Gabriel Resources Ltd. - Management Reports 2021

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (“MD&A”) provides a commentary to enable a reader to assess material changes in the financial condition and results of operations of Gabriel Resources Ltd. (“Gabriel” or the “Company”) and its subsidiary companies (together the “Group”) as at and for the years ended December 31, 2020 and 2019.

The MD&A should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company as at and for the years ended December 31, 2020 and 2019 (“Financial Statements”). These Financial Statements have been prepared using accounting policies in accordance with International Financial Reporting Standards (“IFRS”).

All amounts included in the MD&A are in Canadian dollars (“$”), unless otherwise specified. This report is dated as of March 11, 2021, and the Company’s public filings can be reviewed on the SEDAR website (www.sedar.com).

This MD&A contains forward-looking statements about the Company’s objectives, strategies, financial condition, operations and businesses within the Group. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based upon the beliefs, expectations, reasonable investigation and opinions of Management as of the date of this MD&A. All forward-looking statements, including those not specifically identified herein are made subject to (i) the impact, if any, of the coronavirus pandemic as considered on pages 5, 20 and 21 and (ii) the cautionary language beginning on page 28. Readers are advised to refer to the cautionary language when reading any forward-looking statements.

Overview

Gabriel is a Canadian resource company with its common shares (“Common Shares”) listed on the TSX Venture Exchange (“Exchange”). Gabriel’s activities over many years were previously focused principally on the exploration, permitting and development of the Roșia Montană gold and silver project in Romania (the “Project”). The Project, one of the largest undeveloped gold deposits in Europe, is situated in an area known as the Golden Quadrilateral in the South Apuseni Mountains of Transylvania, Romania, an historic and prolific mining district that has been mined intermittently for over 2,000 years.

The exploitation concession license for the Project (“License”) is held by Roșia Montană Gold Corporation S.A. (“RMGC”), a Romanian company in which Gabriel owns an 80.69% equity interest, with the 19.31% balance held by Minvest Roșia Montană S.A. (“Minvest RM”), a Romanian State-owned mining company.

Upon obtaining the License in 1999, RMGC along with Gabriel and its subsidiary companies focused substantially all of their management and financial resources on identifying and defining the size of the four ore bodies, engineering to design the size and scope of the Project, surface rights acquisitions, rescue archaeology and environmental assessment and permitting.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

In reliance on numerous representations made and actions taken by the Romanian authorities and in the reasonable expectation that the Company’s projects would be evaluated in accordance with the law and reasonable technical standards and, ultimately, on its merits, over US$700 million was invested to maintain and develop the Project and to define two valuable mineral deposits at the Rodu-Frasin (epithermal gold and silver) site and Tarniţa (porphyry copper-gold) site, both within the Bucium area located in the vicinity of Roşia Montană (“Bucium Projects”), in accordance with all applicable laws, regulations, licenses, and permits.

Having encouraged that investment, and despite the Group’s fulfilment of its legal obligations and its development of the Project as a high-quality, sustainable and environmentally-responsible mining project, using best available techniques, the Romanian State has frustrated and prevented the implementation of the Project and the Bucium Projects in an unlawful, discriminatory and nontransparent manner by refusing to make permitting and other administrative decisions in accordance with the established procedures required by law.

On July 21, 2015, the Company and its wholly-owned subsidiary, Gabriel Resources (Jersey) Ltd. (together “Claimants”), filed a request for arbitration (“Arbitration Request”) before the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”) against the Romanian State (the “Respondent”) pursuant to the provisions of international bilateral investment protection treaties which the Romanian Government has entered into with each of the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Reciprocal Protection of Investments (together the “Treaties”) (“ICSID Arbitration”).

Since the Arbitration Request, the ICSID Arbitration has become the Company’s core focus. Accordingly, any information set out in this MD&A relating to the Project, the License, and the Group’s development activities in Romania is for background purposes only and should not be interpreted as being indicative of the Company’s expectations as at the date of this document regarding the future development of the Project.

ICSID Arbitration

As a consequence of Romania’s acts and inactions, the Project and the Bucium Projects have been blocked politically, depriving the Claimants of the use, benefit and entire value of their property rights associated with the Project and the Bucium Projects, which have effectively been taken without compensation in contravention of the applicable legal and administrative processes and requirements.

The ICSID Arbitration seeks compensation for all of the loss and damage resulting from the Romanian State’s wrongful conduct and its breaches of the Treaties’ protections, including expropriation, unfair and inequitable treatment, discrimination, and other unlawful treatment in respect of the Project, the Bucium Projects and related licenses.

Status of the ICSID Arbitration and Recent Developments

The ICSID Arbitration process is well advanced. To date, and in accordance with the procedural timelines established by the presiding tribunal for the ICSID Arbitration (“Tribunal”), the parties have delivered to ICSID a number of substantial written submissions and participated in two hearings on the merits of the claim, each as summarized below:

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

On June 30, 2017, the Claimants filed their memorial on the merits of the claim (“Memorial”) detailing, amongst other things, the factual and legal arguments supporting their claim against Romania and the quantum of the damages sustained;
On February 22, 2018, the Respondent filed its counter-memorial (“Counter-Memorial”) in response to the Memorial;
On May 25, 2018, the Respondent filed a supplementary further preliminary objection with ICSID (“Jurisdictional Challenge”) challenging the jurisdiction of the Tribunal to hear the claims presented by Gabriel Resources (Jersey) Limited;
On November 2, 2018, the Claimants submitted their reply in support of the claims (“Reply”) and responding to the Counter-Memorial and Jurisdictional Challenge;
On February 28, 2019, the Claimants and the Respondent filed its comments on an amicus curiae submission to the Tribunal made by certain non-governmental organizations (or “nondisputing parties”) who have opposed the Project for many years;
On May 24, 2019, the Respondent filed its response to the Reply (“Rejoinder”) and its reply on the Jurisdictional Challenge, the Respondent’s final substantive submission;
On June 28, 2019, the Claimants filed a surrejoinder on the Jurisdictional Challenge, responding to the reply thereon from the Respondent;
An oral hearing on the merits of the claim was held in Washington D.C. between December 2 and December 13, 2019 (“Hearing”) to address the evidentiary record in the case, issues on liability and jurisdiction and to hear testimony from certain of the parties’ fact and expert witnesses;
On March 10, 2020, the Tribunal issued a list of further questions arising from the evidence presented during the Hearing (“Tribunal Questions”);
On April 10, 2020, the Claimants and the Respondent filed their comments on a written submission to the Tribunal by the European Commission as a “non-disputing party” in the ICSID Arbitration;
On May 11, 2020, the Claimants provided their answers to the Tribunal Questions;
On July 13, 2020, the Respondent provided its answers to the Tribunal Questions;
A second oral hearing on the merits of the claim was held virtually from September 28 to October 4, 2020 (“Second Hearing”) which focused on the technical and feasibility-related aspects of the Project and the Bucium Projects and the quantum of the damages claimed, including testimony from certain of the parties’ fact and expert witnesses.

Subsequent to the Second Hearing, the Tribunal confirmed that Claimants and Respondent may make two further simultaneous written submissions in order to comment in conclusion on the evidentiary record (“Post-Hearing Briefs”). The first submissions were filed with ICSID on February 18, 2021 and the second submissions are currently scheduled to be filed on April 23, 2021, after which the Tribunal may pose further questions, as was the case following the Hearing, or the Tribunal may focus on its deliberations ahead of a final decision.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

There is no specified timeframe in the ICSID Rules in which a final decision is to be made by the Tribunal. The Company, however, is informed that it is typical for tribunals in this type of arbitration to require twelve to eighteen months to finalize and issue a decision after Post-Hearing Briefs are submitted. Furthermore, that decision may be subject to a request for annulment (albeit such request can only be submitted on very limited grounds) and there can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or be completed or settled within any specific or reasonable period of time.

A summary of the procedural aspects of the ICSID Arbitration, together with copies of the procedural orders of the Tribunal and the principal submissions, including the Memorial, the Counter-Memorial, the Reply, the Rejoinder and redacted versions of the transcript of the Hearing and Second Hearing are available on ICSID's website.

UNESCO World Heritage

On January 31, 2020, the Ministry of Culture submitted a letter to UNESCO conveying the Romanian Government’s official request for the “reactivation” of its nomination of the “Roşia Montană Mining Landscape” as a UNESCO World Heritage site. Gabriel understands that, in light of the COVID-19 global pandemic, it was decided that the 44th session of the World Heritage Committee, initially scheduled for 29 June - 9 July 2020 has been postponed and is now to take place in June/July 2021 in Furzhou, China (the exact dates are yet to be determined).

