Euro Sun Mining Inc. — Management Reports 2021

Mar 25, 2021

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Management Discussion and Analysis For the year ended December 31, 2020

(all amounts in U.S. dollars unless otherwise noted)

Date: March 25, 2021

This Management Discussion and Analysis (“MD&A”) relates to the financial condition and results of operations of Euro Sun Mining Inc. (“Euro Sun” or the “Company”) as at and for the year ended December 31, 2020. This MD&A should be read in conjunction with the Company’s audited consolidated financial statements and related notes as at and for the year ended December 31, 2020. The audited consolidated financial statements and related notes of Euro Sun have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Unless otherwise noted, all references to currency in this MD&A are in U.S. dollars .

Certain information contained in the MD&A is forward-looking which involves risks and uncertainties. The forwardlooking information is not based on historical fact, but is rather based on the current plans, objectives, goals, strategies, estimates, assumptions and projections about the Company’s industry, business and future financial results. Actual results could differ materially from the results contemplated by this forward-looking information due to a number of factors, including those set forth in this MD&A and under the “Cautionary Statement Regarding Forward Looking Information” and “Risk Factors” sections.

The MD&A was prepared in accordance with the requirements set out in National Instrument 51-102 — Continuous Disclosure Obligations of the Canadian Securities Administrators.

Mr. Pierre Desautels, P. Geo., and Mr. Gordon Zurowski, P. Eng., both principal partners of AGP Mining Consultants Inc. (“AGP”), who are independent Qualified Person (as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) have reviewed and approved the scientific and technical information in this MD&A under the sections “Company Overview”, “Rovina Valley Project – History and Latest Developments”, “Rovina Valley Project Resource Estimate Update”, “Rovina Valley Project Preliminary Economic Assessment”, “2019 PEA Highlights”, “Highlights” and “Outlook”.

Management is responsible for the information disclosed in this MD&A and the accompanying financial statements and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is materially complete and reliable. The audit committee of the board of directors of the Company has reviewed this MD&A and the consolidated financial statements as at and for the year ended December 31, 2020, and Euro Sun’s board of directors approved these documents prior to their release.

Company Overview

The Company is principally a mineral exploration and development company. Through its subsidiaries, the Company is currently focused on advancing its exploration and development plans on its 100%-owned Rovina Valley gold and copper project (the “Rovina Valley Project” or “RVP”) located in west-central Romania. The Rovina Valley Project consists of three copper-gold porphyry systems referred to as Rovina, Colnic and Ciresata on which the Company has carried out extensive exploration programs. RVP is the second largest gold deposit in Europe containing measured and indicated mineral resources of 7.1 million ounces of gold grading 0.55 g/t and 1.4 billion pounds of copper grading 0.16%.

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Rovina Valley Project – History and Latest Developments

The Company holds the Rovina Valley Project through a mining license which covers a total of 27.68 square kilometres (the “Rovina Licence”). The Rovina License was officially ratified by the Romanian Government during Q4 2018. This license secures the mineral tenure and allows the Company to begin the permitting process. The Rovina Valley Project is the Company’s sole exploration-development project in Eastern Europe and the main focus of its exploration efforts there since 2005 when it was awarded the Rovina exploration license through a public tender and bid process. Subsequent exploration by the Company defined three copper-gold porphyry systems or deposits: Rovina (the “Rovina Deposit”), Colnic (the “Colnic Deposit”) and Ciresata (the “Ciresata Deposit”). The Colnic Deposit is located approximately 2.5 km south of the Rovina Deposit and the Ciresata Deposit is approximately 4 km south of the Colnic Deposit.

The area covered by the Rovina License lies within the historic ‘Golden Quadrilateral’ mining district and has good road access, as well as proximity to nearby high-tension electric power and water supplies. The topography of the area is hilly with forest vegetation and interspersed grasslands with elevations of 300 to 700 metres above sea-level.

Drilling activities on the Rovina Valley Project stopped on July 5, 2012 due to the impending expiry of the exploration license on August 29, 2012 and closure of the work program for the submittal of final documentation for the conversion to a mining license. In August 2012, the final exploration report was submitted to the Romanian National Agency for Mineral Resources (“NAMR”) and accepted. Romanian mining law states that the holder of an exploration license has the exclusive right to apply for a mining license at any time or within 90 days after the expiration date of the exploration license. The Company, through its wholly owned subsidiary, SAMAX Romania SRL (“SAMAX”) notified NAMR of its intention to exercise its exclusive statutory right to apply for a mining license.

