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Highlander Silver Corp. Management Reports 2025
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Management Reports
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HIGHLANDER SILVER
Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
INTRODUCTION
This Management's Discussion and Analysis ("MD&A") of Highlander Silver Corp. (the "Company" or "Highlander") provides information on the Company's business activities, financial condition, financial performance, cash flows and outlook for the three and six months ended March 31, 2025, with comparative information for the three and six months ended March 31, 2024. This MD&A is dated May 28, 2025, and takes into account information available up to and including that date.
The Company reports its financial position, financial performance and cash flows in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). This MD&A should be read in conjunction with the Company's condensed consolidated interim financial statements for the three and six months ended March 31, 2025 and the annual consolidated financial statements for the year ended September 30, 2024, which are available on the Company's website at www.highlandersilver.com and on the SEDAR+ website at www.sedarplus.ca. Additional information relating to the Company, including the Company's Annual Information Form, is also set out on the SEDAR+ website at www.sedarplus.ca.
All dollar amounts reported herein are expressed in Canadian dollars unless otherwise indicated.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This document includes certain statements that constitute "forward-looking statements", and "forward-looking information" within the meaning of applicable securities laws (collectively, "forward-looking statements") and statements relating to the potential use of the at-the-market equity program (the "ATM Program"), expected proceeds, timing of issuance, and the anticipated use of any net proceeds. All statements, other than statements of historical fact, are forward-looking statements. These statements appear in a number of places in this presentation and include statements made with respect to anticipated exploration and development activities, and the Company's intention to employ its participatory development model based on community capacity building through skill and safety training, employment, entrepreneurship, infrastructure development and environmental, cultural, health and education programs. When used in this presentation words such as "intends", "expects", "will be", "underway", "targeted", "planned", "objective", "expected", "potential", "continue", "estimated", "would", "subject to" and similar expressions are intended to identify these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to: statements regarding the Company's exploration plans at San Luis, including specific phases, plans, timing, costs, results thereof, and other disclosure set out under "Exploration Plans" herein; the Company's plan for the San Luis Project is to advance the project through integrated exploration, environmental and community development programs; the Company's aim of employing its participatory development model based on community capacity building through skill and safety training, employment, entrepreneurship, infrastructure development and environmental, cultural, health and education programs; the Company expects to continue to obtain the necessary funds primarily through the issuance of common shares in support of its business objectives; intended use of proceeds from the Offering and from warrant and option exercises; the Company, upon approval from its Board of Directors, intends to balance its overall capital structure through a combination of equity financing and/or other forms of financing; and that the Company's planning and budgeting will ensure the Company has appropriate liquidity to meet its business activities, including planned corporate expenditures, exploration expenses, as well as the development activities for the San Luis Project.
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, undue reliance should not be placed on forward-looking statements since the Company can give no assurance that such expectations will prove to be correct. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements, including risks related to the business of the Company; the ability of the Company to raise sufficient capital; general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of precious and base metals; accidents; global outbreaks and contagious diseases (including COVID-19); business and economic conditions in the mining industry generally; the supply and demand for labour and other project inputs; adverse claims made by local communities; changes in commodity prices; unanticipated exploration and development challenges (including failure of equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters); adverse weather conditions; political risk and social unrest; changes in interest and currency exchange rates; and the risks, uncertainties and other factors identified in the Company's periodic filings with Canadian securities regulators.
Page 1
Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
These forward-looking statements were derived using numerous assumptions, including assumptions regarding general business and economic conditions; the Company's ability to develop and maintain relationships with local communities; commodity prices; anticipated costs and expenditures; the Company's ability to advance exploration efforts at San Luis and La Estrella; and the results of such exploration efforts. While the Company considers these assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward-looking statements speak only as of the date those statements are made. Except as required by applicable law, we assume no obligation to update or to publicly announce the results of any change to any forward-looking statement contained herein to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward- looking statements. If we update any forward-looking statements, no inference should be drawn that we will make additional updates with respect to other forward-looking statements. All forward-looking statements contained in this presentation are expressly qualified in their entirety by this cautionary statement.
DESCRIPTION OF BUSINESS
Highlander is primarily focused on advancing the bonanza grade San Luis gold-silver project located adjacent to the past-producing Pierina mine in Central Peru. San Luis hosts Indicated Mineral Resources of 356 koz Au at 24.4 g/t Au and 8.4 Moz Ag at 579 g/t Ag.
Highlander is listed on the Toronto Stock Exchange (the "TSX") under the ticker symbol "HSLV".
