was up 41%, and as Jorge mentioned, the contribution of Lindero with $20.3 million, for a total increase in sales of $34.5 million. The Company elected to early adopt certain amendments to IAS 16, which deal with proceeds before intended use of assets. Under this mandate standard, Company is required to recognize sales proceeds and related costs of items produced in the income statement while the Company is preparing the asset for its intended use.

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

Your first question is coming from Don DeMarco. Your line is live.

Thanks so much for taking my call. Jorge, so you mentioned the stacking system. I read that it's at 23% in February. Performance increasing to 30% to 40% in March. Well, what kind of level would you be comfortable with in order to meet the guidance in 2021?

Thank you for the question, Don. It is important to stress something that we try to describe well in the MD&A, which is we are bypassing whatever tonnage or extract ounces we’re not placing with the stacking system, we are making up with placing ore on the leach pad with trucks, no? So, what we are tracking is the amount of extractable ounces that we place on the leach pad every month, right? So, we are meeting the extractable ounces on the leach pad as per our guidance. The issue is that the ounces that we place on the -- with the stacking system, we expect gold extraction to be in the range of 75%, 78% over 90 days. With the ounces that we place with trucks as they are a bypass that comes from the -- where we draw ore from the secondary crusher stockpile, and it's a 34-millimeter crush. And for that kind of crushed material, that P80 at 34 millimeters, gold extraction is more in the range of 50% over 90 days. Over time, we will achieve a higher extraction rate, not in the 75%, but certainly higher than 50% over time. So, we're having to place more ounces to meet the guidance, more ounces in the leach pad to meet the guidance. So, that's how we're managing. This is a temporary solution while we get the stacking system up to design, right? What I said during the call is that in these early days of March, we are already seeing the stacking system performing at between 30% and 40%. We had yesterday a good day with 9,000 tons per day, which is more like 50% of capacity. We are dealing with some issues with the stocking. It's mainly the overland conveyor braking system malfunctions, no, that…

Also on stacking, but maybe shifting over to grade, I recall around mid-October, the initial grades that you had stacked were a little bit below, like maybe 0.83 grams per ton or something. You had previously maybe been targeting 1 -- above 1. But now, I see that the grade -- stack grades for the full year are 1 gram per ton which implies there's been an increase in the stack grade. Are you comfortable with the grades that you're stacking right now? And is it in line with your expectations and plans?

Yes, grade is in line with our plan. Absolutely.

Okay. And then finally, on capital allocation priorities, we have you generating a lot of free cash flow in 2021. You mentioned you have expanded investment on exploration. Is a dividend something that you're thinking about at this point or repaying the debt? What are your capital allocation priorities beyond investment in exploration?

Yes. And thanks for the question, because it allows me to point something here. We have three priorities. One is, first, we believe at times like these companies -- many companies need to strengthen the balance sheet, right? These are the opportunities we have in cycles like these, legs of the cycles that we are now in to strengthen the balance sheet. So, we view having -- putting together a fortress balance sheet as a priority for us, right? So that's number -- even though our debt to EBITDA is low and whatnot, we -- you will be seeing us ensuring that we come out of this leg of the cycle with a very strong balance sheet. Second is exploration investment. As I noted during the -- my intervention before, we've been shortchanging our investment in exploration for three years basically as we were prioritizing capital allocation to Lindero construction. We have been drilling 2020, only 8,000 meters, not enough to replenish -- deal with depletion at our mines and expand the research and such. So, we got those drilling meterages up north of 40,000, 50,000 meters. We're drilling at all sites. We have new initiatives outside of brownfields. We're going to be drill testing this year as well in Mexico and one in Argentina. And last is returning to shareholders. Yes, that's something that we will consider, the best way to return to shareholders, and we will evaluate those options against other opportunities for growth that we might identify. But certainly, returning capital to shareholders is -- in the way of dividends or a special dividend or other means is something that the Board is considering already.

Your next question is coming from James Huntington. Your line is live.

Just following up from previous questions on the stacking unit there. What sort of time line, like just at your current rates, you think you could be ramped up on the stacking system? It's unfortunate, yes, COVID's obviously restricting you fair bit there. But, do you think this would be like a two-month process or sort of you'll be like 90% of the way by the end of March? Just a bit more color there. Thanks.

Yes. And that's a really tricky question to answer. We have -- our problems are -- with the stacking are isolated right now to the braking system -- to the communications on the braking system. It's an automation issue. We've been trying a lot of things and solving problems and improving, and now we're left with this one. And if you know how this works, you all of a sudden get it right and you get a bump on performance. And we're already starting to see better days, and all of a sudden, we can see significant jumping in performance. We're almost at mid-March. So, it's still our expectation to get within 85% of performance in March. But, if not, we'll see a spillage into April, right? But, it's difficult for me to gauge. I believe the issues are issues that are solved in matters of days or weeks. What we have in front of us with the stacking is something that we -- should be solved in a matter of days or weeks, not months, right, because of the nature of the problem and where we are with the solution. So, my best assessment would be days or weeks to get this problem. And it's just this one problem right now we're battling with, and we have been battling with for a few weeks now, right? So, I believe we're on the last leg of a solution for this.

And then, just if you could give us some color on the ramp-up and the status of the SART plant and sort of what -- how the ramp-up is going there as well.

