ArcWest Exploration Inc. — Annual Report 2020

Apr 29, 2021

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ARCWEST EXPLORATION INC.

ANNUAL FINANCIAL STATEMENTS (Expressed in Canadian Dollars)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of ArcWest Exploration Inc.:

Opinion

We have audited the financial statements of ArcWest Exploration Inc. (the “Company”), which comprise the statements of financial position as at December 31, 2020 and 2019, and the statements of comprehensive loss, cash flow and changes in equity for the years then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes events or conditions that indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Cherry Ho.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC April 29, 2021

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ARCWEST EXPLORATION INC. STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) As at December 31,

	Notes	2020	2019
		$	$
Assets
Current
Cash and cash equivalents		2,518,147	796,499
Receivables and prepaids	5	25,757	175,536
Marketable securities	6	587,899	67,500
		3,131,803	1,039,535
Non-current
Equipment, net		1,710	1,702
Exploration and evaluation assets	4, 7, 12	3,502,873	3,820,818
Reclamation deposit	7	82,000	82,000
Total Assets		6,718,386	4,944,055
Liabilities
Current
Accounts payable and accrued liabilities	8	54,135	96,456
Non-current
Loan payable	9	30,000	-
Total Liabilities		84,135	96,456
Shareholders’ Equity
Share capital	10	8,901,487	6,953,873
Share-based payment reserve	10	1,108,207	1,023,413
Deficit		(3,375,443)	(3,129,687)
Total shareholders’ equity		6,634,251	4,847,599
Total Liabilities and Shareholders’ Equity		6,718,386	4,944,055

Nature and continuance of operations (Note 1) Subsequent events (Note 15)

Approved and authorized on behalf of the Board on April 29, 2021:

(signed) Tony Barresi (signed) Tyler Ruks Tony Barresi, Director Tyler Ruks, Director

The accompanying notes are an integral part of these financial statements.

ARCWEST EXPLORATION INC.

STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

For the years ended December 31, 2020 and 2019

	Note	2020	2019
		$	$
Office and administrative expenses
Consulting fees	12	14,426	77,716
Depreciation		831	766
Filing fees and transfer agent		25,990	34,374
General exploration		27,325	30,370
Investor relations		65,398	365,592
Office and miscellaneous	12	269,902	114,421
Professional fees		69,700	72,450
Share-based payments	10,12	13,911	495,676
Travel		5,523	13,929
Loss before other items		(493,006)	(1,205,294)
Other items
Interest income		10,396	21,629
Gain (loss) on marketable securities	6	226,854	(157,522)
Gain on disposal of property	7	-	170,884
Other income	9	10,000	23,798
Loss and comprehensive loss for theyear		(245,756)	(1,146,505)
Loss per common share
Basic and diluted		(0.00)	(0.02)
Weighted average number of common shares outstanding
Basic and diluted		69,408,533	60,680,982

The accompanying notes are an integral part of these financial statements.

ARCWEST EXPLORATION INC. STATEMENTS OF CASH FLOW

(Expressed in Canadian Dollars)

For the years ended December 31, 2020 and 2019

	2020	2019
	$	$
Cash (used in) provided by:
Operating activities
Loss for the year	(245,756)	(1,146,505)
Items not affecting cash
Depreciation	831	766
Share-based payments	13,911	495,676
Gain on disposal of property	-	(170,884)
(Gain) loss on marketable securities	(226,854)	157,522
Gain on loan financing	(10,000)	-
Changes in non-cash working capital items
Receivables and prepaids	149,779	192,269
Accounts payable and accrued liabilities	(42,321)	38,604
	(360,410)	(432,552)
Investing activities
Exploration and evaluation costs	(28,442)	(380,004)
Proceeds from sale of marketable securities	190,097	194,978
Proceeds from sale of mineral property	-	85,000
Acquisition of equipment	(839)	(590)
Reclamation deposit	-	(82,000)
Cash paid in acquisitions
Eagle Property	-	(5,000)
Sparrowhawk property	-	(5,000)
	160,816	(192,616)
Financing activities
Issuance of shares pursuant to private placement	1,935,000	-
Share issue costs	(53,758)	-
Receipt of loan financing	40,000	-
	1,921,242	-
Increase (decrease) in cash	1,721,648	(625,168)
Cash and cash equivalents- beginning	796,499	1,421,667
Cash and cash equivalents- ending	2,518,147	796,499
Cash and cash equivalents consist of:
Cash	518,147	257,524
Term deposits	2,000,000	538,975
	2,518,147	796,499

Supplemental cash flow information (Note 14)

The accompanying notes are an integral part of these financial statements.

