Karnalyte Resources Inc. — Management Reports 2026

May 14, 2026

KARNALYTE.COM
TSX: KRN
Karnalyte
RESOURCES

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three months ended March 31, 2026

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KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

TABLE OF CONTENTS

MANAGEMENT'S DISCUSSION AND ANALYSIS

3

OVERVIEW

3
- General Overview
3
- First Quarter Update
3
- Asset Sales
4
- Outlook for 2026
4

RESULTS OF OPERATIONS

4
- General and Administrative Expenses
4
- Other Costs Impacting Comprehensive Loss
5

SUMMARY OF QUARTERLY RESULTS

6

INVESTING

8
- Exploration and Evaluation and Other Assets
8
- Capital Assets
8

LIQUIDITY AND CAPITAL RESOURCES

9

CONTRACTUAL OBLIGATIONS

10
- Related Party Transactions
10
- Restrictions on Disposition of the Wynyard Project
10

CRITICAL ACCOUNTING ESTIMATES

11
- Stage of Development
11
- Exploration and Evaluation and Other Assets and Capital Assets
11
- Decommissioning Provisions
12
- Share-Based Payments
12

FINANCIAL RISK FACTORS

12
- Credit Risk
12
- Liquidity Risk and Going Concern
12
- Market Risk
13
- Interest Rate Risk
13

INTERNAL CONTROLS

13
- Disclosure Controls and Procedures
13
- Internal Controls over Financial Reporting (ICFR)
14

OFF BALANCE SHEET ARRANGEMENTS

14

OUTSTANDING SHARES

14

FORWARD-LOOKING INFORMATION

15

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MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") is intended to provide a summary of the operational and financial results of Karnalyte Resources Inc. ("Karnalyte" or "the Company") for the three months ended March 31, 2026 and 2025. This MD&A should be read in conjunction with the condensed unaudited interim financial statements of the Company and the related notes thereto for the three months ended March 31, 2026 and 2025. This commentary is dated May 13, 2026. The financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2025. These documents, the Annual Information Form dated March 31, 2026, and additional information about the Company are available on SEDAR+ at www.sedarplus.ca. Some of the statements made herein contain forward-looking information and accordingly please refer to the "Forward-Looking Information" section at the end of the MD&A.

OVERVIEW

GENERAL OVERVIEW

Karnalyte was incorporated under the Business Corporations Act (Alberta) on November 16, 2007 and is a Saskatchewan-headquartered company focused on the development of potash and magnesium operations in Saskatchewan. The Company's project in Wynyard, Saskatchewan (the "Wynyard Project") is a proposed 2.175 million tonnes per year ("TPY") potash mine utilizing conventional solution mining methods for potash production, with a vision of ultimately becoming the next greenfield, environmentally innovative mine. The Company proposes that the Wynyard Project, key to Karnalyte's goal of becoming a low-cost, sustainable producer of high-quality product, be developed in three phases using a modular approach, with a first phase ("Phase I") consisting of a production facility capable of producing 675,000 TPY of potash, increasing to 1,425,000 TPY of potash in the second phase, and ultimately to 2,175,000 TPY of potash in the third phase. Also under consideration is the secondary magnesium compounds, on Canada's critical minerals list.

FIRST QUARTER UPDATE

During the quarter, Karnalyte advanced key initiatives supporting the continued development of the Wynyard Project.

On January 7, 2026, the Company filed an updated National Instrument 43-101 technical report (the "Technical Report" or "Feasibility Study") on SEDAR+, marking an important milestone in advancing the Wynyard Project and supporting future development and financing activities.

The Company also progressed its review of its development strategy including the evaluation of proposals to advance the magnesium opportunity associated with the Wynyard deposit. This includes consideration of a concept study for potential magnesium metal production, reflecting efforts to enhance and optimize the value of its resource base.

The Company is encouraged by developments in the quarter with respect to commitments made by the Governments of Canada and India to collaborate in the fertilizer sector and strengthen partnerships supporting long-term food and agriculture security. The Company believes these commitments will strengthen the demand for Canadian potash and support the sector's long-term growth.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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To support the development planning and operational readiness of the Wynyard Project, the Company initiated a rail study to evaluate infrastructure requirements, including advancing the design of a rail spur connecting the project site to the Canadian Pacific Kansas City Limited (“CPKC”) main line.

