Exhibit
99.2
May 1,
2024
Fellow
Shareholders:
On
behalf of the Board of Directors and management of Fortuna Silver Mines Inc., I write in connection with the 2024 annual and special
meeting of shareholders. The meeting will be held in the Cheakamus Room, Fairmont Waterfront Hotel, 900 Canada Place, Vancouver, BC on
Thursday, June 20, 2024 at 10:00 a.m. (Vancouver time).
The
accompanying Management Information Circular contains important information regarding recording your votes, the directors nominated for
election, our corporate governance practices, and how we compensate our executives and directors.
We
encourage you to exercise your vote, either in person at the meeting, or by providing your proxy vote, either in paper form, by telephone
or online.
We
look forward to seeing you at the meeting.
Sincerely,
Jorge
Ganoza Durant
President
and Chief Executive Officer
| MANAGEMENT INFORMATION CIRCULAR |
NOTIFICATION
OF NOTICE AND ACCESS TO SHAREHOLDERS
AND
NOTICE
OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE
IS HEREBY GIVEN that the Annual and Special Meeting (the “Meeting”) of the shareholders of Fortuna Silver Mines Inc.
(the “Company”) will be held in the Cheakamus Room, Fairmont Waterfront Hotel, 900 Canada Place, Vancouver, British
Columbia on Thursday, June 20, 2024 at the hour of 10:00 a.m. (local time), where shareholders will be asked:
| (a) | To
receive the financial statements of the Company for the fiscal year ended December 31,
2023, together with the report of the auditors thereon; |
| (b) | To
appoint auditors and to authorize the directors of the Company (the “Directors”)
to fix their remuneration (for further information, please see the section entitled “Particulars
of Matters to be Acted Upon – Appointment and Remuneration of Auditors” in the
Circular, as defined below); |
| (c) | To
determine the number of Directors at eight (for further information, please see the section
entitled “Particulars of Matters to be Acted Upon – Election of Directors”
in the Circular); |
| (d) | To
elect Directors (for further information, please see the section entitled “Particulars
of Matters to be Acted Upon – Election of Directors” in the Circular); and |
| (e) | To
consider, and if thought fit, pass a special resolution to approve a change in the name of
the Company from “Fortuna Silver Mines Inc.” to “Fortuna Mining Corp.”
(for further information, please see the section entitled “Particulars of Matters
to be Acted Upon – Approval of Name Change” in the Circular). |
Shareholders
are also hereby notified that the Company is using the notice-and-access provisions (“Notice-and-Access”) contained
in National Instrument 54-101 for the delivery to its shareholders of the proxy materials for the Meeting (the “Meeting Materials”),
which include the Management Information Circular for the Meeting (the “Circular”). Under Notice- and-Access, instead
of receiving paper copies of the Meeting Materials, shareholders receive this notice to advise them how to either obtain the Meeting
Materials electronically or request a paper copy of the Meeting Materials.
Those
shareholders with existing instructions on their account to receive paper materials will receive paper copies of the Meeting Materials
with this Notice.
Accessing
Meeting Materials Online
The
Meeting Materials are available on the Company’s SEDAR+ profile located at www.sedarplus.ca and are also available on the Company’s
website at: https://fortunasilver.com/investors/shareholder-meeting-materials/. The Meeting Materials will remain on the Company’s
website for one year following the date of this notice. Shareholders are reminded to access and review all of the information contained
in the Circular and other Meeting Materials before voting.
Requesting
Printed Meeting Materials
Registered
shareholders may request a paper copy of the Meeting Materials by telephone at any time prior to the Meeting by calling toll-free at
1-866-962-0498 (or, for holders outside of North America, 1-514-982-8716) and entering the control number located on the proxy and following
the instructions provided. A paper copy will be sent to you free of charge within three business days of receiving your request. To receive
the Meeting Materials prior to the proxy cut-off for the Meeting, you should make your request by Thursday, June 6, 2024.
| MANAGEMENT INFORMATION CIRCULAR | | Page | i |
Beneficial
shareholders with a 16 digit control number may request a paper copy by going on-line at www.proxyvote.com or by calling toll-free at
1-877-907-7643 and entering the control number located on the voting instruction form and following the instructions provided. Shareholders
with a different control number, please call toll-free at 1-844-916-0609. A paper copy will be sent to you free of charge within three
business days of receiving your request. To receive the Meeting Materials prior to the proxy cut-off for the Meeting, you should make
your request by Thursday, June 6, 2024.
For
paper copy requests made on or after the date of the Meeting and within one year of the date of filing of the Circular. Beneficial shareholders
with a 16 digit control number may call toll-free at 1-877-907-7643, and shareholders with a different control number may call 1-844-916-0609,
and a paper copy will be sent to you free of charge within 10 calendar days of receiving your request.
Voting
of Proxies
Registered
Shareholders
Registered
shareholders will still receive a proxy form enabling them to vote at the Meeting. Such proxy will not be valid unless a completed, dated
and signed form of proxy is received by Computershare Trust Company, 100 University Avenue, 8th Floor, Toronto, ON M5J 2Y1,
no less than 48 hours (excluding Saturdays, Sundays and holidays) before the time for holding the Meeting or any adjournment thereof,
or, at the discretion of the Chair, is delivered to the Chair of the Meeting prior to commencement of the Meeting or any adjournment
thereof.
Non-Registered
Shareholders
Shareholders
who hold common shares of the Company beneficially (“Non-Registered Holders”), but registered in the name of intermediaries,
such as brokers, investment firms, clearing houses and similar entities (“Intermediaries”) may receive certain other
materials from their Intermediary, such as a voting instruction form to vote their shares. If you are a Non- Registered Holder of the
Company and receive these materials through your broker or through another Intermediary, please complete and return the materials in
accordance with the instructions provided to you by your broker or by the other Intermediary.
| Voting
Methods |
Internet |
Telephone
or Fax |
Mail |
Registered
Shareholders Shares
are held in own name and represented by a physical certificate or DRS Advice |
Vote
online at
www.investorvote.com |
Telephone:
1-866-732-8683
Fax: 1-866-249-7775 |
Return
the form of proxy in the enclosed envelope. |
Beneficial
Shareholders Shares
held with a broker, bank or other Intermediary. |
Vote
online at
www.proxyvote.com |
Call
or fax to the number(s) listed on your voting instruction form. |
Return
the voting instruction form in the enclosed envelope. |
Questions
If
you have any questions about Notice-and-Access and the information contained in this notice, you may obtain further information by calling
Broadridge toll free at 1-844-916-0609.
DATED
the 1st day of May, 2024.
| |
BY
ORDER OF THE BOARD |
| |
|
| |
Jorge
Ganoza Durant, |
| |
President
and Chief Executive Officer |
| MANAGEMENT INFORMATION CIRCULAR | | Page | ii |
MANAGEMENT
INFORMATION CIRCULAR
TABLE
OF CONTENTS
| PROXIES | |
1 |
| Notice-and-Access Process | |
1 |
| Solicitation and Deposit of Proxies | |
1 |
| Non-Registered Holders | |
2 |
| Voting of Proxies | |
2 |
| Revocation of Proxies | |
3 |
| VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF | |
3 |
| PARTICULARS OF MATTERS TO BE ACTED
UPON | |
3 |
| Appointment and Remuneration of Auditors | |
3 |
| Election of Directors | |
4 |
| Approval of Name Change | |
9 |
| OTHER INFORMATION | |
11 |
| Audit Committee Disclosure | |
11 |
| Renewal of Normal Course Issuer Bid | |
11 |
| Summary of Incentive Plans | |
11 |
| Interest of Certain Persons in Matters
To Be Acted Upon | |
12 |
| Interest of Informed Persons in Material
Transactions | |
12 |
| Additional Information | |
12 |
| Cautionary Notes | |
13 |
| Schedule
“A” |
Statement
of Executive Compensation |
| Schedule
“B” |
Corporate
Governance |
| MANAGEMENT INFORMATION CIRCULAR | | |
MANAGEMENT
INFORMATION CIRCULAR
As
at May 1, 2024
(Monetary
amounts expressed in US dollars, unless otherwise indicated)
This
Management Information Circular (“Circular”) is furnished in connection with the solicitation of proxies by and on
behalf of the management of Fortuna Silver Mines Inc. (the “Company” or “Fortuna”) for use at the
Annual and Special Meeting of the holders of common shares (“Common Shares”) of the Company to be held on Thursday,
June 20, 2024 (the “Meeting”) and any adjournment thereof, at the time and place and for the purposes set forth
in the notice of the Meeting (the “Notice of the Meeting”).
In
this Circular, references to “Non-Registered Holders” means shareholders who do not hold Common Shares in their own
name and “Intermediaries” refers to brokers, investment firms, clearing houses and similar entities that own securities on
behalf of Non-Registered Holders.
PROXIES
Notice-and-Access
Process
The
Company has elected to use the notice-and-access provisions (“Notice-and-Access”) of National Instrument 54-101 –
Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”) for distribution of
this Circular, form of proxy (“Proxy”) and other meeting materials (the “Meeting Materials”) to
registered shareholders and Non-Registered Holders of the Company.
Under
Notice-and-Access, rather than the Company mailing paper copies of the Meeting Materials to shareholders, the Meeting Materials can be
accessed online on the Company’s SEDAR+ profile at www.sedarplus.ca or on the Company’s website at: https://fortunasilver.com/investors/shareholder-meeting-materials/.
The Company has adopted this alternative means of delivery for the Meeting Materials in order to reduce paper use and the printing and
mailing costs.
Shareholders
will receive a “notice package” (the “Notice-and-Access Notification”) by prepaid mail, with details regarding
the Meeting date, location and purpose, and information on how to access the Meeting Materials online or request a paper copy.
Shareholders
will not receive a paper copy of the Meeting Materials unless they contact Broadridge at the applicable toll free number as set out in
the Notice of the Meeting. Provided the request is made prior to the Meeting, Broadridge will mail the requested materials within three
business days. Requests for paper copies of the Meeting Materials should be made by June 6, 2024 in order to receive the Meeting
Materials in time to vote before the Meeting.
Shareholders
with questions about Notice-and-Access may contact Broadridge toll-free at 1-844-916-0609.
Solicitation
and Deposit of Proxies
While
it is expected that the solicitation will be primarily by Notice-and-Access and mail, Proxies may be solicited personally or by telephone
by the directors and regular employees of the Company. All costs of solicitation will be borne by the Company. We have arranged for Intermediaries
to forward the Notice-and-Access Notification to Non-Registered Holders of Common Shares held as of record by those Intermediaries and
we may reimburse the Intermediaries for their reasonable fees and disbursements in that regard.
The
individuals named in the Proxy are directors of the Company, senior management and the Corporate Secretary of the Company. A shareholder
wishing to appoint some other person (who need not be a shareholder) to represent him or her at the Meeting has the right to do so, either
by inserting such person’s name in the blank space provided in the Proxy and striking out the printed names or by completing another
form of proxy. The Proxy will not be valid unless the
| MANAGEMENT INFORMATION CIRCULAR | | Page | 1 |
completed,
dated and signed form of proxy is received by Computershare Trust Company, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1,
not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time for holding the Meeting or any adjournment thereof,
or, at the discretion of the Chair, is delivered to the Chair of the Meeting prior to commencement of the Meeting or any adjournment
thereof.
Non-Registered
Holders
Only
registered holders of Common Shares or the persons they appoint as their proxyholders are permitted to vote at the Meeting. In many cases,
however, Common Shares beneficially owned by a Non-Registered Holder are registered either:
| (a) | in
the name of an Intermediary that the Non-Registered Holder deals with in respect of the shares.
Intermediaries include banks, trust companies, securities dealers or brokers, and trustees
or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans, or |
| (b) | in
the name of a clearing agency, such as The Canadian Depository for Securities Limited (CDS),
of which the Intermediary is a participant. |
There
are two kinds of Non-Registered Holders – those who have not objected to their Intermediary disclosing certain ownership information
about themselves to the Company, referred to as “Non-Objecting Beneficial Owners”, and those who have objected to their Intermediary
disclosing ownership information about themselves to the Company, referred to as “Objecting Beneficial Owners” (“OBOs”).
In
accordance with the requirements of NI 54-101, the Company will distribute the Notice-and-Access Notification to Intermediaries and clearing
agencies for onward distribution to all Non-Registered Holders. Intermediaries are required to forward the Notice-and-Access Notification
to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive Meeting Materials. Intermediaries often use
service companies to forward the Meeting Materials to Non-Registered Holders. The Company intends to pay for the delivery to OBOs, by
Intermediaries, of any proxy-related materials and Form 54-101F7 – Request for Voting Instructions made by Intermediary
for the Meeting.
Generally,
Non-Registered Holders who have not waived the right to receive Meeting Materials will be sent a voting instruction form (“VIF”)
which must be completed, signed and returned by the Non-Registered Holder in accordance with the Intermediary’s directions on the
VIF. In some cases, such Non-Registered Holders will instead be given a Proxy which has already been signed by the Intermediary (typically
by a facsimile, stamped signature) which is restricted as to the number of Common Shares beneficially owned by the Non-Registered Holder
but which is otherwise not completed. This form of proxy does not need to be signed by the Non-Registered Holder, but, to be used at
the Meeting, needs to be properly completed and deposited with Computershare Trust Company as described under “Solicitation and
Deposit of Proxies” above.
The
purpose of these procedures is to permit Non-Registered Holders to direct the voting of the Common Shares that they beneficially own.
Should a Non-Registered Holder wish to attend and vote at the Meeting in person (or have another person attend and vote on behalf of
the Non-Registered Holder), the Non-Registered Holder should strike out the names of the persons named in the Proxy and insert the Non-Registered
Holder’s (or such other person’s) name in the blank space provided or, in the case of a VIF, follow the corresponding instructions
on the form.
Non-Registered
Holders should carefully follow the instructions of their Intermediaries and their service companies, including instructions regarding
when and where the VIF or Proxy form is to be delivered.
Voting
of Proxies
Common
Shares represented by any properly executed Proxy will be voted or withheld from voting on any ballot that may be called for in accordance
with the instructions given by the shareholder. In the absence of such direction, such Common Shares will be voted in favour of the
matters set forth herein.
| MANAGEMENT INFORMATION CIRCULAR | | Page | 2 |
The
Proxy, when properly completed and delivered and not revoked, confers discretionary authority upon the person appointed proxy thereunder
to vote with respect to amendments or variations of matters identified in the Notice of the Meeting and with respect to other matters
which may properly come before the Meeting. In the event that amendments or variations to matters identified in the Notice of the Meeting
are properly brought before the Meeting or any further or other business is properly brought before the Meeting, it is the intention
of the persons designated in the Proxy to vote in accordance with their best judgment on such matters or business. As at the date hereof,
the management of the Company knows of no such amendment, variation or other matter that may come before the Meeting.
Revocation
of Proxies
A
shareholder who has given a Proxy may revoke it by an instrument in writing executed by the shareholder or by his or her attorney authorized
in writing or, where the shareholder is a corporation, by a duly authorized officer or attorney of the corporation, and delivered either
to the registered office of the Company, 200 Burrard Street, Suite 650, Vancouver, British Columbia, V6C 3L6, at any time up to
and including the last business day preceding the day of the Meeting, or if adjourned, any reconvening thereof, or to the Chair of the
Meeting on the day of the Meeting or, if adjourned, any reconvening thereof or in any other manner provided by law. A revocation of a
Proxy does not affect any matter on which a vote has been taken prior to the revocation.
VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF
As
at the date of this Circular, the Company had issued and outstanding 306,114,040 fully paid and non-assessable Common Shares, each share
carrying the right to one vote. The Company has no other classes of voting securities.
Holders
of Common Shares as at May 2, 2024 (the “Record Date”) who either personally attend the Meeting or who have completed
and delivered a Proxy or VIF in the manner and subject to the provisions described above shall be entitled to vote or to have their Common
Shares voted at the Meeting.
To
the knowledge of the directors and officers of the Company, as at the date of this Circular, no person or company directly or indirectly
beneficially owns or exercises control or direction over Common Shares carrying more than 10% of the voting rights attached to all outstanding
Common Shares of the Company, other than:
| Name | |
No. of
Common Shares | | |
%
of Outstanding Common Shares | |
| Van Eck Associates Corporation | |
| 34,021,296 | | |
| 11.11 | % |
PARTICULARS
OF MATTERS TO BE ACTED UPON
To
the knowledge of the Board of directors of the Company (the “Board”), the only matters to be brought before the Meeting
are those matters set forth in the Notice of the Meeting, as more particularly described as follows:
Appointment
and Remuneration of Auditors
Effective
July 13, 2017, KPMG LLP, Chartered Professional Accountants, were appointed as auditors of the Company. The management of the Company
will recommend to the Meeting to appoint KPMG LLP as auditors of the Company for the ensuing year, and to authorize the directors to
fix their remuneration.
Recommendation:
Management of the Company recommends that Shareholders VOTE FOR the appointment of
KPMG LLP as Fortuna's auditors and authorizing the directors to fix their remuneration.
Proxies:
Unless otherwise instructed, Proxies in favour of the management designees will VOTE FOR
the appointment of KPMG LLP as Fortuna's auditors and authorizing the directors to fix
their remuneration. |
| MANAGEMENT INFORMATION CIRCULAR | | Page | 3 |
Election
of Directors
The
Board presently consists of eight directors. Shareholders will be asked at the Meeting to determine the number of directors at eight,
and to elect eight directors. The term of office for all the current directors will expire on the date of the Meeting. The persons named
below (the “Director Nominees”) will be presented for election at the Meeting as management’s nominees and the
persons named in the Proxy intend to vote for the election of these nominees. The senior officers of the Company (“Management”)
does not contemplate that any of these nominees will be unable to serve as a director. Each director elected will hold office until the
next annual general meeting of the Company or until his or her successor is elected or appointed, unless his or her office is earlier
vacated in accordance with the Articles of the Company, or with the provisions of the British Columbia Business Corporations Act.
Recommendation:
Management of the Company recommends that Shareholders VOTE FOR the election of each
of the Director Nominees.
Proxies:
Unless otherwise instructed, Proxies in favour of the management designees will VOTE FOR
the ordinary resolution for the election of the eight Director Nominees |
Information
regarding the Director Nominees is set out below:
JORGE
GANOZA DURANT - Director, President and Chief Executive Officer
Jorge
Ganoza Durant is a geological engineer with over 25 years of experience in mineral exploration,
mining and business development throughout Latin America. He is a graduate from the New Mexico
Institute of Mining and Technology. He is a fourth generation miner from a Peruvian family
that has owned and operated underground gold, silver and polymetallic mines in Peru and Panama.
Before co- founding Fortuna in 2004, Jorge was involved in business development at senior
levels for several private and public Canadian junior mining companies working in Central
and South America. |
 |
| Residence: |
Lima, Peru |
Principal Occupation: President
and CEO of the Company |
Areas of Expertise:
Strategy and Leadership
Operations and Exploration
Risk Management
Corporate Governance
Metals and Mining
Safety, Sustainability and ESG
Finance
Human Capital Management
Financial Literacy
International Business
Spanish Language
Diverse Perspectives |
| Age: |
54 |
|
|
|
| |
|
|
|
|
| Independent: |
No |
Equity Ownership: |
|
| Director
since: |
December 2, 2004 |
|
Number |
Value * |
| 2023
vote results: |
99.24% in favour |
Common Shares: |
2,194,739 |
$10,293,326 |
| |
|
RSUs (cash-settled) |
604,533 |
$ 2,835,260 |
| 2023
Meeting Attendance: |
PSUs (share-settled) |
604,533 |
$ 2,835,260 |
| Board: |
7 of 7 |
|
3,403,805 |
$15,963,845 |
| Overall: |
100% |
Mr. Ganoza meets the Company’s minimum equity ownership requirements. |
| |
|
|
|
|
|
Other
Public Boards:
Nil |
|
* Based on $4.69 per share, being the closing price of the Common Shares
on the NYSE as at May 1, 2024 |
|
| MANAGEMENT INFORMATION CIRCULAR | | Page | 4 |
DAVID
LAING - Director; Chair of the Board; Chair of Sustainability Committee; Member of Compensation Committee.
David Laing is a mining engineer with over 35 years of experience
in the industry. He was the COO of Equinox Gold Corp. and predecessors from August 2016 to November 2018, and was the COO of
Luna Gold from August 2016 to March 2017 when it merged with JDL Gold to form Trek Mining. Before joining Luna Gold, David
was the COO of True Gold, which developed the Karma gold mine in Burkina Faso and was acquired by Endeavour Mining in April 2016.
Prior to joining True Gold, David was COO and EVP of Quintana Resources Capital, a base metals streaming company. David was also one
of the original executives of Endeavour Mining, a gold producer in West Africa. Prior to these roles, David held senior positions in
mining investment banking at Standard Bank in New York, technical consulting at MRDI in California, the Refugio project at Bema Gold
Corp., and various roles at Billiton with operations in Peru, South Africa, and northern Chile. |
 |
Residence:
Age: |
BC, Canada
68 |
Principal Occupation: Mining Engineer;
Independent Mining Consultant |
Areas of Expertise:
Strategy
and Leadership
Operations and Exploration
Risk Management
Corporate Governance
Metals and Mining
Safety, Sustainability and ESG
Finance
Human Capital Management
Financial Literacy
International Business
Spanish Language |
|
|
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
| Director
since: |
September 26, 2016 |
|
Number |
Value * |
| 2023
vote results: |
88.43% in favour |
Common Shares |
109,150 |
$ 511,914 |
| |
|
DSUs (cash-settled) |
173,323 |
$ 812,885 |
| 2023
Meeting Attendance: |
|
282,473 |
$1,324,798 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
9 of 9 |
Mr. Laing meets the Company’s
minimum equity ownership requirements. |
| Independent
Directors: |
7 of 7 |
|
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: Arizona Sonoran Copper Company Inc. (TSX); Blackrock Silver Corp. (TSX Venture Exchange; FSE; OTC) |
|
MARIO
SZOTLENDER - Director and Member of Sustainability Committee
Mario
Szotlender is a co-founder of Fortuna Silver Mines Inc. He holds a degree in international relations and is fluent in several languages.
He has successfully directed Latin American affairs for numerous private and public companies over the past 25 years, specializing
in developing new business opportunities and establishing relations within the investment community. He has been involved in various
mineral exploration and development joint ventures (precious metals and diamonds) in Central and South America, including heading
several mineral operations in Venezuela, such as Las Cristinas in the 1980s. He was President of Mena Resources Inc. until it was
purchased by Rusoro Mining Ltd., of which he was also President.
|
 |
Residence:
Age: |
Caracas, Venezuela
62 |
Principal Occupation: Independent
Consultant and Director of public resource companies |
Areas of Expertise:
Strategy and Leadership
Operations and Exploration
Risk Management
Corporate Governance
Metals and Mining
Safety, Sustainability and ESG
Finance
Human Capital Management
Financial Literacy
International Business
Spanish Language
Diverse
Perspectives
|
|
|
|
|
|
| |
|
|
|
|
| Independent: |
No |
Equity Ownership: |
|
| Director
since: |
June 16, 2008 |
|
Number |
Value * |
| 2023
vote results: |
99.10% in favour |
Common Shares |
171,700 |
$ 805,273 |
| |
|
DSUs (cash-settled) |
316,884 |
$1,486,186 |
| 2023
Meeting Attendance: |
|
488,584 |
$2,291,459 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
6 of 6 |
Mr. Szotlender meets the Company’s
minimum equity ownership requirements. |
| Overall: |
100% |
|
|
|
|
|
|
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: Atico Mining Corporation (TSX Venture Exchange); Endeavour Silver Corp. (TSX and NYSE); Radius Gold Inc. (TSX
Venture Exchange) |
|
| MANAGEMENT INFORMATION CIRCULAR | | Page | 5 |
DAVID
FARRELL - Director; Chair of CG&N and Compensation Committees; Member of Audit
Committee
David
Farrell is a Corporate Director, with over 25 years of corporate and mining experience, and
has negotiated, structured and closed more than $25 billion worth of M&A and structured
financing transactions for natural resource companies. Previously, he was President of Davisa
Consulting, a private consulting firm working with global mining companies. Prior to founding
Davisa, he was Managing Director of Mergers & Acquisitions at Endeavour Financial,
working in Vancouver and London. Prior to Endeavour Financial, David was a lawyer at Stikeman
Elliott, working in Vancouver, Budapest and London. Mr. Farrell graduated from the University
of British Columbia with a B.Comm. (Honours, Finance) and an LL.B. and has earned his ICD.D
designation from the UofT Rotman School of Management and the Institute of Corporate Directors. |
 |
Residence:
Age: |
BC, Canada
55 |
Principal Occupation: Corporate
Director; President of Davisa Consulting (private consulting) |
Areas of Expertise:
Strategy and Leadership
Risk Management
Corporate Governance
Metals and Mining
Finance
Human Capital Management
Financial Literacy
International Business |
| |
|
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
| Director
since: |
July 15, 2013 |
|
Number |
Value * |
| 2023
vote results: |
97.87% in favour |
Common Shares: |
15,000 |
$ 70,350 |
| |
|
DSUs (cash-settled): |
311,073 |
$1,458,932 |
| 2023
Meeting Attendance: |
|
326,073 |
$1,529,282 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
11 of 11 |
Mr. Farrell meets the Company’s
minimum equity ownership requirements. |
| Independent
Directors: |
7 of 7 |
|
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: Hillcrest Energy Technologies Ltd. (CSE); Adventus Mining Corporation (TSX Venture Exchange) |
|
ALFREDO
SILLAU - Director; Member of Audit and Compensation Committees
Alfredo
Sillau is a graduate of Harvard Business School and is Managing Partner and Director of Faro
Capital, an investment management firm that manages private equity and real estate funds.
Previously, Alfredo headed the business development in Peru for Compass Group, a regional
investment management firm, until late 2011. As CEO of Compass, Alfredo actively took part
in the structuring, promoting and management of investment funds with approximately $500
million in assets under management. |
 |
Residence:
Age: |
Lima, Peru
57 |
Principal Occupation: Managing Partner
and Director of Faro Capital (investment management) |
Areas of Expertise:
Strategy and Leadership
Risk Management
Corporate Governance
Metals and Mining
Finance
Human Capital Management
Financial Literacy
International Business
Spanish Language
Diverse Perspectives |
|
|
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
| Director
since: |
November 29, 2016 |
|
Number |
Value * |
| 2023
vote results: |
98.88% in favour |
Common Shares: |
36,502 |
$171,194 |
| |
|
DSUs (cash-settled): |
125,529 |
$588,731 |
| 2023
Meeting Attendance: |
|
162,031 |
$759,925 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
10 of 10 |
Mr. Sillau meets the Company’s minimum equity ownership requirements. |
| Independent
Directors: |
7 of 7 |
|
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: Nil |
|
| MANAGEMENT INFORMATION CIRCULAR | | Page | 6 |
KYLIE DICKSON - Director;
Chair of Audit Committee; Member of CG&N Committee
Kylie Dickson is a Canadian
CPA, CA with more than 14 years’ experience working with publicly traded resource companies. She received her Bachelor of Business
Administration degree in Accounting from Simon Fraser University. Until March 2020, she was Vice-President, Business Development
of Equinox Gold Corp. and previously held the position of Chief Financial Officer of several mineral exploration and mining companies.
