Latest / Kitco MINING / Fortuna Mining Plans $650M Growth Push Funded From Cash Flow | Jorge Ganoza

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Fortuna Mining Plans $650M Growth Push Funded From Cash Flow | Jorge Ganoza · Kitco MINING

• 0:07
  SPEAKER_00: Growing to over 500,000 ounces a year of gold production.
• 0:11
  SPEAKER_00: Hello and welcome to Kitco Mining with me, Paul Harris, here with the 2026 Mining Forum Americas in Colorado Springs.
• 0:18
  SPEAKER_00: Joining me now is Jorge Genosa, CEO of Fortuna Mining, which trades on the New York Stock Exchange under the ticker FSM.
• 0:25
  SPEAKER_00: Jorge, welcome back to Kitco.
• 0:27
  SPEAKER_00: Paul, a pleasure to be here again.
• 0:29
  SPEAKER_00: We have a lot to talk about, Jorge, and you're producing your run rate of production this year is almost, well, it's around 300,000 ounces of gold equivalent this year.
• 0:38
  SPEAKER_00: But you have a plan to get up towards and above 500,000 ounces a year.
• 0:43
  SPEAKER_00: How are you gonna get there and what is the timeline?
• 0:46
  SPEAKER_01: Yeah, you know, it's an exciting uh junction to for Fortuna.
• 0:51
  SPEAKER_01: We have placed ourselves in a unique position to grow, as you mentioned, production by roughly about 60% in terms of annual gold output over the next 18 months.
• 1:01
  SPEAKER_01: How are we gonna do that?
• 1:03
  SPEAKER_01: We are expanding our flagship asset, the Segela Mine in the Ivory Coast.
• 1:08
  SPEAKER_01: It's a 30% expansion of uh mill throughput capacity.
• 1:13
  SPEAKER_01: This is backed by success on the exploration front.
• 1:17
  SPEAKER_01: We have been able to expand our inventory of resources, reserves at this mic, supporting this expansion.
• 1:23
  SPEAKER_01: So this should thrust uh production at the asset level from about 160,000 ounces of gold annually to 200,000.
• 1:32
  SPEAKER_01: And the second leg of uh this uh growth is uh with the Diamba Sud project in Senegal, it's uh advancing at a in a similar timeline as the Segel expansion pretty much.
• 1:46
  SPEAKER_01: We're at the midst of taking the final investment decision, the FID.
• 1:52
  SPEAKER_01: Um, and it's a project that should be delivering about 160,000 ounces to 180,000 ounces of gold annually by mid-2028.
• 2:01
  SPEAKER_00: Thank you.
• 2:02
  SPEAKER_00: Now, undertaking two expansions at the same time, um that that's quite a quite a feat for any company, and I suppose that reflects uh the growing maturity of the company.
• 2:12
  SPEAKER_00: Um, but in terms of uh but also two major sort of capital investments at the same time can be quite challenging.
• 2:19
  SPEAKER_00: How are you still planning on on managing that?
• 2:22
  SPEAKER_01: You know, Fortuna has one of the best balance sheets in the peer group of mid-sized producers.
• 2:27
  SPEAKER_01: As of the end of the second quarter, we have uh over$750 million of liquidity available to us.
• 2:34
  SPEAKER_01: We have a net cash position north of$430 million, and we're generating free cash flow from operations annually at the tune of in this price environment of uh over half a billion dollars a year.
• 2:51
  SPEAKER_01: So, you know, it many times in this industry growth requires a discovery, an acquisition, or leveraging the balance sheet and and and uh uh diluting shareholders through equity raisings.
• 3:09
  SPEAKER_01: No, we're in a unique position with our balance sheet.
• 3:12
  SPEAKER_01: Uh instead of financing uh these expansions, we're funding them through cash flow and and and cash on hand.
• 3:20
  SPEAKER_01: So uh that's a very privileged position we have.
