Fortuna Mining - Earnings Call - Q3 2020

Transcript

Operator (participant)

Ladies and gentlemen, hello and welcome. Thank you for joining us for this Fortuna Silver Mines third quarter 2020 earnings conference call. As a reminder, all phone participants are presently in a listen-only mode, but after today's prepared remarks, you will have the opportunity to ask questions. To get us started today with opening remarks and introductions, I am pleased to yield the floor to IR Manager Mr. Carlos Baca. Good morning, sir.

Carlos Baca (Investor Relations Manager)

Thank you, Jim. Good morning, ladies and gentlemen. I would like to welcome you to Fortuna Silver Mines and to our financial and operations results call for the third quarter of 2020. Today, we will be using a webcast presentation, which will be controlled by us. To download the presentation, please go to our website at fortunasilver.com, click on the Investors tab, then click on the Financials subtab, and under Q3, click on the Earnings Call Webcast link. Jorge Alberto Ganoza, President, CEO, and Director; and Luis Dario Ganoza, CFO, will be hosting the call from our management head office in Lima, Peru. Before I turn over the call to Jorge, I would like to indicate that this earnings call contains forward-looking information that is based on the company's current expectations, estimates, and beliefs. This forward-looking information is subject to a number of risks, uncertainties, and other factors.

Actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast, or projection in the forward-looking information, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's annual information form and MD&A, which are publicly available on SEDAR. The company assumes no obligation to update such forward-looking information in the future except as required by law. I would now like to turn the call over to Jorge Alberto Ganoza, President, CEO, and Co-founder of Fortuna.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Thank you, Carlos, and good morning to all. I'll be presenting an introduction to our third quarter results and discuss the status of our operations in Mexico, Peru, and Argentina, and then turn the call over to Luis who will take you through the financial statements. On slide six of the presentation, in the third quarter, we have reported the highest financial figures in the company's history for sales, free cash flow from operations, and adjusted EBITDA. Free cash from operations was a strong $30 million, and our EBITDA margin stood at a robust 51% over sales. We have $85 million in cash as of the end of the quarter and a comfortable liquidity position of $140 million, with a modest debt-to-EBITDA ratio of 0.7. At Lindero, we produced our first gold on October 20th.

We are pouring gold every week and made our first sales in November. We are immersed in the ramp-up activities with the aim to stabilize production at feasibility design parameters by year-end and into the first quarter and despite continued COVID-19-related restrictions, our mines in Peru and Mexico met production objectives in the quarter. In Argentina, restrictions on flow of personnel across national and provincial borders hamper and drag our ability to provide quick response to the various issues that arise as part of any production ramp-up phase. Across all sites, we have strict sanitary protocols in place and have taken over 8,200 PCR tests to our personnel, reporting approximately 391 positive cases for COVID so far. On slide seven, we share here our key safety performance indicators. We present the KPIs as a 12-month rolling average to better represent trends.

During the third quarter, we had a spike in lost-time accidents. These were mainly related to the start of operations at Lindero, where the workforce is largely local and gaining experience in mining. The severity of these accidents was minor, as shown by the injury severity rate on the graph to the right. Nevertheless, a plan of action is in place to further mitigate risks associated with largely inexperienced workforce at Lindero, in spite of all of the training that this new workforce has been through. Slide eight. Silver production was above budget and previous year by seven and 10%, respectively. The increase was driven by improved grades at our San José mine. Gold production was above our internal budgets and previous year by 17% and 12%, respectively.

The increases were driven by a welcome contribution of approximately 1,400 ounces of gold from the Caylloma mine and higher grades at our San José mine. Gold at Caylloma is coming from a small near-surface high-grade ore shoot, which is an unusual occurrence at this mine, and we're carrying studies to better understand the geologic controls of this occurrence. Slide nine, please. Silver accounted for 59% of sales and 28% for gold, for a combined 87% precious metals contribution. In the quarter, we sold silver at a realized price of $24.90 per ounce, compared to $17 per ounce a year ago. We sold gold at a realized price of $1,925 per ounce, compared to $1,487 a year ago.

