I NVESTING IN
SILVER
I NVESTING IN
GROWTH
2
2
3
3
San Jose Project
Ag-Au, Developing Project
Caylloma Mine
Ag-Zn-Pb, Operating Mine
Photo: San Jose Underground Ramp
SMALL MOVES. BIG GROWTH.
pg.04
pg.05
pg.15
pg.20
pg.22
Our Vision.
Our Mission.
Operating
Highlights
President’s
Letter
Chairman’s
Letter
Fortuna’s
Projects
pg.32
Silver’s
Run
pg.35
Financial
Statements
All figures expressed in Canadian dollars unless otherwise stated.
Growth, production and silver are key themes to the Fortuna story. Fortuna Silver
Mines is progressing quickly towards becoming a mid-tier silver producer. Our Caylloma
silver-zinc-lead mine in Peru completed its first full year of operation in 2007 with
production rising steadily through the period. At our 76%-owned San Jose silver-gold
project in Mexico, high-grade drill results and pre-feasibility work continue to fast-track
development towards engineering and construction of a mine and processing plant.
Fortuna has established a focused and aggressive strategy for rapid growth in
Peru, Mexico and all of Latin America. Management’s extensive experience in Latin
American mining, exploration and business development provides a key element in
achieving this goal.
4
4
“We promote a
stimulating work
environment of
high-standards and
best-practices that
fosters respect,
teamwork and social
and environmental
responsibility.”
03
01
02
04
05
06
07
01 SIMON RIDGWAY, Chairman of the Board 02 JORGE A. GANOZA DURANT, President, CEO and Director 03 THOMAS I. VEHRS, Vice President, Exploration
04 JORGE R. GANOZA AICARDI, Vice President, Operations 05 MARK MOSELEY-WILLIAMS, Vice President, Project Development
06 LUIS DARIO GANOZA DURANT, Chief Financial Officer 07 MANUEL RUIZ-CONEJO CARLOS, Vice President, Business Development
OUR VISION is to build a company valued as a leading silver miner,
centered on developing natural resources in Latin America. We operate
with a commitment to profitability, growth and high standards, while
keeping the well-being of our workers, neighboring communities and
the environment foremost in our operations.
OUR MISSION is to maximize shareholder value through the rational
acquisition, exploration, development and mining of silver in Latin
America with a commitment to sustainable growth of geologic silver
resources and annual metal production.
5
5
OPERATING HIGHLIGHTS
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
Total
2007
2007
2006
Ore Milled (tonnes)
52,687
63,806
65,806
68,615
250,913 33,973
Silver (oz)
Lead (tonnes)
Zinc (tonnes)
Unit cash production cost
95,473
119,110
132,450
139,433
486,466 58,844
646
952
1,178
1,605
1,049
1,712
1,124
1,805
3,771
6,300
326
611
(US$/tonne)
$42.62
$56.65
$49.15
$52.41
$48.04 $38.70
Unit net smelter return
(US$/tonne)
$90.26
$123.65
$133.70
$118.41
$117.84
-
FINANCIAL HIGHLIGHTS
12 mos ended
Dec 31, 2007
15 mos ended
Dec, 2006
Sales
EBITDA*
Income (loss) before income taxes and non-controlling interest
Net loss
Net loss per share, basic & diluted
Total assets
(000s)
$31,667
12,891
1,380
(2,789)
(0.04)
124,446
(000s)
3,372
-
(3,854)
(4,348)
(0.12)
59,194
*EBITDA was calculated by adding back to Operating Income < Write-off of deferred exploration costs, stock-based compensation,
depreciation, depletion and accretion. >
2007 EBITDA
1Q
2Q
3Q
4Q
1.950
2.357
4.115
4.469
Millions of Canadian Dollars
1
2
3
4
5
6
6
7
7
RAISED
$34.2 MILLION
THROUGH
PRIVATE
PLACEMENT
GENERATED
$31.6 MILLION
IN CONCENTRATE
SALES
8
8
9
9
CONSOLIDATED
STRONG
OPERATING TEAMS
AT BOTH SAN JOSE
AND CAYLLOMA
CLEAR PATH TO
BUILD
A MID-TIER
SILVER
PRODUCER
10
10
11
11
Key Milestones 2007 >
Caylloma
Completed first full year of
production
Completed 15,318 meters
of exploration drilling
Increased plant throughput from
an initial 500 tpd to 950 tpd
(June 2008)
With respect to January 2007,
Ag – Pb concentrate production
increased 176% and Zn
concentrate increased 140%
(June 2008)
San Jose
Announced five-fold increase
in silver equivalent resources
in March 2007
Outstanding drill results
continued
Underground ramp development
of 726 meters (June 2008)
Advancing with mine and
plant engineering, hydrologic
studies, permitting and long-term
community agreements
12
12
13
13
Key Goals for 2008 >
Caylloma
Increase production to
1050 tpd
Optimization of crushing and
mill circuits
Exploration and development
of high grade silver veins
San Jose
Complete Trinidad area in –
fill drilling
Underground development and
mine design
Metallurgical testing and process
design
Engineering and design of
Infrastructure and services
Establish long-term community
agreements
14
14
15
15
President’s Letter >
“I am extremely pleased to present this report of our achieve-
ments in 2007 and our plans for 2008 and beyond. In all
key facets of operations, from exploration to production and
personnel to funding, we met or exceeded our objectives
and your company delivered a year of solid growth. As a re-
sult, we enter our next phase of growth in a strong financial
and strategic position.”
Building a Mid-tier Silver Producer. Fortuna is a young company. We began only
three years ago with a vision of building a Mid-tier silver producer in Latin America,
focusing on Peru and Mexico, the world’s top silver-producing countries. In only a short
time, we have acquired two high-quality assets one of which has become a profitable
mine.
Funding of $48 Million in 2007. Financially we have never been stronger. We raised
$34.2 million by way of private placement in January 2007 and warrant conversions
added another $21.06 million. Our funding mix also includes growing cash flow from
the Caylloma silver-lead-zinc mine in Peru which achieved its first full year of produc-
tion in October of 2007. Metal sales reached $31.6 million during 2007 and net cash
flow from operations totaled $13.24 million. At year-end, we reported a debt-free cash
position of $47.2 million. We are now fully funded to meet near-term objectives and
carry out our development plans.
16
16
17
17
Improving Financial Performance. Our financial performance improved steadily
throughout the year, and in the fourth quarter of 2007 we generated net income of
$1.41 million despite lower base metal prices during the period. Overall, we recorded
a net loss for the year of $2.79 million, compared to a loss of $4.35 million in 2006.
Operating income (before interest payments and taxes) was $0.11 million after deduct-
ing $6.97 million of stock-based compensation charges.
Outstanding Potential at San Jose. While Caylloma will help Fortuna grow for years
to come, we are most excited about the continuing work at our San Jose project in
southern Mexico. The project is operated as a joint venture between Fortuna (76%)
and Continuum Resources Ltd. (24%). Work carried out to date on the Trinidad Area
has defined a significant Ag – Au resource where we have advanced from exploration to
in-fill drilling and preliminary engineering, working towards producing a pre-feasibility
study. We envision the Trinidad Area will become a significant, long-term producer of
It’s important to note that the cash flow generated from Caylloma was invested in mine
silver and gold and we have decided to fast-track permitting and development.
optimization and expansion. In fact, Caylloma totally self-funded its capital expendi-
tures during the year, a notable achievement for a new mine. We have budgeted another
US$10million for mine improvements and exploration in 2008, all of which will come
from internal cash generation. As Caylloma increases production and efficiency, the
trend will be towards greater profitability.
Increasing Production. One of our primary goals in 2007 was to increase production
Current Indicated Resources at the Trinidad Area (NI 43 –
101 compliant - see table pg. 29) of the San Jose Project
total 17.7 million ounces of silver equivalent, with 49 mil-
lion ounces of silver equivalent Inferred. In-fill drilling has
been carried out in 2007 and will continue through 2008
until Measured and Indicated Resources supporting a pre-
at Caylloma throughout the year. We began 2007 at a rate of 500 tonnes per day (tpd),
feasibility study are achieved.
“Caylloma totally
self-funded its capital
expenditures during
the year, a notable
achievement for a
new mine.”
and by December we had reached a rate of 750 tpd. At the time of this report, we were
operating at 950 tpd. Silver, lead and zinc production in the fourth quarter increased
46.1%, 53.2% and 74% respectively over the first quarter.
Caylloma is a large project, covering more than 26,000 hectares, but current produc-
tion comes from only two veins on a very small portion of the concession package. Many
intriguing targets require further exploration so part of our operating budget for 2008 is
earmarked to explore those areas with the most potential to add to our production.
San Jose’s Rapid Development. We have outlined an ag-
gressive, US$23 million budget which includes in-fill drilling, engineering and develop-
ment programs for 2008. Our plan is to secure all permits and complete underground
access to the upper 200 meters of mineralization by 2009. Preliminary engineering
and in-fill drilling are underway, leading to a pre-feasibility study. We plan to have com-
pleted by year end preliminary mine design and site selection for plant facilities, infra-
structure and waste/tailings disposal areas. We have also contracted for environmental
impact and hydrological studies.
18
18
19
19
Exploration will continue on the highly prospective 58,000 hectare land package that
surrounds the project. Our work in 2008 will include reconnaissance and geological
mapping to define new targets.
The Precious Metals Run Continues. At the time of this report, metals prices
continued their historic bull run. Silver was trading consistently above US$16 an ounce
with gold well above US$800. The fundamentals that have driven this market—Asian
growth, a weakening U.S. dollar, inflation, and the ongoing silver supply/demand gap-
support continued strength for the demand of metals.
Our Most Important Asset. Finally, we cannot realize our vision without strong man-
agement and staff. That’s why we added many talented people to the Fortuna team
during the year, including key positions in mine management, operations, geology/
exploration and project and business development. I am incredibly gratified for the way
everyone at Fortuna has worked hard at building such a dynamic team. I look forward
to reporting continued success throughout the year.
Jorge A. Ganoza Durant,
President, CEO and Director
20
20
21
21
To Our Shareholders >
A Year of Rapid Growth. We have completed our first full year of production at the
drill intersections, indicates San Jose will become an important asset and a significant
Caylloma Mine in Peru. I’m pleased to report that the mine’s performance has been
source of revenue growth for years to come.
better than anticipated, with a profitable operating income of US$13 million. As we
increase production and move into Caylloma’s second year of operations, we expect
Strategy for Continued Growth. Looking ahead, we expect to see our first revenue
another successful year ahead. At both Caylloma and San Jose, we have reached im-
from San Jose in mid-2010. At that point, with two Latin American mines in opera-
pressive milestones in a short period. Recent advances in exploration and production
tion, we also plan to have identified and acquired several new exploration and/or de-
indicate we will continue our record of growth in both Peru and Mexico.
velopment projects. While we are focused on Peru and Mexico, we are investigating
opportunities in other countries of Central and South America. The great mineral belts
Continued Strength in Silver. We have been helped, of course, by unprecedented
of this region transcend boundaries, of course, and there are many vast tracts where
strength in the metals markets. Our founding business model was to capitalize on ex-
exploration has to date been minimal if not non-existent. In addition, we are seeking
pected high prices for silver, along with anticipated strength in gold and base metals.
opportunities to acquire advanced assets and mid-scale, operating mines. Manage-
At the same time, we believed the greatest opportunity for new discoveries would be
ment’s knowledge of regional mining, exploration, geology, regulatory environments
found in Latin America.
and business practices will continue to allow Fortuna to identify and acquire opportu-
Planned Diversity. Our model is proving both resilient and profitable. The price
nities.
trend for silver appears robust, driven by the same factors driving the gold market—
Teamwork. High metals prices, great projects and new discoveries have all been
weakness in the U.S. dollar, growing inflation fears and investment purchases. Thus
essential to our growth, of course, but I believe an equally important ingredient—if not
we’re experiencing silver prices well above US$16 per ounce. As the San Jose project
the most important—has been putting together the right team. I wish to thank every-
comes on stream, we will add considerable gold to our product mix of silver, lead and
one at Fortuna for their spirit of enterprise and teamwork, and I look forward to even
zinc. This combination will offer some diversity with both precious and base metals,
greater accomplishments ahead.
although price trends for all four commodities have remained fairly consistent over the
past three years.