HIGHLIGHTS AND ACTIVITIES
On January 7, 2025, the Company announced the appointment of Daniel Earle as President and Chief Executive Officer of the Company succeeding Richard Warke, Interim President and CEO, who continues to serve on the Board of Directors alongside Messrs. Thomas Whelan, Jerrold Annett, Javier Toro and Federico Velásquez. Highlander further announced that, in addition to Mr. Earle, it had strengthened its management team with the appointments of Sunny Lowe as Chief Financial Officer, Federico Velasquez as President Peru, Sergio Gelcich as Vice President Exploration, Arun Lamba as Vice President Corporate Development, Purni Parikh as Senior Vice President Corporate Affairs, and Tom Ladner as General Counsel.
On March 11, 2025, the Company announced that it had closed its previously announced bought deal private placement, pursuant to which the Company sold 23,000,000 common shares of the Company at a price of $1.40 per common share for aggregate gross proceeds of $32,200,000 (the "Offering"), including the full exercise of the underwriters' option. The Company intends to use the net proceeds from the Offering to fund the advancement of exploration activities at the Company's San Luis Project in Peru, as well as for working capital and general corporate purposes. In connection with the Offering, the underwriters received a cash fee in an amount representing 6.0% of the gross proceeds of the Offering.
On March 14, 2025, the Company released an updated technical report titled "Technical Report for the San Luis Property" with an effective date of January 15, 2025, prepared by independent qualified person, Martin Mount, MSc MCSM FGS CGeol FIMMM Ceng. (the "Technical Report").
Subsequent Events
On May 12, 2025, Highlander announced the commencement of infrastructure programs with the participation of its community partners to support the start of drilling at the San Luis Project in the coming weeks.
On May 13, 2025, the Company's common shares commenced trading on the TSX and were delisted from the Canadian Securities Exchange.
MINERAL PROPERTIES AND OUTLOOK
San Luis
On May 23, 2024, the Company announced closing of the acquisition of the San Luis Project from SSR Mining Inc. ("SSR Mining"), pursuant to the share purchase agreement between the Company and SSR Mining dated November 29, 2023, as amended (the "SPA"). The project is located in the Ancash Department, which is well-known for mining in Peru with major past and present production from the Pierina gold mine and Antamina copper-zinc mine, respectively.
San Luis currently hosts Indicated Mineral Resources of 356 koz Au at 24.4 g/t Au and 8.4 Moz Ag at 579 g/t Ag and Inferred Mineral Resources of 8 koz Au at 4.9 g/t Au and 336 koz Ag at 202 g/t Ag.
Page 2
Highlander Silver Corp. Management's Discussion and Analysis For the three and six months ended March 31, 2025 and 2024 (Expressed in Canadian dollars, unless otherwise noted)
The mineral resource estimate is hosted within the Ayelen vein system and is open in multiple directions. Furthermore, there are multiple targets for growth on the property given limited and focused historical drilling, and undrilled targets supported by highly anomalous (> 4 g/t Au) trenching and rock samples. The extensive land holding totaling more than 23,000 hectares has yet to be systematically explored with many structures that have not yet been sampled and extensions of vein trends under cover that have not been tested providing further exploration potential. Given this, Highlander will implement a comprehensive program of geological mapping, sampling, and geophysical surveys to develop a technical assessment of the discovery potential before more focused exploration on the highest priority targets.
The Company acquired the San Luis Project for upfront cash consideration of US$5,000,000 and an additional US$37,500,000 in contingent cash consideration (the "Contingent Consideration") upon completion of the following milestones in relation to the San Luis Project pursuant to the SPA:
- US$1,250,000 after the commencement of an initial drilling program;
- US$1,250,000 after the first anniversary of the commencement of an initial drilling program;
- US$5,000,000 after the completion of a feasibility study;
- US$10,000,000 after the beginning of commercial production;
- US$10,000,000 after the first anniversary of commercial production; and
- US$10,000,000 after the second anniversary of commercial production.
The Contingent Consideration is only accrued and payable if and when the above milestones are achieved.
Pursuant to the SPA, a 4% net smelter returns royalty (the "Royalty") on the San Luis Project was granted to SSR Mining. At any time before the commencement of mine construction on the San Luis Project, the Company may buy back half of the Royalty for US$15,000,000, which if, exercised, would reduce SSR Mining's royalty interest to 2%.
Highlander's technical team commenced field reconnaissance of the San Luis Project during July 2024, with mapping in an area of cover north of the Ayelen vein system identifying a series of previously unrecognized new veins. Several targets in the Ayelen area were also reviewed to understand mineralization types and structural settings.
