Fortuna Silver aims for EIA extension in Mexico

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Fortuna Silver Mines Inc. [FVI-TSX; FSM-NYSE; F4S-FSE] on Friday released an update on the legal battle to keep its San Jose mine in Oaxaca, Mexico in operation.

Fortuna Silver Mines is a Canadian company with four operating mines in Argentina, Burkina Faso, Mexico and Peru. It has a fifth mine under construction in Cote d’Ivoire, West Africa.

During the third quarter of 2021, the San Jose Mine produced 1.43 million ounces of silver and 8,910 ounces of gold, representing a decrease of 25% and 22%, respectively, compared to the same period last year.

At San Jose, the all-in sustaining cash cost of payable silver equivalent for the quarter was US$15.51 an ounce.

On Friday, the company released an update on the status of the appeal order received on November 10, 2021, from the Secretaria de Medio Amiente y Recursos Naturales (Semarnat) with respect to the application to extend the environmental impact authorization (EIA) at the San Jose mine.

Fortuna said its Mexican subsidiary, Comania Minera Cuzcatlan, is working with its legal advisers to file an appeal to the denial order prior to the end of November, 2021. It said the appeal will be brought by Minera Cuzcatlan in the Mexican courts.

The grounds for the appeal are that Minera Cuzcatlan is in full compliance with all material environmental laws, and therefore Minera Cuzcatlan has the right to an extension of the EIA under applicable law. The timing for a decision by the administrative court is uncertain, and Fortuna has been advised that such decisions may often take up to a year to be delivered.

Meanwhile the San Jose mine is currently operating under the protection of the Mexican courts, which allows the continued operation of the San Jose mine beyond the expiry date of the EIA.

Under the terms of the company’s credit facility, the company is required to obtain a permanent injunction or equivalent protection, in form and substance acceptable to the lenders acting reasonably, by November 20, 2021, to all the company to continue to operate the San Jose mine from October 23, 2021.

The lenders under the credit facility have agreed to waive that requirement until February 18, 2022, provided such permanent injunction or equivalent protection has not been lifted or stayed prior thereto.

The company said it believes that it is fundamentally in compliance with all material aspects of the EIA and is entitled to an extension.

Production at San Jose was temporarily halted last year a group of individuals led by the former mayor of San Jose de Progreso illegally blocked Federal Highway 175 and roads in the municipality of San Jose Progreso, including access to the San Jose Mine. Fortuna said the aim was to protest action taken by the Electoral Tribunal of the State of Oaxaca in revoking his appointment as mayor.

Operations resumed after the blockade was lifted.

On November 18, 2021, Fortuna Silver shares closed at $4.99, and currently trade in a 52-week range of $12.61 and $4.69.


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