Capitan Silver Corp. — Audit Report / Information 2024

Jan 20, 2025

CAPITAN

SILVER CORP

Consolidated Financial Statements
For the Year Ended September 30, 2024

(Expressed in Canadian Dollars)

---

CAPITAN SILVER CORP.
Index to Consolidated Financial Statements

	Page
INDEPENDENT AUDITOR'S REPORT	3-5
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Position	6
Consolidated Statements of Loss and Comprehensive Loss	7
Consolidated Statements of Cash Flows	8
Consolidated Statements of Changes in Shareholders' Equity	9
Notes to the Consolidated Financial Statements	10-22

---

DAVIDSON & COMPANY LLP
Chartered Professional Accountants

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of
Capitan Silver Corp.

Opinion

We have audited the accompanying consolidated financial statements of Capitan Silver Corp. (the "Company"), which comprise the consolidated statements of financial position as at September 30, 2024 and 2023, 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 material accounting policy information.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit 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 a net loss of $1,313,556 during the year ended September 30, 2024 and, as of that date, the Company's accumulated losses was $4,755,634. 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.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year ended. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our auditor's report.

Assessment of Impairment Indicators of Exploration and Evaluation Assets ("E&E Assets")

As described in Note 8 to the consolidated financial statements, the carrying amount of the Company's E&E Assets was $10,538,248 as of September 30, 2024. As more fully described in Note 4 to the consolidated financial statements, management assesses E&E Assets for indicators of impairment at each reporting period.

A member of Nexia International

1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Davidson-co.com

---

The principal considerations for our determination that the assessment of impairment indicators of the E&E Assets is a key audit matter are that there was judgment made by management when assessing whether there were indicators of impairment for the E&E Assets, specifically relating to the assets' carrying amount which is impacted by the Company's intent and ability to continue to explore and evaluate these assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of indicators of impairment that could give rise to the requirement to prepare an estimate of the recoverable amount of the E&E Assets.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included, among others:

• Evaluating management's assessment of impairment indicators.
• Evaluating the intent for the E&E Assets through discussion and communication with management.
• Reviewing the Company's recent expenditure activity.
• Assessing compliance with agreements including reviewing option agreements and vouching cash payments and share issuances.
• Assessing the Company's rights to explore E&E Assets including sending confirmation requests to optionors to ensure good standing of agreements.
• Evaluating title to ensure mineral rights underlying the E&E assets are in good standing.

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 Accounting Standards, 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.

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

The engagement partner on the audit resulting in this independent auditor's report is Carmen Newham.

Vancouver, Canada

Chartered Professional Accountants

January 17, 2025

---

CAPITAN SILVER CORP.
Consolidated Statements of Financial Position as at
(Expressed in Canadian Dollars)

	Notes	September 30, 2024	September 30, 2023
Assets
Cash		$ 568,421	$ 521,614
Restricted cash	5	25,000	25,000
Taxes receivable	6	6,395	6,746
Prepaid expenses	7	61,026	60,051
		660,842	613,411
Equipment		2,554	1,411
VAT receivable	6	747,756	872,292
Exploration and evaluation assets	8	10,538,248	10,260,774
Total Assets		$ 11,949,400	$ 11,747,888
Liabilities
Accounts payable and accrued liabilities		$ 40,201	$ 43,391
Taxes payable		7,258	6,478
		47,459	49,869
Shareholders’ Equity
Share capital	9	15,847,959	13,827,959
Reserves	9	920,719	380,192
Accumulated other comprehensive loss		(111,103)	931,946
Deficit		(4,755,634)	(3,442,078)
		11,901,941	11,698,019
Total Liabilities and Shareholders’ Equity		$ 11,949,400	$ 11,747,888

Nature and continuance of operations (Note 1)
Subsequent events (Note 15)

On behalf of the Board on January 17, 2025

John-Mark Staude
Director
Arturo Bonillas
Director

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

Page 6 of 22

---

Page 7 of 22

CAPITAN SILVER CORP.

