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Azucar Minerals Ltd. — Management Reports 2025
May 22, 2025
47320_rns_2025-05-22_4bb676ec-e63f-4329-8f48-e07817d04980.pdf
Management Reports
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AZUCAR MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
March 31, 2025
INTRODUCTION
This Management's Discussion and Analysis ("MD&A") for Azucar Minerals Ltd. ("Azucar" or the "Company") has been prepared based on information known to management as of May 22, 2025. This MD&A is intended to help the reader understand the condensed consolidated interim financial statements of Azucar.
Management is responsible for the preparation and integrity of the condensed consolidated interim financial statements, including the maintenance of appropriate information systems, procedures and internal controls. Management also ensures that information used internally or disclosed externally, including the condensed consolidated interim financial statements and MD&A, is complete and reliable.
The Company's board of directors follows recommended corporate-governance guidelines for public companies to ensure transparency and accountability to shareholders. The board's audit committee meets with management regularly to review the condensed consolidated interim financial statements, including the MD&A, and to discuss other financial, operating and internal-control matters.
All currency amounts are expressed in Canadian dollars unless otherwise noted.
FORWARD-LOOKING STATEMENTS
Information set forth in this MD&A may involve forward-looking statements under applicable securities laws. Forward-looking statements are statements that relate to future, not past, events. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "anticipate", "believe", "consider", "attempt", "plan", "estimate", "expect", and "intend", statements that an action or event "may", "might", "could", "should", or "will" be taken or occur, or other similar expressions. All statements, other than statements of historical fact, included herein including, without limitation, statements about the size, timing, and likelihood of success of future exploration on and the development of the Company's properties, the Amparo lawsuit, legal steps the Company may take in connection with the Amparo lawsuit and the injunction, future operations on the El Cobre Project, the Decree and the legal responses employed by the Company or third parties to address it, statements about INAH clearance, detailed archeological investigations and any archeological salvage plan, statements about the completion of data compilation and targeting to assist future drill programs, statements about the impact of the Plan of Arrangement (as defined below) on Azucar, statements about the Company's belief that the Company's cash resources are sufficient to meet its working capital and mineral exploration requirements for its next fiscal years, the completion of the option agreement relating to the Pilot, Red Ring and Confusion Hills properties, any future exploration work on those properties, and the Company's objectives and expectations regarding its capital resources are forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: the need for additional financing; operational risks associated with mineral exploration including receipt and maintenance of required permits; fluctuations in commodity prices; title matters; environmental liability claims and insurance; political and regulatory risk in Mexico and the United States; crime and violence in Mexico; corruption; mineral reserves and resources; reliance on key personnel; community relations; TSX-V and disinterested shareholder approval of the option agreement on the Pilot, Red
Ring and Confusion Hills properties, the volatility of the Company's common share price and volume and other factors beyond the Company's control. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable securities laws. There can be no assurance that such statements will prove to be accurate, and future events and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from management's expectations are disclosed in the Company's documents filed from time to time via SEDAR+ with the Canadian regulatory agencies to whose policies the Company is bound. Investors are cautioned against attributing undue certainty to forward-looking statements.
The users of this information, including but not limited to investors and prospective investors, should read it in conjunction with all other disclosure documents available under the Company's profile on SEDAR+ (www.sedarplus.ca) and/or on the Company's website at www.azucarminerals.com.
HIGHLIGHTS
On September 29, 2023, Azucar reported that, further to its press release of June 2, 2023, it received notification from the First District Court of Veracruz ("First District Court") that its Mexican subsidiary, Minera Alondra ("Alondra"), was named in a lawsuit ("Amparo") relating to twenty-four mineral concessions in Veracruz, Mexico (the "Concessions"), some of which are held by Alondra. The concessions owned by Alondra that are named in the Amparo cover the El Cobre project.
The Amparo was filed in 2022 before the First District Court by thirty-three people from the municipalities of Actopan and Alto Lucero (the "Plaintiffs") who claim that the Concessions affect their right to water and a clean environment amongst other things, and that they should have been consulted prior to the Concessions being issued. The Amparo was brought against the Ministry of Economy ("Economia"), the mining authorities (the General Directorate of Mining and the Public Mining Registry) and both chambers of Congress and is seeking to cancel the Concessions.
The First District Court has notified Alondra that the Amparo has been admitted and that Alondra is an affected third party. The First District Court has also stated that, although the Plaintiffs have not presented any evidence of damage, the continuation of mining-related activities in the area could affect the Plaintiffs' right to health and to a healthy environment, and therefore it has granted a definitive injunction requiring the cessation of mining-related activities on the Concessions that may affect the Plaintiffs.
The Company filed arguments with the First District Court opposing this definitive injunction, but these arguments were dismissed by the First District Court. The Company has appealed this decision on the injunction before the Collegiate Court and is awaiting the outcome. In the meantime, the Company has presented additional arguments and is in the process of collecting expert evidence regarding the Amparo for submission to the First District Court to protect its rights.
The Company will provide material updates on the Amparo as they occur.
Subsequent to quarter end, Azucar signed an Option-Joint venture exploration agreement (the "Option") with Almadex Minerals Ltd. ("Almadex") whereby Azucar has the option to acquire a 60% interest in three of Almadex's wholly owned blocks of claims in Nevada: The Pilot, Confusion Hills and Red Ring prospects, which are more fully described below (the "Projects"). The Pilot project also includes recently optioned claims internal to the Almadex claim block.
