Greetings and welcome to the Fortuna Silver Second Quarter 2023 Financial and Operational Results Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Mr. Carlos Baca, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Eli. Good morning ladies and gentlemen. I would like to welcome you to Fortuna Silver Mines second quarter 2023 financial and operational results conference call. Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganoza, President and Chief Executive Officer; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; David Whittle, Chief Operating Officer, West Africa; and Julien Baudrand, Senior Vice President of Sustainability. Today's earnings call presentation will be available on our website fortunasilver.com. As a reminder, statements made during this call are subject to the reader advisories included in yesterday's news release and in the earnings call presentation. Financial figures contained in the presentation and discussed in today's call are presented in US dollars unless otherwise stated. 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 and is subject to a number of risks, uncertainties, and other factors that could cause actual results to differ materially from a conclusion, forecast, or projection made in the forward-looking information. A description of these risks, uncertainties, and other factors is set out in the company's annual information form for the financial year ended December 31st, 2022. The annual MD&A for the financial year ended December 31st 2022 and the interim MD&A for the second quarter of 2023 which is -- which are all publicly available on SEDAR+ website. Certain material factors or assumptions were applied by the company in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information made in this call. These material factors or assumptions are also described in the company's annual information form for the financial year ended December 31st, 2022. The annual MD&A for the financial year ended December 31st, 2022 and the interim MD&A for the second quarter of 2023. 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, Chief Executive Officer and Co-Founder of Fortuna.

Thank you, Carlos. The highlights of the quarter is our first gold pour at the newly use Séguéla Mine for sure. This took place on May 24th as we released. Séguéla was delivered on budget and slightly ahead of schedule. Séguéla is a flagship asset for the company having high margin gold ounces for over a decade of mining to our portfolio. David Whittle, our Chief Operating Officer for West Africa here with us and he will share with you our progress on the ramp-up activities later in this call. But I can advance that beyond the normal start-up hiccups here and there, things are advancing according to plan. And after a little over two years since the Roxgold acquisition and subsequent capital deployment towards the delivery of Séguéla, we are ready to start harvesting the cash flows and benefits of the transaction. Our strategic expansion of the business into West Africa is going to start paying off. We now have two operating mines in the region and starting in Q3, West Africa becomes our largest contributor to free cash flow and our recent agreement to acquire Chesser Resources and the advanced exploration stage the Diamba Sud project in Senegal, which is set to close in September, adds to our exciting regional exploration and growth pipeline. During the quarter, we had to contend with a couple of events that weighted on the operational and financial results of the company for the period, which were pre-released and discussed in our Q1 MD&A as subsequent events. At the San Jose Mine, in Mexico demands by the workers' union for higher profit sharing beyond what is mandated by law and/or standing collective agreements with the union, led to a 15-day legal blockade generating corresponding loss of production expenses and standby charges. Across Mexico,…

Yes. Thank you, Jorge. So all this report, this fifth report, sustainability report for the company. It includes an updated format to with the access to ESG data such as SASB, TCFD and GRI being our main escorting framework. We also present this year stand-alone mini sustainability reports for each of our operation. So you will be able to find our key performance per site. The report present also a strong ESG governance system with a dedicated sustainability report, sustainability committee and also short-term and incentives-based on ESG performance. The report give also the detail of our 2022 performance on all the material ESG factors such as safety environment, biodiversity, water, waste management and human capital. We will -- you will find also commitments of the company to implement industry standard to manage sustainably related risk and opportunities, mainly climate change -- our climate change position statement based on TCFD with the objective to disclose a 2030 GHG reduction targets in the coming six months. We will have also some news on this climate change matter. Other big commitments this year or last year was GIST and Tailings Management where we target a full compliance by 2027. This standard will warranty to minimize risk from Tailings Management and ensure the long-term value of the company. Finally, the report presents the contribution to our countries and local communities, financial contribution but also you will see other information about how we impact positively on the life of our people. So we have for you to explore these other key aspects of our business. The sustainability report is definitely a good way to affect our long-term growth strategy and also how mining can add building a better world. Thank you. Back to you Jorge.

Thank you, Julien. Now, we have Chief Operating Officers take us through a review of the highlights for the region. So we can start with West Africa, David you want to go ahead.

