Fortuna to strengthen its presence in West Africa with the acquisition of Chesser Resources
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NEWS RELEASE
Fortuna to strengthen its presence in West Africa with the
acquisition of Chesser Resources
Vancouver, M a y 8 , 2023: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) is pleased to announce that it has entered
into a definitive Scheme Implementation Deed ("Agreement") with Chesser Resources Limited (ASX: CHZ) ("Chesser"),
pursuant to which Fortuna has agreed to acquire 100% of the fully-paid ordinary shares of Chesser (the "Chesser Shares")
in consideration for 0.0248 of a common share of Fortuna (each whole share, a "Fortuna Share") for each Chesser Share
held ("Scheme Consideration"). The Scheme Consideration represents a purchase price of approximately A$0.1421 for
each Chesser Share and values the transaction at approximately A$89.0 million (CAD$80.6). The transaction as
contemplated by the Agreement (the "Transaction") will be implemented by way of a scheme of arrangement pursuant
to Part 5.1 of the Australian Corporations Act 2001 (Cth) ("Scheme"). Upon implementation of the Scheme, Fortuna
expects to issue up to 15,545,682 Fortuna Shares to Chesser shareholders, representing approximately 5.1% of the issued
and outstanding Fortuna Shares on an undiluted basis.
The acquisition of Chesser will expand Fortuna’s presence in West Africa to include the preliminary economic assessment
stage Diamba Sud Gold Project (“Diamba Sud”) in Senegal, one of the new and emerging gold discoveries in the region.
Chesser holds tenements covering approximately 872 km2 of prospective ground located in close proximity to and sharing
similar geologic features with tier one gold mines owned by Barrick Gold and B2 Gold located in Mali. Diamba Sud itself
comprises four open pitable high-grade gold deposits, along with numerous targets yet to be tested. Fortuna will prioritize
exploration to expand the mineral resource before advancing Diamba Sud to development stage.
Jorge A. Ganoza, President & CEO of Fortuna, commented, “In a short time, Chesser has done a great job advancing Diamba
Sud from early-stage exploration to a PEA -stage project with multiple targets yet to be tested. Withi n the larger and
diversified Fortuna portfolio, the advancement of Diamba Sud will benefit from our technical and operational strength
and lower cost of capital.” Mr. Ganoza continued, “Diamba Sud is located in the highly productive Senegal -Mali shear
zone, close to world class gold mines. We are excited by the value creation opportunities this transaction offers to Chesser
and Fortuna shareholders.” Mr. Ganoza concluded, “This transaction is very much aligned with our strategy to bring high-
value exploration and development opportunities in regions where we are established.”
On December 12, 2022, Chesser released a second update (refer to Chesser news release dated December 12, 2022 ) to
its scoping study and Mineral Resource estimate that was originally released in March 2022 (refer to Scoping Study Report
Diamba Sud Gold Project, Senegal 15 March 2022). In this second updated report, Chesser reported an Indicated Mineral
Resource estimate of 10.0 Mt averaging 1.9 g/t Au containing 625,000 ounces of gold and an Inferred Mineral Resource
estimate of 4.7 Mt averaging 1.5 g/t Au containing 235,000 ounces of gold prepared in accordance with the JORC Code (as
defined below ). The mineral resources are distributed across the Area D , Area A , Karakara, and Bougouda deposits.
Potential exploration opportunities exist, including the new discovery at Western Splay which warrants additional
exploration.
The scoping study on Diamba Sud demonstrated that the project is a conventional open pit and CIL process design and
has the potential to generate an attractive post-tax NPV5% of US$218 million and 43% IRR over a 7.5-year mine life2. Upon
closing of the Transaction, Fortuna intends to conduct a detailed optimization study of the current technical data and
economic parameters relating to the project, together with the preparation of an updated exploration and development
plan. Fortuna’s strong balance sheet and attractive cost of capital will serve to accelerate the continued exploration of
Diamba Sud and future development.
