Vancouver, March 26, 2021: Fortuna Silver Mines Inc. (NYSE: FSM) (TSX: FVI) announces an update of the status of the legal proceedings related to a disputed royalty on one of its extracting mining concessions at the San Jose Mine located in Oaxaca, Mexico.
In 2017, the Mexican Geological Service (“SGM”) advised the Company that a previous owner of one of the Company’s mineral concessions at the San Jose Mine, had granted to SGM a royalty of 3% of the billing value of the minerals obtained from the concession. At the date of the Company’s acquisition of the concession, the royalty was not disclosed to the Company and it did not appear on the electronic title register at the Mining Registry although it is listed in the official record books of the concessions of the Mining Registry. The Company obtained advice from external legal counsel which confirmed that there was no legal basis for the creation of the royalty and that it was invalidly created. The Company initiated legal proceedings to uphold its position that no royalty is payable.
Administrative proceedings were initiated to remove reference to the royalty from the title register, and subsequently further legal proceedings (the “Amparo Proceedings”) were initiated to contest the legality of the cancellation procedure of the Dirección General de Minas (“DGM”) for non-payment of the royalty. On March 2, 2020, the Company obtained a permanent stay of execution (akin to an injunction), which protects the Company from making payment of the disputed royalty in order to avoid cancellation of the concession until a final non-appealable resolution is reached in the Amparo Proceedings. The Company’s appeal of the decision of the Court at first instance in the Amparo Proceedings is before the Collegiate Court. A decision is expected during mid-2021. (refer to Fortuna news releases dated March 5, 2020 and December 1, 2020).
In 2018, the Company initiated administrative proceedings (the “Administrative Proceedings”) in the Mexican Federal Administrative Court (“FAC”) against the DGM to remove reference to the royalty from the title register on the grounds that there is no legal basis for the creation of the royalty and that it was invalidly created. Effective March 26, 2021, the FAC resolved against correcting the title register, on the basis that the previous owner of the mineral concession offered the disputed royalty to the SGM. The Company’s Mexican legal advisors are of the view that the resolution of the FAC is erroneous as the Judge failed to consider the relevant Mining Laws relating to royalties in place at the time of the grant of the
mineral concession. The Company’s legal position with respect to the disputed royalty remains unchanged. The Company intends to vigorously defend its position and appeal the resolution of the FAC and file an appeal with the Collegiate Circuit Court in Mexico by April 21, 2021.
The resolution of the FAC does not affect the permanent stay of execution obtained by the Company on March 2, 2020.
About Fortuna Silver Mines Inc.
Fortuna Silver Mines Inc. is a Canadian precious metals mining company with operations in Peru, Mexico and Argentina. Sustainability is integral to all our operations and relationships. We produce silver and gold and generate shared value over the long-term for our shareholders and stakeholders through efficient production, environmental protection, and social responsibility. For more information, please visit our website at www.fortunasilver.com