Anacortes Mining Corp. — Management Reports 2022

Apr 15, 2022

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

General

On October 6, 2021, the Company changed its corporate name from First Light Capital Corp. to Anacortes Mining Corp. The Company is listed on the TSX Venture Exchange under the symbol 'XYZ.V' and is a reporting issuer in Ontario, Alberta and BC. The Company is also listed on the OTC Markets Group (OTCQB) under the symbol 'XYZFF'.

The following Management's Discussion and Analysis ("MD&A") is intended to assist the reader to assess material changes in financial condition and results of operations of Anacortes Mining Corp. ("Anacortes" or the "Company") as at and for the years ended December 31, 2021 and 2020.

This MD&A should be read in conjunction with the audited consolidated financial statements and the notes thereto as at and for the year ended December 31, 2021. These audited consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

All dollar amounts are expressed in Canadian dollars unless otherwise indicated. Note that additional information relating to the Company is available on SEDAR at www.sedar.com. This MD&A contains forward-looking statements. Please refer to the cautionary language at the end of this document.

The effective date of this MD&A is April 12, 2022.

Contents of the MD&A

• 1. Highlights for the year ended December 31, 2021 and outlook for 2022
• 1. Overview
• 1. Tres Cruces Project (including Preliminary Economic Assessment)
• 1. Results of operations
• 4.1 Results of operations for years ended December 31, 2021 and 2020
• 4.2 Results of operations for the three months ended December 31, 2021 and 2020
• 1. Selected annual and quarterly information
• 1. Liquidity and capital resources
• 1. Outstanding share data
• 1. Transactions between related parties
• 1. Off-balance sheet transactions
• 1. Proposed transactions and subsequent events
• 1. Use of accounting estimates and judgments
• 1. Financial instruments

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

13. Risk factors

• 13.1 Financial
• 13.2 Industry
• 13**.**3 Metal prices
• 13.4 Political risk
• 13.5 Environmental and governmental regulations
• 13.6 COVID-19 global pandemic
• 1. Cautionary statement on forward-looking information
• 1. Approvals
• 1. Additional information

1. Highlights for the Year Ended December 31, 2021 and Outlook for 2022

• On October 6, 2021, the Company changed its name from First Light Capital Corp. and closed a transaction with New Oroperu Resources Inc. pursuant to a definitive arrangement agreement entered into by both parties on June 16, 2021 to combine and create Anacortes Mining Corp. (the "Transaction").
• Under the terms of the Arrangement Agreement, each New Oroperu shareholder received 5.815 common shares of Anacortes for each New Oroperu common share held.
• Concurrent with the closing of the Transaction, the Company consolidated its shares on a 6 for 1 ratio.
• Anacortes is led by a new management team and Board of Directors with extensive experience in Latin America and Peru and proven capabilities in all facets of mine development and operations.
• During the fourth quarter of 2021, the Company commenced a Preliminary Economic Assessment ("PEA") on its Tres Cruces Project in Peru. The PEA was completed in March 2021 and its highlights include a pre-tax net present value at a 5% discount rate ("NPV 5%") of US$294.3 million, an after-tax NPV 5% of US$165.9 million and an after-tax internal rate of return ("IRR") of 33.0% with a 2.1 year payback at US$1,700/oz.
• During the year ended December 31, 2021, the Company incurred a net loss of $19,424,280 compared to $1,369,678 in 2020, mostly as a result of incurring transaction costs of 16,397,735 and $2,298,137 in share-based payments related to option grants.
• As at December 31, 2021, the Company had a cash position of $12,862,013 (December 31, 2020 $1,820,538.
• The Company is preparing to commence a drilling program at Tres Cruces in April 2022. This program will provide further information to support the Company's planned feasibility study at Tres Cruces as well as to test the deep sulphide potential suggested by a number of holes previously drilled by Barrick which ended in high-grade mineralization.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

2. Overview

On October 6, 2021, the Company closed a transaction with New Oroperu Resources Inc. ("New Oroperu") pursuant to a definitive arrangement agreement entered into by both parties on June 16, 2021 (the "Arrangement Agreement") to combine and create Anacortes Mining Corp. Anacortes 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 with the goal of creating the next mid-tier multiasset gold producer.

Tres Cruces is one of the highest-grade oxide deposits globally and hosts oxide plus sulphide indicated resources of 2,474,000 ounces at 1.65 g/t gold, inclusive of 630,000 ounces of high-grade leachable gold at 1.28 g/t gold and inferred resources of 104,000 ounces at 1.26 g/t gold. The recently released PEA on the leachable resource at Tres Cruces indicates a robust open-pit, heap leach project. Anacortes is well capitalized and intends to aggressively advance the Tres Cruces Oxide Project through feasibility, permitting and to production as quickly as possible.

