Cantex Mine Development Corp. — Annual Report 2021

Nov 24, 2021

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Cantex Mine Development Corp.

Consolidated Financial Statements

Expressed in Canadian dollars

July 31, 2021

Cantex Mine Development Corp.

July 31, 2021

Table of contents

Auditors' Report	1 - 3
Consolidated Statements of Financial Position	4
Consolidated Statements of Loss and Comprehensive Loss	5
Consolidated Statements of Changes in Shareholders' Equity	6
Consolidated Statements of Cash Flows	7
Notes to the Consolidated Financial Statements	8 - 27

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Cantex Mine Development Corp.

Opinion

We have audited the accompanying consolidated financial statements of Cantex Mine Development Corp. (the “Company”), which comprise the consolidated statements of financial position as at July 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at July 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audits 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 of the consolidated financial statements, which indicates that the Company incurred cumulative losses of $78,939,972 to July 31, 2021 and additional financing will be required for the Company to continue operations. As stated in Note 1, these events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes 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.

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 to 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 the 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 judgment 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 risk 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 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.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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.

The engagement partner on the audit resulting in this independent auditor’s report is Peter Maloff.

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Vancouver, Canada November 23, 2021

Chartered Professional Accountants

Cantex Mine Development Corp.

Consolidated Statements of Financial Position

(Stated in Canadian dollars)

			July 31,		July 31,
As at	Note		2021		2020
Assets
Current assets
Cash		$	2,117,966	$	5,599,995
Receivables andprepaids	4		320,540		157,212
			2,438,506		5,757,207
Non-current assets
Reclamation bonds	5(c)		61,821		8,821
Property and equipment	6		581,172		609,907
Right-of-use assets	7		169,593		354,606
		$	3,251,092	$	6,730,541
Liabilities
Current liabilities
Trade and other payables		$	327,234	$	257,802
Due to related parties	8		604,167		341,293
Lease obligations	7		168,413		365,029
Flow throughpremium liability	10(b)		-		242,200
			1,099,814		1,206,324
Non-current liabilities
Asset retirement obligation	9		407,000		374,000
			1,506,814		1,580,324
Shareholders' equity
Share capital	10		75,918,474		72,089,956
Equity reserve	10		4,765,776		4,781,776
Deficit			(78,939,972)		(71,721,515)
			1,744,278		5,150,217
		$	3,251,092	$	6,730,541

Nature and continuance of operations (Note 1) Commitments (Note 10 (b)) Subsequent events (Note 10 (b)) Contingencies (Note 11)

Approved by the Board of Directors:

"Vernon Frolick" Vernon Frolick

"Chad Ulansky" Chad Ulansky

See accompanying notes to the consolidated financial statements.

Page 4

Cantex Mine Development Corp.

Consolidated Statements of Loss and Comprehensive Loss

(Stated in Canadian dollars)

			Years ended	Years ended	July 31,
	Note		2021		2020
Expenses
Depreciation	6,7	$	246,748	$	715,810
Exploration expenditures	5		8,251,260		11,684,854
Office and administrative			151,073		180,760
Professional fees			46,327		46,446
Stock-based compensation	10(d)		-		136,000
Transferagent andfilingfees			52,834		59,084
			(8,748,242)		(12,822,954)
Other items
Flow through premium recovery	10(b)		1,481,200		9,569,900
Interest income			33,537		174,374
Foreignexchange gain			15,048		52,652
			1,529,785		9,796,926
Loss and comprehensive loss		$	(7,218,457)	$	(3,026,028)
Loss per common share, basic and diluted		$	(0.14)	$	(0.06)
Weighted average number of common shares
outstanding,basic and diluted			51,442,079		47,896,517

See accompanying notes to the consolidated financial statements.

Page 5

Cantex Mine Development Corp.

Consolidated Statements of Changes in Shareholders' Equity (Stated in Canadian dollars)

		Number of
		common		Share		Equity
	Note	shares		capital		reserve		Deficit		Total
Balance, July 31, 2019		45,938,586	$	70,382,727	$	4,938,804	$	(68,959,215)	$	6,362,316
Shares issued for cash - private placement	10(b)	1,907,000		12,005,160		-		-		12,005,160
Share issuance costs	10(b)	-		(742,281)		-		-		(742,281)
Flow through premium		-		(9,812,100)		-		-		(9,812,100)
Warrants exercised for shares	10(c)	286,500		177,750		(8,000)		-		169,750
Options exercised for shares	10(c)	82,000		78,700		(21,300)		-		57,400
Reserves transferred on expired options		-		-		(263,728)		263,728		-
Stock-based compensation	10(d)	-		-		136,000		-		136,000
Loss and comprehensive loss for theyear		-		-		-		(3,026,028)		(3,026,028)
Balance, July 31, 2020		48,214,086		72,089,956		4,781,776		(71,721,515)		5,150,217
Shares issued for cash - private placement	10(b)	2,246,948		4,135,601		-		-		4,135,601
Share issuance costs	10(b)	-		(237,249)		-		-		(237,249)
Flow through premium		-		(1,239,000)		-		-		(1,239,000)
Warrants exercised for shares	10(c)	5,765,834		1,169,166		(16,000)		-		1,153,166
Loss and comprehensive loss for theyear		-		-		-		(7,218,457)		(7,218,457)
Balance, July 31, 2021		56,226,868	$	75,918,474	$	4,765,776	$	(78,939,972)	$	1,744,278

See accompanying notes to the consolidated financial statements.

