Gunpoint Exploration — Management Reports 2022

Apr 9, 2022

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Management’s Discussion and Analysis

Year Ended 31 December 2021

(Expressed in Canadian dollars, unless otherwise noted)

8 April 2022

For further information on the Company, reference should be made to its public filings on SEDAR at www.sedar.com. Information is also available on the Company’s website at www.gunpointexploration.com. This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited annual consolidated financial statements for the year ended 31 December 2021 and related notes thereto which have been prepared in accordance with International Financial Reporting Standards. The MD&A contains certain forward looking statements, please review the disclaimers that are provided at the last page of this report.

OVERVIEW

Gunpoint Exploration Ltd. (the “Company” or “Gunpoint”) is focused on the acquisition and exploration of gold-silver deposits located primarily in the United States. Gunpoint’s primary property is the Talapoosa gold project (“Talapoosa”) in Nevada, USA. The Company’s common shares trade on the TSX Venture Exchange under the symbol “GUN.TSXV”. The Company has its head office in Vancouver, B.C.

During the current year, the Company’s corporate activities were focused on coordinating due diligence for third parties interested in Talapoosa and completing the sale of La Gitana and Pena Blanca. The Company continued to maintain its El Escorpion property in good standing for joint venture or divesture.

HIGHLIGHTS – Year Ended 31 December 2021

• The Company’s cash position as at 31 December 2021 was $83,600.

• During the year, the Company received from Inomin Mines Inc. (“Inomin”) a cash payment of $25,000 and 1,000,000 common shares of Inomin for the sale of the La Gitana property.

• During the year, the Company received from Madoro Metals Corp. (“Madoro”), formerly known as Megastar Development Corp., a cash payment of US$30,000 and 250,000 common shares of Madoro pursuant to the option agreement to acquire the Cerro Minas property.

• In November 2021, the Company entered into debt settlement agreements with

• (i) Chesapeake Gold Corp. (“Chesapeake”), the Company’s parent and

• (ii) A company controlled by the President of the Company,

to settle aggregated debt in the amount of $2,066,000 by issuing an aggregate of 3,443,333 common shares. As at 31 December 2021, the transactions were pending TSX approval and the common shares had not been issued.

• During the year ended 31 December 2021, the Company granted 1,815,000 incentive stock options to directors and officers under its stock option plan, at an exercise price of $0.60 per share for a term of five years. The options will vest and be exercisable on the basis of 25% annually commencing 23 November 2022, the first anniversary of the date of the grant.

EVENTS SUBSEQUENT TO 31 December 2021

• In January 2022, the Company completed the debt settlement transactions with Chesapeake and a company controlled by the President of the Company by issuing an aggregate of 3,443,333 common shares.

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• In February 2022, the Company completed a private placement of 3,000,000 units at a price of $0.50 per unit for aggregate proceeds of $1,500,000. Each unit consists of one common share of the Company and one-half of one common share purchase warrant (each whole common share purchase warrant, a "Warrant"). Each Warrant entitles the holder to purchase one additional common share of the Company at an exercise price of $0.75 until 28 February 2024.

MINERAL PROPERTIES

Talapoosa (Nevada, USA)

Overview

The Company owns a 100% interest in Talapoosa located in Lyon County, Nevada. Talapoosa is a low-sulphidation gold-silver property located in the Walker Lane gold trend of western Nevada, approximately 45 kilometres east of Reno. Talapoosa consists of 509 unpatented lode mining claims owned by the Company, 26 leased unpatented lode mining claims, 6 additional leased fee land sections and a portion of one additional fee land section owned by one of the Company’s US subsidiaries. The total land package for the property is contiguous and covers approximately 14,870 acres. The aggregate annual payments to the Bureau of Land Management and underlying owners are approximately US$199,300. The project is subject to net smelter royalties of up to 5%.

Talapoosa has a National Instrument 43-101 compliant resource estimate hosting a measured and indicated resource of 632,000 ounces of gold (23.1 million tons at a grade of 0.035 oz/t AuEq) and an inferred resource of 326,000 ounces of gold (12.6 million tons at a grade of 0.033 oz/t AuEq) using a cut-off of 0.015 oz/t gold equivalent.