1 Implied value is based on the Canadian dollar $5.19 VWAP of Fortuna shares on the TSX over the 5 trading days up to and including May 5, 2023,
converted to an Australian dollar VWAP of $5.73 using a 0.9056 Canadian dollar to Australian dollar FX rate. The implied value will change based
on movements in the Fortuna share price and FX.
2 Assuming a US$1,600/oz gold price
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Board of Directors' Approval and Recommendations
The Board of Directors of Fortuna has unanimously approved the Transaction, including, without limitation, the issuance
of the Scheme Consideration.
The Board of Directors of Chesser has unanimously approved the Transaction and has recommended that all Chesser
shareholders vote in favor of the proposed Scheme at the Scheme Meeting (as defined herein), in the absence of a superior
proposal and subject to the independent expert appointed by Chesser (the "Independent Expert") concluding that the
Scheme is in the best interests of Chesser shareholders. Subject to those same qualifications, each director of Chesser
intends to vote (or cause to be voted) all Chesser Shares in which he has a Relevant Interest (as defined in the Agreement)
in favor of the Scheme, representing approximately 6.74% of the issued and outstanding Chesser Shares at the meeting
of the shareholders of Chesser (the "Scheme Meeting").
Transaction Structure and Certain Terms of the Agreement
Pursuant to the Agreement, Fortuna has agreed to acquire 100% of the Chesser Shares by way of the Scheme pursuant to
which Chesser shareholders will receive 0.0248 of a Fortuna Share for each Chesser Share held. In addition, under the
terms of the Agreement, Chesser is required to procure that all unvested Chesser options automatically vest in accordance
with their terms upon the Scheme becoming effective following Federal Court of Australia (the "Court") approval of the
Scheme. Chesser option holders who exercise their Chesser options prior to the Scheme record date will be entitled to
participate in the Scheme. Additionally, Chesser has entered into option cancellation deeds with certain Chesser option
holders pursuant to which their unexercised options will be cancelled with effect on implementation of the Scheme.
The Transaction, including without limitation, the Scheme, is subject to approval by the Court, the Chesser shareholders
at the Scheme Meeting, together with other customary closing conditions. The Scheme is also conditional on, among other
things, acceptance from the TSX, including in respect of the issuance and listing of new Fortuna Shares issuable pursuant
to the Scheme. Upon implementation of the Scheme, the new Fortuna Shares will be listed for trading on the TSX and the
NYSE.
A Scheme Booklet setting out the key terms of the Transaction, including the Scheme, the Independent Expert's report,
and the reasons for the Chesser directors' recommendation will be sent to all Chesser shareholders in due course. The
Scheme Meeting to consider the Scheme is expected to be held in August 2023, and the Scheme is expected to be
implemented in August/September 2023 subject to satisfaction of all conditions and receipt of all necessary approvals.
The Scheme is conditional, among other things, upon approval by at least 75% of the number of votes cast, and more than
50% of the number of Chesser shareholders present and voting, at the Scheme Meeting.
The Agreement also contains customary deal protection mechanisms, including no shop and no talk provisions, matching
and notification rights for Fortuna in the event of a competing proposal, and a break fee payable by Chesser in specified
circumstances. In addition, as part of the Transaction, Fortuna has agreed to pay any tax or taxes payable in Senegal as a
result of the acquisition of the Chesser Shares.
Advisors and Counsel
INFOR Financial Inc. is acting as financial advisor to Fortuna in connection with the Transaction. Blake, Cassels & Graydon
LLP is acting as Fortuna’s legal counsel and Allens is acting as Fortuna’s Australian legal counsel.
