Azimut Exploration Inc.

Financial Statements August 31, 2022 and 2021

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Independent auditor’s report

To the Shareholders of Azimut Exploration Inc.

Our opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Azimut Exploration Inc. (the Company) as at August 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have audited

The Company’s financial statements comprise:

the statements of financial position as at August 31, 2022 and 2021;
the statements of net (earnings) loss and comprehensive (income) loss for the years then ended;
the statements of changes in equity for the years then ended;
the statements of cash flows for the years then ended; and
the notes to the financial statements, which include significant accounting policies and other explanatory information.

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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Other information

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

PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l. 1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1 T: +1 514 205 5000, F: +1 514 876 1502

“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.

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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 IFRS, 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.

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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 Nochane Rousseau.

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Montréal, Quebec December 22, 2022

1 FCPA auditor, public accountancy permit No. A122718

Statements of Financial Position (in Canadian dollars)

Azimut Exploration Inc.

Assets Current assets Cash and cash equivalents (Note 4) Amounts receivable (Note 5) Asset available for sale (Note 6) Prepaid expenses Non-current assets Tax credit and mining rights receivable (Note 5) Investments (Note 7) Property and equipment (Note 8) Intangible assets (less accumulated amortization of $25,822; $24,130 as at August 31, 2021) Right-of-use assets (Note 9) Exploration and evaluation assets (Note 10) Total assets Liabilities and Equity Current liabilities Accounts payable and accrued liabilities Advances received for exploration work Lease liabilities (Note 11) Flow-through shares premium liability (Note 13b) Non-current liabilities Lease liabilities (Note 11) Asset retirement obligations (Note 12) Total liabilities Equity Share capital (Note 13) Underwriters’ options (Note 14) Stock options (Note 15) Contributed surplus Deficit Total equity Total liabilities and equity	As at August 31, 2022 $ 14,035,435 4,049,680 1,906,238 129,740 20,121,093 2,387,064 51,940 1,550,062 6,759 80,402 30,007,786 34,084,013 54,205,106 4,985,145 458,196 36,976 - 5,480,317 36,462 1,513,102 1,549,564 7,029,881 61,933,968 635,182 3,779,214 4,102,973 (23,276,112) 47,175,225 54,205,106	As at August 31, 2021 $ 27,641,849 3,664,105 - 50,085
		31,356,039
		2,440,766 73,941 635,990 2,826 128,326 17,223,009
		20,504,858
		51,860,897
		2,730,618 291,860 45,220 3,399,557
		6,467,255
		73,438 987,764
		1,061,202
		7,528,457
		61,550,590 635,182 3,010,920 4,028,710 (24,892,962)
		44,332,440
		51,860,897

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

Approved by the Board of Directors

(s) Jean-Charles Potvin Director (s) Jean-Marc Lulin Director

(5)

Statements of Net (Earnings) Loss and Comprehensive (Income) Loss For the years ended August 31, 2022 and 2021 (in Canadian dollars, except number of common shares)

Azimut Exploration Inc.

Revenues Operator income (Notes 10a, b, f and h) Expenses General and administrative (Note 16) General exploration (Note 16) Impairment of exploration and evaluation assets (Note 10) Operating expenses Financing cost (income), net Interest income Interest and bank charges Part XII.6 Tax (Note 13b) Unwinding of discount on asset retirement obligations (Note 12) Interest on lease liabilities Other losses (gains) Change in fair value – investments Loss before income taxes Deferred income tax recovery (Notes 13b and 18) Net (earnings) loss and comprehensive (income) loss for the year Basic and diluted net (earnings) loss per share(Note 19) Weighted average number of shares outstanding(Note 19)	2022 $ 107,435 1,672,592 208,597 17,629 1,898,818 (180,414) 5,446 41,506 84,369 18,416 (30,677) 22,001 1,782,707 (3,399,557) (1,616,850) (0.02) 81,938,858	2021 $ 314,592
		1,272,388 316,275 352,887
		1,941,550
		(54,578) 2,117 262 2,466 22,405
		(27,328)
		(25,344)
		1,574,286 (1,023,527)
		550,759
		0.01
		70,626,602

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

(6)

Azimut Exploration Inc. Statements of Changes in Equity For the years ended August 31, 2022 and 2021 (in Canadian dollars, except number of common shares)

Balance as at September 1, 2021 Net earnings and comprehensive income for the year Stock options exercised (Note 15) Stock options expired (Note 15) Stock-based compensation (Note 15) Share issue expenses Balance as at August 31, 2022 Balance as at September 1, 2020 Loss and comprehensive loss for the year Common shares private placement (Note 13a) Flow-through private placement (Note 13b) Less: Premium Stock options exercised (Note 15) Stock options expired (Note 15) Stock-based compensation (Note 15) Share issue expenses Balance as at August 31, 2021	Share capital Number(1) $ 81,753,844 61,550,590 - - 440,000 386,260 - - - - - - (2,882) 82,193,844 61,933,968 65,788,137 32,685,285 - - 12,411,807 23,249,100 3,463,900 11,500,148 - (3,487,984) 90,000 138,800 - - - - - - (2,534,759) 81,753,844 61,550,590	Underwriters’ options $ 635,182 - - - - - 635,182 - - - - - - - - 635,182 635,182	Stock options $ 3,010,920 - (179,960) (74,263) 1,022,517 - 3,779,214 2,400,388 - - - - (65,000) (241,500) 917,032 - 3,010,920	Contributed surplus $ 4,028,710 - - 74,263 - - 4,102,973 3,787,210 - - - - - 241,500 - - 4,028,710	Deficit $ (24,892,962) 1,616,850 - - - - (23,276,112) (24,342,203) (550,759) - - - - - - - (24,892,962)	Total $ 44,332,440 1,616,850 206,300 - 1,022,517 (2,882) 47,175,225 14,530,680 (550,759) 23,249,100 11,500,148 (3,487,984) 73,800 - 917,032 (1,899,577) 44,332,440
	Number(1) 81,753,844 - 440,000 - - - - 82,193,844 65,788,137 - 12,411,807 3,463,900 - 90,000 - - - - 81,753,844

There were no common shares that were unpaid as at August 31, 2022 (Nil in 2021).

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

(7)

Azimut Exploration Inc. Statements of Cash Flows For the years ended August 31, 2022 and 2021 (in Canadian dollars)

Cash flows from (used in) operating activities Net earnings (loss) for the year Items not affecting cash Depreciation of property and equipment Amortization of intangible assets Depreciation of right-of-use assets Change in fair value, investments Impairment of exploration and evaluation assets Refundable duties credit for losses and refundable tax credit relating to resources, net Stock-based compensation cost Unwinding of discount on asset retirement obligations Recovery of deferred income taxes Changes in non-cash working capital items Amounts receivable Prepaid expenses Accounts payable and accrued liabilities Cash flows from financing activities Private placement Flow-through private placement Share issue expenses Stock options exercised Repayment of lease liabilities - Cash flows used in investing activities Advance received for exploration work, net Additions to property and equipment Additions to intangible assets Additions to exploration and evaluation assets Option payments on E&E assets Proceeds from sale of investments Addition, investments Tax credit and mining rights received Net change in cash and cash equivalents Cash and cash equivalents – Beginning of year Cash and cash equivalents – End of year Additional information Interest received Interest paid Additional cash flow information(Note 21)	August 31, 2022 $ 1,616,850 12,372 1,692 47,924 22,001 17,629 - 1,017,367 84,369 (3,399,557) (579,353) 1,959,382 (79,655) 465,108 2,344,835 1,765,482 - - (2,882) 206,300 (45,220) 158,198 1,156,289 (544,015) (5,625) (16,236,706) 20,000 - - 79,963 (15,530,094) (13,606,414) 27,641,849 14,035,435 (180,414) 65,370	August 31, 2021 $ (550,759) 11,748 688 47,924 (25,344) 352,887 (4,633) 917,032 2,466 (1,023,527)
		(271,518)
		(650,759) (13,995) 89,744
		(575,010)
		(846,528)
		23,249,100 11,500,148 (1,899,577) 73,800 (294,467)
		32,629,004
		1,751,740 (7,397) (2,449) (12,525,828) - 12,828 (10,816) 814,088
		(9,967,834)
		21,814,642 5,827,207
		27,641,849
		(54,578) 24,785

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

(8)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

1 Nature of operations and general information

Azimut Exploration Inc. (“Azimut” or the “Company”), governed by the Business Corporations Act (Quebec), is in the business of acquiring and exploring mineral properties. The Company’s registered office is at 110 De La Barre Street, Suite 224, Longueuil, Quebec, Canada. The mining and mineral exploration business involves a high degree of risk, and there can be no assurance that planned exploration and development programs will result in profitable mining operations. The Company’s shares are listed on the TSX Venture Exchange (“TSXV”) under the symbol AZM and on the OTCQX Market (“OTCQX”) under the symbol AZMTF.

Until it is determined that a property contains mineral reserves or resources that can be economically mined, it is classified as an exploration and evaluation (“E&E”) asset. It has not yet been determined whether the Company’s properties contain ore reserves that are economically recoverable. The recoverability of the amounts shown for E&E assets is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration and evaluation of its properties, and the profitable sale of the E&E assets.

