Magma Silver Corp. — Management Reports 2024

Sep 10, 2024

AFRICAN ENERGY METALS INC. MANAGEMENT DISCUSSION AND ANALYSIS Six Months Ended June 30, 2024 and 2023

TABLE OF CONTENTS

Page

1.	DESCRIPTION OF BUSINESS	3.
2.	PROPOSED TRANSACTIONS	4.
3.	LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN	5.
4.	RESULTS OF OPERATIONS	6.
5.	SUMMARY OF QUARTERLY FINANCIAL INFORMATION	7.
6.	TRANSACTIONS WITH RELATED PARTIES	8.
7.	MATERIAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS	8.
8.	RISKS RELATED TO THE COMPANY’S BUSINESS	9.
9.	OTHER MD&A DISCLOSURE REQUIREMENTS	12.

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This discussion and analysis should be read in conjunction with the unaudited condensed consolidated interim financial statements and related notes thereto for the six months ended June 30, 2024 and 2023 (the “Financial Statements”), and the audited consolidated financial statements and related notes thereto for years ended December 31, 2023 and 2022 which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by IASB. All amounts in the financial statements and this discussion and analysis are presented in United States dollars, unless otherwise indicated. This Management Discussion and Analysis (“MD&A”) is dated September 10, 2024 and discloses specified information up to that date.

FORWARD LOOKING INFORMATION

This management discussion and analysis (“MD&A”) contains certain forward-looking statements and information relating to African Energy Metals Inc. (“Company”) that are based on the beliefs of its management as well as assumptions made by and information currently available to the Company. When used in this document, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. This MD&A contains forward-looking statements relating to, among other things, regulatory compliance, the sufficiency of current working capital, the estimated cost and availability of funding for the continued exploration and development of the exploration projects. Such statements reflect the current views of management with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.

1. DESCRIPTION OF BUSINESS

On March 27, 2007, African Energy Metals Inc., was incorporated pursuant to the provisions of the Business Corporations Act (British Columbia). On August 25, 2020, the Company changed its name to Central African Gold Inc. On February 7, 2022, the Company changed its name to African Energy Metals Inc. and was trading on the TSX Venture Exchange (“TSX-V”) under the symbol CUCO effective February 12, 2022.

The Company is engaged in the acquisition, exploration, and development of mineral resources.

Previously completed Management Discussion and Analysis documents covering comments for earlier periods have been prepared and filed accordingly on www.sedarplus.ca.

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2. PROPOSED TRANSACTIONS

Mink Narrows Acquisition

On April 5, 2024, the Company signed a definitive agreement with Voyageur Mineral Explorers Corp. ("Voyageur") (the "Definitive Agreement") to earn a 100% interest in the Mink Narrows Group high-grade polymetallic copper VMS project (the "Project") located in the prolific Flin Flon Manitoba VMS mining camp.

Under the terms of the Definitive Agreement, the Company had the right to earn a 100% interest in the Project through the exercise of an option on the Property with an exploration earn-in requirement of CAD $1,000,000 over a four-year period. The Project is subject to a net smelter return royalty of 2% granted to Voyageur.

In addition to the exploration expenditures, the Definitive Agreement required the issuance of the greater of 1,800,000 common shares of the Company or CAD$300,000 worth of common shares of the Company at a minimum value of CAD$0.045 per common share to Voyageur over the term of the agreement. The Company agreed to pay a maximum of CAD$55,000 to Voyageur over the term of the agreement. Voyageur is arm’s length party to the Company. The share issuances and payments under the Definitive Agreement are subject to the approval of the TSX Venture Exchange, which approval has not been obtained.

The Project was the subject of an existing option agreement between Voyageur and Laser Gold Resources Inc. (“Laser Gold”). Laser Gold has agreed to terminate the earlier option agreement pursuant to a compensation agreement dated April 4, 2024, with the Company (the “Compensation Agreement”). Under the terms of the Compensation Agreement, the Company agreed to issue 4,000,000 common shares and pay CAD$40,000 to Laser Gold. The terms of the Compensation Agreement provided that the shares to be issued to Laser Gold may be issued in tranches and will not be issued until such time as Laser Gold will not be holding shares of the Company that exceed 9.9% of the issued and outstanding shares of the Company. Laser Gold is arm’s length party to the Company and to Voyageur. The share issuances and payments under the Compensation Agreement are subject to the approval of the TSX Venture Exchange, which approval has not been obtained.