3. Tres Cruces Project

The Tres Cruces Oxide Project is strategically located in a highly prospective geological belt that hosts significant gold deposits such as Lagunas Norte (which is located within 10 km), Yanacocha and Pierina. Tres Cruces is underexplored with oxide and sulphide resource growth potential. It has not been drilled since 2008 when gold prices were approximately US$850/oz, and several of the best drill intercepts from the previous drilling campaign are below and outside of the current pit-constrained mineral resource.

The Company released its Preliminary Economic Assessment (PEA) on Tres Cruces in March 2022. Highlights of the PEA are:

• Pre-Tax Net Present Value at a 5% discount rate ("NPV 5%") of US$294.3 million
• After-Tax NPV 5% of US$165.9 million
• After-Tax Internal Rate of Return ("IRR") of 33.0%; 2.1 year payback at US$1,700/oz
• Average gold production of 68,000 ounces annually over an initial oxide mine life of 7 years. Peak gold production of 81,000 ounces in Year 2.
• Initial CAPEX of US$125.2 million
• Average Daily Throughput: 5,800 tpd over initial mine life.
• 588,000 ounces of gold mined over the initial mine life of 7 years.
• Recovered gold is estimated at 481,000 ounces over the initial mine life.

This PEA was prepared in accordance with National Instrument 43-101 ("NI 43-101") and evaluates the economics of mining the Tres Cruces Oxide Gold Deposit through conventional open pit mining and heap leach processing for gold recovery to doré. The study was prepared by M3 Engineering and Technology of Tucson, Arizona and Lima, Peru, in cooperation with Nilsson Mine Services of Pitt Meadows, BC, Transmin Ltd., of Lima, Peru, Advantage Geoservices Ltd. of Osoyoos, BC, and Jeffrey Rowe of Surrey, BC.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

PEA ASSUMPTIONS AND RESULTS
Description	Units
Net Present Value (NPV 5%) Pre-Tax	US$ (million)	$294.3
Net Present Value (NPV 5%) After-Tax	US$ (million)	$165.9
After-Tax Internal Rate of Return (IRR)	%	33.0
Payback Period	Years	2.1
LOM Cumulative Cash Flow	US$ (million)	$235.6
LOM All-In Sustaining Costs (AISC)	US$/oz	$786
Pre-Production CAPEX	US$ (million)	$125.2
Sustaining CAPEX (LOM)	US$ (million)	$5.2
Mine Life	Years	7
Average Processing Rate	Tonnes/day	5,800
LOM Strip Ratio		2.89:1
Average Gold Recovery	%	81.7
Average Annual Gold Production	Oz/year	68,000
Total LOM Gold Production	Ounces	481,000

Mineral Resource Estimate

The current resource prepared by Jeffrey Rowe and James Gray (Advantage Geoservices), published in March 2021, was an update of the Technical Report by Lacroix and Associates (L&A) dated September 2012 for previous owner New Oroperu Resources (which is now a wholly-owned subsidiary of the Company). The estimate used the geologic models of lithology and alteration that were developed for the L&A resource, but divided the deposit by mineralization type (oxide, transition, or sulphide). Gold grade correlation based on geology was not readily apparent and the decision was made to use a 0.2 g/t grade shell as control for grade estimation. This shell was generated using an indicator estimation method. A total of 327 holes have been used for this estimate, of which 159 were RC holes and 168 were core holes. Sample grades were composited to a down-hole length of 3 m. Assays, subdivided by grade domain, were capped in a conventional manner prior to compositing.

Gold grades were estimated inside and outside the mineralized grade shell by ordinary kriging, into blocks with dimensions of 10m x 10m x 5m (X/Y/Z). Average density values were assigned by lithology based on 2,700 core density measurements.

The resource has been classified based on spatial parameters related to drill density and configuration, and the generation of an optimised pit. Blocks were initially classified as Inferred where the average distance to

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

the closest three holes is within 80 m, and as Indicated where the average distance to the closest three holes is within 50 m. Pit optimization included variable cost and recovery values dependent on mineralization type. All material included in the Mineral Resource Estimate is contained within the optimized shell.

Mineral Resources Estimates1
Resource Classification		Indicated		Inferred
	Tonnes(1000's)	Au(g/t)	Oz Au(1000's)	Tonnes(1000's)	Au(g/t)	Oz Au(1000's)
Oxide (0.3 g/t cut-off)	9,636	1.37	425	487	0.75	12
Transition(0.3 g/t cut-off)	5,707	1.12	205	361	0.60	7
Sulphide(0.9 g/t cut-off)	31,132	1.84	1,844	1,713	1.55	85
Total	46,475	1.65	2,474	2,561	1.26	104

The PEA only considers mining and processing of leachable oxides and transition materials from the Indicated and Inferred resource categories. Sulfide mineralization is considered a future opportunity and does not currently factor into mine planning, processing or financial results as reported in this PEA.