The act of applying to UNESCO for such designation is wholly incompatible with development of the Project. The application itself is an undertaking by Romania to stop development of the subject area and preclude mining, as would a decision by the World Heritage Committee formally approving the application. Notwithstanding, Romania raised an objection in the ICSID Arbitration that breaches of the Treaties relating to its UNESCO application purportedly fall outside the scope of the Tribunal’s jurisdiction (which objection the Company understands is without merit and is not legally supported).

In light of these developments and, for the avoidance of doubt, on February 21, 2020, Gabriel provided notice to Romania of a dispute under the Treaties with regard to Romania’s application to UNESCO in relation to Roşia Montană and has reserved its right to commence a further arbitration if warranted accordingly (the “Notice”).

In the Notice, Gabriel confirmed that it is prepared to cooperate in good faith at a senior level with the Romanian Government and other authorities in a process of consultation with regard to the UNESCO application. To date, there has been no official response from the Romanian Government. Gabriel is hopeful that Romania will engage constructively and that it will withdraw its UNESCO application in order to preserve the possibility that Romania, and in particular the local communities in and around Rosia Montana, can enjoy the significant wide-ranging benefits from the sustainable development of the Project, as part of an amicable resolution of the dispute regarding Gabriel’s investments in Romania. The inclusion of the “Roşia Montană Mining Landscape” on the UNESCO World Heritage List would have a material adverse impact on the Company’s business insofar as it would undermine the possibility of an amicable resolution of the dispute with Romania that would allow for the development of the Project.

The issuance of the Notice does not in any way interfere with Gabriel’s pursuit of the ICSID Arbitration.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Other Recent Developments

Impact of Coronavirus

With respect to the outbreak of the novel coronavirus (COVID‐19), Gabriel continues to consider carefully the impact, noting the widespread disruption to normal activities and the uncertainty over the duration of this disruption. The highest priority of the Board of Directors is the health, safety and welfare of the Group’s employees and contractors. Gabriel recognizes that the situation is extremely fluid and is monitoring the relevant recommendations and restrictions on work practices and travel. At this time, these recommendations and restrictions do not significantly impact Gabriel’s ability to continue the ICSID Arbitration process or conduct the limited operations in Romania, nor has there been a significant impact on the Group’s results or operations in 2020.

As noted below in “Future Financing Requirement”, the Group will seek new short and longer term investment and the Group is also looking to sell its remaining long lead-time equipment. The market and timing for each initiative may be adversely affected by the effects of COVID-19. As a result, Gabriel will react to circumstances as they arise and will make the necessary adjustments to the work processes required, including to maintain the ICSID Arbitration calendar, and, should any material disruption from COVID-19 affect the Group for an extended duration, Gabriel will review certain planned activities in Romania and take remedial actions, if it is determined to be necessary or prudent to do so.

Board Changes

Following a request of certain of the major shareholders for ongoing Board renewal, Mr. Walter Segsworth, Mr. David Peat and Ms. Janice Stairs resigned as directors of Gabriel effective December 11, 2020.

On January 21, 2021 Gabriel announced the appointment to the Board of Mr. Jeffrey Couch, Ms. Anna El-Erian and Mr. James Lieber as independent non-executive directors, effective immediately. Following these appointments, the Board is composed of seven members, of which three are independent directors and Ms. Anna El-Erian has been appointed as the Chair of the Board. Furthermore, the Board has resolved to form the following standing committees:

Mr. Couch has been appointed as Chair of the Audit Committee and Mr. Lieber and Ms. ElErian have been appointed as additional members of the Audit Committee.
Ms. El-Erian has been appointed as Chair of the Corporate Governance and Nominating Committee and Mr. Lieber and Mr. Kochav have been appointed as additional members of the Corporate Governance and Nominating Committee.
Mr. Couch has been appointed as Chair of the Compensation Committee and Ms. El-Erian and Mr. Cramer have been appointed as additional members of the Compensation Committee.

The new Board members will work with Gabriel’s existing Board and Management team as the Company advances its ICSID Arbitration case against the Government of Romania.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

RMGC - Government Audits and Investigations

Romanian National Agency for Fiscal Administration (“ANAF”) Investigations

Since the filing of the ICSID Arbitration, RMGC has been subjected to several audits and investigations by ANAF, a Romanian Government agency operating under the Ministry of Public Finance, a Romanian Government department, which is also charged with organizing and overseeing Romania’s defense of the ICSID Arbitration.

RMGC was served with a decision by ANAF assessing a liability for value-added-tax (“VAT”) in the amount of RON 27 million (approximately $8.6 million) on July 5, 2017 (the “VAT Assessment”). On October 20, 2017, RMGC received an additional demand from ANAF in respect of interest and penalties related to the VAT Assessment for RON 18.6 million (approximately $6.0 million).

On February 6, 2019, the Alba Court of Appeal (Division for Administrative and Tax Claims) ruled in favor of RMGC’s annulment challenge of the VAT Assessment. ANAF subsequently filed an appeal against this decision with the High Court of Cassation and Justice. Following a December 2, 2020 hearing, the High Court of Cassation and Justice handed down judgment dismissing ANAF’s appeal and upholding the annulment of the VAT Assessment. This decision is final and conclusive.

In parallel with the VAT Assessment, and for five years as of the date of this MD&A, a separate directorate of ANAF has continued to pursue an ad hoc investigation covering a broad range of operational activities and transactions of RMGC, and a number of its suppliers, consultants and advisors, covering an extensive period spanning 1997 to 2016, then subsequently extended to September 2019 (the “ANAF Investigation”). RMGC is co-operating in good faith with ANAF, however as at the date of this MD&A Gabriel still awaits formal indication of the grounds for the ANAF Investigation and neither the Company nor RMGC has received any feedback on its status.

Prosecutor Office Investigation

As previously disclosed, in November 2013, RMGC was informed of an investigation by the Ploiesti Public Prosecutor's Office (“PPPO”) into the principals/key shareholder(s) of a group of companies including Kadok Interprest LLC (“Kadok Group”). In March 2020, RMGC was informed that the authorities had closed the file in relation to the commercial relationship between RMGC and the Kadok Group but the Alba Public Prosecutor’s Office is continuing its investigation of the commercial relations between RMGC and a list of service providers.

In April 2020, RMGC filed a request with the Prahova prosecutor’s office, amongst other things, for the removal of a restriction order on the equivalent of $0.3 million held in one of RMGC’s Romanian bank accounts and removal of a notation on RMGC’s file at the Romanian Trade Registry that the Company was “under criminal investigation”. The Prahova prosecutor’s office subsequently admitted RMGC’s requests and confirmed the release of the restricted cash.

Long Lead-Time Equipment

Long lead-time equipment (“LLTE”) consisting of crushing and milling equipment was originally procured by the Group between 2007 and 2009 for the operational phase of the Project. The prospect of the LLTE being used in the future for the purpose for which it was purchased is considered remote.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Since 2015, the Group has sold a majority of the LLTE, most recently concluding the sale of the remaining ball mill in the fourth quarter of 2019 for aggregate net proceeds of US$2.3 million (approx. $3.0 million).

The Company continues, through its agents, to procure the sale of the remaining LLTE, comprising predominantly a SAG mill together with a gearless motor drive, ball mill motors and SAG mill/ball mill spares. During the quarter ended December 31, 2020, the carrying amount of the remaining LLTE was assessed for indicators of impairment and Management deemed it appropriate to record an impairment charge of $0.4 million.

Liquidity

Cash and cash equivalents at December 31, 2020 were $6.4 million.

The Company’s average monthly cash usage during Q4 2020 was $2.5 million (Q3 2020: $2.1 million), the increase primarily reflecting the payment of significant ICSID Arbitration related costs accrued in the prior quarter, where activities focused on preparation and attendance at the Second Hearing.

At the end of Q4 2020, accruals for costs in respect of the ICSID Arbitration amounted to $1.5 million (Q3 2020: $4.6 million), the significant reduction primarily reflecting limited activities in the final quarter of 2020 with a focus on Post-Hearing Briefs in the period.

The Group had sufficient funds as at December 31, 2020 to settle all then current and existing longterm liabilities, after taking into account that the Company has the option to repay all or a proportion of the principal amount of the convertible notes outstanding at maturity by issuing Common Shares. Management continues to review the Company’s activities in order to identify areas to rationalize expenditures.

