DFR Gold Inc. — Management Reports 2021

Apr 30, 2021

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Management’s Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2020 Date of release April 30, 2021

DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

INTRODUCTION

This Management Discussion and Analysis (‘MD&A”) for the year ended December 31, 2020 has been prepared as at April 30, 2021, and contains certain “forward-looking statements” under the Canadian securities laws. All statements, other than statements of historical fact included herein, including without limitation statements regarding potential mineralization, exploration results, plans and objectives of Diamond Fields Resources Inc. (“Diamond Fields”, “DFR” or “the Company”), are forward-looking statements that involve various risks, uncertainties and assumptions. The MD&A should be read in conjunction with the consolidated financial statements of Diamond Fields.

Change in financial year to December 31,

Effective December 2019, the Company changed its financial year-end from June 30 to December 31 to align reporting with that of its mining sector peers and its Madagascan subsidiary. The change in year-end has resulted in the Company filing a one-time six-months transitional fiscal year covering the period July 1, 2019 to December 31, 2019. Subsequent to the transitional fiscal year, the Company’s financial year will cover the period January 1 to December 31; accordingly, the report for the year ended December 31, 2020 is the Company’s first full year report subsequent to the adoption of the new financial year end.

Coronavirus Covid-19 Pandemic

On March 11, 2020, the World Health Organization (WHO) declared coronavirus COVID-19 a global pandemic (the “Pandemic”). This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have negatively affected workforces, economies, and financial markets globally, leading to an economic downturn. Several vaccines have been approved by WHO since late 2020 and mass vaccination has started in many jurisdictions. The pandemic has negatively impacted the Company’s projects in Namibia and Madagascar. It is not possible for the Company to predict the duration and magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

Additional information about Diamond Fields is available on SEDAR at www.sedar.com.

Management’s responsibility for financial reporting

The consolidated financial statements have been prepared by management who, when necessary, have made informed judgements and estimates of the outcome of events and transactions, with due consideration given to materiality. Management acknowledges its responsibility for the fairness, integrity and objectivity of all information in the consolidated financial statements.

As a means of executing its responsibility, management relies on the company’s system of internal control. This system has been established to ensure, within reasonable limits, that the assets are safeguarded, transactions are properly recorded and are executed in accordance with management’s authorization. In addition, the system ensures that the accounting records provide a solid foundation from which to prepare the consolidated financial statements.

The Board of Directors carries out its responsibility for the consolidated financial statements principally through its Audit Committee, consisting solely of non-management directors. This committee makes its recommendations to the Board of Directors. Based on those recommendations, the Board of Directors approves the consolidated financial statements.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020

(All amounts are expressed in U.S. dollars except where otherwise indicated)

OVERVIEW

Description of business

Diamond Fields is a British Columbia governed company listed on the TSX Venture Exchange. The Company is active in mineral exploration, and has business interests in Madagascar, Namibia and in the Red Sea (jointly managed by The Kingdom of Saudi Arabia and the Republic of Sudan). Moreover, the Company is actively engaged in the assessment of additional mineral projects around the world to identify new opportunities.

The Company’s trading symbol on the TSX Venture Exchange is DFR.

Principal Assets

Beravina (Zircon) . The Company through its Madagascar-based subsidiary, Compagnie Generale des Mines de Madagascar, owns a Mining Licence ( Permis d’Exploitation PE 8096) for the exploration and mining of the Beravina deposit that is valid until June 22, 2055. The project is located in Western Madagascar within the Melaky region, covering 625 hectares and is approximately 220km east of the port of Maintirano, near a state road. An NI 43-101 technical report filed by the Company on January 29, 2019 reported an Inferred Mineral Resource Estimate of 1.5 million tonnes grading 22.7% Zircon (ZrSiO4) (equivalent to 15.3% ZrO2). On May 16, 2019, the Company entered into a cooperation agreement with TMH Acquisition Co. (“TMH”) to advance the project (the “Cooperation Agreement”). An infill drilling program undertaken by TMH between late 2019 and early 2020 confirmed the Zircon grade as reported under the technical report.

Namibia (Diamonds) . Through its Namibian subsidiaries, the Company owns several offshore diamond mining licences in Namibia, including ML111 where the Company has historically produced diamonds (2001-2008, 2016 and 2018-2019). The Company also holds ML139 and 70% of ML32.

Red Sea (Zinc, Copper, Manganese, Cobalt and others). The Atlantis II basin containing the Atlantis II deposit is located at the bottom of the Red Sea. The Project is currently the subject of a dispute with DFR’s joint venture partner, Manafa International Ltd., over certain contractual issues. The Company cannot ascertain whether the licence is in good standing.

REVIEW OF OPERATIONS

Highlights

Coronavirus Covid-19 Pandemic

All jurisdictions where the Company does business have been directly or indirectly impacted by the Pandemic. The Company cannot measure the full extent of the impact of the Pandemic on its activities at this stage, but progress on the Company’s projects has already been hindered.