On May 27, 2015, NAMR approved a 20-year mining license for the Rovina Valley Project which represents the first and most important step in the licensing process. During the conversion process from an exploration license to a mining license, no disruptive physical field work (i.e., drilling, land clearing, etc.) can be carried out on the property until after the mining license has been approved.

Under Romanian law, a mining licence may come into effect upon final review by several government departments and its publication in the official gazette. The Rovina Mining License was approved by the Romanian government in November 2018. Following the conversion to a mining license, approval to begin construction and mining operations will require a building authorization permit that will include land re-zoning and final environmental reviews and government approval resulting from a full Environmental Impact Assessment (“EIA”) study. Public consultation is a legal and integral part of the government environmental approval process. Surface rights are severed from mineral rights, and prior to receiving the final construction permit surface rights need to be acquired.

Through its wholly owned operating subsidiary, SAMAX, the Company continues to maintain its proactive local stakeholder engagement program. The program includes local community hall public meetings, a public information centre and partnership programs with local NGO’s and community leaders to implement community-based projects. The Company’s good relations with the community have allowed unhindered surface access for drilling in the Rovina Valley Project area which requires permission from landowners. In addition, the Company continues with its long lead time work activities for both the EIA and the strategic environmental assessment (the “SEA”) documentation that will be required for the permitting of the project.

In the fourth quarter 2018, the Company engaged AGP Mining Consultants Inc. and Lycopodium Engineering Inc. to complete an independent resource estimate update and to complete a Preliminary Economic Assessment (“PEA”) to disclosure standards defined in NI 43-101. The Company announced the results of the resource estimate update and PEA on February 20, 2019, and the supporting NI 43-101 Technical report is filed on SEDAR in accordance Standards of Disclosure for Mineral Projects.

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Rovina Valley Project Resource Estimate Update

On February 20[th] , 2019, Euro Sun announced its updated NI 43-101 mineral resource estimate ("2019 Resource Estimate") as prepared by independent consultants AGP, on its 100% owned Rovina Mining License in west-central Romania. The 2019 Resource Estimate includes the Colnic, Rovina and Ciresata gold-rich copper porphyry deposits, collectively referred to as the Rovina Valley Project. All three deposits are in close proximity and mill feed will be treated at a central facility. Colnic and Rovina are amenable to open-pit mining and Ciresata to bulk underground mining.

The 2019 Resource Estimate is an update to the 2012 Resource Estimate (completed by AGP) to primarily reflect higher operating costs, new metallurgical recoveries (see ESM Press Release dated September 19, 2018), and higher metal prices on resource constraining Lerchs-Grossman open pits using appropriate cut-off grades. The geologic model and interpolated block model from the 2012 Resource Estimate are not changed in this current estimate (see the 2019 Resource Estimate 43-101 Technical Report filed on SEDAR on April 1, 2019). Mineral resources were estimated in conformance with the 2014 CIM Mineral Resource and Mineral Reserve definitions referred to in NI 43101 and are considered to have reasonable prospects for economic extraction.

AGP concluded that, effective February 20, 2019, and utilizing approximately 120,256 m of diamond drill hole data drilled by Euro Sun from 2006 through 2012, the Rovina Valley Project contains mineral resources of 89.8 million tonnes of Measured Resources at a grade of 0.62 g/t Au and 0.19 % Cu containing 1.78 million ounces of gold and 385 million pounds of copper, indicated resources of 306.6 million tonnes at a grade of 0.53 g/t Au and 0.15 % Cu containing 5.26 million ounces of gold and 1,006 million pounds of copper. The total Measured and Indicated resources amount to 396.5 million tonnes at a grade of 0.55 g/t Au and 0.16 g/t Cu containing 7.05 million ounces of gold and 1,391 million pounds of copper. Inferred resources added an additional 28.2 million tonnes at a grade of 0.37 g/t Au and 0.16 % Cu containing 0.33 million gold ounces and 98 million pounds of copper. The table below summarizes the result of the mineral resource estimate for all three porphyry deposits in the Rovina Valley Project.