Prior to her work with public companies, Ms. Dickson was an audit manager in the mining group of a major audit firm. |
|
| Residence: |
BC, Canada |
Principal Occupation: Corporate
Director of public resource companies |
Areas of Expertise:
Strategy and Leadership
Operations and Exploration
Risk Management
Corporate Governance
Metals and Mining
Finance
Human Capital Management
Financial Literacy
International Business
Diverse Perspectives |
| Age: |
44 |
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
|
| Director
since: |
August 16, 2017 |
|
Number |
Value * |
| 2023
vote results: |
97.20% in favour |
Common Shares: |
3,500 |
$ 16,415 |
| |
|
DSUs (cash-settled): |
137,765 |
$646,118 |
| 2023
Meeting Attendance: |
|
141,265 |
$662,533 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
8 of 8 |
Ms. Dickson meets the Company’s minimum
equity ownership requirements. |
| Independent
Directors: |
7 of 7 |
|
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: Hillcrest Energy Technologies Ltd. (CSE); Star Royalties Ltd. (TSX Venture Exchange) |
|
KATE HARCOURT - Director;
Member of Sustainability Committee
Kate Harcourt is a sustainability
professional with over 30 years of experience, principally in the mining industry. She has worked with a number of mining companies
and as a consultant for International Finance Corp. She received a BSc Hons, Environmental Science, from Sheffield University and
a MSc Environmental Technology, from Imperial College, London, and is a Chartered Environmentalist (CEnv) and a Member of the Institution
of Environmental Scientists. |
 |
| Residence: |
Wales, UK |
Principal Occupation: Independent
Environmental and Social Advisor |
Areas of Expertise:
Strategy and Leadership
Operations and Exploration
Risk Management
Corporate Governance
Metals and Mining
Safety, Sustainability and ESG
Finance
Human Capital Management
International Business
Diverse Perspectives |
| Age: |
60 |
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
| Director
since: |
July 2, 2021 |
|
Number |
Value * |
| 2023
vote results: |
98.91% in favour |
Common Shares: |
Nil |
Nil |
| |
|
DSUs (cash-settled): |
66,557 |
$312,152 |
| 2023
Meeting Attendance: |
|
66,557 |
$312,152 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
6 of 6 |
The deadline for
Ms. Harcourt to meet the Company’s minimum equity ownership requirements is July 2, 2026. |
| Independent
Directors: |
7 of 7 |
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
Other Public Boards: Orezone Gold Corporation
(TSX); Atalaya Mining plc (London Stock Exchange) |
|
| MANAGEMENT INFORMATION CIRCULAR | | Page | 7 |
SALMA SEETAROO – Director;
Member of CG&N and Sustainability Committees
Salma Seetaroo is the co-founder
and chief executive officer of Cashew Coast, an integrated cashew business located in Côte d’Ivoire, with two processing
factories employing over 1,000 people, primarily women, and supporting 5,000 farmers. Salma has spent over 16 years working in debt,
equity and special situations investments in Africa as an investment banker. She is a member of the Global Advisory Board of the
Bayes Business School, City University London, UK where she earned an Executive MBA. Salma started her career as a City solicitor
with a global law firm, Norton Rose Fulbright in London. |
|
| Residence: |
Abidjan, Côte d’Ivoire |
Principal Occupation: Chief Executive
Officer, Cashew Coast |
Areas of Expertise:
Strategy and Leadership
Risk Management
Corporate Governance
Metals and Mining
Safety, Sustainability and ESG
Finance
Human Capital Management
Financial Literacy
International Business
French Language
Diverse Perspectives |
| Age: |
46 |
|
|
|
| |
|
|
|
|
| Independent: |
Yes |
Equity Ownership: |
|
| Director
since: |
June 27, 2022 |
|
Number |
Value * |
| 2023
vote results: |
99.02% |
Common Shares: |
Nil |
$Nil |
| |
|
DSUs (cash-settled): |
52,685 |
$247,093 |
| 2023
Meeting Attendance: |
|
52,685 |
$247,093 |
| Board: |
7 of 7 |
|
|
|
| Committees: |
4 of 4 |
The deadline for Ms. Seetaroo to meet
the Company’s minimum equity ownership requirements is June 27, 2027. |
| Independent
Directors: |
7 of 7 |
|
|
|
|
| Overall: |
100% |
* Based on $4.69 per share, being the
closing price of the Common Shares on the NYSE as at May 1, 2024 |
|
| |
|
|
|
|
|
| Other
Public Boards: GoviEx Uranum Inc. (TSX Venture Exchange) |
|
Due
to a review by the United States Securities and Exchange Commission (the “SEC”) of the Company’s use of inferred
resources for the calculation of depletion expense in its audited financial statements contained in the Annual Report on Form 40-F
for the year ended December 31, 2015, the Company was delayed in filing its annual audited financial statements and related MD&A
for the years ended December 31, 2016 and 2015, and its annual information form for the year ended December 31, 2016 (collectively,
the “Annual Financial Documents”). In connection with the delayed filing of the Annual Financial Documents, the Company
applied for and received on April 3, 2017 a management cease trade order (“MCTO”) from the British Columbia Securities
Commission and other Canadian provincial securities regulatory authorities. The MCTO prohibited certain executive officers of the Company
from trading in securities of the Company until the Company completed the required filing of the Annual Financial Documents and became
current on all filing obligations.
On
May 1, 2017, the Company reported that the SEC had verbally communicated it would accept the Company’s use of inferred resources
for the calculation of depletion expense, provided that the Company included additional disclosure regarding the calculations. Accordingly,
the Company proceeded to finalize the Annual Financial Documents and filed them on May 15, 2017. The SEC formally concluded its
review on May 17, 2017.
Due
to the delay in finalizing the Annual Financial Documents, the Company was delayed in filing its interim financial statements and related
MD&A for the three months ended March 31, 2017 and 2016 (together, the “Interim Financial Documents”). The
Company filed the Interim Financial Documents on May 24, 2017, and the MCTO was revoked by the British Columbia Securities Commission
on May 25, 2017.
On
June 22, 2020, the Autorité des marches financiers and the Ontario Securities Commission each issued a cease-trade order
against Algold Resources Inc. (“Algold”) for having failed to file its annual statements for the fiscal year ended
December 31, 2019. The cease trade order came into effect automatically in every jurisdiction in Canada that the company was reporting
pursuant to automatic reciprocity legislation. In addition, Algold filed under the Bankruptcy and Insolvency Act in February 2021.
A proposal made in the context of a notice of intention was approved by the creditors and
| MANAGEMENT INFORMATION CIRCULAR | | Page | 8 |
homologated
by the court on March 26, 2021. Under such proposal, Algold became a wholly-owned subsidiary of Aya Gold & Silver Inc.
and ceased to be a reporting issuer, effective as of June 11, 2021. Ms. Seetaroo was a director of Algold at the time the cease
trade order was issued and at the time of the bankruptcy filing.
Advance
Notice Policy
Pursuant
to the Advance Notice Policy of the Company which was ratified by the shareholders in 2018, any additional director nominations by a
shareholder of the Company must be received by the Company by April 18, 2024 and must be in compliance with the Advance Notice Policy.
The Company will provide details of any such additional director nominations through a public announcement.
A
copy of the Advance Notice Policy is available for viewing on the Company’s website and on SEDAR+ at www.sedarplus.ca.
Majority
Voting Policy
The
Board has adopted a Majority Voting Policy for the election of directors in uncontested elections. Under this policy, if a nominee receives
a greater number of votes withheld from his or her election than votes for such election, the director shall immediately tender his or
her resignation to the Chair of the Board. The Corporate Governance and Nominating Committee (the “CG&N Committee”)
will consider the resignation and recommend to the Board whether or not to accept it. Any director who tenders his or her resignation
may not participate in the deliberations of either the CG&N Committee or the Board. In its deliberations, the CG&N Committee
will consider the following: the effect such resignation may have on the Company’s ability to comply with any applicable corporate
or securities laws or any applicable governance rules and policies; whether such resignation would result in a violation of a contractual
provision by the Company; the stated reasons, if any, why certain shareholders cast “withheld” votes for the director, the
qualifications of the director, whether the director’s resignation from the Board would be in the best interests of the Company;
whether the director is a key member of an established, active special committee which has a defined term or mandate (such as a strategic
review) and accepting the resignation of such director would jeopardize the achievement of the special committee’s mandate; and
any other exceptional factors that the CG&N Committee considers relevant.
The
Board will review the recommendation of the CG&N Committee and determine whether to accept or reject the resignation. The resignation
will become effective once accepted by the Board. Within 90 days after the applicable shareholder meeting, the Company will file its
decision with the Toronto Stock Exchange (“TSX”) and issue a news release disclosing the Board’s decision (and,
if applicable, the reasons for rejecting the resignation). If the Board accepts any tendered resignation in accordance with the Majority
Voting Policy, then the Board may proceed to either fill the vacancy through the appointment of a new director, or not to fill the vacancy
and instead decrease the size of the Board.
A
copy of the Majority Voting Policy is available for viewing on the Company’s website.
Approval
of Name Change
At
the Meeting, Shareholders will be asked to vote on a special resolution (the “Name Change Resolution”) to approve a change
in the name of the Company from “Fortuna Silver Mines Inc.” to “Fortuna Mining Corp.” (the “Name Change”).
The name change is proposed in order to reflect that the Company’s business has moved from being predominantly focused on the production
of silver to the production of gold and silver.
Subject
to the approvals of the Shareholders, the TSX, and the New York Stock Exchange (the “NYSE”), it is expected that the Common
Shares will commence trading on the TSX and the NYSE under the new name shortly after the Company completes all required filings, including
receipt by the TSX and the NYSE of the necessary documentation. Similarly, subject to the approvals of the Shareholders and the TSX,
it is expected that the Company’s senior subordinated unsecured convertible debentures which mature on October 31, 2024 and
which are listed for trading on the TSX (the “Debentures”) will commence trading on the TSX under the new name shortly
after the Company completes all required filings with the TSX. The Board may determine not to implement the Name Change at any time after
the Meeting and after receipt of
| MANAGEMENT INFORMATION CIRCULAR | | Page | 9 |
necessary
regulatory approvals, but prior to the issuance of a certificate of change of name, without further action on the part of the Shareholders.
The
current trading symbols of the Company’s Common Shares and the Debentures will not change. Following the completion of the Name
Change, share and Debenture certificates of "Fortuna Silver Mines Inc." will remain valid and Shareholders and Debentureholders
will not be required to surrender and exchange their share or Debenture certificates for share or Debenture certificates with the new
name of the Company. The Name Change will not, by itself, affect any of the rights of Shareholders or Debentureholders.
Unless
otherwise directed, the management proxy nominees named in the accompanying form of proxy intend to vote
the
Common Shares represented thereby in respect of the Meeting “for” the Name Change Resolution.
To
be effective, the following Name Change Resolution must be authorized and approved by at least two-thirds of the votes cast by holders
of Common Shares present in person or represented by proxy and entitled to vote at the Meeting:
“Resolved
as a special resolution that:
| i. | The
Company is authorized to file a notice of alteration (the “Notice of Alteration”)
pursuant to the British Columbia Business Corporations Act to alter the notice of
articles of the Company (the “Notice of Articles”) to change its name
(the “Name Change”) from “Fortuna Silver Mines Inc.” to “Fortuna
Mining Corp.”, or such other name that the board of directors of the Company (the “Board”)
in its sole discretion, deems appropriate and as may be approved by regulatory authorities
(including the Toronto Stock Exchange and the New York Stock Exchange); |
| ii. | Any
director or officer of the Company be and is hereby authorized and directed to execute, deliver
and file, or cause to be delivered and filed, the Notice of Alteration with the Registrar
of Companies and to do and perform all such acts and things, sign such documents and take
all such other steps as, in the opinion of such director or officer, may be considered necessary
or desirable to carry out the purpose and intent of these resolutions; |
| iii. | Upon
the Notice of Alteration becoming effective in accordance with applicable law, the Notice
of Articles shall be altered accordingly; |
| iv. | Notwithstanding
that this special resolution has been duly passed by the shareholders of the Company, the
Board is hereby authorized and empowered, if it decides not to proceed with the Name Change,
to revoke this special resolution in whole or in part at any time prior to it being given
effect without further notice to, or approval of, the shareholders of the Company; and |
| v. | Any
director or officer of the Company is hereby authorized and directed to do or cause to be
done all acts and things and to execute and deliver all agreements, forms, notices, certificates,
confirmations and other documents or instruments, as in the opinion of such director or officer
may be necessary or appropriate in order to give effect to these resolutions, such determination
to be conclusively evidenced by the execution and delivery of such agreement, form, notice,
certificate, confirmation or other document or instrument or the doing of any such act or
thing.” |
Recommendation:
The Board has determined that the Name Change is in the best interests of the Shareholders
and unanimously recommends that Shareholders VOTE FOR the Name Change Resolution.
Proxies:
Unless otherwise instructed, Proxies in favour of the management designees will VOTE FOR
the Name Change Resolution. |
| MANAGEMENT INFORMATION CIRCULAR | | Page | 10 |
Executive
Compensation & Corporate Governance
See
Schedule “A” to this Circular for information regarding the Company's compensation strategy, its executive compensation philosophy
and the objectives of the Company’s compensation structures. For additional information on the Director Nominees and the Company’s
corporate governance practices, see Schedule “B” to this Circular.
OTHER
INFORMATION
Audit
Committee Disclosure
Pursuant
to the provisions of National Instrument 52-110 – Audit Committees, the Company’s Annual Information Form dated
March 22, 2024 (the “AIF”) includes under the heading “Audit Committee” a description of the Company’s
Audit Committee and related matters. A copy of the Audit Committee charter setting out the Committee’s mandate and responsibilities
is attached as a schedule to the AIF. The AIF is available for viewing at www.sedarplus.ca.
Renewal
of Normal Course Issuer Bid
In
April 2024 the Board approved the renewal of a share repurchase program pursuant to a normal course issuer bid (the “NCIB”).
On April 30, 2024, the Company announced the acceptance by the TSX of the Company’s NCIB to purchase up to five percent of
its outstanding Common Shares. Under the NCIB, purchases of Common Shares may be made through the facilities of the TSX, the NYSE and/or
alternative Canadian trading systems, commencing on May 2, 2024 and expiring on the earlier of May 1, 2024 and the date on
which the Company has acquired the maximum number of Common Shares allowable under the NCIB or the date on which the Company otherwise
decides not to make any further repurchases under the NCIB. The Company’s securityholders may obtain a copy of the notice of the
normal course issuer bid, without charge, by contacting the Corporate Secretary of the Company by email at: info@fortunasilver.com.
Summary
of Incentive Plans
The
following table sets out information regarding compensation plans under which equity securities of the Company are authorized for issuance,
as at December 31, 2023:
| EQUITY COMPENSATION
PLAN | |
| Plan
Category | |
(a)
No. of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights | | |
(b)
Weighted Average Exercise
Price of Outstanding
Options, Warrants and
Rights (CAD$) | | |
(c)
No. of Securities Remaining
Available for Future Issuance under
Equity Compensation Plans
(excluding Securities Reflected in
column (a)) | |
| Equity Compensation Plans Approved by Shareholders: | |
| | | |
| | | |
| | |
| Options | |
| Nil | | |
| N/A | | |
| 2,950,529 | |
| Share Units | |
| 1,840,012 | | |
$ | 5.51 | | |
| 4,150,080 | |
| Equity Compensation Plans Not Approved by Shareholders: | |
| | | |
| | | |
| | |
| | |
| N/A | | |
| N/A | | |
| N/A | |
| Total: | |
| 1,840,012 | | |
| N/A | | |
| 7,100,609 | |
| MANAGEMENT INFORMATION CIRCULAR | | Page | 11 |
Interest of Certain Persons in Matters To Be Acted
Upon
Other than as disclosed elsewhere in
this Circular, none of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company,
none of the persons who have been directors or executive officers of the Company since the commencement of the Company’s last completed
financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of
beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting.
Interest of Informed Persons in
Material Transactions
Other than as disclosed in this Circular,
no insider, proposed nominee for election as a director, or any associate or affiliate of the foregoing, had any material interest, direct
or indirect, in any transaction or proposed transaction since the commencement of the Company’s last completed financial year which
has materially affected or would materially affect the Company or its subsidiaries.
Additional Information
Additional information relating to the
Company is available for viewing on SEDAR+ at www.sedarplus.ca. Financial information is provided in the Company’s financial statements
and accompanying management’s discussion and analysis for the fiscal year ended December 31, 2023, and its annual information
form dated March 22, 2024. Copies of these documents may be obtained by contacting the Company, attention Corporate Secretary, at
200 Burrard Street, Suite 650, Vancouver, BC V6C 3L6 (Tel: 604-484-4085; Fax: 604-484-4029).
| |
President and Chief Executive Officer |
| MANAGEMENT INFORMATION CIRCULAR | Page | 12 |
Cautionary Notes
Forward-Looking Statements
This Circular contains forward-looking
statements which constitute “forward-looking information” within the meaning of applicable Canadian securities legislation
and “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995 (collectively, “forward-looking statements”). All statements included herein, other than statements
of historical fact, are forward-looking statements and are subject to a variety of known and unknown risks and uncertainties which could
cause actual events or results to differ materially from those reflected in the forward-looking statements. The forward-looking statements
in this Circular include, without limitation, statements pertaining to the Company’s expectations regarding compensation plans and
practices and governance issues; diversity targets; the Company’s sustainability plans, targets, strategies, and goals, such as
local community relations, economic contributions and education, employment, and procurement initiatives, biodiversity initiatives, and
climate change, including the Company’s greenhouse gas emissions target and the means of achieving the same, including the construction
and implementation of a solar power plant at the Séguéla Mine and at the Lindero Mine, and the Company’s long-term
objectives in supporting the global ambition of net-zero emissions by 2050; the Company’s commitments and targets surrounding its
tailings storage facilities, including timelines for compliance with the Global Industry Standard on Tailings Management; the Company’s
NCIB program; the Company’s plans for its mines and mineral properties; mineral resource and reserve estimates; life of mine estimates
and potential extensions thereof; and the Company’s plans and expectations for its properties and operations. Often, but not always,
these forward-looking statements can be identified by the use of words such as “believe”, “expect”, “anticipate”,
“contemplate”, “target”, “plan”, “goal”, “budget”, “aim”, “intent”,
“estimate”, “may”, “should”, “could” and similar expressions, including negative variations.
Forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to
be materially different from any results, performance or achievements expressed or implied by the forward-looking statements. Such risks,
uncertainties, and factors include, among others, risks associated with climate change; risks associated with mining regime changes in
the Company’s operating jurisdictions, including those related to permitting and approvals, environmental and tailings management,
labour, trade relations, and transportation; risks related to mine closure activities, reclamation obligations, and environmental liabilities;
environmental and regulatory risks associated with tailings storage facilities; as well as those factors discussed under “Description
of the Business - Risk Factors” in the Company’s Annual Information Form, a copy of which can be found on the Company’s
profile on the SEDAR+ website at www.sedarplus.ca. Although the Company has attempted to identify important factors that could cause actual
actions, events, or results to differ materially from those described in forward- looking statements, there may be other factors that
cause actions, events, or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein
are based on the assumptions, beliefs, expectations, and opinions of management, including, but not limited to, continued availability
of water and power resources at the Company’s operations; financial and physical impacts of climate change and climate change initiatives
on markets and the Company’s operations; the availability and effectiveness technologies needed to achieve the Company’s sustainability
goals and strategies; the accuracy of the Company’s current mineral resource and reserve estimates; expectations regarding carbon
pricing; that the Company’s activities will be in accordance with the Company’s public statements and stated goals; that there
will be no material adverse change affecting the Company or its properties; that the appeal filed in the Mexican Collegiate Court challenging
the reinstatement of the environmental impact authorization will be unsuccessful; and that there will be no significant disruptions affecting
operations. Forward-looking statements are made as of the date hereof and the Company disclaims any obligation to update any forward-looking
statements, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no
assurance that forward- looking statements will prove to be accurate, as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, investors should not place undue reliance on forward-looking statements.
| MANAGEMENT INFORMATION CIRCULAR | Page | 13 |
Non-IFRS Financial Measures
This Circular contains certain non-International
Reporting Financial Standards (“IFRS”) measures that are used by Fortuna to analyze and evaluate the performance of
Fortuna's business and are widely reported in the mining industry as benchmarks for performance. These measures include “cash cost”,
“free cash flow" (“FCF”), all-in sustaining costs (“AISC”), “earnings before interest,
taxes, depreciation and amortization” (“EBITDA”) and Adjusted EBITDA. The Company believes that certain investors
use these non-IFRS financial measures to evaluate the Company’s performance. However, the measures do not have a standardized meaning
and may differ from measures used by other companies with similar descriptions. Accordingly, they should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with IFRS.
For additional information regarding
these non-IFRS measures, including reconciliations to the closest comparable IFRS measures, see "Non-IFRS Financial Measures"
in the Company's management's discussion and analysis for the year ended December 31, 2023, which is available under the Company's
SEDAR+ profile at www.sedarplus.ca and is incorporated by reference in this Circular.
NCIB Program
The actual number of Common Shares that
may be purchased by the Company under the NCIB program, and the timing of any such purchases, will be determined by the Company based
on a number of factors, including the Company’s financial performance and flexibility in the context of its financial guardrails,
the availability of discretionary cash flow, and capital funding requirements. The NCIB program does not obligate the Company to acquire
any particular number of Common Shares, and the NCIB program may be suspended or discontinued at any time at the Company’s discretion.
| MANAGEMENT INFORMATION CIRCULAR | Page | 14 |
Schedule "A"
Statement of Executive Compensation
Table of Contents
| Introduction |
A-1 |
| Overview |
A-2 |
| 2023 Business Performance |
A-2 |
| Expansion into Senegal |
A-3 |
| Pay for Performance Alignment |
A-4 |
| Executive Compensation Philosophy |
A-4 |
| Compensation Governance |
A-4 |
| Objectives of Compensation |
A-4 |
| Share Ownership Policy |
A-5 |
| Role of the Compensation Committee |
A-5 |
| Role of the Chief Executive Officer |
A-6 |
| Role of Independent Third Party Compensation Advisors |
A-6 |
| Elements of Executive Compensation |
A-7 |
| Peer Comparator Companies - Benchmarking |
A-8 |
| Risk Assessment |
A-8 |
| Vesting Philosophy |
A-9 |
| Incentive Compensation Recovery Policy |
A-10 |
| Anti-Hedging Policy |
A-10 |
| NEO Compensation |
A-10 |
| Base Salary |
A-10 |
| Annual Performance-Based Cash Incentives |
A-11 |
| Medium- and Long-Term Incentives |
A-15 |
| Performance Graphs |
A-22 |
| NEO Profiles |
A-26 |
| Summary Compensation Table |
A-28 |
| Incentive Plan Awards to NEOs |
A-30 |
| Management Contracts / Termination and Change of Control Benefits |
A-31 |
| Director Compensation |
A-33 |
| Deferred Share Unit Plan |
A-33 |
| Retainer Fees |
A-33 |
| Director Compensation Table |
A-34 |
| Option-Based and Share-Based Awards to the Directors |
A-35 |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation |
Introduction
At Fortuna, we believe executive compensation
is key to helping us achieve our strategic goals and retain our success- proven team, and we design and oversee our compensation strategy
with these goals in mind. Our compensation structures are built on the following pillars:
| 1. | Pay for Performance. Our executives’ pay is highly geared to their achievement of pre-defined performance metrics, using individual
short-term performance scorecards and long-term performance share units. In 2023, 79% of our CEO’s (as defined below) compensation
was performance-based or at-risk pay. |
| 2. | Attraction and Retention of Quality People. Our strength is our people. We operate in a highly competitive global environment and
structure our compensation to balance prudent fiscal management and attractive, long-term incentives to bring and retain the best people
to work for you, our shareholders. |
| 3. | Shareholder Alignment. A fundamental tenet of our executive compensation is to establish the right mix of fixed short-term, and at-risk
long-term compensation in order to encourage management to focus on long-term shareholder value. We structure our compensation to promote
and provide the incentive for growth and long-term management of our business through all aspects of the commodity price cycle. |
| 4. | Executive Compensation tied to ESG Metrics. Environment, social and governance (“ESG”) priorities are part of our
strategic plan and we try to capture this in our performance evaluation and executive management compensation structures. In 2023, ESG
metrics accounted for 35% of our short-term incentive plan metrics. |
| 5. | Return of Capital to our Shareholders. In May 2023, we renewed our normal course issuer bid program as a method of returning
capital to our shareholders despite the majority of our free cash flow1 being utilized in the construction of the Séguéla
Mine. We have renewed the program for 2024. |
What We Do
| |
ü |
We pay for performance |
|
ü |
We have an anti-hedging policy |
| |
ü |
We report details of our Pay for Performance metrics (see pages A-11
to A-15) |
|
ü |
We have a trading blackout and insider-trading policy |
| |
ü |
We require minimum share ownership levels for executives and
directors |
|
ü |
We promote retention with equity awards that vest over three
years |
| |
ü |
We have a double trigger for cash severance upon a change of
control |
|
ü |
We engage independent compensation consultants |
| |
ü |
Our compensation plans mitigate undue risk taking |
|
ü |
We promote retention and performance with equity awards that
are based on performance |
| |
ü |
We have an incentive compensation recovery policy |
|
ü |
We work to provide comprehensive compensation
disclosure to strengthen shareholder communication and engagement |
| |
What We Don’t Do |
| |
|
| |
⌧ |
We do not reprice underwater stock options |
|
⌧ |
We do not guarantee incentive compensation |
| |
⌧ |
We do not grant stock options to non-executive directors |
|
⌧ |
We do not provide tax gross-ups for perquisites |
1 Free
cash flow (FCF) is a non-IFRS measure. See “Non-IFRS Financial Measures” on page 14 of this Circular.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-1 |
Overview
Set out below is a brief summary of
our Company’s performance in 2023, our alignment when it comes to pay for performance, and our executive compensation philosophy.
All values in this Statement of Executive Compensation are in US$ unless otherwise noted.
2023 Business Performance
The Company announced record gold and
gold equivalent2 production, and record sales in 2023. These results stem from the transition of the Company in 2021 from a
precious metals producer with three mines focused on mining opportunities in Latin America, to a growth-oriented precious metals producer
in 2023 with five mines operating in Latin America and West Africa.
As part of the Company’s acquisition
(the “Roxgold Acquisition”) of Roxgold Inc. (“Roxgold”) in July 2021, the Company acquired
the Yaramoko gold Mine in Burkina Faso and the advanced development stage Séguéla gold project in Côte d’Ivoire.
On September 29, 2021, the Company announced a decision to start construction on an open pit gold mine at the Séguéla
project. Construction of the Séguéla Mine was completed in mid-2023, on time and on budget, and its first gold pour took
place on May 24, 2023, making it the Company’s fifth operating mine.
Production
For the full year of 2023, the Company
produced 326,638 ounces of gold and 5,883,691 ounces of silver or 452,389 gold equivalent2 ounces. Production highlights for
2023 are:
| ● | Gold production of 326,638 ounces; 13% increase over 2022 |
| ● | Silver production of 5,883,691 ounces; 15% decrease over 2022 |
| ● | Record lead production of 40,851657 pounds; 18% increase over 2022 |
| ● | Record zinc production of 55,060,450 pounds; 19 percent decrease over 2022 |
Contributions to the record gold production
in 2023 included 196,328 ounces of gold from our West African mines: 78,617 ounces of gold from the Séguéla Mine in its
first six months of production (which slightly exceeded its production guidance); 117,711 ounce of gold by the Yaramoko Mine (at the higher
end of its production guidance) and an aggregate of 101,238 ounces of gold from our Lindero Mine in Argentina (at the midpoint of production
guidance).
Sales and Costs
Consolidated sales for fiscal 2023 were
a record $842.4 million, a 24% increase compared to 2022. The increase was mainly due to higher gold sales volume and higher gold prices.