The terms of the Option require Azucar to meet the following cash payment and work commitment schedule:
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Cash Payments:
Making the following cash payments to Almadex:
(i) $100,000 USD, upon acceptance by the TSX Venture Exchange and disinterested shareholder approval by Azucar; and
(ii) $300,000 USD for each Project which Azucar wishes to exercise the Option, after the completion of the Exploration Requirements (defined below) but no later than the exercise of the Option.
Work Commitments:
Completing the following exploration activities on the Projects:
(i) at least 2,000 metres of drilling in the aggregate on one or more of the Projects, within eighteen (18) months of the Effective Date; and
(ii) at least 3,000 metres of drilling on the specific Project which Azucar wishes to exercise the Option, within five (5) years of the Effective Date (collectively, the "Exploration Requirements").
In addition to the above, upon at least 15,000 metres of drilling being completed on a specific Project either during the Option period or thereafter, Azucar shall make a cash payment of $750,000 USD to Almadex.
Pilot Mountain Porphyry Copper-Gold Prospect, Nevada
The Pilot project covers an area of hydrothermal alteration developed in folded sedimentary rocks that have been intruded by tonalite porphyry bodies exposed in drainages. In 2024 Almadex conducted extensive alteration and geologic mapping along with soil sampling, induced polarization ("IP") geophysics and a drone-based magnetics survey. The alteration is dominated by pyrophyllite and white mica. This alteration pattern is considered to be proximal to porphyry mineralisation. The mapping identified several outcrops with evidence of porphyry-style veining. This includes veining interpreted to represent early magnetite, A-type, syntaxial B-veins and late stage D-type quartz-sericite-pyrite veining. A soil sampling program defined a broad zone of anomalous copper-molybdenum and gold coincident with high chargeability from an IP survey and a distinct magnetic high. Recently Almadex finalised an option agreement for claims internal to the claim block where mining for Turquoise has been carried out historically and is ongoing. A drill permit for the Pilot project has been recently approved. Azucar will focus on collating and interpreting the data with the intention of developing concrete first pass drill plans for 2025.
Confusion Hills Porphyry-Epithermal Gold-Copper Prospect, Nevada
The Confusion Hills high sulphidation prospect covers a large alteration zone developed in volcanic rocks. On April 15, 2025 Almadex announced that to date 107 grab rock samples had been taken from outcrop, subcrop and float (grab samples are selected samples and may not represent true underlying mineralisation). These preliminary results were very encouraging as 6 of these samples returned over $0.1\mathrm{g / t}$ gold with 3 returning more than $0.5\mathrm{g / t}$ gold (up to $7.1\mathrm{g / t}$ gold in a grab sample of subcrop and averaging $1.6\mathrm{g / t}$ gold for all 6). Mapping in 2024 and 2025 defined a high sulphidation/porphyry lithocap over an area of $1.6\mathrm{km}\times 0.5\mathrm{km}$. The lithocap displays complex alteration with central zones of vuggy quartz with alunite and massive pyrophyllite zones. Soil sampling was carried out in 2024 and returned anomalous Au, Mo and Cu with an association of Au within the central zone of alteration and a Mo anomaly on one edge. Recently, a two-line IP geophysical survey was conducted which identified a high chargeability feature (interpreted to represent sulphide development) directly beneath the area of quartz alunite alteration and high gold in grab samples at surface. A drone-based mag survey was also conducted to aid with interpretation. A drill permit has been approved for the Confusion Hills prospect. Azucar will commence work on the project immediately including detailed rock sampling to follow up previous results and IP geophysical surveying.
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Red Ring Porphyry-Epithermal Gold-Copper Prospect, Nevada
The Red Ring prospect covers an area of hydrothermal alteration developed in volcanic rocks adjacent to carbonate rocks. Alteration mapping in 2024 identified a large alteration zone interpreted to be a porphyry lithocap extending 2.8 km NW-SE and by at least 1 km NE-SW. Mapping also defined a very strong surface pyrophyllite footprint of 1 km (NW-SE) by 0.5 km (NE-SW). Preliminary rock sampling returned high values of pathfinder trace elements typically associated with the lithocap alteration identified. Soil sampling conducted in 2024 also highlighted areas of anomalous trace elements indicative of a high sulphidation environment above or near a porphyry system. Azucar plans further sampling for 2025 along with some test geophysical studies in order to define areas for potential drilling.
Azucar shares management and Board members with Almadex and the independent Directors of both companies unanimously approved the Option, with the non-independent Board members declaring their interest and abstaining.
Almadex also holds a 19% interest in Azucar (see Almadex news release of November 7, 2024). Accordingly, Almadex is a "related party" of Azucar and the option agreement will constitute a "related party transaction" (as each term is defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101")). The Company intends to rely on the specified markets exemption from the formal valuation requirement set forth in subsection 5.5(b) of MI 61-101. Shareholder approval of the Option by Azucar's disinterested shareholders is required under MI 61-101. The Company expects to seek such disinterested shareholder approval at its Annual General and Special meeting of shareholders on June 26, 2025.
The Option is also subject to acceptance by the TSX Venture Exchange.
OVERALL PERFORMANCE
Background
The Company is a mineral exploration and development company listed on the TSX Venture Exchange under the symbol "AMZ" and quoted on the OTCQB market place under the symbol "AXDDF". The Company was incorporated on April 10, 2015 under the laws of the Province of British Columbia.