Private Placement

In connection with the transaction, the Company intended to complete a non-brokered concurrent part and parcel private placement of up to 3,000,000 units at a price of CAD $0.05 per unit, for aggregate gross proceeds of approximately $150,000. Each unit would consist of one common share and one common share purchase warrant exercisable into one additional share at a price of CDN $0.075 per share for a period of 12 months following the closing date and at a price of CAD$0.10 per share for a period of 24 months following the closing date.

The proceeds from the financing were intended to be used for general working capital purposes primarily relating to the approval and closing of the Project acquisition. In connection with the financing, the Company may pay finder’s fees in cash or securities or a combination of both, as permitted by the policies of the TSX Venture Exchange.

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Finder’s Fees

In connection with the acquisition of the Project, the Company intended to issue up to 1,066,666 common shares as finder’s fees to arm’s length parties, as permitted by the policies of the TSX Venture Exchange. The shares were to be issued to Axiom Exploration Group Ltd. (as to 533,333 shares) and to Lockwood Financial Ltd. (as to 533,333 shares). The securities issued pursuant to the finder’s fees would be subject to a hold period under applicable securities laws, which will expire four months plus one day from the date of closing of the acquisition of the Projects and is subject to receipt of all necessary corporate and regulatory approvals, including approval of the TSX Venture Exchange, which was not obtained.

Debt Settlement

The Company has agreed to settle $210,000 of debt owing to its consultants, creditors, and insiders by issuing 4,200,000 shares in the capital of the Company at a deemed price of CAD$0.05 per share. No warrants would be issued in connection with the debt settlement.

The debt settlement transaction is subject to the approval of the TSX Venture Exchange, and all Shares issued pursuant to the debt settlements will be subject to a four-month statutory hold period. The debt settlement will not create a new control person. The approval of the TSX Venture Exchange was not obtained.

Name Change

Concurrent with or prior to the closing of the acquisition of the Project, the Company intended to change its name to Copper Reef Minerals Inc. and to change the Company’s trading symbol to better reflect the new focus of the Company. The name change was not completed.

Termination of Mink Narrows Acquisition and Related Transactions.

On July 2, 2024, due to market conditions, the Company terminated the Definitive Agreement with Voyageur and the Compensation Agreement with Laser Gold. Due to the termination, the Company did not proceed with the private placement, the debt settlement, the finder’s fees, or name change.

3. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN

As at June 30, 2024, the Company had current assets of $9,773 (December 31, 2023 - $7,937) and current liabilities of $716,132 (December 31, 2023 - $687,700). There is a working capital deficit of $706,359 as at June 30, 2024 (December 31, 2023 – $679,763).

The financial information presented in this MD&A is based on consolidated financial statements that have been prepared based on accounting principles applicable to a “going concern”, which assumes that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

The Company has not generated any revenues or cash flows from operations to date. The Company expects that it will require additional debt or equity funding in the next 12 months to continue its planned exploration and evaluation activities and meet its business objectives. The Company plans to raise funds primarily through issuance of shares. The Company’s ability to continue on a going concern basis is therefore dependent on its ability to successfully raise additional funds. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company.

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4. RESULTS OF OPERATIONS

The information for the six months ended June 30, 2024 and 2023 is based on the condensed consolidated interim financial statements:

interim financial statements:
	Three months	Three months	Six months	Six months
	ended	ended	ended	ended
	June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
Expenses
Filing fees	$ 1,824	$ 17,890	$ 4,887	$ 25,881
Investor relations	183	281	183	2,865
Management fees and consulting fees	-	55,887	18,096	118,736
Office expense	573	5,525	1,620	8,860
Professional fees	15,535	31,695	19,578	97,177
Project generation	44	17,316	1,189	51,665
Share-based payments	-	-	-	12,322
Travel and accommodation	-	245	1,417	58,267
Net loss before other income(expense)	(18,159)	(128,839)	(46,970)	(375,773)
Other income (expense)
Interest expense	(836)	(2)	(1,233)	(393)
Gain(loss)on foreign exchange	(464)	1,051	(1,615)	(750)
Total other income(expense)	(1,300)	1,049	(2,848)	(1,143)
Net loss	$(19,459)	$(127,790)	$(49,818)	$(376,916)

THREE MONTHS ENDED JUNE 30, 2024, COMPARED TO THREE MONTHS ENDED JUNE 30, 2023

For the quarter ended June 30, 2024, net loss was $19,459 compared to net loss of $127,790 recorded during the same quarter in 2023. Material variances from the prior year quarter are as follows:

• A decrease in filing fees of $16,066 during the three months ended June 30, 2024, due to reduced activity in the current reporting quarter.

