MANAGEMENT’S DISCUSSION AND ANALYSIS
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FORTUNA SILVER MINES INC. | 2013 ANNUAL REPORT
Caylloma Mine all-in cash cost per ounce of Ag, net of by-product credits
2014 Guidance
Item
($/oz Ag)
Cash cost net of by-product credits
9.36
Government royalty and mining tax
0.34
Workers’ participation
0.33
Selling, general and administrative expenses (operations)
1.65
Adjusted operating cash cost
11.68
Selling, general and administrative expenses (corporate)
–
Sustaining capital expenditures
4.76
Brownsfields exploration
0.57
All-in sustaining cash cost/oz Ag
17.01
Non-sustaining capital expenditures
0.21
All-in cash cost/oz Ag
17.22
Consolidated all-in cash cost per ounce of Ag, net of by-product credits
2014 Guidance
Item
($/oz Ag)
Cash cost net of by-product credits
6.44
Government royalty and mining tax
0.21
Workers’ participation
0.80
Selling, general and administrative expenses (operations)
1.11
Adjusted operating cash cost
8.56
Selling, general and administrative expenses (corporate)
1.85
Sustaining capital expenditures
5.62
Brownsfields exploration
1.11
All-in sustaining cash cost/oz Ag
17.14
Non-sustaining capital expenditures
0.24
All-in cash cost/oz Ag
17.38
MExICO MInInG TAx
On October 31, 2013, the 2014 Mexico Tax Reform package (“reform”) was approved by the Mexican Congress and was
published in the official gazette in November and December 2013. The new laws have an effective date of January 1,
2014.
Under the reform, three new articles were included relating to federal royalties and taxes, among other tax law changes:
• Special Mining Royalty. This is a 7.5% royalty on earnings before interest, taxes, depreciation, and amortization
(“EDITDA”) based on tax rules (taxable income minus producing costs, but some costs will no longer be
deductible, such as depreciation) and is deductible from income tax.
• Extraordinary Mining Royalty. This consists of a 0.5% royalty rate for companies producing gold, silver and
platinum. This royalty is based on the gross revenues derived from the sales of these metals and is deductible
from income tax but not deductible for the special mining royalty.
• Additional Mining Tax. This corresponds to a tax of 50% of $124.74 per hectare for each concessioned hectare
for companies that have not performed exploration or exploration activities for a consecutive two-year period
during the first 11 years of the concession grant. The tax is increased to 100% of $124.74 per hectare in the
12th year of the concession grant.
• Non-deductible Payments to Employees. Payments to employees that, in turn, are not included as taxable income
to the employee will result in the employer absorbing the non-deductible portion of up to 53%.
