Kincora Copper Limited — Audit Report / Information 2020

Mar 30, 2021

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Kincora Copper Limited (An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS Expressed in Canadian Dollars

For the years ended December 31, 2020 and 2019

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Kincora Copper Limited:

Opinion

We have audited the consolidated financial statements of Kincora Copper Limited (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, cash flows and changes in shareholders’ equity for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters, that in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matter	How	the Matter was Addressed in the Audit
Carrying Value of exploration and evaluation	Our procedures included, but were not limited to, the
assets	following:
As disclosed in Note 6 as at December 31, 2020, the		We obtained an understanding of the key
Company held capitalized exploration and		process associated with management’s
evaluation expenditure assets of $23,634,000.		review of the exploration and evaluation
The carrying value of exploration and evaluation expenditure is assessed for impairment by the Company when facts and circumstance indicate that the exploration and evaluation expenditure may exceed its recoverable amount.		assets; We reviewed purchase agreements associated with the new asset acquired in Australia during the year and tested a sample of exploration expenditures incurredin Australia andMongolia;

During the year ended December 31, 2020, the Company recognized an impairment charge of $30,667,000 in relation to the relinquishment of a portion of its Mongolian assets. The Company determined that there had been no indicators of impairment on its Australian assets.

We considered this a key audit matter because the determination as to whether there are any indicators of impairment involves a number of judgments including whether the Company has tenure, intends to perform ongoing exploration and evaluation activity and whether there is sufficient information for a decision to be made that the area of interest is not commercially viable.

• We tested the Company’s right to explore, which included performing title searches and obtaining confirmations;

• We evaluated the Company’s intention to carry out significant exploration and evaluation activities;

• We recalculated the impairment charge based on management’s determination of areas of interest that had been relinquished and

• We assessed the adequacy of the disclosure included in the financial report.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Cherry Ho.

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DALE MATHESON CARR‐HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC

March 29, 2021

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Statement 1

Kincora Copper Limited

(An Exploration Stage Company)

Consolidated Statements of Financial Position

As at

(Figures in tables are expressed in thousands of Canadian dollars)

	December 31, 2020 December31,2019
ASSETS Current Cash and cash equivalents Receivables, prepaids and deposits (Note 7) Equipment (Note 11) Exploration and evaluation assets (Note 6)	$ 4,461 $ 2,903 344 786
	4,805 3,689 92 163 23,634 50,439
	$ 28,531 $ 54,291
LIABILITIES Current Accounts payable (Note 7 and 9) Accrued liabilities SHAREHOLDERS’ EQUITY Share capital (Note 7) Share-based payment reserve (Note 7) Obligation to issue shares (Note 7) Deficit	$ 765 $ 799 67 25
	832 824
	178,484 172,402 10,847 10,667 201 - (161,833) (129,602)
	27,699 53,467
	$ 28,531 $ 54,291

Nature of Operations and Going Concern (Note 1) Contingencies (Note 12) Subsequent Events (Note 14)

Approved and authorized by the Board of Directors on March 29, 2021

” Ray Nadarajah ” “ Sam Spring” Ray Nadarajah Sam Spring Director Director

The accompanying notes are an integral part of these consolidated financial statements.

Statement 2

Kincora Copper Limited

(An Exploration Stage Company)

Consolidated Statements of Loss and Comprehensive Loss For the years ended December 31,

(Figures in tables are expressed in thousands of Canadian dollars, except per share amounts)

		2020 2019
Expenses Consultants (Note 9) Consultants – Geologists (Note 9) Consultants – Technical Corporate administrative and office services Directors and audit committee fees (Note 9) Exploration costs Foreign exchange loss (gain) Insurance Investor relations Legal and accounting Management fees (Note 9) Share-based compensation (Notes 7 and 9) Transfer agent and filing fees Travel Other items Gain on settlement of debt (Note 7) Write off of accounts payable Loss on impairment of exploration and evaluation assets (Note 6)	$	214 $ 144 121 58 75 87 225 282 244 244 ‐ 24 65 (30) 26 14 148 154 207 216 345 549 242 318 69 50 44 65
		(2,025) (2,175) 45 36 416 - (30,667) (2,817)
Loss and comprehensive loss for theyear	$	(32,231) $ (4,956)
Lossper share – basic and diluted	$	(0.57) $ (0.14)
Weighted average number of common shares outstanding (000’s)		56,114 34,727

The accompanying notes are an integral part of these consolidated financial statements.

Statement 3

Kincora Copper Limited

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

For the years ended December 31,

(Figures in tables are expressed in thousands of Canadian dollars)

Cash provided by (used in):	2020 2019
Operating activities Loss for the year: Items not affected by cash: Gain on settlement of debt Obligation to issue shares Share-based compensation Impairment of exploration and evaluation assets Write off of accounts payable Issuance of bonus shares Changes in non-cash working capital items: Receivables, prepaids and deposits Accounts payable and accrued liabilities Net cash used in operating activities Investing activities Acquisition of equipment Exploration and evaluation asset expenditures Net cash used in investing activities Financing activity Proceeds from private placement, net issue costs Net cash provided by financing activity Change in cash and cash equivalents Cash and cash equivalents – beginning of year Cash and cash equivalents – end ofyear	$ (32,231) $ (4,956) (45) (36) 201 - 242 318 30,667 2,817 (416) - 85 124 492 (674) 613 314
	(392) (2,093)
	(58) (172) (3,135) (1,850)
	(3,193) (2,022)
	5,143 6,081
	5,143 6,081
	1,558 1,966 2,903 937
	$ 4,461 $ 2,903

Supplemental Disclosure of Cash Flow Information (Note 10)

The accompanying notes are an integral part of these consolidated financial statements.

