Azucar Minerals Ltd. — Interim / Quarterly Report 2021

Aug 18, 2021

Condensed Consolidated Interim Financial Statements of

Azucar Minerals Ltd.

For the three and six months ended June 30, 2021 (Unaudited)

NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated interim financial statements of Azucar Minerals Ltd. (“the Company”) for the three and six months ended June 30, 2021 have been prepared by the management of the Company and approved by the Company’s Audit Committee and the Company’s Board of Directors.

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the consolidated interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by CPA Canada for a review of the condensed consolidated interim financial statements by an entity’s auditor.

Azucar Minerals Ltd.

Condensed consolidated interim statements of financial position (Unaudited - Expressed in Canadian dollars)

June 30, 2021	December 31, 2020
$ ASSETS Current assets Cash and cash equivalents (Note 10) 2,769,694 Accounts receivable andprepaid expenses(Note 4) 49,402	$ 4,424,939 111,821
2,819,096	4,536,760
Non-current assets Property and equipment (Note 5) 143,967 Exploration and evaluation assets(Note 6) 21,960,682	154,817 21,125,900
22,104,649	21,280,717
TOTAL ASSETS 24,923,745	25,817,477
LIABILITIES Current liabilities Trade and otherpayables(Note 8(b)) 140,431	598,386
Total liabilities 140,431	598,386
EQUITY Share capital (Note 7) 24,043,321 Reserves (Note 7) 3,575,897 Deficit (2,835,904)	24,043,321 3,356,037 (2,180,267)
Total equity 24,783,314	25,219,091
TOTAL EQUITY AND LIABILITIES 24,923,745	25,817,477

Subsequent Event (Note14)

These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on August 18, 2021.

They are signed on the Company’s behalf by:

/s/Duane Poliquin /s/Fuad Sillem Director Director

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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Azucar Minerals Ltd.

Condensed consolidated interim statements of comprehensive loss (Unaudited - Expressed in Canadian dollars)

	Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020	Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020
Expenses Administrative services fee (Note 8(a)(b)) Depreciation (Note 5) Office Professional fees Transfer agent and filing fees Travel and promotion Share-basedpayments(Note 7(b))	$ $ $ 117,075 249,641 280,598 5,425 3,532 10,850 11,884 26,782 20,929 43,294 34,989 81,631 15,188 14,082 29,257 13,205 5,717 24,022 219,860 21,250 219,860	$ 489,681 7,064 31,120 53,735 29,776 28,876 21,250
	425,931 355,993 667,147	661,502
Other income (loss) Interest income Foreign exchangegain(loss)	2,504 11,535 5,544 (4) (395) 5,966	36,376 (26,899)
	2,500 11,140 11,510	9,477
Total comprehensive loss for theperiod	(423,431) (344,853) (655,637)	(652,025)
Basic and diluted net lossper share(Note 9)	(0.01) (0.01) (0.01)	(0.01)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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Azucar Mineral Ltd.

Condensed consolidated interim statements of cash flows

(Unaudited - Expressed in Canadian dollars)

Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020	Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020
$ $ $ Operating activities Net loss for the period (423,431) (344,853) (655,637) Items not affecting cash Depreciation 5,425 3,532 10,850 Share-based payments 219,860 21,250 219,860 Changes in non-cash working capital components Accounts receivable and prepaid expenses 66,978 75,298 62,419 Trade and otherpayables (2,491) (46,624) (34,721)	$ (652,025) 7,064 21,250 77,190 (38,505)
Net cash used in operatingactivities (133,659) (291,397) (397,229)	(585,026)
Investing activities Exploration and evaluation assets - costs (838,412) (359,519) (1,258,016) Propertyand equipment -purchase - - -	(1,220,047) -
Net cash used in investingactivities (838,412) (359,519) (1,258,016)	(1,220,047)
Financing activities
Net cash from financingactivities - - -	-
Change in cash and cash equivalents (972,071) (650,916) (1,655,245) Cash and cash equivalents,beginningofperiod 3,741,765 6,373,947 4,424,939	(1,805,073) 7,528,104
Cash and cash equivalents,end ofperiod 2,769,694 5,723,031 2,769,694	5,723,031
Supplemental cash flow information (Note 10)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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Azucar Mineral Ltd.