Exploration Plans
The Company's plan for the San Luis Project is to advance the project through integrated exploration, environmental and community development programs. The goal is to surface the resource potential of the project through exploration and undertake environmental studies to support future technical studies, permitting and evaluations of economic potential for development.
Since the acquisition of the San Luis Project in May 2024, the Company has performed field reconnaissance of the project with mapping in an area north of the Ayelen vein system that has identified new veins and is currently undertaking a review of prior exploration plans and targets, particularly at the Bonita vein system, based on new integration and analysis of existing data, drill core review and field work validation.
The Company is currently undertaking infrastructure programs with the participation of its community partners to support the start of exploration programs at the San Luis Project. The initial focus is on the Bonita vein field where mapping and sampling are underway and geophysical surveys are set to commence while infrastructure is being developed to support the start of drilling in the coming weeks.
The Technical Report recommends a two-phase exploration plan. The Company recently initiated Phase 1 of the exploration program with detailed mapping and systematic channel sampling of the known mineralized structures at the Bonita vein system, with a follow-up drilling campaign commencing by June 2025. In addition, the Company plans to carry out prospecting, mapping and sampling at the adjacent areas to identify and follow up on additional veins, with the objective of defining further targets for drilling.
The Company will commence Phase 2 of the exploration program recommended in the Technical Report, extending drilling activities (including drilling of priority targets identified in Phase 1), community programs and infrastructure development for the remainder of 2025 and into 2026.
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Highlander Silver Corp. Management's Discussion and Analysis For the three and six months ended March 31, 2025 and 2024 (Expressed in Canadian dollars, unless otherwise noted)
Community Relations
The property occupies community land and developing and growing social license is a priority for Highlander. The Company is actively engaged with the communities in the direct area of influence of the San Luis Project with the aim of employing its participatory development model based on community capacity building through skill and safety training, employment, entrepreneurship, infrastructure development and environmental, cultural, health and education programs. The Company has an established presence on the property and community agreement to support exploration and drilling. Road rehabilitation work has commenced with the recent conclusion of the rainy season and discussions are underway regarding further infrastructure projects.
La Estrella
The La Estrella Project is located in the Huancavelica Department, Central Peru, about 250 km ESE of Lima, on the eastern slope of the Western Cordillera. It is within the prolific Miocene polymetallic belt, approximately 34 km NNE of the Julcani Mine, which has produced over 105 million ounces of silver from high grade vein mineralization averaging 16 ounces per ton since production started by Buenaventura in 1953 (Hector Barrionuevo, Julcani – Mina emblemática de Minas Buenaventura con 63 años de operación. PERU XVIII Peruvian Geological Congress).
During 2023, the Company developed 3D geological models of the (Ag-Au ±Pb ±Zn ±Cu) mineralization using the available drilling information and interpreted geological controls. Potential extensions to the mineralized envelopes have been used to outline a near-surface exploration target of 15 to 35 Mt averaging between 50 and 60 g/t Ag, and 0.4 to 0.6 g/t Au containing some 25 to 60 Moz Ag and 0.2 to 0.7 Moz Au.
The potential quantity and grade of the exploration target was determined based on 3D geological models of the Ag-Au mineralization using the available drilling information and interpreted geological controls. The potential quantity and grade is conceptual in nature, there has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.
Alta Victoria
Following a strategic review of the Company's mineral project portfolio, and the need to focus resources on projects that have the highest probability of creating shareholder value, the decision was taken to allow the mining lease at Alta Victoria to lapse on December 4, 2023.
Politunche
Following a strategic review of the Company's portfolio, and the decision to focus resources on the highest quality projects, the Company announced the termination of its option to acquire a 100% interest in the Politunche project on July 13, 2023, effective immediately.
Exploration Expenses (Restated)
As disclosed in Note 3 of the Company's condensed consolidated interim financial statements for the three and six months ended March 31, 2025, the Company has voluntarily changed its accounting policy for expenditures on exploration and evaluation, with all such expenditures now expensed until the date the technical feasibility and commercial viability of extracting mineral resource are demonstrable for a project, and on receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent on the Company obtaining the necessary permits and licenses to develop the mineral property.
The following tables summarize exploration expenses by activity and project.
