Carlos Baca - IR Jorge Alberto Ganoza - President and CEO Luis Dario Ganoza - CFO

Chris Thompson - Raymond James Benjamin Asuncion - Haywood Securities John Kratochwil - Canaccord Chris Lichtenheldt - Dundee Capital

Greetings. And welcome to the Fortuna Silver Mines' First Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carlos Baca, Investor Relations Manager. Thank you, Mr. Baca. You may begin.

Thank you, Rob. Good morning, ladies and gentlemen. I would like to welcome you all to Fortuna Silver Mines and to our first quarter 2014 financial and operations results call. Jorge Alberto Ganoza, President and CEO; and Luis Dario Ganoza, Chief Financial Officer will be hosting the call from Lima, Peru. Before I turn over the call to Jorge, I would like to indicate that certain information contained or incorporated by reference in this earnings call, including any information as to our strategy, projects, plans or future financial or operating performance constitutes forward-looking statements. All statements other than statements of historical facts are forward-looking statements. The words, believes, expect, anticipate, contemplate, target, plan, intends, continue, budget, estimate, will, schedule and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that while considered reasonable by the company are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. I would now like to turn the call over to Mr. Jorge Ganoza, President, CEO and Co-Founder of Fortuna. Thank you once again to everyone for joining us.

Thank you, Carlos, and good morning to all. Fortuna reported a strong first quarter in terms of production costs and financial results. The Company produced 1.5 million ounces of silver and 8,150 ounces of gold, a 55% and 81% increase with respect to the first quarter of 2013. We’re on target to meet our annual guidance of 6 million ounces of silver and 32,000 ounces of gold. Additionally at the Caylloma Mine, we produced 3,000 tonnes of zinc and 1,700 tonnes of lead by-products. The growth in silver and gold production comes from the expansion of San Jose Mine from 1,150 tonnes per day throughput to 1,800 tonnes per day achieved September. When compared against the first quarter of 2013, San Jose processed 61% more tonnage with 24% and 17% higher silver and gold grades respectively. The improvement in grades is consistent with the increasing grade profile of the mine at depth, reserve and tonnage and grade reconciliation. Reserve, tonnage and grade reconciliation for the quarter is within acceptable ranges. At San Jose 57% of production tonnage was sourced from the stock work zones on level 1200 currently under the inferred category. Here grades came in 27% higher for silver and 8% higher for gold when compared to the resource model. Costs at our mines were well under control and dropping -- our costs per tonne measured against Q1, 2013 dropped by 15% at San Jose and 7% at Caylloma and were in line with budget. Our consolidated all-in sustaining cash cost, net of by-products was $16.50 per ounce silver, in line with $17 guidance for the year. All-in, sustaining cost for the Caylloma Mine was $13, for San Jose $14 per ounce of silver. Both operations reported drops of $10 for all-in, sustaining cash cost compared to a first quarter of 2013. At Caylloma the main drivers for the all-in sustaining cost per ounce reductions were a 7% drop in costs related to the optimization of mine preparation, headcount and other community relation expenses. On the capital side, the completion of mine camp improvements for $2.9 million, reduction in exploration drilling for $900,000 and reduced underground mine development for $1 million. All-in cost guidance for the year at Caylloma is $17 per ounce of silver. We expect to be closer to this figure for the year as we catch up with the slow start in the first quarter on our underground development plan due to a change in mine contract. At San Jose, all-in sustaining cash cost per ounce compared to a first quarter of 2013 saw the benefit of 15% lower costs, mainly related to a 61% increase in tonnage throughput and related 102% higher silver and 93% higher gold production. All-in cost guidance for the year at San Jose is $14 per ounce and we’re on target to meet guidance. On the project side, we have concluded a scoping study for the implementation of dry stock tailings at San Jose. The results of the project is positive. The benefit of implementing this project will be paying storage capacity within company grounds for 10 million tonnes and additional contribution of weather to our balance. We’re moving to develop basic and detailed engineering aiming to start construction in 2015. We’re also in the process of launching trade off and feasibility studies for a potential expansion of the San Jose mine to 3,000 tonnes per day. We want to see a robust economic return. The decision to move forward with this expansion project should be taken on the fourth quarter of this year. On the exploration front, we continue with underground drilling at the Trinidad North discovery with two rigs. Up to the first week of May we have concluded 23 diamond rig holes for a total of 11,300 meters. The plan for the remainder of the year is to extend our underground exploration another 250 meters from the [indiscernible] northern boundary of drilling. The drill program will continue till year end. Additionally we will be using the end of June as a startup date to update resources and reserves at San Jose to be published in October. Trinidad North remains open on three directions, to the north, west and for 300 meters to surface above level 1,300. From our latest results news release dated April 29th, I want to highlight drill hole 364 with 2.5 kilos of silver and 10 grams per tonne gold over an estimated two ways of 3 meters and drill holes 359 with 880 grams per tonne silver and 4 grams per tonne gold over an estimated two ways of 3.5 meters. These two drill holes currently define Trinidad North has been open to the north and to that. With regard to community permits to advanced drill testing of Trinidad from surface to the north, we continue holding advanced conversations with local Ejido authorities. This is a process that takes time and what I can say at this moment is that we remain optimistic we can obtain a satisfactory agreement with our Ejido neighbors as we have done in the past. At Caylloma we continue advancing with a focused exploration drill program targeting veins with potential for Bonanza style silver mineralization. We have tested three targets with 2,000 meters of drilling since the beginning of the year and we continue with the program. Now Luis, can you please move on with a review of our financials.