We continue to observe with expectation the consolidation of what is configuring to be a historic bull market for precious metals and mining equities at a time when we are prepared to deliver material growth in annual gold production driven by our Lindero mine. Slide 10. As I mentioned in the highlight slide at the start of the presentation, we had a record-breaking quarter in terms of key financial metrics. This performance was driven by higher metal produced and a significant increase in precious metal prices, as just mentioned. Sales were up 36% to $83 million. EBITDA was up 120% to $42 million, and adjusted net income was up 747% to $16 million or $0.09 per share. Slide 11. San José all-in sustaining costs increased 11% to $12 per silver equivalent ounce.

The cost increase was driven by components which are sensitive to higher prices, like workers' participation, mining royalties, and sustaining capital. At Caylloma, all-in sustaining costs increased by 23% to $19.40 per silver equivalent ounce as a result of a 21-day COVID-related voluntary suspension of operations that we took during July. Slide 12. Year-to-date, our capital expenditures on sustaining operations, growth, and exploration amounted to $50 million. Lindero CapEx in the quarter amounted to $12 million. On our financial news release dated August 13th, we provided guidance for total remaining funding requirements for Lindero to be in the range of $55 million-$60 million. We're executing within this budget and expect Lindero to be largely self-funding in Q4. In slide 13, we share with you our first doré bars produced at Lindero on October 20th, a major milestone for the team, for the company.

We are pouring doré gold every week, and our first sales have taken place in November. Slide 14, we share a simplified view of our major milestones and schedule for the project. As I mentioned before, we are immersed in the ramp-up of production and plan to be in operations at design rates in Q1 of next year. In slide 15, Lindero construction is substantially complete. In these initial months of production, we're observing a very good reconciliation between our long-term block model and blast hole sampling. In these early days, leaching kinetics for gold are also tracking according to our design curves. For 2020, we are revising our forecast for gold production at Lindero to between 13,000 ounces and 15,000 ounces. For this forecast, we're taking into consideration temporary operational restraints to incorporate irrigation parcels at a faster pace than originally thought.

This is due to the advanced stacking sequence with trucks we're using. This issue goes away in November with the start of conveyor stacking. Additionally, management is taking a more conservative approach for the ramp-up of the HPGR agglomeration and stacking system. The COVID-related restrictions for the movement of personnel to site and between provinces in Argentina are a source of small but gripping delays as the team moves to solve the various issues that arise as part of any ramp-up process. In the next slides, we share with you views and updated photos of the current status of the site. I would invite you to visit our website where we keep an updated gallery of photos. On slide 20, sorry, 16, we share with you a view of the pit.

At the pit, we're moving the scheduled 40,000 metric tons of material every day, of which about half is ore and half is waste. We're keeping within the scheduled strip ratio of one. The pit is run very efficiently. It's performing well. Five 100-ton trucks, two wheel loaders, two production drill rigs. It's a tight-knit operation. In the next slide, we share with you a view of the secondary and tertiary crushing. Following slide is a view of our agglomeration. We have been solving issues that are normal to ramp-up, improving dust control, making adjustments to some of the chutes and components of the crushing system. What I can report is that we have not identified any material issues, and we're trending in the right direction with respect to achievement of design parameters. In these slides currently shared, we have a view of our first irrigation cell. Next slide, please.

There we go. Then a view of the ADR plant and pumps area and in the last slide, we share a view of the SART plant. The SART plant is the last part of the system that will come in line. We expect the SART commissioning to initiate this second half of November and our current asset portfolio, and here just highlight the fact that Lindero will be moving up to the pinnacle of the pyramid, joining San José and Caylloma as our third mining operations. I'll move on. I'll let Luis now take you through the financial statement highlights.

Luis Dario Ganoza (CFO)

Thank you, Jorge. So as was previously mentioned, we had a record quarter in terms of sales, EBITDA, and cash flow. We recorded sales of $83.4 million, 36% above Q3 2019, on the back of higher metal prices, higher metal production, and partially offset by higher treatment charges from 2019.

We reported quarterly net income of $13.1 million and $16.1 million on an adjusted basis, and earnings per share of $0.07. The loss in that comparative period of Q3 2019 was related to an $8.2 million foreign exchange loss related to the Lindero VAT receivable in Argentina. In Q3 2020, we have reported an FX loss of $3.5 million, of which $2.7 million is related to the Lindero VAT. Also, in that reporting quarter, we had a higher effective tax rate than what we expect on a recurrent basis, with an impact of around $0.01 per share. Consistent with the drivers I have mentioned, we saw a material increase in EBITDA and free cash flow, as Jorge pointed out as well. Free cash flow from operations of $30.1 million represents 36% of sales.

