Fortuna buys Caylloma

Vancouver — Fortuna Silver Mines (FVI-V), formerly Fortuna Ventures, has bought the Caylloma silver mine from two Peruvian companies.

Fortuna agreed to purchase shares in the company that holds Caylloma’s assets and liabilities for US$7.6 million in cash plus 11% of Fortuna’s fully diluted capital. A 2% net smelter return royalty kicks in after 21 million oz. silver have been recovered from the property.

Caylloma had produced about 250 million oz. silver over 400 years before it was shut down in 2003 because of low silver prices. The mine produced 2.6 million oz. in 2002, its last full year in operation.

Following the closure, exploration in the mine area turned up more silver and base metal resources.

Caylloma has a proven and probable reserve of 776,350 tonnes grading 286 grams silver and 0.55 gram gold per tonne, plus 1.83% lead, 2.91% zinc and 0.14% copper. About 7.1 million oz. silver are contained in the resource.

The inferred resource figure is pegged at 1.1 million tonnes grading 386 grams silver and 0.52 gram gold, plus 2.31% lead, 3.59% zinc and 0.37% copper. The inferred resource contains roughly 14.2 million oz. silver.

Plans call for restarting production within a year. With production at an annual rate of 2 million oz. silver, the company estimates cash costs below US$4 per oz.

Fortuna plans to reactivate the mine in less than a year, while at the same time drill-testing the under-explored vein and high-grade shoot targets.

Fortuna is raising US$10 million to cover the costs of acquiring and reopening the mine.

The purchase agreement took six months to hammer out, during which time trading in Fortuna was halted on the TSX Venture Exchange. The stock last traded at 82.