Euromax Resources Ltd. - Annual Report 2020

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ANNUAL INFORMATION FORM

For financial year ended December 31, 2020

March 30, 2021

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1.	GENERAL INFORMATION ............................................................................................... 3
1.1	Date of Information ....................................................................................................... 3
1.2	Technical Information .................................................................................................... 3
1.3	Forward‐Looking Statements ......................................................................................... 3
1.4	Currency ......................................................................................................................... 4
2.	CORPORATE STRUCTURE ............................................................................................... 4
2.1	Name, Address and Incorporation ................................................................................. 4
2.2	Intercorporate Relationships ......................................................................................... 6
3.	GENERAL DEVELOPMENT OF THE BUSINESS................................................................... 6
3.1	Three Year History ......................................................................................................... 6
4.	GENERAL DESCRIPTION OF BUSINESS .......................................................................... 10
4.1	General ........................................................................................................................ 10
4.2	Risk Factors .................................................................................................................. 13
4.3	Description of Ilovica‐Shtuka Project in Macedonia ..................................................... 20
5.	DIVIDENDS & DISTRIBUTIONS ...................................................................................... 43
6.	DESCRIPTION OF CAPITAL STRUCTURE ......................................................................... 43
7.	MARKET FOR SECURITIES ............................................................................................. 43
7.1	Trading Price and Volume ............................................................................................ 43
7.2	Prior Sales .................................................................................................................... 44
8.	ESCROWED SECURITIES ................................................................................................ 44
9.	DIRECTORS AND OFFICERS ........................................................................................... 45
9.1	Name, Occupation and Security Holding ...................................................................... 45
9.2	Cease Trade Orders, Bankruptcies, Penalties or Sanctions .......................................... 46
9.3	Conflicts of Interest ...................................................................................................... 46
10.	AUDIT COMMITTEE ...................................................................................................... 46
10.1	Audit Committee Charter ............................................................................................. 46
10.2	Composition of the Audit Committee .......................................................................... 47
10.3	Relevant Education and Experience ............................................................................. 47
10.4	Pre‐Approval Procedures ............................................................................................. 47
10.5	External Auditor Service Fees ....................................................................................... 47
11.	LEGAL PROCEEDINGS AND REGULATORY ACTIONS ...................................................... 48
12.	INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................... 48
13.	TRANSFER AGENT AND REGISTRAR .............................................................................. 48
14.	MATERIAL CONTRACTS ................................................................................................ 48
15.	INTEREST OF EXPERTS .................................................................................................. 49
16.	AVAILABILITY OF ADDITIONAL INFORMATION ............................................................. 49
APPENDIX 1 ‐ AUDIT COMMITTEE CHARTER ............................................................................ 50

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1. GENERAL INFORMATION

1.1 Date of Information

All information in this annual information form (“ AIF ”) is as of December 31, 2020, unless otherwise indicated. The effective date of this AIF is March 30, 2021 (“ Effective Date ”).

1.2 Technical Information

The scientific or technical information in this AIF with respect to the Ilovica‐Shtuka Gold‐Copper Project (“ Ilovica‐Shtuka Project ”) is based on the technical report entitled, “Ilovica‐Shtuka Project – Feasibility Study Technical Report” (“ FS ”) with an effective date of February 16, 2016 prepared by Robert Davies, BSc, EurGeol, CGeol, Richard Hope, BSc, CEng MIMMM, Hugh Browner, PrEng, MA, MBA, FSAIMM, Dean David, FAusIMM, CP(Met), Berno Dippenaar, PrEng, BEng, Pieter Zietsman, PrEng, BSc(Eng), Peter Critcher, PrEng, BEng, Jeff White, CEng, PrEng, BEng, Roger White, ARSM, BSc, MSc, CEng MIMMM, Gareth Digges La Touche, MSc, FGS, CGeol, EurGeol, Angelo Papaioannou, BA, MCIWEM, FGS, CGeol, Gavin Chamberlain, PrEng, BSc(Eng). The FS is available on the System for Electronic Document Analysis and Retrieval at www.sedar.com. The scientific or technical information in this AIF has been reviewed and approved by Patrick Forward, FIMMM, Chief Operating Officer of the Company and a Qualified Person within the meaning of National Instrument 43‐101 – Standards of Disclosure for Mineral Projects (“ NI 43‐101 ”).

1.3 Forward‐Looking Statements

Certain statements and information contained in this document, including any information as to the future financial or operating performance of Euromax Resources Ltd. (“ Euromax ” or “ Company ”) and other statements that express management’s expectations or estimates of future performance, constitute forward‐looking information under provisions of Canadian provincial securities laws. When used in this document, the words “anticipate”, “expect”, “will”, “intend”, “estimate”, “forecast”, “planned” and similar expressions are intended to identify forward‐looking statements or information. Forward‐looking statements include, but are not limited to: the estimation of mineral reserves and mineral resources; the timing and amount of estimated future production and costs and the timing of the development of new deposits; permitting time lines; and expectations regarding metal recovery rates. Forward‐looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company has made assumptions regarding, among other things: the future capital expenditures of the Company; the Company's performance and business prospects and opportunities; the Company's ability to obtain additional financing on satisfactory terms; timing and receipt of regulatory and governmental approvals for continued operations and future development projects; currency exchange rates; the accuracy of the Company’s mineral reserve and resource estimates and the geological and metallurgical assumptions and operational and price assumptions on which the mineral reserve and resource estimates are based; and the Company's ability to attract and retain qualified personnel. The Company cautions the reader that such forward‐looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the Company to be materially different from its estimated future results, performance or achievements expressed or implied by those forward‐ looking statements and the forward‐looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: global economic conditions, including the effects of the global outbreak of the novel coronavirus, COVID‐19; fluctuations of commodity prices; the fact that the Company currently has negative cash flow; dependence on third party financing; future issuances of Company securities; the fact that the Company has never paid cash dividends; currency fluctuations; legislative, political, social or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with exploration; the risks normally involved in the exploration, development and mining business; uncertainty of mineral reserves, mineral resources, grades and recovery estimates; capital expenditures and operating cost risks; operating hazards inherent in the mining industry; limitations on the transfer of cash or other assets through foreign subsidiaries; the successful and timely permitting of the Company’s Ilovica‐Shtuka Project; title matters; environmental and other regulatory requirements; the risks associated with health, safety and community relations matters; tax residency; litigation risk; competition in the mining industry; risks associated with maintaining title to each mineral property; the level of insurance available; the carrying value of property; dependence on key management; conflicts of interest and related party transactions; legal proceedings; and the fact that substantially all of the assets of

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the Company are located outside Canada. For a more detailed discussion of such risks and material factors or assumptions underlying these forward‐looking statements, see information under the heading “Risk Factors”. The Company does not intend, and does not assume any obligation, to update or revise any forward‐looking statements whether as a result of new information, future events or otherwise, except as required by law.

Cautionary Note to United States Investors Regarding Estimates of Measured, Indicated and Inferred Mineral Resources

This AIF uses the terms “measured”, “indicated” and “inferred” mineral resources. United States investors are advised that while such terms are recognised and required by Canadian regulations, the United States Securities and Exchange Commission does not recognise them. “Inferred mineral resources” have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.

1.4 Currency

All dollar amounts referred to herein are in Canadian dollars, unless stated otherwise. The following table reflects the rates of exchange for certain foreign currencies, expressed in Canadian dollars, in effect at the end of the reporting period and in effect on the day prior to the Effective Date. All exchange rate information has been sourced from www.oanda.com.

Currency	As of the Effective Date, $1.00 CAD equals	Year ended December 31, 2020	Year ended December 31, 2019
Macedonian Denar	41.2146	38.9729	41.7653
US Dollar	0.79369	0.78228	0.76524
British Pound	0.57564	0.57609	0.58335
Euro	0.67393	0.63683	0.68325

2. CORPORATE STRUCTURE

2.1 Name, Address and Incorporation

Euromax was originally incorporated under the Business Corporation Act (British Columbia) (“ BCBA ”) and established as a legal entity in the name of “Omax Resources Ltd.” on May 1, 1990. In August 1996, the company changed its province of registration from British Columbia, Canada to Yukon, Canada. In 2000, Omax Resources Ltd. continued into the province of Alberta, Canada. In 2004, Omax Resources Ltd. changed its province of registration again and continued into the province of British Columbia, Canada and changed its name from Omax Resources Ltd. to Euromax Resources Ltd. On January 1, 2010 Euromax Resources Ltd. was amalgamated under the BCBCA with a company called 0869310 B.C. Ltd. (formerly Silk Road Resources Ltd.) as one company under the name “Euromax Resources Ltd.” and has continued as such since that date. The Company registered as an extra provincial corporation in Alberta on April 14, 2010.

The Company’s registered office is located on the 400‐725 Granville Street, Vancouver, British Columbia, V7Y 1G5, Canada. The Company has a corporate office which is located on Partizanski odredi No. 14, 1/2‐3, Skopje, Republic of North Macedonia (“ Macedonia ”). The Company, through its Macedonian subsidiary, also maintains offices in Strumica and Ilovica, Macedonia.

Euromax is a minerals development company with its core copper development project (Ilovica‐Shtuka Project) located in Macedonia. Euromax, through its local subsidiaries (collectively the “ Group ”), has been involved in the exploration and development of a number of projects in south‐eastern Europe since January 2011; however, since May 2012, when a new management team was appointed, the Group has centred its corporate strategy on the development of the Ilovica‐Shtuka Project.

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Overall progress made in the development of the Ilovica‐Shtuka Project includes:

Granting of two 30‐year conjoined mining exploitation concessions (“ Exploitation Concession(s) ”) (Ilovica 6 and Ilovica 11) for the Ilovica‐Shtuka Project from the Government of the Republic of North Macedonia (“ Macedonian Government ”);
The merger of both Exploitation Concessions held by the Group, Ilovica 6 and Ilovica 11 (“ Merger Request ”), submitted on January 28, 2016, was approved by Macedonian Ministry of Economy (“ MoE ”) and submitted to the Macedonian Government;
Completion of a positive pre‐feasibility study for the Ilovica‐Shtuka Project (“ PFS ”), announced in June 2014;
Completion of the FS, announced on January 6, 2016, which demonstrates the economic robustness of the Ilovica‐Shtuka Project and highlights the attractiveness of the investment opportunity;
Approval of Environmental Impact Study (“ EIA ”) for Ilovica 6 Exploitation Concession by the Macedonian Ministry of Environment and Physical Planning (“ MoEPP ”);
The EIA for Ilovica 11 was submitted on April 26, 2016 for its approval;
Approval of Strategic Environmental Impact Assessment by the MoEPP (required for the urbanisation process of the mine footprint); while a commission within the MoEPP issued a Compliance Report for the EIA on Ilovica 11, and recommended its formal approval to be granted by the MoEPP.
Completion of a Main Mining Project (“ MMP ”) and its submission on June 6, 2016;
Following the completion of the MMP and EIA, on July 22, 2016 an application for the exploitation permit (“ Exploitation Permit Request ”) for Ilovica 6 Exploitation Concession, was submitted for its approval;
An Environmental and Social Impact Assessment (“ ESIA ”) produced by Golder Associates under International standards including European Bank for Reconstruction and Development (“ EBRD ”) (as defined below) Performance Requirements and International Finance Corporation (“IFC”) Equator Principles was released in March 2017;
On November 1, 2019, an Exploitation Permit Request for Ilovica 11 Exploitation Concession was submitted for its approval.

However, beside the positive progress of the Ilovica‐Shtuka Project, as pointed above, starting from July 2019, several events have happened that represent obstacles for further development, including:

On July 12, 2019 Euromax announced that MoE issued a rejection resolution on Exploitation Permit Request for Ilovica 6 Exploitation Concession (“ Rejection Resolution ”). The Rejection Resolution is based on the claim that all documents required under the Minerals law in Macedonia for the application of the exploitation permit were not submitted by the Group.
The Group submitted an appeal on that Rejection Resolution to the State Commission for Acting upon Administrative and Employment Procedures in Second Instance (“ Second Instance Commission ”), however that appeal was rejected by the Second Instant Commission (“ Resolution for Rejection of the Appeal ”).
On October 14, 2019 a lawsuit was submitted to the Administrative Court in Macedonia appealing the Resolution for Rejection of the Appeal (“ First Court Case ”).
The Macedonian Government unitarily terminated the Exploitation Concession for Ilovica 6 on December 16, 2019 (“ Termination of Ilovica 6 ”).
On January 8, 2020 the Group filed a lawsuit to the Administrative Court in Macedonia against that termination (“ Second Court Case ”).
On March 31, 2020 the Administrative Court in Macedonia adopted verdict for the First Court Case (“ Verdict of the First Court Case ”) accepting the lawsuit submitted by the Group and annulling the Resolution for Rejection of the Appeal. That Verdict of the First Court Case was appealed by the Second Instance Commission to the Higher Administrative Court in Macedonia.
On November 11, 2020 the Administrative Court in Macedonia adopted verdict for the Second Court Case (“ Verdict of the Second Court Case ”) rejecting the lawsuit submitted by the Group. Following that, on November 25, 2020 the Group filed an appeal in front of the Higher Administrative Court in Macedonia against this Verdict of the Second Court Case.
On November 21, 2020 the Higher Administrative Court in Macedonia accepted the Verdict of the First Court Case (“ Final Verdict of the First Court Case ”), and the Resolution for Rejection of the Appeal was annulled, and the case was returned for a new decision by the Second Instance Commission.

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Despite the Final Verdict of the First Court Case, on January 27, 2021 the Second Instance Commission made the same decision for a second time, thereby rejecting the Group’s appeal against the Rejection Resolution (“ Second Resolution for Rejection of the Appeal ”).
Subsequent to December 31, 2020, on February 23, 2021 the Group filed a lawsuit to the Administrative Court in Macedonia against the Second Resolution for Rejection of the Appeal (“ Third Court Case ”)

As at the Effective Date, the Ilovica 11 Exploitation Concession is considered valid and in possession of the Group. Whilst the administrative process for termination of Ilovica 6 Exploitation Concession is complete as of December 16, 2019, this is in dispute before the administrative courts in the Republic of North Macedonia and the termination is not in full legal force. As an alternative to the local court proceedings, the Group has the additional option to recover the investment and potential damages from the Government by initiating international arbitration under the arbitration rules of the International Centre of the Settlement of Investment Disputes (“ ICSID ”) in Washington D.C., USA.

