Mercado Minerals — Management Reports 2025

Jun 30, 2025

MERCADO MINERALS LTD.
(formerly Heartfield Mining Corp.)
Management Discussion and Analysis
For the year ended February 28, 2025

The Management Discussion and Analysis (“MD&A”), prepared as of June 30, 2025, should be read in conjunction with the audited financial statements and notes thereto for the year ended February 28, 2025 of Mercado Minerals Ltd. (“Mercado” or the “Company”) which were prepared in accordance with IFRS Accounting Standards.

This MD&A may contain forward-looking information (as such term is defined under applicable securities laws) in respect of various matters including upcoming events. The results or events predicted in this forward-looking information may differ materially from the actual results or events. The Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

DESCRIPTION OF BUSINESS

Mercado Minerals Ltd. (formerly Heartfield Mining Corp.) was formed on March 24, 2021, under the laws of British Columbia. The address of the Company’s corporate office and its principal place of business is Suite 615 - 625 Howe Street, Vancouver, British Columbia, Canada, V6C 2T6. On November 8, 2024, the Company changed its name to Mercado Minerals Ltd.

The Company’s principal business activities include the acquisition and exploration of mineral property assets. As at February 28, 2025, the Company holds an interest in an early-stage mineral exploration property and the Company had not yet determined whether the Company’s mineral property asset contains a deposit of minerals that is economically recoverable. The recoverability of amounts shown for exploration and evaluation asset is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete the development of and the future profitable production from the property or realizing proceeds from its disposition. The outcome of these matters cannot be predicted at this time and the uncertainty casts significant doubt upon the Company’s ability to continue as a going concern.

The Company had an accumulated deficit of $1,045,909 as at February 28, 2025, which has been funded by the issuance of equity. The Company’s ability to continue its operations and to realize its assets at their carrying values is dependent upon obtaining additional financing and generating revenues sufficient to cover its operating costs. The financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the financial statements.

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EXPLORATION PROJECT

Exploration and evaluation assets are as follows:

Porter Property
Acquisition Costs
Balance, February 28, 2023	$ 42,000
Additions – shares	60,000
Balance, February 29, 2024	102,000
Additions – cash	8,000
Balance, February 28, 2025	$ 110,000
Exploration Costs
Balance, February 28, 2023	$ 164,695
Reports, surveying and sampling	45,272
Balance, February 29, 2024	209,967
Additions	468
Balance, February 28, 2025	$ 210,435
Balance at February 29, 2024	$ 311,967
Balance at February 28, 2025	$ 320,435

Porter Property option

On March 24, 2021, the Company entered into a Purchase Option Agreement (the "Agreement") with an arms-length party (the "Optionor"). Pursuant to the Agreement, the Company has an option to acquire 100% interest in five mineral claims known as Porter Property located near Port Alberni on Vancouver Island, British Columbia, Canada (the "Claims") from the Optionor.

Under the terms of the Agreement, the Optionor has granted the Company the option to acquire all rights, title and interest within five kilometers of the five mineral claims. In addition, the Claims are subject to Net Smelter Return Royalty of 1.5% which can be purchased at any time for $1,500,000 by the Company.

Under the Agreement, the Company will make cash payments totaling $40,000 and issue 300,000 common shares as follows:

a. make a cash payment of $6,000 (the "Initial Payment") (paid) upon execution and delivery of the Agreement;
b. make a further cash payment of $6,000 (paid) and issue 300,000 (issued) common shares on the date upon which the common shares are listed on a stock exchange in Canada ("Listing date");
c. make a further cash payment of $8,000 (accrued as at February 28, 2025 and subsequently paid) within 18 months of the Listing date (as renegotiated); and
d. make a further cash payment of $20,000 on or before December 18, 2025 (as renegotiated).

On April 5, 2023, the Company entered into a purchase agreement to acquire the El Medio claim, which is contiguous to the Company's Porter Property, 30 kilometres west of Port Alberni, BC. In consideration for the El Medio claim, the Company issued 1,500,000 common shares of the Company to the vendor, who will retain a 1.5% net smelter returns royalty, which can be purchased by the Company at any time for a cash payment of $1,500,000.

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SELECTED ANNUAL INFORMATION

The table below sets forth selected financial data, in Canadian dollars, relating to the Company for the years ended February 28, 2025, February 29, 2024 and February 28, 2023:

		For the year ended February 28, 2025		For the year ended February 29, 2024		For the year ended February 28, 2023
Total revenue	$	Nil	$	Nil	$	Nil
Net loss	$	(518,191)	$	(190,664)	$	(214,211)
Basic loss per share	$	(0.02)	$	(0.01)	$	(0.02)
Total assets	$	1,056,166	$	321,201	$	326,046
Total current liabilities	$	106,809	$	127,682	$	34,202
Total non-current liabilities	$	Nil	$	Nil	$	Nil
Cash dividends	$	Nil	$	Nil	$	Nil

The Company is in the exploration stage and therefore, does not have revenues from operations. The Company's operating activities are dependent on the Company's working capital.