Beravina Project - Madagascar

Following approval for a proposed drilling program from the Ministry of Mines and Strategic Resources and approval of an Environmental Impact Assessment (“EIA”) by the Madagascan Office National pour l’Environnement (“ONE”), TMH proceeded with a drilling campaign during the last quarter of 2019. The Company announced the results from the TMH drilling program on June 29, 2020 (delayed due to the prevalence of the Pandemic) confirming the average deposit grade of approximately 15% ZrO2 as discussed under subheading Projects further below.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Prior to announcing the drilling results, on June 26, 2020, the Company and TMH amended the Cooperation Agreement, requiring DFR to undertake the next phase of work (the “DFR Work Programme”) and extending the time for TMH to exercise its option to acquire the project. On September 29, 2020 the deadline for completion of phase 1 and start of phase 2 of the DFR Work Programme was extended to May 31, 2021 and the deadline for TMH to exercise its purchase option was extended to August 31, 2021 at the latest. At the date of this report DFR has not yet started ground work pertaining to the DFR Work Programme in Madagascar due to the severe travel restrictions linked to the Pandemic. Discussions with TMH about a further extension to the deadline of the DFR Work Programme are ongoing.

Diamond Mining - Namibia

Following the conclusion of a short mining campaign in 2019, discussions are continuing with International Mining and Dredging Holdings (Pty) Limited (“IMDH”), which carried out the campaign via its subsidiary NUTAM Operations (Pty) Ltd (“NUTAM”). IMDH continues to assess, amongst other things, the need for and possible extent of further exploration and development work in order to potentially improve mining performance. The timing as to any resumption of mining at the ML111 concession is dependent upon the conclusion of discussions with IMDH.

Other prospects and projects

The Company continues to review and assess the suitability of a number of additional mining projects around the world.

Overall operation updates and performance

The Company posted net loss of $678,662 (six-months ended December 31, 2019: $725,745; year ended June 30, 2019: $111,695) for the year ended December 31, 2020.

Corporate activities

The Company concluded a CAD 1,000,000 working capital financing during the first quarter, raising concurrently CAD 200,000 through a share issue and a further CAD 800,000, through a debt arrangement from two related-party lenders, which were repayable on December 31, 2020 or earlier if the Company completed a financing or received authorisation from the Bank of Namibia to export certain funds from Namibia. The Namibian subsidiary received the requisite authorisation within the first quarter and, as such, the loans and interests were fully repaid during the second quarter.

RESULTS OF OPERATIONS

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The MD&A includes certain non-IFRS measures to provide meaningful information, where appropriate.

Other income, consisting of interest, amounted to $10,352 (six-months ended December 31, 2019: $24,093, consisting of interest; year ended December 31, 2019: $1,385,291, consisting of net proceeds from sale of diamonds amounting to $1,105,530, proceeds from Beravina Cooperation Agreement amounting to $250,000 and interest amounting to $29,761) for the year ended December 31, 2020.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Review of selected financial and operating results

Selected period ends financial and non-financial information

	Year	Six-months	Year
	ended	ended	ended
	December 31,	December 31,	June 30,
	2020	2019	2019
	$	$	$
Revenue, interest and other income, gains on disposal	10,352	24,093	1,385,291
Exploration and evaluation expenses	(238,691)	(94,090)	(707,393)
General and administrative expenses	(587,586)	(421,802)	(610,060)
Share based compensation	(8,767)	(27,170)	(92,796)
Fair value movement on derivative instruments	437,482	(185,277)	(86,932)
Interest expense	(56,107)	-	-
Foreign exchange gain	(235,345)	(21,499)	195
Exchange difference on translation of foreign operations	8,478	(6,034)	6,355
Comprehensive loss	(670,184)	(731,779)	(105,340)
Weighted average number of shares outstanding	68,797,032	67,895,662	67,895,662
EPS - basic (cents)	(0.99)	(1.07)	(0.16)

The Company incurred $238,691 (six-months ended December 31, 2019: $94,090; year ended June 30, 2019: $707,393) on exploration and evaluation expenses (E&E) for the year ended December 31, 2020. The breakdown of E&E for the year is as follows: new prospects and projects: $147,205; Namibian projects: $46,562; and, Madagascar Beravina project $44,924. Most of the expenses incurred on Beravina project until the first quarter 2020 were refunded by TMH pursuant to the Cooperation Agreement.

General and administrative overheads (G&A) amounted to $587,586 for the year ended December 31, 2020 (six-months ended December 31, 2019: $421,802; year ended June 30, 2019: $610,060), made up mainly of consultancy and professional fees.

Share-based compensation for the year ended December 31, 2020 amounted to $8,767 (six-months ended December 31, 2019: $27,170; year ended June 30, 2019: $92,796) following the vesting of stock options granted during the preceding reporting periods.