On May 18, 2018, Azucar closed a statutory plan of arrangement (the "Plan of Arrangement") under which its early stage exploration projects, royalty interests and certain other non-core assets (the "Spin-out Assets") were transferred to Almadex Minerals Ltd. (formerly 1154229 B.C. Ltd.) ("Almadex"). Pursuant to the Plan of Arrangement, Azucar shareholders exchanged their existing Azucar common shares and received one "new" common share of Azucar and one common share of Almadex.
In conjunction with the Plan of Arrangement, the Company entered into a subscription agreement and an Investor Rights Agreement with Newcrest Canada Holdings Inc., a wholly owned subsidiary of Newcrest Mining Limited ("Newcrest"). Pursuant to the subscription agreement on May 18, 2018, Newcrest acquired 14,391,568 common shares of Azucar by way of a non-brokered private placement for aggregate gross proceeds of $19,074,425 (the "Newcrest Private Placement") to own 19.9% of the Company. The Investor Rights Agreement provided, among other things, a standstill and lock-up on customary terms and conditions, participation and top-up rights in favour of Newcrest to maintain its pro-rata interest in Azucar, and the right of Newcrest to designate one nominee to the Board of Directors of Azucar.
On October 17, 2018 and April 12, 2019, Newcrest exercised its top-up rights to acquire a further 222,834 and 59,654 common shares of Azucar at a price of $0.5581 and $0.3274 per share respectively. Azucar has not issued any shares from treasury since mid-2019.
On November 7, 2024, Newmont Corporation (formerly "Newcrest") sold its entire shareholding of 14,674,056 common shares of Azucar to Almadex and certain directors and officers of Azucar.
Azucar's management team has been focused on exploration and discovery in Mexico, the United States and Canada for the past 35 years. Traditionally, management has managed risk by forming joint ventures in which partner companies explore and develop projects in return for the right to earn an interest in them. This approach has exposed shareholders to discovery and capital gains without as much funding and consequent share dilution as would be required through sole development of exploration properties. In some cases, projects were advanced further when they were considered of such merit that the risk/reward ratio favored that approach. In other cases, if a property was optioned out with unsatisfactory results and returned to management but considered by management to still have merit, the property rights were retained in order to demonstrate further potential. This is the fashion in which the El Cobre Project discovery was made, as the underlying project was optioned to four different partners prior to Azucar drilling the higher grade areas at the Norte target in 2016.
Company Mission and Focus
Azucar is focussed on exploration of porphyry copper and gold targets in Nevada, USA. The Company also holds a 100% interest in the El Cobre copper-gold porphyry project (subject to net smelter return royalty interests) in Mexico.
Qualified Person
Morgan Poliquin, Ph.D., P.Eng., a qualified person under the meaning of National Instrument 43-101 ("NI 43-101"), and the President, Chief Executive Officer and a director of Azucar, has reviewed and approved the technical content in this MD&A. Much of the scientific and technical contents in this MD&A are derived from the mineral resource estimate ("MRE") on the Norte Zone of the El Cobre project. The independent Qualified Persons responsible for preparing the MRE are set out below under the heading, "QAQC and Reporting relating to the MRE and NI 43-101 Technical Report".
El COBRE PROPERTY
Property Description, Ownership, and Infrastructure
The El Cobre Property is located adjacent to the Gulf of Mexico approximately 75 km northwest of the city of Veracruz in the state of Veracruz, Mexico. Veracruz is a major port city and naval base with an international airport with numerous daily flights to and from Mexico City and other national and international destinations. The Property can be accessed easily from Veracruz via the Veracruz-Alamo Highway (HWY 180) and the Tinajitas-Palma Road. A network of secondary and dirt roads provide access to most of the Property.
The Property consists of nine (9) mineral concessions, covering a combined area of 11,864.4 hectares (ha) and Minera Alondra S.A. de C.V. ("Minera Alondra"), a wholly owned subsidiary of Azucar, holds rights to 100 percent (%) ownership of the Property. El Cobre is subject to Net Smelter Returns ("NSR") royalty interests, assuming production from the Property exceeds 10,001 tonnes per day of ore, totaling 2.25% which can be reduced to 2.0% through the payment of US $3.0 million.
Recent Updates
On September 29, 2020, the Company announced an initial mineral resource estimate ("MRE") for the Norte Zone. Azucar filed on SEDAR+ a NI 43-101 El Cobre Project Technical Report dated November 13, 2020, which contained details of the MRE.
The Norte Zone is one of five copper-gold porphyry zones identified to date within the El Cobre Project and has been the focus of the majority of exploration work conducted at the El Cobre Project since 2016. Highlights of the MRE are as follows:
- Indicated Mineral Resource of 1.2Moz AuEq (million ounce gold equivalent) using the base case NSR (net smelter return) cutoff of US$12/tonne, comprised of 47.2 million tonnes grading at 0.77 g/t AuEq (0.49 g/t Au, 0.21% Cu and 1.4 g/t Ag);
- Inferred Mineral Resource of 1.4 Moz AuEq using the base case NSR cutoff of US$12/tonne, comprised of 64.2 million tonnes grading at 0.66 g/t AuEq (0.42 g/t Au, 0.18% Cu and 1.3 g/t Ag);
- Amenable to an open pit mining method;
- Potential for resource expansion at depth within the Norte Zone as well as at other significant porphyry bodies identified across 5km strike length at the Project.