• 3:23
  SPEAKER_00: We've spoken before and you've mentioned uh the rock solid balance sheet that the company has.
• 3:28
  SPEAKER_00: With these investments, a lot of that's gonna be funded through cash.
• 3:31
  SPEAKER_00: You've still got some sort of debt, I believe.
• 3:33
  SPEAKER_00: Um so as these expansions um occur and you get up to that sort of 500,000 ounce a year production, uh what are the sort of plans for the balance sheet?
• 3:42
  SPEAKER_01: You know, our debt is is very small.
• 3:45
  SPEAKER_01: We have a convertible out there due in 2029,$175 million, as I say.
• 3:51
  SPEAKER_01: Our net cash position, if we were to service the small debt we have, we're still net cash positive, you know, around$450 million, right?
• 4:02
  SPEAKER_01: So our our debt, the debt we carry is to keep the banks exercised and engaged.
• 4:10
  SPEAKER_01: But uh so you know, we plan to run the business with the maintaining the strength of the balance sheet.
• 4:19
  SPEAKER_01: Over the next two years, we're gonna invest in growth, around$650 million.
• 4:24
  SPEAKER_01: That is the ambassad construction, Segel expansion, and our exploration budgets.
• 4:30
  SPEAKER_01: That's around$650 million over the next two years.
• 4:35
  SPEAKER_01: And uh we believe we can do that, we can maintain the strength of the balance sheet, and we can be opportunistic as well with returns to shareholders.
• 4:45
  SPEAKER_01: In the first half of 2026, we have returned over$100 million to shareholders via uh the Share Buyback program.
• 4:53
  SPEAKER_00: Okay, well, I was gonna ask you about the sort of capital returns policy a little bit later on, but let's uh address that now.
• 5:00
  SPEAKER_00: Um, you mentioned that you've been returning capital to shareholders.
• 5:04
  SPEAKER_00: How do you think your capital returns policy will evolve going forward?
• 5:09
  SPEAKER_00: Obviously, as you get uh up towards 500,000 ounces a year of production in this price environment, a lot of people think the gold prices are gonna go higher.
• 5:18
  SPEAKER_00: You're gonna be generating much more cash.
• 5:20
  SPEAKER_00: Will that see you evolve?
• 5:22
  SPEAKER_00: You're thinking about the capital returns.
• 5:24
  SPEAKER_01: Yeah, we right now the the main uh tool we have to return to shareholders is the buyback.
• 5:33
  SPEAKER_01: We've been, as I said, very active in the first half of a year, uh over a hundred million dollars returned via the buybacks.
• 5:40
  SPEAKER_01: We like the buybacks for us now over a dividend because it's more flexible and we're going into a capital-intensive phase with these two builds, right?
• 5:53
  SPEAKER_01: So the flexibility of being opportunistic with the buybacks is something that we value.
• 5:59
  SPEAKER_01: As we advance with our constructions, right, uh we will certainly revisit instituting uh a dividend, right?
• 6:10
  SPEAKER_00: With the the buybacks, obviously you reduce your the number of shares outstanding.
• 6:14
  SPEAKER_00: Is there an optimum or target number of shares outstanding that you'd like to get the company to?
• 6:20
  SPEAKER_01: Uh well we have not been uh viewing it like that right now.
• 6:25
  SPEAKER_01: Fortuna has a large float, and uh you know we are just active in the market whenever we see that those opportunities.
• 6:35
  SPEAKER_01: Uh and uh we had taken a breather on the buyback uh these past months, but opportunistically you would certainly see us in the market again.
• 6:45
  SPEAKER_00: Well, gold sort of shared$150 per ounce uh today, so maybe today's a good day to be buying some of your own stock.
• 6:52
  SPEAKER_01: Yes, absolutely.
• 6:53
  SPEAKER_01: What uh the start of the conference and gold is three percent down.
• 6:58
  SPEAKER_00: Yeah, yeah.
• 6:59
  SPEAKER_00: Okay, but let's not dwell on that.