• A decrease in management fees and consulting fees of $55,887 during the three months ended June 30, 2024, due to conclusion of various agreements.

• A decrease in office expenses of $4,952 during the three months ended June 30, 2024, due to reduced activity in the current reporting quarter.

• A decrease in professional fees of $16,160 due to reduced legal fees recorded in the current quarter.

• A decrease in project generation of $17,272 due to reduced activity in the current quarter.

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SIX MONTHS ENDED JUNE 30, 2024, COMPARED TO SIX MONTHS ENDED JUNE 30, 2023

For the period ended June 30, 2024, net loss was $49,818 compared to net loss of $376,916 recorded during the same period in 2023. Material variances from the prior year period are as follows:

• A decrease in filing fees of $20,994 during the six months ended June 30, 2024, due to reduced activity in the current reporting period.

• A decrease in management and consulting fees of $100,640 during the six months ended June 30, 2024, due to conclusion of various agreements.

• A decrease in office expenses of $7,240 during the three months ended June 30, 2024, due to reduced activity in the current reporting period.

• A decrease in professional fees of $77,599 due to reduced legal fees recorded in the current period.

• A decrease in project generation of $50,476 due to due to reduced activity in the current reporting period.

• A decrease in share-based payments of $12,322 due to no share-based compensation transactions in the current period. There were no new grants or vesting of stock options in the current period.

• A decrease in travel and accommodation of $56,850 due to reduced expenses for trips in the current period.

5. SUMMARY OF QUARTERLY FINANCIAL INFORMATION

The following Information is derived from the consolidated financial statements:

		Loss from continuing	Net comprehensive
	Net loss	**operations per share1 **	**loss2 **
Fiscalquarter ended	$	$	$
June 30, 2024	(19,459)	(0.00)	(12,723)
March 31, 2024	(30,359)	(0.00)	(13,873)
December 31, 2023	(302,596)	(0.02)	(325,720)
September 30, 2023	(77,222)	(0.00)	(78,170)
June 30, 2023	(127,790)	(0.01)	(132,709)
March 31, 2023	(249,126)	(0.01)	(247,920)
December 31, 2022	(653,362)	(0.04)	(632,699)
September 30,2022	(168,532)	(0.01)	(182,105)

(1) Loss per share is rounded to the nearest whole cent.

(2) Explanations for the increase in loss for the quarters ended can be found under Results of Operations.

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6. TRANSACTIONS WITH RELATED PARTIES

Related party transactions for the six months ended June 30, 2024, and 2023 are as follows:

		June	30,	2024		June	30, 2023
Management fees and consultingfees	$			7,308	$		44,841

As at June 30, 2024, the Company owes $126,130 (December 31, 2023 - $117,203) to a company controlled by a director of the Company.

As at June 30, 2024, the Company owes $29,224 (December 31, 2023 - $30,621) to a company controlled by the former Chief Financial Officer of the Company.

As at June 30, 2024, the Company owes a balance of $7,900 (December 31, 2023 - $7,574) to a former related party. During the six months ended June 30, 2024, the Company accrued interest of $326 (June 30, 2023 - $93). The loan is unsecured, bears interest at 8% per annum compounded semi-annually, and due on demand.

As at June 30, 2024, the Company owes a balance of $13,096 (CDN$17,989) (December 31, 2023 - $13,086 (CDN$17,297)) to a company controlled by the former Chief Financial Officer of the Company. During the six months ended June 30, 2024, the Company accrued interest of $506 (CDN$692) (June 30, 2023 - $Nil) in relation to this loan. The loans are unsecured, bears interest at 8% per annum compounded semiannually with maturity on May 17, 2024. After maturity, the loan became due on demand and the loan balance remains unpaid as of June 30, 2024.