Statement 4

Kincora Copper Limited

(An Exploration Stage Company)

Consolidated Statements of Changes in Shareholders’ Equity For the years ended December 31, 2020 and 2019

(Figures in tables are expressed in thousands of Canadian dollars, except number of share amounts)

			Obligation to	Share-based
	Share capital	Share capital	issue shares	payment reserve	Deficit	Total
	(Numberofshares*)	$	$	$	$	$
Balance, December 31, 2018	23,363,655	166,464	-	9,892	(124,646)	51,710
Shares issued for private placement, net	20,838,321	5,624	-	457	-	6,081
Shares issued for settlement of debt	606,124	190	-	-	-	190
Bonus shares issued	345,792	124	-	-	-	124
Share-based compensation	-	-	-	318	-	318
Loss for the year	-	-	-	-	(4,956)	(4,956)
Balance, December 31, 2019	45,153,892	172,402	‐	10,667	(129,602)	53,467
Shares issued for private placement, net	17,763,962	5,143	-	-	-	5,143
Shares issued for exploration and evaluation assets	4,983,333	598	-	-	-	598
Shares issued for debt and services	827,824	144	-	-	-	144
Bonus shares issued	657,933	197	-	-	-	197
Shares for services to be issued	-	-	201	-	-	201
Share-based compensation	-	-	-	180	-	180
Loss for the year	-	-	-	-	(32,231)	(32,231)
Balance, December 31, 2020	69,386,944	178,484	201	10,847	(161,833)	27,699

*The share numbers have been adjusted to reflect a consolidation of the Company’s share capital on a 3:1 basis effective January 8, 2021 (Note 7).

The accompanying notes are an integral part of these consolidated financial statements.

Kincora Copper Limited (An Exploration Stage Company) Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

1. Nature of Operations and Going Concern

Kincora Copper Limited (“the Company” or “Kincora”) was incorporated in British Columbia on September 24, 1983. The Company is engaged in the acquisition and exploration of exploration and evaluation assets. The Company’s shares are listed on the TSX-Venture Exchange (“TSXV”).

The head office of the Company is located at Suite #400 - 837 West Hastings Street, Vancouver, British Columbia V6C 3N6 and the registered address and records office is located at 25[th] Floor, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1D3.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company continues to incur operating losses, has limited financial resources, no source of operating cash flow, and no assurances that sufficient funding, including adequate financing, will be available to conduct further exploration and development of its exploration and evaluation assets projects. These material uncertainties may cast a significant doubt on the validity of this assumption.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to continue operations. As at December 31, 2020, the Company has an accumulated deficit of $161,833,000, a net loss for the year ended December 31, 2020 of $32,231,000, has working capital of $3,973,000 and a cash balance of $4,461,000. During the year, the Company closed a non-brokered private placement with total proceeds of $5,329,194. If the going concern assumption was not appropriate for these consolidated financial statements, adjustments would be necessary to the carrying values of assets, liabilities, reported income and expenses and the statement of financial position classifications used. Such adjustments could be material.

Kincora on a daily basis since late January 2020 has been closely monitoring the development of the novel coronavirus (COVID-19) and its spread globally. Preventative measures have been taken to modify how it conducts its business, to protect staff, contractors and the communities where it operates. These measures include international and domestic travel restrictions, remote work and supplemental health care, particularly for its Ulaanbaatar based staff and for the drilling program commenced at the Trundle project in Central West New South Wales (“NSW”), Australia. Health and safety considerations, and appropriate risk assessments, continue to dictate various project generation functions, exploration and marketing activities. In Mongolia, Canada and Australia, the Company will continue to pay close attention to the rapidly changing landscapes it faces and the measures mandated by the National and State provincial governments. While the extend of the impact is unknown, the Company anticipates this outbreak might increase the difficulty in capital raising which may negatively impact the Company’s business and financial condition.

2. Basis of Preparation

Statement of Compliance

These consolidated financial statements, including comparatives have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). They have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit or loss, which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The significant

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. Basis of Preparation – continued

Statement of Compliance – continued

accounting policies, as disclosed, have been applied consistently to all periods presented in these consolidated financial statements.

Critical Accounting Estimates

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported expenses during the year. Actual results could differ from these estimates.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

• The carrying value and the recoverability of exploration and evaluation assets, which are included in the statements of financial position based on capitalized acquisition and expenditure costs, facing review for impairment based on factors including the planned exploration budgets and activities, commodity prices, drill results of exploration programs, and strategic direction of the Company;

• The inputs used in accounting for share-based compensation expense included in profit or loss calculated using the Black-Scholes Option Pricing Model;

• The valuations of shares issued in non-cash transactions using the quoted share price as the fair valuebased measurement on the date the shares are issued for the transaction; and

• The recognition of deferred tax assets based on the change in unrecognized deductible temporary tax differences.

3. Significant Accounting Policies

a) Basis of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Kincora Group Ltd (“KGL”), Nadmin IBEX LLC (“Nadmin”), Golden Grouse IBEX LLC (“Golden Grouse”), BSG Investments Inc. (“BSGII”), Game Creek Company Limited (“Game Creek”), Samsul Mineração Ltda. (“Samsul”) and Kincora Copper Australia Pty Ltd. Inter-company balances and transactions are eliminated on consolidation. BSGII, Game Creek and KGL are British Virgin Island incorporated companies. Nadmin and Golden Grouse are incorporated in Mongolia. Samsul is incorporated in Brazil. Kincora Copper Australia Pty Ltd was incorporated in Australia in 2019.

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

3. Significant Accounting Policies – continued

b) Share-based compensation

The Company grants stock options to acquire common shares of the Company to directors, officers, employees and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee. The fair value of stock options is measured on the date of grant, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period. A corresponding increase in share-based payment reserve is recorded when stock options are expensed. When stock options are exercised, share capital is credited by the sum of the consideration paid and the related portion of share-based compensation previously recorded in sharebased payment reserve. Share-based compensation arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity settled share-based payment transactions and measured at the fair value of goods or services received. If the fair value of the goods or services received cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity instruments granted at the date the Company receives the goods or the services.

c) Cash and cash equivalents

Cash equivalents consist of highly liquid investments that are readily convertible into cash with maturities of three-months or less when purchased.

d) Exploration and evaluation assets

Exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditures are capitalized. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.

Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.

Exploration and evaluation assets are tested for impairment if facts or circumstances indicate that impairment exists. Examples of such facts and circumstances are as follows:

• the period for which the Company has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

• substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;

• exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

• sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

3. Significant Accounting Policies – continued

• d) Exploration and evaluation assets – continued

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.

Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

e) Loss per share

Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company. In calculating the diluted loss per share, the weighted average number of common shares outstanding assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. For the periods presented, this calculation proved to be anti-dilutive.

f) Equipment

Equipment is carried at cost less amortization and amounts written-off. The assets residual value, amortization methods and useful lives are reviewed, and adjusted, if appropriate, at each reporting date. Amortization is provided for over the estimated lives of the related assets based on annual rates as follows:

Exploration equipment 10 Years - Straight-line Computers 10 Years - Straight-line

• g) Income taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable loss; nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

3. Significant Accounting Policies – continued

g) Income taxes – continued

taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

h) Functional and presentation currency

The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and its subsidiaries for the year ended December 31, 2020 and 2019 is the Canadian Dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates (“IAS 21”). The Company’s presentation currency is the Canadian dollar (“$”).

Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the date when the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in the statements of comprehensive loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

i) Provision for environmental rehabilitation

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of exploration and evaluation assets and equipment when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to the assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is depreciated on the same basis as exploration and evaluation assets.

The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes would be recorded directly to exploration and evaluation assets with a corresponding entry to the rehabilitation provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, would be charged to profit or loss for the period. At December 31 2020 and 2019, the Company had no provisions for environmental rehabilitation.

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

3. Significant Accounting Policies – continued

j) Impairment of assets

The carrying amount of the Company’s long-lived assets (which includes equipment and exploration and evaluation assets) is periodically reviewed, including following the reduction in any mineral tenure rights and at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.

The recoverable amount is the greater of an asset’s fair value, less cost to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows, largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

k) Financial Instruments

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

Financial assets/liabilities	Classification
Cash and cash equivalents	Amortized cost
Receivables	Amortized cost
Accountspayable	Amortized cost

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

3. Significant Accounting Policies – continued

• k) Financial Instruments – continued

Measurement

Financial assets at FVTOCI

Elected investments in equity investments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss).

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transactions costs expensed in the statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are recorded in the statements of loss and comprehensive loss in the period in which they arise.

Fair value measurement disclosure includes classification of financial instrument in a hierarchy comprising three levels reflecting the significance of the inputs used in making the measurements, described as follows:

Level 1: Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or liabilities, other than Level 1 prices such as quoted interest or currency exchange rates; and

Level 3: Valuations based on significant inputs that are not derived from observable market data, such as discounted cash flow methodologies based on internal cash flow forecasts.

The fair values of the Company’s cash and cash equivalents constitutes a Level 1 fair value measurement. The fair value of the Company’s receivables and accounts payable approximate the carrying value due to their short-term nature.

Impairment of financial assets at amortized cost

The Company recognized a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset’s credit risk has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

3. Significant Accounting Policies – continued

• k) Financial Instruments – continued

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statements of loss and comprehensive loss.

l) Leases

As at the commencement date of a lease, the Company recognizes a lease liability and an asset representing the right to use the underlying asset during the lease term (i.e. the “right-of-use” asset) unless the underlying asset has a low value or the lease term is twelve months or less, which are expensed in the period incurred. At this date, the right-of-use asset is measured at cost, which includes the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred and also includes an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset. The right-of-use asset is then depreciated using the straight-line method from the lease commencement date to the earlier of the end of the lease term or the end of the useful life of the asset. The right-of-use asset may also be reduced for any impairment losses, if any.

At the lease commencement date, the lease liability is measured at the present value of the future lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate, which is the rate the Company would pay for similar assets at similar locations over a similar term. The lease liability is measured at amortized cost using the effective interest method.

Kincora Copper Limited (An Exploration Stage Company) Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

4. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to commence the development of its exploration and evaluation assets and to maintain a flexible capital structure for its projects for the benefit of its stakeholders. As the Company is in the exploration stage, its principal source of funds is from the issuance of common shares. Further information relating to liquidity risk is disclosed in Note 5. In the management of capital, the Company includes the components of shareholders’ equity. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture property arrangements, acquire or dispose of assets or adjust the amount of cash and cash equivalents. In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company’s investment policy is to invest its cash in highly liquid short-term interest-bearing investments with maturities of three months or less from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations. The Company is uncertain as to whether its current capital resources will be sufficient to carry its exploration plans and operations through its current operating period and, accordingly, management is reviewing the timing and scope of current exploration plans and is also pursuing other financing alternatives to fund the Company’s operations. There were no changes in the Company’s approach to capital management during the period. The Company is not subject to any externally imposed capital requirements.

5. Management of Financial Risk

The Company’s financial instruments are exposed to certain financial risks. The risk exposures and the impact on the Company's financial instruments are summarized below.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is periodically exposed to interest rate risk on its cash equivalents as these instruments are exposed to interest rate fluctuations on renewal. Management has assessed this risk as low.

Currency risk

Currency risk is the risk that the fair values of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company’s operations are focused on Australia and Mongolia, where many exploration and administrative expenses are incurred in the Australian Dollar, Mongolian Tugrik and the US Dollar. The Company’s ability to advance funds to Australia is subject to the valuation of the Australian dollar, and the ability to advance funds to Mongolia is subject to changes in the valuation of the Tugrik and the US dollar as well as rules and regulations of the Mongolian government. Fluctuations in the value of the Australian Dollar, Tugrik and the US dollar may have positive and/or adverse effect on the operations and operating costs of the Company. Management seeks to limit foreign current risk, primarily seeking to retain funds in Canada wiring funds as and when needed to foreign subsidiaries to met operating expenditures, and believes this risk to be minimal.