Page 6

Cantex Mine Development Corp.

Consolidated Statements of Cash Flows

(Stated in Canadian dollars)

		Years ended	Years ended	July 31,
		2021		2020
Operating activities
Loss for the year	$	(7,218,457)	$	(3,026,028)
Items not involving cash
Flow through premium recovery		(1,481,200)		(9,569,900)
Depreciation		246,748		715,810
Stock-based compensation		-		136,000
Interest on lease obligations		17,259		25,811
Unrealized foreign exchange gain		3,544		(168)
Changes in operating assets and liabilities
Receivables and prepaids		(163,328)		274,066
Trade and otherpayables and due to relatedparties		332,306		(1,654,935)
		(8,263,128)		(13,099,344)
Investing activities
Lease liability for right of use assets		(213,875)		(673,668)
Reclamation bonds		(56,544)		-
		(270,419)		(673,668)
Financing activities
Issuance of common shares		4,135,601		12,005,160
Warrants exercised		1,153,166		169,750
Options exercised		-		57,400
Share issue costs		(237,249)		(742,281)
Repayment of advances from relatedparty		-		(3,649,000)
		5,051,518		7,841,029
Change in cash during the year		(3,482,029)		(5,931,983)
Cash,beginningofyear		5,599,995		11,531,978
Cash, end ofyear	$	2,117,966	$	5,599,995
Supplemental disclosure:
Taxes paid	$	-	$	-
Interestpaid	$	-	$	-
Recognition of asset retirement obligation	$	33,000	$	68,000
Transfer of reserves on exercised options and warrants	$	16,000	$	29,300
Recognition of right of use assets	$	-	$	370,024
Transfer of reserves on expired options	$	-	$	263,728
Flow through premium liability	$	-	$	242,200

See accompanying notes to the consolidated financial statements.

Page 7

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

1. Nature and continuance of operations

Cantex Mine Development Corp. (“Cantex” or the “Company”) is incorporated under the laws of the Province of Alberta and is considered to be in the exploration stage with respect to its mineral properties. To date, the Company has not generated significant revenues from operations and has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. The Company’s common shares are listed on the TSX Venture Exchange under the symbol “CD”.

The head office, principal address and registered and records office of the Company are located at 203-1634 Harvey Avenue, Kelowna, BC V1Y 6G2.

These consolidated financial statements have been prepared by management on a going concern basis, which assumes the Company will continue in operations for the foreseeable future and be able to realize its assets and discharge is liabilities in the normal course of business. The ability of the Company to continue operations is dependent upon the existence of economically recoverable reserves, successful development of the Company’s mineral properties (Note 5), continued receipt of financial support (Note 8), completion of equity financings (Note 10), and generating profitable operations in the future. It is not possible to predict whether economically recoverable reserves exist, the Company’s financing efforts will be successful, or if the Company will attain a profitable level of operations.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

As at July 31, 2021, the Company has incurred cumulative losses of $78,939,972 (July 31, 2020 – $71,721,515) and has working capital of $1,338,692 (July 31, 2020 – $4,550,883). Additional financing will be required for the Company to continue operations. The above conditions may raise significant doubt regarding the Company’s ability to continue as a going concern. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, adjustments would be necessary in the carrying values of assets and liabilities.

2. Basis of presentation

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The significant policies applied in these consolidated financial statements are based on IFRS in effect as of July 31, 2021.

These consolidated financial statements were approved for issue by the Board of Directors on November 23, 2021.

• (b) Basis of presentation

These consolidated financial statements include the accounts of the Company and its whollyowned subsidiary, Cantex Gold Corp.

owned subsidiary, Cantex Gold Corp.
Name of Subsidiary Country of Incorporation	Proportion of Ownership Interest
	July 31, 2021 July 31, 2020
Cantex Gold Corp. USA	100% 100%

Page 8

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

2. Basis of presentation (continued)

• (c) Adoption of new and revised standards and interpretations

New Standards Adopted

• IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – This amendment was adopted as of August 1, 2020 and has been applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and corrections of errors are generally retrospectively accounting for, whereas changes in accounting estimates are generally accounted for on a prospective basis. There was no impact to the financial statements from the adoption of this amendment.

3. Significant accounting policies

• (a) Basis of consolidation

These consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary. Control is achieved when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive loss from the effective date of control or up to the effective date of loss of control, as appropriate.

All intercompany transactions, balances, income and expenses are eliminated in full on consolidation.

(b) Income

Interest income from financial assets is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(c) Foreign currencies

The functional currency is the currency of the primary economic environment in which the entity operates. The Company’s reporting currency and the functional currency of the Company and its subsidiary’s operations is the Canadian dollar as this is the principal currency of the economic environment in which the Company operates and is the principal currency in which the funds from financing activities are generated.