Consolidated Statements of Loss and Comprehensive Loss

For the Years ended September 30,

(Expressed in Canadian Dollars)

	Notes	2024	2023
Expenses
Management and consulting fees	10	$ 346,930	$ 424,054
Depreciation		745	1,099
Filing fees		87,084	83,540
Foreign exchange (gain) loss		(4,546)	18,989
Investor relations and marketing		151,111	90,331
General and administration		43,487	46,445
Professional fees		136,857	93,113
Share-based compensation	9,10	540,527	20,169
Travel and meals		31,365	5,232
Interest income		(20,004)	(36,561)
Net loss for the year		(1,313,556)	(746,411)
Foreign exchange movements		(1,043,049)	731,983
Comprehensive loss for the year		$ (2,356,605)	$ (14,428)
Weighted average number of common shares outstanding – basic and diluted		76,432,144	69,237,586
Loss per share - basic and diluted		$ (0.02)	$ (0.01)

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

---

Page 8 of 22

CAPITAN SILVER CORP.

Consolidated Statements of Cash Flows

For the Years ended September 30,

(Expressed in Canadian Dollars)

	2024	2023
OPERATING ACTIVITIES
Net loss for the year	$ (1,313,556)	$ (746,411)
Items not involving cash:
Depreciation	745	1,099
Share-based compensation	540,527	20,169
Foreign exchange	(283,194)	106,230
Changes in non-cash working capital items:
Accounts payable and accrued liabilities	36	(181,138)
Taxes receivable	222,876	(346,821)
Prepaid expenses	(975)	(34,285)
	(833,541)	(1,181,157)
INVESTING ACTIVITIES
Exploration and evaluation assets	(1,137,326)	(1,576,111)
Acquisition of equipment	(2,326)	-
	(1,139,652)	(1,576,111)
FINANCING ACTIVITIES
Proceeds from shares issuance, net of issuance costs	2,020,000	3,200,000
	2,020,000	3,200,000
Increase in cash	46,807	442,732
Cash, beginning of the year	521,614	78,882
Cash, end of the year	$ 568,421	$ 521,614

During the year ended September 30, 2024, non-cash transaction for mineral property expenditures included in accounts payable was $4,477 (September 30, 2023 - $6,923).

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

---

CAPITAN SILVER CORP.
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in Canadian Dollars)

	Note	Share Capital		Accumulated Other Comprehensive (Income)/Loss	Deficit	Total
		Shares	Amount	Reserves
Balance at September 30, 2022		53,785,797	$ 10,438,790	$ 360,023	$ 199,963	$ (2,695,667)
Private placement	9	16,000,000	3,200,000	-	-	-
Shares issued for property acquisition	8	804,974	189,169	-	-	-
Share-based payments	9	-	-	20,169	-	-
Foreign exchange movement		-	-	-	731,983	-
Loss for the year		-	-	-	-	(746,411)
Balance at September 30, 2023		70,590,771	$ 13,827,959	$ 380,192	$ 931,946	$ (3,442,078)
Private placement	9	13,466,667	2,020,000	-	-	-
Share-based payments	9	-	-	540,527	-	-
Foreign exchange movement		-	-	-	(1,043,049)	-
Loss for the year		-	-	-	-	(1,313,556)
Balance at September 30, 2024		84,057,438	$ 15,847,959	$ 920,719	$ (111,103)	$ (4,755,634)

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

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

1. Nature and continuance of operations

Capitan Silver Corp. was incorporated on October 30, 2019, under the laws of the Business Corporation Act (British Columbia) as part of a plan of arrangement (the "Plan of Arrangement") to reorganize Riverside Resources Inc. ("Riverside"). The Company's head office address is 550 – 800 West Pender Street, Vancouver, British Columbia, Canada V6C 2V6. On August 21, 2020, the Company listed on the TSX Venture Exchange (the "Exchange") with the symbol CAPT.

The Company's business activity is the acquisition and exploration of mineral properties in Mexico.

The Company's ability to continue operations is uncertain and is dependent upon the ability of the Company to obtain necessary financing to meet the Company's liabilities and commitments as they become payable, acquiring assets or a business, and the ability to generate future profitable production or operations or sufficient proceeds from the disposition thereof. The outcome of these matters cannot be predicted at this time. The consolidated financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations. The Company incurred a net loss of $1,313,556 for the year ended September 30, 2024 and accumulated losses of $4,755,634 as of September 30, 2024. 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.

There are many external factors that can adversely affect general workforces, economies and financial markets globally such as global health conditions and political conflict in other regions. It is not possible for the Company to predict the duration or magnitude of the adverse results of these factors and its effects on the Company's business or ability to raise funds.

