Century Lithium Corp. - Interim / Quarterly Report 2021

CYPRESS DEVELOPMENT CORP.

MANAGEMENT DISCUSSION AND ANALYSIS

THREE AND NINE MONTHS ENDED – SEPTEMBER 30, 2021

INTRODUCTION

This Management Discussion and Analysis (“MD&A”) of Cypress Development Corp. and its subsidiaries (the “Company” or “Cypress”) has been prepared by management as of November 29, 2021. Information herein is provided as of November 29, 2021, unless otherwise noted. The following discussion of performance, financial condition and outlook should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2020 and 2019 (“Financial Statements”) and the notes thereto, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2021 and 2020 (“Interim Financial Statements”) and notes thereto prepared in accordance with IFRS. These statements are filed with the relevant regulatory authorities in Canada. All amounts herein are expressed in Canadian dollars, unless otherwise indicated.

Additional information relevant to the Company’s activities, including the Company’s Annual Information Form dated March 15, 2021 (the “Annual Information Form”), can be found on SEDAR at www.sedar.com.

Dr. William Willoughby, PhD., PE is a non-independent Qualified Person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects, and approved the scientific and technical information in this MD&A.

Readers are cautioned that this MD&A contains forward-looking statements. All information, other than historical facts included herein, including without limitation data regarding potential mineralization, exploration results and future plans and objectives of Cypress is forward-looking information that involves various risks and uncertainties. There can be no assurance that such information will prove to be accurate and future events and actual results could differ materially from those anticipated in the forward-looking information.

HIGHLIGHTS, RECENT DEVELOPMENTS AND OUTLOOK

Highlights for the Quarter

Closing of a license agreement to use proprietary technology for direct lithium extraction at the Clayton Valley Lithium Project (the “Lionex Process”).
Entered into a water rights purchase and sale agreement (the “Water Rights Agreement”) for water rights for the Clayton Valley Lithium Project.
Assembled the majority of the components of the Pilot Plant.
Appointed Cassandra Joseph as independent director and Chair of the Board of Directors.
Appointed Bryan Disher as independent director and Chair of the Audit and Compensation and Corporate Governance committees of the Board of Directors
Appointed Spiros Cacos as Vice President, Investor Relations.

Recent Developments and Outlook

During the quarter, the Company made significant progress as it continued its preparatory work to advance its Clayton Valley Lithium Project towards the feasibility stage. The Company entered into the Water Rights Agreement with Intor Resources Corp. (“Intor”), a subsidiary of Nevada Sunrise Gold Corp., for the purchase of Intor’s water rights in the Clayton Valley. These water rights allow for 1,770 acre feet of water for mining, milling and domestic use per year and will meet a significant portion of the Clayton Valley Lithium Project’s water needs. The Water Rights Agreement contains several conditions precedent, including the extension by the Nevada Division of Water Resources of Intor’s water rights permit. The permit was extended post quarter end to August 28, 2022. Completion of the Water Rights Agreement is expected prior to year-end 2021.

During the quarter, the Company also entered into a share purchase and license agreement (the “License Agreement”) with Chemionex Inc. (“Chemionex”), an Ontario based company, and an arm’s length third party (together the “Sellers”). The License Agreement formalized the terms of acquisition of a license to use Chemionex’s direct lithium extraction (“DLE”) Lionex Process at the Clayton Valley Lithium Project. The acquisition included pilot plant equipment designed and constructed by Chemionex for the Company, which uses the Lionex Process (“Pilot Plant Equipment”). Under the terms of the License Agreement, Cypress acquired a 100% ownership of a private company, 2845028 Ontario Inc., which owns the Pilot Plant Equipment and a license to use the Lionex Process for the Clayton Valley Lithium Project.

The purchase price for the Pilot Plant Equipment and the Lionex Process license comprised a $350,000 cash payment and one million Cypress shares which, following regulatory approval, were transferred into escrow (the “Consideration Shares”). The purchase price grants full ownership of 2845028 Ontario Inc. to the Company with no further payment or royalty obligations for the use of the Lionex Process.

Cypress has 12 months following installation of the Pilot Plant Equipment to carry out performance tests to confirm the successful operation of the Pilot Plant Equipment and determine, in its absolute discretion, whether to release the Consideration Shares to the Sellers. In the event Cypress determines not to release the Consideration Shares, 2845028 Ontario Inc. will revert to the Sellers, the cash payment will be forfeited by the Company, and the Consideration Shares will be returned to the Company’s treasury.

The pilot plant was largely completed during the quarter and extraction testing of lithium-bearing claystone commenced during early November 2021. The plant operation is supervised by Continental Metallurgical Services LLC in conjunction with Cypress and del Sol Refining Inc. (“del Sol”) personnel.

The plant is configured into three general sections: leaching, tailings handling and direct lithium extraction (“DLE”). Offsite testing of product and stripped leach solutions will be conducted at NORAM Engineering and Construction Ltd.’s (“Noram Engineering”) BC Research laboratory in Richmond. BC, Canada.

Each section in the plant will have specific objectives. The leaching section will work to optimize leach conditions and confirm lithium extraction into pregnant leach solution. The tailings handling section will utilize a counter current decantation arrangement of thickener settlers and flocculant mixing determined by Pocock Industrial with the objectives of determining materials handling, moisture content and water consumption.

The offsite work to be conducted by NORAM Engineering will treat concentrated lithium solution from the DLE portion of the pilot plant to produce lithium hydroxide and test the stripped leach solution for compatibility in recycling to the leaching portion of the plant.

During the quarter, the Company spent $2,517k on site related activities which included $1,151k on the pilot plant.

Management and Board Changes

On June 2, 2021, Ms. Cassandra Joseph was appointed non-executive director of the Company. On August 27, 2021, Ms. Joseph was appointed Chair of the Company’s Board of Directors, succeeding Mr. Donald Huston, previous Chairman and President, and Mr. Bryan Disher was appointed non-executive director and Chair of the Audit and Compensation and Corporate Governance committees of the Board of Directors. Dr. William Willoughby, Chief Executive Officer (“CEO”) of the Company, assumed the role of President, in addition to his role as CEO, effective on that date.

After the quarter end, Mr. Ken Owen was appointed non-executive director to the Company’s Board of Directors and Mr. Huston and Ms. Amanda Chow resigned from the Board.

On August 1, 2021, Mr. Spiros Cacos joined the Company as Vice President, Investor Relations. Mr. Cacos is an Investor Relations & Corporate Communications executive with over 20 years of comprehensive experience with a primary focus in mineral companies, including grassroots, development, and production. He brings to Cypress his extended network within the financial community, together with investment advisors, portfolio managers, industry analysts, and media outlets throughout North America, the United Kingdom, and Europe.

BUSINESS DESCRIPTION, EXPLORATION AND DEVELOPMENT ASSETS AND HISTORY

Nature of Business

Cypress is a public company listed on the TSX Venture Exchange under the symbol “CYP”. The Company is an exploration and development stage company that is engaged principally in acquisition, exploration and development of its mineral properties and has not yet determined whether the properties contain reserves that are economically recoverable. The recoverability of amounts shown for the mineral properties and related deferred exploration and evaluation costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the exploration and development of the property, and upon future profitable production.

