Anacortes Mining Corp. — Interim / Quarterly Report 2021

Aug 31, 2021

First Light Capital Corp. Management Discussion and Analysis Quarterly Report – June 30, 2021

This Management Discussion and Analysis (“MD&A”) of First Light Capital Corp. (the “Company”) provides analysis of the Company’s financial results for the six-month period ended June 30, 2021. The following information should be read in conjunction with the unaudited condensed consolidated interim financial statements and the notes to the unaudited condensed interim financial statements for the six-month period ended June 30, 2021 and the audited financial statements for the year ended December 31, 2020, which are prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts are expressed in Canadian dollars unless otherwise noted.

This discussion includes certain statements that may be deemed “forward-looking statements”. Forward- looking statements usually include words such as may, will, would, expect, plan, anticipate, budget, estimates, potential, believe, intend, or other similar words. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. The Company does not update or revise forward-looking information even if new information becomes available unless legislation requires us to do so. Investors should not place undue reliance on forward-looking statements. Additional details of the specific risks associated with the operations of the Company and such forward-looking statements are set out below under “Risks and Uncertainties”. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements.

Date of Report

This MD&A is prepared as of August 30, 2021.

Corporate Profile and Overall Performance

First Light Capital Corp. (the “Company”) was incorporated under the Business Corporations Act of British Columbia on March 15, 2018. The Company is classified as a “Capital Pool Company” for the purposes of Policy 2.4 of the TSX Venture Exchange Inc. (the “TSX-V” or the “Exchange”). As a result, the Company’s principal business is the identification and evaluation of a Qualifying Transaction (“QT”) and once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities. The Company has not conducted commercial operations other than to enter into discussions for the purpose of identifying potential acquisitions or interests.

Qualifying Transaction

The Company has entered into a definitive arrangement agreement to complete a Qualifying Transaction. The Company and New Oroperu Resources Inc. (“New Oroperu” or “NOP”) entered into a definitive arrangement agreement dated June 16, 2021 (the “Arrangement Agreement”) to combine and create Anacortes Mining Corp. (“Anacortes”) – a new growth-oriented gold company (the “Transaction”) which intends to focus on continued exploration and advancement of New Oroperu’s Tres Cruces project located in Peru, in addition to seeking further growth opportunities in the Americas.

Under the terms of the Arrangement Agreement, which was negotiated at arms-length, each New Oroperu shareholder will receive 5.815 common shares of First Light (each a “First Light Share”) for each New Oroperu common share held (each a “New Oroperu Share”) (the “Share Exchange Ratio”). A portion of the New Oroperu options outstanding will vest immediately prior to closing of the Transaction and shall be transferred to New Oroperu for cancellation at closing of the Transaction (“Closing”) for an amount equal to the positive difference between the exercise price and the 20-day volume weighted average share price of New Oroperu for the 20-day period ending on the day prior to the announcement of the Transaction. All remaining outstanding options of New Oroperu will be exchanged for equivalent options of First Light in accordance with the Arrangement Agreement and based on the Share Exchange Ratio. The outstanding New Oroperu warrants will be adjusted to become exercisable for First Light Shares based on the Share Exchange Ratio. Based upon the Share Exchange Ratio, a total of 162,168,499 First Light Shares will be issued to New Oroperu shareholders based on a total of 27,887,962 New Oroperu Shares, before giving effect to a 6:1 consolidation.

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The Transaction will constitute a change of control of New Oroperu, and at closing New Oroperu will be required to pay an aggregate of approximately $2.4M in cash change of control payments to five insiders.

Pursuant to the terms of the Arrangement Agreement, a portion of the New Oroperu options outstanding will vest immediately prior to closing of the Transaction and shall be transferred to New Oroperu for cancellation at closing of the Transaction for an amount equal to the positive difference between the exercise price and the 20-day volume weighted average share price of New Oroperu for the 20-day period ending on the day prior to the announcement of the Transaction. All remaining outstanding options of New Oroperu will be exchanged for equivalent options of First Light in accordance with the Arrangement Agreement and based on the Share Exchange Ratio. A total of $2,073,600 will be paid to certain New Oroperu option holders pursuant to the above.