2. Basis of presentation

These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments, which are stated at their fair value. All dollar amounts presented are in Canadian dollars unless otherwise specified. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

3. Statement of compliance

These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IASB").

4. Material accounting policy information

a. Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All inter-company transactions and balances have been eliminated upon consolidation.

Name of subsidiary	Country of incorporation	Proportion of ownership	Principal activity
Rios de Suerte S.A. de C.V. ("Rios")	Mexico	100%	Mineral exploration

Page 10 of 22

---

CAPITAN SILVER CORP.
Notes to the Consolidated Financial Statements
For the Year ended September 30, 2024
(Expressed in Canadian Dollars)

4. Material accounting policy information (continued)

b. Foreign currency translation

The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company is the Canadian dollar and the Mexican Pesos for Rios. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Transactions in currencies other than the functional currency for an entity are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rate while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

The subsidiary with a Mexican Peso functional currency has been translated into Canadian dollars as follows:

Assets and liabilities are translated at period end exchange rates, while revenues and expenses are translated using average rates over the period. Translation gains and losses relating to the foreign operations are included in accumulated other comprehensive loss as a separate component of shareholders' equity.

c. Exploration and evaluation assets

Pre-exploration costs are expensed as incurred. The Company records exploration and evaluation asset interests, which consist of the right to explore for mineral deposits, at cost. The Company records deferred exploration costs, which consist of costs attributable to the exploration of exploration and evaluation asset interests, at cost. All direct and indirect costs relating to the acquisition and exploration of these exploration and evaluation asset interests are capitalized on the basis of specific claim blocks until the exploration and evaluation asset interests to which they relate are placed into production, disposed of through sale, or where management has determined there to be an impairment. If an exploration and evaluation asset interest is abandoned, the exploration and evaluation asset interests and deferred exploration costs will be written off to operations in the period of abandonment.

On an on-going basis, the capitalized costs are reviewed on a property-by-property basis to consider if there is any impairment on the subject property. Management's determination for impairment is based on: 1) whether the Company's exploration programs have significantly changed, such that previously identified resource targets are no longer being pursued; 2) whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future; or 3) whether remaining lease terms are insufficient to conduct necessary studies or exploration work.

The recorded cost of exploration and evaluation asset interests is based on cash paid and the assigned value of share consideration issued (where shares are issued) for exploration and evaluation asset interest acquisitions and exploration costs incurred. The recorded amount may not reflect the recoverable value, as this will be dependent on future development programs, the nature of the mineral deposit, commodity prices, adequate funding and the ability of the Company to bring its projects into production.

d. Provision for environmental rehabilitation

The Company recognizes liabilities for legal or constructive obligations associated with the retirement of exploration and evaluation assets and equipment. The net present value of future rehabilitation costs is capitalized to the related asset along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value.

Page 11 of 22

---

CAPITAN SILVER CORP.
Notes to the Consolidated Financial Statements
For the Year ended September 30, 2024
(Expressed in Canadian Dollars)

4. Material accounting policy information (continued)

d. Provision for environmental rehabilitation (continued)

The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditure. These changes are recorded directly to the related assets with a corresponding entry to the rehabilitation provision.

The increase in the provision due to the passage of time is recognized as an interest expense. The Company currently does not have any significant provisions for environmental rehabilitation.

e. Impairment of long-lived assets

At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax 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 is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that 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. A reversal of an impairment loss is recognized immediately in profit or loss.

f. Financial instruments

Financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The determination of the classification of financial assets is made at initial recognition. Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVTPL; for other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI.

The Company’s accounting policy for each of the categories is as follows:

Financial assets at FVTPL: Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed as incurred. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets held at FVTPL are recognized in profit or loss.

Financial assets at FVTOCI: Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income (loss).

Page 12 of 22

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

4. Material accounting policy information (continued)

f. Financial instruments (continued)

Financial assets at amortized cost: A financial asset is measured at amortized cost if the objective of the business model is to hold the financial asset for the collection of contractual cash flows, and the asset's contractual cash flows are comprised solely of payments of principal and interest. They are classified as current assets or non-current asset based on their maturity date and are initially recognized at fair value and subsequently carried at amortized cost less any impairment.

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 forward-looking information.

The following table shows the classification of the Company’s financial assets under IFRS 9:

Financial instrument	Classification
Cash	Amortized cost
Restricted cash	Amortized cost
Accounts payable and accrued liabilities	Amortized cost

Financial liabilities

The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows:

Fair value through profit or loss - This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in profit or loss.