Exploration and Evaluation Assets

Developments on the properties are as follows:

Dean Claims, Nevada, USA

On September 8, 2016 Cypress entered into an agreement to acquire a 100% interest in the 2,700 acre Dean lithium property in Clayton Valley, Nevada. To purchase is 100% interest in the claims, over a four-year period the Company paid US$140,000 ($181,946) in cash and issued 1,050,000 shares of the Company, valued at $221,250.

The Optionor retains a net smelter return (“NSR”) royalty interest of 3% with Cypress having the right to purchase twothirds of the NSR for $1,000,000.

As at September 30, 2021, the Company has incurred $674,293 in exploration and evaluation expenditures on the property.

Glory Claims, Nevada, USA

On January 26, 2016 Cypress entered into an agreement to acquire a 100% interest in the 1,280 acre Glory lithium property in Clayton Valley.

On January 28, 2019, the Company completed the purchase with a cash payment of US$75,000 and the issuance of 250,000 common shares of Cypress to the vendor valued at $58,750. The vendor retains a 3% NSR royalty interest. Cypress has the right to purchase two-thirds of the royalty, or 2% NSR, for US$1 million prior to the beginning of production.

Gunman Project, White Pine Claims, Nevada, USA

The Company has a 100% interest in certain claims located in White Pine County, Nevada. The Company incurred and capitalized $441,623 in acquisition and exploration costs. The property is subject to a 2% NSR.

In 2017 the Company entered into an option agreement which provided the optionee (Caliber Minerals Inc. formerly Silcom Systems Inc.) with an earn-in option to acquire an initial 51% interest in the property. The Company subsequently granted the optionee a second option to acquire an additional 29% interest. The optionee paid the Company US$50,000 in respect of the option agreements.

On December 5, 2017, the Company entered into an agreement with Pasinex Resources Limited (through its wholly owned subsidiary Pasinex Resources Nevada Limited) (“Pasinex”), whereby the original optionee transferred its previous option to Pasinex.

To acquire an initial 51% interest in the property, Pasinex issued the Company 600,000 of its listed common shares and made cash payments of US$200,000 and must incur exploration expenditures totaling US$1,850,000 over the three-year term of the agreement (the “First Option”). In 2020, in exchange for a cash payment of US$15,000, the exploration expenditure requirements with respect to the First Option were extended on November 27, 2020, as follows:

US$200,000 in exploration expenditures by December 31, 2021 US$1,400,000 in exploration expenditures by December 31, 2022

The Company granted Pasinex a second option (the “Second Option”) to acquire an additional 29% interest by issuing 200,000 listed common shares and making a cash payment of US$250,000 after satisfying and exercising the First Option and incurring additional exploration expenditures totaling US$1,100,000 within 12 months. The Second Option agreement was extended to December 31, 2024. Pasinex issued the Company the 200,000 shares, valued at $6,000, in 2019

Upon completion of the Second Option, issuance of all the shares and cash payments and completion of all work commitments, Pasinex will have earned an 80% interest in the property, subject to an underlying 2% NSR royalty interest.

As at September 30, 20121 Pasinex is required to make the following cash payments and share issuances to the Company:

	Cash	Share	Expenditure
Due Date	Payments	Issuances	Commitments
By December 31, 2021	-	-	US$ 200,000
By December 31, 2022	-	-	US$1,400,000
By December 31, 2024	US$250,000	200,000	US$1,100,000
Receipt of a feasibility report within 90 days of
exercise of the First Option
Total	US$250,00	200,000	US$2,700,000

Clayton Valley Lithium Project

The contiguous Dean and Glory properties collectively comprise Company’s Clayton Valley Lithium Project. Exploration drilling began on the properties in 2017.

History of the Clayton Valley Lithium Project

On February 7, 2018, the Company reported results from the first four core holes on the Glory claims at the Clayton Valley Lithium Project and that the drilling extended the trend of lithium (“Li”) mineralization by more than 2 kilometers south and west from the Dean claims, where the Company had previously reported 14 drill holes and encountered lithiumbearing claystone over an area averaging 4 kilometers by 2 kilometers. The Company commenced mobilization for drilling on the Clayton Valley Lithium Project in support of a prefeasibility study (“PFS”).

On April 3, 2018, the Company announced results from three holes drilled at the Clayton Valley Lithium Project and reported an intersection of 97 meters averaging 1,144 ppm Li in the final hole.

On May 1, 2018, the Company announced a maiden independent resource estimate for the Clayton Valley Lithium Project that noted a total indicated mineral resource of 597 million tonnes at an average grade of 899 ppm (0.09%) Li, which equates to a contained 2.857 million tonnes of lithium carbonate equivalent (“LCE”). The Company also reported total inferred mineral resource of 779 million tonnes at an average grade of 888 ppm (0.089%) Li which equates to a contained 3.683 million tonnes of LCE.

On May 9, 2018, the Company commenced a Preliminary Economic Assessment (“PEA”) on the Clayton Valley Lithium Project to be undertaken by Global Resource Engineering, Ltd. Of Denver, Colorado, an independent engineering services firm.

On September 6, 2018, the Company announced results from the PEA, reporting a net present value of $1.45 billion at an 8% discount rate.

On October 26, 2018, the Company closed a non-brokered placement financing for total gross proceeds of $2,010,647 to be used for the completion of the, including further metallurgical studies and related infill drilling, and for general working capital purposes.

On February 14, 2019, the Company selected Ausenco Engineering Canada Inc. as the lead consultant for the PFS.

On February 26, 2019, the Company completed the first phase of metallurgical testing in the PFS and reported that testing confirmed the range of parameters used in the PEA conducted in 2018.

In April 2019, the Company completed its infill drilling program and received assay results at the Clayton Valley Lithium Project. The drilling was focused within a one kilometer-square area where six holes were completed to an average of 120 meters below surface grade.

On July 15, 2019, the Company reported on the demonstration of high lithium recoveries for the Clayton Valley Lithium Project utilizing extraction processes developed by Lilac Solutions.

On August 29, 2019, the Company achieved a milestone where a commercially viable process was identified based on filtration, to deal with the separation of clay particles from leach solutions.

On November 14, 2019, the Company contracted NORAM Engineering to conduct concept testing for the Clayton Valley Lithium Project. On February 27, 2020, the Company received positive initial results from the test program.

On May 19, 2020, the Company announced results from the PFS of the Clayton Valley Lithium Project: average annual production of 27,400 tonnes per year LCE, mine life for PFS of 40 years, industry-low cash cost of US$3,392 per tonne LCE, US 1.052 billion NPV at 8% discount rate after, after tax internal rate of return of 25.8% and payback period of 4.4 years.

On August 11, 2020, the Company announced a mineral resource estimate at the Clayton Valley Lithium Project which included measured plus indicated resources of 929.6 million tonnes averaging 1,062 ppm Li or 5.2 million tonnes LCE.