For the year ended December 31, 2020, a credit of $437,482 (six-months ended December 31, 2019, charge of $185,277; year ended June 30, 2019 charge of $86,932) was recognised as fair value movement of derivative instruments in the statement of loss, following a revaluation of 10,666,667 outstanding warrants which were issued on September 23, 2016 to Spirit Resources at an exercise price of CAD 0.125. The gain arose mainly as a result of DFR stock trading comparatively lower on the last day of the reporting period (CAD 0.145) compared to December 31, 2019 (CAD 0.185) in addition to the reduction in the remaining life of the warrants which was 0.73 years (December 31, 2019: 1.73 years; June 30, 2019: 2.23 years) at the end of the reporting period and lower interest rates.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Interest expense amounting to $56,107 for the year ended December 31, 2020 (December 31 and June 30, 2019 – Nil) relates to interest charge on loans raised during the first quarter, fully repaid during the second quarter of the financial year under review.

Loss on foreign exchange amounting to $235,345 for the year ended December 31, 2020 (six-months ended December 31,2019: $21,499; year ended June 30, 2019 (gain): $195) arose mainly during the first quarter upon the exchange of Namibian Dollars (NAD) held in Namibia (following approval from the Bank of Namibia) to US Dollars when the NAD suffered over 20% depreciation against the USD during the first quarter of the reporting period as a consequence of the Pandemic.

Projects

Madagascar “Beravina” Zircon

In 2016, the Company acquired the Beravina zircon project in Madagascar. Beravina is a pegmatitehosted, hard rock, zircon deposit located approximately 325 kilometers west-northwest of Antananarivo, the capital of Madagascar. The deposit is characterized by a small surface footprint, with the mineralised pegmatite describing a steeply dipping cone-shaped structure. On January 29, 2019, the Company filed a NI 43-101 technical report, disclosing an Inferred Mineral Resource Estimate of 1.5 million tonnes grading 22.7% Zircon (ZrSiO4) (equivalent to 15.3% ZrO2). The report is available on SEDAR and the Company’s website, with the reported resource summarised below.

Category	Tonnes (Millions)	ZrO2%	ZrSiO4%	HfO2%	ThO2 ppm	U3O8 ppm	Density t/m3
Inferred	1.5	15.3	22.7	0.3	537	46	3.1

Various consultants (SGS South Africa, HATCH and the MSA Group) have conducted analyses of the Beravina mineralisation, minerology, metallurgy and other deposit characteristics (the “2018 Work Program”) in advance of an intended drill program. Results from further metallurgical and material processing tests released in October 2018 confirmed that zircon can be concentrated to levels of between 50% ZrO2 and 58% ZrO2 with varying levels of thorium ingrained. Further testing is expected to result in processing refinements that might further improve the grade and quality of expected product.

On May 16, 2019, the Company entered into the Cooperation Agreement with TMH, a special purpose vehicle established by Denham Mining Fund LP, to advance the Company’s Beravina project (the “Beravina Project”) in Madagascar. Pursuant to the terms of the Cooperation Agreement, TMH made a payment of $250,000 to the Company and committed to fund the next stage of exploration and development work at Beravina (the “2019 Work Program”). The 2019 Work Program was expected to incur costs of approximately $500,000 and to be completed within seven months from the date of the Cooperation Agreement (the “Evaluation Period”). TMH has the right to extend the Evaluation Period by a further three months if it has incurred expenditures of $500,000 and has made a further payment of $250,000.

TMH submitted a planned drill program comprising of 14 drill holes as part of the 2019 Work Program. DFR obtained approval for the drilling program from the Ministry of Mines and Strategic Resources and approval for its Environmental Impact Assessment (“EIA”). EIA approval was only provided on October 29, 2019, which resulted in a delay in implementation of planned drilling to early November 2019. As the delay was not anticipated by the Company or TMH, the Company granted an extension to the Evaluation Period (which was originally envisaged as being 7 months from 16 May 2019), without financial penalty, to May 31, 2020.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

TMH performed exploration drilling, sampling and assaying work pursuant to the 2019 Work Program during the period September 2019 to March 2020. A total of 13 diamond core drill holes (906 meters) were completed before the program was curtailed due to the onset of the rainy season in Madagascar. On June 29, 2020, DFR published a summary of the assay results from the 2019 Work Program which delivered a weighted average grade estimate of 15.5% ZrO2 confirming the 15.3% grade of the Company’s NI 43-101 technical report referred to above. Please refer to DFR’s release dated June 29, 2020 for further details.