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

5. Management of Financial Risk – continued

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts. The majority of cash is deposited in bank accounts held with major banks in Canada, Australia and Mongolia. As most of the Company’s cash is held by two banks there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. The Company has secondary exposure to credit risk on its receivables. This risk is minimal as receivables consist primarily of refundable goods and services taxes.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company attempts to manage liquidity risk by maintaining sufficient cash and cash equivalent balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short-term obligations.

As at December 31, 2020, the Company had a cash balance of $4,461,000 (2019 - $2,903,000) to settle current liabilities of $832,000 (2019 - $824,000). During the year, the Company closed a non-brokered private placement with total proceeds of $5,329,194 (Note 7). Subsequent to period end, on March 26, 2021, the ASX announced that Kincora was admitted to the official list of ASX Limited with official quotation of Kincora’s CDI’s to commence on March 30, 2021, following the Company having raised A$10 million pursuant to its prospectus dated March 1, 2021, by the issue of 50 million shares (settled on the ASX in the form of CDIs).

Historically, the Company’s sole source of funding has been the issuance of equity and debt financing. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant financing. Liquidity risk is assessed as high.

Commodity price risk

The Company’s ability to raise capital to fund exploration or development activities is subject to risks associated with fluctuations in the market prices of copper and gold. The Company closely monitors commodity prices to determine the appropriate course of action to be taken.

Fraud risk

Fraud risk is the vulnerability that the Company faces from entities capable of intentional misconduct because of pressure, opportunity and rationalization. Fraud risk comes from sources both internal and external to the Company. The Company closely monitors its operations to determine the appropriate course of action to be taken.

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

6. Exploration and Evaluation Assets

For the year ended December 31, 2020 (000’s)

		Bronze		Golden		Macquarie
		**Fox **		Grouse		Arc		**Total **
Acquisition costs
Acquisition & maintenance	$	-	$	-	$	773	$	773
Total current acquisition costs	$	-	$	-	$	773	$	773
Exploration costs
Amortization	$	84	$	45	$	-	$	129
Assaying		-		-		134		134
Camp		1		5		143		149
Drilling		-		-		1,089		1,089
Fuel		-		-		104		104
Geological/geophysics		-		-		20		20
License/fees/taxes		1		2		5		8
Rental/utilities		2		15		167		184
Salaries/labor		48		125		667		840
Sampling		240		-		-		240
Supplies/safety gear		-		-		109		109
Transportation/travel		1		9		73		83
Total current exploration costs	$	377	$	201	$	2,511	$	3,089
Total costs incurred during the year	$	377	$	201	$	3,284	$	3,862
Balance, opening		49,291		1,148		‐		50,439
Impairment		(30,455)		(212)		‐		(30,667)
Balance,ending	$	19,213	$	1,137	$	3,284	$	23,634
Cumulative costs:
Acquisition	$	36,624	$	1,094	$	773	$	38,491
Exploration		13,044		3,440		2,511		18,995
Impairment		(30,455)		(3,397)		-		(33,852)
	$	19,213	$	1,137	$	3,284	$	23,634

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

6. Exploration and Evaluation Assets – continued

For the year ended December 31, 2019 (000’s)

		Bronze		Golden
		**Fox **		Grouse		Badrakh		**Total **
Acquisition costs
Acquisition & maintenance	$	-	$	-	$	‐	$	‐
Total current acquisition costs	$	-	$	-	$	‐	$	‐
Exploration costs
Amortization	$	121	$	97	$	2	$	220
Assaying		28		26		7		61
Camp		35		41		7		83
Drilling		321		562		204		1,087
Fuel		-		10		7		17
Geological/geophysics		1		-		-		1
License/fees/taxes		-		13		-		13
Rental/utilities		4		42		9		55
Salaries/labor		108		239		44		391
Sampling		85		-		-		85
Supplies/safety gear		7		13		9		29
Transportation/travel		6		17		5		28
Total current exploration costs	$	716	$	1,060	$	294	$	2,070
Total costs incurred during the year $		716	$	1,060	$	294	$	2,070
Balance, opening		48,575		2,611		‐		51,186
Impairment		-		(2,523)		(294)		(2,817)
Balance,ending	$	49,291	$	1,148	$	‐	$	50,439
Cumulative costs:
Acquisition	$	36,624	$	1,094	$	-	$	37,718
Exploration		12,667		3,239		294		16,200
Impairment		-		(3,185)		(294)		(3,479)
	$	49,291	$	1,148	$	‐	$	50,439

Exploration and evaluation assets – Mongolia – Bronze Fox

The Company acquired a 100% interest in the shares of KGL in consideration for $35,882,000 in cash, common shares and warrants. KGL holds title to the Bronze Fox copper/gold project in Mongolia.

Following the issuance of the Bronze Fox mining license approximately 85% of the eastern Bronze Fox license was relinquished as part of the conversion of the exploration to mining license. Following a detailed review of historical acquisition and expenditure relating to the eastern Bronze Fox license an impairment has been undertaken to reflect:

• the pro-rata amount of the capitalised acquisition costs for the eastern license; and,

• for the capitalised specific exploration costs for activities undertaken on ground no longer retained

The review has resulted in a write down of $29,713,000 relating to the area that has been relinquished.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

6. Exploration and Evaluation Assets – continued

Exploration and evaluation assets – Mongolia – Bronze Fox ‐ continued

Such a methodology is consistent with the Company’s standard review process as per the prior ground held and relinquished in Mongolia.

During the year ended December 31, 2020, the Company recorded total impairment loss of $30,455,000 relating to the write-off of exploration license, which includes $742,000 write-off of IBEX acquisition cost.