In parallel, the Company is reviewing proposals to enhance business development activities in support of advancing project financing initiatives.

ASSET SALES

Subsequent to the quarter end, Karnalyte sold two parcels of land in the Wynyard area for net proceeds of approximately $1.09 million. The Company also obtained options on these parcels to plan, develop and lease areas necessary for the development of well pads and related facilities to support the planned solution mining operations.

These activities are part of the Company’s ongoing efforts to optimize its asset portfolio and ensure that land holdings align with development requirements.

The Company intends to sell additional parcels of farmland in compliance with an updated exemption order the Company received from the Saskatchewan Farm Land Security Board on March 24, 2026.

OUTLOOK FOR 2026

In 2026, Karnalyte will continue to advance the development of the Wynyard Project through ongoing technical, infrastructure, and strategic initiatives. The key priorities for the Company include:

• further refinement of its development plans.
• advancing supporting studies, including infrastructure planning such as rail access.
• progressing the development strategy review for magnesium-related opportunities.
• pursuing strategic partnerships, financing initiatives and business development opportunities to support project advancement; and
• continuing to optimize operations and capital allocation.

Karnalyte remains committed to advancing its projects in a manner that supports long-term value creation for stakeholders, while aligning with evolving market conditions and global demand for fertilizer and critical minerals.

RESULTS OF OPERATIONS

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative (“G&A”) costs for the three month period ended March 31, 2026 amounted to $408,000 which is an increase of $104,000 from the comparative 2025 amount.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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The key components of the G&A costs are as follows:

G&A Expenditures
(CAD $ thousands)

	Three months ended March 31,
	2026	2025
Salaries, wages and benefits	65	66
Business development, investor relations, regulatory fees	64	21
Accounting and legal	127	52
Consulting	42	51
Directors fees	55	58
Office and general	55	56
Total general and administrative	408	304

Salaries, wages and benefits for the three month period ended March 31, 2026 amounted to $65,000 compared to $66,000 in 2025, which is a decrease of $1,000. The staff complement remains unchanged from prior year and the Company currently does not have plans to significantly increase the number of full-time equivalent employees.

Business development, investor relations and regulatory fees for the three month period ended March 31, 2026 amounted to $64,000 compared to $21,000 in 2025, which is an increase of $43,000. The increase is largely due to hiring investor relations consultants to assist with investor presentation materials and media strategy.

Accounting and legal for the three month period ended March 31, 2026 were $127,000 compared to $52,000 in 2025, which is an increase of $75,000 for legal assistance relating to the Saskatchewan Farm Land Security Board exemption order.

Consulting for the three month period ended March 31, 2026 amounted to $42,000 compared to $51,000 in 2025, which is a decrease of $9,000. Expenses in this category are largely due to a consulting contract with the CFO.

Director fees for the three month period ended March 31, 2026 amounted to $55,000 compared to $58,000 in 2025, which is a decrease of $3,000. The complement of five directors, the associated fees, and the number of meetings during the first quarter remain unchanged from the prior period.

Office and general for the three month period ended March 31, 2026 amounted to $55,000 compared to $56,000 in 2025, which is a decrease of $1,000.

OTHER COSTS IMPACTING COMPREHENSIVE LOSS

Depreciation for the three month period ended March 31, 2026 was $3,000 compared to $3,000 in the 2025 comparative period.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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Share-based compensation for the three month period ended March 31, 2026 was $8,000 compared to $5,000 in 2025. Share-based compensation in 2026 was derived from 470,000 stock options granted in July 2025 and 210,000 stock options granted in June 2024. Whereas, share-based compensation in 2025 related to 230,000 stock options granted in June 2024 and 380,000 stock options granted in August 2023. These expenses are all non-cash in nature and stock options are expensed over a two year vesting period using a declining balance method.