Amortized cost - This category comprises liabilities initially recognized at fair value less directly attributable transaction costs. Subsequently, they are measured at amortized cost using the effective interest method.

g. Loss per share

Basic loss per common share is calculated by dividing net loss available to common shareholders by the weighted-average number of shares outstanding during the year. The effect of dilutive stock options warrants and similar instruments on loss per share is recognized on the use of the proceeds that could be obtained upon these and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. Diluted loss per share value excludes all dilutive potential common shares if their effect is anti-dilutive.

h. Income taxes

Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity. Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they revert, based on the laws that have been enacted or substantively enacted by the reporting date.

Page 13 of 22

---

CAPITAN SILVER CORP.
Notes to the Consolidated Financial Statements
For the Year ended September 30, 2024
(Expressed in Canadian Dollars)

4. Material accounting policy information (continued)

h. Income taxes (continued)

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current income tax liabilities and assets, and they relate to income taxes levied by the same tax authority for the same taxable entity. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related income tax benefit will be realized.

i. Critical accounting estimates, judgments, and assumptions

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amount of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Information about significant areas of estimation uncertainty in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are noted below with further details of the assumptions contained in the relevant note.

Critical accounting judgments

• Recoverability and classification of value added tax (“VAT”): which are included in the consolidated statements of financial position. Management has determined that the timing of collection is uncertain as the recovery of VAT receivable involves a complex application process, accordingly VAT is recorded as a non-current asset.
• Management’s determination of the functional currency of the Company and each of its subsidiaries requires judgment based on the factors outline in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Critical accounting estimates

• Exploration and evaluation assets: Exploration and evaluation costs are initially capitalized as intangible exploration assets with the intent to establish commercially viable reserves. The Company is required to make estimates and judgments about the future events and circumstances regarding whether the carrying amount of intangible exploration assets exceeds its recoverable amount. Recoverability is dependent on various factors, including the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development and upon future profitable production or proceeds from the disposition of the exploration and evaluation assets themselves. Additionally, there are numerous geological, economic, environmental and regulatory factors and uncertainties that could impact management’s assessment as to the overall viability of its properties or the ability to generate future cash flows necessary to cover or exceed the carrying value of the Company’s exploration and evaluation assets properties.
• Share-based payments: Charges for share-based payments are based on the fair value on the date the awards are granted. Stock options are valued using the Black-Scholes option pricing model, and inputs to the model include assumptions on share price volatility, discount rates and expected life outstanding.

Page 14 of 22

---

CAPITAN SILVER CORP.
Notes to the Consolidated Financial Statements
For the Year ended September 30, 2024
(Expressed in Canadian Dollars)

4. Material accounting policy information (continued)

j. Capital stock

Common shares are classified as shareholders’ equity. Incremental costs directly attributable to the issuance of common shares and stock options are recognized as a deduction from equity. Common shares issued for consideration other than cash, are valued based on their market value at the date the shares are issued.

The Company uses the residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The Company considers the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their fair value, as determined by the closing market price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

k. Share-based payments

The stock option plan allows the Company’s employees, directors and consultants to acquire shares of the Company. The fair value of options granted is recognized as a share-based payments expense with a corresponding increase in shareholders’ equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Consideration paid on the exercise of stock options is credited to share capital and the fair value of the options is reclassified from reserves to capital stock.

The fair value is measured at grant date and each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes Option Pricing Model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the number of stock options that are expected to vest.

In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

l. New standards issued and not yet effective

The following new standards, amendments to standards and interpretations have been issued but are not effective during the year ended September 30, 2024.

(i) On April 9, 2024, the IASB issued a new standard – IFRS 18, “Presentation and Disclosure in Financial Statements” with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to:

• the structure of the statement of profit or loss;
• required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements (that is, management-defined performance measures); and
• enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general.

IFRS 18 will replace IAS 1; many of the other existing principles in IAS 1 are retained, with limited changes. IFRS 18 will apply for reporting periods beginning on or after January 1, 2027 and also applies to comparative information. Adoption of IFRS 18 will not impact the recognition or measurement of items in the financial statements, but it might change what an entity reports as its ‘operating profit or loss’.

