TORONTO (miningweekly.com) – Canadian project developer Fortune Minerals on Friday announced that it would buy the Revenue silver mine, in south-western Colorado, from private arm's-length vendors through a staged transaction that would see it transform into a miner.

London, Ontario-listed Fortune said that it had incorporated a Colorado subsidiary, Fortune Revenue Silver Mines to acquire the mine from Silver Star Resources, Star Mine Operations and Revenue-Virginius Mines.

Under the asset purchase agreement, Fortune bought an initial 12% participating interest in the mine by paying the vendors $2-million and by issuing 32-million shares.

Fortune Revenue has the right to buy a 100% interest in the mine by paying the vendors $14-million by July 31, and by issuing a promissory note to pay up to $36.8-million in deferred quarterly installments over 3.5 to 5.75 years, determined by revenue targets starting in August 2015.

Fortune Revenue would also assume obligations to make two deferred payments totalling $4.5-million and pay a 2% net smelter return royalty, which is capped at $9-million, to the former owners of the mine.

The acquisition of the remaining interest in the mine is subject to Fortune arranging financing.

Fortune Revenue is the operator during the transition period and is funding the working capital for the mine.

Fortune is also adding one of the current vendors of the mine, James Williams Jr, to its slate of nominees for election to the board at the company's annual and special meeting to be held on June 24.

Fortune said that it had raised C$4.25-million as part of the Revenue mine acquisition and can increase that amount to C$5.1-million with shareholder approval.

Fortune’s strategic partner Procon Resources had exercised a portion of its pre-emptive right to maintain a 19.43% interest in the company by buying on a private placement basis, 5.63-million shares at a price of C$0.40 a share for net proceeds of C$2.25-million.

Procon is entitled to buy a further two-million shares for C$834 450.80, subject to shareholder approval.

Fortune had also extended the term of an existing C$3-million debt facility by two years to August 2016, and has increased the amount of the facility by C$2-million to a total of C$5-million to help fund Fortune's obligations under the transaction.

Fortune billed the transaction as “an accretive acquisition accomplishing Fortune's goal of becoming a producing mining company, while also positioning the company for further growth in the Sneffels silver mining district of Colorado with a fully permitted project to leverage processing of ores from other mines in the area”.

The Revenue mine is a fully permitted and constructed mine, comprising a concentrator and surface facilities, currently ramping up to 400 t/d, with the first concentrate produced this month.

The operation currently has an expected 13-year life with average yearly output 1.78-million ounces of silver, including gold, lead and zinc by-product credits representing about 30% of revenues.

Revenue is a low-cost producer with projected site production cash costs for silver of $8.02/oz and can generate breakeven free cash flow at a silver price of $12.42/oz – both net of by-products.

The mine has 215 300 short tons classified under National Instrument 43-101 as measured, 586 300 short tons as indicated and 684 200 short tons as inferred, containing 16.3-million ounces of silver in the measured and indicated categories and 10.1-million ounces of silver in the inferred category.

Fortune said that the mine has resource upside stemming from the horizontal and vertical projection of the two main veins beyond the current resources, and delineation of new resources in the five other mineralised veins intersected by the Revenue tunnel are mainly unexplored. The operation also has about 700 000 t of ore in surface and underground stockpiles, and there are opportunities to expand production to other mines in the area.

The company currently has contracts with Teck Resources to process concentrate at its Trail smelter, in British Columbia.

Fortune is also making headway in developing the the Nico gold/cobalt/bismuth/copper mine and mill, in Canada's Northwest Territories, while Fortune last September voluntarily ended its summer field programme in the Klappan region of British Columbia, where it is pressing ahead with its Arctos anthracite project, pending the provincial and Tahltan First Nation governments ironing out issues.