Condensed consolidated interim statement of changes in equity (Unaudited - Expressed in Canadian dollars)

Balance, January 1, 2020 Share-based payments Total comprehensive loss for the period	Share Capital Number of shares Amount $ 73,829,025 24,043,321 - - - - 73,829,025 24,043,321 - - - - 73,829,025 24,043,321 - - - - 73,829,025 24,043,321	Reserves Share-based payments Total Reserves $ $ 3,302,237 3,302,237 21,250 21,250 - - 3,323,487 3,323,487 32,550 32,550 - - 3,356,037 3,356,037 219,860 219,860 - - 3,575,897 **3,575,897 **	Deficit $ (828,924) - (652,025) (1,480,949) - (699,318) (2,180,267) - (655,637) (2,835,904)	Total
				$ 26,516,634 21,250 (652,025)
Balance, June 30, 2020 Share-based payments Total comprehensive loss for the period				25,885,859 32,550 (699,318)
Balance, December 31, 2020 Share-based payments Total comprehensive loss for the period				25,219,091 219,860 (655,637)
Balance, June 30, 2021				24,783,314

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

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Azucar Minerals Ltd. Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

1. Nature of Operations

Azucar Minerals Ltd. (the “Company” or “Azucar”) was incorporated on April 10, 2015 under the laws of the Province of British Columbia pursuant to a Plan of Arrangement to reorganize Almaden Minerals Ltd. (“Almaden”) which was completed on July 31, 2015. The Company’s business activity is the exploration of the El Cobre project in Veracruz, Mexico. To date, the Company has not generated significant revenues from operations and is considered to be in the exploration stage. The address of the Company’s registered and records office is Suite 1710 –1177 West Hastings Street, Vancouver, BC, Canada V6E 2L3.

2. Basis of Presentation

(a) Statement of Compliance with International Financial Reporting Standards

These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance and compliance with International Accounting Standards (“IAS”) 34 “ Interim Financial Reporting” (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

(b) Basis of preparation

These condensed consolidated interim financial statements are prepared on a going concern basis, which assumes the Company will continue its operations for a reasonable period of time. The Company’s ability to continue its operations is dependent upon obtaining additional financing or maintaining continued support from its shareholders and creditors, and generating profitable operations in the future.

These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. This interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period.

Except as described below, these condensed consolidated interim financial statements follow the same accounting policies and methods of application as the annual audited consolidated financial statements for the year ended December 31, 2020.

The changes in accounting policies are also expected to be reflected in the Company's consolidated financial statements as at and for the year ended December 31, 2021.

These condensed consolidated interim financial statements do not include all note disclosures required by IFRS for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021.

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Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

Azucar Minerals Ltd.

3. Significant Accounting Policies

The preparation of these condensed consolidated interim financial statements requires management to make judgements and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these judgements and estimates. The condensed consolidated interim financial statements include judgements and estimates which, by their nature, are uncertain. The impacts of such judgements and estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods. There have been no changes in estimates since the annual consolidated financial statements as at and for the year ended December 31, 2020.

4. Accounts Receivable and Prepaid Expenses

Accounts receivable and prepaid expenses consist of the following:

	June 30,	December 31,
	2021	2020
	$	$
Accounts receivable	21,332	65,519
Prepaid expenses	28,070	46,302
	49,402	111,821

5. Property and Equipment

Computer hardware Computer software Field equipment Building	Total
$ $ $ $ Cost	$
December 31, 2020 3,068 27,719 39,582 118,420 Additions - - - -	188,789 -
June 30, 2021 3,068 27,719 39,582 118,420	188,789
Accumulated depreciation
December 31, 2020 2,387 8,532 17,132 5,921 Depreciation 359 2,621 2,245 5,625	33,972 10,850
June 30, 2021 2,746 11,153 19,377 11,546	44,822
Carrying amounts
December 31, 2020 681 19,187 22,450 112,499	154,817
June 30, 2021 322 16,566 20,205 106,874	143,967

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Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

Azucar Minerals Ltd.

6. Exploration and Evaluation Assets

Exploration and evaluation assets – El Cobre	$
Acquisition costs:
Opening balance – December 31, 2020	1,539,062
Additions	-
Closing balance – June 30, 2021	1,539,062
Deferred exploration costs:
Opening balance - December 31, 2020	19,586,838
Costs incurred during the period:
Drilling and related costs	249,069
Professional/technical fees	27,571
Claim maintenance/lease costs	47,142
Geochemical, metallurgy	50,772
Travel and accommodation	46,775
Geology, geophysics, exploration	251,698
Supplies and miscellaneous	22,710
Environmental	12,635
Value-added tax	126,410
Total deferred exploration costs during the period	834,782
Closing balance – June 30, 2021	20,421,620
Total exploration and evaluation assets	21,960,682

The following is a description of the Company’s property interest and related spending commitments:

(a) El Cobre

The Company owns a 100% interest in the El Cobre property located in the state of Veracruz, Mexico.

