Cabral Gold Inc. — Interim / Quarterly Report 2021

Aug 26, 2021

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Cabral Gold Inc.

(An Exploration Stage Company)

Interim MD&A – Quarterly Highlights

For the six months ended June 30, 2021

Dated: August 26, 2021

Cabral Gold Inc.

Interim MD&A – Quarterly Highlights For the six months ended June 30, 2021

Management Discussion and Analysis

The following Interim MD&A – Quarterly Highlights (“ MD&A ”) of Cabral Gold Inc. (“ Cabral ” or the “ Company ”) has been prepared as at August 26, 2021. It is intended to be read in conjunction with the condensed interim consolidated financial statements of the Company as at and for the six months ended June 30, 2021.

This Interim MD&A – Quarterly Highlights has been compiled in accordance with Section 2.2.1 of Form 51-102F1 - Management’s Discussion & Analysis .

All of the financial information presented in this MD&A has been prepared in accordance with International Financial Reporting Standards (“ IFRS ”) unless otherwise noted.

All monetary amounts are expressed in Canadian dollars unless otherwise noted.

Guillermo Hughes, P. Geo. MAusIMM and FAIG., a consultant to the Company as well as a Qualified Person as defined by National Instrument 43-101, (“ NI 43-101 ”) approved the technical information presented in this MD&A.

Cautionary Statement on Forward-Looking Information

This MD&A document contains ‘forward-looking information’ and ‘forward-looking statements’ (together, the “ forward-looking statements ”) within the meaning of applicable securities laws. Such forwardlooking statements concern the Company’s anticipated operations in future periods, planned exploration and development of its properties, and plans related to its business and other matters that may occur in the future. This information relates to analyses and other information that is based on expectations of future performance and planned work programs. These forward-looking statements are made as of August 26, 2021.

Users of forward-looking statements are cautioned that actual results may vary from the forward-looking statements contained herein. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to:

• Risks related to the exploration and development of natural resource properties

• Risks related to the uncertainty of mineral resource calculations and the inclusion of inferred mineral resources in economic estimations

• Risks related to fluctuations in future metal prices (particularly gold prices)

• Risks related to market events and conditions

• Risks related to governmental regulations, including without limitation, environmental laws and regulations

• Risks related to delays in obtaining governmental or regulatory approvals, licenses or permits

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• Risks related to the Company’s mineral properties being subject to prior unregistered agreements, transfers or claims and other defects in title

• Risks related to uncertainty associated with the Company’s ability to obtain funding in the future

• Risks related to the Company’s inability to meet its financial obligations under agreements to which it is a party (see ‘Liquidity and going concern’)

• Risks related to competition from larger companies with greater financial and technical resources, and

• Risks related to the Company’s directors and officers becoming associated with other natural resource companies which may give rise to conflicts of interest.

Reference is made to the risk factors presented in the Annual Information Form for the year ended December 31, 2020 dated as of April 12, 2021 and the Short Form Prospectus dated June 28, 2021 both of which are available on www.sedar.com.

Although the forward-looking statements contained in this document are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this document, and the Company assumes no obligation to update or revise them to reflect new events or circumstances except as may be required under applicable securities laws. There can be no assurance that forward-looking statements, or the material factors or assumptions used to develop such forward-looking statements, will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements.

Overview

The Company is a mineral exploration and development company with interests in gold projects in the state of Pará in northern Brazil. Cabral’s primary project is Cuiú Cuiú.

The Company holds its interest in Cuiú Cuiú through Magellan Minerais Prospecção Geológica Ltda. (“ Magellan Brazil ”). Magellan Brazil is a wholly owned subsidiary of Cabral Gold B.C. Inc. (“ CG B.C. ”) which in turn is a wholly owned subsidiary of the Company.

Highlights

The six months ended June 30, 2021 and the period ended August 26, 2021 were highlighted by the following activities and initiatives:

Exploration and development

• The Company’s current drill program commenced in Q3 2020 and consists of three drill rigs as follows: - The Company’s wholly-owned RC rig which has been drilling since September 2020. This drill rig is focussed on conducting reconnaissance drilling, testing a series of predominately grass-roots targets

• A contracted Prospector W750 RC drill rig which has been drilling since November 2020. This drill rig is focussed on follow-up testing of advanced targets and is expected to continue drilling until the onset of the rainy season in November 2021

• A contracted diamond-drill rig which arrived on site and has been drilling since February 2021. It is exclusively focussed on advancing the MG deposit

• The Company has contracted two additional diamond-drill rigs which are expected to arrive on site and commence drilling in early September 2021

• During the period, the most significant exploration result was the identification of an extensive weathered, transported, colluvial gold blanket in oxidized and saprolitized rocks above the MG deposit

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• Drill results have been disclosed in press releases throughout the period including the following results of note:

• RC drill hole RC-40 at Machichie returned 34m @ 5.4 g/t gold from surface, including 13m @ 13.4 g/t gold from 18m, including a high-grade grade section of 3m @ 48.2 g/t gold from 18m

• Diamond-drill hole DDH-208 at MG returned 2.1m @ 29.4 g/t gold from 89.6m, including 0.5m @ 120.6 g/t gold from 90.9m