On June 26, 2020, DFR announced an amendment to the Cooperation Agreement (the “Amended Agreement”) which requires DFR to undertake the next phase of work, involving a high-resolution magnetic drone survey, the development of digital elevation models and limited groundwork (“Phase 1”) with the aim of locating potential new mineral deposits and extensions to the existing deposit. If successful, the Company agreed that it would then engage in a drilling campaign on the Project (“Phase 2”) to be completed by 30 November 2020. DFR has committed to spend between US$250,000 and US$350,000 in connection with such activities, subject to ongoing positive results. The Amended Agreement extended the time available for TMH to exercise its option to acquire the Project (which may be extended a further three (3) months through an advance payment (on the Option exercise price) of US$250,000) until December 31, 2020.

On September 29, 2020, due to ongoing travel and operational restrictions resulting from the COVID19 pandemic, the Company announced that it had agreed to a further eight month extension to the Cooperation Agreement, such that the deadline for DFR to complete Phase 1 and commence Phase 2 would be extended to May 31, 2021, and, consequently the deadline for completion of Phase 2 would be extended to July 31, 2021, and the time available for TMH to exercise its option to acquire the Project would be extended to August 31, 2021. At the date of issue of this report, DFR had not executed on Phase 1 due to travel restrictions associated with the prevailing Pandemic. The Company is in discussions with TMH about a further extension to the deadlines for commencement and completion of both Phase 1 and Phase 2.

TMH has the option (the “Option”) to acquire 100% of the Project in consideration of a payment of $2,000,000 and the grant of a nine percent royalty from future sales, subject to certain minimum deductions. Pursuant to the Amended Agreement, upon exercising the Option TMH must also reimburse DFR for the amount of expenditures incurred by DFR in connection with Phase 1 and Phase 2 of the Amended Agreement. Upon exercise of the Option, TMH is required to place the Project into production by no later than 30 June 2023 (the “Project Long-Stop Date”), subject to certain extensions for events of force majeure, such as permitting delays, but no longer than 30 June 2025. Should the project not be placed into production by the Project Long-Stop Date, then TMH is required to make advance royalty payments to the Company, as follows:

• A. $500,000 on the Project Long-Stop Date;

• B. $500,000 six months after the Project Long-Stop Date; and,

• C. $500,000 on every anniversary of the Project Long-Stop Date thereafter.

If TMH should fail to make an advance royalty payment, when due, then the Company shall have the right to reacquire the Project in consideration of 50% of any advance royalty payments made by TMH.

Most of the costs incurred by the Company for the Beravina Project from the start of the 2019 Work Programme until March 31, 2020 have been refunded by TMH, the costs incurred from April 2020 onwards are for the Company’s account. Expenditures born by the Company for the year ended December 31, 2020 amounted to $44,924 (six-months ended December 2019: $Nil; year ended June 30, 2019: $171,218).

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Namibian Marine Diamond Concessions

The Company holds three mining licences off the coast of Namibia. The principal mining licence, ML111, is held by its subsidiary, Diamond Fields (Namibia) (Pty) Limited (“DFN”), and is valid until December 4, 2025. DFN also holds mid to deep water offshore licence ML139, which expires in November 2029. Namibian Diamond Company (Pty) Limited (“NDC”), a 70% owned Namibian subsidiary, holds a near shore mining licence, ML32, which expires on December 17, 2023. An Environmental Clearance Certificate for ML32 was issued by the Ministry of Environment and Tourism on April 24, 2019.

In November 2017, IMDH and NUTAM presented DFR (and its subsidiary DFN) with an initial six months (non-continuous) mining program and, on November 10, 2018, IMDH/NUTAM’s vessel MV Ya Toivo started mining activities on ML111. Phase 1 was completed on January 13, 2019, producing 47,298.18ct net weight rough diamonds from which the Company’s share of net proceeds amounted to $1,105,530 during the year ended June 30, 2019.

Following completion of the first phase of the mining campaign (in January 2019), the Company and IMDH have been assessing the results and considering the need for further exploration and development work before completing the mining compaign. Such work is expected to improve recoveries from the remaining blocks under the current ML111 mining plan. As a result of these discussions, further mining campaigns of the ML111 mining program have been delayed. Any resumption of mining with IMDH is dependent upon the conclusion of these discussions.

The Company has incurred $46,562 (six-months ended December 31, 2019: $31,644; year ended June 30, 2019: $155,831) on the Namibian operations for the year ended December 31, 2020.

Atlantis II, Red Sea

The Atlantis II deposit is comprised of a series of interlinked sub-basins predominantly infilled by a series of SEDEX (Sedimentary Exhalative) sedimentary sequences. Pursuant to an agreement reached in 2011, a 30-year mining licence issued by the Joint Red Sea Commission to Manafa International Trade Company (“Manafa”) was to be transferred to a joint venture company that was to be majority owned by the Company. Diamond Fields was entitled to a 50.1% interest in such company, with Manafa to hold the remaining 49.9% of shares. Manafa never transferred the licence resulting in a dispute.