ARCWEST EXPLORATION INC. STATEMENTS OF CHANGES IN EQUITY

(Expressed in Canadian Dollars)

		Number of	Share	Share-based
	Note	common shares	capital	payment reserve	Deficit	Total
			$	$	$	$
Balance, December 31, 2018		59,692,212	6,852,428	527,737	(1,983,182)	5,396,983
Shares issued for Todd Creek property	7	846,154	84,615	-	-	84,615
Shares issued in Eagle Property Agreement	4	100,000	9,000	-	-	9,000
Shares issued in Sparrowhawk Purchase Agreement	4	87,000	7,830	-	-	7,830
Share-based compensation	10	-	-	495,676	-	495,676
Comprehensive loss for the year		-	-	-	(1,146,505)	(1,146,505)
Balance, December 31, 2019		60,725,366	6,953,873	1,023,413	(3,129,687)	4,847,599
Issued pursuant to private placement	10	19,350,000	1,935,000	-	-	1,935,000
Share issuance costs	10	490,000	(124,641)	70,883	-	(53,758)
Shares issued for Todd Creek property	7	1,960,784	137,255	-	-	137,255
Share-based compensation	10	-	-	13,911	-	13,911
Comprehensive loss for the year		-	-	-	(245,756)	(245,756)
Balance, December 31, 2020		82,526,150	8,901,487	1,108,207	(3,375,443)	6,634,251

The accompanying notes are an integral part of these financial statements.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

1. NATURE AND CONTINUANCE OF OPERATIONS

ArcWest Exploration Inc. (“ArcWest” or “the Company”), was incorporated under the Business Corporations Act (British Columbia) on December 23, 2010 and is a corporation listed publicly on the TSX Venture Exchange (“TSX-V”). On February 28, 2019, the Company changed its name from Sojourn Exploration Inc. to ArcWest Exploration Inc. and is trading on the TSX-V under the stock symbol “AWX”. The Company is engaged in mineral exploration.

The registered and records office of the Company is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, V6C 2X8. The head office of the Company is located at 1000-355 Burrard Street, Vancouver, BC V6C 2G8.

These financial statements have been prepared on the basis of the accounting principles applicable to a going concern, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred an operating loss for the year ended December 31, 2020 of $245,756 and had a cumulative deficit of $3,375,443 at December 31, 2020. In order to continue as a going concern and meet its corporate objectives, the Company will require additional financing through debt or equity issuances or other available means. There is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. These material uncertainties may cast significant doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

Since March 2020, several measures have been implemented in Canada and the rest of the world in response to the increased impact from the novel coronavirus (COVID-19). The Company continues to operate its business at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on business operations cannot be reasonably estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows.

2. BASIS OF PREPARATION

Statement of compliance

These financial statements, including comparatives, have been prepared in accordance with International Accounting Standards using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the IFRS Interpretations Committee (“IFRIC”).

Basis of presentation

These financial statements have been prepared on a historical cost basis except for certain financial assets measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flows. All dollar amounts are presented in the Company’s functional currency, the Canadian dollar, unless otherwise specified.

Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported profit or loss during the period.

Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates made by management include the following:

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

2. BASIS OF PREPARATION (continued)

Use of estimates and judgments (continued)

a) Share-based payments

The estimated fair value of all share-based payments is determined at the date of grant using the Black-Scholes Option Pricing Model, and is expensed in the statement of comprehensive loss over the vesting period of the options granted. The Black-Scholes Option Pricing Model utilizes subjective assumptions such as expected price volatility and expected life of the option. Changes in these input assumptions can significantly affect the fair value estimate.

b) Exploration and evaluation assets

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

c) Income taxes

Provisions for income and other taxes are based on management’s interpretation of taxation laws, which may differ from the interpretation by taxation authorities. Such differences may result in eventual tax payments differing from amounts accrued. Reported amounts for deferred tax assets and liabilities are based on management’s expectation for the timing and amounts of future taxable income or loss, as well as future taxation rates. Changes to these underlying estimates may result in changes to the carrying value, if any, of deferred income tax assets and liabilities.

d) Significant judgments

The preparation of financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty, and the classification of financial instruments.

3. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared using the following accounting policies:

Financial instruments

a) Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The following table shows the classification of the Company’s financial instruments:

	Classification
	IFRS 9
Cash and cash equivalents	FVTPL
Receivables	amortized cost
Marketable securities	FVTPL
Accounts payable	amortized cost
Loan payable	amortized cost

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

b) Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss).

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of comprehensive loss during the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in the statement of comprehensive loss.

c) Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the credit risk of the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

d) Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of comprehensive income (loss). However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statements of comprehensive loss.