On February 7, 2021, the Company entered into a twelve-month lease agreement with del Sol for the lease of part of their refining facility in the Amargosa Valley (the “Amargosa Site”). The Amargosa Site is located approximately 110 miles south from Tonopah, Nevada and will be used to house the pilot plant.

On March 1, 2021, the Company amended the PFS Report (as set out below).

On March 22, 2021, the Company closed a bought deal public offering for 15,640,000 units of the Company at a price of $1.25 per unit for gross proceeds of $19,550,000. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant is exercisable for one common share of the Company for a period of 36 months, expiring on March 22, 2024 at an exercise price of $1.75.

On April 13, 2021, the Company entered into a five-year lease with Nye County, renewable for two additional five-year terms, for 19.64 acres of land adjacent to Tonopah Airport for US$750 per month.

On May 3, 2021, the Company entered into a mineral property acquisition agreement to acquire 24 unpatented mining claims in the Clayton Valley for strategic purposes.

On May 10, 2021, the Company entered into a letter of intent for the purchase of water rights for the Clayton Valley Lithium Project from the Nevada Sunrise Gold Corp. Group.

On May 20, 2021, the Company announced that it has entered into a service agreement with Chemionix to advise on the DLE section of the pilot plant.

On July 6, 2021, the Company entered into a share purchase and license agreement with Chemionix for the Pilot Plant Equipment and the use of Chemionix’s Lionex Process DLE technology for both testing in the pilot plant and the use, without any further payment, for the Clayton Valley Lithium Project.

On September 8, 2021, the Company entered into the Water Rights Agreement, allowing for 1,770 acre-feet of water per year for mining, milling and domestic use.

PREFEASIBILITY STUDY

Amended Prefeasibility Study for Clayton Valley Lithium Project

The Company’s NI 43-101 Technical Report on the Clayton Valley Lithium Project is titled “Prefeasibility Study Clayton Valley Lithium Project Esmeralda County, Nevada” with an effective date of August 5, 2020, amended March 15, 2021 (the “PFS Report”). The PFS Report includes the results from all drilling and metallurgical testing, updates to the capital and operating cost estimates, and addresses changes in the physical and economic conditions since the previous technical reports relating to the Clayton Valley Lithium Project.

The following is a summary of the PFS Report. The detailed PFS Report is available for review on the Company’s website and also under the Company’s SEDAR profile at www.sedar.com.

Project Description, Location and Access

Cypress commissioned the PFS Report of the Clayton Valley Lithium Project. The Clayton Valley Lithium Project is in Esmeralda County, Nevada, six miles east of the community of Silver Peak, and is located within township 2 south, range 40 east, and township 3 south, range 40 east, Mt. Diablo Meridian. Access from Tonopah, Nevada, is by traveling 22 miles south on US Highway 95, then 19 miles west on Silver Peak Road.

The PFS updates previously disclosed mineral resource estimates and economic assessments.

Mineral Rights and Tenure

The Clayton Valley Lithium Project comprises 129 unpatented placer mining claims and 212 unpatented lode mining claims. The claims cover 5,430 acres and provide Cypress with the rights to all brines, placer and lode minerals on the property. All lode and placer claims are unpatented U.S. Federal claims administered by the U.S. Bureau of Land Management (the “BLM”). The claims are held 100% by Cypress and subject to an underlying 3% NSR agreement. The royalty can be brought down to a 1% NSR in return for US$2 million in payments to the original property vendor. The claims require annual filing of “Intent to Hold” and cash payments to the BLM and Esmeralda County totaling $167 per 20 acres or claim, depending on claim type.

History

The first recorded mining activity in Clayton Valley was in 1864 with the discovery of silver at the town of Silver Peak. The playa in the center of Clayton Valley was mined for salt as early as 1906, and later explored for potash during World War II. Lithium was noted during the 1950s. In 1964, Foote Minerals acquired leases and began production of lithium carbonate at Silver Peak by 1967. Production of lithium carbonate from brine has continued to the present under several companies, currently under Albemarle Corporation.

The occurrence of lithium in sediments of Clayton Valley was reported as early as the 1970s by the United States Geological Survey. In 2015, Cypress acquired rights to claims on the south and east side of Angel Island. Sampling revealed high lithium concentration in surface sediments. In 2017, Cypress drilled its first holes in the Dean claim block, followed later that year by drilling in the Glory claim block. In February 2018, Cypress reported exploration results on the Dean claims in a NI 43-101 technical report. Later in 2018, Cypress completed additional drilling followed by a NI 43101 technical report Resource Estimate and the PEA.

Geological Setting, Mineralization and Deposit Type

The Clayton Valley is a closed basin near the southwestern margin of the Basin and Range geo- physiographic province of western Nevada. Horst and graben normal faulting is a dominant structural element of the Basin and Range and likely occurred in conjunction with deformation due to lateral shear stress, resulting in disruption of large-scale topographic features. Clayton Valley is the lowest in elevation of a series of regional playa filled valleys, with a playa floor of about 100 square kilometers (km2) that receives surface drainage from an area of about 1,300 km2. The valley is fault-bounded on all sides, delineated by the Silver Peak Range to the west, Clayton Ridge and the Montezuma Range to the east, the Palmetto Mountains and Silver Peak Range to the south, and Big Smokey Valley, Alkali Flat, Paymaster Ridge, and the Weepah Hills to the north.

The western portion of the project area is dominated by the uplifted basement rocks of Angel Island which consist of metavolcanic and clastic rocks, and colluvium. The southern and eastern portions are dominated by uplifted, lacustrine sedimentary units of the Esmeralda Formation. Within the project area, the Esmeralda Formation is comprised of fine grained sedimentary and tuffaceous units, with some occasionally pronounced local undulation and minor faulting.

Elevated lithium concentrations, generally greater than 600 ppm, are encountered in the local sedimentary units of the Esmeralda Formation from surface to at least 142 meters below surface grade. The lithium- bearing sediments primarily occur as silica-rich, moderately calcareous, interbedded tuffaceous mudstone, claystone and siltstone.

Lithium occurs in potentially economic concentrations in three types of deposits: pegmatites, continental brines, and clays. Lithium is produced from pegmatites and brines, with brines the largest producer of lithium worldwide. There is no active mining of lithium clay deposits. In clay deposits, lithium is often associated with smectite (montmorillonite) group minerals. The USGS presents a preliminary descriptive model of lithium in smectites of closed basins (AsherBolinder, 1991), Model 251.3(T), which suggests three forms of genesis for clay lithium deposits: alteration of volcanic glass to lithium-rich smectite; precipitation from lacustrine waters; and incorporation of lithium into existing smectites. In each case, the depositional/diagenetic model is characterized by abundant magnesium, silicic volcanic rocks, and an arid environment.

Exploration

Cypress began exploring the project in late 2015. Exploration activities carried out by Cypress to the date of the PFS Report included surface sampling, detailed geological mapping, and drilling. In 2016, prior to drilling, Cypress collected 494 soil and rock chip samples. Results indicated elevated lithium concentrations over most of the project area. Cypress also conducted surface geologic mapping over most of the project. The geologic information is used as a guide for exploration planning in combination with surface samples and drilling results.

