First Mining Gold Corp. — Audit Report / Information 2020

Aug 17, 2020

FORM 51-102F4

BUSINESS ACQUISITION REPORT

Item 1 Identity of Company

1.1 Name and Address of Company

First Mining Gold Corp. (the “ Company ”) Suite 2070 – 1188 West Georgia Street Vancouver, British Columbia V6E 4A2

1.2 Executive Officer

Daniel W. Wilton Chief Executive Officer and Director 604 639 8825

Item 2 Details of Acquisition

2.1 Nature of Business Acquired

On August 7, 2020, Treasury Metals Inc. (“ Treasury Metals ”) acquired all of the issued and outstanding shares of Tamaka Gold Corporation (“ Tamaka ”), a wholly-owned subsidiary of the Company and the indirect owner of the Goldlund Gold Project (“ Goldlund ”), in order to combine Treasury Metals’ Goliath Gold Project ( Goliath ”) with Goldlund (the “ Transaction ”).

Pursuant to the Transaction, Treasury Metals issued to the Company 130,000,000 common shares of Treasury Metals (“ TML Shares ”) and 35,000,000 common share purchase warrants to purchase TML Shares (“ TML Warrants ”) with an exercise price of $0.50 and a three-year term.

As a result of the Transaction, the Company holds an ownership interest in Treasury Metals of approximately 43% (the “ Acquisition ”) of the TML Shares outstanding on a nondiluted basis, based on the number of TML Shares issued and outstanding immediately following the completion of the Transaction.

The Acquisition is that of an equity investee under NI 51-102.

Following the Transaction, on receipt of necessary shareholder and regulatory approvals, Treasury Metals consolidated its common shares on a 3 to 1 basis (the “ Consolidation ”), and the TML Shares commenced trading on the Toronto Stock Exchange (the “ TSX ”) on a post-Consolidation basis on August 11, 2020. The TML Warrants and TML Shares issued to the Company under the Transaction were adjusted in accordance with the Consolidation, and as a result, the Company now holds 43,333,333 TML Shares and 11,666,666 TML Warrants on a post-Consolidation basis.

The Transaction is more fully described in the press release of the Company dated June 3, 2020 and filed on SEDAR at www.sedar.com under the Company’s SEDAR profile.

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2.2 Date of Acquisition

August 7, 2020.

2.3 Consideration

Pursuant to the Transaction, the Company received 130,000,000 TML Shares and 35,000,000 TML Warrants (both on a pre-Consolidation basis). Following the Acquisition, the Company holds an ownership interest in Treasury Metals of approximately 43% of the TML Shares outstanding on a non-diluted basis, based on the number of TML Shares issued and outstanding immediately following the completion of the Transaction. Following the Transaction, on receipt of necessary shareholder and regulatory approvals, Treasury Metals completed the Consolidation, and the TML Shares commenced trading on the TSX on a postConsolidation basis on August 11, 2020. The TML Warrants and TML Shares issued to the Company under the Transaction were adjusted in accordance with the Consolidation, and as a result, the Company now holds 43,333,333 TML Shares and 11,666,666 TML Warrants on a post-Consolidation basis.

Pursuant to the Transaction, Treasury Metals received consideration in the form of all the issued and outstanding shares in the capital of Tamaka.

2.4 Effect on Financial Position

Pursuant to the Transaction, the Company acquired 43,333,333 TML Shares and 11,666,666 TML Warrants (both numbers on a post-Consolidation basis) and the Company was granted a 1.5% net smelter returns royalty on all Goldlund claims, 0.5% of which can be bought back by Treasury Metals at any time by paying the Company $5,000,000. In addition, the Company will receive $2,500,000 from Treasury Metals upon receipt of a mining lease to extract material from an open pit mine at Goldlund, and an additional $2,500,000 from Treasury Metals upon 300,000 tonnes of ore being extracted from a mine at Goldlund.

