Executive Summary / Key Takeaways

• Fortuna Mining Corp. (FSM) is undergoing a significant strategic transformation, divesting non-core, short-life, and high-cost assets to focus on a portfolio of higher-margin, longer-life, and lower-risk operations, aiming to rebuild annual production to 0.5 million gold equivalent ounces.
• The company's flagship Séguéla mine in Côte d'Ivoire is on a clear growth path, guided to produce 170,000 to 180,000 ounces of gold by 2026, supported by a substantial $78 million capital budget for expansion and promising exploration at Kingfisher and Sunbird deposits.
• Diamba Sud in Senegal is emerging as Fortuna's next growth engine, with a recently published 1 million-ounce resource and a fast-tracked development plan targeting a construction decision in the second half of 2026.
• Fortuna boasts a robust financial position, with $537 million in liquidity and $215 million in net cash as of Q2 2025, providing a strong foundation to de-risk its organic growth initiatives and withstand market fluctuations.
• Operational excellence and technological advancements, such as Lindero's new photovoltaic plant and Caylloma's hydraulic paste backfill plant, are driving cost efficiencies and sustainability, contributing to an anticipated consolidated All-in Sustaining Cost (AISC) of $1,750 per ounce by 2026.

Fortuna's Strategic Evolution and Market Position

Fortuna Mining Corp., a Canadian precious metals company, is strategically repositioning itself within the dynamic global mining landscape. Originally incorporated in 1990 as Fortuna Silver Mines Inc., the company rebranded in June 2024 to reflect its broader focus. This evolution is marked by a decisive shift towards a streamlined portfolio of higher-margin, longer-life, and lower-risk assets. The recent divestitures of the San Jose mine in Mexico and the Yaramoko mine in Burkina Faso, both nearing the end of their mineral reserves and identified as higher-cost operations, underscore this strategic pivot. These sales generated approximately $84 million in gross proceeds and, crucially, redirected about $50 million in capital and management focus from mine closure projects to high-value growth opportunities.

In the competitive mining sector, Fortuna operates as a mid-tier player, distinguishing itself through geographic and commodity diversification. While major competitors like Newmont Corporation (NEM) and Barrick Gold Corporation (GOLD) benefit from immense scale, often leading to superior operational efficiencies and deeper resource bases, Fortuna's multi-country presence across Latin America (Argentina, Peru) and West Africa (Côte d'Ivoire, Senegal) offers a hedge against regional disruptions. This diversification, encompassing gold, silver, lead, and zinc, provides a more balanced revenue stream compared to gold-centric rivals, potentially offering greater market adaptability. However, this broader asset base can also entail more complex management and exposure to varied geopolitical risks, areas where more focused operators like Agnico Eagle Mines (AEM), with its emphasis on stable jurisdictions, or Pan American Silver (PAAS), with its specialized silver expertise, may exhibit stronger profitability trends and financial health. Fortuna's strategic adaptability for rapid market entry into emerging regions is a key differentiator, allowing it to pursue exploration-driven growth where larger players might move more cautiously.

The broader industry is currently benefiting from strong gold prices, which Fortuna is actively leveraging to expand its margins. The demand for base metals is also seeing tailwinds from global trends, including the increasing need for energy infrastructure driven by advancements in AI and data centers. This could indirectly bolster demand for metals like copper, which, while not a primary output for Fortuna, reflects a positive underlying market for diversified miners.

Technological Edge and Operational Excellence

Fortuna Mining's strategic narrative is not solely about asset optimization; it is deeply intertwined with a commitment to technological differentiation and operational excellence. These initiatives are designed to enhance efficiency, reduce costs, and improve environmental performance, thereby strengthening the company's competitive moat.

