Fortuna Silver says Mexico blockade has ended

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Fortuna Silver Mines Inc. [FVI-TSX, Lima; FSM-NYSE; F4S-FSE] says the illegal road blockage that was preventing access to its San Jose Mine in Oaxaca, southern Mexico, has been lifted.

Operations at the mine are scheduled to resume today, starting with the nightshift, the company said in a press release that came after the close of trading on March 25, 2019.

Fortuna had previously stated that a group of individuals led by the former mayor of San Jose de Progreso had illegally blockaded Federal Highway 175 and roads in the municipality of San Jose Progreso, including access to the San Jose Mine. It said the aim was to protest action taken by the Electoral Tribunal of the state of Oaxaca in revoking his appointment as mayor.

As a result of the illegal blockade, the company decided to temporarily halt mining and processing operations at the San Jose Mine.

Despite news of the resumption, Fortuna shares eased 4.6% or 18 cents to $3.74. The shares are currently trading in a 52-week range of $2.05 and $6.12.

Fortuna Silver is a fast-growing precious metals producer, operating two low-cost mines in Peru and Mexico. The San Jose Mine produced 8.0 million ounces of silver and 53,517 ounces of gold in 2018. In 2019, the company was forecasting consolidated production of up to 9.0 million ounces of silver, up to 54,000 ounces of gold, up to 29 million bounds of lead, and up to 44 million pounds of zinc.

In its recently released 2020 guidance highlights, Fortuna said the San Jose Mine plans to process 1.06 million tonnes this year at an average grade of 223 g/t silver and 1.39 g/t gold. Capital investment is estimated at US$17.1 million, including US$12.2 million for sustaining capital expenditures and US$4.9 million for brownfield exploration programs.

This year, the company has said it plans to produce between 7.5 and 8.3 million ounces of silver and between 101,000 and 125,000 ounces of gold.

Fortuna recently released an update on the status of legal proceedings related to a disputed royalty on one of its extracting mining concessions at the San Jose Mine.

In early February, 2020, the company initiated legal proceedings against the Direccion General de Minas (DGM) to contest the procedure taken by DGM to cancel one of its mining concessions if the disputed royalty (in the Mexican equivalent of US$30 million), plus VAT (being the amount of the claimed royalty from 2011 to 2019) is not paid by March 15, 2020.

Fortuna said the District Court in Mexico City admitted the company’s legal proceedings and on March 2, 2020, and also granted a permanent stay of execution, which protects the company from the cancellation of concessions until a resolution by the court is reached on the legality of the cancellation procedure.

The timing of a decision by the Court at first instance in this action against DGM is uncertain and may take several months, the company said. In the event that the company is unsuccessful in these proceedings, it may appeal.

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