Capital Resources

Completion of Private Placement

As previously announced, on December 23, 2020, the Company closed a non-brokered private placement (the “2020 Private Placement”) of 25,326,972 units of the Company (the “Units”) for gross proceeds of US$5 million (approximately $6.6 million). Each Unit consists of one Common Share and half of one Common Share purchase warrant (each whole warrant a “Warrant”) and was issued by the Company at a price of $0.26 per Unit. Each Warrant entitles the holder to acquire one Common Share at an exercise price of $0.39 at any time within three years of issuance. The new Common Shares and new Warrants issued were subject to a statutory four-month hold period.

Future Financing Requirements

The Company believes that it has sufficient sources of funding to enable the Group to maintain its primary assets, including its License and associated rights and permits, and to fund general working capital requirements together with the material estimated costs associated with the Company advancing the ICSID Arbitration through to May 2021. Gabriel is currently planning to raise additional financing in the short-term to maintain its primary assets while it awaits a decision from the Tribunal.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

There can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or within any specific or reasonable period of time. The Group does not have sufficient cash to fund either the development of the Project or all the long-term activities required to see the ICSID Arbitration through to its conclusion. Accordingly, further to the necessary short-term financing, the Group will require additional funding to pursue the ICSID Arbitration as appropriate following the Tribunal’s decision, including in any potential annulment proceeding and/or litigation to enforce any arbitral award. Notwithstanding the Company’s recent and historic funding, there is a risk that sufficient additional short or long-term financing may not be available to the Company on acceptable terms, or at all.

Outlook

Notwithstanding the ongoing ICSID Arbitration, the Company remains open to engagement with the Romanian authorities in order to achieve an amicable resolution of the dispute or a settlement enabling the Group to develop the Project and the Bucium Projects.

In the meantime, the Company’s current plans for the ensuing year are as follows:

the advancement of the final procedural stages of the ICSID Arbitration prior to the issuance of an arbitral award, including the submission of the Post-Hearing Briefs;
securing additional funding during the second quarter of 2021;
carefully managing its cash resources (including the disposition of the remaining LLTE acquired for the Project); and
the protection of its rights and interests in Romania (including, so far as reasonably practical and desirable, ensuring that existing licenses and permits remain in good standing).

Annual Summary

The annual summary is set out in the following table. The amounts are derived from the Financial Statements prepared under IFRS.

Statements prepared under IFRS.
in thousands of Canadian dollars, except per share amounts		2020		2019		2018
Operating loss	$	25,608	$	36,221	$	44,413
Other expenses		9,091		8,310		6,153
Loss - attributable to owners of the parent		34,699		44,531		50,566
Loss per share (basic and diluted)		0.06		0.09		0.13
Total assets		11,007		31,183		26,893
Non-current liabilities		-		80,070		71,136
Cash flows from financingactivities	$	10,180	$	32,953	$	19,828

Results of Operations

Operating loss in 2020 was $25.6 million, $10.6 million lower than in 2019 ($36.2 million) with the decrease arising from three main factors:

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

First, as described in the “Expenses” section below, 2020 corporate, general and administrative costs of $22.9 million were $9.3 million lower than 2019, including $6.1 million lower costs related to the ongoing ICSID Arbitration, $2.3 million lower payroll costs, and a further $0.7m reduction in overall corporate, general and administrative costs. This gain was offset by $0.7 million of severance costs incurred at RMGC and the partial forgiveness of a related party loan (as more fully described in the Financial Statements) also related to the severance ($0.1 million) which arose only in the year ended December 31, 2020.
Second, the $0.4 million impairment charge recognized in 2020 is lower than the $1.0 million charge recognized in 2019.
Third, as set out in the “Expenses” section below, stock-based compensation was $1.5 million lower in 2020 compared to $3.0 million in 2019.

Other expenses increased year-on-year by $0.8 million and include finance costs, finance income, gains on disposal of assets and foreign exchange gains and losses:

Finance costs in 2020 of $9.8 million (2019: $9.0 million) reflect the accretion of the debt component of the convertible subordinated unsecured notes (“Convertible Notes”) issued in 2014 and 2016. The increase year-on-year is due to the accretion rising as the liability to repay the Convertible Notes increases over the period to maturity. This cost was reduced from June 2020 by the partial conversion of some of those instruments.
Lower interest rates on reducing short-term deposit cash balances through 2020 resulted in lower finance income ($0.1 million) when compared to 2019 ($0.4 million).
Exchange gains of $0.6 million were recognized in 2020 (2019: loss of $0.7 million) due to the appreciation of the US dollar against the Canadian dollar having a favorable effect on US dollar cash balances when converted at period end to the presentation currency, the Canadian dollar.
A $1.2 million gain on disposal of the ball mill in 2019 was not repeated in 2020.
A $0.3 million write down of a receivable in 2019 was not repeated in 2020.

Total Assets

Total assets decreased by $20.2 million in 2020, reflecting the utilization of $30.0 million of cash to (i) fund the Group’s 2020 activities ($23.1 million) and (ii) pay 2019 trade payables and accrued liabilities ($6.9 million), offset by net cash inflows from financing activities described below.

Total assets increased by $4.3 million in 2019, reflecting the utilization of $28.1 million of cash to fund the Group’s 2019 activities and the $3.3 million reduction in value of LLTE following proceeds of $3.8 million received from the sale of a ball mill. Net cash outflows were offset by the $32.6 million net proceeds received in aggregate from closing private placements conducted in 2018 and 2019 during the year.

Current and Non-Current Liabilities

In 2019 Non-current liabilities were comprised of the debt components of the Convertible Notes of $80.1 million). As the Convertible Notes are due to mature on June 30, 2021, these have now been moved to current liabilities as at December 31, 2020.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Cash Flows from Financing Activities

Cash flows from financing activities in 2020 primarily reflect the net cash inflow after issue costs of $6.5 million from the 2020 Private Placement, $3.5 million from the exercise of warrants and $0.2 million from the exercise of incentive stock options (“Options”). As noted above, 2019 benefitted from $32.6 million of financing cash inflows.

Results of Operations

The results of operations are summarized in the following tables. The amounts are derived from the Financial Statements prepared under IFRS.

in thousands of Canadian dollars, except per share amounts	2020Q4	2020Q3	2020Q2	2020Q1
Income Statement
Loss - attributable to owners of parent	7,381	11,742	8,820	6,756
Loss per share-basic and diluted	0.01	0.02	0.02	0.01
Statement of Financial Position
Working capital	3,506	1,162	9,936	11,981
Total assets	11,007	12,844	19,362	21,629
Statement of Cash Flows
Cash flows from financing activities	6,469	-	3,711	-
in thousands of Canadian dollars, except per share amounts	2019Q4	2019Q3	2019Q2	2019Q1
Income Statement
Loss - attributable to owners of parent	18,263	11,128	7,408	7,732
Loss per share-basic and diluted	0.03	0.02	0.02	0.02
Statement of Financial Position
Working capital	15,146	27,242	9,365	13,858
Total assets	31,183	42,791	21,755	26,153
Statement of Cash Flows
Cash flows from financing activities	401	26,228	-	6,324
Review of Financial Results
	3 months ended		12	months ended
		December 31		December 31
in thousands of Canadian dollars, except per share amounts	2020	2019	2020	2019
Operating loss for the period	4,678	16,611	25,608	36,221
Loss for the period
- attributable to owners of parent(1)	7,381	18,263	34,699	44,531
Lossper share - basic and diluted	0.01	0.03	0.06	0.09

(1) The transfer by the Company of equity in RMGC to Minvest RM during Q1 2014 resulted in the presentation of a non-controlling interest, as set out in the Financial Statements.

Operating and overall loss for the 12 months ended December 31 in 2020 and 2019 are described in the Annual Summary section above.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Operating loss for the three-month period ended December 31, 2020 of $4.7 million was $11.9 million lower when compared to the corresponding 2019 period ($16.6 million) primarily reflecting $8.4 million lower costs related to the ongoing ICSID Arbitration and $2.3 million lower costs related to payroll, each as explained in the Corporate, General and Administrative costs analysis below, a $0.4 million impairment charge recognized in 2020 being lower than the $1.0 million charge recognized in 2019, and a $0.3 million net reversal in stock-based compensation when compared to the three-month period to December 31, 2019.