Transactions in foreign currencies are initially recorded at the rates of exchange prevailing at the date of the transaction. At the end of the reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the date of the statement of financial position.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Page 9

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

(c) Foreign currencies (continued)

The results and financial position of operations which have a functional currency different from that of the Company are translated into Canadian dollars as follows:

• assets and liabilities are translated at the closing exchange rate at that date;

• income and expenses are translated at average exchange rates for the period; and

• the resulting exchange differences are included in the foreign currency exchange gain (loss) on the statement of loss.

(d) Equipment

Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is recognized using the straight-line method, over 60 months for Field equipment and 36 months for Computer software.

An item of equipment is derecognized upon disposal, when held for sale or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the consolidated statement of comprehensive loss.

The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for equipment and any changes arising from the assessment and are applied by the Company prospectively.

(e) Exploration expense

Mineral property acquisition costs and exploration and development expenditures incurred prior to determination of the feasibility of mining operations, periodic option payments and administrative expenditures are expensed as incurred. Such expenses incurred subsequent to the determination of the feasibility of mining operations are deferred until the property to which they relate is placed into production, sold, allowed to lapse or abandoned. These costs will be amortized over the estimated life of the property following commencement of commercial production, or written off if the property is sold, allowed to lapse or abandoned or when an impairment in value has occurred. Proceeds from property option payments received are netted against exploration expenses of the related mineral rights, with any excess being included in operations as administration fees earned.

Page 10

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

• (f) Stock-based payments

The Company has a stock option plan that is described in Note 10(e). Stock-based compensation to employees or those that provide similar services as employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Stock-based compensation 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 costs of equity-settled transactions are recognized over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense is recognized for equity-settled transactions at each reporting date until the vesting date and reflects the Company’s best estimate of the number of equity instruments that will ultimately vest. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied provided that all other performance and/or service conditions are satisfied.

(g) Taxation

Income tax expense represents the sum of tax currently payable and deferred tax. If the current and deferred tax relates to items recognized directly in equity or in other comprehensive income, the related taxes are recognized in equity or other comprehensive income.

Current income taxes

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are substantively enacted by the date of the statement of financial position.

Deferred income taxes

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable loss, and differences relating to investments in subsidiary to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates substantively enacted at the statement of financial position date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

Page 11

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

(h) Loss per share

The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding stock options and share purchase warrants, in the weighted average number of common shares outstanding during the year, if dilutive. The calculation assumes that proceeds upon the exercise of the options and warrants are used to purchase common shares at the average market price during the period. During the years ended July 31, 2021 and 2020, all outstanding stock options and warrants were antidilutive.

(i) Financial instruments

Non-derivative financial assets:

The Company has only loans and receivables as non-derivative financial assets. Loans and receivable are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment loss using the expected credit loss model.

Cash consists of amounts held at major financial institutions that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value and are measured at amortized cost. The Company’s cash is invested in business accounts.

Impairment of financial assets at amortized cost

The Company assesses all information available, including on a forward-looking basis, the expected credit losses associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as the reporting date, with the risk of default as at the date of initial recognition, based on all information available, and reasonable and supportive forwardlooking information.

Non-derivative financial liabilities:

The Company’s non-derivative financial liabilities comprise of trade and other payables and due to related parties.

All financial liabilities fall within the classification of other financial liabilities versus financial liabilities through profit and loss and are initially recorded at fair value net of any attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Transaction costs on financial liabilities classified as FVTPL are expensed as incurred.

Page 12

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

(i) Financial instruments (continued)

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

At the end of each reporting period subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which they arise. The net gain or loss recognized in profit or loss excludes any interest paid on the financial liabilities.

Derivative financial assets and liabilities

The Company has no derivative financial assets or liabilities.

(j) Impairment of non-financial assets

At each date of the statement of financial position, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the assets belong.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of comprehensive loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years.

(k) Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the obligation. Any increase in a provision due solely to passage of time is recognized as interest expense.

Page 13

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

(l) Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence; related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

(m) Asset retirement obligations

The Company accounts for the recognition and measurement of liabilities for statutory, contractual or legal obligations associated with the retirement of equipment, and mineral properties when those obligations result from the acquisition, construction, development or normal operations of the assets. When determinable, a liability for future site reclamation costs, or other obligations, would be recorded at net present value and the corresponding increase in the assets carrying value would then be amortized over the remaining useful life of the asset.

Management has reviewed the Company’s likely retirement costs of its equipment, and mineral properties for known obligations under contract, common practices or laws and regulations in effect or anticipated. The Company has determined that there is a material asset retirement obligation associated with the Yukon project, and accordingly, has accrued this amount in the financial statements.

(n) Significant accounting judgments and estimates

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ materially and adversely from these estimates.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

• i) The inputs used in calculating the fair value for stock-based compensation expense included in profit or loss and share-based share issuance costs included in shareholders’ equity. The stock-based compensation expense is estimated using the Black-Scholes options-pricing model as measured on the grant date to estimate the fair value of stock options. This model involves the input of highly subjective assumptions, including the expected price volatility of the Company’s common shares, the expected life of the options, and the estimated forfeiture rate.

• ii) The recognition of deferred tax assets. The Company considers whether the realization of deferred tax assets is probable in determining whether or not to recognize these deferred tax assets.