Valuation of equity units issued in private placements

The Company uses a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted bid price on the day prior to the announcement date. The balance, if any, was allocated to the attached warrants. Any fair value attributed to the warrants is recorded as share-based payment reserve.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Exploration and evaluation assets

Pre-exploration costs

Pre-exploration costs are expensed in the period in which they are incurred.

Exploration and evaluation expenditures

Once the legal right to explore a property has been acquired, all costs related to the acquisition, exploration and evaluation of mineral properties are capitalized by property. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the period in which they occur.

The Company may occasionally enter into arrangements, whereby the Company will transfer part of a mineral interest, as consideration, for an agreement by the transferee to meet certain exploration and evaluation expenditures which would have otherwise been undertaken by the Company. The Company does not record any expenditures made by the transferee on its behalf. Any cash consideration received from the agreement is credited against the costs previously capitalized to the mineral interest given up by the Company, with any excess cash accounted for as a gain on disposal.

When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written off to the statement of comprehensive loss.

The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development and is classified as “mines under construction."

Exploration and evaluation assets are also tested for impairment before the assets are transferred to development properties.

As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.

Impairment of long-lived assets

At the end of each reporting period, the Company's assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is evaluated at the cash generating unit (“CGU”) level, which is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The recoverable amount of the CGU is the greater of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control an identified asset for a period of time in exchange for consideration.

Leases of right-of-use assets are recognized at the lease commencement date at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, and otherwise at the Company’s incremental borrowing rate. At the commencement date, a right-ofuse asset is measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.

Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term, except where the lease contains a bargain purchase option a right-of-use asset is depreciated over the asset’s useful life.

Share-based compensation

The Company recognizes a share-based compensation charge in operations for stock options granted to employees, officers and directors of the Company. The share-based compensation charge is based on the fair value of option awards granted, measured using the Black-Scholes Option Pricing Model at the date of issue. The fair value of stock options granted is amortized to expense on a graded basis over the vesting periods of the options granted with an off-setting amount recorded in reserves. Any expense recorded for options that are forfeited because non-market vesting conditions are not satisfied, is reversed in the period in which forfeiture occurs.

Current and deferred income taxes

Current taxes receivable or payable are estimated on taxable income for the current year at the statutory tax rates enacted or substantively enacted.

Deferred tax assets and liabilities are recognized based on the difference between the tax and accounting values of assets and liabilities and are calculated using enacted or substantively enacted tax rates for the periods in which the differences are expected to reverse. The effect of tax rate changes is recognized in profit or loss, as the case may be, in the period of substantive enactment.

Loss per share

Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period.

Diluted loss per share is adjusted for the dilutive effect of options, warrants and similar instruments. The dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. In the periods that the Company reports a net loss, basic per share amounts are the same basis as on a dilutive basis as the result would be anti-dilutive.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting standards issued but not yet effective

Accounting pronouncements with future effective dates are either not applicable or are not expected to have a material impact on the Company’s financial statements.

4. ACQUISITIONS OF MINERAL PROPERTIES

Sparrowhawk Property Acquisition

On February 26, 2019, the Company signed a purchase agreement (the “Sparrowhawk Purchase Agreement”) to acquire 100% of the Sparrowhawk Property located 65 kilometres northeast of Smithers in north-central British Columbia. Under the terms of the Purchase Agreement, the Company acquired a 100% interest in the property by issuing 87,000 common shares to the vendor and paying $5,000 cash. For accounting purposes, the acquisition of this property has been recorded as an asset acquisition as the property is not considered to be a business when applying the guidance within IFRS 3.

Consideration paid:

Consideration paid:
	$
Fair value of 87,000 common shares issued (note 10)	7,830
Cash paid	5,000
Total consideration paid	12,83012,830
Net assets acquired– Mineral properties	12,830

The property will be subject to a 1% net-smelter royalty (“NSR”) which can be purchased by the Company for $2,000,000.

Eagle Property Acquisition

On March 5, 2019, the Company signed a purchase agreement (the “Eagle Property Agreement”) to acquire 100% of the Eagle Property located in northwestern British Columbia. Under the terms of the Eagle Property Agreement, ArcWest acquired a 100% interest in the property by making a cash payment of $5,000 and issuing 100,000 common shares. For accounting purposes, the acquisition of this property has been recorded as an asset acquisition as the properties are not considered to be a business when applying the guidance within IFRS 3.

Consideration paid:

Consideration paid:
	$
Fair value of 100,000 common shares issued (note 10)	9,000
Cash paid	5,000
Total consideration paid	14,00014,000
Net assets acquired– Mineral properties	14,000

5. RECEIVABLES AND PREPAIDS

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

	December 31,	December 31,
	2020	2019
	$	$
Interest receivable	2,481	4,710
GST receivable	7,884	17,235
Prepaid expenditures	10,701	70,187
Other receivables (Note 12)	4,691	83,404
	25,757	175,536

Other receivables include a receivable from a related party in the amount of $3,224 (December 31, 2019 – $3,357) (Note 12) related to the subleasing of the Company’s office on a month-to-month basis as well as a BC mining exploration tax credit in the amount of $nil (December 31, 2019 – $80,047).