Mining and Processing

The Tres Cruces Oxide project presented in the PEA will employ conventional open pit mining with heap leach processing on a 365 day per year, 24 hour per day operating basis. The process will consist of a crushing circuit, a heap leach pad, a recovery plant, and water management ponds. Mined rock from the pit will be transported to the crusher by haul truck. A 6,000 tpd, three-stage crushing plant will reduce runof-mine (ROM) to minus 16 mm. Crusher product will be transported to the heap leach pad via a conveyor belt and stacker system.

The heap leach pad will be lined with a geomembrane and will include a solution recovery system to contain and capture the process solution. The crushed phase will be conveyed and stacked in lifts on the leach pad by a mobile radial stacker. The stacker will be fed by a series of mobile grasshopper conveyors placed across the heap that will be fed from the main overland conveyor from the crushing circuit. Sections of the conveyor transporting crush to the heap will be permanent, and some sections located on the overliner will be semi-permanent and mobile to allow them to be moved as needed, allowing for phased construction of the pad and overliner placement over the life of the mine.

The lifts will be stacked to a target of 8 m with a total heap height of 85 m. Stacking will advance continuously, whereby areas will be placed under leach intermittently through the irrigation of dilute cyanide solution delivered from the Adsorption Desorption Recovery (ADR) plant by an infrastructure of distribution piping. The cyanide solution leaches gold from the stacked heap and the rate of recovery and ultimate

1 Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

recovery is enhanced by increasing the surface exposure of mineralisation by crushing and by the stacking of multiple lifts on top of each other.

Above the geomembrane within the coarse-crushed overliner, perforated collection piping transports the pregnant leach solution (PLS) to the ADR for gold recovery by carbon adsorption. The gold recovery strategy incorporates a vertical multi-stage carbon column, intermittent scheduled carbon transfer to the elution circuit for stripping under high temperature and pressure, and the electrowinning of the high-tenor strip solution to sludge on cathode. Electrowinning sludge will be dried in a retort where mercury can be condensed and recovered. Subsequently, the sludge is fluxed and smelted to produce precious metal doré bars for sale to an offsite refinery. Note that while silver is a by-product of gold production, there is no silver resource presented in this PEA since the geological and metallurgical databases lack the detail to evaluate the potential contribution.

PLS will flow by gravity to the ADR plant but can be bypassed to the pregnant solution pond in the event of a precipitation event. Excess process solutions due to storm events can be stored in the Overflow Pond. Make-up cyanide, pH level and water from the barren solution pond can be added to the ADR barren solution tank, before recirculating the solution back to the heap by pumping. Use of raincoats on the heap, back up power-supply for pumps, and containment surge volume within the process water ponds are some of the means to address excess process solution due to storm events.

Based on preliminary column testing at a crush size of 16 mm, a gold recovery of 81.7% is being used in this PEA. The Company intends to conduct an extensive metallurgical program during 2022 to confirm this recovery with metallurgical samples collected during the upcoming drilling program.

LOM Operating Costs
Area	LOM Cost (US$1000's)
Mine Operating Cost	$140,043
Process Plant Operating Cost	$61,468
Water Treatment Plant	$2,942
Site and Services	$8,332
G & A	$35,177
Treatment & Refining	$1,586
Royalties	$12,193
Closure	$25,030
Total	$286,771
$/t Processed	$19.23

Capital and Operating Costs

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

Initial Capital Costs
Item	Cost (US$1000's)
Direct Cost	$56,381
Indirects	$14,327
Total Directs and Indirects	$70,708
Contingency (@25%)	$17,677
Mining Pre-strip	$21,610
Mining Contingency (@7.5%)	$1,621
Owner's Cost & First Fills	$13,539
Total Initial Capex	$125,154

Further details on operating and capital costs can be found in Chapter 21 of the PEA.

Sensitivity

For the purposes of this MD&A, only gold price sensitivity is presented. Sensitivity to capital costs, operating costs and recovery can be found in Chapter 22 of the PEA.

Gold Price Sensitivity
Metal Price	IRR, after Tax
Base Case	$1,700	$812,856	$235,628	$165,949	33.0%
20%	$2,040	$975,428	$329,748	$240,652	42.6%
10%	$1,870	$894,142	$282,856	$203,430	38.0%
-10%	$1,530	$731,571	$188,013	$128,158	27.6%
-20%	$1,360	$650,285	$139,742	$89,856	21.8%

Disclosure

The PEA results are summarized for purposes of this MD&A. The complete PEA can be found on SEDAR and the Company's website.

The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no guarantee that the inferred mineral resources can be categorized as Indicated or Measured mineral resources or mineral reserves, and as such there is no guarantee that the project and the economics of that project as described in this report can be achieved.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

4. Results of Operations

4.1 Results of operations for the years ended December 31, 2021 and 2020

The Company's net loss for the year ended December 31, 2021 was $19,424,280 (2020 - $1,369,678). The loss for the year was comprised primarily of transaction expense of $16,397,735 and share-based payments of $2,298,137. Transaction costs were incurred in connection with the transaction with New Oroperu Resources Inc. ("New Oroperu" or "NOP") as described below.