• RC drill hole RC-63 at Hamilton Novo returned 3m @ 13.2 g/t gold from 7.0m, including 1m @ 36.7 g/t gold from 7.0m

• Diamond-drill hole DDH-214 at MG returned 60m @ 3.5 g/t gold from surface in oxidized saprolitic blanket cover, including 2.6m @ 64.6 g/t gold from 41.0m

• Diamond-drill hole DDH-215 at MG returned 7.6m @ 4.1 g/t gold from 149.0m, including 4.3m @ 11.3 g/t gold from 149.0m and a second deeper intercept of 18.1m @ 4.3 g/t gold from 198.9m depth, including 1.0m @ 45.1 g/t gold from 210.5m

• The Company acquired the interests of a majority stakeholder of the Cuiú Cuiú garimpeiro condominium in each of March 2021, May 2021 and August 2021 at a total cost of R$ 1,416,900 (approximately $330,000) pursuant to the terms of the garimpeiro condominium agreement

• Ongoing regional soil and rock chip sampling and reconnaissance mapping continued during the period in various target areas within the Cuiú Cuiú district. Assay results are pending

Finance

• The balance of cash and cash equivalents as at June 30, 2021 was $1,528,437 and the net working capital balance as at this date was $1,141,779 (see ‘Liquidity and going concern’)

• In July 2021, the Company announced that it had closed a bought-deal prospectus offering selling 21,298,000 units for gross proceeds of $11,500,920. Each unit is comprised of a common share and one-half of one share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.80 per share until July 6, 2023 (see ‘Liquidity and going concern’)

• In July 2021, the Company announced that the TSX Venture Exchange had accepted for listing the 10,649,000 share purchase warrants issued in connection with the July 2021 bought-deal prospectus offering (TSX Venture Exchange symbol ‘CBR-WT’)

• The R$ depreciated 4% against the Canadian dollar in 2021 through August 19, 2021. This follows from a 24% decline in 2020. The Company has benefited from this volatility as the relative depreciation of the R$ serves to reduce R$ denominated expenditures and liabilities when measured in $. The Q1 2021 depreciation of the R$ of 10% was largely reversed in Q2 2021

Other

• Ongoing corporate social responsibility activities continued during 2021 within the community of Cuiú Cuiú and surrounding areas including extensive assistance in connection with the COVID-19 outbreak as well as ongoing contributions to the community’s school, the provision of community garbage cleanup services, contribution to the community construction of a water tower, the sharing of the Company’s medical centre facilities and staff with the community and ongoing support of educational and health events related to COVID-19 treatment, testing and prevention

• In April 2021, the Company announced the appointment of Rodney Cooper to the Board of Directors and the resignation of Dennis Moore from the Board of Directors.

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Cuiú Cuiú

The Company’s primary gold project is Cuiú Cuiú.

Cuiú Cuiú garimpeiro condominium payments

On February 19, 2006, Magellan Brazil entered into a surface access agreement with the holders of the traditional surface rights over the Cuiú Cuiú property. The 2006 agreement has since been amended and extended several times the most recent of which was on March 29, 2017. The current terms of the agreement require Magellan Brazil to pay R$ 5,400 per year (equivalent of $1,340 as at June 30, 2021) to each of the 19 majority stakeholders and R$ 2,700 per year ($670) to each of the 61 minority stakeholders.

Payments totalling approximately $60,000 were made to the garimpeiros (both majority and minority stakeholders) in March and April 2021 in connection with the surface access fee in respect of the year ended March 2022.

Acquistion of garimpeiro interests

The surface access agreement with the Cuiú Cuiú garimpeiro condominium provides the Company with the right to acquire any stakeholder’s interest at any time for a specified price as defined in the agreement. Such purchases are made for the purpose of consolidating land tenure of strategic ground.

In March 2021, the Company acquired the interest of a majority stakeholder for a price of R$ 474,000 (approximately $105,000) pursuant to the terms of the garimpeiro condominium agreement.

In May 2021, the Company acquired the interest of a second majority stakeholder also for a price of R$ 474,000. An additional nominal amount relating to compensation for structures and other improvements on the property will be determined and paid in Q3 2021.

In August 2021, the Company acquired the interest of a third majority stakeholder for a price of R$ 468,900 (approximately $116,000).

Q2 2021 and subsequent work program

Exploration initiatives undertaken during Q1 2021 and the period ended August 26, 2021 included the following:

Reconnaissance RC drill program

In February 2020, Cabral announced that it had acquired a track mounted ASV Scout ST-50 reverse circulation drill rig that is capable of drilling to a maximum of 200m depth.

The rig was purchased with the objective of allowing the Company to rapidly and cost effectively test its growing portfolio of, high-grade targets, specifically regional targets that are not well defined. The drill programs for these targets are planned as drill holes traverse across surface geochemical anomalies or boulder occurrences to identify potential mineralized structures or trends.

The Company’s wholly-owned RC rig is currently focussed on testing for new gold in-oxide-blankets deposits. It is tasked with drilling vertical holes through oxidized saprolite cover to bedrock beneath surface geochemical anomalies.

