Source: Adrian Day 05/15/2024 Several resource companies on Global Analyst Adrian Day's recommended list reported first-quarter results last week. Fortuna Silver Mines Inc. (NYSE: FSM) had a very strong quarter, with earnings more than 50% higher than consensus expectations, as higher production and lower costs drove the higher earnings. The company is now back on track after a series of problems and negative market perceptions. All-in-sustaining Costs ("AISC") of less than $1,500 were at the low end of guidance as the Séguéla mine continues to report stunning results, with an AISC of $948. Across the company, cash costs were a low $879 per ounce, excluding San Jose, which is winding down only $744/ounce. Like most other companies, Fortuna said its first quarter is expected to be the lowest quarter for the year, and full-year guidance was re-iterated. Across the company, gold accounted for 81% of revenue, silver 10%, and base metals the balance. The company is continuing to use its strong cash flow to pay down debt, repaying another $40 million in the last quarter on top of the $123 million repaid since the third quarter, when Séguéla got up and running. CEO Jorge Ganoza said that providing flexibility to its balance sheet was its top priority for cash flow. It is also repurchasing shares now that the debt is down significantly, buying back one million shares late in the quarter. Might San Jose Have a Future? The company had previously said that current reserves at the San Jose mine in Mexico would run out by the end of the year. But it is seeking to bring in new reserves, aggressively exploring the new Yessi discovery, adding another rig (now three) seeking to expand the mineralization. Ganoza said there were essentially three decisions that could be made on San Jose. First, convert some of the resources into mineable reserves due to higher gold and silver prices. Second, put the mine on care and maintenance while continuing to explore until more tonnage and ounces have been discovered. And third, close the mine. He said the discovery was exciting and he was "hopeful" but it needed to grow; "we are not there yet." He said the company needed more time and more information. It would be into the third quarter before there would be sufficient data to make a decision. But it sounds more likely that one of the first two options will be pursued before closing the mine. I interviewed CEO Ganoza along with Chris Marcus of Arcadia Economics on this webcast. Ganoza explained the quarter and the company's strategic plans. All in all, this was a very strong quarter, further validating my view that Fortuna has turned the corner with strong operations, low costs, and a solid balance sheet with strong management. More importantly, the unwarranted negative perception of the stock has also turned. After virtually doubling since the end of February, stock valuations are now more in line with silver peers. We expect continued growth from Fortuna, but after the run, are holding for now. Wheaton Has a Strong Quarter as Problem Mines Recover Wheaton Precious Metals Corp. (NYSE: WPM) reported a strong first quarter, with a reversal of last quarter's poor contribution from Salobo, Wheaton's largest stream, as the Salobo III expansion continues to ramp up. Grades there were a little higher in the last quarter, but are expected to drop off during the year as lower grade ore comes into the mining sequence. Two other large streams that had had issues, Peñasquito and Antamina, both performed well. With first-quarter production of 143,000 ounces, the company is tracking towards its annual guidance of between 550K and 620K ounces, which it reiterated. Company-wide, the revenue was 64% from gold and 32% from silver; the silver is significantly higher than other royalty and streaming companies (and higher than many "silver" mining companies). Wheaton has a rock-solid balance sheet, with cash of $306 million and available liquidity of $2.3 billion, down marginally from the end of the year as Wheaton acquired several streams and royalties, including $450 million for several Orion Streams. After the quarter ended, it sold equity in Hecla for $177 million. Finally, the company increased its dividend in line with its "progressive dividend" policy. Wheaton is currently trading at a premium to Franco-Nevada, over 10% on a price to NAV and 16% on price to cash flow, mostly due to Franco's decline on the back of the Cobre Panama closure. It is also trading close to historical valuation highs on several metrics. So, while Wheaton is a solid company with high-margin, long-life ounces, we are holding now. Altius's Diversification Pays Off, With Growth Opportunities Ahead Altius Minerals Corp. (OTC: ATUSF) reported earnings in line with expectations after the company pre-released attributable royalty income of $17.4 million, up from just over $16 million in the prior quarter, mostly due to growth from 58%-owned Altius Renewables (ARR). Revenue was down the year-ago quarter, however, due to a decline in potash prices from unusual highs and the end of the Genesee Coal Mine revenue. The company has about $10.5 million in cash (excluding the $91 million held within ARR, which is consolidated on the balance sheet) and virtually $112 million in debt after repaying $2 million during the quarter. There is $93 million available on its credit facility. Although this might not appear to be a particularly strong balance sheet, Altius also has holdings in various publicly traded shares, including $178 ...