Impairment for the three month period ended March 31, 2026 was $138,000 compared to $245,000 in 2025. In 2014, previous management determined that $59,149,000 of the $63,165,000 total carrying amount of capital assets and exploration and evaluation and other assets were no longer recoverable. As at March 31, 2026, the Company determined that those impairment indicators continue to exist. Therefore, in addition to the impairment losses recognized in prior years, the Company recorded an impairment loss of $130,000 (2025 - $229,000) for additions to exploration and evaluation assets and $8,000 (2025 - $16,000) for additions to capital assets to adjust to their estimated recoverable amount. For additional information, refer to the notes to the financial statements dated December 31, 2015 available on SEDAR+ at www.sedarplus.ca.

Net finance expense for the three months ended March 31, 2026 was $8,000 compared to $7,000 in the 2025 comparative period. Finance income relates to the corresponding interest income that the cash and cash equivalents generate. Finance expense relates to the accretion of the decommissioning liability.

SUMMARY OF QUARTERLY RESULTS

The following table provides selected financial information of the Company for each of the last eight quarters ended at March 31, 2026:

Selected Quarterly Results

	2026		2025		2024
	Mar 31	Dec 31	Sep 30	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30
Total revenue	-	-	-	-	-	-	-	-
Comprehensive (loss)/income	(565)	(430)	(509)	511	(564)	(425)	(265)	(510)
Basic and diluted loss per share	(0.01)	(0.01)	(0.01)	0.01	(0.01)	(0.01)	(0.01)	(0.01)
Total current assets	646	701	1,075	1,562	1,464	1,225	1,537	1,739
Total assets	5,860	5,918	6,295	6,786	6,691	6,875	7,190	7,395
Total liabilities	2,792	2,293	2,255	2,247	2,667	2,292	2,193	2,142
Total shareholders’ equity	3,068	3,625	4,040	4,539	4,024	4,583	4,997	5,253

*Expressed in thousands except loss per share

The comprehensive losses in the first quarter of 2026 were driven primarily by general and administrative expenses, relating to the efforts of legal counsel relating to the Saskatchewan Farm Land Security Board

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

exemption order, as well as investor relations consultants preparing documentation to assist the Company with capital raising efforts. In addition, since there was no recovery from the change in estimate on the decommissioning liability, that also attributed to a greater comprehensive loss in the first quarter of 2026.

The comprehensive losses in three of the four quarters of 2025 were driven primarily by both G&A expenses and impairment of exploration and evaluation and other assets relating to efforts on the Feasibility Study, of which summary results were press released on November 26, 2025 and the full report released on January 7, 2026. In the second quarter of 2025, the comprehensive income was due to the gain on sale of three parcels of land which was partially offset by G&A as well as impairment. The comprehensive loss in the first quarter of 2025 was driven primarily by G&A and impairment of exploration and evaluation and other assets relating to efforts on both the Feasibility Study as well as the magnesium study. Also, since there was no recovery from the change in estimate on the decommissioning liability, that also attributed to a greater comprehensive loss in the first quarter of 2025.

The comprehensive losses in all three quarters of 2024 were driven primarily by both G&A expenses, particularly office and general expenses, salaries and wages, directors fees and accounting and legal expenses, as well as impairment. Additionally, in the third quarter of 2024, the expenditures were partially offset by the gain on disposal of processing and other equipment, mineral properties and computer software as a result of the sale of idle assets in Wynyard.

The second quarter of 2024's loss was higher due to office and general expenses incurred for the investor relations firm, additional Board meetings and trips to Wynyard for asset sale preparations. In the third quarter of 2024, the comprehensive loss was positively impacted by the Wynyard idle assets sale. In the third and fourth quarters of 2024 and the first quarter of 2025, the comprehensive loss was negatively impacted as the Company reviewed its development of the magnesium assets at the same time as the Wynyard Project which, in turn, increased the impairment expense. In the second quarter of 2025, the comprehensive income was positively impacted by the sale of three parcels of land, which more than offset the increased expenditures relating to the Feasibility Study. In the third quarter of 2025, the comprehensive loss was negatively impacted as the Company continued to work on the Feasibility Study, which increased the impairment expense. While work on the Feasibility Study continued in the fourth quarter of 2025, these expenditures were partially offset by the Wynyard farm land rental income. In the first quarter of 2026, losses increased as a result of legal fees incurred on the Saskatchewan Farm Land Security Board exemption order, as well as investor relations consultant's assistance with presentation materials for capital raising efforts. Past performance is not a guarantee of future performance and the information in this MD&A is not necessarily indicative of results for any future period. Factors expected to impact general and administrative expenses in future periods have been described throughout this MD&A.