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Highlights of the reconnaissance RC drill program in Q2 2021 and the period ended August 26, 2021 are presented in the Company’s news releases and its website and include the following:

• Drill hole RC-84 returned 2m @ 10.5 g/t gold from 25m, RC-85 returned 3m @ 6.6 g/t gold from 14m, RC-87 returned 1m @ 6.2 g/t from 8m and RC-88 returned 2m @ 3.6 g/t from 32m. All four RC holes are located at the Morro da Lua target (July 15, 2021 news release)

• Drill hole RC-112 at Pau da Merenda target, returned 40m @ 2.2 g/t gold in-oxide-blanket from surface including 7m @ 9.4 g/t gold from 33m which also included2m @ 23.8 g/t gold from 38m (August 10, 2021 news release). This may prove to be the second gold in-oxide-blanket discovered on the property to date.

Follow-up RC drill program

The Company entered into a contract with a third-party independent drilling contractor to add a second RC drill rig to its drill program to focus on the follow-up drilling of advanced targets. The rig was mobilised to site in late October 2020 and commenced drilling in November 2020. The rig is a larger truck-mounted unit capable of drilling to depths of 450m. The program is designed to follow up positive results from previous drill holes and surface trenches where the locations of the mineralized structures are known.

Highlights of the follow-up RC drill program in Q2 2021 through August 26, 2021 are presented in the Company’s news releases and its website and include the following:

• Drill hole RC-63 drilled at Hamilton Novo returned 3m @ 13.2 g/t gold, including 1m @ 36.7 g/t gold (April 29, 2021 news release). Drill hole RC-65 returned 51m @ 0.8g/t gold from surface, RC-66 returned 75m @ 0.6 g/t gold from surface and RC-68 returned 18m @ 1.4 g/t gold from surface as well as 20m @ 0.9 g/t gold from 24m. RC- 65, RC-66, and RC-68 were all drilled in oxide-blanket (June 8, 2021 news release).

• Drill hole RC-69 returned 75m @ 0.4g/t gold from surface. RC-100 returned 33m @ 0.7 g/t gold from surface and RC-91 returned 24m @ 0.8 g/t gold from surface. The intercepts in all three holes were oxide-blanket (July 29, 2021 news release).

Diamond-drill program

In February 2021, the Company announced that it had added a third drill rig to its drill program and commenced a minimum 5,000 metre diamond-drill program. The rig initially focussed on extending and confirming high-grade zones at both the MG and Central gold deposits where previous diamond-drilling returned over 70 drill intercepts in excess of 10 g/t gold.

In July 2021, the Company announced that it had added two more diamond-drill rigs to its drill program thereby bringing the total number of rigs in operation at Cuiú Cuiú to five including three diamond-drill rigs and two RC rigs. The two new rigs are expected to be on site and drilling by September 2021.

The first diamond rig will continue to focus on drilling off the MG gold deposit. The second rig will be initially focused on the drilling of regional priority targets. The third rig will initially be focused on targeting historic high-grade zones at the Central gold deposit.

Many of the recent intercepts at MG encountered near surface transported oxidized gold mineralization in colluvial saprolitic blanket above primary basement mineralization.

Highlights of the diamond-drill program in Q2 2021 through August 26, 2021 are presented in the Company’s news releases and its website and include the following:

• Drill hole DDH-208 at MG returned 2.1m @ 29.4 g/t gold, including 0.5m @ 120.6 g/t gold from 90.9m (April 15, 2021 news release)

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• Drill hole DDH-211 returned 14m @ 1.1 g/t gold from 24m depth and drill hole DDH-210 intersected 12.7m @ 0.28 g/t gold from 8m depth (April 29, 2021 news release)

• Drill hole DDH-214 at MG returned 60m @ 3.5 g/t gold from surface, including 2.6m @ 64.6 g/t gold from 40m (May 19, 2021 news release)

• Drill hole DDH-215 returned 17.6m @ 4.1 g/t gold from 149.0m, including 4.3m @ 11.3 g/t and 18.1m @ 4.3 g/t gold from 198.9m, which also included 1.0m @ 45.1g/t, from 210.5m (June 8, 2021 news release)

• Drill hole DDH-218 returned 63.5m@0.9g/t from 53.5m, including 0.5m @ 12.7 g/t gold from 57.7m, 0.5m @ 13.1 g/t gold from 76.5m and 0.5m @ 16.2g/t gold from 81m (July 29, 2021 news release).

Other exploration initiatives

Exploration activity during 2021 to date has been focused on the three drill programs described above. No significant geological reconnaissance or geochemical surveys have been undertaken in 2021 to date.

Mineral resource estimate

Two gold deposits have been defined at Cuiú Cuiú and contain National Instrument 43-101 compliant Indicated resources of 5.9Mt @ 0.90g/t (200,000 oz) and Inferred resources of 19.5Mt @ 1.24g/t (800,000 oz). The resource estimate is described in the technical report concerning the Cuiú Cuiú project dated March 25, 2021 (amended June 28, 2021) with an effective date of June 19, 2021 is available on www.sedar.com.