6. MARKETABLE SECURITIES

	December 31,	December 31,
	2020	2019
	$	$
Beginning balance	67,500	-
Addition	483,642	420,000
Disposals	(190,097)	(194,978)
Realized gain (loss) on marketable securities	(19,903)	(15,022)
Unrealized gain (loss) on marketable securities	246,757	(142,500)
	587,899	67,500

On September 23, 2020, 150,000 common shares were received by the Company pursuant to the Eagle Property Earn-In Agreement between the Company and Wedgemount Resources Corp. (“WMR”) (Note 7). These shares are held at FVTPL and all unrealized gains and losses are recorded in the statement of comprehensive loss.

On September 11, 2020, 1,202,141 common shares were received by the Company (the “Option Consideration Shares”) pursuant to the Oxide Peak Earn-In Agreement between the Company and TDG Gold Corp. (“TDG”, formerly Locrian Resources Inc.) (Note 7). These shares are held at FVTPL and all unrealized gains and losses are recorded in the statement of comprehensive loss. At December 31, 2020, the TDG shares held by the Company were fair-valued and this resulted in an unrealized gain of $144,257.

On August 7, 2020, 200,000 common shares were received by the Company pursuant to the Todd Creek Earn-In Agreement between the Company and P2 Gold Inc. (“P2 Gold”, formerly Central Timmins Exploration Corp.) (Note 7). These shares are held at FVTPL and all unrealized gains and losses are recorded in the statement of comprehensive loss. At December 31, 2020, the shares held by the Company were fair-valued and this resulted in an unrealized loss of $40,000.

On April 17, 2019, the Company completed the sale of the Willoughby property to Strikepoint Gold Inc. (“Strikepoint”) and received 3,000,000 common shares of Strikepoint (Note 7). These shares are held at FVTPL and all unrealized gains and losses are recorded in the statement of comprehensive loss. The Company sold 1,500,000 shares during the year ended December 31, 2019 and 1,500,000 shares during the year ended December 31, 2020. This resulted in an unrealized gain recognized of $142,500 (2019 - $142,500) and a realized loss on sale of $19,903 (2019 - $15,022). At December 31, 2020, there were no remaining shares held by the Company.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

7. EXPLORATION AND EVALUATION ASSETS

As at December 31, 2020 and 2019, the Company has capitalized the following acquisition and exploration costs:

									Northern
									Vancouver
	Oweegee	Willoughby	Todd Creek	Oxide Peak	Eagle	Rip	**Teeta Creek **	Sparrowhawk	Island	Huckleberry	Total
	$	$	$	$	$	$	$	$	$		$
Balance, December 31, 2018	0	320,223	0	430,655	252,655	290,183	193,216	-	-	-	0
Acquisition costs – shares (Note 4)	-	-	-	-	9,000	-	-	7,830	-	-	16,830
Acquisition costs – cash (Note 4)	-	-	-	-	5,000	-	-	5,000	-	-	10,000
Consulting fees	4,950	998	-	-	-	-	-	-	-	-	5,948
Field support	594	1,061	4,006	404	848	188	814	1,390	2,217	36	11,558
Geochemistry and geology	14,212	9,334	6,200	5,560	3,297	1,120	2,294	9,052	3,539	877	55,485
Option payments (Note 10)	-	-	147,115	-	-	-	-	-	-	-	147,115
Staking	-	-	-	10,886	775	4,420	1,623	12,553	11,963	-	42,220
Travel and accommodation fees	21,566	-	36,044	2,197	3,199	689	7,883	6,122	1,689	4,456	83,845
Wages and salaries (Note 12)	72,260	2,500	126,012	15,937	35,844	7,938	67,812	71,469	10,969	9,563	420,304
	1,223,161	334,116	1,306,304	465,639	310,618	304,538	273,642	113,416	30,377	14,932	4,376,743
BC Mining Exploration Tax Credit refund	(93,902)	-	(55,851)	(3,962)	(776)	(1,513)	(805)	-	-	-	(156,809)
Option payments received	-	-	-	(15,000)	-	-	(25,000)	-	(25,000)	-	(65,000)
Disposition of mineral properties	-	(334,116)	-	-	-	-	-	-	-	-	(334,116)
Balance, December 31, 2019	1,129,259	-	1,250,453	446,677	309,842	303,025	247,837	113,416	5,377	14,932	3,820,818
Environmental and permitting	2,000	-	2,000	-	-	-	-	-	-	-	4,000
Field support	-	-	820	-	-	-	-	-	-	-	820
Geochemistry and geology	1,681	-	3,023	(80)	14,285	1,820	-	4,290	-	-	25,019
Option payments (Note 10)	-	-	137,255	-	-	-	-	-	-	-	137,255
Staking	-	-	-	-	-	9,629	-	-	-	-	9,629
Travel and accommodation fees	-	-	920	-	521	-	-	920	-	-	2,361
Wages and salaries (Note 12)	67,156	-	87,625	10,625	27,656	9,219	5,594	24,469	3,281	5,990	241,615
	1,200,096	-	1,482,096	457,222	352,304	323,693	253,431	143,095	8,658	20,922	4,241,517
Option payments received	-	-	(220,000)	(375,644)	(18,000)	-	(125,000)	-	-	-	(738,644)
Balance, December 31, 2020	1,200,096	-	1,262,096	81,578	334,304	323,693	128,431	143,095	8,658	20,922	3,502,873

