For what it's worth, Simon Ridgway
Fortuna Silver (FVI.V)
Fortuna had a better 2008 than most juniors – they increasedproduction, cut losses, and advanced their projects. The stock sold offwith the rest of market, going from $3 to $0.50, but also like the restof the gold market, it doubled off its meltdown low to $1, which isabout where it sits now.
Fortuna primarily consists of a producing mine and a developmentproject. The Caylloma mine in southern Peru is a silver mine with lead,zinc, copper, and gold credits. It produces about 450,000 ounces ofsilver per quarter, and Simon says they’re on track to produce between1.6 and 1.8 million ounces this year.
Net of base metals, Caylloma is producing silver at – get this – 10cents per ounce. And that’s at current base metal prices. This isespecially astounding when you consider that many other silverproducers are struggling with costs. The life of mine at Caylloma is 10years, but Simon expects reserves to expand with the new resourcecalculation that should be out in a month or two. The mine currentlyhas 5 million ounces of Proven and Probable Reserves – but it has 5.4million in Measured and Indicated and a whopping 13.8 million inInferred.
“And the atmosphere at the entire operation is fantastic,” Simon says.“From the engineers to the janitors, they’re all proud to be workingthere. I couldn’t be happier with the atmosphere down there.”
Meanwhile, the company’s development project is the San Josesilver/gold project, located about an hour south of Oaxaca, Mexico.It’s a high-grade epithermal vein system, and they expect to be inproduction in late 2010, early 2011. While no pre-feasibility study hasbeen completed on the project yet, Simon says San Jose should produceabout 4 million ounces of silver per year, and at a relatively low costof $3-$4 dollar per ounce.
“And we’re well financed,” he adds. “We’ve got $30 million in the bank, so we should be one of the top producers in the area.”
If you’ve followed the company, you also know there’s a “but” to thisstory. Protesters illegally blocked the main access road to the projecta couple months ago. While this didn’t affect the pre-engineering workthat was ongoing, it admittedly brought some negative attention theirway. And the concerns grew since the local government, despite itspromises, hasn’t immediately acted to remove the illegal demonstrators.
Somewhat perplexing is that the mine was in production for many yearsand the previous owner had no conflicts. Which makes one wonder aboutthe motivations of the protesters. Simon just returned from the projectand gave us some insight.
“The demonstrations are less about the mine and more about thepolitics. Elections are in July, and they’re trying to influence whichway the population will vote. They’re trying to turn the populationmore left wing, but they’re having limited success. It’s a politicallymotivated demonstration, and unfortunately it’s really affecting thetown of San Jose.”
How big is the demonstration right now? “There’s about 10-15 peoplesitting outside the mine gate, most of which are women. The crowd isn’tgrowing, it’s shrinking, so there’s not a lot of people actuallyprotesting. Are they being paid to be there? Very possibly. That’s thefeeling we get, but we don’t know that. The most radical of theprotesters is the local priest. He rails against mining in hissermons.”
What’s their beef? “They’re talking about the dangers of cyanide, butSan Jose will be an underground mine, meaning no cyanide will be usedand the surface won’t be affected at all. They were also worried aboutthe cows – but the only way we’d harm any cattle is if they got in theway of the drill bit, and obviously we’re not going to drill throughcows.”
I asked him if they’re still able to work at the project. “We’re stillable to go in and out. We want to drill off a much larger resource andthen put a much larger mine in production. In the meantime, we’re stilldoing our engineering work.”
And when does he think things will be resolved? “The government wouldlike to get the demonstrators out of there. We have 100% support fromlocal, state, and national authorities, and they’ve made it clear theywant mining in Oaxaca. So while they’ve been slow to act, we’re sittingback and seeing if the demonstration wears itself out. In the end,though, I’m confident this mine will go forward.”
And since our conversation, the local and state authorities in Oaxacahave removed the roadblock and Fortuna is gradually resuming onsiteactivities.