Current assets principally reflect activity in the cash and cash equivalents account. Cash outlays vary over the quarters depending on the Company's activities. In the second quarter of 2025, the Company sold three parcels of land for net proceeds totaling $1,408,000. In the first quarter of 2025, the three same three parcels of land were reclassified to a current asset as assets held for sale in the amount of $420,000, which is the lower of cost and fair value.

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Total assets on a quarterly basis reflect two main components, cash from financings still available to the Company and capitalized expenditures on capital assets and mineral properties for moving the Wynyard Project forward. Total assets remained relatively constant for the periods above.

Total liabilities for the periods above relate to trade and other payables and the decommissioning liability. These balances vary in the analysis due to the timing of the payments required relative to the work performed in bringing the Wynyard Project to its current level, as well as adjustments to the decommissioning liability due to changes in the average bond and inflation rates. Balances in all the quarters presented include the accrual of restructuring costs that took place in the second and third quarters of 2017, of which the Company reached a settlement in the fourth quarter of 2025.

Total shareholders' equity is impacted by the quarterly comprehensive (losses)/income and the share-based compensation as the number of shares outstanding remains unchanged. As at March 31, 2026, the Company had 53.28 million common shares outstanding.

INVESTING

The Company capitalizes costs that are determined to provide future benefits and charges other costs to comprehensive loss including salaries, support and office costs, community relations programs and other administrative related expenditures. Costs directly related to capital assets are capitalized to appropriate categories and depreciated over their useful lives.

Expenditures to date were focused on the completion of the Company's resource reports, including updating the Company's prior technical reports and 2013 environmental impact statement, confirming the resources and reserves through drilling wells on the initial focus area and preparing the Company for construction by advancing detailed engineering and completing initial site preparation.

EXPLORATION AND EVALUATION AND OTHER ASSETS

During the three month period ended March 31, 2026, $130,000 in additions to exploration and evaluation and other assets were impaired. The additions related to the Wynyard Project. The net balances classified as exploration and evaluation and other assets are as follows:

Exploration and Evaluation and Other Assets (CAD $ thousands)

	March 31, 2026	December 31, 2025
Mineral property
Surface land	4,384	4,384
Drilling	245	245
Balance, end of period	4,629	4,629

CAPITAL ASSETS

The net balances classified as capital assets are as follows:

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

Capital Assets (CAD $ thousands)

	March 31, 2026	December 31, 2025
Machinery and equipment	-	-
Buildings	73	75
Land	125	125
Land improvements	12	13
Computer hardware	-	-
Assets under construction	-	-
Balance, end of period	210	213

The impaired additions to capital assets in the first quarter of 2026 related to the change in estimate of the decommissioning liability. There were no disposals to capital assets. The decrease in capital assets is a result of $3,000 depreciation recognized during the first quarter of 2026.

The Company's ability to secure adequate financing for the development of the Wynyard Project on economic terms could result in a material difference from the Company's estimate of the recoverable asset.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2026, the Company had negative working capital of $0.4 million compared to positive working capital of $0.2 million at December 31, 2025 including $0.1 million and $0.4 million, respectively, in cash and cash equivalents.

As at March 31, 2026 and 2025, the Company also had $0.4 million in restricted cash that was set up as a requirement from the Government of Saskatchewan with respect to reclamation obligations regarding the Wynyard Project. In 2026, the Company will be updating its reclamation program for the Wynyard Project in accordance with Government of Saskatchewan regulations. This update may result in the requirement to increase the amount held as restricted cash in order to satisfy the financial assurance requirements of the Government of Saskatchewan in future periods.

The Company maintains cash in bank accounts for day to day operations and invests the excess in overnight financial instruments in high interest saving accounts that are highly liquid.

The Company is in its pre-development phase and therefore there is material uncertainty that the Company will be able to raise additional funds to maintain sufficient financial resources to fund ongoing operating and required exploration expenditures and to move forward to the production stage. The ability of the Company to continue as a going concern is dependent upon obtaining further equity issuances or other forms of financings. Please refer to the Liquidity Risk and Going Concern section under the Financial Risk Factors heading below.