Due to the independent domestic and international legal review of the Group’s legal position relating to the Termination of Ilovica 6, together with international legal remedies available, the Group’s management’s and directors’ view is that the Group has strong legal position and accordingly there is a reasonable expectation for reaching a positive outcome of this dispute with the Government of the Republic of North Macedonia.

2.2 Intercorporate Relationships

The diagram below sets forth the intercorporate relationships between the Company and its local subsidiaries, which collectively constitute the Group, as at the Effective Date. For each subsidiary, the jurisdiction of incorporation, the percentage of voting securities or ownership held by the Company and the principal mineral properties owned is shown:

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NOTES:

1. Silk Road Exploration BVI is a dormant company and has been struck off the BVI Companies Register

2. Excludes Euromax Resources Limited, a UK domiciled, dormant company wholly owned by Euromax Resources UK (Services) Limited

3. GENERAL DEVELOPMENT OF THE BUSINESS

3.1 Three Year History

Year ended December 31, 2018

Non‐brokered private placements

On April 12, 2018 the Company closed a non‐brokered private placement (“ April 2018 Private Placement ”) with Galena Resource Equities Limited (“ Galena ”) by issuing 29 million units (“ 2018 Units ”) for gross proceeds of C$5.2 million, whereby one 2018 Unit consisted of (i) one common share in the capital of the Company (the “ Common Share ”) issued at a price of C$0.18 and (ii) one share purchase warrant exercisable at a price of C$0.23 at any time before April 12, 2020.

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In connection with the April 2018 Private Placement, the Company entered into:

an Ancillary Right Agreement, which provides Galena right to nominate two members of the Company’s board of directors (“ Board ”) until such time as Galena no longer holds greater than 10% of the Company’s Common Shares;
an off‐take agreement with Trafigura Pte. Ltd. (“ Trafigura ”), according to which 20% of the future produced copper concentrate from the Ilovica‐Shtuka Project will be sold to Trafigura.

Amendments on convertible loans

On April 12, 2018, the Company successfully negotiated and entered into agreements with each of EBRD and CC Ilovitza (“ CCI ” a member of the CCC Group) to amend certain loan agreements entered into with each of such parties in on April 29, 2016.

Conditions of the convertible loan closed with EBRD (“ EBRD convertible loan ”) that were amended are as follows:

The EBRD convertible loan matures on December 31, 2018, extended from April 30, 2018, or earlier, upon an equity financing of at least US$50 million.
Conversion price of the US$5 million principal amount of the loan has been reduced from C$0.40 to C$0.23 per Common Share.
Interest would be accrued from May 1, 2018 to December 31, 2018 at a rate of 20% per annum, compounded annually, on collectively (i) the principal amount, (ii) on amount of US$1.42 million (“ Redemption amount ”), (iii) the Fee of US$0.15 million and (iv) a finance delay interest accrued from January 1, 2017 to April 30, 2018 on the principal amount at the rate of 3 months LIBOR plus 7% per annum.

Conditions of the convertible loan closed with CCI (“ CCI convertible loan ”) that were amended are as follows:

Maturity of the CCI convertible loan has been extended to December 31, 2018, from April 30, 2018.
Conversion price of the received proceeds of C$5.2 million has been reduced from C$0.40 to C$0.23 per Common Share.
The fixed interest rate has been increased to 20% per annum, compounded annually, which has applied retrospectively from May 20, 2016 (changed from interest rate of 9% per annum, compounded daily).

Board restructuring

Following the closing of the April 2018 Private Placement, and pursuant to the Ancillary Rights Agreement, James Burke and Tzolo Voutov were nominated by Galena to serve on the Board and were subsequently elected by shareholders at the Company’s Annual General Meeting held on June 28, 2018.

On November 14, 2018, Euromax announced further changes to the Board, pursuant to which Tim Morgan‐Wynne, previously a Non‐Executive Director, became the Non‐Executive Chairman of Euromax, while Martyn Konig, the former Executive Chairman, continued his service on the Board as a Non‐Executive Director.

Corporate Update

Following the April 2018 Private Placement, the Group’s management completed a cost cutting programme. This included a reduction of staff by approximately 70% and the closure of two offices. The resulting monthly expenditure almost halved as a consequence, however key personnel have been retained to ensure that the Group can continue all required permitting, finance and technical activities for successful implementation of the Ilovica‐Shtuka Project.

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Year ended December 31, 2019

Ilovica‐Shtuka Project Permitting Update

On July 12, 2019, Euromax announced that the Group received the Rejection Resolution. The Exploitation Permit Request for Ilovica 6 Exploitation Concession was submitted on July 22, 2016. The Rejection Resolution is based on the claim that all documents required under law for the application were not submitted by the Group.

Following that, the Group submitted an appeal on that Rejection Resolution to the State Instance Commission, however that appeal was rejected by the Second Instance Commission. On October 14, 2019 a lawsuit was submitted to the Administrative Court in Macedonia appealing the Resolution for Rejection of the Appeal.

On November 1, 2019, an Exploitation Permit Request for the other exploitation concession was submitted for its approval.

On December 16, 2019 the Government took a decision to terminate the Ilovica 6 Exploitation Concession. Following that, subsequent to the year ended December 31, 2019, on January 8, 2020 the Group filed a lawsuit to the Administrative Court in Macedonia against that termination decision.

Appointment of international law firm

On December 17, 2019 Euromax announced that the option of international arbitration remained open and would be pursued as appropriate, and that Euromax had appointed international law firm LANSKY, GANZGER & Partner to prepare for that outcome.

Non‐brokered private placements

On May 13, 2019 the Company closed a non‐brokered private placement (“ May 2019 Private Placement ”) to Galena under which 147,008,640 units were issued for gross proceeds of C$9.2 million or US$6.9 million. Each unit consisted of (i) one Common Share issued at a price of C$0.0625 and (ii) one share purchase warrant exercisable at a price of C$0.15 at any time before May 13, 2021. The proceeds of the May 2019 Private Placement were raised for the development of the Ilovica‐Shtuka Project and for general corporate purposes.

In connection with the May 2019 Private Placement, the Company also issued additional 17,641,037 units to other existing shareholders, for aggregate gross proceeds of $1.1 million or US$0.8 million (the “Concurrent Offering”, and together with the May 2019 Private Placement, the “ May 2019 Transactions ”).

In connection with the closing of the May 2019 Private Placement, the Company and Galena:

Amended the existing Ancillary Right Agreement, dated April 10, 2018, to provide Galena with the right to nominate two additional members of the Board, i.e. Galena would have the right to nominate four directors, until such time as Galena (collectively with its affiliates) no longer holds greater than 20% of the Company’s Common Shares (calculated on a fully diluted basis). If Galena (collectively with its affiliates) holds between 10% and 20% of the Company’s Common Shares (calculated on a fully diluted basis), Galena can only nominate two directors of the Board. The Ancillary Rights Agreement provides that the Board shall consist of eight directors should Galena hold less than 55% of the Company’s Common Shares (calculated on a fully diluted basis). In the event that Galena (collectively with its affiliates) holds greater than 55% of the Company’s Common Shares (calculated on a fully diluted basis), Galena will have the right to nominate an additional director to the Board, or five directors in total, whereby in that case the number of the Board’s members will be increased to nine directors.
Signed additional off‐take agreement with Trafigura according to which the remaining 80% of the future produced copper concentrate from the Ilovica‐Shtuka Project will be sold to Trafigura.

In connection with the May 2019 Private Placement, Galena was provided with a right of first refusal to participate in any proposed equity‐linked financing in an amount up to 60% of such financing subject only to participation rights held by EBRD and CCI.

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Considering the serious financial difficulty of the Group resulting from permitting delays for the Ilovica‐Shtuka Project over the last 24 months, the Company applied for an exemption from the shareholder approval requirements of the Toronto Stock Exchange (“ TSX ”) on the basis of financial hardship. As the Group was facing serious financial difficulties, with limited alternatives and an immediate need to address its financial obligations, such circumstances did not afford the Group sufficient time to hold a special shareholders’ meeting in respect of the May 2019 Transactions.

As a result of the Group’s request for an exemption from applicable TSX rules in respect of an otherwise required special meeting of shareholders in connection with the May 2019 Transactions, the TSX placed Euromax under remedial delisting review, which is normal practice when a listed issuer seeks to rely on such exemption. On May 28, 2019 the Company announced that the Continued Listing Committee of the TSX had determined that the Company satisfied the TSX’s requirements for continued listing.

The securities issued pursuant to the May 2019 Transactions are subject to a four month hold period from the date of closing in accordance with applicable Canadian securities laws.

Amendments on convertible loans

In connection with the closing of the May 2019 Private Placement, the EBRD and CCI convertible loans were further amended, as disclosed below.

Maturity date was extended to February 28, 2021;
Annual fixed interest of 20% was reduced to 7%, applicable from April 1, 2019;
Conversion price was set at C$0.15 per Common Share applied to the whole outstanding balance of both convertible loans at the day of conversion.
To waive any pre‐emptive or participation rights that EBRD and CCC may have with respect to the May 2019 Private Placement.

Board restructuring

On May 1, 2019 the Company announced a Board restructuring, whereby Mr. Nicolas Treand was appointed as a Director, replacing Mr. Tzolo Voutov, who stepped down from the Board, as representative of Galena. Mr. Nicolas Treand, alongside with the existing management, assumed an executive role in charge of Macedonian affairs. Additionally, on June 24, 2019 the Company announced the appointment of Mr. Ivan Vutov as a Non‐Executive Director of the Company.

Following the Annual General Meeting held on June 24, 2019, the Board consisted of the following individuals: Mr. Tim Morgan‐Wynne (as Chairman), Mr. Martyn Konig, Mr. Varshan Gokool, Mr. Nicolas Treand, Mr. James Burke, Mr. Ivan Vutov and Mr. Raymond Threlkeld.

On November 13, 2019 Euromax announced that Mr. Raymond Threlkeld had resigned from the Board.

Year ended December 31, 2020

Ilovica‐Shtuka Project permitting – update

During the year ended December 31, 2020 the Final Verdict of the First Court Case was adopted by the Higher Administrative Court in Macedonia which accepted the Group’s appeal against the Rejection Resolution. The Rejection Resolution was a legal condition for the Government of the Republic of North Macedonia to make a decision for the Termination of Ilovica 6. However, following that Final Verdict of the First Court Case, the Second Instance Commission did not consider the Final Verdict of the First Court Case sufficient to change their position and once again confirmed the decision for the Rejection Resolution. Therefore, subsequent to December 31, 2020, a new legal case was filed before the Administrative Court to challenge this second decision of the Second Instance Commission, for which the Group already has a strongly positive legal precedent from the Final Verdict of the First Court Case by the Higher Administrative Court in Macedonia.

As alternative to the local court proceedings, the Group has the additional option to recover the investment and potential damages from the Government by initiating international arbitration under the arbitration rules of ICSID in Washington D.C., USA.

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Due to the independent domestic and international legal review of the Group’s legal position relating to Termination of Ilovica 6, together with international legal remedies available, the Group’s management’s and directors’ view is that the Group has strong legal position and accordingly there is a reasonable expectation for reaching a positive outcome of this dispute with the Government of the Republic of North Macedonia.

The completion of this administrative court process relating to the Termination of Ilovica 6 could be influenced and might be further prolonged by the current coronavirus (COVID‐19) pandemic and related uncertainties.

The basis of the Group’s legal position is that the approval of the merger request for Ilovica 6 and Ilovica 11 Exploitation Concessions, submitted on January 28, 2016, which is still pending approval by the Government of the Republic of North Macedonia, would materially change the Group’s legal position as these two concessions would be merged into one new exploitation concession which would allow the submission of required documentation for an Exploitation Permit approval. The approval of the merger request represents a material trigger for further development of the Ilovica‐Shtuka Project.

Extension of convertible loans

Subsequent to year ended December 31, 2020, both convertible loans (EBRD and CCI convertible loans) were extended to February 28, 2022.

Board restructuring

On August 31, 2020 the Company announced a Board restructuring, whereby Varshan Gokool resigned from the Board and from his position as Chief Executive Officer and President of the Company. Tim Morgan‐Wynne was appointed as Executive Chairman, previously Non‐Executive Chairman, and Nicolas Treand as President of the Company in addition to his executive role in charge of Macedonian affairs.

On September 21, 2020 the Company announced the appointment of Stanislav Delchev as a Non‐Executive Director of the Company.

Following the Annual General Meeting, held on September 18, 2020, the Company announced that the following members have been appointed to the Board’s committees:

Audit Committee: Stanislav Delchev (Chair), James Burke and Martyn Konig;
Compensation Committee: Martyn Konig (Chair), Tim Morgan‐Wynne and James Burke;
Technical Committee: Greg Morris (Chair), Patrick Forward and Vladislav Trashliev.

4. GENERAL DESCRIPTION OF BUSINESS

4.1 General

The Group is a minerals development company with a core development copper Ilovica‐Shtuka Project in Macedonia. The Company holds a 100% interest in Euromax Resources DOO Skopje (“ Euromax Macedonia ”), a Macedonian incorporated company which is developing Ilovica‐Shtuka Project.

In 2007, the Group acquired an option to acquire the Macedonian subsidiaries of Freeport McMoran Copper & Gold Inc. (“ FMEC”) for an initial consideration of US$600,000 and 100,000 Euromax Common Shares. On completion of the US$1.5 million exploration program in Macedonia as per this option during 2011, the Group exercised its option on November 2, 2011 and in January 2012 the Group gained 100% control of Euromax Macedonia and the Ilovica‐Shtuka Project.

