Our job as management is considerably easier during the good times in the market than it is during corrections, but I consider it a very rewarding opportunity to be able to guide the company through both the good times as well as the more challenging times that ultimately come in our business.  While the past year has seen its set of challenges, and while it is not in our nature to pull punches by postponing exploration plans, I believe our calculated approach and decisions made during 2022 will ensure Affinity is poised to take advantage of the market turnaround that appears to be on the horizon.
 
I think it’s important to first, thank those loyal shareholders that have continued to support Affinity during this unprecedented, extremely unpleasant time in the markets.  Without shareholders with a long-term vision of our projects and our industry, it is very difficult to weather the market storms and realize the true potential of the projects and the value of our investment.  We are fortunate to have many of those like-minded shareholders in our ranks. 
 
I also feel the pain of a significant portion of my investment portfolio, that is Affinity, that has been obliterated, just like yours.  Though I am convinced this is temporary, a strong stomach in addition to an optimistic view of economic fundamentals favorable to our sector is required to be a successful gold investor.  
 
The last year has been frustrating.  All market fundamentals would suggest a different outcome, but for the past year our sector has faced significant headwinds resulting in market caps across the industry plunging in comparison to previous years. It’s not a problem unique to Affinity.  To be frank, many of our peers will not make it, or they will dilute their company into oblivion in an effort to fund expensive exploration programs that may or may not be successful. The worst factor facing the industry is that even companies with great results can’t seem to stop their free-falling valuations.  The normal cycle of funding exploration programs and then raising additional capital based on successful results seems broken at the moment.  It’s an extremely difficult environment for investors to be successful at the moment.
 
Between myself and Darren Blaney, CFO, we have over 30 years of experience in the industry and during that time we have seen first-hand the impacts of tough market conditions in the exploration sector. One of the most significant enemies of shareholder value is dilution and it can be magnified in times of market weakness if management isn’t committed to managing it carefully.
 
In the spring, we faced a difficult decision whether to raise capital to fund expensive exploration programs on our projects or to bunker down and hold out for a price that better represents our company’s projects and our shareholders’ interests. Our management team went back and forth looking at different possibilities and outcomes. During these discussions we relied on our experience in seeing the ups and downs in the industry and continually reminded ourselves of the long-term goals we set for Affinity when we took over management.
 
We made the difficult decision to limit increasingly expensive, dilutive exploration programs at depressed market prices in order to weather the market storm. We minimized any discretionary expenses for the Company and postponed payment of any management salaries to ensure that the Company reserved as much cash as possible to see this through. We recognize that this isn’t ideally what our shareholders would prefer.  It’s certainly not what we as management would prefer either, but by preserving Affinity’s fully diluted share capital of under 50 million shares outstanding, Affinity and its shareholders will be in a great position to see value return to their investment as the market improves.
 

Our Current and Future Asset Portfolio
 
Although I began this letter to shareholders detailing the current challenging landscape, it is even more important to highlight the opportunity that lies before us. The junior exploration space is unique as investors who can look past the volatility are granted some of the greatest wealth creating opportunities in the public markets. One of the largest priorities I have as both a shareholder and in management, is for Affinity to have high quality properties. A couple realities that guide our perspective for current and potential projects are as follows:
 
1-Precious metals, particularly gold and silver, will always hold real value.
2-The project must have the potential to be a world class deposit.
3-The project must be in a geopolitically stable jurisdiction.
 
Currently, Affinity has two projects that fit well with those priorities.   As I mentioned earlier, both of our projects are precious and base metals projects (primarily gold and silver), 100% owned, and are strategically positioned in world class jurisdictions within the friendly mining nation of Canada.
 

The Regal Property
 
During the year, we successfully made the final option payment on our flagship Regal property and now hold 100% ownership in the property. The Regal project is rich in history and the two drill programs that Affinity has conducted have uncovered some very enticing results. Prior to our ownership there was next to no exploration drilling on the project. The property was previously small scale mined for silver, lead, zinc, tin and tungsten and there was a pre- NI 43-101 resource estimate completed. There are two main regions where mining took place, the Regal/Snowflake historic region and the Allco Silver historic region. The bulk of our high-grade results have come from the Allco historic region. We initially focused on this region as the geology as well as the interest of past small-scale miners pointed to the potential for a deposit environment very similar to Rokmaster’s Revel Ridge project located to the north. The drilling has been mostly shallow test holes that have uncovered multiple mineralized systems. The most noteworthy is the Silver Slam system we discovered in the 2021 program which carried elevated gold in addition to the high-grade silver, lead and zinc that is encountered throughout the property.
 
