Freeport Resources Inc. — Interim / Quarterly Report 2021

Sep 27, 2021

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The following Management Discussion and Analysis (“MD&A”) of Freeport Resources Inc. (the “Company”) has been prepared by management in accordance with the requirements of National Instrument 51-102 (“NI 51-102”) as of September 27, 2021 and should be read in conjunction with the condensed consolidated interim financial statements of the Company for the six months ended July 31, 2021, the audited consolidated financial statements for the year ended January 31, 2021, the related notes contained therein which have been prepared under International Financial Reporting Standards (“IFRS”). The information contained herein is not a substitute for detailed investigation or analysis on any particular issue. The information provided in this document is not intended to be a comprehensive review of all matters and developments concerning the Company.

All financial information in this MD&A has been prepared in accordance with IFRS and all dollar amounts are quoted in Canadian dollars, the reporting and functional currency of the Company, unless specifically noted.

OVERVIEW

The Company was incorporated in British Columbia and is listed on the TSX Venture Exchange (“TSXV”) under the symbol “FRI” and listed on the OTCQB Market under the ticker symbol "FEERF". The Company is a Canadian junior mineral exploration company with a diversified portfolio of exploration and evaluation assets in Papua New Guinea (PNG), Newfoundland and Labrador (NL) and British Columbia (BC).

SIGNIFICANT EVENTS/OVERALL PERFORMANCE

In August 2021, the Company granted 3,000,000 stock options exercisable at a price of $0.20 for four years from the date of grant. The stock options were granted to officers, directors and consultants of the Company.

EXPLORATION ACTIVITIES

Star Mountains Property

During the year ended January 31, 2021, the Company acquired all of the outstanding share capital of Quidum Resources Inc. (“Quidum”). Quidum is a privately held company that controls Highlands Pacific Resources Ltd. (“HPR”), a corporation established under the laws of Papua New Guinea with a series of contiguous exploration licences located in Papua New Guinea that are together commonly known as the Star Mountains Property.

In August 2021, the Company announced that its application to extend Exploration License Number EL 1312 has been granted by the Papua New Guinea, Minister of Mining with effect from September 20, 2020 for a term of two years.

In September 2021, the Company announced that its applications to extend Exploration Licenses EL 2467 Mt. Abemh, EL 2001 Benstead and EL 1781 Mt. Scorpion, have been granted by the Minister with effect from December 2nd, 2020, December 20th 2020 and March 12th, 2020, respectively for a term of two years.

In May 2021, the Company shared its results from an evaluation of the Star Mountains data conducted by Minerva Intelligence Inc. (TSX-V: MVAI) ("Minerva"), an artificial intelligence company focused on knowledge engineering. Previously announced on November 23, 2020, Minerva utilized DRIVER, its cutting-edge AI software, to perform an evaluation of multi-element drilling data. In addition, Minerva reinterpreted existing geophysical information on the project and completed traditional K-Means Cluster analysis on the multi-element data. Freeport engaged Minerva to apply its cognitive AI-powered DRIVER technology to sub-surface geochemical data available for the Star Mountains project to enhance its next phases of surface and sub-surface evaluation of the extensive property, located 25 kilometres from the Ok Tedi mine in Papua New Guinea. DRIVER and K-Means Cluster analyses were focused in the Olgal deposit area, utilizing geochemical analyses from 23 drillholes, for which a current inferred resource was previously determined. Evaluation identified multiple mineralized subgroups of dioritic rocks and skarn as potentially significant for copper, as well as a significant overlap of copper and goldbearing volumes. These sub-groups are located at the core of the deposit area and well distributed from near surface to the basal thrust fault at depth. Two mineralized dioritic sub-groups for gold were identified.

DRIVER Evaluation

DRIVER delivers valuable insights from multi-element geochemical data through comprehensive evaluation of all elements present within a given database, not simply elements of direct economic interest. Comparable evaluation of such data has typically been prohibitively time-consuming and too complex for geologists to attempt. Many of the DRIVER volumes examined at the Olgal deposit exhibit a prominent central pipe-like feature having a strong spatial association with Quartz Diorite and "Early Diorite". This pipe-like feature is interpreted to represent a composite volume resulting from gold – copper intercepts hosted within quartz diorite and/or "Diorite 4'' in drillholes 001OLG10, 002OLG10 and 014OLG12. As such, study results confirm previous interpretation of at least two dioritic intrusive phases (Quartz Diorite and "Early Diorite"). A separate and distinct molybdenum volume southeast of the core of the deposit area is interpreted to indicate a third diorite intrusion. The Olgal Deposit is interpreted to result from multi-phase intrusion of diorite at the contact between Derai Limestone and Leru Sediments. Study results also support interpretation of a mineralized copper and gold trend extending north-northwest from the Olgal Deposit. These results and interpretations independently validate similar interpretations by Freeport personnel.