Thank you. For Q1 2014 we recorded sales of $45.5 million, up 12% from the prior year; net income of $4.9 million, a decrease of 27% compared to Q1 of 2013 and cash flow from operations before changes in working capital of $16.9 million, up 4% compared to the prior year period. Silver and gold increased significantly as a result mainly of a commissioning of expansion of the San Jose mine to 1,800 tonnes per day in last quarter of last year. Silver sold was 1.6 million ounces, up 57% compared to the previous year and gold sold was a bit 8,700 ounces, up 87% compared to the prior year. The impact of higher metal sold on our sales was offset though by a lower price environment when compared to Q1 of 2013. Realized silver and gold prices for Q1 2014 were 33% and 22% lower than the previous year. Our mine operating earnings was $17.2 million, slightly above Q1 2013 by 3%. The increase in sales did not fully translate into higher mine operating earnings as our gross margins came down from 41% to 38%, reflecting the impact of lower metal prices. This negative impact however was offset to a large extent by lower unit cost at both subsidiaries, 15% lower at San Jose and 7% lower at Caylloma and higher head grades at San Jose. We recorded selling and G&A of $7.9 million, an increase of $2.3 million compared to the prior year period. Out of this incremental amount, $1.7 million is related to share based payments which is mostly explained by mark to market effect and about $0.5 million is related to non-recurring items, mainly incentive performance payment. Moving forward on a quarterly basis, we expect general and administrative expenses of around $4.2 million and a total amount for the selling and G&A line item out of financials between $5.2 million to $5.5 million. Our income before tax was $9.1 million and that’s 1.7 million below Q1 2013 as a result of the higher G&A items I just described. Now our net income for the period was $4.9 million with an effective tax rate of 46%, which is in line with our expectation for the year. Earnings per share was $0.04 compared to $0.05 in Q1 2013. Cash flow from operations before changes in working capital and after taxes paid was $16.9 million, while total capital expenditures was $10 million, which gives us a free cash flow measure in the quarter of almost $7 million. Our total cash position including short-term investments as of the end of the quarter was $62.1 million, an increase of $13 million over year-end 2013. Thank you and back to you Carlos.

Thank you very much for listening to us. We would now like to turn the call over to any questions that you may have. Please state your name clearly.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question is from the line of Chris Thompson with Raymond James. Please proceed with your question. Chris Thompson - Raymond James: Couple of quick questions. Just looking at I guess the head grade per ton. They were pretty good for the quarter, arguably higher than guidance for the year. Do you see this is as continuing?

Hello, Chris. Our grades against the budget were 13% higher and this is explained by the fact that roughly half of the production in the quarter came from inferred research zone. And this is a deviation from the annual plan. This is been or has been accumulated in our short-term planning. And I have to say that this Ejido for parts or at least resistance on level 1,200, we have accessed an area of inferred resources for conversion with underground development. And what we came up with was a zone that in terms of grade and has surprised to the upside and again a bit of assistance on the mine side. The team accelerated the development of the area and started implementing production panels and sure enough, this area in the model is in inferred category. Grades we are finding, as I explained in the call, came up 27% higher for silver and 8% higher for gold comparing against the inferred resource model. We are adjusting the short-term plan. I would not expect 50% production being sourced steadily through the year from this zone start declining and grades should start reverting back to our plan. But we had a nice surprise to the upside as we entered this inferred resource zone and we became a bit, I would say greedy with these new zone. We pushed it more than we would have liked perhaps. Chris Thompson - Raymond James: Just a quick question I guess on the dry stack tailings. Do you see this is providing the adequate water against resources to satisfy the jump to 3,000 tonne a day?

