FVI: Q3 in Line and San Jose Feasibility Imminent

MATTHEW O'KEEFE, Cormark Securities Inc. (11/17/2009)
"Fortuna Silver offers investors exposure to a high-quality, junior producer, with a rapidly growing production profile. Its primary producing asset is the Caylloma silver-lead-zinc mine in Peru, which is ramping up production to 1.6+ MMoz of silver per year. Its secondary asset is the San Jose silver-gold project in Mexico, which is on track for production in 2011 and should add over 3 MMoz per year. The Management team is a proven mine developer and operator, with a successful track record of identifying and developing undervalued assets.

Q3 Results in Line

Fortuna Silver Mines reported results for the third quarter that are mostly in-line with adjusted EPS at $0.013 versus our estimate of $0.017 and CFPS, before working capital items, at $0.030 versus our estimate of $0.037. The company has maintained 2009 production guidance of 1.6 MMoz of silver, which we believe is achievable. Its cash position at the end of the quarter remains strong at $33.7 MM.

Pre-Feasibility Ahead for San Jose Project

In the next several weeks, Fortuna is expected to complete a feasibility study for the San Jose Project. This will be a major milestone on the San Jose production path, which should significantly de-risk the project and allow construction to begin early next year. Increasing Target To C$2.40 from C$2.30; Buy Recommendation

After updating our model for Q3 results and incorporating our revised silver price forecast, our NAV-based target price increases to $2.40 per share. Fortuna continues to prove itself as a solid mine operator at Caylloma, with upside potential from a positive feasibility study at San Jose this quarter."

 PRINT THIS PAGE   EMAIL THIS PAGE

Under SEC rules, analysts are required to disclose their interest in securities that they cover. We strongly encourage you to contact them to understand any potential conflicts of interest they may have.

Related Quotes: