Fortuna Announces Expansion of Its San Jose Mine From 2,000 to 3,000 tpd

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Dec. 17, 2014) - Fortuna Silver Mines Inc. (TSX:FVI)(NYSE:FSM)(FRANKFURT:F4S)(BVLAC:FVI) is pleased to announce Board approval of two major capital projects for 2015 at the San Jose Mine in Mexico: mill expansion from 2,000 to 3,000 tonnes per day ("tpd") and construction of a dry stack tailings deposit and filter facility. The company is in a strong financial position to meet its capital budgets from operating cash flows and available liquidity.

Jorge A. Ganoza, President and CEO, commented, "With the approval of these two key projects, we are positioning our company to increase annual consolidated production to the range of 12 to 14 million ounces of silver equivalent while maintaining our low cost producer status." Mr. Ganoza added, "Key at these times as well is our ability to self-fund growth from operating cash flows and cash-on-hand."

San Jose Mine expansion highlights

• Silver and gold production: Annual production rate ranging from 6.7 - 8.3 million ounces of silver and 52.0 - 56.7 thousand ounces of gold or 9.8 - 11.7 million silver equivalent* ounces
• Capital expenditure: US$30 million
• Economics: 36% after-tax Internal Rate of Return (IRR)**; payback period of 2 years
• All-in sustaining cash cost (AISCC)**: Expansion will position San Jose´s AISCC in the range of US$8 - 9/oz Ag, net of by-product gold
  

* Silver equivalent production estimated using silver-to-gold ratio of 60:1

** After-tax IRR and AISCC estimated using a flat price of US$16/oz Ag and US$1,200/oz Au

3,000 tpd mill expansion

The capital cost estimate for the plant expansion to 3,000 tpd is US$30 million. The budget for 2015 is US$12.6 million with the balance to be disbursed in 2016. The capital figures are based on a feasibility level capital estimate prepared by M3 Engineering, the same firm that carried out the EPCM for the on-time and on-budget construction of the processing plant in 2011.

Direct capital costs of major items include:

• Crushing: US$2.5 million
• Grinding: US$8.1 million
• Flotation: US$3.9 million
• Concentrate filter: US$1.7 million
• Power supply: US$1.0 million

Project activities are scheduled to commence in the first quarter of 2015 with commissioning planned for mid-2016. The expansion project is permitted.