Fortuna Mining Corp. Q2 FY2026 earnings call

Overall Financial and Capital Allocation Highlights

• Delivered strong operating and financial performance in Q2 2026, generating significant free cash flow while maintaining a robust net cash balance sheet.
• Returned $82 million to shareholders via share buybacks in Q2, bringing year-to-date total returns to $106 million (≈41% of year-to-date free cash flow from ongoing operations) through repurchase of 10.8 million shares.
• Capital allocation priorities are: 1) fund organic growth projects, 2) maintain a strong balance sheet, 3) return excess capital to shareholders, with share buyback levels adjusted to accommodate growth spending.
• Ended Q2 with $606 million in cash and short-term investments, total liquidity of ~$756 million, and a net cash position of ~$435 million, providing full flexibility to fund concurrent growth projects and exploration.

Operational Safety

• A fatal contractor accident occurred at the Seguela mine during the quarter; management reaffirmed safety as the highest priority, with renewed focus on heavy equipment controls, contractor management, and critical control verification.
• Total recordable injury frequency rate was 121 for the quarter; Cayoma and Lindero ended the quarter with 1,154 and 990 lost-time-injury-free days respectively.

Growth Project Milestones

• Yanda Sud (Diambasud) Gold Project (Senegal): Feasibility study confirmed robust project economics, with average annual production of 158,000 ounces over the first 4 years and a 9.4 year mine life. Environmental and social impact assessment (ESIA) is approved, final permitting is expected soon, and discussions with the government on a stable tax regime are progressing. A final investment decision is targeted for H2 2026. Management views Diambasud as a beachhead in a prolific West African gold district and is actively expanding local land holdings.
• Seguela Mine 30% Plant Expansion + Sunbird Underground Project (Cote d'Ivoire): Board approved the $109 million plant expansion and $48 million underground development project, which will support average annual production of over 200,000 ounces at Seguela for the next decade. The 6 MW on-site solar plant is commissioned and operating as expected; solar capacity will be expanded to 10 MW with zero capital cost to Fortuna. ESIA for the underground project has been submitted with favorable feedback, final permitting is expected by end-2026, and underground development is on track to begin Q2 2027. The expansion is targeted for completion in mid-2028.

Regional Operational Updates

• At Lindero, crusher reliability work is complete, and the on-site solar facility supplied 26% of power needs in H1 2026, delivering $3.2 million in energy savings.
• Exploration is active across all core regions, with seven drill rigs working to expand the resource base at Seguela. Total 2026 exploration budget has been increased from $50 million to $60-$65 million to support greenfield projects and expanded brownfield exploration.

1. West Africa (Seguela Mine): Produced 41,693 ounces of gold in Q2 2026, bringing year-to-date production to 83,699 ounces. 433,000 tonnes of ore were mined at an average grade of 3.06 g/t, and 421,000 tonnes were processed at 3.46 g/t. Cash cost was $676 per ounce, and all-in sustaining cost (ASIC) was $1,765 per ounce. This segment accounted for approximately 58% of total Q2 gold equivalent production. 2. Latin America (Lindero Mine, Argentina): Produced 20,829 ounces of gold in Q2 2026, with year-to-date production of 42,374 ounces. Cash cost was $1,459 per ounce, and ASIC was $2,265 per ounce. The increase in costs over Q1 2026 was driven by temporary crusher refurbishment costs, Argentine inflation, and peso appreciation impacts. This segment accounted for approximately 29% of total Q2 gold equivalent production. 3. Latin America (Cayoma Mine): Performed in line with plan, with quarter-over-quarter growth in gold equivalent ounces driven by improved gold grades offsetting lower silver grades. Cash cost was $27.8 per silver equivalent ounce, and ASIC was $44.9 per silver equivalent ounce, largely in line with Q1 2026 levels after adjusting for commodity price impacts on silver equivalent conversion. The 28% complete storage facility expansion project is progressing on plan. This segment accounted for approximately 13% of total Q2 gold equivalent production. Consolidated Q2 2026 results: 72,217 total gold equivalent ounces produced; total sales of $318 million; adjusted attributable net income of $75 million ($0.25 per share); adjusted EBITDA of $200 million (63% margin); free cash flow from ongoing operations of $85 million. Consolidated cash cost per gold equivalent ounce was $1,034, and consolidated ASIC was $2,157 per ounce.

• Annual 2026 production guidance is maintained, with year-to-date production of 145,089 gold equivalent ounces keeping the company on track to meet full-year targets.
• Consolidated ASIC guidance for 2026 is maintained, with Q2 2026 expected to be the peak cost quarter for Lindero, and unit costs forecast to trend lower through H2 2026. After removing Q2 one-time costs, consolidated ASIC is expected to trend toward the $2,000 per ounce range in H2 2026, with the most pronounced cost declines occurring in Q3 2026 before leveling off in Q4 2026.
• Combined growth projects are on track to deliver ~60% annual production growth, enabling the company to exceed 500,000 ounces of annual gold production by mid-2028, with all growth fully funded via existing cash and operating cash flow without the need for new equity issuance.

• External cost pressures: Metal price-linked royalties, elevated diesel prices, global inflation, and supply chain bottlenecks may push costs above guidance. Argentine macroeconomic conditions, including peso appreciation and foreign exchange repatriation spreads, have already added incremental cost pressure in 2026.
• Sustained external cost volatility could impact the company's three-year ASIC guidance.
• Growth project permitting timelines are subject to regulatory approval risk, despite progress to date.

Q: Are the Q2 one-time cost increases (Lindero crusher work, Seguela contractor mobilization) recurring, and what is the expected cadence of ASIC declines in H2? What is the outlook for share repurchase run rates as growth spending increases? / A: All Q2 one-time costs are non-recurring and will not carry into H2. ASIC is expected to decline sharply in Q3 (most notably at Lindero) before leveling off in Q4, with the company expecting to remain within full-year guidance. The Q2 $82 million share buyback was a historical peak; the company will maintain sustained buybacks at a lower run rate, adjusting levels based on growth spending needs and market valuation.

Q: Over what timeframe will the $109 million Seguela expansion capital and $48 million underground development budget be spent? / A: The $48 million underground development budget will be mostly spent in 2026 and early 2027, covering portal preparation and initial works. The $109 million plant expansion budget will be spread out from current quarters through project completion in mid-2028, with detailed quarterly spending plans still in development.

Q: Can all current planned growth projects (Diambasud, Seguela expansion, Argentine projects) be funded without returning to the equity market, given your current cash position? / A: Yes, definitely. The company's current cash position, strong liquidity, and operating cash flow generation across price scenarios are sufficient to fund the 60% production growth over the next 18-24 months entirely organically, with no new share issuance needed. Capital allocation priorities are fixed as funding growth first, then exploration, then maintaining a strong balance sheet, then returning capital via buybacks, with buyback volumes adjusted to meet other priorities.

Q: What is the update on your new Guyana exploration project? / A: Management is very optimistic about the opportunity in Guyana, where the government views mining as a strategic development priority alongside the country's oil and gas sector. The local team is nearly complete, and initial drilling is on track to start by early Q4 2026 to test early geological targets at the Quartzstone project.