Developing San Jose. While Caylloma’s production growth is ahead of schedule
(with considerable potential for resource expansion), our most important catalyst for
growth is clearly San Jose. Exploration in 2007, which included a number of high-grade
Simon Ridgway,
Chairman
22
22
23
23
Caylloma Mine
Highlights
• First full year of operation in 2007
• Production ahead of projected levels
• Mine and processing plant optimization
• New resource calculation for 2008
• Budgeted US$10 million for exploration, devel-
opment, tailings and plant improvements in 2008
• Over 12,000 hectares of ground to explore
Commodities:
Zinc, Lead, Silver & Gold
Location:
Arequipa, Peru
(Latitude 15° 13” S, Longitude: 71° 49” W)
Ownership:
100% by Fortuna Silver Mines Inc.
Deposit Type:
Intermediate-sulfidation epithermal deposit
Status:
Mine and processing plant operating at 950 tpd
with expansion to 1050 tpd underway.
Actively exploring for new discoveries.
24
24
Caylloma Mine >
Overview. Through its wholly-owned Peruvian
subsidiary Minera Bateas S.A.C., Fortuna pur-
chased a 100% interest in the past-producing
Caylloma Mine and related concessions in 2005.
Following significant upgrading and modernization
of the processing plant, the mine was returned to
25
25
“Through constant optimizations
in the processing plant we have been able
to surpass our production targets.”
A new updated resource estimate, based on drilling conducted through the year on the
Animas vein, is expected during 2008.
Production Higher than Anticipated. Through a continuous optimization process,
the plant delivered a greater throughput capacity than the 700 tpd originally contem-
plated in the first production phase. Production rates increased throughout the period,
production in October of 2006. In 2007, its first full year of operation, Caylloma produced
beginning at 500 tpd and reaching 750 tpd by year end. By June of 2008 the plant
486,466 ounces of silver, 6,300 tonnes of zinc and 3,771 tonnes of lead from 250,914
was processing 950 tpd. Management anticipates expansion to 1,050 tpd by the end
tonnes of ore. Higher production is anticipated for 2008.
of 2008. Lead+silver and zinc concentrates are delivered weekly to port facilities in
Fortuna controls over 12,000 hectares encompassing the Caylloma Mining District and
nearby Sukuytambo District of southern Peru. The rich epithermal deposits of the Caylloma
Bonanza Grades on the Bateas Vein. Mining is presently concentrated on two
District have been worked intermittently since the start of the Spanish colonial period in
principal veins, Animas and Santa Cata. Following discovery of bonanza silver grades on
the 1500s, with historical production estimated at over 200 million ounces of silver.
the Bateas vein in 2007, underground development began with a goal of incorporating
nearby Callao for sale on international markets.
AS OF YEAR-END 2007, MINERAL RESERVES AND RESOURCES AT CAYLLOMA WERE
CALCULATED AS FOLLOWS:
Bateas mineralization into the production mix for 2008.
Expanding Resources. Exploration of the rich Caylloma district is ongoing with a
goal of bringing additional veins into production. More than 15 major mineralized veins
Proven & Probable Reserves:
343,046 tonnes @ 454 gpt Ag, 0.8 gpt Au, 0.1% Pb,
have been identified within the district.
0.1% Zn: Contained Ag 5,017,466 oz.
Measured and Indicated Resources:
1,173,326 tonnes @ 143 gpt Ag, 0.7 gpt Au, 4.2% Zn:
Contained Ag 5,426,326 oz.
Inferred Resources:
1,415,499 tonnes @ 305 gpt Ag, 0.4 gpt Au, 2.0% Pb,
3.1% Zn: Contained Ag 13,825,919 oz.
We drilled 15,318 meters to test various targets during 2007 and we have budgeted
US$1.7 million for exploration in 2008.
26
26
27
27
San Jose Project
Highlights
• 17.7 M oz silver equivalent in Measured and
Indicated Resources
• 49 M oz silver equivalent in Inferred Resources
• 26,605 meters of drilling in 2007: 17,694
meters of in-fill drilling in Trinidad Area and
8,911 meters of exploratory drilling in the San
Ignacio Area
• Budgeted US$23 million for exploration, in-fill
drilling, engineering, design and development
in 2008
• Secured surface right agreements for initial
30 hectares
Commodities:
Silver & Gold
Location:
Oaxaca, Mexico in the Taviche Mining District
(Latitude 16° 41” n, Longitude: 96° 42” W)
Ownership:
Fortuna Silver Mines Inc. 76%,
Continuum Resources Ltd. 24%
Deposit Type:
High-grade, low-sulfidation epithermal deposit
Status:
Resources definition, developing project
28
28
29
29
San Jose Project >
Overview. Located only an hour’s drive from the city of Oaxaca, San Jose contains a
Current NI 43-101 Resources. As of March 31, 2007, mineral resources are esti-
high-grade silver and gold-bearing system with outstanding exploration potential. Indicated
mated as follows (based on drill results from 2006):
Resources in the property’s Trinidad vein system average 262.6 g/t silver and 2.19 g/t gold.
The 58,000-hectare land package lies in a silver-gold vein district with a previously unrec-
Table 1. San Jose Mineral Resource - Cutoff Grade of 150 g/t Silver Equivalent
ognized potential.
Resource Classification
K tonnes Eq Ag (g/t) Silver (g/t) Gold (g/t) Silver (koz) Gold (koz)
San Jose operates under a joint venture between Fortuna (76%) and Continuum Resources
Indicated Mineral Resources:
Ltd. (24%). Both parties contribute to costs in proportion to their respective ownership
percentage.
- Trinidad Vein
- Bonanza Vein
- Paloma Vein
824
599
48
Engineering and Development in 2008. Based on outstanding drill results achieved in
Total Indicated Resource
1,471
2006 and 2007, Fortuna´s management team decided to accelerate the pace of develop-
ment of the Trinidad Area. Engineering and design work has begun to build a 1,000 to
Inferred Mineral Resources:
1,500 tpd processing plant. The scope of the 2008 program includes:
•
In-fill drilling
• Underground development and mine design
• Metallurgical testing and process design
•
Infrastructure and services (hydrologic studies, energy, etc.)
• Work on establishing long-term community agreements
- Trinidad Vein
- Bonanza Vein
- Bonanza Splay Vein
- Paloma Vein
- Stockwork Zone
Total Inferred Resource
1,687
1,609
15
373
214
3,898
322.80
453.30
263.80
374.00
376.70
443.60
922.50
275.50
281.60
391.50
232.20
310.50
185.20
262.60
268.00
272.60
694.20
194.30
196.60
260.60
1.78
2.80
1.54
6,151.60
5,979.80
285.80
47.20
53.90
2.40
2.19
12,417.20
103.50
2.13
14,536.10
115.50
3.35
14,102.00
173.30
4.48
1.59
1.67
334.80
2,330.10
1,352.70
2.20
19.10
11.50
2.57
32,655.70
321.50
We have retained AMEC plc, an international project management and engineering ser-
Indicated Resources contain an estimated 17.7 million silver-equivalent ounces. In-
vices company, to conduct the Scoping Study. The Scoping and Pre-feasibility studies will
ferred Resources are estimated to contain 49.1 million silver-equivalent ounces. Silver
include a mine design plan and site selection for plant facilities, mine infrastructure and
equivalency estimates were derived using US$10.30/oz for silver and US$525/oz for
waste and tailings disposal areas. Underground development has also begun on a 2,000
gold. The resulting Ag:Au ratio is 51:1. Metallurgical recoveries and net smelter returns
meter decline main access ramp. At that time of the report, 720 meters of construction
are assumed to be 100% only for the purposes of estimating silver equivalency.
had been delivered.
30
30
31
31
San Jose Project >
Michael G. Hester of Independent Mining Consultants, Inc. is the Qualified Person for the
The 2007 drill program encountered a number of high-grade intersections, including
purposes of reporting of the Mineral Resources as defined by the Canadian Securities Ad-
(based on a cutoff grade of 100 g/t silver equivalent):
ministrators’ National Instrument 43-101.
Other Drill Targets on San Jose’s 50,000 Hectares Land Package. The San Jose land
package contains vast areas of unexplored but very prospective ground. A key part of our
work in 2008 includes ongoing generative exploration, including geochemical and geophys-
ical work. Already over 17,000 geochemical soil and stream sediment samples have been
collected. So far this work has identified at least four areas of interest that are receiving
follow-up detail exploration.
Exploration and Resource Definition In-Fill Drilling. Fortuna completed 26,605 meters
of drilling in 2007. In-fill drilling focused on the Trinidad Area (17,694 meters) and San
Ignacio Area (8,911 meters).
Drill Hole
SJO-054
Including
and
and
and
SJO-055
SJO-057
SJO-060
including
and
SJO-063
SJO-065
SJO-068A
SJO-068A
SJO-071
SJO-074
SJO-075
SJO-075
SJO-079
SJO-079
SJO-079
SJO-081
including
From
(m)
To
(m)
Interval
(m)
Au
(g/t)
2.48
7.00
4.52
4.58
8.32
Ag
(g/t)
283
510
692
633
848
11.86
1151
6.06
10.85
32.49
17.61
4.44
1.43
3.7
3.9
1.0
1.5
1.6
2.8
7.26
1.41
588
588
2017
637
1224
183
395
563
131
758
183
264
867
143
104.85
6.30
6.35
12.80
9.00
2.50
11.55
25.10
5.35
3.80
2.60
20.90
7.63
6.78
7.00
1.25
21.86
2.27
0.89
34.25
2.35
13.60
1039
25.35
1.15
1.34
9.09
113
634
Ag Eq
(g/t)
Ag Eq
(oz/T)
News
Releases
410
867
922
867
1272
1756
897
1141
3674
1535
1450
256
581
763
182
834
265
407
1237
215
1733
182
1098
30-May-07
16-Jul-07
16-Jul-07
16-Jul-07
16-Jul-07
16-Jul-07
21-Aug-07
21-Aug-07
21-Aug-07
21-Aug-07
21-Aug-07
21-Aug-07
5-Sep-07
5-Sep-07
5-Sep-07
5-Sep-07
12.0
25.3
26.9
25.3
37.1
51.2
26.1
33.3
107.2
44.8
42.3
7.5
17.0
22.3
5.3
24.3
7.7
11.9
36.1
6.3
50.5
5.4
32.0
360.70
360.70
411.25
425.30
446.00
173.60
149.90
129.70
129.70
143.60
292.70
423.50
299.5
364.8
164.2
221.3
397.97
432.23
345.31
441.50
482.45
322.10
345.20
465.55
367.00
417.60
438.10
455.00
176.10
161.45
154.80
135.05
147.40
295.30
444.40
307.1
371.6
171.2
222.5
419.83
434.50
346.20
475.75
484.80
347.45
346.35
32
32
33
33
Silver Market and Uses >
SILVER IN 2007. Industrial and Investment Demand Keep Prices High.