In addition to our own work, the project’s exploration potential has been greatly strengthened by Rokmaster’s resource expansion work. For our project, the most relevant aspect is the expansion of the Revel Ridge project on trend to the southeast of their original resource (toward us). This continues to confirm and strengthen some of our early assumptions about the project’s structures and geology. Even though we were not able to conduct any of our own exploration this year, our understanding of the project continues to grow through closely following Rokmaster’s success.
 
Exploration at the Regal is capital intensive as much of the project and all of our targeted areas are only accessible by helicopter. We have targets identified and plans in place for our next round of exploration and we hope to see drills back at the Regal this coming year if the markets allow for us to do so.
 

The Windfall North Property
 
Our second 100% owned project is a pure greenfield project that we acquired next to Osisko’s Windfall project in Quebec. This is not just a “close-ology” play. Rather it is a play on an understanding of the geological structure that appears to control the world class Windfall deposit. Osisko recently published a PEA on the project. With a $1600 gold price the project’s after-tax NPV is C$1,168.4 million, with after-tax IRR of 33.8% and after-tax payback after start of production of 2 years. The more they drill, the better the project gets.
 
In the PEA, mineral reserve estimate is based on the Windfall MRE (2022) which used a cutoff grade of 3.5 g/t Au. The categories are listed below:
 
Measured: 297,000 Oz at 11.4 g/t Au
Indicated: 3,754,000 Oz at 11.4 g/t Au
Inferred: 3,337,000 Oz at 8.4 g/t Au
 
There are two faults that run parallel, north and south, that contain the majority of Osisko’s deposit. North from the main deposit they discovered the Golden Bear Zone along the Windfall fault this past year. Osisko subsequently embarked on a broad regional exploration program with tens of thousands of meters looking outside of their current domains. It appears they are very confident that the mineralization is regional and driven by a singular or similar geological occurrence.
 
We have until the fall of 2023 to put work into the project to keep it in good standing. Work on this project is comparatively easier, as there are no mountains and far friendlier terrain. Our initial program is designed to delineate potential drill target locations and will be relatively inexpensive in the context of exploration.
 
The current bear market conditions also create opportunities for companies to pick up quality projects at suppressed prices and we will continue to search out and evaluate these opportunities as they come available.
 

Current Geopolitical Considerations
 
The recent years have exposed a few global concepts that are of concern from a multitude of perspectives. For the purposes of this letter, I want to focus on the growing concerns that face our industry and where I, and many others who are analyzing the global industry think things are likely headed. Obviously, our world is presently in a place of extreme tension which I don’t need to comment on, but I can comment on the implications for our company and how we will be positioning from a strategic standpoint.
 
The rise of centralist governments in places like South America have shown investment risk is exponentially rising for companies that operate in these countries. We have seen developments completely shut down or nationalized by governments resulting in shareholders left with nothing.
 
The global landscape is changing and we are fortunate to operate in a country where free markets and resource extraction remain a priority. Canada continues to be an exporting nation whose success is largely tied to the marketability of our resources.
 
With the ongoing global developments one of the biggest themes facing investors and policy makers is the domestic ability and/or friendly nations ability to secure resources that are critical for tomorrows society. Many are calling for western nations like Canada and the United States to become less dependent resources derived from less secure nations and to incentivize domestic production. Canada has recently passed legislation and also allocated significant funding toward expanding mineral exploration and fast-tracking projects in the Canadian mining sector.
 
If you have been watching the energy and oil industry for the past couple of years, it probably teaches us everything we need to know. If you invested in domestic oil production in Canada two years ago, many people would call that moronic, but hindsight is the friend of the patient. I believe the same will be said for our industry very soon.
 

The Imminent Case for Precious Metals
 
Precious metals investors are all scratching their heads right now looking at the inflation numbers, the geopolitical tensions, the implosion of the crypto space and the rampant and continued money creation and wondering why gold has not yet exploded higher. Well, we are too. Yet, we remain very bullish on the future of gold and silver.
 
