Fortuna Silver Mines Inc. (fka FVITF)

[TraderRich]

Fortuna Receives Positive Pre-Feasibility Study for the San Jose Project; Construction Activities to Commence

VANCOUVER, April 26, 2010 /PRNewswire via COMTEX/ -- Fortuna Silver Mines Inc. (Fortuna) (TSX: FVI/Lima Stock Exchange: FVI) - is pleased to announce the results of a positive Pre-feasibility Study (CA:PFS 19.00, 0.00, 0.00%) for its 100% owned San Jose Project in Oaxaca, Mexico. The PFS was prepared by Chlumsky, Armbrust and Meyer (CAM) from data supplied by Fortuna and their consultants. CAM is an internationally recognized mining consulting firm based in Denver, Colorado.

Fortuna has already been granted all of the necessary permits to commence construction at San Jose. Project staffing for the construction phase is currently being finalized and the Engineering Procurement Construction Management (EPCM) contract for the construction of the plant and ancillary facilities has been awarded to M3. M3 is an international engineering and construction company out of Tucson, Arizona with ample experience in Mexico. The Company has also initiated pre-construction activities for the water project, tailings facilities and power connection.



Highlights of the Pre-feasibility Study include:

- 3.5 million tonnes of Probable Reserves with 23.2 million ounces of
contained silver and 181,000 ounces of contained gold (average head
grades of 205 g/t of silver and 1.6 g/t of gold)

- 2.7 million tonnes of Inferred Resources* with 17 million ounces of
contained silver and 133,500 ounces of contained gold not included in
the Reserves or the economic model

- After-tax Net Present Value (NPV) of US$ 36.4 million at an 8%
discount rate

- After-tax Internal Rate of Return (IRR) of 18%

- Estimated Pre-production Capital Expenditures (CAPEX) of
US$ 55.7 million

- Average Cash Cost per silver equivalent (Ag Eq) ounce over life of
Reserves of US$ 6.90

- 9 year production plan based on existing Reserves

- Incremental throughput rate starting at 750 tonnes per day (tpd),
scaling to 1,000 tpd in 2014 and to 1,500 tpd in 2016

* This figure refers to resources above the break even cut-off grade.





San Jose Project Summary

The PFS is based on the resources described in our NI 43-101 compliant resource estimate dated December 10, 2009 which has been filed on SEDAR, and defines a total of 3.5 million tonnes in Reserves with a projected life of 9 years. Average head grades for the life of the Reserves are estimated at 205 g/t of silver and 1.6 g/t of gold. The economic evaluation is treated on a project basis using a silver price of US$ 15.12 per troy ounce and a gold price of US$ 897.51 per troy ounce.

Pre-tax and after-tax NPVs are estimated at US$ 46 million and US$ 36.4 million respectively, both at a discount rate of 8%. The IRR is estimated at 20% and 18% pre-tax and after-tax, respectively. Pay back on an undiscounted basis is estimated at 5.5 years. Cumulative undiscounted free cash flow is projected at US$ 95.1 million.

Capital costs for the pre-production stage are projected at US$ 55.7 million. Capital costs during the operational stage for the life of Reserves are estimated to be US$ 60 million for purposes of sustaining CAPEX as well as project expansion to the 1,500 tpd production level.

At the San Jose Project there will be two payable metals - silver and gold, with silver being the predominant metal. The San Jose Mine will be an underground operation with the metallurgical process consisting of conventional flotation to recover silver and gold from sulphide ores in the form of a concentrate.

Operations are modeled to start at 750 tpd scaling to 1,000 tpd after the initial two and a half years of operation with a subsequent ramp-up to 1,500 tpd. Metal produced in concentrates over the life of current existing Reserves will be 20.4 million ounces of silver and 163,000 ounces of gold. These projections do not take into consideration the silver and gold that will be produced from the Inferred Resources following their upgrading to reserves.

Average unit cash costs throughout the life of the Reserves are estimated to be US$ 38.8 per tonne of treated ore and US$ 6.9 per Ag Eq ounce.

Jorge Ganoza, President, CEO and Director, commented, "Management is pleased to report the results of the pre-feasibility study of San Jose. The study shows a project that is viable with conventional mining and processing methods with healthy economic returns. It has been challenging to incorporate into a study of this nature all the areas of opportunity that in Management's view, make San Jose a robust project. The old miner's adage: "drill for structure and drift for reserves" holds true. The limitation to model an underground mine including only Measured and Indicated resources for reserve conversion meant that a significant amount of Inferred resources located in the upper portions of the mine, where mining takes place in the initial years, are not accounted for in the mine plan. Under this scenario, the mine demands more upfront development and a longer time to achieve the targeted 1,500 tpd in the pre-feasibility study. Management is now focused on advancing San Jose and capitalizing on this and other areas of opportunity."


Whole article here...

http://www.marketwatch.com/story/fortuna-receives-positive-pre-feasibility-study-for-the-san-jose-project-construction-activities-to-commence-2010-04-26?siteid=nbsh