Fortuna Boosts Reserves 400% At Caylloma

The Caylloma silver-lead-zinc mine in southern Peru has proven and probable reserves of 20.3 million oz. silver — 404% more than previously estimated, Fortuna Silver Mines (FVI-V, FVITF-O) has reported.

This year, the mine in the southern highlands of Arequipa is forecast to produce 1.6 million oz. of pure silver. (In the first half of the year, it produced 853,160 oz.)

Currently, the Caylloma operates at a production rate of 1,200 tonnes per day but is working to get permitting to increase that number to 1,500 tonnes per day.

The updated resource figures put proven and probable reserves at 4.03 million tonnes averaging 156 grams silver per tonne, 0.55 gram gold, 1.7% lead and 2.58% zinc. Measured and indicated resources now tally 267,470 tonnes grading 64 grams silver, 0.31 gram gold, 1.18% lead and 2.17% zinc.

Inferred resources are estimated at 1.3 million tonnes averaging 187 grams silver, 0.29 gram gold, 1.92% lead and 3.25% zinc for contained silver of 7.7 million oz.

The new estimate was based on all data available through the end of 2008 for all reported veins with the exception of the Bateas Vein, which includes all data through the end of March 2009.

The reserve figures were calculated from the measured and indicated resource based on factors such as mining methods, mining dilution and historical operating costs at Caylloma, a high-grade epithermal vein system.

These included mining at US$23.46 per tonne, processing at US$7.90 per tonne, power at US$3.92 per tonne, maintenance at US$1.04 per tonne, administration US83¢ per tonne, additional costs at US$4.48 per tonne and concentrate shipping costs of US$6.17 per tonne.

Operating costs totalled US$47.80 per tonne and comprise the lower net smelter return value for reserve reporting purposes. Minimum mining width was assumed at 2.1 metres for the Animas Vein and 1 to 1.5 metres for the narrower silver veins.

Mining dilution was estimated at 10% with the exception of the Silvia and Soledad veins, where mining dilution was included at 15%.

Fortuna acquired the Caylloma mine and its San Jose silver-gold project in Oaxaca, Mexico, in late 2005.

San Jose is a low-sulphidation epithermal system within the Taviche mining district in southern Oaxaca. A 33,000-metre infill drill program has been completed in the Trinidad area of the project and the company expects to release a new resource estimate by the end of the second quarter and management expects to bring a construction decision to its board by the end of the third quarter, begin construction in 2010 and production in 2011.

Fortuna Silver Mines was created in 2004. Its operating philosophy is to acquire advanced silver exploration projects and or producing mines in Latin America.

The news sent Fortuna shares up 5¢ or 5.6% to 95¢ apiece. The company has traded in a 52-week band of 38¢-$1.70 per share.