Drilling

Cypress drilled at the project in 2017, 2018, and 2019 a total of 29 vertical, NQ-size core holes. Drill hole depths ranged from 33 to 142.3 meters, totaling 2,574.9 meters drilled. The drilling results indicate a favorable section of claystone extending to depths of approximately 120 meters, where a strong, apparently planar, alternating oxidation/unaltered zone exists. The lithium content through these zones appears consistent, as do other geochemical factors, and any specific significance of the oxidized and unaltered zones regarding lithium mineralization is not apparent.

Sampling, Analysis and Data Verification

Samples collected at the Clayton Valley Lithium Project comprise surface samples and NQ-size drill core. Surface samples of outcropping materials or soil were collected by Cypress’ geologists using standard hand tools. Location and material were logged, samples were bagged and marked with number or other designation.

Samples are crushed, split, and pulverized at the laboratory in preparation for analysis. After pulverizing, two subsamples are selected by the lab for duplicate analysis. Cypress has submitted eight pulp duplicates to a secondary laboratory as check samples, the pulp duplicates are principally used by the primary lab for internal quality control and are not relied on by Cypress to evaluate the overall quality of the sampling program.

For most samples collected at the project, Cypress’ QA/QC procedures were limited to insertion of a certified reference material (“CRM”) standard at a rate of one standard sample per 30 core samples. These standards were purchased in durable, pre-sealed packets. The standard sample assay results were routinely reviewed by Cypress’ geologists, and the results fell within the anticipated range of variability as described by the manufacturer of the standards. The assay results in total, including standard, core, and surface sample data, provide no indication of systematic errors that might be due to sample collection or assay procedures.

Data verification efforts included on-site inspections of the project, drilling activity, core storage facility, independent laboratory facilities, check sampling, and auditing of the project database.

Mineral Processing & Metallurgical Testing

Lithium in the deposit is associated with illite and smectite clays. The lithium is amenable to leaching with dilute sulfuric acid leach followed by filtration, solution purification, concentration and electrolysis to produce lithium hydroxide.

Leaching tests were conducted by Continental Metallurgical Services (“CMS”) in Butte, Montana. Tests on solid-liquid separation, tailings handling, and lithium recovery from solution were performed at several laboratories in the US and Canada. All analytical work was supported by ALS Minerals in Reno, Nevada and Vancouver, B.C.

Physical property testing shows the clay is soft, has negligible abrasion and work indices, and readily disaggregates with agitation in water. Testing has shown that leaching must be done at less than 30% solids for the slurry to mix, pump, and flow properly.

Leach tests were conducted on various samples under varying conditions to determine optimum acid concentrations and temperatures in leaching, and whether variability exists by material type. Tests on composite samples from four drill holes in 2019 showed only minor differences with respect to sample depth, oxidation or weathering state of the clay.

Large leach tests were performed on samples to provide slurry for rheology, filtration, and lithium recovery testing. The tests yielded average results of 86.5% extraction of lithium into solution and 126.5 kilograms per tonne for acid consumption.

Testing was conducted to determine a commercial means of solid-liquid separation. Specific conditions and equipment were identified. Solids from filtration tests simulating the final circuit were generated. The solids following single stage washing are suitable for handling by conveyor to a conventional dry-stack tailings facility.

CMS and NORAM Engineering designed and tested critical key elements of the flowsheet for recovering the lithium from solution. The flowsheet uses several stages to remove impurities and recycle 85% of the inflow back to leaching. The remaining 15% is treated by evaporation, followed by crystallization of salts and recovery of free sulfuric acid. Sulfuric acid is returned to the leach circuit along with the water recovered from evaporation. The NORAM Engineering-CMS test program was successful in yielding a concentrated lithium solution containing 1.85% lithium with low impurities and suitable for direct production of lithium hydroxide after additional treatment.

Mineral Resources

The mineral resource estimate is based on all drilling results from the Clayton Valley Lithium Project, totaling 33 core drill holes.

The reported mineral resource is pit constrained by an “ultimate” pit that extends to the property boundaries and uses slope angles determined from geotechnical study described in Section 16.0 of the PFS Report. The area around and beneath the tailings facility is excluded from the pit constrained mineral resource.

The pit-constrained mineral resource (Table 1-1) totals 1,304.2 million tonnes averaging 904.7 parts per million (ppm) Li in the indicated resource. Lithium contained in the pit-constrained indicated resource totals 1,179.9 million kg of Li, or 6.28 million tonnes of LCE.

Table 1-1: Summary of Mineral Resources

	Tonnes Above
Domain		Li Grade (ppm)
	Cutoff (millions)		Li Contained (million kg)

Indicated
Tuffaceous mudstone	91.4	656.8	60.1
Claystone all zones	956.9	973.9	932.0
Siltstone	255.8	734.2	187.8
Total	1,304.2	904.7	1,179.9
Inferred
Tuffaceous mudstone	39.9	560.2	22.3
Claystone all zones	146.2	792.5	115.9
Siltstone	50.3	821.9	41.4
Total	236.4	759.6	179.6

The effective date of the mineral resource estimate is August 5, 2020. The QP for the estimate is Ms. Terre Lane of Global Resource Engineering Ltd. and is independent of Cypress.
The mineral resources were determined at a 400 ppm Li cut-off and specific gravity of 1.505.
The mineral resource estimate was prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards (“2014 CIM Definition Standards”) and with the generally accepted CIM’s “Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 29, 2019).
Cautionary statements regarding mineral resource estimates: mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources will be converted into mineral reserves. Inferred mineral resources are the part of a mineral resource for which quantity and grade or quality are estimated based on limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological, and grade or quality continuity.

Mineral Reserves

The indicated resources were used to determine the mineral reserves as described in Sections 14.0 and 15.0 of the PFS Report.

Within the ultimate pit shell, 16 pit phases were constructed, expanding from initial mining in the southwest to the northeast. For the production schedule and analysis, only the first eleven phases are used to produce a mine life of approximately 40 years. The cumulative result for all eleven phases forms the mineral reserves in Table 1-2.

Table 1-2: Summary of Mineral Reserves

	Tonnes Above Cutoff	Li Grade	Li Contained
Domain	(millions)	(ppm)	(million kg)
Probable Reserve
Total	213.3	1,129	240.9

The effective date of the mineral reserve estimate is August 5, 2020. The QP for the estimate is Ms. Terre Lane of Global Resource Engineering Ltd. and is independent of Cypress.
The mineral reserve estimate was prepared with reference to the 2014 CIM Definition Standards and the with generally accepted CIM’s “Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 29, 2019).
Mineral reserves are reported within the pit design at a mining cut-off of 900 ppm.
The cut-off of 900 ppm is an optimized cut-off selected for the mine production schedule. The mineral reserve cutoff exceeds the 400-ppm economic mineral resource cut-off to accelerate return on capital, maximize operating margins, and reduce risk. Material between the economic cut-off and is the optimized cut-off is stockpiled for future processing.
The mineral reserves are derived from and not separate from the mineral resources.
No inferred resources are included in the mineral reserves or given value in the economic analysis.

