IKN

This is the note on Fortuna Silver (FSM) that appeared in IKN651, five days ago. Readers of The IKN Weekly knew long before the news about San José hit today.

Fortuna Silver (FSM) (FVI.to) and its Mexican EIA permits

“The more laws,

the less justice”

Marcus Tullius Cicero

One of those notes that falls between “Regional Politics” and ‘Market Watching’, but as it affects a specific company (and potentially its stock price) I’ve gone with putting it on this side of the fence. The concept of the breach between law and justice was already understood in depth in Roman Empire times, as the brief and pithy quote attributed to Cicero attests. There’s a problem brewing at Fortuna Silver’s (FSM)(FVI.to) Mexican arm, the specific issue being the apparent non-renewal of one of the company’s key environmental permits. As ever in and around San José de Progreso, Oaxaca, it’s difficult to get a definitive handle on the problem as the town is very anti-mine, while FSM and its large workforce naturally generate their own support. The company is always quick to point to the facts, for example in how they have been through no end of inspections from the relevant authorities without ever having suffered (serious) consequences. The bad blood between town and company stretches back to when the company first landed and set up in Mexico (I was a shareholder and covered FSM…never again) with townsfolk staging regular and often long-term protests outside the mine gates.

The problems for FSM have increased under the new AMLO government, as it has installed its own people in the public sector apparatus. This is also true for SEMARNAT, the Mexican environmental authority and today, the bureau that FSNM needs to deal with in order to keep its EIA licences in good order is under the control of its secretary, Albores González. Apparently connected to the anti-mining groups in Oaxaca and South Mexico, before getting his new job Señor González made repeated statements against the presence of FSM at San José. The issue is now coming to a head. As at any other operating mine, FSM operates according to the law and under several EIA licenses, emitted and renewed on a rolling basis. FSM currently has a total of six EIA permits in-hand, with four of them posing no issues and due renewed in 2022, 2025, 2026 and 2029 respectively. Aside those four, FSM has a minor “order of regularization” EIA, recently emitted that demands the company make repairs and improvements to a range of small matters (that can be literally as small as changing a water faucet, or making cosmetic changes to buildings) that is different to the normal EIA but poses no real issue.

The problem is with the sixth, a license FSM needs to operate and was due renewed on October 23rd this year. Since FSM started its renewal process for the license in September 2020 (14 months ago) SEMARNAT has refused to emit the renewal and is denying FSM its permit. According to local reports (12), this decision is entirely due to the decision of SEMARNAT Secretary González. We are now at the point where the company has got its workforce to stage “Keep the mine open” protests, which sounds a little desperate to this desk. To close, I’ll translate the final section of the above report because it was well written and mainly sympathetic to the mining company side of the argument, but summed up the anti-mining position at the end:

“The problem the mine faces is that SEMARNAT, via several of its public servants including Albores González, have openly stated that it is their intention to close the mine because its population does not want it there and it has not complied with environmental laws. However, Señor Albores has not answered requests for meetings since September 2020. Also, that the head of SEMARNAT is close and friends with anti-mining activists in Oaxaca, all of whom live outside of the mine’s area of influence.”