Fortuna announces aquisition of silver mine in Peru and related financing
Fortuna Ventures Inc. (TSX-V:FVI) is pleased to announce that it has signed a Purchase Agreement to acquire 100% of the Caylloma Silver Mine in Peru. The Company will also change its name to Fortuna Silver Mines Inc.
The Caylloma acquisition includes a National Instrument 43-101 compliant Resource Estimate of 7 million ounces silver in proven and probable reserves, plus 14 million ounces silver in inferred resources, for a total resource of 21 million ounces of silver; a 600 tonne per day processing plant; and more than 8,000 hectares of mining concessions. Furthermore, all the required permits and infrastructure are in place to re-start production.
The Caylloma Silver Mine
Caylloma ranks among the most prolific silver producers in Peru, with a 400 year history and over 250 million ounces of silver mined to date. Located only 4.5 hours from Arequipa, the second largest city in Peru, it lies within 60 km of four other operating silver and gold mines, owned by local companies. The district is connected to the national power grid and has all the required infrastructure and services to support mining operations.
The last year of operation at Caylloma was 2002, when 2.6 million ounces of silver were produced. The current owners temporarily halted operations in 2003 due to depressed metal prices, and in order to revamp the Caylloma mill. Concurrently, a major exploration program was undertaken in the area of the mine which resulted in the discovery of significant silver and base metal resources.
Fortuna anticipates that production will recommence within 12 months, achieving a production rate of approximately 2 million ounces of silver per year in 2006, at an estimated cash cost of less than US$ 4.00 per ounce of silver, net of byproduct credits. A 5,000 meter exploration drill program will also be conducted, targeting underexplored veins and high grade ore shoots.
Mr. Peter Thiersch, President of Fortuna, commented that “We are not only acquiring a turn key project with 21 million ounces of silver in combined reserves and resources, but also a commanding land position in one of the most prolific silver vein camps in Peru. We anticipate production startup within 12 months, and look forward to being a low cost producer in a rising silver market. We are also designing a significant exploration program to evaluate additional targets on the property and we plan to capitalize on our local expertise to aggressively pursue further acquisitions.”
All resource and reserve figures presented in this press release have been independently verified by consulting firm Chlumsky, Armbrust and Meyers (CAM) in an NI 43-101 compliant Technical Report, dated April 22, 2005.
Table of Reserves and Resources
|RESERVES||tonnes||contained Ag oz||Ag oz/t||Au g/t||Pb %||Zn %||Cu %|
|Traditional Silver Veins|
|Total In-situ Reserves||319,138||4,659,415||14.6||0.84||0.06||0.08||0.02|
|Polymetalic Vein – Animas|
|Total In-situ Reserves||457,212||2,482,661||5.43||0.35||3.06||4.88||0.23|
|Total Mineable Reserves||776,350||7,142,420||9.2||0.55||1.83||2.91||0.14|
|INFERRED RESOURCE||tonnes||contained Ag oz||Ag oz/t||Au g/t||Pb %||Zn %||Cu %|
|Traditional Silver Veins||454,947||6,878,799||15.12||0.38||0.32||0.7||0.16|
|Polymetalic Vein - Animas||691,652||7,338,428||10.61||0.61||3.62||5.49||0.5|
|Total Inferred Resource||1,146,599||14,217,828||12.4||0.52||2.31||3.59||0.37|
Under the terms of the Purchase Agreement between the Company and two private Peruvian companies, Compañia Minera Arcata S.A. and Compañia Minera Ares S.A.C. (the “Vendors”), the Company will acquire all of the shares of a company that owns the Caylloma assets and liabilities for a purchase price of US$7.55 million plus 10.803% of the fully diluted capital of the Company.
The Company will pay the purchase price to the Vendors as follows: 1) US$100,000 at signing of the purchase agreement, which has been paid; 2) US$2.95 million by the issuance at closing of a convertible promissory note that is payable on or before the sixth month anniversary of closing; 3) US$4.5 million payable on the first year anniversary of closing; and 4) 10.803% of the outstanding capital of the Company, calculated on a fully diluted basis. A 2% net smelter returns royalty payable to the Vendors will accrue after 21 million ounces of silver have been recovered from the property.
The Company plans to complete a US$10 million financing to pay the deferred cash portion of the purchase price and for working capital required to reopen the mine. This financing will be completed at prices and on terms in the context of the market at that time.
The agreement with the Vendors requires that on completion of the US$10 million financing, the Vendors will own shares and warrants equal to 10.803% of the Company on a fully diluted basis, at an expected ratio of 40% and 60% respectively.
The Company will also complete a non brokered private placement financing of C$1,050,000 prior to or at the closing. The private placement will involve the sale of 1,500,000 units at the price of $0.70 per unit, with each unit being comprised of one common share and one warrant. Each warrant will be exercisable to purchase a further common share for one year at a price of $0.75.
The mine acquisition, financing and name change are subject to acceptance by the TSX Venture Exchange and/or shareholder approval. Closing of the acquisition will occur as soon as possible after receipt of those approvals, and is expected to occur before the end of June, 2005.
Trading in the shares of the Company on the TSX Venture Exchange was halted, at the Company’s request, in late December 2004 pending the completion of the negotiations on the Caylloma Mine acquisition. With the issuance of this news release, trading is anticipated to resume shortly.
In January 2005, Nathanael Lineham and Robert Rosner resigned as directors of the Company, and Mr. Simon Ridgway was appointed a Director. Mr. Ridgway is President of Radius Gold Inc. and brings to Fortuna over 15 years’ experience in financing and managing exploration companies operating in North, Central and South America.
Effective March 9, 2005, 87,470 shares of the Company held in escrow were cancelled and returned to treasury, due to the expiration of the escrow agreement. There are now no outstanding escrow shares. The Company’s current issued and outstanding capital is 6,461,221.
Mr. Peter Thiersch, M.Sc. P.Geo., President of Fortuna Ventures, is the Qualified Person for the Company, as defined by National Instrument 43-101, and is responsible for the accuracy of this press release.
For further information on Fortuna Ventures Inc. please call (604) 484-4085 or visit our website at www.fortunaventures.com
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and disinterested Shareholder approval. The transaction cannot close until the required Shareholder approval is obtained, which is being sought by consent of those holding more than 50% of the issued shares. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the Caylloma Acquisition and related transactions may not be accurate or complete and should not be relied upon. Trading in the securities of Fortuna Ventures Inc. should be considered highly speculative.
The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release.
ON BEHALF OF THE BOARD,
Peter Thiersch, President
Fortuna Ventures Inc.