FVI: Caylloma Operation Continues to Improve

HAYTHAM HODALY, Salman Partners Inc. (05/05/2010)
"As at the end of March 31, 2010, the company had cash and short-term investments of US$69.3 million and held working capital of US$72.73 million. During the quarter, the company spent roughly US$2.7 million on its properties, as well as US$1.6 million in plant and equipment costs. The company indicated that its current cash position and operating cash flows from its Caylloma mine should be sufficient to fund its capital expenditure requirements to bring the San Jose project to commercial production.
. . .Subsequent to the company's quarterly conference call, we made some slight adjustments to our valuation. We have:Incorporated slightly higher silver recoveries for the remainder of this year and going forward as the quarterly recoveries to date (87.89%) are higher than the full year budget of 85%. This results in a slight increase in our forecast contained silver production for 2010 to approximately 1.72 million ounces from 1.65 million ounces previously. Fortuna is currently forecasting silver production of 1.7 million ounces.
  • Incorporated the latest financial results, as well as the equity dilution associated with the latest financing completed throughout the quarter.
    • We continue to value the shares of Fortuna using a 2.1x multiple to mining assets, adding back non-mining assets at face value. As our adjustments are minimal and our NAV increases only slightly, our target price of Cdn$3.10 per share remains unchanged. Given our positive outlook on precious metals, in addition to encouraging results from the recently released prefeasibility study for the San Jose project and continued improvements expected at Caylloma, we reiterate our BUY recommendation on the shares of Fortuna Silver Mines."

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