Cabral Gold Inc. — Interim / Quarterly Report 2021

Aug 26, 2021

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Cabral Gold Inc.

An exploration stage company

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SIX MONTHS ENDED JUNE 30, 2021

NOTICE

These unaudited interim consolidated financial statements have been prepared by management and have not been the subject of a review by the Company’s independent auditor.

Cabral Gold Inc.

Condensed interim consolidated statements of financial position

(Expressed in Canadian Dollars)

Notes	June 30, 2021 Dec. 31, 2020
ASSETS Current assets Cash and cash equivalents Accounts receivable Prepaid expenses Total Current assets Non-current assets Fixed assets 5 Mineral properties 6 Total Assets LIABILITIES Current liabilities Accounts payable and accrued liabilities 7 Total Current liabilities Shareholders’ equity Share capital 8(a) Reserves 8(b), 8(c), 8(d) Accumulated other comprehensive income Accumulated deficit Total Shareholders’ equity Total Liabilities and Shareholders’ equity Nature of operations and going concern (Note 1) Commitments and contingent liabilities (Note 15) Subsequent events (Note 16)	1,528,437 $ 5,477,780 $ 119,642 116,078 103,254 68,279
	1,751,333 5,662,137 1,350,632 1,172,863 1,921,272 1,519,490
	5,023,237 $ 8,354,490 $
	609,554 $ 416,077 $
	609,554 416,077 21,445,773 21,197,071 2,930,132 2,514,669 (741,591) (733,526) (19,220,631) (15,039,801)
	4,413,683 7,938,413 5,023,237 $ 8,354,490 $

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

Approved by the Board of Directors

“Derrick Weyrauch” “Carlos Vilhena” Derrick Weyrauch, Director Carlos Vilhena, Director

Cabral Gold Inc.

Condensed interim consolidated statements of loss and comprehensive loss (Expressed in Canadian Dollars except number of shares)

Notes	3 months ended June 30, 2021 3 months ended June 30, 2020 6 months ended June 30, 2021 6 months ended June 30, 2020
Expenses Exploration and evaluation 9 Stock-based compensation 8(c), 8(d) Management 12(a) Marketing Depreciation 5 Office and administrative Professional fees Listing expense Travel Other income and expenses Foreign exchange expense Interest income Loss (gain) on sale of mineral property Net loss for the period Other comprehensive income and loss Unrealised foreign currency translation items Total comprehensive loss for the period Loss per share, Basic and diluted Weighted average shares outstanding, Basic and diluted	1,525,638 $ 314,252 $ 2,985,748 $ 858,546 $ 305,918 55,394 555,634 132,695 104,234 95,779 210,225 190,953 70,432 72,888 181,279 125,674 75,734 31,153 144,306 68,799 19,928 25,614 52,685 52,922 14,398 6,488 34,185 16,219 2,058 3,897 25,865 6,083 - 26,217 - 33,991
	2,118,340 631,682 4,189,927 1,485,882 3,037 5,579 4,867 5,886 (10,051) (23) (13,964) (543) - 9,305 - (27,267)
	2,111,326 $ 646,543 $ 4,180,830 $ 1,463,958 $
	(229,350) 152,447 8,065 458,682
	1,881,976 $ 798,990 $ 4,188,895 $ 1,922,640 $
	0.02 $ 0.01 $ 0.03 $ 0.02 $ 120,144,048 64,801,793 119,824,369 63,230,521

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

Cabral Gold Inc.