During 2011, the Company completed 15 core holes totaling 3,251 meters at Talapoosa. With the 2011 drill data, the Company re-modeled and re-interpreted the resource with independent consultants. In 2013, Tetra Tech WEI Inc. (“Tetra Tech”) provided an updated NI 43-101 resource estimate adding approximately 380,000 ounces of gold and 5.4 million ounces of silver compared to the previous NI 43-101 resource estimate. In March 2015, WSP Canada Inc. (“WSP”) was commissioned by Timberline to update a technical report on the Project originally completed by Tetra Tech on April 12, 2013.

Set out in the table below is a summary of the resource estimation at Talapoosa by WSP :

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Option agreement – Timberline Resources Corporation

On 1 March 2015, the Company granted Timberline Resources Corporation (“Timberline”) an option (“Option”) to acquire from Gunpoint’s subsidiary, American Gold Capital US Inc. (“American Gold”), a 100% interest in Talapoosa. In consideration for the Option, Timberline paid US$300,000 and issued 2,000,000 common shares of Timberline to American Gold.

Pursuant to the Agreement, Timberline had until 12 September 2017 to exercise the Option to acquire a 100% interest in Talapoosa (the “Option Period”). Timberline could exercise the Option by making a US$10 million cash payment to American Gold. For a period of five years after Timberline exercised the Option, Timberline was required to pay American Gold an additional US$10 million (payable in cash and Timberline common shares) if the daily price of gold

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averaged US$1,600 per ounce or greater for a period of ninety consecutive trading days. Pursuant to the Option, American Gold would retain a 1% net smelter royalty(“NSR”) on Talapoosa which Timberline could purchase for US$3.0 million.

On 20 October 2016, the Option agreement was amended. The Company agreed to extend the Option (“Extended Option”) 18 months to 31 March 2018. In consideration for the Extended Option, Timberline paid US$1 million and issued 1,000,000 common shares to the Company. In addition, Timberline’s repurchase option for the Company’s 1% NSR was terminated.

Timberline did not make the option payment due 31 March 2018 to Gunpoint. Timberline’s option to acquire Talapoosa was terminated and 100% ownership reverted back to the Company. During the Option Period, Gunpoint received US$1.3 million and 3,000,000 common shares of Timberline.

As at 31 December 2021, the market value of Gunpoint’s 3,000,000 (31 December 2020 – 3,000,000) Timberline common shares was approximately $840,000 (31 December 2020 - $1,350,000).

OTHER EXPLORATION PROJECTS

Le Cecilia (Sonora State, Mexico)

In 2010, the Company acquired the La Cecilia Project (“La Cecilia”) from Chesapeake together with three other properties for consideration that resulted in Chesapeake becoming a majority shareholder. As the date hereof, Chesapeake currently owns approximately 67% of the Company.

On 31 January 2017, the Company entered into an agreement (“La Cecilia Option Agreement”) with Riverside Resources Inc. (“Riverside”) whereby Riverside was granted an option to acquire a 100% interest in La Cecilia.

Pursuant to the La Cecilia Option Agreement, Riverside was entitled to acquire La Cecilia by making $250,000 in cash payments and issuing 1,000,000 Riverside common shares to the Company over three years per following schedule:

• A payment of $10,000 upon execution of the La Cecilia Option Agreement; (Received);

• A $15,000 cash payment and issuance of 100,000 common shares of Riverside concurrent with the execution of registerable agreement in Mexico (“the Effective Date”) (Received);

• A $25,000 cash payment and issuance of 200,000 common shares of Riverside on or before the first anniversary of the Effective Date; (Received);

• A $75,000 cash payment and issuance of 300,000 common shares of Riverside on or before the second anniversary of the Effective Date; (Received), and

• A $125,000 cash payment and issuance of 400,000 common shares of Riverside on or before the third anniversary of Effective Date; (Received)

Riverside completed the acquisition of La Cecilia in 2020. In total, Gunpoint received $250,000 and 1,000,000 common shares of Riverside. The Company has recorded La Cecilia at $nil value due to a previous impairment. The consideration received from Riverside was recognized as income.

In September 2020, Riverside spun out their Penoles project in Mexico by way of a plan of arrangement issuing common shares of Capitan Mining Inc. (“Capitan”) to existing Riverside shareholders. Capitan is a new public company on the TSX Venture Exchange. As a part of the spin out, the Company received 259,399 common shares of Capitan. As at 31 December 2021, the fair market value of 259,399 common shares of Capitan was $61,000 and the fair market value of the 1,000,000 common shares of Riverside was approximately $160,000.