The Ilovica 6 Exploration Concession was originally issued in May 2006. In July 2012 the Macedonian Government issued to Euromax Macedonia the Exploitation Concession for Ilovica 6, thereby granting the Group the right of exploitation of mineral resources for an initial term of 30 years. Further, the EIA for Ilovica 6 was formally approved in September 2012 by the MoEPP.

In January 2016, the Macedonian Government granted the Exploitation Concession for Ilovica 11 to Euromax Macedonia, thereby granting the Group the right of exploitation of mineral resources for an initial term of 30 years.

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Following that, the Merger Request for merging of both Exploitation Concessions, Ilovica 6 and Ilovica 11, submitted in January 2016 was approved by the MoE and submitted further for its ratification by the Macedonian Government.

On July 22, 2016, the Exploitation Permit Request for Ilovica 6 Exploitation Concession was submitted for approval, following the earlier submission of the EIA for Ilovica 11 Exploitation Concession and the Main Mining Project. On November 1, 2019 the Exploitation Permit Request for Ilovica 11 Exploitation Concession was also submitted for approval.

On July 12, 2019 Euromax announced that MoE adopted the Rejection Resolution for Ilovica 6 Exploitation Concession while on December 16, 2019 the Macedonian Government unilaterally terminated the agreement for the Ilovica 6 Exploitation Concession. The Group is currently exhausting all domestic legal remedies against the Rejection Resolution and the termination of the agreement.

Employees, consultants and contractors

As at the Effective Date, the Group had 11 direct employees, of which 9 were located in Macedonia and two in the United Kingdom.

Euromax is dependent on the services of its key executives. Further, the Group is dependant for much of its operational support, including drilling and preparation of resource estimates and technical reports, on external contractors.

Competitive Conditions

The metal exploration and mining business is competitive. The Company competes with numerous other companies, including those that are large established companies having substantial capabilities and greater financial and technical resources than Euromax. As a result of such competition, the Company may sometimes be disadvantaged in the acquisition of attractive mineral properties. The Company also faces competition in sourcing supplies and service providers in connection with its mining operations.

Environmental Protection

The Group is obliged to comply with the environmental provisions of the Minerals Law (as defined below) and environmental law and other environmental regulations in Macedonia and the other jurisdictions in which it operates. The Group is further subject to EBRD performance requirements concerning mine safety, subsoil and land use, permitting, mine closure and environmental protection.

Within Macedonia, there are no environmental bonds for exploration concessions regulated in the Minerals Law. If environmental damage occurs, the exploration concessionaire is obliged to compensate and remediate for any damage in accordance with the environmental law. On completion, the Group is required to conduct remediation of the area of the Ilovica‐Shtuka Project in accordance with the Macedonian environmental provisions. In terms of exploitation concession, according to the Minerals Law, the cost for eliminating the harmful effects on the environment from the operations should be funded upfront, i.e. the MoE will require a confirmation for a financial guarantee (available funds for remediation of the land affected by the installation as described in the waste management plan) prior to issuing the exploitation permit.

Health and Safety, Community and Environmental Policies

Environmental management and corporate social responsibility are corporate priorities of Euromax. Euromax is committed to the integration of environmental and social considerations in its strategy and the establishment of sustainable relationships with the communities surrounding all its projects at all levels of project development and operations. Euromax’s programs and procedures are aimed at minimising and mitigating any adverse environmental impact in accordance with international best practices.

Euromax’s community, environmental and health and safety policies (updated and approved by the Board in June 2014) are designed for setting and meeting high standards as a prerequisite for carrying on business in a sustainable society and the protection of life, safety, health and the environment.

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Euromax aims to build relationships with the communities that foster mutual respect and understanding, active partnership and long term commitment. Euromax acknowledges that it is operating in environments with different cultures, lifestyles and heritage and also recognizes that at every stage of operations and development potential negative effects may occur due to lack of communication and stakeholder engagement. Good management of communication and relationships with local communities, both in the short and long terms, is essential to business success. Thus in order to promote positive effects and to mitigate any negative effects and impacts the Company manages community relationships based on respect for these communities, and full transparency and openness in communication process with local communities.

Regulatory Overview

The Group’s asset is located in Macedonia and is subject to various levels of government controls and regulations which are amended from time to time in this country.

Below are some of the more significant aspects of such controls and regulations that materially affect the principal areas of business of the Company.

Taxes and exchange control on Mining Companies

Euromax Macedonia is subject to the Macedonian Corporate Tax Law. Under this law, the financial profit adjusted for tax purposes represents the tax base. The tax rate is flat and set at 10% of the tax base. Under the Corporate Tax Law dividends and income earned by foreign legal entities are subject to a 10% withholding tax.

Foreign exchange control applies in transactions between residents and non‐residents and is subject to reporting requirements and in certain cases approval. Transfers of profit and proceeds of sale of ownership of shares in investments can be freely transferred outside the country.

Macedonian Mining Law and Mineral Ownership

The law governing the mining sector in Macedonia is the Minerals Law, published in the Official Gazette No.136 on November 5, 2012 (“ Minerals Law ”), which was entered into force on November 13, 2012, and amended during the course of 2013, 2014, 2015, 2016 and 2019. The Minerals Law is subject to supervision by the MoE, while the state inspectorate for technical inspection supervises the implementation. Under the Minerals Law, the Macedonian Government does not have any entitlement to an equity interest in mining companies.

Under the Minerals Law, exploration concessions may be converted into exploitation concessions upon request to the MoE following submission of the required documentation. The Macedonian Government grants exploitation concessions over an area of up to 30km[2] , which area may be increased to accommodate mining infrastructure, for a period of up to 30 years. The Company, through Euromax Macedonia was granted with two conjoined Exploitation Concessions (Ilovica 6 granted in July 24, 2012 and Ilovica 11 granted in January 13, 2016). The concession agreement for the Ilovica 6 Exploitation Concession was harmonized with the new Minerals Law by the signing of a new concession agreement on September 23, 2014. However, the concession agreement for Ilovica 6 Exploitation Concession was unilaterally terminated by the Macedonian Government and ongoing administrative proceedings has been undertaken before the administrative courts in Macedonia against that termination.

In January 2019, the Parliament of the Republic of North Macedonia adopted the proposed amendments to the Minerals Law which provided that the Government cannot grant any concession for exploitation of mineral resources for leaching and flotation procedures of metallic mineral resources with cyanide and sulphuric acid in open pit mines. The exception to this are concessions for the exploitation of metallic mineral resources of already existing mines. The Group is fully compliant with these amendments.

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Summary table of the Group’s mineral interest rights

A summary of the existing mineral interest rights of Euromax Macedonia and its controlled entities are set out below:

Nature of permit/concession	Date Granted	Term (and extensions)	Area (km2)	Minerals covered	Percentage interest
Ilovica 11 Exploitation Concession	January 13, 2016	30 years extendable for up to a further	13.74	Copper and gold	100%
Ilovica 6 Exploitation Concession	July 24, 2012	30 years extendable for up to a further	1.68	Copper and gold	100%

Note:

Ongoing administrative court case against Government’s decision for termination of Ilovica 6 Exploitation Concession

Royalty

Pursuant to Minerals Law and applicable regulations, royalties payable for metals produced from the exploitation concession are:

2% of the market value of the metal of copper per tonne and for each tonne of copper concentrate produced; and
2% of the market value of the gold produced and for each tonne of gold concentrate produced.

4.2 Risk Factors

The following risk factors, as well as risks not currently known to the Group, could materially adversely affect the Group’s future business, operations and financial position and could cause them to differ materially from the estimates described in the forward‐looking statements and information contained herein. The risks set out below include those that are widespread and associated with any form of business and those that are specific risks associated with the Group’s business and its involvement in the exploration and mining industry generally, and in south‐eastern Europe in particular. Shareholders and prospective investors should carefully consider, in light of their own financial circumstance, the factors set out herein.

The directors and management of Euromax are monitoring the global crisis regarding coronavirus (COVID‐19) pandemic. There is likely to be some business disruption caused by the outbreak including potential delays to the resolution of the current administrative process related to the Termination of Ilovica 6. However, the directors and management do not consider that there would be an immediate impact on the Group’s statement of financial position and will continue to monitor the situation closely.

Title Matters

The Group cannot guarantee that title to its properties will not be challenged. The Group’s mineral properties could be subject to prior unregistered agreements, transfers or claims, and title could be affected by, among other things, undetected defects. In addition, the Group might be unable to operate its properties as permitted or to enforce its rights with respect thereto.

The Termination of the Ilovica 6 Exploitation Concession is outlined above. For clarity, the Exploitation Concession for Ilovica 11 remains in place and valid. Following independent domestic and international legal advice that has reviewed the Group’s legal position, together with local and international legal remedies available, the Group is working towards the resolution of this situation regarding the Exploitation Concession for Ilovica 6.

Permitting Requirements

Mining operations require mining and other permits from the government. These permits may not be issued on a timely basis or at all, and such permits, when issued, may be subject to requirements or conditions with which it is burdensome or expensive to comply. Furthermore, there is no assurance that delays will not occur in connection with obtaining all necessary renewals of existing permits, additional permits for any possible future changes to operations, or additional permits associated with new legislation.

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Economic and Political Instability in Emerging Market Jurisdictions

During the year ended December 31, 2020, the Group operated in the Republic of North Macedonia, so there are risks to conducting business associated with emerging market economies. These risks may include, among others, invalidation of governmental orders and permits, uncertain political and economic environments, sovereign risk, war, civil disturbances, arbitrary changes in laws or policies, the failure of foreign parties to honour contractual relations, delays in obtaining or the inability to obtain necessary governmental permits, authorizations and consents, limitations on foreign ownership, limitations on the repatriation of earnings, limitations on exports, instability due to economic under‐development, inadequate infrastructure and increased financing costs. In addition, the enforcement by the Group of its legal rights to exploit its properties may not be recognised by any foreign government or by the court system of a foreign country. These risks may limit or disrupt the Group’s operations, restrict the movement of funds or result in the deprivation of mining related rights or the taking of property by nationalisation or expropriation without fair compensation.

On March 30, 2020 the Republic of North Macedonia became a member of the North Atlantic Treaty Organisation (“NATO”), and on March 27, 2020 Council of Europe made positive decision for opening of negotiation talks of EU with Republic of North Macedonia, however the process has been further blocked and the first inter‐governmental session as an official start of negotiation with EU has not been held yet.

Dependence on Third Party Financing

The Group currently has no source of operational cash flow, further funds would be required to: (i) cover the committed costs for maintaining of Ilovica‐Shtuka Project past December 2021; (ii) cover any costs associated with potential international arbitration; (iii) repay both convertible loans and gold advance purchase payments, if required; and (iv) construct and bring the Ilovica‐Shtuka Project into commercial production. As a result, the Group will continue to depend on third party financing to fund future working capital, capital expenditures, operating and exploration costs and other general corporate requirements. The success and the pricing of any such capital raising and/or debt financing will be dependent upon the prevailing market conditions at that time for junior exploration and development companies to attract significant amounts of debt and/or equity. There can be no assurance that such financing will be available to the Group or, if it is, that it will be offered on acceptable terms. Failure to obtain sufficient financing, as and when required, may result in a delay or indefinite postponement of exploration or development on any or all of the Group’s properties.

Fluctuation of Commodity Prices

The Group’s exploration and other mining activities have previously been, and may in the future be, significantly adversely affected by declines in gold and copper prices. Commodity prices are volatile and are affected by numerous factors beyond the Group’s control such as the sale or purchase of metals by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuations in the value of the US dollar and other foreign currencies, global and regional supply and demand, and the political and economic conditions of major mining countries throughout the world.

A sudden fall in commodity prices or sustained low commodity prices could adversely impact the Group’s future revenues, profits and cash flows. In particular, sustained low, or further reductions in, commodity prices could:

reduce or eliminate the Group’s ability to finance the exploration of existing and future mineral projects;
force the Group to lose its interest in, or to sell, all or some of its properties;
halt or delay the development of existing or new projects; and
reduce the value of the Group’s securities.

Furthermore, declining or sustained low commodity prices could impact the Group’s operations by requiring a reassessment of the feasibility of any existing or new projects. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

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Carrying Value of Mineral Right Interests

Based on annual impairment reviews made by management, in the event that the long‐term expectation is that the net carrying amount of certain capitalised development and exploration costs will not be recovered, then the carrying amount is written down to the appropriate recoverable amount, with the write‐down amount charged to the statement of profit or loss. These write‐downs could occur if: the legal title is lost, the carrying amounts of the capitalised costs exceed the related undiscounted net cash flows of reserves and/or its fair value less costs to sell; exploration activities have ceased; exploration results are not promising such that exploration will not be planned for the foreseeable future; or insufficient funding is available to complete the development and exploration programme.

Expected future cash flows are inherently uncertain, and could materially change over time. They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold and copper prices, discount rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditures. If any of these uncertainties occur either alone or in combination, it could require management to recognise an impairment, which could adversely affect the Group’s business, results of operations and financial position.

Dilution

The Group may require additional funds to fund development and exploration programmes and potential acquisitions. The Group cannot predict the size of future issuances of common shares or the issuance of debt instruments or other securities convertible into shares or the effect, if any, that future issuances and sales of the Group’s securities will have on the market price of the common shares. If it raises additional funding by issuing additional equity securities, such financing may substantially dilute the interests of existing shareholders. Sales of substantial amounts of common shares, or the availability of such common shares for sale, could adversely affect the prevailing market prices for the Group’s securities.

Share Price Volatility

In recent years, the world securities markets, including those in Canada, have experienced a high level of price and volume volatility and the market price of securities of many companies, including the Company, have experienced wide fluctuations in price which have not necessarily been related to operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in share price will not occur.

Corruption and Bribery

As part of progressing the development of the Ilovica‐Shtuka Project, the Group has interactions with many levels of government in Macedonia. The Government of the Republic of North Macedonia has introduced a law on prevention of corruption and established a State Commission for Prevention of Corruption aimed at reducing bribery or corruption in Macedonia.