New Oroperu transaction

On October 6, 2021, First Light Capital Corp. ("First Light") closed a transaction with New Oroperu pursuant to a definitive arrangement agreement entered into by both parties on June 16, 2021 (the "Arrangement Agreement") to combine and create Anacortes Mining Corp. ("Anacortes") (the "Transaction").

Under the terms of the Arrangement Agreement, which was negotiated at arms-length, each New Oroperu shareholder received 5.815 common shares of Anacortes (each an "Anacortes Share") for each New Oroperu common share held (each a "New Oroperu Share") (the "Share Exchange Ratio"). Immediately following completion of the Transaction, Anacortes consolidated its common shares at a ratio of six preconsolidation shares to one post-consolidation share (the "Consolidation"). As a result, a total of 27,074,716 post-consolidation Anacortes Shares were issued to New Oroperu shareholders.

As a result of the Transaction, the then-current shareholders of NOP acquired control of First Light and consequently, the Transaction has been accounted for as a reverse acquisition of First Light in accordance with the guidance provided under IFRS 2, Share-based payments, and IFRS 3, Business Combinations. Accordingly, the Transaction has been accounted for as an acquisition of the net assets of First Light by NOP where the excess of the fair values of the equity instruments granted by NOP to the shareholders and option and warrant holders of First Light over the net assets of First Light has been recognized as a transaction expense (as detailed below) in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

Net assets acquired:	Note	Amount
Cash		$ 23,644,681
Accounts receivable		2,065
Accounts payable		(1,615,810)
Net assets acquired		22,030,935
Cost of acquisition:
Value of common shares deemed to be issued by the Company		26,592,939
Stock options deemed to be issued by the Company		63,525
Warrants deemed to be issued by the Company		2,712,799
Change in control payments to New Oroperu management and directors	(i)	2,426,628
Portion of New Oroperu options vested and paid out on change in control	(i)	2,040,961
Value of common shares issued on partial payment of advisory fees		1,480,284
Value of warrants issued on partial payment of advisory fees		219,716
Other costs of the transaction	(i)	2,891,818
Total cost of acquisition		38,428,670
Total costs of acquisition		$ 38,428,670
Total net assets acquired		22,030,935
Total transaction expense		$ 16,397,735

Note (i): Transaction expense includes cash costs of $7,359,406, comprised of $2,426,628 in change-in-control payments paid to former officers and directors of New Oroperu, $2,040,961 in payouts for the cancellation of a portion of in-the-money New Oroperu stock options held by former officers, directors, and employees of New Oroperu, and other costs of $2,891,818, which includes success fees, fairness opinion fees, legal fees, due diligence costs, regulatory fees and transfer agent fees. The remainder of the transaction expense is non-cash.

Other expenses

During the year ended December 31, 2021, the Company incurred $2,298,137 in share-based payments (2020 – $1,074,318) as a result of the grant of 1,800,000 options to new employees, directors and consultants in October 2021 (2020 – 872,250 options granted).

The Company had expenses of $772,661 for the year ended December 31, 2021 (excluding $2,298,137 of share-based payments and $16,397,735 incurred in transaction expense), compared to expenses of $440,341 for the previous year. The increases in expenses were primarily due to shareholder communications costs of $154,088 compared to $nil in 2020, salaries and benefits of $122,473 compared to $nil in 2020 and legal, audit and accounting expense of $135,750 compared to $71,570 in 2020. Following the Transaction, the Company hired a shareholder communications firm and a market maker to provide the Company with greater exposure to potential shareholders and the Company hired a full time CEO and CFO, resulting in salaries and benefits costs in 2021. Legal and audit expenses were also higher compared to 2020 as a result of additional audit, tax and legal work in connection with the Transaction with New Oroperu.

Expenditures at Tres Cruces

During the year ended December 31, 2021, the Company incurred $2,807,956 in costs related to Tres Cruces all of which were capitalized in exploration and evaluation properties. This included a payment of $2,059,410 (US$1,620,709) to Minera Boroo Misquichilca SA (formerly Minera Barrick Misquichilca)

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

("MBM") to complete the transfer of ownership of surface rights, drill core and all related data associated with the Tres Cruces project, as described below. During the year ended December 31, 2020, the Company recognized a net gain of $192,465 on the receipt of $244,720 (US$175,000) from MBM pursuant to the Option Agreement described below.

Termination of the Tres Cruces Option Agreement in 2021

Pursuant to a Share Purchase Option and Joint Participation Agreement (the "Option Agreement") dated May 31, 2002, Anacortes subsidiary's New Oroperu Resources Inc. granted an option (the "Option") to MBM to earn up to 70% of the equity in Aurifera Tres Cruces S.A. ("ATC"), a New Oroperu (now an Anacortes) subsidiary, by, among other things, conducting exploration activities on the Tres Cruces gold project owned by ATC. In 2006, in order to enable MBM to conduct exploration activities on the Tres Cruces, ATC assigned the project to MBM pursuant to the terms of a Mining Assignment Agreement dated December 18, 2006 (the "Mining Assignment Agreement").

