Fortune Minerals to acquire Revenue Silver Mine in U.S.A.

2014-05-09

CSE - Canadian National Stock Exchange · Copper · Zinc · Lead · Silver · Gold · Indium · Canada

/NOT FOR DISSEMINATION IN THE UNITED STATESOR TO UNITED STATESNEWSWIRE SERVICES/

_Historical, high-grade past producer in Coloradoin commissioning phase for ramp up to production target of 1.78 million ounces of silver per year plus by-product credits_

LONDON, ON, May 9, 2014/CNW/ - Fortune Minerals Limited (TSX: FT) (OTCQX: FTMDF) ("Fortune" or the "Company") (www.fortuneminerals.com) is pleased to announce that it has completed the first phase of the planned purchase of a 100% interest in the Revenue Silver Mine in southwestern Colorado, U.S.A.from private arm's length vendors. The acquisition of this producing asset is being made with the financial support of the Company's strategic partner, Procon Resources Inc. ("Procon") as negotiations progress towards completing the proposed project financing facility for the NICO gold-cobalt-bismuth-copper project in Canada'sNorthwest Territoriesand Saskatchewan. Procon is exercising its pre-emptive right to purchase up to 7,717,871 shares of Fortune at a price of 40 centsper share for net proceeds of up to CAD$ 3,087,148.40to help finance part of this acquisition. The staged purchase of the Revenue Silver Mine is an accretive acquisition accomplishing Fortune's goal of becoming a producing mining company, while also positioning the Company for further growth in the Sneffels Silver Mining District of Coloradowith a fully permitted project to leverage processing of ores from other mines in the area.

Revenue Silver Mine Acquisition Highlights:

Staged transaction to acquire a 100% interest in the mine to minimize equity dilution; Fully permitted and constructed mine, concentrator and surface facilities currently ramping up to 400 tons per day with the first concentrate produced in May, 2014; Projected 13-year life of mine average annual production of 1.78 million ounces of silver, plus gold, lead, and zinc by-product credits representing about 30% of revenues; Low cost producer with projected C1 cash cost silver price of US$ 8.02per ounce and breakeven free cash flow silver price of US$ 12.42per ounce - both net of by-products; Resources of 215,300 short tons classified as Measured, 586,300 short tons as Indicated and 684,200 short tons as Inferred, containing 16.3 million ounces of silver in the Measured and Indicated Resources and 10.1 million ounces of silver in the Inferred Resources; Resource upside from the horizontal and vertical projection of the 2 main veins beyond the current resources, delineation of new resources in the 5 other mineralized veins intersected by the Revenue Tunnel that are largely unexplored, processing of about 700,000 tons of additional broken mineralized material in surface and underground stockpiles, and opportunities to expand production to other mines in the area; Fortune is the Operator of the mine and has staff at the site presently; Contracts with Teck Resources for concentrate processing at its Trail, B.C.Smelter; Acquisition costs of 32 million common shares of Fortune, US$ 16 millionof cash payments, up to US$ 36.8 millionin deferred payments over 6.5 years, and assumption of obligations to pay US$ 4.5 millionin deferred payments and a capped 2% net smelter return royalty to the previous owners of the project; CAD$ 4.25 millionraised to fund first stage commitments of the transaction at a premium 40 centprice, which can be increased to CAD$ 5.1 millionwith shareholder approval.

Fortune will hold a conference call on Monday, May 12, 2014at 10 a.m. ETto review the Revenue Silver acquisition. Robin Goad, President and Chief Executive Officer, Mike Romaniuk, Vice President and Chief Operating Officer, and Adam Jean, Vice President and Chief Financial Officer will host the call. An audiocast of the call will be distributed in a subsequent news release.

To participate in the call, please dial:

1-888-390-0605 (within North America) or 416-764-8609 (metro Torontoarea and outside North America)

Robin Goad, Fortune's President and Chief Executive Officer, commented, "We are very pleased to announce this accretive and transformative acquisition accomplishing our goal of becoming a diversified mineral producer. Upon completion of this transaction, Fortune will own a 100% interest in a producing silver operation with by-product credits for gold, lead, zinc and potentially copper. The development of our NICO and Arctos projects provides our shareholders with further participation in gold, cobalt chemicals needed to manufacture rechargeable batteries, 12% of global bismuth reserves, and a world class anthracite metallurgical coal deposit. We look forward to marketing this opportunity to the investment community, while also continuing our negotiations to complete the project financing for our NICO vertically integrated mine and refinery project with our strategic partner and its banks."