Transparency International’s annual Corruption Perceptions Index scores and ranks countries according to their perceived levels of public sector corruption on a scale where 0 is a country perceived to be highly corrupt to 100 depicting a country perceived as very clean. For 2020, Macedonia scored 35, ranking it 111[th] position out of 180 countries, a decline from 106[th] position in 2019.

The Group is required to comply with anti‐bribery and corruption laws including the Canadian Corruption of Foreign Public Officials Act. Additionally, the Group has contractual commitments to comply with the standards and requirements of the EBRD. The Group has developed and adopted a Code of Business Conduct and Ethics and also an Anti‐Corruption and Bribery Policy which are intended to mitigate these risks, and are enforced with the Group’s employees, consultants and contractors. The Group makes every effort to ensure the Group’s employees, consultants and contractors comply with all applicable laws and if found liable the Group may face significant fines or penalties.

Currency Risk

The Group maintains most of its working capital in US dollars. The Group currently operates in Macedonia and its operating costs are incurred in a combination of Macedonian denars, Canadian dollars, British pounds or Euros. Accordingly, the Group is subject to fluctuations in the rates of currency exchange between these currencies. The Group has not hedged its exposure to currency fluctuations.

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Resource Estimates

The mineral resource estimates presented herein are made by the Group’s personnel and independent geologists. These estimates depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. There can be no assurance that estimates will be accurate. The inclusion of mineral resource estimates should not be regarded as a representation that these amounts can be economically exploited and no assurances can be given that such resource estimates will be converted into reserves. Different experts may provide different interpretations of resource estimates.

Dependence on Key Personnel

The success of the Group and its ability to continue to carry on operations is dependent upon its ability to retain the services of certain key personnel. The loss of their services to the Group may have a material adverse effect on the Group. The Group does not presently have “key person” life insurance for any of its officers.

Capital and Operating Cost Risks

The Group’s forecasts and technical reports are based on a set of assumptions current as at the date of completion of these forecasts and studies. The realised operating and capital costs achieved by the Group may differ substantially owing to factors outside the control of the Group, including currency fluctuations, supply and demand factors for the equipment and supplies, global commodity prices, transport and logistics costs and competition for human resources. Though the Group incorporates a level of contingency in its assumptions, these may not be adequate depending on market conditions.

The mining business is capital intensive and the development, exploration and exploitation of mineral reserves and resources and the acquisition of machinery and equipment require substantial capital expenditure. The Group’s Ilovica‐ Shtuka Project will involve significant capital expenditure to progress.

Further, the Group relies on certain key third‐party suppliers and contractors for equipment, raw materials and services used in, and the provision of services necessary for the continuing exploration and development of the Ilovica‐Shtuka Project. As a result, the Group’s operations at its sites are subject to a number of risks, some of which are outside of the Group’s control, including negotiating agreements with suppliers and contractors on acceptable terms, the inability to replace a supplier or contractor and its equipment, raw materials or services in the event that either party terminates the agreement, interruption of operations or increased costs in the event that a supplier or contractor ceases its business due to insolvency or other unforeseen events and failure of a supplier or contractor to perform under its agreement with the Group. The occurrence of one or more of these risks could have a material adverse effect on the Group’s business, results of operations and financial position.

External & Geopolitical risks

To the extent that the economy deteriorates for an extended period of time, the prospects for the Group’s business could be materially harmed. In addition, the Group’s business may be affected by changes in political and market conditions, such as interest rates, availability of credit, inflation rates, changes in laws, and national and international circumstances. Recent geopolitical events, including, the outbreaks of the coronavirus (COVID‐19) pandemic, may create further uncertainty and risk with respect to the prospects of the Group’s business.

Government Regulation

Mineral businesses are subject to regulation and intervention by governments in such matters as the imposition of specific exploration, drilling and development obligations; environmental protection controls and control over the development and abandonment of resource (including restrictions on production). As well, governments may regulate or intervene with respect to prices, taxes, royalties and the exportation of commodities. Such regulation may be changed from time to time in response to economic or political conditions. The implementation of new regulations or the modification of existing regulations affecting the minerals industries could reduce demand for commodities produced, increase the Group’s operating costs and have a material adverse impact on the Group’s results of operations and financial position.

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Operating Hazards and Other Uncertainties

The Group’s business operations are subject to risks and hazards inherent in the mining industry. The exploration for and the development of mineral deposits involves significant risks, including:

environmental hazards;
discharge of pollutants or hazardous chemicals;
industrial accidents;
labour disputes and shortages;
supply and shipping problems and delays;
shortage of equipment and contractor availability;
unusual or unexpected geological or operating conditions;
fire;
changes in the regulatory environment; and
natural phenomena such as inclement weather conditions, floods and earthquakes.

These or other occurrences could result in damage to, or destruction of, mineral properties, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. The Group could also incur liabilities as a result of pollution and other casualties all of which could be very costly and could have a material adverse effect on the Group’s financial position and results of operations.

Health, Safety and Community Relations

The Group’s operations are subject to various health and safety laws and regulations that impose various duties on the Group’s operations relating to, among other things, worker safety and surrounding communities. These laws and regulations also grant the authorities broad powers to, among other things, close unsafe operations and order corrective action relating to health and safety matters. The costs associated with the compliance of such health and safety laws and regulations may be substantial and any amendments to such laws and regulations, or more stringent implementation thereof, could cause additional expenditure or impose restrictions on, or suspensions of, the Group’s operations. The Group has made, and expects to make in the future, significant expenditure to comply with the extensive laws and regulations governing the protection of the environment, waste disposal, worker safety, mine development and protection of endangered and other special status species, and, to the extent reasonably practicable, create social and economic benefit in the surrounding communities.

As a mining business, the Group may come under pressure in the jurisdictions in which it operates, or will operate in the future, to demonstrate that other stakeholders (including employees, communities surrounding operations and the countries in which they operate) benefit and will continue to benefit from the Group’s commercial activities, and/or that the Group operates in a manner that will minimise any potential damage or disruption to the interests of those stakeholders. The Group currently maintains good relations with local communities in the areas in which it operates and has a demonstrable track record of promoting community and social relations activities for the benefit of local communities. However, the Group may face opposition with respect to its current and future development and exploration projects which could materially adversely affect the Group’s business, results of operations and financial position.

Further, certain NGOs, some of which oppose globalisation and resource development, are often vocal critics of the mining industry and its practices, including the use of hazardous substances in processing activities. Adverse publicity generated by such NGOs or others related to extractive industries generally, or the Group’s operations specifically, could have an adverse effect on the Group’s reputation and financial position and may impact its relationship with the communities in which it operates. The Group seeks to mitigate this risk by its commitment to operate in a socially responsible manner. However, there can be no guarantee that the Group’s efforts in this respect will mitigate this potential risk.

The Group may also be held responsible for the costs of addressing contamination at the site of current or former activities and could be held liable for exposure to hazardous substances. The costs associated with such responsibilities and liabilities may be significant.

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Environmental Risks

All phases of the Group’s operations are subject to environmental regulation in the various jurisdictions in which it operates. There is no assurance that the Group will have or be able to obtain all necessary environmental approvals, licenses, permits or consents or be in compliance therewith or that notwithstanding its precautions, breaches of environmental laws (whether inadvertent or not) will not occur. The lack of or inability to obtain any such approvals, licences, permits or consents or any breaches of environmental laws, may result in penalties including fines or other sanctions, breach of the conditions of a mining concession or other consent or permit with possible revocation of the concession, consent or permit. In this regard, environmental hazards may exist on the properties in which the Group has an interest which are unknown to the Group at present and which have been caused by previous or existing owners or operators of the properties.

Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non‐compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, won’t adversely affect the Group’s operations, or its ability to develop its properties economically.

Non‐Canadian Assets and Management

While the Company is incorporated under the laws of British Columbia and its registered office is located in Vancouver, the Group has office in Skopje, Republic of North Macedonia. Furthermore, its officers and directors and substantially all of the assets of the Company are located outside Canada. It may not be possible for holders of securities to effect service of process within Canada upon such officers and directors who reside outside Canada. There may be difficulty in enforcing against the Company’s assets and judgments obtained in Canadian courts predicated upon the provisions of applicable Canadian provincial securities legislation may not be recognised or enforceable in jurisdictions where the Company’s officers or directors reside or where the Company’s assets are located.

Shortage of qualified skilled labour workers in the Republic of North Macedonia

An increase in worldwide demand for skilled labour may cause unanticipated cost increases and delays in delivery times, thereby impacting operating costs, capital expenditures and production schedules.

Competition

The Group faces strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, precious or base metals. The majority of these companies have greater financial resources, operational experience and technical capabilities. As a result, there can be no assurance that the Group will be able to compete successfully against other companies in acquiring new prospecting, development or mining rights.

Insurance Coverage Could Be Insufficient

While the Group maintains insurance to protect against certain risks, the nature of these risks is such that liability could exceed policy limits or could be excluded from coverage. There are also risks against which the Group cannot insure or against which it may elect not to insure. Losses from these events may cause substantial delays and require significant capital outlays, adversely affecting future results of operations and financial position.

Litigation Risks

All industries, including the mining industry, are subject to legal claims. Defence and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal proceeding could have a material adverse effect on the Group’s financial position and results of operations.

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Tax Matters

Euromax’s tax residency is affected by a number of factors, some of which are outside of its control, including the application and interpretation of the relevant tax laws and treaties. If ever Euromax was assessed to be not tax resident in Canada, it may be liable to pay additional Canadian taxes, including, but not limited to, capital gains tax based on the difference between the fair market value and tax cost of its assets at the relevant time. If such taxes were to become payable, this could have a material adverse effect on the Group’s business, results of operations and financial condition. Further, the income tax consequences to holders of common shares would be different from those applicable if Euromax was a tax resident in Canada.

No Dividends

The Group has never paid dividends. It currently intends to retain future earnings, if any, to fund the development and growth of its business, and may not pay any cash dividends for the foreseeable future. Furthermore, the Group may in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends. As a result, investors will have to rely on capital appreciation, if any, to earn a return on their investment in common shares in the foreseeable future. The payment of future dividends, if any, will be reviewed periodically by the Group’s board of directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and such other factors deemed by the board of directors to be relevant at the time.

Mineral Exploration

Mineral resource exploration is highly speculative, involves substantial expenditures, and is frequently unsuccessful. Few prospects that are explored are ultimately developed into producing mines. To the extent that the Group continues to be involved in exploration, the long‐term success of its operations will be related to the cost and success of its exploration programmes. There can be no assurance that the Group’s exploration efforts will be successful. The success of exploration is determined in part on the following factors:

the identification of potential mineralisation based on superficial analysis;
availability of prospective land;
availability of government‐granted exploration and exploitation permits;
the quality of management, geological and technical expertise; and
the capital available for exploration and development.

Substantial expenditures are required to determine if a project is economically feasible. It could take several years to establish proven and probable mineral reserves and to develop and construct mining and processing facilities. As a result of these uncertainties, there can be no assurance that current and future exploration programmes will result in the discovery of mineral reserves and the development of mines.

Conflicts of Interest

Certain of the directors and officers of the Group are directors or officers of other mineral resource companies and, to the extent that such other companies may participate in ventures in which the Group may participate, the directors of the Group may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the directors of the Group, a director who has such a conflict will abstain from voting for or against the approval of such matter. Furthermore, in appropriate cases the Group will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.

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4.3 Description of Ilovica‐Shtuka Project in Macedonia

Project Description and Location

Property Location

The property is located in the southeast of the Republic of North Macedonia, approximately 15 km to the west of the border with Bulgaria, Figure 1. The centre of the mineralised zone is located at coordinates 7 654 000 E, 4 595 500 N Hermannskogel Projection.

==> picture [300 x 224] intentionally omitted <==

Source: Nations Online Project

The project lies within the municipality of Bosilovo, approximately 20 km to the east of the town of Strumica and is situated on the western slopes of the Maleshevski mountain range. The project area is part of Mount Ograzhden and ranges from 450 m above mean sea level (“ AMSL ”) to a maximum elevation of approximately 860 m AMSL.

Property Details

A letter from Euromax Macedonia’s lawyer in Skopje, Republic of North Macedonia, Mens Legis, dated February 8, 2016, states the following regarding title information:

“The Company for production, trade and services EUROMAX RESOURCES DOO Skopje (“Company”) is a limited liability company duly registered with the Central Registry of Macedonia on 01.12.2005 under registry number 6061800 and registered address at Boulevard Partizanski Odredi No. 14‐1/2/3 Center, 1000 Skopje, Macedonia, and validly exists under the Macedonian law and is in good standing.

Shareholders of EUROMAX RESOURCES DOO Skopje, each one holding both legally and beneficially a share of the issued share capital of EUROMAX RESOURCES DOO Skopje, are as follows:

EUROMAX RESOURCES (MACEDONIA) LTD, with incorporation number BC0915327 and address at 10th Floor, 595 Howe Street, Vancouver BC V6C 2T5, Canada, holding 99,99% of the Company’s shares; and
EUROMAX RESOURCES (MACEDONIA) UK LIMITED, with company number 8300380 and address at Fifth Floor, 12 Berkeley Street, London W1J 8 DT, UK, holding 0,01% of the Company’s shares.

EUROMAX RESOURCES DOO Skopje has complied with all the legal requirements of the applicable legislation of Macedonia and operates in compliance with the applicable laws and regulations referring to its business activities in Macedonia and the requirements of the granted concessions for exploitation of minerals – copper and gold for the locality of Ilovica in the municipality Bosilovo and Novo Selo, Macedonia, i.e. the requirements of the Licenses.