La Gitana (Oaxaca State, Mexico)

The Company owns a 100% interest in the La Gitana property located in Oaxaca State, Mexico (“La Gitana”). La Gitana is a large low sulphidation epithermal system hosting precious metals mineralization that is both structurally and lithologically controlled.

On 4 June 2019, the Company entered into a non-binding letter of intent ("LOI") with Inomin Mines Inc. (“Inomin”) to sell its 100% interest in the La Gitana. Pursuant to the LOI, Inomin had an option to acquire a 100% interest in La Gitana in consideration for $300,000 in cash payments and issuing 2,000,000 common shares as follows:

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• A payment of $10,000 on signing the LOI; (Received)

• A payment of $25,000 and 150,000 common shares following execution of a definitive agreement;

• A payment of $50,000 and 250,000 common shares on first anniversary;

• A payment of $65,000 and 450,000 common shares on second anniversary;

• A payment of $75,000 and 500,000 common shares on third anniversary; and

• A payment of $75,000 and 650,000 common shares on fourth anniversary.

The definitive agreement was dependent on a surface agreement being finalized with the Santa Maria Lachixonace community (“Ejido”). The Company was unable to reach an agreement with the Ejido. On 4 August 2020, Gunpoint agreed to sell La Gitana and another exploration property Pena Blanca (“Pena Blanca”) in Oaxaca state to Inomin for $25,000 and 1,000,000 common shares of Inomin. The Company retains a 1.5% NSR on Pena Blanca. Inomin has the option to purchase 0.5% of the 1.5% NSR from Gunpoint for $1.0 million dollars.

In March 2021, the TSX Venture Exchange approved the transaction and the Company received the cash and share consideration for the two properties.

As at 31 December 2021, the fair market value of the 1,000,000 Inomin common shares was approximately $135,000.

Cerro Minas (Oaxaca State, Mexico)

The Cerro Minas Project (“Cerro Minas”) is located 130 kilometers southwest of Oaxaca City and comprises 899 hectares. The mineralization at Cerro Minas consists of skarn and polymetallic replacement zones with silver, copper, zinc, lead and locally gold. Previous exploration identified two mineralized zones, La Reyna and La Fe, associated to the contact of an intermediate intrusion within a sequence of Cretaceous limestones and shales converted to marble and hornfels.

On 16 October 2019, the Company entered into an agreement with Megastar Development Corp. (“Megastar”) whereby Megastar was granted an option to acquire a 100% in Cerro Minas by making US$100,000 in cash payments and issuing 800,000 Megastar common shares to Gunpoint over three years. Subsequently, Megastar changed its name to Madoro Metals Corp. (“Madoro”). The cash and share consideration are payable as follows:

• A cash payment of US$10,000 and 100,000 common shares of Madoro on the Effective Date (Received).

• A cash payment of US$20,000 and 150,000 common shares of Madoro on or before the first anniversary of the Effective Date (Received);

• A cash payment of US$30,000 and 250,000 common shares of Madoro on or before the second anniversary of the Effective Date; and (Received)

• A cash payment of US$40,000 and 300,000 common shares of Madoro on or before the third anniversary of the Effective Date.

Gunpoint retains a 1.5% net smelter return royalty on Cerro Minas. Madoro has the option to purchase a 0.5% net smelter royalty for US$1.0 million dollars. Madoro is responsible for the property taxes and holding costs (including surface right agreement) to maintain Cerro Minas in good standing during the term of the option agreement.

As at 31 December 2021, the fair market value of the Madoro common shares held by the Company was approximately $32,500.

El Escorpion (Guatemala)

Chesapeake had an option to purchase the El Escorpion property (“El Escorpion”), a 900 hectare concession in eastern Guatemala. To earn a 100% interest in El Escorpion, Chesapeake agreed to pay US$351,000 in option payments over 5 years. Chesapeake can purchase a 1% NSR for US$585,000.

El Escorpion is located 85 kilometers by paved road southeast of Guatemala City. El Escorpion is situated seven kilometers southwest and along trend of Pan American Silver’s Escobal deposit. Mineralization at Escobal is associated with steeply dipping and northeast-southwest trending intermediate sulfidation epithermal silver rich quartz veins with significant values in gold, lead and zinc. The Escobal land package completely surrounds El Escorpion.