As at June 30, 2024, the Company owes $731 (CDN$1,000) (December 31, 2023 - $756 (CDN$1,000)) to a company controlled by a former director of the Company, which is unsecured, non-interest bearing, and due on demand.

7. MATERIAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of condensed consolidated interim financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated interim financial statements and the reported revenues and expenses during this year. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.

Significant area requiring the use of estimates include the recoverability of exploration and evaluation assets, fair value of share-based compensation, and unrecognized deferred income tax assets.

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Critical judgments exercised in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

i) Going concern - The Company’s assessment of its ability to continue as a going concern requires management to consider all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Material uncertainties related to events or conditions may cast significant doubt upon the Company’s ability to continue as a going concern.

ii) The application of the Company’s accounting policy for exploration and evaluation expenditures requires judgment in determining whether it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available. If information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in the consolidated statement of loss in the period when the new information becomes available.

8. RISKS RELATED TO THE COMPANY’S BUSINESS

Resource exploration is a speculative business and involves a high degree of risk. There is a probability that the expenditures made by the Company in exploring its properties will not result in discoveries of commercial quantities of minerals. A high level of ongoing expenditures is required to locate and estimate ore reserves, which are the basis to further the development of a property. Capital expenditures to support the commercial production stage are also very substantial.

The following sets out the principal risks faced by the Company:

Financing risks. Exploration and development of mineral deposits is an expensive process, and frequently the greater the level of interim stage success the more expensive it can become. As at June 30, 2024 the Company had not yet achieved profitable operations. During the six months ended June 30, 2024, the Company incurred a net loss of $49,818 (June 30, 2023– $376,916), a cash outflow from operating activities of $5,946 (June 30, 2023 - $97,761) and, as of June 30, 2024, the Company had a working capital deficit (current assets minus current liabilities) of $706,359 (December 31, 2023 – deficit of $679,763).

The Company has no producing properties and generates no operating revenues; therefore, for the foreseeable future, it will be dependent upon selling equity in the capital markets to provide financing for its continuing substantial exploration budgets. While the Company has been successful in obtaining financing from the capital markets for its projects in recent years, there can be no assurance that the capital markets will remain favourable in the future, and/or that the Company will be able to raise the financing needed to continue its exploration programs on favourable terms, or at all. Restrictions on the Company’s ability to finance could have a material adverse outcome on the Company and its securities.

Exploration risk . There can be no assurance that economic concentrations of minerals will be determined to exist on the Company’s property holdings within existing investors’ investment horizons or at all. The failure to establish such economic concentrations could have a material adverse outcome on the Company and its securities. The Company’s planned programs and budgets for exploration work are subject to revision at any time to take into account results to date. The revision, reduction or curtailment of exploration programs and budgets could have a material adverse outcome on the Company and its securities.

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Market risks . The Company’s securities trade on public markets and the trading value thereof is determined by the evaluations, perceptions and sentiments of both individual investors and the investment community taken as a whole. Such evaluations, perceptions and sentiments are subject to change, both in short term time horizons and longer-term time horizons. An adverse change in investor evaluations, perceptions and sentiments could have a material adverse outcome on the Company and its securities.

Commodity price risks . The Company’s exploration projects seek copper and cobalt in the DRC. While each of these minerals have recently been the subject of significant price increases from levels prevalent earlier in the decade, there can be no assurance that such price levels will continue, or that investors’ evaluations, perceptions, beliefs and sentiments will continue to favour these target commodities. An adverse change in these commodities’ prices, or in investors’ beliefs about trends in those prices, could have a material adverse outcome on the Company and its securities.

Share Price Volatility and Price Fluctuations . In recent years, the securities markets in Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies, particularly junior mineral exploration companies like the Company, have experienced wide fluctuations which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that these price fluctuations and volatility will not continue to occur.

Currency risks. The Company’s exploration expenditures are predominately in US dollars and equity raised is predominately in Canadian dollars. The financial risk is the risk to the Company's operations that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. The Company is subject to fluctuations in foreign currency exchange rates and currently does not use derivative instruments to reduce its exposure to foreign currency risk.