Exploration and evaluation assets – Mongolia – Golden Grouse

On April 18, 2012, the Company acquired a 100% interest in Golden Grouse from the optionor, Temujin Mining Corp. (“Temujin”), which held two mineral exploration licenses adjoining the Company’s Bronze Fox project in Mongolia.

On October 28, 2016, the Company obtained seven mineral exploration licenses and two new license applications in mergers with IBEX Land Mongolia LLC (“IBEX Land”) and IBEX Mongolia LLC (“IBEX”). The fair value in excess of the net assets of IBEX Land and IBEX was allocated to Bronze Fox ($742,000) and Golden Grouse ($1,094,000). The Company retains the full regional exploration dataset across the IBEX portfolio and various infrastructure associated with the merger, including the White Pearl camp in the Southern Gobi, but as of December 31, 2019, all of the mineral exploration licenses associated with the IBEX transaction that are no longer being explored by the Company have been written down for a total of $3,185,000.

During the year ended December 31, 2020, the Company recorded an impairment loss of $212,000 relating to the write-off of exploration license.

Exploration and evaluation assets – Mongolia – Badrakh

On November 11, 2019, the Company entered an agreement with Temuulen Orshikh LLC (“Temuulen”), a privately held Mongolian company that owns 100% of the Badrakh project that provided a staged pathway to earn up to 80% shareholding interest in the project. Following drilling three drill holes, the receipt of all exploration results and technical review, the Company notified Temuulen that it will not further pursue the project, and wrote off all its capitalized exploration costs of $294,000.

Exploration and evaluation assets – Australia – Nyngan and Nevertire

On November 21, 2019, the Company has been granted new exploration licence covering 762 km[2 ] named the Nyngan project located in the Lachlan fold belt (LFB), central NSW, Australia. On January 6, 2020, the Company’s license application for its Nyngan project was formally approved, and the Company was granted with exploration license EL8929.

On January 30, 2020, an application for a second large new exploration licence was made directly to the NSW state for the Nevertire project, covering 382 km[2] . On April 14, 2020, the Company was successfully granted a new exploration licence (EL8960) for the Nevertire project.

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

6. Exploration and Evaluation Assets – continued

Exploration and evaluation assets – Australia – Macquarie Arc

On January 30, 2020, the Company entered into a binding memorandum of understanding (MoU) and made a non-refundable option payment of $25,000 to RareX Limited (“RareX”) providing the exclusive right to acquire a 65% interest in six mineral leases and five projects covering 587km2 in the LFB.

On March 19, 2020, the Company announced it had completed definitive agreements with RareX. The key commercial terms being:

• Issuing 4,983,333 common shares of the Company upon closing, subject to a voluntary 12-month lockup, resulting in RareX becoming a 9.9% shareholder (issued on March 27, 2020) (Note 7);

• Payment of $150,000 in cash to RareX upon closing as follows:

• $100,000 in cash consideration (paid on March 30, 2020); and,

• $50,000 in cash as reimbursement to RareX for outstanding holding costs and licence renewals (paid on March 30, 2020).

• The Company acquiring a 65% interest in the respective licences, becoming operator and sole financer of all further exploration until a positive scoping study or preliminary economic assessment (PEA). Upon completion of the PEA, the Company and RareX will form a joint venture with standard funding and dilution requirements and right of first refusal on transfers;

• The Company is committed to maintain the full licence portfolio in good standing for a period of 12 months and RareX shall have the right to retain a 100% ownership in any licence that the Company may elect to drop or to not renew, for no consideration;

• The Company obtained the approval from the TSXV on February 19, 2020.

7. Share Capital

Authorized share capital: Unlimited Common shares without par value.

The Company consolidated its capital on the basis of three existing shares for one new share effective January 8, 2021. All shares figures and references have been retroactively adjusted to reflect the share consolidation.

Share issuances:

• a) On January 9, 2019, the Company issued 187,093 shares with a fair value of $61,742 to certain directors, officers and service providers on account of services rendered to the Company in the amount of $87,000, resulting in a gain on debt settlement of $25,258.

• b) On February 20, 2019, the Company issued 262,497 shares to certain directors, officers and service providers on account of services of $94,500.

• c) On June 11, 2019, the Company closed a private placement (“Offering ”) for gross proceeds of $6,251,500 through the issuance of 20,838,321 units at a price of $0.30 per unit. Each unit is composed of one common share and one common share purchase warrant. Each warrant entitles the holder thereof to purchase one additional common share at an exercise price of $0.75 per warrant share for a period of two years from the date of closing of the private placement. The Company paid finders’ fees of $170,374 in connection with this private placement.

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

(An Exploration Stage Company)

7. Share Capital – continued

Share issuances: – continued

The Company announced New Prospect Capital Management (“ New Prospect ”), on behalf of a special purpose managed vehicle, Century Development Ltd. (“ Century ”), via the placement became the Company’s second largest shareholder. New Prospect secured an approximate 12% stake in the Company and has the right to a board seat.

The TSXV also required that the subscription for 5,333,333 units by Century to be closed in trust pending clearance of a PIF submitted by a designated representative of Century. This condition was the result of Century becoming an “ insider ” of the Company (as defined under TSXV policies) on closing of the Offering. Prior to year end, the units were released to Century.

Included in receivables, prepaids and deposits as at December 31, 2019 was a receivable of $601,111 due from the trust account of a former legal counsel of the Company. The amount was held in conjunction with the private placement and was received during the year ended December 31, 2020 by the Company. The Company recorded gain on debt settlement of $45,180 relating to payables forgiven by the Company’s former legal counsel.

• d) On August 7, 2019, following shareholder approvals at the September 2019 annual general meeting, the Company issued 345,792 bonus shares to the Company’s president and CEO in consideration of services rendered over 24 months in the amount of $124,485.