Yes and really the dry stack has two very important angles to it. One is that when we made the decision to build this mine back in 2010, we had in total resources, reserves, everything 5 million tonnes. Today, we have 10 million tonnes in total inventories and growing. The tailings facility we designed for back in 2010 was to hold 5 million tonnes. So we need to address the long-term tailing disposal of the mine. This is a way to do it and we can dispose of almost 10 million tonnes within ground surface rights that we control, where we already have a change of land use which is a main required permit in Mexico. So this is really on the technical sustainability side, the way to go. An added benefit is that compared to what we do today is that yes, for sure, we will be able to gain significantly more water by using the dry stack tailings. We currently have a lot of what we call dead water in the tailings facility and by going dry stack, we will recover all of that water. It certainly supports the balance for 3,000 tonnes per day in our initial estimates. Chris Thompson - Raymond James: That’s great, Jorge. Any idea of capital cost?

We plan to – we’re not doing a feasibility study. We’re going from scoping to basic engineering, and what we plan to do -- this is not a project that was budgeted for 2014. So what we intend to -- we budgeted engineering, but no construction in 2014. So what we intend to do is develop basic engineering and with a few years we get from basic engineering to seek budget approval at the board level to start making some equipment orders, placing some equipment orders and what not. The initial fee we have right now for the total affront capital and initial tailing site facility and everything is in the low to mid-20s, $20 million, $20 million to $24 million. That would be good for two to three years. So it’s not up-front but for initial two to three years.

You know, life of mines, just for reference, in our life of mines budget, we accounted for $40 million. To deal with acquired debt [ph] we needed additional tailings facility. So we believe this will over the life of mine models, gain significant savings although it will be brought closer to the present.

(Operator Instructions) The next question is from the line of Benjamin Asuncion of Haywood Securities. Please go ahead with your question. Benjamin Asuncion - Haywood Securities: Some of my questions were already just answered. Just was wondering, so far as Trinidad North, can you give us a sense out of the number of holes drilled, how many are released, and kind of what we would be looking at for timing on the next batch of exploration results?

We would expect to have a release probably late mid-July, I think that would be -- we continue with the drilling with the two rigs in Trinidad North. We have an additional rig in the South, drill testing this stoke work zone and new area to the south on level 1,200 that I just talked about. So I would expect that by July, in two months, two and a half months we can be releasing additional results. We’re getting good advance – about 40 meters per day per week. So right now we don’t have a large number of holes pending, probably one or two. So we will wait till we can make more of a comprehensive release of results. The other thing worth noting is that we will be making a cut date of last day of June to start working on our updated resource and re-service we mentioned. That will likely be releasing in late September or October. Benjamin Asuncion - Haywood Securities: And just so far as the expansion that was completed I guess in early April; can you give us a sense of what April average throughput rates are or maybe even sort of May-to-date, in terms of where you are to hitting the 2,000 tonnes a day.

We’re not up steady 2,000 tonnes per day yet. Gaining that additional 150 tonnes per day which we we’re aiming to do is challenging the team. We believe it’s a matter of time. We don’t see any material hurdles. Our average throughput for April has been below 2,000 tonnes per day. In May we’ve already seen base of 2,000 tonne per day with good recoveries, in line with what we aim for, which is 89% to 90% for both silver and gold. But we are still having difficulties to keep it steady through. But I am confident that we will get there. There are no material reasons not to do it. It’s just balancing, managing all the parts, keeping good recoveries, having a concentrate grade that is also within plan. So it’s just is going to take us a few more days, a few more weeks, but no material reasons. We’re already achieving some days, or some steady rates, 2,000, and their recoveries and the quality of concentrate that we expect from. Benjamin Asuncion - Haywood Securities: Okay, perfect, and just a last thing. I might have missed this. You mentioned that the announcement for the expansion to 3,000 tonnes per day would be -- was given in fourth quarter concurrent with a board decision at that point in time.

