Affinity Metals Corp.

Management Discussion and Analysis

For the Year Ended June 30, 2020

INTRODUCTION

The following management discussion and analysis (MD&A) of the financial position of Affinity Metals Corp. (“Company”) and results of operations should be read in conjunction with the audited condensed financial statements and accompanying notes for the year ended June 30, 2020. The audited condensed financial statements together with the following management discussion and analysis are intended to provide readers with a reasonable basis for assessing the financial performance of the Company as well as forward-looking statements relating to potential future performance. All statements, other than those of historical fact, included in this MD&A, including without limitation, statements regarding potential mineralization and reserves, exploration results and future plans and objectives of the Company, are forward-looking statements that involve various risks and uncertainties. There can be no assurance such statements will prove accurate and actual results and future events could differ materially from those anticipated in such statements.

DATE

This MD&A includes material occurring up to and including October 28, 2020.

FORWARD LOOKING STATEMENTS

This MD&A contains certain statements that may constitute “forward looking statements”. Forward looking statements include, but are not limited to, statements regarding future anticipated property acquisitions, the content, cost, timing and results of future anticipated exploration programs, the anticipated discovery and delineation of mineral resources/reserves, proposed business and financing plans (including private placements of equity securities), anticipated business trends and potential future operating revenues. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. Forwardlooking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions or are those which, by their nature, refer to future events. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future performance, and that actual results may differ materially from those in forwardlooking statements as a result of various factors, including, but not limited to, the Company’s inability to negotiate successfully for the acquisition of interests in mineral properties, the Company’s inability to identify one or more economic deposits on its properties, variations in the nature, quality and quantity of any mineral deposits that may be located, the Company’s inability to obtain any necessary permits, consents or authorizations required for its activities, to produce minerals from its properties successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement its business strategies.

Historical results of operations and trends that may be inferred from this MD&A may not necessarily indicate future results from operations. In particular, the current state of the global securities markets may cause significant reductions in the price of the Company’s securities and render it difficult or impossible for the Company to raise the funds necessary to continue operations.

All of the Company’s public disclosure filings, including its most recent management information circular, material change reports, press releases and other information, may be accessed via www.sedar.com under Affinity Metals Corp. and readers are urged to review these materials, including the technical reports filed with respect to the Company’s mineral properties.

DESCRIPTION OF BUSINESS

Affinity Metals Corp. is incorporated in the Province of British Columbia. The Company is a reporting issuer in British Columbia and its shares trade on the TSX Venture Exchange. The Company is engaged in the acquisition, exploration and developing of mineral properties in British Columbia and the Yukon. The Company is currently focusing on identifying new exploration opportunities and joint ventures for its properties.

OVERALL PERFORMANCE

At this time, the Company does not own any operating mines and has no operating income/sales from mineral production. Funding for operations is raised primarily through public and private share offerings. Future operations and the Company’s ability to meet mineral property option commitments are dependent on the Company’s ability to raise sufficient funding through share offerings or operations to support current and future expenditures. At June 30, 2020, the Company had working capital of $340,164.

Realization of the carrying value of mineral interests is dependent upon funding, the ability of the Company and third parties to bring mineral interests into profitable production, or recovery from sale.

The audited condensed financial statements have been prepared on a going concern assumption which contemplates the Company will continue in operation and realize its assets and discharge its liabilities in the normal course of operations. Should the going concern assumption not continue to be appropriate, further adjustments to carrying values may be required.

RESULTS OF OPERATIONS – MINERAL PROPERTIES

During the year ended June 30, 2020 the Company incurred exploration and evaluation expenditures in the amount of $653,710. This amount includes a payment under the option agreement of the Regal Property of $20,000 and 100,000 common shares valued at $8,000. Costs related to an exploration program on the Company’s Regal Property were incurred in the amount of $625,710. Approximately 1,800 meters of diamond drilling were completed during the year along with extensive prospecting, mapping and sampling on key areas on the property. Assay results from the sampling program were released on October 15, 2019 and can be viewed on the Company’s website (www.affinity-metals.com).

EXPLORATION EXPENDITURES

Regal Property, BC

The Company's Regal Property is located in the prolific Kootenay Arc near Revelstoke, BC. On November 15, 2017, the Company entered into a four year option agreement to purchase 100% interest in the property. Upon execution of the agreement, the Company issued 50,000 common shares with a fair value of $3,000 and paid $5,000 cash. The extensive property package hosts three former past producing mines and in 2011 the property has had an extensive airborne geophysical survey conducted that defined high potential linear targets correlating with the mineralization of the three past producing mines. The remaining terms and payments of the option agreement are as follows:

i) $10,000 cash payment (paid during the year ended June 30, 2019) and 50,000 shares issued to the vendor on the first anniversary of the agreement (issued during the year ended June 30, 2019);
ii) $20,000 cash payment (paid during the year ended June 30, 2020) and 100,000 shares to be issued to the vendor on the second anniversary of the agreement (issued during the year ended June 30, 2020);
iii) $30,000 cash payment and 150,000 shares to be issued to the vendor on the third anniversary of the agreement;
iv) $40,000 cash payment and 250,000 shares to be issued to the vendor on the fourth anniversary of the agreement.