7. Share Capital and Reserves

(a) Authorized share capital

At June 30, 2021, the Company’s authorized share capital consisted of an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

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Azucar Minerals Ltd. Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

7. Share Capital and Reserves (Continued)

(b) Stock option plan

The Company’s stock option plan permits the issuance of options to acquire up to a maximum of 10% of the Company’s issued common shares. Stock options issued to any consultant or person providing investor relations services cannot exceed 2% of the issued and outstanding common shares in any twelve month period. At June 30, 2021, the Company may reserve up to 697,903 shares that may be granted as stock options. The exercise price of any option cannot be less than the volume weighted average trading price of the shares for the five trading days immediately preceding the date of the grant. The maximum term of all options is ten years. The Board of Directors determines the term of the option and the time during which any options may vest. Options granted to consultants or persons providing investor relations services shall vest in stages with no more than 25% of such option being exercisable in any three month period. All options granted during the period ended June 30, 2021 vested on the date of grant.

The continuity of stock options for the period ended June 30, 2021 is as follows:

	Exercise	December 31,			Expired/	June 30,
Expiry date	price	2020	Granted	Exercised	cancelled	2021
April 28, 2021	$ 0.60	3,584,200	-	-	(3,584,200)	-
June 4, 2021	$ 0.29	493,000	-	-	(493,000)	-
July 7, 2021	$ 0.34	967,800	-	-	-	967,800
February 28, 2022	$ 0.36	515,000	-	-	-	515,000
May 9, 2022	$ 0.11	425,000	-	-	-	425,000
December 17, 2022	$ 0.16	465,000	-	-	(85,000)	380,000
May 11, 2023	$ 0.12	-	3,984,200	-	-	3,984,200
June 14, 2023	$ 0.13	-	413,000	-	-	413,000
Options outstanding
and exercisable		6,450,000	4,397,200	-	(4,162,200)	6,685,000
Weighted average
exerciseprice		$0.45	$0.12	-	$0.55	$0.17

The fair value of the options granted during the period ended June 30, 2021, was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:

Risk-free interest rate	0.33%
Expected life	2 years
Expected volatility	79.83%
Expected dividend yield	Nil
Weighted average fair value per option	$0.05

During the six months ended June 30, 2021, the Company recognized share-based payments expense of $219,860 (2020 - $21,250) associated with the vesting of stock options granted.

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Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

Azucar Minerals Ltd.

8. Related Party Transactions and Balances

(a) Compensation of key management personnel

Key management personnel include these persons having the authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Key management includes members of the Board, the President and Chief Executive Officer, the Chief Financial Officer and the Executive Vice President. These amounts are included within administrative services fee expense. The aggregate value of compensation to key management personnel was as follows:

	Three months ended June 30,	Three months ended June 30,	Six months ended June 30,	Six months ended June 30,
	2021	2020	2021	2020
	$	$	$	$
Management fees(1)	78,150	151,800	195,375	303,600
Share-based payments	155,650	15,000	155,650	15,000
	233,800	166,800	351,025	318,600

• (1) Management fees are recorded within Administrative services fees.

(b) Other related party transactions

Administrative Services Agreement

The Company paid administrative services fees to Almaden pursuant to an Administrative Services Agreement dated May 15, 2015, under which Almaden provides the Company with office space, executive management, marketing support, technical oversight, and financial/corporate secretary duties, amongst other administrative services.

Almaden and the Company are considered related parties through common officers.

At June 30, 2021, included in trade and other payables is $87,948 (December 31, 2020 - $81,623) due to Almaden.

Other

At June 30, 2021, the Company accrued $46,551 (December 31, 2020 - $460,463) payable to Almadex for drilling services in Mexico included in exploration and evaluation assets.

Almadex and the Company are considered related parties through common officers.

Amounts owing to related parties are unsecured, non-interest bearing and due on demand.

9 . Net Loss per Share

Basic and diluted net loss per share

The calculation of basic net loss per share for the three months ended June 30, 2021 was based on the net loss attributable to common shareholders of $423,431 (2020 – $344,853) and a weighted average number of common shares outstanding of 73,829,025 (2020 – 73,829,025).

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Azucar Minerals Ltd. Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

9 . Net Loss per Share (Continued)

The calculation of basic net loss per share for the six months ended June 30, 2021 was based on the net loss attributable to common shareholders of $655,637 (2020 – $652,025) and a weighted average number of common shares outstanding of 73,829,025 (2020 – 73,829,025).

The calculation of diluted net loss per share for the three and six months ended June 30, 2021 and 2020 did not include the effect of stock options and warrants as they were considered anti-dilutive.