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

7. EXPLORATION AND EVALUATION ASSETS (continued)

Todd Creek, Oweegee, and Willoughby Properties

On September 13, 2018, the Company completed the Millrock Acquisition with Millrock Resources Inc. (“Millrock”) for the Todd Creek, Oweegee, and Willoughby properties.

On January 2, 2019, the Company issued 846,154 common shares as a property payment for Todd Creek at a value of $84,615 and paid cash of $62,500. On January 10, 2020 the Company issued 1,960,784 common shares as the final property payment for Todd Creek at a value of $137,255 (Note 10).

Sale of Willoughby Property

On April 17, 2019, the Company completed the previously announced Strikepoint Agreement (the “Strikepoint Agreement”) with Strikepoint with respect to the acquisition by Strikepoint of 100% of the Willoughby Property. The terms of the Strikepoint Agreement include:

• A cash payment $85,000 and 3,000,000 common shares (paid and issued by Strikepoint);

• The Company retains a 1.5% net smelter return royalty, which can be reduced by Strikepoint to 0.5% for an additional cash payment of $1,000,000.

During the year ended December 31, 2019, a gain of $170,884 on sale of the Willoughby Property was recorded.

Northern Vancouver Island Property

During the year ended December 31, 2019, the Company staked certain claims in the Miocene porphyry copper-gold belt on northern Vancouver Island.

Huckleberry Property

During the year ended December 31, 2019, the Company staked approximately 2,525 hectares located 85 km southwest of Houston BC.

Rip Property

The Rip Property is a porphyry Cu-Mo±Au prospect located in the Skeena Arch approximately 60 km south of Houston. On August 4, 2020, ArcWest staked additional mineral claims adjoining the Rip Property to cover two known porphyry copper occurrences. The property now extends over 7811 hectares.

Teeta Creek Earn-In Agreement

On October 15, 2019, the Company entered into an agreement with Teck Resources Inc. (“Teck”) to explore the Teeta Creek property in northern Vancouver Island, British Columbia. Teck can earn an initial 60% interest in the property by funding over a three-year period cumulative exploration expenditures of $3,000,000 and staged cash payments of $250,000, respectively, including a minimum of 1,000 meters of drilling. Teck can also acquire an additional 20% interest by incurring an additional $8,000,000 in exploration expenditures. A minimum exploration expenditure of $500,000 is required before March 31, 2021. During the year ended December 31, 2020, $125,000 was received as an option payment (2019 - $25,000).

Northern Vancouver Island Earn-In Agreement

On December 20, 2019, the Company entered into an agreement with Teck to explore the Northern Vancouver Island property. Teck can earn an initial 60% interest in the property by funding over a four-year period cumulative exploration expenditures of $2,000,000 and staged cash payments of $150,000 due in annual payments of $25,000 with the last payment of $50,000 due on January 15, 2024. Teck can also acquire an additional 20% interest by incurring an additional $6,000,000 in exploration expenditures. A minimum exploration expenditure of $150,000 is required before January 15, 2021. During the year ended December 31, 2019, $25,000 was received as an option payment and $25,000 was received as an option payment subsequent to December 31, 2020.

Eagle Property Earn-In Agreement

On September 23, 2020, the Company entered into an agreement with WMR whereby WMR can explore the Eagle property in northern Vancouver Island, British Columbia. WMR can earn an initial 60% interest in the property by funding a total of $2,050,000 in exploration expenditures over a three-year period in addition to staged payments totalling $110,000 and

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

7. EXPLORATION AND EVALUATION ASSETS (continued)

issuance of 1,350,000 common shares. WMR can also acquire an additional 20% interest by delivering a feasibility study report on the property. A minimum exploration expenditure of $50,000 is required before December 31, 2020 ($82,000 incurred as at December 31, 2020). During the year ended December 31, 2020, $18,000 was received as an option payment ($15,000 cash and issuance of 150,000 common shares with a fair value of $3,000) (Note 5).