For the three months ended March 31, 2025
| San Luis | La Estrella | Total | |
|---|---|---|---|
| Community relations | $ 9,762 | $ 5,813 | $ 15,575 |
| Depreciation | 3,144 | 302 | 3,446 |
| Environmental, regulatory & permitting | 9,271 | – | 9,271 |
| Salaries, contractors & project administration | 385,045 | 36,090 | 421,135 |
| Site preparation, camp & field expenses | 137,619 | 13,474 | 151,093 |
| $ 544,841 | $ 55,679 | $ 600,520 |
Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
For the six months ended March 31, 2025
| San Luis | La Estrella | Total | |
|---|---|---|---|
| Community relations | $ 16,351 | 5,813 | $ 22,164 |
| Depreciation | 5,914 | 591 | 6,505 |
| Environmental, regulatory & permitting | 9,271 | – | 9,271 |
| Salaries, contractors & project administration | 800,740 | 91,835 | 892,575 |
| Site preparation, camp & field expenses | 218,753 | 22,931 | 241,684 |
| $ 1,051,029 | $ 121,170 | $ 1,172,199 |
For the three months ended March 31, 2024
| Alta Victoria (Restated) | La Estrella (Restated) | Politunche (Restated) | Total (Restated) | |
|---|---|---|---|---|
| Depreciation | $ – | $ 1,067 | $ – | $ 1,067 |
| Geological & geophysical investigations | – | 147,126 | – | 147,126 |
| Salaries, contractors & project administration | 38,406 | 28,434 | 1,049 | 67,889 |
| Site preparation, camp & field expenses | 2,221 | 7,633 | – | 9,854 |
| $ 40,627 | $ 184,260 | $ 1,049 | $ 225,936 |
For the six months ended March 31, 2024
| Alta Victoria (Restated) | La Estrella (Restated) | Politunche (Restated) | Total (Restated) | |
|---|---|---|---|---|
| Depreciation | $ – | $ 2,504 | $ – | $ 2,504 |
| Geological & geophysical investigations | 7,640 | 183,263 | – | 190,903 |
| Salaries, contractors & project administration | 131,078 | 139,288 | 2,264 | 272,630 |
| Site preparation, camp & field expenses | 18,255 | 19,092 | – | 37,347 |
| $ 156,973 | $ 344,147 | $ 2,264 | $ 503,384 |
The increase in exploration expenses to $600,520 and $1,172,199 for the three and six months ended March 31, 2025, respectively, from $225,936 and $503,384 for the three and six months ended March 31, 2024, respectively, was primarily driven by the increase of exploration activities at the San Luis Project, which was acquired in May 2024. This increase was offset by reduced drilling activities at Alta Victoria, Politunche and La Estrella as the Company concentrated its efforts on advancing the San Luis Project.
Salaries, contractors & project administration were higher for the three and six months ended March 31, 2025, compared to the same periods in 2024, mainly related to the addition of operating expenses from the San Luis Project with the hiring of additional personnel to support the expanded activities at the San Luis Project.
The increase in site preparation, camp, and field expenses aligns with the ramp-up in exploration activities at the San Luis Project, driven by higher costs related to site travel, maintenance, and the procurement of supplies and materials.
The decrease in geological and geophysical investigation expenses for the three and six months ended March 31, 2025, is primarily due to the Company not yet commencing these activities at the San Luis Project, with work scheduled to begin by June 2025.
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Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
LOSS FROM OPERATIONS
| Three months ended March 31, 2024 | Six months ended March 31, 2024 | |||
|---|---|---|---|---|
| 2025 | (Restated) | 2025 | (Restated) | |
| Exploration expenses | $ 600,520 | $ 225,936 | $ 1,172,199 | $ 503,384 |
| General and administrative expenses | 1,410,210 | 839,879 | 2,371,040 | 1,105,842 |
| Loss from operations | 2,010,730 | 1,065,815 | 3,543,239 | 1,609,226 |
| Gain on disposal of equipment | – | (4,316) | (137,294) | (4,316) |
| Finance cost | 130,221 | – | 136,787 | – |
| Interest and other income | (114,317) | (96,918) | (125,058) | (51,335) |
| Foreign exchange loss | 4,099 | – | 252,094 | – |
| Write-off of mineral property interests | – | 36,486 | – | 36,486 |
| Write-off of receivables | 176,403 | – | 176,403 | – |
| Net loss | $ 2,207,136 | $ 1,001,067 | $ 3,846,171 | $ 1,590,061 |
Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024
The Company incurred loss from operations of $2,010,730 for the three months ended March 31, 2025 (March 31, 2024 – $1,065,815). The increase in the loss is due to the following factors:
- An increase in exploration expenses of $600,520 for the three months ended March 31, 2025 (March 31, 2024 – $225,936) from the increase in exploration activities at San Luis Project, which was acquired in May 2024. The initial fieldwork includes geological mapping, sampling, and site preparation. These startup activities have significantly increased exploration costs compared to prior periods.