The Transaction has not closed as of August 30, 2021.

Initial Public Offering

On March 20, 2019, the Company filed a Prospectus in respect of an Initial Public Offering (“IPO”). The Company’s IPO was completed on April 23, 2019 with the issuance of 2,500,000 common shares at a price of $0.10 per share, for gross proceeds of $250,000. In connection with the financing, the Company entered into an Agency Agreement with Leede Jones Gable Inc. (the “Agent”). As part of the Agency Agreement, the Agent received a cash commission of 10% of gross proceeds, or $25,000, a corporate finance fee of $10,500, and a legal cost reimbursement of $10,400. As part of the Agency Agreement, the Company agreed to grant Agent warrants (the “Agent’s Warrants”) which will entitle the Agent to purchase up to 10% of the common shares sold under the IPO, at a purchase price that is equal to the price per share offered in the IPO. The Agent’s Warrants are exercisable until 24 months from the Listing date.

The Company commenced trading on the Exchange on May 3, 2019 under the symbol XYZ.P.

Results of Operations

Six-months ending June 30, 2021

The Company’s only activity to date has been to attempt to identify businesses with a view to completing a Qualifying Transaction. During the six-month period ending June 30, 2021, the Company had a net loss of $354,175 The loss related primarily to due diligence costs of $215,775. These costs were related to a potential property acquisition during the period.

Liquidity and Capital Resources

At June 30, 2021 the Company had a working capital surplus of $1,867,218 (December 31, 2020 - $2,207,243) and cash of $1,910,250 compared to $2,214,452 at December 31, 2020. As of the date of this report, the Company has not paid dividends and does not have any commitments for capital expenditures.

Management believes the Company has sufficient working capital at this time to meet its ongoing financial obligations; however, there is no revenue generated from operations, and any additional working capital would require raising additional debt and/or equity capital. Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.

Transactions with Related Parties

Key management personnel consist of officers and directors of the Company. Key management compensation was $Nil for the six-month period ended June 30, 2021.

Outstanding Share Data

On July 21, 2021, First Light and NOP completed a private placement financing whereby First Light issued 55,096,250 subscription receipts (the “Subscription Receipts”) at a price of C$0.40 per Subscription Receipt (the “Subscription Price”) for gross proceeds of C$22,038,500 (the “Private Placement”) and net proceeds of $20,483,330. The Private Placement included the partial exercise of the agents’ option and was co-led by Haywood Securities Inc. (“Haywood”)

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as sole bookrunner, and Clarus Securities Inc. (“Clarus” and together with Haywood, the “Agents”) under the brokered portion of the Private Placement.

The Private Placement consisted of Subscription Receipts offered by First Light and by 1310612 B.C. Ltd. (“Finco”), a wholly-owned subsidiary of First Light, as follows:

• (i) 4,406,250 Subscription receipts sold by First Light on a brokered basis;

• (ii) 49,077,500 Subscription receipts sold by Finco on a brokered basis;

• (iii) 125,000 Subscription receipts sold by First Light on a non-brokered basis; and

• (iv) 1,487,500 Subscription receipts sold by Finco on a non-brokered basis.

Each Subscription Receipt sold by First Light will entitle the holder thereof to receive one First Light common share (each, a “First Light Share”) and one-half of one common share purchase warrant of First Light (each full warrant, a “First Light Warrant”). Each Subscription Receipt sold by Finco will entitle the holder to receive one Finco common share (each a “Finco Share”) and one-half of one Finco common share purchase warrant (each whole warrant a “Finco Warrant”). After conversion of the Finco Subscription Receipts and in connection with closing of the Transaction, Finco will amalgamate with a wholly-owned subsidiary of First Light which will result in the Finco Shares and the Finco Warrants being exchanged for First Light Shares and First Light Warrants on a “one for one” basis. Each First Light Warrant shall be exercisable for one First Light Share at an exercise price of C$0.55 for a period of 24 months from the closing date of the Private Placement. If certain escrow release conditions are not satisfied on or before the November 30, 2021 (subject to extension at the request of the Company or the Agents), or if the Arrangement Agreement is terminated at any earlier time, or if First Light advises the Agents or announces to the public that it does not intend to satisfy the escrow release conditions, then holders of the Subscription Receipts will be returned an amount equal to the aggregate Subscription Price for the Subscription Receipts held by them, together with a pro rata portion of interest earned on the escrowed proceeds (less applicable withholding tax, if any) and the Subscription Receipts will be cancelled and of no further force or effect.