Rovina Valley Resource Estimate (2019)

Resource Category	Tonnage (MM t)	Au (g/t)	Cu (%)	Gold (M oz)	Copper (M lb)	AuEq (M oz)*
Measured
Rovina(open-pit)	32.1	0.36	0.29	0.37	208	0.83
Colnic(open-pit)	29.2	0.65	0.12	0.61	74	0.77
Ciresata(underground)	28.5	0.88	0.16	0.81	102	1.03
Total Measured	89.8	0.62	0.19	1.78	385	2.63
Indicated
Rovina(open-pit)	74.2	0.27	0.22	0.64	365	1.44
Colnic(open-pit)	106.5	0.47	0.10	1.62	228	2.12
Ciresata(underground)	125.9	0.74	0.15	3.01	413	3.92
Total Indicated	306.6	0.53	0.15	5.26	1,006	7.47
Total Measured + Indicated	396.5	0.55	0.16	7.05	1,391	10.11
Inferred
Rovina(open-pit)	14.9	0.19	0.19	0.09	62	0.22
Colnic(open-pit)	4.7	0.34	0.10	0.05	10	0.07
Ciresata(underground)	8.6	0.70	0.14	0.19	26	0.25
Total Inferred	28.2	0.37	0.16	0.33	98	0.55

Notes: *AuEq determined by using a long term gold price of US$1,500/oz and a copper price of US$3.30/lb. Metallurgical recoveries are not taken into account for AuEq.

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Base case cut-offs used in the table are 0.35 g/t AuEq for the Colnic deposit and 0.25% CuEq for the Rovina deposit (both of which are amenable to open-pit mining), and 0.65 g/t AuEq for the Ciresata deposit, which is amenable to underground bulk mining.

For the Rovina and Colnic porphyries, the resources are pit-shell constrained using Lerchs-Grossmann algorithm pit optimizer and market metal values of $1,500/oz Au price and $3.30/lb Cu price, with net prices after smelter payables, concentrate transport, smelter charges, and royalty of US$1,384/oz Au and US$2.61/lb Cu for Colnic and US$1,286/oz Au and US$2.59/lb Cu for Rovina. Flotation metallurgical recoveries used are: Colnic 81.5% gold, 88.5% copper and Rovina 73.2% gold, 94.7% copper.

The quantity and grade of Inferred Resources reported above are conceptual in nature, and are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. For these reasons, an Inferred Mineral Resources has a lower level of confidence than an Indicated Mineral Resources and it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Rounding of tonnes as required by reporting guidelines may result in apparent differences between tonnes, grade, and contained metal content.

At both the Rovina and Colnic deposits, there are higher-grade portions of each deposit that outcrop at surface. These areas represent higher grade porphyry core mineralization that can allow cut-off grade optimization in mining scenarios. As an example, the higher-grade mineralization at Colnic contains measured plus indicated resources at >0.70 g/t Au eq of 46 million tonnes at 0.75 g/t Au and 0.12% Cu. At the Rovina deposit, the higher-grade mineralization contains measured plus indicated resource at >0.50% Cu eq of 30 million tonnes at 0.48 g/t Au and 0.34% Cu. Ciresata has a continuous zone of high-grade gold and copper mineralization in the core of the deposit that persists at depth that is suitable for extraction with an underground bulk-mining method. At Ciresata, the measured plus indicated resource of this core at >1.0 g/t Au eq contains 58 million tonnes at 1.04 g/t Au and 0.18% Cu.

Rovina Valley Project Preliminary Economic Assessment

On February 20, 2019, the Company announced the results of the Preliminary Economic Assessment (“PEA” and, together with the 2019 Resource Estimate, the “2019 Technical Report”) for the exploitation of the Colnic open pit; the initial phase of development of its Rovina Valley gold and copper project (the “Rovina Valley Project”). The Company is applying a staged, multi-phase development approach for the Rovina Valley Project. The Rovina Valley Project consists of the Colnic and Rovina gold-copper deposits amenable to open-pit development and the Ciresata gold-copper deposit suitable for underground development. The PEA considers the Colnic mineral deposit only but does include the processing facilities which will also be used in treating both Rovina and Ciresata mineral deposits. Sequencing for the Rovina open pit and Ciresata underground mine will be undertaken in a separate study at a later date.

2019 PEA Highlights

• Average annual gold equivalent production of 139,000 ounces

• Colnic life of mine production of 1,675,000 Gold Equivalent ounces (1,301,000 ounces Au) over 12 years

• ▪ Avg. AISC of $752/oz (net of copper credit)

• Processing rate of 20,000 tonnes per day incorporating flotation and dry stack tailings deposition.

