Black Iron Inc.

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65 Queen Street West, Suite 900 Toronto, Ontario Canada M5H 2M5

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that an annual and special meeting (the “Meeting”) of the common shareholders of Black Iron Inc. (the "Company") will be held on Thursday June 24, 2021 at 2:00 p.m. (Toronto time) at 198 Davenport Road, Toronto, Ontario M5R 1J2 for the following purposes:

to receive and consider the audited financial statements of the Company as at and for the fiscal year ended December 31, 2020, together with the report of the auditors thereon, and the financial statements of the Company as at and for the three-month period ended March 31, 2021 (the “Financial Statements”);
to elect directors of the Company for the ensuing year;
to appoint McGovern Hurley LLP as auditor of the Company and authorize the directors to fix their remuneration;
to approve the Company’s stock option plan;
to approve the Company’s deferred share unit plan; and
to transact such further or other business as may properly come before the Meeting or any postponement(s) or adjournment(s) thereof.

AS A RESULT OF THE GOVERNMENTAL PROHIBITION AGAINST GROUP GATHERINGS AND TO HELP REDUCE THE SPEAD OF COVID-19, ONLY REGISTERED SHAREHOLDERS AND/OR THEIR APPOINTEES MAY ATTEND THE MEETING IN PERSON. IN ADDITION, WE STRONGLY ENCOURAGE ALL SHAREHOLDERS TO NOT ATTEND THE MEETING IN PERSON AND TO VOTE THEIR SHARES BY COMPLETING AND RETURNING THE ENCLOSED FORM OF PROXY, AS DESCRIBED BELOW.

Shareholders and/or their appointees may participate in the Meeting by way of conference call however votes cannot be cast on the conference call. Please register at https://us02web.zoom.us/meeting/register/tZYvd-2qrTIpHdR_79fA2rBOhiN4_Er506BK to receive conference call details.

This notice is accompanied by a form of proxy, a management information circular (the “Circular”), and the Financial Statements and related management’s discussion and analysis of financial condition.

The directors of the Company have fixed the close of business on May 10, 2021 as the record date, being the date for the determination of the registered holders entitled to notice and to vote at the Meeting and any postponement(s) or adjournments(s) thereof.

The board of directors of the Company has by resolution fixed 2:00 p.m. (Toronto time) on Tuesday June 22, 2021 or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement(s) or adjournment(s) of the Meeting as the time by which proxies to be used or acted upon at the Meeting or any postponement(s) or adjournment(s) thereof shall be deposited with the Company’s transfer agent, in accordance with the instructions set forth in the accompanying management information circular and the form of proxy.

DATED at Toronto, Ontario as of the 26[th] day of May, 2021

BY ORDER OF THE BOARD OF DIRECTORS

(Signed) “Matthew Simpson” Chief Executive Officer

MANAGEMENT INFORMATION CIRCULAR MAY 26, 2021

INFORMATION REGARDING CONDUCT OF MEETING

Solicitation of Proxies

This management information circular (“Circular”) is furnished in connection with the solicitation by the management of Black Iron Inc. (“Black Iron” or the “Company”) of proxies to be used at the annual meeting (the “Meeting”) of holders of common shares (“Shareholders”) of the Company to be held at 2:00 p.m. (Toronto time) on Thursday, June 24, 2021 and at any postponement(s) or adjournment(s) thereof for the purposes set forth in the accompanying notice of meeting (“Notice of Meeting”) . References in this Circular to the “Meeting” include references to any postponement(s) or adjournment(s) thereof. It is expected that the solicitation will be primarily by mail but proxies may also be solicited through other means by employees, consultants and agents of the Company. The Company will bear the costs of solicitation.

The board of directors of the Company (the “ Board ”) has by resolution fixed the close of business on Monday, May 10, 2021 as the record date for the meeting (the “ Record Date ”) being the date for the determination of the registered Shareholders entitled to notice of and to vote at the Meeting and any postponement(s) or adjournment(s) thereof. The Board has by resolution fixed 2:00 p.m. (Toronto time) on Tuesday, June 22, 2021 or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement(s) or adjournment(s) of the Meeting, as the time by which proxies to be used or acted upon at the Meeting or any postponement(s) or adjournment(s) thereof shall be deposited with the Company’s transfer agent.

The Company shall make a list of all persons who are registered Shareholders on the Record Date and the number of common shares of the Company (the “ Common Shares ”) registered in the name of each person on that date. Each Shareholder is entitled to one vote on each matter to be acted on at the Meeting for each Common Share registered in his or her name as it appears on the list.

Unless otherwise stated, the information contained in this Circular is as of the date hereof. This Circular contains references to United States dollars and Canadian dollars. All dollar amount references, unless otherwise indicated, are expressed in Canadian dollars and United States dollars are referred to as “United States dollars” or “US$”.

Appointment and Revocation of Proxies

The persons named in the enclosed form of proxy are officers and/or directors of the Company. A Shareholder desiring to appoint some other person or Company to represent him or her at the

Meeting may do so by inserting such person's name in the blank space provided in that form of proxy or by completing another proper form of proxy and, in either case, depositing the completed proxy at the office of the transfer agent of the Company indicated on the enclosed envelope not later than the times set out above.

In addition to revocation in any other manner permitted by law, a Shareholder may revoke a proxy given pursuant to this solicitation by depositing an instrument in writing (including another proxy bearing a later date) executed by the Shareholder or by an attorney authorized in writing at 65 Queen Street West, Suite 900, Toronto, Ontario M5H 2M5 at any time up to and including the last business day preceding the day of the Meeting.

Voting of Proxies

Common Shares represented by properly executed proxies in favour of persons designated in the printed portion of the enclosed form of proxy will be voted for each of the matters to be voted on by Shareholders as described in this Circular or withheld from voting or voted against if so indicated on the form of proxy and in accordance with the instructions of the Shareholder on any ballot that may be called for, and if the Shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted accordingly. In the absence of such election, the proxy will confer discretionary authority to be voted in favour of each matter set out in the form of proxy for which no choice has been specified. The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice of Meeting or other matters which may properly come before the Meeting. At the time of printing this Circular, management of the Company knows of no such amendments, variations or other matters to come before the Meeting. However, if any other matters that are not now known to management should properly come before the Meeting, the proxy will be voted on such matters in accordance with the best judgement of the named proxies.

Non-Registered Holders

Only registered Shareholders or the persons they appoint as their proxies are permitted to vote at the Meeting. However, in many cases, shares beneficially owned by a holder who is not a registered Shareholder (a “ Non-Registered Holder ”) are registered either: (i) in the name of an intermediary with whom the Non-Registered Holder deals in respect of the Common Shares such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans (an ” Intermediary ”); or (ii) in the name of a clearing agency (such as The Canadian Depository for Securities Limited of which the Intermediary is a participant). In accordance with the requirements of National Instrument 54-101 of the Canadian Securities Administrators, the Company will distribute copies of the Notice of Meeting, form of proxy and this Circular to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders. Intermediaries are then required to forward the materials to the appropriate Non-Registered Holders.

These materials are being sent to both registered Shareholders and Non-Registered Holders. If you are a Non-Registered Holder, and the Company or its agent has sent these materials directly to you, your name and address and information about your holdings of Common Shares have been obtained in accordance with applicable securities regulatory requirements from the Intermediary holding on your behalf.

By choosing to send these materials to you directly, the Company (and not the Intermediary holding on your behalf) has assumed responsibility for (i) delivering these materials to you, and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instructions.

Non-Registered Holders will be given, in substitution for the proxy otherwise contained in proxyrelated materials, a request for voting instructions (the “ Voting Instructions Form ”) which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary, will constitute voting instructions which the Intermediary must follow.

The purpose of this procedure is to permit Non-Registered Holders to direct the voting of the Common Shares they beneficially own. Should a Non-Registered Holder who receives the Voting Instructions Form wish to vote at the Meeting in person (or have another person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should so indicate in the place provided for that purpose in the Voting Instructions Form and a form of legal proxy will be sent to the Non-Registered Holder. In any event, Non-Registered Holders should carefully follow the instructions of their Intermediary set out in the Voting Instructions Form.

Voting Securities and Principal Holder Thereof

The authorized capital of the Company consists of an unlimited number of Common Shares. As of the Record Date, the Company has 262,908,965 Common Shares issued and outstanding.

To the knowledge of the directors and officers of the Company, as of the date hereof, no person beneficially owns, directly or indirectly, or exercises control or direction over securities carrying more than 10% of the voting rights attached to the Common Shares other than RAB Capital who have publicly disclosed that they hold 36,800,000 Common Shares, which represents approximately 13.4% of the outstanding Common Shares as of the date hereof.

Interest of Persons in Matters to be Acted Upon

No director or executive officer of the Company, nor any person who had held such a position since the beginning of the last completed financial year end of the Company, no Nominee (as defined below) nor any respective associates or affiliates of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise in any matter to be acted upon at this Meeting other than the election of directors.

EXECUTIVE COMPENSATION DISCLOSURE

Compensation Discussion and Analysis

Objectives

The overall objectives of the Company’s compensation program include: (a) attracting and retaining talented executive officers who can assist with the Company’s mineral exploration and mine development strategy; (b) aligning the interests of those executive officers with those of the Company; and (c) linking individual executive officer compensation to the performance of the Company. The Company’s compensation program is designed to compensate executive officers for the performance of their duties and to reward them for the performance of the Company.

Elements of Compensation

The elements of compensation that may be paid to the Named Executive Officers (as such term is defined in National Instrument 51-102F6 — Statement of Executive Compensation ) on a go-forward basis are: (a) base salary and bonus; (b) option-based awards; (c) perquisites and personal benefits; and (d) termination and change of control benefits.

Base salary is a fixed element of compensation that will be payable to each Named Executive Officer for performing his or her position’s specific duties. The amount of base salary for a Named Executive Officer is determined through negotiation of an agreement with each Named Executive Officer and is determined on an individual basis by the need to attract and retain talented individuals. While base salary is intended to fit into the Company’s overall compensation objectives by serving to attract and retain talented executive officers, the size of the Company and the nature and stage of its business will also impact the level of base salary.

Bonuses are short-term performance based financial incentives that will be determined through a formal or informal compensation review process. As the Company grows and develops its projects, the Company may consider formalizing an annual incentive award program that will clearly articulate performance objectives and specific measurable goals that would be linked to individual performance criteria set out for the Named Executive Officers and other executive officers. In an effort to preserve cash and reduce the risk of needing to raise further capital at depressed share prices, the Company did not pay any year-end bonuses to any Named Executive Officers, directors or consultants for the period ended December 31, 2020.

Option-based awards are a variable element of compensation that will be used to reward each Named Executive Officer for individual performance and/or the performance of the Company. Option- based awards are intended to fit into the Company’s overall compensation objectives by aligning the interests of the Named Executive Officers with those of the Company, and linking individual Named Executive Officer compensation to the performance of the Company. The Joint Committee (as defined herein) will be responsible for setting and amending any equity incentive plan under which an option-based award is granted. This will be done on a discretionary basis.

The Company may, depending on the circumstances, provide for termination and, in certain instances, change of control benefits under the provisions of the agreements that will be negotiated with the Named Executive Officers. See “Termination and Change of Control Benefits”.

Performance Graph

The following graph compares the quarterly percentage change in the cumulative total Shareholder return for $100 invested in Common Shares against the cumulative total shareholder return of the S&P/TSX Composite Index for the five most recently completed financial years of the Company, assuming the reinvestment of all dividends.

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During this time period, executives of the Company delivered on several major milestones to create Shareholder value including the signing of a US$100 million royalty term sheet, initiation and advancement of a highly competitive offtake process that ultimately resulted in the selection of Cargill, Incorporation for a US$75 million prepay offtake agreement as announced in May 2021, US$65 million expressions of interest from three engineering, procurement and construction firms, out of which two have been converted to heads of agreements and obtaining expressions of interest from banks and export credit agencies for US$260 to $300 million of senior debt. In addition, executive compensation during this period is reflective of the dedication and loyalty of the executives to persevere despite challenging political dynamics and the compensation levels required to attract the calibre of people with the relevant expertise to build an iron ore mine in Ukraine.

Summary Compensation Table

The following table summarizes the compensation paid during the three financial years ended December 31, 2020, 2019 and 2018 in respect of the individuals who were carrying out the role of the Chief Executive Officer (“ CEO ”) of the Company, the Chief Financial Officer of the Company (“ CFO ”) and each of the three most highly compensated executive officers other than the CEO and CFO at the end of the most recently completed financial year whose total compensation was individually more than $150,000 for that financial year (the “ Named Executive Officers ”).

					Non-equity incentive plan compensation ($)	Non-equity incentive plan compensation ($)
Name and position with the Company	Year	Salary (US$)	Share- based Awards (US$)	Option- based awards (US$) (2)	Annual incentive plans	Long- term incentive plans	Pension value (US$)	All other compensation (US$)	Total compensation (US$)
Matthew Simpson (Chief Executive Officer)	2020	273,275	N/A	230,665	Nil	Nil	Nil	Nil	503,939
	2019	263,980	N/A	20,369	Nil	Nil	Nil	Nil	284,349
	2018	271,693	N/A	Nil	Nil	Nil	Nil	Nil	271,693
Paul Bozoki (Chief Financial Officer)	2020	74,824	N/A	57,222	Nil	Nil	Nil	Nil	132,047
	2019	75,191	N/A	8,147	Nil	Nil	Nil	Nil	83,338
	2018	77,626	N/A	Nil	Nil	Nil	Nil	Nil	77,626
Les Kwasik (Chief Operating Officer)	2020	90,000	N/A	77,438	Nil	Nil	Nil	Nil	167,438
	2019	60,000	N/A	Nil	Nil	Nil	Nil	Nil	60,000
	2018	60,000	N/A	Nil	Nil	Nil	Nil	Nil	60,000
Stan Bharti (Executive Officer)	2020	224,585	N/A	Nil	Nil	Nil	Nil	Nil	224,585
	2019	225,297(1)	N/A	Nil	Nil	Nil	Nil	Nil	225,297
	2018	235,625(1)	N/A	Nil	Nil	Nil	Nil	Nil	235,625

Notes:

(1) Amount paid to Forbes & Manhattan (as defined below) pursuant to the agreement between Forbes & Manhattan and the Company. Mr. Stan Bharti is the Executive Chairman of Forbes & Manhattan. See “Forbes & Manhattan Agreement” below. (2) The dollar value of option awards estimated using the Black-Scholes-Merton valuation model on the date of grant under the following weighted average assumptions: expected dividend yield — 0%; expected volatility — 135% ; risk-free interest rate — 0.32%; and expected life — 2.72 years.

Compensation Review Process

The Company has established the Joint Committee as a committee of the Board. The Joint Committee is responsible for, among other things, reviewing, approving and recommending to the Board, base salary, bonus, options and other benefits, of the Named Executive Officers and other executive officers of the Company in addition to reviewing the Company’s director compensation practices. See “Corporate Governance Practices”.

Incentive Plan Awards

Stock Option Plan

The Company’s stock option plan (the “ Stock Option Plan ”) was approved by the Company’s directors on March 29, 2011, and became effective upon completion of the IPO (as defined herein). The Stock Option Plan was amended and restated on March 12, 2015, to among other things, provide that only executive directors, senior officers, consultants and employees of the Company will be eligible to participate in the Stock Option Plan. Non-executive independent directors are not be able to participate in the Stock Option Plan of the Company.

The Stock Option Plan is considered an “evergreen” plan since the Common Shares covered by the options which have been exercised shall be available for subsequent grants under the Stock Option Plan and the number of options available to grant increases as the number of issued and outstanding Common Shares increases. As a result, should the Company issue additional Common Shares in future, the number of Common Shares issuable under the Stock Option Plan will increase accordingly. The current

Stock Option Plan allows for the grant of incentive stock options to the Company’s employees, executive directors, seniors officers and consultants.

The Toronto Stock Exchange (the “ TSX ”) requires that securities based compensation arrangements be approved by shareholders every three years from the date of implementation. The Stock Option Plan was last approved by Shareholders at the Shareholders meeting held on June 27, 2018. The following is a summary of the terms of the Stock Option Plan, which is qualified in its entirety by the provisions of the Stock Option Plan. At the Meeting, the Company is seeking Shareholder approval of the Stock Option Plan. A copy of the Stock Option Plan is attached at Appendix “B” hereto. The following is a summary of the terms of the proposed Stock Option Plan, which is qualified in its entirety by the provisions of the Stock Option Plan.

Pursuant to the Stock Option Plan non-executive independent directors, are not eligible to participate in the Stock Option Plan. The aggregate number of Common Shares issuable pursuant to the Stock Option Plan and any other share compensation arrangement to all participants shall not exceed 10% of the issued and outstanding Common Shares at the time of the grant. The aggregate number of Common Shares issuable under the Stock Option Plan and any other share compensation arrangement to insiders of the Company shall not at any time exceed 10% of the Common Shares then outstanding. The aggregate number of Common Shares issued upon exercise of the options granted under the Stock Option Plan and any other share compensation arrangement to insiders of the Company within a one-year period shall not exceed 10% of the Common Shares then outstanding.

Under the Stock Option Plan, vesting provisions may be as established by the Board. Options granted under the Stock Option Plan are non-assignable and will have an exercise price determined by the Board at the time the option is granted, but in any event shall not be less than the closing price of the Common Shares on the day immediately preceding the date of the grant of the option. The options will be exercisable for a period determined by the Board at the time of granting the options provided, however, all options must be exercisable during a period not extending beyond five years from the date of the option grant.

If an optionee ceases to be an employee, executive director, senior officer or consultant of the Company, other than as a result of termination with cause, any options held by such optionee at the effective date thereof shall be exercisable only to the extent that the optionee is entitled to exercise the options and only for 90 days thereafter or prior to the expiration of the option period in respect thereof, whichever is sooner. In the case of an optionee being dismissed from employment or service for cause, the options shall immediately terminate and shall no longer be exercisable as of the date of such dismissal. In the event of death of an optionee, options are exercisable by the estate until the earlier of, twelve months following the date of death or the expiry date of the option.

In the event that the expiry of an option falls within, or within two days of, a trading blackout period imposed by the Company (the “ Blackout Period ”), the expiry date of such option period shall be automatically extended to the 10[th] business day following the end of the Blackout Period.

Subject to regulatory approval, amendments to the Stock Option Plan do not require shareholder approval, including, without limitation, for: (i) amendments of a housekeeping nature; (ii) the addition of or a change to vesting provisions of a security or the Stock Option Plan; (iii) a change to the termination provisions of a security or the Stock Option Plan which does not entail an extension beyond the original expiry date; and (iv) the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the Stock Option Plan reserve.

The Board may, subject to receipt of requisite shareholder and regulatory approval, make the following amendments to the Stock Option Plan: (i) any amendment to the number of securities issuable under the Stock Option Plan, including an increase to a fixed maximum number of securities or a change from a fixed maximum number of securities to a fixed maximum percentage; (ii) any change to the definition of “Participants” which would have the potential of narrowing or broadening or increasing insider participation; (iii) amendments to

increase the maximum number of Common Shares which may be issued under the Stock Option Plan or amendments so as to increase the insider participation limits; (iv) amendments to increase the ability of the Board to amend the Stock Option Plan without shareholder approval; (v) amendments to the definition of “Eligible Person”; (vi) amendments relating to the transferability of options other than as permitted under the Stock Option Plan; (vii) amendments to the exercise price of any options issued under the Stock Option Plan where such amendment reduces the exercise price of such option (for this purpose, a cancellation or termination of an option or a Participant prior to its expiry for the purpose of re-issuing options to the same participant with a lower exercise price shall be treated as an amendment to reduce the exercise price of an option); (viii) amendments to the term of any option issued under the Stock Option Plan; (ix) the addition of any form of financial assistance; (x) any amendment to a financial assistance provision which is more favourable to Participants; (xi) any addition of a cashless exercise feature, payable in cash or securities, which does not provide for a full deduction in the number of underlying securities from the Stock Option Plan; (xii) the addition of deferred or restricted share unit or any other provision which results in Participants receiving securities while no cash consideration is received by the Company; (xiii) any amendments to the amendment provisions of the Stock Option Plan; and (xiv) any other amendments that may lead to significant or unreasonable dilution in the Company’s outstanding securities or may provide additional benefits to Participants, especially to insiders of the Company, at the expense of the Company and its existing shareholders.

As of the Record Date, the Company had 262,908,965 Common Shares issued and outstanding (259,933,338 Common Shares issued and outstanding as of December 31, 2020) and accordingly, the maximum number of options that would be granted under the Stock Option Plan as at the Record Date is 26,290,896 options, being 10% of the current issued and outstanding Common Shares as at the Record Date (25,993,333 options as at December 31, 2020) before taking into account any additional DSU grants under the DSU Plan which would further reduce the unallocated entitlements.

As at December 31, 2020, a total of 14,617,500 stock options and 9,066,890 DSUs (and as at the Record Date, a total of 14,657,500 stock options and 9,096,616 DSUs) were issued and outstanding which represents (i) approximately 9.1% of the issued and outstanding Common Shares of the Company as at December 31, 2020, leaving approximately 2,308,943 stock options (representing 0.9% of the issued and outstanding Common Shares on such date) available for future grants under the Stock Option Plan, and (ii) approximately 9.0% of the issued and outstanding Common Shares of the Company as at the Record Date, leaving approximately 2,576,780 stock options (representing 0.9% of the issued and outstanding Common Shares on such date) available for future grants under the Stock Option Plan, before taking into account any additional DSU grants under the DSU Plan which would further reduce the unallocated entitlements.

The Company’s annual Burn Rate as described in Section 613(d) of the TSX Company Manual under the Stock Option Plan was 0.4% in fiscal year 2018, 1.8% in fiscal year 2019 and 4% in fiscal year 2020. The Burn Rate is calculated by dividing the number of stock option’s granted under the Stock Option Plan during the relevant fiscal year by the weighted number of common shares outstanding for the applicable fiscal year, as described in Section 613(p) of the TSX Company Manual.

The following table provides information regarding the incentive plan awards for each Named Executive Officer outstanding as of December 31, 2020.

Outstanding Share Awards and Option Awards Name	Option Awards	Option Awards	Option Awards	Option Awards	Share Awards	Share Awards
	Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date	Value of unexercised in-the-money options ($)(1)	Number of shares or units of shares that have not vested (#)	Market or payout value of share awards that have not vested ($)(1)
Matthew Simpson (Chief Executive Officer)	600,000 750,000 3,200,000 1,000,000	0.12 0.05 0.095 0.145	Feb 16, 2022 Jan 9, 2024 June 15, 2025 Aug 7, 2025	1,328,500	NIL	NIL
Paul Bozoki (Chief Financial Officer)	300,000 300,000 700,000 400,000	0.12 0.05 0.095 0.145	Feb 16, 2022 Jan 9, 2024 June 15, 2025 Aug 7, 2025	402,500	NIL	NIL
Les Kwasik (Chief Operating Officer)	400,000 1,000,000 500,000	0.12 0.095 0.145	Feb 16, 2022 June 15, 2025 Aug 7, 2025	430,500	NIL	NIL
Stan Bharti (Executive Officer) (2)	500,000 400,000	0.12 0.145	Feb 16, 2022 Aug 7, 2025	188,000	NIL	NIL
TOTALS	10,050,000			2,349,500	NIL	NIL

Notes: (1) Based on the closing market price of the Common Shares of $0.34 on December 31, 2020. (2) Mr. Bharti is the Executive Chairman of Forbes & Manhattan.

Value on Pay-Out or Vesting of Incentive Plan Awards

The following table provides information regarding the value on pay-out or vesting of incentive plan awards for the year ended December 31, 2020.


Name	Option awards – Value during the year on vesting ($)(1)	Share awards – Value during the year on vesting ($)	Non-equity incentive plan compensation – Pay-out during the year ($)
Matthew Simpson (Chief Executive Officer)	948,000	Nil	N/A
Paul Bozoki (Chief Financial Officer	240,000	Nil	N/A

Notes: (1) Based on the closing market price of the Common Shares of $0.34 on December 31, 2020.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below sets out the outstanding stock options under the Stock Option Plan and the DSUs under the DSU Plan, being the Company’s only compensation plans under which Common Shares are authorized for issuance, as of December 31, 2020.

		Number of securities to be issued upon exercise of outstanding options and DSUs	Weighted-average exercise price of outstanding options and DSUs	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category		(a)	(b)	(c)
Equity compensation plans approved by security holders	Stock Options	14,617,500	$0.07	2,309,569
	DSUs	9,066,890	$0.07	2,309,569
Equity compensation plans not approved by security holders		NIL	NIL	NIL
TOTAL		23,684,390		2,309,569

Notes: (1) The number of stock options remaining available for issuance if no further DSUs are issued. (2) The number of DSUs remaining available for issuance if no further DSUs are issued.

Termination and Change of Control Benefits

The following describes the respective consulting agreements entered into by the Company and the Named Executive Officers in place as of the date hereof.

Matthew Simpson (Chief Executive Officer)

Iron Strike Inc. entered into an agreement with the Company on September 7, 2010, as amended on January 1, 2014, for the services of Mr. Simpson as the President and Chief Executive Officer of the Company. Pursuant to the agreement, Mr. Simpson receives a base fee of $29,166.67 per month. Mr. Simpson’s agreement provides for a severance payment of 12 months’ base fees on termination by the Company without cause. The agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees. Just cause is defined to include, but is not limited to: (i) dishonesty or fraud; (ii) theft; (iii) breach of fiduciary duties; (iv) being guilty of bribery or attempted bribery; or (v) gross mismanagement. Mr. Simpson may terminate the agreement on three months’ written notice and shall forthwith resign any position then held with the Company and the Company shall have the right to elect to immediately terminate the agreement on payment of three months’ base fees. Mr. Simpson resigned as the President of the Company on February 7, 2017 but remains in his position as the CEO of the Company.

In the event that there is a change in control of the Company, either Mr. Simpson or the Company shall have one year from the date of such change in control to elect to have Mr. Simpson’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Mr. Simpson that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Mr. Simpson in the 36 months’ prior to the change in control. Therefore, assuming a change of control occurred as at the year ended December 31, 2020, Mr. Simpson would be entitled to $1,050,000 upon a change of control. Following a change in control, all

options granted to Mr. Simpson shall be dealt with in accordance with the terms of the Stock Option Plan; however all options granted to Mr. Simpson, but not yet vested, shall vest immediately.

Paul Bozoki (Chief Financial Officer)

Pannonia Capital Inc. entered into an agreement with the Company on October 12, 2010, as amended on January 1, 2014, for the services of Mr. Bozoki as Chief Financial Officer. Pursuant to the agreement, Mr. Bozoki receives a base fee of $8,333.33 per month Mr. Bozoki’s agreement provides for a severance payment of 12 months’ base fees on termination by the Company without cause. The agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees. Just cause is defined to include, but is not limited to: (i) dishonesty or fraud; (ii) theft; (iii) breach of fiduciary duties; (iv) being guilty of bribery or attempted bribery; or (v) gross mismanagement.

In the event that there is a change in control of the Company, either Mr. Bozoki or the Company shall have one year from the date of such change in control to elect to have Mr. Bozoki’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Mr. Bozoki that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Mr. Bozoki in the 36 months’ prior to the change in control. Therefore, assuming a change of control occurred as at the year ended December 31, 2020, Mr. Bozoki would be entitled to $300,000 upon a change of control. Following a change in control, all options granted to Mr. Bozoki shall be dealt with in accordance with the terms of the Stock Option Plan; however all options granted to Mr. Bozoki, but not yet vested, shall vest immediately.

Director Compensation

Following completion of the initial public offering of the Company on March 29, 2011 (the “ IPO ”), the Board determined that certain non-executive directors were to be paid a quarterly retainer of $10,000 and the Chair of the Board was to be paid a quarterly retainer of $25,000. In addition, each Board committee chair was to be paid an additional annual fee of $10,000. In light of the ongoing political events in Ukraine and depressed iron ore projects, management of the Company took proactive steps to reduce certain expenses. During the year ended December 31, 2015, in an effort to preserve cash and reduce overall costs, the Company reduced the overall size of the Board from seven to five members and reduced nonexecutive independent director fees as follows: (i) quarterly retainer of $5,000; (ii) Chair of the Board to receive a quarterly retainer of $10,000; and (iii) in addition each Board committee chair (John Detmold and David Porter) to receive an additional annual fee of $5,000 per annum. A portion of these fees are paid in cash with the balance paid in DSUs.

In 2015, the Company adopted the DSU Plan which was established to assist the Company in the recruitment and retention of qualified persons to serve on the Board and, through the proposed issuance by the Company of Common Shares under the DSU Plan, to promote better alignment of the interests of non-executive directors and the long-term interests of Shareholders.

The Board uses the DSUs issued under the DSU Plan as part of the Company’s overall director compensation plan. Since the value of DSUs increase or decrease with the price of the Common Shares, DSUs reflect a philosophy of aligning the interests of directors with those of the Shareholders by tying compensation to share price performance. See “Deferred Share Unit Plan”.

Directors may also be reimbursed for all reasonable travel and other expenses incurred by them in the performance of their duties. In addition, the Company may grant stock options from time to time to executive-directors to align a portion of director compensation with the performance of the Company. The following table provides information regarding compensation paid to the Company’s nonexecutive directors for the financial year ended December 31, 2020.

Name	Fees earned (US$)(1)	Share awards (US$)	Option awards (US$) (2)	Non-equity incentive plan compensation (US$)	All other compensation (US$) (3)	Total (US$)
Bruce Humphrey	14,947	117,858	N/A	Nil	Nil	132,804
John Detmold	14,012	56,647	N/A	Nil	Nil	70,660
Pierre Pettigrew	7,473	46,065	N/A	Nil	Nil	53,539
David Porter	9,342	55,284	N/A	Nil	Nil	64,625
TOTALS	45,774	275,854	N/A	Nil	Nil	321,627

Notes: (1) Amounts shown in the following table were received in DSUs and cash, as follows: (2) The value ascribed to option grants represents non-cash consideration and has been estimated using the Black-Sholes Model as at the date of grant. See “Stock Option Plan”, above.

(3) All other benefits did not exceed the lesser of $50,000 and 10% of the total annual compensation for each director.

Outstanding Share Awards and Option Awards

The following table provides information regarding the incentive plan awards for each non-executive director as of December 31, 2020.

	Option Awards	Option Awards	Option Awards	Option Awards	Share Awards	Share Awards	Share Awards
Name	Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date	Value of unexercised in-the-money options ($)(1)	Number of shares or units of shares that have not vested (#)	Market or payout value of share awards that have not vested ($)	Market or payout value of vested share- based awards not paid out or distributed ($)(2)
Bruce Humphrey	NIL	NIL	NIL	NIL	NIL	NIL	1,232,778
John Detmold	NIL	NIL	NIL	NIL	NIL	NIL	524,714
Pierre Pettigrew	NIL	NIL	NIL	NIL	NIL	NIL	610,722
David Porter	NIL	NIL	NIL	NIL	NIL	NIL	714,528

Notes:

(1) Based on the closing market price of $0.09 per Common Share on December 31, 2019.

(2) The value attributed to DSUs held by directors as of December 31, 2020 is based on the closing market price of $0.34 per Common Share on December 31, 2020.

Value on Pay-Out or Vesting of Incentive Plan Awards

The following table provides information regarding the value on pay-out or vesting of incentive plan awards for the financial year ended December 31, 2020.