The Company's total assets as at February 28, 2025 increased by $734,965 compared to the total assets as at February 29, 2024 primarily due to the increase in cash pursuant to the closing of the non-brokered financing on December 23, 2024 for gross proceeds of $810,500.

OPERATIONS

Mercado is an exploration stage company, and its property is in the early stages of exploration and not in production. Consequently, the Company's net loss is not a meaningful indicator of its performance or potential.

The key performance driver for the Company is the acquisition and development of prospective mineral properties. By acquiring and exploring projects of technical merit, the Company increases its chances of finding and developing an economic deposit.

At this time, the Company is not anticipating profit from operations in the near future. Until such time as the Company is able to realize profits from the production and marketing of commodities from its mineral interests, the Company will report an annual deficit and will rely on its ability to obtain equity or debt financing to fund on-going operations. Additional financing will be required for additional exploration and administration costs. Due to the inherent nature of the junior mineral exploration industry, the Company will have a continuous need to secure additional funds through the issuance of equity or debt in order to support its corporate and exploration activities.

The three-month period ended February 28, 2025

The net loss for the three months ended February 28, 2025 (the "Current Quarter") was $359,801, compared to a net loss for the three months ended February 29, 2024 (the "Comparative Quarter") of $35,442. The increase in net loss of $324,359 between the two quarters was primarily due the following:

• Management fees increased by $48,500 primarily due to additional fees for the Company's CEO, CFO and Vice-President of Corporate Development in the Current Quarter (see Transactions with Related Parties section below);
• Professional fees increased by $40,858 primarily due to additional legal services with respect to corporate and securities matters in the Current Quarter; and
• Shared-based compensation increased by $209,841 as the Company granted 2,130,00 stock options in the Current Quarter compared to none in the Comparative Quarter.

The Company's other expenses were in line with the activities in the Current Quarter compared to the Comparative Quarter.

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The twelve-month period ended February 28, 2025

The net loss for the twelve months ended February 28, 2025 (the "Current year") was $518,191, compared to a net loss for the twelve months ended February 29, 2024 (the "Comparative Year") of $190,664. The increase in net loss of $327,527 between the two years was primarily due to the same factors discussed above and other expenses as follows:

• Management fees increased by $62,500 primarily due to additional fees for the Company's CEO, CFO and Vice-President of Corporate Development in the Current Year (see Transactions with Related Parties section below);
• Project evaluation increased by $13,188 primarily from costs incurred for property visits and assessments in the Current Year compared to none in the Comparative Year;
• Professional fees increased by $15,182 primarily due to additional legal services with respect to corporate and securities matters in the Current Year;
• Shared-based compensation increased by $209,841 as the Company granted 2,130,00 stock options in the Current Year compared to none in the Comparative Year; and
• Transfer and agent filing fees increased by $11,875 due to additional corporate and regulatory related filings fees in line with the Company's activities in the Current Year.

The Company's other expenses were in line with the activities in the Current Year compared to the Comparative Year.

SUMMARY OF QUARTERLY RESULTS

($000's except earnings per share)

	Feb 28, 2025	Nov 30, 2024	Aug 31, 2024	May 31, 2024	Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023
Total Revenue	$Nil	$Nil	$Nil	$Nil	$Nil	$Nil	$Nil	$Nil
Net Loss	$(360)	$(70)	(42)	(46)	$(36)	$(63)	(47)	(45)
Basic loss per share	$(0.01)	$(0.01)	$(0.00)	$(0.00)	$(0.00)	$(0.00)	$(0.00)	$(0.00)

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2025, the Company had $728,723 in cash. The Company does not have any cash flow from operations due to the fact that it is an exploration stage company and therefore equity financings have been the sole source of funds.

At February 28, 2025, the Company had a working capital of $628,922. The Company's current assets are not sufficient to support the Company's general administrative and operating requirements on an ongoing basis for the foreseeable future. Accordingly, further financing will be required, and the Company will have to raise additional funds to continue its operations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements.

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TRANSACTIONS WITH RELATED PARTIES

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

The Company had incurred the following key management personnel costs from related parties:

	2024	2023
	$	$
Management fees	104,500	42,000
Share-based compensation	152,701	-
	257,201	42,000

Key management includes directors and key officers of the Company, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") and family members that are considered related to key management.