Although management has taken steps to verify the titles to mineral properties in which the Company has an interest, in accordance with industry standards for the current stage of exploration and evaluation of the properties, these procedures do not guarantee the Company’s title. Property titles may be subject to unregistered prior agreements and may not comply with regulatory requirements.

2 Summary of significant accounting policies

The significant accounting policies used in preparing these financial statements are described below.

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The Company has consistently applied the accounting policies in preparing its IFRS financial statements, including the comparative figures, except as otherwise stated. The Board of Directors approved the financial statements for issue on December 22, 2022.

Basis of measurement

These financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments to fair value.

Presentation and functional currency

The financial statements are presented in Canadian dollars, the functional currency of the Company.

Jointly controlled assets and exploration activities

A jointly controlled asset involves joint control and offers joint ownership by the Company and other venturers of assets contributed to or acquired for the purpose of the joint venture (“JV”) without the formation of a corporation, partnership or other entity.

Where the Company’s activities are conducted through jointly controlled assets and exploration activities, the financial statements include the Company’s share in the assets and liabilities and the income and expenses from the joint operations.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, bank balances, and highly liquid short-term investments with original maturities of three (3) months or less from the date of purchase and which are readily convertible to known amounts of cash.

Financial instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred, and the Company has transferred substantially all risks and rewards of ownership.

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Azimut Exploration Inc. Notes to Financial Statements

For the years ended August 31, 2022 and 2021

2 Summary of significant accounting policies (cont’d)

Financial instruments (cont’d)

Financial assets and liabilities are offset, and the net amount is reported in the Statements of Financial Position when there is an unconditional and legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

Financial assets are initially measured at fair value. If the financial asset is not subsequently accounted for at fair value through profit or loss, then the initial measurement includes transaction costs that are directly attributable to the asset’s acquisition or origination. On initial recognition, the Company classifies its financial instruments into the following categories depending on the purpose for which the instruments were acquired.

a) Fair value through profit and loss investments: Investments at fair value through profit and loss are equity investments recognized initially at fair value and subsequently measured at fair value. Gains or losses arising from changes in fair value are recorded in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.
b) Amortized cost: Financial assets at amortized cost are non-derivative financial assets with fixed or determinable payments constituted solely of payments of principal and interest that are held within a “held to collect” business model. Financial assets at amortized cost are initially recognized at the amount expected to be received, less, when material, a discount to reduce the financial assets to fair value. Subsequently, financial assets at amortized cost are measured using the effective interest method less a provision for expected losses. The Company’s cash and cash equivalents and amounts receivable are classified within this category.

Investments are currently measured at fair value with changes in fair value, including any interest or dividend income recognized in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.

Financial liabilities at amortized cost: Accounts payable and accrued liabilities and advances received for exploration work, which are classified as financial liabilities at amortized cost, are initially recognized at the amount required to be paid, less, when material, a discount to reduce to fair value. Accounts payable and accrued liabilities and advances received for exploration work are measured at amortized cost using the effective interest method.

Financial liabilities are classified as current liabilities if payment is due within twelve (12) months. Otherwise, they are presented as non-current liabilities.

Impairment of financial assets

Amortized cost: The expected loss is the difference between the amortized cost of the financial asset and the present value of the expected future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account. Provisions for expected losses are adjusted upwards or downwards in subsequent periods if the amount of the expected loss increases or decreases. For trade receivables, the Company applies the simplified approach, which requires expected lifetime losses to be recognized from the initial recognition of the receivables. The Company assumes that there is no significant increase in credit risk for instruments with low credit risk.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss during the period in which they are incurred.

Property and equipment are depreciated as they become available using the declining balance method at the rates indicated below, except for camps and camps under finance lease, which are amortized using the straight-line method over 54-month to 126-month periods (camps) and 18-month periods (camps under finance lease). Depreciation of camps and camps under finance lease is capitalized to E&E assets.

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Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

2 Summary of significant accounting policies (cont’d)

Property and equipment (cont’d)

ipment (cont’d)
	Rate
Office furniture	20%
Office equipment	20%
Computer equipment	30%
Specialist equipment	30%
Vehicle	30%

The Company allocates the amount initially recognized in respect of an item of property and equipment to its significant parts and depreciates separately each such part. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.

Gains and losses on disposals of property and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains and losses in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.

Identifiable intangible assets

The Company’s intangible assets include computer software with finite useful lives. These assets are capitalized and amortized at a 30% declining balance basis.

Leases

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

i) the contract involves the use of an identified asset;
ii) the Company has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and
iii) the Company has the right to direct the use of the asset.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted using the interest rate implicit in the lease if that rate can be determined or the Company’s incremental borrowing rate. The carrying amount of the rental obligations must be revalued if there is a change to the terms of the lease, to rent payments that are essentially fixed, or to the assessment of an option to purchase the underlying property.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The term of the lease is to be determined as the non-cancellable term of the lease plus any periods covered by an option to extend the lease if it is reasonably certain to be exercised or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.

E&E assets

E&E assets comprise mineral properties and deferred exploration and evaluation expenses. Expenditures incurred during activities before mineral resource exploration and evaluation begins, being all expenditures incurred prior to securing the legal rights to explore an area, are expensed as incurred and presented under general exploration in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.

(11)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

2 Summary of significant accounting policies (cont’d)

E&E assets (cont’d)

E&E assets include rights in mineral properties, paid or acquired through a business combination or an acquisition of assets, and costs related to the initial search for mineral deposits with economic potential or to obtain more information about existing mineral deposits. Mineral property rights are recorded at acquisition cost. Mineral property rights and options to acquire undivided interests in mineral property rights are depreciated only as these properties are put into commercial production. These costs are impaired when properties are abandoned or when cost recovery or resource access is uncertain.

From time to time, the Company may acquire or dispose of a property pursuant to the terms of an option agreement. Since options are exercisable entirely at the discretion of the option holder, the amounts payable or receivable are not recorded. Option payments are recorded as additions to E&E assets when the payments are made or as a reduction to E&E assets when payments are received.

Proceeds on the sale of mineral properties are applied by property in reduction of the acquisition costs, then in reduction of the exploration costs and any residual is recorded in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss unless contractual work is required, in which case the residual gain is deferred and will be reduced once the contractual disbursements are done.

Funds received from partners for exploration work on certain properties where the Company is the operator, as per agreements, are accounted for in the Statements of Financial Position as advances received for exploration work. These amounts are reduced gradually once the exploration work is performed. Project management fees, received when the Company is the operator, are recorded in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.

The Company’s E&E expenditures for each separate area of interest are capitalized and include costs associated with prospecting, sampling, trenching, drilling and other work involved in the search for deposits, including topographical, geological, geochemical and geophysical activities. They also reflect costs related to establishing the technical and commercial viability of extracting a mineral resource identified through exploration or acquired through a business combination or asset acquisition.

E&E expenditures include the cost of the following:

establishing the volume and grade of deposits through core drilling, trenching and sampling activities in an ore body;
determining the optimal extraction methods and metallurgical and treatment processes;
studies related to surveying, transportation and infrastructure requirements;
permitting activities; and
economic evaluations to determine whether the development of the mineralized material is commercially justified, including scoping, prefeasibility and final feasibility studies.

When a project moves into the development phase, E&E expenditures are capitalized to development costs in property and equipment and are tested for impairment.

E&E expenditures include overhead expenses directly attributable to the related activities.

Cash flows attributable to capitalized E&E costs are classified as investing activities in the Statements of Cash Flows.

Impairment of non-financial assets

Property and equipment and E&E assets are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. E&E assets are reviewed by area of interest. If any such indication is present, the recoverable amount of the asset is estimated in order to determine whether impairment exists. Where the asset does not generate cash flows that are independent of other assets, the Company estimates the recoverable amount of the asset group to which the asset belongs.

An asset’s recoverable amount is the higher of fair value less costs to sell or value in use. 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 for which estimates of future cash flows have not been adjusted.

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Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

2 Summary of significant accounting policies (cont’d)

Impairment of non-financial assets (cont’d)

If the recoverable amount of an asset or asset group is estimated to be less than its carrying amount, the carrying amount is reduced to the recoverable amount. Impairment is recognized immediately in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of the recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognized. A reversal is recognized as a reduction in the impairment charge for the period.

Government assistance

The Company is entitled to a refundable tax credit on qualified mining exploration expenses incurred in the province of Quebec and to a mining duties credit, which are recorded against the deferred exploration expenditures in the financial position or recognized in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss when the related general mining exploration expenses have been recognized in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss.

Provisions and asset retirement obligations

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, when it is probable that an outflow of economic benefits will be required to settle the obligation, and when the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Provisions for asset retirement obligations are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value where the effect is material. The discount rate used is based on a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, excluding the risks for which future cash flow estimates have already been adjusted. The increase in the provision due to the passage of time is recognized in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss. Changes in assumptions or estimates are reflected in the period in which they occur. The Company also records a corresponding asset amount which is amortized in a logical and systematic manner.

Share-based payment transactions

The fair value of share options granted to employees is recognized as an expense or capitalized to E&E assets over the vesting period with a corresponding increase in stock options. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company.

The fair value is measured at the grant date and recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. At each Statement of Financial Position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.

Share capital and warrants

Common shares and warrants are classified as equity. Incremental costs directly attributable to the issuance of shares or warrants are recognized as a deduction from the proceeds in equity in the period where the transaction occurs. Proceeds from unit placements are allocated between shares and warrants issued on a pro-rata basis of their value within the unit using the Black-Scholes pricing model to determine the fair value of warrants issued.