Name	Option awards – Value during the year on vesting ($)	Share awards – Value during the year on vesting ($)	Non-equity incentive plan compensation – Pay-out during the year ($)
Bruce Humphrey	NIL	1,232,778	NIL
John Detmold	NIL	524,714	NIL
Pierre Pettigrew	NIL	610,722	NIL
David Porter	NIL	714,528	NIL

Notes: (1) Based on the closing market price of $0.34 per Common Share on December 31, 2020.

Deferred Share Unit Plan

In 2015, the Company implemented a deferred share unit plan (the “ DSU Plan ”) for the benefit of the Company’s non-executive directors. The DSU Plan was established to assist the Company in the recruitment and retention of qualified persons to serve on the Board and, through the proposed issuance by the Company of Common Shares under the DSU Plan, to promote better alignment of the interests of non-executive directors and the long-term interests of Shareholders.

The Board uses the deferred share units (“ DSUs ”) issued under the DSU Plan as part of the Company’s overall director compensation plan. Since the value of DSUs increase or decrease with the price of the Common Shares, DSUs reflect a philosophy of aligning the interests of directors with those of the Shareholders by tying compensation to share price performance.

The DSU Plan provides the Company with the ability to issue DSUs from treasury as a treasurybased plan and to reserve for issuance an aggregate of up to 5% of the number of issued and outstanding common shares of the Company, subject to an aggregate maximum number of common shares issuable from all share-based compensation plans of 10%. As of each of December 31, 2020 and the Record Date, there were 9,066,890 DSUs issued and outstanding representing approximately 3.5% of the then current issued and outstanding Common Shares and 9,096,616 DSUs issued and outstanding representing approximately 3.45% the then current issued and outstanding Common Share, respectively.

Summary of the DSU Plan

Set out below is a summary of the DSU Plan.

Administration of DSU Plan

The DSU Plan is administered by the Joint Committee and the Joint Committee has full discretionary authority to administer the DSU Plan including the authority to interpret and construe any provision of the DSU Plan and to adopt such rules and regulations for administering the DSU Plan as the Joint Committee may deem necessary in order to comply with the requirements of the DSU Plan, acting reasonably.

The DSU Plan provides that non-executive directors may elect to receive up to 75% of their annual compensation (the “ Annual Remuneration ”) in DSUs as follows: (a) 25% of the Annual Remuneration in DSUs; (b) 50% of the Annual Remuneration in DSUs; or (c) 75% of the Annual Remuneration in DSUs; subject to certain restrictions set out herein (the “ DSU Payment ”). Upon receipt of the requisite shareholder approvals and the approval of the TSX, the Company shall have the power, at the Joint Committee’s discretion, to satisfy DSU payments payable under DSUs by the issuance of Common Shares from treasury

on the basis of, subject to certain adjustment provisions of one Common Share for each DSU. A DSU is a unit credited toward an eligible non-executive director of the Company (a “ Participant ”) by way of a bookkeeping entry in the books of the Company, the value of which is equivalent to a Common Share. A Participant’s DSU account will be credited with the number of DSUs determined by dividing the dollar amount of compensation payable in DSUs on the payment date by the share price of the Common Shares at the time. Share price is defined in the DSU Plan and means the closing price of a Common Share on the TSX averaged over the five (5) consecutive trading days immediately preceding the date of grant or the redemption date, as the case may be. In the event that a dividend (other than stock dividend) is declared and paid by the Company in Common Shares, a Participant will be credited with additional DSUs. The number of such additional DSUs will be calculated by dividing the total amount of the dividends that would have been paid to the Participant if the DSUs in the Participant's account on the dividend record date had been outstanding Common Shares (and the Participant held no other Common Shares), by the closing price of a Common Share on the TSX on the date on which the dividends were paid on the Common Shares.

The Annual Remuneration payable in the form of DSUs to the Participants shall be recorded by the Company as soon as practicable after March 31 of each fiscal year. Notwithstanding any election by a Participant under the DSU Plan, the Joint Committee may, in its sole discretion, decline to award DSUs in respect of a director's Annual Remuneration and instead require the non-executive director to receive cash for Annual Remuneration in the ordinary course.

Each vested DSU held by a Participant who ceases to be an eligible director shall be redeemed by the Company on the relevant date the Participant ceases to be an eligible director, for any reason whatsoever, including death (the “ Separation Date ”), for a DSU Payment to be made to the Participant on such date as the Company determines not later than 60 days after the Separation Date and in any event no later than December 31 of the following calendar year, without any further action on the part of the holder of the DSU in accordance with the terms of DSU Plan.

The Participant holding such DSU shall not be entitled to the DSU Payment if the Participant ceases to be an eligible director, other than if the Participant ceases to be an eligible director in the event of, in connection with, or as a result of, a change of control, prior to the vesting condition(s) having been satisfied, and such DSU shall then be deemed cancelled. In the event of a change of control, each DSU shall automatically vest and be redeemable upon the occurrence of the Separation Date in accordance with the DSU Plan.

Maximum Number of Common Shares Issued

The maximum number of DSUs that may be issued pursuant to the DSU Plan cannot exceed 5% of the issued and outstanding Common Shares at the time of grant. In addition, the aggregate number of Common Shares reserved for issuance pursuant to the DSU Plan and any other securities-based compensation arrangement (pre-existing or otherwise) of the Company (as defined by applicable securities laws) shall not exceed 10% of the Common Shares outstanding from time to time.

The aggregate number of Common Shares issuable to eligible directors pursuant to the DSU Plan together with any shares issued pursuant to any other security based compensation arrangement, but excluding all DSUs and other securities that are Acceptable Equity Awards (as defined in the DSU Plan), shall not exceed 1% of the total number of outstanding Common Shares on a non-diluted basis, and the award value of all awards (together with the award value of all other rights granted under any other security based compensation arrangement), but excluding all DSUs and other securities that are Acceptable Equity Awards, to any one Eligible Director shall not exceed $100,000 per year per Eligible Director.

As at December 31, 2020, a total of 14,617,500 stock options and 9,066,890 DSUs were issued and outstanding which represents approximately 9.1% of the issued and outstanding Common Shares of the Company, leaving approximately 2,308,943 DSUs (representing 0.9% of the issued and outstanding Common Shares on such date) available for future grants under the DSU Plan, before taking into account any additional stock option grants under the Stock Option Plan which would further reduce the unallocated entitlements.

As at the Record Date, a total of 14,657,500 stock options and 9,096,616 DSUs were issued and outstanding which represents approximately 9.0% of the issued and outstanding Common Shares of the Company, leaving approximately 2,576,780 DSUs (representing 0.9% of the issued and outstanding Common Shares on such date) available for future grants under the DSU Plan, before taking into account any additional stock option grants under the Stock Option Plan which would further reduce the unallocated entitlements.

The Company’s annual Burn Rate as described in Section 613(d) of the TSX Company Manual under the DSU Plan was 0.4%, in fiscal year 2018, 1.1% in fiscal year 2019 and 39.6% in fiscal year 2020. The Burn Rate is calculated by dividing the number of DSUs granted under the DSU Plan during the relevant fiscal year by the weighted number of common shares outstanding for the applicable fiscal year, as described in Section 613(p) of the TSX Company Manual.

Insider Participation Limits

Pursuant to the provisions of the DSU Plan, insider participation is limited to the number of the Company’s issued Common Shares: (i) issued to insiders of the Company within any one-year period, and (ii) issuable to insiders of the Company, at any time, pursuant to the DSU Plan or when combined with all of the Company’s other security based compensation arrangements, which cannot exceed 10% of the Company’s total issued and outstanding Common Shares, respectively.

Transferability

Except as otherwise may be expressly provided for under this DSU Plan or pursuant to a will or by the laws of descent and distribution, no DSU and no other right or interest of a Participant is assignable or transferable, and any such assignment or transfer in violation of this DSU Plan shall be null and void.

Amendments to the DSU Plan

The Joint Committee’s discretion to amend, modify and change the provisions of the DSU Plan, acting reasonably, shall be limited to such amendments that are of a “housekeeping” nature, including the addition of or a change to vesting provisions of a security or the DSU Plan or a change to the election provisions which does not entail an increase to the maximum percentage of Annual Remuneration the non-executive directors are permitted to receive in DSUs and will not, without receipt of shareholder approval (whether or not required by law or regulation) and regulatory approval, make any amendment to the DSU Plan that:

(i) Increases the number of securities issuable under the DSU Plan, including an increase to a fixed maximum number of securities or a change from a fixed maximum number of securities to a fixed maximum percentage;
(ii) Changes the definition of “Participants” which would have the potential of narrowing or broadening or increasing insider participation;
(iii) Any amendment to shorten the vesting conditions;
(iv) Any amendment that would permit the DSUs to be transferable (other than as provided herein);
(v) any other amendments to the DSU Plan amendment provisions;

and shall only be effective upon such amendment, modification or change being approved by the Board, Shareholders of the Company and the stock exchanges and any other regulatory authorities having jurisdiction over the Company, and provided any such amendment shall be effective only if the DSU Plan will continue to meet the requirements of paragraph 6801(d) of the regulations to the Income Tax Act (Canada) or any successor provision.

Other Arrangements

Forbes & Manhattan Agreement

Pursuant to an agreement dated January 1, 2014 between Black Iron and Forbes & Manhattan, Inc. (“ Forbes & Manhattan ”), a company of which Mr. Stan Bharti is Executive Chairman (a former director and current executive officer of Black Iron), Forbes & Manhattan will continue to deliver management, business and operational consulting services to the Company. Forbes & Manhattan will be paid a fee of $25,000 per month (the “ Forbes Fee ”), plus applicable HST. The agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising Forbes & Manhattan in writing. Just cause is defined to include, but is not limited to the following: (a) dishonesty or fraud; (b) theft; (c) breach of fiduciary duties; (d) being guilty of bribery or attempted bribery; or (e) gross mismanagement. In the event that the Company wishes to terminate the agreement, the Company shall pay Forbes & Manhattan (in a lump sum payment) the equivalent of 12 months times the Forbes Fee. In the event that there is a change in control of the Company, either Forbes & Manhattan or the Company shall have one year from the date of such change in control to elect to have Forbes & Manhattan’s appointment terminated. In the event such election is made, the Company shall within 30 days of such election, make a lump sum termination payment to Forbes & Manhattan in an amount that is equivalent to 36 month’s base fees plus an amount equivalent to all cash bonuses paid to Forbes & Manhattan in the 36 months’ prior to the change in control. Assuming a change of control occurred as at the year ended December 31, 2017, Forbes & Manhattan would be entitled to $900,000 on a change in control. The definition of “change of control” is set out above under the heading “Termination and Change of Control Benefits”.

The Forbes Fee is intended to reflect the value of the benefits and services that are provided to Black Iron by Forbes & Manhattan in gaining access to a number of individuals by virtue of their relationship with Forbes & Manhattan. Various administrative, strategic and technical services are provided and will be provided to the Company through a team of geologists, mining engineers and financial professionals related to Forbes & Manhattan on an as needed basis. In certain instances, additional fees will be paid to such individuals by the Company directly and not in connection with this agreement for their services; however, such fees are typically substantially lower than if the Company had to seek out and engage such persons on its own on a full time basis. Without the support provided by Forbes & Manhattan, the Company would not otherwise have ready access to the breadth of skilled professionals available through Forbes & Manhattan on an as needed basis. In addition, Forbes & Manhattan, through its and Mr. Stan Bharti’s contacts and reputation will assist the Company in fostering relationships with strategic investors and investment banks.

CORPORATE GOVERNANCE PRACTICES

The Company and the Board recognize the importance of corporate governance to the effective management of the Company and to the protection of its stakeholders, particularly Shareholders. The Company’s approach to issues of corporate governance is designed with a view to ensuring that the business and affairs of the Company are effectively managed so as to enhance Shareholder value. The Board fulfills its mandate directly and through its committees at regularly scheduled meetings or as required. The directors are kept informed regarding the Company’s operations at regular meetings and through reports and discussions with management on matters within their particular areas of expertise. Frequency of meetings may be increased and the nature of the agenda items may be changed depending upon the state of the Company’s affairs and in light of opportunities or risks that the Company faces.

The Company believes that its corporate governance practices are in compliance with applicable Canadian requirements including National Policy 58-201 – Corporate Governance Guidelines . The Company has considered the applicable requirements and believes that its approach is appropriate and works effectively for the Company and its Shareholders. The Company continues to monitor developments in Canada with a view to further revising its governance policies and practices, as appropriate.

The following is a description of the Company’s corporate governance practices, which has been prepared by the Joint Committee of the Board and has been approved by the Board.

Board of Directors

The Board currently consists of six members, a majority of whom are independent. Mr. Matthew Simpson is not independent as he is Chief Executive of the Company. Messrs. John Detmold, Bruce Humphrey, Pierre Pettigrew, David Porter and Zenon Potoczny are independent for the purposes of NI 58101 – Disclosure of Corporate Governance Practices .

Other Directorships

The following directors of the Company currently hold directorships in the following reporting issuers (or equivalent in a foreign jurisdiction) as noted below:

issuers (or equivalent in a foreign jurisdiction) as	noted below:
Director	Other Reporting Issuers	Stock Exchange
Matt Simpson	None	N/A
John Detmold	None	N/A
Bruce Humphrey	Euro Sun MiningInc.	TSX
Pierre Pettigrew	African Gold Group Inc. Belgravia Capital Investments Inc. Troilus Gold Corp.	TSX-V TSX-V TSX
David Porter	None	N/A
Zenon Potoczny	Zhoda Investments AB	beQuoted OTC

During the year ended December 31, 2020, the Board held four Board meetings. The attendance of each of the directors, based on the number of meeting each was eligible to attend is as follows: Mr. Humphrey (4/4), Mr. Detmold (4/4), Mr. Pettigrew (4/4), Mr. Porter (4/4) and Mr. Simpson (4/4). The remainder of Board activities were conducted by way of written consent resolutions.

Board Mandate

The Board has adopted a written mandate in which it assumes responsibility for the stewardship and development of the Company. The mandate provides that: (i) the Board’s primary responsibility is to develop and adopt the strategic direction of the Company and to, at least annually, review and approve a strategic plan as developed and proposed by management, which takes into account the business opportunities and risks of the Company; and (ii) the Board is responsible for reviewing and approving the Company’s financial objectives, plans and actions, including significant capital allocations and expenditures.

The mandate charges the Board with responsibility for, among other things: (i) monitoring corporate performance; (ii) identifying principal business risks and ensuring that appropriate systems are put in place to manage such risks; (iii) monitoring and ensuring internal control and procedures; (iv) ensuring appropriate standards of corporate conduct; (v) reviewing and approving financial statements and management’s discussion and analysis; (vi) reviewing compensation of the members of the Board and senior management; (vii) reviewing and approving material transactions and annual budgets; (viii) developing the Company’s approach to corporate governance; (ix) identifying and recommending new

nominees; and (x) assessing its own effectiveness in fulfilling its mandate. The Board’s mandate also sets forth procedures relating to the Board’s operations such as the size of Board and selection process, director qualifications, director orientation and continuing education, meetings and committees, evaluations, compensation and access to independent advisors.

The Independence of the Board

To facilitate the functioning of the Board independently of management, the following structures and processes are in place:

there are no members of management on the Board other than the President and CEO;
members of management, including without limitation the CEO, are not present for the discussion and determination of certain matters at meetings of the Board unless required;
each of the Audit Committee and Joint Committee are comprised solely of independent directors;
under the by-laws of the Company, any two directors may call a meeting of the Board;
the CEO’s compensation is considered by the Board, in his absence, by the Joint Committee at least once a year;
in addition to the standing committees of the Board, independent committees will be appointed from time to time, when appropriate; and
the Board’s practice is to hold in-camera meetings with the independent directors at the end of each Board or committee meeting to the extent required.

The independent directors hold in camera sessions during regularly scheduled board meetings at which non-independent directors and members of management are not in attendance. To facilitate open and candid discussion among its independent directors, the independent directors are encouraged to ask questions and to request non-independent directors and members of management to excuse themselves during discussions on related matters. Any items of discussion that could involve a potential conflict of interest among one or more directors will be voted on by those directors who do not have a conflict in connection with the relevant matter.

Position Descriptions

Chair of the Board

The Chair of the Board is Mr. Bruce Humphrey and he is considered to be an independent director. The Board has developed and adopted a written position description for the Chair of the Board, indicating that the Chair is responsible for, among other things, chairing all meetings of the Board in a manner that promotes meaningful discussion, providing leadership to enhance the Board’s effectiveness, acting as a liaison between the Board and management and at the request of the Board, representing the Company to external groups, including shareholders, community groups and government. He ensures that resources are available to the Board, as necessary, that functions are delegated to the appropriate committees of the Board and responsibilities are understood. The Chair works with the Joint Committee to ensure a process is in place to assess the performance, effectiveness and contribution of the Board as a whole on an annual basis.

Chair of the Audit Committee

The Chair of the Audit Committee is Mr. John Detmold. The Board has adopted a written position description for the Chair of the Audit Committee, indicating that the Chair of the Audit Committee is responsible for, among other things, chairing all meetings of the Audit Committee, ensuring the Audit

Committee monitors the Company’s financial reporting process and internal control systems independently and objectively, ensuing procedures are in place to review the Company’s public financial statements disclosure, and overseeing the Audit Committee’s participation in the accounting and financial reporting process and audits of the financial statements.

Chair of the Joint Corporate Governance and Compensation Committee

The Board has appointed David Porter as Chair of the Joint Corporate Governance and Compensation Committee (the “ Joint Committee ”) and developed and adopted a written position description for the Chair of this Joint Committee which indicates that the Chair of the Joint Committee is responsible for, among other things, assessing reviewing the Board’s compensation on at least an annual basis and reviewing and recommending to the Board the level of compensation packages for the executive officers and members of senior management, assessing the effectiveness of the Board and the Company’s governance, including periodically reviewing with the Board, on a periodic basis, the requisite skills and characteristics of prospective Board members as well as the composition of the Board as a whole.

Chief Executive Officer

The Board has developed and adopted a role statement for the Chief Executive Officer whose primary role is to take overall supervisory and managerial responsibility for the day-to-day operations of the Company’s business and manage the Company in order to achieve the goals and objectives determined by the Board in the context of the Company’s strategic plan. The Chief Executive Officer’s role statement sets forth responsibilities including, but not limited to: (i) maintaining, developing and implementing the Company’s strategic plans; (ii) developing new strategic alliances to enhance shareholder value; (iii) providing high quality leadership, support, coordination and guidance to staff and various responsible officers and managers; (iv) ensuring communications between the Company and major shareholders; (v) providing timely strategic, operational and reporting information to the Board; (vi) coordinating the preparation of an annual business plan; and (vii) taking responsibility for the administration of all of the Company’s sub-areas and administrative practices.

Orientation and Continuing Education

Generally, the Joint Committee is responsible for ensuring that new directors are provided with an orientation and education program, which will include written information about the duties and obligations of directors, the business and operations of the Company, documents from recent Board meetings, and opportunities for meetings and discussion with senior management and other directors. Directors are expected to attend all meetings of the Board and are also expected to prepare thoroughly in advance of each meeting in order to actively participate in the deliberations and decisions.

The Board recognizes the importance of ongoing director education and the need for each director to take personal responsibility for this process. The Board notes that it has benefited from the experience and knowledge of individual members of the Board in respect of the evolving governance regime and principles. Moreover, the Board acknowledges that the Company has benefitted from the directors’ combined extensive experience in the industries of mining and finance as well as the regulatory environment in Ukraine. The Board ensures that all directors are apprised of changes in the Company’s operations and business.

Ethical Business Conduct

In fulfilling its mandate and approving various decisions put forth by management, the Board ensures that the measures taken by management comply with Canadian securities regulations and other applicable legislation. Members of the Board are also aware of their fiduciary role with the Company as well as their individual fiduciary duties in their capacity as directors, all of which are set out in various provincial corporate legislation. In exercising their powers and discharging their duties, the Board is required to act

honestly and in good faith with a view to the best interests of the Company, and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

The Board has adopted a written code of ethics entitled the “Code of Business Conduct and Ethics” (the “ Ethics Code ”), which applies to all employees, officers and directors of the Company. The purpose of the Ethics Code is to, among other things, promote honest and ethical conduct, promote legal compliance, promote the avoidance of conflicts of interest, provide mechanisms to report unethical conduct and help foster a culture of honesty and accountability for the Company.

The Board is responsible for compliance issues relating to the Ethics Code, which contains the procedures by which an individual can report actual or potential violations of the Ethics Code to the Chair of the Audit Committee. The Ethics Code provides that any violations of the Ethics Code by any employee, officer or director may be grounds for disciplinary action including termination of employment, office and directorship.

Pursuant to the Ethics Code, directors or officers of the Company are required to disclose to the Chair of the Audit Committee in writing, any conflicts of interest, or request to have entered into the minutes of meetings of the Board the nature and extent of such interest. The fiduciary duties placed on individual directors pursuant to corporate legislation and the common law, and the conflict of interest provisions under corporate legislation which restricts an individual director’s participation in decisions of the Board in which the director has an interest also ensure that the Board operates independently of management and in the best interests of the Company.

The Board has adopted a written “Whistleblower Policy” which establishes procedures for: (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters or violations of the Ethics Code; and (ii) the submission by employees of the Company, on a confidential and anonymous basis, of concerns regarding questionable accounting, auditing matters or violations of the Ethics Code.

The Board has adopted a “Corporate Disclosure and Insider Trading Policy” to ensure that: (i) the Company complies with timely disclosure obligations under securities laws; (ii) the Company prevents the selective disclosure of material changes; (iii) documents released by the Company or public oral information that relate to the business and affairs of the Company do not contain a misrepresentation; (iv) persons to whom the policy applies understand their obligations to preserve the confidentiality of “undisclosed material information” (as defined in the policy); and (v) all appropriate parties who have “undisclosed material information” are prohibited from trading in securities of the Company on such information and “tipping” under applicable laws, TSX rules and the policy.

Nomination of Directors

The Board as a whole is responsible for the nomination of directors. The Board’s responsibilities include identifying and recommending new candidates for nomination to the Board based upon: (i) the competencies and skills necessary for the Board as a whole to possess; (ii) the competencies and skills necessary for each individual director to possess; (iii) the competencies and skills which each new nominee to the Board is expected to bring; and (iv) whether the proposed nominee to the Board will be able to devote sufficient time and resources to the Company. To encourage an objective nomination process, the Board promotes open and candid discussion among its independent directors.

The size of the Board will be reviewed on a regular basis. The Board will take into account the number of directors required to carry out the Board’s duties effectively, and to maintain a diversity of views and experience.

Majority Voting Policy

The Company has adopted a majority voting policy (the “ Majority Voting Policy ”) to provide a meaningful way for the Shareholders to hold individual directors accountable and to require the Company to closely examine directors that do not have the support of a majority of Shareholders, on an annual basis. The policy provides that at each annual meeting of shareholders, forms of proxy for the election of directors will permit a Shareholder to vote in favour of, or to withhold from voting, separately for each director nominee and that where a director nominee has more votes withheld than are voted in favour of him or her, the nominee will be considered not to have received the support of the Shareholders, even though duly elected as a matter of corporate law. Pursuant to the policy, such a nominee will forthwith submit his or her resignation to the Board, such resignation to be effective on acceptance by the Board. The Board will establish an advisory committee (the “ Advisory Committee ”) to which it shall refer the resignation for consideration. In such circumstances, the Advisory Committee will make a recommendation to the Board as to the director’s suitability to continue to serve as a director after reviewing, among other things, the results of the voting for the nominee, and the Board will consider such recommendation. This policy does not apply where an election involves a proxy battle (i.e., where proxy material is circulated in support of one or more nominees who are not part of the director nominees supported by the Board).

Committees of the Board

As of the date hereof, the Board had the following two standing committees:

Audit Committee - comprised of John Detmold (Chair), Pierre Pettigrew and David Porter; and
Joint Committee – comprised of David Porter (Chair), Pierre Pettigrew and Bruce Humphrey.

Each of these committees are comprised of directors who are independent of management and each of the committees noted above report directly to the Board. From time to time, when appropriate, ad hoc committees of the Board may be appointed by the Board.

Audit Committee

Audit Committee Charter

The Audit Committee has adopted a written charter setting out its mandate and responsibilities. The Audit Committee is responsible for assisting the Board in fulfilling its oversight responsibilities relating to financial accounting and reporting processes and internal controls. The Audit Committee’s primary duties and responsibilities are to: (i) conduct reviews and discussions with management and the external auditors relating to the audit and financial reporting as are deemed appropriate by the committee; (ii) assess the integrity of internal controls and financial reporting procedures of the Company and ensure implementation of such controls and procedures; (iii) ensure appropriate standards of corporate conduct for senior financial personnel and employees and, if necessary, adopt a corporate code of ethics; (iv) review the quarterly and annual financial statements and management’s discussion and analysis of the Company’s consolidated financial position and operating results and report thereon to the Board for approval; (v) select and monitor the independence and performance of the Company’s external auditors and approve their remuneration; (vi) provide oversight to related party transactions entered into by the Company; and (vii) provide oversight of all disclosure relating to financial statements, management’s discussion and analysis and information derived therefrom. The Audit Committee is responsible for inquiring of management and the external auditors about significant risks or exposures, both internal and external to which the Company may be subject and assessing the steps management has taken to minimize such risks. The Audit Committee is also responsible for establishing and implementing procedures in respect of complaints and submissions relating to accounting matters and the approval of non-audit services by the external auditors. A copy of the Charter of the Audit Committee is attached to this Circular as Appendix “A”.

Composition of the Audit Committee

The Audit Committee has been constituted to oversee the financial reporting processes of the Company and is comprised of three independent directors; namely Messrs. John Detmold, (Chair of the Audit Committee), David Porter and Pierre Pettigrew. Each member of the Audit Committee is financially literate and possesses extensive financial knowledge, experience and comprehension of financial statements.

Additional information regarding the Audit Committee is contained in the Company’s annual information form for the year ended December 31, 2020 (the “ AIF ”) under the heading “Audit Committee Disclosure”. The AIF is available under the Company’s profile on SEDAR at www.sedar.com.

Relevant Education and Experience

The summaries of experience and education for each of the members of the Audit Committee follows:

John Detmold. Mr. Detmold has over 30 years’ experience in corporate finance experience and as the CEO of several financial service and industrial companies. Currently, Mr. Detmold is also the Chairman of Invecture Group, S.A. de C.V., the Chairman of Comunicación Xersa, S.A. de C.V. and is an active member of the Young Presidents Organization. He graduated from McGill University with a Bachelor’s degree with honours in Economics.

David Porter. Mr. Porter holds an MBA and is a seasoned executive who served as Vice President Human Resources and Organizational Effectiveness for the Iron Ore Company of Canada from 1992 to 2008. Since January, 2009, Mr. Porter has been a Principal at Atlee Services. He has also been responsible for Operations, Safety, Health, Sustainable Development, Communications and Community Relations across the mining and steel sectors for over 34 years. Mr. Porter has led the development and execution of business strategy, negotiated agreements with international unions, governments and communities and led business transformation initiatives.

Pierre Pettigrew. From January 1996 to February 2006, Mr. Pettigrew served as a member of the Government of Canada where he led a number of senior government departments in successive federal Canadian governments. Among other positions, he has served Canada as the Minister of Foreign Affairs, Minister for International Trade and the Minister for International Cooperation. Mr. Pettigrew presently works with Deloitte & Touche, LLP in the role of Executive Advisor, International and he serves as a director of several public companies.

Reliance on Certain Exemptions

Since the commencement of the Company’s recently completed financial year, the Company has not relied on any exemptions available under National Instrument 52-110 — Audit Committees .

Audit Committee Oversight

At no time since the commencement of the Company’s recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.

Pre-Approval Policies and Procedures

The Audit Committee charter sets out procedures regarding the provision of non-audit services by the Company’s independent registered chartered accountants. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor’s

independence and requires Audit Committee pre-approval of permitted non-audit and non-audit-related services.

External Auditor Service Fees (by category)

KPMG LLP was appointed as the Company’s external auditors pursuant to a letter dated December 14, 2010. The appointment was ratified by the Board on December 14, 2010. The aggregate fees billed by the Company’s external auditors for the last two fiscal years are set out in the table below. “Audit Fees” includes fees for audit services including the audit services completed for the Company’s subsidiaries. “Audit-Related Fees” includes fees for assurance and related services by the Company’s external auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and not reported under Audit Fees, including the review of interim filings and travel related expenses for the annual audit. “Tax Fees” includes fees for professional services rendered by the external auditor for tax compliance, tax advice, and tax planning. “All Other Fees” includes all fees billed by the external auditors for services not covered in the other three categories. On May 14, 2018, the Company appointed McGovern Hurley LLP as the Company’s external auditor replacing KPMG LLP.

Year	Audit Fees ($)	Audit Related Fees ($)	Tax Fees ($)	All Other Fees ($)
2020	38,000	NIL	5,000	NIL
2019	34,262	3,466	5,000	NIL

The Joint Corporate Governance and Compensation Committee

The Joint Committee is currently comprised of Messrs. David Porter (Chair), Pierre Pettigrew and Bruce Humphrey; and each of whom is an independent director.

The Board, with the assistance of the Joint Committee, is responsible for reviewing the compensation of members of the Board to ensure that compensation realistically reflects the responsibilities and risks involved in being a director and for reviewing the compensation of members of senior management to ensure that compensation is competitive within the industry and aligns the interests of such individual with those of the Company.

In connection with its responsibilities relating to compensation of the Company’s directors and officers, the Joint Committee is responsible for: (i) annually reviewing, approving and recommending to the Board for approval, the remuneration of the senior executives of the Company (including the Chief Executive Officer and Chief Financial Officer); (ii) reviewing the Chief Executive Officer’s goals and objectives for the upcoming year and providing an appraisal of such performance at the end of the year; (iii) meeting with the Chief Executive Officer to discuss goals, objectives, compensation and performance of other senior executive officers; (iv) reviewing and recommending to the Board for approval, the remuneration of directors and senior executives, including any bonus entitlements; (v) developing and submitting recommendations with regard to other employee benefits and bonus plans; (vi) periodically reviewing bonus plans and stock option plans in light of new trends and practices in the industry; (vii) reviewing the use of the Company’s stock option plan; and (ix) reviewing the Company’s executive compensation disclosure in any management information circular of the Company.

In addition, the Joint Committee is tasked with the function of developing and recommending to the Board a set of corporate governance principles applicable to the Company and to identify and recommend individuals to the Board for nomination as members of the Board and its committees (other than the Joint Committee). The Joint Committee is responsible for reviewing with the Board, on a periodic basis, the requisite skills and characteristics of prospective Board members as well as the composition of the Board as a whole. This assessment will include member’s contribution, qualification as independent, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board. The Board identifies new candidates for board nomination by considering experience and qualifications in the areas of

mining, financial reporting, capital markets and public company stewardship. The Board seeks members who have skills and experiences in these areas and will augment its membership of the Board from time to time as considered necessary in order to ensure experience and skills from these areas are reflected on the Board at all times.

Board Assessments

The Board and its individual directors are assessed on an informal basis continually as to their effectiveness and contribution. All directors are free to make suggestions for improvement of the practice of the Board at any time and are encouraged to do so.

Director Term Limits

The Company has not adopted term limits for directors on the Board or other mechanisms of director renewal as the Board currently assesses each director in order to ensure that the Board is balanced between highly experienced directors with long-term knowledge and those with a fresh perspective. The Board will periodically consider whether term limits or other mechanisms of renewal for the Board should be adopted and will implement changes when necessary.