• iii) The accrual of unresolved tax assessment. The Company has recorded an estimate of the amount payable as a result of a tax audit by the Government of Yemen. In the event that the circumstances surrounding this matter change, the effects will be recognized.

Page 14

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

3. Significant accounting policies (continued)

• (n) Significant accounting judgments and estimates (continued)

• iv) The inputs for future asset retirement obligations. The Company has capitalized an asset retirement cost and accrued a future asset retirement obligation. In the event that the assumptions used by management change, the effects will be recognized.

• v) The valuation of right-of-use assets. The Company has capitalized drilling equipment leased to it from a related party based on the estimated interest rate that the Company would be able to obtain.

(o) Flow-through shares

Under Canadian income tax legislation, a company is permitted to issue flow-through shares whereby the Company agrees to incur qualifying expenditures and renounce the related income tax deductions to the investors. The Company has adopted a policy to (i) allocate the proceeds between the offering of the shares and the sale of tax benefits when the shares are offered and (ii) recognize an income tax provision upon filing of appropriate renunciation forms with the Canadian taxation authorities for qualifying expenditures previously incurred. The allocation of the proceeds is made based on the difference between the quoted price of the shares and the amount the investor pays for the flow-through shares. A liability is recognized for the premium paid by the investors. The liability is reduced and the reduction of premium liability is recorded in other income upon filing of appropriate renunciation forms with the Canadian taxation authorities for qualifying expenditures previously incurred.

4. Receivables and prepaids

	July 31,	July 31,
	2021	2020
GST receivables	$ 114,388	$ 43,885
Prepaid expenses	206,152	113,327
	$ 320,540	$ 157,212

5. Mineral property interests

The Company has not yet determined whether any of its mineral properties contain economically recoverable mineral reserves. Although the Company has taken steps to verify title to the mineral properties in which it, through its subsidiary, has an interest, in accordance with industry standards for the stage of exploration of such properties, those procedures do not guarantee the Company’s title.

Title to mining properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mining properties. The Company has diligently investigated rights of ownership of all of the mineral concessions in which it has an interest and, to the best of its knowledge, all agreements relating to such ownership rights are in good standing. However, this should not be construed as a guarantee of title. The concessions may be subject to prior claims, agreements or transfers and rights of ownership may be affected by undetected defects.

Page 15

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

5. Mineral property interests (continued)

		Yukon (a)		Yemen (b)	Nevada (c)	Nevada (c)		Total
Cumulative expenditures to July 31, 2019	$	15,918,376	$	26,084,933	$	2,224,675	$	44,227,984
Consulting and engineering		1,571,827		5,876		27,382		1,605,085
Geophysics		224,931		-		-		224,931
Licenses and permits		5		-		22,666		22,671
Travel, field and other		6,412,385		91,480		1,994		6,505,859
Wages		3,229,158		97,150		-		3,326,308
Net expenditures during the year		11,438,306		194,506		52,042		11,684,854
Cumulative expenditures to July 31, 2020		27,356,682		26,279,439		2,276,717		55,912,838
Consulting and engineering		989,735		5,252		210,390		1,205,377
Licenses and permits		14,280		-		20,935		35,215
Travel, field and other		3,643,861		134,175		380,471		4,158,507
Wages		2,375,155		89,873		387,133		2,852,161
Net expenditures during the year		7,023,031		229,300		998,929		8,251,260
Cumulative expenditures to July 31, 2021	$	34,379,713	$	26,508,739	$	3,275,646	$	64,164,098

(a) Yukon program

As of July 31, 2021, the Company holds 1,075 claim blocks covering 21,500 hectares, which are located approximately 100 km northeast of Mayo, Yukon, Canada. These claims are 100% held by the Company and were acquired by staking.

• (b) Yemen program

(i) Exploration license

During 1996, the Company was granted a 52,000 square kilometer (“km[2] “) prospecting permit in the Republic of Yemen. With continued exploration, the Company was able to focus its efforts on progressively smaller areas that demonstrated the potential for economic mineralization. The Company has held an exploration license granting exclusive exploration rights and the right to obtain an exploration contract since 1999. Under the terms of the exploration contract, the Government of the Republic of Yemen has the right to offer to acquire, on commercial terms, an undivided interest of up to 49% in this exploration license. In this event, the Company’s interest (and that of any partner) would be diluted proportionately.

Page 16

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

5. Mineral property interests (continued)

(b) Yemen program (continued)

(i) Exploration license (continued)

In January 2012, the exploration license containing the Al Hariqah project was renewed under the new Yemeni mining code. The new license is valid for an initial four year period and can be renewed for two further four year periods. In addition, the license has been expanded from its original 71 km[2] to 956 km[2] .

(ii) Agreement for Al Hariqah property

In December 2011, the Company entered into an agreement with Piedmont Lithium Limited (“Piedmont”, formerly known as WCP Resources Ltd) wherein Piedmont can earn an interest in the Al Hariqah gold project by funding advanced exploration and mine development to commercial production. The staged earn-in agreement allows Piedmont to earn up to a 70% interest in the project after funding a minimum of US$30,000,000 over a seven year period.

