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MEI Online: Plant Operation News: North America: January 5th 2015


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:: Fortuna Announces Expansion of its San Jose Mine from 2,000 to 3,000 tpd


Fortuna Silver Mines 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 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.




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