Under the terms of the Option Agreement, MBM was required to make a production decision in respect of the Tres Cruces project on or before December 31, 2020 and if it did not do so, New Oroperu had the right to terminate the Option Agreement and the Option. Similarly, the Mining Assignment Agreement expired by its terms on December 31, 2020. The Mining Assignment Agreement further provided that promptly following expiration, MBM would assign to ATC any surface/access rights to the Tres Cruces project acquired by MBM during the term of the Mining Assignment Agreement for a purchase price equal to the book value of those surface rights.

MBM did not make a production decision in respect of the Tres Cruces project on or before December 31, 2020. On October 18, 2021, following the acquisition of New Oroperu by Anacortes Mining Corp., MBM, Anacortes and its subsidiaries (including ATC) confirmed that the Option Agreement, the Option, and the Mining Assignment Agreement have been terminated and MBM has transferred to ATC the surface/access rights to the Tres Cruces project in exchange for payment to MBM of the sum of US$1,620,709.

4.2 Results of operations for the three months ended December 31, 2021 and 2020

In the three months ended December 31, 2021, the Company incurred aggregate expenditures of $2,444,287 (three months ended December 31, 2020 – $nil) on the Tres Cruces project. This included a payment of $2,059,410 (US$1,620,709) to MBM to complete the transfer of ownership of surface rights, drill core and all related data associated with the Tres Cruces project

The Company recorded expenses of $271,739 for the three months ended December 31, 2021 (excluding $2,182,376 for share-based payments and $16,397,735 incurred in transaction expense, both of which are discussed above), compared to expenses of $86,313 for the same quarter last year. Following the Transaction, the Company hired a shareholder communications firm and a market maker to provide the Company with greater exposure to potential shareholders, resulting in shareholder communication costs in 2021, and the Company hired a full time CEO and CFO, resulting in salaries and benefits costs in 2021. Legal and audit expenses were also higher compared to 2020 as a result of additional audit, tax and legal work in connection with the Transaction with New Oroperu.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

5. Selected Annual and Quarterly Information

The following selected financial data has been prepared in accordance with IFRS. This table should be read in conjunction with the Company's audited consolidated financial statements.

	2021	2020	2019
Loss for the year	(19,424,280)	(1,369,678)	(74,664)
Basic and diluted loss per share	($0.63)	($0.05)	($0.00)
Total assets	16,396,616	2,244,142	514,926
Total liabilities	274,784	125,368	28,349
Total shareholders' equity	16,121,832	2,118,774	486,577

Results for the eight most recent quarters ending with the last quarter ended December 31, 2021:

	December 31	September 30	June 30	March 31
For the quarterly periods ending	2021	2021	2021	2021
Income (loss) for the quarter	(18,263,593)	(578,373)	(327,497)	(254,817)
Basic income (loss) per share	($0.44)	($0.02)	($0.02)	($0.01)
	December 31	September 30	June 30	March 31
For the quarterly periods ending	2020	2020	2020	2020
Income (loss) for the quarter	(446,387)	(746,244)	(84,083)	(92,964)
Basic income (loss) per share	($0.02)	($0.03)	($0.01)	($0.00)

Quarterly Results - General Trend

The Company expects that the level of general quarterly operating expenses will continue to increase, as the Company ramps up operations at Tres Cruces and the Company continues to pursue new exploration and evaluation assets. Since the closing of the Transaction, the Company has also taken on a more aggressive shareholder communications program.

6. Liquidity and Capital Resources

During the year ended December 31, 2021, the Company's cash position increased by $11,041,475 as a result of the net cash received following the closing of the Transaction. As at December 31, 2021, the Company's cash position was $12,862,013 (2020 – $1,820,538) and its working capital was $12,948,006 (2020 – $1,752,904).

The Company is preparing to conduct a drilling program at Tres Cruces in April 2022. This program will provide further information to support the Company's planned feasibility study at Tres Cruces as well as to test the deep sulphide potential suggested by a number of holes drilled by MBM which ended in high-grade mineralization.

The Company is currently well capitalized but as Tres Cruces is not in commercial production, it does not generate cash from operations. The Company does not have sufficient funds to fully develop Tres Cruces,

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

achieve commercial production and produce gold and other metals economically. Although First Light was successful in raising gross proceeds of over $22 million in July 2021, there can be no assurance that future funding will be available to the Company when needed or, if available, that this funding will be on acceptable terms. If adequate funds are not available, the Company may not be able to develop Tres Cruces and achieve commercial production. Even if adequate funds are available, there is no guarantee that Tres Cruces will achieve commercial production and generate positive future cash flows.

7. Outstanding Share Data

There were 42,113,660 shares of the Company outstanding at December 31, 2021 and 42,313,660 shares outstanding as of the date of this report.

