Basalt Flask + Fortify

Does the flat damage reduction stack additively or multiplicatively with Fortify?

It works using the normal mitigation procedures, which means that they stack multiplicatively... Because they are two separate effects:

• Basalt flasks grant +20% physical damage reduction (AKA physical resist)
• Fortify grants 20% reduced damage taken.

In this case, the resist step is always calculated before the "reduced" and "less" damage taken steps. So, for instance, say you have the following mitigation:

• 10,000 armour
• You pop a Basalt flask
• Level 20/21 Arctic armour running
• NO Endurance charges/Soul of Steel/Chaos golem (for the sake of simplicity here)
  

...And a monster runs up and hits you for a base of 2,000 physical damage. Here's how the calculation goes in order:

• First, it calculates your armour. As armour reduces damage by a factor of (raw phys + [AR/10])/raw phys, that means it becomes (2000 + (10000/10=1000))/2000= 1.5, so your damage is divided by 1.5, yielding a physical damage reduction of 33.33%. Importantly, the game doesn't apply it YET, it stacks on flat reduction next!

[li]Flat reduction is applied ALONGSIDE armour's reduction. So we add the 20% from the Basalt Flask to the 33.33% from armour, giving us 53.33% reduction. If we had other things (like endurance charges, the Soul of Steel passive, or an active Chaos Golem) those would add FURTHER to this.[/li]
[li]Once all of the "physical damage reduction" is calculated, NOW it applies it: 53.33% of 2000 is 1066.66, so our physical damage is reduced to 933.33.[/li]
[li]NEXT comes our other methods: remember, "increased/decreased" ALWAYS applies BEFORE "more/less." So, naturally, next up comes foritfy: assuming no passives/gems that boost its strength, it's "20% reduced." If we had other increased/reduced effects, we'd sum them up here. But with just that? 20% of 933.33 is 186.66, so damage is cut to 746.66.[/li]
[li]Lastly, the "Less" comes: level 20 or 21 Arctic Armour gives "13% LESS physical damage." 13% of 746.66 is 97.06, so damage is cut to 649.6, which is our final number.[/li]

(edit: bah, got beaten to the first reply while I was trying to type up an explanation of the calculations. :P)