The mineral reserve is classified as a probable reserve as described in Section 15.1.3 of the PFS Report. The probable reserve contains 240.9 million kg of Li, or 1.28 million tonnes LCE.

Mining Operations

Mining will be carried out using conventional surface methods. Excavation will use a single Caterpillar 6020B or equivalent shovel (hydraulic excavator configuration) with a 12 m³ bucket capacity. The initial pit is based on the first eight phases of the ultimate pit (Table 1-3) and were developed to mine higher-grade material, and a preliminary mining schedule was generated for the base case scenario based on a nominal daily production rate of 15,000 tonnes/day (tpd) of mill feed. No drilling or blasting will be required.

d. No drilling	or blasting will be required.	or blasting will be required.	or blasting will be required.	or blasting will be required.
	Table 1-3: Initial Pit Production by Phase
		Low Grade		Ore Li	Ore Li
	Ore Tonnes		Waste Tonnes			Stripping
Pit Phase		Tonnes		Contained	Grade
	(millions)		(millions)			Ratio
		(millions)		(millions Kg)	(ppm)

1	29.9	0.36	0.70	35.9	1,199	0.04
2	16.2	0.03	2.5	18.9	1,165	0.16
3	23.8	1.01	3.6	26.7	1,122	0.19
4	12.3	1.06	2.3	14.4	1,169	0.27
5	33.4	7.4	2.2	37.0	1,109	0.29
6	32.5	7.5	2.6	36.8	1,131	0.31
7	14.1	0.21	2.9	16.0	1,140	0.22
8	34.3	6.0	2.3	38.6	1,125	0.24
9	4.1	9.0	0.0	4.0	968	2.20
10	5.7	5.1	0.0	5.6	994	0.89
11	7.0	6.0	0.0	7.0	1,001	0.86
Total	213.3	43.6	19.1	240.9	1,129	0.29

The processable material will be removed from the pit using in-pit, semi-mobile feeder-breaker with conveyors. The production equipment includes a 12 m³ hydraulic excavator and scrapers to haul lower grade claystone to a waste dump. The stripping ratio is 0.29:1. The mine operates on a two 10-hour shift, 7 days/week schedule.

Infrastructure

Access to the project is via Silver Peak Road. The east side of Angel Island was identified for the plant location based upon proximity to the road, power, mine area, and favorable topography.

Facilities on-site include administration, laboratory, warehouse, reagent storage, sulfuric acid plant, crushing, leaching and lithium recovery areas, mine shop, and fuel and reagent storage areas.

An acid plant, with 2,500 tpd of acid capacity, is a key item of infrastructure. The plant will burn elemental sulfur to create sulfuric acid and, in the process, generate steam to heat leach tanks. The plant will also be equipped for power generation.

Tailings will be conveyed from the filtration area and stacked in tailings facility south of the plant by conveyor. Dozers will be used for final spreading and contouring.

Cypress has evaluated options for securing makeup water estimated at 2,000 gallons per minute. A specific source and related costs are excluded from the study. Allowances are included in the estimates for constructing supply wells, pipeline, and power.

Permitting & Environmental

Environmental permitting requirements for the Clayton Valley Lithium Project are expected to be similar to other mines in Nevada. The permitting process consists of submitting a Plan of Operations to the BLM, who will act as lead agency, conducting environmental baseline studies, and preparing an Environmental Impact Statement along with other permit applications prior to site development and operations. The applications will include consideration of reclamation, surface water, groundwater and air pollution prevention plans, and other items common to mining operations in the State of Nevada. Permits and plans will include all applicable monitoring, reporting schedules, bonding and fees. The time frame for permitting the project is estimated at 18 to 24 months.

A Phase I Environmental Site Assessment of the project was conducted in 2019 and found no existing environmental liabilities. A Threatened and Endangered Species Preliminary Study was also completed. Initiation of field studies is included in the recommendation.

Capital & Operating Costs

Capital Costs

The capital and operating costs are estimated according to accepted methods for prefeasibility studies. The estimates constitute a Class 4 estimate, as defined by the AACE International, and have an accuracy of +30%/-15%. All costs are presented in Q1 2020 US$. The initial capital costs total US$493 million, which includes US$95 million in contingency plus working capital. Vendor quotes, internal data and public information were used along with construction factors to estimate direct costs. Indirect costs allow for EPCM, freight, sales tax and Owners Costs. Contingency at 20% is applied to the direct and indirect costs.

Table 1-4: Capital Cost Summary

Area	US$’000
Facilities	5,891
Mine	34,768
Plant	306,855
Infrastructure	25,907
Owners Costs	24,992
Contingencyand WorkingCapital	94,704
Total CAPEX	493,115

Operating Costs

The operating costs were developed for the operation sized to at the nominal mill rate of 15,000 tpd. The estimated operating costs total an average of US$91.9 million/year, or US$16.90/t.

Table 1-5: Operating Cost Summary

Area	Avg Annual	Mill Feed
	US$’000	US$/t

Mining	10,787	1.98
Processing	77,588	14.27
G&A	3,550	0.65
Total OPEX	91,925	16.90

The operating costs are developed from estimates of labor, operating and maintenance supplies, and power. The total labor force required for the operation is estimated at 183 on-site employees.

Acid plant operations are a major component in the operating costs and account for one third of the total operating cost based on a delivered cost of US$145 per tonne for sulfur. The acid plant has capacity to generate 93% of the power required by the operation and will have surplus power available when the operation is running. No allowances are made in the operating cost estimates for potential power sales or offsets.

Economic Analysis

An after-tax discounted cash flow model was prepared using the information and estimates in the PFS Report. The model includes federal, state and local taxes.

The nominal production rate at full operation is set at 15,000 tpd, or 5.475 million tonnes/year (tpy). The production schedule uses the material from the first eight pit phases, which results in a 40-year mine life, and 213 million tonnes of mill feed at an average grade of 1,129 ppm Li. Recovery of lithium is estimated at 83%. The resulting annual output averages 27,400 tpy of LCE.

The economic evaluation is reported in terms of LCE using an average price of US$9,500 per tonne. The price assumption reflects variations expected over time due to start-up and type of lithium product.

The only revenue stream considered is from the sale of lithium products. No revenues are included for any other byproducts. Such revenues remain to be determined.

No credit is taken for power sales or offsets on purchased electricity. Results for the project base case are:

Average annual production of 27.4 million kg of LCE.
Cash operating cost of US$3,387/tonne LCE
After-tax US$1.030 billion NPV at 8% discount rate
After-tax IRR of 25.8%
Payback period of 4.4 years
Break-even price (0% IRR) of US$4,081/t LCE

The cash flow model is most sensitive to changes in lithium price. Sensitivities to lithium price, capital and operating cost are shown in Table 1-6.