The MRE and NSR cut-off sensitivities are presented in Table 1 with the base case cutoff at $US12.00 NSR highlighted. The favorable infrastructure at the El Cobre Project suggests that the threshold for economic mineralization will be low relative to many other deposits. Copper and gold mineralization at the Norte Zone is associated with a multiphase variably potassic-phyllic altered porphyritic diorite intrusive complex that is cut by late mafic and intermediate dykes and post mineral feldspar porphyry. The Norte Zone is approximately 0.6 km x 0.4 km along an E-W strike. Sulphide mineralization, which extends up to 900 metres depth, consists of disseminated and vein-hosted chalcopyrite and trace bornite (Cu mineralization) exposed in surface outcrops and intersected in drill core.
Table 1. Indicated and Inferred Mineral Resource and Sensitivity Analysis
| Classification | Cutoff | in situ | In situ Grades | In situ Metal Content | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (NSR $US) | (ktonnes) | NSR | Au (gpt) | Cu (%) | Ag (gpt) | AuEqv (gpt) | Au (kOz) | Cu (Mlbs) | Ag (kOz) | AuEq (kOz) | |
| Indicated | 7.5 | 52,828 | 29.17 | 0.45 | 0.20 | 1.3 | 0.72 | 772 | 230 | 2,189 | 1,217 |
| 9 | 51,134 | 29.86 | 0.47 | 0.20 | 1.3 | 0.73 | 766 | 228 | 2,150 | 1,207 | |
| 12 | 47,211 | 31.47 | 0.49 | 0.21 | 1.4 | 0.77 | 748 | 221 | 2,049 | 1,175 | |
| 20 | 42,923 | 33.26 | 0.52 | 0.22 | 1.4 | 0.82 | 723 | 211 | 1,924 | 1,131 | |
| 25 | 34,711 | 36.99 | 0.59 | 0.24 | 1.5 | 0.91 | 660 | 187 | 1,630 | 1,020 | |
| 30 | 19,092 | 47.07 | 0.78 | 0.29 | 1.6 | 1.17 | 482 | 123 | 982 | 718 | |
| 40 | 10,634 | 56.97 | 0.98 | 0.34 | 1.7 | 1.42 | 336 | 79 | 569 | 487 | |
| Classification | Cutoff | in situ | In situ Grades | In situ Metal Content | |||||||
| (NSR $US) | (ktonnes) | NSR | Au (gpt) | Cu (%) | Ag (gpt) | AuEqv (gpt) | Au (kOz) | Cu (Mlbs) | Ag (kOz) | AuEq (kOz) | |
| Inferred | 7.5 | 103,105 | 20.31 | 0.30 | 0.14 | 1.2 | 0.49 | 998 | 324 | 3,819 | 1,630 |
| 9 | 86,821 | 22.57 | 0.34 | 0.16 | 1.2 | 0.55 | 949 | 298 | 3,414 | 1,531 | |
| 12 | 64,191 | 26.88 | 0.42 | 0.18 | 1.3 | 0.66 | 860 | 254 | 2,768 | 1,354 | |
| 20 | 51,617 | 30.16 | 0.48 | 0.20 | 1.4 | 0.74 | 792 | 224 | 2,338 | 1,226 | |
| 25 | 37,381 | 35.03 | 0.57 | 0.22 | 1.5 | 0.86 | 685 | 182 | 1,790 | 1,036 | |
| 30 | 20,314 | 43.84 | 0.74 | 0.26 | 1.6 | 1.09 | 485 | 116 | 1,067 | 709 | |
| 40 | 10,280 | 52.93 | 0.93 | 0.29 | 1.8 | 1.32 | 307 | 67 | 582 | 435 |
Notes for Mineral Resource Table:
1. The Mineral Resource Estimate was prepared by Sue Bird M.Sc., P.Eng. of Moose Mountain Technical Services, the QP, in accordance with NI 43-101, and with an effective date of August 3, 2020.
2. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
3. The NSR and AuEq values were calculated using US$1,500/oz gold, US$3.00/lb copper and US$18/oz silver, and using metallurgical recoveries of 88% for gold and copper, and 70% for silver. Smelter terms and offsite costs have been applied as follows: gold payable = 94%, copper payable = 96.5%, silver payable
= 90%, gold refining costs = US$5.00/oz, silver refining costs = US$0.50/oz, copper treatment and offsite (transportation) costs = US$0.30/lb. NSR royalty = 2.5%. The final equations for NSR and AuEq are:
$$
\text{NSR} = \text{Au} \times (\text{US} \$44.04 \times 88\% + \text{Cu}\% \times (\text{US} \$2.53 \times 88\% + \text{Ag} \times (\text{US} \$0.49 \times 70\%));
$$
$$
\text{AuEq} = \text{Au}(g/t) + 1.27 \times \text{Cu}(\%) + 0.009 \times \text{Ag}(g/t).
$$
- The MRE has been confined by a "reasonable prospects of eventual economic extraction" pit using 45 degree slopes, with the pit size determined at a gold price of US$1,950/oz, a copper price of US$4.50/lb and a silver price of US$28.50/oz. The mining costs used are US$2.00/tonne. A process cost of US$12.00/tonne is used as the cutoff of processed material.
- The specific gravity of the deposit is estimated to be 2.68
- Numbers may not add due to rounding.
The Norte Zone MRE is classified in accordance with guidelines established by the Canadian Institute of Mining (CIM) "Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines" dated November 29, 2019 and CIM "Definition Standards for Mineral Resources and Mineral Reserves" dated May 10, 2014.
There are no other known factors or issues known by the QP that materially affect the MRE other than normal risks faced by mining projects.
The El Cobre Project is subject to the same types of risks that large base metal projects experience at an early stage of development in Mexico. The nature of the risks relating to the Project will change as the Project evolves and more information becomes available. The Company has engaged experienced management and specialized consultants to identify, manage and mitigate those risks.
