Fortuna Silver Mines ahead of schedule at San Jose, Mexico

Fortuna Silver Mines (FVI-T) started building its San Jose underground mine in southern Mexico in the second quarter of 2010 and now says it can increase its start-up production rate from 750 tonnes per day to 1,000 tonnes per day.

According to an updated plan for the mine, 47 km south of  the city of Oaxaca, that rate will rise to 1,500 tonnes per day by the third quarter of 2013, two and a half years ahead of the schedule  in the prefeasibility study.

“We are now in a position to achieve the maximum 1,500 tonne per day capacity only 18 months after the start up of operations in the third quarter of this year,” the company’s president and chief executive, Jorge Ganoza, said in a statement. “This should translate into higher initial silver and gold output in a very favourable metal price environment.”

Currently the start-up ore stockpile stands at 33,000 tonnes – more than one month of mill feed at 1,000 tonnes per day, he added.

San Jose has probable reserves of 3.8 million tonnes with 24.5 million ounces of contained silver and 191,600 ounces of contained gold at average grades of 202 grams silver per tonne and 1.58 grams gold per tonne.

The company forecasts total metal production from 2011 to 2019 of 21.6 million ounces of silver and 172,815 ounces of gold. The average cash cost per ounce of silver net of by-product credits is estimated at US$2.84 – or US$7.84 per silver equivalent ounce.

Not included in the reserves or economic model of San Jose are 3.1 million tonnes of inferred resources with 22 million ounces of contained silver and 178,000 ounces of contained gold at average grades of 222 grams silver and 1.80 grams gold.

“Management expects to upgrade and convert these inferred resources to reserves as is typical for an operating mine,” the company stated in a press release outlining its updated mine plan.

San Jose is a high-grade silver and gold bearing epithermal vein system. The deposit is characterized by mineralized multiphase quartz-carbonate-sulfide veins, hydrothermal breccias and stockwork veining. The mineralized system is hosted within a sequence of Tertiary andesitic volcanic and volcaniclastic rocks.

At presstime in Toronto Fortuna Silver Mines was trading at $4.81 per share within a 52-week range of $1.85 and $6.81. The junior has about 122.96 million shares outstanding.