Table 1-6: Economic Sensitivity (US$)

Variation	50%	Base Case	150%
Lithium Price $/t LCE NPV-8% IRR	$4,750 $-0.14 million 5.0%	$9,500 $1.030 billion 25.8%	$14,250 $2.142 billion 41.3%
Capital Cost NPV-8% IRR	$247 million $1.252 billion 46.2%	$493 million $1.030 billion 25.8%	$740 million $807 million 17.8%
Operating Cost NPV-8% IRR	$1,664/t LCE $1.407 billion 31.2%	$3,387/t LCE $1.030 billion 25.8%	$4,993/t LCE $647 million 19.7%

Note: IRR (internal rate of return) and NPV (net present value) are both shown after-tax

Interpretation & Conclusions

The Clayton Valley Lithium Project has mineral resources and mineral reserves to support a mine life in excess of 40 years at a production rate at 27,400 tpy LCE and an average estimated operating cost of US$3,387/tonne LCE. The project risks are typical of a mining project at a prefeasibility level of study and further work with respect to processing and permitting are needed to advance the project to the feasibility level. A pilot plant program and environmental studies are needed to advance the project to the feasibility stage.

Recommendations & Risks

The recommendations to advance the project are:

Processing—Additional test work is needed to confirm the process flowsheet and determine recoveries and reagent
consumptions at the pilot stage. Critical information includes,
confirm steps and equipment in leaching and filtration;
conduct further work to enhance solid-liquid separation and reduce acid consumption;
determine lithium and acid losses in the processing plant if any;
o optimize solution handling in the plant and determine if bleed streams or additional treatment are needed to recycle solutions; and
determine whether potassium, magnesium, rare earth elements and other elements have commercial value.
Mining—Drilling or limited test mining is required to obtain material for metallurgical testing.
Permitting—A field program is required to determine if any species of concern are present and to gather data to
prepare a Plan of Operations.

• Infrastructure—Feasibility-level designs for the mine, plant and tailings storage areas can begin. Further determination of project power and water supply are needed.

Cost of the programs is estimated at US$7,250 million.

Table 1-7: Estimated Pilot Plant Costs

Area	US$ x 1000
Pre-program studies	150
Sampleprocurement	500
Infill drilling	500
Equipment
Leaching	650
Lithium Recovery	2,600
Operatingexpenses	1,500
Contingency	1,350
Total Program	7,250

The potential risks at this stage of the Clayton Valley Lithium Project are:

Recovery of lithium from the project was not proven at a commercial scale. Further testing in a pilot plant is needed;
Production is potentially limited by the availability and cost of sulfur and its transportation;
The project is most sensitive to lithium market prices which are currently dependent on the demand for lithium
batteries in electric vehicles and energy storage;

A source of makeup water has not been secured. Options to obtain water through rights acquisition, purchase or other
agreements should be pursued; and
Environmental permitting is subject to presence of flora, fauna or other conditions which are yet to be determined.

SHAREHOLDER RIGHTS PLAN

The Company announced on September 3, 2020, that it has entered into a Shareholder Rights Plan (the “Plan”), subject to all necessary regulatory and shareholder approval.

The Plan is designed to ensure that the Company’s shareholders are treated fairly in the event of a take-over bid for the Company’s common shares and that the Company’s Board of Directors and shareholders will have adequate time to evaluate any unsolicited take-over bid and, if appropriate, to evaluate and pursue other alternatives to maximize shareholder value. The Plan was not adopted in response to any actual or threatened take-over bid or other proposal from a third party to acquire control of the Company.

The Plan is effective as of September 2, 2020 (“Effective Date”). The Plan received the approval of the TSX Venture Exchange, subject to shareholder approval. The Company’s shareholders approved the Plan at the Annual General and Special Meetings of Shareholders held on October 14, 2020. The Plan will be in effect until three years from the Effective Date and must be renewed by shareholders at the 2023 Annual General Meeting and every three years thereafter.

At the close of business on the Effective Date, one right (a “Right”) was issued and attached to each common share of the Company outstanding at that time. A Right will also attach to each common share of the Company issued after the Effective Date.

The Plan is similar to shareholder rights plans recently adopted by several other Canadian companies. The Plan is not intended to block take-over bids. The Plan includes “Permitted Bid” provisions which will prevent the dilutive effects of the Plan from operating if a take-over bid is made by way of a take-over bid circular that, among other things, remains open for a minimum of 60 days and is accepted by a specified proportion of the common shares held by independent shareholders. The Plan will be triggered by an acquisition, other than pursuant to a Permitted Bid, of 20% or more of the outstanding common shares of the Company.

FINANCIAL RESULTS AND LIQUIDITY

Summary of Quarterly Results

The following selected financial information is a summary of quarterly results taken from the Company’s unaudited quarterly financial statements.

	September 30, 2021	June 30, 2021	March 31, 2021	December 31, 2020
Totalassets	$28,416,654	$25,740,084	$25,918,317	$ 6,864,765
Working capital	$ 19,639,277	$ 19,271,028	$ 20,462,381	$ 2,051,088
Revenue	$-	$-	$-	$-
Netloss	$ (123,175)	$ (254,159)	$ (710,648)	$ (230,961)
Net loss per share: Basic and fully diluted	$ (0.00)	$ (0.00)	$ (0.01)	$ (0.00)

	September 30, 2020	June 30, 2020	March 31, 2020	December 31, 2019
Total assets	$ 5,994,705	$ 5,201,423	$ 5,087,063	$ 5,285,202
Working capital	$ 1,419,515	$ 738,882	$ 1,059,176	$ 1,532,143
Revenue	$-	$-	$-	$-
Net loss	$ (267,534)	$ (125,096)	$ (239,350)	$ (408,018)
Net loss per share: Basic and fully diluted	$ (0.00)	$ (0.00)	$ (0.00)	$ (0.01)

Total assets increased $2,676,570 in Q3 2021 compared to Q2 2021 principally due to the receipt of $1,709,863 on the issuance of 4,179,726 shares from the exercise of 4,029,726 share purchase warrants and 150,000 stock options and 1,000,000 shares issued at a value of $970,000 as part of the consideration to acquire the Pilot Plant Equipment and Lionex Process license, less the loss for the quarter of $123,173. Working capital increased $369,249 in the quarter reflecting the equity receipts less the quarterly loss and expenditures on evaluation and exploration, property, plant and equipment, and intangible assets of $1,278,040.

In Q2 2021 total assets decreased by $178,233 from March 31, 2021, principally reflecting the net loss for the quarter of $254,159, plus $121,125 received on the exercise of 397,500 share purchase warrants and 390,000 stock options. Working capital decreased in quarter by $1,191,353 as a result of the quarterly loss, equity receipts and expenditures of $948,365 on evaluation and exploration and property, plant and equipment.

In Q1 2021 total assets increased by $19,053,552 from year end 2020. This increase reflects the net proceeds from the Company’s issuance of 15,640,000 equity units for net proceeds of $18,177,107 and $1,506,799 received from the exercise of 4,889,700 share purchase warrants and 1,350,000 stock options, less the $710,648 loss for the quarter. Working capital in the quarter increased $18,411,293 reflecting the equity receipts less the loss for the quarter and $545,465 in expenditures on exploration and evaluation and property, plant and equipment.

Total assets increased $870,060 in the quarter ended December 31, 2020, from $1,084,477 proceeds from the exercise of 1,370,000 and 3,412,892 stock options and warrants, respectively, and a loss of $171,873. Working capital increased $631,573 in the quarter due to the equity issues, loss for the quarter and the expenditure of $227,071 on exploration and evaluation.