• Pre-Tax NPV5% of $218.1 million with an IRR of 15.4% and Post-Tax NPV5% of $168.8 million with an IRR of 13.5% at $1,325/oz gold and $3.10/lb copper

• Initial capital costs of $339.7 million (total CAPEX of $352 million)

• Average metallurgical recoveries of 82% for gold and 89% copper without utilizing cyanide

The 2019 PEA highlights a positive economic project for our initial phase of development at the Rovina Valley Project. Colnic is an at surface open pit deposit containing only 28.6% of the total measured and indicated resources at the Rovina Valley Project. Colnic will form the foundation of a multi-decade operation with the expectation of bringing the Rovina pit on-line using pre-installed processing facility and infrastructure followed by the Ciresata deposit.

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Preliminary Economic Assessment Highlights

Base Case Assumptions
Gold price (base case)	$1,325/oz
Copperprice (base case)	$3.10/lb
Goldrecovery	82%
Copper recovery	89%
MineLife (Colnic Only)	12years
Mining rate	20,000 tonnesper day
**Mine Parameter **
Average annualgold equivalent production	139,000 ounces
Average annualgold production	108,000 ounces
Average annualcopperproduction	13.3millionpounds
Average gold grade g/t	0.58
Average coppergrade %	0.10
ColnicLOMStripratio (waste to ore)	1.9:1
**Capital Costs **
Pre-strip capital	$33.5 million
Initial capital	$306.2 million
Total Initial Capital	$339.7 million
SustainingCapital	$12.2 million
Total CAPEX	$352 million
Operating Costs
All-in sustaining costs	$743/ ounce Au
Miningcosts	$2.25 /tonne moved
Millingcosts	$7.03 /tonne milled
G&A costs	$0.50 /tonne milled
Cash Flow
Pre-Tax NPV(5% discount rate)	$218 million
Pre-Tax IRR	15.4%
Post-Tax NPV(5% discount rate)	$169 million
Post-Tax IRR	13.5%

The PEA was prepared by Lycopodium Minerals Canada Limited and AGP. The PEA was filed on SEDAR (on April 1, 2019, in accordance with National Instrument 43-101: Standards of Disclosure for Mineral Projects (“NI 43-101”).

Further information on the Rovina Valley Project, including the 2019 Technical Report, can be found on the Company’s web site at www.eurosunmining.com.

All exploration or development field activities undertaken by the Company in Romania must occur on valid mining license, exploration licenses, or prospecting permits issued by NAMR in Bucharest, which is responsible for the administration of all mining and exploration licenses and prospecting permits. According to the regulations and standard practices in Romania, the Company must submit reports of work completed and follow-up work programs on an annual basis to NAMR.

Prior to initiation of any exploration activity, environmental approval of a proposed exploration program must be obtained from various land management agencies having local, county and/or regional jurisdiction. These local agencies are responsible for forestry, surface waters, archaeology and history, and are coordinated through the local environmental agency. The levels of environmental studies and approvals are determined by the local environmental agency following an approval template referred to as the ‘urbanization certificate’. In practice, exploration activities, including drilling, are classified as low impact, and as such do not require comprehensive environmental impact studies.

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Environmental permits for exploration are granted for one to two-year periods, and all local agencies have the right to monitor and inspect environmental impacts to evaluate compliance with issued permits even though such monitoring tends to be minimal in scope and nature. Any changes to the exploration activity that result in a greater environmental impact require approval.

Since SAMAX is an exploration and evaluation stage company, the activities it conducts on its projects are largely restricted to drilling and ancillary activities associated with the drilling programs, such as access road and drill pad construction. As such, the reclamation costs in respect of drilling activities are not material to the Company and are factored into the Company’s budgets for exploration programs. When the Company wishes to enter the production stage, it will need to prepare a feasibility study as well as extensive environmental impact assessments studies. These environmental impact assessments will provide the Company with a better idea of the future costs of compliance with applicable environmental requirements and will also provide a better estimate of the eventual costs of reclamation obligations at the end of the mine life.