Within twelve months of closing the Transaction, the Company intends to distribute up to 23,333,333 TML Shares and all 11,666,666 TML Warrants (both numbers on a postConsolidation basis) to its shareholders (the “ Distribution ”).

First Mining will continue to have the right to nominate three directors to the Treasury Metals board of directors (the “ Board ”) until the later of (1) the next meeting of shareholders of Treasury Metals at which directors are to be elected, and (2) the earlier of (i) the date of the Distribution, and (ii) the date that is 12 months from the closing date of the Transaction. If at any time after closing the Company holds between 10% and 19.9% of the issued and outstanding TML Shares, the Company will have the right to nominate two directors to the Treasury Metals Board. If the Company’s share ownership in Treasury Metals is reduced to between 5.0% and 9.9% of the issued and outstanding TML Shares, the Company will have the right to nominate one director to the Treasury Metals Board.

In addition, Treasury Metals constituted a Technical Committee on closing of the Transaction, with the committee overseeing project development of the consolidated GoldlundGoliath assets. The Technical Committee consists of four members, with the Company initially entitled to appoint two members of the committee. After closing, as long as the Company holds more than 19.9% of the issued and outstanding TML Shares, it will continue to have the right to appoint two members of the Technical Committee. If, at any time after closing the Transaction, the Company’s ownership is reduced to between 10.0% and 19.9% of the issued and outstanding

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TML Shares, the Company will have the right to nominate one member of the Technical Committee.

As a result of its shareholding interest and representation on the Treasury Metals Board, the Company will record its investment in TML Shares as an investment in associate with an initial carrying value of $78.0 million. The TML Warrants will be recorded as investments at fair value through profit and loss and had an estimated fair value on closing of $9.7 million. The additional consideration received by the Company will be recorded as non-current assets with an aggregate estimated fair value at closing of $4.2 million.

Other than the foregoing, the Company does not have any plans or proposals for any other material changes in its business affairs which may have a significant effect on the financial performance or position of the Company, including any proposal to liquidate the business of the Company, to sell, lease or exchange all or a substantial parts of its assets, to amalgamate the business organization or to make any other material changes to its business or the business of Treasury Metals.

2.5 Prior Valuations

No valuation opinions were obtained in the last 12 months by the Company or Treasury Metals required by securities legislation or a Canadian exchange or market to support the consideration paid by the Company in connection with the Transaction.

2.6 Parties to Transaction

Prior to the Transaction, Treasury Metals was not an informed person, associate or affiliate of the Company.

2.7 Date of Report

August 17, 2020.

Item 3 Financial Statements

The Company is exempt from the requirements of Section 8.4 of NI 51-102 to file certain financial statements pursuant to the exemption in Section 8.6 of NI 51-102. The exemption is available because the Acquisition is being accounted for using the equity method. Summary financial information of 100% of the assets, liabilities and results of operations of Treasury Metals for the six months ended June 30, 2020 and for the year ended December 31, 2019 is set out below (the “ Summary Financial Information ”) and no adjustments have been made to reflect the Company’s 43% interest in Treasury Metals’ business post-Acquisition.

The Summary Financial Information is derived from the audited annual consolidated financial statements of Treasury Metals for the years ended December 31, 2019 and 2018 (collectively, the “ Treasury Annual Financial Statements ”) and the interim consolidated financial statements of Treasury Metals for the six months ended June 30 2020 (the “ Treasury Interim Financial Statements ”), available on Treasury Metals’ profile on SEDAR at www.sedar.com. The Treasury Annual Financial Statements were prepared in accordance with International Financial Reporting Standards (“ IFRS ”) and reported in Canadian dollars. The Treasury Interim Financial Statements were prepared in accordance with IAS 34, interim financial reporting. The auditor of the Treasury Annual Financial Statements expressed an unmodified opinion in their audit report that states that the Treasury Annual Financial Statements

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present fairly, in all material respects, the financial position of Treasury Metals as at December 31, 2019 and 2018 and its financial performance and cash flows for the years then ended in accordance with IFRS. The significant accounting policies applied in the preparation of the Treasury Annual Financial Statements are described in such financial statements. No consent from the auditor was requested and the auditor had no involvement in the preparation and disclosure of the Summary Financial Information. The Summary Financial Information has been prepared by the Company in accordance with the financial reporting framework specified in subsection 3.2(6) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for summarized financial information of a business accounted for using the equity method.

