Location

Serbia

Ownership

24.2% of Medgold Resources Corp.
shares (TSX.V: MED)

Overview

Through two C$1.5 million equity investments in Medgold Resources Corp. (see Medgold’s news release dated January 9, 2017), Fortuna Silver Mines is funding a Strategic Alliance with Medgold and has the option to nominate two Selected Properties over the course of 2017 to form joint ventures with Medgold. Exploration will center on high and low-sulfidation epithermal gold-silver mineralization in the western portion of the Tethyan orogenic system. Each joint venture, if formed, will allow Fortuna the right to earn a 51 percent interest by spending $3.0 million over three years, with a first-year commitment of $1.0 million, and gain an additional 19 percent interest by spending a further $5.0 million and completing a Preliminary Economic Assessment.

The following jurisdictional and exploration summary is taken verbatim from the Medgold Resources website (effective 7 September 2016):

"Serbia is a relatively small land-locked country in southern Europe, approximately one third the size of the UK with a population of just over 7 million people. It borders Bulgaria and Romania to the east, Hungary to the north; Macedonia to the south; and Croatia, Bosnia, and Montenegro to the west. After the political turmoil that swept the Balkans following the breakup of Yugoslavia in the 1980s and 1990s, the country has finally stabilized and Serbia officially applied for membership of the EU in 2009.

Mining has always been an important part of the Serbian economy. In 2013, mining and quarrying accounted for 2% of the GDP and employed over 22,000 people. The industry produces primarily copper, iron and steel with significant production of gold, lead, coal, salt and selenium. For many decades the largest mining operation in the country has been the State-owned Rudarsko Topionicki Bazen Bor ("Bor") copper-gold mine.

In the last few years, there's been a huge increase in interest in Serbia's mineral potential following Reservoir Minerals discovery of high sulphidation copper-gold mineralization at Cukaru just south of Bor. Medgold joins at least six other companies which were engaged in gold and copper exploration in Serbia, including Canadian companies Avala Resources Ltd., Euromax Resources Ltd., Mundoro Capital Inc., First Quantum Minerals Ltd., and Reservoir Minerals Inc., as well as Orogen Gold plc of the United Kingdom. In addition, the major miners Rio Tinto and Freeport-McMoRan Copper & Gold are working in the country under JV's with third parties.

The country has a tremendous metal endowment because of its geological setting straddling the Alpine-Balkan-Carpathian-Dinaride metallogenic- geodynamic province. The province forms part of the great Tethyan, or Alpine-Himalayan, orogenic system that extends from western Europe through Turkey and Iran to South East Asia. The Tethyan belt resulted from the convergence and collision of the Indian, Arabian and African plates with Eurasia. The belt hosts numerous world class mineral deposits, and its metallogeny is dominated by the full spectrum of intrusion-related mineral deposits including porphyry copper-gold deposits and related high-sulphidation copper-gold mineralisation.

Serbia's mining industry enjoys high-level government support. Our decision to expand our generative exploration effort into Serbia is timely. The on-going contraction of the gold exploration industry worldwide has created major opportunities for risk-tolerant junior exploration companies like Medgold. The cost of exploration has decreased significantly, and there are many dormant exploration projects which can be acquired quickly and at low cost.

The Ministry of Natural Resources, Mining and Spatial Planning is the Government agency responsible for the mining sector. In 2013, a new Law on Mining and Geological Research was under review which stipulates the establishment of the Geological Institute of Serbia and formulates a Mineral Resources Management Strategy. Under the new law, entities performing mining activities in Serbia would pay fees for the use of mineral deposits and geothermal resources, which included 7% of revenue for hydrocarbons in a liquid and gas state (crude oil and gas) and other natural gases, 5% for all metallic raw materials (for smelting), 5% for nonmetallic raw materials, 3% for all types of coal and oil shale, and 2% for geothermal energy (Ministry of Energy, Development and Environmental Protection of Republic of Serbia, 2014; Ministry of Natural Resources, Mining and Spatial Planning, 2012, 2014)."

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