Oxide Peak Earn-In Agreement TDG

On December 22, 2019, the Company entered into an agreement with TDG to explore the Oxide Peak property in northern British Columbia. TDG can earn an initial 60% interest in the property by funding over a three-year period cumulative exploration expenditures of $2,400,000 and staged cash payments of $55,000, respectively, including a minimum of 1,000 meters of drilling. TDG can also acquire an additional 20% interest by preparing and delivering a preliminary economic assessment for the property to the Company. A minimum exploration expenditure of $400,000 is required before December 31, 2020. On September 11, 2020, TDG issued 1,202,141 common shares in settlement of the Option Consideration Shares (5% of the number of TDG common shares outstanding prior to going public) to the Company for a total value of $360,642. During the year ended December 31, 2020, an option payment of $15,000 in cash was also received (2019 - $15,000).

Todd Creek Earn-In Agreement

On July 8, 2020, the Company entered into an agreement with P2 Gold to explore the Todd Creek property in northern British Columbia. P2 Gold can earn an initial 51% interest in the property by funding over a five-year period cumulative exploration expenditure of $15,000,000 and staged payments of $1,150,000. P2 Gold can also acquire an additional 19% interest by completing and delivering to the Company a feasibility study report. A minimum exploration expenditure of $500,000 is required before December 31, 2020, which includes a mandatory minimum of 1,000 meters of diamond drilling. During the year ended December 31, 2020, $100,000 was received in cash and 200,000 shares valued at $120,000 were issued as an option payment.

Reclamation bonds

As at December 31, 2020, $82,000 (December 31, 2019 - $82,000) was held in reclamation bonds broken down as follows: $56,500 on the Todd Creek Property and $25,500 on the Oweegee property.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	December 31	December 31
	2020	2019
	$	$
Accounts payable	31,135	78,221
Accrued liabilities	23,000	18,235
	54,135	96,456

Included in accounts payable is $5,058 (December 31, 2019 - $37,372) due to related parties (Note 12).

9. LOAN PAYABLE

The Company applied for and received on November 10, 2020, $40,000 from the Canada Emergency Business Account (“CEBA”) which is an interest-free loan to cover operating costs which was offered in the context of the COVID-19 pandemic outbreak by the Government of Canada. Repaying the balance of the loan on or before December 31, 2022 will result in a loan forgiveness of $10,000. On December 31, 2022, the Company has the option to extend the loan for 3 years and it will bear a 5% interest rate. As at December 31, 2020, there is reasonable assurance that the Company will be able to repay the loan on or before December 31, 2022 and therefore receive the loan forgiveness of $10,000. Therefore, the income from the loan forgiveness of $10,000 has been accrued during the year ended December 31, 2020 and is included in other income.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

10. SHARE CAPITAL AND RESERVES

Authorized: Unlimited common shares without par value.

Shares issued: Common shares: 82,526,150 (December 31, 2019 – 60,725,366).

During the year ended December 31, 2020, the Company:

• issued 1,960,784 common shares valued at $137,255 related to the Todd Creek Property (Note 7).

• completed a non-brokered private placement by issuing 19,350,000 units (“Units”) at a price of $0.10 per Unit for gross proceeds of $1,935,000. Each Unit consists of one common share and one-half share purchase warrant entitling the holder to acquire an additional common share at a price of $0.15 per common share for a period of three years from closing. The Company paid share issuance costs of $173,641, including the issuance of 490,000 common shares at the offering price, 903,000 finders’ warrants valued at $70,883 and cash paid of $53,758. Using the residual method, no value was attributed to the warrants included in the Units. The fair value of the agent warrants was estimated using the Black Scholes Option-Pricing Model. Assumptions used in the pricing model were as follows: risk-free interest rate – 0.26%; expected life – 1 year; expected volatility 159.51%; expected forfeitures – 0%; and expected dividends 0%. Expected price volatility was calculated based on the Company’s historical share prices.

During the year ended December 31, 2019, the Company:

• issued 846,154 common shares valued at $84,615 related to the Todd Creek Property (Note 7);

• issued 100,000 common shares valued at $9,000 pursuant to the Eagle Property Agreement (Note 4); and

• issued 87,000 common shares valued at $7,830 pursuant to the Sparrowhawk Purchase Agreement (Note 4).

Stock options

The Company adopted an incentive stock option plan (the “Option Plan”) which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with TSX-V requirements, grant to directors, officers, employees and technical consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares. Such options will be exercisable for a period of up to 10 years from the date of grant. Vesting terms will be determined at the time of grant by the Board of Directors.