K-Means Cluster Analysis

K-Means Cluster analysis was focused in the Olgal deposit area, utilizing geochemical analyses from 23 drillholes, for which a current inferred resource was previously determined (see below). Evaluation identified multiple mineralized subgroups of dioritic rocks and skarn as potentially significant for copper. These sub-groups are located at the core of the deposit area and well distributed from near surface to the basal thrust fault at depth. Two mineralized dioritic sub-groups for gold were identified. Widespread presence of Derai Limestone in the project area, within which numerous occurrences of diorite intrusions have been documented, supports interpreted potential for Cu ± Au skarn-style mineralization. Subsequent application of K-Means Cluster analysis to geochemical results from limited drill holes around the broader area of the Olgal Deposit are interpreted to indicate that Futik, Ratatat and Kum Kom have multiple intercepts corresponding to the mineralized sub-groups described above. Therefore, they are interpreted to represent targets for future evaluation.

Geophysics Reinterpretation

Available geophysics, dominated by various generations of magnetic data, with subordinate electromagnetic data, were also evaluated. Spatial association of strong magnetic anomalies with surface geochemical results are interpreted to indicate the Star Mountains project area has multiple targets having a signature similar to the Olgal Deposit and are, therefore, worthy of further evaluation. Magnetic Inversion modeling identified a large volume underlying the Olgal Deposit, with the majority of the

volume extending northwest, toward Futik and beyond. As such, geophysical results are interpreted to support potential for identification of additional sub-surface mineralization, extending northwest from Olgal, through Futik and beyond. In addition, magnetic inversion results also document subsurface volumes spatially associated with Ratatat and Tuk. There are comparatively small sub-surface inversion volumes (relative to the Olgal – Futik anomaly) evident at Ratatat and Tuk, however, there are only limited drill hole results with which to evaluate sub-surface potential. Note: the detailed survey did not extend far enough north to cover Kum Kom and, therefore, there are no magnetic data available to assess potential at that locality. Results of magnetic inversion support results of K-Means Cluster analysis, interpreted to support further evaluation of these areas. Finally, results of magnetic inversion are interpreted to indicate the Olgal Deposit is a decapitated porphyry, again, consistent with previous interpretation. However, the Olgal Deposit is interpreted to have been tilted to the north-northeast in the hanging wall of the thrust fault and transported to the northeast. Therefore, the root of the Olgal porphyry system is interpreted to be located to the west-southwest of the current surface exposure.

Significant Conclusions

1. Based on K-Means Cluster, DRIVER and 3D inversion results, potential to expand both grade and volume of copper ± gold porphyry-style mineralization is interpreted to exist at the core of the Olgal Deposit area, extending to the northwest. Infill drilling is recommended.

2. Extending drill holes 003OLG10 and 004OLG10 below the basal thrust fault is expected to return mineralized intercepts associated with an anomaly identified through 3D inversion of magnetic data, based on magnetic susceptibility results.

3. Mapped exposures of epidote alteration, marble, skarn and diorite, supported by trends interpreted from the results of both K-Means Cluster and DRIVER analysis and a large subsurface volume delineated by magnetic inversion, are interpreted to indicate strong potential for identification of additional porphyry-style mineralization extending from the Olgal Deposit northwest to Futik and beyond.

4. Limited drilling at Futik, Ratatat, Pad 48 and Tuk is interpreted to have tested the margins of their respective target anomalies, particularly those defined by 3D inversion of magnetic data, with holes either collared too far laterally and/or not drilled deep enough. Further evaluation is strongly recommended.

A summary report prepared by Minerva can be found on the Freeport website at www.freeportresources.com.

Yandera Copper Project

In August 2021, the Company completed the acquisition of Carpo Resources Inc. (“Carpo”) by acquiring all of the outstanding share capital from the vendors (the “Transaction”). Carpo is a privately held company that controls Era Resources Inc. (“Era”), a corporation established under the laws of the Cayman Islands (“Cayman”) and which itself controls an exploration license located in Papua New Guinea, commonly known as the “Yandera Copper Project”. In consideration for all of the outstanding share capital of Carpo, the Company issued 20,000,000 common shares. No finder’s fees or commissions are payable in connection with the Transaction.