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CONTRACTUAL OBLIGATIONS

In addition to the minimum regulatory expenditure requirements, the following table summarizes the commitments of the Company as at March 31, 2026:

Contractual Obligations (CAD $ thousands)

Payments due by period
	Total	Less than one year	Two - three years	Four - five years	More than five years
Trade and other payables	1,054	1,054	-	-	-
Other payables	154	-	154	-	-
Leases on mineral property	3,333	367	735	735	1,496
Contracts	24	24	-	-	-
Total	4,565	1,445	889	735	1,496

Trade and other payables relate to operating and investing expenditures that were payable at the period ended March 31, 2026 as well as an accrual of restructuring costs that took place in the second and third quarters of 2017, of which the Company reached a settlement in the fourth quarter of 2025.

Leases on mineral property refer to the annual fees which are required to maintain the mineral leases related to the Wynyard Project. The Wynyard Project comprises three mineral leases. KLSA 010 has a term of 21 years and expires on September 7, 2031. KL246 and KL247A also have terms of 21 years and both expire on April 24, 2037. The Company is required to pay annual lease payments of $10.00 per hectare on any area held under lease for the term of the lease for a total cost of $367,300 per year. The Company is also required to expend not less than $3,000,000 for work during the first three years of the term of the lease. Expenditures made to date on the property have satisfied this requirement.

Contracts relate to fixed-amount consulting services agreed upon but not fully invoiced.

RELATED PARTY TRANSACTIONS

There were no material changes to management compensation arrangements and no other related party transactions for the three months ended March 31, 2026.

RESTRICTIONS ON DISPOSITION OF THE WYNYARD PROJECT

Pursuant to the terms of the subscription agreement (the "Subscription Agreement") and the offtake agreement (the "Offtake Agreement") between the Company and GSFC, each dated January 10, 2013, the Company must not divest, sell, assign, transfer or otherwise dispose of any part of its interests in the Wynyard Project without the prior written consent of GSFC until the third anniversary of the date on which the first shipment for delivery of products is dispatched by the Company in accordance with the terms of the Offtake Agreement (the "Project Lock In Period"). After the expiry of the Project Lock In Period, a person may acquire an interest in the Wynyard Project subject to GSFC's right to terminate the Offtake Agreement at that time. The Subscription Agreement provides that, subject to certain conditions, the above-described

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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restrictions on disposition do not apply to a creation or grant of a security interest to a lender providing financing for the Wynyard Project (including for an expansion thereof). The Offtake Agreement provides that following the expiry of the Project Lock In Period, the Company may dispose of any part of the Wynyard Project that is not part of the Company’s subsurface mineral lease KLSA 010 or that is not intended or reasonably required for the three phases of the Wynyard Project.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with IFRS Accounting Standards (“IFRS”) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amount of assets, liabilities, income and expenses. The Company evaluates judgments and estimates periodically based on historical experience and various assumptions that are considered reasonable in the circumstances. Actual results may differ from those reported. The Company reviews significant areas subject to judgment and estimation with the Audit Committee and independent auditors. Significant areas requiring judgment and estimates include:

STAGE OF DEVELOPMENT

The Company is in the pre-development stage of its history and at this stage of the Company’s growth, it is subject to the risks associated with early stage companies, including uncertainty of future revenues, developing acceptable markets and growth into established markets, profitability and the need to raise additional financing to continue to progress its Wynyard Project.

Continued exploration and development of the property is dependent on the Company’s ability to obtain necessary financing. As the Company is not currently producing from its property, it will be necessary for the Company to seek additional equity or debt to finance its programs.

EXPLORATION AND EVALUATION AND OTHER ASSETS AND CAPITAL ASSETS

The Company’s exploration and evaluation expenditures relating to the acquisition of mineral properties, leases, and the exploration and development thereon are recorded at cost and include direct and indirect acquisition and exploration costs associated with specific mineral properties. These costs are capitalized on the basis of the potential realization from the underlying asset and will be amortized over the shorter of estimates of reserves or service life, following the commencement of production, or written off, if the properties are sold or abandoned.