Thanks, Jorge. Operations in West Africa continued their solid performance during the second quarter of 2023, the highlight being the completion of construction and the pouring of first gold at the Séguéla mine on May 24 with 4,023 ounces of gold being produced in the quarter, which we shipped in July. As we commenced processing operations, we encountered some initial commissioning issues and altered mining plans to provide a more competent fee material to the processing plant. Initial processing plant fee for commissioning was predominantly oxide ore from the up at 10 meters of mining at the Antenna pit. This section of the Antenna pit appeared to have been heavily depleted due to artisanal mining activities. They’re, therefore, not providing the initially expected grade. The nature of this oxide also caused issues within the first stages of processing [indiscernible] leading to reduced throughputs. These issues have been addressed. Mill feed [ph] is now a combination of fresh, transitional and oxide ore and nameplate capacity of 154 tonnes per hour is currently being met or exceeded. Whilst the above early issues mean that we now expect production from Séguéla will be at the lower end of the guidance range. Current mill feed puts are exceeding maybe capacity and our long-term view of Séguéla's potential remains unchanged. The initial grade control drilling at Antenna showed a 15% increase in contained ounces compared to the geological model driven by a 2% increase in tonnes and 13% increase in grade when discounting the upper 10 meters of oxide ore. Initial grade control drilling is now completed Ancien pit with Stage 2 Antenna pit grade control drilling underway. In the second quarter, Séguéla Mine 383,100 tonnes of ore at an average grade of 2.35 grams per tonne and 877,143 tonnes of waste for a strip…

Thank you, David. We can move on to LatAm, Cesar.

Thank you, Jorge, and good morning to everyone. In the second quarter of 2023, consolidated silver and gold production at our Latin American operations, plus 1.26 million ounces and 31,323 ounces respectively, representing a decrease of 23.6% and 16.7% when compared to the comparable period in 2022. This decrease in production was mainly driven by the 15-day illegal blockade at the San Jose Mine as referenced to by Jorge, which concluded on May 11 and also lower head grades at the Lindero Mine. So in Argentina at the Lindero Mine, mine production for the second quarter was 0.8 million tons of mineralized material with a stripping ratio of 2.69:1, which is aligned with the operations plan for the year of 1.17:1. Gold production in the quarter was 25,456 ounces. This is 12% lower when compared to the second quarter of 2022. But as mentioned, this decrease is explained by lower head grades of mineralized material plate on the leach pad as be fully aligned with the mineral reserves and mining sequence for the period. Gold production for the first six months of 2023 totaled 50,714 ounces well in line to meet annual guidance. AISC is expected to be at the high end of annual guidance range, mainly due to higher sustaining CapEx driven by the leach pad expansion, high capitalized stripping cost, higher inflationary pressures from key consumables and services, and the lag on the depreciation of the Argentine peso. The mine continues capturing savings and focus remains on cost control and value generation by concentrating on constantly pursuit efficiencies and delivering strategic capital projects on time and on budget. I am also pleased to report that, the contract for the construction and operation of the solar plant at Lindero has been awarded. The solar plant will supply about 40%…

Thank you, Cesar. Luis, please go ahead.

Yes. Thank you. So sales were $158.4 million in the quarter. That's a decrease of $9.5 million compared to the prior year. The decrease was driven mainly by the lower metals sold at San Jose as explained due to the legal blockade reported in the month of April. Silver and gold metals sold at San Jose were 31% and 30% below the prior year. As a result, both of a 15-day stoppage and as Cesar explaine, the lower average production rates over effective days of production. Silver and gold prices were up 7% and 6% compared to Q2 of 2022, but this positive effect was offset by a sharp drop in zinc prices of 31%. Our operating income was down $5.4 million, primarily as a result of lower sales and the $7.1 million of nonrecurring expenses, that we've mentioned consisting of $3.5 million of standby charges, $2.8 million related to a new agreement with the Workers Union at San Jose and a $1 million fine at Yaramoko. Consolidated cash cost of sales per gold equivalent ounce was approximately $970. This is $80 above the prior year. The increase was a result of higher cost per ounce sold at San Jose related to lower productivity rates and lower head grades as a result of a ramp-up process after the stoppage and higher cost per ounce at Lindero related to lower volume produced and higher input costs. This was partially offset by lower costs per ounce sold at Yaramoko. Our lower income tax in the quarter compared to Q2 of 2022, reflects lower income before income taxes and a tax credit in the quarter at our Mexican operations. In addition, the prior year effective tax rate was impacted by timing of withholding taxes. After the aforementioned impacts and onetime charges, we recorded…

Thank you. Carlos for Q&A.

Thank you, Jorge. We would now like to open the call to any questions that you may have.

[Operator Instructions] Our first question is coming from Eric Winmill with Bank of Nova Scotia. Your line is live.

Great. Thanks for taking my question. Obviously, great to see Séguéla ramping up well. I know it's still early days but just wondering if you had any additional detail in terms of what you're seeing in terms of where the grade is tracking in terms of reconciliation and tons and when you think you might get to steady state there? I mean notwithstanding, the transformer issue that would be great. Thanks.