Stock Options

In October 2021, the Company granted 1,800,000 stock options at an exercise price of $2.40, with an expiry date of October 12, 2026. In October and November 2021, 33,332 options were exercised at $0.60. In January 2022, 200,000 options were exercised at $1.29 and 187,666 options expired at $1.29. In February 2022, the Company granted 225,000 options at an exercise price of $2.40 and an expiry date of February 2, 2027.

Number of Options		Exercise	Expiry Date	Contractual Life ofOptions Remaining
Outstanding	Exercisable	Price		in Years
1,182,381	1,182,381	$ 0.46	October 5, 2022	0.5
16,666	16,666	$0.60	October 5, 2022	0.5
1,800,000	1,725,000	$2.40	October 12, 2026	4.5
225,000	225,000	$2.40	February 2, 2027	4.8
3,224,047	3,149,047

The following stock options are outstanding as of the date of this report:

Warrants

The following warrants are outstanding as at December 31, 2021 and as of the date of this report:

Number ofWarrants	Exercise Price	Expiry Date	Contractual Life of WarrantsRemaining in Years
1,792,958	$0.52	August 8, 2022	0.3
815,138	$0.88	May 7, 2023	1.1
4,591,354	$3.30	July 21, 2023	1.3
550,668	$2.40	October 5, 2023	1.5
354,166	$3.30	October 5, 2023	1.5
8,104,284

8. Related Party Transactions

Transactions with related party companies

During the years ended December 31, 2021 and 2020, the Company's related parties consisted of private companies owned by executive officers and directors of the Company. The following table represents the details of related party transactions paid or accrued to the related party companies in 2021 and 2020:

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS

For the year ended December 31, 2021

(Expressed in Canadian dollars)

	Note	2021	2020
Consulting fees	(i)	$91,936	$80,000
Transaction costs	(ii)	1,226,628	-
Exploration and evaluation properties	(iii)	120,789	158,983
General and administrative	(iv)	66,670	83,904
		$1,506,023	$322,887

• (i) During the year ended December 31, 2021, consulting fees of $91,936 (2020 $80,000) related to corporate development and investor relations was paid to 2725487 Ontario Ltd., a company controlled by the Company's former VP, Corporate Development.
• (ii) In April 2019, New Oroperu entered into agreements with its directors and officers that would result in change in control payments to be made to the directors and officers in the event of a change of control of New Oroperu. As a result of the completion of the transaction between First Light and New Oroperu on October 6, 2021, directors and officers of New Oroperu received change in control payments totalling $2,426,628 upon closing, of which $726,628 was paid to NS Star Enterprises Ltd. ("NS Star", a company controlled by the Company's former CEO), $500,000 was paid to 2725487 Ontario Ltd. and $1,200,000 was paid directly to directors and officers (see Compensation of directors and key management personnel below).
• (iii) During the year ended December 31, 2021, $120,789 (2020 $158,983) was paid to NS Star for consulting fees in connection with the Company's Tres Cruces project.
• (iv) During the year ended December 31, 2021, $55,161 (2020 $67,500) was paid to Morfopoulos Consulting Associates Ltd. (a company controlled by the Company's former CFO) for accounting, management and administrative services and $11,509 (2020 - $16,404) was paid to NS Star for administrative services.

As at December 31, 2021 and 2020, $nil was due to related parties. Any amounts payable to related parties are non-interest bearing and due on demand.

Compensation of directors and key management personnel

The remuneration of independent directors and key management personnel (not included above) during the years ended December 31, 2021 and 2020 was as follows:

	Note	2021	2020
Transaction costs	(i)	$3,163,290	$-
Directors' fees		60,427	42,000
Consulting fees	(ii)	-	36,500
Share-based payments	(iii)	2,103,520	-
Salaries and benefits	(iii)	122,473	-
		$5,449,710	$78,500

(i) Transaction costs included $1,200,000 paid directly to directors and officers of New Oroperu as change in control payments (see Transaction with related party companies above), $18,000 paid to a New Oroperu director who provided advisory services in connection with the Transaction, and $1,945,290 paid to directors and officers of New Oroperu in connection with the payout of certain vested options.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

• (ii) Consulting fees totalling $36,500 were paid to two directors of New Oroperu in 2020. $Nil was paid in 2021.
• (iii) Share-based payments pertain to options granted on October 12, 2021 to the current directors and officers of the Company and salaries and benefits are amounts paid during the year ended December 31, 2021 to the current officers of the Company.

9. Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet financing arrangements during 2021 and up until the date of this report.

10. Proposed Transactions and Subsequent Events

There are no proposed transactions.

There were two events subsequent to December 31, 2021:

• (a) On January 4, 2022, the Company received $258,000 from the exercise of 200,000 stock options at $1.29 per share. On January 4, 2022, 187,666 stock options exercisable at $1.29 per share expired.
• (b) On February 2, 2022, the Company granted 150,000 stock options to three officers of the Company and 75,000 stock options to an employee of the Company. All of these options vest immediately and entitle the holder to purchase one common share of the Company at an exercise price of $2.40 per share for a period of five years from the date of grant.

