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Letter to Shareholders

I am pleased to present to you a review of  Solitario’s 2019 achievements. First of all, I want to thank all of our shareholders for their continued support and also acknowledge the hard work of our two joint venture partners, Nexa Resources S.A. (NYSE: NEXA; TSX: NEXA) (“Nexa”) the fourth largest zinc producer in the world; and Teck American Incorporated (“Teck”), a wholly owned subsidiary of Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK), the world’s third largest zinc producer.

Florida Canyon Zinc Project (39% Solitario – 61% Nexa), Peru

During 2019, the largest surface drilling program in project history was completed by Solitario’s partner, Nexa, on our high-grade Florida Canyon zinc project. Results of the 2019 Florida Canyon drilling program were exceptional. A total of 17,036 meters were drilled in 39 core holes, however, two holes did not reach target depth due to drilling difficulties. The 14 best drill holes intersected the following significant intercepts of zinc equivalent (“ZnEq”) mineralization.

*Zn-Eq was calculated using the following price assumptions: Zn=$1.10/lb., Pb=$0.91lb., Ag=$16.50/oz. Reported intervals are estimated to be at least 80% of the true thickness

Numbers in this table may not add exactly as numbers have been rounded to the nearest decimal

We achieved our three most important objectives at Florida Canyon: 1) expanding the near- vertical San Jorge body to the south and its associated high-grade horizontal mantos to the east; 2) discovering and partially defining the 1021 Zone over a minimum strike length of 800 meters (a long section of the 1021 Zone, below); and, 3) extending a number of horizontal mantos in the Karen-Milagros area. Please see prior news releases for a listing of all drilling results from the 2019 drilling program at Florida Canyon. Twenty-eight (28) drill holes, or 72%, intersected significant mineralization. This was clearly an outstanding outcome. 

The 2019 drilling program also indicated that significant expansion potential still exists within the drilling footprint of the Florida Canyon mineralized system and along trend in areas outside of the footprint. Importantly, several strong surface occurrences of high-grade zinc were discovered approximately four-to-five kilometers south of the current drill pattern. We believe this completely undrilled corridor is very fertile ground for expanding the Florida Canyon high- grade zinc system. A conceptual cross section showing the strong relationship of these surface showings to the geology of defined resources is shown below.

Lik Zinc Project (50% Solitario – 50% Teck), Alaska

On our high-grade Lik zinc project in Alaska, Solitario’s partner, Teck, completed its second year of surface exploration to identify new drilling targets. The program is guided by Teck’s extensive experience in the Red Dog district. Activities and objectives for the 2019 Lik exploration program included:

  • Improve geologic and structural interpretations through relogging of 20 previously drilled core holes.
  • Follow-up geologic mapping and geochemical sampling at the newly identified North Area Prospect.
  • Multi-element continuous scan of historic core with XRF scanning technology to further define the Lik deposit geochemical signature and characterize its distal geochemical halo to potentially vector in on new drill targets based on similarities seen in other deposits in the district.
  • Develop new cross-sections through reinterpretation of stratigraphy and structure.

 

Based upon our review of the preliminary results of the work performed during 2019, we are very excited about the future potential for new discoveries at Lik. Teck is currently completing its final analysis of the technical data gathered during 2019

Corporate and Zinc Market Update

monetize non-core assets during 2019 and the latter part of 2018. Moving forward, reductions in G & A costs are anticipated to result in savings of approximately $250,000 per year over 2017 level costs. This was mainly accomplished through staff reductions, employee benefit reductions and reduced consulting costs. We also sold non-producing royalty positions in three exploration properties during 2019. Solitario received CDN $250,000 in cash and CDN $350,000 in a convertible note as payment for
the royalties.

Importantly, with the recent signing of the US-China trade agreement, it appears that the zinc market is improving as we move into 2020. Combined Shanghai, LME and U.S. exchange inventories of zinc are down to a critically low level of just several days of worldwide zinc consumption. This inventory level is the lowest on record and lower than that prior to the 2006- 2007 super cycle when the price for zinc exceeded $2.00 per pound. We believe that zinc price has plenty of room for appreciation, and if that were to occur, Solitario is well poised to benefit.

2020 Outlook  

With our healthy balance sheet, improving zinc markets and strong joint venture partnerships, we look forward to the coming year with optimism. Our partners, Nexa and Teck, with our input, are currently finalizing 2020 work plans and budgets. We look forward to releasing the details of these programs in the
upcoming weeks. As always, we will strive to explore new
opportunities to add value for all Solitario stakeholders. 

Sincerely,


Christopher E. Herald
President & Chief Executive Officer

Drill hole information contained within is reported under Nexa’s quality control program reviewed by Mr. Walt Hunt, COO for Solitario Zinc Corp., who is a qualified person as defined by National Instrument 43-101. Samples are derived from 50% splits of HQ and NQ (2.5 and 1.9 inch) diameter core. Samples are shipped via secured third-party land transportation companies and analyzed by ALS Global Inc., in Lima, Peru.