Fortuna Mining Corp. 2026 Q2 Earnings Call

You may begin. Thank you, Holly.

Good morning, everyone, and welcome to Fortuna Mining's second quarter 2026 financial and operational results conference call. Joining today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer, and Co-founder. Luis Dario Ganoza, Chief Financial Officer. David Whittle, Chief Operating Officer, West Africa, and Cesar Velasco, Chief Operating Officer, Latin America. Today's webcast presentation and Q2 2026 results materials are available on our website at fortunamining.com. Before we begin, please note that statements made during today's call are subject to the reader advisories included in yesterday's news release, the webcast presentation, our management discussion and analysis, and the risk factors outlined in our annual information form. All financial figures discussed today are in US dollars unless otherwise stated.

The technical information discussed on this call has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services, and a qualified person as defined under National Instrument 43-101. Today's remarks will provide a concise overview of our second quarter results and our priorities guiding the business through the balance of the year. With that, I'll turn the call over to Jorge Ganoza.

Thank you, Carlos, and good morning to all. Thanks for joining us. The second quarter was another strong quarter for Fortuna. We delivered solid operating performance, generated significant free cash flow, maintained a very strong balance sheet, and advanced the two principal value drivers for next phase of growth, the Séguéla plant expansion and the Diamba Sud Gold Project, which together are key to delivering approximately 60% growth in annual production by mid-2028. Operationally, we produced 72,217 gold equivalent ounces in the quarter and 145,089 gold equivalent ounces year to date, keeping us on track to achieve annual production guidance. We experienced a fatal accident at our Séguéla mine involving a contractor truck operator. Our thoughts remain with his family, colleagues, and all those affected.

Safety remains our highest priority with a renewed focus on heavy model equipment controls, contractor management, and field verification of critical controls. For the quarter, our total recordable injury frequency rate was 121. Caylloma and Lindero ended the quarter with 1,154 and 990 days respectively, free of lost time injuries. Commendable performance for these two mines. Financially, the second quarter was a strong quarter across our key metrics, even with realized gold and silver prices lower than the exceptionally strong first quarter. Sales were $380 million. Adjusted attributable net income, $75 million or $0.25 per share. An adjusted EBITDA of $200 million, representing a strong EBITDA margin of 63%.

Free cash flow from ongoing operations was $85 million, bringing free cash flow from ongoing operations for the first half of the year to $260 million. At mid-year, the business has generated $661 million in sales, $420 million in adjusted EBITDA, and $186 million in adjusted attributable net income or $0.62 per share. This performance is translating directly into shareholder returns. During the second quarter, we returned $82 million through share buybacks. Year to date, we have returned $106 million or approximately 41% of free cash flow from ongoing operations through the repurchase of 10.8 million shares. We believe this demonstrates the quality of the portfolio and the focus of our capital allocation priorities.

We're funding growth, sustaining a strong balance sheet, and returning meaningful capital to shareholders all at the same time. While free cash flow was lower quarter-over-quarter, this was primarily due to the timing of income tax payments and higher sustained capital, partially offset by favorable working capital movements. With that as context, the bigger story for Fortuna is that we have moved from defining our next phase of growth to executing it, anchored by Diamba Sud and Séguéla plant expansion, and supported by strong cash generation and net cash balance sheet. During the quarter, both projects reached important milestones. At Diamba Sud, the feasibility study confirmed a robust development project in Senegal. At Séguéla, the board approved the 30% plant expansion in Côte d'Ivoire. I will leave the detailed execution plans, timelines, and operating details to our Chief Operating Officer for West Africa, David Whittle.

Together, these projects provide the production foundation for Fortuna's next step change in scale and support our path to exceed half a million ounces of annual gold production by mid-2028. Importantly, this growth is within our control. It is driven by assets already in our portfolio, in jurisdictions where we have operating experience, technical capability, and established teams. Not by acquisitions or external opportunities. At Diamba Sud, our focus is on advancing the project through the remaining permitting and the stabilization of tax regime. At Séguéla, the approved expansion builds on an asset that continues to demonstrate strong operating performance, geological potential, and scalability within our established West African platform. Our balance sheet remains a major strategic advantage. At quarter end, we had cash and short-term investments of $606 million, total liquidity of approximately $756 million, and a net cash position of approximately $435 million.

This financial strength allow us to fund the concurrent development of the Séguéla plant expansion and the Diamba Sud project, while preserving flexibility for exploration, business development, and opportunistic shareholder returns via the buyback. Our buyback program remains our preferred means of returning capital to shareholders, particularly at times when we believe our share price does not fully reflect the strength of our current performance, balance sheet, and growth pipeline. We will continue to evaluate repurchases with discipline, balancing the opportunity to buy back shares against our liquidity requirements or expanding needs and overall market conditions. On costs, consolidated AISC was $2,157 per gold equivalent ounce in the quarter. We expect second quarter to represent a peak in AISC for the year, with AISC trending down through the second half of the year as key operational items normalize.

Importantly, the cost drivers within our control support AISC remaining within our annual guidance range. The factors that we need to monitor closely are external. Royalties linked to metal prices, Argentina macroeconomic conditions, diesel, consumables, and contractor indexation, all of which could affect our full year AISC guidance. With that now, I will now turn the call over to the operating team to review the quarter in more detail. We can start with David Whittle, Chief Operating Officer for West Africa.

David? Thanks, Jorge. Before discussing the quarter, I'd like to highlight the progress we are making on the key growth initiatives that strengthen our West Africa platform.

These being the publication of the Diamba Sud feasibility study, which demonstrates robust project economics and supports a potential final investment decision in the second half of the year. Board approval of the 30% plant capacity expansion at Séguéla, following the progress and further expansion of the Somba underground project. At Diamba Sud, the ESIA has been approved and discussions with the government are progressing well, with final permitting expected soon. The feasibility study outlines average annual gold production of 158,000 ounces over the first four years and a 9.4-year mine life. A robust project that will only continue to strengthen from further exploration and regional opportunities.

At Séguéla, the $109 million process plant expansion, together with the Somba underground project, is expected to support average annual gold production of more than 200,000 ounces over the next decade, reinforcing Séguéla's position as a cornerstone asset in our West Africa platform. Together, Diamba Sud and Séguéla, underpinned by their mineral reserve and resource base, establish the production foundation for our West African operations and support Fortuna's path to producing at a rate of 500,000 ounces of gold per year by 2028. Turning now to the quarter, Séguéla delivered another solid operating performance, producing 41,683 ounces of gold in line with the mine plan. First half mine production now stands at 83,699 ounces and remains firmly on track to meet guidance.