Court protects Fortuna Silver mining concession in Mexico

San Jose mine, Mexico. (Credit: Fortuna Silver)

Fortuna Silver (NYSE: FSM; TSX: FVI) reported Thursday that it has received a stay of execution preventing Mexican authorities from canceling the concession for the San Jose mine in Oaxaca until the court makes a decision on the cancellation procedure over a disputed royalty.

In 2017 the Mexican Geological Service (SGM) advised Fortuna that a previous owner had granted the SGM a royalty of 3% of the billing value of minerals obtained from the concession, the company said.

Fortuna said authorities were seeking $30 million plus the value-added tax

The company initiated legal proceedings in 2018 against the government agency Direccion General de Minas (DGM) to remove reference to the royalty and in January received notice from DGM seeking to cancel the concession. Fortuna said authorities were seeking $30 million plus the value-added tax.

The company said the District Court in Mexico City this week granted a permanent stay of execution, which protects Fortuna from cancellation of the concession until a resolution by the court is reached on the legality of the cancellation procedure.

“The timing of a decision by the court at first instance in this action against the DGM is uncertain and may take several months,” Fortuna said in a statement.

“In the event that the company is unsuccessful in these proceedings, it may appeal. If ultimately the company does not prevail, it may be required to pay the disputed royalty in order to preserve the mining concession.”

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