Women on the Board of Directors and in Executive Officers

The Company has not adopted a written policy specifically relating to the identification and nomination of women directors nor does the Board consider the level of representation of women when making executive officer appointments or set targets regarding women on the Board or in executive positions. However, informally, the Company values diversity, including, without limitation, diversity of experience, perspective, education, race, gender and national origin as part of its overall business strategy. The Board intends to consider whether it should adopt specific policies and practices regarding the representation of women on the Board and in executive positions, including the setting of targets for such representation. As at the date hereof, no members of the Board are women.

MATTERS TO BE CONSIDERED

Financial Statements

The financial statements for the fiscal year ended December 31, 2020, together with the auditor’s report thereon, and the financial statements for the three-month period ended March 31, 2021 will be presented to Shareholders for review at the Meeting and were mailed to Shareholders with the Notice of Meeting and this Circular. No vote by the Shareholders is required with respect to this matter.

Election of Directors

Under the constating documents of the Company, the Company is to have a minimum of three directors and a maximum of ten directors. The Board currently consists of six directors. The Company has nominated six persons (the “ Nominees ”) for election as a director at the Meeting. At the Meeting, Shareholders will be asked to elect these Nominees as directors.

The following table provides the names of the Nominees and information concerning such Nominees. The persons in the enclosed form of proxy intend to vote for the election of the Nominees. Management does not contemplate that any of the Nominees will be unable to serve as a director. At the Meeting, Shareholders will be asked to elect these Nominees as directors. The process for voting for election of each director will be by individual voting and not by slate voting. The Shareholders can vote for or withhold from voting on the election of each director on an individual basis. As the Company has adopted a Majority Voting Policy, the process for voting for election of each director will be by individual voting and not by slate voting. The Shareholders can vote for or withhold from voting on the election of each director

on an individual basis. See “Corporate Governance Practices” for more information on our Majority Voting Policy.

Unless authority to do so is withheld, the persons named in the accompanying proxy intend to vote for the election of all of the Nominees. If prior to the Meeting any of such Nominees is unable to or unwilling to serve, the persons named in the accompanying form of proxy will vote for another nominee or nominees in their discretion if additional nominations are made at the Meeting. Each Nominee elected will hold office until his successor is elected at the next annual meeting of Shareholders, or any postponement(s) or adjournment(s) thereof, or until his successor is elected or appointed.

Information in the table below regarding the number of Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised by the Nominees is based upon information furnished by the respective Nominee and is as at the Record Date.

Name, Municipality of Residence and Position with the Company	Director/Officer Since	Principal Occupation	Number of Common Shares Beneficially Owned, Directly or Indirectly or Over Which Control or Direction is Exercised
BRUCEHUMPHREY, Chair(2) Ontario, Canada	December 22, 2010	Business and Mining Consultant	622,500
JOHNDETMOLD, Director(1) Naucalpan, Mexico	December 22, 2010	Managing Director, Invecture Group	3,690,909
PIERREPETTIGREW, Director(2) Ontario, Canada	December 22, 2010	Executive Advisor, Deloitte & Touche LLP	775,000
DAVIDPORTER, Director(1) (2) Ontario, Canada	December 22, 2010	Business and Mining Consultant	125,000
ZENONPOTOCZNY, Director Ontario, Canada	May 18, 2021	Director of Zhoda Investments	Nil.
MATTHEWSIMPSON, Chief Executive Officer and Director Ontario, Canada	December 15, 2010	Chief Executive Officer of the Company	1,341,333

Notes:

(1) Member of the Audit Committee. John Detmold is the Chair of the Audit Committee.

(2) Member of the Joint Committee. David Porter is the Chair of the Joint Committee.

The directors of the Company are elected by the Shareholders at each annual meeting and typically hold office until the next annual meeting at which time they may be re-elected or replaced.

The by-laws of the Company permit the Board to appoint directors to fill any casual vacancies that may occur between meetings of Shareholders. Individuals appointed as directors to fill casual vacancies on the Board hold office like any other director until the next annual general meeting at which time they may be re-elected or replaced.

As of the Record Date, the directors, as a group, beneficially own, directly or indirectly, or exercise control or direction over, a total of 6,517,242 Common Shares, representing approximately 2.48% of the then issued and outstanding Common Shares.

All of the Nominees were elected as directors by the Shareholders at the last annual meeting of the Shareholders except for Mr. Potoczny, who was appointed as a director on May 18, 2021.

Corporate Cease Trade Orders

To the Company’s knowledge, no Nominee is, as at the date of the Circular, or was within ten years before the date of the Circular a director, chief executive officer or chief financial officer of any company (including the Company) that:

(a) was subject to a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation, that was in effect for a period of more than 30 consecutive days, and that was issued while the Nominee was acting in such capacity as director, chief executive officer or chief financial officer; or
(b) was subject to a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation, that was in effect for a period of more than 30 consecutive days, and that was issued after the Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Bankruptcies

To the Company’s knowledge, no Nominee:

(a) is, as at the date of the Circular, or has been within the ten years before the date of the Circular, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(b) has, within the ten years before the date of the Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold assets of the Nominee.

Penalties or Sanctions

To the knowledge of the Company, no Nominee, has been subject to:

(a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.

Conflicts of Interest

The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interests, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in a conflict is required to disclose his interest and abstain from voting on such matter.

Other than as disclosed herein, there are no known existing or potential conflicts of interest among the Company, its promoters, directors and officers or other members of management of the Company or of any proposed promoter, director, officer or other member of management as a result of their outside business interests except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies.

Indebtedness of Directors and Executive Officers

As at the date hereof, none of the Company’s directors, executive officers, employees and former executive officers, directors and employees of the Company or any of its subsidiaries was indebted to the Company or its subsidiaries or has any indebtedness to another entity that is the subject of a guarantee, support agreement, letter of credit or similar arrangement or understanding provided by the Company or its subsidiaries.

Appointment of Auditors

Unless authority to do so is withheld, the persons named in the accompanying proxy intend to vote for the appointment of McGovern Hurley LLP (“ McGovern ”) as the auditor of the Company to hold office until the next annual general meeting and to authorize the directors to fix their remuneration. KPMG LLP (“ KPMG ”) were first appointed the Company’s auditor pursuant to a letter dated December 14, 2010. The appointment was ratified by the Board on December 14, 2010. KMPG were succeeded by McGovern as of May 14, 2018.

The Audit Committee recommends the election of McGovern Hurley LLP as the Company’s auditor to hold office, until the Company’s next annual general meeting. It is intended that all management proxies received will be voted in favour of the appointment of McGovern Hurley LLP as the Company’s auditor, unless a proxy contains specific instructions to vote against such resolution.

Approval of Stock Option Plan

The TSX requires that “evergreen” securities based compensation arrangements be approved by shareholders every three years from the date of implementation. Therefore, at the Meeting, shareholders of the Company entitled to vote on the matter will be asked to consider, and if thought advisable, pass an ordinary resolution approving the Stock Option Plan (the “ Stock Option Plan Resolution ”), the full text of which is set out below. In the event that the Stock Option Plan Resolution is not passed by the requisite number of votes cast at the Meeting, the Company will not have an operative stock option plan and therefore the Board will not be able to issue additional options until such time as another stock option plan is created and approved, and may consequently have difficulty attracting and retaining high caliber personnel. However, whether or not the Stock Option Plan Resolution is approved, all options currently outstanding under the Stock Option Plan will remain in effect in accordance with their terms. A summary of the Stock Option Plan can be found under “ Executive Compensation Disclosure – Incentive Plan Awards – Stock Option Plan ” The full text of the Stock Option Plan is attached hereto at Appendix “B”.

Resolution to Approve Stock Option Plan

The Stock Option Plan Resolution requires the affirmative vote of a majority of votes cast at the Meeting. At the last Shareholders meeting held on June 27, 2018, Shareholders approved the Stock Option Plan. As the prior shareholder approval of the unallocated Options will expire on June 27, 2021, all

unallocated Options outstanding as of such date will be cancelled and the Company will not be permitted to grant further options under the Stock Option Plan until such time as the required shareholder approval is obtained.

If approval is obtained at the Meeting, the Company will not be required to seek further approval of the grant of unallocated options under the Stock Option Plan until the Company’s 2024 annual and special Shareholders’ meeting (provided that such meeting is held on or prior to June 24, 2024). If approval is not obtained at the Meeting, the Company must forthwith stop granting options under the Stock Option Plan and options which are outstanding as of the date of the Meeting and are subsequently cancelled, terminated or exercised will not be available for a new grant of options until shareholder approval is obtained; however, all options that have been granted until June 24, 2021, but not yet exercised, will continue unaffected.

Shareholders of the Company will be asked to pass the Stock Option Plan Resolution set out below and approve the Stock Option Plan.

Whereas:

the Board of Directors of the Company adopted on March 29, 2011 a Stock Option Plan, as amended and restated by the Board on May 25, 2015 (the “ Stock Option Plan ”) which does not have a fixed maximum number of common shares issuable; and
the rules of Toronto Stock Exchange provide that all unallocated options, rights or other entitlements under a security based compensation arrangement which does not have a fixed number of maximum securities issuable, be approved every three (3) years;

Be it resolved that:

all unallocated options under the Stock Option Plan be and are hereby approved;
the Company have the ability to continue granting options under the Stock Option Plan until June 24, 2024, which is the date that is three (3) years from the date of the shareholder meeting at which shareholder approval is being sought; and
any director or officer of the Company be and is hereby authorized to do such things and to sign, execute and deliver all documents that such director and officer may, in their discretion, determined to be necessary in order to give full effect to the intent and purpose of this resolution.

The directors of the Company recommend that the Shareholders approve the Stock Option Plan. It is intended that all management proxies received will be voted in favour of the approval of the Stock Option Plan, unless a proxy contains specific instructions to vote against such resolution.

Approval of DSU Plan

The TSX requires that “evergreen” securities based compensation arrangements be approved by shareholders every three years from the date of implementation. Therefore, at the Meeting, Shareholders entitled to vote on the matter will be asked to consider, and if thought advisable, pass an ordinary resolution approving the DSU Plan (the “ Deferred Share Unit Plan Resolution ”), the full text of which is set out below. In the event the Deferred Share Unit Plan Resolution is not passed by the requisite number of votes cast at the Meeting, all unallocated DSUs will be cancelled and the Company will not be permitted to make further grants until security holder approval is obtained. As a result, the Company may have difficulty attracting and retaining high caliber personnel. A summary of the DSU Plan can be found under “ Executive Compensation Disclosure –Director Compensation – Deferred Share Unit Plan ”. The full text of the DSU Plan is attached hereto as Appendix “C”.

The Deferred Share Unit Plan Resolution requires the affirmative vote of a majority of votes cast at the Meeting. At the last Shareholders meeting held on June 27, 2018, Shareholders approved the DSU Plan. As the prior shareholder approval of the unallocated DSUs will expire on June 27, 2021, all

unallocated DSUs outstanding as of such date will be cancelled and the Company will not be permitted to grant further DSUs under the DSU Plan until such time as the required shareholder approval is obtained.

If approval is obtained at the Meeting, the Company will not be required to seek further approval of the grant of unallocated DSUs under the DSU Plan until the Company’s 2024 annual and special Shareholders’ meeting (provided that such meeting is held on or prior to June 24, 2024). If approval is not obtained at the Meeting, the Company must forthwith stop granting DSUs under the DSU Plan and DSUs which are outstanding as of the date of the Meeting and are subsequently cancelled, terminated or vested will not be available for a new grant of DSUs until shareholder approval is obtained; however, all DSUs that have been granted until June 24, 2021, but not yet vested, will continue unaffected.

Shareholders of the Company will be asked to pass the Deferred Share Unit Plan Resolution set out below and approve the DSU Plan.

Whereas:

the Board of Directors of the Company approved a Deferred Share Unit Plan of the Company (the “ DSU Plan ”) for non-executive directors of the Company on March 12, 2015, as amended and restated on May 28, 2018, which provides that annual compensation to non-executive directors may be redeemable in Common Shares issued from treasury; and
the rules of Toronto Stock Exchange provide that all unallocated options, rights or other entitlements under a security based compensation arrangement which does not have a fixed number of maximum securities issuable, be approved every three (3) years;

Be it resolved by ordinary resolution that:

all unallocated deferred share units under the DSU Plan be and are hereby approved;
the Company have the ability to continue granting DSUs under the DSU Plan until June 24, 2024, which is the date that is three (3) years from the date of the shareholder meeting at which shareholder approval is being sought; and
any director or officer of the Company, be and hereby is authorized to do all acts and things and execute all documents, as may be necessary or desirable in his opinion to give effect to the foregoing.

The directors of the Company recommend that the Shareholders approve the DSU Plan. It is intended that all management proxies received will be voted in favour of the approval of the DSU Plan, unless a proxy contains specific instructions to vote against such resolution.

Interest of Informed Persons in Material Transactions

To the knowledge of the directors and officers of the Company, no informed person of the Company, proposed nominee for director of the Company, or any associate or affiliate of the foregoing has or had any material interest, direct or indirect, in any transaction since the commencement of the Company’s last financial year or in any proposed transaction, which, in either case, has materially affected or will materially affect the Company.

Additional Information

Additional information relating to the Company may be found under the profile of the Company on SEDAR at www.sedar.com. Additional financial information is provided in the Company's audited financial statements and related management’s discussion and analysis for the financial year ended December 31, 2020, which can be found under the profile of the Company on SEDAR. Shareholders may also request these documents from the Corporate Secretary of the Company by email at [email protected] or by telephone at (416) 861-2262.

Board of Directors Approval

The contents of this Circular and the sending thereof to the shareholders of the Company have been approved by the Board.

BY ORDER OF THE BOARD OF DIRECTORS

(signed) “Matthew Simpson” Chief Executive Officer

Toronto, Ontario May 26, 2021

APPENDIX “A”

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BLACK IRON INC.

CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

1. PURPOSE OF THIS CHARTER

The Audit Committee (the “ Committee ”) is appointed by the Board of Directors (the “ Board ”) of Black Iron Inc. (the “ Corporation ”) to assist the Board in fulfilling its oversight responsibilities relating to financial accounting and reporting process and internal controls for the Corporation. The Committee’s primary duties and responsibilities are to:

a) conduct such reviews and discussions with management and the external auditors relating to the audit and financial reporting as are deemed appropriate by the Committee;
b) assess the integrity of internal controls and financial reporting procedures of the Corporation and ensure implementation of such controls and procedures;
c) ensure that there is an appropriate standard of corporate conduct for senior financial personnel and employees including, if necessary, adopting a corporate code of ethics;
d) review the quarterly and annual financial statements and management’s discussion and analysis of the Corporation’s financial position and operating results and in the case of the annual financial statements and related management’s discussion and analysis, report thereon to the Board for approval of same;
e) select and monitor the independence and performance of the Corporation’s external auditors, including attending at private meetings with the external auditors and reviewing and approving all renewals or dismissals of the external auditors and their remuneration; and
f) provide oversight of all disclosure relating to, and information derived from, financial statements, management’s discussion and analysis and information.

The Committee has the authority to conduct any investigation appropriate to its responsibilities, and it may request the external auditors, as well as any officer of the Corporation, or outside counsel for the Corporation, to attend a meeting of the Committee or to meet with any members of, or advisors to, the Committee. The Committee shall have unrestricted access to the books and records of the Corporation and has the authority to retain, at the expense of the Corporation, special legal, accounting, or other consultants or experts to assist in the performance of the Committee’s duties.

The Committee shall review and assess the adequacy of this Charter annually and submit any proposed revisions to the Board for approval. In fulfilling its responsibilities, the Committee will carry out the specific duties set out in Part 4 of this Charter.

2. AUTHORITY OF THE AUDIT COMMITTEE

The Committee shall have the authority to:

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a) engage independent counsel and other advisors as it determines necessary to carry out its duties;
b) set and pay the compensation for advisors employed by the Committee; and c) communicate directly with the internal and external auditors.

3. COMPOSITION AND MEETINGS

The Committee and its membership shall meet all applicable legal, regulatory and listing requirements, including, without limitation, those of the Ontario Securities Commission (“ OSC ”), the Toronto Stock Exchange, the Business Corporations Act (Ontario) and all applicable securities regulatory authorities.

a) The Committee shall be composed of three or more directors as shall be designated by the Board from time to time. The members of the Committee shall appoint from among themselves a member who shall serve as Chair. The position description and responsibilities of the Chair are set out in Schedule “A” attached hereto.
b) Each member of the Committee shall be “independent” and “financially literate”. An “independent” director is a director who has no direct or indirect material relationship with the Corporation. A “material relationship” is a relationship which, in the view of the Board of Directors of the Corporation, could be reasonably expected to interfere with the exercise of the director’s independent judgement or a relationship deemed to be a material relationship pursuant to Sections 1.4 and 1.5 of National Instrument 52-110 — Audit Committees , as set out in Schedule “B” hereto. A “financially literate” director is a director who has the ability to read and understand a set of financial instruments that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the accounting issues that can be reasonably expected to be raised in the Corporation’s financial statements.
c) Each member of the Committee shall sit at the appointment of the Board of Directors, and in any event, only so long as he or she shall be independent. The Committee shall report to the Board of Directors.
d) The Committee shall meet at least quarterly, at the discretion of the Chair or a majority of its members, as circumstances dictate or as may be required by applicable legal or listing requirements. A minimum of two and at least 50% of the members of the Committee present, either in person or by telephone, shall constitute a quorum.
e) If within one hour of the time appointed for a meeting of the Committee, a quorum is not present, the meeting shall stand adjourned to the same hour on the next business day following the date of such meeting at the same place. If at the adjourned meeting a quorum as hereinbefore specified is not present within one hour of the time appointed for such adjourned meeting, such meeting shall stand adjourned to the same hour on the second business day following the date of such meeting at the same place. If at the second adjourned meeting a quorum as hereinbefore specified is not present, the quorum for the adjourned meeting shall consist of the members then present.
f) If, and whenever a vacancy shall exist, the remaining members of the Committee may exercise all of its powers and responsibilities so long as a quorum remains in office.
g) The time and place at which meetings of the Committee shall be held, and procedures at such meetings, shall be determined from time to time by the Committee. A meeting of the Committee may be called by letter, telephone, facsimile, email or other communication equipment, by giving at least 48 hours’ notice, provided that no notice of a meeting shall be necessary if all of the members are present either in person or by means of conference telephone or if those absent have waived notice or otherwise signified their consent to the holding of such meeting.
h) Any member of the Committee may participate in the meeting of the Committee by means of conference telephone or other communication equipment, and the member participating in a meeting pursuant to this paragraph shall be deemed, for purposes hereof, to be present in person at the meeting.
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i) The Committee shall keep minutes of its meetings which shall be submitted to the Board. The Committee may, from time to time, appoint any person who need not be a member, to act as a secretary at any meeting.
j) The Committee may invite such officers, directors and employees of the Corporation and its subsidiaries as the Committee may see fit, from time to time, to attend at meetings of the Committee.
k) Any matters to be determined by the Committee shall be decided by a majority of votes cast at a meeting of the Committee called for such purpose. Actions of the Committee may be taken by an instrument or instruments in writing signed by all of the members of the Committee, and such actions shall be effective as though they had been decided by a majority of votes cast at a meeting of the Committee called for such purpose. The Committee shall report its determinations to the Board at the next scheduled meeting of the Board, or earlier as the Committee deems necessary. All decisions or recommendations of the Committee shall require the approval of the Board prior to implementation, other than those relating to non-audit services and annual audit fees which do not require the approval of the Board.
l) The Committee members will be elected annually at the first meeting of the Board following the annual general meeting of shareholders.
m) The Board may at any time amend or rescind any of the provisions hereof, or cancel them entirely, with or without substitution.

4. RESPONSIBILITIES

a) Financial Accounting and Reporting Process and Internal Controls

i) The Committee shall review the annual audited and interim financial statements and related management’s discussion and analysis before the Corporation publicly discloses this information to satisfy itself that the financial statements are presented in accordance with applicable accounting principles and in the case of the annual audited financial statements and related management’s discussion and analysis, report thereon and recommend to the Board whether or not same should be approved prior to their being filed with the appropriate regulatory authorities. With respect to the annual audited financial statements, the Committee shall discuss significant issues regarding accounting principles, practices, and judgments of management with management and the external auditors as and when the Committee deems it appropriate to do so. The Committee shall satisfy itself that the information contained in the annual audited financial statements is not significantly erroneous, misleading or incomplete and that the audit function has been effectively carried out.
ii) The Committee shall review any internal control reports prepared by management and the evaluation of such report by the external auditors, together with management’s response.
iii) The Committee shall be satisfied that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements, management’s discussion and analysis and annual and interim earnings press releases, and periodically assess the adequacy of these procedures.
iv) The Committee shall review any press releases containing disclosure regarding financial information that are required to be reviewed by the Committee under any applicable laws before the Corporation publicly discloses this information.
v) The Committee shall meet no less than annually with the external auditors and the Chief Financial Officer or, in the absence of a Chief Financial Officer, with the officer of the Corporation in charge of financial matters, to review accounting practices, internal controls and such other matters as the Committee, Chief
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Financial Officer or, in the absence of a Chief Financial Officer, the officer of the Corporation in charge of financial matters, deem appropriate.

vi) The Committee shall inquire of management and the external auditors about significant risks or exposures, both internal and external, to which the Corporation may be subject, and assess the steps management has taken to minimize such risks.
(vii) The Committee shall provide oversight of the Corporation’s policies, procedures and practices with respect to the maintenance of the books, records and accounts, and the filing of reports, by the Corporation with respect to third party payments in compliance with the Corruption of Foreign Public Officials Act (Canada), the Extractive Sector Transparency Measures Act (Canada) and similar applicable laws.
viii) The Committee shall review the post-audit or management letter containing the recommendations of the external auditors and management’s response and subsequent follow-up to any identified weaknesses.
ix) The Committee shall ensure that there is an appropriate standard of corporate conduct including, if necessary, adopting a corporate code of ethics for senior financial personnel and all employees.
x) The Committee shall establish and monitor procedures for:
the receipt, retention and treatment of complaints received by the Corporation regarding: (a) accounting, internal accounting controls or auditing matters; or (b) violations of the Corporation’s policies including the Code of Business Conduct and Ethics; Anti-Bribery and Anti-Corruption Policy; and Corporate Disclosure, Confidentiality and Insider Trading Policy; and
the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters or violations of any of the Corporation’s policies (as described above).
The Corporation’s whistleblower policy will be extended to cover any concerns or complaints regarding the aforementioned matters.
xi) The Committee shall provide oversight to related party transactions entered into by the Corporation.
xii) The Committee shall establish the budget process, which shall include the setting of spending limits and authorizations, as well as periodic reports from the Chief Financial Officer comparing actual spending to the budget.
xiii) The Committee shall have the authority to adopt such policies and procedures as it deems appropriate to operate effectively.

b) Independent Auditors

i) The Committee shall recommend to the Board the external auditors to be nominated for the purpose of preparing or issuing an auditors’ report or performing other audit, review or attest services for the Corporation, shall set the compensation for the external auditors, provide oversight of the external auditors and shall ensure that the external auditors’ report directly to the Committee.
ii) The Committee shall be directly responsible for overseeing the work of the external auditors, including the resolution of disagreements between management and the external auditors regarding financial reporting.
iii) The pre-approval of the Committee shall be required as further set out in Schedule “C” prior to the undertaking of any non-audit services not prohibited by law to be provided by the external auditors in accordance with this Charter.
iv) The Committee shall monitor and assess the relationship between management and the external auditors and monitor, support and assure the independence and objectivity of the external auditors.
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v) The Committee shall review the external auditors’ audit plan, including the scope, procedures and timing of the audit.
vi) The Committee shall review the results of the annual audit with the external auditors, including matters related to the conduct of the audit.
vii) The Committee shall obtain timely reports from the external auditors describing critical accounting policies and practices, alternative treatments of information within IFRS that were discussed with management, their ramifications, and the external auditors’ preferred treatment and material written communications between the Corporation and the external auditors.
viii) The Committee shall review fees paid by the Corporation to the external auditors and other professionals in respect of audit and non-audit services on an annual basis.
ix) The Committee shall review and approve the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former auditors of the Corporation.
x) The Committee shall monitor and assess the relationship between management and the external auditors and monitor and support the independence and objectivity of the external auditors.
xi) The Committee shall have the authority to engage the external auditors to perform a review of the interim financial statements.

c) Other Responsibilities

The Committee shall perform any other activities consistent with this Charter and governing law, as the Committee or the Board deems necessary or appropriate.

SCHEDULE “A” BLACK IRON INC. POSITION DESCRIPTION FOR THE CHAIRMAN OF THE AUDIT COMMITTEE

1. PURPOSE

The Chairman of the Audit Committee of the Board shall be an independent director who is elected by the Board to act as the leader of the Committee in assisting the Board in fulfilling its financial reporting and control responsibilities to the shareholders of the Corporation.

2. WHO MAY BE CHAIRMAN

The Chairman will be selected from amongst the independent directors of the Corporation who have a sufficient level of financial sophistication and experience in dealing with financial issues to ensure the leadership and effectiveness of the Committee.

The Chairman will be selected annually at the first meeting of the Board following the annual general meeting of shareholders.

3. RESPONSIBILITIES

The following are the primary responsibilities of the Chairman:

a) chairing all meetings of the Committee in a manner that promotes meaningful discussion;
b) ensuring adherence to the Committee’s Charter and that the adequacy of the Committee’s Charter is reviewed annually;
c) providing leadership to the Committee to enhance the Committee’s effectiveness, including:
i) providing the information to the Board relative to the Committee’s issues and initiatives and reviewing and submitting to the Board an appraisal of the Corporation’s independent auditors and internal auditing functions;
ii) ensuring that the Committee works as a cohesive team with open communication, as well as ensuring open lines of communication among the independent auditors, financial and senior management and the Board of Directors for financial and control matters;
iii) ensuring that the resources available to the Committee are adequate to support its work and to resolve issues in a timely manner;
iv) ensuring that the Committee serves as an independent and objective party to monitor the Corporation’s financial reporting process and internal control systems, as well as to monitor the relationship between the Corporation and the independent auditors to ensure independence;
v) ensuring that procedures are in place to assess the audit activities of the independent auditors and the internal audit functions;
vi) ensuring that procedures are in place to review the Corporation’s public disclosure of financial information and assess the adequacy of such procedures periodically, in consultation with any disclosure committee of the Corporation;
vii) ensuring that clear hiring policies are put in place for partners and employees of the auditors;
d) ensuring that procedures are in place for dealing with complaints received by the Corporation regarding accounting, internal controls and auditing matters, and for employees to submit confidential anonymous concerns, ensuring the establishment of a budget process, which shall include the setting of spending limits and authorizations and periodical reports from the Chief Financial Officer of actual spending as compared to the budget regarding questionable accounting or auditing matters; and
e) managing the Committee, including:
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i) adopting procedures to ensure that the Committee can conduct its work effectively and efficiently, including committee structure and composition, scheduling, and management of meetings;
ii) preparing the agenda of the Committee meetings and ensuring pre-meeting material is distributed in a timely manner and is appropriate in terms of relevance, efficient format and detail;
iii) ensuring meetings are appropriate in terms of frequency, length and content;
iv) obtaining and reviewing with the Committee an annual report from the independent auditors, and arranging meetings with the auditors and financial management to review the scope of the proposed audit for the current year, its staffing and the audit procedures to be used;
v) overseeing the Committee’s participation in the Corporation’s accounting and financial reporting process and the audits of its financial statements;
vi) ensuring that the auditor’s report directly to the Committee, as representatives of the Corporation’s shareholders; and
vii) annually reviewing with the Committee its own performance.
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SCHEDULE “B” BLACK IRON INC. NATIONAL INSTRUMENT 52-110 AUDIT COMMITTEES (“NI 52-110”)

Section 1.4 — Meaning of Independence

(1) An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer.
(2) For the purposes of subsection (1), a “material relationship” is a relationship which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of a member’s independent judgment.
(3) Despite subsection (2), the following individuals are considered to have a material relationship with an issuer:
(a) an individual who is, or has been within the last three years, an employee or executive officer of the issuer;
(b) an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer;
(c) an individual who:
- (i) is a partner of a firm that is the issuer’s internal or external auditor,
- (ii) is an employee of that firm, or
- (iii) was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time;
(d) an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual:
- (i) is a partner of a firm that is the issuer’s internal or external auditor,
- (ii) is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or
- (iii) was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time;
(e) an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuer’s current executive officers serves or served at that same time on the entity’s compensation committee; and
(f) an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years.
(4) Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because
(a) he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or
(b) he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005.
(5) For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service.
(6) For the purposes of clause (3)(f), direct compensation does not include:
(a) remuneration for acting as a member of the board of directors or of any board committee of the issuer, and
(b) the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service.
(7) Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member
(a) has previously acted as an interim chief executive officer of the issuer, or
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(b) acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis.
(8) For the purpose of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer.

Section 1.5 — Additional Independence Requirements for Audit Committee Members

(1) Despite any determination made under section 1.4 of NI 52-110, an individual who
(a) accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a parttime chair or vice-chair of the board or any board committee; or
(b) is an affiliated entity of the issuer or any of its subsidiary entities,
is considered to have a material relationship with the issuer.
(2) For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by
(a) an individual’s spouse, minor child or stepchild, or a child or stepchild who shares the individual’s home; or
(b) an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer.
(3) For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service.
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SCHEDULE “C” BLACK IRON INC.

Procedures for Approval of Non-Audit Services

The Corporation’s external auditors shall be prohibited from performing for the Corporation the following categories of non-audit services:
(a) bookkeeping or other services related to the Corporation’s accounting records or financial statements;
(b) appraisal or valuation services, fairness opinion or contributions-in-kind reports; (c) actuarial services;
(d) internal audit outsourcing services;
(e) management functions;
(f) human resources;
(g) broker or dealer, investment adviser or investment banking services;
(h) legal services; and
(i) any other service that the Canadian Public Accountability Board or International Accounting Standards Board or other analogous board which may govern the Corporation’s accounting standards, from time to time determines is impermissible.
In the event that the Corporation wishes to retain the services of the Corporation’s external auditors for tax compliance, tax advice or tax planning, the Chief Financial Officer of the Corporation shall consult with the Chair of the Committee, who shall have the authority to approve or disapprove on behalf of the Committee, such non-audit services. All other non-audit services shall be approved or disapproved by the Committee as a whole.
The Chief Financial Officer of the Corporation shall maintain a record of non-audit services approved by the Chair of the Committee or the Committee for each fiscal year and provide a report to the Committee no less frequently than on a quarterly basis .
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APPENDIX “B” Stock Option Plan

BLACK IRON INC.

INCENTIVE STOCK OPTION PLAN

ARTICLE I INTRODUCTION

1.1 Purpose of Plan

The purpose of the Plan is to secure for the Company and its shareholders the benefits of incentives inherent in the share ownership by the senior officers, key employees and consultants of the Company and its Subsidiaries who, in the judgment of the Board, will be largely responsible for its future growth and success. It is generally recognized that a stock option plan of the nature provided for herein aids in retaining and encouraging employees of exceptional ability because of the opportunity offered them to acquire a proprietary interest in the Company. The Stock Option Plan is considered an “evergreen” plan since the Common Shares covered by the options which have been exercised shall be available for subsequent grants under the Stock Option Plan and the number of options available to grant increases as the number of issued and outstanding Common Shares increases.