Assets under construction, machinery and equipment, buildings, land improvements, computer hardware and leasehold improvements are recorded at cost.

The Company reviews exploration and evaluation assets, capital assets and other non-financial assets for indicators of impairment at each reporting period or if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Impairment indicators are used to determine whether carrying values of assets should be assessed for impairment or whether a reversal of impairment may be required.

Internal and external indicators of impairment for capital and other non-financial assets are considered, including significant changes in the extent or manner in which an asset is expected to be used. The use of a significant portion of the Company’s capital assets is related to exploration and evaluation activity.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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Indicators of impairment for exploration and evaluation assets include the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive exploration and evaluation expenditures on mineral properties are budgeted, and results of exploration and evaluation activities on the exploration and evaluation assets. Management also considers whether sufficient data exists to indicate that the carrying amount of capital assets and exploration and evaluation and other assets is unlikely to be recovered in full from successful development or by sale.

In measuring impairment, estimates of future cash flows require assumptions about future business conditions and other developments. Significant, unanticipated changes to these assumptions could require a provision for impairment in the future.

DECOMMISSIONING PROVISIONS

Amounts are recorded for decommissioning provisions that will be incurred by the Company on or before the end of the operating life of the facilities and properties, and upon retirement of its mining assets. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The provision and related asset and expense are impacted by estimates with respect to the costs and timing of decommissioning.

SHARE-BASED PAYMENTS

The Company has share-based payments expenses for stock option awards to employees, directors, officers and consultants, as explained in the Company's financial statements. IFRS requires that all share-based awards be accounted for using the fair value method. Under this method, the Black-Scholes option pricing model requires estimates of the expected life of the option, forfeiture rates, stock volatility and the risk-free interest rate expected over the life of the option. A change in these assumptions could materially change the amount of share-based payments expenses recorded.

FINANCIAL RISK FACTORS

CREDIT RISK

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its commercial obligations. The Company has no significant concentration of credit risk arising from operations. The Company's cash and restricted cash is held with large Canadian financial institutions and management believes the risk of loss to be remote.

LIQUIDITY RISK AND GOING CONCERN

The Company manages liquidity risk by maintaining sufficient cash balances to meet liabilities when due. As at March 31, 2026, the Company had cash and cash equivalents totalling $96,000 (2025 - $498,000) to settle trade and other payables of $1,054,000 (2025 - $1,060,000). Subsequent to the period end, two parcels of land were sold for net proceeds totaling $1,090,000. As at March 31, 2026 and March 31, 2025, the Company's trade and other receivables are subject to normal trade terms.

Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon the Company's ability to continue as a going concern. The Company is in its pre-development phase and therefore there is material uncertainty that the Company will

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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be able to raise additional funds to maintain sufficient financial resources to fund ongoing operating and required exploration and to move forward to the production stage. As at March 31, 2026, the Company had working capital deficit (current assets less current liabilities) of $408,000 which is expected to be insufficient to fund operations in the upcoming year. Subsequent to the period end, the Company sold two parcels of land for net proceeds totaling $1,090,000. The Company's working capital deficit and subsequent land sales may be insufficient to fund operations in the upcoming year and beyond. In addition to ongoing operating expenses, the Company is committed to expenditures in 2026 and subsequent years on its regulatory spending requirements and mineral properties to keep the Company in good standing. The Company's cash position may also be impacted by a requirement to fund the decommissioning liability. The ability of the Company to continue as a going concern is dependent upon obtaining further equity issuances or other forms of financings. There is no assurance that the Company will be successful in obtaining required funding at an acceptable cost as and when needed or at all. Failure to obtain additional funding on a timely basis may cause the Company to postpone development plans, forfeit rights in its properties or reduce or terminate its operations.

The financial statements do not include any adjustments to carrying values of asset amounts and liabilities, or reported expenses that may be necessary if the going concern assumption were not appropriate.

MARKET RISK

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Company's future potash sales are exposed to price risk with respect to North American and international potash prices.

INTEREST RATE RISK

The Company's trade and other payables are non-interest bearing. Trade payables have contractual maturities of less than 45 days, while other payables relating to the settlement of restructuring costs have a contractual maturities within the next 13 months. As at March 31, 2026, the Company's only interest bearing asset is cash in high interest saving accounts. Cash and cash equivalents earn interest at prevailing short-term interest rates. During the three month period ended March 31, 2026, the Company earned interest income of $6,000 (2025 - $6,000) from its cash and cash equivalents.