Diamond Fields has completed an independent resource analysis based on the original core data from the Atlantis II Deeps collated by Preussag. Development of the project has been hindered since April 2013 following the dispute with Manafa, and the Company cannot ascertain whether the licence is in good standing. Diamond Fields continues to take efforts aimed at finding a resolution to the dispute. No significant expenditures were incurred on the project during the reporting period. Any expenditure incurred on the project is accounted and reported under sub-heading evaluation of new prospects and other projects in the financial statements and MD&A.

Evaluation of new prospects and other projects

The Company continues its efforts to secure new projects, which involve the engagement of consultants and professionals. For the year ended December 31, 2020, the Company incurred $147,205 (six-months ended December 31, 2019: $62,447; year ended June 30, 2019: $380,344) on the evaluation of new projects, made up mainly of consultancy and professional fees for desktop evaluations. No project other than as reported above has reached a stage which would require disclosure and separate reporting.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table sets forth selected financial information for the eight most recently completed quarters:

All amounts in US$	Dec 31 2020	Sep 30 2020	Jun 30 2020	Mar 31 2020	Dec 31 2019	Sep 30 2019	Jun 30 2019	Mar 31 2019
Other Income	199	757	528	8,868	14,241	9,852	262,097	1,110,467
Net (Loss) / Income	(306,314)	134,503	(685,603)	178,752	(102,573)	(623,172)	(297,058)	517,182
Basic (Loss) / Earnings per share	(0.00)	0.00	(0.01)	0.00	(0.00)	(0.01)	(0.00)	0.01

CAPITAL RESOURCES AND LIQUIDITY

Cash and Working Capital

At December 31, 2020, the Company had working capital deficit amounting to $573,645 (December 31, 2019: $63,948; June 30,2019 working capital: $640,661), including cash amounting to $234,937 (December 31, 2019: $1,202,786; June 30, 2019: $1,575,101). The Company also suffered a substantial $967,849 decrease in cash, which arose mainly as a result of: operating costs $826,277, loss on foreign exchange $235,345 and interest expense $56,107, partly offset by $151,720 arising from proceeds from a share issue. The resulting change in working capital deficit amounting to $509,697 was substantiually lower than the reduction in cash due to the favourable variance on the derivative financial instruments.

During the first quarter of the financial year, the Company entered into a short term debt arangement with two related parties, raising CAD 800,000 concurrently with a CAD 200,000 share issue, to fund working capital, repayable on December 31, 2020 or earlier, subject to the Company completing a financing or obtaining approval to export certain funds from Namibia. The Company received approval from the Bank of Namibia to transfer NAD 12,000,000 to the Company’s USD bank account, accordingly, the $606,878 loans received during the first quarter have been settled in full, together with interest amounting to $56,107, during the second quarter.

Share and loans transactions

The Company had 67,895,662 outstanding shares as at December 31, 2019. During the first quarter, the Company entered into a working capital financing agreement with: Albert C. Gourley Professional Corporation, an entity controlled by its Non-Executive Chairman, Mr Albert Gourley; and, its major shareholder, Spirit Resources SARL (“the Lenders”). Each Lender subscribed for CAD 100,000 common shares at an issue price of CAD 0.20 per Common Share and advanced the Company CAD 400,000 at an interest rate of 10% repayable on December 31, 2020 (“the Loan”) giving the Company working capital of CAD 1,000,000 in aggregate. Upon closing, the Company issued 1,000,000 common shares and the total number of shares outstanding increased to 68,895,662.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

The Loan was required to be repaid earlier in the event that the Company and its subsidiaries: completed an equity financing or otherwise received funding, payments or income equal to CAD 1,000,000; or the Company’s Namibian subsidiary received authorisation from the Bank of Namibia to remit not less than $500,000 from Namibia. The Company’s subsidiary received approval from the Bank of Namibia, and transferred NAD 12,000,000 (equivalent to $679,852) to the Company’s bank account. as such, the Loan was repaid together with interest as commented under the sub-heading Cash and Working Capital .

Stock options and warrants

The Company operates a fixed, less than 10%, stock option plan and has approval to issue up to a maximum of 6,789,000 stock options as at December 31, 2020 (December 31, 2019: 6,789,000). A total of 5,150,000 stock options were outstanding as at December 31, 2019 and 2020. All the outstanding 5,150,000 options (December 31, 2019: 4,420,934 options; June 30, 2019: 3,841,867) had vested as at December 31, 2020. All outstanding and unexercised options have an exercise price of CAD 0.145 per share. An amount of $8,767 (December 2019: $27,170; June 2019: $92,796) was recognized as share-based compensation during the year ended December 31, 2020.