• e) On October 29, 2019, the Company issued 156,534 shares with a fair value of $32,872 to service providers on account of services rendered to the Company in the amount of $43,500, resulting in a gain on debt settlement of $10,628.

• f) On March 27, 2020, the Company issued 4,983,333 shares with a fair value of $598,000 to RareX as part of the consideration to acquire a 65% interest in six mineral leases and five projects covering 587km[2] in the LFB (Note 6).

• g) On April 8, 2020, the Company issued 827,824 common shares for $144,000 of services rendered by certain directors, officers and service providers during the second half of 2019.

• h) On June 12, 2020, following the Company’s annual remuneration review, the Company issued an aggregate of 657,933 bonus shares awarded to management of the Company in consideration of services rendered with a fair value of $197,380. 374,600 of the bonus shares are vesting three years, with one third vesting at each of the calendar year ended 2020, 2021 and 2022. During the year ended December 31, 2020, the Company recorded share-based compensation of $62,049 for the common shares vested with the remaining recorded in prepaid services.

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)

7. Share Capital – continued

Share issuances: – continued

• i) On August 26, 2020, the Company closed a private placement for gross proceeds of $5,329,194 through the issuance of 17,763,962 units at a price of $0.30 per unit. Each unit is composed of one common share and one common share purchase warrant. Each warrant entitles the holder thereof to purchase one additional common share at an exercise price of $0.75 per warrant share for a period of two years from the date of closing of the private placement. The Company paid finders’ fees of $185,640 in connection with this private placement.

• j) Subsequent to period end, on March 26, 2021, the ASX announced that Kincora was admitted to the official list of ASX Limited with official quotation of Kincora’s Chess Depositary Interests (“CDI’s”) to commence on March 30, 2021, following the Company having raised A$10 million pursuant to its prospectus dated March 1, 2021, by the issue of 50 million shares (settled on the ASX in the form of CDIs).

Obligation to issue shares:

The Company has a share for services plan approved in 2019. Pursuant to the plan, the Company provides compensation to directors and officers in both shares and cash. The portion of compensation that will be paid by shares are recorded in obligation to issue shares and will be transferred to share capital upon issuance of the shares. During the year end December 31, 2020, the Company accrued fees of $363,000 (2019: $556,500) to its officers and directors. As at December 31, 2020, the Company has a balance owing of $443,833, with $200,516 recorded in obligation to issue shares and the remaining in accounts payable.

Stock options:

The Company has a stock option plan in place under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the plan, the exercise price of each option shall not be less than the discounted market price of the Company's stock as calculated on the date of grant. The options can be granted for a maximum term of 10 years and vest as determined by the board of directors.

On September 27, 2019, the Company granted to directors, officers and employees a total of 3,272,353 stock options under the Company's stock option plan. 2,181,625 have a two-year term from issuance date exercisable at a price of $0.33 per share, vesting over a four-month period from the grant date. 1,090,728 have a three-year term from issuance date exercisable at a price of $0.75 per share, vesting over a four-month period post the Company receiving the shareholder approvals required by the TSXV on August 2, 2019. The fair value of the options granted was determined to be $329,835.

During the year ended December 31, 2020, the Company recorded share-based compensation of $12,320 (2019 - $317,515) for the options vested.

On April 30, 2020, the Company granted 237,620 options to directors and officers of the Company, of which 118,810 are exercisable at $0.33 per share for a period of two years and 118,810 are exercisable at $0.75 per share for a period of three years. The Company has granted an additional 757,661 stock options to various directors, officers, employees and consultants of the Company, which are exercisable at a price of $0.255 for a period of three years. The total fair value of the options granted and vested was determined to be $167,452.

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

(An Exploration Stage Company)

7. Share Capital – continued

Stock options: – continued

The fair value was determined using the Black-Scholes Option Pricing Model with the following assumptions:

	April 30, 2020	April 30, 2020	September 27, 2019	September 27, 2019
Expected dividend yield	0%	0%	0%	0%
Expected stock price volatility	129.61%	142.81%	113%	115%
Risk free rate	0.29%	0.29%	1.51%	1.57%
Forfeiture rate	0%	0%	0%	0%
Expected life of options	3years	2years	3years	2years

During the year ended December 31, 2020, 166,664 stock options (2019 - 363,932) expired unexercised.

A summary of the Company’s stock option transactions is as follows:

			Number of	Weighted average
			options	exercise price
Balance outstanding – December	31,	2018	1,192,785	$1.26
Granted			2,181,625	0.33
Granted			1,090,728	0.75
Expired			(363,932)	1.35
Balance outstanding – December	31,	2019	4,101,206	0.63
Granted			118,810	0.33
Granted			118,810	0.75
Granted			757,661	0.26
Expired			(166,664)	0.60
Balance outstanding – December	**31, **	2020	4,929,823	$0.56

The weighted average life of the stock options are 1.22 years.

As at December 31, 2020, the following stock options are outstanding and exercisable:

Number	Price per share	Expiry date	Options exercisable
200,007	$1.58	September 13, 2021	200,007
200,006	$1.13	September 13, 2021	200,006
131,088	$1.29	January 23, 2021	131,088
131,088	$1.62	January 23, 2021	131,088
2,181,625	$0.33	September 27, 2021	2,181,625
1,090,728	$0.75	September 27, 2022	1,090,728
757,661	$0.26	April 30, 2023	757,661
118,810	$0.33	April 30, 2022	118,810
118,810	$0.75	April 30, 2023	118,810
4,929,823	$0.56		4,929,823

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

7. Share Capital – continued

Warrants:

On June 11, 2019, the Company issued 15,264,333 warrants with a fair value of $457,930 pursuant to a private placement. Each warrant entitles the holder to purchase a common share of the Company for a period of two years at $0.75 per warrant. The fair value was determined using the residual value method.