This number contains a positive impact of around $5.5 million from changes in working capital related to timing of certain payable items. But even excluding these effects, free cash flow was close to 30% of sales. So slide 25, when breaking down our sales performance for the quarter, we can see the highest impact came from higher silver and gold metal prices. In particular, silver price contributed $5.2 million out of the total $22 million increase in sales. Also worth mentioning, the negative impact we see from treatment and refining charges, and which have been a consistent feature of 2020, are expected to revert in 2021 as we are seeing much improved terms in the market for next year.

On slide 26, when looking at our comparative segmented results over Q3 2019, we can see the strong performance at both our mines, San José and Caylloma, in terms of EBITDA and cash costs. At San José, there is higher all-in sustaining costs in the quarter, which, as Jorge explained, is related to items of cost that are linked to sales and profits, specifically royalties and workers' participation. Also, as Jorge mentioned, there is a smaller component relating to the timing of CapEx execution. At Caylloma, the financial impact of that 21-day suspension was more than offset by higher silver prices and the significant contribution of gold production in the quarter, which represented 13% of sales at Caylloma. Both mines recorded lower costs year over year that contributed to our improved financial performance.

As well, as was mentioned by Jorge, the higher all-in sustaining costs at Caylloma is related to the temporary 21-day suspension. On slide 27, G&A at our operations reflects the cost containment measures implemented in Q2. The increase in share-based payments is strictly related to the performance of the share price. Our effective tax rate was 53% for the quarter, as the devaluation of the Mexican peso year-to-date continues to affect our income tax provision. We estimate the impact in the quarter in terms of the effective tax rate was around 7 percentage points. Finally, on slide 28, we provide an overview of the evolution of our liquidity position over the last few quarters. Total liquidity at the end of Q3 was $140 million.

The main takeaway here is that in Q3, our cash position and total liquidity already reflect an inflection point as we recorded a small increase of $8 million over Q2. Total cash expenditures at Lindero in Q3 2020 were $28 million, which was more than covered by cash from operations. In Q4 at Lindero, we expect additional construction capital expenditures of approximately $12 million, plus additional cash outlays of a similar magnitude related to construction payables as we close the project. Back to you, Carlos.

Carlos Baca (Investor Relations Manager)

Thank you, Luis. We would now like to turn the call over to any questions that you may have.

Operator (participant)

Gentlemen, thank you. And to our listening audience, if you would like to ask a live question over your telephone line, simply press star and one on your telephone keypad.

Pressing star and one will place your line into a queue, and I will open your lines one at a time. Also, a friendly reminder that if you're joining us today on a speakerphone, please return to your handset prior to pressing star and one to be certain that your signal does reach our equipment. Once again, ladies and gentlemen, that is star and one if you would like to ask a live question. We'll hear first from Trevor Turnbull at Scotiabank. Please go ahead, sir.

Trevor Turnbull (Director of Gold and Silver Global Equity Research)

Yeah. Hi, Jorge and Luis. I had a question. You talked a little bit about what you were doing in the last few months of the year, November, December at Lindero. Can you talk a little bit about how October looked in terms of what you were able to get on the pad in terms of tons or ounces?

And can you talk also a little bit maybe about how the mining costs are tracking at Lindero so far?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Yes. October was a difficult month in the ramp-up. We had two breakdowns of conveyor head pulleys, something quite unusual. We've never seen anybody in the team break off pulleys like that, particularly new pulleys. So that was a problem with fabrication that took us down pretty much 12, 13 days in the month, right? Those are very simple to manufacture. We manufacture them ourselves in Salta. And we have manufactured spare head pulleys, something that we have never carried in stock anywhere in light of what happened. But nevertheless, that took us down around 12 days in the month of October. Our design rate of production in the crushing system is about 1,100 metric tons per hour.