At the Lindero mine in Argentina, a significant technological advancement is the commissioning of a 14.5 MWh photovoltaic plant in Q2 2025. This plant supplied approximately 26% of Lindero's power needs in June 2025, resulting in nearly $270,000 in diesel cost savings and avoiding an estimated 720 tons of CO2 emissions. This tangible benefit translates directly into lower operating costs and a reduced carbon footprint, providing a clear competitive advantage in energy management. Similarly, at the Caylloma mine in Peru, the completion of a new hydraulic paste backfill plant in April 2025, a $5.4 million investment, enables a more efficient and automated process at a lower cost per ton. This technology also reduces CO2 emissions by eliminating the need to transport critical material outside the underground mine, further enhancing operational efficiency and environmental stewardship.

Beyond operational technologies, Fortuna is heavily investing in advanced exploration techniques to expand its resource base. The company's global exploration budget for 2025 stands at $51 million, an increase from $41 million in 2024. This capital is directed towards high-value targets such as the Kingfisher and Sunbird deposits at the Séguéla mine, where drilling has yielded encouraging results. For instance, recent drilling at Kingfisher intersected 4.5 g/t Au over an estimated true width of 37.4 meters, and at Sunbird, 11.2 g/t Au over an estimated true width of 5.6 meters. These exploration successes are crucial for extending mine life and integrating new, high-grade mineralization into future mine plans, with Kingfisher expected to be incorporated into Séguéla's life of mine plan by year-end 2025. The "so what" for investors is clear: these technological and exploration efforts directly contribute to a lower-cost production profile, extended asset lives, and a more sustainable operational footprint, all of which enhance long-term shareholder value and solidify Fortuna's market position.

Financial Performance: A Foundation for Growth

Fortuna Mining's financial performance in recent quarters reflects the positive impact of its strategic streamlining and a favorable gold price environment. The company's margins have expanded significantly, demonstrating operational effectiveness. In Q2 2025, the average realized gold price reached $3,306 per ounce, a 14% increase from Q1 2025. This contributed to a record EBITDA margin of 55%, up from 50% in Q1 2025, and an operating margin of 36%, an increase from 28% in the prior quarter. Net earnings from continued operations were $41 million, or $0.14 per share, in Q2 2025, compared to $33 million, or $0.11 per share, in Q1 2025. It is important to note that the Q2 2025 adjusted EPS of $0.14 included a $17 million withholding tax accrual related to the inaugural dividend from the Séguéla mine, equivalent to $0.06 per share. Adjusting for this, the company's earnings would have surpassed analyst consensus.

Cash flow generation remains robust, with free cash flow from operations at $57.5 million in Q2 2025, following a record $111 million in Q1 2025.

This strong cash generation has significantly bolstered Fortuna's balance sheet, with liquidity reaching $537 million and net cash climbing to $215 million by the end of Q2 2025. This financial strength provides the necessary capital to fund ongoing growth initiatives without significant reliance on external financing.

While consolidated All-in Sustaining Costs (AISC) temporarily rose to $1,932 per ounce in Q2 2025 (from $1,750 in Q1 2025), management clarified this was a timing effect related to capital expenditures and waste stripping at Lindero and Séguéla. Lindero's AISC is projected to decrease to below $1,500 per ounce by Q4 2025 following the completion of its leach pad expansion. Séguéla's AISC is expected to temporarily increase to $1,800 per ounce in Q4 2025 due to planned peak waste stripping and capital investments, but will remain within annual guidance. Looking ahead, Fortuna targets a consolidated AISC of $1,750 per ounce for 2026, reflecting anticipated cost efficiencies and increased production. The company's current P/E ratio of 16.39 and P/S ratio of 2.35 suggest a potentially attractive valuation compared to the industry average Forward P/E of 20.87, indicating that the market may not yet fully appreciate the company's strategic repositioning and growth potential.

Growth Catalysts: Organic Expansion and Exploration

Fortuna's future growth is firmly anchored in its organic pipeline, with a clear vision to rebuild annual production to 0.5 million gold equivalent ounces. This growth is designed to be higher margin, longer life, and lower risk. The Séguéla mine in Côte d'Ivoire stands as the primary catalyst, guided to produce 140,000 ounces of gold in 2025 and expanding to 170,000 to 180,000 ounces by 2026 as its expansion plan comes online. A $78 million capital budget for Séguéla in 2025 is enabling this expansion, including the third lift of the tailings storage facility, which is on track for Q3 2025 completion and will support increased throughput until 2029.