The El Cobre Project is located in a general region where Pre-Columbian archaeological sites are known. To date exploration programs on the project have been conducted in consultation with Mexico's Federal Agency for Archeology, INAH, which resulted in the identification of several small areas for further study and classification, including one area lying within the MRE pit outline. As is standard practice in Mexico, areas required for development and mining activity would require a clearance from INAH following the implementation of more detailed archaeological investigations and an archaeological salvage program, if necessary. The Company is committed to working with INAH as part of its future exploration and development plans.
Mineral Resource Estimate Details
The drillhole database used to calculate the MRE is comprised of 45 exploration diamond drillholes completed between 2008 and 2019 totalling 28,448 metres, containing a total of 27,173.12m of drill core analyzed for gold and copper by fire assay and Inductively Coupled Plasma – Atomic Emission Spectroscopy ("ICP-AES"), with four acid digestion. Sample intervals within the mineralized domains ranged from 0.45m to 3.81m in length, with 98% of the intervals having a length of 3.0 metres or less.
The Norte Zone 3D geological model created by Azucar integrates assay and geological data collected from diamond core drilling; surface geologic mapping; soil geochemical; and geophysical surveys. Based on these data, the Norte Zone is modelled as an east-west elongate 600 metre x 400 metre subvertical zone of porphyry copper-gold mineralization extending to a maximum depth of approximately 900 metres vertically below surface. Mineralization is constrained by 3D geological solids representing host diorite intrusive, and peripheral andesite and dacite tuff volcanic rocks.
Length-weighted averaged composites of 3 metre core length, restricted to each rock type, were calculated and used for exploratory data analysis and resource estimation. Assays were capped by zone and domain based on cumulative probability plots to remove outliers. The modelled variograms from each domain were used for resource estimation.
A block model with a regularized cell size of 20 m by 20 m by 10 m was used to estimate grade for each metal using Ordinary Kriging (OK). The percentage of each block below the overburden
surface and within each domain is used for interpolation and the resource calculations. A total of 489 density measurements have been collected at site. Based on this data, the specific gravity (sg) within the sulphide material is consistent with a mean value of 2.68. The final grade estimates are validated visually by comparing each block's metal estimates to the raw downhole assay data and statistically by comparing the modelled grades to the de-clustered composite grades (NN model), by swath plots and by grade-tonnage curves.
About the El Cobre Project
To date, Azucar has discovered five copper-gold porphyry zones within the El Cobre Project along an approximately 4-5 km trend, stretching from Norte down to Encinal in the southeast (see Figure 1, Exploration Targets). These zones are defined by distinct Cu-Au soil anomalies, discrete, positive magnetic features, a large IP chargeability anomaly, and drilling. A summary of the various zones is provided below.
NORTE ZONE: All five holes drilled in the Norte Zone prior to 2016 intersected porphyry-style mineralisation. Hole 08-CBCN-022, one of the deepest holes drilled at Norte in 2008, returned values of 0.14% Cu with 0.19 g/t Au over 259 m and 08-CBCN-19 intersected 41.15 metres averaging 0.42 g/t gold and 0.27% copper to the end of the hole at 187.45 metres. Drilling at the Norte Zone in 2016 and 2017 resulted in intersections including 114.60 metres grading 1.33 g/t Au and 0.48% Cu (Hole EC-17-018, see press release of April 5, 2017), 80.50 metres grading 1.34 g/t Au and 0.46% Cu (Hole EC-16-012, see press release of October 24, 2016), and 70.45 metres grading 2.32 g/t Au and 0.59% Cu (Hole EC-17-026, see press release of July 25, 2017). Continued drilling through 2018 and 2019 has culminated in the MRE.
VILLA RICA ZONE: The Villa Rica Zone is located about 1.8 km south of the Norte zone and comprises a roughly 2.5 kilometre by 1 kilometre area of hydrothermal alteration defined also by a strong north-northwest trending magnetic-chargeability high and associated copper-gold soil geochemical anomalies. Past mapping and sampling defined several areas of exposed porphyry mineralisation within the Villa Rica zone, including the Raya Tembrillo target and the Naranjo target, both at the north end of the Villa Rica zone. Initial drilling in 2017 on the Raya Tembrillo target intersected two styles of mineralisation; hypogene copper-gold porphyry mineralisation (115.00 metres of 0.57 g/t gold and 0.27% copper, see press release of November 28, 2017) and near surface exotic enriched copper mineralisation with an apparent tabular distribution (94.00 metres of 1.36% copper; see press release of December 13, 2017).
The Primo target area, first announced on October 16, 2019, is also considered to be part of the Villa Rica zone and is located approximately 1 km south of Raya Tembrillo. Primo has been the location of some of the highest copper grades intersected at the Project, such as 200 metres of 0.40 g/t gold and 0.24% copper from 718 metres downhole, which included 86.50 metres of 0.70 g/t gold and 0.42% copper from 831.50 metres (see press release of October 16, 2019).
EL PORVENIR ZONE: The El Porvenir zone is located about 2 km east of the Villa Rica zone. Significant copper and gold grades have been intersected at El Porvenir, such as 0.16% Cu and 0.39 g/t Au over 290 m in hole DDH04CB1. Results from minimal drilling in 2017 include hole EC-17-040 which intersected 108.00 metres grading 0.88 g/t Au and 0.29% Cu, (see press release of December 5, 2017) and hole EC-17-044 which intersected 40.25 metres grading 0.50 g/t Au and 0.25% Cu (see press release of February 8, 2018).