Key personnel risks . The Company’s exploration efforts are dependent to a large degree on the skills and experience of certain of its key personnel. The Company does not maintain “key man” insurance policies on these individuals. Should the availability of these persons’ skills and experience be in any way reduced or curtailed, this could have a material adverse outcome on the Company and its securities.

Competition . Significant and increasing competition exists for the limited number of mineral property acquisition opportunities available. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than the Company, the Company may be unable to acquire additional attractive mineral properties on terms it considers acceptable.

Cyber Security Risks. As the Company continues to increase its dependence on information technologies to conduct its operations, the risks associated with cyber security also increase. The Company relies on management information systems and computer control systems. Business and supply chain disruptions, plant and utility outages and information technology system and network disruptions due to cyber-attacks could seriously harm its operations and materially adversely affect its operation results, Cyber security risks include attacks on information technology and infrastructure by hackers, damage or loss of information due to viruses, the unintended disclosure of confidential information, the issue or loss of control over computer control systems, and breaches due to employee error. The Company’s exposure to cyber security risks includes exposure through third parties on whose systems it places significant reliance for the conduct of its business. The Company has implemented security procedures and measures in order to protect its systems and information from being vulnerable to cyber-attacks.

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The Company believes these measures and procedures are appropriate. To date, it has not experienced any material impact from cyber security events. However, it may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks. Compromises to its information and control systems could have severe financial and other business implications.

Foreign Countries and Regulatory Requirements . Currently, the Company has joint-ventures located in the DRC. Consequently, the Company is subject to certain risks associated with foreign ownership, including currency fluctuations, inflation, and political risk. Both mineral exploration and mining activities and production activities in foreign countries may be affected in varying degrees by political stability and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected in varying degrees by government regulations with respect to community rights, restrictions on production, price controls, export controls, restriction of earnings, taxation laws, expropriation of property, environmental legislation, water use, labour standards and workplace safety. The Company maintains the majority of its funds in Canada and only forwards sufficient funds to meet current obligations.

Environmental and Other Regulatory Requirements . The current or future operations of the Company, including development activities and commencement of production on its properties, require permits from various governmental authorities and such operations are and will be subject to laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance that approvals and permits required to commence production on its properties will be obtained on a timely basis, or at all. Additional permits and studies, which may include environmental impact studies conducted before permits can be obtained, may be necessary prior to operation of the properties in which the Company has interests and there can be no assurance that the Company will be able to obtain or maintain all necessary permits that may be required to commence construction, development or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable costs.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining or extraction operations may be required to compensate those suffering loss or damage by reason of such activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or abandonment or delays in development of new mineral exploration properties. To the best of the Company's knowledge, it is currently operating in compliance with all applicable environmental regulations.

History of Net Losses; Accumulated Deficit; Lack of Revenue from Operations . The Company has incurred net losses to date. Its deficit as of June 30, 2024, was $29,205,167. Even if the Company commences development of certain properties, the Company may continue to incur losses. There is no certainty that the Company will produce revenue, operate profitably, or provide a return on investment in the future.

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Uninsurable risks . The Company and its subsidiaries may become subject to liability for pollution, fire, explosion, against which it cannot insure or against which it may elect not to insure. Such events could result in substantial damage to property and personal injury. The payment of any such liabilities may have a material, adverse effect on the Company's financial position.

9. OTHER MD&A DISCLOSURE REQUIREMENTS

Information available on SEDAR

As specified by National Instrument 51-102, the Company advises readers of this MD&A that important additional information about the Company is available on the SEDAR+ website http://www.sedarplus.ca/

Outstanding Share Data

As at the date of this MD&A, the Company had 20,067,952 shares outstanding. As at the same date there were 1,000,000 warrants outstanding at exercise prices of CDN $0.40 per share and 536,250 stock options outstanding at exercise prices ranging from CDN $0.20 to CDN $0.80 per share.

Outstanding Warrants	Exercise Price(CDN$)	Expiry Date
325,000	0.40	October 19, 2024
300,000	0.40	December 16, 2024
375,000	0.40	December 29,2024
1,000,000

Outstanding Options	Vested Options	Exercise Price (CDN$)	Expiry Date
25,000	25,000	0.80	March 31, 2026
448,750	448,750	0.20	November 23, 2027
62,500	62,500	0.28	February6,2028
536,250	536,250

Off Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Vancouver, British Columbia

September 10, 2024

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