The vendor will retain a 3% NSR which can be fully bought out anytime for $500,000 cash and 100,000 shares per each 1%.

Nor Property, Yukon

The Nor IOCG (iron oxide-copper-gold) property is located on the east flank of the Richardson Mountains, about 65 km east of the Dempster Highway and 395 km north of Dawson City. During fiscal 2009 the Company earned a 100% interest in the property. The Company paid $207,500 cash and issued 66,667 shares.

Certain claims are subject to a 2% NSR royalty. The Company has the right to purchase 50% of the NSR royalty retained by the Optionor for a purchase price of $2,000,000 and the right of first refusal on the remaining 50%.

The Nor Property is currently in an area where there is dispute called the ‘Peel Watershed Regional Use Plan’ (“Plan”) between the Yukon Government and First Nations Group. Therefore, the Plan has restricted the Company from exploration activities. Subsequent to the year end, the Plan has been settled, however the area where the property is located is not yet finalized, with respect to mining activities. Management has kept the claims and titles in good standing and intends to continue exploration once a conclusion with respect to the mining activities has been finalized. The Company completed no exploration on the Nor property during the current or prior year.

FINANCIAL SUMMARY

During the year ended June 30, 2020, the Company actively investigated various mineral properties for potential acquisition, operating a diamond drill program as well as an extensive prospecting program on the Company’s Regal property. Other expenses were in the normal course of operations for the Company and were minimized where possible to conserve working capital.

The Company expended a total of $653,710 on exploration interests during the year ended June 30, 2020. Other components of the Company’s operations for the year ended June 30, 2020 included business development and property investigation costs of $167,952, consulting fees of $297,350, interest expenses of $500, office and miscellaneous expenses of $19,612, professional fees of $43,727, stock-based compensation expense of $202,600 and transfer agent and filing fees of $14,084. The Company also received proceeds from

the issuance of shares to investors in the amount of $1,376,960 to fund exploration and operations. As such, there was a net increase in cash and cash equivalents of $251,961 for the year ended June 30, 2020.

Advertising and promotional efforts were also significantly increased contributing to the overall increase. Consulting fees and stockbased compensation also increased over the previous year due to the increase efforts required by contractors to operate the company. Legal fees increased due to the private placements and property agreement negotiations during the year.

As the Company has no revenues, increased exploration activity and operations causes an increase in losses. Other losses can be caused by write-downs or write-offs of carrying value of impaired mineral assets.

SELECTED ANNUAL INFORMATION

SELECTED ANNUAL INFORMATION
	June 30, 2020	June 30, 2019	June 30, 2018
Total Revenues	NIL	NIL	NIL
Net loss	($745,825)	($233,858)	($197,752)
Net loss per share (basic and diluted)	($0.02)	($0.01)	($0.01)
Total assets	$1,680,701	$524,580	$498,120
Total long term financial liabilities	NIL	NIL	NIL

RESULTS OF OPERATIONS

The net loss for the year ended June 30, 2020 was $745,825 compared to a net loss of $233,858 in the prior year. reflecting an overall increase to net loss of $511,967. Business development and property investigation increased by $156,959 over the previous year due to drilling completed on the West Timmons property that was acquired and then subsequently relinquished. Consulting fees increased over the comparative year by $104,850 due to the additional time spent by consultants as the Company has become more active in raising capital and in exploration and operational activities. Office and miscellaneous expenses increased accordingly by $13,640 and professional fees increased by $30,860 as additional legal assistance was required in the current year as compared to last. Transfer agent and filing fees also increased by $3,212 over the comparative year due to work related to the Company’s annual general meeting and private placements. Stock based compensation was also paid in the current year in the amount of $202,600 to officers, directors and an advisor, whereas in the previous comparable year, none was paid.

SUMMARY OF QUARTERLY RESULTS

The following table sets forth a comparison of revenues and earnings for the previous eight quarters ending with June 30, 2020. Financial information is presented in Canadian dollars and is prepared in accordance with IFRS.

	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sept 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sept 30, 2018
Net income (loss)	(405,598)	(110,046)	(126,933)	(103,248)	(70,775)	(55,652)	(55,192)	(52,239)
Net income (loss) per share (Basic and diluted)	(0.013)	(0.003)	(0.004)	(0.004)	(0.001)	(0.002)	(0.002)	(0.002)

Discussion

The Company is an exploration company without revenues.

