Fortuna Silver Mines (FSM, Financial) is seeing strong growth in production. The excellent grade of gold and silver productions at the key mines of Caylloma and San Jose is forecast to position Fortuna robustly for long-term growth and enable it to soon emerge out of the current period of adversity linked to the declining ore prices.
Strong operational performance
For example, at San Jose, Fortuna delivered and processed 178,000 tonne at an average grade of 1.83 grams per tonne gold and 215 grams per tonne silver, leading to the production of 9,300 ounces of gold and 1.1 million ounces of silver. Moreover, San Jose forecast for this year is for 33,300 ounces of gold and 4.3 million ounces of silver.
At Caylloma, Fortuna produced 114,000 tonnes comprising of 1.86% lead, 3.3% zinc and approximately an average grade of 171 grams per tonne silver leading to 4 million pounds of lead, 7.5 million pounds of zinc and 536,000 ounces of silver. Considering the complete fiscal year 2015, Fortuna has forecast 2.2 million ounces of silver at this key mine, and remains well on the target to meet the forecast results.
The continued growth in the gold and silver productions at significant reduction in the costs at the key San Jose mine, Mexico and Caylloma mine, Peru illustrates the robustness of the excavation processes being employed by the company and generates significant cash flows to be invested for the future company growth, going forward.
Consensus estimates
For the forthcoming five years, the analysts who follow Fortuna are forecasting it to expand earnings at an average annual rate of 0%. For this year, analysts are estimating earnings growth of 22.92% compared to the previous year. Also, analysts are forecasting the earnings growth for next year of 49.15% compared to this year's estimated earnings.
The consensus estimate among 10 polled investment analysts evaluating Fortuna Silver Mines Inc. suggests that the company would outperform the market. This consensus rating is maintained since the investment analyst’s sentiments got better on Aug. 27, 2014. The earlier consensus estimate suggested investors to hold their position in Fortuna Silver Mines Inc.
The improvement in the analyst’s rating for the stock to outperform from buy depicts the analyst’s confidence in the growth of Fortuna with improved top line and bottom line expansions.
Conclusion
Overall, the investors are advised to invest into Fortuna Silver Mines Inc. looking at the impressive company valuations with the trailing P/E and forward P/E ratios of 32.33 and 19.55 respectively, depicting that the stock would not be costly for the investors, going forward. The profit margin of 8.97% is satisfactory. More importantly, Fortuna has a strong balance sheet with no debt and having total cash of $77.26 million, encouraging the company to plan for future growth investments.