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There are no options, warrants, subscriptions or any other agreements that would entitle a third person other than the existing shareholders to acquire any shares or other securities of EUROMAX RESOURCES DOO Skopje, except for:

Share Pledge Agreement by and between EUROMAX RESOURCES (MACEDONIA) LTD and EUROMAX RESOURCES (MACEDONIA) UK LIMITED and RGLD GOLD AG dated 28 November 2014, as amended and supplemented by the First Amendment Agreement dated 03 March 2015 and the Second Amendment Agreement dated 29 July 2015;
Share Pledge Agreement by and between EUROMAX RESOURCES (MACEDONIA) UK LIMITED and RGLD GOLD AG dated 28 November 2014, as amended and supplemented by the First Amendment Agreement dated 03 March 2015.

Whereas, EUROMAX RESOURCES (MACEDONIA) LTD and EUROMAX RESOURCES (MACEDONIA) UK LIMITED as existing shareholders of EUROMAX RESOURCES DOO Skopje established in favour of RGLD GOLD AG as the Pledgee and for its benefit, a first priority pledge over their shares in EUROMAX RESOURCES DOO Skopje, as a security for the obligations deriving from the Gold Purchase and Sale Agreement.

EUROMAX RESOURCES DOO Skopje up to date has the corporate power and has obtained all Government Authorizations to carry out the activities it currently carries out or, so far as we are aware, proposes to carry out, including, without limitation, holding the Licenses and its property in Macedonia, dealing with its bank accounts inside and outside Macedonia, prosecute financial transactions and hold and deal in foreign currency.

After due and careful enquiry, EUROMAX RESOURCES DOO Skopje is not in breach or violation of or in default under its constitutional documents or any law, regulation or rule or any decree, judgment or order applicable to it, including for the avoidance of doubt any environmental laws or regulations.

The searches we have carried out do not reveal that the Company for production, trade and services EUROMAX RESOURCES DOO Skopje is in liquidation, administration, receivership or administrative receivership or that a winding‐ up petition has been presented against it or is pending, threatened or contemplated.

In our best knowledge we have not revealed any material litigation claims against or involving EUROMAX RESOURCES DOO Skopje or their assets. No such proceedings are pending, threatened or contemplated.

The Licenses confer on EUROMAX RESOURCES DOO Skopje for the term of its validity, the exclusive right to carry on the development, extraction and drilling of copper and gold minerals and to occupy the surface area of the Licenses, free and clear of any encumbrances.

Without prejudice to the above, transportation and sales of, and exportation of copper and gold minerals are subject to special permits and conditions required according to the applicable laws, which EUROMAX RESOURCES DOO Skopje should provide in the regular course of business before starting with such activities.

For the activities of exploitation of copper and gold minerals EUROMAX RESOURCES DOO Skopje shall regulate the ownership right over the land within the concession field. For the part of the land which is state owned EUROMAX RESOURCES DOO Skopje shall be required to register the right of use at the Agency for Real Estate Cadastre of Macedonia, and regarding the part of the land which is a private land on the concession field, a procedure of expropriation of property should be initiated. If the concession field encompasses forests, EUROMAX RESOURCES DOO Skopje as a concessioner shall notify the Public Enterprise for management with forests “Makedonski Sumi”.

The Licenses have been validly issued to, and are legally and beneficially owned by the Company for production, trade and services EUROMAX RESOURCES DOO Skopje.

The Licenses are in full force and effect and have not been revoked, suspended, cancelled or terminated and there is no basis for such revocation, suspension, cancellation or termination.

Based on the provisions of the Law on minerals (Official Gazette of Macedonia No.136/2012…192/15), the concession for detailed geological explorations of minerals can be granted for one concession period (up to 6 years for metallic minerals) and may not be extended, and the concession for exploitation of minerals can be granted for up to 30 years with possibility to extend it for up to 30 years.

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The Concession Agreement is valid until 24.07.2042. The New Concession Agreement is valid for 30 years as of the day of signing, i.e. until 13.01.2046.

The terms of the Licenses have been complied with in all material respects and there has been no breach of the Licenses and there are no circumstances which are likely to give rise to the Licenses being breached, revoked or not renewed, in whole or in part, in the ordinary course of events.

EUROMAX RESOURCES DOO Skopje has, or has the benefit of, all necessary rights and interests deriving from the Licenses in the manner in which they are currently exercised.

Any covenants (negative or positive), restrictions, notices or other obligations of EUROMAX RESOURCES DOO Skopje pursuant to the Licenses and Macedonian legislation (including the obligations to commence/maintain work on the Licenses and pay the relevant fees) have been fully complied with as of the date of this opinion.

EUROMAX RESOURCES DOO Skopje has full and unrestricted title to the Licenses with the benefit of quiet possession and free from lawful interruption and disturbance and there are no laws, regulations or other provisions which will restrict the right of the Company for production, trade and services EUROMAX RESOURCES DOO Skopje to use the Licenses.

Subject to the terms and conditions of the Gold Purchase and Sale Agreement and the Assignment Agreement, EUROMAX RESOURCES DOO Skopje, as a security for payment and discharge of the secured obligations under the Gold Purchase and Sale Agreement, assigned to Royal Gold's benefit all of its rights, title and interest in and to, and obligations under, the Concession Agreement and shall, within 30 days as of the day when an annex to the New Concession Agreement or as the case may be, the extended and/or merged Concession Agreement, that enables the assignment by way of security of rights and obligations in respect of the New Concession Agreement is to be concluded, assign by way of security all of its rights and obligations arising there from (“Encumbrance”).

The Licenses are sufficient to allow EUROMAX RESOURCES DOO Skopje to search and explore copper and gold minerals, and after exploitation permit from the Ministry of Economy of Macedonia is granted (EUROMAX RESOURCES DOO Skopje is obliged to apply for exploitation permit in term of 4 years from concluding the concession agreement for exploitation ) to exploit, extract, remove and process copper and gold minerals on Ilovica locality, Municipality of Bosilovo and Municipality of Novo Selo, Macedonia.

Except for the concession fee for exploitation of minerals (consisted of annual fee for usage of the land depending on the type of the minerals and fee for the exploited amount of the minerals), there are no application, registration, renewal or other official statutory or regulatory fees or any stamp, registration or similar taxes or charges payable and outstanding in relation to the Licenses.

It is not a legal requirement for the holder of the concession for the Licenses to be registered, recorded, notarized or filed at any public office or elsewhere, but the Ministry of Economy of Macedonia as authorized body in the field of the minerals, that keeps a registry of granted mining concessions in Macedonia.

None of the area covered by the Licenses is included in any register of contaminated land maintained by any enforcing authority pursuant to the relevant environmental laws.

There are no laws of Macedonia which would materially alter the terms of the Licenses of EUROMAX RESOURCES DOO Skopje. However, in addition to the obligation of EUROMAX RESOURCES DOO Skopje to comply in full with the requirements, measures, obligations and liabilities of the Licenses, it shall obey all other legal requirements of the laws regulating separate areas such as environmental protection, water protection, work safety requirements, safety and protection of people’s health and property, road infrastructure and other similar requirements.

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There are no exchange control restrictions on the provision of loans (including shareholder loans), except for reporting requirements to the Macedonian National Bank and Central Registry of Macedonia (Registry of Foreign Direct Investments) or on foreign currency being held or transferred from Macedonia or the transfer of shares of EUROMAX RESOURCES DOO Skopje. Without prejudice to the above, transfer of exploitation concession or transfer of shares in EUROMAX RESOURCES DOO Skopje that entails change of control in EUROMAX RESOURCES DOO Skopje (meaning acquiring majority share of the issued share capital of EUROMAX RESOURCES DOO Skopje) as holder of the concession for exploitation of copper and gold minerals requires prior written consent by the Government of Macedonia as grantor of the concession as well as payment of a fee in amount of 7% of the appraised value of the concession based on an appraisal report for obtaining consent for transfer of concession for exploitation of minerals or consent for transfer of shares, as applicable.

There are no restrictions on a company incorporated outside Macedonia being a shareholder of EUROMAX RESOURCES DOO Skopje as Macedonian incorporated company and owning legal and beneficial title to a controlling interest in the issued shares of such company.

Unless the applicable Double Tax Treaty, if any, does not state otherwise, withholding taxes are payable in case of any distribution of dividend or management fee made by EUROMAX RESOURCES DOO Skopje to its overseas shareholders at the rate of 10%. According to the Double Tax Treaty between Macedonia and UK, the tax on dividend shall not exceed 5% if the beneficial owner is a company that owns directly at least 10% of the capital of EUROMAX RESOURCES DOO Skopje and dividends shall not be taxed if the beneficial owner of the dividends is a company that owns directly at least 25% of the capital of EUROMAX RESOURCES DOO Skopje for an uninterrupted twelve‐month period ending on the date the dividend is paid.”

The property boundaries and map coordinates are determined by paper staking and the figure below shows the concessions on a topographic map.

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Concession Area

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Taxes and Royalties

There are no special rules applicable to the taxation of exploration mining entities. The only exception is prescribed in that the turnover of gold and other precious metals towards the central bank is exempted from value added tax (“ VAT ”).

The concessionaire performing detailed geological explorations of mineral resources is obliged to pay fees for the use of an area, depending on the type of mineral resource.

The compensation for the concession for exploitation of minerals (concession fee) is consisted of:

An annual fee for use of the location, i.e. the area granted with the exploitation concession, depending on the type of the mineral that is subject to the concession; and,
Compensation for exploitation of the minerals – ores of copper and gold, that are subject to the concession.

The amount and manner of payment of the concession fee is specified in the Tariff Book, published in the Official Gazette No.65 on April 17, 2014, for determination of the amount of the compensation for issuing permits and concessions for detailed geological explorations and concessions for exploitation of minerals. New Tariff Book was published in the Official Gazette No.24/2020 on February 4, 2020, applied from January 1, 2021.

Royalties payable for metals produced from the exploitation concession are fixed at 2% of the market value for metal per tonne in each tonne of concentrate produced. Basis for calculation is the official report for the average fluctuation of the prices of metals on the LME in the past three months, which is considered to be market value. Payment of the royalty is made quarterly in arrears, by the 15th of the month following the quarter end.

Property Maintenance

The concessionaire is obliged to implement at its own expense measures for environmental protection and protection of nature and cultural heritage, as well as measures for re‐cultivation of the land in accordance with the law.

The concessionaire is obliged to compensate in whole the damage caused to third persons during the exploitation of minerals and the damage caused to the environment.

After finishing the exploitation and the mining works, the concessionaire is obliged to perform reparation of the area and re‐cultivation of the land. In case the concessionaire does not perform this activity, the grantor will perform the reparation at the expense of the concessionaire. All costs for reparation of eventually occurred deformations on the road and road zone, during the exploitation or from motion and operation of the mechanisation on the road infrastructure shall be covered by the concessionaire.

At this time there are no environmental liabilities identified on the property, nor are there any known material factors or risks that may affect access, title or the right or ability to perform work on the property.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Site Topography, Elevation and Vegetation

The project is situated on the western slopes of the Malesevske mountain range. The project area is part of Mount Ograzhden and ranges from 450 metres AMSL to a maximum elevation of approximately 860 metres AMSL. The main valley where the village of Ilovica is located is at approximately 260 metres AMSL.

The area comprises an undulating mountainous topography, with moderately rugged steep slopes up to 30° and generally rounded mountain tops. The Strumica valley floor is flat.

The mountains of the area are relatively unspoiled and contain a combination of Sub‐Mediterranean Balkan forests and Balkan Mid‐European forests. The forests are natural and include oak, beech, chestnut, black and white pine and walnut trees, with Sessile Oak forests dominating. Clearing of the forest for livestock pasture has occurred creating steppes on the less steep saddles and lower slopes. Where this has occurred, meadow grassland now predominates.

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Climate

Owing to its southerly, landlocked situation, Macedonia’s regional meteorology is characterised by a combination of Mediterranean and continental‐style climates.

The typical Mediterranean climate of warm, dry summers and mild, wet winters is modified by the proximity of continental Eurasia so that summers are hot with generally cold, but variable winters and a double peak in rainfall in late spring and autumn/winter.

The annual average rainfall at the plant site is approximately 715 millimetres. The monthly precipitation fluctuations are summarised in the following table:

Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14	Estimates of annual rainfall (mm) in dry, average and wet years at the plant site based on synthesised data 1960/61‐ 2013/14
Dry Years					Mean	Wet Years
Return Period (years)
100	50	25	10	5	2	5	10	25	50	100
Annual Exceedance Probability
0.99	0.98	0.96	0.90	0.80	0.50	0.20	0.10	0.04	0.02	0.01
396	433	475	539	600	715	830	891	955	997	1,034

Local Population

The Malesevske mountain range in which the Ilovica‐Shtuka Project is situated is largely unpopulated, with the vast majority of inhabitants residing within the Strumica valley to the west of the mountains.

The total population of the Strumica valley region is approximately 100,000 inhabitants. The villages of Shtuka and Ilovica have 1,500 to 2,000 inhabitants each and they belong to the municipality of Bosilovo.

The table below presents the statistics collected within the 2002 Census (“ Census ”) regarding the municipality of Bosilovo.

	Population Statistics for Bosilovo Municipality	Population Statistics for Bosilovo Municipality	Population Statistics for Bosilovo Municipality	Population Statistics for Bosilovo Municipality
Total Population	Economically Active			Economically Non‐active
	All	Employed	Unemployed
5,741	4,208	3,190	1,018	1,533

NOTES :

Economically non‐active are defined by the Census as follows: Housewives (engaged on duties within the household in their own house), persons that are serving a sentence in a prison or are in military service, those permanently incapable of work, children under 15 years of age, students and pensioners.

The Census states that the majority of the population (70.7%) work in agriculture; 12.6% work in industry and 16.7% work in the services.

Regional Infrastructure

The property is well served by asphalt‐paved roads. The site is located in the hills approximately 3km northeast of the village of Ilovica. The village of Ilovica is located 3km to the north of road number M6, which is a two lane asphalt paved road that leaves Strumica to the east. To reach the village of Ilovica, a good quality 3km single carriage asphalt paved road is taken from the M6.

The site is well linked to the road network in southern Europe. The E‐75 International Road passes south through central Europe and the Republic of North Macedonia to the port of Thessaloniki. The E‐75 passes some 50km west of the site and is linked to the M6 Highway, which passes east to the south of Ilovica, by Route 604 over the Belasic Mountains.