The biggest gains in the supply of silver came from mines, up 3.5% from 2006. As
*All prices are in US dollars unless otherwise stated
prices remain high, new production will come on stream and continue a trend that has
accelerated dramatically in the past decade. Mine production has increased 24% since
The average silver price for 2007 rose to $13.38 per ounce, a 16% increase over 2006
1998, more than offsetting declines in government sales and scrap supply.
and the fourth straight year of double-digit annual percentage gains. By May of 2008, silver
was trading well above $16.00 per ounce (hitting $20.80 on March 6) and by late May had
Despite an expected decline in industrial demand and continued growth in mine supply,
exceeded $18.00.
the Silver Institute predicts another year of price gains in 2008. The biggest factor in
this forecast is further strength in investment demand, fueled mostly by growing infla-
The primary factors behind silver’s climb in 2007 were higher industrial demand and in-
tion fears and US dollar weakness.
creasing investment purchases. Industrial demand for silver more than offset declines in
jewelry, silverware and especially photography. The stronger investment buying held to a
trend established over the past decade as buyers finally removed the last of the silver over-
hang generated during the massive dishoarding in the 1980s. The surge in silver Exchange
Traded Funds (ETFs) accelerated this process since the investment vehicles were launched
in 2006.
While industrial demand was up 7% from 2006, total world silver demand declined by
2.1%. The sharpest drop by far was from photography, where the 128.3 million ounces
used amounted to a 10.9% decrease from the previous year and 45% decrease over the
past decade.
What’s driving the growth in industrial demand? Silver is the best electrical and thermal
conductor of all metals, so it is used widely in electronic and many other industrial/techni-
cal applications. As the demand for computers, cell phones, televisions and high-tech uses
grows, so does the need for silver as an essential component. That’s why industrial demand
in 2007 rose the fastest in North America (8.4%), Asia (3.5%) and Europe (3%).
WORLD SILVER SUPPLY IN 2007
(MILLION OUNCES)
75%
Mine Production
WORLD SILVER DEMAND IN 2007
(MILLION OUNCES)
Source: The Silver Institute: World Silver Survey 2008
4%
Coins/Medals
18%
Jewelry
51%
Industrial
5%
20%
Government Sales
Silver Scrap
7%
Silverware
5%
Investment
15%
Photography
34
34
35
35
07 Financial Statements
pg.36
MD&A
pg.50
pg.51
pg.52
pg.54
pg.55
pg.71
Consolidated
Balance
Sheet
Consolidated
Statement of
Deficit
Consolidated
Statement of
Operations
Consolidated
Statement of
Cashflow
Notes and
Consolidated
Financial
Statements
Corporate
Information
36
36
37
37
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year ended December 31, 2007
CHANGE IN
FISCAL
YEAR END
In August, 2006, Fortuna Silver Mines Inc. (“Fortuna” or the “Company”) changed its fiscal year-end
from September 30th to December 31st. The Company’s year-end now matches that of its Peruvian
subsidiary which owns the Caylloma Mine, resulting in an increase in the efficiency of the Company’s
accounting operations. A Notice of Change in Fiscal Year End was filed on sedar.com.
Therefore, the accompanying consolidated financial statements are for the 12 month period ended De-
cember 31, 2007, with comparatives to the transitional 15 month period ended December 31, 2006
(further referred to as “2006”).
GENERAL
This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited
consolidated financial statements of the Company for the year ended December 31, 2007 and fifteen
month period ended December 31, 2006, prepared in accordance with Canadian generally accepted
accounting principles. This MD&A is prepared as of March 21, 2007. All amounts are expressed in
Canadian dollars unless otherwise indicated.
BUSINESS OF
THE COMPANY
Fortuna Silver Mines Inc. is a mining company focused on producing silver and developing silver proj-
ects in Latin America. The Company’s principal assets are the Caylloma poly metallic Mine in southern
Peru and the San Jose Silver-Gold Project in southern Mexico.
RECENT
DEVELOPMENTS
AND 2006
HIGHLIGHTS
Financial and Operating Results
In 2007 the Company generated a net loss of $2.79 million compared to a net loss of $4.35 million in
2006. For the fourth quarter of 2007 the Company generated a net profit of $1.41 million compared
to $0.02 million in the corresponding period of 2006. Cash generated by operating activities for 2007
was $13.24 million compared to cash outlfow $0.78 million in 2006, and $5.86 million for the fourth
quarter of 2007.
The Company´s Caylloma mine had its first full year of operations in 2007. In the twelve months
250,913 tonnes of ore were treated, and metal production amounted to 486,465 ounces of silver,
6,300 MT of zinc, and 3,771 MT of lead. Cash production cost per tonne for the year was US$48 and
the corresponding unit net smelter return (NSR) was US$118 (cash production cost is a non-GAAP
measure. See page 8 for reconciliation of cash production cost to the cost of sales in the consolidated
statement of operations).
San Jose project – resources and project update
On March 12, 2007 Fortuna published an updated resource estimate for San Jose property based on
an 11,000 meter drilling program conducted during the first half of 2006. The results significantly
exceeded management’s expectations, reporting:
Indicated Mineral Resource: 1.47 million tonnes grading 262.6 g/t Ag and 2.19 g/t Au containing
17.7 million Ag equivalent ounces.
Inferred Mineral Resources: 3.9 million tonnes grading 260.6 g/t Ag plus 2.57 g/t Au containing
49.1 million Ag equivalent ounces.
Silver equivalency estimates were derived using US$10.30/oz for silver and US$525/oz for gold yield-
ing a Ag:Au ratio of 51:1. Metallurgical recoveries and net smelter returns are assumed to be 100%.
This represented nearly a five fold increase in the inferred resource and the addition of 17.7 million
indicated Ag equivalent ounces compared to the previously estimated resource. During 2007, the
Company executed a 26,605 meter drilling campaign. Based on this work a new resource estimate is
expected to be produced in the second quarter of 2008.
In late 2007 the engineering phase started at San Jose project. The Company expects to conclude its
permitting process and a pre-feasibility study in 2008 and based on existing information it plans to go
directly into detailed engineering and construction upon conclusion of the pre-feasibility.
Financing
During the past year, the Company was successful in raising significant funding by way of an equity
financing; in January 2007 the Company completed a brokered private placement of 18.0 million units
at a price of $1.90 per unit, providing gross proceeds of $34.20 million. Each unit consists of one
common share and one-half of a common share purchase warrant. Each whole warrant entitles the
holder to purchase one additional common share of the Company for 18 months at a price of $2.30.
Management Additions
On October 25, 2007 the Company announced the appointment of Mark Moseley-Williams to the new
position of Vice President of Project Development, and on February 6, 2008 the Company announced
the appointment Manuel Ruiz-Conejo to the new position of Vice President of Business Development.
Mr. Moseley-Williams is based in Oaxaca at the San Jose project site, and Mr. Ruiz Conejo is based out
of Fortuna´s Lima office.
38
38
39
39
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
Year End Report – December 31, 2006
SELECTED
ANNUAL
INFORMATION
Sales
Income (loss) before income taxes
and non-controlling interest
Net loss
per share, basic and diluted
Total assets
Total long-term financial liabiliites
Twelve month
period ended
Dec. 2007
31,667
Fifteen month
period ended
Dec. 2006
3,372
1,380
(2,789)
(0.04)
124,446
433
(3,854)
(4,348)
(0.12)
59,194
97
$
$
$
$
$
$
000
000
000
000
000
QUARTERLY
INFORMATION
The following table provides information for the eight fiscal quarters ended December 31, 2007:
Quarters Ended
$ 000
$ 000
Revenues
Net Income (loss)
Net Income (loss)
per share, basic
Net Income (loss)
per share, diluted $
$
31-12-07
7,930
1,411
30-09-07 30-06-07
8,797
947
9,201
(3,391)
31-03-07
5,739
(1,756)
31-12-06 31-09-06 31-09-06 31-03-06
0
0
(2,371)
(1,745)
3,370
21
0
363
0.02
(0.05)
0.01
(0.03)
0.00
(0.04)
0.01
(0.09)
0.02
(0.05)
0.01
(0.03)
0.00
(0.04)
0.01
(0.09)
FINANCIAL
RESULTS
During 2007 the Company generated $31.67 million of sales compared to $3.37 million in 2006.
The previous period included only two months of commercial production. During 2007 mine operating
income was $13.11 million and operating income was $0.11 million after deducting $6.97 million of
stock based compensation charges. These results reflect the healthy margins of the Company´s operat-
ing Caylloma mine. Operating income attributable to Caylloma for the year was $8.97 million.
For the last quarter of 2007 the Company recorded record net income of $1.41 million compared to
$0.02 million in the corresponding quarter of 2006. With respect to previous quarters this increase
was achieved in spite of lower zinc prices through increased concentrate sales. The losses of the first
and third quarters of 2007 were driven by stock-based compensation charges of $2.31 million and
$4.12 million respectively.
Total cost of sales for 2007 was $18.45 million, of which $5.77 million was depletion, depreciation,
and accretion (2006: $2.18 million and $0.92 million respectively). This corresponds entirely to
production and sales from Caylloma mine.
Sales and administrative expenses for 2007 totalled $6.13 million compared to $2.03 million for the
fifteen months ended December 31, 2006. The increase was largely due to the fact that 2007 was
the first full year of operations of Caylloma mine, as well as due to higher total corporate expenses as-
sociated to the growth of the company. The stock based compensation charge totalled $6.97 million
for the year ended December 31, 2007, compared to $4.13 million for the fifteen month period ended
December 31, 2006.
Interest and other income and expenses amounted to net income of $1.53 million compared to net
income of $0.47 million for the fifteen months ended December 31, 2006. In 2007, this amount
included $1.29 million of interest earned, and the increase was due to the Company holding a signifi-
cantly larger average cash balance for 2007 compared to 2006.
Net gain on commodity contract for 2007 was $1.56 million and was comprised of a $0.01 million
realized loss on forward lead and zinc contracts entered into with a bank to fix the final settlement price
of metal delivered in concentrates, where the final settlement price is yet to be set at a future quota-
tional period according to contract terms, a realized gain of $0.10 million on lead and zinc derivative
contracts (Asian style options) entered into with a bank as part of a medium-term price protection
program, and $1.45 million unrealized gain on derivative positions outstanding at year end associated
with the same price protection program.
Interest and finance expenses for 2007 were $0.09 million compared to $0.02 million in 2006. These
interest expenses relate to short-term loans taken in the last quarter of 2006 and paid off in the first
quarter of 2007.
Foreign exchange loss recorded for the year was $1.67 million, compared to a gain of $0.67 million for
the fifteen months ended December 31, 2006. The Company holds its foreign assets in US and local
currencies which have depreciated against the Canadian dollar throughout 2007. Under the temporal
method for translation of financial statements which the Company currently uses, the losses arising
from the translation to the stronger Canadian dollar are included in the statement of operations.
Write-off of deferred exploration costs was $0.01 million in 2007 compared to $0.04 million for the
fifteen months ended December 31, 2006. This consisted mainly of regional exploration expenses.
In 2007, the Company recognized a loss on disposal of capital assets of $0.06 million in connection
with disposition of minor equipment at Caylloma mine.
The $4.26 million Income tax provision recorded in 2007 (2006: $0.49 million) consisted of current
and future income tax expense. Current income tax for the period, including the worker profit sharing
plan regulated by Peruvian law was $0.54 million (2006: nil). Future income tax expense, amounting
to $3.7 million (2006: $0.49 million) mainly related to temporary differences arising on amounts of
mineral properties at Peruvian operations.
40
40
41
41
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
Year End Report – December 31, 2006
RESULTS OF
OPERATIONS
Peru – Caylloma Poly metallic Mine
Caylloma Mine
Tonnes milled
Grade per tonne
Silver (oz)
Lead (%)
Zinc (%)
Recoveries
Silver (%)
Lead (%)
Zinc (%)
Production (metal contained)
Silver (oz)
Lead (tonnes)
Zinc (tonnes)
Unit cash production cost (US$/tonne)
Unit Net Smelter Return (US$/tonne)
Mar-31
Jun-30
Sep-30
Dec-31
Total
52,687
63,806
65,806
68,615
250,913
2.23
1.39
2.65
71.39
88.59
84.16
95,473
646
1,178
42.62
90.26
2.29
1.67
2.92
73.28
89.22
86.22
119,110
952
1,605
46.65
123.65
2.45
1.80
3.01
75.75
88.50
86.51
132,450
1,049
1,712
49.15
133.70
2.43
1.87
3.09
77.74
87.51
85.09
139,433
1,124
1,805
52.41
118.41
2.36
1.70
2.93
74.75
88.43
85.56
486,466
3,771
6,300
48.04
117.84
The 100% owned Caylloma mine had its first full year of production in 2007 with total ore milled at
250,914 tonnes. The mill started the year at a 500 tpd throughput rate and closed the year at an aver-
age monthly rate of 750 tpd. Overall, design parameters like metal recovery and concentrate grades
were achieved in a shorter period than originally planned and production ramp up to design capacity was
achieved faster than expected. In the fourth quarter of 2007 metal production increases with respect to
the first quarter of 2007 for silver, lead, and zinc, were 46.1%, 53.2%, and 74% respectively.