Warrants issued to brokers, in respect of an equity financing, are recognized as share issue expenses, reducing the share capital with a corresponding credit to warrants.

Underwriters’ options

The fair value of share options granted to the underwriters is measured by using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted and are recognized as share issue expenses, reducing the share capital with a corresponding credit to Underwriters’ options.

(13)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

2 Summary of significant accounting policies (cont’d)

Flow-through shares

The Company finances some exploration and evaluation expenditures through the issuance of flow-through shares. The resource expenditure deductions for income tax purposes are renounced to investors in accordance with the appropriate income tax legislation. The Company recognizes a deferred tax liability for flow-through shares and a deferred tax expense at the moment the eligible expenditures are incurred. The difference between the quoted price of the common shares and the amount the investors paid for the shares (the “premium”), measured in accordance with the residual value method, is recognized as other liability, which is reversed in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss as a deferred tax recovery when eligible expenditures have been made.

Income taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss except to the extent that it relates to items recognized directly in other comprehensive loss or in equity, in which case it is recognized in other comprehensive loss or in equity, respectively. Mining taxes represent Canadian provincial taxes levied on mining operations and are classified as income taxes since such taxes are based on a percentage of mining profits.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regards to previous years. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is provided using the liability method, providing for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. A temporary difference is not provided for if it arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss.

The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

Deferred income tax assets and liabilities are presented as non-current and are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Loss per share

The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss and the weighted average number of common shares outstanding for the effects of all warrants, brokers’ units and stock options that may add to the total number of common shares in the case where they would not have an anti-dilutive impact.

Segment disclosures

The Company currently operates in a single segment: the acquisition, exploration and evaluation of mineral properties. All of the Company’s activities are conducted in the province of Quebec, Canada.

3 Critical accounting estimates, judgments and assumptions

Many of the amounts included in the financial statements require management to make judgments and/or estimates and assumptions. These judgments and estimates are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Actual results may differ from the amounts included in the financial statements. Revisions to estimates are recognized prospectively.

(14)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

3 Critical accounting estimates, judgments and assumptions (cont’d)

Areas of significant estimates and assumptions affecting the amounts recognized in the financial statements include the following:

a) Asset retirement obligations

Asset retirement obligations arise from the development, construction and normal operation of mining property and equipment, as mining activities are subject to laws and regulations governing the protection of the environment. Such costs arising from the decommissioning of site preparation work, discounted to their net present value, are provided for and capitalized to the carrying amount of the asset as soon as the obligation to incur such costs arises. The discount rate used is based on a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, excluding the risks for which future cash flow estimates have already been adjusted. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. The Company also records a corresponding asset amount which is amortized over the remaining service life of the asset.

Future remediation costs are accrued based on management’s best estimate at the end of each period of the undiscounted cash costs expected to be incurred at each site. Changes in estimates are reflected in the period during which an estimate is revised. Accounting for reclamation and remediation obligations requires management to make estimates of the future costs that the Company will incur to complete the reclamation and remediation work required to comply with existing laws and regulations at each site. The Company also estimates the timing of the cash outflow, which is subject to change and is currently estimated to be the year 2026 in the Nunavik region and the year 2033 in the James-Bay region for the Elmer Discovery, which represents a significant accounting estimate by the Company. Actual costs incurred may differ from those estimated amounts. Also, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required from the Company. Increases in future costs could materially impact the amounts charged to activities for reclamation and remediation.

Areas of significant judgment affecting the amounts recognized in the financial statements include the following:

a) Uncertainty caused by COVID-19

The extent and duration of COVID-19 are still uncertain, as are the measures implemented by governments and other organizations to contain the spread. Any estimate on the outcome and duration of these developments are subject to significant uncertainty and, accordingly, any estimates of the extent to which COVID-19 may materially and adversely affect the Company’s ability to complete planned E&E activities and meet its obligations according to terms of the operations, financial results and condition in future periods are also subject to significant uncertainty.

b) Valuation of the refundable duties credit for losses and the refundable tax credit for resources

The refundable mining duties credit and the refundable tax credit for resources for the current and prior periods are measured at the amount expected to be recovered from the taxation authorities using the tax rates and tax laws that have been enacted or substantively enacted at each Statement of Financial Position reporting date. Uncertainties exist with respect to the interpretation of tax regulations, including the mining duties credit and the tax credit for resources for which certain expenditures could be disallowed by the taxation authorities in the calculation of credits and the amount and timing of their collection. The calculation of the Company’s mining duties credit and tax credit for resources necessarily involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot be finally determined until a notice of assessments and payments has been received from the relevant taxation authority. Differences arising between the actual results following the final resolution of some of these items and the assumptions made, or future changes to such assumptions, could necessitate adjustments to the mining duties credit and tax credit for resources, the E&E assets and expenses, and the income tax expenses in future periods.

The amounts recognized in the financial statements are derived from the Company’s best estimation and judgement as described above. However, the inherent uncertainty regarding the outcome of these items means that the eventual resolution could differ from the accounting estimates and therefore impact the Company’s financial position and its financial performance and cash flows.

(15)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

3 Critical accounting estimates, judgments and assumptions (cont’d)

c) Impairment of non-financial assets

The Company’s measurement with respect to the carrying amount of non-financial assets is based on numerous assumptions and may differ significantly from actual recoverable amounts. The recoverable amounts are based, in part, on certain factors that may be partially or totally outside of the Company’s control. This evaluation involves a comparison of the estimated recoverable amounts of non-financial assets to their carrying values. The estimated recoverable amounts may differ from actual recoverable amounts, and these differences may be significant and could have a material impact on the Company’s financial position and the result of operations. Assets are reviewed for an indication of impairment at each Statement of Financial Position reporting date. This determination requires significant judgment. Factors which could trigger an impairment review include, but are not limited to, significant negative industry or economic trends, interruptions in exploration and evaluation activities and a significant drop in commodity prices.

Based on an impairment analysis performed in 2022, the Company impaired certain properties, given that no exploration and evaluation expenses were budgeted and that some claims were abandoned or were not expected to be renewed (Note 10). In the James Bay region, gold properties were impaired by $17,490 and the uranium property by $139, for a total impairment of $17,629.

4 Cash and cash equivalents

As at August 31, 2022, cash and cash equivalents of $14,035,435 ($27,641,849 – August 31, 2021) included $9,163,858 ($12,089,115 – August 31, 2021) of guaranteed investment certificates bearing interest at 1.95% (0.45% – August 31, 2021), cashable any time without any penalties.

5 Amounts receivable

Tax credit and mining rights receivable Less: Tax credit and mining rights receivable – Non-current Tax credit and mining rights receivable – Current Commodity taxes Amounts receivable Current amount receivable	2022 $ 4,824,375 2,387,064 2,437,310 834,814 777,556 4,049,680	2021 $ 2,520,729 2,440,766
		79,963 1,118,665 2,465,477
		3,664,105

6 Asset available for sale

On August 8, 2022, Azimut and two affiliates of Newmont Corporation (“Newmont”) and an affiliate of Fury Gold Mines Limited (“Fury”) entered into an agreement for the sale of Azimut’s 23.77% participating interest in the Eleonore South Joint Venture (“ELSJV”) to Newmont and Fury (the “ELSJV Transaction”). In consideration for the sale of its interest in the ELSJV, Azimut will receive 2.9 million shares of the Company that were directly or indirectly controlled by Newmont.

Immediately upon the closing of the ELSJV Transaction, the 2.9 million common shares were returned to Azimut’s treasury for cancellation. The ELSJV Transaction was closed on September 9, 2022, thus resulting in the reduction of Azimut’s common shares issued and outstanding to 79,293,844.

Participating interest in the ELSJV	Carrying amount as at August 31, 2022 $ 1,906,238	Fair value as at August 31, 2022 $* 2,581,000

* Azimut’s common share price of $0.89 as at August 31, 2022 (2,900,000 shares at $0.89)

Azimut has measured its 23.77% participating interest in the ELSJV classified as as an available-for-sale asset in current assets at the lower of the carrying amount and the fair value less costs to sell.

(16)

Notes to Financial Statements

Azimut Exploration Inc.

For the years ended August 31, 2022 and 2021

7 Investments

Captor Capital Corp. Fury Gold Mines Ltd. Monarch Mining Corp. Silver Spruce Resources Inc. Vision Lithium Inc. West African Resources Ltd Yamana Gold Inc.	As at August 31, 2022 Market price per share Number of shares Fair value $ $ 0.150 17,500 2,625 0.530 2,333 1,236 0.380 2,092 795 0.020 30,000 600 0.065 25,000 1,625 1.141 37,500 42,779 5.800 393 2,279 51,940	As at August 31, 2021	As at August 31, 2021
	Market price per share Number of shares $ 0.150 17,500 0.530 2,333 0.380 2,092 0.020 30,000 0.065 25,000 1.141 37,500 5.800 393	Market price per share Number of shares $ 1.550 17,500 0.950 2,333 0.770 2,092 0.045 30,000 0.105 25,000 0.982 37,500 5.570 393	Fair value $ 27,125 2,216 1,611 1,350 2,625 36,825 2,189
			73,941

The investments are mainly held in common shares of Canadian publicly traded companies. The fair values of the investments in common shares are based on the quoted market prices of those shares on a recognized stock exchange at the end of each reporting period.