- An increase in salaries and benefits of $539,893 for the three months ended March 31, 2025 (March 31, 2024 – $nil), due to the Company's expansion of its management team. This includes the appointment of a new CEO and other key executives in early 2025 contributing to a rise in compensation-related expenses.
Six Months Ended March 31, 2025 Compared to the Six Months Ended March 31, 2024
The Company incurred loss from operations of $3,543,239 for the six months ended March 31, 2025 (March 31, 2024 – $1,609,226). The increase in the loss is due to the following factors:
- An increase in exploration expenses of $1,172,199 for the six months ended March 31, 2025 (March 31, 2024 – $503,384) from the increase in exploration activities at the San Luis Project, which was acquired in May 2024. The initial fieldwork includes geological mapping, sampling, and site preparation. These startup activities have significantly increased exploration costs compared to prior periods.
- An increase in office and other expenses of $258,707 for the six months ended March 31, 2025 (March 31, 2024 – $13,701), as a result of the increase of corporate activities to support exploration activities at the San Luis Project.
- Salaries and benefits of $579,314 for the six months ended March 31, 2025 (March 31, 2024 – $nil), due to the Company's expansion of its management team. This includes the appointment of a new CEO and other key executives in early 2025 contributing to a rise in compensation-related expenses.
- Share-based compensation, a non-cash cost, of $1,103,297 for six months ended March 31, 2025 (March 31, 2024 – $599,005), as a result of new options granted during the six months ended March 31, 2025.
Page 6
Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
SUMMARY OF QUARTERLY RESULTS
The Company's quarterly financial statements are reported under IFRS issued by the IASB, as applicable to interim financial reporting. The following table provides highlights from the quarterly results of the Company's unaudited condensed consolidated interim financial statements for the past eight quarters.
| | 2025
Q2 | 2025
Q1
(Restated) | 2024
Q4
(Restated) | 2024
Q3
(Restated) |
| --- | --- | --- | --- | --- |
| Loss from operations | $ (2,010,730) | $ (1,532,510) | $ (1,098,900) | $ (410,316) |
| Net loss | (2,207,136) | (1,639,035) | (1,136,526) | (358,608) |
| Total comprehensive loss | (1,979,702) | (1,116,109) | (639,694) | (1,216,549) |
| Net loss per share – basic and diluted | $ (0.03) | $ (0.02) | $ (0.01) | $ (0.00) |
| | 2024
Q2
(Restated) | 2024
Q1
(Restated) | 2023
Q4
(Restated) | 2023
Q3
(Restated) |
| Loss from operations | $ (1,065,815) | $ (543,411) | $ (370,267) | $ (357,860) |
| Net loss | (1,001,067) | (588,994) | (1,172,155) | (409,139) |
| Total comprehensive loss | (1,101,449) | (587,258) | (1,435,007) | (434,043) |
| Net loss per share – basic and diluted | $ (0.02) | $ (0.01) | $ (0.04) | $ (0.01) |
The increase in loss from operations in the first and second quarter of 2025 from the preceding quarter is mainly related to the addition of operating expenses from the San Luis Project acquired in May 2024, an increase in exploration expenditures as the Company prepares to begin its drilling program, scheduled to start by June 2025, and an increase in stock-based compensation due to the granting of new options to the new Directors and management team in October 2024 and January 2025.
The increase in loss from operations in the fourth quarter of 2024 from the preceding quarter is mainly related to the addition of operating expenses from the San Luis Project acquired in May 2024. In addition, the Company had additional impairment losses on the Alta Victoria and Politunche properties, leading to an increase in net loss in the fourth quarter of 2024.
The increase in loss from operations and net loss in the second quarter of 2024 from the preceding quarter is mainly related to an increase in stock-based compensation due to the granting of new options to consultants in March 2024.
The increase in net loss in the fourth quarter of 2023 is due to the impairment losses incurred from the Alta Victoria and the Politunche properties.
The change in total comprehensive loss is related to the foreign currency translation for the respective periods.
LIQUIDITY AND CAPITAL RESOURCES
| March 31, 2025 | September 30, 2024 | |
|---|---|---|
| Cash and cash equivalents | $ 30,294,154 | $ 2,500,894 |
| Receivables | 89,483 | 290,357 |
| Prepaids and other | 20,078 | 25,536 |
| Accounts payable and accrued liabilities | 556,349 | 372,481 |
| Consideration payable | 1,797,000 | 1,687,375 |
| Total current assets | 30,403,715 | 2,816,787 |
| Total current liabilities | $ 2,353,349 | $ 2,059,856 |
The Company's ability to continue as a going concern is dependent upon the successful execution of its business plan, raising additional capital and/or evaluating strategic alternatives for its mineral property interests. The Company expects to continue to obtain the necessary funds primarily through the issuance of common shares in support of its business objectives. While the Company has been successful in securing financing to date, there can be no assurances that future equity financing, debt facilities, or strategic alternatives will be available on acceptable terms to the Company or at all.