Highlights

Feasibility Study

In May 2020, the Company announced that it had selected SENET (Pty) Ltd. to deliver a definitive feasibility study for the Rovina Valley Project in Romania with significant work continuing through the fourth quarter. The results of the definitive feasibility study were announced in March 2021, showing average annual gold equivalent production of 146,000 ounces in years 1-10, consisting of 106,000 ounces of gold and 19 million pounds of copper per annum, average AISC of $790/gold equivalent ounces in years 1-10, with an initial capex of $399 million.

Governance and Corporate Structure Changes

The Company made significant changes in its governance and corporate structure with the termination of its relationship with former chairman Stan Bharti and his merchant bank, Forbes and Manhattan Inc. The Company also relocated its head office. In January 2021, the Company announced the appointment of Peter Vukanovich as nonexecutive chairman of the Company.

Sale of Vilhelmina Mineral AB

On July 2, 2020, the Company sold its ownership in Vilhelmina Mineral AB for consideration of 96,211,544 shares in Nickel Mountain Resources AB valued at $1,136,537 on the date of the transaction.

Bought Deal Financing

On June 5, 2020, the Company closed an upsized bought deal public offering by issuing 57,235,384 common shares of the Company at a price of C$0.39 per common share for proceeds of $16,623,044 (CAD$22,321,780).

Board of Director Appointments

In June 2020, the Company appointed Peter Vukanovich and Paul Perrow to its Board of Directors. Both Mr. Vukanovich and Mr. Perrow bring over 30 years of experience in the financial services and asset management industries, respectively.

Private Placement

On January 30, 2020, the Company closed a private placement financing by issuing 11,379,000 common shares of the Company at a price of C$0.29 per common share for proceeds of $2,504,040 (CAD$3,300,000).

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Appointment of new Chief Operating Officer for Rovina Valley

In January 2020, the Company appointed Samuel Rasmussen as Chief Operating Officer for Rovina Valley. Since graduating the Colorado School of Mines, Mr. Rasmussen has accumulated over 25 years of experience building and operating large tonnage mines for international miners such as Glencore, Lundin Mining, Freeport McMoRan and Anglo American.

Outlook

The Company’s primary focus is to undertake the Environmental and Social Impact Assessment and will also continue the Feasibility Study accelerating the Rovina Valley Project towards a construction decision.

The PEA in April 2019 outlined a robust project with an average annual gold production of 139,000 ounces over 12 years with an all-in sustaining cost “AISC” of $752/oz (net of copper credit). Production was based on a throughput rate of approximately 20,000 tonnes per day with initial capital costs of $339.7 million. Average metallurgical recoveries of 82% for gold and 89% copper without utilizing cyanide.

Selected Annual Information

	2020	2019	2018
Net loss for the year from continuing operations	$(11,938,621) $ (8,109,130) $ (7,215,770)
Net loss for the year from discontinued operations	(994,274)	(3,104,552)	-
Basic and diluted loss per share from continuing operations	(0.08)	(0.11)	(0.12)
Basic and diluted income per share from discontinued operations	(0.01)	(0.04)	-
Total assets	$ 10,231,275	$ 2,913,193	$ 2,372,663
Number of weighted average shares	144,082,453	77,192,721	58,240,301

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Selected Quarterly Financial Information

The following tables set out selected financial information for the last eight quarters:

For the quarters ended	December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020	December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
Net loss from continuing
operations	$ (3,943,354) $	(3,503,173) $ (3,564,979) $ (927,115)
Net loss from discontinued
operations	-	(574,291) (130,800) (289,183)
Basic and diluted loss per share
from continuing operations	(0.02)	(0.02) (0.03) (0.01)
Basic and diluted loss per share
from discontinued operations	-	- - -
For the quarters ended	December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019
Net loss from continuing operations	$ (1,805,033) $	(1,004,956) $ (3,467,456) $ (1,831,685)
Net loss from discontinued
operations	(3,021,161)	(18,301) (35,529) (29,561)
Basic and diluted loss per share
from continuing operations	(0.02)	(0.01) (0.05) (0.03)
Basic and diluted loss per share
from discontinued operations	(0.04)	- - -

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Results of operations for the year ended December 31, 2020