On July 15, 2020, the Company issued 18,000,000 common shares through non-brokered private placement for gross proceeds of $1,800,000. The Company intends to use the funds to identify and evaluate assets or businesses suitable for a Qualifying Transaction. No finders` fees or commissions were paid in connection with the Offering. All of the Shares issued in the Offering are subject to a statutory hold period that expires on November 16, 2020.

As at June 30, 2021, there were 30,687,500 common shares issued and outstanding.

As at March 31, 2021, there were 30,625,000 common shares issued and outstanding.

As at December 30, 2020, there were 30,546,000 common shares issued and outstanding.

As at September 30, 2020, there were 30,546,000 common shares issued and outstanding.

As at December 31, 2019, there were 12,500,000 common shares issued and outstanding.

On April 23, 2019, the Company granted 300,000 stock options exercisable at a price of $0.10 per share for a period of five years, and 250,000 agent warrants to acquire 250,000 common shares at a price of $0.10 per share, for a 24month period.

Braydon Sutton, former director of the Company, resigned as of June 9, 2020, resulting in forfeiture of the 100,000 shares under the option held as at December 31, 2020.

On February 8, 2021, the Company issued 79,000 common shares for the exercise of warrants priced at $0.10 per common share for gross proceeds of $7,900.

On April 14, 2021, the Company issued 62,500 common shares for the exercise of warrants priced at $0.10 per common share for gross proceeds of $6,250.

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Risks and Uncertainties

The Company’s sole objective is to identify a satisfactory Qualifying Transaction. The closing of any proposed Qualifying Transaction is subject to a number of terms and conditions, including completion of due diligence procedures by parties to the transaction and receipt of all required regulatory approvals, and there is no assurance that a transaction will be completed. If the Company does not complete a Qualifying Transaction within the time permitted by the Exchange, its common shares could be delisted.

The Company does not have a source of income, has not commenced commercial operations, and has no significant assets other than cash. There can be no assurance that the Company will be able to raise additional funding in the future on terms acceptable to the Company.

During the three-month period ended March 31, 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, was declared a pandemic by the World Health Organization. The outbreak has resulted in governments worldwide enacting emergency measures to combat the spread of the virus which in turn have caused material disruption to business globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. No significant impact has been noted to the Company’s business during the period ended June 30, 2021. The management team is closely following the progression of COVID-19 and its potential impact on the Company.

Credit risk

Credit risk is the risk of loss associated with the counterparty’s inability to fulfill its payment obligations. Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash. To minimize the credit risk the Company places these instruments with a high quality financial institution.

Liquidity risk

Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the identification and evaluation of a QT.

Interest rate risk

The Company is exposed to interest rate risk on the variable rate of interest earned on bank deposits. The fair value interest rate risk on bank deposits is insignificant as the deposits are short‐term.

The Company has not entered into any derivative instruments to manage interest rate fluctuations.

Currency risk

The Company’s expenses are denominated in Canadian dollars. The Company’s corporate office is based in Canada and current exposure to exchange rate fluctuations is minimal.

The Company does not have any foreign currency denominated monetary assets or liabilities. The principal business of the Company is the identification and evaluation of assets or a business and once identified and evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval and acceptance by regulatory authorities.

Off Balance Sheet Transactions

The Company does not have any off balance sheet arrangements as at June 30, 2021 or as of the date of this report.

Additional Information

Additional information relating to the Company can be found on SEDAR at www.sedar.com.

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