Transaction Details

Fortune has incorporated a wholly-owned Coloradosubsidiary, "Fortune Revenue Silver Mines Inc." ("Fortune Revenue") to acquire the Revenue Silver Mine from Silver Star Resources LLC, Star Mine Operations LLC and Revenue-Virginius Mines Corporation (collectively, "the Vendors"). Pursuant to the asset purchase agreement, Fortune Revenue has purchased a 12% participating interest in the mine by paying the Vendors US$ 2 millionand by issuing 32 million shares in Fortune's capital stock. Fortune Revenue can purchase a 100% interest in the mine by paying the Vendors an additional US$14 millionby July 31, 2014and by issuing a promissory note to pay up to US$ 36.8 millionin deferred quarterly installments over 3.5 to 5.75 years determined by revenue targets commencing in August, 2015. Fortune Revenue will also assume obligations to make two deferred payments totaling US$ 4.5 millionand pay a 2% net smelter return royalty, which is capped at US$ 9 millionto the former owners of the Revenue Silver Mine. The acquisition of the remaining interest in the mine is subject to Fortune arranging financing. Fortune Revenue is the Operator during the transition period and is funding the working capital for the mine. Fortune has agreed to add one of the current Vendors of the mine, James Williams, Jr.to its slate of nominees for election to the Board of Directors at the Company's Annual and Special Meeting to be held on June 24, 2014.

Mahendra Naik, Fortune's Chairman said, "We look forward to having Jim Williamsjoin our Board. Jim is a geologist with a history of successful transactions and projects in the mining and petroleum industries as well as considerable experience and knowledge of the Revenue Silver Mine that will complement our Board as we complete the mine commissioning and ramp up operations to full production."

Financing

Fortune has raised an additional CAD$ 4.25 millionas part of the Revenue Silver Mine acquisition and can increase that amount to CAD$ 5.1 millionwith shareholder approval at the June 24Annual and Special Meeting of shareholders. Procon has exercised a portion of its pre-emptive right to maintain a 19.43% interest in the Company by purchasing on a private placement basis, 5,631,744 shares at a price of 40 centsper share for net proceeds of CAD$ 2,252,697.60. Procon is entitled to purchase an additional 2,086,127 shares of Fortune for proceeds of CAD$ 834,450.80, subject to shareholder approval. In addition, Fortune has extended the term of the existing CAD$ 3 milliondebt facility it has with an arm's length party by two years to August, 2016, and has increased the amount of the facility by CAD$ 2 millionto a total of CAD$ 5 millionto help fund Fortune's obligations pursuant to this transaction.

These securities have not been and will not be registered under the United States Securities Act of 1933, as amended, or the securities laws of any state, and may not be offered or sold in the United Statesabsent registration or an applicable exemption from such registration requirements. This press release does not constitute an offer to sell or a solicitation of an offer to buy these securities in the United Statesor in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Revenue Silver Mine

The Revenue Silver Mine is situated on 147 patented and unpatented mining claims, totaling approximately 1,079.9 acres located in southwestern Colorado, approximately 11 km southwest of the town of Ourayand 490 km southwest of Denver. The mine is fully permitted and consists of high-grade, narrow silver-gold-lead-zinc-copper veins that will be mined by underground mining methods, an underground mill, and surface facilities to support production at a rate of 400 tons per day over a minimum 13-year mine life. The mine is serviced by roads connected to the Coloradohighway system, the Coloradoelectrical grid, and other services in a historic mining district where there is a pool of skilled mine labour and management personnel. An operating team is already in place consisting of approximately 90 people that complement Fortunes existing management team.

The Revenue Silver Mine operated in the late 1800's and early 1900's by Caroline Mining Co. and had historical production of approximately 14 million ounces before the mill burned in 1912 and the mine closed. Ranchers Exploration and Development Corp. ("Ranchers"), Camp Bird Mine (Federal Resources) as well as Sunshine mining all conducted significant additional exploration and mine rehabilitation work on the property during the 1960's, 1980's and 1990's, but the mine did not re-open due to low silver prices. The Vendors acquired the property in 2011 and conducted considerable additional exploration and development work to validate the resources and prepare the mine for production. The mine is currently in ramp up, and a path to realizing production to a planned 400 tons per day in the mill is being executed. Fortune conducted significant on-site and desktop due-diligence to validate the resources and facilities for the Revenue Silver Mine prior to making this acquisition.