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The Company acquired a 100% interest in El Escorpion from Chesapeake by issuing 500,000 common shares of Gunpoint to Chesapeake and assuming the remaining property payments to the prior concession owner. To date, the concession owner has received US$331,000 of the US$351,000 purchase price.

If Chesapeake elects to purchase the existing 1.0% NSR, Chesapeake will be granted a 0.5% NSR royalty from Gunpoint. In addition, Gunpoint will issue 1,000,000 common shares to Chesapeake in the event a NI 43-101 measured and indicated resource estimate of 1.0 million gold equivalent ounces is defined on El Escorpion.

On 19 August 2015, the Ministry of Energy and Mines granted title for the El Escorpion concessions. In late 2016, the Constitutional Court of Guatemala temporarily suspended permits for several mineral concessions in the country including El Escorpion. The Constitutional Court is seeking a review of the stakeholder engagement process. Gunpoint has initiated a follow up consultation with the local community to support the cancellation of the suspension. The concession owner has agreed to an extension of the final payment of US$20,000 to purchase El Escorpion until the exploration suspension is lifted.

RESULTS OF OPERATIONS – SELECTED ANNUAL INFORMATION

The following table summarizes selected financial data for the Company for each of the three most recently completed financial years. The information set forth below should be read in conjunction with the consolidated audited financial statements, prepared in accordance with International Financial Reporting Standards and Canadian generally accepted accounting principles as applicable.

In $000s	Year Ended 31 December 2021 Year Ended 31 December 2020 Year Ended 31 December 2019
Exploration General & administration(1) Share-based compensation Finance cost Foreign exchange gain (loss) Unrealized gain (loss) on investment Other income (expenses) Net income (loss) before tax Deferred income tax recovery Net income (loss) after tax Revenue Total assets Non-current financial liabilities Basic/diluted earnings(loss) per share	$ (12.4)$ (2.9) $ (23.0) (211.6) (139.6) (132.6) (49.4) (38.9) (73.3)
	(273.4) (181.4) (228.9) (28.0) (36.4) (36.1) 5.6 (14.2) (88.4) (850.6) 1,510.9 (95.1) 215.7 229.3 173.4
	(930.7) 1,508.2 (275.1) - - -
	(930.7) 1,508.2 (275.1)
	- - - 7,441.1 8,112.5 6,506.6 1,032.0 1,032.0 1,035.1 (0.02) 0.03 (0.01)
1General and administration (“G&A”) consists of general and administrative expenses and professional fees

The Company incurred a net loss of $930,700 for the year ended 31 December 2021, compared to net income of $1,508,200 in 2020 and net loss of $275,100 in 2019. The fluctuation of net income over the past three years was primarily due to unrealized gains and losses on investments, cash and fair value of common shares received for various option agreements, cash and fair value of common shares received for the sale of a mineral property during the year ended 31 December 2021.

The Company incurred $211,600 of general and administration costs in 2021 compared to $139,600 in 2020, and $132,600 in 2019. The higher G&A costs are mostly due to an increased office/warehouse lease in Reno, Nevada and professional fees in re-negotiating the extended terms of the underlying land agreements for Talapoosa.

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The Company recognized a share-based compensation expense of $49,400 in the current year compared to an expense of $38,900 in 2020, and $73,300 in 2019. The higher expense in 2019 was due to vesting of share options granted in April 2018.

The Company had an unrealized loss on investments of $850,600 compared to a gain of $1,510,900 in 2020, and a loss of $95,100 in 2019. The unrealized investment gains and losses are due to the fluctuations in market value from the Company’s equity holdings in Timberline Resources Corp., Jiulian Resources Inc. (formerly South Atlantic Gold), Precipitate Gold Corp., Riverside Resources Inc., Madoro Metals Corp., Capitan Mining Inc., and Inomin Mines Inc.

A foreign exchange gain of $5,600 was recognized for the year ended 31 December 2021 compared to an exchange loss of $14,200 in 2020, and a loss of $88,400 in 2019. The change in foreign exchange gain or loss was due to the fluctuation of the foreign exchange rates through the years.

During the current year, the Company received the final payment of $25,000 cash and 1,000,000 common shares of Inomin pursuant to the sale of La Gitana and Pena Blanca. The fair value of cash and common shares received for the sale of $160,000 were recorded in other income. As at 31 December 2021, the fair market value of the 1,000,000 Inomin common shares was $135,000.