A balance of 10,666,667 stock warrants with an exercise price of CAD 0.125 per unit were outstanding at December 31, 2020 and 2019. The warrants were issued to Spirit Resources SARL (“Spirit”), an entity owned by the Company’s major shareholder, in 2016 upon closing a CAD 1,000,000 equity financing with Spirit. If not exercised, the warrants will expire on September 23, 2021.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of income and expenses during the period. Actual results could differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements within the next financial year are discussed below:

Share-based Payment Transactions

The Company measures the cost of equity-settled transactions with employees and other parties by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 10 of the latest audited financial statements.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020

(All amounts are expressed in U.S. dollars except where otherwise indicated)

Derivative Financial Instruments

The Company has determined that its functional currency is the US dollar and has issued non-broker warrants in a currency other than its functional currency. The Company measures the cost of the derivative financial instruments by reference to the fair value of the instruments at the date at which they are granted and revalues them at each reporting date. Estimating fair value for non-broker warrant transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the warrant, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value derivative financial instrument transactions are disclosed in Notes 11 of the latest audited financial statements.

Title to Mineral Property Interests

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

ADOPTION OF NEW ACCOUNTING STANDARDS & OTHER PROPOSED FUTURE ACCOUNTING CHANGES

New standards, amendments and interpretations not yet effective

IFRS 17, Insurance Contracts

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of Insurance contracts within the scope of the Standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts and requires that liabilities to be measured at a current fulfilment value and provides a more uniform measurement and presentation approach for all insurance contracts.

IFRS 17 supersedes IFRS 4, Insurance Contracts, and related interpretations, and is effective for reporting periods beginning on or after January 1, 2021.

The Company does not anticipate that the application of IFRS 17 in the future will have a material impact on the amounts reported and disclosures made in the Company’s consolidated financial statements.

CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENT RISKS

(i) Capital Management

The Company’s objective when managing its capital is to ensure it has sufficient capital to maintain its ongoing mining operations and safeguard its ability to continue as a going concern in order to pursue the continued development of its various mineral properties.

The Company’s capital consists of shareholders’ equity. The Company’s policy is to fund ongoing exploration activities, as well as its administration and corporate activities, from the issuance of shares and debt instruments. The Company may acquire additional funds from capital or debt markets where advantageous circumstances arise. The Company assesses capital and debt markets on a case by case basis to minimize the cost of capital in the prevailing markets and maintain an optimal capital structure. The Company plans to raise capital or borrow funds, although there is no certainty that such financing will be available on terms acceptable to the Company.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. No investments in asset backed commercial paper are used. There are no outside restrictions on the Company’s capital.

The Company’s capital management policies have not changed during the year.

(ii) Financial Instrument Risks

The Company is exposed in varying degrees to a variety of financial instrument related risks. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk; interest rate risk; equity price risk; and, commodity price risk.

Foreign currency risk

Foreign currency risk is the risk that a variation in exchange rates between currencies with which the Company transacts will affect the Company’s operations and financial results. The Company primarily transacts business in Canada, Mauritius, Namibia, Madagascar and South Africa and purchases goods and services denominated in US dollars, Canadian dollars, Namibian dollars, Madagascar Ariary, UK Pounds and South African Rand. As such, the Company has exposure to foreign currency exchange rate fluctuations. The Company has not entered into any agreements or purchased any instruments to hedge possible foreign currency risks.

Interest rate risk

The Company does not have any financial instruments subject to interest rate risk at the date of reporting.

Equity price risk

Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets. The Company has no equity holdings and is therefore not exposed to this risk.

Commodity price risk

Commodity price risk is the uncertainty associated with the valuation of assets arising from changes in price of commodities. Though the Company is at an early exploration stage it is exposed to price risk through its Namibian operations where intermittent mining and sale of products occur.

Credit risk

The Company is primarily exposed to credit risk on its cash and the risk of financial loss if counterparty to a financial instrument fails to meet its financial obligation. Credit risk exposure on cash is limited through maintaining cash with high-credit quality financial institutions and instruments.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking harm to the Company’s reputation. The Company monitors cash flows to ensure it has sufficient available funds to meet current and foreseeable financial requirements at a reasonable cost.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

RISK FACTORS

The Company’s properties and operations are subject to certain risks including but not limited to government regulations related to mining, mineral prices and currency fluctuations, competition, receipts of permits and approval from government authorities, operating hazards and other risks inherent to mineral exploration, development and mining operations.

Additional Financing Requirements

The Company will require additional financing in order to continue the development of its properties and its exploration activities. There can be no assurance as to the success of future financing activities necessary to meet the Company’s obligations and operating requirements. Failure to obtain sufficient financing may result in delay or postponement of activities, or even a loss of property interests.