Proposed work program

The technical report also includes reference to a recommended two-phase exploration program. The Phase 1 exploration budget totals $7,812,000 and includes 5,600m of reconnaissance RC drilling using Cabral’s own rig, 10,000m of definition drilling using a contracted larger RC rig and 5,000m of infill drilling using a contracted diamond-drill rig. The Phase 2 exploration budget totals $6,998,000 and is directed primarily to the continuation of the Phase 1 drill program; it includes 3,000m of reconnaissance RC drilling using Cabral’s own rig, 6,000m of definition drilling using a contracted larger RC rig and 2,375m of infill drilling using three contracted diamond-drill rigs.

Cumulative exploration expenditures

Cumulative exploration spend incurred on the Cuiú Cuiú property through June 30, 2021 by the Company and a previous owner of the property amounts to approxiamtely $34.9m as follows:

	Previous owner (1) Dec. 31, 2020 (2) 6 months ended June 30,2021 Total	Previous owner (1) Dec. 31, 2020 (2) 6 months ended June 30,2021 Total
Drilling (direct costs) Payroll Field costs Consulting, third parties Freight and travel Assay Geophysics	12,252,193 $ 973,053 $ 7,187,040 2,526,753 1,255,833 1,832,832 1,178,055 1,408,997 931,739 711,648 832,789 181,802 772,114 -	893,989 $ 14,119,235 $ 712,566 10,426,359 811,725 3,900,390 55,944 2,642,996 332,031 1,975,418 96,206 1,110,797 - 772,114
	24,409,763 $ 7,635,085 $	2,902,461 $ 34,947,309 $

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• (1) Relates to exploration expenditures incurred from the initial establishment of Magellan Brazil in 2005 through April 16, 2016 when Magellan Brazil was transferred from Magellan Minerals Ltd. to Cabral Gold Ltd. (now CG B.C.) through a series of transactions. CG B.C. became a wholly owned subsidiary of Cabral Gold Inc. on October 30, 2017

• (2) Relates to exploration expenditures incurred from October 30, 2017 through December 31, 2020. Virtually no exploration activity was undertaken from April 16, 2016 through October 30, 2017

• (3) Compiled based on previously reported annual financial statements denominated in Canadian dollars

Permitting process

On December 23, 2020, the EIA-RIMA (environmental background study) was submitted as part of the mining applications for 850.615/2004 and 850.047/2005 within the legally required timeframe.

At the same time, an application for six Trial Mining Licenses (Guias de Utilizacao) covering an area of approximately 250 hectares was submitted for the Central, Pau da Merenda, Moreira Gomes and Machiche of which two were granted by the ANM on February 3, 2021 on the Moreira Gomes and Machiche target areas.

Corporate social responsibility

Corporate social responsibility activities within the surrounding community of Cuiú Cuiú continued in 2021 to date including the following:

• Ongoing contributions to the community’s school

• Contribution to the construction of water tanks to better utilize the water bore previously supplied by the Company

• Sharing of the Company’s medical centre facilities and related staff with the community with extensive assistance provided in terms of both personnel and medical resources to the community in connection with the COVID-19 pandemic

• Involvement in the construction of a new health clinic with all members of the community participating; the clinic was formally inaugurated in early May 2021. The Company will assist the local government to supply the necessary equipment and supplies to maintain the clinic. The clinic will be formally transferred to the local government in early September 2021

• Ongoing provision of space for the local police post and logistical support to the police. The Company has agreed with the local community and local government to cooperate in the construction of a permanent police post at Cuiú Cuiú.

The support of the local community is extremely important in the permitting process.

Camp and other construction

• The Company continued the construction of the camp at Cuiú Cuiú in 2021 to date including the following:

• Ongoing construction of kitchen, eating area, bathroom and laundry facilities (completed in Q1 2021)

• Construction of a new geological office was completed in Q2 2021

• Construction of an open shed for sampling and sample preparation (completed in Q3 2021)

• Ongoing construction of administrative office, warehouse with operational vehicle workshop, fuel depots (including the acquisition of fuel tank systems) and recreational areas (expected completion in Q3 2021)

• The process of recovering and transferring the historical core to the new core shed commenced in early 2021 and is expected to be completed in Q3 2021.

The completion of camp construction has been repeatedly deferred due to the expansion of scope to include items such as the following:

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• Construction of a base for an internet / radio tower providing dedicated broadband and radio communication over the project area and a much-needed improvement in communications within the district and externally(expected completion of Q3 2021)

• Construction of a fully functional garage-workshop with warehouse to provide ongoing support to the Company’s fleet of four-wheel drive vehicles, quadbikes, RC drill rig and heavy equipment (expected completion of Q3 2021)

• Construction of a fuel depot including a total fuel capacity of 70,000 litres with a view to improving the quality, safety and control of fuel and reducing the effective cost of fuel during the wet season when freight costs are considerably higher (expected completion of Q4 2021)

• Expansion of main core shed to accommodate an additional two full benches for core logging (expected completion of Q4 2021).

In addition, near-term accommodation requirements will be addressed using two weather-haven style all weather climatized portable tents which are relatively inexpensive, can be rapidly constructed and provide considerable flexibility as to both functionality and future movement to different locations. Significant increases in accommodation requirements are driven by growth in the number of employees, drill contractors, other contractors and onsite visitors (relating to the permitting process, visits from various government bodies, etc.). Expected completion of both tents is early September 2021.