8 Property and equipment

Office furniture $ Office equipment $ Computer equipment $ Specialist equipment $ 1,765 8,602 24,941 108 - - 18,565 - (352) (1,720) (10,268) (32)	Camp(1) $ Vehicles $ 600,396 178 966,419 - (58,488) (52)	Total $ 635,990 984,984 (70,912)
1,413 6,882 33,238 76	1,508,327 126	1,550,062
22,125 29,914 102,726 14,832 (20,712) (23,032) (69,488) (14,756)	2,297,051 3,702 (788,724) (3,576)	2,470,350 (920,288)
1,413 6,882 33,238 76	1,508,327 126	1,550,062
2,205 10,754 26,652 156 - - 7,397 - (440) (2,152) (9,108) (48)	- 254 733,818 - (133,422) (76)	40,021 741,215 (145,246)
1,765 8,602 24,941 108	600,396 178	635,990
22,125 29,914 84,161 14,832 (20,360) (21,312) (59,220) (14,724)	1,330,632 3,702 (730,236) (3,524)	1,485,366 (849,376)
1,765 8,602 24,941 108	600,396 178	635,990

(1) Depreciation of property and equipment included in E&E assets in the amount of $58,540 ($133,498 – August 31, 2021)

(17)

Azimut Exploration Inc. Notes to Financial Statements

For the years ended August 31, 2022 and 2021

9 Right-of-use assets

Right-of-use assets
Year ended August 31, 2022 Opening net book amount Depreciation for the year(1) Closing net book amount As at August 31, 2022 Cost Accumulated depreciation Net book amount as at August 31, 2022 Year ended August 31, 2021 Opening net book amount Additions Depreciation for the year(1) Closing net book amount As at August 31, 2021 Cost Accumulated depreciation Net book amount as at August 31, 2021	Office $ 128,326 (47,924) 80,402 224,174 (143,772) 80,402 176,250 - (47,924) 128,326 224,174 (95,848) 128,326	Elmer Camp $ - - - - - - 350,701 48,403 (399,104) - 549,404 (549,404) -	Total $ 128,326 (47,924)
			80,402
			224,174 (143,772)
			80,402
			526,951 48,403 (447,028)
			128,326
			773,578 (645,252)
			128,326

(1) Depreciation of right-of-use assets included in E&E assets in the amount of $Nil ($399,104 – August 31, 2021).

On April 16, 2021, the Company exercised its right to purchase the Elmer Camp for a consideration of $1 after the final rent payment of $50,000 was paid all the benefits and risks incidental to the ownership of the camp were transferred to the Company.

(18)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets

All mineral properties are located in the Province of Quebec.

Change in E&E assets in 2022

Cost as at August 31, Additions 2021 $ $ 148,220 11,676 10,312,568 15,369,137	Option payments Reclassifi- cation Tax credit Cost as at August 31, (note 6) 2022 $ $ $ $ - - - 159,896 - - (2,011,558) 23,670,147	Accumulated impairment as at August 31, Impairment Accumulated impairment as at August 31, 2021 2022 $ $ $ - - - - - -	Net book amount as at August 31, 2022 $ 159,896 23,670,147
10,460,788 15,380,813	- - (2,011,558) 23,830,043	- - -	23,830,043
169,837 11,688 2,081,342 413,309	- - - 181,525 - - (180,409) 2,314,242	- - - - - -	181,525 2,314,242
2,251,179 424,997	- - (180,409) 2,495,767	- - -	2,495,767
24,496 27,085 141,264 1,976	- - - 51,581 - - (860) 142,380	- - - - - -	51,581 142,380
165,760 29,061	- - (860) 193,961	- - -	193,961
60,546 3,700 1,571,699 270,293	- (64,246) - - - (1,841,992) - -	- - - - - -	- -
1,632,245 273,993	- (1,906,238) - -	- - -	-
166,159 - 286,446 126	- - - 166,159 - - (55) 286,517	(148,416) - (148,416) (264,231) - (264,231)	17,743 22,286
452,605 126	- - (55) 452,676	(412,647) - (412,647)	40,029
2,878 20,960 28,613 17,109	- - - 23,878 - - (7,468) 38,254	- - - - - -	23,878 38,254
31,491 38,069	- - (7,468) 62,092	- - -	62,092
13,880 - 42,077 -	(13,880) - - - (6,120) - - 35,957	- - - - - -	- 35,957
55,957 -	(20,000) - - 35,957	- - -	35,957
323,044 35,616 137,242 152,613	- - - 358,660 - - (67,978) 221,877	(47,996) (9,755) (57,706) (29,662) (7,735) (37,442)	300,954 184,435
460,286 188,229	- - (67,978) 580,537	(77,658) (17,490) (95,148)	485,389
15,510,311 16,335,288	(20,000) (1,906,238) (2,268,328) 27,651,033	(490,305) (17,490) (507,795)	27,143,238
32,929 9,577 916,580 3,665	- - - 42,506 - - (1,600) 918,645	(32,929) - (32,929) (916,580) - (916,580)	9,577 2,065
949,509 13,242	- - (1,600) 961,151	(949,509) - (949,509)	11,642

(19)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2022 (cont’d)

Cost as at August 31, Additions 2021 $ $ 53,001 - 10,347 42,426	Option payments Reclassifi- cation Tax credit Cost as at August 31, (note 6) 2022 $ $ $ $ - - - 53,001 - - (18,519) 34,254	Accumulated impairment as at August 31, Impairment Accumulated impairment as at August 31, 2021 2022 $ $ $ - - - - - -	Net book amount as at August 31, 2022 $ 53,001 34,254
63,348 42,426	- - (18,519) 87,255	- - -	87,255
26,727 - 10,936 39,424	- - - 26,727 - - (17,208) 33,152	- - - - - -	26,727 33,152
37,663 39,424	- - (17,208) 59,879	- - -	59,879
7,551 - 2,844 -	- - - 7,551 - - - 2,844	(7,551) - (7,551) (2,844) - (2,844)	- -
10,395 -	- - - 10,395	(10,395) - (10,395)	-
111,406 81,850	- - (35,727) 157,529	(10,395) - (10,395)	147,134
3,624 349,235 - 82,517	- - - 352,859 - - (36,019) 46,498	- - - - - -	352,859 46,498
3,624 431,752	- - (36,019) 399,357	- - -	399,357
16,574,850 16,862,132	(20,000) (1,906,238) (2,341,674) 29,169,070	(1,450,209) (17,490) (1,467,699)	27,701,371
1,286,736 3,535 4,085,084 19,419	- - - 1,290,271 - - (2,802) 4,101,701	(1,054,369) - (1,054,369) (3,134,729) - (3,134,729)	235,902 966,972
5,371,820 22,954	- - (2,802) 5,391,972	(4,189,098) - (4,189,098)	1,202,874
453,353 - 445,968 44,889	- - - 453,353 - - (6,086) 484,771	(104,513) - (104,513) (145,089) - (145,089)	348,840 339,682
899,321 44,889	- - (6,086) 938,124	(249,602) - (249,602)	688,522
172,357 - 325,144 392	- - - 172,357 - - (171) 325,365	(95,299) - (95,299) (204,913) - (204,913)	77,058 120,452
497,501 392	- - (171) 497,722	(300,212) - (300,212)	197,510
738,282 127 982,241 -	- - - 738,409 - - - 982,241	(738,282) - (738,282) (982,241) - (982,241)	127 -
1,720,523 127	- - - 1,720,650	(1,720,523) - (1,720,523)	127
8,489,165 68,362	- - (9,059) 8,548,468	(6,459,435) - (6,459,435)	2,089,033

(20)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2022 (cont’d)

Cost as at August 31, Additions 2021 $ $ 59,732 - 8,906 19,363	Option payments Reclassifi- cation Tax credit Cost as at August 31, (note 6) 2022 $ $ $ $ - - - 59,732 - - (8,452) 19,817	Accumulated impairment as at August 31, Impairment Accumulated impairment as at August 31, 2021 2022 $ $ $ - - - - - -	Net book amount as at August 31, 2022 $ 59,732 19,817
68,638 19,363	- - (8,452) 79,549	- - -	79,549
- 52,948 - 13,993	- - - 52,948 - - (6,108) 7,885	- - - - - -	52,948 7,885
- 66,941	- - (6,108) 60,833	- - -	60,833
484,838 139 709,305 -	- - - 484,977 - - - 709,305	(484,838) (139) (484,977) (709,305) - (709,305)	- -
1,194,143 139	- - - 1,194,282	(1,194,143) (139) (1,194,282)	-
9,751,946 154,805	- - (23,619) 9,883,132	(7,653,578) (139) (7,653,717)	2,229,415
26,326,796 17,016,937	(20,000) (1,906,238) (2,365,293) 39,052,202	(9,103,787) (17,629) (9,121,416)	29,930,786

Fully impaired properties for which mining claims are still held by the Company.

Acquisition and exploration – Net book value Prepaid exploration expenses	August 31, 2022 $ 29,930,786 77,000 30,007,786	August 31, 2021 $ 17,223,009 -
		17,223,009

The 2021 E&E assets have been grouped where necessary to reflect the same area of interest and to conform with the 2022 presentation.