Location, Physiograpy and Accessibility

The Yandera project is located approximately 95km southwest of the city of Madang in the foothills of the Bismarck Mountain Range, which is part of the central cordillera of New Guinea, at an elevation of approximately 1,900m above sea level. The site is situated on the northern side of the range, about 13km east-northeast from Mt. Wilhelm, with the extensive floodplain of the Ramu River approximately 20km to the east. The deposit area is mountainous with the Imbrum River valley to the west and the Tai-Yor River valley to the east. Materials and transport for the site team are via helicopter from Madang Airport or from a lay down yard which runs through the village of Usino, a 10-12 minute flight away.

History

In 1965, Kennecott acquired the Exploration License (EL) to work on the Project. They continued ownership and operated until 1973, when Triako Mines acquired the Project and had its operator, Amdex, complete the work programs. Amdex jointly worked with Broken Hill Proprietary Company (BHP) on the property from 1974 to 1977. In 1978 Amdex joint-ventured with Buka Minerals. Work and ownership between Amdex and Buka Minerals continued until 1984, when they dropped the Project. The Project sat idle until 1999, when Highland Pacific and Cyprus Amax acquired an EL and worked on the Project before dropping it prior to 2000. The Project then sat idle again until Belvedere Limited acquired the EL for the property. In 2005, Belvedere formed a joint-venture with Marengo Mining Limited, who operated the property. In 2006, Marengo Mining acquired the Project through the purchase of Belvedere’s interest. Since then Marengo Mining, now Era Resources Inc., has been the sole owner and operator of the Project. Era was subsequently acquired by Carpo which is now owned by the Company.

Geology

Yandera is an igneous, intrusive-hosted, structurally controlled copper porphyry system with ancillary molybdenum and gold composed of a series of adjacent, vertically oriented deposits along recognized structural trends. Mineralization is concentrated in several deposits, namely, Imbruminda, Gremi, Omora, Gamagu and Dimbi. Imbruminda, Gremi, and Omora are contiguous and separated from Dimbi by a lowgrade, central, silica-rich zone, which is bounded on three sides by high angle faults. The bulk of the mineralization is adjacent to these major structures on a northwest-southeast trend. Locally, northnortheast-trending cross faults bound mineral domains and reflect the structural complexity of the district.

The property lies within the New Guinea Orogenic Belt, which stretches from the southeastern portion of the island through the central mountain ranges into Indonesia, and to the west of Grasberg, Freeport McMoran's giant Copper-Gold mine. The belt is home to some of the world’s largest producing mines and deposits, including the aforementioned Grasberg, which hosts the largest reserve of gold and second largest reserve of copper in the world. This belt includes slices of metamorphic basement and contains a variety of sedimentary packages. Above Paleozoic and early Mesozoic schists, marbles and granodiorite lie packages of Triassic to Jurassic volcanic, and clastic sediments, and Jurassic to Cretaceous clastic, volcanic, and volcanogenic sediments.

Other Properties

The Hutton Property is located in Northern Labrador, Canada and is an exploration and evaluation stage garnet sand project. The Company owns 100% of the interest in the property. The Company owns 100% of the Red Rose property, and 50% of the Tsirku-Jarvis property, with no future commitments with respect to these properties. During the period ended July 31, 2021, the Company wrote down the Q and the Spanish Mountains properties to $nil.

Dr. Nathan Chutas, PhD, CPG, Senior Vice-President of Operations for Freeport, is a qualified person for the purposes of National Instrument 43-101. Dr. Chutas has reviewed and approved the technical content in this MD&A.

RESULTS OF OPERATIONS

Revenues

Due to the Company’s status as an exploration and development stage mineral resource company and a lack of commercial production from its properties, the Company currently does not have any revenues from its operations.

Expenses for the six months ended July 31, 2021

The Company had a net loss of $1,004,367 for the six months ended July 31, 2021 compared to a net loss of $277,589 for the six months ended July 31, 2020.

Expenses details are as follows:

• a) Advertising and promotion of $193,415 (2020 - $17,500) – the increase is due to the the addition of a new marketing program to raise the profile of the Company.

• b) Consulting fees of $297,355 (2020 - $170,954) – the increase is due to the addition of new consultants in the current period.

• c) Project investigation costs of $373,145 (2020 - $nil) – the variance is due to the acquisition of the Star Mountain Property, in which the exploration expenditures are accounted for as project investigation costs in the statement of comprehensive loss.