Mine production throughout the year took place principally on the poly metallic Animas vein which
provided 76% of ore sourced to the mill in 2007. Other sources of ore were: Santa Cata vein (9%), old
stockpiles fed into the mill during the first 5 months of operations (5%), and ore from developments
(10%). Head grades also increased steadily throughout the year as expected reflecting the exhaustion
of old low grade stockpiles and an increased production from the Animas Central ore shoot, where the
Company focused its development and preparation efforts, in line with the 2007 mine plan.
Through a continuous optimization process in the crushing and grinding circuit during 2007 the pro-
cessing plant has delivered a greater throughput capacity than the 700 tpd originally contemplated
in the plant design for this first phase of production. Currently the plant is achieving up to 830 tpd.
Silver metal recovery in the lead concentrate was taken from an average of 71% for the first quarter
of 2007 to 78% in the fourth quarter of 2007, well above the expected 74%. This was achieved by
re-circulating the underflow of the lead-silver circuit flotation cells for regrinding with negligible ad-
ditional investment.
Cash production cost per tonne of treated ore evolved from US$42.95 for the first quarter of 2007 to
US$52.41 for the fourth quarter of the year, and the average for 2007 was US$48.46. Out of this
unit cash production cost for the year, the increase in 8,910 tonnes of ore stock piles carried in inven-
tory accounts for US$1.4 and approximately 16,000 tonnes of broken ore held in shrinkage stopes
not shown in inventory accounts for approximately another US$1.0. This accumulation in ore stock
took place mainly during the second semester of the year which contributes to the upward trend in unit
costs during this period. In particular, during the fourth quarter of 2007 the main driver of the sharp
increase in unit costs has been increased mine preparation as the mine is being prepared for higher
throughput.
Based on upward cost trends in mine supplies, particularly steel and metallurgical reagents, as well as
the expected impact of strong local currency appreciation in the last months of 2007 the Company is
expecting cash production costs to remain around US$50 per tonne for 2008 (cash production cost is
a non-GAAP measure. See page 8 for reconciliation of cash production cost to the cost of sales in the
consolidated statement of operations).
The processing plant is permitted and practically ready to accommodate production increments up to
1,050 tonnes per day as a yearly average. Management has been accelerating development and prepa-
ration of stopes on the Ag-Zn-Pb Animas vein with the objective of achieving full throughput capacity
by 2008. During the third quarter of 2007 the Company embarked on an investment plan designed to
address infrastructure requirements associated with the expansion at Caylloma, and which consisted
mainly of a tailings dam expansion, a main extraction level for the Animas vein, and connection to
a new power line for increased energy access. The first two items are well underway, but the energy
project is currently delayed due to ongoing negotiations including neighboring mines and the energy
company owner of the main power line in the area. As a result of this, a minimum increase to 900 tpd
has been planned for 2008, where the timing for full achievement of 1,050 tpd will depend on the
resolution of factors currently out of management’s control.
A total of 15,318 meters were drilled testing various targets during 2007. The Company is expecting a
new updated resource estimate, based on the drilling conducted through the year on the Animas vein,
for the second quarter of 2008.
42
42
43
43
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
RESULTS OF
OPERATIONS
(continued)
It is important to note the discovery of Bonanza silver grades on the north-east extension of the Bateas
vein, as published on a March 10, 2008 news release. Highlights of the drilling on Bateas included
1.6 meters at 6,000 g/t Ag. The Company has initiated the necessary underground development to
incorporate Bateas mineralization in the production plan for 2008. The Company has an exploration
budget of US$ 1.7 million and will be drill-testing multiple targets in 2008.
Year End Report – December 31, 2006
Acquisitions
Fortuna is constantly evaluating new mining opportunities in order to meet our corporate objective of
building significant silver inventory and cash flow, by acquiring advanced projects or operating mines
from private parties in Latin America.
Mexico – San Jose Silver-Gold Project
Cash cost per tonne (non-GAAP measures)
On March 12, 2007 the Company announced the latest resource estimate for the San Jose project, the
details of which are noted above. Subsequent to this, the Company executed a 26,605 meter drilling
campaign which concluded on December 2007. 17,694 meters were drilled in the San Jose area and
8,910 meters were drilled on San Ignacio, the southern extension of the mineralized structure, looking
to discover a new high grade shoot. The results obtained in the San Jose area have been consistent
and were made public through six news releases dated May 30, July 16, August 21, and September
6, 2007, and January 16, and February 21, 2008. Based on these results a new resource estimate is
expected during the second quarter of 2008. Drilling conducted in the southernmost San Ignacio area
is still pending assay results and an interpretation that will allow follow up work recommendations.
On the greater 40,000 hectare land package a generative exploration program is being conducted.
Already over 17,000 geochemical soil and stream sediment samples have been collected. Up to date
this exploration work has allowed to delineate 4 areas of interest that are receiving follow up detailed
exploration.
During the last quarter of 2007 the Company awarded several studies as part of the engineering phase
that has initiated at the project. These include a hydrologic study awarded to Water Management Con-
sultants, the environmental impact study awarded to Clifton Associates Ltd., mill and tailings dam site
selection awarded to AMEC, and a scoping study awarded to AMEC as well. A pre-feasibility study, as
well as additional metallurgical tests is expected to be awarded early in the second quarter of 2008.
The excavation of an underground ramp commenced at the end of the second quarter of 2007. Up to
March 15, 2008, 284 meters of decline had been completed. Poor rock conditions and surface weath-
ering in the initial segment of the ramp have caused a slower advance then the initially projected 170
meters per month. Rock conditions have now normalized. The ramp has been designed based on the
existing geologic model and will provide the main access for future underground operations.
The Company expects to conclude its permitting process and the pre-feasibility study in 2008 and
based on existing information it plans to go directly into detailed engineering and construction upon
conclusion of the pre-feasibility.
Cash cost per tonne is a key performance measure that management uses to monitor performance.
These performance measures have no meaning within Canadian Generally Accepted Accounting Prin-
ciples (“Canadian GAAP”), and, therefore, amounts presented may not be comparable to similar data
presented by other mining companies.
The following table presents a reconciliation of cash production costs per tonne of processed ore to the
cost of sales in the consolidated statement of operations:
Cost of sales
Change in inventory (ore and concentrate stock piles)
Depletion, depreciation, and accretion
Total cash production cost
Total processed ore (tonnes)
Cash production cost per tonne of processed ore (US$)
CAD$
$’000
18,447
382
(5,766)
13,063
US$
$’000
@ 0.9308
17,170
355
(5,367)
12,159
250,914
48.46
LIQUIDITY
AND CAPITAL
RESOURCES
The Company’s cash resources and liquid investments increased during the year ended December 31,
2007 by $45.60 million to $47.24 million.
For 2007 operating activities generated a net cash amount of $13.24 million.
During 2007 the Company invested a total amount of $10.52 million in mineral properties, where
investments in Caylloma and San Jose accounted for $6.21 million and $4.31 million respectively.
Total amount invested in 2007 in plant and equipment was $5.80 million, where Caylloma and San
Jose accounted for $2.20 million and $3.60 million respectively. Additionally, the investments in
mining properties and projects in Mexico demanded total value added tax disbursements of $1.03
million. This value added tax is refundable and is included as part of current assets as at December
31, 2007.
44
44
45
45
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
Year End Report – December 31, 2006
LIQUIDITY
AND CAPITAL
RESOURCES
(continued)
During 2007, Caylloma was successful in self-funding its capital expenditure needs and generating
free cash flow. Moving forward management expects ongoing and expansion capital needs for 2008
to continue to be self-financed by internally generated cash from operations. In net terms over the
past fiscal year our corporate funding needs were met with the issuance of common shares for total net
proceeds of $55.53 million. This was comprised of $1.96 million from the exercise of stock options,
$21.06 million from the exercise of warrants, and $32.51 million of net proceeds from January 2007
private placement.
Also during 2007 the Company paid back short term debt of US$5.55 million raised in 2006.
With regards to San Jose project, management expects investments of up to US$19 million over the
next 12 months (Fortuna´s cost share is 76% of this amount) on advanced engineering and further
exploration of the surrounding area. These investments will be funded through internal cash reserves.
As at December 31, 2007, the Company had working capital of $51.16 million compared to working
capital of $0.11 million at December 31, 2006.
At December 31, 2007, due to related parties consists of $0.01 million (December 31, 2006 - $0.03
million) owing to an officer and to companies with a common director. These amounts were incurred as
a result of shared administrative costs. These amounts are unsecured, non-interest bearing and payable
in the normal course of business.
CRITICAL
ACCOUNTING
ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles re-
quires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting periods. Signifi-
cant items subject to such estimates and assumptions include the fair values of financial instruments
and derivatives, determination of mineral reserves, the carrying amount of mineral property, plant and
equipment, assay grades of metal concentrates sold, valuation of inventories and future income taxes,
recoverability of receivables, provisions for asset retirement obligation and reclamation, fair value esti-
mation of acquisitions and stock-based awards. Actual results could differ from those estimates.
As at March 21, 2008 the Company has 9.68 million warrants outstanding with expiry date of July 11,
2008 and a strike price of $2.30. The exercise of these warrants could potentially bring in cash to the
Company in the amount of $22.26 million.
FINANCIAL
INSTRUMENTS
The carrying value of cash and cash equivalents, receivables, due from/to related parties and accounts
payable and accrued liabilities approximate their fair value because of the short-term maturity of those
instruments.
Management believes the Company’s financial position after the closing of its January financing as well
as results of its ongoing operation in Caylloma is sufficient to support the Company’s operating and
capital requirements on an ongoing basis. Actual funding requirements may vary from those planned
due to further acquisition opportunities. Management believes it will be able to raise equity capital
or access debt facilities as required in both the short and long term, but recognizes the uncertainty
attached thereto.
RELATED PARTY
TRANSACTIONS
The Company incurred charges from directors, officers, and companies having a common director or
officer as follows:
Mineral property costs – geological fees
Consulting fees
Salaries and wages
Management fees
$ 000
$ 000
$ 000
$ 000
Year ended 15 Months ended
December 31,
2006
December 31,
2007
45
188
108
266
174
75
16
146
These charges were measured at the exchange amount, which is the amount agreed upon by the trans-
acting parties.
The Company enters into derivative contracts to manage its exposure to fluctuations in base metal pric-
es. These contracts are marked-to-market at the end of each period, and the changes in estimated fair
value are recorded as an unrealized gain (loss) on commodity contracts in the statement of operations.
As at December 31, 2007 the Company estimated the fair value of the outstanding contracts at $1.47
million, which was recorded as unrealized gain in the consolidated statements of operations, with cor-
responding derivative asset recognized in the consolidated balance sheet. The estimated fair value was
determined based on using applicable valuation techniques for commodity options with reference to the
published marked prices for underlying commodities quoted at London Metal Exchange.
The net amount of settled positions in 2007 which were recorded in the statement of operations under
net gain on commodity contract was $0.09 million.