Geology

The geology of the Revenue Silver Mine is well understood from the historical mining activity in the area and mine site as well as a comprehensive drill hole and sample database and block model that has been compiled from more than a century of activities on the property. Mineralization consists of narrow, high-grade, epithermal quartz-carbonate veins containing freibergite and tetrahedrite (silver), native gold, galena (lead), sphalerite (zinc), chalcopyrite (copper) and pyrite. The known resources are contained in the Virginius and Yellow Rose Veins. They dip steeply and can be traced for up to 4.8 km along strike, more than 900 metres at depth, and range in width between 0.15 and 2.74 metres. There is good potential to identify additional resources along the projection of strike and dip of the known resources. There are also a minimum of five additional veins that are intersected by the Revenue Tunnel that are also known to be mineralized but remain underexplored and represent significant potential to identify additional resources.

Resource Estimates

A number of historical resource estimates have been prepared for the Revenue Silver Mine by the previous operators. The Vendors also commissioned several resource estimates, which were prepared by SRK Consulting, the most recent of which was done in compliance with National Instrument ("NI") 43-101. A Technical Report has been issued in draft and will be filed on the SEDAR website within 45 days of this news release. Dorinda Bair, B.S. (Geology), CPG, the author of the draft report is the Qualified Person responsible for the resource estimates and background sections, Mark Jorgensen, B.S. (Metallurgy), MMSA is the Qualified Person responsible for the Metallurgical and Process sections, and James M. Beck(PE) is the Qualified Person responsible for the Environmental sections contained in the Technical Report. The information provided below is based on such report and the assumptions and qualifications contained therein pursuant to NI 43-101.

For data verification, Dorinda Bairreviewed 10% of the resource database of both historical and new data against assay certificates and found less than 2% error in the database for silver, gold, lead, copper and zinc in the Virginius Vein and less than 2% error in the database for silver, gold, lead and zinc in the Yellow Rose. Identified errors were corrected in the database. Silver Star Resources LLC provided additional copper data for the Yellow Rose area from recently located historical data. However, the first pass validation identified greater than 10% error in data entry for the copper analytical data. This data was returned to Silver Star for corrections and the data has been omitted from the current Yellow Rose resource estimate pending a recheck of this additional copper data. At Virginius, a lack of historical Quality Assurance / Quality Control data limited the Resource estimate to "Indicated". There are no significant limitations to the data. SRK is of the opinion that the data available is adequate for resource estimation.

The Mineral Resources for the Revenue Silver Mine are all contained in the Virginius and Yellow Rose Veins and have been classified as Measured, Indicated and Inferred based on standards as defined by the "CIM Definition Standards - For Mineral Resources and Mineral Reserves", prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on December 17, 2010. The classification of the resources reflect the relative confidence of the grade estimates defined by the search radiuses determined for each classification and the number of composites and drill holes and/or chip samples required for each classification. Top cuts were determined for each metal using geostatistic analysis. The interpolation method used was inverse distance squared. The classification criteria are intended to encompass zones of reasonably continuous mineralization.

Virginius Mineral Resource Estimate The Virginius Main and Footwall Veins have been extensively sampled in workings and in stope development by Sunshine Mining but due to limited historic Quality Assurance / Quality Control measures being applied during this period to support sampling efforts, the classification was limited to "Indicated". The Indicated Mineral Resources for the Virginius Main and Footwall Veins are those blocks having a minimum of three samples within an anisotropic search of 100 ft x 100 ft x 50 ft. Inferred Mineral Resources are those blocks having a minimum three samples within an anisotropic search of 200 ft x 200 ft x 50 ft. All results from channel samples and drilling at the project that are within the wireframes have been used in the mineral resource estimate. Note that tons are short tons.