Higher gold sales volume resulted mainly from the contribution of the Séguéla Mine in the second half of the year upon successful
commissioning and ramp-up in the second quarter of 2023, and higher sales volume at the Yaramoko Mine explained by higher processed head
grades in 2023. The realized gold price was $1,948 per ounce in 2023 compared to $1,802 per ounce in 2022.
For the full year of 2023, the Séguéla
and Yaramoko Mines achieved all-in sustaining costs (“AISC”)3 below guidance range supported by their strong
annual gold production. The Lindero and Caylloma Mines performed within their respective AISC3 guidance for the year, while
the San Jose Mine missed its AISC3 guidance as a result of production shortfalls as a result of the 15-day illegal union blockade
in the second quarter of 2023 and the associated disruption to operations thereafter.
| 2 | Gold
equivalent (AuEq) is a non-IFRS measure. See “Non-IFRS Financial Measures” on page 14 of this Circular. AuEq
production for 2023 includes gold, silver, lead and zinc and is calculated using the following metal prices: $1,9482/oz Au, $23.37/oz
Ag, $2,155/t Pb and $2,706/t Zn or Au:Ag = 1:83.38, Au:Pb = 1:0.90, Au:Zn = 1:0.72 |
| 3 | AISC
is a non-IFRS measure. See “Non-IFRS Financial Measures” on page 14 of this Circular. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-2 |
Consolidated AISC4 in 2023 was $1,508 per ounce
on a gold equivalent sold basis compared to $1,431 per ounce for 2022. The increase in AISC4 was primarily due to:
| ● | Cash cost5 per gold equivalent ounce
was $874 compared to the $849 reported in 2022 as the contribution of lower cost production in the second half of the year from the Séguéla
Mine was offset higher costs per ounce at the Lindero Mine mainly due to lower planned head grades in 2023, and higher costs at the San
Jose Mine due to lower processed ore as a result of the 15-day illegal union blockade in the second quarter, lower head grades, higher
mining contractor tariffs and the appreciation of the Mexican Peso; and |
| ● | Higher sustaining capital at the Lindero Mine
as a result of Phase 2 of the leach pad expansion and higher capitalized stripping. |
Health and Safety
The Company is committed to ensuring
the highest possible standards of health and safety management and to provide safe and healthy working conditions in all areas of our
operations. We believe that all work-related accidents, injuries and diseases are preventable. Occupational health and safety is one of
Fortuna’s core values and a pillar of our Sustainability Framework. The Company’s Health and Safety Policy aims to support
the attainment of a safe, healthy working environment, as well as a zero harm workplace for our employees, contractors, and visitors,
at all of our mining operations, exploration sites, and offices.
Highlights of the Company’s health
and safety management performance for 2023 include:
| ● | Zero cases of work-related illnesses. |
| ● | Total recordable frequency incident rate (“TRIFR”) of
1.22 in 2023 which is a 47% reduction of the TRIFR of 2.67 in 2022. In 2023, an aggregate of 17 events
were registered compared to 30 in 2022. |
| ● | The Company incurred five lost time injury incidents
(using the Occupational Safety and Health Administration (“OSHA”) definition) in 2023 which was the same as in 2022.
The lost time incident frequency rate was 0.36 in 2023 compared to 0.39 in 2022. |
| ● | At the end of 2023, the Yaramoko Mine achieved
the status of having completed three years of operations without recording a lost time injury incident. |
| ● | Yaramoko Mine achieved ISO 45001 certification
of its occupational health and safety management system, and the San Jose and Caylloma Mines maintained their certifications. |
| ● | The improvements in workplace safety achieved
in 2023 were overshadowed by a fatality of an employee of a mining contractor that occurred at the Caylloma Mine in June 2023. No
other personnel were injured in the accident. |
Based on past events, the Company’s
safety programs have been optimized, taking into account the lessons learned from incident investigations. In particular, the Company
has advanced the implementation of its Critical Risk Management program and developed a Contractor Management Standard to improve oversight
and risk management of contractors on site. In addition, a risk-based leadership training program is being implemented company-wide to
reinforce the health and safety culture of our organization.
Expansion into Senegal
In September 2023, the Company
expanded its presence in West Africa with the acquisition of Chesser Resources Limited (“Chesser Resources”) and its
preliminary economic assessment stage Diamba Sud Gold Project in Senegal, one of the new and emerging gold discoveries in the region.
| 4 | See
Note 3 on page A-2 above. |
| 5 | Cash
cost is a non-IFRS measure. See “Non-IFRS Financial Measures” on page 14 of this Circular. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-3 |
Pay for Performance Alignment
A significant portion of executive pay
is provided in the form of equity compensation. This pay-for-performance alignment with shareholder interests is strengthened by the Company’s
performance share unit plan (the “Share Unit Plan”). The Company’s Compensation Committee notes that total compensation
for the NEOs (as defined below), as disclosed in the Summary Compensation Table on page A-29, includes the grant date value
of option and share based compensation. As such, the total compensation disclosure does not reflect the fluctuations in value realizable
by executives, which ultimately aligns our executive compensation with shareholder experience. For example, the grant date value of
share units awarded to the CEO, Jorge Ganoza Durant, in 2023 was $1,812,505; however, due to the vesting restrictions imposed, the value
of these awards at December 31, 2023 was $Nil as no portion of the awards had vested by that date. The Compensation Committee
believes that deferment of some components of compensation through the application of time-vesting and performance vesting schedules supports
retention of executives and long-term alignment with shareholder value.
Executive Compensation Philosophy
Fortuna’s success is built on
our people. In addition to investing in high quality tangible assets, Fortuna also invests in market leading human and intellectual capital.
Our compensation philosophy is designed to attract and retain highly qualified and motivated executives who are dedicated to the long-term
success of the Company and to the creation and protection of shareholder value. Our goal is to focus and motivate employees to achieve
higher levels of performance and to appropriately reward those employees for their results. We believe that shareholders should also be
rewarded by the efforts of our team, as evidenced by Fortuna’s strong balance sheet and growth in silver and gold production –
with low costs - over the past five years.
We believe our pay-for-performance compensation
structure aligns our executives with the long-term interests of shareholders. Based on results achieved by both the individual and the
Company, our executive compensation structure is strongly performance-based. Our program with a significant proportion of executive compensation
at risk, in the form of performance-based short-term cash incentives, as well as long-term share price contingent stock options, RSUs
and PSUs, illustrates our strong focus on pay-for-performance.
Fortuna’s executive compensation
program and practices are described in detail below. The Compensation Committee believes that Fortuna’s compensation governance
provides transparent and effective support for the attainment of Fortuna’s key business objectives, alignment with its shareholders’
interests and the creation of long-term value for all stakeholders.
Compensation Governance
Objectives of Compensation
Fortuna operates a complex business
in a highly competitive market for experienced executives. We compete with both public and private, and often larger, mining companies
for experienced management capable of delivering superior value. Fortuna’s people make the difference in distinguishing its performance
relative to its peers. The Company’s compensation program is therefore designed to be competitive with its peers to ensure that
they can attract, motivate and retain the highly-qualified individuals with the skills and experience necessary to execute the Company’s
growth-oriented strategic plan and create sustainable value for Fortuna’s shareholders.
The primary objectives of Fortuna’s
executive compensation program are to attract, motivate and retain top-quality, experienced executives who will deliver long-term superior
value. Noting that ours is a commodity-based business, Fortuna’s share price is heavily influenced by the price of silver and gold.
Fortuna therefore balances its compensation program with rewards for the attainment of operational measures and risk management that are
within executives’ ability to influence. Essential to our core business objectives are the following elements:
| ● | To recruit and retain high calibre, appropriately
qualified executive officers by offering overall base salary compensation competitive with that offered for comparable positions among
a peer group of similarly situated mineral resource companies, while strongly aligning total compensation with performance. For example, |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-4 |
executive compensation is structured so
that the “at risk” component represents a significant portion of each executive’s total compensation. Our goal is to
offer superior opportunities to achieve personal and career goals in a growth-focused team with corresponding pay for performance.
| ● | To motivate executives to achieve important corporate
and individual performance objectives that may be influenced by the executive and reward them when such objectives are met or exceeded. |
| ● | To align the interests of executive officers
with shareholders’ interests by providing incentives that balance short- and long-term business goals, reflect value created for
shareholders, and support the retention of key executives. This element is delivered primarily through a cash-based short-term incentive
plan and a long-term incentive plan consisting of share units granted to vest with performance and over time. While the bonus plan rewards
executives on attainment of annual objectives/milestones, typically, our executives see the majority of their compensation in the form
of long-term equity tied to long-term value creation. Previous equity grants are taken into account when the granting of new share units
or other equity awards is contemplated. |
| ● | To ensure that total compensation paid takes into account the Company’s
overall financial position. |
Share Ownership Policy
The Company’s Chief Executive
Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Operating Officers, Senior Vice- Presidents
and directors are required to achieve and maintain minimum shareholding thresholds. The CEO is required to have acquired Common Shares
and/or share-settled share units of the Company having a value equal to three times the gross amount of his annual base salary; the CFO
is required to have acquired Common Shares and/or share-settled share units having a value equal to two times the gross amount of his
annual base salary, and each of the Chief Operating Officers and Senior Vice-Presidents must have acquired Common Shares and/or share-settled
share units having a value equal to one times the gross amount of his annual base salary. Non-executive directors are required to hold
Common Shares and/or DSUs of the Company having a value equal to three times the gross amount of their annual director retainer. As at
December 31, 2023, all NEOs have met their minimum shareholding targets.
Role of the Compensation Committee
The Compensation Committee is responsible
for reviewing matters pertaining to the Company’s compensation philosophy, programs and policies, including director and executive
compensation and grants, and making recommendations to the Company’s Board of Directors (“Board”) for approval.
In particular, the Compensation Committee’s duties include making recommendations to the Board regarding: the goals and objectives
of the CEO and CFO, and evaluating the CEO’s and CFO’s performance in light thereof; CEO, CFO and director compensation; bonus
plans for executives; equity-based plans; and approving the Company’s annual Statement of Executive Compensation.
The Compensation Committee meets at
least twice annually and is comprised of three directors, all of whom (including the chair) are independent within the meaning of section
1.4 of National Instrument 52-110 – Audit Committees. David Farrell is independent, was appointed chair on March 12,
2015 and has served on the Compensation Committee since May 9, 2014. David Laing is independent and has served on the Compensation
Committee since December 21, 2016, and Alfredo Sillau is also independent and has served on the Compensation Committee since May 1,
2018. The provisions of the Charter of the Compensation Committee relating to composition include a provision that no member of the Compensation
Committee shall have served as the CEO of the Company or of an affiliate, within the past five years, or as the CFO of the Company or
of an affiliate, within the past three years.
The complete terms of the Compensation
Committee Charter are available on Fortuna’s website on the “Corporate Governance” page.
The Compensation Committee members have
the necessary experience to enable them to make decisions on the suitability of the Company’s compensation policies or practices.
Messrs. Farrell and Laing have in the past served, or currently serve, on compensation committees of other public resource or mining
companies. The Board is satisfied that the composition of the Compensation Committee ensures an objective process for determining compensation.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-5 |
In support of the fulfilment of their
role, the Compensation Committee may, from time to time, engage and receive input from external independent advisors skilled in executive
compensation matters, with knowledge of the mining industry. In 2021 and 2022, the Compensation Committee engaged Global Governance Advisors
(“GGA”), an independent executive compensation and governance advisory firm with significant experience advising mining
company boards. For certain compensation matters pertaining to executive officers other than the CEO and CFO, the Compensation Committee
fulfils its responsibility in consultation with the CEO. The Compensation Committee reviews recommendations made by the CEO and has discretion
to modify any of the recommendations before making its independent recommendations to the Board.
When considering the appropriate compensation
to be paid to executive officers, the Compensation Committee considers a number of factors including:
| ● | Recruiting and retaining executives critical to the success of Fortuna and
the enhancement of shareholder value; |
| ● | Providing fair and competitive compensation that provides pay for performance; |
| ● | Aligning the interests of management and shareholders
by including measures of shareholder value among key performance metrics for executive compensation awards and compensation elements that
emphasize contingent at-risk and equity-linked compensation; |
| ● | Rewarding performance that supports long-term
sustainable value, both on an individual basis and at an overall company level; and |
| ● | Available financial resources and the economic outlook affecting Fortuna’s
business. |
In early 2023, management of Fortuna
recommended that only cost-of-living increases be reflected in the 2023 base salaries of the senior executives. The Compensation Committee
conducted a review of the competitiveness of the compensation levels for the senior executives and non-employee directors and considered
the findings in a 2022 Global Mining Compensation Survey published by GGA. Based on the recommendation of management and the review completed
by the Compensation Committee, the Compensation Committee did not deem it necessary to engage GGA to provide advice related to the proposed
cost-of-living increases to base salaries. On the recommendation of the Compensation Committee, as applicable, the base salaries of NEOs
increased 4% over 2022 and their short-term incentive target percentages remained unchanged over 2022.
Role of the Chief Executive Officer
The CEO plays a role in executive compensation
decisions by making recommendations to:
| ● | the Board regarding the Company’s annual
objectives that provide the structure for the assessment of compensable corporate performance and alignment of individual annual objectives
of other executive officers and employees; and |
| ● | the Compensation Committee regarding CEO and
CFO base salary adjustments, target annual performance-based cash incentives awards and actual pay-outs, and long-term incentive awards
in the form of stock options and grants under the Share Unit Plan. |
Role of Independent Third Party
Compensation Advisors
In early 2021 and 2022, the Compensation
Committee engaged GGA to prepare reports of the competitiveness of the compensation levels for the senior executives and non-executive
directors’ compensation against the primary peer group and supplemental benchmarks from GGA’s database. The GGA report for
2022 took into account Fortuna’s structure resulting from expansion of operations in West Africa. The Compensation Committee and
the Board considered the advice contained in these GGA reports when determining the Company’s executive compensation program for
2021 and 2022.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-6 |
In late 2022, the Company engaged GGA
to review the Company’s compensation disclosure in its 2023 management proxy circular. For the financial years ended December 31,
2022 and 2023, the Company paid independent compensation advisors the following amounts:
| | |
2022 | | |
| 2023 | |
| Executive and Director Compensation-Related Fees - GGA | |
CAD $ |
62,726 | | |
| CAD$ |
12,372 | |
| All Other Fees | |
Nil | | |
| Nil | |
| Total | |
CAD $ |
62,726 | | |
| CAD $ |
12,372 | |
Elements of Executive Compensation
As discussed above, Fortuna’s
compensation program has been comprised of three main elements: base salary, annual performance-based cash incentive award, and grant
of equity-based long-term incentive compensation in the form of performance share units (“PSUs”), restricted share
units (“RSUs”) and/or stock options.
In 2021 and 2022, the Company granted
cash-settled RSUs and share-settled PSUs to its senior executives in order to align executive compensation with shareholder interests.
This practice was continued in 2023. The PSUs granted in March 2023 make up 50% (based on the grant date fair value) of long-term
incentive compensation for the executives, the vesting of which is subject to the satisfaction of corporate performance objectives. The
specific design, rationale, determination of amounts, and related information regarding each of these components are outlined below.
| Element of Compensation |
|
Description |
|
Relationship to Corporate Objectives |
|
Element “At-
Risk” or “Fixed” |
| Base Salary |
|
Base salaries are the only fixed pay element and are set based on the position and the individual executive’s growth-to-competence in the role. They are also used as the base to determine the value of other elements of compensation (i.e. multiple of base salary). |
|
Competitive base salaries enable the Company to attract and retain highly qualified executives and provide essential stability in times of market volatility. |
|
Fixed |
| |
|
|
|
|
|
|
| Annual Performance- Based Cash Incentives |
|
Annual performance-based cash incentives are a variable element of compensation designed to reward executive officers for achievement of annual milestones consistent with the long-term strategic plan and split between corporate and individual performance metrics. Target percentages are fixed each year by the Board. |
|
Short-term milestone goals typically represent a balanced portfolio of metrics with a one-year horizon. They are structured to balance elements that are within the control of management (for example: production, safety and development milestones) with external factors (financial metrics which fluctuate with metal prices, and total shareholder return (“TSR”) which is influenced by short-term market sentiment). |
|
At-Risk |
| |
|
|
|
|
|
|
| Long-Term Equity Incentives |
|
RSUs, PSUs and stock options are a variable element of compensation intended to reward executives for success in achieving sustained shareholder value reflected in stock price. As these grants vest over time, they are also important for executive retention. |
|
Long-term incentives encourage executives to focus on consistent value creation over the longer term (3 years in the case of RSUs and PSUs and up to 5 years for stock options). Equity grants strongly align the interests of executives with long-term interests of shareholders since the received value is dependent on absolute future share performance. |
|
At-Risk |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-7 |
Peer Comparator Companies - Benchmarking
Fundamental to Fortuna’s compensation
philosophy is to provide competitive compensation in support of the attraction and retention of high calibre executives. Accordingly,
the Compensation Committee relies on input from independent compensation advisors from time to time and other outside information, including
the insight of Board members.
Our goal is to design and implement
compensation packages that are fair and reasonable, based in large part on benchmarking against similar companies, but offering incentive
for above-average performance. The ultimate test of this process is our ability to attract and retain high-performance executives over
the long term.
In determining an appropriate group
of comparator mining companies for consideration in determining the Company’s compensation levels in 2023, the Compensation Committee
reviewed its comparator mining companies in light of the growth of the Company, principally through the construction and commissioning
of the Séguéla Mine. The Compensation Committee considered the following criteria in creating our peer group:
| ● | companies of similar scope to Fortuna’s metrics, primarily from a market
capitalization perspective, but also considering other factors such as production levels, and geographical
location; |
| ● | companies with a similar gold and silver production profile; |
| ● | companies who are operational and produce revenue; |
| ● | companies with a similar business strategy and scope of operations to Fortuna;
and |
| ● | publicly traded companies on major Canadian and American exchanges. |
Based on these factors, it was determined
that the following companies were suitable peer comparators for consideration in determining senior executive compensation for 2023:
| Alamos Gold Inc. |
Equinox Gold Corp. |
OceanaGold Corp. |
| Aris Mining Corporation |
First Majestic Silver Corp. |
Perseus Mining Limited |
| Centerra Gold Inc. |
Hecla Mining Company |
SSR Mining Inc. |
| Coeur Mining Inc. |
IAMGOLD Inc. |
Wesdome Gold Mines Ltd. |
| Dundee Precious Metals Inc. |
Lundin Gold Inc. |
|
| Eldorado Gold Corporation |
New Gold Inc. |
|
For 2024, our peer group has been updated
with the addition of B2 Gold Corp., Hudbay Minerals Inc. and Pan American Silver Corp.
Our compensation decisions are guided
by experience and professional judgment, with due consideration of our benchmark data, but including assessment of a complex range of
factors including the experience, tenure, and unique leadership characteristics of our executives. Our benchmarking process is a guideline
to making the right decision in specific cases, not a pre-determination of compensation decisions.
Risk Assessment
The Compensation Committee considers
the risk implications associated with Fortuna’s compensation policies and practices on an on-going basis and as part of its annual
compensation review. There are no identified risks arising from the Company’s compensation policies and practices that are reasonably
likely to have a material adverse effect on the Company. The executive compensation program seeks to encourage actions and behaviours
directed towards increasing long-term value while modifying and limiting incentives that promote inappropriate risk-taking.
The
Compensation Committee’s risk assessment and management is based on the underlying philosophy that guides the Compensation
Committee in the design of the key elements of compensation as follows:
| ● | provide total compensation that is competitive to attract, retain and motivate
high calibre executives in a mining employment marketplace with a shortage of world-class executive talent; |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-8 |
| ● | balance the mix or relative value of the key
elements of compensation (salary, annual performance-based cash incentives, long-term incentives), providing sufficient stable income
at a competitive level so as to discourage inappropriate risk taking while also providing an important portion of total compensation that
is variable and “at- risk” for executives; |
| ● | strengthen and maintain the link between pay
and performance, both Company and individual performance, and ensure the objectives against which performance is measured can be fairly
assessed and do not encourage inappropriate risk taking; and |
| ● | defer a significant portion of “at-risk”
compensation to keep executives focused on continuous long-term, sustainable performance. |
Some specific controls that are in place to mitigate certain
risks are as follows:
| ● | Business Continuity and Executive Retention Risk.
Total compensation is reviewed annually to ensure it remains competitive year over year, and that we have sufficient ‘holds’
on our key talent through potential forfeiture of unvested incentives, for example. |
| ● | Environmental and Safety Risk. Environmental
and safety are important factors used to assess the on-going performance of the Company and have an important (and direct) impact on executive
pay, in that improvements in safety and environmental metrics are rewarded and negative environmental and safety events will negatively
affect contingent compensation. |
| ● | Cash Flow Risk. Salary levels are fixed in advance,
while annual performance-based cash incentive awards are limited, in that they are linked to performance and are a percentage of salary. |
| ● | Stock Dilution Risk (from issuances of long-term
incentives in the form of stock options and certain RSUs and PSUs which will be share-settled). Fortuna’s stock option plan (“Stock
Option Plan”) has been limited to 12,200,000 Common Shares under option for many years, and no stock options have been granted
since 2018. In addition, deferred share units (“DSUs”) are paid in cash based on the Common Share price at the time
of payout, rather than by issuing stock. Further, certain RSUs have been paid in cash based on the Common Share price at the time of payout,
rather than by issuing stock, noting that all RSUs granted in 2021, 2022 and 2023 are to be paid out in cash. In 2020, we also reduced
the maximum share reservation limit from 5% to 2.25% under our Share Unit Plan. See “Share Unit Plan” on page A-17. |
| ● | Inappropriate Risk Taking. Align executive interests
with interests of shareholders by encouraging equity exposure through long-term incentives such as RSUs and PSUs, and mitigating incentives
to undermine value through an anti-hedging policy. |
Vesting Philosophy
The Compensation Committee believes
that deferment of some components of compensation through the application of vesting schedules and performance goals supports retention
of executives and long-term alignment with shareholder value. Accordingly, equity awards have the following vesting schedules:
| Stock Options: | 50% vest after one year; 50% vest after two years. |
| RSUs: | 20% vest after one year; 30% vest after two years; 50% vest
after three years. |
| PSUs: | 20% vest after one year; 30% vest after two years; 50% vest after three years – each vesting subject to fulfillment of performance
goals by each vesting date. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-9 |
Incentive Compensation Recovery
Policy
On the recommendation of the Compensation
Committee, in 2016 the Board adopted an Incentive Compensation Clawback Policy in order to provide a measure of accountability and to
ensure that incentive compensation paid by the Company to its officers, directors and employees is based on accurate financial and operational
data. Up to the entire amount of annual incentives, performance based compensation and short- and long-term incentives awarded, paid or
payable to officers, directors and employees of the Company could be forfeited or subject to repayment in the event of a restatement of
the Company’s financial statements due to inaccurate data.
In November 2023, on the recommendation
of the Compensation Committee and approval by the Board, this policy was retitled “Incentive Compensation Recovery Policy”
and updated to include new requirements of the NYSE, as well as the compensation recovery provisions of the Sarbanes-Oxley Act (which
differ from the NYSE requirements). Retained from our previous policy is the requirement that the policy applies not only to executive
officers (the minimum required by the NYSE), but also to any employee whose fraud, theft, embezzlement, serious misconduct or negligence
caused or contributed to the restatement of the Company’s financial statements.
Anti-Hedging Policy
Pursuant to the Company’s Anti-Hedging
Policy adopted in early 2015, no director or officer of Fortuna is permitted to purchase financial instruments, including, for greater
certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset
a decrease in market value of any Company securities granted as compensation or held, directly or indirectly, by such director or officer.
NEO Compensation
During the fiscal year ended December 31,
2023, the Company’s most recent fiscal year end, five individuals were “named executive officers” of the Company within
the meaning of the definition set out in National Instrument Form 51-102F6 - “Statement of Executive Compensation”. The
following information provides disclosure of the compensation paid or payable by the Company to its CEO, CFO and its three most highly
compensated executive officers (other than the CEO and CFO):
| ● | Jorge Ganoza Durant, President (since January 23, 2006) and CEO (since
August 13, 2008), |
| ● | Luis Ganoza Durant, CFO (since June 5, 2006), |
| ● | David Whittle, Chief Operating Officer, West Africa (since October 1,
2022; formerly Vice-President, Operations – West Africa from October 1, 2021 to September 30,
2022), |
| ● | Cesar Velasco, Chief Operating Officer, Latin America (since September 1,
2021) |
| ● | Eric Chapman, Senior Vice-President, Technical Services (since October 1,
2021; formerly Vice-President, Technical Services from January 1, 2017 to September 30, 2021), |
(herein together referred to as “NEOs”).
Base Salary
In establishing levels of cash and equity-based
compensation, the Company considers the executive’s performance, level of expertise, responsibilities, and comparable levels of
remuneration paid to executives of other companies of similar size, development and complexity within the mining industry. Fortuna believes
that it is not always appropriate, however, to place full reliance on external salary surveys because of the years of service and experience
of the Company’s executive team and the specific circumstances of the Company. The base salaries for the CEO and the CFO are reviewed
by the Compensation Committee and any increase is recommended to the Board at the beginning of a fiscal year. Base salaries for the other
NEOs are assessed and set by the CEO.
The Compensation Committee continues
to monitor competitive conditions including executive retention risks, and reviewed information provided by GGA. For 2023, the base salaries
of the NEOs increased by 4% to keep pace with cost-of-
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-10 |
living increases and their short-term
incentive target percentages remained unchanged over 2022. In 2022, as a result of Fortuna’s transformational acquisition of Roxgold,
which significantly changed the Company’s structure, and expanded its scope of business and operations, geographic diversity and
geopolitical complexity, the base salaries and short-term incentive program targets were increased. Prior to 2022, the base salaries of
the prior years’ NEOs had not been increased since 2019, and in 2021 were increased by 3% (except that the base salary of the Senior
Vice-President, Technical Services was increased by 23% in line with benchmark sources).
Annual Performance-Based Cash
Incentives
Based on the recommendations of the
Compensation Committee, the Board will approve the bonus target and form of scorecard for each of the CEO and CFO. The CEO will approve
the bonus target and form of scorecard for each Chief Operating Officer and Senior Vice-President and will evaluate the performance of
those individuals. Notwithstanding the foregoing, the Board has the discretion to adjust the amounts of annual performance-based cash
incentives based on a recommendation by the Compensation Committee.
In early 2023, the Board, on the recommendation
of the Compensation Committee, approved an annual cash bonus plan for the executive officers as was similarly approved in 2022 and 2021.