In addition, the Company received US$30,000 cash and 250,000 common shares of Madoro pursuant to the Cerro Minas option agreement. The fair value of the cash and common shares received in the amount of $54,600 was recorded in other income. As at 31 December 2021, the fair market value of the Madoro common shares held by the Company was $32,500.

Total assets decreased over the past fiscal years due to a decline in market value of Company’s equity holdings in investments, and funding the Company’s corporative activities including maintaining its mineral properties in good standing.

SUMMARY OF QUARTERLY RESULTS

The following table summarizes selected financial data for the Company for each of the eight most recently completed financial quarters. The information set forth below should be read in conjunction with the consolidated financial statements for the relevant period, prepared in accordance with International Financial Reporting Standards.

In $000s 3mths 31-Dec-21 $	3mths 30-Sep-21 $ 3mths 30-Jun-21 $	3mths 31-Mar-21 $ 3mths 31-Dec-20 $	3mths 30-Sep-20 $ 3mths 30-Jun-20 $	3mths 31-Mar-20 $
Total revenue - Exploration 24.2 Net income (loss) before taxes 325.6 Deferred income tax recovery - Net income (loss) after taxes 325.6 Comprehensive income (loss) for the period 325.6 Basic/diluted income (loss) per share 0.02 Total assets 7,441.1	- - (24.5) (0.9) (489.8) (146.9) - - (489.8) (146.9) (489.8) (146.9) (0.01) (0.00) 7,030.2 7,389.0	- - (0.6) (1.8) (619.6) 382.3 - - (619.6) 382.3 (619.6) 382.3 (0.01) 0.01 7,478.8 8,112.5	- - (0.1) (0.4) 805.4 288.8 - - 805.4 288.8 805.4 288.8 0.02 0.01 7,701.3 6,889.0	- (0.6) 31.7 - 31.7 31.7 0.00 6,600.3

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

In $000s	Year Ended 31 December 2021	Year Ended 31 December 2020	Year Ended 31 December 2019
Cash inflow (outflow) from operating activities	(62.7)	(106.7)	(38.1)
Cash inflow (outflow) from investing activities	(243.7)	(144.4)	(246.9)
Foreign exchange impact on cash	4.8	(17.2)	(133.8)
Net cash flows	(301.6)	(268.3)	(285.0)
Cash balance	83.6	385.2	653.5

As at 31 December 2021, the Company has a working capital deficit of $1,153,900 compared to a working capital deficit of $664,200 at 31 December 2020. The increase in working capital is due to a declining cash balance from operating expenses and property holding costs, offset by proceeds from property option and sales agreements.

Cash outflow from investing activities for the year ended 31 December 2021 was $243,700 compared to an outflow of $144,400 in 2020. The cash outflow was largely related to Talapoosa’s underlying property payments and maintaining the Company’s properties in good standing.

It will be necessary for the Company to arrange for additional financing to meet its on-going obligations and overhead requirements. The Company’s ability to continue as a going concern is dependent on the corporate ability to raise funds. The Company incurs approximately US$200,000 per year to maintain its mineral properties in good standing.

Although the Company successfully completed a financing in February 2022, there can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing may be favourable.

SHAREHOLDERS’ EQUITY

As at 31 December 2021, the Company had 43,501,600 shares issued and outstanding and did not have any share purchase warrants outstanding.

In January 2022, the Company closed the transactions related to debt settlement agreements by issuing 3,443,333 common shares and in February 2022, the Company issued 3,000,000 common shares in connection with a $1,500,000 private placement.

As at the date of this report, the Company had 49,944,933 shares issued and outstanding and 1,500,000 warrants outstanding. Each warrant entitles the holder to purchase one additional common share of the Company at an exercise price of $0.75 until 28 February 2024.

The following is a summary of the stock options outstanding as at 31 December 2021 and as at the date of this report:

Expiry Date		Exercise Price	Number of Options	Number of Options Vested
2 May 2023	$	0.25	1,150,000	1,087,500
23 November 2026	$	0.60	1,815,000	-

REGULATORY DISCLOSURES

- Off Balance Sheet Arrangements

As at 31 December 2021 and the date of this report, the Company does not have any off-balance sheet arrangements.

Related Party Transactions

The Company’s related parties include its subsidiaries, its parent Chesapeake, associates over which it exercises significant influence and a company controlled by the President of the Company. Transactions with related parties for goods and services are made on normal commercial terms and are considered to be at arm’s length.