The Diamba Sud project in Senegal is rapidly emerging as Fortuna's next growth engine. In just six months, indicated resources at Diamba Sud grew by 53% and inferred resources by 93%, for a combined 1 million ounces. This significant resource expansion is considered a "game changer" for the project. Fortuna is pursuing a fast-track development approach, with a Preliminary Economic Analysis (PEA) expected in late October/early November 2025, followed by a quick transition to a feasibility study in early 2026. A construction decision is targeted for the second half of 2026. The company has allocated a $19 million budget for Diamba Sud in 2025, with an additional $17 million approved for early works, reflecting strong confidence in the project's viability.

Beyond these core growth assets, Fortuna is actively populating its exploration pipeline across its operating regions. This includes investments in companies like Awalé, which holds intriguing land positions in West Africa, and early-stage joint ventures in Mexico and Argentina. The company's increased global exploration budget of $51 million for 2025 (up from $41 million in 2024) underscores its commitment to identifying new high-value opportunities, balancing higher geological risk with lower financial risk to the company. These efforts are aimed at securing a continuous stream of projects that can deliver meaningful production (north of 120,000-150,000 ounces of gold) over a decade, further de-risking the company's long-term growth trajectory.

Risks and Headwinds

Despite a compelling growth narrative, Fortuna Mining faces several risks and challenges that warrant investor attention. Geopolitical factors, particularly in West Africa, remain a concern. While the company successfully divested its Yaramoko mine in Burkina Faso due to a challenging business and security environment, ongoing political stability in the region could impact future operations or new project developments. In Côte d'Ivoire, delays in collecting VAT have resulted in $37 million in receivables outstanding for approximately 17 months by the end of Q2 2025. While management attributes this to the electoral cycle and expects normalization by year-end, such delays can impact working capital and cash flow.

Currency fluctuations, particularly the appreciation of the Argentine peso against the U.S. dollar, have impacted costs at the Lindero mine, causing them to be about 10% above guidance in Q3 2024. Although the Argentine government has shown positive signs by easing capital exchange rate controls, allowing for the repatriation of over $40 million in July 2025, the long-term stability of these policies remains a factor to monitor. Furthermore, the mining industry is inherently exposed to commodity price volatility, and while Fortuna benefits from strong gold prices, a significant downturn could impact profitability and cash flow. The company's commitment to safety was tragically underscored by a fatal accident at Séguéla in February 2025, a stark reminder of the inherent operational risks in mining.

Conclusion

Fortuna Mining Corp. is undergoing a profound transformation, shedding non-core assets to sharpen its focus on a portfolio of high-quality, long-life, and lower-risk operations. This strategic streamlining, coupled with a robust balance sheet and a clear organic growth pipeline, positions the company for a compelling future. The Séguéla mine, as the flagship asset, is set to drive near-term production growth, while the rapidly advancing Diamba Sud project promises to be the next significant contributor. Fortuna's commitment to operational excellence and technological innovation, exemplified by projects like the Lindero solar plant and Caylloma's backfill facility, underpinning its ability to manage costs and enhance sustainability, contributing to an anticipated reduction in consolidated AISC by 2026.

While geopolitical risks and currency volatility present ongoing challenges, management's proactive approach to portfolio optimization and a disciplined capital allocation strategy mitigate these concerns. The company's strong liquidity and net cash position provide a solid foundation to fund its ambitious growth plans and weather market uncertainties. For discerning investors, Fortuna Mining presents a compelling investment thesis: a company strategically re-engineered for higher-margin growth, leveraging technological advancements, and poised to deliver increased production and improved cost efficiencies in a favorable precious metals market. The journey to 0.5 million gold equivalent ounces is well underway, supported by a clear roadmap and a strengthened financial position.