Expenses for the three months ended July 31, 2021

The Company had a net loss of $544,283 for the three months ended July 31, 2021 compared to a net loss of $232,316 for the three months ended July 31, 2020.

Expenses details are as follows:

• a) Advertising and promotion of $94,557 (2020 - $17,500) – the increase is due to the the addition of a new marketing program to raise the profile of the Company.

• b) Consulting fees of $130,557 (2020 - $148,454) – the increase is due to the addition of new consultants in the current period.

• c) Project investigation costs of $231,632 (2020 - $nil) – the variance is due to the acquisition of the Star Mountain Property, in which the exploration expenditures are accounted for as project investigation costs in the statement of comprehensive loss.

SUMMARY OF QUARTERLY REPORTS

The following table summarizes the Company’s financial results for each of the most recently completed quarters:

July 31, 2021 April 30, 2021 January 31, 2021 October 31, 2020 July 31, 2020 April 30, 2020 January 31, 2020 October 31, 2019	Revenue Loss Loss $ $ Per Share
	Nil (544,283) (0.01) Nil (460,084) (0.01) Nil (7,801,689) (0.19) Nil (762,200) (0.01) Nil (232,316) (0.01) Nil (45,273) (0.01) Nil (1,285,966) (0.38) Nil (33,175) (0.01)

During the three months ended January 31, 2021, the Company recorded project investigation costs of $6,195,470 related to the Star Mountain Property.

During the three months ended January 31, 2020, the Company wrote-down exploration and evaluation costs of $1,246,324.

LIQUIDITY AND CAPITAL RESOURCES

The accompanying condensed consolidated interim financial statements have been prepared in accordance with IFRS on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders, refinancing debts payable, obtaining additional long-term debt or equity financing, as well as achieving and maintaining a profitable level of operations. As the outcome of these matters cannot be predicted at this time, these financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue operations. The Company’s primary capital assets are mineral property assets.

During the period ended July 31, 2021, the Company issued 1,909,667 common shares from the exercise of warrants for proceeds of $184,300.

Subsequent to the period ended July 31, 2021, the Company issued 100,000 common shares from the exercise of warrants for proceeds of $10,000.

Working capital Accumulated deficit	July 31, 2021 January 31, 2021
	2,397,691 3,198,634 16,904,514 15,900,147

TRANSACTIONS WITH RELATED PARTIES

The following balances are owing to directors, officers and companies controlled by the directors and officers:

	July 31,	January 31,
	2021	2021
	$	$
Due to an accounting firm of which a director and officer is a partner	-	2,875
	-	2,875

The Company had the following transactions with key management personnel during the period ended July 31, 2021 and 2020:

	2021	2020
	$	$
Management fees	30,000	24,857
Consulting fees	15,419	17,500
Accounting fees	30,000	20,000
Project investigation costs	56,639	-
	132,058	62,357

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The details of Freeport’s accounting policies are presented in Note 2 of the condensed consolidated interim financial statements for the period ended July 31, 2021. These policies are considered by management to be essential to understanding the processes and reasoning that go into the preparation of the Company’s audited financial statements and the uncertainties that could have a bearing on its financial results.

ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

Please refer to the audited consolidated financial statements for the year ended January 31, 2021 on www.sedar.com.

FINANCIAL INSTRUMENTS

Please refer to the July 31, 2021 condensed consolidated interim financial statements on www.sedar.com.

CAPITAL MANAGEMENT

Please refer to the July 31, 2021 condensed consolidated interim financial statements on www.sedar.com.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCING REPORTING

In connection with National Instrument (“NI”) 52-109 (Certification of Disclosure in Issuer’s Annual and Interim Filings) adopted in December 2008 by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the unaudited interim financial statements and the audited annual financial statements and respective accompanying Management’s Discussion and Analysis. The Venture Issuer Basic Certification does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109.

RISKS AND UNCERTAINTIES

The Company’s activity of natural resource exploration is considered to be very high risk. Companies in this industry are subject to many and varied kinds of risks, including but not limited to, environmental, commodity prices, political and economic, with some of the most significant risks being:

1. Substantial expenditures are required to explore for mineral reserves and the chances of identifying economical reserves are extremely small;

2. The junior resource market, where the Company raises funds, is extremely volatile and there is no guarantee that the Company will be able to raise funds as it requires them;

3. Although the Company has taken steps to verify title to the mineral properties it has an interest in or is earning into, there is no guarantee that the property will not be subject to title disputes or undetected defects; and

4. The Company is subject to the laws and regulations relating to environmental matters, including provisions relating to reclamation, discharge of hazardous material and other matters. The Company conducts its exploration activities in compliance with applicable environmental protection legislation and is not aware of any existing environmental problems related to its properties that may cause material liability to the Company.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

PROPOSED TRANSACTIONS

There are no proposed transactions that have not been disclosed herein.