Yes, we have not made a decision to move to 3,000 tonnes per day. What we are saying is that we will conduct all the necessary technical and financial analysis to come up with a solid robust project to take the mine to that level. And we expect we will be concluding with those studies towards the end of the year and at that point management will present its recommendations to the board. Benjamin Asuncion - Haywood Securities: Okay. And then would we be still looking at kind of a modular expansion of the plant?

We are going to be carrying trade off studies as part of this feasibility work, and a lot of those questions will be answered throughout the process. But our initial collective thought here is that this should jump to 3,000 tonnes per day. We believe the mine can accumulate it and just starting a new floatation line, we could accommodate it. Probably the main changes will take place in crushing and grinding.

Your next question comes from the line of John Kratochwil with Canaccord. Please go ahead with your question. John Kratochwil - Canaccord: I had a question, the exploration drift that you are currently driving across, how far advanced is that and is it still seeming to be on track to be completed? I think last guidance you gave was kind of August, September timeline. Is that still on track?

We faced delay due to a ventilation raise bore. We faced a delay due to a ventilation raise bore for the start of the drilling. That has been overcome. Basically just to give you a bit more color on this, most of the mine infrastructure we developed is under footwall of the structure and this raise bore was done on hanging wall of the structure, which is the area where we are drilling from and the quality of the road as we expected was poor. And so the raise boring, the rimming of the raise bore took longer than originally planned. It had to be done slowly and carefully in order not to lose the raise bore. But that’s done, it’s concluded. We have all the services and access and ventilations through the raise bore now and we’re advancing. So, we do not expect any material delays with regard to our end goal of covering those additional 250 meters from the current boundary of drilling before the end of the year. We have some -- a bit of comfort zone and the raise bore took that away but we’re still within our timeframes. John Kratochwil - Canaccord: Okay. And just to clarify, most of the drill results that we have seen to-date since the resource update has been basically from Trinidad North. Is that update on October largely going to be an increase or an update on resources in Trinidad North or are we expecting something from the stockwork zone as well?

No, we should expect a conversion from the stockwork zone. So what we should expect to see is growth in inferred resources coming mainly from Trinidad North and a migration from inferred to measured and indicated, mainly from the stockwork zones in the main deposit. John Kratochwil - Canaccord: And then final question I had -- maybe I misunderstood on the call but did I hear you say G&A for rest of the year, excluding stock based comp is going to be in the range of about 4.2 million a quarter?

Yes, that’s accurate.

Thank you. (Operator Instructions) The next question comes from the line of Chris Lichtenheldt of Dundee Capital. Please go ahead with your question. Chris Lichtenheldt - Dundee Capital: Just a question again on the development at Trinidad. Irrespective of the studies that you are conducting right now looking at an expansion, do you still expect to be in Trinidad North early next year bringing ore out, whether it be for 2,000 tonnes a day or 3,000 tonne a day mill?

Yes, we are still working for that. The key development for that, Chris, is deepening of the main decline. We had some minor delays due to priorities in the disposition of equipment as we went through expansion but we have re-taken the priority on the deepening of the decline and we expect we will be in Q1 starting to source ore from the boundary of Trinidad ore. Chris Lichtenheldt - Dundee Capital: Okay, great. Secondly I just wonder about kind of Caylloma, the all-in sustaining cost for the quarter were quite good in the low $13s. When you look at the silver price environment and the nature of that ore body and the cost you’re achieving now, can you comment a little bit about how you see next year maybe, even after going forward at Caylloma, can you maintain these sort of costs and production levels?

As I stated, we had particularly a good figure of $13 at Caylloma for Q1. But one of the main drivers for us has been a delay in underground development that has occurred throughout the first quarter, mainly due to a change in underground contractor. So we prioritize production and a lot of the development that had to take place was postponed, as the team there at the mine went through the phase of readjusting, changing contractor. So we expect all-in costs to gravitate to almost $17 for the year. And we -- what we believe is that in this price environment, $17 is reasonable for Caylloma moving forward. We’re starting to see some – we also have to be convinced that as prices go up, we all face severe cost inflation pressures that as prices come down, we also see some deflation taking place and in some cases I’m surprised to see it coming after than I would have expected. So we are seeing cost adjustments to the downside. But in this pricing range, I would believe around $17 or $16 is reasonable for these mines.

Thank you. At this time I will turn the floor back to management for closing comments.

If there are no further questions, I would like to thank everyone for listening to today’s earnings call. We look forward to you joining us next quarter. Have a good day.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.