Total assets increased $114,360 in Q2 2020, mainly due to the net loss in the quarter of $125,096, partially offset by the receipt of $30,400 from the exercise of stock options and warrants. Working capital decreased by $320,194 in the quarter as a result of the loss and equity exercises and the expenditure of $225,598 on exploration and evaluation.

In the quarter ended March 31, 2020, total assets decreased $198,139 principally as a result of the Company’s net loss for the quarter of $239,350. Working capital decreased by $473,067 reflecting the loss for the quarter and the expenditure of $233,617 on exploration and evaluation.

Nine Months Ended September 30, 2021 as Compared to Nine Months Ended September 30, 2020

The Company is in the exploration and development stage and does not yet generate any revenue.

For the period ended September 30, 2021, the Company reported a net loss of $1,087,980 or a $0.01 loss per share, compared to a loss of $631,981 or a $0.01 loss per share during the same period in 2020.

The Company’s total expenses of $1,781,551 increased by $866,910 as compared to $914,641 in the same period in the previous year. The Company’s expenses are principally comprised of administrative, office and miscellaneous expenses of $196,771 (2020 - $118,136), consulting fees of $694,601 (2020 - $263,493), legal costs of $146,323 (2020 - $274,218),

salaries and share-based compensation of $374,224 (2020 - share-based compensation of $84,577), shareholder communication costs of $243,883 (2020 - $158,985),

Salaries and wages and share-based compensation, a non-cash expense, increased following the hiring of a full-time CFO in Q2 2021 and a Vice-President, Investor Relations as the Company entered into two employment agreements during the current nine-month period. The Company did not have any employees in the prior year. During the nine months ended September 30, 2021, 250,000 of the 750,000 options granted to the Company’s CFO, with a fair value of $155,407, vested. In the period ended September 30, 2020, 350,000 options, with a fair value of $84,577, that had been granted to consultants vested.

Shareholder communications increased $84,898 compared to the same period in 2020 as the Company ramped up its marketing activities in the current period.

Consulting fees increased $431,108 from the comparative period as the Company paid bonuses to certain contactors in the first quarter following the completion of the Company’s bought deal offering.

During the current period, the Company had a foreign exchange gain of $687,150 (2020 - $nil) on US dollars the Company holds to meet US dollar denominated exploration and evaluation expenditures, partially offsetting the expenditures for the period.

Three Months Ended September 30, 2021 as Compared to Three Months Ended September 30, 2020

The Company is in the exploration and development stage and does not yet generate any revenue.

For the quarter ended September 30, 2021, the Company reported a net loss of $123,175 or a $0.00 loss per share, compared to a loss of $267,534 or a $0.00 loss per share during the same quarter in 2020.

The Company’s total expenses of $461,866 increased by $191,332 as compared to $270,534 in the same quarter in the previous year. The Company’s expenses are principally comprised of administrative, office and miscellaneous expenses of $40,851 (2020 - $37,684), consulting fees of $57,274 (2020 - $86,852), legal costs of $25,412 (2020 - $16,198), salaries and share-based compensation of $235,024 (2020 – share-based compensation of $84,577), shareholder communication costs of $93,007 (2020 - $35,782),

Salaries and wages and share-based compensation, a non-cash expense, increased following the hiring of a full-time CFO in Q2 2021 and a Vice-President, Investor Relations during the current quarter. as the Company entered into two employment agreements during the current nine-month period. The Company did not have any employees in the prior year. During the three months ended September 30, 2021 – 250,000 of the 750,000 options granted to the Company’s CFO, with a fair value of $155,407, vested. In the period ended September 30, 2020, 350,000 options, with a fair value of $84,577, that had been granted to consultants vested.

Shareholder communications increased $57,225 compared to the same quarter 2020 as the Company ramped up its marketing activities in the quarter.

Consulting fees decreased $29,578 from the comparative quarter due to timing of these expenses.

During the current quarter, the Company had a foreign exchange gain of $339,255 (2020 - $nil) on US dollars the Company holds to meet US dollar denominated exploration and evaluation expenditures, partially offsetting the expenditures for the quarter.

Liquidity and Capital Resources

In management’s view, given the nature of the Company’s operations, which consist of exploration and evaluation of mining properties, the most relevant financial information relates primarily to current liquidity, solvency and planned property expenditures. The Company’s financial success will be dependent upon the extent to which it can discover mineralization and the economic viability of developing its properties.

Such development may take years to complete and the amount of resulting income, if any, is difficult to determine. The sales value of any minerals discovered by the Company is largely dependent upon factors beyond the Company’s control, including the market value of the metals to be produced. The Company does not expect to receive significant income from any of its properties in the foreseeable future.

During the quarter, the Company continued its preparatory work to further progress its Clayton Valley Lithium Project towards the feasibility stage. The main activities focused around securing the water rights, closing the License Agreement, assembly of the pilot plant, licensing, and securing the appropriate staffing and support for the assembly and operation of the pilot plant.

The Company has no revenue generating operations from which it can internally generate funds. To date the Company’s activities have been financed by the sale of its equity securities by way of private placements and the exercise of incentive stock options and share purchase warrants. The Company’s working capital was $19,639,277 at September 30, 2021, consisting of cash and cash equivalents of $19,819,807 and receivables, prepaids and marketable securities of $168,496, less accounts payable and accrued liabilities of $349,026, as compared to working capital of $2,051,088 at December 31, 2020.

The changes to working capital were mainly due to:

Gross proceeds of $19,550,000 from the bought deal financing in March, 2021;
$3,216,662 in proceeds from the exercise of 1,890,000 options and 9,316,926 share purchase warrants;
Expenditures incurred during the current period for general operations; and
Expenditures on exploration and evaluation assets, property, plant and equipment and intangible asset of $3,741,870

The Company has historically met all its cash requirements through equity financings. Future funding needs of the Company are dependent upon the Company’s continued ability to obtain equity and/or debt financing to meet its financial obligations and to pursue further exploration on its properties.

The Company expects that it will operate at a loss for the foreseeable future however, the Company believes that its cash and cash equivalents as at the date of this MD&A are sufficient for the Company’s currently planned operating needs for the next 12 months.

TRANSACTIONS WITH RELATED PARTIES

The aggregate amounts of expenditures paid or payable to key management personnel consisting of directors, former directors or companies with common directors were:

	September 30, 2021 September 30, 2020
Charged to profit and loss for consulting fees: Amanda Chow – Director Don Huston – President, Director, Chairman Cassandra Joseph – Director Don Myers – Director Jim Pettit – Director, Acting CFO Willoughby & Associates, PLLC - a company owned by William Willoughby, CEO and a Director of the Company Sub-total Charged to profit and loss for salaries and wages: Abraham Jonker – CFO Capitalized to exploration and evaluation assets Willoughby & Associates, PLLC - a company owned by William Willoughby, CEO and a Director of the Company Total expense	$ 21,500 $ 9,000 85,625 45,150 9,444 - 76,625 36,000 63,875 4,500 128,862 86,096
	385,931 180,746
	183,000 -
	72,531 98,812
	$ 641,462 $ 279,558

Administrative agreement

The Company operates from the premises of Sentinel Market Services Ltd. (“Sentinel”), a private company owned by Jim Pettit, a director of the Company. Sentinel provides office and administrative services to the Company on a short-term contract, cost-recovery based contract. In November 2021 the Board of Directors approved a revised contract with Sentinel for the continuation of these services under a $25,000 per month fixed price contract, reviewable quarterly.