The long-term investments into marketable securities are classified as available-for-sale and are mea-
sured at fair value at the end of each period. Fair value of these investments is determined based on
published market prices of underlying securities. Change in fair values of available-for-sale marketable
securities is recognized in other comprehensive income. During 2007, the Company recorded other
comprehensive loss of $0.05 million relating to change in fair value of marketable securities, which
offset other comprehensive gain of $0.05 million for measurement of these securities at fair value on
adoption of financial instrument standards on January 1st, 2007. The amounts are net after tax.
46
46
47
47
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
Year End Report – December 31, 2006
OTHER DATA
Additional information related to the Company is available for viewing at www.sedar.com.
Share Position and Outstanding Warrants and Options
The Company’s outstanding share position at March 21, 2008 is 85,321,659 common shares. In
addition, a total of 19,071,779 share purchase warrants and incentive stock options are currently
outstanding as follows:
Type of Security
Number
Exercise Price
Expiry Date
Warrants
Options
9,681,424
862,117
1,613,238
12,156,779
39,000
30,000
250,000
270,000
451,000
60,000
200,000
280,000
860,000
225,000
20,000
50,000
1,385,000
80,000
15,000
50,000
50,000
50,000
2,025,000
250,000
25,000
250,000
6,915,000
$2.30
$0.345
$0.345
July 11, 2008
June 27, 2010
November 17, 2010
$0.37
$0.80
$2.82
$1.35
$2.29
$1.75
$1.75
$1.55
$1.66
$1.61
$1.90
$1.96
$2.22
$2.75
$3.09
$3.10
$3.10
$3.05
$3.22
$2.97
$3.10
$2.52
December 2, 2009
July 24, 2010
October 9, 2010
February 5, 2016
March 30, 2016
May 8, 2016
May 22, 2016
July 5, 2016
July 10, 2016
September 13, 2016
November 20, 2016
November 23, 2016
January 11, 2017
February 6, 2017
April 22, 2017
May 31, 2017
June 17, 2017
June 27, 2017
July 2, 2017
September 23, 2017
October 24, 2017
February 5, 2018
CHANGE IN
ACCOUNTING
POLICY
On January 1, 2007, the Company adopted the provisions of CICA Sections 1530 “Comprehensive
Income”, 3251 “Equity”, 3855 “Financial Instruments – Recognition and Measurement”, 3861 “Fi-
nancial Instruments – Presentation and Disclosure”, and 3865 “Hedges”. These sections address the
classification, recognition and measurement of financial instruments and hedges in the financial state-
ments and inclusion of other comprehensive income.
Comprehensive income is the change in the net assets of a company arising from transactions, events
and circumstances not related to shareholders. It consists of net income and other comprehensive
income, which includes items that would not normally be included in net income such as unrealized
gains and losses on available-for-sale securities.
As a result of adopting these new standards at January 1, 2007, the Company recorded an unrealized
gain of $0.45 million relating to the change in accounting for financial assets classified as “available-
for-sale”. As a result of change in accounting policy, these financial assets are measured at fair value
instead of cost. This increase was reported as a one-time cumulative effect to other comprehensive
income.
Additional detail relating to changes in accounting policy with regards to financial instruments can be
found in Note 4 of the consolidated financial statements as at and for the twelve months ended De-
cember 31, 2007.
FORWARD
LOOKING
INFORMATION
Certain statements contained in this MD&A and elsewhere constitute forward-looking statements. Such
forward-looking statements involve a number of known and unknown risks, uncertainties and other
factors which may cause the actual results, and performance of achievements of the Company to be
materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statements were made, and readers are advised to
consider such forward-looking statements in light of the risks set forth below.
RISKS AND
UNCERTAINTIES
The most significant risk affecting the profitability and viability of the Company’s mining operations is
the fluctuation of metal prices. Volatility of metal prices is high by historic measures and strong down-
turns on these prices can have significant adverse effects on the continuity of the Company’s opera-
tions. In order to mitigate this risk in the medium term, the Company has put in place price protection
strategies for approximately 50% of its zinc and lead metal production during twelve months from the
original contract dates up to January 2009.
The Company´s reporting currency is the Canadian dollar, however the Company’s foreign assets as well
as most of its commercial transactions are held and take place in US and local currencies. As a con-
sequence, the financial results of the Company´s operations as reported in Canadian dollars are subject
to changes in value of the Canadian dollar relative to US and local currencies.
48
48
49
49
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2006
RISKS AND
UNCERTAINTIES
The business of mineral exploration and extraction involves a high degree of risk. Few properties that
are in the exploration stage ultimately become producing mines. The Company’s mineral properties
are located in emerging nations and consequently may be subject to a higher level of risk compared to
developed countries. Operations, the status of mineral property rights, title to the properties and the
recoverability of amounts shown for mineral properties in emerging nations can be affected by changing
economic, regulatory, and political situations.
INTERNAL
DISCLOSURE
CONTROLS AND
PROCEDURES
The Company evaluated the effectiveness of the design and operation of the disclosure controls and
procedures as of December 31, 2007 under the supervision of the Chief Executive Officer (“CEO”)
and the Chief Financial Officer (“CFO”). Based on the results of this evaluation the CEO and the CFO
have concluded that such disclosure controls are sufficiently effective to provide reasonable assurance
that material information relating to the Company is made known to management and disclosed in ac-
cordance with the applicable securities laws.
Management is responsible for establishing a system of internal control over financial reporting to
provide reasonable assurance regarding the reliability and integrity of the Company´s financial informa-
tion and the preparation of its financial statements in accordance with Canadian generally accepted
accounting principles. Management of the Company has evaluated design of internal control over
financial reporting as of December 31, 2007 and has concluded there are no material weaknesses.
Management continues to review and refine its internal controls and procedures.
In 2006 the Company reported material weaknesses in the design of internal control over financial re-
porting. Throughout 2007 management has addressed this by ensuring adequate advice on Canadian
GAAP is available to account for complex transactions.
KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3 Canada
Telephone (604) 691-3000
Fax (604) 691-3031
www.kpmg.ca
AUDITORS’ REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheet of Fortuna Silver Mines Inc. as at December 31,
2007 and 2006 and the consolidated statements of operations and comprehensive loss, sharehold-
ers’ equity and cash flows for the year ended December 31, 2007 and the fifteen month period ended
December 31, 2006. These financial statements are the responsibility of the Company’s manage-
ment. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2007 and 2006 and the results of its opera-
tions and its cash flows for the year ended December 31, 2007 and the fifteen month period ended
December 31, 2006 in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Vancouver, Canada
March 20, 2008
KPMG LLP, a Canadian limited liability partnership is the Canadian member firm of KPMG International, a Swiss cooperative.
50
50
51
51
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
DECEMBER 31, 2007 AND DECEMBER 31, 2006
Expressed in thousands of Canadian Dollars
CONSOLIDATED
BALANCE SHEETS
Dec. 31, 2007
Dec. 31, 2006
CURRENT
Cash and cash equivalents
Derivatives (Note 5)
Accounts receivable and prepaid expenses (Note 6)
GST and value added taxes
Inventories (Note 7)
LONG-TERM INVESTMENTS (Note 8)
PROPERTY, PLANT & EQUIPMENT (Note 9)
MINERAL PROPERTIES (Note 10)
ASSETS
$
47,240
1,400
2,051
5,147
1,693
57,531
908
13,669
52,338
$
124,446
LIABILITIES
CURRENT
Accounts payable and accrued liabilities
Due to related parties, net (Note 11)
Current portion of obligation under capital lease (Note 12)
Loans (Note 12)
$
OBLIGATIONS UNDER CAPITAL LEASE (Note 12)
ASSET RETIREMENT OBLIGATION (Note 13)
FUTURE INCOME TAX LIABILITY (Note 14)
NON-CONTROLLING INTEREST (Note 10)
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (Note 15)
CONTRIBUTED SURPLUS
DEFICIT
ACCUMULATED OTHER COMPREHENSIVE INCOME (Note 16)
5,917
14
439
-
6,370
433
1,916
8,069
6,593
23,381
100,159
11,770
(11,008)
144
101,065
$
$
$
1,641
-
1,901
3,738
826
8,106
741
7,806
42,541
59,194
2,193
27
45
5,730
7,995
97
1,758
4,910
3,227
17,987
43,341
6,085
(8,219)
-
41,207
CONSOLIDATED
STATEMENTS OF
OPERATIONS AND
COMPREHENSIVE
LOSS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
FOR THE YEAR ENDED DECEMBER 31, 2007 AND
FOR THE FIFTEEN MONTH PERIOD ENDED DECEMBER 31, 2006
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Year ended
Dec. 31, 2007
15 month
period ended
Dec. 31, 2006
Sales
Cost of sales
(including depletion, depreciation and accretion of $5,766 and $919)
$
MINE OPERATING INCOME
Selling, general and administrative expenses
(includes depreciation of $32 and $0)
Stock-based compensation (Note 15)
Write-off of deferred exploration costs
OPERATING INCOME (LOSS)
Interest and other income and expenses
Interest and finance expenses
Net gain on commodity contracts (Note 5)
Loss on disposal of property, plant and equipment
Gain on disposal of investment
Foreign exchange (loss) gain
INCOME (LOSS) BEFORE INCOME TAXES
AND NON-CONTROLLING INTEREST
Income tax provision (Note 14)
Non-controlling interest
NET LOSS FOR THE PERIOD
Other comprehensive loss, net of tax
Unrealized loss on available for sale long-term investments (Note 8)
$
COMPREHENSIVE LOSS FOR THE PERIOD
Loss per share - Basic and diluted
Comprehensive loss per share - Basic and diluted
$
$
31,667
18,447
13,220
6,127
6,974
12
13,113
107
1,529
(90)
1,558
(59)
-
(1,665)
1,273
1,380
4,261
(92)
(2,789)
(305)
(3,094)
(0.04)
(0.04)
$
$
$
$
3,372
2,175
1,197
2,025
4,132
40
6,197
(5,000)
470
(23)
-
-
26
673
1,146
(3,854)
494
-
(4,348)
-
(4,348)
(0.12)
(0.12)
$
124,446
$
59,194
Weighted average number of shares outstanding
71,602,275
36,834,106
Nature and continuance of operations (Note 1)
Commitments (Note 19)
Subsequent events (Note 20)
APPROVED BY THE DIRECTORS:
Jorge Ganoza Durant,
Director
Simon Ridgway,
Director
52
52
53
53
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
FOR THE YEAR ENDED DECEMBER 31, 2007
AND FOR THE FIFTEEN MONTH PERIOD ENDED DECEMBER 31, 2006
Expressed in thousands of Canadian Dollars, except for share amounts
...CONTINUED
(Formerly Fortuna Ventures Inc.)