11. Use of Estimates and Judgments

The preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenues and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Significant assumptions about the future and other sources of estimation uncertainty that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

Critical accounting estimates

Critical accounting estimates are estimates and assumptions made by management in the preparation of these consolidated financial statements that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and include, but are not limited to, the following:

Share-based payments and valuations of equity units issued in reverse takeover transaction

The fair value of share-based payments is subject to the limitations of the Black-Scholes option pricing model, which incorporates market data and involves the input of highly subjective assumptions, including

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

the volatility of share prices, and changes in subjective input assumptions which can materially affect the fair value estimate. In addition, the valuations of equity units issued in the reverse takeover transaction is also based on the Black-Scholes option pricing model. Where equity units have been issued for certain transaction costs, the amounts of that cost have been allocated between common shares and share purchase warrants on the relative fair value method.

Critical accounting judgments

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include, but are not limited to, the following:

Accounting for reverse takeover transaction

Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require the Company to make certain judgements as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 – Business Combinations. If an acquired set of assets and liabilities includes goodwill, the set is presumed to be a business.

As a result of the transaction with New Oroperu Resources Inc. ("NOP"), the then-current shareholders of NOP acquired control of First Light and consequently, the Transaction has been accounted for as a reverse acquisition of First Light in accordance with the guidance provided under IFRS 2, Share-based payments, and IFRS 3, Business Combinations. Accordingly, the Transaction has been accounted for as an acquisition of the net assets of First Light by NOP where the excess of the fair values of the equity instruments granted by NOP to the shareholders and option and warrant holders of First Light over the net assets of First Light has been recognized as a transaction expense in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021.

Functional currency

The Company applied judgment in determining its functional currency and the functional currency of its subsidiaries. Functional currency was determined based on the currency in which funds are sourced and the degree of dependence by the subsidiary on the Company for financial support.

Exploration and evaluation properties

Management is required to make judgments on the status of each mineral property, the future plans with respect to finding commercial reserves, and indicators of impairment. The nature of exploration and evaluation activity is such that only a few projects are ultimately successful and some assets are likely to become impaired in future periods.

Recovery of deferred tax assets

The Company estimates the expected manner and timing of the realization or settlement of the carrying value of its assets and liabilities and applies the tax rates that are enacted or substantively enacted on the estimated dates of realization or settlement.

12. Financial Instruments

As at December 31, 2021 and 2020, the Company's financial instruments are comprised of cash and cash equivalents, trade payables and accrued liabilities and due to related parties. The carrying amount reported

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

in the consolidated statements of financial position for these financial instruments approximate fair value due to the short-term maturities of these financial instruments.

The Company's risk exposure and the impact on the Company's financial instruments are as follows:

a) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations.

The Company is exposed to concentration of credit risk with respect to its cash; however, the risk is minimized as cash is placed with major Canadian financial institutions.

b) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company's approach to managing liquidity risk is to plan that it will have sufficient assets and cash flows to meet liabilities when due. As at December 31, 2021, the Company has working capital of $12,948,006 (2020 - $1,752,904). As at December 31, 2021, the Company has trade payables and accrued liabilities of $274,784 (2020 - $125,368).

c) Market Risk

Market risk is the risk that the fair value of or future cash flows from the Company's financial instruments will significantly fluctuate due to changes in market prices. The value of financial instruments can be affected by changes in interest rates, foreign currency rates and equity prices. Management closely monitors individual interest rate and foreign currency movements to determine the appropriate course of action to be taken by the Company.

d) Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is not exposed to significant interest rate risk.

e) Foreign currency risk

The Company has certain assets and liabilities denominated in United States dollars that expose it to currency risk, as follows:

	December 31	December 31
	2021	2020
Cash	$702,771	$323,909
Accounts payable	(14,125)	-
Net foreign exposure to US dollars	$688,646	$329,909

The Company does not utilize derivatives or other techniques to manage foreign currency risk.

The Company's exposure to foreign currency risk arises primarily from fluctuations between the Canadian dollar and the US dollar. Cash held in US dollars as at December 31, 2021 is $702,771 and liabilities denominated in US dollars are $14,125. The Company has not entered into any derivative instruments to manage foreign exchange fluctuations.

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

Based on the above net currency exposure as at December 31, 2021 and assuming all other variables remain constant, a 10% strengthening or weakening of the US dollar against the Canadian dollar would result in $87,000 increase/decrease of foreign exchange gain or loss in the Company's consolidated statements of loss and comprehensive loss.

f) Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not exposed to any significant price risk.

13. Risk Factors

Companies operating in the mining industry face many and varied kind of risks. While risk management cannot eliminate the impact of all potential risks, the Company strives to manage such risks to the extent possible and practical. The following are the risk factors most applicable to the Company.