(21)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021

Cost as at August 31, Additions 2020 $ $ 125,738 22,482 4,543,669 8,109,708	Tax credit Cost as at August 31, Accumulated impairment as at August 31, 2021 2020 $ $ $ - 148,220 - (2,340,809) 10,312,568 -	Impairment Accumulated impairment as at August 31, 2021 $ $ - - - -	Net book amount as at August 31, 2021 $ 148,220 10,312,568
4,669,407 8,132,190	(2,340,809) 10,460,788 -	- -	10,460,788
8,782 161,055 1,197,075 926,750	- 169,837 - (42,483) 2,081,342 -	- - - -	169,837 2,081,342
1,205,857 1,087,805	(42,483) 2,251,179 -	- -	2,251,179
15,401 9,095 109,680 37,933	- 24,496 - (6,349) 141,264 -	- - - -	24,496 141,264
125,081 47,028	(6,349) 165,760 -	- -	165,760
60,546 - 1,565,081 11,745	- 60,546 - (5,127) 1,571,699 -	- - - -	60,546 1,571,699
1,625,627 11,745	(5,127) 1,632,245 -	- -	1,632,245
156,821 9,338 286,325 216	- 166,159 (54,975) (95) 286,446 (8,006)	(93,441) (148,416) (256,225) (264,231)	17,743 22,215
443,146 9,554	(95) 452,605 (62,981)	(349,666) (412,647)	39,958
2,878 - 27,928 1,215	- 2,878 - (530) 28,613 -	- - - -	2,878 28,613
30,806 1,215	(530) 31,491 -	- -	31,491
13,880 - 31,054 11,023	- 13,880 - - 42,077 -	- - - -	13,880 42,077
44,934 11,023	- 55,957 -	- -	55,957
264,312 58,734 85,625 80,471	- 323,046 (46,184) (28,856) 137,240 (29,619)	(1,812) (47,996) (43) (29,662)	275,050 107,578
349,937 139,205	(28,856) 460,286 (75,803)	(1,855) (77,658)	382,628
8,494,795 9,439,765	(2,424,249) 15,510,311 (138,784)	(351,521) (490,305)	15,020,006
32,929 - 916,036 966	- 32,929 (32,929) (422) 916,580 (916,036)	- (32,929) (544) (916,580)	- -
948,965 966	(422) 949,509 (948,965)	(544) (949,509)	-

(22)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021 (cont’d)

Cost as at August 31, Additions 2020 $ $ 53,001 - 6,391 4,728	Tax credit Cost as at August 31, Accumulated impairment as at August 31, 2021 2020 $ $ $ - 53,001 - (772) 10,347 -	Impairment Accumulated impairment as at August 31, 2021 $ $ - - - -	Net book amount as at August 31, 2021 $ 53,001 10,347
59,392 4,728	(772) 63,348 -	- -	63,348
26,727 - 7,726 3,900	- 26,727 - (690) 10,936 -	- - - -	26,727 10,936
34,453 3,900	(690) 37,663 -	- -	37,663
11,175 - 2,844 -	- 11,175 (6,729) - 2,844 (2,844)	(822) (7,551) - (2,844)	3,624 -
14,019 -	- 14,019 (9,573)	(822) (10,395)	3,624
107,864 8,628	(1,462) 115,030 (9,573)	(822) (10,395)	104,635
9,551,624 9,449,359	(2,426,133) 16,574,850 (1,097,322)	(352,887) (1,450,209)	15,124,641
1,286,736 - 4,042,889 44,495	- 1,286,736 (1,054,369) (2,300) 4,085,084 (3,134,729)	- (1,054,369) - (3,134,729)	232,367 950,355
5,329,625 44,495	(2,300) 5,371,820 (4,189,098)	- (4,189,098)	1,182,722
453,353 - 348,726 99,541	- 453,353 (104,513) (2,299) 445,968 (145,089)	- (104,513) - (145,089)	348,840 300,879
802,079 99,541	(2,299) 899,321 (249,602)	- (249,602)	649,719
172,357 - 324,017 2,000	- 172,357 (95,299) (873) 325,144 (204,913)	- (95,299) - (204,913)	77,058 120,231
496,374 2,000	(873) 497,501 (300,212)	- (300,212)	197,289
738,282 - 982,241 -	- 738,282 (738,282) - 982,241 (982,241)	- (738,282) - (982,241)	- -
1,720,523 -	- 1,720,523 (1,720,523)	- (1,720,523)	-
8,348,601 146,036	(5,472) 8,489,165 (6,459,435)	- (6,459,435)	2,029,730

(23)

Azimut Exploration Inc. Notes to Financial Statements For the years ended August 31, 2022 and 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021 (cont’d)

Cost as at August 31, Additions 2020 $ $ - 59,732 - 9,980	Tax credit Cost as at August 31, Accumulated impairment as at August 31, 2021 2020 $ $ $ - 59,732 - (1,074) 8,906 -	Impairment Accumulated impairment as at August 31, 2021 $ $ - - - -	Net book amount as at August 31, 2021 $ 59,732 8,906
- 69,712	(1,074) 68,638 -	- -	68,638
484,838 - 709,305 -	- 484,838 (484,838) - 709,305 (709,305)	- (484,838) - (709,305)	- -
1,194,143 -	- 1,194,143 (1,194,143)	- (1,194,143)	-
9,542,744 215,748	(6,546) 9,751,946 (7,653,578)	- (7,653,578)	2,098,368
19,094,368 9,665,107	(2,432,679) 26,326,796 (8,750,900)	(352,887) (9,103,787)	17,223,009

Fully impaired properties for which mineral claims are still being held by the Company.

(24)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

10 Exploration and evaluation assets (cont’d)

a) The James Bay Strategic Alliance (the “James Bay Alliance”) was formed between Azimut and SOQUEM on September 22, 2016, to identify, acquire and explore highly prospective gold targets in the Eeyou Istchee James Bay Territory (the “James Bay region”) of Quebec. Under the terms of the James Bay Alliance, the Company delivered a target report to SOQUEM in exchange for a cash payment of $100,000.

On April 25, 2019, Azimut and SOQUEM signed an agreement to amend the terms of the James Bay Alliance. Under the amended agreement, SOQUEM had earned its 100% interest in four (4) properties (Munischiwan, Pikwa, Pontois and Desceliers; the “SOQUEM Properties”) by investing $2,715,992 in work expenditures and granting Azimut a 50% back-in option on the SOQUEM Properties in exchange for $3,317,427 in work expenditures over three (3) years, which represents the same amount of SOQUEM’s cumulative investment in work expenditures on the SOQUEM Properties, the Dalmas Property and the Galinée Property. Azimut was the operator during the earn-in option period. During field seasons, SOQUEM has the right to provide up to 30% of the Company’s field personnel at a mutually agreed upon imputed rate. On May 31, 2021, Azimut fulfilled its obligations to exercise its back-in option to regain a 50% interest in the SOQUEM Properties. Since then, the SOQUEM Properties have been held as 50/50 JV projects, each property subject to a JV agreement between Azimut and SOQUEM. Azimut remains the operator of Munischiwan, Pontois and Descelier. SOQUEM is the operator of Pikwa.

b) The Dalmas-Galinée Properties are subject to a JV agreement between Azimut and SOQUEM. On April 25, 2019, SOQUEM acquired a 50% interest in the Dalmas Property by making a cash payment of $12,421 for the claim staking cost and $107,045 for work expenditures, and a 50% interest in the Galinée Property by making a cash payment of $87,900 for the claim staking cost and $494,390 for work expenditures. Azimut remains the operator. During field seasons, SOQUEM has the right to provide up to 30% of the Company’s field personnel at a mutually agreed upon imputed rate.
c) The Eleonore South Property was subject to a letter of intent in 2006 in which Azimut agreed to form a three-way JV project with Les Mines Opinaca Ltée, a wholly-owned subsidiary of Newmont, and Eastmain Resources Inc. (“Eastmain Resources”). The Eleonore South Property included 166 claims of the former Opinaca C Property and 116 claims owned by Newmont. In February 2008, Eastmain Resources had earned a 33.33% interest in the Eleonore South Property by making cumulative cash payments of $185,000, granting 30,000 common shares to the Company and funding $4 million in work expenditures. The ownership of the Eleonore South Property was as follows: Azimut 23.77%, Newmont 38.11% and Eastmain Resources 38.12%. On August 8, 2022, Azimut agreed to sell its 23.77% participating interest (see note 6).
d) The Opinaca A and B properties are subject to a JV agreement with the following parties:
Opinaca A is a 50/50 JV project with Everton Resources Inc. (“Everton”). Everton earned 50% interest in March 2010 by making cumulative cash payments of $180,000 and incurring $2.8 million in work expenditures.
Opinaca B is a 25/50/25 JV project with Hecla Quebec Inc. (“Hecla”) and Everton. Everton earned its interest after it reached cumulative cash payments of $160,000 in March 2010 and incurred $2 million in work expenditures. Hecla earned its 50% interest after it reached cumulative cash payments of $580,000 in November 2018 and incurred $6 million in work expenditures. Of the total cash payment made by Hecla, Azimut received $290,000.
e) The Wabamisk Property was held 49% by Azimut and 51% by Newmont as at August 31, 2022. Newmont made cumulative cash payments of $500,000 and incurred $4 million in work expenditures. On August 8, 2022, Newmont exercised its right to voluntarily withdraw from the Wabamisk JV in consideration for the payment by Azimut of a nominal amount of $1. In connection with such withdrawal, Newmont will cease to be a participant in the Wabamisk JV (the “Wabamisk Transaction”). Consequently, upon closing the Wabamisk Transaction, Azimut would own a 100% interest in the 333 mining claims comprising the Wabamisk Property. The Wabamisk Transaction closed on September 9, 2022.
f) The Wapatik Property was the subject of a letter of offering in which an exclusive offer was made to Mont Royal Resources Limited (“Mont Royal”) in exchange for a cash payment of $20,000 to Azimut. On September 21, 2020, the Company granted Mont Royal the option to earn a 50% interest in the Wapatik Property by making cash payments to Azimut aggregating $80,000, funding a minimum of $4 million in work expenditures over four (4) years and performing a minimum 4,000 metres of diamond drilling. Under the terms of the agreement, Mont Royal may earn an additional 20% interest, for a total interest of 70%, by making an additional cash payment of $120,000 and incurring an additional $3 million in work expenditures over three (3) years from the election date, and by delivering a preliminary economic assessment under National Instrument 43-101 on or before the third (3[rd] ) anniversary of the election notice.