Condensed interim consolidated statements of changes in shareholders’ equity (Expressed in Canadian Dollars)

	Accumulated other Total Issued Subscription Reserves, Reserves, Reserves, comprehensive Accumulated shareholders' common shares Share capital receipts Warrants Stock options RSUs loss deficit equity
Balance at December 31, 2019 Shares issued for cash Share issuance costs Subscription receipts Stock-based compensation Comprehensive loss Balance at June 30, 2020 Balance at December 31, 2020 Shares issued for cash: Exercise of stock options Exercise of warrants Vesting of RSUs Stock-based compensation Comprehensive loss Balance at June 30, 2021	61,659,250 11,866,177 $ - $ 1,328,820 $ 694,335 $ 6,889 $ 338,571) ($ 10,411,867) ($ 3,145,783 $ 25,997,400 3,249,675 - - - - - - 3,249,675 - (159,582) - 12,528 - - - - (147,054) - - 490,625 490,625 - - - - 122,361 10,334 - - 132,695 - - - - - - (458,862) (1,463,958) (1,922,820)
	87,656,650 14,956,270 $ 490,625 $ 1,341,348 $ 816,696 $ 17,223 $ 797,433) ($ 11,875,825) ($ 4,948,904 $
	119,491,737 21,197,071 $ - $ 1,061,358 $ 1,394,608 $ 58,703 $ 733,526) ($ 15,039,801) ($ 7,938,413 $ 403,724 147,202 - - (63,671) - - - 83,531 100,000 25,000 - - - - - - 25,000 374,999 76,500 - - - (76,500) - - - - - - - 489,708 65,926 - - 555,634 - - - - - - (8,065) (4,180,830) (4,188,895)
	120,370,460 21,445,773 $ - $ 1,061,358 $ 1,820,645 $ 48,129 $ 741,591) ($ 19,220,631) ($ 4,413,683 $

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

Cabral Gold Inc.

Condensed interim consolidated statements of cash flows

(Expressed in Canadian Dollars)

	6 months ended June 30, 2021 6 months ended June 30, 2020
OPERATING ACTIVITIES Net loss for the period Adjustments for items not involving cash: Stock-based compensation Depreciation Unrealised foreign exchange loss (gain) Net changes in non-cash working capital: Decrease (increase) in accounts receivable Decrease (increase) in prepaid expenses Increase in accounts payable Cash used in operating activities INVESTING ACTIVITIES Additions to mineral properties Additions to fixed assets Cash used in investing activities FINANCING ACTIVITIES Issuance of shares for cash Share issuance costs Subscription receipts Cash provided by financing activities Effect of change in exchange rate on cash Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period	4,180,830) ($ 1,463,958) ($ 555,634 132,695 144,306 68,799 (67,515) 10,652
	(3,548,405) (1,251,812) (3,564) 13,632 (34,975) 42,919 165,937 76,819
	(3,421,007) (1,118,442) (336,474) (139,712) (297,912) (133,962)
	(634,386) (273,674) 108,531 3,249,675 - (147,054) - 490,625
	108,531 3,593,246 (2,481) (668) (3,949,343) 2,200,462 5,477,780 705,725
	1,528,437 $ 2,906,187 $

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

Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

1. NATURE OF OPERATIONS

Cabral Gold Inc. (“ Cabral Gold ” or the “ Company ”; formerly San Angelo Oil Limited (“ San Angelo ”)) was incorporated on February 11, 2014 under the British Columbia Business Corporations Act.

The Company’s registered office is located at 1200 – 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.

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.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“ IFRS ”) applicable to a going concern, which assumes the Company will be able to realise its assets and settle its liabilities in the normal course of business. For the six months ended June 30, 2021, the Company reported a net loss of $4,180,830 (six months ended June 30, 2020: net loss of $1,463,958), and as at that date had a net working capital balance of $1,141,779 (December 31, 2020: $5,246,060).

The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional funding from loans or equity financings 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.

These 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.

In July 2021, the Company announced that it had closed a bought deal financing raising gross proceeds of $11,500,920 (see Note 16(a)).

2. BASIS OF PREPARATION

These financial statements include the accounts of Cabral Gold Inc. and its subsidiaries as follows:

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

			Functional
	Location	Ownership	currency
Cabral Gold B.C. Inc.	Canada	100%	$
Magellan Minerais Prospecção Geológica Ltda.	Brazil	100%	R$

The Company’s interest in Magellan Minerais Prospecção Geológica Ltda. (“ Magellan Brazil ”) is held through its wholly-owned subsidiary, Cabral Gold B.C. Inc. (“ CG B.C. ”).

Magellan Brazil holds 100% of the Cuiú Cuiú property and several secondary properties.