• 7:01
  SPEAKER_00: Now um we've spoken about the expansion at Segela.
• 7:04
  SPEAKER_00: Um, there's much more potential to come there um with the Sunbird Sunbird, sorry, the Sunbird Underground Project.
• 7:10
  SPEAKER_00: Tell me a little bit about that.
• 7:12
  SPEAKER_01: Yeah.
• 7:13
  SPEAKER_01: The bigger story here is uh Fortuna controls its growth.
• 7:19
  SPEAKER_01: We are expanding the Segela Mine, which is a mine we've been operating since 2023.
• 7:27
  SPEAKER_01: Uh it's our newest mine on flagship asset.
• 7:30
  SPEAKER_01: We have made discoveries like Sandbird, Kingfisher, and it's on the back of that resource growth that we are planning for this expansion.
• 7:38
  SPEAKER_01: And uh Sandbird will be going underground.
• 7:41
  SPEAKER_01: We are starting the early works for underground, and uh we have roughly about a million ounces that we'll be mining from the underground, supplementing or for the eight pits that we currently have in the mine plant.
• 7:57
  SPEAKER_01: So uh, you know, Segel expansion is already approved, permitted, and uh advancing ahead, we expect to deliver first goal mid-2028, and uh it would be there would certainly be an underground component.
• 8:15
  SPEAKER_01: The underground would be fitting in this beginning a quarter of uh milk throughput, and uh once in steady state, probably up to 40% of milk throughput will come from Sunbird Underground.
• 8:29
  SPEAKER_00: Are you thinking of Sunbird as eventually sort of replacing sort of current production, or do you still see potential to further expand production there?
• 8:39
  SPEAKER_01: Right now, based on the resources we have available, we believe uh the 2.3, 2.5 million tons a year of uh milling throughput capacity is optimum based on the size of the inventory we have.
• 8:55
  SPEAKER_01: Right?
• 8:55
  SPEAKER_01: That still allows us to project the life of mine for close to a decade at that higher throughput rate, right?
• 9:03
  SPEAKER_01: And that's where we want to be looking at all of our mines with a decade in mining in reserves, based on reserves.
• 9:10
  SPEAKER_00: Okay.
• 9:11
  SPEAKER_00: You're also looking beyond your your current operations, and I want to talk to you about Guyana where you've uh signed an earning agreement on the Quartzone project.
• 9:20
  SPEAKER_00: Um let's start at the top.
• 9:22
  SPEAKER_00: What's attractive about Guyana for you?
• 9:24
  SPEAKER_01: You know, first is within our regions of choice, South America, it's a hunting ground for us.
• 9:30
  SPEAKER_01: Second, it's a geology that's very familiar to us because we're working on the same rocks across the Atlantic.
• 9:38
  SPEAKER_01: So the greenstone greenstone belts, same uh geologic uh controls, same lithological structural controls.
• 9:47
  SPEAKER_01: So it's a geology we're very familiar with, where we already had a lot of success.
• 9:52
  SPEAKER_01: And uh really Guyana is emerging as a as a new successful mining uh uh jurisdiction.
• 10:01
  SPEAKER_01: Really, the the growth driven first by the success on oil and gas, and now the government is trying also to leverage its uh mining, uh its mineral resources.
• 10:15
  SPEAKER_01: And uh just to give you an example, uh you get a concession granted, and along with that, you already immediately get your drill permits.
• 10:23
  SPEAKER_01: So time to drill is being basically reduced to zero.
• 10:29
  SPEAKER_00: I imagine given uh some of the other locations you operate in, such as Peru, where getting drill permits can take what six to two years, six months to two years?
• 10:40
  SPEAKER_01: So that's key critical, right?
• 10:42
  SPEAKER_01: And uh within our regions of choice, which are West Africa and South America, uh, we will move tactically.
• 10:48
  SPEAKER_01: And uh yeah, we're very excited about the project Quartzone.
• 10:53
  SPEAKER_01: It's a very exciting project.