INTERNAL CONTROLS

DISCLOSURE CONTROLS AND PROCEDURES

The Company has established disclosure controls and procedures for the timely and accurate preparation of financial and other reports. Such disclosure controls and procedures are designed to provide reasonable assurance that material information required to be disclosed is recorded, processed, summarized and reported within the periods specified by applicable securities regulations. In addition, the disclosure controls ensure that information required to be disclosed is accumulated and communicated to the appropriate members of management and properly reflected in the Company's continuous disclosure filings.

As with most small or developing companies and consistent with the concept of reasonable assurance, the Company recognizes that the relative cost of maintaining these disclosure controls and procedures should not exceed their expected benefits. As a result, the Company's disclosure controls and procedures can only provide

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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reasonable assurance, and not absolute assurance, that the objectives of such controls and procedures are met.

The Chief Executive Officer and Chief Financial Officer are responsible for evaluating the disclosure controls and procedures. They have concluded that the design and operation of these disclosure controls and procedures were not effective due to the existence of material weaknesses in the internal controls over financial reporting noted in the following section.

The Company mitigates these weaknesses by using external consultants as appropriate; however, such mitigating procedures do not constitute compensating controls for the purposes of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109").

INTERNAL CONTROLS OVER FINANCIAL REPORTING (ICFR)

The Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing and ensuring the operating effectiveness of internal controls over financial reporting. They are also responsible for causing the internal controls to be designed and operated effectively under their supervision. They are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. It is management's belief that any control system, no matter how well conceived or operated, can provide only reasonable, but not absolute, assurance that the objectives of the control system are met. An internal control system cannot prevent all errors or fraud.

The Company does not have adequate in-house personnel to properly implement segregation of duties with respect to day-to-day accounting, complex accounting and non-routine transactions that may arise and also to prevent and monitor the potential for management override. It is not deemed economically feasible at this time to have such personnel.

These material weaknesses may increase the risk of material misstatements in the financial statements; the Company mitigates these weaknesses by using external consultants as appropriate; however, such mitigating procedures do not constitute compensating controls for the purposes of NI 52-109.

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off balance sheet arrangements at the time of this MD&A.

OUTSTANDING SHARES

As of the date of this MD&A, the Company has 53,283,982 Common Shares and 960,000 stock options issued and outstanding.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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FORWARD-LOOKING INFORMATION

Certain statements in this MD&A constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation. Forward-looking statements relate to future events or future performance and reflect the Company's current expectations, beliefs, and assumptions regarding future events. Forward-looking statements are often, but not always, identified by the use of words or phrases such as "accelerate", "advance", "anticipate", "believe", "budget", "continue", "could", "estimate", "expect", "forecast", "future", "guidance", "intend", "may", "objective", "ongoing", "outlook", "plan", "potential", "predict", "project", "pursue", "schedule", "seek", "should", "strategy", "target", "will", "would", or similar words or phrases suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance.

Forward-looking statements in this MD&A include, but are not limited to, statements with respect to: the anticipated development, construction, and operation of the Wynyard Project; the results of the Technical Report, including projected mine life, production capacity, capital and operating costs, net present value, internal rate of return, and other economic metrics; estimated Mineral Resources and Mineral Reserves; planned production of potash and hydromagnesite; the Company's ability to obtain financing for the development of the Wynyard Project; the Company's expectations regarding the potash and hydromagnesite markets, including demand, pricing, and competition; the Company's ability to obtain and maintain required permits, licences, and approvals; the Company's relationship with GSFC and the performance of the Offtake Agreement; the review of the Company's development strategy, including the assessment of magnesium chloride co-production; the status and potential resumption of the Proteos Nitrogen Project; the Company's expectations regarding its business strategy, plans, and objectives; expectations regarding the Company's ability to continue as a going concern; and expectations regarding future general and administrative expenses, cash flows, and working capital requirements.

