Fortuna announces positive construction decision for its Lindero gold Project in Salta, Argentina
Fortuna announces positive construction decision for its Lindero gold Project in
Salta, Argentina
(All dollar amounts are expressed in US dollars unless otherwise indicated)
Vancouver, September 21, 2 017-- Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) is pleased to
announce today that the Board of Directors of the Company has made a positive construction decision
for the 100% owned Lindero gold Project located in the Province of Salta, Argentina. In July 2016,
Fortuna completed the acquisition of Goldrock Mines Corp. whose principal asset was the Lindero
Project (see Fortuna news release dated July 28, 2016 ). Lindero has an approved environmental impact
study and has been granted all major permits for the construction of an 18,750 tpd open pit, heap leach
gold mine.
Jorge Ganoza, President, CEO and Director, commented, “With a base case IRR 1 of 18% and a 3. 6 year
payback, we have delivered a strong project greatly derisked technically and financially that will
contribute low cost gold production over its 15 years of operation. Initial capital of $239 million is going
to be comfortably funded from our approximately $190 million cash position, available lines of credit
and projected cash flows. We do not envision accessing equity capital markets or having to tak e hedge
positions for this project.” Mr. Ganoza continued, “The optimization work conducted over the past year
has captured opportunities for improved metallurgical recovery and reduced leach time. At the same
time, technical risks have been mitigated on th e process side by bringing in a SART 2 plant, ore
agglomeration and a conveyor stacking system to year one.” Mr. Ganoza added, “Under our
construction plan, detailed engineering and site activities are expected to commence next month with
commissioning expected in the second quarter of 2019.” Mr. Ganoza concluded, “In the first year of full
production, Lindero will take Fortuna's annual production to approximately 9 million ounces of silver
and 190,000 ounces of gold or 340,000 gold equivalent2 ounces.”
Figures reported in this news release supersede those stated in the Goldrock 2016 Feasibility Study. An
updated feasibility study technical report will be filed on SEDAR at www.sedar.com and posted on our
website at https://www.fortunasilver.com/mines-and-projects/technical-reports/ within forty-five days
from the date of this news release.
Notes:
1. IRR: Internal Rate of Return
2. SART: Sulphidization-Acidification-Recycle-Thickening
3. Gold equivalent ounces calculated using a gold to silver ratio of 1 to 60
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Life of Mine Highlights
Mine life 1 (years) 15
Annual ore placed in leach pad (Mt) 6.75
Strip ratio (waste to ore) 1.2
Head grade (g/t) 0.62
Recovery (%) 75
Gold recovered to doré (Moz) 1.3
Average annual gold recovered to doré 2 (koz) 96
Peak annual gold recovered to doré (koz) 138
AISC3 ($/oz Au) 802
Initial capital ($ M) 239
Sustaining capital ($ M) 105
Gold price ($) 1,250
Exchange rate (ARS4:USD) 17.80
After-tax NPV 5 @ 5% ($ M) 130
After-tax IRR6 (%) 18
Payback period7 (years) 3.6
Production
Base Case Economics
Notes:
1. Includes 20 months of heap rinsing of gold inventory
2. Average over years 1 – 13. Does not include gold from heap rinsing.
3. All-In Sustaining Cash Cost
4. Argentine Peso
5. Net Present Value; considers initial capital in one single annual period; excludes High -Pressure-Grinding-Roller
(HPGR) acquired upon the acquisition of Goldrock Mines Corp.
6. Considers initial capital in one single annual period; excludes High-Pressure-Grinding-Roller (HPGR) acquired
upon the acquisition of Goldrock Mines Corp.
7. Payback based on undiscounted cash flow
The Lindero porphyry gold system remains open at depth below the current pit shell of reserves and
resources with high grade drill intercepts bottoming on mineralization . The nearby Arizaro p orphyry
system, located within the Lindero concession, is a ne ar term exploration target discussed, along with
Lindero and other exploration prospects, in the Brownfields Exploration Opportunities section in this
news release.