• 10:55
  SPEAKER_01: It's some 35 kilometers due north from Oco West, you know, G mining.
• 11:01
  SPEAKER_01: Uh similar geology.
• 11:03
  SPEAKER_01: I don't like to do proximology, but geology is very similar.
• 11:07
  SPEAKER_01: And uh yeah, we're gonna start drilling this month of October, so we're looking forward to that.
• 11:13
  SPEAKER_00: In some ways, this is perhaps a bit of a departure for the company because this is a very early stage opportunity, and you know, for you to be you know starting an opportunity this early, you're obviously looking at quite a uh a development time to get it toward potentially an investment decision and a mine build.
• 11:33
  SPEAKER_01: Well, when we look at our pipeline, we currently have a stable platform of production from three mines where we can project life of mine for a decade, producing about 300,000 ounces of gold.
• 11:47
  SPEAKER_01: Half a billion dollars of free cash flow from operations annually out of this platform.
• 11:52
  SPEAKER_01: Over the next 18 months, we can deliver 60% growth from the two projects we discussed, the Ambassuda and Segela.
• 12:00
  SPEAKER_01: Projects that are de-risked technically, socially, and financially.
• 12:06
  SPEAKER_01: So we're thinking now what happens in 2029, 2030.
• 12:11
  SPEAKER_01: We are in no rush to go into acquiring uh or doing aggressive MA to acquire something that can fit into our pipeline because our growth is taken care of over the short medium term.
• 12:23
  SPEAKER_01: So projects like uh like uh Quartstone, like AWALE Resources, we're the largest investor in AWALE resources.
• 12:34
  SPEAKER_01: Um exploration we're doing in Argentina, what we're trying to look there is seed our our next leg of growth, but thinking beyond 2029, right?
• 12:46
  SPEAKER_01: Okay, which is a a very uh unique position uh and favorable position to be.
• 12:51
  SPEAKER_00: It is an I imagine one of the the appeals at Guyana is that in the country you mentioned Oko Oko West, the if I remember correctly, the the timeline from initial exploration through to development construction and into production was a matter of years, five or six if uh if I remember correctly.
• 13:07
  SPEAKER_01: Yes, it had to do with their you know expiration uh cycle.
• 13:12
  SPEAKER_01: But uh on the permitting side, speed to cash flow there is uh what you would expect in places like Africa.
• 13:19
  SPEAKER_01: Uh you can permit in a year or two.
• 13:22
  SPEAKER_00: Yeah, yeah.
• 13:23
  SPEAKER_00: Okay.
• 13:24
  SPEAKER_00: Well, let's talk about some of the the challenges that business faces uh at the moment.
• 13:28
  SPEAKER_00: This year has been a challenging year in terms of cost, particularly fuel costs, given what's happening elsewhere in the world.
• 13:35
  SPEAKER_00: You you have operations, mining operations in several different countries.
• 13:38
  SPEAKER_00: How are you managing this particular aspect, cost inflation, particularly fuel cost inflation?
• 13:45
  SPEAKER_01: Yeah, for every$10 that uh crude raises in price, it impacts our ASIC about$12 to$14 per ounce.
• 13:59
  SPEAKER_01: That's the kind of impact we see.
• 14:01
  SPEAKER_01: So in the big scheme of things, it's not that material for us, right?
• 14:09
  SPEAKER_01: So if we look at cost against our guidance for 2026, some of the bigger impacts on our on our all-in-sustaining costs have to do, for example, with royalties.
• 14:22
  SPEAKER_01: Because we budgeted 2026 at a price, we guided based on that price, and now you know we we guided, I think we were using$3,500 if memory serves me well.
• 14:34
  SPEAKER_01: Now we're even with this retreating price, we're talking about 41.
• 14:38
  SPEAKER_01: Our average price for second quarter was what$4,400, right?
• 14:43
  SPEAKER_01: First quarter was$4,800.