Loss for the three-month period ended December 31, 2020 was $7.4 million, approximately $2.7 million higher than the operating loss, compared to an overall $18.3 million loss for the same period in the prior year which was $1.7 million higher than the 2019 fourth quarter operating loss. Principal reasons for the $1.0 million increase in non-operating expenses between the corresponding periods included (i) a $0.3 million write down of a receivable in 2019 not repeated in 2020; (ii) a $1.2 million gain on disposal of the ball mill in 2019, not repeated in 2020 and (iii) $0.1 million higher finance costs in 2020.

Expenses

Corporate, General and Administrative

*Corporate, General and Administrative*
	3	months ended	12	months ended
		December 31		December 31
in thousands of Canadian dollars	2020	2019	2020	2019
ICSID Arbitration related	1,932	10,335	12,158	18,337
Payroll	924	3,227	4,715	7,080
Finance	242	186	817	878
Community relations	188	173	775	803
Property and exploration taxes	180	169	715	689
Travel and transportation	95	359	504	1,043
Long lead-time equipment storage costs	121	120	486	557
Office rental and utilities	113	138	476	506
Information technology	94	113	379	468
Legal	45	216	366	568
External communications	43	20	168	147
Other	574	533	1,337	1,127
Corporate, general and administrative expense	4,551	15,589	22,896	32,203

All operating expenditures incurred by the Group are included in corporate, general and administrative expenses.

ICSID Arbitration related expenses are for legal and other advisory services provided to the Company in respect of the ICSID Arbitration - summary details of the substantial written submissions and hearings which required these services and were principal drivers of related costs in 2019 and 2020 are set out in “Status of the ICSID Arbitration and Recent Developments” above. For the three-month period ended December 31, 2020, such costs were approximately $1.9 million, primarily reflecting initial preparation of the Post-Hearing Briefs. ICSID Arbitration related expenses in the corresponding quarter of 2019 of $10.3 million reflects more intense activity in respect of work on rebuttal evidence and preparing for and attending the two-week Hearing in December 2019.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Payroll is the total of salaries, bonuses and relevant taxes for all Group employees. Full year payroll costs for 2020, and fourth quarter costs in particular, are materially lower than 2019 which reflect that (i) Management initiated a program of retrenchment in September 2020, leading to payroll costs reduced accordingly from the third quarter, offset by the $0.7 million of related severance costs noted separately in the Financial Statements; and (ii) 2020 performance reviews and any related bonus awards are yet to be determined, whereas in 2019 employee bonuses were determined and accrued for at the year-end.

Travel and transportation costs are lower in the three-month period and full year ended December 31, 2020 due to the reduced mobility of personnel resulting from the Covid-19 restrictions and precautions taken.

LLTE costs for the three-month period ended December 31, 2020 are equivalent to the corresponding 2019 period but decreased overall in the full year ended December 31, 2020 as a result of reduced storage and other holding costs following the sale of the remaining ball mill in the fourth quarter of 2019.

Legal expenses include ongoing corporate legal advice within the Group, in particular with regard to matters such as the VAT Assessment and the ANAF investigations, and are also reduced in the corresponding 2019 period reflecting more limited activity on those matters.

Stock-Based Compensation

*Stock-Based Compensation*
		3	months ended			12	months ended
			December 31				December 31
		2020		2019		2020		2019
Stock option compensation
Number of stock options granted		-		88,290		6,206,536		6,068,070
Average value ascribed to each option granted	$	-	$	0.57	$	0.46	$	0.37
Number of stock options exercised		-		853,000		525,339		853,000
Average value ascribed to each option exercised	$	-	$	0.50	$	0.35	$	0.50
Number of stock options expired/cancelled		-		-		2,081,827		2,325,000
Average value ascribed to each option expired/cancelled	$	-	$	-	$	0.56	$	0.84
DSU compensation
Number of DSUs issued		4,049		99,672		318,702		524,250
Average value ascribed to each DSU issued	$	-	$	0.57	$	0.47	$	0.53
Number of DSUs cancelled		-		-		115,165		-
Average value ascribed to each DSU cancelled	$	-	$	-		0.41	$	-

Stock Based Compensation

Stock Based Compensation
	3 months ended		12 months ended
		December 31		December 31
in thousands of Canadian dollars	2020	2019	2020	2019
DSUs - (reversal) / expense	(584)	(267)	(685)	569
Stock option-expense	282	317	2,153	2,389
Stock based compensation	(302)	50	1,468	2,958

The estimated fair value of the Options is calculated using the Black-Scholes method as at the date of grant and amortized over the period during which the Options vest.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

With effect from July 1, 2016, non-executive directors receive at least fifty per cent of their director’s fees payable in deferred share units (“DSUs”) or, at their election, Options in lieu of cash. Certain non-executive directors have elected to receive all of their director’s fees payable in DSUs or Options.

No Options or DSUs were granted to any non-executive directors during the three-month period ended December 31, 2020 in lieu of director’s fees for services provided during the third quarter of 2020 due to a blackout being in place throughout the fourth quarter of 2020, when such instruments would ordinarily be priced and granted. The cost of these instruments has been accrued at year end and the issue took place in the first quarter of 2021, in tandem with Options and DSUs granted to certain non-executive directors in lieu of director’s fees for services provided during the fourth quarter of 2020. The Company has accrued $0.1 million for the cost of future issuance of Options and DSUs for fees for services provided during the third and fourth quarters of 2020.

A total of 88,290 Options were issued in lieu of director’s fees for services provided during the third quarter of 2019 during the three-month period ended December 31, 2019 to certain nonexecutive directors. At December 31, 2019 the Company accrued $0.1 million for the cost of future issuance of Options and DSUs for fees for services provided during the fourth quarter of 2019.

DSUs are revalued each period end based on the period end closing share price. The initial value of the DSUs on grant, and the effect on the valuation of DSUs of the period-on-period change in share price, is expensed. At December 31, 2020, the Company’s share price was $0.23 (September 30, 2020: $0.40), resulting in a DSU revaluation gain of $0.6 million for the three-month period ended December 31, 2020.

Finance Income

*Finance Income*
	3	months ended	12	months ended
		December 31		December 31
in thousands of Canadian dollars	2020	2019	2020	2019
Interest income	2	121	71	395

Interest income reflects the average holdings of cash and cash equivalents during the respective periods shown above. Interest income has reduced significantly since the start of the second quarter of 2020, in line with the significant reduction in available cash balances through the year and reduced North American treasury yields in the period.

As at December 31, 2020, approximately 29% of the Company’s cash and cash equivalents were invested in US government guaranteed instruments, with the majority of the balance held as cash deposits with major Canadian banks.

Finance Costs

*Finance Costs*
	3	months ended	12	months ended
		December 31		December 31
in thousands of Canadian dollars	2020	2019	2020	2019
Financing costs - convertible note accretion	2,503	2,340	9,784	8,958

Finance costs relate to the accretion of the debt components of the Convertible Notes issued in private placements closed in 2014 and 2016, which are measured at amortized cost using the effective interest rate method. On June 3, 2020, Kopernik Global Investors, LLC elected, on behalf of certain funds, to convert $4,763,000 aggregate principal amount of Convertible Notes (approximately 5% of those in issue) into approximately 15.4m Common Shares.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Foreign Exchange

The Company has experienced an increase in foreign currency gains and losses as a result of increased exposure to the US dollar. All of the funds raised in the three private placements of equity and warrants since 2018 were received in US dollars and the Company retained these US dollars to fund its subsequent US dollar-denominated working capital expenses, principally costs related to the ICSID Arbitration.

Taxes

All tax assessments received prior to December 31, 2020 have been paid or provided for in the Financial Statements.

Investing Activities

The majority of Group expenditures over the years through December 31, 2015 were for identifying and defining the size of the four ore bodies, for engineering to design the size and scope of the Project, environmental assessment and permitting, social support to local communities, communications and public relations activities to support the permitting process, archeological and rehabilitation work to buildings, as well as surface rights and property acquisition and resettlement housing and infrastructure.

Since January 1, 2016, no significant expenditures apart from building maintenance have been incurred in these areas and any such expenditures are expensed in the income statement.

Purchase of Capital Assets

	3	months ended	12	months ended
		December 31		December 31
in thousands of Canadian dollars	2020	2019	2020	2019
Total investment in capital assets	4	22	10	63
Depreciation and disposal - expensed	8	16	39	104

The purchase of capital assets remains low, in line with the Company’s cost containment strategy.