Lindero After-Tax Economics Sensitivity Analysis
Gold Price NPV @ 5% IRR Payback Period
($/oz) ($ M) (%) (Years)
1,150 68 12 4.7
1,250 130 18 3.6
1,350 192 23 3.1
1,450 253 28 2.4
3
Mineral Reserves and Resources
Mineral Reserves and Resources are reported as of September 9, 2017 based on 132 diamond drill holes
totaling 37,897 meters and the addition of 12 new holes drilled by Fortuna in 2016 totaling 4,462
meters. The estimates incorporate a revised geological interpretation and updated metallu rgical
recoveries, metal prices and estimated operating costs.
Mineral Resource estimation involved the usage of drill hole samples in conjunction with surface
mapping to construct three -dimensional wireframes defining lithologic, alteration, and grade dom ains.
Samples were selected inside these wireframes, coded, composited and top cut. Boundaries were
treated as hard, firm or soft based on statistical and geostatistical analysis. Gold and copper grades were
estimated by ordinary kriging into a geological block model consisting of 10 m x 10 m x 4 m selective
mining units representing each domain. Estimated grades were validated globally, locally, and visually
prior to classification and are reported above a 0.20 g/t Au cut-off grade within a conceptual pit shell.
Mineral Reserve estimates have considered only Measured and Indicated Mineral Resources as only
these categories have sufficient geological confidence to be considered Mineral Reserves. Subject to the
application of certain economic and mining-related qualifying factors, Measured Resources may become
Proven Reserves and Indicated Resources may become Probable Reserves.
Contained Metal
Tonnes Au Cu Au
(000) (g/t) (%) (koz)
Prove n 26,009 0.74 0.11 618
Probable 62,263 0.57 0.11 1,131
Proven + Probable 88,272 0.62 0.11 1,749
Mineral Resources Contained Metal
Tonnes Au Cu Au
(000) (g/t) (%) (koz)
M easured 610 0.24 0.06 5
Indicated 11,897 0.24 0.07 92
Measured + Indicated 12,507 0.24 0.07 97
Inferred 5,700 0.36 0.10 65
Mineral Reserves - Proven and Probable
Lindero, Argentina
ClassificationProperty
Lindero, Argentina
ClassificationProperty
Notes:
1. Mineral Reserves and Resources are as defined by CIM Definition Standards on Mineral Resources and Mineral Reserves
2. Mineral Resources are exclusive of Mineral Reserves
3. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability
4. There are no known legal, political, environmental, or other risks that could materially affect potential development of the
Mineral Resources or Mineral Reserves at Lindero
5. Mineral Resources and Mineral Reserves for Lindero are reported as of September 9, 2017
6. Mineral Reserves for Lindero are reported based on open pit mining within designed pit shells based on variable gold cut -off
grades and gold recoveries by metallurgic al type. Met type 1 cut- off 0.27 g/t Au, recovery 75.4%; Met type 2 cut -off 0.26 g/t
Au, recovery 78.2%; Met type 3 cut- off 0.26 g/t Au, recovery 78.5%; and Met type 4 cut -off 0.30 g/t Au, recovery 61.7%. The
cut-off grades and pit designs are considered appropriate for long term gold prices of $1,250/oz
7. Lindero Mineral Resources are reported within a conceptual pit shell above a 0.2 g/t Au cut -off grade using a long- term gold
price of $1,250/oz, mining costs at $1.67 per tonne of material, with total proc essing and process G&A costs of $7.84 per
tonne of ore and an average process recovery of 75%. The refinery costs net of pay factor were estimated to be $6.90 per
ounce of gold. Slope angles are based on 3 sectors (39°, 42°, and 47°) consistent with geotec hnical consultant
recommendations
8. Eric Chapman, P.Geo. (APEGBC #36328) is the Qualified Person for resources and Edwin Gutierrez (SME Registered Member
#4119110RM) is the Qualified Person for reserves, both being employees of Fortuna Silver Mines Inc.
9. Totals may not add due to rounding procedures
4
Lindero Initial Capital Costs
The fully scoped initial capital cost is estimated at $239 million including $19 million for owner operated
mining fleet and $24 million for contingencies. Estimated capital costs are based on the cost
environment in Argentina for the first semester of 2017. Sustaining capital for the project is estimated at
$105 million.
