G Mining TZ Corp. — Management Reports 2020

Mar 23, 2020

KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

FORWARD-LOOKING INFORMATION AND MATERIAL ASSUMPTIONS

This report on results for the three months ended January 31, 2020 contains forward-looking information, including forwardlooking information about Kanadario Gold Inc.’s (the "Company") operations, estimates, and exploration and acquisition spending.

Forward-looking information is generally signified by words such as “forecast”, “projected”, “expect”, “anticipate”, “believe”, “will”, “should” and similar expressions. This forward-looking information is based on assumptions that the Company believes were reasonable at the time such information was prepared, but assurance cannot be given that these assumptions will prove to be correct, and the forward-looking information in this report should not be unduly relied upon. The forward-looking information and the Company’s assumptions are subject to uncertainties and risks and are based on a number of assumptions made by the Company, any of which may prove to be incorrect.

GENERAL

This Management Discussion and Analysis (“MD&A”) of the financial condition, results of operations and cash flows of the Company for the three months ended January 31, 2020, should be read in conjunction with the condensed interim financial statements as at January 31, 2020 and the audited financial statements as at October 31, 2019. This MD&A is effective March 23, 2020. Additional information relating to the Company is available on SEDAR at www.sedar.com.

The Company has prepared its condensed interim financial statements for the three months ended January 31, 2020 in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS”) and International Accounting Standard (“IAS”) 34 Interim Financial Statements , as issued by the International Accounting Standards Board.

DESCRIPTION OF BUSINESS

The Company is an exploration stage company incorporated on November 23, 2017, under the laws of the province of British Columbia, Canada. Its principal business activity is the acquisition, exploration and evaluation of mineral properties located in the province of Quebec, Canada. The Company’s head office and principal business address is 1680 – 200 Burrard Street, Vancouver, British Columbia, Canada, V6C 3L6. The Company’s registered and records office is 400 – 725 Granville Street, Vancouver, British Columbia, Canada, V7Y 1G5.

On October 22, 2019, the Company completed its initial public offering (“IPO”). The Company’s common shares are traded on the TSX Venture Exchange under the symbol “KANA”.

BUSINESS OF THE COMPANY

On December 17, 2018, the Company issued 600,000 common shares at a price of $0.05 per share for gross proceeds of $30,000.

On January 30, 2019, the Company closed a private placement for gross proceeds of $300,000. The Company issued 3,000,000 units at a price of $0.10 per unit. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of $0.15 for a period of one year from the date of issuance. No value was attributed to the warrants.

On October 22, 2019, the Company completed its IPO of 5,000,000 common shares of the Company at $0.15 per share for gross proceeds of $750,000. The Company paid finders’ fees of $42,850 and issued 170,000 finder’s warrants with a value of $16,422. Each warrant entitles the holder to acquire one common share at a price of $0.15 for a period of two years from the date of issuance. The Company incurred other share issue costs of $78,793.

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

EXPLORATION AND EVALUATION ASSETS

Cameron Lake Project

On June 1, 2018, the Company entered into a mineral property acquisition agreement to acquire a 100% interest in mineral claims located in the Cameron Lake area in the province of Quebec.

Under the terms of the agreement, the Company paid $50,000 during the current period and issued 1,000,000 common shares (issued and valued at $50,000) of the Company during the period ended October 31, 2018.

The property is subject to a 2% net smelter return royalty, of which the Company may repurchase one-half (1%) for $1,000,000.

A summary of exploration and evaluation expenditures for the three months ended January 31, 2020 and year ended October 31, 2019 is as follows:

		Cameron Lake
		Project
Balance, October 31, 2018	$	133,695
Acquisition Costs
Acquisition		50,000
Claim costs		8,660
Total Acquisition Costs		58,660
Property Exploration Costs
Geological		9,971
Geophysics		34,092
Total Exploration Costs		44,063
Balance, October 31, 2019		236,418
Property Exploration Costs
Geophysics		95,881
Total Exploration Costs		95,881
Balance, January 31, 2020	$	332,299

The Company is currently evaluating the results of a recently completed high-resolution helicopter magnetics survey on the Cameron Lake Project. The current work program includes prioritizing target areas for surface exploration in 2020.