(25)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

10 Exploration and evaluation assets (cont’d)

g) The Duquet Property was transferred to Azimut on September 30, 2015, in consideration of an aggregate 2.25% NSR royalty on the property under an agreement reached with SOQUEM, Osisko Exploration James Bay Inc. and Newmont Northern Mining ULC. The Duquet Property was grouped with the Rex Property to form a single entity (the Rex-Duquet Property) and became subject to the Nunavik Alliance (see h ).
h) The Nunavik Strategic Alliance (the “Nunavik Alliance”) was formed between Azimut and SOQUEM on April 25, 2019, under which SOQUEM has the option to earn an initial 50% interest in the Rex (now Rex-Duquet), Rex South and Nantais properties by investing $16 million in exploration work over four (4) years, of which the first two (2) years is a firm commitment of $4 million each year. SOQUEM may also acquire an additional 10% interest by investing $8 million per designated property over two (2) years, including the delivery of a preliminary economic assessment. Azimut is the operator of the Nunavik Alliance. During field seasons, SOQUEM has the right to provide up to 30% of the Company’s field personnel at a mutually agreed upon imputed rate

11 Leases liabilities

The Company leases office space, warehouse facilities and exploration equipment. The office lease is for five (5) years until June 30, 2023, with an option to renew for an additional year under the same conditions. The warehouses and exploration equipment are covered by monthly leases and represent low-value items. The Company has elected not to recognize right-of-use assets or lease liabilities for these leases.

Opening balance Addition Principal repayment for the year Ending balance Less: Current lease liability Non-current lease liability	2022 $ 118,658 - (45,220) 73,438 36,976 36,462	2021 $ 364,722 48,403 (294,467)
		118,658
		45,220
		73,438

12 Asset retirement obligations

The following tables summarize the Company’s asset retirement obligation as at August 31, 2021 and 2022:

Opening balance Addition Change in estimate Unwinding of discount on asset retirement obligations Balance – End of year		2022	Total $ 987,764 543,389 (102,420) 84,369 1,513,102	2021
	Rex-Duquet, Rex South $ 987,764 - (102,420) 84,369 969,713	Elmer $ - 543,389 - - 543,389		Rex-Duquet, Rex South $ 251,480 - 733,818 2,466
				987,764

The following are the assumptions used to estimate the provision for the asset retirement obligation:

	Rex-Duquet,			Rex-Duquet,
	Rex South	Elmer	Total	Rex South
	$	$	$	$
Estimated undiscounted cash flows required to settle
the obligations	$1,094,929	$758,316	$1,853,245	$998,935
Weighed average discount rate	6.44%	5.97%		1.00%
Estimated number of years before the disbursements
necessary to settle the obligations	3.5 years	10.5 years		4.5 years

(26)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

13 Share capital

An unlimited number of common shares are authorized, without par value, voting and participating.

a) Issuance of common shares

On September 14, 2020, the Company completed a non-brokered private placement of 3,333,335 common shares at a price of $1.80 per share for aggregate gross proceeds of $6,000,003. An amount of $202,381 was paid in respect of the offering for the share issuance expense.

On July 16, 2021, the Company completed a bought deal private placement financing with a syndicate of underwriters for total gross proceeds of $28,749,245, consisting of 3,463,900 flow-through shares at a price of $3.32 per share and 9,078,472 common shares at a price of $1.90 per share, which includes the exercise of the underwriters’ option to purchase 1,973,172 additional shares. The underwriters received: (a) a cash commission of $1,380,299 and (b) 501,695 non-transferable compensation options, representing 4% of the total number of offered shares sold under the offering, each exercisable for one common share of the Company at a price of $1.90 per share until January 16, 2023. The estimated fair value of $635,182 was determined by the Black-Scholes pricing model using the following assumptions: risk-free interest of 0.43%, expected life of 24 months, annualized volatility rate of 100% (based on the Company’s historical volatility for 24 months up to the issuance date) and dividend rate of 0%. A total of $1,062,014 was paid in respect of the offering for the share issuance expense, including the portion allocated to the flow-through share premium liability.

b) Issuance of flow-through shares

Issuance of flow-through shares
Flow-through share premium – Beginning of year Addition Amortization Flow-through share premiums – End of year	2022 $ 3,399,557 - (3,399,557) -	2021 $ 935,100 3,487,984 (1,023,527)
		3,399,557

On July 16, 2021, the Company completed a private placement by issuing 3,463,900 flow-through shares at a price of $3.32 per share for aggregate gross proceeds of $11,500,148. The flow-through shares were issued at a $1.07 premium on the closing price of the Company shares on the TSXV on the day of issue ($2.25). The premium, recognized as a flow-through share premium liability of $3,706,373, was reduced by $218,389 and allocated to share issuance expenses. A subsequent pro-rata reduction of the liability is recognized as a tax recovery expense as the eligible expenditures are incurred. The commissions or finder’s fees were paid in respect of the offering (See 13 (a)).

As at August 31, 2022, no amount remains to be incurred pursuant to the flow-through financing agreement. In renouncing the eligible expenditures under the look-back rule, the Company is required to pay a tax under Part XII.6.

14 Underwriters’ options

The following table presents the Underwriters’ compensation option activities for the years ended August 31, 2022 and 2021, summarizing the information as at August 31, 2022:

Outstanding – August 31, 2020 Issued pursuant to private placement (Note 13a) Outstanding August 2022 (unchanged from August 31, 2021)	Number - 501,695 501,695	Weighted average exercise price $ Expiry - 1.90 January 16, 2023 1.90

(27)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

15 Stock option plan

The Company maintains a stock option plan in which a maximum of 8,190,000 stock options may be granted. The number of shares reserved for issuance under the stock option plan is approximately 9.99% of the Company’s 81,903,844 common shares issued and outstanding as at April 4, 2022, at which time the Company filed for an increase in the stock option plan. The exercise price of the options is set at the closing price of the Company’s shares on the TSXV the day before the grant date. The options have a maximum term of ten (10) years following the grant date. If a blackout period should be in effect at the end of the term, the expiry date will be extended by ten (10) business days following the end of the blackout period. The options vest immediately unless otherwise approved and disclosed by the Board of Directors.

The following tables summarize the information about stock options outstanding and their vesting status as at August 31, 2022:

Outstanding – Beginning of period Granted Exercised Expired Forfeited Outstanding – End of period Vested – End of period Exercise price $ Between 0.19 – 0.50 Between 0.51 – 1.00 Between 1.01 – 1.50 Between 1.51 – 2.00	2022 Number Weighted average exercise price $ 5,085,000 0.72 1,682,000 0.95 (440,000) 0.47 (110,000) 1.146 (138,000) 1.389 6,079,000 0.77 5,752,000 Options outstanding 1,880,000 2,655,000 1,515,000 29,000 6,079,000	2022 Number Weighted average exercise price $ 5,085,000 0.72 1,682,000 0.95 (440,000) 0.47 (110,000) 1.146 (138,000) 1.389 6,079,000 0.77 5,752,000 Options outstanding 1,880,000 2,655,000 1,515,000 29,000 6,079,000	2021 Number Weighted average exercise price $ 4,480,000 0.67 1,007,000 1.00 (90,000) 0.82 (312,000) 0.87 - - 5,085,000 0.72 4,950,000 Options vested Weighted average remaining contractual life (years) 1,880,000 3.53 2,645,000 7.94 1,198,000 7.42 29,000 4.38 5,752,000 6.43	2021 Number Weighted average exercise price $ 4,480,000 0.67 1,007,000 1.00 (90,000) 0.82 (312,000) 0.87 - - 5,085,000 0.72 4,950,000 Options vested Weighted average remaining contractual life (years) 1,880,000 3.53 2,645,000 7.94 1,198,000 7.42 29,000 4.38 5,752,000 6.43	2021 Number Weighted average exercise price $ 4,480,000 0.67 1,007,000 1.00 (90,000) 0.82 (312,000) 0.87 - - 5,085,000 0.72 4,950,000 Options vested Weighted average remaining contractual life (years) 1,880,000 3.53 2,645,000 7.94 1,198,000 7.42 29,000 4.38 5,752,000 6.43
	Number 5,085,000 1,682,000 (440,000) (110,000) (138,000) 6,079,000 5,752,000				Weighted average exercise price $ 0.67 1.00 0.82 0.87 -
					0.72
					Weighted average remaining contractual life (years) 3.53 7.94 7.42 4.38
					6.43

On December 19, 2019, the Company granted 150,000 stock options to an employee with an exercise price of $0.50 per option. Of this total, 50,000 vested immediately, 50,000 on December 19, 2020, and the remaining 50,000 on December 19, 2021. The fair value of the granted options amounted to $58,500, of which $2,994 ($15,738 in 2021) was charged to general exploration during the year ended August 31, 2022 ($15,738 in 2021). The fair value was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 1.25%, expected life of 10 years, annualized volatility rate of 78% based on the Company’s historical volatility, and dividend rate of 0%.

