Fortuna Announces Expansion of Its San Jose Mine From 2,000 to 3,000 tpd
Fortuna Silver Mines Inc. (TSX:FVI)(NYSE:FSM)(FRANKFURT:F4S)(BVLAC:FVI) is pleased to announce Board approval of two major capital projects for 2015 at the San Jose Mine in Mexico: mill expansion from 2,000 to 3,000 tonnes per day (“tpd”) and construction of a dry stack tailings deposit and filter facility. The company is in a strong financial position to meet its capital budgets from operating cash flows and available liquidity.
Jorge A. Ganoza, President and CEO, commented, “With the approval of these two key projects, we are positioning our company to increase annual consolidated production to the range of 12 to 14 million ounces of silver equivalent while maintaining our low cost producer status.” Mr. Ganoza added, “Key at these times as well is our ability to self-fund growth from operating cash flows and cash-on-hand.”
San Jose Mine expansion highlights
- Silver and gold production: Annual production rate ranging from 6.7 – 8.3 million ounces of silver and 52.0 – 56.7 thousand ounces of gold or 9.8 – 11.7 million silver equivalent* ounces
- Capital expenditure: US$30 million
- Economics: 36% after-tax Internal Rate of Return (IRR)**; payback period of 2 years
- All-in sustaining cash cost (AISCC)**: Expansion will position San Jose´s AISCC in the range of US$8 – 9/oz Ag, net of by-product gold
* Silver equivalent production estimated using silver-to-gold ratio of 60:1
** After-tax IRR and AISCC estimated using a flat price of US$16/oz Ag and US$1,200/oz Au
3,000 tpd mill expansion
The capital cost estimate for the plant expansion to 3,000 tpd is US$30 million. The budget for 2015 is US$12.6 million with the balance to be disbursed in 2016. The capital figures are based on a feasibility level capital estimate prepared by M3 Engineering, the same firm that carried out the EPCM for the on-time and on-budget construction of the processing plant in 2011.
Direct capital costs of major items include:
- Crushing: US$2.5 million
- Grinding: US$8.1 million
- Flotation: US$3.9 million
- Concentrate filter: US$1.7 million
- Power supply: US$1.0 million
Project activities are scheduled to commence in the first quarter of 2015 with commissioning planned for mid-2016. The expansion project is permitted.
The mine is well ahead of production with a 2.8 year projection of developed reserves by the end of 2015; sufficient to comfortably source 3,000 tpd. No major infrastructure projects are required at the mine.
Dry stack deposit and plant facility
The San Jose Mine will be shifting from conventional slurry tailings disposal to dry stack tailings. The capital projection is US$32 million based on basic engineering estimates prepared by M3 Engineering.
The project was initiated during the fourth quarter of 2014; US$1.0 million has been spent to-date with the balance to be expended in 2015. Purchase orders for filters and other major equipment have already been placed.
Direct capital costs of major items include:
- Filtration: US$13.7 million
- Dry stack deposit earthwork and preparation: US$2.3 million
- Thickening: US$1.3 million
- Backfill plant: US$1.4 million
The company is awaiting the approval of the environmental impact study of the project, pending the regularization of the change in land use of a single parcel. Completion of the dry stack tailings facility is projected for the fourth quarter of 2015.
The company will be providing comprehensive production, capital and cost guidance for 2015 in mid-January.
Cautionary note regarding Inferred Resources
Fortuna Silver Mines Inc. prepares its resource and reserve estimates in accordance with the guidelines of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in the Canadian National Instrument 43-101. The economic evaluation of the proposed expansion from 2,000 to 3,000 tpd at San Jose Mine is based on existing Mineral Reserves (see Fortuna news release dated September 30, 2014) plus the inclusion of Inferred Resources which satisfied minimum technical requirements defined by the Company. The economic evaluation disclosed by this document provides only a preliminary indication of potential economic indicators (IRR, payback and AISCC). Investors are cautioned not to assume that any part of the Inferred Resources will ever be converted into economically mineable reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Boris G. Caro, is an independent consultant and a Qualified Person for Fortuna Silver Mines Inc. as defined by National Instrument 43-101. Mr. Caro is a Member of Australasian Institute of Mining and Metallurgy (Membership Number 305462) and a Registered Member of the Chilean Mining Commission (Comisión Calificadora de Competencias en Recursos y Reservas Mineras, Registered Member Number 0229) and is responsible for ensuring that the information contained in this news release is an accurate summary of the original reports and data provided to or developed by Fortuna Silver Mines.
About Fortuna Silver Mines Inc.
Fortuna is a growth oriented, silver and base metal producer focused on mining opportunities in Latin America. Our primary assets are the Caylloma silver mine in southern Peru and the San Jose silver-gold mine in Mexico. The company is selectively pursuing acquisition opportunities throughout the Americas. For more information, please visit our website at www.fortunasilver.com.
ON BEHALF OF THE BOARD
Jorge A. Ganoza, President, CEO and Director
Fortuna Silver Mines Inc.