Historical Estimates
Disclosure of the historical estimate in this news release is derived from the Diamba Sud Scoping Study completed in
March 2022 by Chesser and updated in October and December 2022 and has been judged to be relevant and therefore
suitable for disclosure, however should not be relied upon. Mineral Resources were reported within a US$1,800/oz gold
price pit shell and at a cut-off grade of 0.5 g/t Au. In the Company's view, there are no material differences between the
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confidence categories assigned under the 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves prepared by the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists
and Minerals Counsel of Australia, as amended (the “ JORC Code ”) and the equivalent confidence categories in the
Canadian Institute of Mining 2014 Definition Standards f or Mineral Resources and Reserves. NI 43-101, defined below,
reporting requirements do not allow for "Inferred Mineral Resources" to be added to other Mineral Resource categories
and must be reported separately. The Inferred Resource category estimates above under the JORC Code were reported
separately in each instance. There are numerous uncertainties inherent in the historical estimate, which is subject to all
of the assumptions, parameters, and methods used to prepare such historical estimates. The historical estimate has been
prepared in accordance with the requirements of the Joint Ore Reserves Committee of The Australasian Institute of Mining
and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia and does not comply with or fulfill
the CIM Definition Standards on Mineral Resources and Mineral Reserves, as amended, adopted by the Canadian Institute
of Mining, Metallurgy and Petroleum (the “CIM Definition Sta ndards”) as required by National Instrument 43 -101 –
Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (“ NI 43-101”), and may vary
significantly from actual amounts, grade, and quality of minerals recovered from the property. There are no other recent
estimates or data available to Fortuna as of the date of this news release, and a detailed study of the current technical
data and economic parameters relating to the property, together with the preparation of an updated development plan,
is required to be conducted following the completion of the acquisition of Chesser in order to update these historical
estimates, as a current mineral resource or mineral reserve. A qualified person has not done sufficient work to classify the
historical estimates as current mineral resources or current Mineral Reserves and Fortuna is not treating the historical
estimate as current mineral resources. Investors are cautioned not to place undue reliance on the historical estimates
contained in this news release.
Qualified Person
Eric Chapman, Senior Vice President of Technical Services, is a Professional Geoscientist of the Association of Professional
Engineers and Geoscientists of the Province of British Columbia (Registration Number 36328), and is the Company’s
Qualified Person (as defined by NI 43-101). Mr. Chapman has reviewed and approved the scientific and technical
information contained in this news release and has verified the underlying data.
About Fortuna Silver Mines Inc.
Fortuna Silver Mines Inc. is a Canadian precious metals mining company with four operating mines in Argentina, Burkina
Faso, Mexico, and Peru, and a fifth mine under construction in Côte d’Ivoire. Sustainability is integral to all our operations
and relationships. We produce gold and silver and generate shared value over the long-term for our stakeholders through
efficient production, environmental protection, and social responsibility. For more information, please visit our website.
ON BEHALF OF THE BOARD
Jorge A. Ganoza
President, CEO, and Director
Fortuna Silver Mines Inc.
Investor Relations:
Carlos Baca | [email protected] | www.fortunasilver.com | Twitter | LinkedIn | YouTube
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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 Transaction, including without limitation,
the timing of the Scheme Meeting, and the closing of the Transaction, the timing and anticipated receipt of required Chesser shareholder and court
approvals; the timing and anticipated approv al of stock exchange other approvals , and the ability of Fortuna and Chesser to satisfy the other
conditions to, and to complete, the Transaction; the ability to expand and prove a mineral resource and reserve at the Diamba Sud gold project, timing
of the completion of a definitive feasibility study on the Diamba Sud gold project, statements relating to the value and nature of the Diamba Sud gold
project, and other similar statements. Often, but not always, these Forward -looking Statements can be identified by the use of words such as
"anticipated", “estimated”, “potential”, “open”, “future”, “assumed”, “projected”, “used”, “detailed”, “has been”, “gain”, “p lanned”, “reflecting”,
“will”, “anticipated”, “estimated” “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, many of which are beyond the ability of the Company
to control or predict and which may cause actual results, performance or achievements to be materially different from any res ults, performance or
achievements expressed or implied by the Forward -looking Statements. Such risks, uncertainties and facto rs include, among others, the completion
and timing of the Transaction, the ability of the Company and Chesser to receive, in a timely manner, the necessary approvals to satisfy the conditions
to closing of the Transaction; the ability to complete the Tran saction on terms contemplated by the Company and Chesser, or at all; the ability to
