Fortuna Silver updates San Jose

The treatment plant at Fortuna Silver's San Jose silver-gold project in Oaxaca, Mexico. Photo by Ian BickisThe treatment plant at Fortuna Silver's San Jose silver-gold project in Oaxaca, Mexico. Photo by Ian Bickis

Fortuna Silver Mines (FVI-T) started building its San Jose underground silver-gold mine 47 km south of the city of Oaxaca in southern Mexico in the second quarter of 2010. Now, the company says it can increase the start-up production rate from 750 tonnes per day to 1,000 tonnes per day.

According to an updated mine plan released June 1, that rate would rise to 1,500 tonnes per day by the third quarter of 2013, two-and-a-half years ahead of the schedule outlined 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.”

The start-up ore stockpile stands at 33,000 tonnes – with 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 grading 202 grams silver per tonne and 1.58 grams gold per tonne, or 24.5 million oz. contained silver and 191,600 oz. contained gold.

The company forecasts total metal production from 2011 to 2019 of 21.6 million oz. silver and 173,000 oz. gold. The average cash cost per oz. silver net of by-product credits is estimated at US$2.84, or US$7.84 per silver equivalent oz.

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

San Jose is a high-grade gold-silver-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, Fortuna Silver Mines traded 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.

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