Due to the pending arrival of two additional diamond-drill rigs in early September, the Company has retained an external construction company based in Moraes Almeida to complete certain of the foregoing construction initiatives which are now expected to be completed by early September 2021. The less pressing construction projects such as parts of the accommodation facilities and the nursing station will continue to be undertaken by resources contracted locally in Cuiú Cuiú; these are expected to be completed by early Q4 2021.

Company response to COVID-19

In order to protect both staff and the local Cuiú Cuiú community from COVID-19, the Company introduced a number of COVID-19 protocols in 2020 that meet and, in most cases, exceed the requirements issued by federal, state and local governments. Testing of all personnel (both employees and contractors) before entering the project is obligatory and suspected cases onsite are isolated and removed from site immediately for treatment in Itaituba. These initiatives also include the ongoing testing of all employees and contractors and have continued in force through August 26, 2021.

All employees and third-party contractors are provided with medications and vitamin supplements to help enhance their immunity against COVID-19 and are regularly monitored by the Company’s in-house nursing staff for any early signs of illness and treated accordingly. Health and safety protocols are reinforced on a daily basis with safe practices in place to reduce the risk of transmission. All activities involving the community of Cuiú Cuiú have been restricted in order to minimise risks of cross-contamination.

Vaccination of employees is underway both onsite and when on break in Itaituba where vaccinations are now well advanced for the general population aged 18 and older. A register of all vaccinated employees is maintained and employees are being advised to be fully vaccinated.

As part of its ongoing corporate social responsibility initiatives, the Company has provided extensive support to the town of Cuiú Cuiú throughout the current crisis through the provision of medical personnel and supplies (including masks and test-kits) to the community and the maintenance of a medical outpost in Cuiú Cuiú to serve not only the Company’s own staff, but also local partners and the broader community. Visits by the Brazilian Health department to the Cuiú Cuiú community were sponsored by the Company.

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In late January 2021, the reconaissance drill program was temporarily suspended due to an outbreak of COVID-19 within the drill team. Operations recommenced in late February 2021.

Brazil continues to suffer from the much-publicised growth in the spread of COVID-19 including variants throughout the country.

Outlook

Subject to developments in the status of the COVID-19 pandemic in Brazil, the Company’s exploration plans through December 31, 2021 will be a continuation of the initiatives described above and summarised as follows:

• Reconnaissance RC drill program utilising the Company’s own track-mounted ASV Scout ST-50 rig

• Follow-up RC drill program through approximately November 2021 utilising the larger truck-mounted rig contracted from a third-party driller

• Introduction of two additional diamond-drill rigs bringing the total number of diamond-drill rigs on site to three

• Other exploration initiatives including stream sediments, soil sampling and channel sampling

• Completion of camp construction

• Possible further acquisitions of strategic ground including selected garimpeiro interests in the Cuiú Cuiú condominium

• Pending evaluation of the PAE (Brazilian Economic Feasibility Study) submitted in August 2018 and the EIA-RIMA report submitted to the SEMMA in late December 2020, the Company will move forward with all necessary actions required in the permitting process.

An application for six Trial Mining Licenses were submitted for the Central, Pau da Merenda, Moreira Gomes and Machiche in December 2020, of which two were granted by the ANM on February 3, 2021 (in respect of the Moreira Gomes and Machiche target areas). The environmental licensing for these Trial Mining Licenses, with submission of a formal RCA/PCA report in December 2020, has been requested but remains outstanding.

All current expiry dates of licences have been officially extended due to the COVID-19 pandemic for an additional 15 months from the original expiry dates.

Poconé properties

The Company was a party to two sets of agreements with third parties pursuant to which mineral properties in the Poconé region of the state of Mato Grosso were to be identified, explored and developed. The first agreement was entered into between Magellan Minerals Ltd. (“ Magellan ”) and ECI Exploration & Mining Inc. (“ ECI ”) on October 17, 2011 effective December 2009 pursuant to which ECI and Magellan would share equally in the rights and responsibilities associated with the identification, exploration and development of mineral properties (the “ ECI Venture ”). The second set of agreements was between Magellan, ECI and Brasil Central Engenharia Ltda. (“ Brasil Central ”) pursuant to which Magellan, ECI, and Brasil Central would seek to identify, explore and develop mineral properties through a newly incorporated entity, PGM. Magellan Brazil held a 35% interest in PGM through September 26, 2018.

Magellan’s rights and responsibilities associated with both the ECI Venture and PGM were transferred to CG B.C. pursuant to an agreement dated April 15, 2016 between CG B.C., Magellan and ECI.

While the Poconé properties have never had a carrying value in the books of the Company, Magellan Brazil’s share of various liabilities relating to the ECI Venture and PGM were recognised.

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Virtually no exploration activity was undertaken on any of the Poconé properties since 2012, however, nominal claim maintenance charges continue to be incurred. In addition, the Company historically incurred various other charges and realised proceeds on the liquidation of certain assets relating to both the ECI Venture and PGM.