SELECTED ANNUAL INFORMATION

	October 31, 2019 $	October 31, 2018 $
Revenue	-	-
Net loss	(178,510)	(82,178)
Basic and diluted loss per common share	(0.03)	(0.03)
Total assets	1,019,219	199,949
Long-term debt	-	24,000
Dividends	-	-

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

SELECTED QUARTERLY INFORMATION

Results for the four most recently completed quarters are summarized below.

For the Quarter Periods Ending	January 31, 2020 $ (unaudited)	October 31, 2019 $ (unaudited)	July 31, 2019 $ (unaudited)	April 30, 2019 $ (unaudited)
Total revenue	Nil	Nil	Nil	Nil
Loss for the period	(70,708)	(55,927)	(105,092)	(15,641)
Basic and diluted loss per share	(0.01)	(0.01)	(0.01)	(0.00)
Total assets	914,417	1,019,219	423,315	467,344
Total non-current liabilities	Nil	Nil	24,000	24,000
Dividends	Nil	Nil	Nil	Nil
For the Quarter Periods Ending	January 31, 2019 $ (unaudited)	October 31, 2018 $ (unaudited)	July 31, 2018 $ (unaudited)	April 30, 2018 $ (unaudited)
Total revenue	Nil	Nil	Nil	Nil
Loss for the period	(1,850)	(34,785)	(50)	(90)
Basic and diluted loss per share	(0.00)	(0.01)	(0.00)	(0.00)
Total assets	484,695	199,949	103,607	87,000
Total non-current liabilities	24,000	24,000	Nil	Nil
Dividends	Nil	Nil	Nil	Nil

OPERATIONS

During the three months ended January 31, 2020, the Company reported a net loss of $70,708 (2019 - $1,850). Expenses for the three months ended January 31, 2020 compared to the same period in 2019 were as follows:

• Consulting fees increased from $nil to $40,500 due to increased activity following the IPO;

• Office and general increased from $444 to $5,263 due to additional activity;

• Professional fees increased from $1,406 to $8,827 due to increased activity following the IPO;

• Rent increased from $nil to $6,000 as a result of office space being rented where it was not being rented in the comparative period; and

• Transfer agent and filing fees increased from $nil to $9,960 due to setup costs, AGM costs and recurring fees following the IPO.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2020, the Company’s cash was $572,815 (October 31, 2019 - $778,986) and the working capital was $560,745 (October 31, 2019 - $712,334).

The Company has no sources of revenue, and will need to raise additional financing in order to meet general working capital requirements and to continue exploration on its mineral property following the 2020 fiscal year.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements.

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

TRANSACTIONS WITH RELATED PARTIES

These amounts of key management compensation are included in the amounts shown on the condensed interim statements of comprehensive loss:

		Three Months		Three Months
		Ended		Ended
	January 31, 2020		January 31, 2019
Short-term compensation(consultingfees andprofessional fees)	$	6,000	$	-

During the three months ended January 31, 2020, short-term compensation to related parties consisted of:

• Consulting fees of $3,000 to Dominic Verdejo, a director and the President and Chief Executive Officer of the Company; and

• Professional fees of $3,000 to P. Joseph Meagher, a director and the Chief Financial Officer of the Company.

There were no other related party transactions for the three months ended January 31, 2020 and 2019.

There were no related party balances as at January 31, 2020 and October 31, 2019.

EVENTS OCCURRING AFTER THE REPORTING DATE

In early March 2020, there was a global outbreak of coronavirus (COVID-19) that has resulted in changes in global supply and demand of certain mineral and energy products. These changes, including a potential economic downturn and any potential resulting direct and indirect negative impact to the Company cannot be determined, but they could have a prospective material impact to the Company’s project exploration activities, cash flows and liquidity.