FOR THE YEAR ENDED DECEMBER 31, 2007
AND FOR THE FIFTEEN MONTH PERIOD ENDED DECEMBER 31, 2006
Expressed in thousands of Canadian Dollars, except for share amounts
CONSOLIDATED
STATEMENTS OF
SHAREHOLDERS’
EQUITY
Share
subscriptions
and obligation
to issue shares
and warrants
Share Capital
Shares
Amount
Contributed
surplus
(Deficit)
Total
Shareholders’
Equity
Balance –
September 30, 2005
20,083,465
$ 12,164
$
6,616
$
296
$
(3,871)
$
15,205
CONSOLIDATED
STATEMENTS OF
SHAREHOLDERS’
EQUITY
Exercise of options
650,000
424
Exercise of warrants
6,124,631
5,601
-
-
Private placement for cash
16,700,000
22,050
(2,031)
Private placement
commission non-cash
transaction
Private placement
acquisition non-cash
transaction
760,261
1,140
-
1,897,621
2,714
(2,714)
-
-
-
-
-
Fair value of share purchase
warrants issued
-
Property finders fee non-cash
transaction
50,000
Property acquisition non-cash
transaction
Loan fee
168,417
153,333
Transfer of contributed surplus
on exercise of options
Stock based compensation
Issue costs
(non-cash amount $1,140)
(Loss) for the period
-
-
-
-
-
68
285
276
214
-
(1,595)
-
Balance December 31, 2006 46,587,728
$ 43,341
$
(1,871)
1,871
-
-
-
(214)
4,132
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
424
5,601
20,019
1,140
-
-
68
285
276
-
4,132
(1,595)
(4,348)
(4,348)
$
6,085
$
(8,219)
$
41,207
Share Capital
Shares
Amount
Contributed
Surplus
Accumulated
other
Comprehensive
Income
Total
Shareholders’
Equity
(Deficit)
46,587,728
$ 43,341
$
6,085
$
(8,219)
$
-
$
41,207
Balance –
December 31, 2006
Cumulative impact of
accounting changes,
net of tax (Note 4)
-
-
Exercise of options
1,753,600
1,957
Exercise of warrants
14,214,035
21,057
Private placement for cash
18,000,000
34,200
Private placement
commission non-cash
transaction
Transfer of contributed surplus
on exercise of options
Stock based compensation
Issue costs (non-cash
amount $802)
(Loss) for the period
Other comprehensive (loss),
net of tax
422,300
802
-
-
-
-
-
1,289
(1,289)
-
6,974
(2,487)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,789)
449
-
-
-
-
-
-
-
-
449
1,957
21,057
34,200
802
-
6,974
(2,487)
(2,789)
-
(305)
(305)
Balance December 31, 2007 80,977,663
$ 100,159
$
11,770
$
(11,008)
$
144
$ 101,065
54
54
55
55
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
FOR THE YEAR ENDED DECEMBER 31, 2007 AND
FOR THE FIFTEEN MONTH PERIOD ENDED DECEMBER 31, 2006
Expressed in thousands of Canadian Dollars
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
CONSOLIDATED
STATEMENTS OF
CASH FLOWS
OPERATING ACTIVITIES
Net (loss) for the period
Items not involving cash
Depletion and depreciation
Accretion expense
Future income tax
Stock based compensation
Unrealized (gain) on commodity contracts
Non-controlling interest
Write-off of deferred exploration costs
(Gain) on disposal of investment
Loss on disposal of equipment
Foreign exchange (gain)
Changes in non-cash working capital items
Accounts receivable and prepaid expenses
Inventories
Accounts payable
Payments (to) from related parties (Note 11)
Net cash from (used in) operating activities
FINANCING ACTIVITIES
Proceeds on issuance of common shares
Capital lease obligations
Repayment of debt (Note 12)
Proceeds from loans
Net cash from financing activities
INVESTING ACTIVITIES
Purchase of long-term investment
Mineral property expenditures
Value added taxes on purchase of property, plant and equipment
Property, plant & equipment expenditures
Proceeds from disposal of equipment
Net cash used in investing activities
INCREASE (DECREASE) IN CASH
Cash and cash equivalents – beginning of period
CASH AND CASH EQUIVALENTS –
END OF PERIOD
Supplementary disclosure of cash flow information:
Cash (received) paid for interest
Cash paid for income taxes
Non-cash transactions (Note 18)
$
$
$
Year ended
Dec. 31, 2007
15 month
period ended
Dec. 31, 2006
$
(2,789)
$
(4,348)
5,640
158
3,717
6,974
(1,466)
(92)
12
-
59
(515)
(527)
(798)
2,877
(13)
13,237
55,528
(132)
(5,730)
-
49,666
-
(10,515)
(1,033)
(5,795)
39
(17,304)
45,599
1,641
47,240
(1,504)
608
739
180
494
4,132
-
40
(26)
-
(272)
(2,256)
(826)
1,367
19
(757)
25,589
(29)
(5,070)
5,685
26,175
(1,000)
(20,657)
(3,302)
(4,668)
-
(29,627)
(4,209)
5,850
1,641
84
-
$
$
$
01. NATURE AND
CONTINUANCE OF
OPERATIONS
Fortuna Silver Mines Inc. (the “Company”) is engaged in silver mining and related activities, including
exploration, extraction, and processing. The Company operates the Caylloma zinc/lead/silver mine in
southern Peru and is currently developing the San Jose silver/gold project in Mexico.
The Company’s continuing operations and the recoverability of amounts shown for its exploration stage
mineral properties are dependent upon the availability of the necessary financing to complete the
exploration and development of such mineral property interests, and upon future profitable production
or proceeds from the disposition of its mineral property interests. Future profitable production is
primarily dependent on the quality of ore resources, ability to obtain permits, future metal prices,
operating and environmental costs, fluctuations in currency exchange rates, political risks and varying
levels of taxation.
02. SIGNIFICANT
ACCOUNTING
POLICIES
In 2006, the Company changed its year-end from September 30 to December 31. The comparative
figures reflect the 15 month period ended December 31, 2006.
a) Basis of presentation:
The consolidated financial statements have been prepared in accordance with Canadian generally
accepted accounting principles (“Canadian GAAP”). The consolidated financial statements include
the accounts of the Company’s wholly owned subsidiaries, Minera Bateas SAC (Bateas) and Fortuna
Silver (Barbados) Inc. and of the Company’s 76% interest in Compania Minera Cuzcatlan SA, a variable
interest entity for which a non-controlling interest has been recorded to reflect the 24% interest of the
Company’s partner. All significant intercompany balances and transactions have been eliminated on
consolidation.
b) Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting periods. Significant
items subject to such estimates and assumptions include the fair values of financial instruments
and derivatives, determination of mineral reserves, the carrying amount of mineral property, plant
and equipment, assay grades of metal concentrates sold, valuation of inventories and future income
taxes, recoverability of receivables, provisions for asset retirement obligation and reclamation, fair value
estimation of acquisitions and stock-based awards. Actual results could differ from those estimates.
c)Revenue Recognition:
Revenue arising from the sale of metal concentrates is recognized when title and the significant risks
and rewards of ownership of the concentrates have been transferred to the buyer. The passing of title
to the customer is based on the terms of the sales contract and final commodity prices are set on a
specified quotational period, either one or three months after delivery at the option of the customer.
The Company’s metal concentrates are provisionally priced at the time of sale based on the prevailing
market price.
d) Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturities of ninety days or
less.
56
56
57
57
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
e) Long-term investments
Long-term investments are those investments which the Company will be retaining for a period longer
than one year. These investments are classified as available-for-sale and are recorded at fair value.
f) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated over the estimated economic
life of the asset as follows:
02. SIGNIFICANT
ACCOUNTING
POLICIES
(continued)
h) Asset Retirement Obligation
The fair value of an obligation associated with the retirement of a tangible long-lived asset is recorded
in the period in which it is incurred and a reasonable estimate of the fair value can be made, with a
corresponding increase to the carrying amount of the related asset. The liability is accreted over time
for changes in the fair value of the liability through charges to accretion, which is included in depletion,
depreciation and accretion expense. The costs capitalized to the related assets are amortized in a
manner consistent with the depletion and depreciation of the related assets.
Buildings, mine site
Buildings, other
Machinery and equipment
Furniture and other equipment
Vehicles
Life of mine
20 – 30 years
3 – 8 years
4 – 10 years
4 – 5 years
The expected remaining life of the mine as at December 31, 2007 is 9 years. Land is not depreciated.
Equipment under capital lease is initially recorded at the present value of minimum lease payments at
the inception of the lease.
Management reviews the carrying value of its property, plant, and equipment when events or changes
in circumstances indicate that their carrying values may not be recoverable. Impairment of an asset
is considered to exist if total estimated future cash flows on an undiscounted basis expected to be
generated by the asset are less than the carrying amount of the asset. If a shortfall exists, the asset is
written down to its fair value.
g) Mineral Properties
The Company defers the cost of acquiring, maintaining its interest, exploring and developing mineral
properties when future inflow of economic benefits from the properties is probable and until such time
as the properties are placed into production, abandoned, sold or considered to be impaired in value.
Costs of producing properties, including capitalized interest are amortized on a unit-of-production
basis over proven and probable reserves and costs of abandoned properties are written-off. Proceeds
received from the sale of interests in mineral properties are credited to the carrying value of the
mineral properties, with any excess included in operations. Write-downs due to impairment in value
are charged to operations.
For operating mines all replacement and expansion exploration within the mineral deposit is capitalized
and amortized on a unit-of-production basis over proven and probable reserves as part of the production
cost.
Management reviews the carrying value of mineral properties when events or changes in circumstances
indicate that their carrying values may not be recoverable. Amounts shown for properties represent
costs incurred net of write-downs and recoveries, and are not intended to represent present or future
values.
i) Inventories
Ore stockpile and finished goods inventories are valued at the lower of production cost and net realizable
value. Production costs include all mine site costs. Materials and supplies are valued at weighted
average cost less allowances for obsolescence.
j) Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under the asset
and liability method, future tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Future tax assets and liabilities are measured using
enacted or substantively enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on future tax assets
and liabilities of a change in tax rates is recognized in income in the year that includes the date of
substantive enactment. Future tax assets are recognized to the extent that they are considered more
likely than not to be realized.
k) Stock-based Compensation
The Company has a share option plan which is described in Note 15. The Company records all stock-
based compensation relating to options granted using the fair value method such that stock-based
payments are measured at fair value and expensed over their vesting period with a corresponding
increase to contributed surplus. Upon exercise of share purchase options, the consideration paid by
the option holder, together with the amount previously recognized in contributed surplus, is recorded
as an increase to share capital.
l) Basic and Diluted Loss Per Share
Basic loss per share (“LPS”) is calculated by dividing the net loss applicable to common shareholders by
the weighted average number of common shares outstanding for the year.Potentially dilutive outstanding
options and warrants are excluded from the calculation of LPS, as they would be anti-dilutive.
m) Foreign Currency Translation
The Company’s subsidiaries are accounted for as integrated foreign operations. Monetary items
denominated in a foreign currency are translated into Canadian dollars at exchange rates prevailing at
the balance sheet date and non-monetary items are translated at exchange rates prevailing when the
assets were acquired or obligations incurred. Foreign currency denominated revenue and expense items
are translated at the exchange rates prevailing at the transaction date. Gains or losses arising from the
translations are included in operations except for gains or losses arising from translation of capitalized
costs and costs of purchase of property, plant and equipment at exploration properties, in which case
such foreign exchange gains or losses are capitalized.
58
58
59
59
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
n) Financial Instruments
The long-term investments are classified as available-for-sale and are recorded at their fair value,
which is determined with reference to market value of underlying marketable securities. Derivative
instruments are recorded at fair value, which is determined with reference to the market value of
underlying commodities. All other financial instruments are recorded at cost, which approximates their
fair value, due to the short-term maturity and high liquidity.
o) Risk Management
Interest rate risk
The Company holds cash and cash equivalents which earn interest at variable rates as determined by
financial institutions.
Credit risk
The Company only places its cash with major financial institutions.
Foreign currency risk
The Company is exposed to currency risk in that its subsidiary operations are transacted in Peruvian
Nuevo Soles, Mexican Pesos and the U.S. dollar. The Canadian dollar value of the assets and liabilities of
the subsidiary denominated in these three currencies will fluctuate due to changes in foreign exchange.
The Company does not use any hedging instruments to reduce its foreign currency exposure.