The operating results of junior exploration companies are capable of demonstrating wide variations from period to period and year to year due to variances in exploration expenditures and write-downs of mineral properties. Other than the descriptions regarding administrative costs already discussed, management of Affinity Metals does not believe that meaningful information about the Company’s operations can be derived from an analysis of quarterly fluctuations in any more detail than presented herein.

A complete list of significant accounting policies can be found in the annual audited financial statements for the year ended June 30, 2020. All financial amounts are in Canadian dollars.

The audited condensed financial statements for the year ended June 30, 2020 have been prepared on a going concern assumption which contemplates the Company will continue in operation and realize its assets and discharge its liabilities in the normal course of operations as disclosed in Note 1 of the audited financial statements.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2020, the Company held cash in the amount of $256,349 compared to $4,388 at June 30, 2020. Accounts payable and accrued liabilities of $205,280 are comprised of normal trade payables for ongoing operations and accrued liabilities. Other current liabilities include notes payable and related accrued interest to companies owned by officers of the Company in the amount of $10,654 for 2019.

In that the Company has no revenues, additional cash will be required to continue funding its current property maintenance and administrative costs presumably within the next fiscal year. The Company will also need to raise further funds should it decide to undertake future exploration programs and/or acquire additional exploration assets.

The Company periodically seeks additional financing through the issuance of equity. While the Company has been successful in raising capital in the past, there can be no assurance it will be able to do so in the future.

The Company has no material debt obligations, other than short-term liabilities incurred in normal activities. The Company has no longterm debt.

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements that would potentially affect current or future operations, or the financial condition of the Company.

TRANSACTIONS WITH RELATED PARTIES

The Company incurred the following related party transactions with companies that were controlled by a relative of a director of the Company.

.
	Year Ended
	June 30, 2020 June 30, 2019
Interest expense–Directors of the Company	$ 500 $ 654

Key management personnel compensation

Interest expense–Directors of the Company gement personnel compensation	Year Ended June 30, 2020 June 30, 2019 $ 500 $ 654
	Year Ended
	June 30, 2020 June 30, 2019
Consulting fees – accrued or paid to a company controlled by the CEO Consulting fees – accrued or paid to a company controlled by the CFO	145,500 97,500 145,500 95,000
Consulting fees–accrued or paid to officers	$ 291,000 $ 192,500

For the year ended June 30, 2020, there were $242,029 of capitalized exploration expenditures that were accrued or paid to companies controlled by a director of Company (2019 - $nil).

Related party balances

Included in trade payables and accrued liabilities at June 30, 2020 is $96,813 (2019 – $67,651) owed to officers of the Company for accrued consulting fees.

PROPOSED TRANSACTIONS

The Company does not currently have any proposed transactions approved by the Board of Directors. All current transactions are fully disclosed in the audited condensed financial statements for the year ended June 30, 2020.

ACCOUNTING POLICIES

Basis of preparation

A complete list of significant accounting policies can be found in Note 2 of the audited annual financial statements for the year ended June 30, 2019. The financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The financial statements are presented in Canadian dollars unless otherwise noted.

The financial statements for Affinity Metals Corp. have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As at June 30, 2020, the Company had not advanced its exploration and evaluation assets to commercial production and is not able to finance day to day activities through operations. The Company’s continuation as a going concern is dependent upon the successful results from its exploration activities and its ability to attain profitable operations and generate funds therefrom and/or raise equity capital or borrowings sufficient to meet current and future obligations. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management intends to finance operating costs over the next twelve months with cash on hand, loans from directors and companies controlled by directors and or private placement of common shares.

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

RISKS AND UNCERTAINTIES

Resource exploration is a speculative business and involves a high degree of risk. There is no certainty that the expenditures made by the Company in the exploration of properties will result in discoveries of commercial quantities of minerals. Exploration for mineral deposits involves risks which even a combination of professional evaluation and management experience may not eliminate. Significant expenditures are required to locate and estimate ore reserves, and further the development of a property. Capital expenditures to bring a property to a commercial production stage are also significant. There is no assurance the Company has, or will have, commercially viable ore bodies. There is no assurance that the Company will be able to arrange sufficient financing to bring ore bodies into production. The following are some of the risks to the Company, recognizing that it may be exposed to other additional risks from time to time

Limited business history of the Company, including lack of revenues and no assurance of profitability
Dependence on key management personnel
Reliance on availability and performance of independent contractors
Challenges by other unknown parties to property title
Environmental issues
Federal and provincial political risk
Commodity price risk
• Financial markets

The Company is diligent in minimizing exposure to business risk, but by the nature of its activities and size, will always have some risk. These risks are not always quantifiable due to their uncertain nature. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, then actual results may vary materially from those described on forward-looking statements.