Piedmont had two years from February 2012 to exercise an option to commence the earnin to the project, after which they may earn an initial 40% interest in the project by expending US$5,000,000 within two years. As of May 31, 2014, Piedmont gave notice that they felt they had reached this 40% level; the Company does not agree with this statement. In October, 2014, Piedmont gave additional notice that they would no longer be funding the project. Allocation of ownership of the project has not yet been finalized. In May 2021, the Company received notice from Piedmont that it had assigned its interest in Al Hariqah to Lantern Resources Pty Ltd, an affiliate and subsidiary of Piedmont.

In October 2014, the Company, in conjunction with Piedmont, declared a state of force majeure in regards to the Al Hariqah project. Due to the current political climate, notice was given to the Chairman of the Geological and Mineral Resource Board of Yemen that the Company no longer felt that the project area was secure. Operations at the Al Hariqah site have since ceased; the Company’s current expenditures on the project relate to maintaining our Yemen office and employing office staff to continue to promote our interests in the country.

(c) Nevada program

As at July 31, 2021, the Company had four gold exploration claims in the state of Nevada comprised of 86 claims. Reclamation bonds of $61,821 (July 31, 2020 - $8,821) have been posted with the State of Nevada.

Page 17

Cantex Mine Development Corp.

Notes to the consolidated financial statements

July 31, 2021

(Stated in Canadian dollars)

6. Property and equipment

		Field		Computer
	equipment		equipment			Total
Cost
Balance July 31, 2019	$	606,762	$	7,913	$	614,675
Additions		68,000		-		68,000
Balance July 31, 2020		674,762		7,913		682,675
Additions		33,000		-		33,000
Balance July 31, 2021	$	707,762	$	7,913	$	715,675
Accumulated depreciation
Balance July 31, 2019	$	10,638	$	396	$	11,034
Depreciation		60,151		1,583		61,734
Balance July 31, 2020		70,789		1,979		72,768
Depreciation		60,153		1,582		61,735
Balance July31,2021	$	130,942	$	3,561	$	134,503
Carrying amounts:
As at July 31, 2020	$	603,973	$	5,934	$	609,907
As at July31,2021	$	576,820	$	4,352	$	581,172

7. Right-of-use assets and lease obligation

Right-of-use assets and lease obligation
		Field
		equipment
Balance July 31, 2019	$	638,655
Additions		370,027
Depreciation		(654,076)
Balance July 31, 2020		354,606
Depreciation		(185,013)
Balance July 31, 2021	$	169,593

The Company entered into a lease agreement with Kel-Ex Developments Ltd., a related party (Note 8), for the lease of three drills and an excavator for $66,667 per month plus GST. The lease expired on May 31, 2020 and the Company renewed the lease for a two-year term ending June 30, 2022. Total payments over the term of the lease total $393,375 plus GST; monthly payments vary based on the timing of the drill program and whether the equipment is in use or not.

Page 18

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

7. Right-of-use assets and lease obligation (continued)

Interest expense on lease obligations for the year ended July 31, 2021 was $17,259 (year ended July 31, 2020 – $25,810), and is included in Exploration expenditures. For the leases, the Company had estimated that it could obtain financing to purchase the right-of-use assets at an annual rate of 8%. Total cash outflows for leases was $213,875 during the year ended July 31, 2021 (year ended July 31, 2020 – $673,668). There are no variable lease payments not included in the measurement of lease obligations.

	Lease	obligation
Lease obligation, July 31, 2019	$	642,860
2020-2022 lease obligation		370,027
Principal payments		(673,668)
Interest on lease obligation		25,810
Lease obligation, July 31, 2020		365,029
Principal payments		(213,875)
Interest on lease obligation		17,259
Lease obligation, July 31, 2021	$	168,413

8. Related party transactions and balances

During the years ended July 31, 2021 and 2020, the Company had related party transactions with the following individuals and companies related by way of common directors or shareholders:

• C.F. Mineral Research Ltd. (“CF Minerals”) – a private company owned by the Cantex Chairman. CF Minerals provides heavy mineral geochemistry services to the Company, as well as storage of samples and supplies.

• Kel-Ex Development Ltd. (“Kel-Ex”) – a private company owned by the Cantex Chairman. KelEx provides administration, payroll and office services to the Company, as well as some shared exploration costs and equipment rentals.

• Element 29 Ventures Ltd. (“Element 29”) – a private company owned by the Cantex CEO. Element 29 provides geological consulting services and equipment rentals to the Company.

• FourIrons Consulting (“FourIrons”) – a private company owned by the Cantex CFO. FourIrons provides financial consulting services to the Company.

• Metalex Ventures Ltd. (“Metalex”) – a publicly listed company with common directors and management. Metalex shares office space with Cantex and thus have certain shared expenditures which get re-billed on a cost-recovery basis.

• Thomas Obradovich (“Obradovich”) – a former director of the Company; Mr Obradovich resigned from the board as of May 18, 2021.

The key management personnel of the Company are the Directors, Chief Executive Officer, and Chief Financial Officer.

Page 19

Cantex Mine Development Corp.