Selected financial information

Selected financial information
		Three months		Three months		Year ended		Year ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Loss from continuing operations	$	(3,943,354)	$	(1,805,033)	$	(11,938,621)	$	(8,109,130)
Loss from discontinued operations		-		3,021,161		(994,274)		3,104,552
Loss per share from continuing operations		(0.02)		(0.02)		(0.08)		(0.11)
Loss per share from discontinued operations		-		-		(0.01)		-
Expenses:
Consulting and management fees	$	492,697	$	666,736	$	2,616,992	$	2,999,792
Professional fees		69,816		22,333		193,517		86,309
General office expenses		26,150		47,339		178,661		202,900
Travel expenses		25,890		36,281		63,282		234,298
Shareholder communications and filing fees		118,130		309,647		691,101		715,660
Share-based compensation		(104,773)		249,163		1,368,838		1,109,669
Change in fair value of investments		30,102		-		325,749		-
Other expenses		104,057		(23,638)		66,264		5,648
	$	762,069	$	1,307,861	$	5,504,404	$	5,354,276
Exploration and evaluation expenditures:
Consulting and technical	$	902,670	$	505,448	$	2,514,652	$	1,990,828
Feasibility study		1,264,693		-		1,933,096		-
Surface rights		45,418		2,353		111,165		63,130
Environmental studies		197,930		521		413,241		7,066
Other exploration costs		405,056		(55,833)		425,630		49,407
Metallurgical testing		210,332		(68,499)		210,332		33,990
Field office support and administration		(131,027)		(117,729)		235,015		128,327
Professional fees		401		7,217		43,061		13,135
Travel		48,677		669		79,521		(12,370)
Licence fees		237,135		223,025		468,504		481,341
	$	3,181,285	$	497,172	$	6,434,217	$	2,754,854

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Results of operations for the three months ended December 31, 2020 (“Q4 2020”)

The net loss from continuing operations for Q4 2020 was $3,943,354 compared to a net loss of $1,805,033 for Q4 2019. The associated loss per share was $0.02 in Q4 2020 and $0.02 Q4 2019.

Consulting costs incurred during Q4 2020 were $492,697 compared to $666,736 in the comparative period. This decrease was primarily due to the reduction of the number of consultants in 2020, reducing costs compared to prior year.

Professional fees incurred during Q4 2020 were $69,816 compared to $22,333 in Q4 2019. The increase was primarily due to cost of a one-time compensation study completed in 2020.

General office expenses incurred during Q4 2020 were $26,150 compared to $47,339 in Q4 2019. The decrease was primarily due to terminating the Company’s shared services contract in 2020.

Shareholders communications and filing fees were $118,130 for the three months ended December 31, 2020, compared to $309,647, in Q4 2019. This decrease is primarily due to marketing costs incurred in Q4 2019 that did not re-occur in 2020.

Travel costs were $25,890 for Q4 2020 compared to $36,281 in Q4 2019. This decrease is primarily due to travel restrictions in place due to COVID-19.

The Company has increased its exploration and evaluation expenditure in Q4 2020 to $3,181,285 from $497,172 in the comparative period. This change is primarily due to increased environmental study, surface rights, and feasibility study costs, combined with the costs for the new COO in Q4 2020 YTD compared to Q4 2019.

Results of operations for the year ended December 31, 2020 (“Q4 2020 YTD”)

The net loss from continuing operations for Q4 2020 YTD was $11,938,621 compared to a net loss of $8,109,130 for Q4 2019 YTD. The associated loss per share was $0.08 in Q4 2020 YTD and $0.14 Q4 2019 YTD.

Consulting costs incurred for the year ended December 31, 2020 were $2,616,992 compared to $2,999,792 in the comparative period. The decrease is due to a reduction in the number of consultants contracted in 2020 compared to 2019.

Professional fees incurred during Q4 2020 YTD were $193,517 compared to $86,309 in Q4 2019 YTD. The increase was primarily due to increased legal fees and the cost of a one-time compensation study completed in 2020.

General office expenses incurred during Q4 2020 were $178,661 compared to $202,900 in Q4 2019. The decrease was primarily due to terminating the Company’s shared services contract, combined with fewer promotional costs in 2020.

Share-based compensation for Q4 2020 YTD was $1,368,838 compared to $1,109,669 in the comparative period. This difference was primarily due to the revaluation of outstanding DSUs in 2020 as a result of an increase in the Company’s share price and change in foreign exchange rate between the Canadian and US dollar, combined with the grant of new stock options in 2020.

The Company has increased its exploration and evaluation expenditure in Q4 2020 YTD to $6,434,217 from $2,754,854 in the comparative period. This change is primarily due to increased environmental study, surface rights, and feasibility study costs, combined with the costs for the new COO in Q4 2019 YTD.