Financing Activities

The Company has raised funds since 2014 through private placements of Convertible Notes, Common Shares and warrants (together “Private Placements”) amounting to gross aggregate proceeds of $154.7 million. The Company has used and is continuing to use the proceeds of the Private Placements to finance the costs of the ongoing ICSID Arbitration and for general working capital purposes. Further information on the Private Placements is provided in the Financial Statements.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Cash Flow Statement

Liquidity and Capital Resources

The main sources of liquidity are the Company’s cash and cash equivalents, and the equity and debt markets. At December 31, 2020, aggregate cash and cash equivalents were $6.5 million (December 31, 2019: $25.7 million).

Working Capital

At December 31, 2020, the Company had working capital, calculated as total current assets less assets held for sale less total current liabilities (after adjusting for the Convertible Notes which are redeemable in shares and therefore do not affect the ability of the Company to meet its liabilities), of $3.5 million (December 31, 2019: $15.1 million). This period-on-period decrease is reflective of a $19.2 million higher cash balance at the 2019 year end (following the $26.4 million financing concluded in the third quarter of 2019) offset by higher 2019 current liabilities, noted below.

After adjusting for the Convertible Notes, at December 31, 2020, the Company had current liabilities of $3.7 million (December 31, 2019: $11.3 million). This period-on-period decrease is primarily due to the significantly higher ICSID Arbitration cost accruals at December 31, 2019 for work performed in preparation for, and attendance at, the Hearing.

Resettlement Liabilities

RMGC had a program for purchasing homes in the Project area, which was suspended in February 2008 due to the suspension of the environmental review process in September 2007.

At December 31, 2020 the Company had accrued resettlement liabilities totaling $0.6 million (December 31, 2019: $0.6 million).

Contractual Obligations

A summary of the Company’s contractual capital and operating lease commitments as of December 31, 2020 is included within the Financial Statements.

The Company and its subsidiaries have a number of arm’s-length agreements with third parties who provide a wide range of goods and services. Typically, the service agreements are for a term of not more than one year and permit either party to terminate upon notice periods ranging from 15 to 90 days. At termination, the Company has to pay for services rendered, and costs incurred, to the date of termination.

Critical Accounting Estimates

The preparation of Financial Statements in conformity with IFRS requires Management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amount of expenses and other income during the reporting period.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Significant estimates and assumptions include those related to going concern, the recoverability or impairment of certain assets, benefits of future income tax assets, estimated useful lives of capital assets, valuation of stock based compensation and other benefits, assumptions and determinations as to whether costs are expensed or capitalized, and the valuation and measurement of the components of the Private Placements.

While Management believes that these estimates and assumptions are reasonable, actual results could vary significantly therefrom. The critical accounting estimates are not significantly different from those reported in the Financial Statements as at, and for the year ended, December 31, 2019.

Going Concern

On the basis of the Company’s balance of cash and cash equivalents as at December 31, 2020, the Company has sufficient funding necessary to maintain the Group’s primary assets and to fund general working capital requirements together with the material estimated costs associated with the Company advancing the ICSID Arbitration through to May 2021. There can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or within any specific or reasonable period of time.

As at December 31, 2020, the Group had no sources of operating cash flows and does not have sufficient cash to fund either the development of the Project or all the long-term activities required to see the ICSID Arbitration through to its conclusion, including in any potential annulment proceeding and/or litigation to enforce any arbitral award. Accordingly, the Group will require additional funding in the short-term to maintain its primary assets, including its License and associated rights and permits while it then awaits the decision of the Tribunal, and further financing to pursue the ICSID Arbitration to its conclusion. Notwithstanding the Company’s recent and historic funding, there is a risk that sufficient additional financing may not be available to the Company on acceptable terms, or at all.

Future Income Tax Assets

Income taxes are calculated using the asset and liability method of tax accounting. Under this method, current income taxes are recognized for the estimated income taxes payable for the current period. Future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that are expected to be in effect when the differences reverse. Income tax assets are recognized to the extent that the recoverability of future income tax assets is considered probable.

The Company has subsidiaries in countries that have differing tax laws and tax rates, primarily Romania and the United Kingdom. The provision for income taxes is based on a number of estimates and assumptions made by Management, including its understanding of domestic and international tax rules. Advice is also sought from local professional tax advisors in the respective countries where the Group operates.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Tax authorities in Romania have regularly initiated various tax audits to assess the appropriateness of RMGC’s tax filing positions. Regulators may interpret tax regulations differently from the Company and its subsidiaries, which may cause changes to the estimates made. As noted above, in 2017 RMGC received the VAT Assessment from ANAF which, with interest and penalties, amounted to approximately RON 45.6 million (approximately $14.6 million). RMGC initiated a formal challenge to the VAT Assessment through the Romanian courts, with a favorable ruling from the Alba Iulia Court of Appeal which was appealed by ANAF. At the hearing before Romania’s High Court of Cassation and Justice on December 2, 2020 the appeal against the decision in favor of RMGC was dismissed which is final and conclusive. The Group no longer recognizes a contingent liability related to this VAT Assessment in the Financial Statements.

Valuation of the Private Placements

The units issued by the Company in Private Placements in 2014 and 2016 consisted of Convertible Notes, warrants and arbitration value rights. The Company utilized the Black-Scholes model to value the warrant component of the units (each of which entitle the holder to acquire one Common Share at an exercise price of $0.46) and a discounted cash flow model to value the debt component of notes. The equity component of the notes was recognized initially at the difference between the fair value of each Private Placement as a whole and the fair value of the debt and warrant components. Any directly attributable transaction costs were allocated to the liability and equity components in proportion to their initial carrying amounts. A nil value was initially ascribed to the arbitration value rights and, given the current stage of the ICSID Arbitration process, a nil valuation remains applicable as at December 31, 2020. The Private Placements in 2014 and 2016 contain two embedded derivatives, both of which were initially valued at nil with no subsequent adjustment in value.

The units issued by the Company in the 2018, 2019 and 2020 Private Placements consisted of Common Shares and warrants each of which entitles the holder to acquire one Common Share at an exercise price of $0.49, $0.645 and $0.39 respectively, at any time in the five years following issuance (in the case of the 2018 and 2019 Private Placements) and at any time in the three years following issuance (in the case of the 2020 Private Placement). The Company utilized the BlackScholes model to value the warrant component of the units and allocated the remainder of the value to the equity component. Any directly attributable transaction costs were allocated to the equity and warrant components in proportion to their initial carrying amounts.

Useful Lives of Capital Assets

The Company’s policy is to amortize capital assets over their useful lives once the assets are brought into production. Management assesses useful lives of assets to ensure that they reflect the intended use of those assets.

Valuation of Stock-Based Compensation

The Company utilizes Options, DSUs and restricted share units (“RSUs”) as means of compensation. Equity settled RSUs and Options are valued using the Black-Scholes model, and are amortized over the expected vesting periods. Management reviews the assumptions used in the Black-Scholes valuation on an annual basis to ensure appropriateness.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

DSUs are initially issued at the five-day weighted average market price of the Common Shares at the date of issue, and the value thereof is subsequently recalculated to fair value based on the quoted market value of the Common Shares at the end of each reporting period.

Financial Instruments and Management of Financial Risk

The recorded amounts for cash, cash equivalents, accounts receivable, accounts payable, accrued liabilities and other liabilities approximate fair values based on the nature of those instruments.

The Company’s objective is to safeguard its cash and cash equivalents in order to be able to fund ongoing expenditures. The Company manages its capital structure and makes adjustments to it based on the level of funds on hand and anticipated future expenditures. The long-term costs, including advisors’ fees of pursuing the ICSID Arbitration and general corporate working capital, have been material and are estimated to continue to be significant.

To safeguard cash the Company invests its surplus capital in liquid instruments at reputable financial institutions with acceptable credit standings.

The Group’s risk exposures and the impact on the Group’s financial instruments are summarized below:

Credit Risk

The Group’s credit risk is primarily attributable to cash and cash equivalents that are held in investment accounts with Canadian banks and invested in Canadian and United States sovereign debt. The Group has adopted an investment strategy to minimize its credit risk by investing in sovereign debt (primarily issued by Canada and the United States, subject to availability) with the balance of cash being invested on short-term overnight deposit with major Canadian banks.