10. Supplemental Cash Flow Information

Cash and cash equivalents is comprised of the following:

	June 30,	December 31,
	2021	2020
	$	$
Cash	1,269,694	1,024,939
Term Deposits	1,500,000	3,400,000
	2,769,694	4,424,939

As at June 30, 2021, $49,851 (December 31, 2020 - $473,085) of exploration and evaluation asset costs is included in trade and other payables

11. Financial Instruments

The fair values of the Company’s cash and cash equivalents, accounts receivable and trade and other payables approximate their carrying values because of the short-term nature of these instruments.

The Company does not carry any financial instruments at fair value.

The Company’s financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest rate risk and commodity and equity price risk

(a) Currency risk

The Company’s property interests in Mexico make it subject to foreign currency fluctuations and inflationary pressures which may adversely affect the Company’s financial position, results of operations and cash flows. The Company is affected by changes in exchange rates between the Canadian Dollar and foreign currencies. The Company does not invest in foreign currency contracts to mitigate the risks.

As at June 30, 2021, the Company is exposed to foreign exchange risk through the following assets and liabilities denominated in currencies other than the functional currency of the applicable subsidiary:

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Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

Azucar Minerals Ltd.

11. Financial Instruments (Continued)

(a) Currency risk (Continued)

Currency risk(Continued)
	US dollar	Mexican peso
All amounts in Canadian dollars
	$	$
Cash and cash equivalents	293,077	247,071
Total assets	293,077	247,071
Trade and other payables	111	47,718
Total liabilities	111	47,718
Net assets	292,966	199,353

A 10% change in the US dollar exchange rate relative to the Canadian dollar would change the Company’s profit or loss by $30,000.

A 10% change in the Mexican peso relative to the Canadian dollar would change the Company’s profit or loss by $20,000.

(b) Credit risk

The Company’s cash and cash equivalents are held in large Canadian and Mexican financial institutions. The Company’s accounts receivable consists primarily of sales tax due from the federal government of Canada. The Company is exposed to credit risks through its accounts receivable.

To mitigate exposure to credit risk on cash and cash equivalents, the Company has established policies to limit the concentration of credit risk with any given banking institution where the funds are held, to ensure counterparties demonstrate minimum acceptable credit risk worthiness and ensure liquidity of available funds.

As at June 30, 2021, the Company’s maximum exposure to credit risk is the carrying value of its cash and cash equivalents and accounts receivable.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure.

Trade and other payables are due within twelve months of the statement of financial position date.

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to varying interest rates on cash and cash equivalents. The Company has no interest-bearing debt.

A 1% change in the interest rate does not have any significant impact on the Company’s net loss.

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Azucar Minerals Ltd. Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

11. Financial Instruments (Continued)

(e) Commodity and equity price risk

The ability of the Company to explore its exploration and evaluation assets and the future profitability of the Company are directly related to the market price of gold and other precious metals. The Company monitors gold prices to determine the appropriate course of action to be taken by the Company. Equity price risk is defined as the potential adverse impact on the Company’s operations due to movements in individual equity price or general movements in the level of the stock market. The Company closely monitors the individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.

12. Management of Capital

The Company considers its capital to consist of components of equity. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the exploration of its exploration and evaluation assets and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares and acquire or dispose of assets.

In order to maximize ongoing exploration efforts, the Company does not pay out dividends. The Company’s investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments with short-term maturities, selected with regards to the expected timing of expenditures from continuing operations.

The Company expects its current capital resources will be sufficient to carry its exploration plans and operations for the foreseeable future. There have been no changes to the Company`s capital management approach during the year. The Company is not subject to externally imposed capital requirements.

13. Segmented Information

The Company operates in one reportable operating segment, being the acquisition and exploration of mineral resource properties in Canada, the United States, and Mexico.

Geographic information is as follows:

	Property and	Exploration and	June 30,
	equipment	evaluation assets	2021
	$	$	$
Mexico	128,247	21,960,682	22,088,929
Canada	15,720	-	15,720
	143,967	21,960,682	22,104,649

The Company’s revenue from interest income on cash and cash equivalents was earned in Canada.

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Notes to the condensed consolidated interim financial statements For the three and six months ended June 30, 2021 (Unaudited - Expressed in Canadian dollars)

Azucar Minerals Ltd.

14. Subsequent Event

On July 8, 2021, the Company granted certain employees, consultants and directors an aggregate of 793,800 stock options in accordance with the terms of the Company’s stock option plan, each of which is exercisable into one common share at an exercise price of $0.11 per share until July 8, 2023.

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