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Liquidity and Capital Resources

The recovery of resource property related expenditures is dependent on the ability of the Company to obtain necessary financing to complete the development of its Rovina Valley Project or other potential projects and attain future profitable production. The Company’s financial success will depend on its ability to raise financing to construct potential projects. At present, the Company has no established sources of income, and the success of its exploration and development programs will be contingent upon the Company’s ability to raise sufficient equity financing on terms favourable to the Company. The Company does not expect to generate any internal cash flows to help finance the development costs of the Rovina Valley Project.

As at December 31, 2020, the Company had cash and cash equivalents of $7,825,681 (December 31, 2019 - $1,499,857) and working capital of $6,492,422 (December 31, 2019 – negative $1,529,466). The Company’s cash flow needs are for funding the continuing operations of the exploration work in Romania, working capital requirements and corporate administration.

On March 26, 2019, the Company closed a non-brokered private placement financing of 10,000,000 units at a price of CAD$0.30 per unit for gross proceeds of $2,241,000 (CAD$3,000,000). Each unit is comprised of one common share and one half of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.50 for a period of two years from the grant date. The Company paid commissions and other expenses of $84,769 (CAD$113,452) in relation to this private placement.

On July 4, 2019, the Company issued 8,610,000 units of the Company (the “Units”) at a price of C$0.36 per Unit for gross proceeds of C$3,099,600 ($2,373,674) on completion of a brokered private placement offering. Each Unit consisted of one common share of the Company and one common share purchase warrant. Each warrant is exercisable to acquire one common share at a price of C$0.47 per share until July 4, 2021. The Company paid C$216,972 ($166,157) in finder fees for this private placement and issued 602,700 Broker Warrants. Each Broker Warrant is exercisable to acquire one common share of the Company at a price of C$0.47 until July 4, 2021. The Company paid other expenses of C$277,866 ($212,787) in relation to this private placement.

On December 2, 2019, the Company closed its first tranche of a non-brokered private placement financing of 8,000,000 units at a price of CAD$0.25 per unit for gross proceeds of $1,504,000 (CAD$2,000,000). Each unit is comprised of one common share and one half of a common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.40 for a period of two years from the grant date. The warrants were valued at CAD$0.06. The Company also granted 14,000 finder warrants to certain finders exercisable to acquire one common share at a price of CAD$0.40 for a period of two years from the grant date. The finder warrants were valued at CAD$0.06 and were included in share issuance costs. The Company paid commissions and other expenses of $2,632 (CAD$3,500) in relation to this private placement.

On December 12, 2019, the Company closed its second tranche of a non-brokered private placement financing of 2,100,000 units at a price of CAD$0.25 per unit for gross proceeds of $398,265 (CAD$525,000). Each unit is comprised of one common share and one half of a common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.40 for a period of two years from the grant date. The warrants were valued at $0.06. The Company also granted 7,000 finder warrants to certain finders exercisable to acquire one common share at a price of CAD$0.40 for a period of two years from the grant date. The finder warrants were valued at CAD$0.06 and were included in share issuance costs. The Company paid commissions and other expenses of $1,328 (CAD$1,750) in relation to this private placement.

On January 30, 2020, the Company closed a non-brokered private placement financing of 11,379,300 shares at a price of CAD$0.29 per share for gross proceeds of $2,504,040 (CAD$3,300,000). The Company paid commissions and other expenses of $19,547 (CAD$25,888) in relation to this private placement.

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On June 5, 2020, the Company closed a bought deal prospectus offering of 57,235,384 units at a price of $0.39 per unit for gross proceeds of $16,623,044 (CAD$22,321,780). Each unit was comprised of one common share and one half of one common share purchase warrant. Each whole warrant is exercisable to acquire one common share at a price of CAD$0.55 for a period of three years from the grant date. The Company granted 4,006,477 broker warrants to the underwriters of the offering (Note 7). The broker warrants have an exercise price of CAD$0.39 and are exercisable for a period of two years from the grant date. The Company paid cash commissions and other expenses of $1,450,888 (CAD$1,950,311) in relation to this offering.

Operating Segments

The Company has concluded that it has only one material operating segment, the development of its Romanian mining permit, for financial reporting purposes.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements, with the exception of operating leases noted below.

