On Monday, December 20th, Fortuna Silver ($FSM / $FVI.TO) announced that the SEMARNAT, Mexico’s environmental authority, granted a twelve-year extension of the Environmental Impact Authorization at the San Jose mine. SEMARNAT confirmed that the mine operations are conducted in accordance with all environment obligations under the EIA, reassessed the application and thereby granted the extension.
Since the mine was put into operation by FSM, PROFEPA (Mexico’s environmental protection agency) has conducted 13 inspections. The Company has never been cited for pollution or environmental damage. In addition the Company spends the resources to go well above and beyond the environmental and community outreach requirements to remain in compliance with its operating permits and maintain a good relationship with the local stakeholders and authorities.
FSM is the biggest employer in the region of Central Valleys of Oaxaca and the biggest direct and indirect source of economic wealth output in the area. The only surprise for me was that the extension was granted before year-end. I expected that FSM would have to incur the cost of elevating this matter to the courts.
During the period between the initial denial and subsequent granting of the extension, the mine operations were never paused and the Company did not incur loss of revenue. Based on the reserves, the current assessed life of mine is three years. However, the property hosts multiple areas of possible resource expansion. While its impossible to know if the Company can extend the mineral reserves for the full twelve years of the extension, I am confident that the mine will operate for several years beyond the rated LOM. This probability, in my opinion is not yet factored into the stock price.
The above commentary is an excerpt from the next issue of my Mining Stock Journal newsletter. I also lay out an updated valuation analysis and offer my price forecast for the next six to nine months. The valuation analysis was derived from conversations with the Company over last two days, as well as my expectations for the existing mines and for the high-grade Sequela gold mine, which is now under construction with the first gold pour expected in mid-2023.
In addition to this, I provide update opinions on several of the companies I cover, own and recommend plus a Stocking Stuffers section that includes an opinions on Pan American Silver (PAAS) and Great Bear Resources.
More information on my newsletter can found here: Mining Stock Journal subscription information. There’s no minimum required subscription term beyond the first month, though more than half of my subscribers have been subscribed for over two years. I do all of my own research and I emphatically do not take any compensation whatsoever from mining companies.