Fortuna Silver Makes Strides At San Jose

It took longer than expected, but Fortuna Silver Mines (FVI-V, FVITF-O) has more than doubled indicated resources at its San Jose project in Oaxaca state, Mexico, to 37.6 million silver-equivalent oz.

Part of the hold-up was a group of demonstrators who blocked the main access road for a few weeks in April and early May. Federal and state police forced them to end their demonstration at the request of local officials.

The day after Fortuna released the bolstered resource estimate, the company announced that its environmental impact study for the project has been approved, which will allow for construction and operation of a mine.

The company is not quite there yet, however, with engineering studies for a prefeasibility study currently under way. Those include studies on the development of a mine, processing plant design, tailings dam engineering and evaluating power and water supply alternatives. Fortuna hopes to have those studies done by the end of the year.

Indicated resources now stand at 2.69 million tonnes grading 295 grams silver per tonne and 2.27 grams gold, for 37.6 million silver-equivalent oz. The average silver grade for the new resource estimate is up 12%, while the average gold grade is 4% higher.

Inferred resources stand at 2.41 million tonnes grading 262 grams silver per tonne and 2.11 grams gold for 30.4 million silver-equivalent oz.

A cutoff grade of 150 grams silver was used for both indicated and inferred resources.

The company added 40,000 metres worth of drilling to the resource estimate, which incorporates a total of 64,200 metres of drilling and 908 underground channel samples.

Most of the recent drilling — about 33,000 metres — came from the Trinidad area of the San Jose project.

San Jose is a low-sulphidation epithermal vein system, located 47 km (or a one-hour drive) from the city of Oaxaca.

The deposit is characterized by mineralized multiphase quartz carbonate sulphide veins, hydrothermal breccias and stock-work veining, hosted within a sequence of tertiary andesitic volcanic and volcaniclastic rocks.

Fortuna has done some work on the San Ignacio zone as well, located about 800 metres south of the Trinidad zone.

In addition to the engineering studies, Fortuna is trying to negotiate a collaborative agreement with the local community.

Fortuna also operates the 100%- owned Caylloma silver-zinc-lead mine in the sourthern highlands of Arequipa, Peru. The company has been operating the 1,000-tonne-per- day operation for three years, but is working towards increasing throughput to 1,500 tonnes per day. The company expects to produce 1.6 million oz. silver in 2009.