1.2 Definitions

(a) “Associate” has the meaning ascribed thereto in the Securities Act.

(a)	“Associate” has the meaning ascribed thereto in the Securities Act.
(b)	“Board” means the board of directors of the Company, or any committee of the board of directors to
	which the duties of the board of directors hereunder are delegated.
(c)	“Company” means Black Iron Inc., a company duly incorporated under the laws of Ontario.
(d)	“Consultant” means a person providing consulting services to the Company or any of its Subsidiaries.
(e)	“Consultant Company” means for an individual Consultant, a company or partnership of which the
	individual is an employee, shareholder or partner.
(f)	“Director” means a director of the Company or any of its Subsidiaries.
(g)	“Eligible Person” means any employee, senior Officer or Consultant of the Company or any of its
	Subsidiaries.
(h)	“Exchange” means the Toronto Stock Exchange or any other stock exchange on which the Shares
	are listed.
(i)	“Insider” of the Company shall mean a Participant who is an “insider” of the Company that is subject
	to insider reporting requirements pursuant to National Instrument 55-101 – Insider Reporting
	Exemptions.
(j)	“Option” shall mean an option granted under the terms of the Plan.
(k)	“Option Commitment” means the notice of grant of an Option delivered by the Company hereunder
	to an Optionee and substantially in the form of Exhibit A hereto.
(l)	“Option Period” shall mean the period during which an Option may be exercised.
(m)	“Optionee” shall mean a Participant to whom an Option has been granted under the terms of the
	Plan.
(n)	“Participant” means, in respect of the Plan, an Optionee who elects to participate in the Plan.

(o) “Plan” means this Incentive Stock Option Plan established and operated pursuant to Article II hereof.

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(p) “Securities Act” means the Securities Act (Ontario) as amended from time to time.
(q) “Share Compensation Arrangement” means the Plan described herein and any other security based compensation arrangements implemented by the Company including stock options, other stock option plans, employee stock purchase plans, share distribution plans, stock appreciation rights, restricted share unit plans or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares of the Company.
(r) “Shares” shall mean the common shares of the Company.
(s) “Subsidiary” has the meaning ascribed thereto in the Securities Act.

ARTICLE II STOCK OPTION PLAN

2.1 Participation

Options to purchase Shares may be granted hereunder to Eligible Persons.

2.2 Determination of Option Recipients

The Board shall make all necessary or desirable determinations regarding the granting of Options to Eligible Persons and may take into consideration the present and potential contributions of a particular Eligible Person to the success of the Company and any other factors which it may deem proper and relevant.

2.3 Exercise Price

The exercise price per Share shall be determined by the Board at the time the Option is granted, but, in any event, shall not be less than the closing price of the Shares on the Exchange on the trading day immediately preceding the date of the grant of the Option.

2.4 Grant of Options

The Board may at any time authorize the granting of Options to such Eligible Persons as it may select for the number of Shares that it shall designate, subject to the provisions of the Plan The date of each grant of Options shall be determined by the Board when the grant is authorized.

2.5 Option Commitment

Each Option granted to an Optionee shall be evidenced by an Option Commitment detailing the terms of the Option and upon delivery of the Option Commitment to the Optionee by the Company the Optionee shall have the right to purchase the Shares underlying the Option at the exercise price set out therein, subject to any provisions as to the vesting of the Option.

2.6 Terms of Options

The periods within which Options may be exercised and the number of Shares which may be issuable upon the exercise of Options in any such period shall be determined by the Board at the time of granting the Options provided, however, that all Options must be exercisable during a period not extending beyond five years from the date of the Option grant.

Notwithstanding the foregoing, in the event that the expiry of an Option Period falls within, or within two (2) days of, a trading blackout period imposed by the Company (the “ Blackout Period ”), the expiry date of such Option Period shall be automatically extended to the 10[th] business day following the end of the Blackout Period.

2.7 Exercise of Option

Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Company of a written notice of exercise specifying the number of Shares with respect to which the Option is being exercised and accompanied by payment in full of the exercise price of the Shares to be purchased. Certificates for such Shares shall be issued and delivered to the Optionee within a reasonable time following the receipt of such notice and payment.

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2.8 Vesting

Options granted pursuant to the Plan shall vest and become exerciseable by an Optionee at such time or times as may be determined by the Board.

2.9 Lapsed Options

If Options are surrendered, terminated or expire without being exercised in whole or in part, new Options may be granted covering the Shares not purchased under such lapsed Options.

2.10 Death of Optionee

If an Optionee ceases to be an Eligible Person due to death, any Option held by it at the date of death shall be exercisable by the Optionee’s legal heirs or personal representatives. All such Options shall be exercisable only to the extent that the Optionee was entitled to exercise the Option at the date of death and only for 12 months after the date of death or prior to the expiration of the Option Period in respect thereof, whichever is sooner, subject to the Board determining otherwise.

2.11 Termination of Employment

If an Optionee ceases to be an Eligible Person, other than as a result of termination with cause, any Option held by such Optionee at the effective date thereof shall be exercisable only to the extent that the Optionee is entitled to exercise the Option and only for 90 days thereafter (or such longer period as may be prescribed by law) or prior to the expiration of the Option Period in respect thereof, whichever is sooner, subject to the Board determining otherwise. In the case of an Optionee being dismissed from employment or service for cause, the Option shall immediately terminate and shall no longer be exerciseable as of the date of such dismissal.

2.12 Effect of Take-Over Bid

If a bona fide offer (the “ Offer ”) for Shares is made to the Optionee or to shareholders generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror exercising control over the Company within the meaning of the Securities Act, then the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee of the full particulars of the Offer. The Board will have the sole discretion to amend, abridge or otherwise eliminate any vesting schedule so that notwithstanding the other terms of this Plan, such Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Shares received upon such exercise (the “ Optioned Shares ”) pursuant to the Offer. If:

(a) the Offer is not complied with within the time specified therein;
(b) the Optionee does not tender the Optioned Shares pursuant to the Offer; or
(c) all of the Optioned Shares tendered by the Optionee pursuant to the Offer are not taken up and paid for by the offeror in respect thereof;

then at the discretion of the Board, the Optioned Shares or, in the case of clause (c) above, the Optioned Shares that are not taken up and paid for, shall be returned by the Optionee to the Company and reinstated as authorized but unissued Shares and the terms of the Option as set forth in this Plan and the Option Commitment shall again apply to the Option. If any Optioned Shares are returned to the Company under this Section, the Company shall refund the exercise price to the Optionee for such Optioned Shares.

2.13 Effect of Reorganization, Amalgamation, Merger. etc.

If there is a consolidation, reorganization, merger, amalgamation or statutory amalgamation or arrangement of the Company with or into another corporation, a separation of the business of the Company into two or more entities or a transfer of all or substantially all of the assets of the Company to another entity, the Board will have the sole discretion to amend, abridge or otherwise eliminate any vesting schedule so that notwithstanding the other terms of this Plan, such Option may be exercised in whole or in part by the Optionee and at the discretion of the Board, upon the exercise of an Option under the Plan, the holder thereof shall be entitled to receive any securities, property or cash which the Optionee would have received upon such consolidation, reorganization, merger, amalgamation, statutory amalgamation or arrangement, separation or transfer if the Optionee had exercised his Option immediately prior to the applicable record date or event, as applicable, and the exercise price shall be adjusted as applicable by the Board, unless the Board otherwise determines the basis upon which such Option shall be exercisable, and any such adjustments shall be binding for all purposes of the Plan.

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2.14 Adjustment in Shares Subject to the Plan

If there is any change in the Shares through or by means of a declaration of stock dividends of Shares or consolidations, subdivisions or reclassifications of Shares, or otherwise, the number of Shares subject to any Option, and the exercise price thereof and the maximum number of Shares which may be issued under the Plan in accordance with Section 3.1 (a) shall be adjusted appropriately by the Board and such adjustment shall be effective and binding for all purposes of the Plan. An adjustment under Section 2.13 or 2.14 (the “ Adjustment Provisions ”) will take effect at the time of the event giving rise to the adjustment, and the Adjustment Provisions are cumulative. The Company will not be required to issue fractional Shares in satisfaction of its obligations hereunder. Any fractional interest in a Share that would, except for this provision, be deliverable upon the exercise of an Option will be cancelled and not be deliverable by the Company. If any questions arise at any time with respect to the exercise price or number of Shares deliverable upon exercise of an Option in connection with any of the events set out in Sections 2.12, 2.13 or 2.14, such questions will be conclusively determined by the Company’s auditors, or, if they decline to so act, any other firm of Chartered Accountants that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and all Optionees.

ARTICLE III GENERAL

3.1 Maximum Number of Shares

(a) The aggregate number of Shares issuable pursuant to this Plan or any other Share Compensation Arrangement (pre-existing or otherwise) to all Participants shall not exceed 10% of the issued and outstanding Shares at the time of grant.
(b) The aggregate number of Shares issuable pursuant to this Plan and any other Share Compensation Arrangement (pre-existing or otherwise) to Insiders shall not exceed 10% of the Shares outstanding at any time.
(c) The aggregate number of Shares issued upon exercise of the Options granted pursuant to this Plan and any other Share Compensation Arrangement (pre-existing or otherwise) to Insiders within a oneyear period shall not exceed 10% of the Shares then outstanding.

3.2 Transferability

Options are not assignable or transferable other than by will or by the applicable laws of descent. During the lifetime of an Optionee, all Options may only be exercised by the Optionee.

3.3 Employment

Nothing contained in the Plan shall confer upon any Optionee any right with respect to employment or continuance of employment with the Company or any Subsidiary, or interfere in any way with the right of the Company or any Subsidiary, to terminate the Optionee’s employment at any time. Participation in the Plan by an Optionee is voluntary.

3.4 No Shareholder Rights

An Optionee shall not have any rights as a shareholder of the Company with respect to any of the Shares covered by an Option until the Optionee exercises such Option in accordance with the terms of the Plan and the issuance of the Shares by the Company.

3.5 Record Keeping

The Company shall maintain a register in which shall be recorded the name and address of each Optionee, the number of Options granted to an Optionee, the details thereof and the number of Options outstanding.

3.6 Necessary Approvals

The Plan shall be effective only upon the approval of both the Board and the shareholders of the Company by ordinary resolution. The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of any governmental authority having jurisdiction or any stock exchanges on which the Shares are listed for trading which may be required in connection with the authorization, issuance or sale of such Shares by the Company. If any Shares cannot be issued to any Optionee for any reason including, without limitation, the failure

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to obtain such approval, then the obligation of the Company to issue such Shares shall terminate and any exercise price paid by an Optionee to the Company shall be returned to the Optionee.

3.7 Administration of the Plan

The Board is authorized to interpret the Plan from time to time and to adopt, amend and rescind rules and regulations for carrying out the Plan, subject to section 3.9 below. The interpretation and construction of any provision of the Plan by the Board shall be final and conclusive. Administration of the Plan shall be the responsibility of the appropriate officers of the Company and all costs in respect thereof shall be paid by the Company.

3.8 Income Taxes

The Company shall have the power and the right to deduct or withhold, or require an Optionee to remit to the Company, the required amount to satisfy federal, provincial, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan, including the grant or exercise of any Option granted under the Plan. With respect to any required withholding, the Company shall have the irrevocable right to, and the Optionee consents to, the Company setting off any amounts required to be withheld, in whole or in part, against amounts otherwise owing by the Company to the Optionee (whether arising pursuant to the Optionee's relationship as an officer, employee or consultant of the Company or otherwise), or may make such other arrangements that are satisfactory to the Optionee and the Company. In addition, the Company may elect, in its sole discretion, to satisfy the withholding requirement, in whole or in part, by withholding such number of Shares issuable upon exercise of the Options as it determines are required to be sold by the Company, as trustee, to satisfy any withholding obligations net of selling costs. The Optionee consents to such sale and grants to the Company an irrevocable power of attorney to effect the sale of such Shares issuable upon exercise of the Options and acknowledges and agrees that the Company does not accept responsibility for the price obtained on the sale of such Shares issuable upon exercise of the Options.

3.9 Amendment, Modification or Termination of Plan

Subject to the requisite shareholder and regulatory approvals set forth under subparagraphs 3.9(a) and (b) below, the Board may, from time to time, amend or revise the terms of the Plan or may discontinue the Plan at any time provided however that no such right may, without the consent of the Optionee, in any manner adversely affect his rights under any Option theretofore granted under the Plan.

(a) The Board may, subject to receipt of requisite shareholder and regulatory approval, which will require: (i) obtaining the approval of a majority of holders of the Shares voting at a duly called and held meeting of the holders of Shares and, (ii) in the case of any amendments to Sections 3.1(b) and 3.1(c) so as to increase the Insider participation limits, approval of a majority of the holders of the Shares voting at a duly called and held meeting of holders of Shares excluding shares voted by Insiders who are Eligible Persons, make the following amendments to the Plan:

(i) any amendment to the number of securities issuable under the Plan, including an increase to a fixed maximum number of securities or a change from a fixed maximum number of securities to a fixed maximum percentage. A change to a fixed maximum percentage which was previously approved by shareholders will not require additional shareholder approval;

(ii) any change to the definition of “Participants” which would have the potential of narrowing or broadening or increasing insider participation;

(iii) amendments to Section 3.1(a) to increase the maximum number of Shares which may be issued under the Plan or amendments to Sections 3.1(b) and 3.1(c) hereto so as to increase the Insider participation limits;

(iv) amendments to Section 3.7 in any manner or any amendments to this Section 3.9 so as to increase the ability of the Board to amend the Plan without shareholder approval;

(v) amendments to the definition of “Eligible Person”

(vi) amendments relating to the transferability of Options other than as permitted under the Plan;

(vii) amendments to the exercise price of any Options issued under the Plan where such amendment reduces the exercise price of such Option (for this purpose, a cancellation or termination of an Option or a

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Participant prior to its expiry for the purpose of re-issuing Options to the same Participant with a lower exercise price shall be treated as an amendment to reduce the exercise price of an Option);

(viii) amendments to the term of any Option issued under the Plan;

(ix) the addition of any form of financial assistance;

(x) any amendment to a financial assistance provision which is more favourable to Participants;

(xi) any addition of a cashless exercise feature, payable in cash or securities, which does not provide for a full deduction in the number of underlying securities from the Plan;

(xii) the addition of deferred or restricted share unit or any other provision which results in Participants receiving securities while no cash consideration is received by the Company;

(xiii) any amendments to this Section 3.9 Plan amendment provisions; and

(xiv) any other amendments that may lead to significant or unreasonable dilution in the Company’s outstanding securities or may provide additional benefits to Participants, especially to insiders of the Company, at the expense of the Company and its existing shareholders.

(b) The Board may, subject to receipt of requisite regulatory approval, where required, in its sole discretion and without shareholder approval, make all other amendments to the Plan that are not of the type contemplated in subparagraph 3.9(a) above, including, without limitation:

(i) amendments of a housekeeping nature;

(ii) the addition of or a change to vesting provisions of a security or the Plan;

(iii) a change to the termination provisions of a security or the Plan which does not entail an extension beyond the original expiry date; and

(iv) the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the Plan reserve.

3.10 No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

3.11 Interpretation

The Plan will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 3.12 Compliance with Applicable Law

If any provision of the Plan or any agreement entered into pursuant to the Plan contravenes any law or any order, policy, by-law or regulation of any regulatory body or stock exchange having authority over the Company or the Plan then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

Approved by the Board on May 26, 2021.

EXHIBIT A

BLACK IRON INC.

INCENTIVE STOCK OPTION PLAN

OPTION COMMITMENT

Notice is hereby given that, effective this _ day of _, 20_ (the “ Effective Date ”), [Black Iron Inc.] (the “ Company ”) has granted to ___ (the “ Optionee ”), an Option to acquire __ Common Shares (the “ Shares ”) on or prior to 5:00 p.m. (Toronto Time) on the __ day of ____ (the “ Expiry Date ”) at an exercise price of Cdn. $_____ per Share.

Shares may be acquired as follows:



The grant of the Option evidenced hereby is made subject to the terms and conditions of the Company’s 2014 Stock Option Plan (the “ Stock Option Plan ”), the terms and conditions of which are hereby incorporated herein.

To exercise your Option, deliver a written notice specifying the number of Shares you wish to acquire, together with a certified cheque or bank draft payable to the Company for the aggregate exercise price, to the Company or as otherwise instructed by the Company. A certificate for the Shares so acquired will be issued by the Company’s transfer agent as soon as practicable thereafter.

The undersigned hereby acknowledges having read the Stock Option Plan and agrees to the terms and conditions of the Stock Option Plan.

The undersigned Optionee hereby authorizes the Company to withhold any remuneration payable to the undersigned for the purposes of paying any taxes owing as a result of the undersigned’s participation in the Stock Option Plan and hereby further authorizes the Company to remit such amounts owing to the relevant taxation authorities on the undersigned’s behalf.

BLACK IRON INC.

Authorized Signatory

[Name of Optionee]

APPENDIX “C” Amended and Restated Deferred Share Unit Plan

BLACK IRON INC.

Deferred Share Unit Plan

May 26, 2021

Definitions and Interpretation

1.01 Definitions : For purposes of the DSU Plan, unless a word or term is otherwise defined it shall have the following meanings:

(a) “Acceptable Equity Awards” means any DSUs or other equity awards that are granted to or taken by a non-employee director in place of cash fees, provided that the equity award granted has an initial value that is equal to the value of the cash fees given up in exchange therefor;
(b) "Act" means the Business Corporations Act (Ontario) or its successor, as amended from time to time;
(c) “Annual Remuneration means, in respect of a Director, all amounts payable to a Director by the Corporation in respect of services provided to the Corporation by the Director in a calendar year, including without limitation (i) annual base retainer fee for serving as a Director; (ii) annual retainer fee for serving as a member of a Board committee; (iii) annual retainer fee for chairing a Board committee; (iv) fees for attending meetings of the Board, but, for greater certainty, excludes amounts received by a Director as a reimbursement for expenses incurred in attending meetings of the Board.
(d) "Board" means the board of directors of the Corporation;
(e) “Change of Control” means any of the following:
(i) a takeover bid (as defined in the Securities Act (Ontario)), which is successful in acquiring Common Shares,
(ii) the sale of all or substantially all the assets of the Corporation,
(iii) the sale, exchange or other disposition of a majority of the outstanding Common Shares in a single transaction or series of related transactions,
(iv) the dissolution of the Corporation’s business or the liquidation of its assets,
(v) a merger, amalgamation or arrangement of the Corporation in a transaction or series of transactions in which the Corporation’s shareholders receive less than 51% of the outstanding shares of the new or continuing corporation,
(vi) the acquisition, directly or indirectly, through one transaction or a series of transactions, by any person or entity, of an aggregate of more than 50% of the outstanding Common Shares,
(vii) as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Corporation or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Corporation for election to the Corporation’s board of directors do not constitute a majority of the Corporation’s board of directors.
(f) "Committee" means the Board or the Corporate Governance and Compensation Committee of the Corporation;
(g) "Common Shares" means the common shares of the Corporation;
(h) "Corporation" means Black Iron Inc., a corporation incorporated under the Act;
(i) "Designated Affiliate" means an affiliate of the Corporation designated by the Committee for purposes of the DSU Plan from time to time;
(j) "Director" means a member of the Board from time to time;
(k) "DSU" means the right to receive a DSU Payment evidenced by way of book-keeping entry in the books of the Corporation and administrated pursuant to the DSU Plan, the value of which, on a particular date, shall be equal to the Market Value at that date;
(l) "DSU Grant Letter" has the meaning in section 3.03;
(m) "DSU Issue Date" means the date recommended by the Committee and, if the Committee is not the Board, confirmed by the Board from time to time. If a DSU Issue Date falls during a blackout period pursuant to the Corporation’s Disclosure, Confidentiality and Insider Trading Policy, such DSU Issue Date shall become the fifth trading day following the expiry of such blackout period, unless otherwise determined by the Board;
(n) "DSU Payment" means, subject to the effectiveness of Sections 6.02 and 6.03 hereof, a cash payment by the Corporation to a Participant equal to the Market Value of a Common Share on the Separation Date multiplied by the number of DSUs held by the Participant on the Separation Date;
(o) "DSU Plan" means this amended and restated deferred share unit plan;
(p) "Eligible Director" means a person who is a Director or a member of the board of directors of any Designated Affiliate and who, at the relevant time, is not otherwise an employee of the Corporation or of a Designated Affiliate, and such person shall continue to be an Eligible Director for so long as such person continues to be a member of such boards of directors and is not otherwise an employee of the Corporation or of a Designated Affiliate;
(q) "Market Value" means the weighted average trading price of the Common Shares on the TSX for the five (5) consecutive trading days immediately prior to the date as of which Market Value is determined. If the Common Shares are not trading on the TSX, then the Market Value shall be determined based on the trading price on such stock exchange or over-the-counter market on which the Common Shares are listed and posted for trading as may be selected for such purpose by the Committee. In the event that the Common Shares are not listed and posted for trading on any stock exchange or over-the-counter market, the Market Value shall be the fair market value of such Common Shares as determined by the Committee in its sole discretion;
(r) "Participant" for the DSU Plan means each Eligible Director to whom DSUs are issued;
(s) "Separation Date" means the date that a Participant ceases to be an Eligible Director for any reason whatsoever, including death, of the Eligible Director, and is otherwise not employed by the Corporation or a Designed Affiliate;
(t) "Stock Exchanges" means collectively, the TSX and any other stock exchange on which the Common Shares may be listed from time to time; and
(u) "TSX" means The Toronto Stock Exchange.

1.02 Securities Definition : In the DSU Plan, the term "affiliate", shall have the meaning given to such term in the Securities Act (Ontario).

1.03 Headings : The headings of all articles, parts, sections, and paragraphs in the DSU Plan are inserted for convenience of reference only and shall not affect the construction or interpretation of the DSU Plan.

1.04 Context, Construction : Whenever the singular or masculine are used in the DSU Plan, the same shall be construed as being the plural or feminine or neuter or vice versa where the context so requires.

1.05 Canadian Funds : Unless otherwise provided, all references to dollar amounts in the DSU Plan are to lawful money of Canada.

Purpose and Administration of the DSU Plan

2.01 Purpose of the DSU Plan : The purpose of the DSU Plan is to strengthen the alignment of interests between the Eligible Directors and the shareholders of the Corporation by linking director compensation to the future value of the Common Shares. In addition, the DSU Plan has been adopted for the purpose of advancing the interests of the Corporation through the motivation, attraction and retention of directors of the Corporation and the Designated Affiliates of the Corporation, it being generally recognized that DSU plans aid in attracting, retaining and encouraging director commitment and performance due to the opportunity offered to them to receive compensation in line with the value of the Common Shares.

2.02 Administration of the DSU Plan : The DSU Plan shall be administered by the Committee and the Committee shall have full discretionary authority to administer the DSU Plan including the authority to interpret and construe any provision of the DSU Plan and to adopt such rules and regulations for administering the DSU Plan as the Committee may deem necessary in order to comply with the requirements of the DSU Plan, acting reasonably. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and conclusive and shall be binding on the Participants and the Corporation. All costs incurred in connection with the DSU Plan shall be for the account of the Corporation.

2.03 Delegation to Compensation Committee : All of the powers exercisable under the DSU Plan, may, to the extent permitted by applicable law and as determined by resolution of the Directors, be exercised by the Compensation Committee. 2.04 Record Keeping : The Corporation shall maintain a register in which shall be recorded:

(a) the name and address of each Participant in the DSU Plan;
(b) the number of DSUs granted to each Participant under the DSU Plan; and
(c) the date and price at which DSUs were granted.

Elections

3.01 Subject to such rules, regulations, approvals and conditions as the Committee may impose, a Director may elect to request payment of all or a portion of his or her Annual Remuneration in the form of Deferred Share Units.

3.02 To request payment of all or a portion of Annual Remuneration in the form of Deferred Share Units, a Director shall complete and deliver to the Corporate Secretary of the Corporation a written election in the form attached as Schedule A hereto:

a) for the Annual Remuneration entitled to be received by the Director during the Stub Year, no later than thirty (30) days after the Effective Date; and
b) for the Annual Remuneration entitled to be received by the Director for any Fiscal Year following the Stub Year, no later than December 31 of the immediately preceding Fiscal Year.

3.03 A Director shall be entitled to elect one of the following three (3) options with respect to the deferred payment of his or her Annual Remuneration:

a) 25% of the Annual Remuneration' in the form of Deferred Share Units;
b) 50% of the Annual Remuneration in the form of Deferred Share Units; or
c) 75% of the Annual Remuneration in the form of Deferred Share Units.

3.04 A Director's election received by the Corporate Secretary of the Corporation under Section 4.2 shall be irrevocable and shall continue to apply until the Director completes and delivers to the Corporate Secretary of the Corporation a revised election which may increase or decrease the percentage of deferred payment of his or her Annual Remuneration in the form of Deferred Share Units in accordance with the options set out in Section 4.3. Any such revised election shall be effective in respect of the next full Fiscal Year commencing after the date which such revised election is delivered. A Director may make one revised election per Fiscal Year. Directors shall not, subject to their initial election set out in Section 4.2(a), be entitled to make any revised elections for the period applicable to the Stub Year.

3.05 The Annual Remuneration payable in respect of each Quarter in the form of DSUs to the Directors shall be recorded by the Corporation as soon as practicable after the last day of each Quarter. The Annual Remuneration payable in the form of DSUs to the Directors shall be recorded by the Corporation as soon as practicable after March 31 of each Fiscal Year. Notwithstanding any election by a Director under the Plan, the Committee may, in its sole discretion, decline to award DSUs in respect of a Director's Annual Remuneration and instead require the Director to receive cash for Annual Remuneration in the ordinary course.

3.06 A Participant’s DSU account will be credited with the number of DSU’s determined by dividing the dollar amount of compensation payable in DSU’s on the payment date by the Market Value of the Common Shares at the time. Market Value means the closing price of a Common Share on the TSX averaged over the five (5) consecutive trading days immediately preceding the date of grant or the redemption date, as the case may be.

DSU Plan

4.01 Participants : The Committee may grant and issue to each Eligible Director on each DSU Issue Date, that number of DSUs as determined by resolution of the Committee.

4.02 Redemption : Each vested DSU held by a Participant who ceases to be an Eligible Director shall be redeemed by the Corporation on the relevant Separation Date for a DSU Payment to be made to the Participant on such date as the Corporation determines not later than 60 days after the Separation Date and in any event no later than December 31 of the following calendar year, without any further action on the part of the holder of the DSU in accordance with the terms of this part 4.

If a DSU is subject to vesting condition(s), the Participant holding such DSU shall not be entitled to the DSU Payment if the Participant ceases to be an Eligible Director, other than if the Participant ceases to be an Eligible Director in the event of, in connection with, or as a result of, a Change of Control, prior to the vesting condition(s) having been satisfied, and such DSU shall then be deemed cancelled. In the event of a Change of Control, each DSU shall automatically vest and be redeemable upon the occurrence of the Separation Date in accordance with the preceding paragraph.

4.03 DSU Letter : Each grant of DSUs under the DSU Plan shall be evidenced by a letter of the Corporation (“DSU Grant Letter”). Such DSUs shall be subject to all applicable terms and conditions of the DSU Plan and may be subject to any other terms and conditions, including, without limitation, vesting conditions, which are not inconsistent with the DSU Plan and which the Committee deems appropriate for inclusion in a DSU Grant Letter. The provisions of the various DSU Grant Letters entered into under the DSU Plan need not be identical, and may vary from grant to grant and from Participant to Participant.

4.04 Dividends : In the event that a dividend (other than stock dividend) is declared and paid by the Corporation on Common Shares, a Participant will be credited with additional DSUs on the same terms as the DSUs proposed herein. The number of such additional DSUs will be calculated by dividing the total amount of the dividends that would have been paid to the Participant if the DSUs in the Participant's account on the dividend record date had been outstanding Common Shares (and the Participant held no other Common Shares), by the closing price of a Common Share on the TSX on the date on which the dividends were paid on the Common Shares.

4.05 Term of the DSU Plan : The DSU Plan shall be deemed to become effective as of [DATE] . The DSU Plan shall remain in effect until it is terminated by the Board. Upon termination of the Plan, the Corporation shall redeem all remaining DSUs under section 3.02, as at the applicable Separation Date for each of the remaining Participants.

Withholding Taxes

5.01 Withholding Taxes : The Corporation or any Designated Affiliate of the Corporation may take such steps as are considered necessary or appropriate for the withholding of any taxes or other amounts that the Corporation or any Designated Affiliate of the Corporation is required by any law or regulation of any governmental authority whatsoever to withhold.

General

6.01 Amendment of DSU Plan : Subject to Section 6.02, the Committee may from time to time in the absolute discretion of the Committee amend, modify and change the provisions of the DSU Plan, provided that any amendment, modification or change to the provisions of the DSU Plan that would:

(a) materially increase the benefits under the DSU Plan;
(b) materially modify the requirements as to eligibility for participation in the DSU Plan; or
(c) terminate the DSU Plan.

shall only be effective upon such amendment, modification or change being approved by the Board and, if sections 7.02 and 7.03 become effective, approval of shareholders of the Corporation and the Stock Exchanges and any other regulatory authorities having jurisdiction over the Corporation, and provided any such amendment shall be effective only if the DSU Plan will continue to meet the requirements of paragraph 6801(d) of the regulations to the Income Tax Act (Canada) or any successor provision.

6.02 Amendment of DSU Plan Where Treasury Shares Issuable: If sections 7.02 and 7.03 become effective, the Committee’s discretion to amend, modify and change the provisions of the DSU Plan, acting reasonably, shall be limited to such amendments that are of a “housekeeping” nature including the addition of or a change to vesting provisions of a security or the DSU Plan or a change to the election provisions which does not entail an increase to the maximum percentage of Annual Remuneration the non-executive directors are permitted to receive in DSUs , and will not, without receipt of shareholder approval (whether or not required by law or regulation) and regulatory approval, make any amendment to the DSU Plan that:

(vi) Increases the number of securities issuable under the Plan, including an increase to a fixed maximum number of securities or a change from a fixed maximum number of securities to a fixed maximum percentage;
(vii) Changes the definition of “Participants” which would have the potential of narrowing or broadening or increasing insider participation;
(viii) Any amendment to shorten the vesting conditions; (ix) Any amendment that would permit the DSUs to be transferable (other than as provided herein);
(x) any other amendments that to the plan amendment provisions.;

and shall only be effective upon such amendment, modification or change being approved by the Board, Shareholders of the Corporation and the Stock Exchanges and any other regulatory authorities having jurisdiction over the Corporation, and provided any such amendment shall be effective only if the DSU Plan will continue to meet the requirements of paragraph 6801(d) of the regulations to the Income Tax Act (Canada) or any successor provision.

6.03 Non-Assignable : Except as otherwise may be expressly provided for under this DSU Plan or pursuant to a will or by the laws of descent and distribution, no DSU and no other right or interest of a Participant is assignable or transferable, and any such assignment or transfer in violation of this DSU Plan shall be null and void.

6.04 Rights as a Shareholder and Director : No holder of any DSUs shall have any rights as a shareholder of the Corporation at any time. Nothing in the Plan shall confer on any Eligible Director the right to continue as a Director of the Corporation or as a director of any Designated Affiliate or interfere with right to remove such director.