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The following table summarizes the compensation of the Company’s key management:

			31 December		31 December
			2021		2020
Management fees	$	$	27.5	$	17.0
Stock-based compensation to officers and directors	$	$	49.4	$	38.9
Amounts Payable and Accrued Liabilities		$	173.3	$	0.4
PromissoryNote and Interest		$	1,034.0	$	1,007.7

During the year ended 31 December 2021, fees of $27,500 (31 December 2020 – $17,000) to the Company’s key management were included in professional fees.

During the year ended 31 December 2021, the Company recognized total share-based compensation expense of $49,400 (31 December 2020 – $38,900) for stock options issued to employees, officers and directors of the Company.

As at 31 December 2021, $2,600 (31 December 2020 – $nil) is owing to the CFO, $nil (31 December 2020 - $400) is owing to the former CFO, $168,700 (31 December 2020 – $nil) is owing to the President of the Company and $2,000 (31 December 2020 – $nil) is owing to a company controlled by President of the Company; the balances are included in accounts payable and accrued liabilities

On 23 November 2021, the Company agreed to issue 1,723,333 common shares to settle promissory note and accrued interest owed to a company controlled by the President of the Company of $1,034,000. As at 31 December 2021, the transaction was pending TSX approval and these common shares were issued in January 2022.

On 23 November 2021, the Company agreed to issue 1,720,000 common shares to settle due to related party amount of $1,032,000. As at 31 December 2021, the transaction was pending TSX approval and these common shares were issued in January 2022.

Financial Instruments and risk management

a) Financial instrument classification and measurement

The Company classifies the fair value of these transactions according to the following hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments.

• Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

• Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

In	$000s		Level 1		Level 2		Level 3		Total 31 December 2021	Total 31 December 2021
	Investments	$	1,328.3	$	-	$	-	$	1,328.3
In	$000s		Level 1		Level 2		Level 3		Total 31 December 2020
	Investments	$	2,026.4	$	-	$	-	$	2,026.4

The fair value of other financial instruments, including cash, accounts payable and accrued liabilities, promissory note payable, and amounts due to a related party, approximate their carrying values due to the relatively shortterm maturity of these instruments. The Company’s policy for determining when a transfer occurs between levels in the fair value hierarchy is to assess the impact at the date of the event or the change in circumstances that could result in a transfer. There were no transfers between the levels during the year ended 31 December 2021.

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b) Fair values of financial assets and liabilities

The fair values of financial instruments are summarized as follows:

		31 December	31 December	2021		31 December	2020	2020
In$000s		Carrying Value		Fair Value		CarryingValue		Fair Value
Financial assets
Cash	$	83.6	$	83.6	$	385.2	$	385.2
Investment		1,328.3		1,328.3		2,026.4		2,026.4
Financial liabilities
Accounts payable & accrued liabilities		565.3		565.3		354.7		354.7
Promissory note		700.0		700.0		700.0		700.0
Due to relatedparty		1,032.0		1,032.0		1,032.0		1,032.0

c) Credit risk

The Company's credit risk is primarily attributable to cash. Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company has no significant concentration of credit risk arising from operations. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Company’s cash is held through large Canadian financial institutions. As at 31 December 2021, management considers the Company’s exposure to credit risk is minimal.

d) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages liquidity risk through the management of its capital structure as described in Note 4. The accounts payable and accrued liabilities are due within the current operating period.

As at 31 December 2021, the Company had a cash balance of $83,600 (31 December 2020 – $385,200) to settle current liabilities of $1,265,300 (31 December 2020 – $1,054,700). So far, the Company is not profitable and has had to rely on the issuance of equity securities for cash, primarily through private placements and from related and other parties. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

e) Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. The Company’s financial instruments include investments which are publicly traded and therefore subject to the risks related to the fluctuation in the equity markets. The Company closely monitors market values to determine the most appropriate course of action.

f) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows from a financial instrument will fluctuate because of changes to market interest rates. The Company is exposed from time to time to interest rate risk as a result of holding fixed income cash equivalents and investments, of varying maturities. A 1% change in market interest rates would result in no significant change in value of cash or fixed income securities. The risk that the Company will realize a loss as a result of a decline in the fair value of these assets is limited as they are generally held to maturity.

g) Currency risk

Currency risk is the risk of a loss due to the fluctuation of foreign exchange rates and the effects of those fluctuations on the Company’s foreign currency denominated monetary assets and liabilities. The Company currently operates in the United States, Mexico and Guatemala. Certain costs and expenses are incurred in US dollars, Mexican pesos and Guatemala quetzal. The Company attempts to mitigate currency risk through the preparation of short and long term expenditure budgets in the foreign currencies and planning for the conversion of Canadian dollars into foreign currencies whenever exchange rates are favourable.