Included in due from related party at September 30, 2021, is $22,211 (December 31, 2020 - $18,374) due from Sentinel.

Included in accounts payable at September 30, 2021, is $88,447 (December 31, 2020 - $43,334) due to directors and/or their companies.

BALANCE SHEET ARRANGEMENTS

At September 30, 2021, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to the Company.

SUBSEQUENT EVENTS

On October 1, 2021, the Company granted 150,000 incentive stock options to a director of the Company. The options are exercisable at $1.51 per share for a period of five years from the date of grant. On November 22, 2021, the Company granted an additional 1,945,000 incentive stock options to directors and contractors of the Company at an exercise price of

$2.26 per share. These options vest over variable periods of up to three years and are exercisable for a period of five years from the date of grant.

On October 8, 2021, TSX Venture Exchange approval was received for a mineral property acquisition agreement dated May 3, 2021. In terms of this agreement the Company acquired a 100% interest in 24 unpatented mining claims, comprising 480 contiguous acres in Clayton Valley, Nevada for a purchase consideration of 49,000 Cypress shares. The claims have no retained or underlying royalties.

On October 29, 2021, the Company appointed Mr. Ken Owen to its Board of Directors. Mr. Owen has over 40 years of experience in the mining industry, holding management positions at De Beers, and Anglo American, including Senior Vice President of Anglo American South Africa. He also held positions as associate consultant with SRK Consulting, Technical Director of Mwana Africa PLC and non-executive director of Firestone Diamonds Plc. He holds a M.Sc. in Minerals Production Management from Imperial College, London.

On October 29, 2021, at the Company’s Annual General and Special Shareholders’ Meeting its shareholders approved a new long-term equity incentive plan (the “Plan”). The Plan is a 10% rolling incentive plan that allows for equity incentives to be awarded to directors, officers, employees and consultants of the Company equivalent in aggregate of no more than 10% of the issued common shares of the Company. The Plan also, inter alia, allows for the award of deferred share units, performance share units and reserved share units as part of the 10% allowable issuance.

On November 18, 2021, Mr. Donald Huston and Ms. Amanda Chow resigned from the Board of Directors effective on that date.

The Company issued 4,741,189 common shares pursuant to the exercise of warrants and received proceeds of $6,949,791.

The Company issued 217,500 common shares pursuant to the exercise of options and received proceeds of $22,738.

FINANCIAL INSTRUMENTS AND OTHER RISKS

The Company’s financial instruments consist of cash, receivables and accounts payable and accrued liabilities.

The Company does not use derivative instruments to reduce its exposure to foreign exchange risk. The fair market values of these financial instruments approximate their carrying values, unless otherwise noted.

In conducting business, the principal risks and uncertainties faced by the Company center around exploration and development, metal prices and market sentiment. Exploration for minerals and development of mining operations involve many risks, many of which are outside the Company’s control. In addition to the normal and usual risks of exploration and mining, the Company often works in remote locations that lack the benefit of infrastructure or easy access.

The price of metals fluctuate and are affected by many factors outside of the Company’s control. The relative price of metals and future expectations for such prices have a significant impact on the market sentiment for investment in mining and mineral exploration companies.

The Company relies on equity financing for its working capital requirements and to fund its exploration programs.

The Company does not have sufficient funds to put any of its resource interests into production. There is no assurance that such financing will be available to the Company, or that it will be available on acceptable terms.

The Company’s business is highly uncertain and risky by its very nature. The most significant risk for the Company is the junior resource market, where the Company raises funds, is volatile and there is no guarantee that the Company will be able to raise funds as and when required. Other risk factors include the establishment of undisputed title to mineral properties, environmental concerns and obtaining of governmental permits and licenses when required. Success is totally dependent upon the knowledge and expertise of management and employees and their ability to identify and advance attractive exploration projects and targets from grass roots to more advanced stages.

Regulatory standards continue to change, making the review process longer, more complex and therefore more expensive. Even if an ore body is discovered, there is no assurance that it will ever reach production.

While it is impossible to eliminate all of the risks associated with exploration and mining, it is management’s intention to manage its affairs, to the extent possible, to ensure that the Company’s assets are protected and that its efforts will result in increased shareholder value.

FINANCIAL RISK FACTORS

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

Credit risk

Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash and receivables. Management believes that the credit risk concentration with respect to financial instruments included in receivables is remote because these instruments are due primarily from government agencies. Approximately $19,350,000 of the Company’s cash and equivalents are held with a Canadian chartered bank which has an AA credit rating.

Liquidity risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when they come due. As at September 30, 2021, the Company had a cash balance of $19,819,807 to settle current liabilities of $349,026 and had working capital of $19,639,277. All of the Company’s financial liabilities are subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. These fluctuations may be significant.

(a)

Interest rate risk

The Company has cash balances held with financial institutions. The Company’s current policy is to invest excess cash in guaranteed investment certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks. In addition to cash and interest-bearing deposits with banks of $18,117,587 (December 31, 2020 - $401,245) as of September 30, 2021, the Company has $1,700,000 (December 31, 2020 - $1,700,000) in interest-bearing investment-grade guaranteed investment certificates with accrued interest of $2,220 (December 31, 2020 - $309). A 1% change in interest rates would have an effect of $17,000 (December 31, 2020 - $17,000) on interest income.

(b) Foreign currency risk

The Company is exposed to foreign currency risk on fluctuations related to cash, receivables and accounts payable and accrued liabilities that are denominated in United States Dollars. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks. In addition to cash in US bank accounts of $13,969,164 as of September 30, 2021, the Company has $205,936 denominated in US dollars. A 1% change in foreign exchange rates would have an effect of $137,632 on foreign currency.

PROPOSED TRANSACTIONS

The Company has no proposed transactions.

ADDITIONAL INFORMATION

Additional information with respect to the Company is also available on the Company’s website at www.cypressdevelopmentcorp.com and also on SEDAR at www.Sedar.com

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The Company’s management is responsible for presentation and preparation of the interim financial statements and the Management’s Discussion and Analysis.

The MD&A has been prepared in accordance with the requirements of securities regulators, including National Instrument 51-102 of the Canadian Securities Administrators.

The financial statements and information in the MD&A necessarily include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the financial information we must interpret the requirements described above, make determinations as to the relevancy of information to be included and make estimates and assumptions that affect reported information. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

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.

SHARE CAPITAL

As at the report date of November 29, 2021, the following were outstanding:

Share capital - issued and outstanding 131,627,085 Options 7,324,000 Warrants 12,262,253 *

11,879,100 warrants with an exercise price of $1.75 and 383,153 warrants with an exercise price of $1.25, expiring on March 22, 2024.