During the year ended February 28, 2025, the Company incurred management fees of $32,000 (2024 - $Nil) to the Company's CEO; $10,000 (2024 - $Nil) to a company controlled by the Company's CFO; $24,000 (2024 - $Nil) to a director of the Company; and $38,500 (February 29, 2024 - $42,000) to a company controlled by the former CEO and a director of the Company.

During the year ended February 28, 2025, the Company granted 1,550,000 stock options to directors and officers of the Company and the share-based compensation recognized in the statement of loss and comprehensive loss was $152,701 (February 29, 2024 - $Nil).

At February 28, 2025, the Company owed:

• $Nil (February 29, 2024 - $25,725) to a company controlled by the former CEO of the Company;
• $17,758 (February 29, 2024 - $Nil) to the Company's CEO;
• $10,000 (February 29, 2024 - $Nil) to a company controlled by the Company's CFO; and
• $24,900 (February 29, 2024 - $Nil) to a director of the Company.

COMMITMENTS

The Company does not have any significant commitments.

EVENTS SUBSEQUENT TO FEBRUARY 28, 2025

(a) Subsequent to February 28, 2025, 3,483,000 warrants were exercised for gross proceeds of $174,150 and 50,000 warrants expired unexercised.

(b) On June 6, 2025, the Company signed a letter of intent (the "LOI") with Concordia Silver Company S.A. de C.V. ("Concordia"), an arms-length party. Pursuant to the LOI, the Company intends to acquire 100% of Concordia and its underlying property rights in Mexico (the "Proposed Transaction").

On June 10, 2025, in connection with the LOI, the Company has entered into a bridge loan agreement with Concordia for US$200,000. The loan is non-interest bearing. Concordia may repay the bridge loan at any time, without penalty, but it is otherwise due and payable within five business days of the earlier of (i) August 31, 2025 if the Proposed Transaction has not completed by such date, and (ii) the date the parties agree to terminate discussions regarding the Proposed Transaction. The bridge loan is secured by a general charge over all of the assets of Concordia.

Completion of the Proposed Transaction remains subject to a number of conditions, including negotiation of definitive documentation and receipt of any required regulatory approvals. The Proposed Transaction cannot be completed until these conditions have been satisfied, and there can be no assurance the Proposed Transaction will be completed as presently contemplated.

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SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management's experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The Company's critical accounting estimates are disclosed in Note 3 of the audited financial statements for the year ended February 28, 2025.

FINANCIAL INSTRUMENTS

Fair value of financial instruments

International Financial Reporting Standards 13, Fair Value Measurement, establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company's financial instruments include cash and accounts payable and accrued liabilities. The carrying amounts of accounts payable and accrued liabilities approximate their respective fair values due to the short-term to maturity of these financial instruments. Cash is measured based on Level 1 of the fair value hierarchy.

Financial risk management objectives and policies

The Company's financial instruments include cash and accounts payable and accrued liabilities. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. It is management's opinion that the Company is not exposed to material currency risk, interest rate risk or other price risk. The Company's exposure to and management of market risk has not changed materially from that of the prior year.

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash. To minimize the credit risk the Company places these instruments with a high-quality financial institution. The Company's exposure to and management of credit risk has not changed materially from that of the prior year.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. In the management of liquidity risk of the Company, the Company maintains a balance between continuity of funding and the flexibility through the use of borrowings. Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the Company's projects and operations. As at February 28, 2025, the Company has cash of $728,723 to settle current liabilities of $106,809. The Company's management of liquidity risk has not changed materially from that of the prior year.

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RISKS AND UNCERTAINTIES

The risk factors associated with the principal business of the Company are discussed below. Briefly, these include the highly speculative nature of the mining industry characterized by the requirement for large capital investment from an early stage and a very small probability of finding economic mineral deposits. In addition to the general risks of mining, there are country-specific risks associated with operating in a foreign country, including currency, political and economic conditions (including the outbreak of war or levying of sanctions), social, and legal risk.

Due to the nature of the Company’s business and the present stage of exploration and development of its project, the Company may be subject to significant risks. Readers should carefully consider all such risks set out in the discussion below. The Company’s actual exploration and operating results may be very different from those expected as at the date of this MD&A.

Exploration and Mining Risks

Resource exploration, development, and operations are highly speculative, characterized by a number of significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate, including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are other risks involved in the conduct of exploration programs. The Company will rely on consultants and others for exploration and development expertise. Substantial expenditures are required to establish mineral resources and mineral reserves through drilling, to develop metallurgical processes to extract the metal from mineral resources, and in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining.

No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are:

• the particular attributes of the deposit, such as size, grade and proximity to infrastructure;
• metal prices, which are highly cyclical; and
• government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection.

The exact effect of these factors cannot accurately be predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital.