SUEGRO ZONE: Drilling in 2019 identified this new porphyry centre between the El Porvenir and Encinal Zones. The Suegro Zone is located approximately 250 metres south of the Porvenir Zone, within a large area of alteration associated with more subdued magnetics, and low zinc and manganese in soil. The Suegro mineralisation intersected in the drilling to date is associated with an altered (locally intense phyllic alteration overprinting potassic) intrusive.
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Intercepts to date include 28.20 m of 0.54 g/t Au and 0.17% Cu (hole EC-19-064; see press release of March 19, 2019).
ENCINAL ZONE: The Encinal zone is located approximately 1 km south of the El Porvenir zone. Previous drilling at Encinal has intersected a highly altered breccia pipe containing fragments of stockwork veining and porphyry mineralisation across which 18.28 metres returned 1.42 g/t Au and 0.10% Cu (Hole CB5). The breccia pipe occurs in a large alteration zone, IP chargeability high and magnetics low which has not been tested to depth. On June 19, 2017 Azucar announced that a new area of exposed stockwork quartz veining and gold mineralisation had been identified in the Encinal Zone. On June 29, 2017 Azucar announced the results of initial drilling on this exposed stockwork (Hole EC-17-025) which returned results including 34.47 metres grading 0.73 g/t Au and 0.20% Cu.
QAQC and Reporting relating to the MRE and NI 43-101 Technical Report
The NI 43-101 Technical Report relating to the El Cobre property, titled "NI 43-101 Technical Report Mineral Resource Estimate on the El Cobre Copper-Gold-Silver Property Veracruz State, Mexico" is available under the Company's profile on SEDAR+ (www.sedarplus.ca). The Technical Report was authored by Kris Raffle, P.Geo. of APEX Geoscience Ltd., and Sue Bird, M.Sc., P.Eng. of Moose Mountain Technical Services both of whom act as independent consultants to the Company and are Qualified Persons (QPs) as defined by National Instrument 43-101 ("NI 43-101").
The analyses which underpin the MRE were carried out at ALS Chemex Laboratories at Guadalajara, Zacatecas, Mexico; and North Vancouver, Canada using industry standard analytical techniques. For gold, samples were first analysed by fire assay and atomic absorption spectroscopy ("AAS"). Samples that returned values greater than 10 g/t gold using this technique were then re-analysed by fire assay but with a gravimetric finish. For copper, samples were first analysed by Inductively Coupled Plasma – Atomic Emission Spectroscopy ("ICP-AES"), with four acid digestion. Samples that returned values greater than 10000 g/t copper using this technique were then re-analysed by HF-HNO3-HCLO4 digestion with HCL leach and ICP-AES finish. Blanks, field duplicates and certified standards were inserted into the sample stream as part of Azucar's quality assurance and control program. The QPs detected no significant QA/QC issues during review of the data. Azucar is not aware of any drilling, sampling, recovery or other factors that could materially affect the accuracy or reliability of the data referred to herein.
Other
During the three months ended March 31, 2025, the Company recovered net of $36,364 (2024 - $148,106) of exploration costs from the refund of value-added tax at the El Cobre Project.
Upcoming / Outlook
The Company is not planning any fieldwork at El Cobre until the situation regarding the Amparo which is described in the section titled "Highlights" above is clarified.
RISK FACTORS
The Company is engaged in exploration for mineral deposits. These activities involve significant risks which, even with careful evaluation, experience and knowledge, may not, in some cases, be eliminated. The Company's success depends on a number of factors, many of which are beyond its control. The primary risk factors affecting the Company include inherent risks in the mining industry, metal price fluctuations and operating in foreign countries and currencies. In addition to the risks described herein, readers of this MD&A are encouraged to read the "Risk Factors" contained in the Company's annual management discussion and analysis filed on and available
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under the Company's SEDAR profile on www.sedar.com. Important risk factors to consider among others are:
- inherent risks within the mining industry;
- market volatility for marketable securities and investments;
- political, economic and social environment;
- risks related to international labour organization ("ILO") convention 169 compliance.
- title to mineral properties;
- mineral resource estimates;
- prices of gold, copper, silver and other metals;
- cash flows and additional funding requirements;
- exchange rate fluctuations;
- environmental, climate change, health and safety regulation compliance;
- laws, regulations and permits,
- Information systems and cyber security
- possible dilution to present and prospective shareholders;
- material risk of dilution presented by large number of outstanding share purchase options and warrants;
- trading volume;
- volatility of share price;
- competition;
- dependence on management; and
- conflict of interest.
Impairment of Exploration and Evaluation Assets
The Company assesses its exploration and evaluation assets quarterly to determine whether any indication of impairment exists. Common indications of impairment, which is often subjective, include, but are not limited to, that the right to explore the assets has expired or will soon expire and is not expected to be renewed, that substantive expenditure of further exploration is not planned, or that results are not compelling enough to warrant further exploration by the Company.
At March 31, 2025, the Company concluded that impairment indicators existed with respect to exploration and evaluation assets however since the refund of value-added taxes exceed the deferred exploration cost, a recovery of exploration and evaluation assets of $36,364 was recognized.