03. NEW
ACCOUNTING
PRONOUNCEMENTS
Canadian Institute of Chartered Accountants (“CICA”) has issued three new standards which will affect
the financial disclosures and results of operations of the Company for interim and annual periods
beginning January 1, 2008. The company will adopt the requirements commencing in the interim
period ended March 31, 2008. The adoption of these new standards is not expected to have any
material impact on the Company’s financial results.
a) Section 1535 – Capital Disclosures
This Section establishes standards for disclosing information about an entity’s capital and how it is
managed. Under this standard the Company will be required to disclose the following, based on the
information provided internally to the entity’s key management personnel:
(i) qualitative information about its objectives, policies and processes for managing capital;
(ii) summary quantitative data about what it manages as capital;
(iii) whether during the period it complied with any externally imposed capital requirements
to which it is subject; and
(iv) when the company has not complied with such externally imposed capital requirements,
the consequences of such non-compliance.
b) Section 3031 - Inventories
This Section prescribes the accounting treatment for inventories and provides guidance on the
determination of costs and its subsequent recognition as an expense, including any write-down to
net realizable value. It also provides guidance on the cost formulas that are used to assign costs to
inventories.
c) Section 3862 – Financial Instruments – Disclosures
This Section replaces Section 3861 “Financial Instruments – Disclosure and Presentation” and requires
entities to provide disclosure of quantitative and qualitative information in their financial statements
that enable users to evaluate the significance of financial instruments for
the entity’s financial position and performance; and the nature and extent of risks arising from financial
instruments to which the entity is exposed during the period and at the balance sheet date, and
management’s objectives, policies and procedures for managing such risks. Entities will be required
to disclose the measurement basis or bases used, and the criteria used to determine classification for
different types of instruments.
The Section requires specific disclosures to be made, including the criteria for:
(i) designating financial assets and liabilities as held for trading;
(ii) designating financial assets as available-for-sale; and
(iii) determining when impairment is recorded against the related financial asset or when an
allowance account is used.
04. FAIR VALUE OF
FINANCIAL
INSTRUMENTS
Adoption of New Accounting Standards
On January 1, 2007, the Company adopted the provisions of the Canadian Institute of Chartered
Accountants Handbook (“CICA HB”) Sections 1530 “Comprehensive Income”, 3251 “Equity”, 3855
“Financial Instruments – Recognition and Measurement”, 3861 “Financial Instruments – Presentation
and Disclosure”, and 3865 “Hedges”. These sections address the classification, recognition and
measurement of financial instruments and hedges in the financial statements and inclusion of other
comprehensive income. These standards have been applied retrospectively with no restatement of
comparative amounts for prior periods.
a) Comprehensive income
Section 1530 introduces comprehensive income, which consists of net income and other comprehensive
income. Other comprehensive income represents changes in shareholders’ equity during a period
arising from transactions and other events and circumstances from non-owner sources and includes
unrealized gains and losses on financial assets classified as available-for-sale. The components of
comprehensive income are disclosed on the consolidated statements of operations and comprehensive
loss.
b) Financial instruments
Financial assets and liabilities held-for-trading are measured at fair value with changes in those
fair values recognized in net income. Financial assets and financial liabilities considered held-to-
maturity, loans and receivables, and other financial liabilities are measured at amortized costs using
the effective interest method of amortization. Available-for-sale financial assets are measured at fair
value with unrealized gains and losses recognized in other comprehensive income. Investments in
equity instruments classified as available-for-sale that do not have a quoted market price in an active
market are measured at cost.
Derivative instruments, including embedded derivatives, are recorded on the balance sheet at fair value.
Changes in the fair values of derivative instruments are recognized in net income with the exception
of derivatives designated as effective cash flow hedges. Section 3865 establishes the standards for
hedge accounting.
60
60
61
61
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
c) Impact upon adoption of CICA HB Section 1530, 3251, 3855, 3861 and 3865
As a result of adopting these new standards at January 1, 2007, the Company recorded an unrealized
gain of $449 resulting from the change in accounting for financial assets classified as “available-for-
sale”. Prior to adoption of these new standards these financial assets were stated at cost. The gain was
recorded as a one-time cumulative adjustment to other comprehensive income (Note 16).
05. DERIVATIVES
During October 2007, the Company entered into a series of put and call option commodity arrangements
to secure a minimum price level on part of its zinc and lead metal production throughout the period
November 2007 to December 2008. A long put and a long call refer to put and call options that have
been bought by the Company, and a short call refers to call options that have been sold by the Company.
Settlement of these options occurs monthly during the period from December 2007 until January
2009. No initial premium associated with these trades has been paid.
The following Zinc Asian Option contracts were entered into:
14 Long put options at strike price:
14 Short call options at strike price:
14 Long call options at strike price:
USD 2,575/t, for the total of 2,800 tons
USD 2,750/t, for the total of 2,800 tons
USD 3,450/t, for the total of 2,800 tons
The following Lead Asian Option contracts were entered into:
14 Long put options at strike price:
14 Short call options at strike price:
14 Long call options at strike price:
USD 3,000/t, for the total of 1,750 tons
USD 3,300/t, for the total of 1,750 tons
USD 4,300/t, for the total of 1,750 tons
As at December 31, 2007 the Company had 12 open options on each of the arrangements. The
estimated fair value of the outstanding Asian Options of $1,400 was determined based on using
applicable valuation techniques for commodity options with reference to the published market prices
for underlying commodities quoted at London Metal Exchange. This amount has been recorded as an
unrealized gain on commodity contract as at December 31, 2007.
06. ACCOUNTS
RECEIVABLE
AND PREPAID
EXPENSES
Trade accounts receivable
Advances and other receivables
Prepaid expenses and deposits
December 31, 2007
409
$
1,505
137
2,051
$
December 31, 2006
1,562
$
279
60
1,901
$
07. INVENTORIES
Inventories consist of the following:
Ore stock piles
Concentrate stock piles
Materials and supplies
December 31, 2007
466
$
159
1,068
1,693
$
December 31, 2006
78
$
165
583
826
$
08. LONG TERM
INVESTMENTS
At December 31, 2007 and December 31, 2006 the Company owned 3,706,250 shares of
Continuum Resources Ltd. As at December 31, 2006 these were stated at cost. With the adoption
of financial instruments standards, the Company measures these investments at fair value (Note
4). The fair value was determined based on published share prices of underlying securities on
the active market. On adoption of financial instruments standards, a cumulative adjustment was
recorded in other comprehensive income to reflect the change in accounting policy. During the
year ended December 31, 2007 the decrease in fair value of $352 ($305 net of taxes) has been
recognized in other comprehensive loss for the period (Note 16).
Fair value
Cost
Unrealized gain (cumulative)
December 31, 2007
908
$
741
167
$
December 31, 2006
-
$
741
-
$
09. PROPERTY,
PLANT &
EQUIPMENT
Property, plant and equipment are comprised of the following:
Land
Machinery & equipment
Buildings
Furniture & other equipment
Transport units
Equipment under capital lease
Work in progress
Cost
259
8,222
2,989
912
524
1,035
1,421
15,362
Accumulated
Depreciation
Dec. 31, 2007
Net book value
Dec. 31, 2006
Net book value
$
$
-
1,034
409
104
75
71
-
1,693
$
$
259
7,188
2,580
808
449
964
1,421
13,669
$
$
-
4,526
2,457
372
174
169
108
7,806
$
$
62
62
63
63
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
10. MINERAL
PROPERTIES
Mineral Properties are located in Peru and Mexico and are comprised of the following:
Peru - Caylloma
Mexico – San Jose
Other
Cost
31,063
26,070
12
57,145
$
$
Depletion
4,795
-
-
4,795
$
$
Write-off
-
-
12
12
$
$
$
Dec. 31, 2007
Net
26,268
26,070
-
52,338
$
$
Dec. 31, 2006
Net
23,965
18,564
12
42,541
$
The carrying amount of mineral properties at San Jose includes $336 of capitalized interest on
loans (Note 12). Additions to mineral properties are comprised of development and exploration
costs capitalized and consist of $6,526 at Caylloma and $7,506 at San Jose properties for the year
ended December 31, 2007. Included in additions to San Jose mineral properties are depreciation of
equipment involved in construction work of $57 (2006: $nil), and general and administrative costs to
develop the mine of $929 (2006: $nil).
San Jose Project, Mexico
The San Jose Project is owned and operated by Compañia Minera Cuzcatlan (“Cuzcatlan”), a company
owned 76% by the Company and 24% by Continuum Resources Ltd (“Continuum”). The Company
is the operator of the work programs and the Company and Continuum must contribute to the costs
thereof in proportion to its ownership percentage in Cuzcatlan.
Cuzcatlan has been accounted for as a variable interest entity, as defined in CICA Accounting Guideline
15 “Consolidation of Variable Interest Entities” and has been consolidated from the date of acquisition.
A non-controlling interest of $6,593 has been recorded as at December 31, 2007 (December 31,
2006 - $3,227).
11. RELATED
PARTY
TRANSACTIONS
The Company incurred charges from directors, officers, and companies having a common director or
officer as follows:
Year ended Dec. 31, 2007
Mineral property costs – geological fees
Consulting fees
Salaries and wages
Management fees
$
45
188
108
266
$
15 Months ended
Dec. 31, 2006
174
75
16
146
These charges were measured at the exchange amount, which is the amount agreed upon by the
transacting parties.
At December 31, 2007, due to related parties consists of $14 (December 31, 2006 - $27) owing to
an officer and to companies with a common director. These amounts were incurred as a result of shared
administrative costs. These amounts are unsecured, non-interest bearing and payable in the normal
course of business.
12. LOANS AND
LEASES
On November 21, 2006 the Company borrowed $4,600 at an interest rate of 12% from Quest Capital
Corporation in connection with the acquisition of the San Jose property. The loan was due on May 30,
2007, however the $4,600 plus interest of $25 was paid back on January 15, 2007.
On October 30, 2006 a revolving credit line of US$ 950 with a CDN value of $1,079 as of December
31, 2006 and an interest rate of Libor + 1.5% plus a variable utilization fee, was taken for working
capital purposes from Traxys North America. The amount of the credit line of $1,079, plus interest and
fees of $41 was paid back on February 8, 2007.
At December 31, 2007 the Company has capital lease obligations of $872 (December 31, 2006 -
$142) including a current portion of $439 (December 31, 2006 - $45). These are related to the
acquisition of mining equipment, transport units and buildings. These obligations have terms of 24,
25 months and 36 months, have expiry dates ranging from October 5, 2009 to December 15, 2010
and bear interest at rates ranging from 8.16% to 8.92%. During the year ended December 31, 2007,
$132 was paid on the capital leases (15 month period ended December 31, 2006: $29). During the
year ended December 31, 2007 the Company assumed new capital lease obligations of $862 (15
month period ended December 31, 2006: $171)
13. ASSET
RETIREMENT
OBLIGATION
The Company has recorded an asset retirement obligation of $1,916 as of December 31, 2007 as a
result of accretion of the previously recorded asset retirement obligation of $1,758 as of December
31, 2006 by $158. The accretion expense was calculated over the year using a rate of 9%. The initial
amount was based on an estimate prepared by an independent third party at the time of acquisition as
to the cost of reclamation associated with the Caylloma property. The Company is currently reviewing
its reclamation obligations at the property in light of changing regulations and on the basis of further
data in respect of the mine life.
In view of the uncertainties concerning environmental reclamation, the ultimate cost of reclamation
activities could differ materially from the estimated amount recorded. The estimate of the Company’s
asset retirement obligation relating to the Caylloma mine is subject to change based on amendments to
laws and regulations and as new information regarding the Company’s operations becomes available.
Future changes, if any, to the estimated liability as a result of amended requirements, laws, regulations,
operating assumptions, estimated timing and amount of obligations may be significant and would be
recognized prospectively as a change in accounting estimate. Any such change would result in an
increase or decrease to the liability and a corresponding increase or decrease to the mineral property,
plant and equipment balance.