Page 15 of 22

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

5. Restricted cash

As at September 30, 2024 and 2023, the Company’s restricted cash of $25,000 related to a GIC earning a variable rate of 2.95% (2023 – 2.70%) interest per annum held as collateral in respect to the corporate credit card facility with a financial institution.

6. Taxes and VAT receivable

Taxes and VAT receivable consist of tax refunds from the Federal Government of Canada and Mexico.

	September 30, 2024	September 30, 2023
GST recoverable amounts in Canada	$ 6,395	$ 6,746
VAT recoverable amounts in Mexico	747,756	872,292
	$ 754,151	$ 879,038

7. Prepaid expenses

The breakdown of prepaid expenses is as follows:

	September 30, 2024	September 30, 2023
Expense advances	$ 40,153	$ 39,662
Insurance	14,877	15,389
Rent	996	-
Prepaid deposit	5,000	5,000
	$ 61,026	$ 60,051

8. Exploration and evaluation assets

The exploration and evaluation assets in which the Company has an interest are located in Mexico. Title to exploration and evaluation asset interests 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 mineral claims. The Company has investigated title to all of its exploration and evaluation asset interests and, to the best of its knowledge, title to all of its interests is in good standing.

Cruz de Plata, Durango, Mexico

On January 10, 2022 and as amended on March 1, 2022, the Company entered into an option agreement to acquire all outstanding net smelter royalties (“NSR’s”) on mining claims in the Cruz de Plata Property from Exploraciones del Altiplano (“Altiplano”), a private Mexican exploration company (the “Royalty Purchase”). This included a 2% NSR on the Capitan Hill claims, 0.75% on claims covering the Jesús María, San Rafael, Pinchazo and Capitan 2 claims and 0.5% on third-party claims. The total consideration for the Royalty Purchase is US$1,000,000, of which US$550,000 will be paid in cash and US$450,000 in the Company’s common shares to be issued over 2 years. The Company will also retain a right of first refusal on any shares distributed to Altiplano as consideration.

Page 16 of 22

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

8. Exploration and evaluation assets (continued)

The transaction details as below:

Due date	Cash	Common shares in value
Upon the closing date (January 11, 2022)	US$100,000 (paid)	-
On or before the first anniversary of the closing date (January 11, 2023)	US$150,000 (paid)	US$150,000 (issued)
On or before the second anniversary of the closing date (January 11, 2024)*	US$300,000	US$300,000

*As of April 1, 2024, an amendment agreement was executed with Altiplano. This agreement replaces the third payment of US$300,000 and the share issuance of US$300,000 with the following:

Due date	Cash	Common shares in value
Within five business days of the execution and delivery of the agreement	US$87,500 (paid)
On or before 6 months following the effective date (October 1, 2024)*	US$100,000	US$100,000**
On or before 12 months following the effective date (April 1, 2025)	US$150,000	US$150,000

*Subsequent to the 2024 fiscal year end, on November 4, 2024, an amendment agreement has been made with Altiplano, wherein the second payment is replaced by the following:

Due date	Cash
As of November 4, 2024	US$34,000**
On or before December 2, 2024	US$33,000**
On or before January 2, 2025	US$33,000***

**Subsequent to the 2024 fiscal year end, the Company issued 934,280 shares valued at US$100,000 and made payments totalling US$67,000 pursuant to the terms of the agreement.

***Subsequent to the 2024 fiscal year end, Altiplano approved the extension of the payment date to February 1, 2025.

In addition to the NSR's held by Altiplano, the Cruz de Plata Property has a 1% NSR owned by Riverside which was created as part of the Plan of Arrangement. The Company has the option to purchase and retire the Riverside royalty for $250,000 at any time.

On November 28, 2022, the Company executed an option agreement with Minera Fresnillo S. A. de C. V. (a wholly owned subsidiary of Fresnillo plc) ("Minera"), to acquire a 100% interest for certain mineral concessions at the Cruz de Plata Project.

The terms of the option agreement include the right to explore and an option to acquire 100% interest in the mineral concessions for total payable amount of US$1,000,000 over the three-year period. In the event the Company acquires 100% interest, Minera will maintain a 1% NSR which the Company can buy-back for US$1,000,000.

