Drilling returns more silver and gold at Fortuna’s mines

VANCOUVER — Gold and silver prices struggled in April, which meant most precious metal producers saw their share prices slide. For Fortuna Silver Mines (FVI-T, FSM-N), however, a slumping share price belies strong financials and promising drill results from both of its operating mines.

Fortuna has drills turning at its Caylloma mine in Peru and its San Jose mine in Mexico. At Caylloma, Fortuna is exploring the Ramal Piso Carolina and Don Luis veins, both of which lie north of the Animas, Bateas and Soledad veins currently being mined. 

Don Luis is returning results typical of the silver-laced Caylloma district, such as 1.7 metres grading 1,294 grams silver per tonne and 3.56 grams gold per tonne, and the results are deepening the limit of known mineralization in that area. 

Ramal Piso Carolina is also showing its silver strength, but drill cores from this vein bear a bonus: high-grade gold. For example, hole 32 returned 2.6 metres grading 247 grams silver and 12.6 grams gold, while hole 55 cut 2.5 metres of 105 grams silver and 21.28 grams gold. Hole 56 produced three mineralized intercepts: 0.9 metre of 1,759 grams silver and 1.77 grams gold, 1.2 metres of 117 grams silver and 12 grams gold and 1.2 metres of 430 grams silver and 30.25 grams gold. 

Fortuna’s vice-president of exploration Thomas Vehrs said the results are “very significant” because Ramal Piso Carolina is the first vein at the property to carry high gold grades. The Ramal Piso Carolina vein remains open for expansion to depth and along strike, and drilling continues. 

At San Jose, drills are exploring the Trinidad vein system with two goals: to upgrade the inferred resource to indicated status and to explore for more mineralization along strike. 

Expansion holes collared north of the known resource at Trinidad have been hitting silver-gold mineralization zones that are wider and carry better grades than other known zones at the property. For example, hole 276 returned 16.4 metres grading 520 grams silver and 3.69 grams gold, while hole 283 cut 13 metres of 1,789 grams silver and 10.1 grams gold. 

Infill holes are also returning wide mineralized intervals, with zones of crackle breccia and quartz-calcite vein stockworking that carry better-than-average grades. Hole 271 returned 54.6 metres grading 199 grams silver and 1.73 grams gold, hole 277 cut 39.4 metres of 393 grams silver and 2.86 grams gold, and hole 280 hit 19.7 metres grading 889 grams silver and 8.01 grams gold. 

Things are also progressing well for Fortuna on the financial front. In the first quarter Fortuna recorded net income of US$6.7 million from revenues totalling US$40.7 million. The company produced 992,218 oz. silver and 4,492 oz. gold in the first three months of the year at a consolidated cash costs of US$6.60 per oz. silver, net of gold credits. 

The company expects cash costs to fall once it completes the mill expansion at San Jose, which will boost throughput to 1,500 tonnes per day from 1,000 tonnes per day. Lower-than-expected gold grades and creeping unit costs also pushed costs at San Jose higher than usual for the quarter.

Fortuna is well funded to complete that task and continue drilling, with US$68 million in the bank and access to an untapped US$40-million credit facility. Its gold and silver output is also climbing: Fortuna expects to churn out 4.4 million oz. silver and 23,300 oz. gold in 2013, compared to 4 million oz. silver and 20,700 oz. gold in 2012. 

The Caylloma mine is located 225 km northwest of Arequipa. The 1,300-tonne-per-day mine is home to 4.3 million tonnes of proven and probable reserve grading 130 grams silver, 0.37 gram gold, 1.52% lead and 2.15% zinc. San Jose — in Mexico’s Oaxaca district — has proven and probable reserves totaling 3.3 million tonnes grading 190 grams silver and 1.58 grams gold.

News of the gold-rich drill results from Caylloma added 4¢ to Fortuna’s share price, lifting it to $2.85. The company has a 52-week trading range of $2.67 to $5.85, and 125 million shares outstanding.