Notes to the consolidated financial statements

July 31, 2021

(Stated in Canadian dollars)

8. Related party transactions and balances (continued)

(a) Related party expenses

The Company’s related party expenses (net of recoveries) consist of the following amounts:

	Years ended July 31,	Years ended July 31,
	2021	2020
Laboratory and mineralogical costs, including storage fees	$ 429,647	$ 665,977
Geological consulting fees	387,899	552,769
Consulting fees	54,375	10,000
Shared field expenditures	2,151,207	2,842,289
Shared office and administrative costs	38,428	107,220
	$ 3,061,556	$ 4,178,255

The Company’s related party expenses to the following related parties:

	Year ended July 31,
	2021 2020
C.F. Mineral Research Ltd.	$ 429,647$ 669,933
Element 29 Ventures Ltd.	969,1251,206,274
FourIrons Consulting	44,375-
Kel-Ex Development Ltd.	1,571,7272,258,514
Metalex Ventures Ltd.	36,68231,920
Kathrine McDonald	-1,614
Thomas Obradovich	10,00010,000
	$ 3,061,556 $4,178,255

(b) Related party liabilities

The liabilities of the Company include the following amounts due to related parties, which are due on demand, unsecured and non-interest bearing:

	July 31,	July 31,
	2021	2020
C.F. Mineral Research Ltd.	$ 124,549$	77,181
Element 29 Ventures Ltd.	168,925	127,054
FourIrons Consulting	2,966	-
Kel-Ex Development Ltd.	304,107	124,206
Metalex Ventures Ltd.	3,620	2,852
Thomas Obradovich	-	10,000
	$ 604,167$	341,293

Page 20

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

8. Related party transactions and balances (continued)

(c) Key management personnel compensation

	Years	Ended July 31,
	2021	2020
Wages and benefits(1)	$ 271,916$ 418,066
Stock based compensation(2)		-108,800
	$ 271,916$ 526,866

(1) Wages and benefits include amounts paid or accrued for geological consulting fees, payroll costs and financial consulting fees. Geological consulting fees are paid to Element 29 for the services of the Chief Executive Officer; payroll costs are the amounts paid to Kel-Ex for the services of the Chief Financial Officer in August 2020; financial consulting fees are paid to FourIrons for the services of the Chief Financial Officer beginning in August 2020.

(2) Stock-based compensation is the fair value of options granted and expensed to directors and management personnel during the year. The Company issued stock-based compensation to a director and to a consultant during the year ended July 31, 2020.

9. Asset retirement obligation

The Company’s sole asset retirement obligation is based on its ownership of a remote camp location in the Yukon and right-of-use assets in said location that it will eventually need to be removed. Management estimates the cost to remove the camp structures and equipment, and the estimated time period during which these costs will be incurred in the future. These costs are expected to be incurred in approximately 8 years (July 31, 2020 – 9 years). The undiscounted amount of estimated cash flow required to settle the asset retirement obligation is $673,200 (July 31, 2020 - $660,000). The discounted amount of estimated cash flow required to settle the asset retirement obligation as at July 31, 2021 discounted at a rate of 6.5% (July 31, 2020 – rate of 6.5%) is $407,000 (July 31, 2020 –$374,000).

10. Share capital and reserves

• (a) Authorized share capital

The authorized share capital of the Company is an unlimited number of common shares without par value. All issued shares are fully paid.

(b) Issued share capital

In August 2019 , in a combination of flow through shares at $6.00 per share and charity flow through shares at $6.52, the Company received proceeds of $12,005,160 and issued 1,907,000 shares. The Company paid commissions of $570,310, and other share issuance costs of $171,971 in conjunction with this deal. The Company incurred a flow-through premium of $9,812,100 associated with this flow-through share issuance. As at July 31, 2020, the Company had $296,318 in remaining flow through funds to spend; these were incurred in August of 2020. As the Company had not yet incurred sufficient expenditures relating to this flow-through issuance, there was a resulting Flow-through premium liability of $242,200, which was recovered during the year ended July 31, 2021; we have recognized the recovery of flow through premium of $242,200 (year ended July 31, 2020 – $9,569,900) as Other income in the Statement of Loss and Comprehensive Loss.

Page 21

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

10. Share capital and reserves (continued)

(b) Issued share capital (continued)

In August 2020, the Company received proceeds of $4,135,601 from the issuance of 2,246,948 common shares, which were issued as a combination of flow through shares at $1.70 per share and charity flow through shares at $1.90 per share. The Company paid commissions of $196,491 and other share issuance costs of $40,758 in conjunction with this deal. The Company incurred a flow-through premium of $1,239,000 associated with this flow-through share issuance. As at July 31, 2021, the Company had fulfilled its commitment to spend these flow through funds; as such, there was no resulting Flow-through premium liability. We have recognized the recovery of flow through premium of $1,239,000 as Other income in the Statement of Loss and Comprehensive Loss.

During the year ended July 31, 2020, the Company issued 286,500 shares upon the exercising of warrants; total proceeds received was $169,750. During the year ended July 31, 2021, the Company issued 5,765,834 shares upon the exercising of warrants; total proceeds received was $1,153,166.

During the year ended July 31, 2020, the Company issued 82,000 shares upon the exercising of stock options; total proceeds from stock options was $57,400.

