Fortuna Silver revises numbers at Lindero after delays

Fortuna Silver Mines (TSX: FVI; NYSE: FSM) reported a jump in resource tonnes and ounces exclusive of reserves at its Lindero gold project in Argentina and estimates the project will produce between 145,000 and 160,000 oz. gold in its first year of commercial production.

The company reported measured and indicated resources for Lindero of 18.9 million tonnes (a 51% increase over earlier estimates) grading 0.5 grams gold per tonne and 0.11% copper for 302,000 contained oz. gold (a 211% increase).

Inferred resources stand at 8.6 million tonnes (a 51% increase) grading 0.38 gram gold and 0.10% copper for 106,000 contained oz. gold (a 63% increase).

Proven and probable measure 84.23 million tonnes (5% decrease) grading 0.63 gram gold and 0.11% copper for 1.71 million contained oz. gold (2% decrease).

Based on infill drilling last year and optimization of its mine plan, the company says it was able to identify a higher grade mineralized area for mining in the first year of production.

The gold-rich porphyry system at Lindero sits at an elevation of 3,500-4,000 metres, about 260 km west of Salta City in Salta province.

Fortuna Silver decided to build the open-pit, heap leach mine in September 2017. It has been designed as an 18,750 tonne-per-day, owner-operated mine with a pit life of 13 years.

The company updated shareholders on construction progress at Lindero in February, noting that abnormal rains and electrical storms had slowed its progress and that the overall project was 40% complete.

Fortuna says the slow start and ramp-up in excavations at the leach pad and crushing plant had resulted in delays and revisions to the construction schedule. It now expects to start stacking ore in the fourth quarter of 2019 and to pour its first dore by the end of the year, with commercial production targeted for the first quarter of 2020.

It also forecast that total construction capital costs would rise to US$295 million, an increase of 20% over initial guidance.

Ryan Thompson, a mining analyst who covers the company for BMO Capital Markets, forecasts the company will produce about 149,000 oz. gold in its first year of production, from April 1, 2020 to March 31, 2021.

“With commissioning expected in October and commercial production expected in Q1/20, we think FVI shares have the potential to rerate higher as construction continues to advance,” he comments in a research note.

The analyst has a price target on the stock $7.50 per share and an outperform rating.

Fortuna’s shares are trading at $4.56 with a 52-week range of $4.20 to $7.78. The company has a $729-million market capitalization.


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