The Group is exposed to the credit risk of domestic Romanian banks that hold and disburse cash on behalf of its Romanian subsidiaries. The Group manages its Romanian bank credit risk by centralizing custody, control and management of its surplus cash resources outside of Romania at the corporate office and only transferring money to its Romanian subsidiary based on near-term cash requirements, thereby mitigating exposure to domestic Romanian banks.

The Group holds cash balances in the United Kingdom to fund corporate office activities and is therefore exposed to the credit risks of these major UK banks.

The Group’s credit risk is also attributable to value-added taxes receivable. Value-added taxes receivable are primarily receivables from the Romanian Government, which are more recent and not subject to challenge pursuant to the VAT Assessment. As at December 31, 2020, overdue VAT receivable amounts claimed by RMGC total approximately $0.3 million.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Liquidity Risk

The Company has the ability to repay all or a proportion of the principal amount of the Convertible Notes at maturity by issuing Common Shares from treasury (as more fully described in the Financial Statements); these Convertible Notes represent a significant portion of the long-term Group liabilities. As of the date of this MD&A, the Group had no sources of operating cash flows and does not have sufficient cash to fund either the development of the Project or all the long-term activities required to see the ICSID Arbitration through to its conclusion, including any annulment process and enforcement. Taking account of the Group’s existing treasury balances, and subject to raising additional funding as described above, the Group expects to have sufficient funds to settle all other current and existing long-term contractual liabilities as they fall due.

Market Risk

(a) Interest rate risk

The Group has cash balances and significant fixed-coupon debt in the form of Convertible Notes. The Group maintains a short-term investment horizon, typically less than three months, for its cash and cash equivalents, and therefore minimizes the risk of interest rate volatility at investment maturity.

With a short-term investment horizon and the intent to hold all investments until maturity, the Group is only marginally exposed to capital erosion should interest rates rise and cause fixed-yield investments to devalue.

The Group’s primary objective with respect to cash and cash equivalents is to mitigate credit risk. The Group has elected to forego yield in favor of capital preservation.

The interest rate attributable to the Convertible Notes is a fixed interest rate for the period of the instrument and is therefore not subject to market fluctuations.

(b) Foreign currency risk

The Group’s presentation currency is the Canadian dollar and its activities expose it to fluctuations in foreign exchange rates. The Group has monetary assets and liabilities which are denominated in Romanian Lei, US dollars, UK pounds and Euros and is, therefore, subject to exchange variations against both the functional currency of the entity and presentation currency of the Group.

The Group maintains cash and cash equivalents in various currencies and is therefore susceptible to market volatility as foreign cash balances are revalued to the functional currency of the entity and thereafter to the presentation currency of the Group. Therefore, the Group may report foreign exchange gains or losses during periods of significant economic and market volatility. At December 31, 2020, the Group held 58% and 26% of its cash and cash equivalents in US and Canadian dollars, respectively.

The Company has not entered into any derivative hedging activities.

Sensitivity

As of December 31, 2020, the carrying amount of the financial instruments equals fair market value. Based on Management’s knowledge and experience of the financial markets, in respect of the Company’s balance of cash and cash equivalents as at December 31, 2020, the Company believes the following market movements are “reasonably possible” over a twelve-month period and would have the stated effects on net income:

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

A plus or minus 1% change in earned interest rates; would affect net interest income by $0.1 million.
A plus or minus 1% change in foreign exchange rates; would affect net income by $0.1 million.

Risks and Uncertainties

An investment in the Common Shares is subject to a number of risks and uncertainties. This section describes existing and future material risks to the business of the Group. The risks described below are not exhaustive. Additional risks and uncertainties not currently known to the Company, or those that it currently deems to be immaterial, may become material and adversely affect the Group’s business. The realization of any of these risks may materially and adversely affect the Group’s business, financial condition, results of operations and/or the market price of Gabriel’s securities.

The Outbreak of the Coronavirus (COVID‐19)

The Company faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt the Group’s operations, including, but not limited to, the advancement of the ICSID Arbitration, and the effects of the coronavirus or other epidemics may materially and adversely affect its business and financial conditions.

The extent to which the coronavirus impacts the Group’s business and operations, and the market for its securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak.

In particular, the continued spread of the coronavirus and travel and other restrictions established to curb the spread of the coronavirus, could materially and adversely impact the Group’s business including, without limitation, the progress of the ICSID Arbitration (for example the availability of the Tribunal, legal counsel, industry experts and ICSID personnel), the Project work program, employee health, limitations on travel, and other factors that will depend on future developments beyond the Company’s control, which may have a material and adverse effect on the its business, financial condition and results of operations. There can be no assurance that the Group’s personnel will not be impacted by these pandemic diseases and ultimately the Group may see its workforce productivity reduced or incur increased medical costs or insurance premiums as a result of these health risks.

ICSID Arbitration

The resources necessary to pursue the ICSID Arbitration are substantial and the costs, fees and other expenses and commitments payable in connection with the ICSID Arbitration may differ materially from Management’s expectations. In view of the case-specific nature of arbitration, and the inherent uncertainty in the actions of the Respondent and in the process, timing and outcome of the ICSID Arbitration, there can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or be completed or settled within any specific or reasonable period of time.

There is no assurance that the Claimants will be successful in establishing Romania’s liability in the ICSID Arbitration or, if successful, that the Claimants will receive or collect an award of compensation from the Respondent in the amount requested, of significantly reduced value, or at all. Failure to prevail in the ICSID Arbitration, or to obtain adequate compensation for the loss in value of the Group’s investment, would materially adversely affect the Group.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

The pursuit by the Company of the ICSID Arbitration may lead to the commencement of further abusive fiscal and other investigations and assessments against RMGC or its staff or employees by the Romanian State.

UNESCO World Heritage List

As described above, on January 31, 2020, the Romanian Government indicated that it had taken steps to resume the procedure to list the “Roşia Montană Mining Landscape” as a UNESCO World Heritage site.

The act of applying to UNESCO for such designation is wholly incompatible with the development of the Project. The application itself is an undertaking by Romania to stop development of the subject area and preclude mining, as would a decision by the World Heritage Committee formally approving the application. The inclusion of the “Roşia Montană Mining Landscape” on the UNESCO World Heritage List would have a material adverse impact on the Company’s business insofar as it would undermine the possibility of an amicable resolution of the dispute with Romania that would allow for the development of the Project.

Additional Funding

Further funding will be required by the Company to pursue the ICSID Arbitration to its conclusion, including the enforcement of any award, and for general working capital requirements.

Historically, the Company has been financed through the issuance of its Common Shares, Convertible Notes and other equity-based securities. Although the Company has been successful in the past in obtaining financing, it has limited access to financial resources as a direct result of the dispute concerning the Project and the core focus of the Company upon the ICSID Arbitration. Notwithstanding the Company’s historic funding, there is a risk that sufficient additional financing may not be available to the Company on acceptable terms, or at all. In addition, the current outbreak of COVID-19 has had a negative impact on global economies and financial markets. The continued spread of COVID-19 and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions, which may adversely impact the Company’s ability to obtain financing.

While, as disclosed above, the Company is continuing a process to sell its remaining LLTE which would, if completed, provide the Company with a reduced cost base and additional working capital, there are no assurances regarding the success of such a sale process or that any proceeds may be realized from the sale of the remaining equipment. The timing of the receipt of any such sales proceeds is also uncertain.

Refinancing of Existing Securities

The Company may need or desire to refinance all or a portion of the Convertible Notes or warrants issued and outstanding pursuant to the Private Placements. There can be no assurance that the Company will be able to refinance any of its indebtedness or incur additional indebtedness.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Political and Economic Uncertainty in Romania

Gabriel’s material operations, property rights and other interests are located in Romania. As such, the Company’s activities are subject to a number of country-specific risks and risks relating to the European Union (such as laws and policies which impact Romania) over which it has no control. These risks may include social, political, economic, legal and fiscal instability and changes of Romanian or European Union laws and regulations affecting mining, foreign ownership, taxation, working conditions, rates of exchange, exchange control, exploration licensing, and export licensing and export duties.

In the event of a dispute arising in respect of the Company’s activities in Romania (other than the ICSID Arbitration and the Notice regarding UNESCO World Heritage), the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or elsewhere. Any adverse or arbitrary decision of a court, arbitrator or other governmental or regulatory body may have a material adverse impact on the Company’s business, assets, prospects, financial condition and results of operations and/or the market price of its securities.