David, you want to expand the answer?

Yes, initially as we touched on in the discussion earlier, our grade control drilling at the Antenna pit indicated an increase in overall ounces, predominantly grade-driven as well. And in our recent reconciliation through the plant that would now imply that we are seeing those grades as expected from our mining plans actually in the mill as well. We still got to do the reconciliation of the grade control drilling at Tzaneen, which is now being completed. There will probably still be a couple of weeks away and the grade control drilling at the Stage 2 of Antenna pit is currently underway.

And to add a bit of color to that with the infill drilling at antenna, which is anchored for production this year and into the next one. The infill grid is a 10-meter drill spacing pretty much. So giving higher confidence for ore control and we expect to report our consolidation of production to reserves at the end of the third quarter with the results for the third quarter. And for the second quarter, it was just a few initial weeks of production and getting the new balance a process that went on in the first month of the third quarter in July. And you can expect other team is dealing with the balancing [indiscernible] beltways and stuff like that which is normal with any commissioning process. So we expect that by the end of Q3 we can probably provide our first reconciliation. But so far since suggest David that we're tracking along expectations.

Yes, after those initial issues would be predominantly oxide ore. Yes.

Would be great know. Super helpful. Thank you very much. I will hop back.

Thank you. Our next question is coming from Don DeMarco with National Bank Financial. Your line is live.

Thank you, operator. Good morning, Jorge and team. Guys just following along the line of questioning on the previous call on Séguéla. Jorge you mentioned you're expecting AISC in the order of about $1,000 an ounce going forward. But just wondering if you're going to be reporting AISC for Q3? And how should we model costs during this ramp up say over the next two or three quarters?

Yes, we will be reporting all-in sustaining costs for the quarter. I mean, I think, it will be reasonable to expect that those all-in sustaining figures for the initial months of production is going to be a bit distorted. But we plan to report we're making some adjustments or some adjustments have been made also to the original mine plan. As David described we have had to expose more fresh ore than the original plant contemplated. We had to move faster into two shifts in the pit in just one. So those things will have some bearing on the all-in sustaining in the short-term for sure. But long-term and long-term I'm talking about at this stage the next two quarters I would expect we are tracking within our guidance expectations. Luis, perhaps you want to expand anything on that?

Just to provide a bit more visibility. I mean that involves a cash cost per ounce in the range of $600 to $650 on average over the next couple of quarters depending as Jorge just described on some of the variability we might see as the mine continues to the mine plants continue to adapt. And AISC yes, it's -- we stick to our guidance of around $1,000 to $1,050 per ounce for the second half of the year on average.

Okay. Thank you for that. Just a second question looking at the Chesser acquisition. Clearly, this provides an opportunity in your pipeline. We're looking ahead to the close of the transaction in September. But beyond that could you give us a sense of the timing on some milestones you might expect a resource update in PEA. I don't know maybe it's too early to talk about potential first for or something. But what is the runway of catalysts and milestones that you envision for this?

Yes. For us Diamba Sud remains an exploration project. Chesser had advanced with a PEA and was trying to move beyond the PEA building on engineering towards pre-phased study. We are analyzing reviewing all of that work. There might be some engineering work. We want to continue pursuing. But largely for us Chesser remains an exploration part. Diamba Sud is today a sub-million-ounce deposit and as it sits today doesn't meet our criteria for developing a mine. But we -- having said that, we have are of a strong view that there is near opportunities to take that 5 million ounce deposit as it sits today well beyond the one million ounces. Diamba Sud sits at the core of one of the most productive gold belt in the West African region just kilometers away from Gounkoto and Loulo and B2 Gold's Fekola mine. So we are quite excited about the exploration opportunity this presents, but it is an exploration project for us. We still have to show success with the jewelry and move the ambush beyond the 1 million ounces before we contemplate development stage project. So it's an advanced exploration project for one we're very excited at them. We are currently developing an exploration budget. We want to be drilling Diamba Sud before the end of the year. But first things first we need to close the transaction. That will take place in September. That's our best estimate right now. And -- but our exploration team even [indiscernible] are working already on exploration budget for the second half of 2020.

Okay. That's helpful. And that's all for me. So good luck with the continued ramp up at Séguéla.

Thank you.

Thank you. [Operator Instructions] Okay. We appear to have no questions on the line at this time. So I will hand it back for any closing comments.

Thank you, Eli. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day.

This concludes today's conference and you may disconnect your lines at this time and we thank you for your participation.