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Capital Management

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the development of its resource properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

In the management of capital, the Company includes the components of shareholders’ equity as well as cash and investments.

The Company manages the capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash, and investments.

In order to maximize ongoing development efforts, the Company does not pay out dividends.

The Company’s investment policy is to invest its cash in Canadian chartered banks or the equivalent in the United States and in highly liquid short-term interest-bearing investments, such as Canadian Government treasury bills, banker’s acceptances or Guaranteed Investments Certificates, with initial maturity terms less than one year from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations.

Significant Accounting Policies

Please refer to the audited annual financial statements for the year ended 31 December 2021 which were filed on SEDAR.

RISKS AND UNCERTAINITIES

The Company is in the business of acquiring, exploring and developing gold and silver properties. The Company is exposed to a number of risks and uncertainties that are common to other resource exploration companies in the same business.

The risks and uncertainties described in this section are considered by management to be the most important in the context of the Company’s business. The risks and uncertainties below are not inclusive of all the risks and uncertainties the Company may be subject to and other risks may apply.

COVID-19 Pandemic

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The impact on the Company has been minimal to date and it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business at this time.

Early Stage – Need for Additional Funds

Gunpoint has no history of profitable operations and its present business is at an early stage. The Company anticipates that it may make substantial capital expenditures for the acquisition, exploration, development and production of its mineral properties in the future. The Company currently has no revenue and may have limited ability to raise the capital necessary to undertake or complete future exploration or development programs. As such, the Company is subject to many risks common to other companies in the same business, including under-capitalization, cash shortages, and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that Gunpoint will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of its early stage of operations.

The Company hopes to obtain financing in the future primarily through further equity and/or debt financing, as well as through joint venturing and/or optioning out the Company’s properties to other mineral exploration companies. There can be no assurance that the Company will succeed in obtaining additional financing, now or in the future.

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Failure to raise additional financing on a timely basis could cause the Company to suspend its operation and eventually to forfeit or sell its interest in its properties.

Exploration and Development

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits, but also from finding mineral deposits that, though present, are of insufficient size and/or grade to return a profit from production.

The Company does not have any operating mines at present. All the Company’s properties are in the exploration stage. There is no assurance that a commercially viable mineral deposit exists on any of the Company’s properties and substantial additional work will be required in order to determine the presence of any such deposit.

All of the mineral claims to which Gunpoint has a right to acquire an interest are in the exploration stages only, and are without a known body of commercial ore. Upon discovery of a mineralized occurrence, several stages of exploration and assessment are required before its economic viability can be determined. Development of the subject mineral properties would follow only if favorable results are determined at each stage of assessment. Few precious and base metal deposits are ultimately developed into producing mines.

There is no assurance that Gunpoint’s mineral exploration activities will result in any discoveries of commercial bodies of ore. The long-term profitability of Gunpoint’s operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors.

Operating Hazards and Risks

Mining operations involve many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.

In the course of exploration, development and production of mineral properties, certain risks, and in particular unexpected or unusual geological operating conditions, including rock bursts, cave-ins, fires, flooding and earthquakes, may occur. Operations in which Gunpoint has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of mineral deposits, any of which could result in damage to or destruction of mines and other producing facilities, damage to life and property, environmental damage and possible legal liability for any or all damages.

Although Gunpoint maintains liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities could exceed policy limits, in which event Gunpoint could incur significant costs that could have a materially adverse effect upon its financial conditions.

Supplies, Infrastructure, Weather and Inflation

Gunpoint’s property interests are often located in remote, undeveloped areas and the availability of infrastructure such as surface access, skilled labour, fuel and power at an economic cost cannot be assured. These are integral requirements for exploration, production and development facilities on mineral properties. Power may need to be generated on site.

Due to the partial remoteness of its exploration projects, Gunpoint may be forced to rely on the accessibility of secondary roads and air transport for the supply of goods and services.