In August 2015, ECI received notification that a former optionor of one of the property interests acquired by ECI on behalf of the ECI Venture had filed a claim against ECI and PGM in connection with an option agreement that had been entered into with the ECI Venture in December 2009. As of August 26, 2021, no claim had been filed against the Company, however, the Company is responsible for 50% of costs of ECI pursuant to the ECI Venture agreement. The plaintiff is claiming an amount of US$ 780,000 plus damages. Management has assessed the likelihood of a potential loss to be less than 50%. No accrual has been made in the accounts for any amount associated with the claim.

On September 26, 2018, an agreement was entered into pursuant to which the shares of PGM held by both Magellan Brazil and the Brazilian subsidiary of ECI were transferred to Brasil Central in exchange for Brasil Central taking over the debts of PGM and making nominal cash payments.

The disposal of PGM does not reduce the Company’s exposure relating to the aforementioned legal claim against ECI and PGM. Furthermore, as part of the sale of PGM, Magellan Brazil and the Brazilian subsidiary of ECI provided an indemnification to PGM relating to any losses resulting from the legal claim.

Proposed transactions

As at June 30, 2021 and August 26, 2021, there were no material proposed asset or business acquisitions or dispositions being contemplated.

Selected financial information

A summary of results in respect of the five quarters ended June 30, 2021 is as follows. This summary information has been derived from the audited consolidated financial statements and condensed interim consolidated financial statements (unaudited) of the Company.

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Statements of loss

	Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Revenue Exploration and evaluation Administration (cash): Management Marketing Office and administration Professional fees Listing expense Travel Administration (non-cash): Stock-based compensation Depreciation Foreign exchange loss Interest income Other expense (income) Net loss	- - - - - 314,252 733,325 1,059,971 1,460,110 1,525,638 95,779 124,867 102,614 105,991 104,234 72,888 96,252 120,712 110,847 70,432 25,614 31,057 25,577 32,757 19,928 6,488 18,777 7,210 19,787 14,398 3,897 13,277 5,212 23,807 2,058 26,217 39 (19) - -
	230,883 284,269 261,306 293,189 211,050 55,394 332,182 378,667 249,716 305,918 31,153 47,412 58,408 68,572 75,734
	86,547 379,594 437,075 318,288 381,652 5,579 7,896 6,259 1,830 3,037 (23) (2,636) (4,050) (3,913) (10,051) 9,305 1,054 (87) - -
	646,543 1,403,502 1,760,474 2,069,504 2,111,326

• Exploration and evaluation: See ‘Cuiú Cuiú – Q2 2021 and subsequent work program’. Exploration spend was significantly reduced in Q2 2020 due to the COVID-19 suspension of fieldwork and the reduction in net payroll costs in Brazil due to benefits provided by government programs. Q3 2020 spend increased with the commencement of the initial RC drill program (using the Company’s own RC drill rig), the rental of various heavy equipment to facilitate the program, a contracted soils program, the termination of the government payroll programs and the restart of other general exploration activity. Exploration spend continued to grow thereafter with the commencement of the second RC drill program (using a contracted RC drill rig) in Q4 2020 and the diamond-drill program in Q1 2021. The continued deterioration in the value of the Brazilian reais relative to the Canadian dollar has served to reduce $ denominated costs incurred in Brazil

• Management costs relate to compensation of the Company’s officers (Executive Chairman, President and CEO and CFO). The presented amounts exclude stock-based compensation. The increase in Q3 2020 was due to a bonus paid to the President and CEO and a remuneration increase for both the President and CEO and the Executive Chairman introduced effective August 1, 2020

• Marketing expenditures relate to attendance at conferences (physical and virtual), various advisory services and other marketing related expenditures

• Office and administration relate to the costs of operating the Company’s Vancouver office

• Professional fees relate to audit and legal fees

• Stock-based compensation relates to the amortisation of tranches of stock options and RSUs granted as follows:

• June 2018: 450,000 stock options having a term of five years and an exercise price of $0.23 and vesting over two years

• January 2019: 1,694,672 stock options having a term of five years and an exercise price of $0.25 and vesting over two years

• September 2019: 266,666 RSUs issued vesting over 36 months

• September 2019: 2,575,000 stock options having a term of five years and an exercise price of $0.15 and vesting over two years

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• July 2020: 3,405,000 stock options having a term of five years and an exercise price of $0.27 and vesting over two years

• August 2020: 575,000 RSUs issued vesting over 36 months

• November 2020: 1,150,000 stock options having a term of five years and an exercise price of $0.60 and vesting over two years

• April 2021: 600,000 stock options having a term of five years and an exercise price of $0.49 and vesting over two years

• April 2021: 85,938 RSUs issued vesting over 18 months and 498,437 RSUs issued vesting over 36 months

• Other income (net) in Q2 2020 relates primarily to proceeds (net of applicable taxes) realised on the sale of a secondary property (not part of Cuiú Cuiú).