On August 2, 2019, the Company issued 5,574,000 warrants with a fair value of $Nil pursuant to a private placement. Each warrant entitles the holder to purchase a common share of the Company for a period of two years at $0.75 per warrant. The fair value was determined using the residual value method.

On August 26, 2020, the Company issued 17,763,962 warrants with a fair value of $Nil pursuant to a private placement. Each warrant entitles the holder to purchase a common share of the Company for a period of two years at $0.75 per warrant. The fair value was determined using the residual value method.

During the year ended December 31, 2020, nil warrants (2019 - 2,992,266) expired unexercised.

A summary of the Company’s warrant transactions is as follows:

				Weighted average
			Number of warrants	exercise price
Balance – December	31,	2018	2,992,254	$1.335
Issued			20,838,333	0.750
Expired			(2,992,266)	1.335
Balance – December	31,	2019	20,838,321	$0.750
Issued			17,763,962	0.750
Balance – December	**31, **	2020	38,602,283	$0.750

The weighted average life of the warrants is 1.02 years.

As of December 31,2020, the following warrants are outstanding and exercisable:

Number	Price per share	Expiry date
15,264,321	$0.750	June 11, 2021
5,574,000	$0.750	August 2, 2021
17,763,962	$0.750	August26,2022
38,602,283	$0.750

Reserves :

Share-based payment reserve represents the fair value of stock options or warrants until such time that the share-based instruments are exercised, at which time the corresponding amount will be transferred to share capital.

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Kincora Copper Limited

(An Exploration Stage Company)

8. Segmented Information

The Company operates in two operating segments being the acquisition and exploration of exploration and evaluation assets in Mongolia and Australia. The Company’s head office is located in Canada, and all of the Company’s non-current assets are located in Mongolia and Australia as follows.

Inthousand $		Mongolia		Australia		Total
Balance at December 31, 2020
Mineral properties	$	20,350	$	3,284	$		23,634
Equipment	$	92	$	-	$		92
In thousand $		Mongolia		Australia		Total
Balance at December 31, 2019
Mineral properties	$	50,439	$	-	$		50,439
Equipment	$	163	$	-	$		163

9. Related Party Transactions

The Company incurred the following amounts for related party services:

• a) During the year ended December 31, 2020, the Company incurred consulting fees of $32,400 (2019 - $39,150) to BridgeMark Financial Corp. and $34,020 (2019 - $34,650) to Regiis Oak Capital Corp., companies with a former officer in common for management and accounting services.

• b) During the year ended December 31, 2020, the Company incurred consulting fees of $7,380 (2019 - $Nil) to a company with an officer in common for management and accounting services.

• c) During the year ended December 31, 2020, the Company incurred $345,144 (2019 - $549,485) in management fees for companies with an officer in common for management services.

• d) During the year ended December 31, 2020, the Company incurred consulting and director’s fees of $384,000 (2019 - $314,000) to current directors.

• e) During the year ended December 31, 2020, the Company incurred consulting fees of $20,000 (2019 - $20,000) to a director of the Company.

• f) At December 31, 2020, the Company owed $375,206 (2019 - $227,411) in accrued directors’ fees in accounts payable.

• g) During the year ended December 31, 2020, the Company issued 827,824 common shares to settle $144,000 payables owing to officers and directors of the Company. During the year ended December 31, 2019, the Company issued 227,822 common shares with a fair value of $79,306 to settle $91,500 payables owing to the officers and directors of the Company.

Compensation of key management personnel

Compensation of key management personnel
		December 31,		December 31,
In thousand $		2020		2019
Management, chairman, directors, and audit committee fees	$	823	$	957
Share-based payments*		**207 **		282
	$	1,030	$	1,239

* The estimated fair value of the stock options vested during the year was determined using the Black‐Scholes Option Pricing Model.

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)

10. Supplemental Disclosure of Cash Flow Information

Supplemental Disclosure of Non-Cash Financing and Investing		December 31,		December 31,
Activities include_(‘000):_		2020		2019
Amortization capitalized to exploration and evaluation assets	$	129	$	220
Shares issued in settlement of debt or services	$	144	$	190
Shares issued for exploration and evaluation assets	$	598	$	-
		December 31,		December 31,
Supplemental Disclosure of Cash and Cash Equivalents_(‘000):_		2020		2019
Cash at bank	$	4,438	$	2,880
Bank term deposit		23		23
	$	4,461	$	2,903

11. Equipment

Net carrying costs at December 31, 2020 and 2019 are as follows (‘000):

		Computers	Exploration Equipment	Exploration Equipment	Total
Cost
Balance as at December 31, 2018	$	22	$	882	$ 904
Additions		3		169	172
Balance as at December 31, 2019		25		1,051	1,076
Additions		-		58	58
Balance As at December 31, 2020	$	25		1,109	1,134
Accumulated amortization and impairment
Balance as at December 31, 2018	$	(18)	$	(675)	$ (693)
Amortization		(4)		(216)	(220)
Balance as at December 31, 2019		(22)		(891)	(913)
Amortization		(3)		(125)	(128)
Impairment		-		(1)	(1)
Balance As at December 31, 2020	$	(25)	$	(1,017)	$ (1,042)
Net book value
At December 31, 2019	$	3	$	160	$ 163
At December 31, 2020	$	‐	$	92	$ 92

Kincora Copper Limited (An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

12. Contingencies

Contingencies

In the course of its business activities the Company has from time to time, been the subject of civil claims by third parties, including former employees that could give rise to a liability to pay compensation or damages. In addition, the Company may receive notices from regulatory and other governmental agencies responsible for the administration of regulations impacting on the Company's business affairs, in relation to the imposition or intended imposition of penalties, assessments and other orders that could potentially have an adverse effect or negatively impact on the Company's business and financial condition. Based upon historic experience with the management of such claims, assessment and regulatory actions, the Company does not anticipate that the outcome of those claims, assessments and regulatory actions, will have a materially adverse effect on the Company’s business or financial condition.