These annual performance-based cash incentives include the following variables:
| ● | Target Levels: A percentage of base salary which takes into account the executive’s
level of expertise and responsibilities, as well as comparable levels of remuneration
of peer comparator companies. |
| ● | Scorecard Result. A measure of performance based on the achievement of personal
and corporate objectives during the fiscal year. Both personal and corporate objectives are defined for each executive of the Company. |
Target Levels
Taking into consideration information
provided by GGA, the Compensation Committee did not recommend any changes in the bonus target levels for the Company’s 2023 NEOs
annual performance-based cash incentive. Accordingly, the bonus target details for 2023 remain as they were in 2022, as follows:
| |
|
Target Annual Performance-
Based Cash Incentive |
|
|
Percentage of NEO’s
Total Objectives
for 2023 |
|
| NEO |
|
(% of Base
Salary) |
|
|
Corporate Objectives |
|
|
Personal Objectives |
|
| CEO |
|
|
100 |
% |
|
|
100 |
% |
|
|
0 |
% |
| CFO |
|
|
80 |
% |
|
|
75 |
% |
|
|
25 |
% |
| COO, West Africa |
|
|
80 |
% |
|
|
20 |
% |
|
|
80 |
% |
| COO, Latin America |
|
|
80 |
% |
|
|
20 |
% |
|
|
80 |
% |
| Senior VP, Technical Services |
|
|
70 |
% |
|
|
20 |
% |
|
|
80 |
% |
2023 Scorecards – Achievement Factors and Results
Each NEO’s annual performance-based
cash incentive includes corporate and personal objectives. The corporate objectives that were set for 2023 include environmental, social
and governance targets which had a weighting of 35% of total objectives. The corporate objectives and results of 2023 for the NEOs are
set out in the table below.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-11 |
2023 Corporate Objectives and Results
Category and Weight |
Sub Category |
Sub Weight |
KPI |
Minimum
(Incentive at 50%) |
Target
(Incentive at 100%) |
Maximum
(Incentive at 150%) |
Note |
2023 Results |
Incentive Score |
|
Financial 10% |
Financial |
10.0% |
Free Cash Flow (FCF) 1 |
FCF =
$ 10M |
FCF =
$ 30M -
$ 52M |
FCF≥
$ 66M |
Target range based on combined AISC and production guidance
ranges, adjusted for portfolio effect.
Minimum and Maximum calculated incremental production and
AISC
effects. |
FCF:
$ 140.5M |
200% |
|
Operational 30% |
Production |
4.0% |
Ag production |
Ag production =
5.9M oz |
Ag production =
6.3M - 6.9M
oz |
Ag
production ≥
7.2M oz |
Target range based on guidance range. Minimum and Maximum
calculated
+-10% deviation from guidance midpoint |
Production (Ag): 5.9M
oz |
50% |
|
11.0% |
Au production |
Au production = 279k oz |
Au production = 282k - 320k
oz |
Au
production ≥
327k oz |
Target range based on guidance range. Minimum and Maximum
calculated using -5% deviation from Seguela target floor and +10% deviation from Seguela target
ceiling. |
Production (Au): 326.6k
oz |
195% |
|
Costs |
15.0% |
Global total AISC2 |
AISC =
$1,540 /oz Au Eq. |
AISC =
$1,480 -
$1,320 /oz Au Eq. |
AISC ≤
$1,270 /oz Au Eq. |
Target range based on guidance range. Minimum and Maximum
calculated double deviation from guidance midpoint. Excludes corporate G&A |
Global AISC:
$ 1,520 /oz Au Eq. |
67% |
|
Growth 25% |
Séguéla Construction Completion |
12.5% |
First gold pour |
July 2023 |
May 2023 -
June 2023 |
April 2023 |
|
First gold pour: May 2023 |
150% |
|
12.5% |
CAPEX |
CAPEX ≥
182M |
CAPEX =
$168M –
$ 179M |
CAPEX ≤
165M |
Minimum target - Original Capex
$173.5 + 5%
Target - Original Capex $173.5 +- 3% Maximum target - Original
Capex
$173.5 - 5% |
CAPEX:
$173.4M |
150% |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-12 |
| ESG 35% |
Safety3 |
5.0% |
Safety Leading Performance Index |
Safety Performance Index = 70% |
80% ≤ Safety Performance Index ≤ 100% |
Safety Performance Index ≥ 125% |
The Safety Leading Performance Index includes:
● % of corrective actions implemented on time
● % of Fatal Risk Control Protocols (FRCP) audits and Critical Control Check List
(CCCL) inspections executed on time
● % of inspections (other than CCCL) executed on time
● % of employees
training plan for Critical Risk Management completed on time |
Safety Leading Performance Index: 112% |
100% |
| 5.0% |
TRIFR |
TRIFR = 4.00 |
3.4 ≤ TRIFR ≤ 3.8 |
TRIFR ≤ 2.14 |
TRIFR target for 2023 is at 3.6 (46 TRIs +-2 TRI).
Maximum is 2.14 (Top tier (#9) of ICMM members performance in 2021). Minimum is at 4.0 (50 TRIs). |
TRIFR: 1.22 |
0% |
| Environment4 |
5.0% |
Environment Leading Performance Index |
Environment Performance Index = 70% |
80% ≤ Environment Performance Index ≤ 100% |
Environment Performance Index ≥ 125% |
The Environment Leading Performance Index includes:
● % of corrective actions
implemented on time
● % of inspections executed on time |
Environment Leading Performance Index: 120% |
180% |
| Social5 |
5.0% |
Communities Relations Leading Performance Index |
Community Relations Performance Index = 70% |
80% ≤ Community Relations Performance Index ≤ 100% |
Community Relations Performance Index ≥ 125% |
The Community relations Leading Performance Index includes:
● % of actions implemented on time
● % of stakeholders engagement activities executed on time |
Communities Relations Leading Performance Index: 105% |
120% |
| |
Climate Change |
7.5% |
Implementation of Climate Change action plan |
Below expectations |
Meets expectations |
Exceeds expectations |
Board of Directors discretion based on 2023 work plan implementation |
Exceeds expectations |
125% |
| GISTM |
7.5% |
Implementation of action plan to comply with the Global Industry Standard on Tailings Management (“GISTM") |
Below expectations |
Meets expectations |
Exceeds expectations |
Board of Directors discretion based on 2023 work plan implementation |
Exceeds expectations |
125% |
| 100% |
|
100.0% |
|
|
|
|
CPI Result 2023 |
130% |
|
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-13 |
Notes:
Free cash flow (FCF) and AISC are non-IFRS measures. See
“Non-IFRS Financial Measures” on page 14 of this Circular.
| 1. | FCF: Metal prices on actual results will be normalized if lower than budget and left unadjusted if higher, as long as both production
and opex targets are met. |
| 2. | Cost: Ag Eq ratios fixed as follows: Au:Ag = 81.00, Au:Pb = 0.85, Au:Zn = 0.53. |
| 3. | If fatality occurs at any company location, entire Safety metric default to 0. |
| 4. | If a significant spill occurs at any company location, Environment metric default to 0. |
| | Significant spills: Any type of spill that has a level of
consequence equal or above Moderate according to the Corporate Risk Matrix concerning the Environmental and/or Reputational aspects. |
| 5. | If a significant dispute occurs at any company location, Social metric default to 0. |
| | Significant disputes: Any type of dispute that has a level
of consequence equal or above Important (Major) according to the Corporate Risk Matrix concerning the Community and/or Reputational aspects. |
The personal objectives and performance results for each
of the NEOs for 2023 are as follows:
|
NEO |
Objectives |
Weighting |
2023 Achievement |
2023
Rating |
| CEO |
Corporate Performance |
100% |
130% |
130% |
| CFO |
Corporate
Performance
Personal
Performance |
75%
25%
100% |
130%
109%
OVERALL ACHIEVEMENT RATING: |
98%
27% 125% |
| COO West Africa |
Corporate
Performance
Personal Performance |
20%
80%
100% |
130%
150%
OVERALL ACHIEVEMENT RATING: |
26%
87% 113% |
| COO Latin America |
Corporate
Performance
Personal Performance |
20%
80%
100% |
130%
100%
OVERALL ACHIEVEMENT RATING: |
26%
80% 106% |
|
SVP
Technical Services |
Corporate
Performance
Personal Performance |
20%
80%
100% |
130%
102.5%
OVERALL ACHIEVEMENT RATING: |
26%
82% 108% |
Annual Performance-Based Cash Incentives Awarded for Fiscal
2023 Performance
The 2023 Corporate Objectives and Results on which the annual
performance-based cash incentives were awarded for fiscal 2023 performance are set out on pages A-12 and A-13.
In 2023, the Company’s Financial
and Growth results exceeded the target range maximum in those respective categories, primarily based upon the completion of the construction
of the Séguéla Mine on time and on budget, and its first gold pour taking place in May 2023.
In the Operations
category, gold production for the year was just under the target range maximum and included six months’ of gold
production from the Séguéla Mine.
In the ESG category, five of the six
subcategories met or exceeded the mid-range target percentages.
One of the Company’s ESG objectives
related to health and safety was not met due to the fatality at the Caylloma Mine in June 2023 (see “Overview - 2023 Business
Performance – Health and Safety”). As a result, the safety metric was recorded as zero. Based on past events, the Company’s
safety programs have been optimized, taking into account the lessons learned from incident investigations. In particular, the Company
advanced the implementation of its Critical Risk Management program and developed a Contractor Management Standard to improve oversight
and risk management of contractors on site. In addition, a risk-based leadership training program was implemented company-wide to reinforce
the health and
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-14 |
safety culture of our organization.
By the end of 2023, the TRIFR was 1.22 for the year which was a 47% reduction of the TRIFR of 2.67 in 2022.
In respect of the other ESG objectives:
| ● | There were zero significant spills and zero significant
disputes with local communities at its operations. |
| ● | Fortuna conducted the required analysis on energy
consumption and greenhouse (“GHG”) emissions to enable it to set its GHG emissions reduction target which were disclosed
in February 2024 (see ”Climate Change Initiatives Undertaken in 2023” in Schedule “B”, Corporate Governance). |
| ● | Completion of an initial climate-related scenario
analysis to enhance the Company’s understanding of its exposure to climate-related risks and opportunities
and the resilience of our business strategy. |
| ● | Significant progress on its 2023 workplan toward
its commitment to achieve GISTM compliance by the end of 2027, including completion of a governance system and making progress on technical
studies on our tailings storage facilities. |
Based on the foregoing factors, and
on the personal performance of our NEOs for 2023, annual performance-based cash incentives for the financial year ended December 31,
2023 were determined in March 2024 and paid to NEOs as follows:
| NEO | |
Annual Performance-Based Cash
Incentive Amount | | |
Achievement Level Percentage | |
| Jorge Ganoza Durant, President & CEO | |
$ | 926,120 | | |
| 130 | % |
| Luis Ganoza Durant, CFO | |
$ | 508,581 | | |
| 125 | % |
| David Whittle, COO, West Africa | |
$ | 571,684 | | |
| 113 | % |
| Cesar Velasco, COO, Latin America | |
$ | 334,687 | | |
| 106 | % |
| Eric Chapman, Senior VP, Technical Services | |
$ | 300,769 | | |
| 108 | % |
Forward-Looking 2024 Performance Targets
The Company has maintained the categories
of the short-term incentive Corporate Performance Indicators for NEOs for 2024 as they were in 2023 (see pages A-12 and A-13). The
2024 target weightings are 40% to operations, 30% to environmental, social and governance, 20% to growth, and 10% to financial. The ESG
target sub-categories for 2024 are safety, environment, social, GISTM, and ESG strategy and ratings.
2024 NEO Performance Objectives
The following table sets out the weighting
of each NEO’s short-term incentive of the 2024 Corporate Performance Objectives set out above:
| NEO | |
Weighting of 2024 Corporate Performance
Objectives | |
| Jorge Ganoza Durant, President & CEO | |
| 100 | % |
| Luis Ganoza Durant, CFO | |
| 80 | % |
| David Whittle, COO, West Africa | |
| 80 | % |
| Cesar Velasco, COO, Latin America | |
| 80 | % |
| Eric Chapman, Senior VP, Technical Services | |
| 70 | % |
Medium- and Long-Term Incentives
Stock Option Plan
The Stock Option Plan is designed to
be competitive within the natural resource industry, and its objective is to align the interests of the Company’s personnel with
shareholders by linking compensation to the longer-term performance of Common Shares, and to provide our personnel with a significant
incentive to continue and increase their efforts in
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-15 |
advancing the Company’s operations.
Incentive stock options have been a significant component of executive compensation as it allows the Company to reward each individual’s
efforts to increase shareholder value without requiring the use of the Company’s cash reserves.
Incentive options were granted annually
from the establishment of the Stock Option Plan in 2011 through 2015, and in 2017 and 2018. However, during the years 2019 to 2023, no
stock options were granted. Since 2013, non-executive directors are no longer granted incentive stock options, rather they receive equity-based
compensation through DSUs. No stock options were exercised by NEOs in 2023.
When stock options are granted, they
generally have a term of five years and have a vesting restriction of 50% exercisable after one year and 100% exercisable after two years
from the date of grant. Upon vesting, the holder of an option is free to exercise and sell the underlying Common Shares subject to applicable
securities laws. It is the Company’s policy to not re-price outstanding stock options.
The Company does not have a policy in
respect of holding or retention periods for exercised stock options.
The Stock Option Plan was approved by
the shareholders on May 26, 2011, as subsequently amended and restated effective March 1, 2015. The material terms of the Stock
Option Plan are summarized as follows:
| 1. | options may be granted under the Stock Option Plan to such directors, officers, employees and service providers of Fortuna or its
subsidiaries as the Board may from time to time designate; |
| 2. | the Stock Option Plan reserves a maximum of 12,200,000 Common Shares for issuance on exercise of options (representing 3.979% of the
issued and outstanding Common Shares as at December 31, 2023); |
| 3. | Fortuna currently has no options outstanding, and as a result of option exercises and cancellations since the Stock Option Plan was
established, the total number of Common Shares underlying options that are currently available for future grants is 2,950,529 (0.964%
of Fortuna’s current issued share capital). |
| 4. | the number of options granted to independent directors in any 12 month period cannot exceed 1% of Fortuna’s total issued and
outstanding securities (the Company has not issued stock options to independent directors since 2013); |
| 5. | the number of Common Shares reserved for issuance to any one individual in any 12 month period may not exceed 5% of the issued capital,
unless Fortuna has obtained disinterested shareholder approval; |
| 6. | the number of Common Shares underlying options: (i) issued to insiders of the Company, within any one year period, and (ii) issuable
to insiders of Fortuna, at any time, under the Stock Option Plan, or when combined with all of Fortuna’s other security-based compensation
arrangements, cannot exceed 10% of Fortuna’s total issued and outstanding securities, respectively; |
| 7. | the minimum exercise price of an option shall not be less than the closing price of the Common Shares as traded on the Toronto Stock
Exchange (the “TSX”) on the last trading day immediately preceding the date of the grant of the option, provided that
in the event that the Common Shares are not listed on the TSX at the time of the grant, the option exercise price shall not be less than:
(i) the price allowed by any other stock exchange or regulatory authority having jurisdiction, or (ii) if the Common Shares
are not listed for trading on any other stock exchange, the fair market value of the Common Shares as determined by the Board; |
| 8. | the exercise price of an option may not subsequently be reduced; |
| 9. | options will be granted for a period of up to 10 years, subject to extension in the event of a self-imposed “black out”
or similar period imposed under any insider trading policy or similar policy of the Company (in such case the end of the term of the options
will be the tenth business day after the end of such black out period), and may have vesting restrictions if and as determined by the
Board at the time of grant; |
| 10. | options are non-assignable and non-transferable; |
| 11. | unless otherwise determined by the Board, a vested option is exercisable for up to 90 days from the date the optionee ceases to be
a director, officer, employee or service provider of Fortuna or of its subsidiaries, unless: (i) such optionee was terminated for
cause, in which case the option shall be cancelled, or (ii) if an optionee dies, the legal representative of the optionee may exercise
the option for up to one year from the date of death; |
| 12. | unless otherwise determined by the Board, if an optionee’s employment or service with Fortuna is terminated by Fortuna without
cause, by the optionee for “Good Reason” (as defined in the Stock Option Plan) or due to disability |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-16 |
or death, a portion
of the unvested options held by such optionee shall immediately vest according to a set formula;
| 13. | unless otherwise determined by the Board, where an optionee’s employment is terminated by Fortuna within 12 months after a change
of control of Fortuna, the optionee resigns for Good Reason within 12 months after a change of control, or if the optionee dies while
performing his or her regular duties as a director, officer and/or employee of Fortuna of its subsidiaries, then all of his or her outstanding
options shall immediately vest; |
| 14. | the Stock Option Plan contains a provision that allows the Board to amend the Stock Option Plan, without shareholder approval, in
such manner as the Board, in its sole discretion, determine appropriate. The Board may make amendments: for the purposes of making formal
minor or technical modifications to any of the provisions of the Stock Option Plan; to correct any ambiguity, defective provisions, error
or omission in the provisions of the Stock Option Plan; to change any vesting provisions of options; to change the termination provisions
of the options or the Stock Option Plan; to change the persons who qualify as eligible directors, officers, employees and service providers
under the Stock Option Plan; to add a cashless exercise feature to the Stock Option Plan; and to extend the term of any option previously
granted under the Stock Option Plan. However, shareholder approval shall be obtained to any amendment to the Stock Option Plan that results
in an increase in the number of Common Shares issuable pursuant to the Stock Option Plan, an extension of the term of an option, any amendment
to remove or exceed the insider participation limit discussed in paragraph 6 above, or amendments to the amending provision in the Stock
Option Plan; |
| 15. | there are provisions for adjustment in the number of Common Shares issuable on exercise of options in the event of a share consolidation,
split, reclassification or other relevant change in Fortuna’s corporate structure or capitalization; and |
| 16. | Fortuna may withhold from any amount payable to an optionee such amount as may be necessary so as to ensure that Fortuna will be able
to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required
deductions. |
Share Unit Plan
Overview
In November 2010, the Board, on
the recommendation of the Compensation Committee, established the Share Unit Plan which initially provided for the granting of RSUs only,
but was amended in March 2015 to include PSUs. The purposes of the Share Unit Plan are to promote a greater alignment of interests
between officers and employees of the Company and the shareholders of the Company, to associate a portion of officer and employee compensation
with the returns achieved by shareholders of the Company over the medium term, and to attract and retain officers and employees with the
knowledge, experience and expertise required by the Company. The Board may award such number of RSUs or PSUs (“Share Units”)
to an eligible officer or employee (a “Grantee”) to provide appropriate equity-based compensation for the services
that he or she renders to the Company.
In 2017, the Board approved, on the
recommendation of the Compensation Committee, and the shareholders subsequently ratified, amendments to the Share Unit Plan which permit
the Board to grant RSUs and PSUs that will be settled in Common Shares, or a mix of Common Shares and cash, rather than purely in cash.
The purpose of these amendments was to better align executive compensation with the interests of the Company’s shareholders, to
reduce the mark-to-market effect of cash-settled Share Units on the Company’s financial results, and to bring the terms of the Company’s
Share Units in line with those granted by its peers.
On April 20, 2020, the Board approved,
on the recommendation of the Compensation Committee, and the shareholders subsequently ratified, an amendment to the Share Unit Plan which
reduced the number of shares that can be issued upon vesting of Share Units at the time of grant from 5% to 2.25%. This amendment was
made to better align the Share Unit Plan with governance best practices.
The number of Common Shares issuable
under the Share Unit Plan is limited to a fixed maximum percentage of 2.25% of the issued and outstanding Common Shares from time to time,
provided that, in combination with all other security-based compensation arrangements of the Company, the aggregate number of Common Shares
issuable thereunder will not exceed 10% of the issued and outstanding Common Shares from time to time. The maximum number of Common Shares
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-17 |
issuable under the Share Unit Plan to
insiders of the Company, in combination with all other security-based compensation arrangements of the Company, at any time will not exceed
10% of the issued and outstanding Common Shares, and the number of securities to be issued to insiders of the Company pursuant to such
arrangements within any one-year period will not exceed 10% of the issued and outstanding Common Shares. The maximum number of Common
Shares issuable under the Share Unit Plan to any one individual, together with any Common Shares issuable pursuant to any other security-
based compensation arrangement of the Company, will not exceed 2% of the total number of issued and outstanding Common Shares from time
to time which equaled 6,131,753 Common Shares as at December 31, 2023. The Share Unit Plan also requires that shareholder approval
be obtained for certain amendments in accordance with the requirements of the TSX, including in the event of an increase in the maximum
number of Common Shares issuable under the Share Unit Plan or an extension of the expiry date for the Share Units granted under the Share
Unit Plan (see “Amendments” below for further details).
As at the date of this Circular, an
aggregate of 2,087,751 Common Shares are issuable pursuant to share-settled Share Units granted under the Share Unit Plan (0.682% of the
Company’s current issued share capital) and as a result of the settlement of Share Units and cancellations since the Share Unit
Plan was established, the total number of Common Shares underlying Share Units that are currently available for future grants is 4,799,815
(1.586% of the Company’s current issued share capital). Such Share Units do not include the Legacy Share Units (see “Legacy
Share-Based Compensation Plans” below).
Eligible Participants
Participation in the
Share Unit Plan is restricted to employees and officers of the Company or an affiliate of the Company (each, an “Eligible
Participant”).
Transferability
The rights or interests, including Share
Units, of a Grantee under the Share Unit Plan may not be assigned, transferred or alienated in any way (other than to the beneficiary
or estate of a Grantee, as the case may be, upon the death of the Grantee).
Administration of the Plan
The Share Unit Plan permits the Board
to grant awards of Share Units to an Eligible Participant. Upon vesting, the Share Units give the Grantee a right to payment in cash in
an amount equal to the fair market value of the vested Share Unit on the date of payment, less any withholding taxes. Share Units granted
after the adoption of the amendments to the Share Unit Plan approved in 2017, which have vested, may be paid out in Common Shares, cash
or a combination of Common Shares and cash equal to the fair market value of the vested Share Unit on the date of payment. “Fair
market value” means, with respect to any particular date, the average closing price for a Common Share on the TSX on the five
trading days immediately prior to that date.
Share Units shall expire if they have
not vested prior to the expiry date of the Share Unit as established by the Board, which shall be no later than December 31 of the
third calendar year following the end of the year in which the services to which the grant of such Share Unit relates (or where such services
straddle two calendar years, the first calendar year in which the services to which the grant of such Share Units relates) were rendered.
In addition, PSUs will be terminated to the extent that the performance objectives or other vesting criteria have not been met.
If a Grantee’s employment or service
with the Company is terminated due to the voluntary resignation of the Grantee, then all Share Units granted to such person which have
not vested prior to their resignation shall be forfeited and cancelled, and any vested Share Units credited to the Grantee’s account
shall be paid out to such person as soon as practicable.
If a Grantee’s employment or service
with the Company is terminated by the Company without cause, by such person for “good reason” (such as a demotion,
a reduction in pay or a required relocation) or due to a disability or such person’s retirement, then: 1) such person shall be entitled
to a pay out of that portion of PSUs that have vested as of the termination date, and all unvested PSUs shall be forfeited and cancelled;
and 2) a fraction of such person’s unvested RSUs shall immediately vest in proportion to the number of days that such person was
actively employed between the grant date and
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-18 |
the termination date, with the remainder
of the unvested RSUs held by such person being forfeited and cancelled. Any vested Share Units credited to the Grantee’s account
as of the termination date shall be paid out to such person as soon as practicable.
If a Grantee is terminated for cause,
such person’s Share Units, whether vested or unvested, shall be forfeited and cancelled as of the termination date. If a Grantee’s
employment or service with the Company is terminated by the Company within 12 months of the occurrence of a change of control, or such
person terminates his or her employment for “good reason” within 12 months after a change of control occurs, then all outstanding
Share Units which have not vested shall immediately vest and be paid out.
If a Grantee’s employment or service
with the Company is terminated due to the death of such person, then: 1) such person’s beneficiaries shall be entitled to be paid
out that portion of the PSUs that have vested, and all unvested PSUs shall be forfeited and cancelled; and 2) a fraction of such person’s
unvested RSUs shall immediately vest in proportion to the number of days that such person was actively employed between the grant date
and his or her date of death, with the remainder of the unvested RSUs held by such person being forfeited and cancelled. Any vested Share
Units credited to the Grantee’s account as of the date of his or her death shall be paid out to such person’s beneficiaries
as soon as practicable. Notwithstanding the foregoing, if a Grantee’s employment or service with the Company is terminated due to
his or her death while performing his or her regular duties as an officer or employee of the Company, then all outstanding Share Units
which have not vested shall immediately vest and be paid out to such person’s beneficiaries.
Vesting of Share Units
Share Units vest at the discretion of
the Board, in which the vesting schedule is generally fixed at the time of grant by the Board. We believe that deferment of some components
of compensation through the application of vesting schedules and performance goals supports retention of executives and long-term alignment
with shareholder value. Accordingly, equity awards vest 20% after one year, 30% after two years, and 50% after three years, and each vesting
of PSUs is subject to fulfillment of performance goals by each vesting date.
Payment of Share Units
Share Units granted after the adoption
of the 2017 amendments to the Share Unit Plan which have vested, may be paid out in Common Shares, cash or a combination of Common Shares
and cash equal to the fair market value of the vested Share Unit on the date of payment. Share Units are paid upon each vesting date in
Common Shares, cash or a mix of Common Shares and cash, at the Board’s discretion, in an amount equal to the fair market value of
the Share Units; however, the payout of PSUs is also subject to satisfaction of performance criteria.
Dividends
Share Units are not considered to be Common Shares of the
Company under the Share Unit Plan, and do not entitle a Grantee to dividends.
Fractional Entitlements
No fractional Common Shares may be issued under the Share
Unit Plan, before or after the amendments described hereunder.
Amendments
The Share Unit Plan may be amended,
suspended or terminated by the Board, in whole or in part, at any time; provided, however, that no such amendment shall, without the consent
of the Eligible Participants affected by the amendment, adversely affect the rights accrued to such Eligible Participants with respect
to Share Units granted prior to the date of the amendment.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-19 |
Notwithstanding the foregoing, shareholder
approval shall be obtained in accordance with the requirements of the TSX for any amendment that results in:
| (a) | an increase in the maximum number of Common Shares issuable under the Share Unit Plan; |
| (b) | an amendment to the individuals designated as Eligible Participants under the Share Unit Plan; |
| (c) | an extension of the expiry date for Share Units granted under the Share Unit Plan; |
| (d) | an amendment that would permit a Share Unit to be transferable or assignable, other than by will or the laws of descent and distribution;
or |
| (e) | an amendment to the amendment provisions contained in the Share Unit Plan. |
Legacy Share-Based Compensation Plans
In connection with the closing of the
Roxgold Acquisition, Fortuna issued certain replacement stock options (“Legacy Options”) and assumed certain share
units (“Legacy Share Units”) which were governed by the terms of the stock option plan of Roxgold dated March 5,
2020 (as amended) and the restricted share unit plan of Roxgold dated December 18, 2012 (as amended). As of December 31, 2023
there were no outstanding Legacy Options or Legacy Share Units. These legacy stock option and share unit plans are no longer in effect.
Annual Burn Rate
In accordance with the rules of
the TSX, the table below sets out the Company’s annual burn rate in respect of stock options and Share Units granted during the
past three fiscal years (“Burn Rate”). The Burn Rate is expressed as a percentage and is calculated by dividing the
number of stock options and Share Units granted during the relevant fiscal year by the weighted average number of the Common Shares outstanding
for the year. The information in the table below does not include the Legacy Options or the Legacy Share Units.
| Year | |
Stock Options | |
Share Settled Units | | |
Total | | |
Weighted Average Common Shares Outstanding | |
| | |
Granted | |
Burn Rate | |
Granted | |
Burn Rate | | |
Granted | | |
Burn Rate | | |
| |
| 2023 | |
N/A | |
N/A | |
844,187 | |
0.29 | % | |
844,187 | | |
0.29 | % | |
295,066,839 | |
| 2022 | |
N/A | |
N/A | |
824,768 | |
0.28 | % | |
824,768 | | |
0.28 | % | |
291,281,088 | |
| 2021 | |
N/A | |
N/A | |
1,196,012 | |
0.50 | % | |
1,196,012 | | |
0.50 | % | |
237,997,561 | |
PSUs Granted in 2023
On March 20, 2023, the Board approved
the following grants of PSUs (the “2023 PSUs”) to the NEOs listed in the table below, which are subject to performance
targets related 50% to three-year Relative Total Shareholder Return and 50% to Growth, which is intended to further align management of
our business with long-term shareholder interest:
| NEO | |
No. of 2023 PSUs |
| Jorge Ganoza Durant, President & CEO | |
| 260,770 |
| Luis Ganoza Durant, CFO | |
| 104,460 |
| David Whittle, COO, West Africa | |
| 89,538 |
| Cesar Velasco, COO, Latin America | |
| 84,208 |
| Eric Chapman, Senior VP, Technical Services | |
| 62,866 |
The 2023 PSUs are subject to the following
time-vesting metrics:
| Vesting/Payout Date | |
Amount Vested | |
| 12 months from grant | |
| 20 | % |
| 24 months from grant | |
| 30 | % |
| 36 months from grant | |
| 50 | % |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-20 |
and to a multiplier ranging from 50% to 200% depending on
the achievement level of certain performance targets. The corporate performance metrics are set out below.