Magellan Minerals Ltd. (“ Magellan ”) was the parent company of Magellan Brazil until April 2016.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These condensed interim consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board applicable to the preparation of interim financial statements, including International Accounting Standard 34, ‘Interim Financial Reporting’. The accounting policies followed in these condensed interim consolidated financial statements are the same as those applied in the Company’s annual consolidated financial statements for the year ended December 31, 2020.

The condensed interim consolidated financial statements do not contain all disclosures required under IFRS and should be read in conjunction with Company’s annual consolidated financial statements and the notes thereto for the year ended December 31, 2020.

Certain of the prior year’s figures have been reclassified to reflect the account classification adopted in the current year.

4. 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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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

5. FIXED ASSETS

		Land Buildings Vehicles Equipment Total 548,956 $ 182,242 $ 202,027 $ 521,765 $ 1,454,990 $ - 103,176 38,428 156,308 297,912 9,740 5,976 5,077 11,102 31,895 558,696 291,394 245,532 689,175 1,784,797 - (55,440) (89,045) (137,642) (282,127) - (32,713) (30,494) (81,099) (144,306) - (1,868) (2,488) (3,376) (7,732) - (90,021) (122,027) (222,117) (434,165) 548,956 126,802 112,982 384,123 1,172,863 558,696 $ 201,373 $ 123,505 $ 467,058 $ 1,350,632 $
Cost: December 31, 2020 Additions Foreign exchange differences June 30, 2021 Accumulated depreciation: December 31, 2020 Depreciation expense Foreign exchange differences June 30, 2021 Net book value: December 31, 2020 June 30, 2021
		Land Buildings Vehicles Equipment Total
Cost: December 31, 2019 Additions Foreign exchange differences December 31, 2020 Accumulated depreciation: December 31, 2019 Depreciation expense Foreign exchange differences December 31, 2020 Net book value: December 31, 2019 December 31, 2020		665,422 $ 131,138 $ 138,287 $ 207,284 $ 1,142,131 $ - 96,923 114,896 410,938 622,757 (116,466) (45,819) (51,156) (96,457) (309,898)
		548,956 182,242 202,027 521,765 1,454,990
		- (33,290) (69,670) (65,632) (168,592) - (36,354) (41,545) (96,720) (174,619) - 14,204 22,170 24,710 61,084
		- (55,440) (89,045) (137,642) (282,127)
		665,422 97,848 68,617 141,652 973,539 548,956 $ 126,802 $ 112,982 $ 384,123 $ 1,172,863 $

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

6. MINERAL PROPERTIES

6 months ended June 30, 2021 Foreign Dec. 31, 2020 Additions exchange June 30, 2021
Cuiú Cuiú Bom Jardim Other	1,363,483 $ 337,775 $ 34,036 $ 1,735,294 $ 136,475 26,239 3,493 166,207 19,532 - 239 19,771
	1,519,490 $ 364,014 $ 37,768 $ 1,921,272 $
Year ended December 31,	2020 Foreign Dec. 31, 2019 Additions exchange Dec. 31, 2020
Cuiú Cuiú Bom Jardim Other	1,420,696 $ 176,679 $ 233,892) ($ 1,363,483 $ 102,039 63,229 (28,793) 136,475 15,885 8,009 (4,362) 19,532
	1,538,620 $ 247,917 $ 267,047) ($ 1,519,490 $

The Company’s primary mineral property is Cuiú Cuiú.

All of the Company’s mineral properties are located in Brazil.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee their titles. Property title may be subject to unregistered prior agreements or transfers and may be affected by undetected defects.

It is possible that economically recoverable reserves may not be discovered and accordingly a material portion of the carrying value of mineral properties could be impaired in the future.

The Company is required to make statutory claim maintenance expenditures to the Brazilian authorities each year to maintain its properties in good standing.

Cuiú Cuiú surface access agreement, garimpeiro condominium

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 owners are organised into a ‘condominium’ (which is similar to a cooperative) comprising minority stakeholders and majority stakeholders.