Stock option transactions are summarized as follows:

		Weighted
	Number	Average
	of Options	Exercise Price
		$
Balance, December 31, 2018	5,550,000	0.14
Granted–April 2, 2019	480,000	0.10
Balance, December 31, 2019 and 2020	6,030,000	0.15

As at December 31, 2020, the Company had outstanding stock options as follows:

	Exercise	Remaining life	Options	Options
Expiry date	price	(years)	outstanding	exercisable
	$
October 22, 2023	0.15	2.81	5,550,000	5,550,000
April 2,2024	0.10	3.25	480,000	480,000

The weighted average price of options outstanding was $0.15 and the weighted average life was 2.84 years.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

10. SHARE CAPITAL AND RESERVES (continued)

On April 2, 2019, the Company granted 480,000 stock options to its employees and consultants. The options vest over the course of one and half years and are exercisable at $0.10 per share for a period of five years. The fair value of the options granted was $31,223. The options vest 1/6 immediately and 1/6 every three months. The fair value was determined using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield - 0%, risk-free rate – 2.20%, volatility – 97.01%, forfeiture rate – 0% and expected life – 5 years.

During the year ended December 31, 2020, $13,911 was recorded in share-based payments (2019- $495,676).

Warrants

Warrant transactions are summarized as follows:

		Weighted
	Number	Average
	of Warrants	Exercise Price
		$
Balance, December 31, 2018	0	0.17
Forfeited	(7,870,945)	0.25
Balance, December 31, 2019	(7,870,945)0	0.15
Granted as part of private placement units – August 28, 2020	9,675,000	0.15
Granted to agents–August 28, 2020	903,000	0.15
Balances, December 31, 2020	39,581,100	0.15

As at December 31, 2020, the Company had outstanding warrants as follows:

	Exercise	Remaining life	Warrants
Expiry date	price	(years)	outstanding
	$
August 23, 2021	0.15	0.64	23,884,100
August 28, 2021	0.15	0.66	903,000
September 13, 2021	0.15	0.70	5,119,000
August28,2023	0.15	2.66	9,675,000

The weighted average price of warrants outstanding was $0.15 and the weighted average life was 1.14 years.

Share-based payment reserve

Share-based payment reserve records items recognized as share-based compensation expense and other share-based payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital.

11. FINANCIAL INSTRUMENTS AND CAPITAL RISK MANAGEMENT

As at December 31, 2020, the Company’s financial instruments are comprised of cash and cash equivalents, marketable securities, receivables, accounts payable, and loan payable. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

11. FINANCIAL INSTRUMENTS AND CAPITAL RISK MANAGEMENT (continued)

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its cash and cash equivalents and receivables. The Company limits exposure to credit risk by maintaining its cash and cash equivalents with large financial institutions. The Company’s receivables primarily consist of goods and services tax receivable due from the Government of Canada which are all current. Credit risk is assessed as low.

Liquidity risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2020, the Company had a cash and cash equivalents balance of $2,518,147 to settle current liabilities of $54,135. All of the Company’s current financial liabilities have contractual maturities of 30 days or due on demand and are subject to normal trade terms. Due to the current COVID-19 pandemic, liquidity risk is assessed as high.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

(a) Interest rate risk

The Company has cash balances and no interest-bearing debt. As of December 31, 2020, the Company has an interestbearing financial asset in the form of a GIC with a principal amount of $2,000,000 for a term of one year which bears interest at an average rate of 0.3% per annum. The GIC funds can be liquidated without an early redemption penalty. Interest rate risk is assessed as low.

(b) Foreign currency risk

The Company does not have assets or liabilities in a foreign currency and is not exposed to foreign currency risk.

(c) Price risk

The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

Capital management

Capital is comprised of the Company’s shareholders’ equity and any debt that it may issue. As at December 31, 2020, the Company’s shareholders’ equity was $6,634,251 and it had $54,135 in current liabilities. The Company’s objectives when managing capital are to maintain financial strength and to protect its ability to meet its on-going liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. The Company is not subject to any externally imposed capital requirements. There is no change to the Company’s Capital management during the year ended December 31, 2020.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

12. RELATED PARTY TRANSACTIONS

During the years ended December 31, 2020 and 2019, the Company entered into the following transactions with related parties:

• The Company paid consulting fees of $6,000 (2019 - $72,000) to Tanun Holdings Ltd., a company controlled by the spouse of John Meekison, the Chief Financial Officer and director of the Company.

• The Company paid salaries and wages of $439,167 (2019 - $375,000) to the Chief Financial Officer, Chief Executive Officer, the Chief Operating Officer and the Vice President of Exploration of the Company. Of this amount, $241,614 (2019 - $352,906) was capitalized to the mineral properties and $192,135 (2019 - $22,094) is included in office and miscellaneous expenses for the year ended December 31, 2020.