2023 PSUs - Corporate Performance Objectives
|
Relative Total Shareholder Return (Weight: 50%)
Rolling 3-year TSR against Performance Peer Group |
| Performance Level |
TSR Percentile Ranking vs. Peer Group |
Multiplier1 |
| Below Threshold |
Below 25th Percentile |
0% |
| Threshold |
25th Percentile |
50% |
| Target |
50th Percentile |
100% |
| Maximum |
75th Percentile or above |
200% |
| Note: |
|
|
| 1. | If the TSR is negative, the amount of the payout is capped at 100%. Multiplier for TSR performance between performance levels will
be calculated on a pro-rata basis. |
| Growth (Weight: 50%) |
|
Vesting |
Growth Objective |
Sub Weight |
Minimum1
(Multiplier=50%) |
Target
(Multiplier=100%) |
Maximum2
(Multiplier=200%) |
|
Year 1 (V. 2024) 3 |
Séguéla’s construction completion |
25% |
First
gold pour in July 2023 |
First gold pour between
May 2023 and June 2023 |
First gold pour in April 2023 |
| 25% |
CAPEX ≥ 182M |
$ 168M ≤ CAPEX ≤ $179M |
CAPEX ≤ 165M |
|
Year 2 (V. 2025) 4 |
Balance depletion & growth through Exploration
& M&A |
--- |
By
the end of 2024, decrease the 2021 global gold equivalent inventory by 20% |
By the end of 2024, achieve net zero change
to 2021 global gold equivalent inventory |
By the end of 2024, increase the 2021 global gold
equivalent inventory by 10% |
|
Year 3 (V. 2026) 3 |
M&A |
--- |
By the end of 2025, add 1.0M oz gold
equivalent in total inventory through M&A |
By the end of 2025, add
1.4M to 1.6M oz gold equivalent in total inventory through M&A |
By the end of 2025, add over 2.0M oz gold equivalent in total inventory through M&A |
| Notes: |
|
|
|
|
| 1. | Multiplier for results below Minimum equals Nil. |
| 2. | Multiplier ≥ 100% payable as long as Fortuna rolling 3-year TSR ≥ 100% at each vesting period. |
| 3. | Multiplier greater or less than 100% will be calculated on a pro-rata based on limits corresponding to each range. |
| 4. | Multiplier greater or less than 100% will be calculated on a pro-rata based on the following performance ranges: |
| Performance Level | |
Multiplier (v.2025) | |
| 20% decrease (5.0 Moz) | |
| 50 | % |
| 10% decrease (5.7 Moz) | |
| 75 | % |
| Net zero change to 2021 Au eq. inventory (6.3M oz – 7.0M oz) | |
| 100 | % |
| 5% increase (7.4 Moz) | |
| 150 | % |
| 10% increase (7.7 Moz or more) | |
| 200 | % |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-21 |
First Tranche Vesting of 2023 PSUs for Fiscal 2023 Performance
The corporate achievement results for
2023 are as follows:
|
Corporate
Performance
Objective |
2023 Result / Achievement Percentage |
Weighting |
2023 PSU
Performance
Multiplier |
| Relative Total Shareholder Return vs. peer group |
P12
(Rolling
3-year TSR against Performance Peer Group below 25th Percentile) |
0% |
50% |
0% |
|
Growth:
Séguéla’s construction
completion1 |
First gold pour in May 2023 |
100% |
25% |
25% |
| CAPEX = $173.4M |
100% |
25% |
25% |
| |
100% |
50% |
| | Note: |
| 1. | Multiplier ≥ 100% payable as long as Fortuna rolling 3-year TSR ≥ 100% at each vesting period. |
As set forth above, the Company’s
corporate objectives for 2023 with respect to growth at Séguéla were achieved. The total shareholder return for 2023 was
below the 25th percentile of our peer group TSR, so a rating of 0% out of a possible 50% was applied.
Based on the 50% achievement of the
corporate performance targets for 2023, the number of Common Shares issued on the vesting of the first tranche of the 2023 PSUs represents
a reduction from 20% to 10% of the PSUs eligible to be vested. Therefore, on March 20, 2024, a total of 84,417 Common Shares were
issued to NEOs for the first tranche of the 2023 PSUs eligible for vesting, and 84,420 PSUs were forfeited, as follows:
NEO | |
Maximum
20% Vest | | |
Performance Payout Percentage | | |
Final
No. of
PSUs Vested | | |
No. of
PSUs
Forfeited | |
| Jorge Ganoza Durant, President & CEO | |
| 52,154 | | |
| 10 | % | |
| 26,077 | | |
| 26,077 | |
| Luis Ganoza Durant, CFO | |
| 20,892 | | |
| 10 | % | |
| 10,446 | | |
| 10,446 | |
| David Whittle, COO West Africa | |
| 17,908 | | |
| 10 | % | |
| 8,954 | | |
| 8,954 | |
| Cesar Velasco, COO Latin America | |
| 16,842 | | |
| 10 | % | |
| 8,421 | | |
| 8,421 | |
| Eric Chapman, Senior VP, Technical Services | |
| 12,573 | | |
| 10 | % | |
| 6,286 | | |
| 6,287 | |
Performance Graphs
Total Shareholder Return
The following graph compares the total
cumulative shareholder return over the past five fiscal years, for $100 invested in Common Shares at the beginning of the period with
the cumulative total return of the S&P / TSX Composite Index and the S&P / TSX Global Mining Index. With the construction of the
Lindero Mine and the first production of gold at the mine in October 2020, the completion of the Roxgold Acquisition in 2021 which
included the gold producing Yaramoko Mine, and commencement of gold production at the Séguéla Mine in 2023, the Company’s
share price performance may be increasingly influenced by the price of gold. The performance of the Company’s Common Shares set
out below does not necessarily reflect future price performance.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-22 |
Source: Global Governance Advisors
The Company has experienced significant
and steady operational growth over the past five years, evolving to its current position as a global intermediate gold and silver producer
with five operating mines. Significant accomplishments during the past several years include the construction of and commencement of commercial
production at the Lindero Mine in Argentina and the Séguéla Mine in Côte d’Ivoire, and the expansion in 2023
to Senegal with the acquisition of Chesser Resources. This growth in the Company’s operations occurred while challenges relating
to COVID-19 and more recently, the extension of the San Jose Mine environment impact authorization and the Company’s related legal
proceedings against the Mexico mining authorities.
One of the Company’s main focuses
for 2023 was the completion of construction of the Séguéla Mine in Côte d’Ivoire, on time and on budget. The
first gold pour at Séguéla occurred on schedule in May 2023.
In order to support the Company’s
goal of managing costs during fluctuating market conditions, annual base salaries of our senior executives increased by 3% in 2019, were
unchanged in 2020, and were increased by 3% in 2021, other than a 23% increase made in 2021 to the annual base salary of our Senior VP,
Technical Services. In 2022, annual base salaries of the CEO and CFO increased 8% and 18%, respectively, to better align with our peers,
and in 2023, the NEOs received 4% cost- of-living increases to their base salaries.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-23 |
Growth Metrics
The Compensation Committee has evaluated
the Company’s relative performance of various key business growth metrics including revenue, adjusted EBITDA6 and gold
equivalent7 production. As illustrated in the table below, these metrics reflect the Company’s continuous business growth
over the past five years.
| Notes: |
| 1. Refer to Note 6 below. |
| 2. Gold equivalent7 includes gold, silver, lead and zinc and is calculated using the following metal prices and ratios: |
| 2019: $1,393/oz Au, $16.20/oz Ag, $2,006/t Pb, $2,535/t Zn; or Au:Ag = 1:85.99, Au:Pb = 1:0.69, Au:Zn = 1:0.55 |
| 2020: $1,805/oz Au, $21.18/oz Ag, $1,830/t Pb, $2,271/t Zn; or Au:Ag = 1:85.22, Au:Pb = 1:0.99, Au:Zn = 1:0.79 |
| 2021: $1,783/oz Au, $25.80/oz Ag, $2,205/t Pb, $2,998/t Zn; or Au:Ag = 1:69.11, Au:Pb = 1:0.81, Au:Zn = 1:0.59 |
| 2022: $1,802/oz Au, $21.75/oz Ag, $2,161/t Pb, $3,468/t Zn; or Au:Ag = 1:82.89, Au:Pb = 1:0.83, Au:Zn = 1:0.52 |
| 2023: $1,948/oz Au, $23.37/oz Ag, $2,155/t Pb, $2,706/t Zn; or Au:Ag = 1:83.38, Au:Pb = 1:0.90, Au:Zn = 1:0.72 |
6 Adjusted
EBITDA is a Non-IFRS measure. See “Non-IFRS Financial Measures” on page 14 of the Circular.
7 See
Note 2 on page A-2 above.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-24 |
Relative Performance – Growth Metrics versus Peers
The Compensation Committee has evaluated
the Company’s relative performance of various key business growth metrics including EBITDA, revenue and gold production. As illustrated
below, the Company’s performance in 2023 resulted in a ranking above average in all metrics, and exceptional performance in all
metrics over the five year period.
Source: Global Governance Advisors
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-25 |
NEO Profiles
JORGE GANOZA DURANT, Chief Executive Officer
| | |
2023 | | |
2022 | | |
2021 | |
| Base salary | |
$ | 712,400 | | |
$ | 685,000 | | |
$ | 637,000 | |
| Annual incentive | |
$ | 926,120 | | |
$ | 712,400 | | |
$ | 637,000 | |
| Share Units | |
$ | 1,812,505 | | |
$ | 1,650,778 | | |
$ | 3,969,626 | |
| Stock Options | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Total Direct Compensation | |
$ | 3,451,025 | | |
$ | 3,048,178 | | |
$ | 5,243,626 | |
| |
| Share Ownership (December 31, 2023) |
Target | |
Target
Value | | |
Total
Acquisition
Value | | |
Target Met |
| 3x base salary | |
$ | 2,137,200 | | |
$ | 14,023,193 | | |
ü |
LUIS GANOZA DURANT, Chief Financial Officer
| | |
2023 | | |
2022 | | |
2021 | |
| Base salary | |
$ | 509,600 | | |
$ | 490,000 | | |
$ | 414,000 | |
| Annual incentive | |
$ | 508,581 | | |
$ | 403,760 | | |
$ | 351,383 | |
| Share Units | |
$ | 726,060 | | |
$ | 661,275 | | |
$ | 1,398,348 | |
| Stock Options | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Total Direct Compensation | |
$ | 1,744,241 | | |
$ | 1,555,035 | | |
$ | 2,163,731 | |
| |
| Share Ownership (December 31, 2023) |
Target | |
Target
Value | | |
Total
Acquisition
Value | | |
Target Met |
| 2x base salary | |
$ | 1,019,200 | | |
$ | 5,689,837 | | |
ü |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-26 |
DAVID WHITTLE, Chief Operating Officer, West Africa
| | |
| 2023 | | |
| 20221 | | |
| 20211 | |
| Base salary | |
$ | 436,800 | | |
$ | 405,000 | | |
$ | 280,978 | |
| Annual incentive | |
$ | 751,234 | | |
$ | 400,875 | | |
$ | 161,197 | |
| Share Units | |
$ | 622,338 | | |
$ | 255,449 | | |
| N/A | |
| Stock Options | |
$ | 0 | | |
$ | 0 | | |
| N/A | |
| Total Direct Compensation | |
$ | 1,810,372 | | |
$ | 1,061,324 | | |
$ | 442,175 | |
| | |
| | | |
| | | |
| | |
| Share Ownership (December 31, 2023) |
Target | |
Target
Value | | |
Total
Acquisition
Value | | |
Target Met |
| 1x base salary | |
$ | 436,800 | | |
$ | 760,499 | | |
ü |
Note:
| 1. | Mr. Whittle was appointed as Chief Operating Officer, West
Africa on October 1, 2022. Prior to then, Mr. Whittle became an employee of the Company on July 2, 2021 as a result of
the Roxgold Acquisition, and held the position of Vice-President, Operations – West Africa from October 1, 2021 to September 30,
2022. |
CESAR VELASCO, Chief Operating Officer, Latin America
| | |
| 2023 | | |
| 2022 | | |
| 20211 | |
| Base salary | |
$ | 410,800 | | |
$ | 390,714 | | |
$ | 308,333 | |
| Annual incentive | |
$ | 334,687 | | |
$ | 293,465 | | |
$ | 239,438 | |
| Share Units | |
$ | 585,294 | | |
$ | 533,069 | | |
$ | 24,750 | |
| Stock Options | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Total Direct Compensation | |
$ | 1,330,781 | | |
$ | 1,217,248 | | |
$ | 572,521 | |
| |
| Share Ownership (December 31, 2023) |
Target | |
Target
Value | | |
Total
Acquisition
Value | | |
Target Met |
| 1x base salary | |
$ | 410,800 | | |
$ | 915,757 | | |
ü |
Note:
| 1. | Mr. Velasco was appointed as Chief Operating Officer, Latin America on September 1, 2021. Prior to then, Mr. Velasco
was employed as Country Head, Peru. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-27 |
ERIC CHAPMAN, Senior VP, Technical
Services
| | |
2023 | | |
2022 | | |
2021 | |
| Base salary | |
$ | 364,127 | | |
$ | 350,123 | | |
$ | 295,311 | |
| Annual incentive | |
$ | 300,769 | | |
$ | 248,517 | | |
$ | 168,251 | |
| Share Units | |
$ | 436,953 | | |
$ | 420,147 | | |
$ | 902,405 | |
| Stock Options | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Total Direct Compensation | |
$ | 1,101,849 | | |
$ | 1,018,787 | | |
$ | 1,365,968 | |
| |
| Share Ownership (December 31, 2023) |
Target | |
Target
Value | | |
Total
Acquisition
Value | | |
Target Met |
| 1x base salary | |
$ | 364,127 | | |
$ | 2,741,979 | | |
ü |
The above-noted information regarding
Total Direct Compensation includes the value of all equity awards at the time of grant (regardless of vesting provisions) but does not
include any increase or decrease in the award values as at the vesting/payout dates due to increases or decreases in the Company’s
stock prices. Any such increases are reflected under the heading “All Other Compensation” in the table below.
Summary Compensation Table
The Company’s operations expanded
significantly in 2021 as a result of the Roxgold Acquisition and subsequent integration of Roxgold’s operations. In 2021 and 2022,
the Company restructured its senior executive team to meet its leadership needs in Latin America and West Africa, and at the corporate
level.
The following summarizes all compensation
paid or payable to NEOs during the fiscal years ended December 31, 2023, 2022 and 2021:
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-28 |
| | |
| | |
| | |
| | |
| |
Non-Equity Annual
Incentive Plan
Compensation | |
| | |
| |
Name and
Principal Position | |
Fiscal
Year | | |
Salary | | |
Share-
based
Awards (1) | | |
Option-
based
Awards | |
Annual
Incentive
Plans(2) | |
Long-term
Incentive
Plans | |
All
Other
Compensation(3) | | |
Total
Compensation | |
| Jorge
Ganoza Durant(4) | |
2023 | | |
$ | 712,400 | | |
$ | 1,812,505 | | |
N/A | |
$ | 926,120 | | |
Nil | |
$ | 1,217,968 | | |
$ | 4,668,994 | |
| CEO | |
2022 | | |
$ | 685,000 | | |
$ | 1,650,778 | | |
N/A | |
$ | 712,400 | | |
Nil | |
$ | 426,218 | | |
$ | 3,474,396 | |
| | |
2021 | | |
$ | 637,000 | | |
$ | 3,969,626 | | |
N/A | |
$ | 637,000 | | |
Nil | |
$ | 36,686 | | |
$ | 5,280,312 | |
| | |
| | |
| | | |
| | | |
| |
| | | |
| |
| | | |
| | |
| Luis Ganoza Durant | |
2023 | | |
$ | 509,600 | | |
$ | 726,060 | | |
N/A | |
$ | 508,581 | | |
Nil | |
$ | 489,548 | | |
$ | 2,233,789 | |
| CFO | |
2022 | | |
$ | 490,000 | | |
$ | 661,275 | | |
N/A | |
$ | 403,760 | | |
Nil | |
$ | 176,880 | | |
$ | 1,731,915 | |
| | |
2021 | | |
$ | 414,000 | | |
$ | 1,398,348 | | |
N/A | |
$ | 351,383 | | |
Nil | |
$ | 22,253 | | |
$ | 2,185,984 | |
| | |
| | |
| | | |
| | | |
| |
| | | |
| |
| | | |
| | |
| David
Whittle(5) | |
2023 | | |
$ | 436,800 | | |
$ | 622,338 | | |
N/A | |
$ | 751,234 | | |
Nil | |
$ | 9,060 | | |
$ | 1,819,432 | |
| COO, West Africa | |
2022 | | |
$ | 405,000 | | |
$ | 255,449 | | |
N/A | |
$ | 400,875 | | |
Nil | |
$ | 9,060 | | |
$ | 1,070,384 | |
| | |
2021 | | |
$ | 280,978 | | |
| N/A | | |
N/A | |
$ | 161,197 | | |
Nil | |
$ | 2,934 | | |
$ | 445,109 | |
| | |
| | |
| | | |
| | | |
| |
| | | |
| |
| | | |
| | |
| Cesar
Velasco(5) | |
2023 | | |
$ | 410,800 | | |
$ | 585,294 | | |
N/A | |
$ | 334,687 | | |
Nil | |
$ | 48,132 | | |
$ | 1,378,913 | |
| COO, Latin America | |
2022 | | |
$ | 390,714 | | |
$ | 533,069 | | |
N/A | |
$ | 293,465 | | |
Nil | |
$ | 23,260 | | |
$ | 1,240,508 | |
| | |
2021 | | |
$ | 308,333 | | |
$ | 24,750 | | |
N/A | |
$ | 239,438 | | |
Nil | |
$ | 2,734 | | |
$ | 575,255 | |
| | |
| | |
| | | |
| | | |
| |
| | | |
| |
| | | |
| | |
| Eric Chapman | |
2023 | | |
$ | 364,127 | | |
$ | 436,953 | | |
N/A | |
$ | 300,769 | | |
Nil | |
$ | 219,565 | | |
$ | 1,321,414 | |
| Senior VP, Technical | |
2022 | | |
$ | 363,069 | | |
$ | 435,683 | | |
N/A | |
$ | 257,707 | | |
Nil | |
$ | 74,656 | | |
$ | 1,131,115 | |
| Services | |
2021 | | |
$ | 306,533 | | |
$ | 936,697 | | |
N/A | |
$ | 174,645 | | |
Nil | |
$ | 40,688 | | |
$ | 1,458,564 | |
Notes:
| 1. | The 2023 amounts represent the grant date fair market value of cash-settled RSUs and share-settled PSUs which was determined by the
Board at the time of granting and based on the then market price of the Company’s shares of CAD$4.69. The grant date values were
calculated in CAD$ and translated to US$ at the 2023 year average exchange rate of CAD$1.00 = US$0.7410. The accounting fair value of
the RSUs is also based on the market price at the time of grant, but the amount recorded is calculated using the pro-rated portion of
the RSU deemed to have vested (but not actually vested) as at December 31, 2023. The accounting fair values for cash-settled RSUs
were calculated in CAD$ and translated to US$ at the exchange rate at December 31, 2023 of CAD$1.00 = US$0.7559. The accounting fair
values for share-settled PSUs were calculated in CAD$ and translated to US$ on a quarterly basis at the applicable quarterly average exchange
rate. The total accounting fair values for 2023 are $1,891,766 for Jorge Ganoza Durant, $757,809 for Luis Ganoza Durant, $649,557 for
David Whittle, $610,890 for Cesar Velasco, and $456,064 for Eric Chapman. |
The performance metrics for the 2023
PSUs relate solely to three-year Total Shareholder Return (50%) and Growth (50%) (see “PSUs Granted in 2023” on
page A-20). The grant date fair market value of the 2023 PSUs is $906,252 for Jorge Ganoza Durant, $363,030 for Luis Ganoza
Durant, $311,169 for David Whittle, $292,647 for Cesar Velasco, and $218,476 for Eric Chapman, of which NIL 2023 PSUs had vested or
been paid as of December 31, 2023.
The 2022 amounts represent the grant date
fair market value of cash-settled RSUs and share-settled PSUs which was determined by the Board at the time of granting and based on the
then market price of the Company’s shares of CAD$4.88. Certain of the grant date values were calculated in CAD$ and translated to
US$ at the 2022 year average exchange rate of CAD$1.00 = US$0.7684. The accounting fair value of the RSUs is also based on the market
price at the time of grant, but the amount recorded is calculated using the pro-rated portion of the RSU deemed to have vested (but not
actually vested) as at December 31, 2022. The accounting fair values for cash-settled RSUs were calculated in CAD$ and translated
to US$ at the exchange rate at December 31, 2022 of CAD$1.00 = US$0.7369. The accounting fair values for share-settled PSUs were
calculated in CAD$ and translated to US$ on a quarterly basis at the applicable quarterly average exchange rate. The total accounting
fair values for 2022 are $1,685.916 for Jorge Ganoza Durant, $675,351 for Luis Ganoza Durant, $260,888 for David Whittle, $544,417 for
Cesar Velasco, and $444,954 for Eric Chapman.
The 2021 amounts represent the grant date fair market
value of cash-settled RSUs and share-settled PSUs which was determined by the Board at the time of granting and based on the then
market price of the Company’s shares of CAD$7.90.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-29 |
Certain of the grant date values were
calculated in CAD$ and translated to US$ at the 2021 year average exchange rate of CAD$1.00 = US$0.7976. The accounting fair value of
the RSUs is also based on the market price at the time of grant, but the amount recorded is calculated using the pro-rated portion of
the RSU deemed to have vested (but not actually vested) as at December 31, 2021. The accounting fair values for cash-settled RSUs
were calculated in CAD$ and translated to US$ at the exchange rate at December 31, 2021 of CAD$1.00 = US$0.7888. The accounting fair
values for share-settled PSUs were calculated in CAD$ and translated to US$ on a quarterly basis at the applicable quarterly average exchange
rate. The total accounting fair values for 2021 are $1,299,058 for Jorge Ganoza Durant, $453,052 for Luis Ganoza Durant, $15,948 for Cesar
Velasco, and $309,226 for Eric Chapman.
| 2. | Amounts represent bonuses earned for the applicable year. For 2023, David Whittle was paid a regular
annual bonus of $571,684 and, pursuant to the Roxgold
Acquisition, a retention payment of $179,550; for 2022, Mr. Whittle was paid a regular annual bonus of $281,175 and, pursuant to
the Roxgold Acquisition, a retention payment of $119,700; for 2021, Mr. Whittle received only a retention payment pursuant to the
Roxgold Acquisition. |
| 3. | Includes health and life insurance premiums paid on behalf of NEOs; contributions to a registered retirement savings plan established
effective January 1, 2019 for executive officers and employees who are resident in Canada; unused vacation paid out, if applicable;
and where the sum of a 2023 RSU or PSU payout, as applicable, and the amounts of previous payouts made for that RSU or PSU equals an amount
that is in excess of the previously disclosed grant fair value of that RSU or PSU, that excess amount, less any previously disclosed excess
amounts, is included. For Jorge Ganoza Durant, the amount shown includes $1,169,129 from the 2023 payout of RSUs
granted in 2020. |
| 4. | Jorge Ganoza Durant does not receive any compensation in his capacity as a director of the Company. |
| 5. | David Whittle was designated as a NEO based on his compensation paid for the fiscal year 2023. His compensation shown for 2021 is
for the period July through December 2021 as he became an employee of the Company on July 2, 2021 pursuant to the Roxgold
Acquisition. Mr. Whittle was appointed an executive officer on October 1, 2022. Cesar Velasco was appointed an executive officer
of the Company on September 1, 2021, and prior to that, he held the position of Country Head, Peru. |
Incentive Plan Awards to NEOs
The following sets forth the details of incentive stock options
to purchase Common Shares of the Company and Share Units held by NEOs as at December 31, 2023:
| | |
OPTION
BASED AWARDS | |
SHARE-BASED
AWARDS | |
| Name | |
No. of
Securities
Underlying
Unexercised
Options | |
Option
Exercise
Price | |
Option
Expiration
Date | |
Value
of
Unexercised
In-The-
Money
Options | |
Value
Vested
During
the
Year (1) | |
Market
Value of
Share Units
Vested
During the
Year (2) | | |
Market
Value of
Vested
Share
Units
Not
Paid
Out | |
No. of
Share
Units Not
Vested | | |
Market
Value of
Share
Units Not
Vested (3) | |
| Jorge Ganoza Durant | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 2,036,720 | | |
N/A | |
| 1,188,724 | | |
$ | 898,556 | |
| Luis Ganoza Durant | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 787,861 | | |
N/A | |
| 460,963 | | |
$ | 348,442 | |
| David Whittle | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 96,323 | | |
N/A | |
| 233,576 | | |
$ | 176,560 | |
| Cesar Velasco | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 121,289 | | |
N/A | |
| 284,108 | | |
$ | 214,757 | |
| Eric Chapman | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 392,193 | | |
N/A | |
| 293,011 | | |
$ | 221,487 | |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-30 |
Notes:
| 1. | No stock options vested during 2023. |
| 2. | The values of share units vested during the year are converted to US$ based on the 2023 average
exchange rate of CAD$1.00 = US$0.7410, and is calculated based on
the number of share units times the average closing price of the Company’s Common Shares on the TSX for the five days preceding
the respective dates of vesting (March 25, 2023 was CAD$4.73 (US$3.50); April 20, 2023 was CAD$5.25 (US$3.89); and April 27,
2023 was CAD$5.04 (US$3.73)). |
The value for David Whittle also includes
$50,163 for share units granted by Roxgold and converted to Fortuna share units pursuant to the Roxgold Acquisition. This value is calculated
based on the weighted volume average closing price of the Company's Common Shares on the TSX, for the five trading days ending three business
days before the payout date (CAD$5.1095 (US$3.79), rather than the vesting date value, in accordance with the terms of the Roxgold Acquisition.
| 3. | The values of share units not vested are converted to US$ based on the exchange rate at December 31, 2023 of CAD$1.00 = US$0.7559,
and are calculated based on the number of share units times the closing price of the Company’s Common Shares on the TSX at December 31,
2023 of CAD$5.10 (US$3.86). |
Management Contracts / Termination
and Change of Control Benefits
The Company has entered into employment
agreements with each of its current NEOs, all of which include change of control provisions. The change of control provisions recognize
that the NEO is integral to the operation and continued development of the Company and therefore requires protection from disruption of
his employment in the event of a change of control of the Company. In addition, all employment agreements with its current NEOs provide
that on termination without cause, any outstanding stock options or RSUs will vest on a pro-rated basis. This is consistent with the direction
of market practice and governance best practices. PSUs do not vest on termination except in the event of a change of control.
The employment agreements also provide
that if, as a result of a change of control of the Company, the NEO is terminated or the change of control results in a reduction in his
level of authority, responsibility, title or reporting relationship, a reduction in certain components of his compensation, or a change
of his primary work location, then he will be entitled to severance pay.
