March 7, 2012 / 10:53 PM / in 6 years

PDAC-Fortuna Silver eyes deals to meet growth target

* Aims to hike output to 14 mln ounces within 5 years

* Eyeing acquisitions to fuel growth

* Focused on Latin America; prefers Peru and Mexico

* To spend $71 mln this year on expansions, drilling

By Julie Gordon

TORONTO, March 7 (Reuters) - Fortuna Silver Mines is on the prowl for takeover targets as the silver producer looks to nearly quadruple its production over the next five years.

The Vancouver-based miner, which has spent the last few years focusing on starting up its San Jose mine in Mexico, is now turning its attention to growth, chief executive Jorge Ganoza told Reuters on the sidelines of PDAC conference.

The Peruvian-born executive was in Toronto to present at the annual mining gathering put on by the Prospectors and Developers Association of Canada.

“We have a strategic objective of producing 14 million ounces of silver (annually) within five years,” said Ganoza, adding that the company plans to produce 3.7 million ounces this year. “We want to become a force in world silver production.”

With about half of that new output coming from expansions at its existing projects in Mexico and Peru, Fortuna is taking a hard look at other growth opportunities.

“It will likely come from an acquisition,” said Ganoza. “Now will it be a post-discovery, pre-development stage opportunity? Very likely, that’s where we look.”

To that point, Fortuna is eyeing targets throughout Latin America. Peru and Mexico are its preferred regions, but Argentina, Chile and Central America are also on its radar.

The main criteria is a silver deposit with a big enough resource to operate for many years and is similar to mines the company already has in its portfolio.

“Every time we think about bringing something new into the portfolio, we don’t just look at the quality of the asset, we say ‘how does this impact the portfolio’,” said Ganoza.

“Not all ounces are created equal, we want ounces that provide that healthy margin that our operation needs.”

With an ambitious growth plan and a tight timeline to make it happen, Fortuna is also banking on its existing portfolio of projects to help squeeze out those extra ounces.

The company plans to spend some $71 million this year, as its expands output at San Jose, revamps facilities at the Caylloma mine in Peru and continues exploration drilling on its Mario deposit, also in Peru.

A resource estimate for Mario is due in the second quarter. While quick to point out that it is still early days, Ganoza said that drill results at the new project are promising.

“We’re excited about what we’re seeing,” he said.

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