The Macedonian railway network system is connected north‐south with the railway network systems of Serbia and Greece. A further line is under construction to the north to Bulgaria. The railway transport system is managed by the publicly owned Macedonian Railways (Makedonski Zeleznici, MZ) and at present, the only provider of railway services in the country. The main station in Skopje is approximately 160km from Ilovica, although the railway follows the E‐75 corridor, with loading sidings in Gevgelija, on the Greek border, approximately 70km from the town of Ilovica. The M6 Highway also passes east to the border with Bulgaria and links with the town of Petrich (40km away in south‐western Bulgaria) and the Bulgarian road and rail networks.

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The Bulgarian rail network extends as far as Petrich, and links to the Pirdorp smelter at Chelopech, the Black Sea ports and the Mediterranean port of Thessaloniki.

The Thessaloniki port is located 145km away from the property and is understood to be the most suitable and operationally optimal option for all modes of shipping (containerised, break bulk, charter).

There is an existing water reservoir on the edge of the site, which is used for agricultural purposes. Hydrological and hydrogeological studies are ongoing on the property to establish local ground water conditions. There is a larger water reservoir at Turija, some 15 km to the west‐northwest which links to the area via a canal.

Macedonia is connected to the European power grid via the national grids of Bulgaria, Greece and Serbia. Bulk power shall be provided by the Macedonian Electricity Transmission System Operator (“ MEPSO ”) via new 110kV overhead transmission lines from existing substations at Berovo and Sushica, approximately 8km from the site.

Plant and Mining Infrastructure

The site layout is shown in figure below.

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The infrastructure design was done in accordance with the infrastructure engineering and design, design criteria and is based on South African Standards with due consideration given to site specific conditions likely to be encountered at the mine site in Macedonia.

The Ilovica‐Shtuka site exhibits steep longitudinal gradients and steep crossfalls, impacting on the design of roads, terraces and other features that require earthworks.

A geotechnical site investigation was managed by Amec Foster Wheeler to determine, inter alia, foundation conditions and material quality.

Plant and other terraces have been designed to best fit in with topography and functional requirements. The tops of the terraces are finished at slopes of up to 7%.

The main access road from the M6 highway to the plant, provided with bitumen wearing course, was designed with a maximum centre line gradient of 8%.

Roads for the plant and mine infrastructure areas have been classed as primary and secondary, provided with bitumen wearing course, and designed with a maximum centre line gradient of 7%.

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Single lane gravel access tracks with passing bays were designed to provide vehicle access to certain areas for operational and maintenance activities. These tracks were designed with a maximum centre line gradient of 14%. The principal of separating clean storm water from mine affected storm water has been applied to the design of the storm water management system. Diversion channels and containment structures (storm water dams) have been provided. Clean storm water is diverted around the process plant, mining services complex and administrative complex, including diversion of the Jazga River underneath the oxide ore stockpile by means of a culvert. Water collected in the dams is ultimately pumped into the process dam for use in the process. The storm water dams are lined and provided with silt traps and configured for periodic desludging.

Bulk power shall be provided by the Macedonian parastatal power utility company MEPSO via new 110kV overhead transmission lines from existing substations at Berovo and Sushica. MEPSO have confirmed that adequate capacity is available for the project. Main medium voltage power is radially distributed within plant areas from the 10kV main switchboard using above ground cables to the transformers and large motors.

Although blasting for mining operations will be done by a blasting contractor, provision has been made for an explosives magazine.

The final disposal of industrial and domestic waste will be off site at a licensed facility; however allowance has been made under civil infrastructure for the costs of an on‐site storage and sorting facility.

Tailings Management Facility (“ TMF ”)

The proposed TMF for the Ilovica‐Shtuka Project is located approximately 3km east‐northeast of the villages of Ilovica and Shtuka, in the Shtuka valley, and southeast of the proposed open pit. The facility has been designed for the storage of 10Mt of tailings per annum for 21 years, thus a total of 210Mt of tailings, which based on an average deposited tailings density of 1.5t/m³ represents a tailings volume of 140Mm³.

The TMF comprises a valley impoundment and involves the construction of a main embankment (6.5Mm³ starter wall) across the valley to the south of the process plant. The tailings in the facility will be contained along the northern, eastern and southern sides by the natural contours of the valley, and on the western side by the starter wall and future downstream wall raises to be constructed above the wall. Construction of the wall raises will be a continuous process over a 21 year period. At closure the TMF wall (including the starter wall) will have a volume of approximately 91Mm³.

The TMF will be built as an engineered embankment constructed using rock‐fill derived from the sterile waste rock that is mined from the open pit. This is the case for the initial starter embankment and all future, downstream raises. This is in contrast to the use of classified tailings for embankment construction, as is the case with most other mining operations in the region. The use of a rock‐fill embankment is in fact more in line with water retaining embankments for large reservoirs, which have been employed successfully in North Macedonia for retaining far higher volumes than for the Project embankment and it offers a much higher degree of safety, especially with respect to seismicity than any alternative approach. It has been designed based on the 1 in 10 000 year maximum design earthquake (“ MDE ”) event, rather than on the requirements of a less stringent Operating Basis Earthquake (“ OBE ”). Seepage through and under the embankment is mitigated with the use of engineered fill and liners on the embankment face that will collect any seepage and channel it to a dedicated storage pond from where it will be recycled through the plant via the main TMF pond. The facility is also designed to accommodate the run‐off from a Probable Maximum Flood (“ PMF ”) 24‐hour event.

Static stability results indicate a factor of safety (FOS) >1.3 and therefore indicate the embankment will remain stable in the static condition. Additional seismic stability modelling indicates average settlements of 1.3m during a maximum design earthquake (“ MDE ”) event and therefore a minimum operational freeboard of 2.0m has been adopted in order to satisfy the recommendations of International Commission on Large Dams (ICOLD) 98, (1995) with reference to seismic activity to manage the associated risk, should such an event occur.

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Supernatant water from the TMF will be recycled to the process plant via a barge pumping system where it will be used in the mineral processing. Process makeup water will be supplemented by water from the Ilovica municipal reservoir as required. Based on the results of computer modelling, there will be periods in which the supernatant pond cannot meet the plant water demand. Data indicates seasonally varying process water makeup water rates in the order of 0m³/h – 330m³/h will be required to meet plant demand. The availability of water for recycling off the facility will increase and therefore the demand for makeup water is anticipated to decrease as the tailings permeability decreases and the extent of tailings area on the footprint increases, leading to greater run‐off and reduced seepage. The model indicates makeup water may not be required during the final years of operations.

Surface run‐off entering the TMF facility from the northeast, will be minimised by construction of a river diversion dam (“ RDD ”) and river diversion channel. The river diversion will convey flow from the Shtuka River around the southern perimeter of the TMF, capturing run‐off from the south and discharging downstream of the storm water dam. A diversion channel will be constructed to keep clean water and water on the facility separate.

At closure a concrete lined spillway and dissipater will be installed. The closure surface of the TMF will be shaped to direct water towards the south of the facility, from where it will be discharging via the spillway to the valley below. Depending on water quality, this system may be combined with the river diversion channel. The TMF will be capped with a system comprising of a minimum 500mm thick mine waste layer and a minimum 150mm thick topsoil layer, to promote vegetative growth.

Oxide Stockpile Storm Water Dam

The top of the oxide ore stockpile is graded to drain into the pit. Clean water from upstream of the stockpile is collected below the stockpile in a culvert which discharges into the Jazga River at a point downstream of the storm water dam. The dam therefore collects water only from the face of the South embankment of the stockpile. The operating parameters of the dam are as follows:

Catchment area: 2.5ha
Estimated 1:100 year X 24h inflow (design capacity): 1.4 Megalitres

A preliminary design was completed by the Group together with the Faculty of Natural and Technical Sciences at the University of Shtip, Republic of North Macedonia, for the culvert required under the Oxide stockpile. Detailed design will be required for this culvert taking into account the geological conditions, hydrology of the area and Macedonian regulations for this type of work.

Waste Rock Dumps

At this stage all waste rock is proposed to be used for the construction of the tailings and water storage dams. Excess waste rock totalling some 50Mt will be placed as a buttress on the downstream face of the TMF embankment.

Site Water Balance

A site wide water balance model with a daily time step was developed in GoldSim in order to estimate water demand, water quantities that can be reclaimed from the TMF and quantities of makeup water that will be necessary to obtain from an external source over the life of the mine. At the time of writing, the GoldSim model comprised the process plant, the pit, the TMF and Ilovica reservoir, the basic components of the mine water supply system as defined in the PFS, each of which was individually modelled.

The total water requirement is 1.017m³/t, which is equivalent to 10.17Mm³/a. The minimum fresh water requirement (for gland seals and spray water) is 2.25Mm³/a. Potable water demand is 0.23Mm³/a.

Multiple runs of the GoldSim model were made, each with different synthetic daily rainfall and evaporation series, to develop statistical distributions of model outputs. Reclaim water from the TMF is the main source of process water. The model suggests that 7.5Mm³/a can be obtained from the TMF in Year 1 and that this amount reduces from Year 2 to Year 10 as seepage losses are high, but then increases as hydraulic conductivity of the tailings reduces, reducing seepage losses. Results indicate that the mine demand for water can be satisfied by reclaim operations in the winter months of the final years of mine life. Demand for water is never satisfied by reclaim operations in summer months, requiring a fresh water source to make up the difference.

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The pit also provides a source of water for the process plant contributed by run‐off and groundwater inflow. The pit contribution is expected to increase from about 0.1Mm³/a in Year 1 to about 1.1Mm³/a (at the 50th percentile) in the final year of operations.

The demand for makeup water varies over mine life from 2.5Mm³/a to about 5.5Mm³/a. The Ilovica reservoir is planned to be the main source of makeup water. Storage yield studies of the Ilovica reservoir assume that the Group would share this water resource with other users (public domestic and agricultural supplies). These studies show that the Group would need to supplement the Ilovica reservoir from an external source such as the Turija reservoir and/or groundwater from the Strumica valley. The amount of supplementary water required will vary seasonally from zero in winter, to the monthly equivalent of about 5Mm³/a (at the 50th percentile) in summer. This assumes that augmentation is initiated when storage in the reservoir drops to the equivalent of 7 days’ supply remaining.

Water Supply Options

Water resources are scarce in the project catchments and in the project area generally, necessitating the following water management strategy:

Use of available and unutilised water resources nearby
Conservation of site run‐off and recycling of wastewater
Maintaining the reliability and water quality of existing public domestic and agricultural water supplies.

Several water resource/supply options are currently under appraisal for servicing the mine scheme. The currently preferred options for supplying the majority of additional requirements, subject to more detailed evaluation, entail development of local groundwater (from the Strumica plain) and/or connection to and utilisation of available supplies from Turija reservoir.

Geochemistry

Geochemical work performed to date has included the use of industry‐standard static and kinetic geochemical testing to characterize the acid production and metal leaching propensity of each of the major rock types which will be mined and/or exposed in the walls of the proposed open pit.

Results of acid‐base accounting (ABA) testing indicate that approximately 5% of the sample population is classifiable as net‐acid consuming, with 49% classified as of ‘low‐reactivity’, 13% classifiable as of weak potential acid generation (PAG) character and 38% classifiable as strong PAG.

A series of 16 field ‘test pads’ were established at Ilovica in 2013 to assess the long‐term weathering behaviour of the waste rock stream (most of which is currently proposed for use in the construction of the TMF embankment). Most un‐ oxidised material shows evidence of strong net acid production, with un‐oxidised hydrothermally altered granodiorite and dacite yielding leachate with a pH of below 3.

Further kinetic tests were initiated in July 2015 to assess the leachate chemistry likely to emanate from material to be placed on the oxide stockpile. The Group has confirmed that ‘transitional’ (sulphide bearing) rock will now not be stockpiled.

Results of preliminary static and kinetic leach tests on available rougher and cleaner scavenger tails generated from flotation test work suggest that the tailings will not generate low pH contact water due to the high residual alkalinity present within the slurry. Further confirmatory tests are being completed to verify this.

Based on results of the static and kinetic testing, acid rock drainage (ARD) risk codes have been incorporated into the Ilovica block model. The codes have then been applied to predict the proportions of PAG and non‐PAG material to be exposed in the pit walls or contained in the waste rock stream throughout mine life.

The proportion of high risk material in both the pit walls and the waste stream increases through mine life, with greater pit extension into un‐oxidised rock units. A significant proportion of PAG material is projected to be exposed on the highwall above the level of water inundation within the pit following closure. This may impact the long‐term quality of water within any future pit lake and therefore any outflow from the pit lake will have to be managed. Further work is planned for during the detailed design phase.

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Most of the initial waste produced corresponds to sterile material and will be used for the initial TMF construction. Highly acid generative waste material begins to be produced from year 3 onwards, which is after the starter TMF embankment (end of life of mine (“ LOM ”) year 2). Acid generative material is mostly produced in LOM years 7 to 18. The carbonate bearing material is located at depth within the pit and is mined later in mine life, from LOM year 6 to year 18. Acid generative material will therefore be effectively capped within the embankment and downstream buttress.

History

General

In 1958, T. Ivanovski and P. Chedomil mapped the south western slopes of the Ograzhden Mountain. They concluded that there were indicators of an ore body that included a deep sulphide deposit.

Mineralisation was discovered in 1973 by the Skopje Bureau of Geology team, headed by D. Denkovski. Copper (Cu), lead (Pb) and zinc (Zn) mineralisation was linked to the dacite intrusions at Ilovica.

Prior to Euromax, the property was held and explored by Phelps Dodge Exploration Corporation (“ PDX ”), who completed drilling campaigns between 2004 and 2006. The Group has integrated the results of the PDX drilling into the drillhole database that has been provided to Tetra Tech.

Between 2004 and 2006, PDX completed the drilling shown in the table below.