A description of each employment agreement
is set out below.
Jorge Ganoza Durant, President and
Chief Executive Officer
Pursuant to an employment agreement
dated effective January 1, 2015, as subsequently amended, the Company paid to Jorge Ganoza Durant in 2023 an annual base salary of
$712,400. The agreement has no fixed expiry date and contains provisions regarding salary, paid vacation time, eligibility for annual
equity-based awards and performance-based cash bonuses, benefits, and change of control of the Company. In the event of termination without
cause, Mr. Ganoza will be entitled to severance pay equal to 24 months’ annual salary. If Mr. Ganoza chooses to terminate
his contract, he is required to give six months’ notice to the Company.
If, on December 31, 2023, Mr. Ganoza
had been terminated without cause, $2,506,183 (comprised of $1,424,800 for 2x annual base salary and $1,081,383 for payout of vested RSUs)
would have been payable to him. If a change of control of the Company had occurred, 694,365 Common Shares for payout of vested PSUs, and
$4,757,826 (comprised of $1,424,800 for 2x annual base salary, $1,424,800 for 2x an assumed 100% bonus, and $1,908,226 for payout of vested
RSUs) would have been payable to him.
Luis Ganoza Durant, Chief Financial
Officer
Pursuant to an employment agreement
dated effective January 1, 2015, as subsequently amended, the Company paid to Luis Ganoza Durant in 2023 an annual base salary of
$509,600. The agreement has no fixed expiry date and contains provisions regarding salary, paid vacation time, eligibility for annual
equity-based awards and performance-based cash bonuses, benefits, and change of control of the Company. In the event of termination without
cause, Mr. Ganoza will be entitled to severance pay equal to 18 months’ annual salary. If Mr. Ganoza chooses to terminate
his contract, he is required to give six months’ notice to the Company.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-31 |
If, on December 31, 2023, Mr. Ganoza
had been terminated without cause, $1,197,331 (comprised of $764,400 for 1.5x annual base salary and $432,931 for payout of vested RSUs)
would have been payable to him. If a change of control of the Company had occurred, 263,004 Common Shares for payout of vested PSUs, and
$2,498,682 (comprised of $1,019,200 for 2x annual base salary, $815,360 for 2x an assumed 80% bonus, and $764,122 for payout of vested
RSUs) would have been payable to him.
David Whittle, Chief Operating Officer, West Africa
Pursuant to an employment agreement
dated effective January 1, 2023, the Company paid to David Whittle in 2023 an annual base salary of $436,800. The agreement has no
fixed expiry date and contains provisions regarding salary, paid vacation time, eligibility for annual equity-based awards and performance-based
cash bonuses, benefits, and change of control of the Company. In the event of termination without cause, Mr. Whittle will be entitled
to severance pay equal to 12 months’ annual salary. If Mr. Whittle chooses to terminate his contract, he is required to give
three months’ notice to the Company.
If, on December 31, 2023, Mr. Whittle
had been terminated without cause, $650,331 (comprised of $436,800 for 1x annual base salary and $213,531 for payout of vested RSUs) would
have been payable to him. If a change of control of the Company had occurred, 116,788 Common Shares for payout of vested PSUs, and $1,673,842
(comprised of $873,600 for 2x annual base salary, $349,440 for 1x an assumed 80% bonus, and $450,802 for payout of vested RSUs) would
have been payable to him.
Cesar Velasco, Chief Operating Officer, Latin America
Pursuant to an employment agreement
dated effective September 1, 2021, as subsequently amended, the Company paid to Cesar Velasco in 2023 an annual base salary of $410,800.
The agreement has no fixed expiry date and contains provisions regarding salary, paid vacation time, eligibility for annual equity-based
awards and performance-based cash bonuses, benefits, and change of control of the Company. In the event of termination without cause,
Mr. Velasco will be entitled to severance pay equal to 12 months’ annual salary. If Mr. Velasco chooses to terminate his
contract, he is required to give three months’ notice to the Company.
If, on December 31, 2023, Mr. Velasco
had been terminated without cause, $702,814 (comprised of $410,800 for 1x annual base salary and $292,014 for payout of vested RSUs) would
have been payable to him. If a change of control of the Company had occurred, 141,072 Common Shares for payout of vested PSUs, and $1,702,359
(comprised of $821,600 for 2x annual base salary, $328,640 for 1x an assumed 80% bonus, and $552,119 for payout of vested RSUs) would
have been payable to him.
Eric Chapman, Senior Vice-President, Technical Services
Pursuant to an employment agreement
dated effective January 1, 2017, as subsequently amended, the Company paid to Eric Chapman in 2023 an annual base salary of CAD$491,400.
The agreement has no fixed expiry date and contains provisions regarding salary, paid vacation time, eligibility for annual equity-based
awards and performance-based cash bonuses, benefits and change of control of the Company. In the event of termination without cause, Mr. Chapman
will be entitled to severance pay equal to 12 months’ annual salary. If Mr. Chapman chooses to terminate his contract, he is
required to give three months’ notice to the Company.
If, on December 31, 2023, Mr. Chapman
had been terminated without cause, CAD$841,598 (comprised of CAD$491,400 for 1x annual base salary and CAD$350,198 for payout of vested
RSUs) would have been payable to him. If a change of control of the Company had occurred, 171,702 Common Shares for payout of vested PSUs,
and CAD$1,945,456 (comprised of CAD$982,800 for 2x base salary, CAD$343,980 for 1x an assumed 70% bonus, and CAD$618,676 for payout of
vested RSUs) would have been payable to him.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-32 |
Director Compensation
Up until 2009, the non-executive Directors
of the Company were primarily compensated by way of directors’ fees and stock options. In 2010, the Company commenced granting DSUs
(described below) to the non-executive directors, and since 2013, ceased the granting of stock options to such directors.
Deferred Share Unit Plan
The Board, on the recommendation of
the Compensation Committee, established a Deferred Share Unit Plan (the “DSU Plan”) the purposes of which are to promote
a greater alignment of interests between non-executive Directors and the shareholders of the Company; and to provide a compensation system
for non-executive Directors that, together with any other compensation mechanisms of the Company, reflects the responsibility, commitment
and risk accompanying Board membership.
The Board may award such number of DSUs
to an eligible Director to provide appropriate equity-based compensation for the services he or she renders to the Company. Unless otherwise
determined by the Board, DSUs vest immediately and a Director’s entitlement to payment of such DSUs is not subject to satisfaction
of any requirements as to any minimum period of membership on the Board.
DSU’s are paid in cash and only
upon termination, which is deemed to occur on the earliest of (i) the date of voluntary resignation or retirement of the Director
from the Board; (ii) the date of death of the Director; or (iii) the date of removal of the Director from the Board whether
by shareholder resolution, failure to achieve re-election or otherwise; and on which date the Director is not an employee of the Company
or any of its affiliates.
Notwithstanding any vesting conditions
that the Board may have established in respect of a grant of DSU, upon the occurrence of a change of control, all outstanding DSUs will
become fully vested. The aggregate number of DSUs outstanding pursuant to the DSU Plan must not exceed 1% of the number of issued Common
Shares in the Company outstanding from time to time.
In 2023, the Board approved a maximum
grant value of CAD$94,000 for DSUs to each of its non-executive directors and CAD$120,000 to its non-executive Chairman of the Board.
Except for Ms. Harcourt and Ms. Seetaroo, who were appointed to the Board on July 2, 2021 and June 27, 2022 respectively,
each such director had achieved the share ownership guidelines and accordingly was provided with the right to elect to receive up to 50%
of their DSU value in the form of an immediate cash payment, with the balance in DSUs. Details of the DSU grant values and cash payments
are set out in the table on page A-34.
Retainer Fees
The cash compensation paid to non-executive directors consists
of annual retainer fees and for 2023 were as follows:
| Board Member | |
$ | 89,000 | |
| Plus, as applicable: | |
| | |
| Chair of the Board | |
$ | 78,000 | |
| Audit Committee Chair | |
$ | 24,000 | |
| Audit Committee Member | |
$ | 8,500 | |
| Compensation Committee Chair | |
$ | 19,000 | |
| Compensation Committee Member | |
$ | 6,250 | |
| Corporate Governance and Nominating Committee Chair | |
$ | 16,000 | |
| Corporate Governance and Nominating Committee Member | |
$ | 5,250 | |
| Sustainability Committee Chair | |
$ | 16,000 | |
| Sustainability Committee Member | |
$ | 5,250 | |
Effective April 1, 2015, Jorge
Ganoza Durant is not paid any compensation, including annual retainer and meeting fees, in his capacity as a director of the Company.
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-33 |
Effective January 1, 2024, the following annual retainer
fees have been amended to be as follows:
| Board Member | |
$ | 89,000 | |
| Plus, as applicable: | |
| | |
| Chair of the Board | |
$ | 78,000 | |
| Audit Committee Chair | |
$ | 24,000 | |
| Audit Committee Member | |
$ | 10,000 | |
| Compensation Committee Chair | |
$ | 19,000 | |
| Compensation Committee Member | |
$ | 8,500 | |
| Corporate Governance and Nominating Committee Chair | |
$ | 16,000 | |
| Corporate Governance and Nominating Committee Member | |
$ | 7,500 | |
| Sustainability Committee Chair | |
$ | 16,000 | |
| Sustainability Committee Member | |
$ | 7,500 | |
Director Compensation Table
The following summarizes all cash compensation paid to the
Directors who were not NEOs of the Company during the fiscal year ended December 31, 2023:
| Name | |
Director Fees
Earned | | |
Share-
based
Awards(1) | | |
Option-
Based
Awards | |
All Other
Compensation | | |
Total
Compensation | |
| David Laing | |
$ | 189,250 | | |
$ | 90,708 | | |
N/A | |
| Nil | | |
$ | 279,958 | |
| Mario Szotlender | |
$ | 129,777 | (2) | |
$ | 35,527 | | |
N/A | |
$ | 66,690 | (3) | |
$ | 231,995 | |
| David Farrell | |
$ | 132,500 | | |
$ | 71,055 | | |
N/A | |
| Nil | | |
$ | 203,555 | |
| Alfredo Sillau | |
$ | 142,036 | (2) | |
$ | 35,527 | | |
N/A | |
| Nil | | |
$ | 177,563 | |
| Kylie Dickson | |
$ | 118,250 | | |
$ | 71,055 | | |
N/A | |
| Nil | | |
$ | 189,305 | |
| Kate Harcourt | |
$ | 94,250 | | |
$ | 71,055 | | |
N/A | |
| Nil | | |
$ | 165,305 | |
| Salma Seetaroo | |
$ | 94,483 | | |
$ | 71,055 | | |
N/A | |
| Nil | | |
$ | 165,538 | |
Notes:
| 1. | The amounts represent the grant date fair market value of DSUs which was determined by the Board at the time of granting and based
on the then market price of the Company’s shares which was CAD$4.69 (US$3.55). The accounting fair value is calculated based on
the year-end market price of the Company’s shares of CAD$5.10 (US$3.86). The accounting fair values of the DSUs are $98,636 for
David Laing, $38,634 for Mario Szotlender, $102,219 for each of David Farrell, Kylie
Dickson, Kate Harcourt, and Salma Seetaroo. All amounts were calculated in CAD$ and translated to US$ at the 2023 year end exchange rate
of CAD$1.00 = US$0.7559. |
| 2. | Includes CAD$47,000 (US$35,527) paid in cash due to the election by each of Mario Szotlender and Alfredo Sillau to receive 50% of
his 2023 DSU grant value in cash rather than DSUs. |
| 3. | Mr. Szotlender was paid CAD$90,000 (US$66,690) for corporate development and financial advisory fees which were paid monthly
in CAD$ and converted to US$ and recorded on the Company’s books using the 2023 year average exchange rate of CAD$1.00 = US$0.7410. |
| 4. | The relevant compensation information for Jorge Ganoza Durant, a director and NEO, is provided in the “Summary Compensation
Table” above. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-34 |
Option-Based and Share-Based Awards
to the Directors
As at December 31, 2023, all outstanding
DSUs were vested. The following table sets forth the details of incentive stock options to purchase Common Shares of the Company and DSUs
held by the Directors who were not NEOs of the Company as at December 31, 2023 (all amounts shown in US$):
| | |
OPTION-BASED
AWARDS | |
SHARE-BASED
AWARDS | |
| | |
| |
| |
| |
| |
| |
Market | | |
| | |
| |
|
| | |
No. of | |
| |
| |
| |
Value of | |
Value of | | |
Market | | |
| |
|
| | |
Securities | |
| |
| |
Value | |
Unexercised | |
DSUs | | |
Value of | | |
| |
Market |
| | |
Underlying | |
Option | |
Option | |
Vested | |
In-The- | |
Vested | | |
Vested | | |
No. of | |
Value of |
| Name | |
Unexercised
Options | |
Exercise
Price | |
Expiration
Date | |
During
the Year | |
Money
Options | |
During
the
Year(1)(2)(4) | | |
DSUs
Not
Paid Out(3)(4) | | |
DSUs
Not
Vested(4) | |
DSUs
Not
Vested(4) |
| David Laing | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 90,830 | | |
$ | 562,792 | | |
N/A | |
N/A |
| Mario Szotlender | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 35,576 | | |
$ | 1,181,565 | | |
N/A | |
N/A |
| David Farrell | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 71,153 | | |
$ | 1,117,524 | | |
N/A | |
N/A |
| Alfredo Sillau | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 35,576 | | |
$ | 442,935 | | |
N/A | |
N/A |
| Kylie Dickson | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 71,153 | | |
$ | 448,555 | | |
N/A | |
N/A |
| Kate Harcourt | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 71,153 | | |
$ | 173,692 | | |
N/A | |
N/A |
| Salma Seetaroo | |
Nil | |
N/A | |
N/A | |
N/A | |
N/A | |
$ | 71,153 | | |
$ | 120,146 | | |
N/A | |
N/A |
Notes:
| 1. | All share-based awards are made in CAD$. |
| 2. | The market value of DSUs vested during the year is converted to US$ using the 2023 year-end exchange rate of CAD$1.00 = US$0.7559,
and is calculated as the number of DSUs outstanding times the closing price of the Company’s Common Shares on the TSX one day prior
to the date of vesting, which was CAD$4.69 (US$3.55). |
| 3. | The value of vested DSUs not yet paid out has been converted to US$ using the 2023 year-end exchange rate of CAD$1.00 = US$0.7559,
and calculated as the number of DSUs outstanding times the closing price of the Company’s Common Shares on the TSX at December 31,
2023 of CAD$5.10 (US$3.86). |
| 4. | All DSUs were fully vested upon granting but are not realizable until termination. |
| MANAGEMENT INFORMATION CIRCULAR | Statement of Executive Compensation Page | A-35 |
SCHEDULE "B"
Corporate Governance
Table of Contents
| Commitment to Responsible Mining |
B-1 |
| 2023 Highlights |
B-1 |
| Diversity |
B-1 |
| Environmental, Social and Governance Obligations |
B-2 |
| Climate Change Initiatives Undertaken in 2023 |
B-4 |
| GISTM Initiatives Undertaken in 2023 |
B-6 |
| Water Management |
B-7 |
| ESG Site Initiatives Undertaken in 2023 |
B-8 |
| Biodiversity |
B-9 |
| Environment |
B-10 |
| Metrics and Targets |
B-10 |
| ESG Reporting and Disclosure |
B-11 |
| ESG Corporate Policies |
B-11 |
| Information / Cyber Security |
B-12 |
| Disclosure of Corporate Governance Practices |
B-12 |
| Board of Directors |
B-12 |
| Enterprise Risk Management |
B-13 |
| Audit Committee |
B-13 |
| Corporate Governance and Nominating Committee |
B-14 |
| Compensation Committee |
B-14 |
| Sustainability Committee |
B-15 |
| Board and Committee Assessments |
B-15 |
| Orientation and Continuing Education |
B-15 |
| Site Visits |
B-16 |
| Shareholder Engagement |
B-16 |
| Ethical Business Conduct |
B-17 |
| Strategic Planning |
B-17 |
| Share Ownership Policy |
B-18 |
| Diversity |
B-18 |
| Director Tenure |
B-20 |
| Succession Planning |
B-20 |
| Director Attendance Record |
B-21 |
| Director Skills and Areas of Experise |
B-21 |
| |
|
| APPENDIX “A” – Board Mandate |
|
Commitment to Responsible Mining
Fortuna sees sustainability as the creation
of long-term economic, social, and environmental value for our stakeholders. This understanding has led us to make a fundamental commitment
to integrate sustainability into our governance, business strategy, organizational culture and day-to-day operations.
2023 Highlights
In terms of governance performance for
2023, key highlights include:
| · | GHG emissions reduction target: Over
the past year, Fortuna conducted the required analysis on energy consumption and greenhouse gas (“GHG”) emissions in
order to set a credible and achievable GHG emissions reduction target. We ended 2023 with clarity on four priority initiatives that will
allow Fortuna to reduce its GHG emissions and have proven to be reliable, affordable, and competitive investments. In early 2024, we disclosed
our GHG emissions reduction target. (See page B-5) |
| · | Climate Change: We conducted an initial
climate-related scenario analysis to enhance our understanding of the Company’s exposure to climate-related risks and opportunities
and the resilience of our business strategy. (See page B-4) |
| · | GISTM: Completed year one work of our
five-year plan to adopt the Global Industry Standard on Tailings Management (“GISTM”) and achieve compliance for all
company owned tailings storage facilities by the end of 2027. (See page B-6) |
| · | Sustainability Report: In July 2023,
we published our fifth annual Sustainability Report, prepared in accordance with Global Reporting Initiative Standards (“GRI
Standards”) and Sustainability Accounting Standards Board Standards (“SASB Standards”), and aligned our climate-related
disclosure with the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”). We anticipate
publishing our sixth Sustainability Report for the year ended December 31, 2023 in the second quarter of 2024. (See page B-11) |
| · | Corporate Governance Policies: Updated
corporate governance policies to better align with industry standards, including the Board and Management Diversity Policy (formerly the
Diversity Policy), and adopted a new Diversity, Equity, and Inclusion Policy. (See page B-18) |
Diversity
With operations and projects in seven countries, diversity
is part of our DNA. Our multicultural team works in different languages and comes from different ethnic backgrounds and experiences.
As such, we recognize the benefits of
embracing diversity, equity, and inclusion in the workplace. This includes broadening our expertise, accessing different outlooks, and
benefiting from all available talent. We respect the perspectives, experience, cultures, and essential differences that are unique among
our Board of Directors, management, and employees.
In 2023, we updated and/or developed new policies to better
reflect our commitment and aspirations towards diversity as follows:
| · | A new Diversity, Equity and Inclusion Policy
- this Policy expands on the Company’s approach to diversity, equity and inclusion and sets the standard to be followed not only
by directors and employees, but also by the Company’s suppliers. |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-1 |
| · | Board and Management Diversity Policy – revises the former Diversity
Policy and relates specifically to the Board and management. |
Mining is a traditionally male dominated
industry, and the Company seeks to promote the participation of women. Currently, the Fortuna has three female directors representing
37.5% of our Board. At the leadership level, 15.8% of our management team are women.
We establish targets for the representation
of women in the workforce and management on an annual basis. The following table reflects the participation of women in our workforce
and targets we have set.
| Sustainability Metrics | |
2023 Performance | |
2023 Targets | | |
2024 Targets | | |
2025 Targets | |
| % of women employees | |
15.86%
Above target | |
| 15.76 | % | |
| 14.28 | % | |
| 15.89 | % |
| % of women in management positions | |
15.81%
Above target | |
| 13.81 | % | |
| 13.34 | % | |
| 17.65 | % |
See “Diversity” on
page B-18 for more information.
Environmental, Social and Governance
Obligations
Our Board is committed to continuing
to focus on providing effective oversight of the Company’s material risks. It is committed to ensuring that environment, social
and governance (“ESG”) factors, including climate change (See “Climate Change Initiatives Undertaken in 2023”
on page B-4), occupational health and safety, tailings management (See “GISTM Initiatives Undertaken in 2023”
on page B-6) and human rights are integrated into the Company’s governance strategy and enterprise risk management processes.
In 2023, ESG metrics accounted for 35% of our short-term incentive plan metrics for senior executives (see Schedule “A” -
Statement of Executive Compensation page A-12). The Company has created a sustainability committee (the “Sustainability
Committee”) to assist in fulfilling our health, safety security, environmental, sustainable development and social responsibility
objectives and obligations. Our vision is to be valued by our stakeholders as a sustainable company and a leader in the precious metals
industry. Our mission is to create sustainable value through growth of our mineral reserves, metal production and the efficient operation
of our assets, while remaining firmly committed to safety, good governance, and social and environmental responsibility.
Five out of eight of the Company’s
Directors have safety, sustainability and ESG expertise, defined as a demonstrable understanding of key environmental impacts for a mining
company in multiple jurisdictions, including climate change risks and opportunities, sustainable development, workplace health and safety,
social performance, license to operate, community engagement, human rights, and governance of these matters. The Board has overall oversight
on ESG related matters and receives quarterly reports on ESG from an external consultant to ensure they remain up to date on the evolutions
in the ESG landscape, including on climate change. The Sustainability Committee in turn works directly with management on ESG issues including
climate change. In addition, all Directors have human capital management expertise, defined as knowledge of sustained succession planning
and talent development and retention programs, including executive compensation. All Directors also have corporate governance expertise,
defined as an understanding of the fiduciary, legal and ethical responsibilities of the Board, particularly issues surrounding conflicts
of interest, corporate opportunity, and insider trading.
The Company’s Senior Vice-President
Sustainability (“SVP Sustainability”) has accountability for ESG and sustainability at the executive leadership team
level and reports directly to the CEO. The role of the SVP Sustainability is to lead the Company’s sustainability and ESG strategy
development and implementation to maintain the value of our mineral assets and improve the long-lasting quality of the Company’s
operations while meeting key stakeholder expectations. In particular, the SVP Sustainability is responsible for tailings facility safety
and for climate-related risks and opportunities management.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-2 |
The SVP Sustainability is supported
by the Corporate Director of Health, Safety and Environment (“HSE”) and the Corporate Director of Geotechnical, Tailings
and Water. Directors of Sustainability for each of Latin America and West Africa assist the SVP Sustainability on ESG and sustainability
matters in their respective regions, and they participate in the development, implementation, and updating of our Sustainability Framework,
including corporate policies, standards, manuals and guidelines, management systems, training and reporting on ESG and sustainability,
including climate change related factors.
The Company’s Health and Safety,
Security, Environment and Communities Committee (“HSSEC”) Corporate Committee comprising members of management meets
quarterly to assist the Company’s senior management in achieving its governance and management objectives in the areas of health,
safety, security, environment and the community relations. The responsibilities of the HSSEC Corporate Committee are to:
| · | Ensure alignment of corporate sustainability policies, framework, standards,
goals and work plans throughout Fortuna and its subsidiaries. |
| · | Make recommendations to ensure the effective implementation of the corporate
sustainability policies, framework, standards, goals, and work plans at operational level. |
| · | Reviewhealth, safety, security, environment and community management programs
and their performance. |
| · | Propose measures to improve the effectiveness of the HSSEC management. |
| · | Ensure best practices and successful initiatives are shared at all sites. |
At a regional level, we have in place
our HSSEC Latin America Committee which convenes monthly to discuss its operations in Latin America, and an equivalent committee in West
Africa. These committees are led by their respective Chief Operating Officers and comprise mainly of the Vice President for Operations
and or the heads of each country or operation, and the Directors of Sustainability. Each committee is also assisted by the Corporate Director,
Health, Safety and Environment.
At each operating site, there is a structure
or a committee responsible for health, safety, environment and/or sustainability factors. Each subsidiary undertakes a monthly operational
and sustainability review, led at the Corporate level. Our subsidiary management participates in reviewing operational progress, sustainability
data, and performance compared to operational and Sustainability Plan key performance indicators (“KPI”)s and targets.
Quarterly reports on ESG trends are also sent to the Executive Leadership and Management Leadership teams to ensure they remain knowledgeable
on the evolution of ESG related matters.
The Company’s ESG and sustainability
governance and management oversight structure is set out below:
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-3 |
Climate Change Initiatives Undertaken in 2023
Fortuna’s approach to climate
is governed by two key ESG related documents which have been approved by the Board: our Environmental Policy, which articulates our key
environmental commitments, and our climate change position statement (the “CC Position Statement”), which was published
on April 7, 2022, and which articulates our approach to climate change and our key climate related commitments.
We recognize that climate change is
a major global challenge that could have near term significant impacts on operations, host communities, resources used in production,
the economy and society in general. Climate change is a systemic risk with the potential to affect our mine infrastructure and operations,
the regulatory frameworks under which we operate and the demand for the minerals we produce.
We recognize the current climate change
science and support the goals of the Paris Agreement and the recommendations of the TCFD. The Company is committed to analyzing the risks
and opportunities of climate change on our business activities, to integrating climate change factors into our long-term strategic planning,
and developing short-term tactical climate change action plans. Our approach to climate change management is guided by three key pillars,
which align to the climate change factors that were identified in a Climate Change Materiality
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-4 |
Assessment as having the greatest potential
to influence the Company’s value: (1) reduce GHG emissions by promoting resource efficiency and increasing the use of renewable
energy sources; (2) build resilience to the physical risks of climate change at our operations and projects; and (3) continuously
improve the performance of our governance and climate change action plans based on climate change science, regulatory and voluntary frameworks
and international standards.
The Company’s climate change governance
is supported by a robust framework that incorporates climate change factors into decision-making, including Board oversight and senior
management accountability which is reflected as follows:
| · | The Sustainability Committee has oversight of climate change factors. |
| · | The SVP Sustainability is accountable for identifying, assessing, managing
and reporting on climate change factors to senior management and the Board on a regular basis. |
| · | Our Country Heads have responsibility for managing climate change risks and
opportunities at the local and site level. |
The Company is committed to enhancing
the integration of climate-related risks into its enterprise risk management processes to ensure that the unique nature of climate-related
risks is appropriately considered and prioritized. The Company will identify and assess climate-related risks and opportunities over the
short, medium, and long term, and develop climate change action plans at the corporate level and at site level, based on risk and opportunity
assessments.
The main climate change related activities
achieved in 2023 were:
| · | The Company completed a study on energy consumption
and GHG emissions in which it identified energy efficiency and decarbonization opportunities and it set climate related metrics and targets,
including GHG emissions reduction targets which were subsequently announced in February 2024. |
In early 2024, we disclosed our GHG emissions
reduction target. The Company set a target to reduce Scope 1 and Scope 2 GHG emissions by 15% in 2030, compared to “business as
usual” forecast GHG emissions in 2030 if no intervention measures were taken.