Metal Prices

The mining industry, in general, is intensely competitive and there is no assurance that a profitable market will exist for the sale of metals produced even if commercial quantities of precious and/or base metals are discovered. Factors beyond the control of Gunpoint may affect the marketability of metals discovered. Pricing is affected by numerous factors beyond Gunpoint’s control, such as international economic and political trends, global or regional consumption and demand patterns, increased production and smelter availability. There is no assurance that the price of metals recovered from any mineral deposit will be such that they can be mined at a profit.

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Title Risks

Although Gunpoint has exercised the usual due diligence with respect to determining title to properties in which it has a material interest, there is no guarantee that title to such properties will not be challenged or impugned. Gunpoint’s mineral property interests may be subject to prior unregistered agreements, or transfers, or indigenous claims, and title may be affected by undetected defects.

Environmental Regulations, Permits and Licenses

Gunpoint’s operations are subject to various laws and regulations in the various jurisdictions in which the Company operates that govern the protection of the environment, exploration, development, production, taxes, labour standards, occupational health, waste disposal, safety and other matters.

Environmental legislation provides restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact statements. Environmental legislation is evolving in a direction of stricter standards and enforcement, and higher fines and penalties for non-compliance. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations. Gunpoint intends to fully comply with all environmental regulations.

The current operations of Gunpoint require permits from various United States and Guatemalan domestic authorities and such operations are governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental, mine safety and other matters.

In the event that the Company advances the Talapoosa project towards a mine construction decision, it will be required to apply for, receive and obtain, among other approvals, permits and authorizations, the utilization of water rights from both state agencies and private water rights holders, and a special use mining permit which is granted by applicable county and state regulatory authorities. In 2021 the Division of Water Resources of the Nevada Department of Conservation and Natural Resources cancelled a water right held by the Company for nonuse. The Company appealed that decision. There can be no assurance that such applications for approvals, permits, authorizations or appeals will be successful.

Gunpoint believes that it is in substantial compliance with all material laws and regulations which currently apply to its activities. There can be no assurance, however, that all permits which Gunpoint may require for its operations and exploration activities will be obtainable on reasonable terms or on a timely basis or that such laws and regulations would not have an adverse effect on any mining project which the Company might undertake.

Competition and Agreements with Other Parties

The mining industry is intensely competitive in all its phases, and Gunpoint competes with other companies that have greater financial resources and technical capacity. Competition could adversely affect Gunpoint’s ability to acquire suitable properties or prospects in the future.

Gunpoint may, in the future, be unable to meet its share of costs incurred under such agreements to which it is a party and it may have its interest in the properties subject to such agreements reduced as a result. Also, if other parties to such agreements do not meet their share of such costs, Gunpoint may not be able to finance the expenditures required to complete recommended programs.

Economic Conditions

Unfavourable economic conditions may negatively impact Gunpoint’s financial viability. Unfavorable economic conditions could also increase Gunpoint’s financing costs, decrease net income or increase net loss, limit access to capital markets and negatively impact any of the availability of credit facilities to the Company.

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Dependence on Management

The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management’s services would be unavailable for any reason, a disruption to the operations of Gunpoint could result and other persons would be required to manage and operate Gunpoint.

FORWARD LOOKING STATEMENTS

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Such forward-looking statements and information herein include, but are not limited to, statements regarding prospective metal production, timing and expenditures to develop the properties, mineral resources, grades and recoveries, cash costs per ounce, capital and operating expenditures and sustaining capital and the ability to fund mine development. The Company does not intend to, and does not assume any obligation to update such forwardlooking statements or information, other than as required by applicable law.

Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company and its operations to be materially different from those expressed or implied by such statements. Such factors include, among others: ability to finance mine development, fluctuations in the prices of metals, fluctuations in the currency markets (particularly Canadian dollar and U.S. dollar); changes in national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and the United States; operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological conditions, pressures, caveins and flooding); inadequate insurance, or inability to obtain insurance; availability of and costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, diminishing quantities or grades of mineral reserves as properties are mined; risks in obtaining necessary licenses and permits, and challenges to the Company’s title to properties.

Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information.

Other technical information

Mr. Todd McCracken (P. Geo) of Tetra Tech is the Qualified Person as defined by NI 43-101 and is responsible for technical information in the updated Resource Estimate for Talapoosa.

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