RISKS AND UNCERTAINTIES

The Company, and the securities of the Company, should be considered a highly speculative investment. The following risk factors should be given special consideration when evaluating an investment in any of the Company's securities.

There are a number of outstanding securities and agreements pursuant to which common shares of the Company may be issued in the future. This will result in further dilution to the Company's shareholders.

The Company has a very limited history of operations, is in the early stage of development, and has received no revenues other than insignificant interest revenues following its transition to a mineral exploration and development company. As such, the Company is subject to many risks common to such enterprises. There can be no assurance that the Company will be able to obtain adequate financing in the future or, if available, that the terms of such financing will be favourable. The Company does not anticipate paying any dividends in the near future.

Although the Company has taken steps to verify the title to mineral properties in which it has acquired an interest, no assurance whatsoever can be given that the Company’s interests may not be challenged by third parties. If challenged, and if the challenge is sustained, it will have an adverse effect on the business of the Company. Title to mineral properties may be subject to unregistered prior agreements or transfers and may also be affected by undetected defects or the rights of indigenous peoples.

Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the properties may be diminished or negated.

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

The exploration of mineral properties involves significant risks, which even experience, knowledge and careful evaluation may not be able to avoid. The price of metals has fluctuated widely, particularly in recent years, as it is affected by numerous factors that are beyond the Company’s control, including international economic and political trends, expectations of inflation or deflation, currency exchange fluctuations, interest rate fluctuations, global or regional consumptive patterns, speculative activities and increased production due to new extraction methods. The effect of these factors on the price of metals, and therefore, the economic viability of the Company’s interests in the mineral properties cannot be accurately predicted. Furthermore, changing conditions in the financial markets, and Canadian income tax legislation may have a direct impact on the Company’s ability to raise funds for exploration expenditures. A drop in the availability of equity financings will likely impede spending. As a result of all these significant risks, it is quite possible that the Company may lose its investments in the Company’s mineral property interests.

CAPITAL DISCLOSURES

The Company’s objectives when managing capital are to identify, pursue and complete the exploration and development of mineral properties, to maintain financial strength, to protect its ability to meet its ongoing liabilities, to continue as a going concern, to maintain credit-worthiness and to maximize returns for shareholders over the long term. Capital of the Company comprises shareholders’ equity.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. The Company’s investment policy is to invest its cash in financial instruments at high credit quality financial institutions with terms to maturity selected with regard to the expected timing of expenditures from continuing operations. There have been no changes to the Company’s approach to capital management during the three months ended January 31, 2020. The Company is not subject to externally imposed capital requirements.

FINANCIAL INSTRUMENTS AND RISKS

As at January 31, 2020, the Company’s financial instruments consist of cash, receivables, and accounts payable and accrued liabilities. The carrying values of these financial instruments approximate their fair values.

Fair value

The Company classifies its fair value measurements in accordance with an established hierarchy that prioritizes the inputs in valuation techniques used to measure fair value as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly. Level 3 - Inputs that are not based on observable market data.

The following table sets forth the Company’s financial asset measured at fair value by level within the fair value hierarchy:

January	31,	2020		Level 1		Level 2			Level 3			Total
Cash			$	572,815	$		-	$		-	$	572,815
October	31,	2019		Level 1		Level 2			Level 3			Total
Cash			$	778,986	$		-	$		-	$	778,986

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company manages credit risk, in respect of cash, by placing it at major Canadian financial institutions. The Company has minimal credit risk. The maximum exposure to credit risk at January 31, 2020 is on cash of

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

$572,815 (October 31, 2019 - $778,986). Receivables of $5,928 (October 31, 2019 - $3,815) is owing from the Canada Revenue Agency.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on capital.