Statements of financial position

	30-Jun-20	30-Sep-20	31-Dec-20	31-Mar-21	30-Jun-21
Cash and cash equivalents	2,906,187	4,460,412	5,477,780	3,578,547	1,528,437
Other current assets	133,691	218,914	184,357	237,185	222,896
Fixed assets	823,484	959,893	1,172,863	1,181,066	1,350,632
Mineral properties	1,447,702	1,460,357	1,519,490	1,611,962	1,921,272
Total assets	5,311,064	7,099,576	8,354,490	6,608,760	5,023,237
Liabilities	362,160	406,678	416,077	722,275	609,554
Share capital	14,956,270	18,077,202	21,197,071	21,202,346	21,445,773
Reserves	2,175,267	2,507,449	2,514,669	2,764,385	2,930,132
Subscription receipts	490,625	242,667	-	-	-
Other comprehensive income	(797,433)	(855,093)	(733,526)	(970,941)	(741,591)
Accumulated deficit	(11,875,825)	(13,279,327)	(15,039,801)	(17,109,305)	(19,220,631)
Total equity	4,948,904	6,692,898	7,938,413	5,886,485	4,413,683
	-	-	-	-	-

• Fixed assets include a 30 hectare plot of land in Cuiú Cuiú that was purchased by Magellan Brazil in early 2016 prior to its acquisition by Cabral. Movements in the period under consideration relate primarily to camp construction and miscellaneous capital purchases relating to the establishment of the exploration camp at Cuiú Cuiú, the purchase and refurbishment of the RC rig, the purchase and refurbishment of several used vehicles to be used at Cuiú Cuiú and the purchase of various other camp tools and equipment (see ‘Camp and other construction’). The cost of fixed asset additions have been offset by depreciation expense and the impact of the general deterioration in the value of the Brazilian reais relative to the Canadian dollar

• The balance of mineral properties relates to capitalised mineral property acquisition and claim maintenance costs. Increases relate to claim maintenance expenditures comprising payments to both the Brazilian authorities (Q1 and Q3 of each year) and members of the Cuiú Cuiú garimpiero condominium (Q1 and Q2 of each year) as well as various surface access payments and acquisition expenditures relating to other parts of the Cuiú Cuiú district. As is the case with fixed assets, increases are offset by decreases associated with the general deterioration in the value of the Brazilian reais. With the exception of $185,978, the June 30, 2021 balance related entirely to Cuiú Cuiú

• The balance of accounts payable and accrued liabilities increased through June 30, 2021 due to the significant increase in the scope of exploration activity through late 2020 and early 2021 with the initiation of the three drill programs as well as camp construction activity. (see ‘Cuiú Cuiú – Q2 2021 and subsequent work program’)

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• The increase in share capital during the period under consideration relates to the $4,179,014 private placement that closed in June and July 2020 and the exercise of share purchase warrants and stock options (total of $4,964,900) in the second half of 2020.

Liquidity and going concern

As at June 30, 2021, the Company had a cash balance of $1,528,437, and net working capital of $1,141,779.

Going concern

The nature of the Company’s operations results in significant expenditures for the acquisition and exploration of mineral properties. To date, the Company has not generated any revenue from mining or other operations as it is considered to be in the exploration stage.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional funding through equity financing provided by the Company’s existing shareholders and/or new shareholders or through other arrangements. There is no assurance that the Company will be successful in this regard.

The recoverability of the carrying value of mineral properties and deferred expenditures is dependent upon a number of factors including the existence of recoverable reserves, the ability of the Company to obtain financing to maintain properties in good standing and continue exploration and development and the discovery of economically recoverable reserves.

The Company’s financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary were the going concern assumption deemed to be inappropriate. These adjustments could be material.

In the event the Company is unable to arrange appropriate financing, the carrying value of its assets and liabilities could be subject to material adjustment and the Company may not be able to meet its obligations as they become due in the normal course of business.

July 2021 bought-deal financing

In June 2021, the Company announced that it had entered into an agreement with Cormark Securities Inc., on behalf of a syndicate of investment dealers pursuant to which the underwriters agreed to purchase, on a bought-deal basis, an aggregate of 18,520,000 units (the “ Units ”) from the treasury of the Company, at a price of $0.54 per Unit for total gross proceeds of approximately $10 million (the “ Offering ”). The Company granted the Underwriters an option (the “ Over-Allotment Option ”) to purchase up to an additional 15% of the Units of the Offering on the same terms exercisable at any time up to 30 days following the closing of the Offering, for market stabilization purposes and to cover over-allotments, if any.

In July 2021, the Company announced that it had closed the bought-deal prospectus offering selling an aggregate of 21,298,000 Units, which included the exercise in full of the Over-Allotment Option, for aggregate gross proceeds of $11,500,920.

Each Unit is comprised of one common share of the Company and one-half of one share purchase warrant of the Company (each whole share purchase warrant, a “ Warrant ”). Each Warrant entitles the holder to acquire one common share at an exercise price of $0.80 per share until July 6, 2023, subject to the terms of a warrant indenture dated July 6, 2021 between the Company and Computershare Trust Company of Canada as warrant agent.

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The Offering was led by Cormark Securities Inc. as lead underwriter and sole bookrunner, on behalf of a syndicate of underwriters including Stifel Nicolaus Canada Inc., Paradigm Capital Inc., and Research Capital Corporation. In consideration for the services provided by the underwriters in connection with the Offering, the Company paid a cash commission of $562,852.85 and issued an aggregate of 1,042,320 underwriters’ warrants (the “ Underwriters’ Warrants ”). Each Underwriters’ Warrant is exercisable into one Common Share at an exercise price of $0.54 per share until July 6, 2023.