Exploration activities will not necessarily result in the discovery of commercially recoverable quantities of targeted minerals (currently diamonds, zinc, copper, gold, nickel and zircon)

Mineral exploration, development and mining activities generally involve a high degree of risk and uncertainty. There is no assurance that continued exploration of the Company’s concessions will result in any discovery of commercial quantities of diamonds, zinc, copper, zircon and/or nickel over and above those previously identified. Even if commercial quantities of diamonds, zircon or other minerals are discovered, economic recovery is dependent upon a number of factors, including the particular attributes of the deposit, such as terrain, size and grade, products prices and government regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. Most of these factors are beyond the control of the Company.

Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by the Company will result in a profitable commercial mining operation. There is no certainty that the expenditures made by the Company towards the search and evaluation of targeted minerals will result in discoveries of commercial quantities of those minerals.

Political Risks

The Company strives to minimize political risk by monitoring events in countries where it operates or where it considers operating, and by complying with local laws and regulations. The Company operates and conducts exploration activities in countries which have experienced civil unrest and/or civil warfare in recent years. It attempts to minimize the risks inherent in conducting operations and exploration in frontier areas by monitoring local conditions and avoiding high risk areas.

Estimates of reserves and resources are inherently uncertain

There is a degree of uncertainty attributable to the calculation of reserves, resources and corresponding grades being mined or dedicated to future production. Until reserves or resources are mined and processed, the quantity of reserves or resources and grades must be considered as estimates only. In addition, the quantity of reserves or resources may vary depending on diamond, zircon and other prices, operating costs and mining efficiency. Any material change in the quantity of reserves, resources or grade may affect the economic viability of the relevant concessions.

Sea diamond deposits are alluvial deposits located on the ocean floor. These deposits are particularly difficult to sample because of their remote nature, variable terrain and the location of diamonds in irregular gravel beds lying above and within crevices and potholes in the bedrock. As a result, there are no standard sampling tools and resource estimation practices employed for these types of deposits.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Operating History

The Company has a limited history of operations and must be considered an early stage resource exploration company. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of its early stage of operations.

Offshore diamond mining involves significant risks

The business of offshore diamond mining is subject to a variety of risks such as accidents, extreme marine and weather conditions, natural disasters, environmental hazards, the discharge of toxic chemicals and other hazards. Such occurrences, against which the Company cannot, or may elect not to insure, may result in damage to or destruction of mining equipment and infrastructure, injuries and loss of life, environmental damage, delayed production, increased production costs and possible legal liability to third parties, any or all of which may have a material adverse effect on the Company’s financial position. The mining and processing systems and the vessels to be used in the Namibian marine concessions are to be at sea throughout the mining process, and weather conditions will inevitably have an effect on operations.

The Company’s Beravina zircon deposit may not deliver a commercially viable product

The Beravina deposit has a NI 43-101 Inferred Mineral Resource estimate. Results from test work showed that zircon can be concentrated between 50% ZrO2 and 58% ZrO2 with varying levels of thorium ingrained. Whilst the Company anticipates undertaking further work, including evaluation of additional processing techniques to improve concentrate grade and remove deleterious elements, as well as market testing of various potential products, there is no certainty that the Company will achieve product grade and quality that can be sold at all or at viable prices.

Title can be uncertain

The Company has investigated its rights to explore and exploit its concessions, and, to the best of its knowledge, those rights are in good standing, however, no assurance can be given that there are no title defects affecting such properties. In addition, no assurance can be given that applicable governments will not revoke, or significantly alter the conditions of, the applicable exploration and mining authorizations and that such exploration and mining authorizations will not be challenged or impugned by third parties. Mining and prospecting licences may be revoked by the applicable government authorities for failure to perform the obligations thereunder. Licences must be renewed periodically. The renewal process involves a review of the licence holder’s performance by government authorities, and no assurance can be given as to the outcome of the review. There is a risk that not all the Company’s renewal and concession applications will be successful.

Infrastructure

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government and other interferences in the maintenance or provision of such infrastructure could adversely affect the Company’s operations, financial condition and results of operations.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Exchange controls may restrict the Company’s ability to repatriate earnings

Namibia is part of the South African Rand Common Monetary Area (“CMA”). Exchange controls in the CMA require that dividends, loans, repayment of loans and payment of all invoices to parties outside the CMA by companies registered in the CMA require prior approval. The controls, as they relate to Namibia, are applied by the Bank of Namibia. The Company held the equivalent of $49,414 (in Namibian Dollars) in Namibia as at the reporting date, which it intends to use to effect payments in Namibia and CMA. Though the Company’s subsidiary has received approval from the Bank of Namibia to refund part of the intercompany loan to the Company during the current financial year, there can be no assurance that the Company’s subsidiary will continue obtaining the requisite approvals in the foreseeable future to repay inter-group loans or pay invoices to parties outside the CMA, including companies within the Company’s corporate group not resident in the CMA. Thus, exchange controls may restrict the Company from repatriating funds and using those funds for other purposes.