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

The February 19, 2006 agreement has since been amended and extended several times with the most recent amendment taking place 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 Cuiú Cuiú garimpeiro interests

The surface access agreement with the 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 majority stakeholder for a price of R$ 474,000 (approximately $110,000). 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 (see Note 16(b)).

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	June 30, 2021 Dec. 31, 2020
Brazil: Payroll and related costs Drilling and assay Freight and travel Equipment rental Claim settlement Cuiú Cuiú condominium liability Third party contractors Third party permitting and other studies Other Canada: Marketing Professional fees Other Due to officers and directors (see Note 14(b))	194,076 $ 88,913 $ 105,901 11,391 74,496 25,634 34,064 - 28,550 28,204 20,990 16,104 11,165 20,359 - 72,937 101,198 66,072 6,000 41,200 3,540 17,758 19,483 9,911 10,091 17,594
	609,554 $ 416,077 $

8. SHAREHOLDERS’ EQUITY

(a) Share capital

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

In July 2021, the Company closed a bought deal financing (see Note 16(a)).

(b) Share purchase warrants

A continuity of the Company’s share purchase warrants is as follows:

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

			Weighted
		Number of	average exercise
	Expiration	warrants	price
December 31, 2019		24,733,190	0.20
Issued:
Broker warrants (June 2020 private placement)	19-Jun-22	144,000	0.20
Exercised:
Finder warrants (July 2019 private placement)	25-Jul-20	(745,045)	0.20
Warrants (July 2019 private placement)	25-Nov-20	(22,296,832)	0.20
Finder warrants (Dec. 2018 private placement)	28-Nov-20	(366,000)	0.25
Pre-2017 RTO San Angelo warrants	26-May-21	(500,000)	0.25
Expired:
Finder warrants (July 2019 private placement)	25-Jul-20	(225,313)	0.20
Warrants (July 2019 private placement)	25-Nov-20	(500,000)	0.20
December 31, 2020		244,000	0.22
Exercised:
Pre-2017 RTO San Angelo warrants	26-May-21	(100,000)	0.25
June 30, 2021		144,000	0.20

The Company had the following share purchase warrants outstanding as at June 30, 2021:

Expiry date	Exercise price Number of warrants
Broker warrants (June 2020 private placement) June 19, 2022	0.20 144,000

The weighted average remaining life of outstanding share purchase warrants as at June 30, 2021 was 12 months (December 31, 2020: 12 months).

In July 2021, the Company closed a bought deal financing which resulted in the issuance of both share purchase warrants and underwriters’ warrants (see Note 16(a)).

(c) Stock options

A continuity of the Company’s stock options is as follows:

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

			Weighted
		Number of	average exercise
	Expiration	options	price
December 31, 2019		5,471,093	0.22
Issued:
July 21, 2020	21-Jul-25	3,405,000	0.27
November 14, 2020	13-Nov-25	1,150,000	0.60
Exercised		(492,500)	0.28
Expired		(672,645)	0.33
Forfeited		(90,000)	0.15
December 31, 2020		8,770,948	0.28
Issued:
April 12, 2021	11-Apr-26	600,000	0.49
Exercised		(403,724)	0.21
Forfeited		(228,000)	0.24
June 30, 2021		8,739,224	0.29

The weighted average remaining life of outstanding stock options as at June 30, 2021 was 43 months (December 31, 2020: 48 months).

Stock-based compensation relating to stock options totalled $489,708 in the six months ended June 30, 2021 (six months ended June 30, 2020: $122,361).

All stock options granted in 2021 will vest in five equal tranches over 24 months including an initial tranche vesting on the date of issuance.