The Company is also committed to supporting
the global ambition of net-zero GHG emissions by 2050 through investing in technology, energy efficiency initiatives, and renewable energy
over the long-term, where such investments are reliable, affordable, and competitive.
| · | We conducted an initial climate related scenario
analysis to enhance our understanding of the Company’s exposure to climate-related risks and opportunities and the resilience of
the Company’s business strategy. In particular, the Company has developed a more detailed understanding of its asset-level exposure
to physical climate risks under different scenarios. |
In 2024, the Company intends to:
| · | Update its internal systems to support the monitoring
and reporting of our GHG emissions reduction target. |
| · | Conduct climate-related water studies for our
higher risk operations. |
| · | Develop an internal climate change awareness
and training program focused on providing education on our GHG emissions reduction target and four priority initiatives to ensure alignment
across the organization. |
| · | Evaluate additional opportunities to implement
energy efficiency initiatives, adopt new technology and/or increase our use of renewable energy to further reduce our energy consumption
and GHG emissions in the coming years. |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-5 |
GISTM Initiatives Undertaken in 2023
On December 21, 2022, the Company
published its GISTM position statement (“GISTM Position Statement”), which articulates Fortuna’s approach to
tailings management along with its implementation commitments. The objective is to improve the Company’s existing tailings standards
which is based on the standards of the Canadian Dam Association (“CDA”) and the Australian National Committee on Large
Dams, and use GISTM to guide the adaptation to a broader tailings management. Under this refined tailings management approach, the Company
has committed to adopt GISTM and achieve compliance to applicable GISTM requirements for all new tailings storage facilities (“TSFs”)
during their first year of operation. The Company will continue to conduct the necessary studies to assess and fulfill GISTM applicable
requirements for all existing TSFs owned and operated by the Company, in order to implement the standards and ensure compliance of all
applicable requirements of GISTM for all Company owned TSFs by the end of 2027.
The following figure presents the Company’s tailings
governance system and controls to create lines of defence to prevent TSF failures:
A five-year plan has been created to
develop the management system and tools needed to implement GISTM, and at the same time ensure its progressive and effective application
in the field. Over the last two years, the Company has updated its TSF Technical Standard, initially based on the CDA, and developed two
additional standards to support the implementation of GISTM, being our TSF Governance Standard and our TSF Social Standard.
During 2023, as outlined in the Company’s GISTM Position
Statement, the Company among other actions:
| · | Implemented a TSF governance system that includes
the creation of an Independent Tailings Review Board (“ITRB”), the designation of an Accountable Executive (“AE”)
reporting to the CEO, and the appointment of a Responsible Tailings Facility Engineer for each site in addition to our Corporate Responsible
Tailings Facility Engineer. |
| · | Updated and developed our TSF Technical Standard
and developed two new standards: a TSF Governance Standard and a TSF Social Standard. |
| · | Made progress on technical studies such as third-party
dam safety reviews, design basis reports and deviance accountability reports. |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-6 |
In 2024, the Company intends to continue to conduct necessary
studies to assess and fulfill GISTM applicable requirements for all TSFs owned and operated by Fortuna, and in particular to:
| · | Ensure compliance with applicable GISTM TOPIC IV on Management and Governance
requirements by the end of 2024. |
| · | Ensure compliance with the applicable requirements of GISTM TOPIC III on
design, construction, operation, and monitoring for all company owned TSFs by the end of 2025. |
| · | Ensure compliance of all other applicable requirements of GISTM for all company
owned TSFs by the end of 2027. |
Water Management
We have developed policies and standards
to support effective water management. In our Environmental Policy, we commit to protect water sources, reduce water use, recycle, and
reuse wastewater wherever possible and ensure water effluents are minimized and discharged according to regulatory requirements. This
requires the Company to actively engage with governments, local authorities, local communities, and other stakeholders on external water
governance issues to support sustainable, consistent, and effective measures that underpin integrated water resource management. Our Community
Relations Policy and our Human Rights Policy are company-wide policies that articulate a commitment to respecting the human rights of
all individuals impacted by our operations, including employees, contractors, the communities in which we operate, and other external
stakeholders. The Human Rights Policy includes a specific commitment of the Company to respect the right to water, among other important
rights. In 2023, Fortuna created a new Corporate Standard on Water Management that outlines requirements related to water management plans,
watershed stakeholder engagement plans, monitoring, performance, site-wide water balance and reporting.
The Sustainability Committee provides
oversight of water management, and the SVP Sustainability has Executive- level responsibility for water management and is the AE for TSFs
as per GISTM, which is closely related to water management. At the Corporate level, the Corporate Director, Geotechnical, Tailings and
Water leads the development and the implementation of the Company’s tailings and water management standards and programs to ensure
the compliance and performance of our sites’ operations regarding the applicable management practices. In addition, the HSSEC Corporate
Committee ensures the alignment of subsidiary-level environmental initiatives, including water management. At the regional and site level,
there are HSSEC or equivalent committees responsible for all areas of sustainability applicable to the business, including water management.
Fortuna assesses each site’s water
needs using a risk-based approach considering the local social environment and climatic conditions to develop operational water balance
and management plans. Fortuna has placed particular focus on managing water use in regions facing challenges of high-water stress. At
our TSFs, water management plans optimize water consumption and recycling, with an emphasis on closed water management circuits to eliminate
or reduce the need to discharge effluent water from our process plants or TSFs. Our water management plans also include participatory
monitoring with local authorities and communities to identify discharges that could impact water quality or other concerns of our stakeholders.
To ensure oversight and internal control
of the use of water in our operations, we have set-up indicators to monitor water use and a specific KPIs target related to the freshwater
consumed per tonne of processed ore which is monitored and reported to management at the Corporate level each month. Performance against
this target is also reported to the Sustainability Committee and the HSSEC Corporate Committee on a quarterly basis.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-7 |
ESG Site Initiatives Undertaken in 2023
Examples of ESG initiatives undertaken in 2023 by our operations
in Latin America and West Africa include:
Lindero Mine (Argentina)
| · | Solar power project: An agreement with Industrias
Juan F. Secco S.A. was signed in June 2023 for the construction and operation of a photovoltaic plant. An environmental impact study
was approved at the end of 2023 and construction of the solar plant is expected to be completed in the second quarter of 2025. This project
is one of the projects to be undertaken by the Company in pursuit of its objective to reduce its GHG emissions reduction target. |
| · | Battery Energy Storage System (“BESS”)
implemented in October 2023: The main objective of the implementation of the BESS is to reduce fuel consumption and decrease the
average daily specific consumption. This system makes it possible to store electrical energy during periods of low consumption for use
during times of high demand, thus making it possible to save energy and optimize surpluses. |
San Jose Mine (Mexico)
| · | The “San Jose 2023 Scholarship Program”:
This program was completed, benefiting 145 high school and university students, 99 of whom were women and 46 men, from seven communities
in San José del Progreso. The program incentivizes community volunteerism, and in the eight in-person and virtual activities proposed,
the scholarship recipients contributed 42.5 hours to the development of their community through activities such as reading aloud for elementary
students, reforestation workshops, gender workshops, and mental health workshops. In this edition of the program, the school completion
rate was 94.48%. |
| · | Preventative Health Campaigns: Campaigns were
conducted to promote preventive health. For example, a mobile clinic truck for rabies vaccination was implemented in coordination with
the San José del Progreso City Council; a mobile clinic truck was implemented in partnership with Manos de Esperanza A.C., where
nine health care services, two complementary services, and 14 orthopedic devices were provided. A total of 1,455 attentions were provided
during these days, benefiting children, youth, adults, and the elderly. |
Caylloma Mine (Peru)
| · | "Fortalécete mujer” (Strengthen
Yourself, Woman) Program: This program was first implemented in 2013 and was organized again in 2023. This initiative was created
as an effort to raise awareness among the population of the Caylloma district of the high rate of gender-based violence in the locality.
Currently, the objective of this initiative is to promote the empowerment of women in Caylloma, through workshops where tools are provided
to encourage personal growth and the development of soft skills. The 54 women who participated during 2023 have been trained as agents
of change to positively influence social progress in the community. |
| · | “Sustainable Management of South American
Camelids” Program: This program is for alpaca breeders located in the neighboring lands of the Anexo de Talta Huarahuarco and the
Santa Rosa Community. Five components were covered in the program, including sanitary technical assistance, genetic improvement, mechanized
shearing and fiber management, commercial articulation, and pasture and forage production. Under the program producers receive training
in technical livestock management to improve their technical capacity in disease treatment, genetic improvement, mechanized shearing,
and fleece management. |
Yaramoko Mine (Burkina Faso)
| · | Local Employability and Training: Five young
people from villages around the mine completed a 4-month training program in heavy equipment operation at national training institutes.
In addition, 18 young people (both men and women) were able to complete their training at the Bagassi vocational training center in weaving,
refrigeration and air conditioning, and masonry. We also continued our scholarship program, which gives 27 local youth the opportunity
to continue their education at universities and training institutes |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-8 |
nationwide. Throughout the year, we
gave a three to six-month professional development or end-of-course internship in the mine's various departments to more than 50 young
people.
| · | Environmental Education Program: We implemented
an environmental education program in collaboration with the Departmental Environmental Service and local schools. Three school gardens
were created in the villages of Pahin, Bagassi, and Haho. The objective of this initiative is to support children’s learning on
plant production and reproduction techniques, as well as making fruit and vegetables available to improve the quality of meals served
in school canteens. |
| · | Reforestation Campaign: We coordinated our actions
with local communities and planted 18,500 trees. |
Séguéla Mine (Côte
d’Ivoire)
| · | Solar Power Supply Plan: We worked in close collaboration
with TotalEnergies to develop plans for a solar power supply plant to cover about 30% of the mine’s electricity needs on site. A
contract was signed between the two parties at the end of the year, with permitting and implementation scheduled to start in 2024. The
project consists of a 6 megawatts peak (MWp) photovoltaic solar plant that will feed the main switch room of the mine, to provide power
during daylight hours and reduce consumption from the grid. This initiative will be the first significant solarization of a mining site
and one of the largest solar projects in country and is expected to significantly contribute to the reduction of GHG emissions for the
Séguéla Mine and for Fortuna on a consolidated basis. |
| · | Social Investment: Our local development program
aims to contribute to the sustainable development of our host communities and is organized in two main components: (1) Our statutory
contribution to the Local Mining Development Fund – which started when production began in May 2023. This is in alignment with
the requirement outlined in the Côte d’Ivoire Mining Code that 0.5% of mine revenues are contributed to the Fund; and (2) Our
voluntary contributions to local development, through the four main pillars of Health, Water and Sanitation, Education, and Food Security.
In 2023, we implemented 13 initiatives that impacted more than 3,000 people, including the transformation of a hand powered pump into
an improved water production system in Bangana; the development of cassava fields for women in Kouego, Tiema and Bangana as part of the
livelihood restoration program, and providing textbooks for elementary school pupils in Kouego, Tiema and Bangana. |
| · | Micro-Credit Program: In recognition of the fact
that some local community members may not be able to fully participate in the 3P Program, this program seeks to identify such cases for
whom a non-agricultural option could be relevant in restoring their livelihoods. It will be based on a partnership with an established
microfinance entity, to offer access to micro-credits for livelihood restoration activities according to specific criteria. |
Biodiversity
The Sustainability Committee provides
oversight of biodiversity, and the SVP Sustainability has Executive-level responsibility for biodiversity. The HSSEC Corporate Committee
ensures the alignment of subsidiary-level environmental initiatives, including biodiversity, through the Sustainability Framework. Each
operating mine has a health, safety, security and environment committee responsible for environmental factors, including biodiversity.
Our biodiversity management seeks to
comply with the national regulations of our host countries and is based on international best practices – including the guidelines
provided by IFC Performance Standard 6 on biodiversity conservation and sustainable management of living natural resources, as well as
emerging concerns outlined by the Taskforce on Nature-related Financial Disclosures. Biodiversity impacts are considered from early on
in our project development lifecycle by ensuring biodiversity impact assessment and management plans are integrated in initial environmental
and social impact assessments. These management plans are then implemented and regularly updated during the operational phase of the resulting
mines, with biodiversity issues also further addressed in mine closure plans to cover the post-operations phases of our assets’
lifecycles.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-9 |
We monitor plant and animal species
included in the International Union for Conservation of Nature Red List of Threatened Species, the Convention on International Trade in
Endangered Species and local regulations, where applicable.
Environment
The Company is committed to ensuring
that the highest possible standards of environmental management are followed in all areas of its business activities. Environment is one
of Fortuna’s core values and is a pillar of our Sustainability Framework. Our Environmental Policy aims to prevent, avoid, minimize,
mitigate, and, when appropriate, offset our negative impacts on ecosystems, and to proactively manage environmental risks associated with
our activities, with the primary goal of attaining zero harm.
All phases of the Company’s operations
are subject to environmental laws and regulations in the jurisdictions in which it operates, in addition to its own policy and standards.
These environmental regulations provide directives and standards to avoid and/or limit spills, releases and emission of various substances
related to industrial mining operations that could result in environmental contamination.
The Company conducts regular environmental
risk assessments of its operations. The overall objective is to assess key environmental risks and their associated controls and to assess
regulatory compliance. Environmental statistics are collected from each of our operations on a monthly basis. To the best of management’s
knowledge, the Company complies in all material respects with all environmental laws and regulations applicable to its exploration, development,
construction and operating activities, including the renewal of environmental permits where applicable. Targets for environmental management
KPIs are set each year and were also one of the factors used in determining management compensation.
In terms of performance, the Company’s
environmental management highlights for 2023 are:
| · | Zero significant environmental spills |
| · | Zero incidents of non-compliance with water quality permits, standards and regulations. |
| · | Reduced GHG emissions intensity per thousand tonnes of processed ore from 17.9 tCO2eq/kt in 2022 to 17.13 tCO2eq/kt ore in 2023. |
| · | Reduced freshwater consumption intensity per ton of processed ore from 0.25 m3/t in 2022 to 0.20 m3/t in 2023. |
Metrics and Targets
The Company identifies key performance
indicators and targets where relevant to allow Fortuna to monitor and report on its performance in relation to sustainability related
risks and opportunities. This includes monitoring the progress towards any targets the entity has set, and any targets required to be
met by law or regulation. At Fortuna, the following key elements underpin our approach to metrics and targets:
| · | Alignment with Governance, Sustainability Strategy and Risk Management. Metrics and targets are
used to monitor against the desired outcome or result expected of the strategy and support with implementation of the sustainability strategy
and ongoing monitoring and oversight of sustainability risks and opportunities. |
| · | Metrics. Metrics are identified and monitored for each sustainability-related risk and opportunity
that could reasonably be expected to affect the company. A methodology is defined to calculate the metric and the inputs to the calculation,
including the limitations of the method used and the significant assumptions made. |
| · | Targets. Targets are set to monitor progress towards achieving the strategic goals. The setting
of targets should consider: quantitative or qualitative specificity, period of measurement, period from which progress |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-10 |
is measured, milestones and interim targets, performance against
each target and an analysis of trends, revisions to the target and an explanation for those revisions.
ESG Reporting and Disclosure
The Company measures and discloses its
sustainability performance using SASB Standards, the recommendations of the TCFD, and the GRI Standards.
Management provides reports on sustainability,
including updates on ESG matters, and updates on sustainability key performance indicators to the Board at least on a quarterly basis
through the Sustainability Committee, as well as to its HSSEC Corporate Committee.
Under the Company’s Enterprise
Risk Management (“ERM”) Program, the Board receives a global corporate risk report and a formal update from the ERM
department on a quarterly basis. ESG matters are mapped on the enterprise risk matrix. (See “Enterprise Risk Management”
on page B-13).
In addition, each operating subsidiary
provides a report on its sustainability performance as part of its monthly production review, including progress toward operational KPIs
corresponding to each of the six sustainability pillars.
On July 24, 2023, the Company announced
the release of its fifth annual sustainability report for the fiscal year ended December 31, 2022 (the “2022 Sustainability
Report”), which is available on its website in English, Spanish and French. The 2022 Sustainability Report details the Company´s
performance on key ESG indicators during 2022. The 2022 Sustainability Report highlights Fortuna´s sustainability management and
initiatives at each operating mine as well as our contributions within our host countries. The 2022 Sustainability Report also includes
a dedicated ESG data section containing disclosure under SASB Metals and Mining Standard, the TCFD Recommendations, and the GRI standard.
We anticipate publishing our sixth sustainability
report for the fiscal year ended December 31, 2023 in the second quarter of 2024.
For reporting and disclosure of water
management (See “Water Management” on page B-7), we strive to align our disclosure to industry leading ESG reporting
frameworks such as SASB, Carbon Disclosure Project with its water security questionnaire, GRI Standards and other recognized frameworks
as needed.
We provide annual disclosure on biodiversity
(See “Biodiversity” on page B-9) through our sustainability reports with industry leading ESG reporting frameworks
such as the SASB Standards and the GRI Standards.
We seek to align our climate change
disclosure (See “Climate Change Initiatives Taken in 2023” page B-4) with leading ESG reporting frameworks. In
2020, we started aligning our climate change disclosure with the TCFD recommendations and the SASB Metals & Mining Standard.
The ESG disclosure landscape has been evolving significantly over the past few years, notably through the establishment of the International
Sustainability Standards Board (“ISSB”) and the ISSB’s issuance of the IFRS Sustainability Disclosure Standards
S1 and S2. We are committed to monitoring the evolving disclosure landscape, including evolving regulatory requirements. Our disclosures
will evolve over time as we continue to take action on climate change.
ESG Corporate Policies
During and subsequent to the fiscal
year ended December 31, 2023, the Company adopted the Diversity, Equity and Inclusion Policy, and updated certain of its environmental
and social governance policies and frameworks that are essential to its operations, including: the Anti-Corruption Policy; the Board and
Management Diversity Policy (formerly the Diversity Policy); and the Sustainability Framework. In addition, in early 2024, the Company
announced its GHG emissions reduction target for 2030 and long-term objectives for 2050 (see page B-5).
Copies of the corporate policies, frameworks
and position statements can be found on the Company's website.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-11 |
Information / Cyber Security
The Company has established and continues
to enhance security controls to protect its information systems and infrastructure. Our goal is to ensure adequate protection of our information
assets in accordance with internal policies and controls, business requirements and relevant laws and regulations.
Our Board provides top level oversight
of risks relating to our information security and of related policies and practices. Senior management, corporate IT security officer
and our corporate Director of Information Technology are responsible for establishing, implementing and maintaining corporate information
security policies and standards.
Our business units are responsible for
ensuring the implementation of controls and protocols within their respective jurisdictions, led by local IT staff. The senior management
team, IT staff, local site management and all personnel are collectively responsible to ensure protection mechanisms are being utilized
and followed to prevent unauthorized access to our information systems. Each user of our information systems is responsible for complying
with the controls and policies that we establish, and for reporting any potential information security incidents of which they are aware.
We engage in ongoing cybersecurity awareness
training including phishing simulation campaigns to develop information security skills for all employees.
Disclosure of Corporate Governance
Practices
Pursuant to National Instrument 58-101
– Disclosure of Corporate Governance Practices ("NI 58-101"), the Company is required to and hereby discloses
its corporate governance practices as follows.
Board of Directors
Since February 2021, our Board
has been led by an Independent Chair, David Laing, an experienced mining executive. As Chair of the Board, David also chairs the independent
directors' sessions that are held at the end of every board meeting and as may otherwise be required.
The Chairman of the Board and a majority
of the Board are independent. The Board considers David Laing, David Farrell, Alfredo Sillau, Kylie Dickson, Kate Harcourt and Salma Seetaroo
to be "independent" according to the definition set out in NI 58-101. Jorge Ganoza Durant is not independent as he is the President
and Chief Executive Officer of the Company. Mario Szotlender is not independent as he is paid a consulting fee by the Company.
All eight of the Company’s Directors
have corporate governance expertise, defined as an understanding of the fiduciary, legal and ethical responsibilities of the Board, particularly
issues surrounding conflicts of interest, corporate opportunity and insider trading.
The Board must comply with conflict-of-interest
provisions in Canadian corporate law, including relevant securities regulatory instruments, in order to ensure that directors exercise
independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.
To the best of our knowledge, the Company is not aware of any existing or potential conflicts of interest between the Company or any of
its directors or officers that have not been disclosed to the Board, except that some of the Directors serve as directors of other public
companies. This information is listed under the profiles of our directors, where applicable, starting on page 4 of this Circular.
As at the date of this Circular, no members of the Board served together on the boards (or board committees) of other public companies,
except for Mr. Farrell and Ms. Dickson, who are both directors of Hillcrest Energy Technologies Ltd.
Special committees of the Board may
be appointed to consider special issues from time to time and in particular, any issues that may involve related party transactions, including
as defined and in compliance with Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.
A special committee of the Board may retain outside advisors at the Company’s expense in appropriate circumstances.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-12 |
The independent directors hold meetings
at the conclusion of every board meeting and as otherwise thought fit. At these meetings, non-independent directors and members of management
are not in attendance. In 2023, the independent directors met seven times.
The Board has adopted a Corporate Governance
Manual which includes the Board mandate and position descriptions for the Chair and the CEO. The mandate of the Board is set out in Appendix
“A” to this Schedule “B”. The Company also has written position descriptions for the Chairs of the Board committees.
The quorum for meetings of the Board and its committees is a majority of the Directors or Committee members, as applicable.
Enterprise Risk Management
The Board is responsible for the Company’s
overall risk oversight. The Company has an Enterprise Risk Management Program in place and maintains a central risk registry. The global
risk management program was implemented to ensure consistency in how operating sites and different areas within the Company identify,
assess, manage, document and report on risks. All locations follow the same methodology and assess risks (impact and probability) using
Fortuna’s Enterprise Risk Matrix. The Company’s risk matrix assesses risks from an operational, financial, reputational, social,
occupational health and safety and environmental perspective. The environmental component of the risk matrix includes climate change considerations
to ensure proper consideration of this topic while assessing risks.
The risk program is facilitated by the
corporate ERM team and consists of periodical detailed workshops within each area of the operating sites as well as quarterly interviews
with site leaders and corporate function owners (e.g., Tailing Management, Technical Services, Finance, etc.). The process follows
a bottom-up approach as information flows from local managers to Country Heads, Regional Leadership and Senior Management.
The results of the quarterly risk review
are consolidated into a site and regional specific risk reports and distributed to local and regional management. Senior Management and
the Board receive a global risk report and a formal update from the ERM department on a quarterly basis.
Audit Committee
| Members: |
Kylie Dickson (Chair), Alfredo Sillau, David Farrell |
| Committee Independence: |
100% |
Under the supervision of the Board,
the Company's Audit Committee has overall responsibility for assisting the Board in fulfilling its oversight responsibilities by reviewing
the financial information to be provided to the shareholders and others, the systems of internal controls and management information systems
established by management, the Company's internal and external audit process, and monitoring compliance with the Company's legal and regulatory
requirements with respect to its financial statements.
In the course of fulfilling its specific
responsibilities hereunder, the Audit Committee is expected to maintain an open communication between the Company's external auditors
and the Board. The Audit Committee does not plan or perform audits or warrant the accuracy or completeness of the Company's financial
statements or financial disclosure or compliance with generally accepted accounting procedures as these are the responsibility of management.
The Audit Committee has a written Charter
which sets out its mandate and responsibilities. The Audit Committee Charter contains a provision which provides that no member of the
Audit Committee shall have served as the CEO of the Company or of an affiliate, within the past five years, or as the CFO of the Company
or of an affiliate, within the past three years.
Due to her education and experience as a Chartered Professional
Accountant, Kylie Dickson has been designated by the Board as the Audit Committee financial expert of the Company.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-13 |
Corporate Governance and Nominating Committee
| Members: |
David Farrell (Chair), Kylie Dickson, Salma Seetaroo |
| Committee Independence: |
100% |
Under the supervision of the Board,
the Company's CG&N Committee has overall responsibility for developing the Company's approach to corporate governance including keeping
informed of legal requirements and trends regarding corporate governance, monitoring and assessing the functioning of the Board and committees
of the Board, and for developing, implementing and monitoring good corporate governance practices. The CG&N Committee is also responsible
for identifying and recommending to the Board possible candidates for the Board as necessary, after considering the competencies and skills
the Directors as a group should possess and considering the appropriate size of the Board.
The CG&N Committee has a written
Charter which sets out its mandate and responsibilities. The CG&N Committee Charter contains provisions which provide that:
| · | The nomination process section of the CG&N Committee Charter reflects
that the Committee will consider recommendations on director nominees appropriately submitted by shareholders; and |
| · | The Composition section of the CG&N Committee Charter requires that at
least one member of the Committee shall be a woman. |
The CG&N Committee is responsible
for identifying individuals and recommending to the Board those qualified to become new board members. New nominees must have a track
record in general business management, experience in an area of strategic interest to the Company, the ability to devote the time required
and a willingness to serve. Recommendations for nominees as appropriately submitted to the CG&N Committee will also be considered
as part of the process. The Board adheres to the following process, with the input and advice of the CG&N Committee, prior to nominating
or appointing individuals as directors:
| · | The Board determines the appropriate size of the Board, with a view to facilitating
effective decision- making. |
| · | The Board considers what competencies and skills the Board as a whole should
possess. In doing so, the Board also considers the needs of each committee. |
| · | The Board assesses what competencies and skills each existing director possesses. |
| · | In accordance with the CG&N Committee Charter, the Board considers recommendations
appropriately submitted by shareholders; |
| · | In accordance with the Company's Board and Management Diversity Policy, the
Board considers diversity when reviewing potential candidates for appointment to the Board. |
Compensation Committee
| Members: |
David Farrell (Chair), David Laing, Alfredo Sillau |
| Committee Independence: |
100% |
The Company’s Compensation Committee
has overall responsibility for recommending levels of executive compensation that are competitive and motivating in order to attract,
hold and inspire senior officers and directors. The Compensation Committee approves the corporate goals relevant to the CEO's compensation
and evaluates the CEO's performance in light thereof. It also makes recommendations to the Board regarding CEO, CFO and director compensation,
bonus plans for management and key employees, and equity-based plans such as incentive stock option and share unit plans.
The Compensation Committee has a written
Charter which sets out its mandate and responsibilities. The Compensation Committee Charter contains a provision which provides that no
member of the Committee shall have served as the CEO of the Company or of an affiliate, within the past five years, or as the CFO of the
Company or of an affiliate, within the past three years.
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Sustainability Committee
| Members: |
David Laing (Chair), Mario Szotlender, Kate Harcourt, Salma Seetaroo |
| Committee Independence: |
Majority |
Under the supervision of the Board, the Company’s Sustainability
Committee is responsible for:
| · | reviewing the health, safety, security, environmental, sustainable development
and social responsibility policies of the Company; |
| · | monitor the health, safety, security, environmental, sustainable development
and social responsibility performance of the Company; and |
| · | assess the effectiveness of the Company's health, safety, security, environmental,
sustainable development and social responsibility policies and practices. |
It also reviews reports from management
on the identification, assessment and management of risks relating to health, safety, security, environmental matters and social responsibility
matters and reports to the Audit Committee and the Board in respect thereof.
The Sustainability Committee has a written
Charter which sets out its mandate and responsibilities. The Sustainability Committee Charter contains a provision which includes explicit
mention of the Sustainability Committee’s oversight of climate change.
Board and Committee Assessments
The CG&N Committee annually assesses
the effectiveness of the Board and how well it is meeting its objectives, and the performance of individual directors. In addition, each
Committee conducts an annual assessment of the effectiveness of such Committee and its Chair.
The assessments are conducted through
written questionnaires completed by the Committee members. The questionnaires include, as applicable, a Board appraisal, an evaluation
of each director's performance, a Committee self-appraisal on responsibility and effectiveness, and an evaluation of the Committee Chair.
The Committees then report the results of their reviews to the Board.
The Board evaluation was conducted in
early 2024 and focused on the Board as a whole and the supporting work of the committees. Topics in the questionnaire included: current
performance, strengths, need for improvement, access to management, the sufficiency and risks of blindspots in the information provided
to Directors, and strategic and planning initiatives. Upon completion of the assessment, relevant feedback from the Directors was reported
to the rest of the Board and to the CEO in the ongoing effort to strengthen communication lines between Directors and between the Board
and management.
While assessment questionnaires are
completed annually, an enhanced Board evaluation, which includes a one-on- one interview between each Director and the Chair of the CG&N
Committee, is conducted every second year. The next enhanced Board evaluation process will occur in 2025.