SUBSEQUENT EVENTS

On July 28, 2020 the Company completed a private placement for a total of 3,750,000 units at a price of $0.20 per unit for total gross proceeds of $750,000. Each unit consists of one common share of the Company and one non-transferrable common share purchase warrant. Each whole warrant may be exercised for one additional common share at a price of $0.35 for a period of 24 months from the closing date of the private placement.

On July 28, 2020, the Company also completed a private placement for a total of 4,605,137 units at a price of $0.22 per unit for total gross proceeds of $1,013,130. Each unit consists of one common share of the Company and one non-transferrable common share

purchase warrant. Each whole warrant may be exercised for one additional common share at a price of $0.33 for a period of 24 months from the closing date of the private placement.

On August 14, 2020, the Company completed a private placement for a total of 1,022,229 flow-through units at a price of $0.45 per flow-through unit for total gross proceeds of $460,003. The Company paid finder’s fees totaling $28,000 cash and 62,222 compensation warrants, with each warrant being exercisable for one common share at a price of $0.65 for 18 months.

On October 5, 2020, the Company entered into an option agreement to earn up to a 100% interest in the Carscallen Extension property located 25 km west of Timmins, Ontario, Canada. The property consists of 47 claim units covering approximately 940 hectares. The terms of the Carscellen Extension option agreement are as follows:

In order for The Company to earn a 70% interest in the property, within 6 months of Exchange approval of the option agreement:

i. The Company shall pay $1,540 in outstanding assay fees and shall receive assays for the bottom section of a previously drilled hole;
ii. Pay the optionor $30,000 in cash; iii. Complete a minimum of 1,300 meters of drilling; and iv. Grant to the optionor a 1% NSR along with an initial $25,000 advance royalty payment.

In order for the Company to earn an additional 10% (80% interest) in the property:

i. Within 30 days of receipt of assays from the 1,300m drilling above, issue 400,000 shares of the Company to the optionor; and
ii. Complete an additional 6,000 meters of drilling on the property within 4 months of completing the 70% option.

In order for the Company to earn an additional 10 % (90%) interest in the property:

i. Upon completing the 80% earn in and electing to proceed with the 90% earn in, issue 500,000 warrants of the Company to the optionor; and
ii. Complete an additional 4,000 meters of drilling on the property within 15 months of Exchange approval of the option agreement.
In order for the Company to earn an additional 10% (100% interest) in the property:
i. Pay $5,000,000 to the optionor.

The Company shall pay advance royalty payments of $25,000 every 6 months to an aggregate total of $250,000 to maintain the property in good standing.

The Company will also deliver a Preliminary Economic Assessment within 5 years of executing the option agreement or the property will revert back to the optionor. The optionor will hold a 1% NSR on the property with no buy back provision.

On October 19, 2020, the Company acquired, through staking, the Windfall North Property in Quebec, Canada.

OUTSTANDING SHARE CAPITAL

At October 28, 2020, the Company had the following number of securities outstanding:

Securities	Number	Exercise Price	Expiry Date
Common shares issued and outstanding	44,859,872	N/A	N/A
Warrants	1,000,000	0.15	November 21, 2020
Warrants	6,000,000	0.15	September 17, 2021
Warrants	1,960,000	0.30	March 2, 2022
Warrants	612,300	0.30	March 24, 2022
Share purchase options	1,670,000	0.05	March 6, 2027
Share purchase options	425,000	0.06	November 15, 2027
Share purchase options	250,000	0.135	October 23, 2029
Share purchase options	1,000,000	0.19	October 23, 2029
Fully diluted share Capital	57,777,172	N/A	N/A

ADDITIONAL INFORMATION

Additional information relating to the Company’s news releases and filings can be found on the SEDAR website: www.sedar.com.

DISCLOSURE BY VENTURE ISSUER WITHOUT SIGNIFICANT REVENUE

An analysis of the material components of the Company’s general and administrative expenses is disclosed in the audited condensed financial statements for the year ended June 30, 2020 to which this MD&A relates. An analysis of the material components of the acquisition and deferred exploration costs of the Company’s mineral property is disclosed in Note 6 to the audited condensed financial statements for the year ended June 30, 2020 to which this MD&A relates.

DISCLAIMER

The information provided in this document is not intended to be a comprehensive review of all matters concerning the Company. The users of this information, including but not limited to investors and prospective investors, should read it in conjunction with all other disclosure documents provided including but not limited to all documents filed on SEDAR (www.SEDAR.com) No securities commission or regulatory authority has reviewed the accuracy or adequacy of the information presented herein.

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Affinity Metals Corp. Management Reports 2020

44090_rns_2020-10-28_9c3bab62-017b-4e4c-9efd-0fbe7bc4c5a5.pdf