Fidelity Minerals

Overview

Fidelity Minerals Corp. (TSXV:FMN,FWB:S5GM) is assembling a portfolio of high-quality mining assets in Peru through a strategic prospect generator (SPG) model. Under the model, Fidelity Minerals identifies and acquires appraisal-stage projects with near-term valuation catalysts that have the potential to provide high-impact M&A opportunities. The SPG model combines the advantages of a prospect generator, mine owner, royalty and streaming company to develop a business model that provides a greater chance of success at a lower cost with a materially enhanced risk-reward profile.

When acquiring new projects, the company looks to find properties with historical mineralization with grades greater than 2 g/t gold, attractive valuation to provide future flexibility, material scale to attract the attention of mid-tier and major players and has the ability to add value. Fidelity Minerals is not an exploration company and prefers to bring its new projects to the drill stage by sourcing and digesting historical data and applying modern exploration tools.

Once the company has brought the projects to a resource definition stage, Fidelity Minerals intends to farm-out its projects to mid-tier or major miners; however, the company intends to retain an NSR to capture future value and monetize its holdings. The company believes that this is a win-win opportunity for the major mining companies as their project pipelines have lacked growth options in recent years due to an under-investment in exploration and appraisal.

Fidelity Minerals is focused on developing its project pipeline in Peru, a highly-ranked Latin American leader in mined commodities, as it offers numerous advantages. For example, the Peruvian government encourages foreign investment by guaranteeing stable income tax regulation and dividend distribution. There are also no restrictions on the repatriation of earnings, currency exchange practices, the remittance of dividends, interest or royalties and international transfers of capital.

Peru has a long history of mining that has grown from, and been sustained in part, by small-scale, high-grade production. Small mine operators contribute approximately 20 percent of all Peruvian gold production. The government has been regulating and formalizing small mining operations to better address concerns associated with the practice and to capitalize on over $300 million in lost taxes.

Of the company’s five projects, Fidelity Minerals’ focus is primarily placed on advancing Cerro Dorado towards production to create near-term cash flow, allowing the company to grow organically and capitalize on its SPG model. The project is permitted under a small mine and mill protocol that is no longer available to new entrants, providing the company with leveraged access to ownable mineral feed in a well mineralized district. The Cerro Dorado project hosts the Cerro Dorado mill and the Rey Salomon mine as well as a full-service 45-person camp which provides accommodation, catering, office and storage facilities.

In 2018, Ausenco conducted a due diligence exercise that validated Fidelity Minerals’ plans for the plant and made several recommendations to enhance the mill’s efficiency and safety. The mill is currently capable of processing 60 tonnes per day and can be upgraded to produce 115 tonnes per day. The plant is expected to include a new flotation circuit that allows for the processing of copper or other base metals.

Since 2012, the Rey Salomon mine has recorded sales of 1,675 tonnes grading 11.80 g/t gold. The on-standby mine is adjacent to the Cerro Dorado mill and fully-permitted.

Fidelity Minerals owns the Greater Las Huaquillas (GLH) project, located in northern Peru. The company is looking to rapidly expand the project and has acquired 100 percent of nine concessions measuring 3,800 hectares and 44.5 percent of nine concessions measuring 3,600 hectares.

As part of the company’s SPG model, Fidelity Minerals has also recently acquired three copper and gold properties in northern Peru: Porphyry Copper, Las Brujas and Cerro El Bronce. The company intends to conduct a detailed geological mapping and surface sampling program on each property to define the extent of the mineralization as well as their prospectivity.

In June 2018, Lions Bay Capital Inc. (TSXV:LBI), an activist investor in the resource and technology sectors, was approved to be a control person in the company at Fidelity Minerals’ annual general meeting. Lions Bay is working to recapitalize the company and to execute a strategy that allows Fidelity Minerals to become a near-term gold producer with expansion opportunities.

Fidelity Minerals’ executive team is experienced in both the mining and financial sectors. Fidelity Minerals VP Operations in Peru, Jose Luis Garcia Yrivarren, was a former commercial manager and buyer for Peru’s largest private third-party gold milling company. He brings an extensive network and has deep relationships with desirable mineral suppliers. Management and insiders, including Lions Bay, also notably own approximately 50 percent of company shares.

Fidelity Minerals Company Highlights

• Fidelity Minerals is using a SPG model to find appraisal-stage projects with near-term valuation catalysts that could provide high-impact M&A opportunities.
• Near-term precious metal milling production in mining-friendly Peru.
• Cerro Dorado plant with 60 tonne per day capacity.
• Permitted to expand current mill to 115 tonnes per day and install an over 60 tonne per day flotation circuit.
• Toll mining provides multiple capital and risk averse advantages.
• Fidelity Minerals has recently acquired three projects in northern Peru and intends to conduct initial exploration programs on the properties in the near term.
• Lions Bay Capital is a strategic shareholder in the company.
• Management and insiders, including Lions Bay, own approximately 50 percent of company shares.