Page 17 of 22

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

8. Exploration and evaluation assets (continued)

The transaction details as below:

Due date	Cash
Upon the closing date (November 28, 2022)	US$50,000 (paid)
18 months from the date of signing (May 28, 2024)*	US$156,300 (paid)
On or before the second anniversary of the closing date (November 28, 2024)	US$150,000**
30 months from the date of signing (May 28, 2025)	US$150,000
On or before the third anniversary of the closing date (November 28, 2025)	US$500,000

*On November 29, 2023, an amendment agreement was established with Minera, extending the second payment date from November 28, 2023, to May 28, 2024, with a total payment due of US$156,300.

**Subsequent to the 2024 fiscal year end, the Company paid US$150,000 pursuant to the terms of the agreement.

The breakdown of exploration and evaluation assets is as follows:

	September 30, 2024	September 30, 2023
Acquisition costs	$ 387,095	$ 528,254
Exploration costs:
Assaying	15,855	101,843
Data acquisition	-	24,245
Field & camp costs	15,956	27,112
Geological consulting	537,512	662,416
Drilling	-	128,567
Transport & support	103,111	141,290
Total current exploration costs	672,434	1,085,473
Professional fees:
Legal fees	29,173	83,880
Community relations	46,178	20,592
Total current professional & other fees	75,351	104,472
Total costs incurred during the year	1,134,880	1,718,199
Balance, Opening	10,260,774	7,832,792
Foreign exchange movements	(857,406)	709,783
Balance, End of the year	$ 10,538,248	$ 10,260,774
Cumulative costs:
Acquisition	$ 4,627,599	$ 4,240,504
Exploration	5,493,570	4,821,136
Professional & other fees	222,646	147,295
Foreign exchange movements	194,433	1,051,839
	$ 10,538,248	$ 10,260,774

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

9. Share capital and reserves

The common shares have no par value and the number of authorized shares is unlimited.

Shares issued for the year ended September 30, 2024

On April 19, 2024, the Company completed a private placement, issuing 13,466,667 common shares at a price of $0.15 per share for gross proceeds of $2,020,000. No finder's fees were disbursed in relation to this private placement.

Shares issued for the year ended September 30, 2023

On November 2, 2022, the Company completed a non-brokered private placement, issuing 16,000,000 common shares at $0.20 each raising gross proceeds of $3,200,000. There was no finder's fee paid on this private placement.

On January 9, 2023, the Company issued 804,974 common shares at a fair market value of US$150,000 to Altiplano per net smelter royalties ("NSR's") purchase agreement (Note 8).

Stock options

The Company has established a rolling stock option plan ("Option Plan") enabling the directors to grant options to employees, officers, directors, and consultants of the Company. From time to time, shares may be reserved by the Board, in its discretion, for options under the Option Plan, provided that the total number of shares reserved for issuance by the Board shall not exceed 10% of the issued and outstanding listed shares (on a non-diluted basis). Options are non-assignable and may be granted for a term not exceeding that permitted by the Exchange, currently ten years.

On June 11, 2024, the Company granted a total of 3,940,000 stock options to certain officers, directors, and consultants of the Company. These options, with a fair value of $540,000 at the grant date, are exercisable at $0.20 per share and are valid until June 11, 2029. The options vest immediately and are subject to a statutory hold period until October 12, 2024, in accordance with applicable securities laws.

Share-based payments relating to options vested during the year ended September 30, 2024, using the Black-Scholes option pricing model was $540,527 (2023 - $20,169) which was recorded as reserves on the statements of financial position and as share-based compensation expense on the statements of loss and comprehensive loss. The share-based payment expense for the options granted during the year was calculated based on the following weighted average assumptions:

	September 30, 2024	September 30, 2023
Risk-free interest rate	2.05%	-
Expected life of options	5 years	-
Expected annualized volatility	97.93%	-
Expected dividend rate	-	-
Fair value per option	$0.14	-

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

9. Share capital and reserves (continued)

The number and weighted average exercise prices of the stock options are as follows:

	Number of options	Weighted average exercise price
Outstanding options, September 30, 2022	2,393,103	$ 0.25
Cancelled	(44,643)	0.19
Expired	(66,147)	0.27
Outstanding options, September 30, 2023	2,282,313	$ 0.24
Granted	3,940,000	0.20
Expired	(50,583)	0.16
Outstanding options, September 30, 2024	6,171,730	$ 0.22

During the year ended September 30, 2024, the Company granted 3,940,000 options (2023 – nil), nil stock options (2023 – 44,643) were cancelled and 50,583 stock options (2023 – 66,147) expired unexercised.

