Fortuna provides update on status of disputed royalty at the San Jose Mine
Fortuna provides update on status of disputed royalty at the San Jose Mine
Vancouver, December 1, 2020: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) announces an update on
the status of the legal proceedings related to a disputed royalty on one of its extracting mining concessions
at the San Jose Mine, located in Oaxaca, Mexico.
Background
In 2017, the Mexican Geological Service (“SGM”) advised the Company that a previous owner of one of
the Company’s mineral concessions at the San Jose Mine, had granted to SGM a royalty of 3% of the billing
value of the minerals obtained from the concession. At t he date of the Company’s acquisition of the
concession, the royalty was not disclosed to the Company and it did not appear on the electronic title
register at the Mining Registry although it is listed in the official record books of the concessions of the
Mining Registry. The Company obtained advice from external legal counsel which confirm ed that there
was no legal basis for the creation of the royalty and that it was invalidly created. The Company initiated
legal proceedings to uphold its position that no royalty is payable.
Administrative Proceedings
In 2018, the Company initiated administrative proceedings (the “Administrative Proceedings”) in the
Mexican Federal Administrative Court (“FAC”) against the Dirección General de Minas (“DGM”) to remove
reference to the royalty on the grounds that there is no legal basis for the creation of the royalty and that
it was invalidly created . The Administrative P roceedings are progressing in accordance with the
procedures of the FAC. A decision is expected within the next three to four months.
Amparo Proceedings
In January 2020, the Company received notice from the DGM seeking to cancel the mining concession if
the royalty, in the Mexican peso equivalent of $30,000,000 plus VAT (being the amount of the claimed
royalty from 2011 to 2019), was not paid before March 15, 2020 (refer to Fortuna news release dated
January 29, 2020 ). In February 2020, the Company initiated legal proceedings (the “Amparo
Proceedings”) against the DGM in the Seventh District Court in Mexico City (“District Court”) to contest
and extinguish the cancellation procedure on the grounds that the royalty is not valid, and also to stay the
cancellation process. The District Court in Mexico City admitted the Company’s legal proceedings on
March 2, 2020 and granted a permanent stay of execution (akin to an injunction) , which protects the
Company from the cancellation of the concession until a final non -appealable resolution is reached on
the legality of DGM’s cancellation procedure (refer to Fortuna news release dated March 5, 2020).
On November 27, 2020, the District Court at first instance found that the Company suffered no harm from
the notice of cancellation procedure and dismissed the proceedings (the “Procedural Finding”) without
deciding on the merit of the Amparo Proceedings and on the validity of the royalty. The Procedural Finding
does not affect the permanent stay of execution, which remains in place. The Company’s Mexican legal
NYSE: FSM | TSX: FVI
www.fortunasilver.com NEWS RELEASE
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advisors are of the view that the decision of the District Court is flawed because the notice of the
cancellation procedure related to the payment of a disputed royalty, which is harmful to the Company as
the royalty is invalid.
The Company ’s legal position with respect to the disputed royalty remains unchanged . The Company
intends to vigorously defend its position and appeal the Procedural Finding and file an appeal with the
Collegiate Court in Mexico by the deadline of December 14, 2020. A decision of the Collegiate Court is
expected during mid-2021. As set out above, t he previously obtained stay of execution protects the
Company from the cancellation of the concession and remains in place until all avenues of appeal have
been exhausted. In the event that the Company does not prevail in the appeal, it may be required to pay
the disputed royalty in order to preserve the mining concession.
About Fortuna Silver Mines Inc.
Fortuna Silver Mines Inc. is a Canadian precious metals mining company with operations in Peru, Mexico
and Argentina. Sustainability is integral to all our operations and relationships. We produce silver and gold
and generate shared value over the long -term for our shareholders an d stakeholders through efficient
production, environmental protection, and social responsibility . For more information, please visit our
website at www.fortunasilver.com.
ON BEHALF OF THE BOARD
Jorge A. Ganoza
President, CEO, and Director
Fortuna Silver Mines Inc.
Trading symbols: NYSE: FSM | TSX: FVI
Investor Relations:
Carlos Baca
T (Peru): +51.1.616.6060, ext. 0
Forward looking Statements
This news release contains forward -looking statements which constitute “forward -looking information” within the
meaning of applicable Canadian securities legislation and “forward -looking statements” within the meaning of the
“safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (collectively, “Forward -looking
Statements”). All statements included herein, other than statements of historical fact, are Forward -looking
Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those reflected in the Forward -looking Statements. The Forward -looking
Statements in this news release may include, without limitation, statements about the Company’s Amparo
Proceedings and administrative proceedings against the DGM, the outcome of the administrative proceedings
against the DGM; the outcome of the Company’s Amparo Proceedings against the DGM to contest the cancellation
procedure, the appeal of decisions and judgments made by the Courts, and the potential for the Company to be
required to pay the amount claimed to preserve its mining concession in the event that the Company’s Amparo
Proceedings to contest the cancellation procedure are unsuccessful, or how the Company would satisfy such payment
and other matters. Often, but not always, these Forward -looking Statements can be identified by the use of words
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such as “estimated”, “potential”, “open”, “future”, “assumed”, “projected”, “used”, “detailed”, “has be en”, “gain”,
“planned”, “reflecting”, “will”, “containing”, “remaining”, “to be”, or statements that events, “could” or “should”
occur or be achieved and similar expressions, including negative variations.
Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially different from any results, performance
or achievements expressed or implied by the Forward -looking Statements. Such uncertainties and factors include,
among others, that the Company may be unsuccessful in its Amparo Proceedings and may be required to pay the
amount of the disputed royalty plus VAT; the duration and effects of COVID -19, and any other pandemics on our
operations, production and workforce, and the effects on global economies, governments, courts and society, actual
results of production and exploration activities; changes in general economic conditions and financial markets;
changes in prices for gold, silver and other metals; fluctuation in foreign exchange rates; any extension of the currency
controls in Argentina; technological and operational hazards in Fortuna’s mining and mine development activities;
delays in commissioning at Lindero; delays in achie ving steady production and commencement of commercial
production at Lindero; risks inherent in mineral exploration; uncertainties inherent in the estimation of mineral
reserves, mineral resources, and metal recoveries; changes to current estimates of miner al reserves and resources;
changes to production estimates; governmental and other approvals; changes in government, political unrest or
instability in countries where Fortuna is active; labor relations issues; as well as those factors discussed under “Ris k
Factors” in the Company's Annual Information Form. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially from those described in Forward-looking
Statements, there may be o ther factors that cause actions, events or results to differ from those anticipated,
estimated or intended.
Forward-looking Statements contained herein are based on the assumptions, beliefs, expectations and opinions of
management, including but not limited to expectations regarding success in its legal and administrative proceedings
which is based upon advice f rom independent law firms, expected trends in mineral prices and currency exchange
rates; the accuracy of the Company’s current mineral resource and reserve estimates; that the Company’s activities
will be in accordance with the Company’s public statements and stated goals; that there will be no material adverse
change affecting the Company or its properties; that all required approvals will be obtained; that there will be no
significant disruptions affecting operations and such other assumptions as set out herein. Forward -looking
Statements are made as of the date hereof and the Company disclaims any obligation to update any Forward-looking
Statements, whether as a result of new information, future events or results or otherwise, except as required by law.
There can be no assurance that the Company will be successful in its legal proceedings or that these Forward-looking
Statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements . Accordingly, investors should not place undue reliance on Forward -looking
Statements.