To use the ideas of Ray Dalio, the best way to understand what is happening today is to look to the past. Inflationary environments are not new and we can learn a lot by zooming out and finding comparable situations. For us, the closest situation is likely the 1970’s inflationary cycle. Markets are not always logical and the gold and silver exploration space can be highly speculative in nature. In the middle of the decade (1975) gold actually fell 24.2%, while inflation averaged 9.13%.  Sound a little familiar? What transpired through the remainder of the 70’s with the raging gold bull was truly epic.
 
Speculatively, it looks like the suppression of the gold price has a few short-term combatants, the US dollar and rising interest rates. Bull markets in precious metals are largely fear induced as people can’t see a better store of value. Eventually, the US dollar will likely roll over as the ability to raise rates indefinitely will run into the reality of the serviceability of debt held by our modern governments. It is my opinion, and an opinion of many others that this is likely coming to an end and could fuel the resurgence of retail and institutional demand in precious metals. As I have said throughout this letter, Affinity Metals will be well positioned to take advantage of that demand.
 

The Growing Case for Industrial Metals
 
With the expansion of government and its role in the economy, we are working within a framework where a growing portion of the investment world is steered by government incentive. The simplest concept, and most meaningful, for those who are in the base and industrial metals, is the “greenification” of well, everything. Whether you agree with it or not, the reality is governments across the world will continue do their best to funnel investment into green energy.
 
The green energy transformation, if it is to come to fruition, will be one of the most capital and resource intensive operations carried out across the world. The need for domestic production of minerals required to carry out these green plans will likely continue to become more and more of a focus for both policy and industry leaders in the western world.
 
One of the many benefits of operating in Canada is that we have had a long-standing focus on the environmental sensitivity of mining. There are solid guardrails already in place and as long as you follow the requirements it remains a very good country to do business in. Our company has projects in the mining provinces of British Columbia and Quebec which have rich histories in mineral production and remain very supportive of companies working within their borders.
 

The Current State of Mining
 
Mining has recently been one of the most unloved investment sectors of the stock market. Even with the majors being flush with cash and looking comparatively cheap, the retail focus remains elsewhere. From these major mining companies, we have seen some select M&A activity but for the most part, these large industry players have been quite conservative with regard to new acquisitions or mergers, despite continuing to deplete their minable reserves. Their focus on paying down debt and creating fortress balance sheets should have the effect of stabilizing the industry and will provide a long runway for years to come for savvy investors. This is a contrast to what we saw in 2011 where the M&A pushed balance sheets to their limits and the correction that came after was substantially harsher and longer lasting than what the risk profile is today. While the balance sheets have dramatically improved and major producers have become cash flow machines, the reserves – more importantly the need to replenish the reserves - is becoming more and more in focus. The stretched need for exploration is only going to continue to grow and when this reality is reflected in the general markets and the elastic band lets go, we should be in for a wild ride!  
 
For now, if we look at green field and early exploration companies like ours, there is some serious blood flowing in the streets. It appears that any and all of the short-term money entities have been largely flushed out and all that remains are the long-term fundamental institutions and some very patient (and early) long term retail investors.  Nowhere has this been more evident than across the junior exploration sector. Since the 2020 highs, the industry has suffered remarkable and brutal depreciation.
 
It is no secret that the mineral exploration industry is largely tied to the underlying commodity prices.  When commodity prices show sustained strength, the investment appetite for smaller market cap opportunities eventually increases. Despite the current sentiment, the fact is, the mining industry is in a very strong place. There are substantial upsides from an industry prospective and as capital flows back into these cashflow giants, there has historically been a trickle-down effect, where smaller companies like Affinity become an opportunity for increased leverage on the strong commodity prices. As history has repeatedly shown, the investor returns on quality junior explorers when the bear turns to raging bull market can be truly staggering.
 

In Closing
 
We are excited to bring our company out of this bear market in a very good position to capitalize on the coming markets. It looks like the precious metals markets are ripe for appreciation in the first part of the coming year. We are monitoring the markets daily and have everything in place from an administrative and marketing standpoint to move quickly when the market allows us to do so.
 
From this letter, I hope shareholders and all readers gain some understanding into the mindset of management and where we are headed with Affinity. The future is bright for our company, and we are tremendously optimistic for our shareholders in 2023.
 
So, I will close where I started—with a sincere thank you. Thank you to our valued associates and thank you to our long-term shareholders. Your trust and confidence in Affinity Metals continues to drive our passion in a challenging industry.
 
Sincerely,

Robert Edwards, CPA, CGA Chief Executive Officer