access various sources of debt and equity capital, generally and on acceptable terms; changes in general economic conditions and financial markets;
changes in the prices of key supplies; technological and operational hazards in the Company mine development activities; operational risks associated
with mining and mineral processing; uncertainty relating to Mineral Resource and Mineral Reserve estimates; uncertainty relat ing to capital and
operating costs, production schedules and economic returns; uncertainties related to new mining operations and development pr ojects such as the
Séguéla Project, including the possibility that actual capital and operating costs and economic re turns will differ significantly from those estimated
for such projects prior to production; uncertainty relating to the costs of the construction, the financing of construction and timing for the completion
of the Séguéla Project; risks relating to the Com pany’s ability to replace its Mineral Reserves; risks associated with mineral exploration and project
development; uncertainty relating to the repatriation of funds as a result of currency controls; environmental matters including obtaining or renewing
environmental permits and potential liability claims; uncertainty relating to nature and climate conditions; risks associated wi th political instability
and changes to the regulations governing the Company’s business operations; changes in national and local government legislation, taxation, controls,
regulations and political or economic developments in countries in which the Company does or may carry on business; risks ass ociated with war,
hostilities or other conflicts, such as the Ukrainian – Russian conflict, and the impact it may have on global economic activity; risks relating to the
termination of the Company’s mining concessions in certain circumstances; risks related to the Company’s ability to develop and maintain relationships
with local communities and stakeholders; risks associated with losing control of public perception as a result of social medi a and other web -based
applications; potential opposition to the Company’s exploration, developme nt and operational activities; risks related to the Company’s ability to
obtain adequate financing for planned exploration and development activities; property title matters; risks relating to the integration of businesses
and assets acquired by the Company; impairments; risks associated with climate change legislation; reliance on key personnel; adequacy of insurance
coverage; operational safety and security risks; legal proceedings and potential legal proceedings; the ability of the Compan y to successfully contest
and revoke the resolution issued by SEMARNAT which annuls the extension of the environmental impact authorization for the San Jose mine;
uncertainties relating to general economic conditions; risks relating to a global pandemic, including COVID -19, which could impact the Company’s
business, operations, financial condition and share price; competition; fluctuations in metal prices; risks associated with e ntering into commodity
forward and option contracts for base metals production; fluctuations i n currency exchange rates and interest rates; tax audits and reassessments;
risks related to hedging; uncertainty relating to concentrate treatment charges and transportation costs; sufficiency of moni es allotted by the
Company for land reclamation; risks associated with dependence upon information technology systems, which are subject to disruption, damage,
failure and risks with implementation and integration; risks associated with climate change legislation; labor relations issues; as well as those factors
discussed under “Risk Factors” in the Company's Annual Information Form. Although the Company has attempted to identify impor tant factors that
could cause actual actions, events or results to differ materially from those described in Forward-looking Statements, there may be other factors that
cause actions, events or results to differ from those anticipated, estimated or intended.
Although Forward-looking Statements contained in this news release is based upon what the Company believe s are reasonable assumptions at the
time they were made, such statements are made as of the date hereof and the Company disclaim s 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
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, no assurance can be given that any events anticipated by the Forward -looking Statements will transpire or occur, or if any
of them do, what benefits or liabilities Fortuna will derive from them. For the reasons set forth above, investors should not place undue reliance on
Forward-looking Statements.
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Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources
Resource estimates included in this news release have been prepared in accordance with the requirements of the Joint Ore Rese rves Committee of
The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council o f Australia. Fortuna’s reserve and
resource estimates have been prepared in accordance with NI 43 -101 and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition
Standards on Mineral Resources and Mineral Reserves. NI 43 -101 is a rule develo ped by the Canadian Securities Administrators that establishes
standards for public disclosure by a Canadian company of scientific and technical information concerning mineral projects.
Australian standards, including the JORC Code, and Canadian standards, including NI 43-101, each differ significantly from the disclosure requirements
of the Securities and Exchange Commission under subpart 1300 of Regulation S-K, and mineral reserve and resource information included in this news
release may not be comparable to similar information disclosed by U.S. companies.
.