Financial Commitments, Contingencies and Litigation

Management Contracts

The Company is party to certain management contracts. These contracts require payment of approximately $3.3 million upon the occurrence of a change of control of the Company, as defined by each officer’s respective consulting agreement. The Company is also committed to payments upon termination of approximately $2.2 million pursuant to the terms of these contracts. The Company has committed to pay a director a bonus of $250,000 on completion of the feasibility study.

Environmental

The Company’s exploration and evaluation activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its activities are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

Novel Coronavirus (“COVID-19”)

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

Related Party Transactions

During the year ended December 31, 2020, the Company entered into the following transactions with related parties not disclosed elsewhere:

On January 6, 2020, the Company granted 1,000,000 stock options to an officer of the Company with a vested value on December 31, 2020 of CAD$193,740 ($149,374). All of the stock options vested immediately on grant date

On June 30, 2020, the Company granted 4,700,000 stock options to various current officers and directors of the Company with a vested value on December 31, 2020 of CAD$832,700 ($642,012). 50% of the stock options vested immediately on the grant date and 50% of the options will vest on January 1, 2021.

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Significant Accounting Policies

The condensed consolidated interim financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2019 with the exception of the adoption of new accounting pronouncements on January 1, 2020 as outlined below.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics. These amendments dd not have a significant impact on the condensed consolidated interim financial statements.

Risk Factors

Investing in the Company involves risks that should be carefully considered. The business and operations of the Company as well as those of its subsidiaries are speculative due to their nature, the locations in which they operate, and their relative stages of development. Investors should be aware that there are various risks, that could have a material adverse effect on, among other things, title to the projects, permitting, the operating results, earnings, business and condition (financial or otherwise) of the Company. For a listing of risk factors, investors should refer to the Company’s Annual Information Form in respect of the year ended December 31, 2020 filed on SEDAR.

Additional Information and Continuous Disclosure

Additional information, including the Company’s press releases, has been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Outstanding Share Data

As at the date of this MD&A, the Company has:

• a) 171,250,514 common shares outstanding.

• b) 50,678,766 warrants outstanding with expiry dates ranging from March 26, 2021 to June 5, 2023 with exercise prices between CAD$0.39 and CAD$0.55. If all the warrants were exercised, 50,678,766 shares would be issued for proceeds of CAD$25,521,606.

• c) 11,127,425 stock options outstanding with expiry dates ranging from June 4, 2021 to June 30, 2025 with exercise prices from CAD$0.28 to CAD$1.36. If exercised, 11,127,425 shares would be issued for proceeds of CAD$6,458,398.

• d) 5,441,259 deferred share units with no fixed expiry.

Cautionary and non-GAAP Measures and Additional GAAP Measures

Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain nonGAAP and additional GAAP measures as indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. Non-GAAP and additional GAAP measures do not have standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies.

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Cautionary Statement Regarding Forward-Looking Information

Except for statements of historical fact relating to Euro Sun certain information contained herein constitutes forwardlooking information within the meaning of applicable Canadian securities legislation which may include, but is not limited to, information with respect to the Company's expected production from, and further potential of, the Company's properties; the Company's ability to raise additional funds; the future price of minerals, particularly gold and copper; the estimation of mineral reserves and mineral resources; conclusions of economic evaluation; the timing and amount of estimated future production; costs of production; capital expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Often, but not always, forward-looking statements/information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements/information is based on management's expectations and reasonable assumptions at the time such statements are made. Estimates regarding the anticipated timing, amount and cost of exploration and development activities are based on assumptions underlying mineral resource estimates and the realization of such estimates are set out herein.

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Euro Sun and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include: uncertainties of mineral resource estimates; the nature of mineral exploration and mining; variations in ore grade and recovery rates; cost of operations; fluctuations in the sale prices of products; volatility of gold and copper prices; exploration and development risks; liquidity concerns and future financings; risks associated with operations in foreign jurisdictions; potential revocation or change in permit requirements and project approvals; competition; no guarantee of titles to explore and operate; environmental liabilities and regulatory requirements; dependence on key individuals; conflicts of interests; insurance; fluctuation in market value of Euro Sun's shares; rising production costs; equipment material and skilled technical workers; volatile current global financial conditions; and currency fluctuations; and other risks pertaining to the mining industry. Although Euro Sun has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Euro Sun does not undertake to update any such forward-looking information, except in accordance with applicable securities laws. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers are cautioned not to place undue reliance on forward-looking information.

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