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Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
In March 2025, the Company announced that it had closed its previously announced bought deal private placement, pursuant to which the Company sold 23,000,000 common shares of the Company at a price of $1.40 per common share for aggregate gross proceeds of $32,200,000, which includes the full exercise of the Underwriters' Option of 3,000,000 shares. The Company intends to use the net proceeds of $30,036,728 from the Offering to fund the advancement of exploration activities at the Company's San Luis gold-silver project in Peru, as well as for working capital and general corporate purposes.
Cash used in operating activities during the three and six months ended March 31, 2025 was $1,529,938 and $2,525,826, respectively (March 31, 2024 – $381,530 and $1,078,836). The increased use of cash is primarily attributable to the increase of the Company's operating activities, offset by the timing of payments affecting changes in non-cash working capital items such as prepaid expenses, receivables and accounts payable and accrued liabilities.
Cash generated from financing activities during the three and six months ended March 31, 2025, was $30,123,328 and $30,127,078, respectively (March 31, 2024 – $nil and $2,981,480, respectively). The increase in cash flow during the three and six months ended March 31, 2025 is primarily attributable to the proceeds from the private placement of $32,200,000 (March 31, 2024 – $nil and $3,000,000, respectively), offset by the share issue cost of $2,163,272 (March 31, 2024 – $nil and $18,520, respectively).
Cash generated from in investing activities during the three and six months ended March 31, 2025, was $28,186 and $176,176, respectively, (March 31, 2024 – cash used in investing activities of $31,217). The increased in cash flow during the three ended March 31, 2025 is primarily attributable to increase in interest income of $67,102 (March 31, 2024 – $nil). The increased in cash flow during the six months ended March 31, 2025 is primarily attributable to increase in proceeds from disposal of equipment of $137,294 (March 31, 2024 – $7,454).
FINANCING USE OF PROCEEDS
Net proceeds from the Offering and from the warrants and options exercised during the six months ended March 31, 2025, of $30,127,078 will be deployed to the exploration and development expenses on the San Luis Project and general and administration expenses. The Company's drilling program at San Luis is scheduled to begin by June 2025.
COMMITMENTS AND CONTINGENCIES
At March 31, 2025, the Company had contractual cash flow commitments as follows:
| < 1 Year | 1-3 Years | Total | ||
|---|---|---|---|---|
| Accounts payable and accrued liabilities | $ | 556,349 | – | $ 556,349 |
| Consideration payable | 1,797,000 | 1,797,000 | 3,594,000 | |
| Office rent obligations | 547,000 | 684,500 | 1,231,500 | |
| Exploration expenses and other | 2,124,240 | – | 2,124,240 | |
| $ | 5,024,589 | $ 2,481,500 | $ 7,506,089 |
SHARE CAPITAL INFORMATION
As at May 28, 2025, the Company had the following securities issued and outstanding:
- 104,970,985 common shares
- 7,095,000 shares issuable pursuant to exercise of stock options
- 29,850,000 shares issuable pursuant to exercise of warrants
As at May 28, 2025, no common shares were issued under the Company's at-the-market program announced on April 10, 2025.
PROPOSED TRANSACTIONS
There are no undisclosed proposed transactions as of the date of this MD&A.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any material off-balance sheet arrangements, other than the Company's obligation for future rental payments described in "Related Party Transactions".
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Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
RELATED PARTY TRANSACTIONS
Key management personnel
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company, and comprises the Company's President and Chief Executive Officer, Chief Financial Officer, President Peru, and Senior Vice President Corporate Affairs and Corporate Secretary and Directors.
Key management compensation for the three and six months ended March 31, 2025 and 2024 is comprised of the following:
| Three months ended March 31, | Six months ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Share-based compensation | $ 369,908 | $ 559,265 | $ 970,794 | $ 559,265 |
| Salaries and benefits | 368,351 | - | 368,351 | - |
| Professional fees | - | 134,841 | 156,605 | 254,024 |
| $ 738,259 | $ 694,106 | $ 1,495,750 | $ 813,289 |
Professional fees relate to the following related party transactions with the Company or Company controlled entities during the period:
a) Stephen Brohman was the Company's CFO until January 2, 2025. He is a principal of Donaldson Brohman Martin CPA Inc. ("DBM CPA"), a firm in which he has significant influence. DBM CPA provides the Company with accounting and tax services.
b) David Fincham was Company's CEO until October 2024.
c) Dr. Leandro Echavarria was the Company's VP of Exploration until January 7, 2025. He has significant influence of LE Geological Services USA. ("LE Geo") that provided geological services to the Company.
