Vancouver-based Fortuna Silver Mines will decide whether to continue operations at its San José mine in Mexico’s Oaxaca state in the third quarter, when the company expects to have a better idea of how significant and profitable the recently discovered Yessi vein will prove to be.
The future of the mine, operated by subsidiary Minera Cuzcatlán, is still uncertain while the company continues preparation to update and execute a multi-year progressive mine closure and a monitoring plan.
“Yessi has been an exciting discovery at the San José mine. But it needs to graduate from an exciting discovery to an exciting resource reserve we can plug into mine plants. And we’re not there yet,” CEO Jorge Ganoza told the Q1 results call.
“It’s going to be probably into the third quarter when we have a better handle on how big this is and how meaningful it can be to mine plants,” Ganoza said, adding that is the reason why Fortuna continues drilling “aggressively,” while management is planning to extend a mine closure plan.
In its Q1 results report, Fortuna said exploration continued at the Yessi vein, including an intercept of 1kg silver equivalent over an estimated true width of 8.1m, highlighting the potential for high-grade shoots.
Ganoza also said the company was looking at three potential scenarios.
“One is, of course,… based on exploration success, we can continue mining. It’s not just exploration success, but also resources that could not get converted in late 2023 benefiting from higher prices as we reassess our mine plants,” Ganoza said.
“There is a second scenario where we decide to place the mine on care and maintenance while we continue with exploration at Yessi. And the last one is we exhaust reserves in 2024 and make the decision to just… roll into a progressive closure plan,” he added.
In late February, Ganoza told BNamericas that regardless of whether this discovery can sustain the mine’s operations beyond 2024, Fortuna management also needs to see a change in the Mexican government’s attitude.
During the call, Ganoza said the company is in dialogue with the two leading presidential candidates, Claudia Sheinbaum and Xóchitl Gálvez, and that it is “hopeful that the investment climate in Mexico for mining will improve as an outcome of this coming election,” slated for June 2. The next president will take office October 1.
In 1Q24, San José produced 759,111oz of silver and 4,533oz of gold, down 42% and 45% versus the same period in 2023, respectively, due to fewer tonnes extracted and lower grades, which is consistent with the annual plan and guidance.
“The operation is experiencing further cost pressures driven by the continued appreciation of the Mexican peso. The company conducts regular assessments and trade-offs between maintaining operations and opting for a care and maintenance option,” Fortuna said in its report.