On October 1, 2020, the Company granted 120,000 stock options to employees with an exercise price of $1.07 per option. Of this total, 25,000 vested immediately, 45,000 on April 1, 2021, and 25,000 on October 1, 2021. The remaining 25,000 were forfeited upon an employee’s departure. The fair value of the granted options amounted to $85,500. An amount of $9,300 ($76,200 in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value of $0.89 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 0.60%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On January 6, 2021, the Company granted 50,000 stock options to employees with an exercise price of $1.12 per option. Of this total, 10,000 vested immediately, 15,000 on July 6, 2021, and the remaining 25,000 on January 6, 2022. The fair value of the granted options amounted to $47,000, of which $8,222 ($39,168 in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value was determined by the Black-Scholes option pricing model with the

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Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

15 Stock option plan (cont’d)

following assumptions: risk-free interest of 0.75%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On June 1, 2021, the Company granted 10,000 stock options to an employee with an exercise price of $1.55 per option. Of this total, 5,000 vested on December 1, 2021. The remaining 5,000 were forfeited upon the employee’s departure. The fair value of the granted options amounted to $11,355. An amount of $6,497 ($4,858 in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value of $1.30 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 1.50%, expected life of 10 years, annualized volatility rate of 86% based on the Company’s historical volatility, and dividend rate of 0%.

On November 2, 2021, the Company granted 12,000 stock options to an employee with an exercise price of $1.76 per option. Of this total, 6,000 vested on May 2, 2022. The remaining 6,000 were forfeited upon the employee’s departure. The fair value of the granted options amounted to $14,257. An amount of $14,257 ($Nil in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value of $1.51 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 1.72%, expected life of 10 years, annualized volatility rate of 86% based on the Company’s historical volatility, and dividend rate of 0%.

On December 13, 2021, the Company granted 100,000 stock options to an employee with an exercise price of $1.40 per option. Of this total, 25,000 vested immediately, 75,000 were forfeited upon an employee’s departure. The fair value of the granted options in the amount of $43,451 ($Nil in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value of $1.25 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 1.41%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On May 10, 2022, the Company granted 100,000 stock options to an employee with an exercise price of $1.25 per option. Of this total, 33,000 vested immediately, 33,000 will vest on May 10, 2023, and the remaining 34,000 on May 10, 2024. The fair value of the granted options amounted to $95,000, of which $45,204 ($Nil in 2021) was charged to general exploration during the year ended August 31, 2022. The fair value of $0.95 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 2.95%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On May 16, 2022, the Company granted 300,000 stock options to an employee with an exercise price of $1.20 per option. Of this total, 50,000 vested immediately, 50,000 will vest on May 16, 2023, 75,000 on May 16, 2024, 75,000 on May 16, 2025, and the remaining 50,000 on May 16, 2026. The fair value of the granted options amounted to $312,000, of which $89,916 ($Nil in 2021) was charged to general and administrative expenses during the year ended August 31, 2022. The fair value of $1.04 per option was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 2.95%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On June 13, 2022, the Company granted 5,000 stock options to employees with an exercise price of $1.21 per option. Of these, 5,000 vested immediately. The fair value of the granted options amounted to $5,150 ($Nil in 2021) and was charged to general exploration during the year ended August 31, 2022. The fair value was determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 3.40%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%.

On August 11, 2022, the Company granted 1,165,000 stock options to directors, officers, employees and consultants with an exercise price of $0.81 per option. Of these, 1,155,000 vested immediately, and the remaining 10,000 will vest on February 11, 2023. The fair value of the granted options amounted to $803,850, as determined by the Black-Scholes option pricing model with the following assumptions: risk-free interest of 2.70%, expected life of 10 years, annualized volatility rate of 87% based on the Company’s historical volatility, and dividend rate of 0%. An amount of $734,850 ($Nil in 2021) was charged to general and administrative expenses, and $62,675 ($Nil in 2021) was charged to general exploration during the year ended August 31, 2022.

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Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

16 Expenses by nature

Salaries and fringe benefits Stock-based compensation Professional and maintenance fees Administration and office Business development and administration fees Advertising Rent Insurance Conferences and meeting Depreciation of property and equipment Amortization of intangible assets Depreciation on right-of-use asset General and administrative expenses Salaries for search of properties Other exploration expenses Stock-based compensation Refundable duties credit for losses and refundable tax credit for resources, net General exploration	2022 $ 210,865 824,766 201,541 96,711 109,925 11,381 4,139 49,352 101,924 12,372 1,692 47,924 1,672,592 6,730 21,657 192,601 (12,391) 208,597	2021 $ 129,234 606,800 264,913 73,343 29,182 15,474 1,930 25,711 65,441 11,748 688 47,924
		1,272,388
		- 10,674 310,234 (4,633)
		316,275

17 Related party transactions

Compensation of key management

Key management includes the directors, the chief executive officer (“CEO”), the chief financial officer (“CFO”), and the Vice-President Corporate Development (starting May 16, 2022) (“VP”). The Vice-President Technology and Business Development vacated the position on December 1, 2021. The compensation paid or payable for services provided by key management is as follows:

Salaries Director fees Stock-based compensation	2022 $ 554,215 98,629 807,516 1,460,360	2021 $ 543,330 45,658 565,800
		1,154,788

An amount of $282,158 for salaries ($329,509 in 2021) is capitalized to E&E assets.

As at August 31, 2022, accounts payable and accrued liabilities include an amount of $234,807 ($364,810 at August 31, 2021) owed to key management. These amounts are unsecured, non-interest bearing and due on demand.

If termination of employment is for reasons other than gross negligence, the CEO and CFO will be entitled to receive an indemnity equal to twelve (12) months of salary, and the VP shall be entitled to receive an indemnity equal to twelve (12) weeks of salary after completing the first year of employment, increasing by four (4) weeks for every additional year of employment to a maximum of one (1) year of salary. The indemnity paid must not represent more than 10% of the Company’s cash and cash equivalents at such time. As at August 31, 2022, the entitled indemnity amounted to $545,385.

In the event of a change of control or a termination of employment following a change of control, the CEO will be entitled to receive an indemnity of $680,000, equal to twenty-four (24) months of salary. The VP will be entitled to receive an indemnity of $266,667 within the twelve (12) months following the change of control, equal to sixteen (16) months of salary. The CFO will be entitled to receive an indemnity of $285,000, equal to eighteen (18) months of salary.

(30)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

18 Income taxes

Component of income tax

The deferred tax expense consists of the following items:

Deferred income tax expense Amortization of flow-through share premiums Recovery of deferred income taxes	2022 $ - (3,399,557) (3,339,557)	2021 $ - (1,023,527)
		(1,023,527)

The effective income tax rate differs from the Canadian statutory tax rate due to the following items:

Loss before income taxes Combined federal and provincial income tax of 26.50 (26.50% in 2021) Non-deductible expenses Change in unrecognized deductible temporary differences Tax effect of renounced flow-through share expenditures Amortization of flow-through share premiums Other Recovery of deferred income taxes	2022 $ (1,782,707) (472,417) 299,720 (2,519,450) 2,835,412 (3,399,557) (143,265) (3,399,557)	2021 $ (1,574,286)
		(417,186) 262,000 (715,000) 852,000 (1,023,527) 18,186
		(1,023,527)

The ability to realize the tax benefits is dependent upon a number of factors, including the sale of properties. Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable profits will be available to allow the asset to be recognized. Unrecognized deferred tax assets amounted to $23,000.

As at August 31, 2022 and 2021, the significant components of the Company’s deferred income tax assets and liabilities are as follows:

Deferred income tax assets Non-capital losses Capital losses Investments Share and warrant issue expenses Property and equipment and intangible assets Exploration and evaluation assets Asset retirement obligations Right-of-use asset Lease liability Unrecognized deferred income tax assets	2022 $ 2,079,000 37,000 86,000 427,000 216,000 (3,221,000) 401,000 (21,000) 19,000 23,000	2021 $ 1,862,000 38,000 83,000 575,000 212,000 (292,000) 67,000 (34,000) 31,000
		2,542,000

(31)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

18 Income taxes (cont’d)

Component of income tax (cont’d)

As at August 31, 2022, the expiry dates of losses available to reduce future years’ income tax are as follows:

2042 2041 2040 2039 2038 2037 2036 2035 2034 2033 2032 2031 2030 2029 2026	Federal $ 1,076,000 797,000 702,000 74,000 211,000 185,000 306,000 410,000 514,000 436,000 790,000 687,000 719,000 816,000 139,000 7,862,000	Provincial $ 1,076,000 797,000 700,000 74,000 210,000 184,000 306,000 409,000 512,000 434,000 787,000 705,000 719,000 818,000 99,000
		7,830,000

As at August 31, 2022, the Corporation has accumulated capital losses in Canada for income tax purposes amounting to approximately $283,000 (2021: $283,000), and these can be carried forward indefinitely against future capital gains.