Subsequent to July 31, 2021, the Company received proceeds of $4,200,000 from the issuance of 8,400,000 common shares, which were issued as units, comprising of one flow-through shares and one-half non-flow through warrant. The Company paid commissions of $203,400 and other share issuance costs of $21,000 in conjunction with this deal. Proceeds from the private placement will be used for the North Rackla, Yukon project.

(c) Stock options and warrants

The Company, in accordance with its shareholder approved stock option plan, is authorized to grant options to directors, officers, employees and consultants, to acquire up to 5% of the aggregate issued and outstanding common shares. The exercise price of the options issued under the plan is determined by the Board of Directors at the time the options are granted. The options vest immediately upon grant, unless otherwise determined by the Board of Directors or Exchange regulations, and are exercisable for a period of up to ten years from the date of grant.

	Stock Options	Stock Options	Stock Options	Warrants	Warrants
			Weighted			Weighted
	Number of		Average	Number of		Average
	options	ExercisePrice		warrants	ExercisePrice
Outstanding, July 31, 2019	1,963,000	$	2.42	11,843,834	$	0.84
Granted	250,000		0.80	-	$	-
Exercised	(82,000)		0.70	(286,500)		0.59
Expired/Cancelled	(85,000)		3.60	-		-
Outstanding, July 31, 2020	2,046,000		2.24	11,557,334		0.85
Exercised	-		-	(5,765,834)		0.20
Exercisable and outstanding, July 31, 2021	2,046,000	$	2.24	5,791,500	$	1.50

Page 22

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

10. Share capital and reserves (continued)

• (c) Stock options and warrants (continued)

Stock option and share purchase warrant transactions are summarized as follows: The following stock options and warrants were outstanding at July 31, 2021:

				Exercise
	Number			price	Expiry date
Options	200,000	*	$	0.80	August 16, 2021
	327,000		$	0.70	March 31, 2023
	434,000		$	1.00	December 28, 2024
	1,035,000		$	3.60	June 4, 2025
	50,000		$	0.80	March 9, 2025
	2,046,000
Warrants	1,629,500		$	1.50	March 15, 2022
	2,905,000		$	1.50	March 22, 2022
	1,257,000		$	1.50	March 29, 2022
	5,791,500

• Subsequent to July 31, 2021, 200,000 stock options expired unexercised and 4,200,000 warrants were issued. The warrants were issued at an exercise price of $0.65/share; 2,610,000 warrants expire on October 19, 2023 and 1,590,000 warrants expire October 21, 2023. The stock options that expired unexercised in August 2021 were originally issued with an expiry date of March 31, 2023; the expiry date changed with the resignation of the board member that the stock options had been issued to.

• (d) Stock option plan

During the year ended July 31, 2021, the Company recognized stock-based compensation of $nil (2020 – $136,000) in the statement of operations as a result of the afore-mentioned stock options granted and vested. The weighted average fair value of options granted in the year ended July 31, 2020 was valued at $0.54 per option using the Black-Scholes option pricing model. The assumptions used in calculating the fair value are as follows:

Risk-free interest rate	0.53%
Expected option life	5 years
Expected stock price volatility	122%
Expected dividend yield	0%

Volatility was determined based upon the historic volatility of the Company’s share price over the same period of time as the expected life of the option.

11. Contingencies

As at July 31, 2021, the Company has accrued $94,273 ($75,648USD) relating to a tax audit in the Yemen branch. A notice of assessment was received from the Government of Yemen in December 2014 of $432,845USD, which the Company objected to on the basis that incorrect bases were being used in the calculations. The Company provided further evidence to the Government of Yemen regarding the bases used to calculate the assessment and a lower amount was assessed, but not finalized. Due to the state of affairs in Yemen, the Company has not yet been able to finalize payment terms of the assessment, but has accrued the reassessed amount as a liability.

Page 23

Cantex Mine Development Corp.

Notes to the consolidated financial statements

July 31, 2021

(Stated in Canadian dollars)

12. Segmented information

The Company manages its business as a single operating segment: mineral exploration. The Company operates in both foreign and domestic countries as follows:

		Years ended	July 31,	July 31,
		2021		2020
Loss
Canada	$	5,990,228	$	2,779,480
Yemen		229,300		194,506
United States of America		998,929		52,042
	$	7,218,457	$	3,026,028
		July 31,		July 31,
		2021		2020
Reclamation bonds
United States of America	$	61,821	$	8,821
Equipment
Canada		750,765		964,513
	$	812,586	$	973,334

13. Income Taxes

• (a) Corporate income tax expense

Income tax expense differs from the amount computed by applying the combined Canadian federal and provincial income tax rates, applicable to the Company, to the income (loss) before the tax provision due to the following:

		2021		2020
Loss before income taxes	$	7,218,457	$	3,026,028
Expected income tax recovery		(1,948,000)		(817,000)
Change in statutory, foreign tax, foreign exchange
rates and other		(63,000)		4,000
Permanent differences		(63,000)		(2,547,000)
Impact of flow through shares		1,117,000		3,161,000
Share issue cost		(64,000)		(200,000)
Adjustment to prior years provision		-		(493,000)
Changes in unrecognized deductible temporary
differences		1,021,000		892,000
	$	-	$	-

Page 24

Cantex Mine Development Corp.