We are running right now, on average, for the year so far, at around 800. In the ramp-up, we're doing well. The loss of operating hours in October, operating days in this case, did take a toll. As I mentioned, I think we're tracking in the right direction with a team of experienced operators who we have trained. Nevertheless, there is always a curve there as they gain more experience with the equipment and the limitations with rotation of supervision and speed at which we can address issues, right? In November, we're faring better. Again, the message, I think, overall is we are heading in the right direction. It's just taking a bit longer because all of these drags with the difficulties to move personnel that are related to our ability to solve issues on site, right? Yeah. With respect to.

Trevor Turnbull (Director of Gold and Silver Global Equity Research)

And so now that November is kind of settling in and is a little more typical of operating, can you say anything about how mining costs look on a unit cost basis compared to what you're targeting?

Luis Dario Ganoza (CFO)

Right, Trevor. Unit costs at the mine are well within expectation. We're not seeing any significant deviations. So for Q4, we expect to be reporting or be in a capacity to report mining costs within our original plan. There's not much deviation on that side. Different, of course, for a plant and indirect costs where there's still a distortion of the ramp-up. But overall, we see that our expected cost at a steady state is achievable and on track, which is in the range of $10.5-$11.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Per ton.

Luis Dario Ganoza (CFO)

Per ton of process ore.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Yes. The main drivers for cost on the side of consumables are what?

Fuel for energy as we self-generate, cyanide, and labor, and the pricing we've been able to achieve on cyanide and fuel is well within what was in our original budgets.

Luis Dario Ganoza (CFO)

Yes, absolutely.

Trevor Turnbull (Director of Gold and Silver Global Equity Research)

Okay. That sounds good, and I understand because the irrigation has been a little bit unsteady due to the way the stacking configurations. It hasn't gone exactly the way you had originally planned. Is it possible to give us a sense of recovery, though, from the heap, if that's tracking also the way you want it to?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Yes. As I mentioned, the leaching kinetics is something we're looking at carefully. We have the benefit that there is little interference with these initial cells as there is nothing stuck on top of them, and the percolation is quite rapid, right?

The solution percolation, the irrigation, the cycle is quite rapid as these are the cells closest to the plastic, right, to the bottom of the heap. And we also have our column tests to control what's happening. And what we can report is that the leaching curves are performing according to our expectations. Remember that we are currently placing coarser ore than the original design calls for. We're placing ore at a P80 of around 35 millimeters. Design is nine millimeters. But we have done the column tests and have done our projections based on this coarser crush. And we expect to be at about 50% recovery within 90 days. And that's where we are tracking. In the initial cells, we did have some issues that are also more operational. We had a bit of ponding in one of the cells.

After stacking with trucks, before we start irrigation, we prepare the ground. We rework the first 30 centimeters. We have to go a bit deeper due to the traffic of trucks. We have to go a bit deeper, and once we did that, the problem just went away, and then we had some clogging of pipes because of the dosage of reactants that we use in order to avoid the precipitation of carbonates in the pipes. That's also an issue that was identified and quickly addressed, but just normal stuff that you see through a ramp-up in a new operation, and the problems are being managed. Leaching kinetics are tracking along with our expectations, and you're just solving these issues, and with respect to the speed at which we can incorporate new areas under irrigation, yes, we have made an adjustment in our forecast.

We were not able to implement retreat stacking, which would have allowed us to bring in irrigation at a much faster pace. We are stacking with trucks in an advance, not in retreat. So we need to wait until the cell is complete. And that's when we can start irrigation. So that takes away the speed at which we can bring new ounces under irrigation. This is a temporary issue related to the fact that we are stacking with trucks. This week, we started working with the conveyor stackers. And this problem just goes away with conveyor stacking, which is designed for retreat stacking, right?

Trevor Turnbull (Director of Gold and Silver Global Equity Research)

Yeah. No, understood. Maybe one just very simple last question for Luis. And that is with respect to the VAT recovery, any sense of kind of how you expect that to play out?

Luis Dario Ganoza (CFO)

Yes.

We expect to start collecting VAT as soon as we start selling. As Jorge mentioned, we had our first sale in November and based on the existing regulation and the amounts we are able to collect as a percentage of sales every month, our expectation is that within 12 and 14 months, we should be able to collect the full amount in pesos. As you might be aware, the collection is in local currency, so that's the time frame, Trevor.