Mineral Tenure Rights

RMGC is the titleholder of the License, which had an initial duration of 20 years and was due to expire on June 21, 2019. RMGC has the right to extend the term of the License for successive subsequent five-year periods as may be needed to ensure rational exploitation of the mineral resources and reserves identified and approved by the Romanian National Agency for Mineral Resources (“NAMR”). An addendum providing for the extension of the term of the License to June 20, 2024, and including a revised royalty rate to 6% on mineral production value, was concluded on June 18, 2019.

Although RMGC retains “nominal ownership” of the License, the acts and omissions of the Romanian State have prevented RMGC from realizing any benefits of such ownership and thus have deprived the License entirely of its value.

Pursuant to an exploration concession license issued by the Romanian State in May 1999 relating to the Bucium perimeter located in the vicinity of Roşia Montană, and following the completion of extensive exploration at Bucium which identified two feasible deposits, RMGC acquired a direct and exclusive legal right to obtain exploitation licenses for the Rodu-Frasin and Tarniţa deposits. However, in violation of RMGC’s legal rights and of Romania’s legal obligations, Romania has failed for the last 13 years to act on RMGC’s applications for exploitation licenses for Rodu-Frasin and Tarniţa.

Any adverse or arbitrary decision of NAMR may have a material adverse impact on the Company’s business, assets, prospects, financial condition and results of operations and/or the market price of its securities.

Legal Proceedings

As previously disclosed, Gabriel has been party (directly and through RMGC) to a number of legal challenges in Romania. In the course of its business, Gabriel may also from time to time become involved in the defense and initiation of legal claims, arbitration and other legal proceedings.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Due to the inherent uncertainties of the judicial process, the nature and results of any such legal proceedings cannot be predicted with any certainty. In addition, such claims, arbitration and other legal proceedings can be lengthy and involve the incurrence of substantial costs and resources by the Company. The initiation, pursuit and/or outcome of any particular claim, arbitration or legal proceeding could have a material adverse effect on the Company’s financial position and results of operations, and on the Company’s business, assets and prospects.

Dependence on Management and Key Personnel

The Group is dependent on a relatively small number of key directors, officers and employees. Loss of any one of those persons could have an adverse effect on it. Retaining qualified and experienced personnel is critical to the Company’s success. However, there can be no assurance that the Group will be successful in so doing.

Furthermore, the loss of key employees, in particular those who possess important historical knowledge related to the Project which could be relevant to the ICSID Arbitration, could have a material adverse effect on the outcome of the ICSID Arbitration and future operations of the Group.

Minvest RM Mine Closure Plan and Environmental Liabilities

In May 2006, Minvest RM’s predecessor permanently ceased all of its mining operations at Roșia Montană. As a result, a mine closure plan was developed, which, Gabriel understands, was approved by the Romanian Ministry of Economy and NAMR. The mine closure plan was developed to integrate into RMGC’s development plans for Roșia Montană in order to avoid any conflict between the Romanian State’s closure activities and RMGC’s development activities. A state-owned company under the coordination of the Ministry of Economy, S.C. CONVERSMIN S.A. (“CONVERSMIN”), has responsibility for the mine closure plan.

There can be no assurance that the activities contemplated by such mine closure plan will be implemented in a timely fashion, and no such action has been undertaken to date within the Roșia Montană license area. Until the mine closure plan has been fully implemented, there can be no assurance that such activities will not attract liability to RMGC, as the titleholder of the License, under the current or future laws, rules and regulations applicable to mining activities in Romania. Likewise, there can be no assurance that the legally binding assumption by the Romanian Stateowned operator of all liabilities associated with its past mining operations or any indemnification of RMGC from such liabilities will be fulfilled by, or be enforceable against, such entity.

Mining exploration activities conducted by RMGC, as titleholder of the License, are also subject to potential environmental risks and liabilities. It is the Company’s belief that RMGC has met its obligations under the License and applicable Romanian laws to perform environmental rehabilitation within the areas of the tenement affected by its exploration activities. To the extent that RMGC becomes subject to material unforeseen and uninsured environmental liabilities, the payment of such costs would reduce funds otherwise available to the Company and could have a material adverse effect on the Company.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Potential Dilution to Existing Shareholders

As described above, the Company will require additional financing in order to pursue the ICSID Arbitration to its conclusion and for general working capital requirements. In order to raise such financing, the Company may sell additional equity or equity-related securities including, but not limited to, Common Shares, share purchase warrants or some form of convertible security. The additional issuances of equity securities, if made, will result in dilution to existing shareholders.

The conversion and/or exercise (as applicable) of the Company’s outstanding Convertible Notes and existing warrants could result in the issuance of a significant number of Common Shares causing significant dilution to the ownership of existing shareholders. Unless and until the Company successfully permits the Project or collects an arbitral award, if any, or acquires and/or develops other operating properties which provide positive cash flow, the Company’s ability to meet its obligations as they fall due or redeem in whole or part or otherwise restructure the Convertible Notes will be limited to the Company’s cash on hand and/or its ability to issue additional equity or debt securities in the future. Such transactions could potentially cause substantial dilution to the shareholders at that time.

Continued Listing of the Common Shares

The continued listing of the Common Shares on the Exchange is conditional upon its ability to meet the applicable continued listing requirements of the Exchange. In the event that Gabriel is not able to maintain a listing of its Common Shares on the Exchange or any substitute exchange, it may be extremely difficult or impossible for shareholders to sell their Common Shares. If the Company is delisted from the Exchange but obtains a substitute listing for the Common Shares, the Common Shares may have less liquidity and more price volatility than experienced on the Exchange. Shareholders may not be able to sell their Common Shares on any such substitute exchange in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market.

As a result of these factors, if the Common Shares are delisted from the Exchange, the price of the Common Shares may decline and the Company's ability to obtain financing in the future could be materially impaired.

Compliance with Anti-Corruption Laws

Gabriel is subject to various anti-corruption laws and regulations including, but not limited to, the Canadian Corruption of Foreign Public Officials Act 1999 and the UK Bribery Act 2010. In general, these laws prohibit a company and its employees and intermediaries from bribing or making other prohibited payments to foreign officials or other persons to obtain or retain business or gain some other business advantage. Gabriel’s primary operations are located in Romania, a country which, according to Transparency International, is perceived as having fairly high levels of corruption relative to the rest of Europe (Romania ranks 69[th] out of 180 countries in terms of corruption, according to a 2020 index published in January 2021 by Transparency International). Gabriel cannot predict the nature, scope or effect of future anti-corruption regulatory requirements to which Gabriel’s operations might be subject or the manner in which existing laws might be administered or interpreted.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Failure to comply with the applicable legislation and other similar foreign laws could expose Gabriel and/or its senior management to civil and/or criminal penalties, other sanctions and remedial measures, legal expenses and reputational damage, all of which could materially and adversely affect Gabriel’s business, financial condition and results of operations. Likewise, any investigation of any potential violations of the applicable anti-corruption legislation by UK, Canadian or foreign authorities could also have an adverse impact on Gabriel’s ability to develop the Project or its business, financial condition and results of operations.

As a consequence of these legal and regulatory requirements, Gabriel has instituted policies and procedures with regard to business ethics, which have been designed to ensure that Gabriel and its employees comply with applicable anti-corruption laws and regulations. However, there can be no assurance or guarantee that such efforts have been and will be completely effective in ensuring Gabriel’s compliance, and the compliance of its employees, consultants, contractors and other agents, with all applicable anti-corruption laws and regulations.

Insurance and Uninsurable Risks

Gabriel maintains insurance to protect itself against certain risks related to its operations in type and amounts that it believes are reasonable depending upon the circumstances surrounding each identified risk and the advice of its retained insurance advisor. There are also risks against which the Company cannot insure or against which it may elect not to insure for various reasons. The potential costs associated with any liabilities not covered by insurance, or in excess of insurance coverage, or compliance with applicable laws and regulations may cause substantial delays to its operations and require significant capital outlays, adversely affecting the future business, assets, prospects, financial condition and results of operations of the Company.

Global Economic and Financial Market Conditions

Global economic and financial conditions may impact the ability of the Company to obtain loans, financing and other credit facilities in the future and, if obtained, on terms favorable to the Company. As a consequence, global financial conditions could adversely impact the Company’s financial status and share price.

