Strategic Alliance

Fortuna Silver Mines Strategic Alliance

In June 2016, Medgold completed a private placement with Fortuna Silver Mines ("Fortuna"). Fortuna purchased 10.0 million units at $0.15 per unit for total proceeds of $1.5 million. Each unit was comprised of one common share in Medgold and one warrant entitling Fortuna to acquire one additional Medgold common share at $0.15 for a period of 12 months.

The proceeds of the private placement are being spent on project-generating exploration in Serbia. In conjunction with the private placement, Medgold granted Fortuna the right to enter into an option agreement to earn up to a 70% interest in one of the Geological Target Areas (a "Selected Property") identified by Medgold's project generation and exploration work in Serbia, by spending a total of US$8.0 million on the Selected Property and completing a Preliminary Economic Assessment.

To acquire an initial 51% interest in the Selected Property, Fortuna must spend a minimum of US$3.0 million on the Selected Property by no later than the third anniversary of the date of the option agreement. Once it has earned 51% Fortuna can elect to form a 51:49 joint venture with Medgold to further develop the Selected Property; or Fortuna can elect to be granted the option to earn an additional 19% interest in the Selected Property by completing a Preliminary Economic Assessment on the Property and spending an additional US$5.0 million in qualified expenditures within three years following the date of the election by Fortuna.

In January 2017, Medgold and Fortuna signed an amendment to their Strategic Alliance whereby Fortuna has the right to enter into separate option agreements to earn up to a 70% interest in two Geological Target Areas (each a "Selected Property") identified by Medgold's generative work. Fortuna can earn a 51% stake in each Selected Property by spending USD $3.0 million on each Selected Property over three years. Once it has earned 51%, Fortuna can elect to form a 51:49 joint venture with Medgold to further develop the Selected Property; or can elect to earn an additional 19% interest in the Selected Property by spending an additional USD $5.0 million in qualified expenditures and completing a Preliminary Economic Assessment on the Selected Property. In addition, Fortuna has elected to exercise all of its 10 million warrants at $0.15, for total proceeds to Medgold of CAD $1.5 million. Medgold will use these funds to continue project-generating exploration in Serbia over the next 12 months.