Canadian Mining Journal


SILVER: Royalty dispute dogs Fortuna Silver

MEXICO – Fortuna Silver Mines is contesting demands for a royalty of 3% of the billing value of minerals obtained from the concession hosting its San Jose mine in Oaxaca, Mexico.

The company recently received a notice from Mexico’s Direccion General de Minas (General Directorate of Mines) that its mining concession will be cancelled if US$30 million plus value-added-taxes (VAT) in royalties owed from 2011 to 2019 isn’t paid before Mar. 15.

The company could not be reached for clarification and comment on the dispute.

Fortuna said the Mexican Geological Service (SGM) first notified the company in 2017 that a previous owner of one its concessions at the San Jose silver-gold mine had granted the 3% royalty to SGM.

The company said it started administrative and legal proceedings in 2018 against the DGM to remove reference to the royalty on the title register and the proceedings are “progressing in accordance with the procedures of the Mexican administrative court.”

Now the company will start “legal proceedings to contest the cancellation procedure and also to stay the cancellation process,” it said in a news release on Jan. 29.

If the company has to pay the royalty or post security that it will do so, it can use its available working capital, it noted.

“In the event that that company is unsuccessful in cancelling the action taken by the DGM or in obtaining a stay of execution, it may be required to pay, or post a bond or other security, up to the amount claimed, in order to preserve the mining concession,” it said. “In that case the company would immediately thereafter proceed with dispute proceedings.”

Fortuna also stated that it has adequate funds to meet sustaining capital requirements at its San Jose silver-gold mine and its Caylloma silver-lead-zinc mine in southern Peru, as well as for capital required to complete its Lindero project in Argentina.

Lindero is an open-pit gold project in Salta province with a mine life of about 13 years. Construction started in September 2017.

At presstime in Toronto, Fortuna was trading at $5.13 per share within a 52-week range of $3.23 and $6.12.

The company has about 160 million common shares outstanding for a market cap of $823 million.

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