6.05 Adjustment in Number of Payments Subject to the DSU Plan : In the event there is any change in the Common Shares, whether by reason of a stock dividend, stock split, reverse stock split, consolidation, subdivision, reclassification or otherwise, an appropriate proportionate adjustment shall be made by the Committee with respect to the number of DSUs then outstanding under the DSU Plan as the Committee, in its sole discretion, may determine to prevent dilution or enlargement of rights.

All such adjustments, as determined by the Committee, shall be conclusive, final and binding for all purposes of the DSU Plan.

6.06 No Representation or Warranty : The Corporation makes no representation or warranty as to the future value of any rights under DSUs issued in accordance with the provisions of the DSU Plan. No amount will be paid to, or in respect of, an Eligible Director under this DSU Plan or pursuant to any other arrangement, and no additional DSUs will be granted to such Eligible Director to compensate for a downward fluctuation in the price of the Common Shares, nor will any other form of benefit be conferred upon, or in respect of, an Eligible Director for such purpose.

6.07 Compliance with Applicable Law : If any provision of the DSU Plan or any DSU contravenes any law or any order, policy, by-law or regulation of any regulatory body having jurisdiction, then such provision shall be deemed to be amended to the extent necessary to bring such provision into compliance.

6.08 Interpretation : This DSU Plan shall be governed by and construed in accordance with the laws of the Province of Ontario.

6.09 Unfunded Benefit : Subject to section 7.03, below, all DSU Payments to be made constitute unfunded obligations of the Corporation payable solely from its general assets and subject to the claims of its creditors. The Corporation has not established any trust or separate fund to provide for the payment of benefits under the DSU Plan.

6.10 No Other Benefit: No amount will be paid to, or in respect of, a Participant under the DSU Plan to compensate for a downward fluctuation in the price of a Common Share, nor will any other form of benefit be conferred upon, or in respect of, a Participant (or a person with whom the Participant does not deal at arm’s length within the meaning of the Income Tax Act (Canada)), for such purpose.

ADDITIONAL PROVISION FOR TREASURY BASED SHARE ISSUANCES

7.01 Effectiveness : Sections 7.02 and 7.03 shall become effective only upon receipt by the Corporation of the necessary TSX approval, including requisite shareholder approval.

7.02 Treasury Issuances : Upon this section becoming effective, the Corporation shall have the power, at the Committee’s discretion, and upon mutual agreement of the specific holder of the DSUs, to satisfy DSU Payments payable under DSUs by the issuance of Common Shares from treasury on the basis of, subject to adjustment in accordance with Section 6.04, one Common Share for each DSU. If the Required Shareholder Approval is not obtained, no Common Shares shall be issuable from treasury in respect of DSUs issuable under this DSU Plan. If applicable, share certificates or other evidence of Common Shares issued pursuant to this section shall bear any legend as may be required by applicable securities laws or Stock Exchange rules.

7.03 Maximum : The maximum number of Common Shares made available for the DSU Plan shall not exceed 5% of the issued and outstanding Common Shares at the time of grant. In addition, the aggregate number of Common Shares reserved for issuance pursuant to this DSU Plan and any other securitiesbased compensation arrangement (pre-existing or otherwise) of the Corporation (as defined by applicable securities laws) shall not exceed 10% of the Common Shares outstanding from time to time. The aggregate number of Common Shares issuable to Eligible Directors pursuant to this DSU Plan together with any shares issued pursuant to any other security based compensation arrangement, but excluding all DSUs and other securities that are Acceptable Equity Awards, shall not exceed 1% of the total number of outstanding Common Shares of the Company on a non-diluted basis and the award value of all awards (together with the award value of all other rights granted under any other security based compensation arrangement), but excluding all DSUs and other securities that are Acceptable Equity Awards, to ~~the~~ any one Eligible Director shall not exceed $100,000 per year per Eligible Director. Insider participation is limited to the number of the Company’s issued Common Shares: (i) issued to insiders of the Company within any one-year period, and (ii) issuable to insiders of the Company, at any time, pursuant to the DSU Plan or when combined with all of the Company’s other security based compensation arrangements, which cannot exceed 10% of the Company’s total issued and outstanding Common Shares, respectively.

Schedule A Deferred Share Unit Plan for Directors of Black Iron Inc. (the "Plan")

PARTICIPATION ACKNOWLEDGEMENT AND ELECTION NOTICE - Sections 4.2 and 4.3 of the Plan I. Acknowledgment of Corporation

The Corporation acknowledges that it has established the Plan for the benefit of Directors in accordance with Section 6801 (d) of the Regulations promulgated under the Income Tax Act (Canada).

II. Election

The Director hereby elects to participate in the Plan and to receive (check):

□ 25% or □ 50% or □ 75%

of the Annual Remuneration that may be payable to him or her after the effective date of this election in the form of Deferred Share Units ("DSUs") and the balance of any such Directors' Annual Remuneration in cash, net of applicable source deductions.

III. Acknowledgement of Director

The Director hereby confirms and acknowledges that:

He or she has received and reviewed a copy of the terms of the Plan and agrees to comply with them.
Notwithstanding this election, the Committee retains discretion to decline to grant DSUs, in which case he or she will receive their Annual Remuneration in cash.
He or she will not be entitled to cause the Corporation or any Affiliate thereof to redeem DSUs granted under the Plan until no longer either a Director of the Corporation or an Affiliate.
When DSUs credited to his or her account pursuant to this election are redeemed in accordance with the terms of the Plan (after he or she is no longer either a Director of the Corporation or any Affiliate), income tax and other withholding requirements will arise and the Corporation will make all source deductions as are required by law. ꞏ
The value of DSUs is based on the value of the common voting shares of the Corporation and is therefore not guaranteed.
No funds will be set aside by the Corporation to guarantee the payment of DSUs. ꞏ The obligation of the Corporation to pay DSUs will remain an unfunded and unsecured liability recorded on its books.
This election will be in effect until he or she makes and delivers a revised election and cannot be retroactively changed.
In the event of any discrepancy between the terms of the Plan and the terms of this Election Notice, the terms of the Plan shall prevail. All capitalized expressions used herein shall have the same meaning as in the Plan unless otherwise defined herein.
Neither the Plan nor anything contained herein constitutes tax or employment law advice to him or her and he or she is responsible for seeking independent counsel in all such matters.

IV. Effective Date

This election shall be effective on the date on which it is received by the Corporate Secretary of the Corporation.

Date	(Name of Director)
	(Signature of Director)
Received	and acknowledged by the Corporation the *_ day of* _, 20_ by
	Signature
	Name
	Title

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Condensed consolidated interim financial statements (Expressed in U.S. dollars) (unaudited)

For the three months ended March 31, 2021 and 2020

BLACK IRON INC.

Condensed consolidated interim financial statements

(Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

Condensed consolidated interim statements of financial position .................................................................................... 1 Condensed consolidated interim statements of loss and comprehensive loss ................................................................ 2 Condensed consolidated interim statements of changes in shareholders’ (deficiency) equity ........................................ 3 Condensed consolidated interim statements of cash flows.............................................................................................. 4 Notes to the condensed consolidated interim financial statements .......................................................................... 5 - 16

BLACK IRON INC.

Consolidated statements of financial position (Expressed in U.S. dollars)

		March 31,		December 31,
		2021		2020
ASSETS
Current
Cash	$	1,166,928	$	1,665,600
Amounts receivable and prepaid expenses		91,954		83,084
Total current assets		1,258,882		1,748,684
Prepaid and other (Note 9)		-		41,619
Equipment		2,858		4,195
Total assets	$	1,261,740	$	1,794,498
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 8)	$	668,887	$	611,218
Total current liabilities		668,887		611,218
Non-current
Warrant liability (Note 7)		-		6,521,549
Conversion option of convertible debenture (Note 9)		-		270,585
Liability component of convertible debenture (Note 9)		-		90,187
Loanpayable (Note10)		47,714		31,417
Total liabilities		716,601		7,524,956
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common shares (Note 5)		72,969,332		72,563,431
Share based payments reserve (Note 6)		1,284,479		1,259,540
Warrant reserve (Note 7)		6,523,105		2,288
Accumulated other comprehensive income		10,473		-
Accumulated deficit		(80,242,250)		(79,555,717)
Totalshareholders'equity (deficiency)		545,139		(5,730,458)
Total shareholders' equity (deficiency)and liabilities	$	1,261,740	$	1,794,498

Nature of operations and going concern (Note 1) Commitments and contingencies (Note 8 and Note 11) Subsequent events (Note 12)

Approved by the Board of Directors on May 14, 2021

“BRUCE HUMPHREY”, Director “JOHN DETMOLD”, Director

BLACK IRON INC.

Consolidated statements of loss and comprehensive loss (Expressed in U.S. dollars)

	Three months ended Three months ended March 31, 2021March 31, 2020
Expenses Consulting and management fees (Note 8) Professional fees expense General office expenses Exploration and evaluation expenses (Note 4) Share-based compensation (Note 6 and Note 8) Travel expenses Shareholder communications and filing fees Change in fair value of warrant liability (Note 7) Change in fair value of conversion option (Note 9) Finance costs (Note 9) Accretion (Note 9) Loss (gain) on foreign exchange Interest income Net loss for the period Other comprehensive loss Items that may be subsequently classifed to net loss: Cumulative exchange translation adjustments Total other comprehensive loss Comprehensive loss for the period	205,979 $ 215,256 $ 26,543 34,780 42,482 46,379 242,244 167,532 43,617 19,253 - 21,671 70,651 36,708 - (450,098) (7,588) 182,049 52,009 42,500 5,404 66,427 5,824 (103,359) (632) (1,834)
	686,533 $ 277,264 $
	(5,752) -
	(5,752) -
	680,781 $ 277,264 $
Basic and diluted loss per share Weighted average number of common shares outstanding - basic and diluted	$ 0.00 $ 0.00 262,226,506 188,396,617

Consolidated statements of changes in shareholders’ equity (deficiency) (Expressed in U.S. dollars)

BLACK IRON INC.

	Common shares	Share based payments	Accumulated deficit	Warrants	Accumulated other comprehensive loss	Total shareholders' equity (deficiency)
	# $	$	$	$	$	$
Balance, December 31, 2019	186,299,159 68,321,728	548,791	(70,604,863)	3,020	-	(1,731,324)
						-
Net loss for the period	- -	-	(277,264)	-	-	(277,264)
Stock option exercise (Note 6)	- -	10,086	-	-	-	10,086
Deferred share units (Note 6)	- -	9,167	-	-	-	9,167
Warrant exercise (Note 7)	300,000 31,821	-	-	-	-	31,821
Conversion of debt to shares (Note 9)	5,620,806 221,107	-	-	-	-	221,107
Balance,March 31,2020	192,219,965 68,574,656	568,044	(70,882,127)	3,020	-	(1,736,407)
Balance, December 31, 2020	259,939,588 72,563,431	1,259,540	(79,555,717)	2,288	-	(5,730,458)
Opening balance, January 1, 2021 (Note 3)	- -	-	-	-	4,721	4,721
Net loss and comprehensive loss	- -	-	(686,533)	-	5,752	(680,781)
Stock option plan (Note 6)	- -	33,990	-	-	-	33,990
Stock option exercise (Note 6)	360,000 44,813	(18,678)	-	-	-	26,135
Deferred share units (Note 6)	- -	9,627	-	-	-	9,627
Warrant exercise (Note 7)	25,000 2,500	-	-	(732)	-	1,768
Warrant grant (Note 7)	- -	-	-	6,521,549	-	6,521,549
Conversion of debt to shares (Note 9)	2,590,627 358,588	-	-	-	-	358,588
Balance, March 31, 2021	262,915,215 72,969,332	1,284,479	(80,242,250)	6,523,105	10,473	545,139

Consolidated statements of cash flows (Expressed in U.S. dollars)

BLACK IRON INC.

	Three months	Three months	Three months	Three months
		ended		ended
	March 31, 2021		March 31,2020
OPERATING ACTIVITIES
Net loss for the period	$	(686,533)	$	(277,264)
Adjustment for:
Share-based compensation (Note 6)		43,617		19,253
Interest income		632		(1,834)
Change in fair value of warrant liability (Note 7)		-		(450,098)
Change in fair value of conversion option of the convertible debenture (Note 9)		(7,588)		182,049
Accretion (Note 9)		5,404		66,427
Non-cash financing costs (Note 9)		139,792		42,500
Depreciation		1,573		1,533
Net cash outflow before working capital changes ~~‑~~		(503,103)		(417,434)
Net change in non cash working capital		143,581		13,042
Cash used in operating activities		(359,522)		(404,392)
FINANCING ACTIVITIES
Warrant exercise (Note 7)		1,768		-
Option exercise (Note 6)		26,135		20,544
Loan payable (Note 10)		16,297		-
Cash provided by financing activities		44,200		20,544
INVESTING ACTIVITIES
Purchase of equipment		(236)		(4,613)
Interest received		632		1,834
Cash provided by / (used in) investing activities		396		(2,779)
Effect of exchange rate changes on cash		(183,746)		(139,910)
CHANGE IN CASH		(498,672)		(526,537)
CASH, beginning of period		1,665,600		988,844
CASH,end ofperiod	$	1,166,928	$	462,307
SUPPLEMENTAL INFORMATION:
Finder warrants issued	$	-	$	3,020

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

1. Nature of operations and going concern

Black Iron Inc. (the "Company") was incorporated under the laws of the Province of Ontario, Canada by Articles of Incorporation dated June 29, 2010. The principal activity of the Company is the exploration and development of ferrous metals in Ukraine, namely the Shymanivske iron ore project located in Kryvyi Rih, Ukraine. The head office of the Company is located at 65 Queen Street West, Suite 805, Toronto, Ontario, M5H 2M5, Canada.

As at March 31, 2021, Black Iron Inc. held 100% of the shares of Black Iron (Cyprus) Limited which in turn holds a 100% interest in Shymanivske Steel LLC.

The condensed consolidated interim financial statements include the financial statements of the Company and its subsidiaries which are listed in the following table:

subsidiaries which are listed in the following table:
Country of incorporation	Percentage of equity interest
	March 31, 2021 December 31, 2020
Black Iron (Cyprus) Limited Cyprus Shymanivske Steel LLC Ukraine	100 100 100 100

These unaudited condensed consolidated interim financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. For the three months ended March 31, 2021, the Company incurred a net loss of $686,533 and as at March 31, 2021, reported an accumulated deficit of $80,242,250 and working capital of $589,995, including $1,166,928 in cash. The Company has no current source of operating cash flow, and there can be no assurances that sufficient funding, including adequate financing, will be available to explore and develop its property and to cover general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the issuance of equity or debt. These matters represent material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.

These unaudited condensed consolidated interim financial statements do not reflect adjustments to the carrying value of assets and liabilities or reported expenses and consolidated statement of financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be material.

The business of exploring for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to establish ore reserves, to develop metallurgical processes, to acquire construction and operating permits and to construct mining and processing facilities. The recoverability of the amounts shown as assets of the Company is dependent upon the Company obtaining the necessary financing to complete the exploration of its property, the discovery of economically recoverable reserves and future profitable operations.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, unregistered claims, indigenous claims, and non-compliance with regulatory, social and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, political uncertainty and currency exchange fluctuations and restrictions.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

2. Basis of presentation

Statement of compliance

The condensed consolidated interim financial statements are in compliance with IAS 34, Interim Financial Reporting. Accordingly, certain information and disclosures normally included in the annual financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (“IASB”), have been omitted or condensed. These condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2020.

Basis of measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis, unless otherwise disclosed. The condensed consolidated interim financial statements have been prepared on an accrual basis except for cash flow information.

3. Significant accounting policies

The unaudited condensed consolidated interim financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2020, with the exception of the accounting change outlined below.

On January 1, 2021, the Company changed the functional currency of its Canadian entity from US dollars to Canadian dollars. This change was made as it was determined that the Canadian dollar was now the predominant currency influencing expenses for the Canadian entity as the Company intends to fund the Shymanivske project from Canadian funds raised. This change was applied to the financial statements prospectively.

As a result of the change to the functional currency of the Canadian entity, the treatment of the Company’s warrants changed. Prior to the change in the Canadian entity’s functional currency, the warrants issued by the Company did not qualify for classification as equity and were recorded as a derivative liability, as the exercise price was not denominated in the Canadian entity’s functional currency of the US dollar. As such, these warrants were classified as warrant liabilities and were recorded at the estimated fair value at each reporting date, computed using the Black-Scholes valuation method. Changes in fair value of each period were included in income or loss for the period. With the change in functional currency for the Canadian entity, the exercise price of these warrants is now denominated in the Canadian entity’s functional currency and as such, these warrants now qualify for classification as equity. Existing warrants recorded as liabilities on January 1, 2021, the date of change in the functional currency, were extinguished and subsequently reclassed as warrants recorded as equity at their then estimated fair value. There were no changes in the value of these warrants recorded through the statement of loss for the three months ended March 31, 2021.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the three months ended March 31, 2021 and 2020

3. Significant accounting policies (continued)

Future accounting standards not yet effective

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2022. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023.

IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify that when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. costs a company would avoid if it did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are effective for annual periods beginning on January 1, 2022.

IAS 16 – Property, Plant and Equipment (“IAS 16”) was amended. The amendments introduce new guidance, such that the proceeds from selling items before the related property, plant and equipment is available for its intended use can no longer be deducted from the cost. Instead, such proceeds are to be recognized in profit or loss, together with the costs of producing those items. The amendments are effective for annual periods beginning on January 1, 2022.

4. Exploration and evaluation expenditures

Exploration and evaluation expenditures for the periods presented were as follows:

	Three months	Three months
	ended	ended
	March 31, 2021	March 31,2020
Consulting and technical	$ 159,470	$ 118,349
Surface rights and consulting	48,029	25,669
Engineering studies	10,614	-
Field office support and administration	17,062	17,286
Travel	6,412	6,228
Professional fees	657	-
	$ 242,244	$167,532

The Company’s principal activity is the exploration and development of its Shymanivske project.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

5. Share capital

Authorized

Unlimited number of common shares without par value.

Authorized Unlimited number of common shares without par value.
	Number of Common shares		Amount
Balance, December 31, 2019	186,299,159	$	68,321,728
Warrant exercise	10,936,193		737,450
Warrant valuation	-		604,262
Option exercise	750,000		27,725
Option valuation	-		10,060
Debenture conversion	25,419,816		1,851,798
Private placement	36,534,420		1,109,525
Cost of issue	-		(99,117)
Balance, December 31, 2020	259,939,588	$	72,563,431
Warrant exercise	25,000		1,768
Warrant valuation	-		732
Option exercise	360,000		26,135
Option valuation	-		18,678
Debenture conversion	2,590,627		358,588
Balance,March 31,2021	262,915,215	$	72,969,332

On May 8, 2020, the Company closed a non-brokered private placement financing of 36,534,420 units at a price of CAD$0.05 per unit for gross proceeds of $1,151,546 (CAD$1,826,721). Each unit is comprised of one common share and one-third of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.06 for a period of three years from the date of issue (see Note 7). The Company paid cash and noncash commissions and other expenses of $80,768 (CAD$113,602) in relation to this private placement.

During the three months ended March 31, 2021, the Company issued 2,590,627 shares on conversion for a final portion of the outstanding convertible debenture (5,620,806 shares converted for the three months ended March 31, 2020) (Note 9).

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

6. Share-based payments reserve

6. Share-based payments reserve	6. Share-based payments reserve	6. Share-based payments reserve	6. Share-based payments reserve	6. Share-based payments reserve
Number of stock options Weighted average exercise price CAD Carrying amount of options Number of DSU Weighted average exercise price CAD Carrying amount of DSU Total carrying amount
Balance, December 31, 2019 9,907,500 $ 0.07 Granted 9,042,500 0.07 Expired (3,395,000) - Forfeited (187,500) 0.08 Exercised (750,000) -	$ 334,996 528,095 (68,705) (5,092) (10,060)	5,474,481 $ 0.05 3,592,409 0.09 - - - - - -	$ 213,795 266,511 - - -	$ 548,791 794,606 (68,705) (5,092) (10,060)
Balance,December 31,2020 14,617,500$0.07	$779,234	9,066,890$0.07	$480,306	$1,259,540
Granted 750,000 0.07 Exercised (360,000) 0.09	33,990 (18,678)	29,726 $ 0.41 - -	9,627 -	43,617 (18,678)
Balance, March 31, 2021 15,007,500$ 0.07	$ 794,546	9,096,616$ 0.41	$ 489,933	$ 1,284,479

Option Plan

The Company maintains a stock option plan pursuant to which the Company may grant stock options up to 10% of the number of issued and outstanding common shares of the Company at the time of the stock option grant. The 10% limit includes both the stock option plan and any other share compensation plan, including the Deferred Share Units (“DSU”) plan. The terms and conditions of each option granted under the Plan are determined by the Board upon the recommendations of the Compensation Committee.

During the three months ended March 31, 2021, the Company granted 750,000 stock options (150,000 granted for the three months ended March 31, 2020) and options vested with a total value of $33,990 ($10,086 for the three months ended March 31, 2020).

The weighted average grant date fair value of options granted during the three months ended March 31, 2021 was measured using the Black-Scholes option pricing model. The following inputs were used in the measurement of fair values at grant date: expected dividend yield of 0% (2020 - 0%), expected volatility of 134% based on the historical volatility of the Company (2020 – 127%), weighted average risk - free interest rate of 0.35% (2020 – 1.75%), an expected forfeiture rate of 4.7% (2020 – 4.7%), weighted average share price of CAD$0.11 (2020 - $0.08), and a weighted average expected life of 2.7 years (2020 – 2.9 years). The weighted average grant-date fair value of options granted during the three months ended March 31, 2021 was $0.05 per option (2020 - $0.03). 300,000 of the options granted by the Company during the three months ended March 31, 2021 vest in eight equal quarterly instalments commencing on the date of grant and 450,000 options granted by the Company during the three months ended March 31, 2021 with one third vesting once the Company’s share price is 50% higher than the exercise price, the second third vesting once the Company’s share price is 100% higher than the exercise price and the final third vesting once the Company’s share price is 150% higher than the exercise price (2020 – 150,000 options vest in eight equal quarterly installments). The first tranche was met when the Company’s quoted market price exceeded the exercise price of the options in May 2021.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

6. Share-based payments reserve (continued)

At March 31, 2021, outstanding options to acquire common shares of the Company were as follows:

Expiry date	Options exercise price (CAD$)	Options outstanding (#)	Options exercisable (#)		Grant date estimated fair value ($)
February 16, 2022	0.12	2,425,000	2,425,000		161,467
October 31, 2023	0.08	300,000	-		14,987
December 5, 2023	0.06	150,000	150,000		4,806
January 9, 2024	0.05	1,950,000	1,950,000		52,959
March 4, 2024	0.07	200,000	200,000		7,650
October 18, 2024	0.08	250,000	187,500		9,927
March 11, 2025	0.07	150,000	93,750		5,750
June 15, 2025	0.10	6,050,000	6,050,000		365,543
August 7, 2025	0.15	2,782,500	1,043,438		252,648
March 1, 2026	0.42	300,000	37,500		71,313
March 1, 2026	0.38	450,000	-		108,048
		15,007,500	12,137,188	$	1,055,098

DSU Plan

On June 23, 2015, the Company adopted a DSU plan for the benefit of non-executive directors which provided the Company with the ability to issue DSUs from treasury and reserve for issuance of common shares of the Company up to a maximum of 3,000,000 DSUs. On June 27, 2018, shareholders approved an amendment to the DSU plan pursuant to which the maximum number of DSUs granted cannot exceed 5% of the number of issued and outstanding common shares of the Company at the date of grant, subject to an aggregate maximum number of common shares issuable from all share-based compensation plans of 10%.

The DSUs are deferred and will be redeemed in the form of one common share for each DSU held on the date the participant ceases to be an eligible director. During the three months ended March 31, 2021, the Company granted 29,726 DSUs with a fair value of $9,627 based on the quoted market price of the Company’s common shares at the date of grant (203,125 DSUs with a grant date fair value of $9,167 during the three months ended March 31, 2020). As the DSUs will be settled in shares, the value of the DSUs is recorded in share-based payments reserve at the time of issue.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

7. Warrants and warrant liability

At March 31, 2021, outstanding warrants to acquire common shares of the Company were as follows:

Number outstanding	Number exercisable	Grant date	Expiry date	Exercise price (CAD)	Estimated fair value at grant date	Estimated fair value at grant date	Grant date share price	Expected volatility	Expected life (yrs)	Expected dividend yield	Risk- free interest rate
55,000	55,000	29-Mar-19	29-Mar-22	$ 0.09	$	1,556	$ 0.06	122%	3	0%	1.45%
13,081,395	13,081,395	27-Sep-19	27-Sep-23	$ 0.11	$	569,100	$ 0.08	116%	4	0%	1.47%
3,384,991	3,384,991	24-Apr-20	24-Apr-24	$ 0.08	$	95,813	$ 0.06	117%	4	0%	0.38%
12,011,474	12,011,474	8-May-20	8-May-23	$ 0.06	$	194,325	$ 0.08	110%	3	0%	0.26%
30,000,000	-	22-Dec-20	22-Dec-25	$ 0.31	$	6,883,852	$ 0.35	129%	5	0%	0.20%
58,532,860	28,532,860				$	7,744,646

Based on management’s assessment, the vesting conditions for the 30,000,000 warrants granted on December 22, 2020 and included in the table above have not yet been met. As such, management has estimated the fair value of these warrants based on information available on the grant date. No value was recorded in the condensed consolidated interim financial statements for these warrants at March 31, 2021, as vesting is not foreseeable or expected as at the date of these condensed consolidated interim financial statements. See also Note 11.

Warrant liability

Warrants that have their exercise prices denominated in currencies other than the Company’s functional currency of the US dollar, and are non-compensatory, are accounted for as financial liabilities in the consolidated statements of financial position. The changes in fair value are recorded in the consolidated statements of loss for the period.

Warrant liability transactions during the periods presented were as follows:

	Number of Warrants	Fair value ($)
Balance, December 31, 2019	26,357,590	1,227,878
Granted	15,563,131	292,834
Exercised	(10,911,195)	(603,530)
Expired	(2,531,666)	(53,194)
Changein fair value during the year	-	5,657,561
Balance, December 31, 2020	28,477,860	6,521,549
Extinguishment	(28,477,860)	(6,521,549)
Balance, March 31, 2021	-	-

On January 1, 2021, the Company changed its functional currency for its Canadian entity from US dollars to Canadian dollars. As a result of this change, the Company’s warrant liability was extinguished and reclassified as equity. The value of the warrant liability as at March 31, 2020 was $nil. See Note 3.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

8. Related party transactions

Key management personnel compensation

In addition to their contracted fees, executive officers participate in the Company’s stock option program (Note 6) and are entitled to participate in the share compensation plan. The Company also has a DSU plan which provides nonexecutive directors with the ability to redeem annual director compensation through the issuance of common shares of the Company. Certain executive officers are subject to mutual termination notices ranging from three to twelve months. Key management personnel compensation paid comprised:

	Three months ended	Three months ended	Three months ended	Three months ended
		March 31, 2021		March 31,2020
Short term employee benefits	$	212,901	$	178,389
Share-based payments		35,920		10,748
	$	248,821	$	189,137

Included in the above amounts is $59,242 ($57,746 for the three months ended March 31, 2020) paid according to a contract for business and operational consulting services with Forbes & Manhattan, Inc., which has common executives with the Company. Officers and directors had 262,500 options vest during the three months ended March 31, 2021 (131,250 for the three months ended March 31, 2020).

The Company is party to certain management contracts. These contracts require payments of approximately $2.9 million upon the occurrence of a change in control of the Company, as defined by each officer’s respective consulting agreement. The Company is also committed to payments upon termination of approximately $624,000 pursuant to the terms of these contracts. As triggering events have not yet taken place, no amounts have been provided for these items.

As at March 31, 2021, the Company had $410,995 (December 31, 2020 - $434,375) of consulting fees and travel expenses owing to its key management personnel. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and are due on demand.

These transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the three months ended March 31, 2021 and 2020

9. Convertible debenture

On September 18, 2019, the Company executed a convertible security funding agreement (the “Agreement”) with Lind Global Macro Fund, LP (“Lind”) providing for a secured convertible debenture financing for gross proceeds of up to CAD$11,000,000 ($8,306,275).

Pursuant to the Agreement, the Company issued to Lind a convertible security with a face value of CAD$2,700,000 ($2,037,890) (the “Convertible Security”) on September 27, 2019, representing a principal amount of CAD$2,250,000 ($1,698,241) and a prepaid interest amount of CAD$450,000 ($339,649).

The Convertible Security was secured by all of the assets of the Company and bears interest at 10% per annum and matures on September 26, 2021. The Convertible Security included covenants typical and customary for secured convertible securities of this nature.

The Company issued to Lind 13,081,395 warrants exercisable for a term of 48 months at an exercise price of CAD$0.11 per share, valued at $569,100 on the date of issue (see Note 7). The warrants were initially recorded as a warrant liability. When the Company changed the functional currency of its Canadian entity from US dollars to Canadian dollars, the original warrant liability was extinguished and the warrants were subsequently issued as equity warrants on January 1, 2021. On issuance at January 1, 2021, the warrants were valued at $2,924,601.

The Company paid Lind a commitment fee of CAD$78,750 ($59,438) and legal fees associated with the Convertible Security of CAD$57,571 ($43,740).

The Company issued to Lind a second convertible security (the “Second Tranche”) under the Agreement with a face value of CAD$498,000 ($353,639) on April 24, 2020, representing a principal amount of CAD$400,475 ($284,327) and a prepaid interest amount of CAD$83,000 ($59,000).

The Company issued Lind 3,384,991 warrants related to the Second Tranche. These warrants are exercisable for a term of 48 months at an exercise price of CAD$0.08 per share, valued at $95,813 on the date of issue (see Note 7). The warrants were initially recorded as a warrant liability. When the Company changed the functional currency of its Canadian entity from US dollars to Canadian dollars, the original warrant liability was extinguished and the warrants were subsequently issued as equity warrants on January 1, 2021. On issuance at January 1, 2021, the warrants were valued at $783,423.

The Company paid Lind closing costs of CAD$14,525 ($10,312) associated with the Second Tranche.

The Second Tranche was secured by all of the assets of the Company and bears interest at 10% per annum and matures on April 23, 2022. The Second Tranche included covenants typical and customary for secured convertible securities of this nature.

The Convertible Security and the Second Tranche were accounted for as a compound financial instrument with a liability component and conversion option component classified as two separate liabilities (Note 7).

The Convertible Security and the Second Tranche were fully converted to equity during the three months ended March 31, 2021. During the three months ended March 31, 2021, the Company issued 2,590,627 shares on conversion of the outstanding convertible debenture (Note 5), converting CAD$456,711 ($358,588) of the face value of the convertible security to shares.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the three months ended March 31, 2021 and 2020

9. Convertible debenture (continued)

The fair value of the conversion features was estimated using a Binomial option pricing model using the following assumptions: expected dividend yield of 0%, weighted average expected volatility of 109% based on historical volatility of the Company’s common shares, risk-free rate of 0.15%, and weighted average expected life of 0.75 years.

The fair value of the liability components was estimated using a weighted average discount rate of 157% based on the estimated discount rate of comparable debt. The discount on the liability components was being accreted over the term of the Convertible Security and the Second Tranche, utilizing effective interest rate method at a 157% weighted average discount rate. For the three months ended March 31, 2021, accretion of the discount totaled $5,404 ($66,427 for three months ended March 31, 2020).