Drillhole	Cu(%)	Au(g/t)	Mineralised Intercepts
PDIC‐04‐01	‐	‐	Verylow values
PDIC‐04‐02	0.15	0.20	288 m(98 to 386 m)at a cut‐off 0.1% Cu
PDIC‐04‐03	0.24	0.27	147.7 m(393 to 540.7 m)at a cut‐off 0.1% Cu
PDIC‐05‐04	‐	0.29	132 m(165 to 297 m)at a 0.1g/t Au cut‐off
PDIC‐06‐06	0.23	0.30	450 m(54 to 504 m)without a cut‐off
PDIC‐06‐07	0.28	0.45	93 m(132 to 225 m)without a cut‐off
PDIC‐06‐08	0.25	0.36	393 m(57 to 450 m)without a cut‐off

Source: Euromax

In 2008 the Group signed an option agreement with PDX to acquire 100% of the property.

Historical Mineral Resources

The maiden mineral resource for the property was estimated by Geoffrey S. Carter, Professional Engineer (P.Eng), of Broad Oak Associates, Toronto, on behalf of Euromax. The Resource was disclosed in a Technical Report, filed with the Canadian Securities Administrators, on August 12, 2008 (Carter 2008). The mineral resource was classified using CIM Definition Standards for Mineral Resources and Mineral Reserves.

The 2008 Resource estimate was superseded by a mineral resource estimate prepared by Moose Mountain Technical Services (“ Moose Mountain ”), with an effective date of February 15, 2012. The Moose Mountain Resource estimate was presented in a Technical Report released on May 17, 2012 and re‐stated in a PEA prepared by Tetra Tech and filed with the Canadian Securities Administrators on March 22, 2013.

Tetra Tech prepared two subsequent mineral resource updates for the project with effective dates of July 26, 2013 and November 27, 2013. The most recent mineral resource estimate was disclosed within a technical report, filed with Canadian Securities Administrators on January 17, 2014.

Euromax is not treating the historical mineral resource estimates as current which have been superseded by the mineral resources contained in the FS.

Historical Mineral Reserves

Historical mineral reserves were estimated by ACA Howe in 2014, and were disclosed as part of the PFS technical report filed with Canadian Securities Administrators on December 22, 2014. The mineral reserves have been entirely superseded by the estimates disclosed within the FS.

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For the historical mineral reserves, a mining plan and schedule was developed for mining the mineral resources that were estimated for the Ilovica‐Shtuka Project. The preliminary mine plan was based upon Measured and Indicated Mineral Resources (effective date November 27, 2013).

The report's prefeasibility level of detail required that both the Measured and Indicated Mineral Resources be classified as a Probable Mineral Reserve.

No Proven Mineral Reserves were designated.

Historical Production

No historical production has occurred on the property.

Geological Setting – The Regional, Local and Property Geology

Regional Geology

Ilovica‐Shtuka is a porphyry copper‐gold deposit, located in a northwest‐southeast striking Cenozoic magmatic arc, that covers large areas of Central Romania, Serbia, Republic of North Macedonia, Southern Bulgaria, Northern Greece and Eastern Turkey.

The porphyry deposits in the region are in close spatial and temporal association with intermediate to felsic, medium to high potassium calcium‐alkaline igneous rocks.

The Ilovica‐Shtuka deposit, which was emplaced circa 29 million years, is an isolated porphyry copper‐gold deposit located about 20 km west of the 33 ‐ 38 million years Osogovo‐Besna‐Kobila lead‐zinc belt and about 30km east of the 22 to 27 million years Leche‐Buchim‐Chalkidiki copper‐gold belt.

Property Geology

The Ilovica‐Shtuka porphyry system is about 1.5km in diameter and is associated with a poorly exposed dacite‐ granodiorite plug, emplaced along the north‐eastern border of the northwest‐southeast elongate Strumica graben. The exact location of the deposit is controlled by major north‐south cross cutting faults and minor northwest‐southeast faulting, parallel to the faulted border of the graben.

At surface, the Ilovica‐Shtuka intrusive complex consists of a central dacitic breccia diatreme, approximately 1.3km in diameter. The diatreme is intruded by at least one dacite and two granodiorite porphyry stocks that have generated several hydrothermal pulses, resulting in widespread multi‐phase veining within a mineralised stockwork.

The Ilovica‐Shtuka porphyry is centred on a hill of more than 400m of absolute relief, surrounded at lower elevations by numerous small dykes and irregular bodies of dacitic tuff and breccias and intermediate volcanic rocks.

The Ilovica‐Shtuka magmatic complex is emplaced into lower Palaeozoic granite. The granite is locally weakly foliated, coarsely porphyroblastic and forms a roughly northwest‐elongate body some 4 by 12km in size, intruding Precambrian mica schist and gneiss.

Numerous isolated outcrops of dacite porphyry elsewhere within the diatreme breccia commonly have vertical flow laminations but are too small to show as individual mapable units. Drilling demonstrates that dacite and granodiorite porphyries expand at shallow depths into a fairly continuous body.

Exploration

Field Mapping and Rock Chip Sampling

Detailed geological mapping was completed on 1:2,000 and 1:5,000 scales and comprised observations with respect to petrology, style of alteration and mineralisation.

Rock chip samples were collected from the outcrops which were identified as having potential to host mineralisation. The samples were submitted to the assaying laboratory described below. The laboratory completed multi‐element analysis using inductively coupled plasma optical emission spectroscopy (“ ICP‐OES ”). Outcrops and chip sample locations were delineated using a hand held Global Positioning System (“ GPS ”). In addition, all of the existing roads and trails were GPS tracked.

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Soil Geochemistry Survey

In total, three phases of soil sampling have been undertaken on the property, resulting in a total of 540 sampling points arranged on a 100 x 100m grid. The total area covered by the soil geochemistry sampling was approximately 5,000m[2] .

Results of soil sampling over the property indicate significant copper anomalies (>200ppm Cu) to the northwest, southwest and south of the mineralised intrusive. These anomalies are believed to represent down slope dispersion of the copper from the central area of mineralisation. In contrast, significant gold (>0.10ppm) and to a lesser extent molybdenum (>20ppm), show less down slope dispersion and more accurately delineate the underlying mineralisation.

‐ Geophysical Surveys Magnetic Survey

A total magnetic intensity survey was conducted by PDX on behalf of the Group between the 1st and 6th of April 2005. Twenty‐four east‐west lines spaced 100m apart were surveyed with readings taken every 10m.

A high amplitude magnetic anomaly was outlined; the magnetic susceptibility measurements demonstrated that the only magnetic rocks in the area are the secondary magnetite enrichment stockwork zones that are the source of the magnetic anomaly.

‐ Geophysical Surveys Induced Polarisation / Resistivity Survey

A high resolution pole dipole array survey was conducted by the Group at Ilovica‐Shtuka in July‐August 2008.

The induced polarisation (“ IP ”)/resistivity survey identified a number of intense IP anomalies, interpreted to be related to sulphide and magnetite mineralisation previously intersected in drill holes. The resistivity models revealed the presence of linear, almost vertical low resistivity features, interpreted as fault zones. The IP survey indicated that the porphyry system could extend to a depth of at least 550m from surface. The core of the hydrothermal system as defined by the IP and magnetic surveys trends north‐northeast and extends to about 800 to 1200m along strike.

Mineralisation

The main sulphide mineral at Ilovica‐Shtuka is chalcopyrite, followed by pyrite and secondary copper sulphides such as chalcocite, covellite and bornite. Molybdenite, galena and sphalerite are present in minor amounts, and occasional traces of sulphosalt minerals such as tetrahedrite‐tennantite and tellurides of gold and silver are observed.

High temperature oxide mineralisation such as magnetite, dominates at depth, associated with pyrrhotite and chalcopyrrhotite in what is interpreted as the core of the system.

A variety of iron hydroxide group minerals are largely developed within the oxidation and cementation zones. Very occasionally gold nuggets are observed at the base of the oxidation zone.

The only visible evidence of copper mineralisation at surface includes: Traces of enargite found in one ledge; very rare green copper oxides, and thin chalcocite coatings on sparse un‐oxidised pyrite deposits exposed in a creek below the leached cap to the west of the porphyry. Since the start of detailed exploration on the Ilovica‐Shtuka Project, copper mineralisation has become more obvious on surface, on newly bulldozed drill‐roads.

Drilling

A total 130 holes have been drilled over 10 campaigns between 2004 and July 2015. Of the 130 holes, 20 were drilled for geotechnical investigation, 15 were drilled for hydrogeological investigation, and 95 were drilled for mineral resource determination. In total, 42,032m have been drilled. The drill holes are generally vertical or steeply dipping; with 95 of the drill holes vertical and the remainder between 55° and 75°.

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The drill locations are illustrated in the figure below.

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Source: Euromax Resources
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Source: Tetra Tech
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NOTES:

West‐east section at 4 595 200 N ‐ The cross section presented in the figure illustrates the interpretation of the drilling results in relation to copper depletion in the oxide materials and supergene enrichment beneath. The gold assays show a similar but less pronounced distribution.

All of the holes were drilled using rotary diamond coring techniques. Drillholes were collared with PQ diameter (85mm core) and then advanced with HQ (61.1mm core) and then occasionally NQ (45.1mm core) diameters. Occasionally, difficult ground conditions were encountered around the base of oxidation. Where this occurred, these sections were cemented and re‐drilled.

A wireline system was used to hoist the core tube to surface to allow the drill core to be extracted. The drill core was placed into 1m long aluminium core boxes, with the core laid out so that the order of drilling is retained. The core was placed with the top of the hole in the top left hand corner of the core box and the deepest core located in the bottom right hand corner of the core box.

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Core Logging and Sampling

Once the core had been collected and transported to the logging facilities in Strumica, the core boxes were laid out on the logging racks for inspection by the exploration geologist. Core blocks were checked for consistency and core boxes were marked with the drill hole number and interval depths. High quality digital photographs of the core were taken both wet and dry. Logging included observations relating to lithology, alteration, mineralisation, structure, recovery and rock quality designation (“ RQD ”). Geologists initially logged the holes onto paper logging forms before entering the logs digitally on a daily basis.

Drill core recovery is very good, generally >95%, throughout the deposit. Within the oxide zone the core is general highly fractured and as such the RQD is low, however the overall core recoveries remain high.

Once logged, the core was marked for cutting. Core was cut with a diamond blade circular table saw. Samples were taken over variable intervals based upon lithology and alteration observations, collected during detailed logging of the core. Where there are no pertinent changes in lithology or alteration, the samples have generally been collected on the basis of 3m intervals.

Generally half of the core samples were taken and processed for analysis. Where density samples were taken, one quarter of the core was collected for density determination and one quarter was taken for assaying. Half core samples have been retained and are stored in the facilities at Strumica.

Collar Surveys

In October 2011, the Group engaged an independent company (DGU Geo Prem of Strumica) to complete a collar survey for drillholes 1 to 27. The survey was completed using a Topcon GPS (model reference: Hiper Pro RTK Base and Rover device). The measurements were collected using real time kinematics from a known trigonometric point with loaded parameters for the local site. The accuracy of measurements was 2 to 5cm.

Collar surveys for drillholes 28 to 67 have been completed using a handheld GPS (Garmin GPS map 62s). The manufacturer specification states that the device accuracy is less than (<) 10m.

The 2015 campaign drill holes from 70 to 130 have been completed using a Garmin GPS map 62s, specified as above.

Downhole Surveys

Downhole surveys were completed by the drilling contractor as the drill string was extracted from the holes. Downhole surveys were completed using a digital survey instrument (JKH‐R magnetic single shot inclinometer) with readings taken every 50m. Generally the drillholes show very low deviation from the planned hole paths, deeper holes show up to 5° variance from design for both dip and azimuth.

Sampling and Analysis

The Group undertakes the bulk of the sample preparation activities in its facilities in Strumica. The activities include: sample selection, core cutting, sample drying and crushing. Milling of the samples is undertaken by the testing laboratories.

All assaying was completed by Eurotest Control AD (“ Eurotest ”), a laboratory with International Organisation for Standardisation (“ ISO ”) 9000 accreditation in Sofia, Bulgaria. Eurotest does not have any previous relationship with Euromax or its management.

General Sampling Methodology

The mineralised zones at Ilovica‐Shtuka have been sampled on the basis of the lithological and alteration observations collected during detailed logging of the core. Where there are no pertinent changes in lithology or alteration, the samples have generally been collected on the basis of 3m intervals.

As of July 7, 2015, the drillhole database for the Ilovica‐Shtuka Project contained 12,695 samples, 11,847 of which are 3m in length or less. The remaining 848 samples were between 3 and 6.5m in length, with 759 being between 3 and 4m in length. There is no correlation between grade and sample length.

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Sample Preparation

After being logged, the sample intervals are marked and the core is sawn in half. The core is photographed after splitting. Tetra Tech was provided with the complete photographic database, which contains a high definition photograph of every box of drill core associated with the project.

The following sample preparation procedure is followed:

Half core samples are crushed to < 2mm grain size.
Two 200g representative sub‐samples are split from the whole via several stages of quartering.
One 200g sample is sent to Eurotest, where it is pulverised and assayed.
The second 200g sample is retained and stored at Strumica.
Pulp rejects (100 to 150g) are returned to Euromax and stored at Strumica.
Coarse rejects of (4 to 10kg bags) are stored at Strumica.

All samples are securely stored in the core storage facility prior to transport by Euromax’s personnel to the Eurotest laboratory in Sofia, Bulgaria.

Assaying

All assaying was completed by Eurotest. Assaying is undertaken on a pulverised 30g sub‐sample of the 200g sample sent to the laboratory. Gold is assayed by Fire assay with an Atomic Absorption Spectroscopy (“ AAS ”) finish. Unusually high values are checked by metallic screen assay.

All other elements including copper, molybdenum and silver are assayed by Inductively Coupled Plasma Atomic Spectroscopy. Any over limit samples (> 10,000ppm for copper and molybdenum and >10ppm for silver) are re‐assayed by AAS.