Initial Capital Costs
Description ($ M)
Road infrastructure 2
Mine equipment and development 22
Crushing 26
Agglomeration 9
Leach pad 27
Stacking and solution handling 18
ADR1, electrowinning and refinery 13
SART plant 22
Laboratories 3
Power distribution 3
Camp and ancillary facilities 15
Water supply and distribution 10
Total Direct Costs 169
Commissioning 2
Construction indirect costs (catering, temporary camps, energy, etc.) 8
Spare parts 2
Owner´s cost 19
EPCM2 16
Contingency 24
Total Indirect Costs 70
Total Construction CAPEX3 239
Pre-production operating expenses 10
Capital credit net of taxes (14)
Working capital 4
Total Initial Capital 239
Notes:
1. ADR: Adsorption, Desorption and Recovery
2. EPCM: Engineering, Procurement, Construction and Management
3. CAPEX: Capital Expenditure; excludes High-Pressure-Grinding-Roller (HPGR) acquired upon the acquisition of Goldrock
Mines Corp.
4. Totals may not add due to rounding
5
Life of Mine Capital
Description ($ M)
Mine equipment 42
Leach pad second phase 29
Closure 35
Sustaining CAPEX 105
ADR expansion 8
Sustaining + Expansion CAPEX 113
Note: Totals may not add due to rounding
Lindero Operating Costs
Lindero cost estimates consider an owner operated mining fleet and on -site diesel power generation
provided by a contractor. Estimated electricity cost is $0.21 per kilowatt hour with a diesel cost of $2.20
per gallon.
Life of Mine Operating Costs
Cash Cost per tonne of Processed Ore Cash Cost per ounce
($/t) ($/oz)
Mine 2.5 166
Plant 5.5 371
General services 1.2 80
Administrative services mine 0.9 64
Distribution and gold refining costs 0.2 12
Cash Cost 10.3 692
Copper credits - (34)
Cash Cost net of by-product credits - 658
General and administrative - 35
Royalties and other taxes - 29
Sustaining capital - 81
AISC - 802
Description
Note: Totals may not add due to rounding
6
Metallurgical Testing and Mineral Processing
Metallurgical Testing
The Lindero project has an extensive body of metallurgical investigation comprised of several phases of
test work as indicated in the Goldrock 2016 Technical Report (see 2016 Goldrock Technical Report ).
Since September 2016, Fortuna has carried out complementary metallurgical test work in the areas o f
comminution, heap permeability and cement agglomeration, gold extraction in column tests, and
copper removal with SART technology with the purpose of confirming and optimizing process design
criteria.
The table below shows key gold extraction results for 10 -meter columns from laboratory test work,
carried out in the first semester of 2017, on material cured in a cyanide solution and agglomerated. A
4% deduction has been accounted for design purposes when going from laboratory results to the field.
Key Gold Extraction Results for 10-meter Columns
Met Type in Reserve Estimation Laboratory Field
(%) (%) (%)
1 Fresh intrusive 63 79.4 75.4
2 Oxide porphyry 20 83.0 79.0
3 Fresh porphyry 9 82.7 78.7
4 Sediments 8 72.8 68.8
Weighted average: 79.9 75.9
Met Type
Gold Extraction
Met Type Description
Optimization of the process design has confirmed the be nefit of the use of a High -Pressure-Grinding-
Roller (HPGR), the inclusion of cyanide cure of ore, and copper removal/ cyanide recovery with a SART
plant. Results indicate that these components allow for improved gold leaching kinetics and effective
extraction of copper from the pregnant solution.
Mineral Processing
Ore will be crushed at a nominal rate of 18,750 tpd using a three -stage crushing system including a
HPGR in the tertiar y stage. A final crush size of P 80 6.0 millimeter is projected. The crushed product will
be agglomerated and cured with a cyanide solution and then conveyed to the leach pad. A mobile
conveying and stacking system will be used to stack ore in 10 meter high lifts. Life of mine (LOM) leach
pad area is projected at 105 hectares with a maximum height of 100 meters. Leaching will be carried in
two stages with a first stage of 30 days and a second stage of 60 days.
The gold pregnant solution will be pumped at a rate of 400 cubic meters per hour to a SART plant, where
copper content in solution will be precipitated in order to maintain copper levels below 400 parts per
million in the solution. The project contemplates an expansion of the pregnant solution flow rate from
400 cubic meters per hour to 600 cubic meters per hour in year four with the objective of reducing
inventory of gold ounces in the heap at the end of mining.
