Fortuna Silver Mines and Roxgold Inc. have joined forces to create a global premier growth oriented intermediate gold and silver producer. Prior to the deal, Fortuna expected an annual gold production of 178,000-200,000oz, now with this joint venture it expects to produce around 450,000oz.
On April 26, Fortuna announced that it entered into an agreement to acquire all of Roxgold's issued and outstanding common shares in exchange for .283 of one Fortuna common share and CAD$ 0.001 (US$ 0.0008) for each Roxgold share obtained.
Following the completion of the transaction, Roxgold became a wholly owned subsidiary of Fortuna and will be delisted from the Toronto Stock Exchange. Under the new agreement, current Fortuna shareholders and former Roxgold shareholders will own 63.6 percent and 36.4 percent of Fortuna's outstanding shares, respectively.
Fortuna's issuance of up to 110,128,963 common shares to Roxgold shareholders was approved by 96.65 percent of Fortuna shareholders who attended the company's annual meeting. Meanwhile, 84.80 percent of Roxgold shareholders voted in favor of the new deal.
The reasons behind the agreement were to create premier growth-oriented global intermediate gold and silver produce to pursue new opportunities, combine two highly experience management teams, diversified and complement each other portfolio, among others. With the new agreement, Fortuna will be able to achieve a production of 450,000oz of gold a year, more than double of what it expected according to its 2021 guidance.
The new agreement creates a low-cost gold and silver producer with four operating mines and a development project. "The company will benefit from a robust exploration pipeline and expanded presence in the Americas and West Africa, two of the fastest growing precious metals producing regions in the world," said Jorge A. Ganoza, President and CEO of Fortuna.
One of Fortuna's projects in Mexico that will benefit from the new agreement is the San José mine located in Oaxaca which produces silver and gold. The mine is operated by Compañía Minera Cuzcatlan, a Mexican subsidiary of Fortuna. Through new investments, the company has been able to increase the mill's capacity to 3,000 tons per day. In 2020, the San José mine produced 6.2Moz of silver and 37,805oz of gold. By 2021, the company expects to produce between 5.8 and 6.5Moz of silver and 38,000-42,000oz of gold.
The company is developing an exploration program in San José, which includes drilling multiple targets and expanding defined resources and reserves. Fortuna's 2021 exploration program budget for San José is US$10.9 million, which will be used for 33,800m diamond drilling and underground development. In addition to San José, the company has three greenfield projects in Mexico: Santa Fe, Higo Blanco and Baborigame, which the company expects to continue mapping, sampling and drilling in 2021.