13.1 Financial

The Company has not generated any revenue since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. As at December 31, 2021, the Company has incurred losses since inception and has an accumulated operating deficit of $55,489,483. The continuation and long-term viability of the Company remains dependent upon its ability to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation of the Company's interests in the underlying properties, and the attainment of profitable operations.

13.2 Industry

Exploring and developing mineral resource projects bears a high potential for a variety of risks. Additionally, few exploration projects successfully achieve development due to factors that cannot be predicted or foreseen. Moreover, even one such factor may result in the economic viability of a project being detrimentally impacted such that it is not feasible or practical to proceed.

Although the Company has taken steps to verify the title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

13.3 Metal Prices

The principal activity of the Company is the exploration and development of gold resource properties. The feasible development of such properties is highly dependent upon the price of gold. A sustained and substantial decline in commodity gold prices could result in the write-down, termination of exploration and development work or loss of its interests in identified resource properties. Although such prices cannot be forecasted with certainty, the Company carefully monitors factors which could affect gold commodity prices in order to assess the feasibility of its resource projects.

13.4 Political Risk

The resource properties on which the Company is pursuing its exploration and development activities are all located in Peru, South America. The political climate is considered by the Company to be stable with

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

periods of uncertainty. To alleviate such risk, the Company funds its Peru operations on an as-needed basis. The Company does not presently maintain political risk insurance for its foreign exploration projects.

13.5 Environmental and Governmental Regulations

The current and future operations of the Company, including development activities, construction and commercial production of its Tres Cruces project, may require permits from various state and local governmental authorities in Peru. Such operations are and will be governed by laws and regulations governing development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters. The Company may experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. The Company believes it is currently in substantial compliance with all material laws and regulations that currently apply to its activities, particularly those in the Quiruvilca Mining District where Tres Cruces is located. There can be no assurance, however, that all permits which the Company may require for the conduct of its operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any project which the Company might undertake. Failure to comply with applicable laws, regulations and permitting requirements may result in the imposition of fines or issuance of clean up orders in respect of the Company or its projects. Such legislation may be changed to impose higher standards and potentially more costly obligations. The Company endeavours to operate in such a manner to ensure it conforms to the standards and government regulations required for each jurisdiction in which it operates.

13.6 COVID-19 Global Pandemic

In March 2020, the world Health organization declared a global pandemic related to COVID-19. The expected impacts on global commerce are anticipated to be far reaching. To date there have been significant volatility in the equity markets, and the movement of people and goods has experienced some restrictions.

As the Company does not have production activities, the ability to fund ongoing exploration is affected by the availability of financing. Due to market uncertainty and volatility, the Company may be restricted in its ability to raise additional funding.

The impact of these factors on the Company is still not determinable. However, they may have a material impact on the Company's financial position, results of operations and cash flows in future periods. ln particular, there may be heightened risk of mineral property impairment and going concern uncertainty.

14. Forward-looking Statements

This MD&A contains forward-looking statements which constitute "forward-looking information" within the meaning of applicable Canadian securities legislation ("Forward-looking Statements"). All statements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected in the Forward-looking Statements.

The Forward-looking Statements in this MD&A may include, without limitation, statements about the Company's expectation that it can receive approval of its application to begin exploration activities and the timing of both that approval and the exploration activities, its expectation that the planned drill program can test the extent of the deposit and increase confidence in the resource and, finally, the Company's intent to aggressively advance Tres Cruces through feasibility and to production under a heap leach open-pit scenario. Often, but not always, these Forward-looking Statements can be identified by the use of words such as

(formerly First Light Capital Corp.)

MANAGEMENT DISCUSSION & ANALYSIS For the year ended December 31, 2021 (Expressed in Canadian dollars)

"anticipated", "estimated", "potential", "open", "future", "assumed", "projected", "used", "detailed", "has been", "gain", "planned", "reflecting", "will", "anticipated", "estimated" "containing", "remaining", "to be", or statements that events, "could" or "should" occur or be achieved and similar expressions, including negative variations.

Forward-looking Statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the ability of the Company to control or predict and which may cause actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements. These risks include changes in general economic conditions and financial markets; political risks; risks relating to the current and potential adverse impacts of the COVID-19 pandemic on the economy, financial markets and the Company's operations; and risks inherent in mineral exploration and development. Although Forward-looking Statements contained in this MD&A are based upon what each of the parties believe are reasonable assumptions at the time they were made, such statements are made as of the date hereof and the Company disclaims any obligation to update any Forward-looking Statements, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no assurance that these Forward-looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader should not place undue reliance on Forward-looking Statements.

15. Approvals

The technical content of this MD&A has been reviewed and validated by James ("Jim") Currie, P. Eng., a qualified person as that term is defined in National Instrument 43-101. Mr. Currie is the President and CEO of Anacortes Mining Corp.

The Board of Directors of the Company has approved the disclosure contained in this MD&A.

16. Additional Information

Additional information about the Company may be found on the SEDAR website at www.sedar.com.