Material Financial and Operations Information
Summary of Quarterly Results
The following is a summary of the Company's financial results for the Company's eight most recently completed fiscal quarters stated in Canadian dollars in accordance with IFRS:
| | Q1
Mar 2025
Quarter | Q4
Dec 2024
Quarter | Q3
Sep 2024
Quarter | Q2
Jun 2024
Quarter |
| --- | --- | --- | --- | --- |
| | $ | $ | $ | $ |
| Revenue | Nil | Nil | Nil | Nil |
| Other income | 51,488 | 32,622 | 344,250 | 220,730 |
| Net income (loss) | (43,993) | (86,724) | 264,956 | 139,745 |
| Net income (loss) per share – basic | 0.00 | 0.00 | 0.01 | (0.00) |
| Net income (loss) per share – diluted | 0.00 | 0.00 | 0.01 | (0.00) |
| Total assets | 1,742,766 | 1,797,989 | 1,863,489 | 1,572,501 |
| Cash dividends declared | - | - | - | - |
| | Q1
Mar 2024
Quarter | Q4
Dec 2023
Quarter | Q3
Sep 2023
Quarter | Q2
Jun 2023
Quarter |
| --- | --- | --- | --- | --- |
| | $ | $ | $ | $ |
| Revenue | Nil | Nil | Nil | Nil |
| Other income | 259,164 | (22,739,569) | 62,162 | 8,805 |
| Net loss | 180,210 | (22,860,374) | (35,405) | (235,125) |
| Net loss per share – basic | (0.00) | (0.31) | (0.00) | (0.00) |
| Net loss per share – diluted | (0.00) | (0.31) | (0.00) | (0.00) |
| Total assets | 1,437,922 | 1,261,158 | 24,190,817 | 24,195,409 |
| Cash dividends declared | - | - | - | - |
Quarterly variances in other income are dependent on the interest income earned from various levels of cash balances and value-added tax recoveries from Mexico. The main causes of change in net income (loss) from quarter to quarter include interest income from cash balances and administrative expenses in the normal course of operations as discussed in Review of Operations and Financial Results section below.
Results of Operations and Financial Results
Results of Operations for the three months ended March 31, 2025, compared to the three months ended March 31, 2024
For the three months ended March 31, 2025, the Company recorded a net loss of $43,993 (2024 – net income of $180,210) or a basic and diluted net loss of $0.00 per share (2024 – $0.00). The increase in loss of $224,203 was primarily a result of a decrease in other income of $207,676 and an increase in operating expenses of $16,527 during the three months ended March 31, 2025.
Because the Company is an exploration company, it has no revenues from mining operations. Other income of $51,488 during the three months ended March 31, 2025 (2024 – $259,164) was primarily consisted of a recovery of exploration and evaluation assets of $36,364 (2024 – $148,106) resulting from the value-added taxes refunds from Mexico that exceeded exploration expenses. Additionally, a decrease in interest income of $73,401 from IVA recovery is another contributing factor to a decrease in other Income.
The Company incurred operation expenses of $95,481 during the three months ended March 31, 2025 (2024 - $78,954) relating to general and administrative expenses as the Company looks for other business opportunities while the El Cobre project is on hold. The increase of $16,527 is directly correlated to the increase in administrative service fees of $40,328 (2024 - $18,471) as management looks for new opportunities.
Liquidity and Capital Resources
At March 31, 2025, the Company had working capital of $1,676,544, including cash of $1,698,243.
Management believes that the Company's cash resources are sufficient to meet its working capital and mineral exploration requirements for its next fiscal year, as these expenditures are considered discretionary by management. Subject to TSX-V and disinterested shareholder approval of the Option (as defined in the section entitled "Highlights"), the Company has no material commitments for the next fiscal year however, any planned exploration programs may require further funding. Management has a proven track record to be able to raise money even in a very challenging financial marketplace.
Three months ended March 31, 2025
Net cash used in operations during the three months ended March 31, 2025 was $85,197 (2024 – $40,078), after adjusting for non-cash activities. The majority of the cash used in operations relate to general administration to operate a corporate head office.
Net cash from investing activities of $44,107 during the three months ended March 31, 2025 (2024 – $233,865) relates to value added tax recovery from expenditures on exploration and evaluation assets on the El Cobre Project.
Net cash from financing activities during the three months ended March 31, 2025 was $Nil (2024 - $Nil).
Disclosure of Outstanding Share Data
The authorized share capital of the Company consists of an unlimited number of common shares without par value.
| Number of Common Shares Issued & Outstanding | Share Capital Amount | |
|---|---|---|
| December 31, 2023 | 73,829,025 | $24,043,321 |
| December 31, 2024 | 73,829,025 | $24,043,321 |
| May 22, 2025 | 73,829,025 | $24,043,321 |
Share issuances during fiscal 2025
The Company had no share issuances as at March 31, 2025.
The Company grants directors, officers, employees and contractors options to purchase common shares under its Stock Option Plan. This plan and its terms are detailed in Note 7(c) to the consolidated financial statements for the year ended December 31, 2024, which are available on SEDAR+ at www.sedarplus.ca.
The following table summarizes information about stock options outstanding at May 22, 2025:
| Expiry date | Exercise price | December 31, 2024 | Granted | Exercised | Expired/ Cancelled | May 22, 2025 |
|---|---|---|---|---|---|---|
| March 10, 2027 | $ 0.11 | 400,000 | - | - | - | 400,000 |
| March 10, 2027 | $ 0.09 | 425,000 | - | - | - | 425,000 |
| December 17, 2027 | $ 0.06 | 380,000 | - | - | (25,000) | 355,000 |
| May 12, 2028 | $ 0.09 | 3,163,200 | - | - | - | 3,163,200 |
| July 10, 2028 | $ 0.05 | 1,060,800 | - | - | - | 1,060,800 |
| May 10, 2029 | $ 0.04 | 400,000 | - | - | - | 400,000 |
| Options outstanding and exercisable | 5,829,000 | - | - | (25,000) | 5,804,000 | |
| Weighted average exercise price | $ 0.08 | - | - | $ 0.06 | $ 0.08 |
As of date of this MD&A, there were 73,829,025 common shares issued and outstanding and 79,633,025 common shares outstanding on a diluted basis.