7
Following the SART plant, the pregnant sol ution will go to an ADR plant and then to electrowinning and
refining where gold will be poured in doré bars. Life of mine recovery is estimated at 75%.
Mining
Lindero will be an owner operated conventional open pit mining operation with a nominal rate of
18,750 tpd of ore and a life of pit operations of 13 years using existing reserves. The ratio of waste to
ore over LOM is 1.2 to 1. The key mining fleet equipment will be initially composed of six 100 ton trucks
and two 17 cubic yard wheel loaders.
In the initial two years, the operation will benefit from mining the higher grade outcropping portion of
the deposit, with an average head grade of 0.9 0 g/t Au, and a low s trip ratio of 0.77 to 1. For the initial
four years, the average head grade is projected at 0.77 g/t Au and a strip ratio of 1 to 1.
Mining costs benefit from short haul distances from the pit to the primary crusher and waste dumps.
Maximum distances are in the range of 2 kilometers. LOM direct mine cost is estimated at $1.1 per
tonne moved.
Refer to the appendix for LOM annual production plan.
Environmental Studies and Permitting
All necessary permits have been granted by the Salta provincial government for the development of
Lindero as an open pit, heap leach gold mine.
In November 2010, Mansfield Minera (subsidiary of Fortuna) submitted an E nvironmental Impact
Assessment (EIA) for the Lindero Project, and in November 2011 received approval thr ough the issue of
the Declaració n de Impacto Ambiental. Approval of the EIA represents formal approval for mine
construction, allowing excavation to proceed. Environmental law requires that the EIA be updated
biannually with the current report submitted in December 2015 and an updated report planned for
submission in March 2018.
In addition, a formal public declaration of support for the Lindero development has been issued by the
provincial government, recognizing Lindero as the priority development project for the Salta province.
Key Infrastructure
Access Roads and Site Access
Lindero is located 260 kilometers due west of the city of Salta, the main service center for the project
and the region. Drive time from Salta to the project is approximately 7.5 hours over a road distance of
420 kilometers with good year round access.
The project site infrastructure has a compact layout footprint of approximately 60 hectares.
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Power Supply
Power will be generated on-site by a contractor through an 8 MW capacity diesel oil plant.
Water Supply
Process water requirements are 105 cubic meters per hour and will be sourced from two existing wells
located 13 kilometers south east from the project site. An additional well is required and will be drilled
as part of construction activities.
Camp Facilities
A permanent accommodation c amp for 320 beds will be built for the LOM operation. For the
construction period, temporary accommodations will be implemented to accommodate the peak of
construction manpower estimated at 600 people.
Brownfields Exploration Opportunities
Arizaro Gold-Copper Porphyry System
The Arizaro Project is located within the Lindero mining concession, 3.2 kilometers southeast of the
Lindero Project. Historic work has included regional and local mapping, trenching with surface rock -chip
sampling (27 trenches, 6,568 total meters, 495 samples) and drilling (8,854 meters, 29 core holes)
completed over four campaigns (2002 and 2010-2013). Drill results include hole ARD-24 intersecting 160
meters averaging 0.64 g/t Au, including 104 meters averaging 0.82 g/t Au.
Drill Hole Highlights
Azimuth Dip From To Interval Au Cu
(°) (°) (m) (m) (m) (g/t) (%)
ARD-13 12 180 168 0.61 0.22
including 100 130 30 1.81 0.40
ARD-21 20 359 339 0.43 0.17
including 28 122 94 0.66 0.18
ARD-24 90 250 160 0.64 0.24
including 120 224 104 0.82 0.26270 -78
Drill Hole
235 -86
-70348
Since August 2016, Fortuna has completed the following work at the Arizaro project aimed at geologic
re-interpretation of the porphyry system and identifying near surface gold resources that could
materially add economic benefit to the Lindero Project:
• Relogging of 8,817 meters (29 drill holes) of historic core - similar geology, alteration and
mineralization are found at both Lindero and Arizaro
• Remapping (1:2,000 scale) of the entire surface area from immediately southeast of Lindero to
and including the historic drilling at Arizaro