• i) Currency risk – The Company has no funds held in a foreign currency, and as a result, is not exposed to significant currency risk on its financial instruments at period-end.

• ii) Interest rate risk – Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Interest earned on cash is at nominal interest rates, and therefore, the Company does not consider interest rate risk to be significant. The Company has no interest-bearing financial liabilities.

• iii) Other price risk – Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk. The Company is not exposed to significant other price risk.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquid funds to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The contractual financial liabilities of the Company as of January 31, 2020 equal $21,373 (October 31, 2019 - $70,467). All of the liabilities presented as accounts payable are due within 30 days of the reporting date.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Impairment of exploration and evaluation assets

The application of the Company’s accounting policy for exploration and evaluation expenditures and impairment of the capitalized expenditures requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalized, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in profit or loss in the year the new information becomes available.

Title to mineral property interests

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

Income taxes

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability, including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent that it is probable that taxable profit will be available against which a deductible temporary difference can be utilized. This is deemed to be the case when there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity that are expected to reverse in the same year as the expected reversal of the deductible temporary difference, or in years into which a tax loss arising from the deferred tax asset can be carried back or forward. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

Going concern risk assessment

The Company’s ability to continue its operations and to realize assets at their carrying values is dependent upon its ability to fund its existing acquisition and exploration commitments on its exploration and evaluation assets when they come due, which would cease to exist if the Company decides to terminate its commitments, and to cover its operating costs. The Company may be able to generate working capital to fund its operations by the sale of its exploration and evaluation projects or raising additional capital through equity markets. However, there is no assurance it will be able to raise funds in the future. These material uncertainties cast significant doubt regarding the Company’s ability to continue as a going concern. These condensed interim financial statements do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying condensed interim financial statements.

Decommissioning liabilities

Rehabilitation provisions are created based on the Company’s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from year to year. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs that will reflect the market condition at the time the rehabilitation costs are actually incurred.

The final cost of the currently recognized rehabilitation provisions may be higher or lower than currently provided for. As at January 31, 2020, the Company has no known rehabilitation requirements, and accordingly, no provision has been made.

Fair value of stock options granted

The Company uses the Black-Scholes option pricing model to value the stock options granted during the year. The BlackScholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates that are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values.

NEW ACCOUNTING STANDARD ADOPTED DURING THE PERIOD

IFRS 16 Leases

Initial adoption

On December 1, 2019, the Company adopted IFRS 16, which specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is twelve months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17 Leases . The standard was issued in January 2016 and is effective for annual periods beginning on or after January 1, 2019.

The Company has elected to apply IFRS 16 using a modified retrospective approach, which does not require restatement of prior period financial information. Modified retrospective application recognizes the cumulative effect of IFRS 16 as an

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KANADARIO GOLD INC. MANAGEMENT DISCUSSION AND ANALYSIS THREE MONTHS ENDED JANUARY 31, 2020

adjustment to opening deficit at December 1, 2019 and applies the standard prospectively. The Company has determined that at December 1, 2019, adoption of IFRS 16 will not result in the recognition of a right-of-use (“ROU”) asset nor a lease obligation.

Ongoing recognition and measurement

On the date that the leased asset becomes available for use, the Company recognizes a ROU asset and a corresponding lease obligation. Interest expense associated with the lease obligation is charged to the statement of income/loss over the lease period with a corresponding increase to the lease obligation. The lease obligation is reduced as payments are made against the principal portion of the lease. The ROU asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Depreciation of the ROU asset is recognized in depreciation expense.

SHARE CAPITAL

The Company had the following securities issued and outstanding:

	March 23,	January 31,	October 31,
	2020	2020	2019
Common shares	12,750,000	12,750,000	12,650,000
Warrants	4,070,000	4,070,000	4,170,000
Stock options	400,000	400,000	500,000
Fully diluted shares	17,220,000	17,220,000	17,320,000

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