As of March 31, 2025, there were no outstanding amounts receivable from or payable to the key management personnel noted above. As of March 31, 2024, accounts payable and accrued liabilities included $61,840 due to key management personnel referred to above.
Related party arrangement
In October 2024, the Company entered into an arrangement to share office space, equipment, personnel, consultants and various administrative services with other companies (Titan Mining Corporation, Augusta Gold Corp. and Armor Minerals Inc.) related by virtue of certain directors and management in common. These services have been provided through a management company equally owned by the related companies. Costs incurred by the management company are allocated and funded by the shareholders of the management company based on time incurred and use of services. All of the parties have jointly entered into a rental agreement for office space. If the Company's participation in the arrangement is terminated, the Company will be obligated to pay its share of the rent payments for the remaining term of the office space rental agreement. The Company's obligation for future rental payments if the Company's participation in the arrangement was terminated on March 31, 2025, was approximately $355,300 (September 30, 2024 - $nil), determined based on the Company's average share of rent paid in the immediately preceding 12 months.
The Company was charged for the following with respect to these arrangements in the three and six ended March 31, 2025 and 2024:
| Three months ended March 31, | Six months ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Salaries and benefits | $ 648,492 | $ - | $ 687,913 | $ - |
| Office and other | 173,301 | - | 199,858 | - |
| Marketing and travel | 5,351 | - | 7,426 | - |
| $ 827,144 | $ - | $ 895,197 | $ - |
At March 31, 2025, amounts in accounts payable and accrued liabilities include $26,310 due to a related party, being the key management personnel referred to above (September 30, 2024 – $nil) with respect to this arrangement.
All related party balances are unsecured and are due within thirty days without interest.
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Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
MATERIAL ACCOUNTING POLICIES AND ESTIMATES
In preparing the accompanying condensed consolidated interim financial statements in conformity with IFRS, management has made judgements, estimates and assumptions that affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. All estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgements and estimates in applying accounting policies that have the most significant effect on amounts recognized in the condensed consolidated interim financial statements are the same as those described in the consolidated annual financial statements for the year ended September 30, 2024.
New accounting policies issued but not yet effective
Certain pronouncements have been issued by the IASB or International Financial Reporting Interpretations Committee that are not mandatory for the current period and have not been early adopted. The amendments are effective for accounting periods beginning on or after October 1, 2024, with earlier application permitted. The Company has reviewed these updates and the amendment that is applicable to the Company is discussed below:
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 18 Presentation and Disclosure in Financial Statements, which will replace IAS 1, Presentation of Financial Statement aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss, in particular additional defined subtotals, disclosures about management-defined performance measures and new principles for aggregation of information. IFRS 18 is accompanied by limited amendments to the requirements in IAS 7 Statement of Cash Flows. IFRS 18 is effective from January 1, 2027. Companies are permitted to apply for IFRS 18 before that date. The Company is currently assessing the impact of the new standard.
VOLUNTARY CHANGE IN ACCOUNTING POLICY
The Company has reviewed its accounting policy with respect to exploration and evaluation expenditures. As a result of this review, management has voluntarily elected to change the accounting policy effective January 1, 2025, in order to enhance the relevance and reliability of the information available to the users of the Company's financial statements. The change in accounting policy has been made with respect to and in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, and has been recognized on a full retrospective basis. Please refer to Note 3 of the Company's condensed consolidated interim financial statements for the three and six months ended March 31, 2025, for full disclosure of the quantified effect of this change in accounting policy.
Under the new accounting policy, the Company capitalizes significant direct costs of acquiring resource property interests. Subsequent to the acquisition of a mineral interest, exploration and evaluation costs incurred, including those related to asset retirement obligations, are expensed as incurred up to the date the technical feasibility and commercial viability of extracting mineral resources are demonstrable for a project and on receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent on the Company obtaining necessary permits and licenses to develop the mineral property. At this point, exploration and evaluation assets are assessed for impairment and then reclassified to property, plant and equipment. Capitalized acquisition costs are assessed for impairment at least annually or when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount, with any impairment loss recognized as an expense.
The financial results disclosed in this MD&A from prior periods that have been affected as a result of the change in accounting policy will be indicated as such with "Restated."