• 14:46
  SPEAKER_01: So so uh that drives royalties.
• 14:49
  SPEAKER_01: Uh certainly some inflation, particularly in the rise and fall that some of our contractors use in Africa, and diesel, of course.
• 14:58
  SPEAKER_01: And then some impacts from macroeconomics in Argentina that have placed against us exporters over the last uh six months.
• 15:07
  SPEAKER_01: I think that's probably have to do more with the electoral cycle in Argentina, but it's basically the impact of royalties to some degree, diesel, and and in the case of our operation in Argentina, the lag in uh effects.
• 15:24
  SPEAKER_00: Okay.
• 15:25
  SPEAKER_00: With the Argentina specifically, uh obviously the the government of Javier Millet is trying to encourage much more investment in the mining sector, and he's created a special taxation and legal stability regime called Rigi to help stimulate that.
• 15:39
  SPEAKER_00: For existing producers such as yourself, is there any benefit or incentives that the government's created to so that you can continue to invest or to stimulate you to continue to invest?
• 15:50
  SPEAKER_01: Absolutely.
• 15:51
  SPEAKER_01: President Millet has turned the investment climate for the better, no doubt.
• 15:56
  SPEAKER_01: Right?
• 15:57
  SPEAKER_01: We are able to freely repatriate uh funds, uh service or debt or or commitments.
• 16:07
  SPEAKER_01: Uh so no no, the the change is uh dramatic, right?
• 16:13
  SPEAKER_01: Now, looking forward, Argentina is going into its electoral cycle again, and I think we're I would say characterize it as cautiously optimistic about uh further investment.
• 16:27
  SPEAKER_01: We're investing at our mind and doing modest investments outside of our mind to be more aggressive with capital deployment to Argentina.
• 16:37
  SPEAKER_01: I think we want to see the outcomes of the upcoming electoral cycle.
• 16:42
  SPEAKER_00: And is that because now is a good time to invest?
• 16:45
  SPEAKER_00: But there's potentially the danger if uh President Millet or whoever runs on his, you know, on his ticket in 2027 doesn't get elected, that um if the opposition comes back in, it may reinstate some of the sort of capital controls that uh previous administrations.
• 17:01
  SPEAKER_00: Uh it's a risk, certainly.
• 17:03
  SPEAKER_01: It's it's a risk.
• 17:04
  SPEAKER_01: So we're cautiously optimistic, and uh we are making measured investments, but any significant larger capital deployments would require that we see a bit more clarity on the electoral.
• 17:20
  SPEAKER_01: Remember, the electoral cycle in Argentina is relatively short compared to other countries in Latin America, it's only four years, right?
• 17:27
  SPEAKER_01: So they are coming to that uh election year, and and we want to see the that seems to have come around very quickly.
• 17:34
  SPEAKER_00: Um, elsewhere where you're making incremental investments, uh Siguela, you're expanding the solar plant.
• 17:41
  SPEAKER_00: Um is that related to what we've seen in terms of energy prices this year, or was that something you were always contemplating and always going to do?
• 17:50
  SPEAKER_01: No, I think it's something that we will always been contemplating.
• 17:54
  SPEAKER_01: Now we have uh two solar uh plants in operation, one at Lindero and uh the second one at Segela.
• 18:03
  SPEAKER_01: And the Ambassud, our new project that will start building, will start building this second half of the year, uh, will also contemplate a solar plant.
• 18:14
  SPEAKER_01: No, so I think it's just good economic sense, good environmental sense.
• 18:18
  SPEAKER_01: Yeah.
• 18:19
  SPEAKER_00: And will that enable you to perhaps reduce the amount of diesel you need or things of that nature?
• 18:24
  SPEAKER_00: Absolutely.
• 18:25
  SPEAKER_01: Less reliance on uh on uh on diesel uh and you know with the kind of swings we're seeing, you know, pays for itself rather quickly.
• 18:36
  SPEAKER_00: We are sitting here at an investor conference, Jorge.