DISCLOSURE BY VENTURE ISSUER WITHOUT SIGNIFICANT REVENUE

A breakdown of the components of the Company’s expenses is disclosed in the condensed consolidated interim financial statements for the period ended July 31, 2021 to which this MD&A relates.

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Information provided in this report, including the financial statements, is the responsibility of management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future value for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying condensed consolidated interim financial statements. Management maintains a system of internal controls to provide reasonable assurances that the Company’s assets are safeguarded and to facilitate the preparation of relevant and timely information.

OTHER MD&A REQUIREMENTS

Additional information relating to the Company’s operations and activities can be found by accessing the Company’s news releases and filings on SEDAR at www.sedar.com.

OUTSTANDING SHARES, STOCK OPTIONS AND WARRANTS

As at the date of this report, the Company had the following outstanding:

• 97,237,375 common shares

• Stock options

Number of	Exercise	Expiry
Options	Price($)	Date
2,200,000	0.29	November 6, 2025
3,000,000	0.20	August 23, 2025
5,200,000

• Warrants

Number of	Exercise	Expiry
Warrants	Price($)	Date
6,921,084	0.40	February 10, 2022
33,513,398	0.10	June 4, 2022
40,434,482

FORWARD-LOOKING STATEMENTS

This MD&A together with the Company's financial statements contain certain statements that may be deemed “forward-looking statements”. All statements in this MD&A, other than statements of historical fact, that address exploration drilling, exploitation activities and events or developments that the Company expects to occur, are forward looking statements. Forward looking statements in this document are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur. Information inferred from the interpretation of drilling results and information concerning resource estimates may also be deemed to be forward looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements.

Inherent in forward-looking statements are risks and uncertainties beyond the Company’s ability to predict or control, including risks that may affect the Company’s operating or capital plans, including risks generally encountered in the exploration and development of natural resource properties, such as unusual or unexpected geological formations, unanticipated metallurgical difficulties, ground control problems, process upsets and equipment malfunctions; risks associated with labour and unavailability of skilled labour; fluctuations in the market prices of the Company’s principal products, which are cyclical and subject to substantial price fluctuations; risks created through competition for natural resource properties; risks associated with lack of access to markets; risks associated with mineral and resource estimates, including the risk of errors in assumptions or methodologies; risks posed by fluctuations in exchange rates and interest rates, as well as general economic conditions; risks associated with environmental compliance and permitting, including those created by changes in environmental

legislation and regulation; risks associated with the Company’s dependence on third parties in the provision of transportation and other critical services; risks associated with aboriginal title claims and other title risks; social and political risks associated with operations in foreign countries; and risks associated with legal proceedings.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, the following assumptions: that there is no material deterioration in general business and economic conditions; that there is no unanticipated fluctuation of interest rates and foreign exchange rates; that the supply and demand for, deliveries of, and the level and volatility of commodity prices develop as expected; that the Company receives regulatory and governmental approvals as are necessary on a timely basis; that the Company is able to obtain financing as necessary on reasonable terms; that there is no unforeseen deterioration in the Company’s activity costs; that the Company is able to continue to secure adequate transportation as necessary for its exploration activities; that the Company is able to procure equipment and supplies, as necessary, in sufficient quantities and on a timely basis; that exploration activity timetables and capital costs for the Company’s planned projects are not incorrectly estimated or affected by unforeseen circumstances; that costs of closure of various operations are accurately estimated; that there are no unanticipated changes to market competition; that the Company’s estimates in relation to its natural resource interests are within reasonable bounds of accuracy (including with respect to size, grade and recoverability of mineral projects) and that the geological, operational and price assumptions on which these are based are reasonable; that no environmental and other proceedings or disputes arise; and that the Company maintains its ongoing relations with its employees, consultants and advisors.

Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forwardlooking statements are not guarantees of future performance. Events or circumstances could cause the Company’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forwardlooking statements. The Company undertakes no obligation to update publicly or otherwise revise any forwardlooking statements or the foregoing list of factors, whether as a result of new information or future events or otherwise, except as may be required under applicable laws.