Subsequent to the year ended December 31, 2020, the Company’s Mongolian subsidiary, Golden Grouse IBEX LLC (GGI), has received a tax act for 2.7 billion tugriks (MNT), approximately $950,000 (U.S.), from the Mongolian Tax Authority (MTA).

The 2021 tax assessment comprises four items, of which the Company strongly refutes the merit of three including the very vast majority of the liability sought relating to the 2016 merger with IBEX (the agreed liability owed is 16.2 million MNT or approximately $5,700 (U.S.)).

The 2016 IBEX merger required a tax assessment, which followed an audit of the IBEX entity's prior-year periods and the on-shore and off-shore agreements to the merger (IBEX and parent entities). The 2016 tax assessment was relied upon by Mongolian government departments to facilitate the merger and was a condition precedent to close the merger with any adverse liability enabling both counterparties to withdraw from the merger (Note 6). In the Company's view, supported by three independent external legal opinions, the 2021 tax assessment's retrospective liability is not in line with the 2016 tax assessment and Mongolian law, and there is no basis for a different determination.

Shortly after the IBEX merger closed, in mid-2017, a tax audit commenced on the merged entity to validate that the merger transaction completed as it was presented to the Mongolian authorities in 2016. This review has only completed in the fourth quarter of 2020, with a fourth audit review team, including a team member from the original 2016 review, delivering the 2021 tax assessment. A statute of limitation for the MTA to review and retrospectively enable a contradictory tax act expires on February 10th, 2021.

The exploration licenses included in the IBEX merger, and the core focus of the 2021 tax assessment, have been thoroughly explored, and subsequently all have been properly relinquished back to the State. The basis of the tax liability sought is referenced to the historical invested capital of the IBEX entity counterparty to the 2016 merger, all of which has since been written off.

The Company is pursuing its defence of the 2016 tax ruling and objection to the 2021 tax act, with a date not yet set with the Tax Dispute Council of the Mongolian Tax Authority.

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

13. Income Tax

A reconciliation of income taxes at statutory rates is as follows:

	December 31,	December 31,
	2020	2019
Loss for the year	(32,231,000)	$ (4,956,000)
Statutory tax rate	27%	27%
Expected tax recovery	(8,687,000)	(1,332,000)
Permanent differences	9,850,000	5,000
Change in unrecognized deductible temporary differences	(1,163,000)	1,327,000
Total tax recovery	$-	$-

The significant components of the Company’s unrecorded deferred tax assets and liabilities are as follows:

	December 31,		December 31,
	2020		2019
Deferred tax assets
Exploration and evaluation assets (liabilities)	(64,000)	$	627,000
Equipment	235,000		203,000
Share issuance costs	75,000		52,000
Non-capital losses available for future period	9,606,000		10,133,000
Allowable capital losses	185,000		185,000
Unrecognized deferred tax assets	10,037,000	$	11,200,000

The significant components of the Company’s temporary differences and unused tax losses are as follows:

	December 31, 2020	December 31, 2019	Expiry Date Range
Exploration and evaluation assets	$164,000	$ 2,524,000	No expiry date
Equipment	917,000	789,000	No expiry date
Share issuance costs and other	279,000	192,000	2017-2018
Allowable capital losses	712,000	712,000	No expiry date
Non-capital losses available for
futureperiods	$ 32,859,000	$34,819,000	2026-2040

Kincora Copper Limited

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

14. Subsequent Events

• Share rollback : The Company consolidated its capital on the basis of three existing shares for one new share effective January 8, 2021. All shares figures and references have been retroactively adjusted to reflect the share consolidation.

• Grant of options : On January 8, 2021, the Company granted 2,004,506 options with a three-year term to certain directors, officers, employees and consultants of the Company, which are exercisable at $0.445 per share within the first two-year period and $0.48 per share in the final third year.

• Share issuance : In February 2021, the Company issued 1,325,082 shares to certain directors, officers ad service providers for services rendered in 2020.

• Mongolian tax act : On January 20, 2021, a Mongolian subsidiary of the Company received a Tax Act ("2021 tax assessment") for 2.7 billion MNT, approximately US$950,000, from the Mongolian Tax Authority ("MTA") relating primarily to the 2016 merger with IBEX. The 2016 IBEX merger required a tax assessment ("2016 tax assessment") as a condition precedent to closure and for reregistration of the merged entities.

There is limited liability recourse to Kincora's Australian and Canadian assets and operations from the 2021 tax assessment. The Company is actively engaging with the MTA, with a dispute counsel date pending, and is seeking a conclusion in line with Mongolian law and the 2016 assessment which was relied upon by both Kincora and the Mongolian authorities that allowed for closure of the 2016 IBEX merger.

Kincora provided a standstill to Resilience Mining Mongolia Pty Ltd ("RMM") for the executed Option and Acquisition Agreement in relating to Kincora's Mongolian portfolio and subsidiaries with RMM at its election having since waived the standstill as it continues its due diligence and technical reviews for the proposed transaction.

• Proposed ASX Listing : On March 1, 2021, the Company lodged a prospectus with the Australian Securities and Investments Commission (“ASIC”) in relation to its proposed dual listing on the ASX.

Under the prospectus, the Company proposed to raise a minimum of A$8-million and a maximum of A$10-million (in each case, before costs), by the issue of CDIs over fully paid ordinary shares in the capital of the Company. A minimum of 40 million CDIs and a maximum of 50 million CDIs will be issued, at an issue price of 20 Australian cents per CDI. The CDIs will be issued at a ratio of one CDI for one share.

The offering closed on March 19, 2021, and the Company received applications up to the maximum subscription of A$10,000,000 (50,000,000 CDIs) with ASX and TSX Venture conditional approvals received.

On March 26, 2021, the ASX announced that Kincora was admitted to the official list of ASX Limited with official quotation of Kincora’s CDI’s to commence on March 30, 2021.