Currency Fluctuations

The Company’s reporting currency is the Canadian dollar, which is exposed to fluctuations against other currencies. The Company’s primary operations are located in Romania and many of its expenditures and obligations are denominated in Romanian Lei (“RON”). In addition, the Company has and/or will have expenditures and obligations denominated in other currencies including, but not limited to, Canadian dollars, US dollars, Euros and United Kingdom pounds sterling (“GBP”). The Company maintains active cash accounts in Canadian dollars, US dollars, GBP and RON and has either monetary assets and/or liabilities in currencies including US dollars, Canadian dollars, Euros, GBP and RON. As such, the Company’s results of operations are subject to foreign currency fluctuation risks and such fluctuations may adversely affect the financial position and operating results of the Company. The Company does not currently use any derivative products to actively manage or mitigate any foreign exchange exposure.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Market Price Volatility

Publicly quoted securities are subject to a relatively high degree of price volatility. It may be anticipated that the quoted market for the Common Shares will be subject to market trends generally and there may be significant fluctuations in the price of the Common Shares.

No History of Earnings or Dividends

The Company has no history of earnings and as such the Company has not paid dividends on its Common Shares since incorporation. The Company does not intend to declare or pay cash dividends at present.

Accounting Policies and Internal Controls

Since January 1, 2011, the Company has prepared its financial reports in accordance with IFRS. In preparation of financial reports, Management of Gabriel may need to rely upon assumptions, make estimates or use their best judgment in determining the financial condition of the Company. Significant accounting policies are described in more detail in the Company’s audited Financial Statements.

In order to have a reasonable level of assurance that financial transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and reported, the Company has implemented internal control systems for financial reporting. Although the Company believes its financial reporting and Financial Statements are prepared with reasonable safeguards to ensure reliability, the Company cannot provide absolute assurance.

Enforcement of Civil Liabilities

As substantially all of the assets of Gabriel and its subsidiaries are located outside of Canada, and certain of its directors and officers are resident outside of Canada, it may be difficult or impossible to enforce judgements granted by a court in Canada against the assets of Gabriel or its subsidiaries or its directors and officers residing outside of Canada.

Conflicts of Interest

Some of the directors and officers of the Company are, or may be, on the boards of other natural resource companies, or other providers of finance, from time-to-time resulting in conflicts of interests. Therefore, there is the potential for a conflict of interest between the Company and some of its directors and officers. Directors and officers of the Company with conflicts of interest will be subject to and will follow the procedures set out in applicable corporate and securities legislation, regulations, rules and policies.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

CEO/CFO Certification

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have established processes to provide them with sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the consolidated Financial Statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the consolidated Financial Statements; and (ii) the consolidated Financial Statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented.

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), the corresponding certificate for venture issuers does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in NI 52-109. In particular, the certifying officers of the Company do not make any representations relating to the establishment and maintenance of:

I. controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes in accordance with the issuer’s GAAP.

The Company’s CEO and CFO are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in the corresponding certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Outstanding Share Data

The Company’s fully diluted share capital as at March 9, 2021 was:

	Outstanding
Common shares	623,507,830
Common stock options	31,964,713
Deferred share units - Common Shares	3,979,468
Warrants	304,687,386
Convertible notes (maturing June 2021)	292,631,239
Fully diluted share capital	1,256,770,636

The impact on the fully diluted share capital of conversion of the Convertible Notes has been calculated based upon the conversion price of $0.3105. The Company has the right to repay the principal in whole or in part in Common Shares at a conversion price of 95% of the market price at the maturity date.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

Forward-Looking Statements

This MD&A contains “forward-looking information” (also referred to as “forward-looking statements”) within the meaning of applicable Canadian securities legislation. Forward-looking statements are provided for the purpose of providing information about Management’s current expectations and plans and allowing investors and others to get a better understanding of the Company’s operating environment. All statements, other than statements of historical fact, are forward-looking statements.

In this MD&A, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein.

Some of the uncertainties associated with material factors or assumptions used to develop forwardlooking statements include, without limitation: the progress of the ICSID Arbitration, actions by the Romanian Government or affiliates thereof, the impact of current or future litigation against the Group, conditions or events impacting the Company’s ability to fund its operations (including but not limited to the completion of additional funding noted above) or service its debt, the ability to progress exploration, development and operation of mining properties and the overall impact of misjudgments made in good faith in the course of preparing forward-looking information.

Forward-looking statements involve risks, uncertainties, assumptions, and other factors including those set out above and below, that may never materialize, prove incorrect or materialize other than as currently contemplated, which could cause the Company’s results to differ materially from those expressed or implied by such forward-looking statements.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, outlook, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “is of the view” “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.

Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation:

the outbreak of the coronavirus (COVID‐19) may affect the Company’s operations and/or the anticipated timeline for the ICSID Arbitration;
the duration, costs, process and outcome of the ICSID Arbitration;
the advancement of Romania’s nomination of the “Roşia Montană Mining Landscape” as a UNESCO World Heritage site;
changes in the Group’s liquidity and capital resources;
access to funding to support the Group’s continued ICSID Arbitration and/or operating activities in the future;
equity dilution resulting from the conversion of the Convertible Notes, or exercise of warrants, in part or in whole to Common Shares;
the ability of the Company to maintain a continued listing on the Exchange or any regulated public market for trading securities;

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

the impact on business strategy and its implementation in Romania of: any allegations of historic acts of corruption, uncertain legal enforcement both for and against the Group and political and social instability;
regulatory, political and economic risks associated with operating in a foreign jurisdiction including changes in laws, governments and legal and fiscal regimes;
global economic and financial market conditions;
volatility of currency exchange rates; and
the availability and continued participation in operational or other matters pertaining to the Group of certain key employees and consultants.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements.

Investors are cautioned not to put undue reliance on forward-looking statements, and investors should not infer that there has been no change in the Company’s affairs since the date of this MD&A that would warrant any modification of any forward-looking statement made in this document, other documents periodically filed with or furnished to the relevant securities regulators or documents presented on the Company’s website. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice. The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions or factors, whether as a result of new information, future events or otherwise, subject to the Company’s disclosure obligations under applicable Canadian securities regulations. Investors are urged to read the Company’s filings with Canadian securities regulatory agencies.

Management’s Discussion & Analysis Fourth Quarter and Full Year 2020

AI assistant

Gabriel Resources Ltd. — Management Reports 2021

43912_rns_2021-03-11_110b4294-c118-431c-9e19-a3e913b24924.pdf

Management’s Discussion and Analysis

Overview

ICSID Arbitration

Status of the ICSID Arbitration and Recent Developments

UNESCO World Heritage

Other Recent Developments

Impact of Coronavirus

Board Changes

RMGC - Government Audits and Investigations

Romanian National Agency for Fiscal Administration (“ANAF”) Investigations

Prosecutor Office Investigation

Long Lead-Time Equipment

Liquidity

Capital Resources

Completion of Private Placement

Future Financing Requirements

Outlook

Annual Summary

Results of Operations

Total Assets

Current and Non-Current Liabilities

Cash Flows from Financing Activities

Results of Operations

Expenses

Corporate, General and Administrative

Stock-Based Compensation

Stock Based Compensation

Finance Income

Finance Costs

Foreign Exchange

Taxes

Investing Activities

Purchase of Capital Assets

Financing Activities

Cash Flow Statement

Liquidity and Capital Resources

Working Capital

Resettlement Liabilities

Contractual Obligations

Critical Accounting Estimates

Going Concern

Future Income Tax Assets

Valuation of the Private Placements

Useful Lives of Capital Assets

Valuation of Stock-Based Compensation

Financial Instruments and Management of Financial Risk

Credit Risk

Liquidity Risk

Market Risk

(a) Interest rate risk

(b) Foreign currency risk

Sensitivity

Risks and Uncertainties

The Outbreak of the Coronavirus (COVID‐19)

ICSID Arbitration

UNESCO World Heritage List

Additional Funding

Refinancing of Existing Securities

Political and Economic Uncertainty in Romania

Mineral Tenure Rights

Legal Proceedings

Dependence on Management and Key Personnel

Minvest RM Mine Closure Plan and Environmental Liabilities

Potential Dilution to Existing Shareholders

Continued Listing of the Common Shares

Compliance with Anti-Corruption Laws

Insurance and Uninsurable Risks

Global Economic and Financial Market Conditions

Currency Fluctuations

Market Price Volatility

No History of Earnings or Dividends

Accounting Policies and Internal Controls

Enforcement of Civil Liabilities

Conflicts of Interest

CEO/CFO Certification

Outstanding Share Data

Forward-Looking Statements

Gabriel Resources Ltd. Management Reports 2021