• Included in share-based payment is $5,783 (2019 - $274,753) relating to directors and officers of the Company.

As at December 31, 2020, $5,058 (December 31, 2019 - $37,372) is owed to related parties and included in accounts payable (Note 8). As at December 31, 2020, $3,224 is due from a related party and included in accounts receivable (December 31, 2019 - $3,357) (Note 5).

Key management includes directors and executive officers of the Company. Other than the amounts disclosed above, there was no other compensation paid or payable to key management for employee services for the reported periods.

13. INCOME TAXES

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

	2020	2019
	$	$
Loss for the year	(245,756)	(1,146,505)
Expected income recovery	(66,000)	(310,000)
Other	15,000	132,000
Change in unrecognized deductible temporary differences	51,000	178,000
Total income tax recovery	-	-

The significant components of the Company's deferred tax assets that have not been included on the statement of financial position are as follows:

	2020	2019
Unrecognized deferred tax assets:	$	$
Exploration and evaluation assets	(29,000)	16,000
Share issue costs	35,000	39,000
Cumulative eligible capital	13,000	13,000
Unrealized (gain)/loss on marketable securities	(14,000)	19,000
Non-capital losses	735,000	602,000
Totalunrecognized deferred taxassets	740,000	689,000

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

13. INCOME TAXES (continued)

The significant components of the Company's temporary differences, unused tax credits and unused tax losses that have not been included on the statement of financial position are as follows:

		Expiry Date		Expiry Date
	2020	Range	2019	Range
	$		$
Exploration and evaluation assets	3,395,000	No expiry date	3,880,000	No expiry date
Share issue costs	130,000	2021 to 2023	143,000	2020 to 2022
Cumulative eligible capital	48,000	No expiry date	48,000	No expiry date
Marketable securities	484,000	No expiry date	210,000	No expiry date
Non-capital losses	2,721,000	2032 to 2040	2,228,000	2032 to 2039

Tax attributes are subject to review, and potential adjustment, by tax authorities.

14. SUPPLEMENTAL CASH FLOW INFORMATION

Investing and financing activities that do not have a direct impact on the current cash flows are excluded from the cash flow statements.

During the year ended December 31, 2020, the following transaction was excluded from the Statement of cash flows:

• the issuance of 1,960,784 common shares valued at $137,255 related to the Todd Creek Property (Note 7);

• the receipt of 200,000 common shares of P2 Gold valued at $120,000 pursuant to the Todd Creek Property Earn-in agreement (Note 6);

• the receipt of 1,202,141 shares of TDG valued at $360,642 pursuant to the Oxide Peak Property Earn-in agreement (Note 6); and

• the receipt of 150,000 common shares of WMR valued at $3,000 pursuant to the Eagle Property Earn-In Agreement (Note 6).

During the year ended December 31, 2019, the following transaction was excluded from the Statement of cash flows:

• the issuance of 846,154 common shares valued at $84,615 related to the Todd Creek Property (Note 7);

• the issuance of 100,000 common shares valued at $9,000 pursuant to the Eagle Property Agreement (Note 4); and

• the issuance of 87,000 common shares valued at $7,830 pursuant to the Sparrowhawk Purchase Agreement (Note 4).

15. SUBSEQUENT EVENTS

Options granted

On January 13, 2021, the Company granted 1,940,000 stock options to certain directors, officers, employees and consultants to the Company, entitling them to purchase one common share for each option held at a price of $0.105 per share and valid for a period of 5 years. The options will vest in 6 equal tranches over 15 months.

Oweegee Earn-In Agreement

On April 19, 2021, the Company entered into a non-binding letter agreement (the “Agreement”) with Sanatana Resources Inc. (“Sanatana”) to negotiate an earn in and joint venture agreement on its Oweegee property. The Agreement provides Sanatana with the exclusive right to negotiate an earn-in and joint venture agreement until May 24, 2021. As consideration for the exclusivity, Sanatana paid the Company a non-refundable deposit of $12,500.

ARCWEST EXPLORATION INC. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) For the years ended December 31, 2020 and 2019

15. SUBSEQUENT EVENTS (continued)

The terms put forward in the Agreement are as follows:

Sanatana can earn an initial 60% interest in the Oweegee property by funding, over a four-year period, cumulative exploration expenditures of $6,000,000 and by making staged cash and share payments totaling $500,000 and 2,000,000 shares, respectively. An additional, minimum exploration expenditure including $600,000 of assessment work is required before December 31, 2021. Santana can also acquire an additional 20% interest by completing and delivering to the Company a feasibility study report.