Trevor Turnbull (Director of Gold and Silver Global Equity Research)

Perfect. Okay. Thanks, guys. That's all I had.

Operator (participant)

Mr. Turnbull, thank you for your question. Next, we'll hear from Chris Thompson at PI Financial. Please go ahead. Your line is open.

Chris Thompson (Head of Research)

Hello, there, guys. Just thanks for taking my questions. Just looking at the pictures, it looks like a great place to build a mine. A couple of quick questions here.

You do mention that you're allowing for additional time to fully take, I guess, the HPGR agglomeration and stacking systems to commercial. Now, is that built into the time frame you anticipate for first commercial production in Q1?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

We originally anticipated, Chris, to place about 500,000 tons of crushed ore on the leach, crushed and agglomerated ore on the leach pad in December. We are reducing that tonnage down to about 320,000 tons. And that is accounting for what we are projecting would be more realistic based on the limitations that we are facing with this COVID environment, right? And as I expected, the flow of people, supervision, technical assistance. So you know how it is with commissioning. Sometimes it just goes very well and smooth, and sometimes it gives you a bit of grief.

In this forecast, we're taking a bit of a more conservative position with respect to the tonnage. We have not translated that into the first quarter of this year. Certainly, it's something we are monitoring. If there is, our expectation is to be today that we should be in a position early in Q1 to be achieving about 500,000 ounces of ore placed on the leach pad every month, right? Before incorporating the HPGR and conveyor stacking, we were already close to that rate of production, right? Yeah.

Chris Thompson (Head of Research)

Right. Could you just what do you need to achieve to tick the box by way of commercial production? Maybe you could just remind us of that.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

I think we would like to see the mechanical aspects of the operation within 85% of design. Again, the mine is operating at the design rate.

Primary and secondary crushers have been operating within that range of efficiency and productivity. We just need to be able to sustain it. And now we need to incorporate this last part of the train. With respect to the metallurgical performance, at the end of the day, metallurgical performance is what it will be. But the leaching kinetics are tracking according to our expectations so far. And the ADR plant, we also had some early issues with the ability to bring temperature in the carbon columns up to design. Those issues have been solved. So I believe the ADR today is at or close to design parameters. So I think the main thing is to see this last portion of the crushing system coming in and have the entire train from primary crushing all the way to the stacking, delivering at or around 900 tons per hour, right?

Chris Thompson (Head of Research)

Right. Right. Okay.

Just moving and just chatting about grade, I guess, placed at the moment. When do you anticipate being in a position to place, I guess, or to increase the grade to expectations on the pad?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

No, we are delivering the grade. If you look at the aggregate, we're behind. But the only reason why we are behind in the aggregate is because in the early start of the crushing, because of the social distancing guidelines, we didn't have room in the camp to accommodate the operations workforce. So what we were doing, we were feeding the mill with the medium-low-grade stockpile. We were feeding the plant with the medium-low-grade stockpile. So on the aggregate, that's what's weighing down on us achieving design or plan grades. But as I said, the reconciliation is tracking well.

And that was an issue related to the first month, two months of initial production. And our operations are delivering the grade. I don't see an issue there.

Chris Thompson (Head of Research)

All right. Okay. So you are stacking 0.9 gram per ton right now on the pads?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

If I go by today's report, 1.2. I mean, we're tracking with the expectations, yeah.

Chris Thompson (Head of Research)

All right. Thank you for that, Jorge. And then just flipping gears a little bit, just one, as I wonder if you could just update us on obviously, there was news last year related to the royalty disagreement with the government. Any developments on that front?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Nothing new. Just as a recap, the case is in court. We have been granted a stay of execution by the court. So protecting us from any intention to collect the royalty on the part of the Secretary of Mines.

The case is in court. A development could be that we have some indications that we might see a ruling on first instance faster than we originally anticipated. We were expecting this would take several months to get resolved on first instance. And the latest is that it is perhaps possible to see a ruling before the end of this year. A ruling would be a ruling on first instance that any of the parties can appeal. And if that is the case, or stay of execution protects the company through all the appeal process as well. So I think the only change could be perhaps that there are some indications that we could see a ruling on first instance faster than originally anticipated.

Chris Thompson (Head of Research)

Great. Thank you. Thank you, Jorge.

Operator (participant)

Mr. Thompson, thank you for your question.