• 18:40
  SPEAKER_00: As the company grows and matures, how are investor demands of the company changing?
• 18:47
  SPEAKER_00: What are they asking you?
• 18:48
  SPEAKER_00: How's that changing?
• 18:50
  SPEAKER_01: That's an interesting question because certainly the appetite of investors changes throughout the precious metals price cycle.
• 18:59
  SPEAKER_01: And uh today I believe there is a general fixation with growth, right?
• 19:08
  SPEAKER_01: Uh you need to show and exhibit growth.
• 19:11
  SPEAKER_01: I've been in other uh legs of the cycles where if you want to grow the market is not supportive, right?
• 19:22
  SPEAKER_00: Is that internal organic growth, or is that okay, you need to go out and buy someone sort of external?
• 19:27
  SPEAKER_01: No, I I I think there is still some restraint on on capital discipline and and uh this thing of not making the mistakes of the past.
• 19:37
  SPEAKER_01: Uh but I see building pressure on on show growth, do something exciting.
• 19:44
  SPEAKER_01: Uh I think we've seen uh we we I see that building.
• 19:48
  SPEAKER_01: I see that building, and it's for us to remain disciplined, right?
• 19:52
  SPEAKER_01: And and uh and cautious.
• 19:55
  SPEAKER_00: Well that's interesting, and imagine it's easier to keep investors at bay when you've got internal growth that could add uh what two to three hundred thousand ounces a year of production.
• 20:04
  SPEAKER_00: Yes.
• 20:04
  SPEAKER_01: Yes, no, I think we have placed ourselves in a unique position, Paul.
• 20:08
  SPEAKER_01: And uh if uh there is a takeaway here is Fortuna controls its growth.
• 20:14
  SPEAKER_01: We have the ounces in the inventory, the projects in the portfolio, and the cash in the balance sheet.
• 20:19
  SPEAKER_00: Okay, we've covered a lot of ground, Jorge.
• 20:21
  SPEAKER_00: Um, you've got a lot going on, so maybe have a recap for our viewers what some of the key catalysts for the company are going to be over the next 12 months or so.
• 20:29
  SPEAKER_01: Yeah, going back to to the organic growth, we made already and announced the uh construction decision for the plant expansion at Segela that's been announced, and we look forward to report on the milestones as we advance through that process.
• 20:48
  SPEAKER_01: And the next big one is our final investment decision for Diamba Suit.
• 20:54
  SPEAKER_01: We have permitted Diamba Suit from the we submitted the ESIA, the Environmental and Social Impact Study, to the government in September of last year.
• 21:05
  SPEAKER_01: We got it approved in July, in less than a year, and we are right now about to conclude the uh obtention of the exploitation permit.
• 21:17
  SPEAKER_01: All of that will have been done in in less than a year.
• 21:21
  SPEAKER_01: And uh so with that, we are looking forward to to announce that, close that process with the government, announce it, and go straight into construction with the uh final investment decision.
• 21:32
  SPEAKER_01: So those are very significant catalysts and that we'll communicate to the market as we advance.
• 21:37
  SPEAKER_01: And of course, we're investing 60 million dollars in mineral exploration this year, lots of drilling over 200,000 meters, and we look also to keep the market informed of our progress with the drill bit.
• 21:49
  SPEAKER_00: Well, it's good to hear there's a lot going on.
• 21:51
  SPEAKER_00: Looking forward to seeing the results of some of those initiatives.
• 21:54
  SPEAKER_00: Umosa, thank you very much for joining me today.
• 21:57
  SPEAKER_01: Thank you.
• 21:58
  SPEAKER_00: And Fortuna Mining trades on the New York Stock Exchange and the Ticker FSM.
• 22:03
  SPEAKER_00: We have a lot more to come from the 2026 Mining Forum Americas in Colorado Springs, so stay tuned and hit that subscribe button.
• 22:10
  SPEAKER_00: I'm Paul Harris and this is Kitko Mining.