The fair values of the stock options granted in 2021 were estimated as at the date of issuance using the Black-Scholes option-pricing model applying the following assumptions:

	April 12, 2021
	($0.49)
Dividends	-
Expected volatility (average)	154%
Risk-free interest rate	1.2%
Expected life (months)	60
Expected rate of forfeiture	15.0%

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

(d) Restricted share units

A continuity of the Company’s restricted share units (“ RSUs ”) is as follows:

December 31, 2019 Issued: July 30, 2020 December 31, 2020 Issued: April 12, 2021 Vested March 31, 2021	266,666
	575,000
	841,666
	584,374 (374,999)
	1,051,041

The vesting profile of the RSUs outstanding as at June 30, 2021 is as follows:

Date of vesting	RSUs
January 30, 2022 September 6, 2022 October 12, 2022 July 30, 2023 April 12, 2024	200,000 66,667 85,939 200,000 498,435
	1,051,041

Stock-based compensation relating to RSUs totalled $65,926 in the six months ended June 30, 2021 (six months ended June 30, 2020: $10,334.

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

9. EXPLORATION AND DEVELOPMENT

6 months ended June 30, 2021

6 months ended June 30, 2021	6 months ended June 30, 2021
	Cuiú Cuiú Other Logistical support Total
Drilling Field costs Payroll Freight and travel Assay Consulting, third parties Office and logistics	893,989 $ - $ - $ 893,989 $ 811,725 8,517 - 820,242 712,566 - 26,267 738,833 332,031 - 958 332,989 96,206 - - 96,206 55,944 - - 55,944 - - 47,545 47,545
	2,902,461 $ 8,517 $ 74,770 $ 2,985,748 $
6 months ended June 30, 2020	Cuiú Cuiú Other Logistical support Total
Payroll Field costs Consulting, third parties Freight and travel Office and logistics Assay	356,131 $ - $ 18,108 $ 374,239 $ 217,638 2,242 - 219,880 97,749 41,194 - 138,943 65,617 - 6,261 71,878 - - 38,781 38,781 14,825 - - 14,825
	751,960 $ 43,436 $ 63,150 $ 858,546 $

10. SALARY AND WAGES

Total payroll, consulting and related costs incurred in the six months ended June 30, 2021 amounted to $959,583 (six months ended June 30, 2020: $574,359).

11. SEGMENTED INFORMATION

The Company operates in one reportable operating segment, being the acquisition, exploration and development of mineral properties. The Company’s assets are located in Canada and Brazil as follows:

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

		Canada		Brazil		Total
Non-current assets:
June 30, 2021	$	2,970	$	3,268,934	$	3,271,904
December 31, 2020		4,995		2,687,358		2,692,353
Net loss:
6 months ended June 30, 2021		610,389		3,570,441		4,180,830
6 months ended June 30, 2020	$	544,087	$	919,871	$	1,463,958

12. RELATED PARTY TRANSACTIONS

(a) Management compensation

	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 Executive Chairman, the President and Chief Executive Officer and the Chief Financial Officer. Employment remuneration is paid to the President and Chief Executive Officer and the Chief Financial Officer. Consulting fees are paid to Geofin Consulting and Hornby Capital Corp., companies controlled by the Executive Chairman and the Chief Financial Officer, respectively.

(b) Balances due to related parties

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

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

(c) Other related party issues

All transactions with related parties have occurred in the normal course of operations and have been measured at the exchange amount, which is the amount agreed to by the related parties.

13. CAPITAL MANAGEMENT

The Company’s objectives in managing its capital are as follows:

• To safeguard its ability to continue as a going concern

• To have sufficient capital to be able to meet its strategic objectives including the continued exploration and development of its existing mineral projects and the identification of additional projects.

Given the current exploration stage of its projects, the Company’s primary source of capital is derived from equity issuances. Capital consists of equity attributable to common shareholders.

The Company has no externally imposed capital requirements and manages its capital structure in accordance with its strategic objectives and changes in economic conditions. In order to maintain or adjust its capital structure, the Company may issue new shares in the form of private placements and/or secondary public offerings.

Additional information relating to going concern is disclosed in Note 1.

14. FINANCIAL INSTRUMENTS

(a) Carrying value and fair value

The Company’s financial instruments comprise cash and cash equivalents, accounts receivable (excluding sales taxes) and accounts payable and accrued liabilities.