Notes to the consolidated financial statements

July 31, 2021

(Stated in Canadian dollars)

13. Income Taxes (continued)

(b) Temporary differences

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the consolidated statement of financial position are as follows:

position are as follows:
		2020		2020
Temporary differences
Exploration and evaluation assets	$	34,856,000	$	30,965,000
Property and equipment		471,000		512,000
Share issue costs		917,000		758,000
Asset retirement obligation		407,000		374,000
Allowable capital losses		636,000		636,000
Non-capital losses available for future period		2,848,000		4,377,000

• (i) The Company has income tax loss carry-forwards of approximately $2,856,000 (2020 - $2,395,000) for Canadian tax purposes. These un-recognized tax losses will expire between 2028 to 2041.

• (ii) The Company has net-capital loss carry-forwards of approximately $636,000 (2020 - $636,000) for Canadian tax purposes. These un-recognized tax losses are carried forward indefinitely.

• (iii) The Company has income tax loss carry-forwards of approximately $752,919 (2020 - $700,877) for United States tax purposes. These un-recognized tax losses will expire between 2026 and 2041.

The remaining tax assets have no expiry date or dates in line with non-capital loss carryforwards.

14. Capital management

The Company includes equity (comprising of issued common shares), reserves and deficit, in its definition of capital.

The Company’s objectives when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

The Company’s primary objective with respect to capital management is to ensure adequate liquid capital resources are in place to fund the exploration of its mineral properties while maintaining its ongoing operations. To secure the additional capital to pursue these plans, the Company may attempt to raise additional funds through the issuance of debt and or equity.

The Company expects its current capital resources will not be sufficient to complete its exploration plans through its current operating period and it will be required to raise additional funds through future equity issuances or secure other financing. To date, the Company has relied on advances from related parties to fund its operations and exploration activities and expects continued financial support through the next twelve months. The Company is currently not subject to externally imposed capital requirements. The Company does not pay out dividends. The Company’s investment policy is to invest its short-term excess cash in secure deposits in large Canadian financial institutions.

Page 25

Cantex Mine Development Corp.

Notes to the consolidated financial statements July 31, 2021

(Stated in Canadian dollars)

15. Financial instruments and risk management

As at July 31, 2021, the Company’s financial instruments are cash, receivables, reclamation bonds, trade and other payables and amounts due to related parties. The amounts reflected in the statement of financial position are carrying amounts and approximate their fair values due to their short-term nature. These financial instruments are classified as follows:

• Cash and reclamation bonds are comprised of balances held at major financial institutions (in the case of reclamation bonds, these are held through the related government body) that are readily convertible into a known amount of cash and which are only subject to an insignificant risk of change in value, is classified as fair value through profit and loss, and is measured at amortized cost on the statement of financial position at fair value;

• Receivables are classified as loans and receivables and are initially measured at fair value and subsequent periodic revaluations are recorded at amortized cost using the effective interest method; and

• Trade and other payables and amounts due to related parties are classified as other liabilities and are initially measured at fair value and subsequent periodic revaluations are recorded at amortized cost using the effective interest rate method.

The Company’s financial instruments are exposed to certain financial risks, including currency, credit, liquidity and price risk.

Fair value is defined as the price what would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

Level 3 – Prices or valuation techniques that require inputs that are both significant to fair value measurement and unobservable (supported by little or no market activity).

The Company has no financial instruments measured at fair value hierarchy for the years presented.

Currency risk - The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Yemen and as such, a portion of its expenses are incurred in the local currency and US dollars. A significant change in the currency exchange rates could have an effect on the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations.

At July 31, 2021, the Company is exposed to currency risk relating to funds held in U.S. dollars, Euros and Yemen rials with a value of approximately $88,648 (July 31, 2020: $620,514). The impact of a 5% change in the exchange rates for these currencies to the Canadian dollar would not materially affect decisions of the Company’s operations plans.

Credit risk - Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The majority of the Company’s cash is held through a large Canadian financial institution with a high investment grade rating.

Page 26

Cantex Mine Development Corp.

Notes to the consolidated financial statements

July 31, 2021

(Stated in Canadian dollars)

15. Financial instruments and risk management (continued)

At July 31, 2021, the Company has no financial assets that are past due or impaired due to credit risk defaults. The Company’s receivables consist mainly of mineral property recoveries due from partners and GST receivable due from the Federal Government of Canada. The Company is subject to the risk that its partners will default on amounts owing for their portion of exploration expenditures. To date, the Company has collected all of its related party receivables.

Liquidity risk - Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages its liquidity risk through the management of its capital structure and financial leverage as outlined in Note 14 to the consolidated financial statements.

Trade and other payables are generally due within 30 days. No significant amounts are past due.

Amounts due to related parties have no fixed terms of repayment, are unsecured and are noninterest bearing, with the exception of invoices received from CF Minerals. This related party has implemented a policy whereby invoices are due upon receipt and past due accounts may be subject to interest of 1.5% per month. No such payables are included in the balance due as at July 31, 2021 and July 31, 2020.

Price risk - The Company is exposed to price risk with respect to commodity prices which can impact the Company’s ability to raise funding for its exploration and development programs. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company.

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