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Fortune Minerals completes Revenue Silver Mine acquisition

Fortune Minerals completes Revenue Silver Mine acquisition

Photo by Bloomberg

1st October 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian silver producer Fortune Minerals has consolidated possession of the Colorado-based Revenue Silver Mine (RSM), underlining its strategic transition from project developer to miner, with two organic development assets waiting in the wings.

The TSX-listed miner on Wednesday took delivery of a $25-million tranche of the $35-million prepay facility from Lascaux Resource Capital Fund 1, which Fortune used to fund the acquisition of the remaining interest in the RSM.

The second tranche of $10-million was expected to close on October 16, which Fortune would use to settle amounts owing to the previous owner of the mine, fund capital improvements to the mine and for working capital.

“Our ability to arrange financing and close this purchase of the RSM in a challenging capital market is a testament to our team. We look forward to completing the changeover of operations and are delighted to welcome the employees of the mine to Fortune as we continue with the ramp up to 400 t/d and cash flow from operations,” Fortune president and CEO Robin Goad said.

Fortune had entered into an amending agreement with the current owners of the RSM and related assets, including Silver Star Resources, Star Mine Operations and Revenue-Virginius Mines Corporation to acquire the assets under more attractive terms.

Under the latest agreement, Fortune paid the vendors $15.5-million from the proceeds of Tranche 1 of the Lascaux facility. The company had agreed to pay a further $3-million when it received the second tranche and 17.74-million Fortune common shares, which would be issued pending shareholder approval.

Before the amendment, Fortune was required to pay the vendors $10-million after receiving the second tranche of the Lascaux facility. The agreement was amended to make funds available for the capital improvements to the mine and for working capital.

Fortune had also changed its agreement with the vendors and RVM Holdings, the previous owner of the mine, under which it paid $4-million to RVM from the proceeds of Tranche 1 of the Lascaux facility, instead of two instalments of $1.5-million due on Wednesday and $3-million due on October 1, 2015, collectively totalling $4.5-million.

MINE IMPROVEMENTS

Fortune reported that a number of capital improvements were currently under way at the RSM to improve safety and realise efficiencies at the mine to meet production objectives. These included drilling a 460-m-deep, 2.45-m-diameter raise bore from the surface to improve mine ventilation and provide a secondary escape way for emergency egress at the back of the mine.

This raise would also be used as an ore pass to access high-grade mineralised material contained in surface stockpiles located at the top of the mountain, which would be used as incremental mill feed during the ramp up to full production.

Fortune was also driving a 300-m-long decline ramp to access the 100 level of the mine where there were developed stopes with broken muck from previous test mining and undeveloped stopes with higher-grade ore.

Scaling, bolting track and ventilation improvements had also been made to improve safety and tramming capacity in the main haulage tunnel. The mill performance was being improved by installing new, higher-capacity pumps, modifications to the crushing and grinding circuits, and by installing a thickener to improve tailings filtration capacity.

The Revenue mine currently had compliant resources of 215 300 t in the measured category, 586 300 t in the indicated category and 684 200 t in the inferred category, containing 16.3-million ounces of silver in the measured and indicated category and 10.1-million ounces of silver in the inferred category.

A recent preliminary economic assessment based the mine plan on 888 283 t (diluted) with an average grade of 14.6 oz/t of silver, 0.02 oz/t of gold, 2.26% lead and 0.9% zinc.

Over the mine’s eight-year life, it was expected to produce 1.86-million ounces of silver at a cash cost of $6.62/oz of silver net of by-product credits, excluding freight, treatment and refining charges (TC/RC), and $10.28/oz C1 cash cost, including TC/RC charges.

The company is also developing the Nico gold/cobalt/bismuth/copper mine and concentrator in the Northwest Territories, which recently received the final land-use permit and Type A water licence required to construct and operate the project, pending the finalising of financing. The ore would be processed in two stages at the Nico site and the company’s Saskatchewan metals processing plant, near Saskatoon.

Fortune also owns the Arctos anthracite metallurgical coal project, in British Columbia.

Edited by Creamer Media Reporter

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