Orientation and Continuing Education
Management will ensure that a new appointee
to the Board receives the appropriate written materials to fully apprise him or her of the duties and responsibilities of a director pursuant
to applicable law and policy. Each new director brings a different skill set and professional background, and with this information, the
Board is able to determine what orientation to the nature and operations of the Company's business will be necessary and relevant to each
new director. Continuing education for directors is provided as such need arises and open discussion is encouraged at all meetings, a
format that fosters learning by the Directors. Each Director of the Company has the responsibility for ensuring that he or she maintains
the skill and knowledge necessary to meet his or her obligations as a director.
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As part of the continuing education
of directors, management makes regular presentations to the Board on specific aspects of the Company's business or industry that are deemed
particularly relevant or important, or on topics that the Board considers to be beneficial. The Company also encourages its directors
to attend conferences, seminars or courses on subjects related to their role on the Board or when appropriate Board Committees.
A minimum of three structured additional
educational seminars on different topics are arranged for the Directors each year. Topics for presentation are suggested annually by the
Directors, and are determined by management in consultation with the Chair of the CG&N Committee. In 2023, educational seminars included:
Quality Assurance and Quality Control mineral resource estimations; mineral reserve estimation reconciliation; metallurgy and tailings
management.
The Board also receives quarterly reports
on ESG trends from external consultants to ensure they remain up to date on the evolutions in the ESG space. In 2023, the Board approved
all strategic plans for 2023, budgets and targets, including those related to ESG.
Site Visits
The Directors routinely visit the Company's
operations. In September 2023, Directors attended the inauguration of the Séguéla Mine in Côte d’Ivoire.
In January 2024, the Directors toured the Lindero Mine in Argentina. Site visits enable the Directors to stay at site and view the
operations, meet with local management, employees and contractors. They also have the opportunity to meet with local community leaders,
and to see local company- sponsored education initiatives. The next planned site visit is to the Caylloma Mine during the second quarter
of 2024.
With the occasion of International Women’s
day on March 8, 2024, Salma Seetaroo, a member of the Board, visited the Séguéla Mine in Côte d’Ivoire
and led a panel discussion on gender equality in the workplace and the importance of women in leadership.
The Directors receive an in-depth monthly
report from management with ad hoc reports delivered as needed. As well, at each of the quarterly meetings of the Board, Directors receive
a detailed report and presentation on each of our business units and meet with selected members of regional management.
Shareholder Engagement
The Company recognizes the benefit of
regular engagement with its shareholders in order to remain attuned to the shareholders' different perspectives on matters affecting the
Company. The Company conducts active shareholder engagement through several means:
| · | Investor relations: Direct access to Fortuna’s
investor relations representatives is provided on our website and publicly available corporate materials. We encourage outreach and provide
timely, transparent, and open discussions regarding the Company´s activities. |
| · | Quarterly earnings calls: Hosted on-line
by our CEO, CFO, and Chief Operating Officers of Latin America and West Africa. Meeting participation details are provided in advance
via press release. These calls are open to the public and provide an opportunity for investors, analysts, and media to interact with management.
All transcripts and webcasts are archived on our corporate website. |
| · | Investor and media engagement: 359 in-person
and on-line meetings were held in 2023. These include interactions with analysts, investors, trade publications, social media influencers,
and traditional media outlets. |
| · | Institutional and retail investor conferences:
We regularly participate at premier precious metals investor conferences, and continually assess additional opportunities to attend
events that will allow us to further connect with interested parties. Our Chairman, CEO and representatives of our executive leadership
team frequently participate and engage with investors at these conferences. |
| · | Site tours: In 2023, we hosted two separate
groups consisting of fund managers, investors, international media, and social media commentators at our Séguéla Mine in
Côte d’Ivoire. The tours provided in-depth access highlighting our newest operation, its culture, and sustainability initiatives,
while providing the |
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-16 |
opportunity to interact with senior leadership,
including our CEO and Chief Operating Officer for West Africa, and numerous members of on-site staff. Looking ahead, we will continue
to evaluate all opportunities to invite key stakeholders to view our operations and projects.
| · | Corporate governance: Our corporate website
provides transparent access to our procedures, policies, and whistle-blower channels, which are overseen by our Board. These initiatives
guide Fortuna to sustainably operate in the best interests of our people, our communities, and our shareholders. This information is also
provided to proxy advisory firms, investors, and advocacy groups on request. |
| · | Disclosure: All annual and quarterly regulatory
filings and news releases are filed on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov. Fortuna also hosts an annual general meeting
where shareholders have the opportunity to engage management and vote on corporate matters. |
Ethical Business Conduct
The Board expects management to operate
the business of the Company in a manner that enhances shareholder value and is consistent with the highest level of integrity. Accordingly,
the Board has adopted a Code of Business Conduct and Ethics and Whistle-Blower Policy (the "Code") which has been filed
on SEDAR+ at www.sedarplus.ca and is also available on the Company's website. In addition, the Board must comply with conflict-of-interest
provisions in Canadian corporate law, including relevant securities regulatory instruments, in order to ensure that directors exercise
independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.
Training on the Code was through online training to all employees directors and officers in 2023.
In order to monitor compliance with
the Code and provide an avenue for stakeholders (employees, officers, directors, suppliers, and customers) to raise concerns and be reassured
that they will be protected from reprisals or victimization for whistle-blowing in good faith, the Board has also adopted a Whistle-Blower
Policy establishing the procedure for the receipt and treatment of reports by the Company, on a confidential or anonymous basis, regarding
accounting, internal controls, auditing matters, disclosure, fraud and unethical business practices, whether submitted by Company employees
or third parties. Complaints may be reported to a manager or supervisor, or through the Company's whistle-blower website: http://fortuna.ethicspoint.com.
Reports are reviewed by the Company's Audit Committee.
Strategic Planning
Management is responsible for developing
and recommending the Company's strategic plan, for approval by the Board and periodically throughout the year. The Board reviews the current
and proposed operations of the Company and assesses the strategic plan's strengths, weaknesses and overall results so that the plan can
be adjusted as needed in a timely manner.
In 2021, the Company engaged external
consultants to assist in the planning process which was conducted over a period of five months and involved meetings with management and
the Board. The result was the adoption of a new strategic plan to cover the period from 2022 to 2026 to secure the long-term growth and
value creation for the Company.
The Board approves the annual corporate
objectives and budget for the ensuing year and the five-year plan. In line with the strategic plan, the Company’s budget for 2023
was approved in December 2022, and the budget for 2024 was approved in January 2024. Management's progress in meeting the strategic
and operational goals is reviewed by the Board throughout the year and is considered when determining compensation. As part of its review,
the Board believes its role is to balance performance and compliance by ensuring that management's actions are consistent with the strategic
goals; reflective of the corporate culture of the Company's business; and in alignment with the Company's risk tolerance.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-17 |
Share Ownership Policy
Based on a recommendation by the Compensation
Committee, the Board adopted in 2016 a Share Ownership Policy, as amended in March 2022, to reflect the completion of the acquisition
of Roxgold Inc. in July of 2021 and the changes in the management structure of the Company. The Share Ownership Policy sets out share
ownership guidelines which will enhance alignment of the interests of directors and executive officers of the Company with its shareholders.
Minimum share ownership levels must be achieved within five years.
The CEO is required to have acquired
Common Shares and/or share-settled share units of the Company having a value equal to three times the gross amount of his annual base
salary; the CFO is required to have acquired Common Shares and/or share-settled share units having a value equal to two times the gross
amount of his annual base salary, and each of the Chief Operating Officers and Senior Vice-Presidents must have acquired Common Shares
and/or share-settled share units having a value equal to one times the gross amount of his annual base salary. Non-executive directors
are required to hold Common Shares and/or DSUs of the Company having a value equal to three times the gross amount of their annual director
retainer. The status of the equity targets of the NEOs and directors and their holdings as at December 31, 2023 are as follows:
| Name | |
Required
ownership as
multiple of
annual base
salary /
retainer | |
Required
dollar value | | |
Common
Shares held | | |
Share-
settled
Share Units
held | | |
DSUs held | | |
Total
holdings | | |
Target met, or
deadline for
meeting target |
| NEOs | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| Jorge Ganoza Durant | |
3x | |
$ | 2,137,200 | | |
| 1,905,418 | | |
| 694,365 | | |
| Nil | | |
| 2,599,783 | | |
Met |
| Luis Ganoza Durant | |
2x | |
$ | 1,019,200 | | |
| 645,593 | | |
| 263,004 | | |
| Nil | | |
| 908,597 | | |
Met |
| David Whittle | |
1x | |
$ | 436,800 | | |
| 6,358 | | |
| 116,788 | | |
| Nil | | |
| 123,146 | | |
Met |
| Cesar Velasco | |
1x | |
$ | 410,800 | | |
| 30,768 | | |
| 141,072 | | |
| Nil | | |
| 171,840 | | |
Met |
| Eric Chapman | |
1x | |
$ | 364,127 | | |
| 150,775 | | |
| 171,702 | | |
| Nil | | |
| 322,477 | | |
Met |
| Directors | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| David Laing | |
3x | |
$ | 267,000 | | |
| 109,150 | | |
| Nil | | |
| 145,801 | | |
| 254,951 | | |
Met |
| Mario Szotlender | |
3x | |
$ | 267,000 | | |
| 171,700 | | |
| Nil | | |
| 306,105 | | |
| 477,805 | | |
Met |
| David Farrell | |
3x | |
$ | 267,000 | | |
| 15,000 | | |
| Nil | | |
| 289,514 | | |
| 304,514 | | |
Met |
| Alfredo Sillau | |
3x | |
$ | 267,000 | | |
| 36,502 | | |
| Nil | | |
| 114,750 | | |
| 151,252 | | |
Met |
| Kylie Dickson | |
3x | |
$ | 267,000 | | |
| 3,500 | | |
| Nil | | |
| 116,206 | | |
| 119,706 | | |
Met |
| Kate Harcourt | |
3x | |
$ | 267,000 | | |
| Nil | | |
| Nil | | |
| 44,998 | | |
| 44,998 | | |
July 2, 2026 |
| Salma Seetaroo | |
3x | |
$ | 267,000 | | |
| Nil | | |
| Nil | | |
| 31,126 | | |
| 31,126 | | |
June 27, 2027 |
Diversity
In early 2024, the Board approved a
Diversity, Equity and Inclusion Policy, which promotes diversity in the workplace by respecting and appreciating differences in gender,
age, ethnic origin, religion, education, sexual orientation, political belief or disability. In addition, the Board also approved certain
amendments to the Board and Management Diversity Policy (formerly the Diversity Policy), which promotes diversity specifically in the
Board of Directors and Senior Management levels. At Fortuna, we respect and value the perspectives, experiences, cultures and essential
differences that our Board, management and employees possess.
The Company currently has three female
directors (37.5% of the Board) and no female senior executive officers. Kylie Dickson was appointed to the Board in August 2017,
Kate Harcourt was appointed to the Board in July 2021 and Salma Seetaroo was appointed to the Board in June 2022. Women comprise
43% of non-management directors and 50% of independent directors on the Board.
During the confidential Board and Committee
assessments conducted in early 2024, Directors were asked to voluntarily self identify in the following categories: gender, disability,
race/ethnicity and cultural/geographical diversity. Four directors self identify as racially and/or ethnically diverse.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-18 |
The following charts show some of the
diverse characteristics of our current members of the Board:
The Board considers gender diversity
an important element in the achievement of its diversity initiatives. The Board does not have a fixed quota for the selection of its candidates.
In 2021, the Board committed to have a composition of 30% female directors as independent directors by the Company’s 2023 annual
general meeting. The Board has achieved this commitment. The CG&N Committee Charter reflects that at least one member of the CG&N
Committee shall be a woman.
We strive to meet or exceed all reasonable
stakeholder expectations and to be the company of choice as a great place to work. We are successful at both because we recruit, retain,
reward and develop our people based upon their abilities and contributions. Fortuna does not condone engagement in actions that would
violate any anti- discrimination, equal employment or other laws and regulations.
Among the various dimensions of diversity,
the Company is focusing on gender. In the locations where the Company operates, mining has traditionally been seen as a male occupation.
The Company is seeking to destigmatize the sector and promote the participation of women, to generate shared value for the Company and
society. The Company has included key performance indicators and targets for the representation of women in the labor force and management
in its five-year sustainability plan.
The Board is committed to fostering
a diverse workplace environment where:
| · | individual differences and opinions are heard and respected; |
| · | employment opportunities are based on the qualifications required for a particular
position at a particular time, including training, experience, performance, skill and merit; and |
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| · | inappropriate attitudes, behaviors, actions and stereotypes are not tolerated
and will be addressed and eliminated. |
The Board proactively monitors company
performance in meeting the standards outlined in the Board and Management Diversity Policy. In particular, the Board uses a skills matrix
to assess the strengths and adequacy of existing Board members, as well as to assist with the evaluation of any new director candidates.
See "Director Tenure and Skills" below.
Director Tenure
There are no term limits for directors
and the Company does not have a retirement policy for directors. The Board believes that the need to have experienced directors who are
familiar with the business of the Company must be balanced with the need for renewal, fresh perspectives and a healthy skepticism when
assessing management and its recommendations. The Board has a formal assessment process that evaluates the performance of the Board and
its committees and the skills and contribution of each director. The Company has not adopted director term limits at this time on the
basis that the imposition of such limits discounts the value of experience and continuity amongst board members.
Such limits create a risk of excluding
experienced and valuable board members as a result of an arbitrary determination based on fixed criteria that may not best serve the interests
of shareholders. The Board believes that other mechanisms of ensuring board renewal, such as the Company's formal assessment program,
are adequate for ensuring that the Company maintains a high performing Board. See pages B-21 and B-22 for details regarding the skills
matrix used by the Board to assess the strengths and adequacy of the Company's directors. The current Board composition reflects a good
balance of directors with knowledge of the history of the Company together with recent appointees who contribute by fresh ideas and perspective.
The following table illustrates an appropriate
degree of director turnover while maintaining Board continuity and experience:
| Director | |
Approximate Years | |
| Jorge Ganoza Durant | |
19 | |
| Mario Szotlender | |
15 | |
| David Farrell | |
10 | |
| David Laing | |
7 | |
| Alfredo Sillau | |
6 | |
| Kylie Dickson | |
6 | |
| Kate Harcourt | |
3 | |
| Salma Seetaroo | |
2 | |
Overall Average:
| |
8.5 | |
| Independent Directors Average: | |
5.7 | |
Succession Planning
Succession planning in key leadership
positions is important to ensure the stability and continuity of the Company’s business. The CG&NC Committee is responsible
for reviewing the Company´s succession plan for the CEO and other key executives on an annual basis, in accordance with the Company’s
Succession Policy.
Each of our Country Heads is responsible
for reviewing and presenting succession plans for key leadership positions in each subsidiary on an annual basis to management of the
Company and the Board.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-20 |
Succession plans include contingency
plans for emergency replacements, as well as near-term and long-term successors for key management positions, and is also recommended
for those positions where there is a critical need to ensure continuity of talent. All such positions are identified through the talent
management process.
Succession planning is a key responsibility
of management. The human resources department partners with management to facilitate the process.
Director Attendance Record
The table below summarizes the number
of Board and committee meetings attended by each director during 2023:
| Director | |
Board | |
Independent Directors | |
Audit Committee | |
CG&N Committee | |
Compensation Committee | |
Sustainability Committee | |
Overall Attendance | |
| Jorge Ganoza Durant | |
7 of 7 | |
| |
| |
| |
| |
| |
| 100 | % |
| Mario Szotlender | |
7 of 7 | |
| |
| |
| |
| |
6 of 6 | |
| 100 | % |
| David Farrell | |
7 of 7 | |
7 of 7 | |
6 of 6 | |
2 of 2 | |
3 of 3 | |
| |
| 100 | % |
| David Laing | |
7 of 7 | |
7 of 7 | |
| |
| |
3 of 3 | |
6 of 6 | |
| 100 | % |
| Alfredo Sillau* | |
7 of 7 | |
7 of 7 | |
6 of 6 | |
1 of 1 | |
3 of 3 | |
| |
| 100 | % |
| Kylie Dickson | |
7 of 7 | |
7 of 7 | |
6 of 6 | |
2 of 2 | |
| |
| |
| 100 | % |
| Kate Harcourt | |
7 of 7 | |
7 of 7 | |
| |
| |
| |
6 of 6 | |
| 100 | % |
| Salma Seetaroo** | |
7 of 7 | |
7 of 7 | |
| |
1 of 1 | |
| |
3 of 3 | |
| 100 | % |
* Alfredo Sillau ceased
to be a member of the CG&N Committee on June 22, 2023.
** Salma Seetaroo was appointed as a
member of the CG&N Committee and the Sustainability Committee on June 22, 2023.
Director Skills and Areas of Expertise
The following skills matrix describes
the particular skills and experience that are considered as integral to the Board performance. This matrix is used by the CG&N Committee
and the Board to assess the strengths and adequacy of the composition of existing Board members, as well as to assist with the evaluation
of any new director candidates.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-21 |
| Skills and Experience |
Jorge
Ganoza
Durant |
Mario
Szotlender |
David
Farrell |
David
Laing |
Alfredo
Sillau |
Kylie
Dickson* |
Kate
Harcourt |
Salma
Seetaroo |
Total
(of 8) |
| Strategy and Leadership: Experience driving strategic direction and leading growth of an organization, preferably including the management of multiple projects, and having comfort with current principles of risk management. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Operations and Exploration: Experience with the operations of a leading mining company, including exploration activities, having a focus on safety, the environment and operational excellence. |
ü |
ü |
|
ü |
|
ü |
ü |
|
5 |
| Risk Management: Knowledge of risk management principles and practices, an understanding of the key risk areas that a company faces, and an ability to identify, assess, manage and report on key risk controls and exposures |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Corporate Governance: Understands the fiduciary, legal and ethical responsibilities of the Board, particularly issues surrounding conflicts of interest, corporate opportunity and insider trading. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Metals and Mining: Knowledge of the mining industry, markets, international regulatory environment and stakeholder management. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Safety, Sustainability and ESG: Demonstrable understanding of key environmental impacts for a mining company in multiple jurisdictions, including climate change risks and opportunities, sustainable development, workplace health and safety, social performance, license to operate, community engagement, human rights and governance of these matters. |
ü |
ü |
|
ü |
|
|
ü |
ü |
5 |
| Finance: Experience in the areas of finance, investment and/or mergers and acquisitions. |
ü |
ü |
ü |
ü |
ü |
ü |
|
ü |
7 |
| Human Capital Management: Knowledge of sustained succession planning and talent development and retention programs, including executive compensation. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Financial Literacy: Ability to understand financial statements that present the breadth and level of complexity of accounting issues that are typical in a mining company. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| International Business: Experience working in a major organization that carries on business in multiple jurisdictions, including exposure to a range of governmental, cultural and regulatory requirements. |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
ü |
8 |
| Spanish/French Language: Fluency in reading and speaking Spanish or French. |
ü |
ü |
|
ü |
ü |
|
|
ü |
5 |
| Diverse Perspectives: Including gender, geographical location, cultural background. |
ü |
ü |
|
|
ü |
ü |
ü |
ü |
6 |
*Kylie Dickson, Chair of the Audit Committee, is the
Audit Financial Expert.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance Page | B-22 |
APPENDIX "A"
Board Mandate
INTRODUCTION
National Policy 58-201, Corporate Governance
Guidelines, and National Instrument 58-101, Disclosure of Corporate Governance Practices, mandate corporate governance policies for reporting
issuers and provide the framework for disclosure of these policies to the public.
The Board of Directors of the Company
(the “Board”) considers good corporate governance to be essential to the fiduciary obligations of the directors to
its shareholders and integral to the ongoing good management and development of the Company, and in this connection has developed this
Mandate.
COMPOSITION OF THE BOARD
The Board has determined that in order
to effectively manage the Company's affairs, the Company requires between five and nine directors, the majority of whom shall be independent.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors meets in person
at least once per year. The Board also holds additional scheduled and unscheduled meetings by telephone conference call from time to time
as business needs require. The quorum necessary for the transaction of business at a Board meeting shall be a majority of the directors.
During the course of a directors’ meeting, if they deem it appropriate, the independent directors may meet in camera, and
in any eventthe independent directors will meet by themselves at least four times per year.
MANDATE
The mandate of the Board is to supervise
the management of the Company and to act in the best interests of the Company. The Board acts in accordance with the British Columbia
Business Corporations Act; the Company’s Articles; the Company’s Code of Business Conduct and Ethics; the Mandate of
the Board, the charters of the Board’s committees, and other applicable laws and policies. The Board approves significant decisions
that affect the Company before they are implemented. As a part of its overall responsibility for the stewardship of the Company, the Board
assumes responsibility for the following:
The Board sets and supervises standards
of corporate governance that create a culture of integrity throughout the Company, and guides the operations of the Company and management
in compliance with the Company's constating documents and British Columbia corporate law, securities legislation in each jurisdiction
in which the Company is a reporting issuer, and other applicable laws.
The Board monitors the Company’s
strategic planning process, including the opportunities and risks of the business. The senior officers of the Company (“Management”)
present materials relating to the strategic plan to the Board periodically throughout the year on current and proposed operations of the
Company. The Board reviews the plan to assess its strengths, weaknesses and overall results so that the plan can be adjusted in a timely
manner.
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The Board, in its assessment of the strategic
plan, reviews principal risks and considers management’s plans to monitor and manage risk. The principal risks to the Company have
been identified as risks relating to the environment, social, safety, securities markets, commodity prices, currency fluctuations, legislative
and title issues arising from operations and the fact that exploration, development and mining activities are inherently risky. Management
assists the Board in identifying risks and to promptly alert the Board when a risk has materialized or materially changed. The Board may
from time to time appoint Management members, board members or advisors to assist in assessing different risks.
The Corporate Governance and Nominating
Committee annually identifies key individuals of the Company and, in consultation with Management, determines how to replace such individuals
should the need arise. Management is assigned the responsibility of training and advising new persons of the Company's policies and practices.
The CEO has primary responsibility for supervising and reviewing the performance of Management.
The Disclosure Policy governs communication
with shareholders and others and reflects the Company's commitment to timely, effective and accurate corporate disclosure in accordance
with all applicable laws and with a view to enhancing the Company's relationship with its shareholders.
| f. | Internal Control and Management Information Systems |
The effectiveness and integrity of the
Company's internal control and management information systems contribute to the effectiveness of the Board and the Company. The Board,
through its audit committee, oversees and monitors internal control and management information systems.
| g. | Approach to Corporate Governance |
The Board has appointed a Corporate Governance
and Nominating Committee which has overall responsibility for developing the Company’s approach to corporate governance including
keeping informed of legal requirements and trends regarding corporate governance, monitoring and assessing the functioning of the Board
and committees of the Board, and for developing, implementing and monitoring good corporate governance practices. The Corporate Governance
and Nominating Committee is also responsible for identifying and recommending to the Board individuals qualified to become new board members.
Individual directors may engage an outside
adviser at the expense of the Company in appropriate circumstances, subject to the approval of the Corporate Governance and Nominating
Committee.
The Company’s website facilitates
feedback from shareholders by permitting requests for information and sending messages directly to the Company.
| i. | Expectations and Responsibilities of Directors |
The Board is responsible for determining
the committees of the Board that are required to effectively manage certain aspects of the Board's duties, and for ensuring that the committees
have the requisite independence, competency and skill. The Board approves and annually reviews the charters of the committees, and conducts,
with the assistance of the Corporate Governance and Nominating Committee, annual reviews of the performance of the committees.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance | Appendix Page | B-ii |
Directors are responsible for attending Board meetings as well
as meetings of committees of which the director is a member. Directors are responsible for reviewing meeting materials in advance of the
meeting.
POSITION DESCRIPTIONS
The Board has developed position descriptions
for the Chair of the Board and the Chair of each Board Committee.
The Board and the CEO have developed
a position description for the CEO, including the corporate objectives that the CEO is responsible for meeting. The Compensation Committee
is responsible for reviewing and making recommendations to the Board regarding those specific goals and objectives relevant to CEO compensation.
ORIENTATION AND CONTINUING EDUCATION
The Board takes the following measures
to ensure that all new directors receive a comprehensive orientation regarding the role of the Board and its committees, and the nature
and operation of the Company’s business. Each new director is provided with a copy of the Corporate Governance Manual, which contains
the Company’s policies and provides a comprehensive introduction to the Board and its committees. Based on the individual skill
set and professional background of each new director, the Chair determines what orientation to the nature and operation of the Company’s
business will be necessary and relevant to each new director.
The Board ensures that proposed directors
are able to devote sufficient time and energy to being a director of the Company. The Board provides continuing education opportunities
for all the directors so that directors may maintain or enhance their skills and abilities as directors, as well as to ensure their knowledge
and understanding of the Company’s business remains current. The Board takes the following measures to provide continuing education
for its directors in order that they maintain the skill and knowledge necessary for them to meet their obligations as directors:
| a. | The Corporate Governance Manual is reviewed by the Board annually and any revisions thereto are given to each director. |
| b. | The Board may request from Management technical or other presentations focusing on a particular property or issue. The Q&A portions
of these presentations are a valuable learning resource for non- technical directors. |
| c. | As requested, site visits to the Company’s mines and projects. |
CODE OF BUSINESS CONDUCT AND ETHICS
The Board has adopted a written code
of business conduct and ethics (the “Code”) applicable to directors, officer, employees and consultants (“Company Personnel”)
of the Company. The Code sets standards designed to promote integrity and deter wrongdoing. As required by securities legislation, the
Code has been filed on SEDAR.
The Board is responsible for monitoring
compliance with the Code. Company Personnel are instructed to report instances of non-compliance with the Code to the Chair of the Corporate
Governance and Nominating Committee.
NOMINATION OF DIRECTORS
The Corporate Governance and Nominating
Committee is responsible for identifying individuals and recommending to the Board those qualified to become new board members. New nominees
must have a track record in general business management, experience in an area of strategic interest to the Company, the ability to devote
the time required and a willingness to serve.
The Board adheres to the following process,
with the input and advice of the Corporate Governance and Nominating Committee, prior to nominating or appointing individuals as directors:
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance | Appendix Page | B-iii |
| a. | The Board determines the appropriate size of the Board, with a view to facilitating effective decision- making. |
| b. | The Board considers what competencies and skills the Board as a whole should possess. In doing so, the Board also considers the needs
of each committee. |
| c. | The Board assesses what competencies and skills each existing director possesses. |
| d. | In accordance with the Company’s Diversity Policy, the Board considers diversity when reviewing potential candidates for appointment to the Board. |
COMPENSATION
The Board has appointed a Compensation
Committee which is responsible for reviewing and making recommendations to the Board regarding the CEO’s compensation, evaluating
the CEO’s performance, making recommendations to the Board with respect to CFO and director compensation, bonus plans for Management
and key employees, incentive-compensation plans and equity-based plans, and reviewing executive compensation disclosure in advance of
the disclosure becoming public.
The vesting period, if any, applicable
to stock options and other stock-based compensation will be determined by the Board.
REGULAR BOARD ASSESSMENTS
The Corporate Governance and Nominating
Committee assesses on an annual basis the required competency and skill required by the Board and its committees.
The Board, its committees and each individual
director will be assessed on an annual basis regarding his, her or its effectiveness and contribution. Such assessment should consider:
| a. | In the case of the board or a committee, its mandate or charter, and |
| b. | In the case of an individual director, the applicable position description (if any), and the competencies and skills each individual
director is expected to bring to the Board. |
The Corporate Governance and Nominating
Committee reports its assessments to the Board on an annual basis.
| MANAGEMENT INFORMATION CIRCULAR | Corporate Governance | Appendix Page | B-iv |
