Fortuna Mining's Strategic Position for Growth in a Rising Gold Cycle

In a world where gold prices have surged to multi-year highs, driven by inflationary pressures and geopolitical uncertainty, Fortuna Mining Corp. (AUGO) stands out as a prime example of a company leveraging strong liquidity, disciplined capital allocation, and high-margin operations to position itself for outsized growth. With a strategic focus on expanding production, optimizing costs, and investing in low-risk jurisdictions, Fortuna is uniquely poised to capitalize on the current gold cycle.

Liquidity as a Catalyst for Growth

Fortuna's financial flexibility is a cornerstone of its strategy. As of Q2 2025, the company reported $537.3 million in liquidity, including cash reserves and an undrawn revolving credit facility. This robust liquidity position, combined with a net debt-to-EBITDA ratio of 0.8x, reflects a balanced capital structure that allows for both operational resilience and strategic investment.

The company's liquidity has been bolstered by $60.4 million in operating cash flow for Q2 2025—a 47% increase quarter-over-quarter—driven by higher gold prices and production efficiency. This cash flow, coupled with a 90% year-over-year rise in Adjusted EBITDA to $106 million, provides Fortuna with the financial firepower to fund its growth initiatives without overleveraging. For context, the company's $280.5 million net debt is offset by a debt reduction of $13.7 million from the Bluestone acquisition settlement, demonstrating disciplined debt management.

Production Expansion: The Borborema and Diamba Sud Projects

Fortuna's growth trajectory is anchored by two transformative projects: the Borborema Gold Project in Brazil and the Diamba Sud Gold Project in Senegal.

• Borborema: Completed on schedule and on budget in 19 months, Borborema began its ramp-up phase in Q2 2025, producing 2,577 gold equivalent ounces (GEO). The project is expected to achieve commercial production by Q3 2025 and is projected to become the company's second-largest gold producer. With all-in sustaining costs (AISC) of $1,783 per ounce at Lindero and $1,634 per ounce at Séguéla, Borborema's low-cost structure will enhance Fortuna's margins as it scales output.

• Diamba Sud: This high-grade project in Senegal has seen a 53% increase in Indicated Resources to 724,000 ounces and a 93% rise in Inferred Resources to 285,000 ounces since 2024. A Preliminary Economic Assessment (PEA) is underway, with completion expected in Q4 2025. The project's potential to add 194,000 ounces at Southern Arc and 31,000 ounces at Moungoundi underscores its role as a long-term growth engine.

By prioritizing these projects, Fortuna is aligning its capital expenditures with high-margin, high-grade assets. The company's $50.3 million CAPEX in Q2 2025—largely directed toward Borborema—reflects this focus, with further investments expected as Diamba Sud's PEA finalizes.

High-Margin Operations in a Rising Gold Cycle

Fortuna's operational efficiency is a key differentiator. In Q2 2025, the company achieved a record 55% EBITDA margin, driven by $3,307/oz gold prices and cost discipline. This margin expansion outperformed peers and highlights Fortuna's ability to convert higher commodity prices into profitability.

The company's all-in sustaining costs have risen slightly to $1,932 per GEO in Q2 2025, but this is largely due to strategic investments in mine stripping and infrastructure. For example, the 14.5 MWh solar plant at Lindero reduced diesel use by 35%, cutting costs and emissions while maintaining production growth. Such innovations ensure that Fortuna's margins remain resilient even as input costs rise.

Moreover, Fortuna's divestiture of non-core assets (e.g., San Jose and Yaramoko mines) has streamlined its portfolio, allowing it to focus on core operations in stable jurisdictions like Argentina, Côte d'Ivoire, and Peru. This strategic reallocation of capital has improved operational clarity and reduced geopolitical risk.

Capital Allocation: A Prime Example of Prudent Stewardship

Fortuna's ability to allocate capital effectively is a hallmark of its management. With $537.3 million in liquidity, the company has the flexibility to:
1. Fund organic growth at Borborema and Diamba Sud.
2. Repurchase shares or increase dividends (it returned 7.4% yield to shareholders in Q2 2025).
3. Acquire strategic assets, such as the pending $13.7 million acquisition of Mineração Serra Grande (MSG) in Brazil.

The company's $280.5 million net debt is well-managed, with a debt-to-EBITDA ratio of 0.8x indicating ample capacity for further leverage if needed. This balance between growth and prudence is rare in the gold sector and positions Fortuna to outperform in a rising price environment.

Investment Thesis: A Buy for the Gold Cycle

For investors seeking exposure to the gold rally, Fortuna offers a compelling case. Its strong liquidity, high-margin operations, and strategic growth projects create a flywheel effect: rising gold prices boost EBITDA margins, which fund further expansion, which in turn increases production and cash flow.

With gold prices projected to remain elevated due to macroeconomic tailwinds, Fortuna's focus on low-cost, high-grade assets ensures it will capture more value than peers. The company's $309,000–339,000 GEO production guidance for 2025—driven by Borborema and Diamba Sud—further reinforces its growth potential.

Conclusion: Fortuna Mining is a prime capital allocator in the current gold cycle. Its disciplined use of liquidity, strategic production expansion, and margin-driven operations make it a standout play for investors looking to capitalize on the sector's resurgence. As the company moves toward commercial production at Borborema and finalizes Diamba Sud's PEA, the upside for Fortuna's shareholders appears substantial.

Investment Recommendation: Buy. Fortuna's combination of financial strength, operational efficiency, and growth catalysts positions it to outperform in a rising gold environment. Investors should monitor the PEA results for Diamba Sud and the ramp-up timeline for Borborema, which could drive further valuation upside.