Financial instruments recognised at fair value on the consolidated statements of financial position are classified in fair value hierarchy levels as follows:

• Level 1: Valuation based on unadjusted quoted prices in active markets for identical assets or liabilities

• Level 2: Valuation techniques based on inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices)

• Level 3: Valuation techniques with unobservable market inputs (involves assumptions and estimates by management).

Cash and cash equivalents and accounts receivable are classified as subsequently measured at amortised cost. Amortised cost approximates fair market value due to the short-term nature of the balances.

Accounts payable and accrued liabilities are classified as subsequently measured at amortised cost and are recorded in the financial statements at amortised cost. The fair value of accounts payable and accrued liabilities may be less than the carrying value as a result of the Company’s credit and liquidity risk.

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

(b) Financial risks

The Company’s activities expose it to a variety of financial risks, including foreign exchange risk, liquidity risk, credit risk and interest rate risk.

Foreign exchange risk

The Company operates primarily in Brazil and is therefore exposed to foreign exchange risk arising from transactions denominated in Brazilian reais (“ R$ ”). Other than Canadian dollar balances, the Company’s cash and cash equivalents, receivables and accounts payable and accrued liabilities are denominated in R$ and US$. Accordingly, the Company is subject to foreign exchange risk relating to such balances in connection with fluctuations against the Canadian dollar. The Company has no program in place for hedging foreign currency risk.

The Company held the following foreign currency denominated balances as at June 30, 2021 and December 31, 2020:

	June 30, 2021 December 31, 2020 R$ US$ R$ US$
Cash and cash equivalents Receivables and prepaid expenses Accounts payable and accrued liabilities Equivalent in Canadian dollars	2,187,041 18,930 2,277,986 3,895 100,190 - 15,446 - (2,254,230) (2,708) (1,261,749) -
	33,001 16,222 1,031,683 3,895 8,188 20,106 252,866 4,959

Liquidity risk

Liquidity risk encompasses the risk that an entity cannot meet its financial obligations in full as they become due. The Company manages liquidity by taking the appropriate steps to maintain adequate cash and cash equivalent balances. The Company monitors actual and forecast cash flows, and matches the maturity profile of financial assets and liabilities. See Note 1.

Credit risk

Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms. Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and receivables. The carrying value of the Company’s financial assets recorded in the consolidated financial statements represents its maximum exposure to credit risk.

All accounts receivable balances are collectable and no valuation allowance or provision was applied or required as at June 30, 2021.

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

Interest rate risk

Interest rate risk is the risk that cash flows will fluctuate due to changes in market interest rates. While the Company’s financial assets are generally not exposed to significant interest rate risk because of their short-term nature, changes in interest rates will have a corresponding impact on interest income realised on such assets.

The Company did not have any interest-bearing liabilities outstanding as at June 30, 2021.

15. CONTINGENT LIABILITY

(a) Litigation

Various legal, tax and regulatory matters are outstanding from time to time due to the nature of the Company’s operations and the Company is therefore subject to litigation in the counties in which it operates. As at June 30, 2021 and August 26, 2021, there was one legal case outstanding which had not been settled. Management is vigorously defending against this claim and has assessed the likelihood of loss related to the outstanding litigation as nil with regards to this outstanding litigation and related exposures. The ultimate outcome or actual cost of settlement may vary materially from management estimates due to the inherent uncertainty regarding the Company’s estimates.

(b) COVID-19

The Company’s operations could be significantly and adversely impacted by the effects of a widespread global outbreak of a contagious disease, such as 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.

16. SUBSEQUENT EVENTS

(a) 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.

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Cabral Gold Inc.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in Canadian Dollars) Six months ended June 30, 2021

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.

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.

Total share issuance costs amounted to approximately $950,000.

In July 2021, the Company announced that the TSX Venture Exchange had accepted for listing the 10,649,000 Warrants issued in connection with the offering

(b) Acquisition of Cuiú Cuiú garimpeiro interests

The surface access agreement with the 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 August 2021, the Company acquired the interest of a majority stakeholder for a price of R$ 468,900 (approximately $116,000). This purchase followed from the purchase of the interests of two other majority stakeholders earlier in 2021 (see Note 6).

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