The net proceeds of the Offering are to be used for the advancement of the Company’s Cuiú Cuiú project and for working capital and general corporate purposes.

In July 2021, the Company subsequently announced that the TSX Venture Exchange had accepted for listing the 10,649,000 Warrants issued in connection with the offering, under the symbol ‘CBR-WT’.

Novel Coronavirus (“COVID-19”)

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 or 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.

Operating activities

Cash used in operating activities in the six months ended June 30, 2021 amounted to $3,421,007 as follows:

• The net loss for the period of $4,180,830

• Non-cash items totalling $632,425 including stock-based compensation and depreciation

• Net reduction in non-cash working capital items of $127,398 in respect of increases in accounts payable.

Investing activities

Cash used in investing activities in in the six months ended June 30, 2021 amounted to $634,386 as follows:

• Additions to mineral properties of $336,474 relating to capitalised acquisition and claim maintenance costs including the January claim maintenance payment to the Brazilian authorities, the purchase of the interest of two majority stakeholders in the Cuiú Cuiú garimpeiro condominium and the annual payment to the Cuiú Cuiú garimpeiro condominium

• Additions to fixed assets of $297,912 relating primarily to ongoing camp construction, the purchase and refurbishment of used vehicles for use at Cuiú Cuiú and the purchase of miscellaneous other camp tools and equipment.

Dividends

The Company has neither declared nor paid any dividends on its common shares to date. The Company does not anticipate paying any dividends on its common shares in the foreseeable future.

Contractual commitments

The Company had no significant medium- or long-term contractual commitments in place as at June 30, 2021 or August 26, 2021 beyond its stated liabilities and the following:

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• Magellan Brazil entered into an agreement in January 2018 with Terra Ambiente Ltda–ME relating to the provision of the EIA-RIMA environmental study; the agreement was subsequently amended. As at June 30, 2021, approximately R$ 160,000 ($40,000) of the contract (as amended) was outstanding

• The contract with a drill contractor pursuant to which a minimum of 10,000 meters is to be drilled via reverse circulation (the follow-up RC drill program)

• The contract with a drill contractor pursuant to which a minimum of 15,000 meters is to be drilled via diamond-drilling

• The Company is committed to sharing in net costs and commitments associated with its Poconé venture including its share of any losses relating to current litigation against PGM and a venture partner.

Capital commitments

The Company had no capital expenditure commitments as at either June 30, 2021 or August 26, 2021 other than agreements associated with the construction of the Cuiú Cuiú camp which are expected to be completed by the end of Q3 2021.

Transactions with related parties

The Company incurred the following costs of management remuneration:

	6 months ended 6 months ended June 30, 2021 June 30, 2020
Management: Employment remuneration Consulting fees Payroll related costs Stock-based compensation, stock options Stock-based compensation, RSUs Directors (excluding management): Stock-based compensation, stock options Stock-based compensation, RSUs	89,500 $ 77,000 $ 98,000 93,000 13,825 12,550 79,678 60,295 21,999 -
	303,002 242,845 130,918 21,969 34,924 10,334
	165,842 32,303 468,844 $ 275,148 $

Management comprises the Company’s Executive Chairman, President and Chief Executive Officer and Chief Financial Officer.

As at June 30, 2021, the Company owed a total of $10,091 to management in connection with unreimbursed expenditures incurred by management on behalf of the Company; this liability was repaid in full in Q3 2021. Amounts owing to management are non-interest bearing, unsecured and have no set terms of repayment.

Outstanding share data

The Company has authorized capital of an unlimited number of common shares with no par value.

The Company had the following common shares, unit and share purchase warrants and stock options outstanding as at June 30, 2021 and August 26, 2021:

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Exerciseprice	Aug. 26, 2021 June 30, 2021
Issued and outstanding common shares Share purchase warrants (expiration date): July 6, 2023 0.80 $ July 6, 2023 0.54 $ June 19, 2022 0.20 $ Stock options (expiration date): June 19, 2023 0.23 $ January 22, 2024 0.25 $ September 6, 2024 0.15 $ July 21, 2025 0.27 $ November 13, 2025 0.60 $ April 11, 2026 0.49 $ RSUs (vesting date): January 30, 2022 September 6, 2022 October 12, 2022 July 30, 2023 April 12, 2024 Fully diluted	141,668,460 120,370,460 10,649,000 - 1,042,320 - 144,000 144,000
	11,835,320 144,000 450,000 450,000 1,323,224 1,323,224 2,111,000 2,111,000 3,105,000 3,105,000 1,150,000 1,150,000 600,000 600,000
	8,739,224 8,739,224 200,000 200,000 66,667 66,667 85,939 85,939 200,000 200,000 498,435 498,435
	1,051,041 1,051,041 163,294,045 130,304,725

Recent accounting pronouncements

A number of new standards, and amendments to standards and interpretations, are not yet effective for annual periods commencing on or after January 1, 2021, and have not been applied in preparing these consolidated financial statements.

The Company has determined that these new accounting standards and amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or will not have a significant impact on the Company’s consolidated financial statements.

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