As at September 30, 2024, the Company has outstanding stock options exercisable as follows:

Expiry date (mm/dd/yyyy)	Number of options outstanding	Weighted average remaining life in years	Exercise price	Number of options exercisable
11/15/2024*	116,730	0.13	$ 0.100	116,730
09/08/2025	2,065,000	0.94	$ 0.250	2,065,000
07/16/2026	50,000	1.79	$ 0.270	50,000
06/11/2029	3,940,000	4.70	$ 0.200	3,940,000
	6,171,730	3.33		6,171,730

*Subsequent to year end, 101,166 options were exercised and 15,564 options expired unexercised.

10. Related party transactions

(a) Transactions:

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company's Board of Directors and corporate officers. The remuneration of directors and key management personnel during the year ended September 30, 2024 is as follows:

	September 30, 2024	September 30, 2023
Management and consulting fees (i)	$ 282,000	$ 282,000
Share-based compensation	356,400	18,677
	$ 638,400	$ 300,677

(i) Management and consulting fees of the key management personnel for the year ended September 30, 2024 were allocated as follows: $132,000 (2023 - $132,000) expensed to management and consulting fees and $150,000 (2023 - $150,000) capitalized to exploration and evaluation assets.

Page 20 of 22

---

CAPITAN SILVER CORP.

Notes to the Consolidated Financial Statements

For the Year ended September 30, 2024

(Expressed in Canadian Dollars)

11. Income tax

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

	2024		2023
Loss for the year	$	(1,313,556)	$ (746,411)
Expected income tax (recovery)	$	(355,000)	$ (202,000)
Change in unrecognized deductible temporary differences		(5,000)	(2,000)
Permanent differences		143,000	6,000
Change in unrecognized deductible temporary		217,000	198,000
Total income tax expense (recovery)	$	-	$ -

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

	2024	Expiry Date Range	2023	Expiry Date Range
Temporary Differences
Exploration and evaluation assets	$ -	No expiry date	$ -	No expiry date
Share issue costs	-	-	52,000	2044
Non-capital losses available for future periods	4,142,000	2040-2044	3,298,000	2039-2043
Canada	3,727,000	2040-2044	3,010,000	2039-2043
Mexico	415,000	No expiry date	288,000	No expiry date

Tax attributes are subject to review, and potential adjustment, by tax authorities.

12. Financial instruments

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

The fair value of the Company's cash, restricted cash and accounts payable and accrued liabilities approximate carrying value, due to their short-term nature.

The Company's risk exposures and the impact on the Company's financial instruments are summarized below:

Liquidity risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2024, the Company had cash of $568,421 (2023 - $521,614) to settle current liabilities of $47,459 (2023 - $49,869). The Company believes it has sufficient funds to meet its current liabilities as they become due.

Page 21 of 22

---

CAPITAN SILVER CORP.
Notes to the Consolidated Financial Statements
For the Year ended September 30, 2024
(Expressed in Canadian Dollars)

12. Financial instruments (continued)

Price risk

The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the potential adverse impact on profit or loss and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices of gold, silver and copper, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

Foreign currency risk

The Company is exposed to foreign currency risk on fluctuations related to accounts payable and accrued liabilities that are denominated in Mexican pesos.

Sensitivity analysis

The Company operates in Mexico and is exposed to risk from changes in the Mexican peso. A 10% fluctuation in the Mexico peso against the Canadian dollar would affect loss for the year by $88,007 (2023 - $82,770).

13. Capital management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of exploration and evaluation assets. In the management of capital, the Company includes components of shareholders' equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The properties in which the Company currently has an interest are in the exploration stage; as such the Company is dependent on external financing to fund activities. In order to carry out planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

The Company is not currently subject to externally imposed capital requirements. There were no change in the Company's approval to capital management.

14. Segmented information

The Company operates in one reportable segment, being the acquisition and exploration of mineral property interests in Mexico.

15. Subsequent events

• On October 31, 2024, the Company granted a total of 400,000 stock options to a new director of the Company. The options are exercisable at $0.30 per share and expire on October 31, 2029. The options vest over 24 months with 1/3 available upon issuance and 1/3 every 12 months thereafter.
• On November 14, 2024, the Company issued 101,166 common shares pursuant to the exercise of 101,166 stock options at a price of $0.10 per share for gross proceed $10,117.

Page 22 of 22