Fortuna Silver (FVITF)

On 23rd sept, Fortuna Silver Mines Inc. reported that underground exploration and development on the Soledad and Silvia veins at its Caylloma Mine located in southern Peru has confirmed high-grade silver mineralization.

- Systematic channel sampling at 2m intervals along the strike of the Soledad vein returned grades averaging 2,259 g/t Ag, 3.76 g/t Au, 0.94% Pb, 1.47% Zn and 0.20% Cu over the initial 62m of the drift, with an average mineralized vein width of 0.70m.

- Locally, Bonanza style grades have been encountered during systematic channel sampling with grades ranging up to 52,224 g/t Ag and 104.76 g/t Au over a vein width of 0.55m.

Vertical continuity of the mineralization is currently being evaluated through the development of a chimney extending upward along the vein structure.

Just as a quick mental exercise (and I know it's only the vein intersection, but humour me a second, yeah?). How much is a metric tonne of rock that holds 1,775 oz of silver and 3.3 oz of gold worth right now?

1,775 X $13.14 = $23,323.50 3.3 X $890 = $2,937 Total = $26,260.50

FVI is buying out CNU.v in a friendly, all share deal. FVI is emitting 7m new shares to buy out CNU.v at a rate of 0.0564 shares of CNU per share of FVI. As a ballpark, at tonight's closing price this values each CNU at 7.1 cents (about a 19% premium on the 6c close today).

For this, FVI gets the main prize of the 24% of the San José silver project it didn't own already. As a very juicy bonus, it also gets its hands on six other projects in the same Oaxaca region of Mexico that CNU owns but didn't have the necessary moolah to move forward itself (See the map above, stolen from the CNU.v website).

This is a great deal for FVI. With virtually no cash at bank, Continuum's share price has sunk due to the ongoing junior explorer slump. Fortuna has plenty of working capital in its ammo dump and has grasped the opportunity to buy out CNU at a knockdown price with both hands. Very smart deal indeed.

The fact that silver is now trading at over $19.43 at time of writing and nearly half the company's zinc and lead production is hedged at prices well over today's spot is not to be taken lightly. This thing has been beaten up in the junior stocks downdraft, but it's a cash flow positive company that has enough on hand to build the very promising San José Mexico mine without recourse to the dreaded credit market if need be. It has plenty of cash at bank, and is earning around $6m EBIT at the Peru Caylloma plant per quarter, so the present $1.66 price is more than ridiculous. A well-run company that makes plenty profit and with rock-solid expansion plans being given away.