Mineral Resource at the Virginius at a Cut-off of US$150/t*

| Area | Category | Tons | Ag (opt) | Au (opt) | Pb (%) | Cu (%) | Zn (%) | Contained Metal | | | | | | Ag (M oz) | Au (oz) | Pb (M lb) | Cu (M lb) | Zn (M lb) | | | | | | | | | | Virginius | Indicated | 485,600 | 26.95 | 0.044 | 4.30 | 0.25 | 1.37 | 13.1 | 21,000 | 41.80 | 2.4 | 13.3 | | Virginius | Inferred | 646,100 | 14.93 | 0.038 | 3.04 | 0.13 | 0.99 | 9.65 | 24,500 | 39.25 | 1.6 | 12.8 |

_Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves._ _The Mineral Resource estimates include Inferred Mineral Resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is also no certainty that Inferred Mineral Resources will be converted to Measured and Indicated categories through further drilling, or into Mineral Reserves, once economic considerations are applied. Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding._ _*Cut-off is based on a minimum total recovered metal based on a mining and milling cost provided by Silver Star Resources LLC of $150/t and diluted to a minimum mining width of 3 feet._ _Recovered block model metal value = (Ag oz/t • Ag recovery • US$/oz Ag) + (Au oz/t • Au recovery • US$/oz Au) + (2000 • Pb % / 100 • Pb recovery • US$/lb Pb) + (2000 • Zn % / 100 • Zn recovery • US$/lb Zn)._ _The metal price and recovery assumptions include a silver ("Ag") price of US$20/oz and recovery of 95%; gold ("Au") price of US$1250/oz and recovery of 90%; a copper ("Cu") price of US$3.15/lb and recovery of 80%; a lead ("Pb") price of US$1/lb and recovery of 90%; and a zinc ("Zn") price of US$1/lb and recovery of 85%._

Yellow Rose Mineral Resource Estimate The Mineral Resources for the Yellow Rose Vein are classified as Measured Mineral Resources for those blocks having a minimum of three samples and three drillholes or channels which are within an anisotropic search of 125 ft x 125 ft x 50 ft within the vein. This classification takes into consideration that there has been sampling in workings around the Yellow Rose Main vein in addition to drilling. Indicated Mineral Resources are those blocks having a minimum of three samples and three drillholes or channels which are within an anisotropic search of 250 ft x 250 ft x 50 ft within the vein. Inferred Mineral Resources are those blocks having a minimum of three samples and three drillholes which are a maximum block-composite separation distance within an anisotropic search of 375 ft x 375 ft x 50 ft within the main vein and related vein splays. All results from channel samples and drilling at the Project that are within the wireframes have been used in the mineral resource estimate. Copper was not estimated at Yellow Rose due to validation concerns for the copper database. This data was hand entered from historical assay certificates and there were too many data entry errors for inclusion at this time. With additional, data review and data entry corrections, there is potential to add this data to the resource estimate. Note that tons are short tons.

Mineral Resource at the Yellow Rose at a Cut-off of US$150/t*

| Area | Category | Tons | Ag (opt) | Au (opt) | Pb (%) | Zn (%) | Contained Metal | | | | | Ag (M oz ) | Au (oz) | Pb (M lb) | Zn (M lb) | | | | | | | | | Yellow Rose | Measured | 215,300 | 10.08 | 0.034 | 1.71 | 1.69 | 2.17 | 6,400 | 7.37 | 7.28 | | Yellow Rose | Indicated | 100,700 | 10.92 | 0.036 | 1.96 | 1.74 | 1.10 | 4,000 | 3,95 | 3.5 | | Yellow Rose | Measured & Indicated | 316,100 | 10.35 | 0.035 | 1.79 | 1.71 | 3.27 | 10,490 | 11.31 | 10.78 | | Yellow Rose | Inferred | 38,100 | 11.01 | 0.025 | 1.69 | 0.92 | 0.49 | 700 | 1.28 | 0.701 |

_Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves._ _The Mineral Resource estimates include Inferred Mineral Resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is also no certainty that Inferred Mineral Resources will be converted to Measured and Indicated categories through further drilling, or into Mineral Reserves, once economic considerations are applied. Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding._ _*Cut-off is based on a minimum total recovered metal based on a mining and milling cost provided by Silver Star Resources LLC of $150/t and diluted to a minimum mining width of 3 feet._ _Recovered block model metal value = (Ag oz/t • Ag recovery • US$/oz Ag) + (Au oz/t • Au recovery • US$/oz Au) + (2000 • Pb % / 100 • Pb recovery • US$/lb Pb) + (2000 • Zn % / 100 • Zn recovery • US$/lb Zn)._ _The metal price and recovery assumptions include a silver ("Ag") price of US$20/oz and recovery of 95%; gold ("Au") price of US$1250/oz and recovery of 90%; a lead ("Pb") price of US$1/lb and recovery of 90%; and a zinc ("Zn") price of US$1/lb and recovery of 85%._