Forward-looking statements are based on a number of material factors and assumptions which management believes to be reasonable at the time, including but not limited to:

• potash and hydromagnesite prices will be consistent with the assumptions set out in the Technical Report;
• the Company obtains the additional financing required to develop the Wynyard Project;
• the Company executes its project development plans in a manner consistent with the Technical Report, including estimated total initial capital expenditures of approximately $4.19 billion;
• estimates of Mineral Resources and Mineral Reserves as set out in the Technical Report are accurate;
• the three-phase production ramp-up from 675,000 TPY to 1,425,000 TPY to 2,175,000 TPY of potash is achieved in accordance with the projected timeline;
• the hydromagnesite market can absorb annual production of 104,000 TPY without material adverse impact on pricing;
• the Company continues to hold title to the Karnalyte property and such title is not challenged or impacted in any material manner;
• the Company is able to obtain and maintain required approvals, licences, and permits, including any extensions to the Environmental Impact Statement, in a timely manner;
• the GSFC Offtake Agreement remains in effect and is performed as anticipated;
• the Company's key senior management continue in their respective roles;

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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• if the Company resumes the Proteos Nitrogen Project, the Company is able to successfully develop and market nitrogen fertilizer products;
• the Company is able to successfully develop and market magnesium products;
• environmental and other applicable laws and regulations are not amended, repealed, or applied in a manner that materially impacts the development and operation of the Wynyard Project;
• the future mining and processing facilities operate as anticipated in the Technical Report; and
• the Company is able to develop and maintain the infrastructure required to produce, store, and transport its products.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual results, performance, or achievements to be materially different from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed under the heading "Financial Risk Factors" in this MD&A and those set out under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2025, including: exploration, development and operation risks related to the Wynyard Project; the ability to secure adequate financing; the uncertainty regarding the estimation of Mineral Resources and Mineral Reserves; the lack of current revenues; the unproven nature of solution mining of carnallite in Saskatchewan; permit and licensing requirements; the Company's ability to satisfy its material agreements, including the Offtake Agreement; the potential loss of key employees or technical experts; the potential for dilution of shareholders through future financings; the risks associated with the hydromagnesite process design and market development; environmental and regulatory risks; the volatility of potash and magnesium prices; competition; and currency exchange rate fluctuations.

Such forward-looking statements are based on a number of material factors and assumptions, including: the stabilization of the global potash industry and market; the Company obtains additional financing in the future; the Company executes its project development plans in a manner consistent with the Technical Report; the Company executes its discounted cash flow model assumptions as described in the Technical Report; estimates of mineral resources and mineral reserves in the Technical Report are accurate; full potash production is reached; that the Company continues to have rights to the property subject to subsurface mineral leases KL 246, KL 247A and KLSA 010, and such rights are not challenged or impacted in any material manner; that the Company is able to obtain required approvals, licences and permits, in a timely manner; the Company is able to successfully develop and market magnesium products; the Company's key senior management continue in their respective roles with the Company; the Company's intellectual property is not challenged; the Company does not become subject to litigation; the Company's ability to meet its obligations under the Offtake Agreement; environmental and other applicable law and other regulations are not amended, repealed or applied in a manner that impacts the development and operation of the Wynyard Project as currently anticipated; there are no adverse changes to the price of potash or magnesium that would adversely affect the prospects for developing and operating the Wynyard Project, or making it inadvisable or uneconomic to proceed with development; the future mining operations operate as anticipated; the Company's ability to maintain and develop positive relationships with foreign governments and future business partners; the Company is able to develop and maintain the infrastructure required to export, store and transport its potash or magnesium production; there are no comparable mining companies targeting carnallite in North America; and the continued existence and operation of the primary potash production facility.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026

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Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under “Financial Risk Factors” elsewhere in this MD&A and the risk factors discussed under the “Risk Factors” section of the Annual Information Form.

Although the forward-looking statements contained in this MD&A are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Company assumes no obligation to update or revise them to reflect new events or circumstances.

Further information about the factors affecting forward-looking statements is available in Karnalyte’s Annual Information Form and the audited annual financial statements for the year ended December 31, 2025, which have been filed with Canadian provincial securities commissions and are available on SEDAR+ at www.sedarplus.ca.

KARNALYTE RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS - MARCH 31, 2026