2012 Production

The silver- and base metal-rich epithermal deposits of the Caylloma Mining District of southern Peru have been mined intermittently since the start of the Spanish colonial period. Located within one of the most important metallogenic provinces of the Andes, past production is estimated at more than 200 million ounces of silver.

Fortuna Silver purchased a 100% interest in the Caylloma Mine and related mining concessions in 2005. Following significant expansion and modernization of the mill, the mine was brought back into production in October 2006. The mine and processing plan are currently producing 1,300 tpd.

Production is sourced primarily from the silver-polymetallic Animas vein (80%), with the balance from the Bateas and Soledad veins. Exploration of the Caylloma Property is ongoing, with expansion of the existing reserve and resource base the main focus.

Location

The Caylloma Mine is located 225 kilometers (approximately 4 hour drive northwest) of Arequipa, Peru in mountainous highlands at an elevation of 4,500 meters above sea level. The mine, processing plant and related infrastructure are located in the Caylloma Mining District, 14 kilometers northwest of the town of Caylloma. The mine is connected to the national power grid and water is locally available.

NI 43-101 Reserves and Resources

1. Mineral Reserves and Mineral Resources are as defined by CIM Definition Standards on Mineral Resources and Mineral Reserves
2. Mineral Resources are exclusive of Mineral Reserves
3. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability
4. There are no known legal, political, environmental, or other risks that could materially affect the potential development of the Mineral Resources or Mineral Reserves at Caylloma
5. Mineral Resources and Mineral Reserves are estimated as of June 30, 2012 and reported as of December 31, 2012 taking into account production-related depletion for the period of July 1, 2012 through December 31, 2012 with the exception of the Animas and Animas NE veins that were re-estimated using all exploration drilling information as of December 31, 2012
6. Metallurgical recovery rates used at Caylloma for estimation of NSR values for sulfide material are 82% for Ag, 45% for Au, 93% for Pb, and 88% for Zn; and for oxide material are 64% for Ag, 45% for Au, 46% for Pb, and 30% for Zn
7. Caylloma Mineral Reserves are estimated using break-even cut-off grades based on estimated NSR values using assumed metal prices of US$29.36/ oz Ag, US$1,544/oz Au, US$2,245/t Pb and US$2,139/t Zn; historical metallurgical recovery rates detailed above; and historic operating costs adjusted for inflation. Caylloma Mineral Resources are reported based on estimated NSR values using metal prices of US$25.14/oz Ag, US$1,391.63/oz Au, US$2,116/t Pb and US$2,028/t Zn; metallurgical recovery rates detailed above; and an NSR cut-off grade of US$30/t
8. Totals may not add due to rounding procedures
9. N/A = Not Applicable

• NI 43-101 Technical Report (March 22, 2013 / PDF, 3.7 Mb)

Geology and Mineralization

The silver-base metal rich epithermal vein deposits of the Caylloma Mining District are hosted by Tertiary calc-alkaline andesitic pyroclastic tuffs and tuff breccias, flows and laharic deposits that unconformably overlie a folded marine sequence of quartzite, shale and limestone of the Jurassic Yura Group. More than 15 major mineralized veins have been identified within the district with the veins typically trending northeasterly and dipping moderately to steeply to the southeast or northwest.

The veins range from 1 to 25 meters in width and range up to 4 kilometers in length. Ore grade shoots are generally subvertical in orientation within the plane of the vein, having lengths of tens to hundreds of meters and extending to more than 300 meters in a downdip direction. Principal ore minerals include sphalerite, galena, chalcopyrite and tetrahedrite with subordinate polybasite, stephanite, argentite, native silver, pyrargyrite, miargyrite, chalcocite, native gold, and other Pb and Ag sulfosalts. Principal gangue minerals are quartz, manganese-rich silicates (dominantly rhodonite), rhodocrosite, and calcite with variable quantities of adularia, illite and barite present locally (Echavarria et al, 2006)