On bifurcation of the various components of the compound financial instrument, it was determined that a loss arose on the transaction in the amount of $399,000. The Company has deferred this amount as prepaid and other asset and realized the loss over the term of the Convertible Security. As at March 31, 2021, the full balance of this prepaid and other asset was expensed.

other asset was expensed.
Liability component as at December 31, 2019	$	172,762
Issuance		11,267
Accretion		380,554
Conversion		(482,806)
Effect of foreign exchange currency difference		8,410
Liability component as at December 31, 2020		90,187
Accretion		5,404
Conversion		(95,591)
Liability component as at March 31, 2021	$	-

Liability component as at December 31, 2019	$	1,318,525
Issuance		177,247
Change in fair value		62,777
Conversion		(1,368,992)
Effect of foreign exchange currency difference		81,028
Liability component as at December 31, 2020		270,585
Change in fair value		(7,588)
Conversion		(262,997)
Conversion option as at March 31, 2021	$	-

10. Loan payable

In April 2020, the Company received a CAD$40,000 ($31,809) Canadian Emergency Business Account (“CEBA”) loan. In January 2021, the Company received an additional $20,000 ($15,905). The CEBA loan is from the Government of Canada and is interest free through December 31, 2022, after which any unpaid balance is converted to a five-year interest-bearing term loan. Repaying the loan balance in full on or before December 31, 2022 will result in loan forgiveness of up to CAD$20,000.

BLACK IRON INC.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

For the three months ended March 31, 2021 and 2020

11. Commitments and contingencies

Legal

A former officer of the Company has initiated a legal action seeking approximately CAD$1.1 million for a change of control payment in connection with Metinvest’s investment in the Company’s subsidiary in 2014. The Company does not believe the change of control payment is due to the former officer and the Company intends to defend the matter vigorously as it believes the former officer’s claim is without merit.

Environmental

The Company’s exploration and evaluation activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its activities are materially 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.

Contracts

See Note 8.

Perpetual Iron

On December 22, 2020, the Company issued 30,000,000 non-transferrable warrants to Perpetual Iron Inc. for facilitating and supporting the negotiations of a non-binding $100 million royalty. The warrants do not vest until certain conditions are met. 10,000,000 warrants vest upon entering a binding definitive agreement with the investor and the remaining 20,000,000 warrants vest upon the Company’s initial draw on the financing facility. If no binding definitive agreement is reached within two years, all warrants will be voided. Additionally, the Company will make a $4.0 million dollar payment to Perpetual Iron contingent on the Company entering a binding agreement and making an initial draw on the financing facility. Neither the warrants nor the fee have been included in the condensed consolidated interim financial statements at March 31, 2021 as management has estimated that the vesting conditions have not been met.

Novel Coronavirus

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

Notes to the condensed consolidated interim financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the three months ended March 31, 2021 and 2020

12. Subsequent events

On May 10, 2021, Black Iron announced that it has selected Cargill Incorporated (“Cargill”) for offtake rights on the initial four million tonnes per year of production from its Shymanivske iron ore project (the “Project”) and a $75 million finance facility to be used for project construction.

Subject to completion of due diligence and successful conclusion of negotiations, Cargill will offtake the production and extend financing of $75 million for the construction of the Project through a finance facility. Drawdown on this funding will be subject to certain conditions being met, including the Project being fully permitted and financed for construction. Black Iron and Cargill’s will now start work on the completion of definitive binding offtake and financing agreements, which reflect the proposed arrangement. Based on the proposed arrangement, the offtake agreement will be for an initial term of ten years and will include a profit-sharing component. On the profit share, Black Iron will receive 100% of the 65% iron content fines benchmark price, currently ~$230 per tonne, and share with Cargill a portion of the incremental sale price of its 3% higher (68%) iron content and low impurity magnetite product. There can be no assurance the proposed arrangement will be completed on the terms described or at all.

BLACK IRON INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE THREE MONTHS ENDED MARCH 31, 2021

Date: May 14, 2021

This Management Discussion and Analysis (“MD&A”) relates to the financial condition and results of operations of Black Iron Inc. together with its subsidiaries (collectively, “Black Iron” or the “Company”) as at and for the three months ended March 31, 2021. This MD&A should be read in conjunction with the Company’s consolidated financial statements and related notes as at and for the year ended December 31, 2020. The condensed consolidated interim financial statements and related notes of Black Iron have been prepared in accordance with International Financial Reporting Standards (“IFRS”) . Unless otherwise noted, all references to currency in this MD&A are in U.S. dollars .

Certain information contained in the MD&A is forward-looking which involves risks and uncertainties. The forward-looking information is not based on historical facts, but is rather based on the current plans, objectives, goals, strategies, estimates, assumptions and projections about the Company’s industry, business and future financial results. Actual results could differ materially from the results contemplated by this forward-looking information due to a number of factors, including those set forth in this MD&A and under the “Cautionary Statement Regarding Forward Looking Information” and “Risk Factors” sections.

The MD&A was prepared in accordance with the requirements set out in National Instrument 51-102 — Continuous Disclosure Obligations of the Canadian Securities Administrators.

Matt Simpson, the Company’s Chief Executive Officer, is a “qualified person” as defined under National Instrument 43-101- Standards of Disclosure for Mineral Projects (“NI 43-101”) guidelines and has reviewed the scientific and technical information contained in this MD&A.

The audit committee of the board of directors of the Company has reviewed this MD&A and the consolidated financial statements for the three months ended March 31, 2021, and Black Iron’s board of directors approved these documents prior to their release.

Overview

Black Iron was incorporated on June 29, 2010 pursuant to the provisions of the Business Corporations Act (Ontario). On October 25, 2010, Black Iron completed the acquisition of Geo-Alliance Ore East Ltd. (since renamed Black Iron (Cyprus) Ltd. (“BKI Cyprus”) which serves as an investment holding company for a Ukrainian subsidiary, Shymanivske Steel LLC (“Shymanivske”). Shymanivske holds an iron ore mining extraction permit over 2.56 square kilometers of land which expires on November 1, 2024 (the “Shymanivske Project” or the “Project”). Shymanivske’s extraction permit can be renewed in 20-year increments. The Shymanivske Project is located near the city of Kryvyi Rih, in the Dnepropetrovsk Region of Ukraine in close proximity to two large producing iron ore mines.

On December 14, 2017, Black Iron released its re-scoped Preliminary Economic Assessment (“PEA”), completed on the Project. The re-scoped PEA is based on a two-phased build out of the mine and production plant with the first phase operation producing 4 million tonnes per year (“MTpa”) of ultra high-grade 68% iron concentrate expanding to 8MTpa starting in the fifth year of production. By phasing the build, the up-front construction costs of the Project are significantly reduced thus increasing the projected returns from the Project and making it easier to secure the financing required for construction. The Project exhibits compelling projected economics, as set forth in the PEA, due to its proximity to major infrastructure including, railway, electrical power and a deep-sea port coupled with a local highly skilled work force. The PEA is preliminary in nature, and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized.

A long-term iron ore benchmark price of US$61.88/t for products containing 62% iron was used in the rescoped PEA (published in December 2017) and adjusted using the three-month average trailing spot iron premium of $7.21 per 1% Fe above 62%. Since publishing the PEA, iron ore prices have substantially increased as spending on major infrastructure projects which entail a large consumption of steel and therefore iron ore forms part of the global economic recovery from COVID-19. There has also been a prominent shift in the iron ore market towards higher iron grade and forms of iron ore that recognizes the “value in use” of iron ore products. This shift has been driven primarily by Chinese steelmakers in a concerted effort to increase productivity, reduce costs and more importantly, reduce greenhouse gas emissions. As demand for higher quality feedstocks increases, premiums are expected to follow suit. It is generally agreed by industry experts that this trend will be sustainable in the longer term. Furthermore, a comparison of the published Platts 65% CFR North China composition for impurities and the Project’s expected concentrate was made. This comparison found that the Project’s expected concentrate is well below the Min-Max impurity range covered by the Platts benchmark suggesting that the Project’s expected concentrate is of a superior quality. Based on this pricing for a low impurity, premium 68% iron content product, the Project forecasts a pre-tax unlevered internal rate of return (“IRR”) of 42.6% and a net present value (“NPV”) of $2,115 million, using a 10% discount rate. The after-tax unlevered IRR using this price and premium is 36.1% and NPV is $1,662 million. Additional details on the re-scoped PEA can be found on the Company’s website (www.blackiron.com) and SEDAR (www.sedar.com).

Outlook

Iron ore prices continue to remain strong with benchmark 62% iron content ore currently selling for ~US$190 per tonne as compared to the long-term price used in Black Iron’s PEA of $62 per tonne. Iron ore is one of the top price appreciating main stream commodities year to date driven in large part by government economic stimulus packages to help get people back to work in light of COVID-19 being highly focused on major infrastructure (roads, railway, power lines, etc.) upgrades. This price increase has led to several steel mills and global trading houses expressing interest to secure Black Iron’s offtake resulting in a preferred bidder being selected.

An updated feasibility study will soon be commenced in parallel to the previously announced Environmental and Social Impact Assessment being completed throughout the rest of this year. These two documents form a critical part of the inputs required by senior lenders and the selected royalty group to enter binding contracts to provide a large portion of the funds required for project construction.

The land Black Iron requires to locate its processing plant, tailings and waste rock stockpiles is owned by Ukraine’s Central Government and is being used by the Ministry of Defense for training purposes. Black Iron has reached agreement with Ukraine’s Ministry of Defense on the amount and coordinates of the land to be transferred and is currently negotiating binding contracts outlining the sequence of land transfer along with a compensation package. To maintain the functionality of this training facility, some land will need to be repatriated from two local communal enterprises and discussions on compensation have also been initiated with these stakeholders.

First Quarter Highlights

On March 8, 2021, the Company announced it had engaged Environmental Resource Management (“ERM”) to conduct an environmental and social impact assessment of its Shymanivske Project.
On March 25, 2021, the Company announced that it had received several offers from well-known multibillion dollar companies interested in securing rights to purchase the planned initial four million tonnes per annum of production from the Shymanivske Project at a slight discount to market price in exchange for making a significant investment towards project construction.

Subsequent Events

Subject to completion of due diligence and successful conclusion of negotiations, Cargill will offtake the production and extend financing of $75 million for the construction of the Project through a finance facility. Drawdown on this funding will be subject to certain conditions being met, as is customary for this type of transaction, mainly related to the Project being fully permitted and financed for construction. Black Iron and Cargill will now start work on definitive binding offtake and financing agreements which reflect the Proposal. Based on the proposal agreed between Black Iron and Cargill (the “Proposal”), the offtake agreement will be for an initial term of ten years and will include a profitsharing component which will align the interests of both parties and thereby generate a strong interdependent relationship of benefit to both parties. On the profit share, Black Iron will receive 100% of the 65% iron content fines benchmark price, currently ~$230 per tonne, and share with Cargill a portion of the incremental sale price of its 3% higher (68%) iron content and low impurity magnetite product.

Cargill’s metals business (“Cargill Metals”) focuses on iron ore and steel trading. Connecting iron ore miners around the world with steel mills and steel end users in key markets, Cargill Metals trades over ~50 million tonnes of iron ore per year and is also a strategic investor of a number of mining operations in North America and Northern Europe.

Black Iron and Cargill Metals agree that, as the world is becoming more environmentally conscious it will naturally turn to ores with a higher iron content and in forms such as pellets/pellet feed that reduce emissions in the production of steel.

Black Iron’s planned 68% iron content magnetite pellet feed is in the top 4% of global production by iron content and is anticipated to reduce emissions generated in the production of steel by an estimated 30% as compared to the more commonly consumed 62% iron content hematite fines. It is envisaged that the high-quality product from the Shymanivske iron ore project will attract a premium price in a variety of markets.

The selection of Cargill as Black Iron’s preferred offtake purchaser has triggered the following activities to bring the Project to a fully financed state for construction:

Update of the Project’s feasibility study will commence upon receipt and review of proposals already requested.
Selection and negotiation of binding terms with the preferred engineering, procurement and construction contractor who proposes to invest ~US$65 million in the Project.
Commencement of third-party due diligence with a consortium of major international financial institutions on binding agreements for senior debt, US$100 million royalty investment and political risk insurance.

The above activities will be supported by the outputs from the environmental impact assessment and Ukraine land transfer work currently ongoing which were previously announced.

Ukraine Business Environment

Ukraine elected a new President on April 21, 2019 on a platform to accelerate changes towards greater European values. On July 21, 2019, parliamentary elections were held in Ukraine in which President Zelensky’s Servant of the People political party won a majority government which should help with the implementation of needed reforms. Ukraine’s President made some major changes to government Ministers on March 4, 2020 including the appointment of a new Prime Minister, Minister of Economy and Minister of Defense because he was upset at their rate of implementing economic reforms. Ukraine's political and economic environment has undergone significant change since the Government's decision not to sign the Association Agreement and the Deep and Comprehensive Free Trade Agreement with the European Union in late November 2013. Political and social unrest escalated into violent conflicts in February 2014 and continue to date in the eastern regions of Ukraine. It also led to the deepening of the ongoing economic crisis, widening of the state budget deficit, depletion of the National Bank of Ukraine’s foreign currency reserves, and as a result, a further downgrading of the Ukrainian sovereign debt credit ratings. The final resolution and the effects of the political and economic crisis are difficult to predict but seem to be stabilizing with bailouts being

provided by the International Monetary Fund based on ongoing reforms being successfully implemented and a recent upgrade in Ukraine’s sovereign risk rating to B- (stable).

While management believes it is taking appropriate measures to support the sustainability of the Company’s business in the current circumstances, a continuation of the current business environment could negatively affect the Company’s results and financial position in a manner not currently determinable. The consolidated financial statements reflect management’s current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Company. The future business environment may differ from management’s assessment.

Selected Quarterly Financial Information

Three months ended	March	31, 2021	December 31, 2020	December 31, 2020	September 30, 2020	September 30, 2020		June 30, 2020
Loss for the period	$	686,533	$	5,631,385	$	1,090,961	$	2,078,236
Total comprehensive loss		680,781		5,631,385		1,090,961		2,078,236
Loss per share		-		(0.02)		(0.01)		(0.01)

Three months ended	March	31, 2020	December 31, 2019		September 30, 2019			June 30, 2019
Loss for the period	$	277,264	$	466,062	$	808,957	$	859,003
Total comprehensive loss		277,264		466,062		808,957		859,003
Loss per share		-		(0.01)		(0.01)		(0.01)

Black Iron is an exploration and evaluation stage company and does not have any revenues. It is expected to incur losses in the development of its business due to its accounting policy to expense exploration & evaluation costs as well as for associated management and general administration.

Selected Annual Information

	2020	2019	2018
	$	$	$
Net loss	9,077,845	2,898,038	2,124,529
Comprehensive loss	9,077,845	3,066,005	3,581,430
Loss per share, basic and diluted	(0.04)	(0.02)	(0.01)
Total assets	1,794,498	1,391,705	676,245

Results of Operations for the Company for the Three Ended March 31, 2021

Selected Financial Information

*Selected Financial Information*
	Three months		Three months
		ended		ended
	March 31, 2021		March 31, 2020
Loss for the period	$	686,533	$	277,264
Comprehensive loss for the period		680,781		277,264
Loss per share		-		-
General and administrative:
Consulting and management fees	$	205,979	$	215,256
Professional fees		26,543		34,780
General office expenses		42,482		46,379
Travel expenses		-		21,671
Shareholder communications and filing fees		70,651		36,708
	$	345,655	$	354,794
Exploration and evaluation expenditures:
Surface rights and consulting	$	48,029	$	25,669
Engineering studies		10,614		-
Consulting and technical		159,470		118,349
Travel		6,412		6,228
Field office support & administration		17,062		17,286
Professional fees		657		-
	$	242,244	$	167,532
Non-cash:
Stock-based compensation	$	43,617	$	19,253
Financing costs		52,009		42,500
Accretion		5,404		66,427
Change in fair value of warrant liability		-		(450,098)
Change in fair value of conversion option		(7,588)		182,049
	$	93,442	$	(139,869)

Three months ended March 31, 2021

Expenses

General and Administrative

There were no travel expenses recorded during the three months ended March 31, 2021 compared with a $21,671 in the same period in the prior year. The decrease was due to travel restrictions imposed by world governments during the COVID-19 pandemic.

Shareholder communications and filing fees were $70,651 during the three months ended March 31, 2021 compared with $36,708 in the same period in the prior year. This increase was primarily due to higher promotional and marketing costs in 2021, combined with higher listing fees due to the Company’s increased share price in 2021.

Exploration and Evaluation Expenditures

The Company recorded exploration and evaluation expenses of $242,244 during the three months ended March 31, 2021 compared to $167,532 in the prior year. This increase was primarily due to higher consulting, combined with higher surface rights costs related to the Shymanivske Project.

Non-Cash Items

750,000 stock options were granted during the three months ended March 31, 2021. 150,000 stock options were granted during the three months ended March 31, 2020. The vesting of stock options resulted in an expense during the three months ended March 31, 2021 of $33,990 compared with $10,086 during the three months ended March 31, 2020. The Company granted 29,726 deferred share units (“DSUs”) valued at $9,627 during the three months ended March 31, 2021. The Company granted 203,125 DSUs valued at $9,167 during the three months ended March 31, 2020.

As part of the convertible security financing for which a first tranche closed on September 27, 2019 and a second tranche closed on April 24, 2020, the Company recorded the convertible debenture as bifurcated between a liability component and a conversion option on the financial statements. During the three months ended March 31, 2021, the remaining balance of the convertible debenture was fully converted to shares and the conversion option and the liability component of the convertible debenture were recorded as $nil on the financial statements at March 31, 2021. For the three months ended March 31, 2021, the Company recorded a gain on the fair value of the conversion option of $7,588 (loss of $182,049 for the three months ended March 31, 2020) and accretion related to the liability component of $5,404 during the three months ended March 31, 2021 ($66,427 for the three months ended March 31, 2020). During the three months ended March 31, 2021, the Company issued 2,590,627 shares for the final outstanding balance of the convertible debenture, converting $358,588 (CAD$456,711) of the face value of the convertible security to shares.

Cash Flows

Three months ended March 31, 2021

During the three months ended March 31, 2021, operating activities before working capital changes used cash of $503,103 compared with a use of cash of $417,434 during the three months ended March 31, 2020. Expenditures in both periods were primarily related to consulting and management fees and for consulting and technical work on the Shymanivske Project. Cash provided by investing activities during the three months ended March 31, 2021 was $396 primarily for interest earned, compared to cash used in investing activities during the three months ended March 31, 2020 of $2,779 primarily for equipment purchases. Cash provided by financing activities of $44,200 was primarily related to option and warrant exercises, combined with loan proceeds, compared to cash provided from option exercises of $20,544 during the three months ended March 31, 2020.

Liquidity and Capital Resources

The recovery of the amounts expended for resource properties are dependent on the ability of the Company to obtain necessary financing to complete the development of the Shymanivske Project or other potential projects and attain future profitable production. The Company’s financial success will depend on its ability to raise financing to construct potential projects. At present, the Company has no established sources of income and the success of its exploration and development programs will be contingent upon the Company’s ability to raise sufficient equity financing on terms favourable to the Company. The Company does not expect to generate any internal cash flows to help finance the development costs of the Shymanivske Project.

As at March 31, 2021, the Company had working capital of $589,995 including cash of $1,166,928 (December 31, 2020 - $1,665,600), compared with working capital of $1,137,466 as at December 31, 2020. The Company’s primary cash flow needs are for development of its mining and exploration permits, administrative expenses and working capital. The Company will maintain its excess working capital in a combination of Canadian and U.S. dollars which will only be converted to Ukrainian Hryvnia as required. The Company maintains most of its cash reserves, including those of the Cyprus subsidiary, at a large reputable Canadian commercial bank in high-quality short-term deposits, cash equivalents or cash.

Operating Segments

The Company has concluded that it has only one material operating segment (the development of its Ukrainian mining and exploration permits) for financial reporting purposes.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements, with the exception of operating leases noted below.

Financial Commitments, Contingencies and Litigation

Leases

The Company has two leases in Ukraine: 1) office space in Kryvyi Rih, Ukraine for an annual rent of approximately $10,000 and 2) lease of a secure warehouse to store drill cores totaling 1,254 square meters for an annual rent including security fees of approximately $6,600. Both leases may be terminated on 30 days’ notice. As the leases are cancellable on 30 days’ notice, they did not meet the requirements of IFRS 16 to be capitalized.

Management Contracts

The Company is party to certain management contracts. These contracts require payments of approximately $2.9 million to the officers of the Company upon the occurrence of a change in control of the Company, as such term is defined by each officer’s respective consulting agreement. The Company is also committed to payments upon termination of approximately $624,000 pursuant to the terms of these contracts.

Legal Matters

A former officer of the Company has initiated a legal action seeking approximately CAD$1.1 million for a change of control payment in connection with the Metinvest’s investment on the Company’s subsidiary in 2014. The Company does not believe the change of control payment is due to the former officer. The Company intends to defend the matter vigorously as it believes the former officer’s claim is without merit.

Perpetual Iron

On December 22, 2020, the Company issued 30,000,000 non-transferrable warrants to Perpetual Iron Inc. for facilitating and supporting the negotiations of a non-binding $100 million royalty. The warrants do not vest until certain conditions are met. 10,000,000 warrants vest upon entering a binding definitive agreement with the investor and the remaining 20,000,000 warrants vest upon the Company’s initial draw on the financing facility. If no binding definitive agreement is reached within two years, all warrants will be voided, Additionally, the Company will make a $4.0 million dollar payment to Perpetual Iron contingent on the Company entering a binding agreement and making an initial draw on the financing facility. Neither the warrants nor the fee have been included in the condensed consolidated interim financial statements at March 31, 2021 as management has estimated that the vesting conditions have not been met.

Novel Coronavirus (“COVID-19”)

Related Party Transactions

Key management personnel compensation

In addition to their contracted fees, executive officers participate in the Company’s stock option program and are entitled to participate in the share compensation plan. The Company also has a DSU plan which provides nonexecutive directors with the ability to redeem annual director compensation through the issuance of common shares of the Company. Certain executive officers are subject to mutual termination notices ranging from three to twelve months. Key management personnel compensation paid comprised:

	Three months ended	Three months ended	Three months ended	Three months ended
		March 31, 2021		March 31,2020
Short term employee benefits	$	212,901	$	178,389
Share-based payments		35,920		10,748
	$	248,821	$	189,137

These transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Critical Judgments and Estimation Uncertainties:

The preparation of consolidated financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates and these differences could be material.

(a) Significant judgments in applying accounting policies

The areas which require management to make significant judgments in applying the Company’s accounting policies in determining carrying values include, but are not limited to:

(i) Income taxes and recoverability of potential deferred tax assets

In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company considers whether relevant tax planning opportunities are within the Company’s control, are feasible and are within management’s ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period.

(ii) Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.

(b) Significant accounting estimates and assumptions

The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:

(i) Mineral resource estimates

The figures for mineral resources are determined in accordance with NI 43-101, issued by the Canadian Securities Administrators. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. Differences between management’s assumptions including economic assumptions such as metal prices and market conditions could have a material effect in the future on the Company’s financial position and results of operation.

(ii) Share-based payments and warrants, including warrants held for sale

Management determines costs for share-based payments and the fair value of shares and warrants held for sale using market-based valuation techniques. The fair value of the market-based and performance-based share awards or shares and warrants held for sale are determined at the date of grant or each reporting date using generally accepted valuation techniques. Assumptions are made, and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Changes in these assumptions affect the fair value estimates. Similar calculations are made in order to value warrants, including warrants held for sale. Such judgments and assumptions are inherently uncertain and there is no guarantee that estimated amounts, in particular the amounts of assets held for sale, will be realized.

Significant Accounting Policies

The consolidated financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2020, with the exception if the accounting change outlined below.

As a result of the change to the functional currency of the Canadian entity, the treatment of the Company’s warrants changed. Prior to the change in the Canadian entity’s functional currency, the warrants issued by the Company did not qualify for classification as equity and were recorded as a derivative liability, as the exercise price was not denominated in the Canadian entity’s functional currency of the US dollar. As such, these warrants were classified as warrant liabilities and were recorded at the estimated fair value at each reporting date, computed using the BlackScholes valuation method. Changes in fair value of each period were included in income or loss for the period. With the change in functional currency for the Canadian entity, the exercise price of these warrants is now denominated in the Canadian entity’s functional currency and as such, these warrants now qualify for classification as equity. Existing warrants recorded as liabilities on January 1, 2021, the date of change in the functional currency, were extinguished and subsequently reclassed as warrants recorded as equity at their then estimated fair value. There were no changes in the value of these warrants recorded through the statement of loss for the three months ended March 31, 2021.

Compound financial instruments (debentures)

Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder.

The number of shares to be issued changes in response to the fair value of the shares and are valued in a currency that is not the Company’s functional currency of US dollars. Therefore, the conversion feature of the compound financial instrument does not qualify for classification as equity. The conversion feature of the compound financial instrument is considered a derivative liability and is measured at fair value with changes in value being recorded in profit or loss. The liability component of the compound financial instrument is recognized initially at the difference between the fair value of a similar liability that does not have a conversion feature and the fair value of the conversion feature.

Subsequent to initial recognition, the conversion feature is revalued at each period end with changes in fair value included in income or loss for the period. The liability component is measured at amortized cost using the effective interest method.

Disclosure Controls and Procedures

Management of the Company is responsible for establishing and maintaining disclosure controls and procedures. Management has designed such disclosure controls and procedures, or caused them to be designed under its supervision, to provide reasonable assurance that material information relating to the Company, including its

consolidated subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer by others within those entities.

Black Iron’s CEO and CFO have certified that they have designed disclosure controls and procedures (or caused them to be designed under their supervision) and they are operating effectively to provide reasonable assurance that material information relating to the issuer and its consolidated subsidiaries is made known to them by others within those entities as of March 31, 2021.

Internal Control over Financial Reporting

Black Iron’s management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). Under their supervision, the Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s internal control over financial reporting includes policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions, acquisitions and dispositions of the assets of the Company; and
Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the annual or interim financial statements.

The CEO and CFO have certified that internal controls over financial reporting have been designed and are operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as at March 31, 2021. Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control 2013 (“COSO 2013”) Framework to design the Company’s internal control over financial reporting.

There were no changes in the Company’s ICFR that have occurred during the period beginning on January 1, 2021 and ended on March 31, 2021 that have materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

Limitations of Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that disclosure controls and procedures and internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Risk Factors

Investing in the Company involves risks that should be carefully considered. The business of the Company is speculative due to the high-risk nature of iron ore mining and exploration in Ukraine. Investors should be aware that there are various risks, that could have a material adverse effect on, among other things, title to the projects, permitting, the operating results, earnings, business and condition (financial or otherwise) of the Company. For a listing of risk factors, investors should refer to the Company’s Annual Information Form filed on SEDAR.

Additional Information and Continuous Disclosure

Additional information, including the Company’s press releases, has been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Outstanding Share Data

As at the date of this MD&A, the Company has:

a) 262,915,215 common shares outstanding.
b) 15,007,500 stock options outstanding with expiry dates ranging from February 16, 2022 to March 1, 2026 with exercise prices ranging from CAD$0.05 to CAD$0.415. If exercised, 15,007,500 shares would be issued for proceeds of CAD$1,736,713.
c) 58,532,860 warrants outstanding with expiry dates ranging from March 29, 2022 to December 22, 2025 with exercise prices between CAD$0.06 and CAD$0.31.
d) 9,096,616 DSUs outstanding with no fixed expiry.

Cautionary Statement Regarding Forward-Looking Information

Except for statements of historical fact relating to Black Iron certain information contained herein constitutes forward-looking information. Forward-looking information is based on what management believes to be reasonable assumptions, opinions and estimates of the date such statements are made based on information available to them at that time, including those factors discussed in the section entitled ‘‘Risk Factors’’ in the Company’s most recent annual information form or as may be identified in the Company’s public disclosure from time to time, as filed under the Company’s profile on SEDAR at www.sedar.com. Forward-looking information may include, but is not limited to, statements with respect to the Shymanivske Project, the PEA, expected economic forecasts and the economic viability of the PEA the Company’s ability to obtain the requisite land rights for the Shymanivske Project, prices of commodities, performance of the Company’s securities, geo-political situation in Ukraine, the impact of COVID-19, the Company’s ability to obtain adequate funding, negotiations with off-take partners, negotiations with respect to a royalty financing and future plans for the Company’s development. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; other risks of the mining industry and the risks described in the annual information form of the Company. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

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Consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

BLACK IRON INC.

Consolidated financial statements (Expressed in U.S. dollars)

For the year ended December 31, 2020 and 2019

Consolidated statements of financial position .................................................................................................................. 5 Consolidated statements of loss and comprehensive loss ............................................................................................... 6 Consolidated statements of changes in shareholders’ (deficiency) ................................................................................ 7 Consolidated statements of cash flows ............................................................................................................................ 8 Notes to the consolidated financial statements ......................................................................................................... 9 - 33

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Independent Auditor’s Report

To the Shareholders of Black Iron Inc.

Opinion

We have audited the consolidated financial statements of Black Iron Inc. and its subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in shareholders’ (deficiency) and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

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

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 consolidated financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company incurred a net loss during the year ended December 31, 2020 and, as of that date, the Company’s current liabilities exceeded its current assets. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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Page 1

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matter described below to be the key audit matter to be communicated in our report.

How our audit addressed the key audit
Key audit matter matter
Warrants – Note 10 During 2020, the Company issued 30,000,000 Our audit procedures included: warrants for facilitating and supporting the • Reviewing the key terms and negotiations of a non-binding financing from a conditions of the warrants issued; global investment bank. The warrants contain • Obtaining the valuation model certain vesting conditions. prepared by management and assessing whether the model was
Management has performed the valuation of appropriate for valuing the warrants the warrants using a valuation model. We issued during the year; considered the recognition of these warrants • Challenging the reasonableness of in connection with the vesting requirements to key assumptions used by be a key audit matter as it involved management in the model to calculate management’s judgement in determining the the fair value of the warrants; timing and likelihood of the vesting conditions • Challenging the reasonableness of being met. key assumptions used by management in the assessment of the likelihood and timing of vesting requirements being met; and
• Assessing the adequacy of the disclosures in the financial report.

Other information

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

Our opinion on the consolidated 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 consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. 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.

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

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

In preparing the consolidated 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 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 consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated 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 risks 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

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consolidated 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 consolidated financial statements, including the disclosures, and whether the consolidated 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner of the audit resulting in this independent auditor’s report is Glen McFarland.

McGovern Hurley LLP

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Chartered Professional Accountants Licensed Public Accountants

Toronto, Ontario March 11, 2021

Page 4

BLACK IRON INC.