Profitability may be affected by fluctuations in commodity prices

The price of the common shares, the Company’s financial results and exploration, development and mining activities may in the future be significantly adversely affected by declines in commodity prices. Future serious price declines in the market value of certain commodities could cause continued development of the Company’s properties to be impracticable.

Government regulations in foreign countries may limit the Company’s activities and harm its business

The concessions comprising the Company’s projects are located in Namibia, Madagascar and the Red Sea Joint Commission area, are subject to the laws and regulations of these respective jurisdictions. Although mining in each jurisdiction has a long history and has not been adversely impacted by unreasonable or arbitrary government action, there can be no assurance that the Company’s business, operations and affairs will not be materially adversely affected by changes to, or arbitrary application of, laws and regulations or changes in the political and economic status.

Operations carried on by the Company in respect of its projects will be subject to government legislation, policies and controls relating to prospecting, development, production, importing and exporting of minerals, concession tenure, exchange controls, mining taxes, labour standards and environmental protection. There can be no assurance that such legislation, policies and controls will not have a material adverse effect on the business, operations and affairs of the Company.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reductions in levels of production at producing properties or require abandonment or delays in development of new mining properties.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

Competition

The mining industry is competitive in all of its phases. The Company faces strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing targeted minerals. Many of these companies have greater financial resources, operational experience and technical capabilities than the Company. As a result of this competition, the Company may be unable to maintain or acquire attractive mining properties on terms it considers acceptable or at all. Consequently, the Company’s revenues, operations and financial condition could be materially adversely affected.

Key Executives

The Company is dependent on the services of key executives, including the directors of the Company and a small number of highly skilled and experienced executives and personnel. Due to the relatively small size of the Company, the loss of these persons or the Company’s inability to attract and retain additional highly skilled employees may adversely affect its business and future operations.

Directors and officers of the Company may have conflicts of interest

Certain of the directors of the Company are directors or officers of, or have shareholdings in, other mining companies. If, and to the extent that, such other companies participate in business ventures in which the Company also participates, those directors may have a conflict of interest. These other mining companies may also compete with the Company for the acquisition of mineral property rights. In the event that any such conflict of interest arises, a director who has such a conflict will disclose the conflict to a meeting of the directors of the Company and will refrain from participating in any Board decisions concerning the matter giving rise to the conflict. In appropriate circumstances, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.

OUTSTANDING SHARE DATA

Movement on shares and stock options have been reported under “Capital Resources and Liquidity” section of this MD&A. A total of 67,895,662 common shares were issued and outstanding as at December 31, 2019 and, 1,000,000 common shares were issued during the first quarter taking the total outstanding shares to 68,895,662. As at December 31, 2020 and 2019, a total of 5,150,000 stock options, all with a price of CAD 0.145 per share, were granted and unexercised. All 5,150,000 stock options (December 31, 2019: 4,420,934; June 30, 2019: 3,841,867) had vested as at December 31, 2020, with expiry dates between December 11, 2021 and August 27, 2023. A balance of 10,666,667 stock warrants with exercise price of CAD 0.125 per share were outstanding at December 31, 2020 and 2019. The warrants were issued in 2016, and if not exercised, will expire on September 23, 2021.

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DIAMOND FIELDS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020 (All amounts are expressed in U.S. dollars except where otherwise indicated)

RELATED PARTY TRANSACTIONS

The Company provided the following compensation to related parties:

G&A - Jean Lindberg Charles - CFO and Secretary G&A - Sybrand van der Spuy, President and CEO G&A and E&E - Fasken Martineau LLP1 E&E - David Reading G&A – Earl Young (former Director and CFO) E&E - Bertrand Boulle Share based compensation - Directors and Officers	Year ended December 31, 2020 $ 154,500 150,000 255,485 16,107 - - 8,767	six-months ended December 31, 2019 $ 77,250 75,000 99,582 - - 4,972 26,474	year ended June 30, 2019
			$ 98,000 112,215 275,282 35,342 18,000 - 90,573

1Mr. Al Gourley, serves as a director, and chairman of the Board of the Company, and is also the Regional Managing Partner of Fasken Martineau LLP London which provides advisory services to the Company.

Notes:

G&A – denotes general and administration expenses E&E – denotes exploration and evaluation expenses

SUBSEQUENT EVENTS

On April 30, 2021, The Company entered into an agreement with its major shareholder, Spirit Resources SARL (“Spirit”) pursuant to which Spirit shall make available an unsecured term loan of $1,000,000 (the “Loan”) to the Company at the rate of 8% per annum. The Loan shall be used for general corporate purposes and shall be repayable in full on April 29, 2022 or earlier upon receipt of the proceeds of any debt, equity or other financing.

PROPOSED TRANSACTIONS

The Company continues to review and assess projects which, if deemed suitable, will be pursued by the Company. As such, management may engage in discussions which involve potential investments, financing and related activities with different parties. As at the date of this MD&A, there is no material undisclosed proposed transaction.

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