19 Loss (net earnings) per share

For the year ended August 31, 2021, the diluted loss per share was the same as the basic loss per share since the potential dilutive instruments had an anti-dilutive effect. Accordingly, the basic and diluted loss per share for 2021 was calculated using the basic weighted average number of shares outstanding of 70,626,602 in 2021

For the year ended August 31, 2022, the diluted net earnings per share was calculated using the basic weighted average number of shares outstanding of 81,938,858 adjusted by the potential dilutive instruments of each stock option where the exercise price was lower than the average market price of the Company’s share. During the year ended August 31, 2022, there were 2,484,671 stock options vested with an exercise price lower than the average market price of shares. As a result, the diluted weighted average number of shares of 84,423,528 was used to calculate the diluted net earnings per share in 2022.

20 Financial instruments, financial risks and capital management

Classification

The Company’s financial instruments as at August 31, 2022, consist of cash and cash equivalents, amounts receivable, investments and accounts payable, accrued liabilities, and advances received for exploration work. The fair value of these financial instruments is either equal to their fair value (investments) or approximates their carrying value due to their shortterm maturity or the fact that they bear interest at current market rates.

The classification of the Company’s financial instruments is summarized as follows:

Financial assets Classification Cash and cash equivalents Amortized cost Amounts receivable Amortized cost Investments Fair value through profit and loss Financial liabilities Accounts payable and accrued liabilities Financial liabilities at amortized cost Advances received for exploration work Financial liabilities at amortized cost	Fair value	Fair value
	2022 $ 14,035,435 777,556 51,940 14,864,931 4,985,144 458,196 5,443,340	2021 $ 27,641,849 2,465,477 73,941
		30,181,267
		2,730,618 291,860
		3,022,478

(32)

Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

20 Financial instruments, financial risks and capital management (cont’d)

Classification (cont’d)

The Company defines the fair value hierarchy under which its financial instruments are valued as follows: Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 includes inputs other than quoted prices in Level 1 that are observable for assets or liabilities, either directly or indirectly; and Level 3 includes inputs for assets or liabilities that are not based on observable market data. There was no transfer of hierarchy level during the years ended August 31, 2022 and 2021.

Financial risks

The Company has exposure to various financial risks, such as credit risk, liquidity risk and market risk, from its use of financial instruments.

Credit risk

The Company’s credit risk is primarily attributable to cash and cash equivalents and amounts receivable. Cash and cash equivalents are deposited in Canadian chartered bank accounts or invested in a diversified manner in securities having an investment-grade rating, from which management believes the risk of loss to be minimal.

The credit risk associated with trade accounts receivable from partners arises from the possibility that the partners may be unable to repay their debts. These receivables result from expenditures incurred on behalf of partners. In 2022, no allowance for doubtful accounts was recorded. The Company closely follows its cash position to reduce its credit risk on amounts receivable.

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. As at August 31, 2022, the Company had sufficient funds, with a cash and cash equivalents balance of $14,035,435 ($27,641,849 – August 31, 2021), to settle current liabilities of $5,480,317 ($6,467,255 – August 31, 2021) and to meet its obligations of $Nil ($10,707,035 – August 31, 2021) under the flow-through financing agreement.

The following are the contractual maturities of financial liabilities, including interest where applicable, as at August 31, 2022:

August 31, 2022:
	Carrying	Contractual	0 to 12	12 to 24	More than
	amount	cash flows	months	months	24 months
	$	$	$	$	$
Accounts payable and accrued
liabilities, advances received for
exploration work	5,443,341	5,443,341	5,443,341	-	-
Lease liabilities	73,438	117,680	64,189	53,491	-

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s risk in that respect arises from its cash and cash and equivalents and is not significant.

Equity price risk

Equity price risk is the risk that the fair value of a financial instrument varies due to the changes in the Canadian mining sector and equity market. Changes in the fair value of investments at fair value through profit and loss are recorded under other gains and losses in the Statement of Net (Earnings) Loss and Comprehensive (Income) Loss. For the Company’s investments at fair value through profit and loss, a variation of ±10% of the quoted market price as at August 31, 2022, would result in an estimated effect on the net income (loss) of $5,000 for the year ended August 31, 2022 ($7,000 - August 31, 2021).

The fair values of the investments in common shares of Canadian publicly traded companies are classified as Level 1 in the fair value hierarchy.

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Notes to Financial Statements For the years ended August 31, 2022 and 2021

Azimut Exploration Inc.

20 Financial instruments, financial risks and capital management (cont’d)

Capital management

The Company considers the items included in equity as capital components.

In terms of capital management, the objectives of the Company are to maximize its ability to continue as a going concern. Management reviews its capital management approach on an ongoing basis, and as needed, the Company raises funds through private placements.

There were no significant changes in the Company’s approach to capital management during the year ended August 31, 2022. The Company is not subject to any externally imposed capital requirements unless the Company closes a flow-through placement, in which case the funds so raised are committed to being spent on qualifying exploration expenses (see Note 13b). The variation of capital components is depicted in the Statements of Changes in Equity.

21 Additional cash flow information

	2022	2021
	$	$
Acquisition of E&E assets included in accounts payable and accrued liabilities	3,919,545	2,130,128
Depreciation of property & equipment and right-of-use assets included in E&E assets	58,540	532,602
Refundable duties credit for losses and refundable tax credit for resources
presented as a reduction in E&E assets, net	2,365,293	2,432,677
Stock-base compensation included in E&E assets	5,150	-

22 Subsequent event

On November 30, 2022, the Company granted KGHM International Ltd (“KGHM”) the option to earn an initial 50% interest (the “First Option”) in the Kukamas Property in the Eeyou Istchee James Bay region of Quebec by making cash payments to Azimut aggregating $250,000, funding a minimum $5 million in work expenditures over four (4) years and performing a minimum of 5,000 metres of diamond drilling. Azimut shall act as the operator during the First Option phase.

KGHM may earn an additional 20% interest, for a total interest of 70% (the “Second Option”), by making an additional cash payment of $225,000 and incurring an additional $4.2 million in work expenditures over three (3) years from the election date, and by delivering a preliminary economic assessment under National Instrument 43-101 on or before the third (3[rd] ) anniversary of the election notice. The Second Option period may be extended by up to three (3) years by incurring work expenditures of $1,700,000 per extension year and making cash payments to Azimut of $100,000 per extension year. KGHM International will act as the operator during this Second Option phase.

If KGHM has exercised the First Option and elects not to exercise the Second Option from the election date, it must pay Azimut $75,000 in cash as final payment.

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Azimut Exploration Inc. — Audit Report / Information 2022

43113_rns_2022-12-23_b50b7205-6264-4870-bd22-28e55efa6bc6.pdf

Azimut Exploration Inc.

Independent auditor’s report

Our opinion

What we have audited

Basis for opinion

Independence

Other information

Responsibilities of management and those charged with governance for the financial statements

Auditor’s responsibilities for the audit of the financial statements

Azimut Exploration Inc.

Azimut Exploration Inc.

1 Nature of operations and general information

2 Summary of significant accounting policies

Basis of preparation

Basis of measurement

Presentation and functional currency

Jointly controlled assets and exploration activities

Cash and cash equivalents

Financial instruments

2 Summary of significant accounting policies (cont’d)

Financial instruments (cont’d)

Impairment of financial assets

Property and equipment

2 Summary of significant accounting policies (cont’d)

Identifiable intangible assets

Leases

E&E assets

2 Summary of significant accounting policies (cont’d)

E&E assets (cont’d)

Impairment of non-financial assets

2 Summary of significant accounting policies (cont’d)

Impairment of non-financial assets (cont’d)

Government assistance

Provisions and asset retirement obligations

Share-based payment transactions

Share capital and warrants

Underwriters’ options

2 Summary of significant accounting policies (cont’d)

Flow-through shares

Income taxes

Loss per share

Segment disclosures

3 Critical accounting estimates, judgments and assumptions

3 Critical accounting estimates, judgments and assumptions (cont’d)

a) Asset retirement obligations

a) Uncertainty caused by COVID-19

b) Valuation of the refundable duties credit for losses and the refundable tax credit for resources

3 Critical accounting estimates, judgments and assumptions (cont’d)

c) Impairment of non-financial assets

4 Cash and cash equivalents

5 Amounts receivable

6 Asset available for sale

Azimut Exploration Inc.

7 Investments

8 Property and equipment

9 Right-of-use assets

10 Exploration and evaluation assets

Change in E&E assets in 2022

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2022 (cont’d)

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2022 (cont’d)

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021 (cont’d)

10 Exploration and evaluation assets (cont’d)

Change in E&E assets in 2021 (cont’d)

Azimut Exploration Inc.

10 Exploration and evaluation assets (cont’d)

Azimut Exploration Inc.

10 Exploration and evaluation assets (cont’d)

11 Leases liabilities

12 Asset retirement obligations

Azimut Exploration Inc.

13 Share capital

a) Issuance of common shares

Azimut Exploration Inc. Audit Report / Information 2022