On July 7, 2020 Treasury Metals closed an $11.52 million bought deal private placement of subscription receipts convertible into an aggregate of 10,666,666 TML Shares and 5,333,333 TML Warrants. On August 13, 2020, Treasury Metals announced that they expect the subscription receipts to convert into units of Treasury Metals on August 17, 2020. Upon conversion of the subscription receipts the Company’s ownership of Treasury Metals will be reduced to approximately 39%. The Company does not expect the issuance of the 10,666,666 TML Shares and 5,333,333 TML Warrants to significantly affect its share of Treasury Metals’ earnings.

TREASURY SUMMARY SELECTED FINANCIAL INFORMATION (in Canadian dollars)

	Balance Sheet		As at June 30, 2020	As at December 31, 2019	As at December 31, 2019
	Total Assets		$84,369,701		$84,453,697
	Total Liabilities		$15,537,189		$11,563,445
	Shareholders’ Equity		$68,832,512		$72,890,252
	Income Statement	6 months ended June 30, 2020			Year ended December 31, 2019
	Revenue	$nil			$nil
	Net Loss	-$4,530,104			-$4,842,845

Proportionate share of Treasury’s equity

Before $11.52 million bought deal financing Approximately 43% After $11.52 million bought deal financing Approximately 39%

Cautionary Note Regarding Forward-Looking Statements

This business acquisition report includes certain “forward-looking information” and “forward-looking statements” (collectively "forward-looking statements”) within the meaning of applicable Canadian and United States securities legislation including the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date of this business acquisition report. Forward-looking statements are frequently, but not always, identified by words such as "expects”, "anticipates”, "believes”, “plans”, “projects”, "intends”, "estimates”, “envisages”, "potential”, "possible”, “strategy”, “goals”, “objectives”, or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions.

Forward-looking statements in this business acquisition report relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events and include, but are not limited to, statements with respect to: (i) the advancement of a combined Goliath-Goldlund gold project towards construction and the upside potential of such a combined gold project; (ii) the Company’s plans to distribute 23,333,333 TML Shares and all 11,666,666 TML Warrants to the Company’s shareholders and the timing for completion of such distribution; and (iii) any milestone-based payments due to the Company under the Transaction; All forward-looking statements are based on the Company’s current beliefs as well as various assumptions made by them and information currently available to them. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements reflect the beliefs, opinions and projections on the date the statements are made and are based upon a number of assumptions and

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estimates that, while considered reasonable by the respective parties, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements and the parties have made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: the presence of and continuity of metals at Goldlund at estimated grades; success in realizing drilling programs; fluctuations in the spot and forward price of gold, silver, base metals or certain other commodities; fluctuations in the currency markets (such as the Canadian dollar versus the U.S. dollar); changes in national and local government, legislation, taxation, controls, regulations and political or economic developments; risks and hazards associated with the business of mineral exploration and exploration drilling programs, development and mining (including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding); the presence of laws and regulations that may impose restrictions on mining; employee relations; relationships with and claims by local communities, indigenous populations and other stakeholders; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development; title to properties.; and the additional risks described in the Company’s Annual Information Form for the year ended December 31, 2019 filed with the Canadian securities regulatory authorities under the Company’s SEDAR profile at www.sedar.com, and in the Company’s Annual Report on Form 40-F filed with the SEC on EDGAR.

The Company cautions that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Company or on our behalf, except as required by law.

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