FINANCIAL INSTRUMENT RISK EXPOSURE AND RISK MANAGEMENT
The Company's financial instruments are exposed to certain financial risks, including credit risk, interest rate risk, liquidity risk and currency risk.
a) Credit risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company's financial assets.
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Highlander Silver Corp. Management's Discussion and Analysis For the three and six months ended March 31, 2025 and 2024 (Expressed in Canadian dollars, unless otherwise noted)
The Company is primarily exposed to credit risk on its cash and cash equivalents, receivables, reclamation deposit and value-added tax receivable. Credit risk exposure is limited through maintaining its cash with high-credit quality financial institutions. The carrying value of these financial assets of $30,542,377 represents the maximum exposure to credit risk.
b) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Fluctuations in market rates do not have a significant impact on the Company's operations. For the three and six months ended March 31, 2025 and 2024, every 1% fluctuation in interest rates up or down would have had an insignificant impact on profit or loss.
c) Liquidity risk
Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages this risk by careful management of its working capital to ensure its expenditures will not exceed available resources.
d) Foreign currency risk
The Company is exposed to currency risk on transactions and balances in currencies other than the functional currency. At March 31, 2025, the Company had not entered into any contracts to manage foreign exchange risk.
As at March 31, 2025, the majority of the Company's cash and cash equivalents was held in Canadian dollars, with the remainder in US dollars or Peruvian Soles. The Company incurs expenditures in Canada and Peru, and as such is exposed to currency risk associated with these costs.
A change in the value of the Peruvian Soles by 10% relative to the Canadian dollar would not have a significant impact on the Company's working capital and net loss for three and six months ended March 31, 2025 and 2024.
CAPITAL MANAGEMENT
The Company's primary objective when managing capital is to ensure that it will be able to continue as a going concern and that it has the ability to satisfy its capital obligations and ongoing operational expenses, as well as having sufficient liquidity to fund suitable business opportunities as they arise.
The capital of the Company includes the components of equity attributable to shareholders of the Company, net of cash and cash equivalents. Capital is summarized in the following table:
| March 31, 2025 | September 30, 2024 (Restated) | ||
|---|---|---|---|
| Equity attributable to shareholders of the Company | $ | 37,713,885 | $ 9,579,320 |
| Less: Cash and cash equivalents | (30,294,154) | (2,500,894) | |
| $ | 7,419,731 | $ 7,078,426 |
The Company manages its capital structure and makes adjustments to it as necessary in light of economic conditions. In order to maintain the capital structure, the Company may, from time to time, issue or buy back equity, or sell assets. The Company, upon approval from its Board of Directors, intends to balance its overall capital structure through a combination of equity financing and/or other forms of financing.
The Company did not have any externally imposed restrictions as at March 31, 2025. To effectively manage its capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has appropriate liquidity to meet its business activities, including planned corporate expenditures, exploration expenses, as well as the development activities for the San Luis Project.
RISKS AND UNCERTAINTIES
The Company is exposed in varying degrees to a variety of financial instrument related risks as discussed in the Company's 2024 annual MD&A dated January 28, 2025 which is available on SEDAR+ at www.sedarplus.ca.
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Highlander Silver Corp.
Management's Discussion and Analysis
For the three and six months ended March 31, 2025 and 2024
(Expressed in Canadian dollars, unless otherwise noted)
Highlander's business activities are subject to significant risks, including, but not limited to, those described in previous disclosure documents. Any of these risks could have a material adverse effect on Highlander, its business and prospects, and could cause actual events to differ materially from forward looking statements related to Highlander.
LIMITATIONS OF CONTROLS AND PROCEDURES
Management has implemented disclosure control and procedures and internal controls over financial reporting intended to allow for the appropriate fair presentation of financial and other information that the Company is required to disclose. Any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, the Company's management cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgements in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
The Company's officers are not required to certify the design and evaluation of the Company's disclosure controls and procedures and internal controls over financial reporting and have not completed such an evaluation. Inherent limitations on the ability of the certifying officers to design and implement on a cost-effective basis disclosure controls and procedures and internal controls over financial reporting for the Company may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
QUALIFIED PERSON
The scientific and technical information in this document related to San Luis is derived from the technical report titled "Technical Report for the San Luis Property" with an effective date of January 15, 2025, prepared by independent qualified person, Martin Mount, MSc MCSM FGS CGeol FIMMM Ceng. The scientific and technical information in this report related to La Estrella was based upon the Company's news releases dated July 11, 2023, and July 17, 2023, which disclosure was approved by Graeme Lyall, a QP under NI 43-101, who was, at the time of such news releases, a Director of the Company.
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