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Environmental Provisions and Potential Environmental Contingency
The Company's mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The Company estimates that future reclamation and site restoration costs based on the Company's exploration activities to date are not significant however the ultimate amount of reclamation and other future site restoration costs to be incurred in the future is uncertain.
Off-Balance Sheet Arrangements
None.
Contractual Commitments
None.
Proposed Transactions
See Subsequent Event.
Transactions with Related Parties
(a) Compensation of key management personnel
Key management personnel include those persons having the authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The aggregate value of compensation to key management personnel was as follows:
| Three months ended March 31, 2025 | Fees (1) | Share-based Payments | Total |
|---|---|---|---|
| $ | $ | $ | |
| Chairman | 5,400 | - | 5,400 |
| President & CEO | 8,625 | - | 8,625 |
| CFO | 6,250 | - | 6,250 |
| EVP | 6,250 | - | 6,250 |
| Directors | - | - | - |
| 26,525 | - | 26,525 | |
| Three months ended March 31, 2024 | Fees (1) | Share-based Payments | Total |
| --- | --- | --- | --- |
| $ | $ | $ | |
| Chairman | 1,800 | - | 1,800 |
| President & CEO | 4,313 | - | 4,313 |
| CFO | 3,125 | - | 3,125 |
| EVP | 3,125 | - | 3,125 |
| Directors | - | - | - |
| 12,363 | - | 12,363 |
(1) Fees are paid to Almaden for services provided by key management pursuant to the Administrative Services Agreement between Azucar and Almaden, as further described below.
(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 March 31, 2025, included in trade and other payable is $15,256 (December 31, 2024 - $29,170) due to Almaden.
Other
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.
Financial Instruments
The fair values of the Company's cash and cash equivalent, 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 March 31, 2025, the Company was exposed to foreign exchange risk through the following assets and liabilities denominated in currencies other than the functional currency of the applicable subsidiary:
| All amounts in Canadian dollars | US dollar | Mexican peso |
|---|---|---|
| $ | $ | |
| Cash and cash equivalent | 1,226,025 | 195,436 |
| Total assets | 1,226,025 | 195,436 |
| Trade and other payables | 173 | 2,823 |
| Total liabilities | 173 | 2,823 |
| Net assets | 1,225,852 | 192,613 |
A 10% change in the US dollar exchange rate relative to the Canadian dollar would change the Company's profit or loss by $123,000.
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A 10% change in the Mexican peso relative to the Canadian dollar would change the Company's profit or loss by $19,000.
(b) Credit risk
The Company's cash and cash equivalent 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 equivalent, 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 March 31, 2025, the Company's maximum exposure to credit risk is the carrying value of its cash and cash equivalent, 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. 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.
(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.
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.
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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 period. The Company is not subject to externally imposed capital requirements.
Subsequent Event
On May 1, 2025, the Company announced it has signed an Option-Joint venture exploration agreement with Almadex whereby Azucar has the option to acquire a 60% interest in three of Almadex's wholly owned blocks of claims in Nevada, the Pilot, Confusion Hills and Red Ring prospects (the "Projects").
The terms of the Option require Azucar to meet the following cash payment and work commitment schedule:
(a) Cash Payments to Almadex:
(i) $100,000 USD, upon acceptance by the TSX Venture Exchange and minority shareholder approval by Azucar; and
(ii) $300,000 USD for each Project which Azucar wishes to exercise the Option, after the completion of the Exploration Requirements (defined below) but no later than the exercise of the Option.
(b) Work Commitments:
(i) at least 2,000 metres of drilling in the aggregate on one or more of the Projects, within eighteen (18) months of the Effective Date; and
(ii) at least 3,000 metres of drilling on the specific Project which Azucar wishes to exercise the Option, within five (5) years of the Effective Date
(collectively, the "Exploration Requirements").
In addition to the above, upon at least 15,000 metres of drilling being completed on a specific Project either during the Option period or thereafter, Azucar shall make a cash payment of $750,000 USD to Almadex. The transaction is subject to the approval of the Company's disinterested shareholders and the TSX Venture Exchange.
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Information on the Board of Directors and Management
Directors:
Duane Poliquin, P.Eng
Morgan Poliquin, P.Eng, Ph.D.
Douglas McDonald, M.A.Sc, B.Com.
Grant Hendrickson, P.Geo.
Fuad Sillem, BA
Audit Committee members:
Fuad Sillem, BA
Grant Hendrickson, P.Geo.
Douglas McDonald, M.A.Sc, B.Com.
Compensation Committee members:
Grant Hendrickson, P.Geo.
Fuad Sillem, BA
Duane Poliquin, P.Eng
Nominating & Corporate Governance Committee members:
Grant Hendrickson, P.Geo.
Fuad Sillem, BA
Morgan Poliquin, P.Eng, Ph.D.
Management:
Duane Poliquin, P.Eng – Chairman
Morgan Poliquin, Ph.D., P.Eng – Chief Executive Officer, President
Korm Trieu, CPA, CA – Chief Financial Officer, Corporate Secretary
Douglas McDonald, M.A.Sc, B.Com. – Executive Vice President