Consolidated statements of financial position (Expressed in U.S. dollars)

		December 31,		December 31,
		2020		2019
ASSETS
Current
Cash	$	1,665,600	$	988,844
Amounts receivable and prepaid expenses		83,084		102,641
Total current assets		1,748,684		1,091,485
Prepaid and other (Note 12)		41,619		297,500
Equipment		4,195		2,720
Total assets	$	1,794,498	$	1,391,705
LIABILITIES
Current
Accountspayable and accrued liabilities(Note 7 and Note 11)	$	611,218	$	403,864
Total current liabilities		611,218		403,864
Non-current
Warrant liability (Note 10)		6,521,549		1,227,878
Conversion option of convertible debenture (Note 12)		270,585		1,318,525
Liability component of convertible debenture (Note 12)		90,187		172,762
Loanpayable(Note 13)		31,417		-
Total liabilities		7,524,956		3,123,029
SHAREHOLDERS' (DEFICIENCY) EQUITY
Common shares (Note 8)		72,563,431		68,321,728
Share based payments reserve (Note 9)		1,259,540		548,791
Warrant reserve (Note 10)		2,288		3,020
Accumulated deficit		(79,555,717)		(70,604,863)
Total shareholders' deficiency		(5,730,458)		(1,731,324)
Total shareholders' deficiencyand liabilities	$	1,794,498	$	1,391,705

Nature of operations and going concern (Note 1) Commitments and contingencies (Note 11 and Note 14)

Approved by the Board of Directors on March 11, 2021

“BRUCE HUMPHREY”, Director “JOHN DETMOLD”, Director

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

BLACK IRON INC.

Consolidated statements of loss and comprehensive loss (Expressed in U.S. dollars)

	Year ended Year ended December 31, 2020 December 31, 2019
Expenses Consulting and management fees (Note 11) Professional fees expense General office expenses Net change in fair value of investment in warrants (Note 5) Exploration and evaluation expenses (Note 6) Share-based compensation (Note 9 and Note 11) Travel expenses Shareholder communications and filing fees Change in fair value of warrant liability (Note 10) Change in fair value of conversion option (Note 12) Finance costs (Note 12) Accretion (Note 12) Loss (gain) on foreign exchange Interest income Net loss for the year Other comprehensive loss Loss on sale of investment in equity securities (Note 5) Net change in fair value of investment in equity securities (Note 5) Total other comprehensive loss Comprehensive loss for the year	754,394 $ 903,115 $ 139,350 137,625 167,926 154,527 - 390 695,708 668,548 794,605 160,695 22,864 54,331 140,035 283,065 5,657,561 379,778 62,777 (65,455) 331,985 150,220 380,554 53,455 (65,205) 21,425 (4,709) (3,681)
	9,077,845 $ 2,898,038 $
	- 644,251 - (476,284)
	- 167,967
	9,077,845 $ 3,066,005 $
Basic and diluted loss per share (Note 15) Weighted average number of common shares outstanding - basic and diluted (Note 15)	(0.04) $ (0.02) $ 226,009,275 179,790,538

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

Consolidated statements of changes in shareholders’ (deficiency)

BLACK IRON INC.

(Expressed in U.S. dollars)

	Common shares	Share based payments	Accumulated deficit	Warrants	Accumulated other comprehensive loss	Total shareholders' (deficiency)
	# $	$	$	$	$	$
Balance, December 31, 2018	159,740,519 67,457,612	750,184	(66,877,084)	-	(1,023,862)	306,850
						-
Net loss for the year	- -	-	(2,898,038)	-	-	(2,898,038)
Other comprehensive loss for the year	- -	-	-	-	(167,967)	(167,967)
Private placement (Note 8)	26,552,390 912,476	-	-	-	-	912,476
Share issuance costs (Note 8)	- (48,360)		-	3,020	-	(45,340)
Stock option plan (Note 9)	- -	76,594	-	-	-	76,594
Deferred share units (Note 9)	- -	84,101	-	-	-	84,101
Expiry of vested options (Note 9)		(362,088)	362,088	-	-	-
Derecognition of financial assets	- -	-	(1,191,829)		1,191,829	-
Balance,December 31,2019	186,292,909 68,321,728	548,791	(70,604,863)	3,020	-	(1,731,324)
Net loss for the year	- -	-	(9,077,845)	-	-	(9,077,845)
Expiry of vested options (Note 9)	- -	(68,705)	68,705	-	-	-
Stock option forfeiture (Note 9)	- -	(5,092)	5,092	-	-	-
Stock option plan (Note 9)	- -	528,095	-	-	-	528,095
Stock option exercise (Note 9)	750,000 37,785	(10,060)	-	-	-	27,725
Deferred share units (Note 9)	- -	266,511	-	-	-	266,511
Warrant exercise (Note 10)	10,936,193 1,341,712	-	-	(732)	-	1,340,980
Warrant expiry (Note 10)	- -	-	53,194	-	-	53,194
Conversion of debt to shares (Note 12)	25,419,816 1,851,798	-	-	-	-	1,851,798
Private placement (Note 8)	36,534,420 1,109,525					1,109,525
Share issuance costs (Note 8)	- (99,117)	-	-	-	-	(99,117)
Balance, December 31, 2020	259,939,588 72,563,431	1,259,540	(79,555,717)	2,288	-	(5,730,458)

The accompanying notes are an integral part of these consolidated financial statements. 7

BLACK IRON INC.

Consolidated statements of cash flows

(Expressed in U.S. dollars)

		Year ended		Year ended
	December 31,		December 31,
		2020		2019
OPERATING ACTIVITIES
Net loss for the year	$	(9,077,845)	$	(2,898,038)
Adjustment for:
Change in value of warrant investment (Note 5)		-		390
Share-based compensation (Note 9)		794,605		160,695
Interest income		4,709		(3,681)
Change in fair value of warrant liability (Note 10)		5,657,561		379,778
Change in fair value of conversion option of the convertible debenture (Note 12)		62,777		(65,455)
Accretion (Note 12)		380,554		53,455
Non-cash financing costs (Note 12)		139,792		150,220
Depreciation		3,282		4,112
Net cash outflow before working capital changes		(2,034,565)		(2,218,524)
Net change in non‑cash workingcapital		319,767		(11,503)
Cash used in operatingactivities		(1,714,798)		(2,230,027)
FINANCING ACTIVITIES
Private placement (Note 8 and Note 10)		1,306,546		1,191,476
Share issuance costs (Note 8 and Note 10)		(99,117)		(45,340)
Convertible debenture (Note 12)		353,442		2,037,890
Convertible debenture issuance costs (Note 12)		(69,115)		(442,827)
Warrant exercise (Note 10)		737,450		-
Option exercise (Note 9)		27,725
Loanpayable(Note 13)		31,417		-
Cashprovided byfinancingactivities		2,288,348		2,741,199
INVESTING ACTIVITIES
Purchase of equipment		(4,757)		(4,437)
Interest received		4,709		3,681
Sale of assets classified as FVOCI (Note 5)		-		338,753
Cash(used in)/provided byinvestingactivities		(48)		337,997
Effect of exchange rate changes on cash		103,254		27,470
CHANGE IN CASH		676,756		876,639
CASH,beginningofyear		988,844		112,205
CASH,end ofyear	$	1,665,600	$	988,844
SUPPLEMENTAL INFORMATION:
Finder warrants issued	$	-	$	3,020

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

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

1. Nature of operations and going concern

As at December 31, 2020, Black Iron Inc. held 100% of the shares of Black Iron (Cyprus) Limited which in turn holds a 100% interest in Shymanivske Steel LLC.

The consolidated financial statements include the financial statements of the Company and its subsidiaries which are listed in the following table:

listed in the following table:
Country of incorporation	Percentage of equity interest
	December 31, 2020 December 31, 2019
Black Iron (Cyprus) Limited Cyprus Shymanivske Steel LLC Ukraine	100 100 100 100

These consolidated financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. For the year ended December 31, 2020, the Company incurred a net loss of $9,077,845 and as at December 31, 2020, reported an accumulated deficit of $79,555,717 and working capital of $1,137,466, including $1,665,600 in cash. The Company has no current source of operating cash flow, and there can be no assurances that sufficient funding, including adequate financing, will be available to explore and develop its property and to cover general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the issuance of equity or debt. These matters represent material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.

These consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities or reported expenses and consolidated statement of financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be material.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

2. Basis of presentation

Statement of compliance

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). The consolidated financial statements were authorized for issue by the Board of Directors on March 11, 2021.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, unless otherwise disclosed. The consolidated financial statements have been prepared on an accrual basis except for cash flow information.

3. Significant accounting policies

Consolidation

The consolidated financial statements comprise the financial statements of Black Iron Inc. and its subsidiaries for the years ended December 31, 2020 and 2019.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-Company balances, income and expenses and unrealized gains and losses resulting from intra-Company transactions are eliminated in full upon consolidation.

Functional currency and foreign currency transactions

The consolidated financial statements are presented in U.S. dollars, which is the Company's and its subsidiaries’ functional currency. All amounts have been rounded to the nearest dollar, unless otherwise indicated.

Transactions in foreign currencies are translated into the entities’ functional currency at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the consolidated statement of financial position dates. Non-monetary items in a foreign currency are measured in terms of historical cost and are translated using the exchange rates on the dates of the initial transactions. All differences are taken to the consolidated statements of loss in the periods in which they arise.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Financial instruments

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

Amounts receivable are initially recognized when they are originated. All other financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost.

Subsequent measurement – Financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the consolidated statements of loss. The Company has classified cash and amounts receivable as financial assets measured at amortized cost.

Subsequent measurement – Financial assets at FVPL

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the consolidated statements of financial position with changes in fair value recognized in other income or expense in the consolidated statements of loss.

Subsequent measurement – Financial assets at FVOCI

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company’s investment in shares of Euro Sun Mining Inc. prior to disposal was classified as a financial asset at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the consolidated statements of comprehensive loss. When the investment is sold, the cumulative gain or loss is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the consolidated statements of loss when the right to receive payments is established.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

The Company’s only financial assets subject to impairment are amounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, amounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL on initial recognition. The Company’s financial liabilities include accounts payable and accrued liabilities, warrant liability, liability component of convertible debenture and the conversion option of the convertible debenture. Accounts payable and accrued liabilities, the liability component of convertible debenture, and the loan payable are each measured at amortized cost, while the warrant liability and conversion option of the convertible debenture are measured at FVPL. All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.

Subsequent measurement – Financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

Subsequent measurement – Financial liabilities at FVPL

Financial liabilities measured at FVPL include financial liabilities management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVPL are carried at fair value in the consolidated statements of financial position with changes in fair value recognized in other income or expense in the consolidated statements of loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the consolidated statements of loss.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Provisions

General

Provisions are recognized when (a), the Company has a present obligation (legal or constructive) as a result of a past event, and (b), it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated statement of operations, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Rehabilitation provision

The Company records the present value of estimated costs of legal and constructive obligations required to restore operating locations in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation of affected areas.

The obligation generally arises when the asset is installed or the ground / environment is disturbed at the production location. When the liability is initially recognized, the present value of the estimated cost is capitalized by increasing the carrying amount of the related mining assets to the extent that it was incurred prior to the production of related ore. Over time, the discounted liability is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability. The periodic unwinding of the discount is recognized in the consolidated statement of operations as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognized as additions or charges to the corresponding assets and rehabilitation liability when they occur. For closed sites, changes to estimated costs are recognized immediately in the consolidated statement of operations.

Cash

Cash in the consolidated statements of financial position comprises cash at banks.

Operating segments

The Company has concluded that it has only one material operating segment (the development of its Ukrainian mining and exploration permits) for financial reporting purposes.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Exploration and evaluation expenditures

Exploration and evaluation expenditures comprise costs of initial search for mineral deposits and performing a detailed assessment of deposits that have been identified as having economic potential.

Exploration and evaluation costs are expensed as incurred and included in the consolidated statement of loss and until technical feasibility and commercial viability of extraction of reserves are demonstrable. Once a mine development decision has been made by the Company, subsequent expenditures incurred to develop the mine are capitalized to mine development assets. Exploration and evaluation costs include an allocation of administration and salary costs as determined by management.

Common shares

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Share-based payment transactions

Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received.

The Company has established a stock option plan to grant non-transferable equity settled options to purchase Common Shares to directors, officers, employees of and consultants to the Company. The number of Common Shares reserved for issuance will not exceed 10% of the total issued and outstanding Common Shares of the Company. The Company has the ability to grant for a maximum period of ten years from the date of grant.

Stock options vest over periods ranging from immediate to two years. The fair value of each option is measured at the date of grant using the Black-Scholes option pricing model and recorded as a compensation expense in the period the options are vested, or the performance is complete. The number of awards expected to vest is reviewed at least annually, with any impact being recognized immediately.

Any consideration paid on exercise of stock options is credited to share capital. On expiry, any amount related to the initial value of the stock option is recorded to deficit.

Warrant liabilities

Certain warrants issued outside the scope of IFRS 2 have an exercise price denominated in Canadian dollars, and therefore, do not qualify for classification as equity as their exercise price is not in the Company’s functional currency of the US dollar. These warrants have been recorded as warrant liabilities and are recorded at the estimated fair value at each reporting date, computed using the Black-Scholes valuation method. Changes in fair value of each period are included in income or loss for the period.

Compound financial instruments (debentures)

Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder.

The number of shares to be issued changes in response to the fair value of the shares and are valued in a currency that is not the Company’s functional currency of US dollars. Therefore, the conversion feature of the compound financial instrument does not qualify for classification as equity. The conversion feature of the compound financial instrument is considered a derivative liability and is measured at fair value using the Black-Scholes valuation method with changes in value being recorded in profit or loss. The liability component of the compound financial instrument is recognized initially at the difference between the fair value of a similar liability that does not have a conversion feature and the fair value of the conversion feature.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (continued)

Accounting pronouncements not yet adopted

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after January 1, 2020 or later periods. Updates that are not applicable or are not consequential to the Company have been excluded thereof.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics. The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2020.

IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. – costs a company would avoid if it did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are effective for annual periods beginning on January 1, 2022.

There are no other standards/amendments or interpretations that are expected to have a significant effect on the consolidated financial statements of the Company.

4. Critical judgements and estimation uncertainties

The preparation of consolidated financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates and these differences could be material.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

4. Critical judgements and estimation uncertainties (continued)

Significant judgments in applying accounting policies and accounting estimates and judgements

The areas which require management to make significant judgments in applying the Company’s accounting policies and accounting estimates and judgements in determining carrying values include, but are not limited to:

(i) Income taxes and recoverability of potential deferred tax assets

(ii) Contingencies and estimates

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events (see note 14).

(iii) Mineral resource estimates

The figures for mineral resources are determined in accordance with National Instrument 43-101, “Standards of Disclosure for Mineral Projects”, issued by the Canadian Securities Administrators. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. Differences between management’s assumptions including economic assumptions such as metal prices and market conditions could have a material effect in the future on the Company’s financial position and results of operation.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

4. Critical judgements and estimation uncertainties (continued)

Significant judgments in applying accounting policies and accounting estimates and judgements (continued)

(iv) Share-based payments and warrants

Management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Similar calculations are made in order to value warrants. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.

(v) Estimation of decommissioning and restoration costs and the timing of expenditure

The cost estimates are updated annually during the life of a mine to reflect known developments, (e.g. revisions to cost estimates and to the estimated lives of operations) and are subject to review at regular intervals. Decommissioning, restoration and similar liabilities are estimated based on the Company’s interpretation of current regulatory requirements, constructive obligations and are measured at fair value. Fair value is determined based on the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or similar liabilities that may occur upon decommissioning of the mine. Such estimates are subject to change based on changes in laws and regulations and negotiations with regulatory authorities.

(vi) Functional currency

Functional currency is the currency of the primary economic environment in which the Company and its subsidiaries operate. If indicators of the primary economic environment are mixed, then management uses its judgement to determine the functional currency that most faithfully represents the economic effect of underlying transactions, events and conditions.

(vii) Fair value of financial instruments

Certain financial instruments, such as investment in Euro Sun Mining Inc. (both equity securities and warrants), warrant liability and conversion option of convertible debentures, are measured at fair value. The estimated fair value of financial instruments, by their very nature, are subject to measurement uncertainty. The Company estimates fair value using valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable input.

(viii) Allowance for credit losses

The allowance for credit losses has been assessed by the Company’s management based on the age of the amounts uncollected as at the end of the reporting period and management’s experiences regarding the Company’s customers’ likelihood of payment. The allowance is assessed at the end of each reporting period and adjusted so that the net amounts receivable reflects the expected future collection of accounts.On January 1, 2020, amendments to refine the definition of materiality in IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors came into effect. These amendments did not have a significant impact on the consolidated financial statements.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

5. Investment in Euro Sun Mining Inc.

Changes in the investment in Euro Sun Mining Inc. (“Euro Sun”) during the periods presented were as follows:

	Equity Securities	Equity Securities	Warrants		Total
	#	$	#	$	$
Balance, December 31, 2018	1,440,140	506,720	786,485	390	507,110
Net change in fair value of warrants recorded in the
consolidated statement of loss and comprehensive loss	-	-	-	(390)	(390)
Net change in fair value of equity securities recorded in
other comprehensive loss (i)	-	476,284	-	-	476,284
Sale of common shares of Euro Sun (ii)	(1,440,140)	(983,004)	-	-	(983,004)
Expiration of Euro Sun warrants(iii)	-	-	(786,485)	-	-
Balance,December 31,2019 and December 31,2020	-	-	-	-	-

(i) As at December 31, 2020 and 2019, all Euro Sun shares had been sold.
(ii) During the year ended December 31, 2019, the Company sold 1,440,140 common shares of Euro Sun for total proceeds of CAD$448,136 ($338,753), resulting in a loss on sale of CAD$851,243 ($644,251).
(iii) On May 7, 2018, Euro Sun announced that it had extended the expiry date of its outstanding common share purchase warrants to November 19, 2018, from their original expiry of May 19, 2018. At Euro Sun’s discretion, expiry could be accelerated if the trading price of Euro Sun’s common shares on the TSX exceeds $2.72 for a period of 20 consecutive trading days. Under this circumstance, Euro Sun had the right, but not the obligation, to accelerate the expiry date of the warrants to a date which is not less than 30 days after the date on which Euro Sun notifies warrant holders of such accelerated expiry date.

On October 22, 2018, Euro Sun announced that it had further extended the expiry date of its outstanding common share purchase warrants to May 19, 2019. The conditions of extension remained unchanged from the previous extension to November 19, 2018 (announced on May 7, 2018).

On May 19, 2019, 786,485 warrants expired.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

6. Exploration and evaluation expenditures

Exploration and evaluation expenditures for the periods presented were as follows:

	Year ended	Year ended
	December 31,	December 31,
	2020	2019
Consulting and technical	$ 503,312	$ 485,701
Surface rights and consulting	103,436	67,259
Field office support and administration	63,442	72,655
Travel	6,228	42,933
Professional fees	19,290	-
	$ 695,708	$668,548

The Company’s principal activity is the exploration and development of its Shymanivske project.

7. Accounts payable and accrued liabilities

	December	31, 2020		December 31,2019
Trade payables	$	555,630	$	369,217
Accruals		55,588		34,647
	$	611,218	$	403,864

Trade payables and accruals are non-interest bearing.

BLACK IRON INC.

Notes to the consolidated financial statements

(Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

8. Share capital

Authorized

Unlimited number of common shares without par value.

Authorized Unlimited number of common shares without par value.
	Number of Common shares		Amount
Balance,December 31,2018	159,746,769	$	67,457,612
Private placement	26,552,390		912,476
Cost of issue	-		(48,360)
Balance,December 31,2019	186,299,159	$	68,321,728
Warrant exercise	10,936,193		737,450
Warrant valuation	-		604,262
Option exercise	750,000		27,725
Option valuation	-		10,060
Debenture conversion	25,419,816		1,851,798
Private placement	36,534,420		1,109,525
Cost of issue	-		(99,117)
Balance,December 31,2020	259,939,588	$	72,563,431

On March 29, 2019, the Company closed a non-brokered private placement financing of 17,508,440 units at a price of CAD$0.06 per unit for gross proceeds of $786,100 (CAD$1,050,506). Each unit is comprised of one common share and one half of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.09 for a period of three years from the date of issue (see Note 10). The Company paid cash and noncash commissions and other expenses of $12,798 (CAD$17,178) in relation to this private placement. Directors and officers of the Company participated in the private placement and acquired a total of 3,008,908 units of this private placement for gross proceeds of $135,000 (CAD$180,534).

On April 5, 2019, the Company closed a non-brokered private placement financing of 9,043,950 units at a price of CAD$0.06 per unit for gross proceeds of $405,376 (CAD$542,637). Each unit is comprised of one common share and one half of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.09 for a period of three years from the date of issue (see Note 10). The Company paid cash and noncash commissions and other expenses of $35,562 (CAD$47,584) in relation to this private placement.

On May 8, 2020, the Company closed a non-brokered private placement financing of 36,534,420 units at a price of CAD$0.05 per unit for gross proceeds of $1,151,546 (CAD$1,826,721). Each unit is comprised of one common share and one-third of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.06 for a period of three years from the date of issue (see Note 10). The Company paid cash and non-cash commissions and other expenses of $80,768 (CAD$113,602) in relation to this private placement.

During the year ended December 31, 2020, the Company issued 25,419,816 shares on conversion for a portion of the outstanding convertible debenture. Subsequent to year end, the remainder of the outstanding balance of the convertible debenture was converted to 2,590,627 shares (Note 12).

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

9. Share-based payments reserve

9. Share-based payments reserve	9. Share-based payments reserve	9. Share-based payments reserve	9. Share-based payments reserve	9. Share-based payments reserve
Number of stock options Weighted average exercise price CAD Carrying amount of options Number of DSU Weighted average exercise price CAD Carrying amount of DSU Total carrying amount
Balance, December 31, 2018 10,507,500 $ 0.12 Granted 3,150,000 0.06 Expired (3,750,000) 0.10	$ 620,490 76,594 (362,088)	3,514,844 $ 0.05 1,959,637 0.06 - -	$ 129,694 84,101 -	$ 750,184 160,695 (362,088)
Balance,December 31,2019 9,907,500 $ 0.07	$ 334,996	5,474,481 $ 0.05	$ 213,795	$ 548,791
Granted 9,042,500 0.07 Expired (3,395,000) - Forfeited (187,500) 0.08 Exercised (750,000) -	528,095 (68,705) (5,092) (10,060)	3,566,367 $ 0.09 - - - - - -	266,511 - - -	794,606 (68,705) (5,092) (10,060)
Balance, December 31, 2020 14,617,500$ 0.07	$ 779,234	9,040,848$ 0.07	$ 480,306	$ 1,259,540

Option Plan

During the year ended December 31, 2020, the Company granted 9,042,500 stock options (3,150,000 granted for the year ended December 31, 2019) and options vested with a total value of $528,095 ($76,594 for the year ended December 31, 2019).

BLACK IRON INC. Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

9. Share-based payments reserve (continued)

The weighted average grant date fair value of options granted during the year ended December 31, 2020 was measured using the Black-Scholes option pricing model. The following inputs were used in the measurement of fair values at grant date: expected dividend yield of 0% (2019 - 0%), expected volatility of 134% based on the historical volatility of the Company (2019 – 127%), weighted average risk - free interest rate of 0.35% (2019 – 1.79%), an expected forfeiture rate of 4.7% (2019 – 4.7%), weighted average share price of CAD$0.11, and a weighted average expected life of 2.7 years (2019 – 2.9 years). The weighted average grant-date fair value of options granted during the year ended December 31, 2020 was $0.05 per option (2019 - $0.03). 2,932,500 of the options granted by the Company during the year ended December 31, 2020 vest in eight equal quarterly instalments commencing on the date of grant and 6,110,000 options granted by the Company during the year ended December 31, 2020 vested immediately (2019 – 2,900,000 options vest in eight equal quarterly installments).

At December 31, 2020, outstanding options to acquire common shares of the Company were as follows:

Expiry date	Options exercise price (CAD$)	Options outstanding (#)	Options exercisable (#)	Grant date estimated fair value vested ($)	Grant date estimated fair value vested ($)
February 16, 2022	0.12	2,425,000	2,425,000		161,467
May 31, 2022	0.11	200,000	200,000		11,866
October 31, 2023	0.08	300,000	-		14,987
December 5, 2023	0.06	250,000	250,000		7,992
January 9, 2024	0.05	1,950,000	2,700,000		52,960
March 4, 2024	0.07	200,000	200,000		7,648
October 18, 2024	0.08	250,000	156,250		9,051
March 11, 2025	0.07	150,000	75,000		4,957
June 15, 2025	0.10	6,110,000	6,110,000		369,166
August 7, 2025	0.15	2,782,500	695,625		139,140
		14,617,500	12,811,875	$	779,234

DSU Plan

The DSUs are deferred and will be redeemed in the form of one common share for each DSU held on the date the participant ceases to be an eligible director. During the year ended December 31, 2020, the Company granted 3,566,367 DSUs with a fair value of $266,511 based on the quoted market price of the Company’s common shares at the date of grant (1,959,637 DSUs with a grant date fair value of $129,694 during the year ended December 31, 2019). As the DSUs will be settled in shares, the value of the DSUs is recorded in share-based payments reserve at the time of issue.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

10. Warrants and warrant liability

At December 31, 2020, outstanding warrants to acquire common shares of the Company were as follows:

Number outstanding	Number exercisable	Grant date	Expiry date	Exercise price (CAD)	Fair value at grant date	Grant date share price	Expected volatility	Expected life (yrs)	Expected dividend yield	Risk- free interest rate
80,000	80,000	29-Mar-19	29-Mar-22	$ 0.09	$ 2,288	$ 0.06	122%	3	0%	1.45%
13,081,395	13,081,395	27-Sep-19	27-Sep-23	$ 0.11	$ 569,100	$ 0.08	116%	4	0%	1.47%
3,384,991	3,384,991	24-Apr-20	24-Apr-24	$ 0.08	$ 95,813	$ 0.06	117%	4	0%	0.38%
12,011,474	12,011,474	8-May-20	8-May-23	$ 0.06	$ 194,325	$ 0.08	110%	3	0%	0.26%
30,000,000	-	22-Dec-20	22-Dec-25	$ 0.31	$6,883,852	$ 0.35	129%	5	0%	0.20%
58,557,860	28,557,860				7,745,378 $

Based on management’s assessment, the vesting conditions for the 30,000,000 warrants granted on December 22, 2020 and included in the table above have not yet been met. As such, management has estimated the fair value of these warrants based on information available on the grant date. No value was recorded in the consolidated financial statements for these warrants at December 31, 2020, as vesting is not foreseeable as at the date of these consolidated financial statements. See also Note 14.

Warrant liability

Warrant liability transactions during the periods presented were as follows:

	Number of Warrants	Fair value ($)
Balance,December 31,2018	-	-
Granted	26,357,590	848,100
Change in fair value duringtheyear	-	379,778
Balance,December 31,2019	26,357,590	1,227,878
Granted	15,563,131	292,834
Exercised	(10,911,195)	(603,530)
Expired	(2,531,666)	(53,194)
Change in fair value duringtheyear	-	5,657,561
Balance, December 31, 2020	28,477,860	6,521,549

On March 29, 2019, the Company issued 8,754,220 warrants as part of a private placement which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.09 until March 29, 2022 (see Note 8). The fair value of these warrants of $184,000 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 122%, risk-free rate of 1.45%, share price of CAD$0.09 and expected life of three years.

On April 5, 2019, the Company issued 4,521,975 warrants as part of a private placement which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.09 until April 5, 2022 (see Note 8). The fair value of these warrants of $95,000 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 122%, risk-free rate of 1.51%, share price of CAD$0.09 and expected life of three years.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

10. Warrants and warrant liability (continued)

Warrant liability (continued)

On September 27, 2019, the Company issued 13,081,395 warrants as part of the convertible debenture which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.11 until September 27, 2023 (see Note 12). The fair value of these warrants of $2,869,934 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 114%, risk-free rate of 0.25%, share price of CAD$0.34 and expected life of four years.

On April 24, 2020, the Company issued 3,384,991 warrants as part of the convertible debenture which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.08 until April 24, 2024 (see Note 12). The fair value of these warrants of $783,422 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 110%, risk-free rate of 0.32%, share price of CAD$0.34 and expected life of four years.

On May 8, 2020, the Company issued 12,178,140 warrants as part of a private placement which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.06 until May 8, 2023 (see Note 8). The fair value of these warrants of $2,796,400 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 118%, risk-free rate of 0.25%, share price of CAD$0.34 and expected life of three years.

On July 30, 2020, the Company announced that it had elected to accelerate the expiry date of the warrants issued on March 29, 2019 and April 5, 2019 in connection with the private placement units issued on these dates. The warrants were subject to the right of the Company to accelerate the expiry date of the warrants if the Company’s common shares close at or above $0.15 per share for more than 10 consecutive trading days on the Toronto Stock Exchange. As such, the warrants expiry date was accelerated to August 31, 2020. As a result of this acceleration, 10,444,529 warrants were exercised and 2,531,666 warrants expired, unexercised.

Warrants - equity

Warrant transactions during the periods presented were as follows:

	Number of Warrants	Fair value ($)
Balance, December 31, 2018	-	-
Granted	105,000	3,020
Balance, December 31, 2019	105,000	3,020
Exercised	(25,000)	(732)
Granted	30,000,000	-
Balance, December 31, 2020	30,080,000	2,288

On March 29, 2019, the Company issued 105,000 finder’s warrants as part of a private placement which entitles the holder to purchase one common share of the Company at an exercise price of CAD$0.09 until March 29, 2022. The fair value of these warrants of $3,020 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0%, expected volatility of 122%, risk-free rate of 1.45%, share price of CAD$0.09 and expected life of three years.

See Note 14.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

11. Related party transactions

Key management personnel compensation

In addition to their contracted fees, executive officers participate in the Company’s stock option program (Note 9) and are entitled to participate in the share compensation plan. The Company also has a DSU plan which provides nonexecutive directors with the ability to redeem annual director compensation through the issuance of common shares of the Company. Certain executive officers are subject to mutual termination notices ranging from three to twelve months. Key management personnel compensation paid comprised:

		Year ended		Year ended
	December 31, 2020		December 31,2019
Short term employee benefits	$	737,654	$	738,546
Share-basedpayments		690,279		108,055
	$	1,427,933	$	846,601

Included in the above amounts is $224,585 ($225,297 for the year ended December 31, 2019) paid according to a contract for business and operational consulting services with Forbes & Manhattan, Inc., which has common executives with the Company. Officers and directors had 6,913,500 options vest during the year ended December 31, 2020 (525,000 for the year ended December 31, 2019).

The Company is party to certain management contracts. These contracts require payments of approximately $2.4 million upon the occurrence of a change in control of the Company, as defined by each officer’s respective consulting agreement. The Company is also committed to payments upon termination of approximately $677,000 pursuant to the terms of these contracts. As triggering events have not yet taken place, no amounts have been provided for these items.

As at December 31, 2020, the Company had $434,375 (December 31, 2019 - $141,250) of consulting fees and travel expenses owing to its key management personnel. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and are due on demand.

These transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

12. Convertible debenture

The Convertible Security is secured by all of the assets of the Company and bears interest at 10% per annum and matures on September 26, 2021. The Convertible Security includes covenants typical and customary for secured convertible securities of this nature. The Company must comply with the covenants on a regular basis.

The Company issued to Lind 13,081,395 warrants exercisable for a term of 48 months at an exercise price of CAD$0.11 per share, valued at $569,100 on the date of issue (see Note 10).

The Company paid Lind a commitment fee of CAD$78,750 ($59,438) and legal fees associated with the Convertible Security of CAD$57,571 ($43,740).

The Company paid Lind closing costs of CAD$14,525 ($10,312) associated with the Second Tranche.

The Second Tranche is secured by all of the assets of the Company and bears interest at 10% per annum and matures on April 23, 2022. The Second Tranche includes covenants typical and customary for secured convertible securities of this nature. The Company must comply with the covenants on a regular basis.

The Convertible Security and the Second Tranche are accounted for as a compound financial instrument with a liability component and conversion option component classified as two separate liabilities, as well as the warrant liability component (Note 10).