64
64
65
65
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
14. INCOME TAX
a) Income tax expense differs from the amount that would be computed by applying the Canadian
statutory income tax rate of 34.12% (2006 – 34.12%) to loss before income taxes and non-controlling
interest. The reasons for the differences are as follows:
15. SHARE CAPITAL
Income (loss) before income taxes
and non-controlling interest
Statutory income tax rate
Expected income tax (recovery)
Items (deductible) non-deductible
for income tax purposes
Differences in tax rates in foreign
jurisdictions and non- recognition benefits
Change in valuation allowance
Total income taxes
Represented by:
Current income tax
Future income tax
$
$
$
$
$
2007
1,380
34.12%
471
(74)
3,202
662
4,261
544
3,717
$
$
$
$
$
2006
(3,854)
34.12%
(1,315)
1,430
(604)
983
494
-
494
b) The tax effects of temporary differences that give rise to significant portions of the future tax assets
and future tax liabilities at December 31, 2007 and December 31, 2006 are presented below:
Future income tax assets (all arising in Canada):
$
Non-capital losses
Financing costs
Undepreciated capital cost in
excess of accounting net book
value and other
Mineral properties
Valuation allowance
Future income tax liabilities:
Long-term investments - Canada
Mineral properties – Peru
Mineral properties – Mexico
Net future income tax (liabilities)
$
2007
1,275
657
4
436
(2,372)
-
(23)
(5,910)
(2,136)
(8,069)
(8,069)
$
$
2006
725
473
-
512
(1,710)
-
-
(2,624)
(2,286)
(4,910)
(4,910)
As at December 31, 2007, the Company had available the following amounts for deduction against future earnings in Canada:
Non-capital losses, expiring as follows:
2008 to 2010
2014 to 2015
2026 to 2027
$
276
1,683
2,765
4,724
Financing costs
$
2,433
a) Authorized: Unlimited common shares without par value
Number of shares
Amount
Balance, September 30, 2005
Exercise of options
Exercise of warrants
Private placement for cash
Private placement commission non-cash transaction (Note 18)
Property acquisition non-cash transaction (Note 18)
Property finders fee non-cash transaction (Note 18)
Property acquisition non-cash transaction (Note 18)
Loan fee (Note 18)
Transfer of contributed surplus on exercise of options
Less issue costs (non-cash amount $1,140)
$
20,083,465
650,000
6,124,631
16,700,000
760,261
1,897,621
50,000
168,417
153,333
-
-
Balance, December 31, 2006
46,587,728
$
Exercise of options
Exercise of warrants
Private placement for cash
Private placement commission non-cash transaction (Note 18)
Transfer of contributed surplus on exercise of options
Less issue costs (non-cash amount $802)
1,753,600
14,214,035
18,000,000
422,300
-
-
12,164
424
5,601
22,050
1,140
2,714
68
285
276
214
(1,595)
43,341
1,957
21,057
34,200
802
1,289
(2,487)
Balance, December 31, 2007
80,977,663
$
100,159
66
66
67
67
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
b) Stock Options
A summary of stock options granted and exercised under the Company’s stock option plan is as
follows:
Year ended Dec. 31, 2007
Outstanding, beginning of period
Granted
Exercised
Expired/cancelled
Outstanding, end of period
Number of
Options
3,765,000
4,355,000
(1,321,100)
(112,500)
6,686,400
$
Weighted Average
Exercised Price
1.62
2.82
1.48
2.56
2.24
$
15 month period ended
Dec 31, 2006
Number of
Options
860,000
3,555,000
(650,000)
-
3,765,000
Weighted Average
Exercised Price
0.56
$
1.70
0.65
-
1.62
$
The following stock options were outstanding and exercisable at December 31, 2007:
Number of shares
Exercise Price $
Expiry Date
39,000
30,000
285,000
451,000
60,000
200,000
280,000
860,000
225,000
20,000
50,000
1,391,400
80,000
15,000
50,000
50,000
50,000
2,025,000
250,000
250,000
25,000
6,686,400
0.37
0.80
1.35
2.29
1.75
1.75
1.55
1.66
1.61
1.90
1.96
2.22
2.75
3.09
3.10
3.10
3.05
3.22
2.97
2.82
3.10
December 2, 2009
July 24, 2010
February 5, 2016
March 30, 2016
May 8, 2016
May 22, 2016
July 5, 2016
July 10, 2016
September 13, 2016
November 20, 2016
November 23, 2016
January 11, 2017
February 6, 2017
April 22, 2017
May 31, 2017
June 17, 2017
June 27, 2017
July 2, 2017
September 23, 2017
October 9, 2010
October 24, 2017
6,286,400 options have vested as at December 31, 2007. The average remaining life of the outstanding
options at December 31, 2007 is 8.7 years.
15. SHARE CAPITAL
(continued)
c) Warrants
A summary of share purchase warrants issued and exercised is as follows:
Year ended
Dec. 31, 2007
15 month period ended
Dec 31, 2006
Number of
Warrants
Weighted Average
Exercise Price
Number of
Warrants
Weighted Average
Exercise Price
Outstanding, beginning of period
Issued
Exercised
Outstanding, end of period
20,566,185
10,559,725
(14,646,535)
16,479,375
$
$
1.23
2.30
1.44
1.89
13,114,117
13,576,699
(6,124,631)
20,566,185
$
$
0.91
1.40
0.91
1.23
The following share purchase warrants were outstanding at December 31, 2007:
Number of warrants
4,322,596
862,117
1,613,238
960,969
8,720,455
16,479,375
Exercise Price $
1.850
0.345
0.345
2.300
2.300
Expiry Date
March 23, 2008
June 27, 2010
November 17, 2010
July 11, 2008
July 11, 2008
d) Stock-Based Compensation
The Company uses the fair value based method of accounting for share options granted to consultants,
directors, officers and employees. The non-cash compensation charge of $6,974 recognized for the
year ended December 31, 2007 (15 month period ended December 31, 2006: $4,132) is associated
with the granting of options to a consultant, directors and employees. These compensation charges
have been determined under the fair value method using the Black-Scholes option pricing model with
the following assumptions:
Risk-free interest rate
Expected stock price volatility
Expected term in years
Expected dividend yield
Year Ended
Dec. 31, 2007
4.04% - 4.67%
59% - 68%
5 & 10
0%
15 month period
Ended Dec. 31, 2006
2.93% - 4.59%
43% - 92%
5 &10
0%
Option pricing models require the input of highly subjective assumptions including the estimate of the
share price volatility, risk-free interest rate and expected life of the options. Changes in the subjective
input assumptions can materially affect the fair value estimate, and therefore the existing models do
not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
68
68
69
69
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
Expressed in thousands of Canadian Dollars, except for share and per share amounts
16. ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
Balance at December 31, 2006
Cumulative impact of accounting changes, net of tax (Note 4)
Adjusted balance January 1, 2007
Unrealized (loss) on available-for-sale long term investment,
net of tax (Note 8)
Balance at December 31, 2007
December 31, 2007
-
449
449
(305)
144
$
$
17. SEGMENTED
INFORMATION
The Company is currently engaged in mining and the development of mineral properties. Details on a
geographical basis are as follows:
Canada
Peru
Mexico
Other
Total
Year ended December 31, 2007
$
Revenue
Operating (loss) income
$
As at December 31, 2007
Property, plant & equipment
Total assets
$
$
-
(8,836)
7
40,273
15 month period ended December 31, 2006
-
Revenue
Operating (loss)
(5,731)
As at December 31, 2006
Property, plant & equipment
Total assets
9
2,589
$
$
$
$
$
$
$
$
$
$
$
$
31,667
8,972
9,252
49,297
3,372
771
7,792
36,762
$
$
$
$
$
$
$
$
-
-
4,407
34,155
-
-
2
19,829
$
$
$
$
$
$
$
$
-
(29)
3
721
-
(40)
3
14
$
$
$
$
$
$
$
$
31,667
107
13,669
124,446
3,372
(5,000)
7,806
59,194
18. SUPPLEMENTARY
DISCLOSURE OF
NON-CASH
TRANSACTIONS
Investing and financing activities that do not have a direct impact on current cash flows are excluded
from the statements of cash flows.
The following non-cash transactions occurred:
Shares issued for property acquisition, previously booked as an obligation
Warrants issued for property acquisition, previously booked as an obligation
Shares issued for property finders fees
Shares issued for commission on private placement
Shares issued for property acquisition
Shares issued to continuum for property acquisition
Shares issued for consideration on Quest loan
Fair market value of options exercised
15 month period ended
Dec. 31, 2006
Amount
2,714
1,871
68
1,140
284,625
284,625
275,999
214
$
$
$
$
$
$
$
$
Number of shares
1,897,621
1,613,238
50,000
760,261
168,417
1,293,750
153,333
-
Shares issued for commission on private placement
Purchase of equipment on a deferred payment plan
Fair value of options exercised
Number of shares
422,300
-
-
Year ended
Dec. 31, 2007
Amount
802
847
1,289
$
$
$
19. COMMITMENTS
The Company has a thirteen month contract with one customer who purchases the full production from
the Company’s operating Caylloma mine. Under the contract, the Company is committed to supply
4,800 tons of lead concentrate and 7,200 tons of zinc. As at December 31, 2007, the Company
fulfilled this commitment.
A processing plant was purchased in Mexico in the first quarter of 2007 for US$2,250,000 to be paid
in three installments of US$750,000. The first installment was paid on February 1, 2007 and the
second installment was paid on August 1, 2007. The final installment was paid on February 1, 2008
and is included in accounts payable and accrued liabilities at December 31, 2007.
The Company has a contract to guarantee power supply at its Caylloma mine. Under the contract the
seller is obligated to deliver a “maximum committed demand” (for the present term this stands at
2,800 Kw) and Bateas is obligated to purchase subject to exemptions under provisions of “Force Ma-
jeure”. The contract is automatically renewed every two years for a period of 10 years. Renewal can be
avoided without penalties by notifying 10 months in advance of renewal date. Tariffs are established
yearly by energy market regulator in accordance with applicable regulations in Peru.
70
70
71
71
FORTUNA SILVER MINES INC.
(Formerly Fortuna Ventures Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in thousands of Canadian Dollars, except for share and per share amounts
20. SUBSEQUENT
EVENTS
Subsequent to December 31, 2007, the Company received $34 from the exercise of 21,400 options
and $7,997 from the exercise of 4,322,596 warrants.
On February 6, 2008 options were granted to purchase up to 250,000 common shares exercisable for
10 years at a price of $2.52 per share.
During January 2008 the Company entered into additional derivative contracts spread out evenly over
the period from February 2008 to January 2009 (Note 5).
The following Zinc Forward sale contract was entered into on a SWAP basis:
•
USD 2,360/t, for the total of 1,700 tons
Qualified Person
Gregory Smith, PGeo, is the
company’s qualified person, as
defined by National Instrument
43-101, and is responsible for
verifying the accuracy of the
technical information in this
Annual Report.
The contract is settled against the arithmetic average of zinc spot prices over the month in which the
contract matures.
The following Lead Asian Option contracts were entered into:
•
•
•
USD 2,575/t, for the total of 1,025 tons
USD 2,760/t, for the total of 1,025 tons
USD 3,300/t, for the total of 1,025 tons
Long put options at strike price:
Short call options at strike price:
Long call options at strike price:
21. COMPARATIVE
FIGURES
Certain comparative figures have been reclassified to conform to the current year’s presentation.
Corporate
Information
Head office:
355 Burrard Street, Suite 840
Vancouver, BC
Canada, V6C 2G8
Tel: 604.484.4085
Fax: 604.484.4029
Auditors:
KMPG LLP
Chartered Accountants
P.O. Box 10426 777 Dunsmuir Street
Vancouver, BC
Canada, V7Y 1K3
Share Transfer Agent:
Pacific Corporate Trust
510 Burrard Street, 2nd Floor
Vancouver, BC
Canada, V6C 3B9
Peru Office:
Piso 17. Av. Pardo y Aliaga # 640
San Isidro, Lima - Peru
Tel: 511.616.6060
Stock Exchange:
TSXV: FVI
Lima Exchange: FVI
Frankfurt: F4S.F
355 Burrard Street, Suite 840
Vancouver, BC
Canada, V6C 2G8
Tel: 604.484.4085
Fax: 604.484.4029
www.fortunasilver.com
TSXV: FVI
Lima Exchange: FVI
Frankfurt: F4S.F