Yes. The SART plant is not critical path for us. It's important. We need the SART plant, but we don't need it to produce gold, and we don't need it in day one, right? So, the copper content in the pregnant solution up to now is manageable. We have -- the SART plant in February was at 37% of design capacity. But, we have reallocated resources from the maintenance team and operations team to the areas that are key or on critical path for gold production, right? Basically, the stacking and the crushing system. So, we have deprioritized efforts around the SART. We will come back to it once we get that stacking system running where we need it to be. The SART plant, we've been running it at around 37%, up to 40% of design capacity. It's been operating efficiently at those rates. We've been able to precipitate 80%, 90% of the copper in solutions. So, the chemistry of the SART plant is performing, I will say, in exceeding our expectations. It's just a matter of increasing flow. Right now, we have an issue with the copper filter. We're waiting for some -- for a small repair on the copper filter, a minor issue. But again, we have prioritized resources to critical path, which is basically the stacking and primary and secondary crusher.

And then, just one last modeling question for me. For depreciation at Lindero, could you guide us what you're sort of expecting this year on like $1 per ounce for Lindero, and if possible, a more longer term value?

Luis, do you want to give a punt to this one?

Yes. I heard you're asking for the depreciation dollars per ounce. We're using the units of production method based on ounces produced. I don't have, unfortunately, a number in my head that I can share with you. But, what we should expect as we are depreciating, based on ounces on a per ounce basis is of course, is the depreciation tracking, of course, the production output throughout the life of mine, right? So, that will be in sync with the evolution of income throughout the life of mine. Yes. I'm sorry, I can't give you a number right now because I don't have it in front of me.

Your next question is coming from Adrian Day. Your line is live.

My question has partly been answered already in one of your previous answers, but I wanted to ask you about the exploration a little bit more. In the foreseeable future, is it all exploration at or close to mine site, or are there any new areas you're looking at?

Yes. It’s a bit of everything, Adrian. So, at the San Jose Mine in Mexico, we have an aggressive program -- drilling program in the immediate vicinity of the mine, both on the north boundary of existing resources on the deep extensions and to the south. We have identified also 4 kilometers -- sorry, 400 meters due east from the main ore shoot, two parallel structures, one that today hosts resources is the Victoria vein, where we have done no mining up to now. And then, a bit further east from Victoria, we have also a couple of interesting drill intercepts of another blind structure with grades in the range of 135 grams over a couple of meters. So, we have a lot of drilling allocated to that. In addition, at the San Jose Mine, we are exploring other areas and other veins within the system. But, I would consider all of this in the -- within the reach of brownfields. So, opportunity that -- where we are successful, we could have the opportunity to truck ore to our San Jose Mill. We signed this year, 2020, an agreement with Mina room. We have optioned the Higo Blanco property. It's some 15, 20 kilometers due east from San Jose. It's an exciting exploration project with some exciting drill results that need follow-up. And that information is public, and you can look at it. So, all of this is within our plans for 2021. In the case of the Caylloma Mine, we have also a similar scenario, drilling within the extensions of non-mineralization and also stepping out into new areas, testing new ideas in a vein system that has been so productive for over 500 years literally. So, in the case of Lindero, we are not doing near mine -- near resource drilling. We are stepping out to the Arizaro gold porphyry. We're going to be drilling that this first half of the year. Arizaro is a gold porphyry -- is a second gold porphyry center in our property. Lindero is the one that we're bringing -- we have brought into production. And Arizaro is located 3.5 kilometers from Lindero, so well within trucking distance. There is a well-identified gold porphyry system there that has received drilling throughout the years. We believe there is potential, as evidenced by past drilling for near-surface, high-grade satellite, perhaps not too big. But, as we have infrastructure so close, we don't need a standalone. So, these satellites could contribute, what, 5 million, 10 million, 20 million tons at grades in excess of 0.4, 0.5 grams gold, we believe, as high as 0.7, as some drilling would suggest. So, we are going to be testing those potential satellites at Arizaro. So, apart from that, we have drilling in new projects in Mexico and Argentina. Exploration, we have option properties, and we're advancing work and work advances. And we firm our commitments on those projects, we'll be discussing them publicly.

Your next question is coming from Justin Stevens. Your line is live.

Thanks, guys. Yes. Most of what I wanted to get has really been covered off. But, I was just mostly wondering, how much copper are you guys seeing so far at Lindero? And the flip side of that would be, how is the cyanide consumption relative to what you're looking for?

Sorry. I didn't hear you all that well. You're asking about the copper content in Lindero?

Yes, in the ore placed so far at Lindero and the cyanide consumption as well.

Yes. Copper is -- copper grades are trending along with what we see in our resource reserve model, around 0.1% copper is what we're seeing. And in the case of Lindero, what makes Lindero viable, technically viable is the fact that 95% of that copper, that 0.1% copper that we see in the Lindero porphyry is in the form of chalcopyrite. So only 5% of copper in chalcopyrite leaches under a cyanide solution. So, it doesn't eat cyanide like other copper mineral forms, like chalcocine, where 70% of copper will leach in the mineral form of chalcocine, chalcocite, chalcosine, copertite or bornite. Those are the cyanide eaters. In the case of Lindero, we have chalcopyrite, and the grade of copper is within our expectations at 0.1. Our cyanide consumption right now is slightly below half 0.5 kilos per ton. So, it's tracking well within what we expect. And the copper that we're seeing in the pregnant solution, it's also within what we would expect with this leaching kinetics. So, we're seeing copper in the range of 400 to 500 ppm in the pregnant solution. So, we're managing that with cyanide. And the SART plant that -- although it's running at 30%, 40% of design capacity, it's doing the work, right?

Yes. No, that's great. And then, the only other question I had was, do you guys have timing for your planned annual reserve and resource update?

Yes. We'll be releasing reserves-resources in the coming weeks.

Thank you. There are no further questions in the queue at this time.

Thank you, Matthew. 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 conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.