The Convertible Security and the Second Tranche may be converted to common shares of the Company at a rate of no more than 1/20[th] of the face value of the Convertible Security and the Second Tranche in any given month and at a price per share equal to 85% of the volume weighted average price per share for the five consecutive trading days immediately prior to the conversion date. Lind reserves the right at any time to increase the conversion limit from 1/20[th] of the face value of the first closing to CAD$500,000 per month, providing that increased amount does not exceed 15% of the aggregate trading volume of the shares for the immediately proceeding 20 days. During the year ended December 31, 2020, the Company issued 25,419,816 shares as settlement for a portion of the outstanding convertible debenture (Note 10), converting CAD$2,584,600 ($1,926,649) of the face value of the convertible security to shares.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

12. Convertible debenture (continued)

The fair value of the liability components was estimated using a weighted average discount rate of 157% based on the estimated discount rate of comparable debt. The discount on the liability components is being accreted over the term of the Convertible Security and the Second Tranche, utilizing effective interest rate method at a 157% weighted average discount rate. For the year ended December 31, 2020, accretion of the discount totaled $380,554 ($1,426 for year ended December 31, 2019).

On bifurcation of the various components of the compound financial instrument, it was determined that a loss arose on the transaction in the amount of $399,000. The Company has deferred this amount as prepaid and other asset and will realize the loss over the term of the Convertible Security. As at December 31, 2020, the balance of this prepaid and other asset is $41,619.

other asset is $41,619.
Liability component as at December 31, 2018	$	-
Issuance		1,358,378
Change in fair value		(65,455)
Effect of foreignexchange currency difference		25,602
Liability component as at December 31, 2019		1,318,525
Issuance		177,247
Change in fair value		62,777
Conversion		(1,368,992)
Effect of foreign exchange currency difference		81,028
Conversion option as at December 31, 2020	$	270,585

Liability component as at December 31, 2018	$	-
Issuance		116,208
Accretion		53,455
Effect of foreign exchange currency difference		3,099
Liability component as at December 31, 2019		172,762
Issuance		11,267
Accretion		380,554
Conversion		(482,806)
Effect of foreign exchange currency difference		8,410
Liability component as at December 31, 2020	$	90,187

At December 31, 2020, the fair value of the conversion option component was $270,585 and the carrying amount of the liability component was $90,187. All debentures were converted subsequent to December 31, 2020 and the liability component and conversion option were reduced to zero (see Note 8).

13. Loan payable

In April 2020, the Company received a CAD$40,000 ($31,417) Canadian Emergency Business Account (“CEBA”) loan. The CEBA loan is from the Government of Canada and is interest free through December 31, 2022, after which any unpaid balance is converted to a five-year interest-bearing term loan. Repaying the loan balance in full on or before December 31, 2022 will result in loan forgiveness of 25% (up to CAD$10,000).

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

14. Commitments and contingencies

Legal

Environmental

Contracts

See Note 11.

Perpetual Iron

On December 22, 2020, the Company issued 30,000,000 non-transferrable warrants to Perpetual Iron Inc. for facilitating and supporting the negotiations of a non-binding financing from a global investment bank. The warrants do not vest until certain conditions are met. 10,000,000 warrants vest upon entering a binding definitive agreement with the investor and the remaining 20,000,000 warrants vest upon the Company’s initial draw on the financing facility. If no binding definitive agreement is reached within two years, all warrants will be voided. Additionally, the Company will make a $4.0 million dollar payment to Perpetual Iron contingent on the Company entering a binding agreement and making an initial draw on the financing facility. Neither the warrants nor the fee have been included in the consolidated financial statements at December 31, 2020 as management has estimated that the vesting conditions have not been met and is not foreseeable as at the date of these consolidated financial statements.

Novel Coronavirus

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

15. Loss per share

Basic loss per share amounts are calculated by dividing the net loss for the year by the weighted average number of common shares outstanding during the year. Basic and diluted weighted average number of shares for the year ended December 31, 2020 was 226,009,275 (179,790,538 for the year ended December 31, 2019).

The diluted loss per share for the year ended December 31, 2020 excludes share purchase options, DSUs, warrants, and the conversion option of debenture of the Company as they were determined to be anti-dilutive. For the year ended December 31, 2020, basic and diluted loss per share was $0.04 ($0.02 for the year ended December 31, 2019).

16. Income taxes

(i) Provision for income taxes

Major items causing the Company’s effective tax rate to differ from the combined Canadian federal and provincial statutory rate of 26.5% (2019 – 26.5%) were as follows:

statutory rate of 26.5% (2019 – 26.5%) were as follows:
		2020		2019
Accounting loss before income tax	$	9,077,845	$	2,898,038
Canadian StatutoryTax Rate		26.50%		26.50%
Expected income tax recovery based on statutory rate	$	(2,406,000)	$	(768,000)
Adjustment to expected income tax benefit:
Stock based compensation		211,000		43,000
Expenses not deducted for tax purposes		1,617,000		72,000
Other		61,000		(284,000)
Change in benefit of tax assets not recognized		517,000		937,000
Deferred income taxprovision(recovery)	$	-	$	-

(ii) Temporary differences

Deferred income tax assets have not been recognized in respect of the following deductible temporary differences:

		2020		2019
Non-capital loss carry-forwards - Canada	$	45,462,000	$	44,428,000
Other - Canada		108,000		45,000
Mineral property costs - Ukraine		2,403,000		2,380,000
Non-capital loss carry-forwards - Cyprus		1,110,000		558,000
Non-capital loss carry-forwards - Ukraine		1,640,000		1,512,000
Total	$	50,723,000	$	48,923,000

Deferred tax assets have not been recognized in respect of these items because it is not probably that future taxable profit will be available against which the Company can use the benefits.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

16. Income taxes (continued)

(iii) Tax loss carry-forwards

The non-capital losses for Canadian income tax purposes of approximately $45,462,000 expire between 2031 to 2040.

The non-capital losses for Cyprus can be carried forward for five years.

The Company carries on most of its operations in Ukraine. The Ukrainian tax system is characterized by numerous taxes; frequently changing legislation which may be applied retroactively; contradictory and wide interpretation of the law, and uncertain administrative practices of the tax authorities. All assessments of tax received by the Company have been accrued in these consolidated financial statements. While management believes that it has provided adequately for tax liabilities, based on its interpretations of applicable tax legislation, official pronouncements and court decisions, the relevant tax authorities could disagree and assess additional tax, the effect of which could be material to these consolidated financial statements.

17. Financial risk management objectives and policies

The Company's financial instruments comprise cash, amounts receivable, accounts payable and accrued liabilities, warrant liability, liability component of convertible debenture, conversion option of convertible debenture, and loan payable.

The main risks that could adversely affect the Company's financial assets, liabilities or future cash flows are credit risk, liquidity risk and market risk.

Management reviews policies for managing each of these risks, which are summarized below.

The following discussion also includes a sensitivity analysis that is intended to illustrate the sensitivity to changes in market variables on the Company's financial instruments and show the impact on income or loss and shareholders' equity, where applicable. The sensitivity has been prepared for the year ended December 31, 2020 using the amounts of other financial assets and liabilities held as at the consolidated statement of financial position date.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets. With respect to credit risk arising from financial assets of the Company, which comprise cash and minimal amounts receivable, the Company's exposure to credit risk arises from default of counterparty, with a maximum exposure equal to the carrying amount of these instruments. Cash balances are held with high credit quality financial institutions. The credit risk of the Company is considered minimal.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. The Company has procedures with the objective of managing such risk, such as monitoring cash flow on a continuous basis through short and medium-term cash planning and maintaining sufficient cash. The Company expects to complete future equity financings, as required and available.

The Company's financial liabilities at December 31, 2020 and 2019 include accounts payable and accrued liabilities that were based on contractual undiscounted payments that are all due in less than one year, the convertible debenture (Note 12) and the loan payable, The warrant liability related to unexercised warrants will be settled in equity, if exercised.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

BLACK IRON INC.

For the years ended December 31, 2020 and 2019

17. Financial risk management objectives and policies (continued)

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rate and equity prices will affect the Company's income or the value of its holdings of financial instruments. The Company is exposed to foreign currency risk and equity price risk.

Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investment in its subsidiaries.

A portion of the Company’s transactions are carried out in other transactional currencies including the Canadian dollar and Ukrainian Hryvnia (“UAH”) which are subject to currency fluctuations. The following summarizes the US dollar amounts of assets and liabilities denominated in other currencies at December 31, 2020:

	CAD	UAH
Cash	$ 1,087,589 $	6,660
Amounts receivable	35,105	126
Accounts payable and accrued liabilities	(583,685)	(12,283)
Warrant liability	(6,521,549)	-
Conversion option of convertible debenture	(90,187)	-
Liability component of convertible debenture	(270,585)	-
	$ (6,343,312) $	(5,497)

A $0.01 strengthening or weakening of the US dollar against the Canadian dollar at December 31, 2020 would result in an increase or decrease in the operating loss of $79,650. A $0.01 strengthening or weakening of the US dollar against the UAH would result in an increase or decrease in operating loss of approximately $1,554.

The Company has no interest rate risk as there are no outstanding bank borrowings and no interest rate exposure, as the Company finances its operations primarily through share offerings.

Capital management

The capital of the Company consists of shareholders’ (deficiency) equity.

The Company's capital management objectives, policies and processes have remained unchanged during the years ended December 31, 2020 and 2019.

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than of the Toronto Stock Exchange (“TSX”) which requires adequate working capital or financial resources such that, in the opinion of TSX, the listed issuer will be able to continue as a going concern. TSX will consider, among other things, the listed issuer's ability to meet its obligations as they come due, as well as its working capital position, quick asset position, total assets, capitalization, cash flow and earnings as well as disclosures in the consolidated financial statements regarding the listed issuer's ability to continue as a going concern.

BLACK IRON INC.

Notes to the consolidated financial statements (Expressed in U.S. dollars)

For the years ended December 31, 2020 and 2019

18. Financial instruments

18. Financial instruments
		December 31, 2020				December	31,2019
	Hierarchy level	Carrying amount		Fair value		Carrying amount		Fair value
Financial liabilities:
Warrant liability	2	6,521,549 $	$	6,521,549	$	1,227,878	$	12,127,878
Conversion option of convertible debentures	3	270,585		270,585		1,318,525		1,318,525

A fair value hierarchy prioritizes the methods and assumptions used to develop fair value measurements for those financial assets where fair value is recognized on the consolidated statements of financial position. These have been prioritized into three levels.

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 – Inputs for the asset or liability that are not based on observable market data.

Fair value amounts represent point-in-time estimates and may not reflect fair value in the future. The measurements are subjective in nature, involve uncertainties and are a matter of significant judgement.

The fair values of other short-term financial instruments, including cash, amounts receivable, accounts payable and accrued liabilities, approximate their carrying values due to the short period of time to maturity. The investment in shares in Euro Sun is classified as level 1 as the price is quoted in an active market (see Note 5). The investment in warrants of Euro Sun (see Note 5), the warrant liability (see Note 10) and the conversion option of the convertible debenture (see Note 12) have been classified as level two within the fair value hierarchy and include inputs that are observable other than quoted prices.

During the years ended December 31, 2020 and 2019, there were no transfers between the levels within the fair value hierarchy.

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BLACK IRON INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2020

Date: March 11, 2021

This Management Discussion and Analysis (“MD&A”) relates to the financial condition and results of operations of Black Iron Inc. together with its subsidiaries (collectively, “Black Iron” or the “Company”) as at and for the year ended December 31, 2020. This MD&A should be read in conjunction with the Company’s consolidated financial statements and related notes as at and for the year ended December 31, 2020. The consolidated financial statements and related notes of Black Iron have been prepared in accordance with International Financial Reporting Standards (“IFRS”) . Unless otherwise noted, all references to currency in this MD&A are in U.S. dollars .

The MD&A was prepared in accordance with the requirements set out in National Instrument 51-102 — Continuous Disclosure Obligations of the Canadian Securities Administrators.

The audit committee of the board of directors of the Company has reviewed this MD&A and the consolidated financial statements for the year ended December 31, 2020, and Black Iron’s board of directors approved these documents prior to their release.

Overview

Outlook

Iron ore prices continue to remain strong with benchmark 62% iron content ore currently selling for ~US$165 per tonne as compared to the long-term price used in Black Iron’s PEA of $62 per tonne. Iron ore is one of the top price appreciating main stream commodities year to date driven in large part by government economic stimulus packages to help get people back to work in light of COVID-19 being highly focused on major infrastructure (roads, railway, power lines, etc.) upgrades. This price increase has led to several steel mills and global trading houses expressing interest to secure Black Iron’s offtake resulting in a formal two staged process being launched with the first phase having closed on October 9, 2020. A short list of companies from the first phase have been invited to participate in the second phase which entails access to a more extensive data room and the option to conduct a site visit either virtually or in person depending on personal preferences and travel restrictions. Upon completion of the second phase anticipated late March 2021, binding submissions to invest and secure offtake rights will be sought.

The land Black Iron requires to locate its processing plant, tailings and waste rock stockpiles is owned by Ukraine’s Central Government and is being used by the Ministry of Defense for training purposes. Black Iron has reached agreement with Ukraine’s Ministry of Defense on the amount and coordinates of the land to be transferred and is currently negotiating the sequence of land transfer along with compensation package. To maintain the functionality of this training facility, some land will need to be repatriated from a local communal enterprise.

Fourth Quarter Highlights

On October 13, 2020, management announced that as an additional source of funding for Project construction, a second Heads of Agreement with a construction company that includes an investment package valued at ~US$60 million has been signed.
On December 22, 2020, the Company announced it had entered a non-binding royalty term sheet for US$100 million with a prominent US based institutional investor. In exchange for investing US$100 million, the investor will be entitled to receive a 6.75% royalty on the phase-one volume of four million tonnes.
The Company hosted representatives from a company interested in securing offtake rights from the Shymaniviske project at site in Ukraine. This company is interested in making an investment towards Project construction in exchange for securing the rights to purchase the Company’s expected ultra high grade 68% pellet feed at a slight discount to market.

Ukraine Business Environment

Selected Quarterly Financial Information

Three months ended	December 31, 2020	December 31, 2020	September 30, 2020	September 30, 2020		June 30, 2020	March	31, 2020
Loss for the period	$	5,631,385	$	1,090,961	$	2,078,236	$	277,264
Total comprehensive loss		5,631,385		1,090,961		2,078,236		277,264
Loss per share		(0.02)		(0.01)		(0.01)		-

Three months ended	December 31, 2019		September 30, 2019			June 30, 2019	March	31, 2019
Loss for the period	$	466,062	$	808,957	$	859,003	$	764,016
Total comprehensive loss		466,062		808,957		859,003		931,983
Loss per share		-		(0.01)		(0.01)		-

Selected Annual Information

	2020	2019	2018
	$	$	$
Net loss	9,077,845	2,898,038	2,124,529
Comprehensive loss	9,077,845	3,066,005	3,581,430
Loss per share, basic and diluted	(0.04)	(0.02)	(0.01)
Total assets	1,794,498	1,391,705	676,245

Results of Operations for the Company for the Three and Twelve Months Ended December 31, 2020

Selected Financial Information

	Three months	Three months	Three months	Three months
		ended		ended		Year ended		Year ended
	December 31,		December 31,		December 31,		December 31,
		2020		2019		2020		2019
Loss for the period	$	5,631,385	$	466,062	$	9,077,845	$	2,898,038
Comprehensive loss for the period		5,631,385		466,062		9,077,845		3,066,005
Loss per share		(0.02)		-		(0.04)		(0.02)
General and administrative:
Consulting and management fees	$	188,277	$	227,049	$	754,394	$	903,115
Professional fees		29,196		46,023		139,350		137,625
General office expenses		39,901		35,121		167,926		154,527
Travel expenses		1,166		4,644		22,864		54,331
Shareholder communications and filing fees		23,654		34,536		140,035		283,065
	$	282,194	$	347,373	$	1,224,569	$	1,532,663
Exploration and evaluation expenditures:
Surface rights and consulting	$	32,080	$	34,442	$	103,436	$	67,259
Engineering studies		-		-		-		-
Consulting and technical		133,254		142,266		503,312		485,701
Travel		-		18,220		6,228		42,933
Field office support & administration		16,623		19,160		63,442		72,655
Professional fees		19,290		-		19,290		-
	$	201,247	$	214,088	$	695,708	$	668,548
Non-cash:
Stock-based compensation	$	73,261	$	20,962	$	794,605	$	160,695
Financing costs		175,089		(297,500)		331,985		150,220
Accretion		127,127		52,029		380,554		53,455
Change in fair value of warrants investment		-		-		-		390
Change in fair value of investment		-		-		-		(476,284)
Change in fair value of warrant liability		4,809,496		176,857		5,657,561		379,778
Change in fair value of conversion option		(46,818)		(65,455)		62,777		(65,455)
	$	5,138,155	$	(113,107)	$	7,227,482	$	202,799

Three months ended December 31, 2020

Expenses

General and Administrative

Professional fees were $29,196 during the three months ended December 31, 2020 compared to $46,023 for the same period in the prior year. These fees were higher in the previous year due to retention of a financial advisor in the quarter to assist with securing funding for project construction.

General office expenses of $39,901 in the three months ended December 31, 2020 include rent and office related expenses along with marketing expenses. The Company shares office space with several other resource companies and pays its proportionate share of expenses. During the three months ended December 31, 2019, the Company recorded a general office expense of $35,121.

Travel expenses were $1,166 during the three months ended December 31, 2020 compared with a $4,644 in the same period in the prior year. The decrease was due to travel restrictions imposed by world governments during the COVID-19 pandemic.

Shareholder communications and filing fees were $23,654 during the three months ended December 31, 2020 compared with $34,536 in the same period in the prior year. This decrease was primarily due to higher promotional and marketing costs in the prior year that did not recur in 2020.

Exploration and Evaluation Expenditures

The Company recorded exploration and evaluation expenses of $201,247 during the three months ended December 31, 2020. This expenditure was primarily for consulting and technical fees related to the Shymanivske Project as required primarily for surface rights acquisition. This is $12,841 lower than the same period in the prior year.

Non-Cash Items

No stock options were granted during the three months ended December 31, 2020. 250,000 stock options were granted during the three months ended December 31, 2019. The vesting of stock options resulted in an expense during the three months ended December 31, 2020 of $63,928 compared with $11,729 during the three months ended December 31, 2019. The Company granted 35,846 deferred share units (“DSUs”) valued at $9,333 during the three months ended December 31, 2020. The Company granted 135,417 DSUs valued at $9,233 during the three months ended December 31, 2019.

As part of the convertible security financing which closed on September 27, 2019, the Company issued 13,081,395 common share purchase warrants exercisable for a term of 48 months at an exercise price of CAD$0.11 per share. As part of the second tranche of the convertible security financing, which closed on April 24, 2020, the Company issued 3,384,991 common share purchase warrants exercisable for a term of 48 months at an exercise price of CAD$0.08 per share. The valuation of the warrants was determined using the Black-Scholes option pricing model and were included as a financing cost of the Company’s convertible debenture. The movement in the valuation at each period end is reflected in the statement of loss and comprehensive loss. The convertible debenture is bifurcated between a liability component and a conversion option on the financial statements. The conversion option is recorded as a $270,585 liability on the financial statements at December 31, 2020 and the liability component of the convertible debenture is recorded on the financial statements at $232,400 at December 31, 2020. The Company recorded a gain on the fair value of the conversion option of $46,818 during the three months ended December 31, 2020 ($65,455 for the three months ended December 31, 2019) and accretion related to the liability component of $127.127 during the three months ended December 31, 2020 ($52,029 for the three months ended December 31, 2019). During the three months ended December 31, 2020, the Company issued 10,096,268 shares as settlement for a portion of the outstanding convertible debenture, converting CAD$1,479,700 ($1,103,019) of the face value of the convertible security to shares. The remaining balance of the convertible debenture was converted to shares in January 2020, reducing the outstanding liability and conversion option to zero.

Year ended December 31, 2020

Expenses

General and Administrative

Professional fees were $139,350 during the year ended December 31, 2020 compared to $137,625 for the same period in the prior year. These fees were comparable year over year.

General office expenses of $167,926 in the year ended December 31, 2020 include rent and office related expenses along with marketing expenses. The Company shares office space with several other resource companies and pays its proportionate share of expenses. During the year ended December 31, 2019, the Company recorded a general office expense of $154,527.

Travel expenses were $22,864 during the year ended December 31, 2020 compared with $54,331 in the same period in the prior year. The decrease was due to travel restrictions imposed by world governments during the COVID19 pandemic.

Shareholder communications and filing fees were $140,035 during the year ended December 31, 2020 compared with $283,065 in the same period in the prior year. This decrease was primarily due to higher promotional and marketing costs in the prior year.

Exploration and Evaluation Expenditures

The Company recorded exploration and evaluation expenses of $695,708 during the year ended December 31, 2020. This expenditure was primarily for consulting and technical fees combined with surface rights costs related to the Shymanivske Project. This is $27,160 lower than the same period in the prior year.

Non-Cash Items

9,042,500 stock options were granted, 187,500 stock options were forfeited, and 3,395,000 stock options expired during the year ended December 31, 2020. 2,900,000 stock options were granted, and 3,750,000 stock options expired during the year ended December 31, 2019. The vesting of stock options resulted in an expense during the year ended December 31, 2020 of $528,095 compared with $76,594 during the year ended December 31, 2019. The Company granted 3,566,367 deferred share units (“DSUs”) valued at $266,511 during the year ended December 31, 2020. The Company granted 1,959,637 DSUs valued at $84,101 during the year ended December 31, 2019.

As part of the convertible security financing which closed on September 27, 2019, the Company issued 13,081,395 common share purchase warrants exercisable for a term of 48 months at an exercise price of CAD$0.11 per share. As part of the second tranche of the convertible security financing, which closed on April 24, 2020, the Company issued 3,384,991 common share purchase warrants exercisable for a term of 48 months at an exercise price of CAD$0.08 per share. The valuation of the warrants was determined using the Black-Scholes option pricing model and were included as a financing cost of the Company’s convertible debenture. The movement in the valuation at each period end is reflected in the statement of loss and comprehensive loss. The convertible debenture is bifurcated between a liability component and a conversion option on the financial statements. The conversion option is recorded as a $270,585 liability on the financial statements at December 31, 2020 and the liability component of the convertible debenture is recorded on the financial statements at $232,400 at December 31, 2020. The Company recorded a loss on the fair value of the conversion option of $62,777 during the year ended December 31, 2020 ($65,355 gain for the year ended December 31, 2019) and accretion related to the liability component of $380,554 during the year ended December 31, 2020 ($53,455 for the year ended December 31, 2019). During the year ended December 31, 2020, the Company issued 25,419,816 shares as settlement for a portion of the outstanding convertible debenture, converting CAD$2,684,600 ($1,926,649) of the face value of the convertible security to shares. The remaining balance of the convertible debenture was converted to shares in January 2020, reducing the outstanding liability and conversion option to zero.

Cash Flows

Three months ended December 31, 2020

During the three months ended December 31, 2020, operating activities before working capital changes used cash of $667,324 compared with a use of cash of $580,775 during the three months ended December 31, 2019. Expenditures in both periods were primarily related to consulting and management fees and for consulting and technical work on the Shymanivske Project. Cash provided by investing activities during the three months ended December 31, 2020 was $1,071 primarily for interest earned, compared to cash provided by investing activities during the three months ended December 31, 2019 of $1,108. Cash used in financing activities of $16,919 was primarily related to share issuance costs, compared to no cash related to financing activities in the three months ended December 31, 2019.

Year ended December 31, 2020

During the year ended December 31, 2020, operating activities before working capital changes used cash of $2,034,565 compared with a use of cash of $2,218,524 during the year ended December 31, 2019. Expenditures in both periods were primarily related to consulting and management fees and for consulting and technical work on the Shymanivske Project. Cash used in investing activities during the year ended December 31, 2020 was $48 primarily for equipment purchased partially offset by interest earned, compared to cash provided by investing activities during the year ended December 31, 2019 of $337,997, primarily from the sale of Euro Sun shares. Cash provided by financing activities of $2,288,348 was primarily from a private placement which generated net cash of $1,207,429, net cash from the second tranche of the convertible debenture of $284,327, $737,450 from warrant exercises, $27,725 from option exercises, and cash from the Canadian Emergency Business Account loan of $31,417, compared to $2,741,199 from private placements and the convertible debenture in the year ended December 31, 2019.

Liquidity and Capital Resources

As at December 31, 2020, the Company had working capital of $1,137,466 including cash of $1,665,600 (December 31, 2019 - $988,844), compared with working capital of $687,621 as at December 31, 2019. The Company’s primary cash flow needs are for development of its mining and exploration permits, administrative expenses and working capital. The Company will maintain its excess working capital in a combination of Canadian and U.S. dollars which will only be converted to Ukrainian Hryvnia as required. The Company maintains most of its cash reserves, including those of the Cyprus subsidiary, at a large reputable Canadian commercial bank in high-quality short-term deposits, cash equivalents or cash.

Operating Segments

The Company has concluded that it has only one material operating segment (the development of its Ukrainian mining and exploration permits) for financial reporting purposes.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements, with the exception of operating leases noted below.

Financial Commitments, Contingencies and Litigation

Leases

Management Contracts

The Company is party to certain management contracts. These contracts require payments of approximately $2.4 million to the officers of the Company upon the occurrence of a change in control of the Company, as such term is defined by each officer’s respective consulting agreement. The Company is also committed to payments upon termination of approximately $677,000 pursuant to the terms of these contracts.

Legal Matters

Perpetual Iron

On December 22, 2020, the Company issued 30,000,000 non-transferrable warrants to Perpetual Iron Inc. for facilitating and supporting the negotiations of a non-binding financing from a global investment bank. The warrants do not vest until certain conditions are met. 10,000,000 warrants vest upon entering a binding definitive agreement with the investor and the remaining 20,000,000 warrants vest upon the Company’s initial draw on the financing facility. If no binding definitive agreement is reached within two years, all warrants will be voided, Additionally, the Company will make a $4.0 million dollar payment to Perpetual Iron contingent on the Company entering a binding agreement and making an initial draw on the financing facility.

Novel Coronavirus (“COVID-19”)

Related Party Transactions

During the year ended December 31, 2020, the Company paid or accrued $1,427,933 ($846,601 for the year ended December 31, 2019) of management compensation relating to officers and directors of the Company. Included in this amount was $224,585 ($225,297 for the year ended December 31, 2019) paid or accrued according to a contract for business and operational consulting services with Forbes & Manhattan Inc. which has common executives with the Company.

All the related party transactions are in the normal course of operations and are measured at the exchange amount which is the amount of consideration established and agreed by the related parties.

As at December 31, 2020, the Company had $434,375 (December 31, 2019 - $141,250) consulting fees and travel expenses owing to its key management personnel. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and are due on demand.

Critical Judgments and Estimation Uncertainties:

(a) Significant judgments in applying accounting policies

The areas which require management to make significant judgments in applying the Company’s accounting policies in determining carrying values include, but are not limited to:

(i) Income taxes and recoverability of potential deferred tax assets

(ii) Contingencies

(b) Significant accounting estimates and assumptions

The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:

(i) Mineral resource estimates

(ii) Share-based payments and warrants, including warrants held for sale

Significant Accounting Policies

Derivative liabilities

Warrants issued have an exercise price denominated in Canadian dollars, and therefore, do not qualify for classification as equity as their exercise price is not in the Company’s functional currency of the US dollar. These warrants have been reclassified as warrant liabilities and are recorded at the estimated fair value at each reporting date, computed using the Black-Scholes valuation method. Changes in fair value of each period are included in income or loss for the period.

Compound financial instruments (debentures)

Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder.

Disclosure Controls and Procedures

Internal Control over Financial Reporting

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions, acquisitions and dispositions of the assets of the Company; and
Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the annual or interim financial statements.

The CEO and CFO have certified that internal controls over financial reporting have been designed and are operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as at December 31, 2020. Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control 2013 (“COSO 2013”) Framework to design the Company’s internal control over financial reporting.

There were no changes in the Company’s ICFR that have occurred during the period beginning on January 1, 2020 and ended on December 31, 2020 that have materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

Limitations of Controls and Procedures

Risk Factors

Additional Information and Continuous Disclosure

Additional information, including the Company’s press releases, has been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Outstanding Share Data

As at the date of this MD&A, the Company has:

a) 259,939,588 common shares outstanding.
b) 14,617,500 stock options outstanding with expiry dates ranging from February 16, 2022 to August 7, 2025 with exercise prices ranging from CAD$0.05 to CAD$0.15. If exercised, 14,617,500 shares would be issued for proceeds of CAD$1,474,413.
c) 58,557,860 warrants outstanding with expiry dates ranging from March 29, 2022 to December 22, 2025 with exercise prices between CAD$0.06 and CAD$0.31.
d) 9,040,848 DSUs outstanding with no fixed expiry.

AI assistant

Black Iron Inc. — AGM Information 2021

42457_rns_2021-06-09_2f240b5e-441f-4347-9708-9002b6794772.pdf

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

BLACK IRON INC.

MANAGEMENT INFORMATION CIRCULAR MAY 26, 2021

INFORMATION REGARDING CONDUCT OF MEETING

Solicitation of Proxies

Appointment and Revocation of Proxies

Voting of Proxies

Non-Registered Holders

Voting Securities and Principal Holder Thereof

Interest of Persons in Matters to be Acted Upon

EXECUTIVE COMPENSATION DISCLOSURE

Compensation Discussion and Analysis

Objectives

Elements of Compensation

Performance Graph

Summary Compensation Table

Compensation Review Process

Incentive Plan Awards

Stock Option Plan

Securities Authorized for Issuance Under Equity Compensation Plans

Termination and Change of Control Benefits

Matthew Simpson (Chief Executive Officer)

Paul Bozoki (Chief Financial Officer)

Director Compensation

Outstanding Share Awards and Option Awards

Value on Pay-Out or Vesting of Incentive Plan Awards

Deferred Share Unit Plan

Summary of the DSU Plan

Administration of DSU Plan

Maximum Number of Common Shares Issued

Insider Participation Limits

Transferability

Amendments to the DSU Plan

Other Arrangements

Forbes & Manhattan Agreement

CORPORATE GOVERNANCE PRACTICES

Board of Directors

Other Directorships

Board Mandate

The Independence of the Board

Position Descriptions

Chair of the Board

Chair of the Audit Committee

Chair of the Joint Corporate Governance and Compensation Committee

Chief Executive Officer

Orientation and Continuing Education

Ethical Business Conduct

Nomination of Directors

Majority Voting Policy

Committees of the Board

Audit Committee

Audit Committee Charter

Composition of the Audit Committee

Relevant Education and Experience

Reliance on Certain Exemptions

Audit Committee Oversight

Pre-Approval Policies and Procedures

External Auditor Service Fees (by category)

The Joint Corporate Governance and Compensation Committee

Board Assessments

Director Term Limits

Women on the Board of Directors and in Executive Officers

MATTERS TO BE CONSIDERED

Financial Statements

Election of Directors

Notes:

Corporate Cease Trade Orders

Bankruptcies

Penalties or Sanctions

Conflicts of Interest

Indebtedness of Directors and Executive Officers

Appointment of Auditors

Approval of Stock Option Plan

Resolution to Approve Stock Option Plan

Whereas:

Be it resolved that:

Approval of DSU Plan

Black Iron Inc. AGM Information 2021