Ladies and gentlemen, as a reminder, that is star and one on your telephone keypad if you would like to ask a live question. Next, we'll hear from an individual investor, Mr. Jason Maloney. Please go ahead, sir. Your line is open.

Yes. You boys are doing a good job. I noticed here at VectorVest, Canada, they have the company valued at CAD 16.62 a share Canadian, and the last question, just wondering if Warren Buffett is interested in taking a large position. Thank you very much.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

We have no relation with VectorVest, so we don't know of that coverage, and last I heard, Warren is not interested in taking a position in Fortuna.

Operator (participant)

Thank you for your question, Jason. Next, we'll hear from Garrett Goggin with Silver Stock Analyst.

Garrett Goggin (Author)

Hey, guys. Thanks for taking my question.

I had questions about Lindero, how we're looking in 2021 and through the end of this year. But I guess we went over them pretty clearly. And I guess my second ones would be Argentina, the capital controls. What was it? There was about $106 million. I think it got out before capital controls kicked in. Has that changed at all? And can you discuss that, please, Luis?

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Yeah. I can give a quick introduction to that. Yes. There are, as we all know, capital controls or restrictions on access to exchange rate, dollar exchange rates in Argentina. Our plan, we have a repatriation plan in place considering all the current restrictions or limitations in place by the government. And our repatriation plan is not impacted for the better part of 2021 by any of these measures because the structures we used to contribute funding to Lindero.

Luis, I don't know if you want to.

Luis Dario Ganoza (CFO)

No, no. To be more precise, we should be fine for the first $120 million-$130 million. We should be able to repatriate directly out of sales proceeds without having to bring those funds back into the country. Again, under the intercompany debt structure that we have in place, this particular component of our intercompany debt is out of the scope of existing restrictions today. And as Jorge mentioned, that should cover us for the first, we expect at least nine to eight months of 2021.

Garrett Goggin (Author)

Right. Right. Yep. Well, okay. So that gives us a little insight into Lindero outlook for 2021 as well if you look at the cash flow of it.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Yes.

Garrett Goggin (Author)

Yep. Okay. All right. That's great. I appreciate it. Thanks for answering my question.

Jorge Alberto Ganoza (President, CEO, and Co-founder)

Thank you.

Operator (participant)

Thank you, Garrett.

Garrett Goggin (Author)

Ladies and gentlemen, once again, that is star and one on your telephone keypad if you'd like to ask a live question. We'll hear next from Ryan Thompson at BMO. Please go ahead.

Ryan Thompson (Equity Research Analyst in Mining)

Yeah. I was actually going to ask the same question as the last caller, but maybe I'll just ask another one. I mean, in Argentina, there was an export tax that was reintroduced. I think it was last year at some point. And there was talk of that export tax potentially going away at some point. So can you maybe just comment on where things are at with that tax and what it currently sets up?

Luis Dario Ganoza (CFO)

The export tax is currently at 8% for gold products, Ryan. And in our particular case, we have a tax stability treatment agreement, a tax stability agreement that fixes that at about 5%.

But that's something that under Argentine laws, you claim after you close the exercise for the year, no? So in March, we're not planning to claim back anything for 2020. So our plan right now is that for 2021, which would include 2020, we would start the process to claim the difference. In Argentina, it works a bit different than in other countries like Peru, for example, where we also have tax stability agreements. In Argentina, unlike Peru, in Argentina, you have to what they fix is the total amount of your tax burden in a way. And looking at other taxable components of the total tax burden, they look at the total amount and see if there is a gain or a loss, and then you can claim that difference, right? In Peru, it's different.

It works by what you fixed in terms of the IR or, sorry, income tax or the royalty itself. But we plan to see if there is a difference in 2021 and then claim it back through 2022, right?

Ryan Thompson (Equity Research Analyst in Mining)

Yep. Thank you.

Operator (participant)

Thank you. And ladies and gentlemen, that does conclude our Q&A session for today's call. I am pleased to turn the floor back to the leadership team for Fortuna and Mr. Carlos Baca.

Carlos Baca (Investor Relations Manager)

Thank you, Jim. We would like to thank everyone for listening to today's earnings call and look forward to you joining us next quarter. Have a good end of the year. Bye.