This from IKN561, out last night, so that you don’t need to pay in order to get good information.
Fortuna Silver (FSM) (FVI.to) EIA permits, part deux
“Well, that escalated quickly,
really that got out of hand fast”
Anchorman: The Legend of Ron Burgundy
The note in IKN650 last weekend was well-timed, as on Friday the news that Mexico’s SEMARNAT was refusing to renew Fortuna Silver’s (FSM) (FVI.to) EIA permit hit the stock like a ton of bricks and suddenly, a thousand column inches are being written about the issue (examples (22) (23) (24)).
Once the problem was aired and the stock dumped, we got the inevitable pushback from the arrogant end of the mining commentariat, fuelled by the equally arrogant attitude of those at Fortuna Silver. As mentioned in passing last weekend, there’s no way I ever cover or own this stock again after what I witnessed many years ago, people who confuse law and justice in ways that would make Cicero turn in his grave.
Do not confuse the two: Fortuna Silver is in a lot of trouble.
The way forward is already mapped out, with SEMARNAT now moving forward to run a consultancy period with locals that it says is still pending from 2011 and whose result will be legally binding. FSM really has no choice but to accede to this consultancy and it puts the future of the mine at risk of being closed down, be clear about that fact (whether you like the idea and think it “fair” or not). FSM has been on the airwaves doing damage control (check out the YouTube video done by one Dave Krantzler, I can only assume he has zero Spanish ability and is being paid by FSM) and has trotted out a range of arguments as to why the SEMARNAT opposition to the mine will not prosper, but before swallowing the line of reasoning coming from a company that previously tried everything in its power to keep the subject out of the limelight, step back and think a little. If you need a little prompting, consider this: For ten years Fortuna has claimed it has the support of locals around San José de Progreso, despite those large and often long-term protests at its mine gates, but all that time has refused to submit to a prior consultancy with the locals. Why? If it has the support it claims, what’s the problem in putting it to the test?
For the time being, the San José mine remains open while the process runs its course but this company will have a black cloud over its future until resolution and,if the consultancy goes the way its anti-mining opponents think it will, the outcome will do more damage to the stock price than that chart above. You may think “this is cheap”, “the locals are crazy” “the company has always been a good citizen” or anything else you want, but do not confuse your own biases with what may “unjustly” happen to this company in 2022 in Oaxaca Mexico, a State with a traditionally negative view of mining activity (we are not in Zacatecas here, folks). Traders and technical analysts may see a trade and a bounce in the cards, but your fundies-based author sees risk, risk and more risk and will avoid FSM like the veritable plague. We close with another quote from a slightly more intellectual source than Ron Burgundy.
“The best books, he perceived, are those
that tell you what you know already.”
1984, George Orwell.’