Quality Assurance / Quality Control Program

Quality assurance / quality control (“ QA/QC ”) samples, including crush duplicates, standard reference materials (“ SRM ”), and blanks were inserted approximately every 20[th] sample. This ensured that at least one set of QA/QC samples were included in every batch of samples issued to the testing laboratory.

The QA/QC program included inserting SRM into the sample stream. A standard was included approximately every 20 samples. This represents approximately 5% of the samples issued to the laboratory. For the 2015 drilling campaign four standard reference materials have been used.

Coarse Duplicates

Coarse duplicates were submitted to the laboratory approximately every 20[th] sample. The duplicates were created when the samples were crushed and split in the facilities in Strumica. To prevent the duplicate from being recognised by the laboratory, these samples were not identified as such when submitted. The total failure rate was 11% for gold and 3% for copper, which is well within acceptable limits for coarse duplicate analysis.

Blanks

The Group has created blank materials out of construction limestone. The limestone is processed through the crushing and splitting procedure using the same techniques as those adopted for the genuine samples. A total of 99 blank samples were inserted for the 2015 campaign. No failures were reported for gold or copper.

Security of Samples

All samples are securely stored in the core storage facility prior to transport by the Group’s personnel to the Eurotest’s laboratory in Sofia, Bulgaria. Samples of half core are placed into plastic bags and sealed with single use ties under the supervision of the Group’s geologists. Bags are labelled with a unique sample number, as well as a sample interval and drill hole reference. The samples are then dried in the drying units at Strumica. Once fully dried, the samples are crushed to 2mm using a jaw crusher. Once crushed and split to 200g, the samples are sent to the laboratory with associated chain of custody documentation. The duplicate sample is retained by the Group and stored in Strumica.

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The results of the laboratory analysis are strictly confidential and the sole property of the Group. All information stored on computer systems is accessible via a password protected network drive, accessible only to a limited number of the Group’s staff. One member of staff is responsible for the transfer of assay results to the drill hole database.

Mineral Resource and Mineral Reserve Estimates

Mineral Resources estimate

Independent consultants Tetra Tech estimated the mineral resources for the project, with an effective date of July 7, 2015. The most recent data included in the estimate was received on July 7, 2015.

The Group provided geological and analytical data in Excel and Access database format and also provided a topographic survey in drawing exchange format file (.dxf) format and consisted of a satellite radar digital elevation model (DEM).

Statistical and grade continuity analyses were completed to characterise the mineralisation and subsequently used to develop grade interpolation parameters for the deposit.

Exploratory data analysis highlighted a number of statistically differentiated grade populations, which were interpreted to be controlled by the following:

Stockwork intensity;
Oxidation state; and
Supergene leaching and enrichment.

Wireframe models were used to isolate grade populations into domains for the purpose of sample selection and to constrain the grade interpolation.

Grade estimation was completed using ordinary kriging. The search ellipsoid dimensions and orientations were chosen to reflect the continuity revealed by geostatistical studies and optimised using quantitative kriging neighbourhood analysis.

Estimates for silver and molybdenum were not made as the silver assays are not made with a sufficiently low detection limit in the majority of the deposit and Tetra Tech considers that the potential for incremental value to be added by molybdenum is limited.

A mineral resource classification scheme consistent with the Canadian Institute of Mining, Metallurgy and Petroleum (“ CIM ”) guidelines (2010) was applied. The estimates are categorised in the inferred, indicated and measured mineral resource categories, reported above a dollar equivalent cut‐off grade that defines the Resource as potentially mineable by open pit mining methods.

Dollar equivalent cut‐offs were calculated based upon spot metal prices from Energy & Metals Consensus Forecasts published by Consensus Economics Incorporated on July 12, 2015. The forecast for September 2016 was US$1,244/oz Au and US$2.87/lb (US$6,333/t) Cu, with a long term forecast of US$1,271/oz Au and US$2.99/lb (US$6,590/t) Cu. For the purpose of assigning a dollar value to blocks so that a cut‐off can be applied to show reasonable prospects of economic extraction, Tetra Tech adopted US$1,250/oz Au and US$3.00/lb Cu (US$6,612/t).

The dollar equivalent is calculated using the following formula:

Dollar eq = [Au * Recovery * Au Price] + [Cu * Recovery * Cu Price]

A pit optimisation was performed using the Lerchs & Grossman algorithm in the Geovia Whittle‐4D™ v.4.6 Software. It is a two part procedure based on the block model and using mining, processing and G&A costs, selling prices and costs, pit slopes, process and mining recoveries, mining dilution, financial information such as discount rates and Capex values and other criteria. These are input at different stages of the optimisation.

In the first part, the mining, processing and G&A costs, selling price and cost, pit slopes, process and mining recoveries and mining dilution are input in the form of rates, percentages and angles. A series of economic pitshells are generated by the software, based on varying revenue factors (RF), typically from 0.3 to 2, which represent different commodity prices.

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Waste and mineral quantities, strip ratios, grades and processing cut‐offs are produced for each pitshell. The pitshells can then be used as a template for design purposes.

Resource grade/tonnage sensitivity tables were created based upon a range of dollar equivalent cut‐offs for blocks within the overall Resource pit shell. A base case cut‐off of US$16/t was chosen for sulphide materials and US$8/t for oxide materials.

For the purpose of Resource reporting, the transitional material has been grouped with either the oxidised or fresh material based upon the copper content. Where the transitional material has less than 0.2% copper, it is regarded as oxide and where greater than 0.2% it is considered as fresh. This approach reflects the fact that there would not be a separate process route for transitional material.

The mineral resource for fresh material is summarised in the table below.

Measured and Indicated Fresh Mineral Resource based upon a Dollar Equivalent cut‐off of US$16/t (Effective from January 5, 2016)

Classification	Tonnage (Kt)	Grade	Grade	Contained Metal	Contained Metal
		Au (g/t)	Cu (%)	Au (Koz)	Cu (Klb)
Measured	147,100	0.31	0.23	1,500	729,500
Indicated	109,700	0.33	0.20	1,100	479,000
Total M + I	256,800	0.32	0.21	2,600	1,208,500

The oxide mineral resources within the constraining pit shell are summarised within the two tables below.

Measured and Indicated Oxide Mineral Resource based upon a Dollar Equivalent cut‐off of US$8/t

(Effective from January 5, 2016)

Classification	Tonnage	Grade	Contained Metal
	(Kt)	Au (g/t)	Au (Koz)
Measured	12,500	0.41	160
Indicated	9,600	0.37	110
Total	22,100	0.39	280

NOTES (Effective January 2016):

g/t = grams per tonne
Koz = kilo ounces
Kt = kilotonne
Dollar equivalent cut‐offs are based upon the following calculation:
a. Dollar Eq = (Au * recovery Au price) + (Cu * recovery Cu price)
The following assumptions were adopted for the calculation of the dollar equivalent:
a. Au recovery in oxide of 74%
b. Cu recovery in oxide of 0%
c. Au recovery in mixed and fresh 88%
d. Cu recovery in mixed and fresh 84%
Forecast metal prices of US$1 250/oz Au and US$3.00/lb Cu.
Recoveries are based on those quoted by Euromax in the PFS (effective date of December 19, 2014). Numbers may not add exactly due to rounding.
Tonnages calculated using the densities outlined in the FS.
Mineral Resources that are not mineral reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio‐political, marketing, or other relevant issues.

In addition to the dollar cut‐off, in order to ensure that the Resource has reasonable prospects of economic extraction, the block model was constrained to a Resource pit shell. This does not represent a formal pit optimisation, as long term forecast metal prices have been adopted. The pit was generated using the Lerchs & Grossman algorithm as implemented in Maptek Vulcan™ 3D software (Version 8.2 64 bit).

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Mineral Reserves

The following quantities have been estimated to CIM standards from the final pit design. These have been converted from measured and indicated resources with the appropriate level of engineering work.

Diluted and Recoverable Reserves	Diluted and Recoverable Reserves	Diluted and Recoverable Reserves	Diluted and Recoverable Reserves	Diluted and Recoverable Reserves
Description	Units	Proven	Probable	Total
Sulphide ore	Mt	112.6	85.5	198.1
Waste	Mt	‐	‐	199.9
Total	Mt	‐	‐	398
Strip ratio	t : t	‐	‐	1.01
Gold grade	g/t	0.32	0.30	0.32
Gold content	Moz	1.17	0.84	2.01
Copper grade	%	0.22	0.19	0.21
Copper content	Mlb	543.9	355.0	898.9

NOTES :

Mineral reserves are reported to a cut‐off grade of 0.22g/t Au and 0.17% Cu based on a gold price of US$1 200/oz less US$59.52/oz selling costs and copper of US$2.50/lb less US$0.282/lb selling costs
There may be minor differences in the totals due to rounding of figures
The reserve estimate assumes the construction of a process plant with 10Mt/a capacity.

The mineral reserve estimate is classified in accordance with CIM Definition Standards on Mineral Resources and Mineral Reserves incorporated by reference into National Instrument 43‐101 “Standards of Disclosure for Mineral Projects”.

Oxide ore is not included in the table above and is considered waste for the purposes of pit optimisation. However, it does have good grade on the contacts with the sulphide ore which enhances the sulphide ore grade in places when diluted. The waste, where it contacts with the sulphide ore, also has some grade as does the sulphide ore outside the pit limits, which reduces the sulphide ore grade but to a lesser extent than it would if it had zero grade. There is no viable copper content in the oxide ore. The combination of these effects means that although more tonnage is added the grades are not affected to the same degree.

However, although the oxide is treated as waste for optimisation, approximately 4.5Mt of oxide ore with an average gold grade of 0.5g/t will be stockpiled adjacent to the crusher and run of mine (ROM) pad. While it is envisaged that this material will be processed at the end of the LOM it is currently not included in the economic analysis and hence does not contribute to the economics of the project.

Legal Title

On December 16, 2019 the process for Termination of Ilovica 6 was completed by the Government of the Republic of North Macedonia, and this has been disputed by the Group in front of the administrative courts in Macedonia.

For clarity, the Group’s Ilovica 11 Exploitation Concession remains in place and valid.

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Mining Operations

Mining Methods

The mining method will use conventional drilling and blasting together with shovel and trucks supported by a fleet of ancillary equipment.

Drilling will be done by tracked drills with 127mm diameter bits to a depth of 11m. Blasting will be done by contractors using ammonium nitrate and fuel oil (ANFO), slurry and non‐electric detonation.

Two 300t hydraulic face shovels with bucket capacities of 16.5m³ will be used on ore and waste.

These will load a fleet of 90t nominal payload rigid dump trucks. The number of trucks will vary between 9 at the start of operations and 19 at its peak. Haul routes, distances and speeds will vary depending on the location of the operation. When hauling from the top of the mine the haul roads will follow the contours to intersect with a permanent perimeter haul road with switchbacks. When hauling from the lower part of the mine in the open pit the trucks will haul along a switchback ramp. Haul road gradients vary from 1:10 to 1:12.

Ancillary equipment will include tracked and wheeled bulldozers for earthmoving, graders for road maintenance and water bowsers for dust suppression. A fleet of service vehicles will maintain the mobile mining fleet. There will also be a complement of utility excavators, lights, pumps and pick‐up trucks. The total mining fleet will vary from 47 at the start of operations to 74 at its peak.

Labour Compliment

Labour has been split into Machine Operators, Maintenance, Management and Technical. The number of machine operators is dependent on the number of machines. The labour force will be mostly local, although some expatriate staff have been allowed for in the early years to allow for start‐up and training.

The initial compliment of machine operators is estimated to be 108 growing to a peak of 183. Management, Technical and Operations staff are estimated to be 45. Maintenance personnel are estimated to be 60.

Mineral Processing and Metallurgical Testing

Metallurgical tests are reported from the Phase II (PII) samples. The work was undertaken on two drill holes which were used to generate an overall master composite (MC) sample. The PII work was extended as Phase II Residual (PIIR), using the PII MC and supplemented by two additional samples covering higher grade domains designated High (H) and Transitional (T), the latter so named because of the presence of secondary sulphides such as chalcocite and bornite. The PIIR work was essentially to evaluate and confirm the results obtained from the PII work to the level of locked cycle test (LCT), especially in the higher grade material which is encountered in the early years of production. The Phase III (PIII) work has to date focussed on the comminution, with flotation work to optimise reagents and flotation variability work in order to assess recoveries in the early years. PIII test work will continue in to the FEED phase in particular to investigate future optimisations of the leaching circuit.

Flotation

A variety of flow sheets were simulated in the laboratory as individual open‐circuit flotation tests during the PII and PIIR stages. Initially, the work concentrated on differential flotation, i.e. the production of a separate Cu concentrate to maximise Cu recovery at a saleable grade of Cu.

The LCT results indicated a concentrate containing 24% Cu and 34g/t Au at recoveries of 82% Cu and 65% Au.

Recovery Methods

The process plant will be constructed for a 10 million tonnes per annum (“ Mt/a ”) capacity based on a flowsheet that produces a saleable copper concentrate (78.8kt/a (dry)) and maximises the overall copper and gold recovery. The process flowsheet has been developed based on a program of metallurgical test work with the objective of producing a saleable copper concentrate and maximising the gold recovery.

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The ROM ore is crushed to a product particle size P100 of 318mm. The crushed ore size is further reduced in a semi‐ autogenous mill/ball mill/crusher circuit (“ SABC ”) configuration. The milling circuit is designed to target a rougher flotation feed F80 of 75μm.

The milled slurry is fed to the rougher/scavenger flotation circuit. The rougher scavenger tails are discharged into the tails thickener for disposal to the TMF. Rougher and rougher scavenger concentrate is collected and feeds into the regrind circuit. The regrind circuit is designed to target a mill product P80 of 25μm. Milled slurry feeds into the cleaner flotation circuit consisting of cleaner, cleaner scavenger and recleaner cells. Recleaner concentrate is dewatered and stored as concentrate.

The diagram in the figure below graphically represents the selected flow sheet with a summarised mass balance.

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