The Company will carefully evaluate the political and economic environment in considering any properties for acquisition. There can be no assurance that additional significant restrictions will not be placed on the Company’s project and any other properties the Company may acquire, or its operations. Such restrictions may have a material adverse effect on the Company’s business and results of operation.

Future Profits/Losses and Production Revenues/Expenses

The Company has no history of operations and expects that its losses will continue for the foreseeable future unless and until such time as the Company’s project(s) advances or any other properties the Company may acquire enter into commercial production and generate sufficient revenues to fund its continuing operations. No deposit that has yet been shown to be economic has yet been found on the Company’s projects. There can be no assurance that the Company will be able to acquire any additional properties. There can be no assurance that the Company will be profitable in the future. The Company’s operating expenses and capital expenditures may increase in subsequent years as needed consultants, personnel and equipment associated with advancing exploration, development and commercial production of the Company’s project and any other properties the Company may acquire are added. The amounts and timing of expenditures will depend on:

• the progress of ongoing exploration and development;

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• the results of consultants' analysis and recommendations;
• the rate at which operating losses are incurred;
• the execution of any joint venture agreements with strategic partners; and
• the acquisition of additional properties and other factors, many of which are beyond the Company's control.

The development of mineral properties will require the commitment of substantial resources to conduct the time-consuming exploration and development of the properties. There can be no assurance that the Company will generate any revenues or achieve profitability. There can be no assurance that the underlying assumed levels of expenses will prove to be accurate.

Additional Funding Requirements

Further exploration and development of the Company's project will require additional resources and funding. The Company currently does not have sufficient funds to fully explore and develop its project. Accordingly, to continue exploration and development of the Company's property will depend upon its ability to obtain financing through debt and/or equity financing, joint ventures, or other means. There is no assurance that the Company will be successful in obtaining the required financing for these or other purposes, including for general working capital.

Competitors in the Mining Industry

The mining industry is highly competitive in all of its phases. Considering the Company's current size and stage of operations, the Company faces strong competition from other mining companies, some with greater financial resources, operational experience and technical capabilities. As a result of this competition, the Company may not be able to obtain required financing and maintain personnel, technical resources or attractive mining properties on terms the Company considers acceptable.

Risks That Are Not Insurable

Hazards such as unusual or unexpected geological formations and other conditions are involved in mineral exploration and development. The Company may become subject to liability for pollution, cave-ins or hazards against which it cannot insure. The payment of such liabilities could result in increases in the Company's operating expenses which could, in turn, have a material adverse effect on the Company's financial position and its results of operations.

Market for Securities and Volatility of Share Price

There can be no assurance that an active trading market in the Company's securities will be established or sustained. The market price for the Company's securities could be subject to wide fluctuations. Factors such as announcements of exploration results, as well as market conditions in the industry, may have a significant adverse impact on the market price of the securities of the Company. The stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of particular companies.

Environmental Matters

All of the Company's mining operations will be subject to environmental regulations, which can make operations expensive or prohibit them altogether. The Company may be subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products that could occur as a result of its mineral exploration, development and production.

To the extent the Company is subject to environmental liabilities, the payment of such liabilities or the costs that it may incur to remedy environmental pollution would reduce funds otherwise available to it and could have a material adverse effect on the Company. If the Company is unable to fully remedy an environmental problem, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy. The potential exposure may be significant and could have a material adverse effect on the Company.

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All of the Company’s exploration, development and any production activities will be subject to regulation under one or more environmental laws and regulations. Many of the regulations require the Company to obtain permits for its activities. The Company must update and review its permits from time to time, and is subject to environmental impact analyses and public review processes prior to approval of the additional activities. It is possible that future changes in applicable laws, regulations and permits or changes in their enforcement or regulatory interpretation could have a significant impact on some portion of the Company’s business, causing those activities to be economically re-evaluated at that time.

Conflicts of Interest

Certain of the Company’s directors and officers may serve as directors or officers of other companies or companies providing services to the Company or they may have significant shareholdings in other companies. Situations may arise where these directors and/or officers of the Company may be in competition with the Company. Any conflicts of interest will be subject to and governed by the law applicable to directors’ and officers’ conflicts of interest. In the event that such a conflict of interest arises at a meeting of the Company’s directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company.

Lack of Revenues; History of Operating Losses

The Company does not have any operational history or earnings and has incurred net losses and negative cash flow from its operations since incorporation. Although the Company will hope to eventually generate revenues, significant operating losses are to be anticipated for at least the next several years and possibly longer. To the extent that such expenses do not result in the creation of appropriate revenues, the Company’s business may be materially adversely affected. It is not possible to forecast how the business of the Company will develop.

Reliance on Key Personnel

The Company will be dependent on the continued services of its senior management team, and its ability to retain other key personnel. The loss of such key personnel could have a material adverse effect on the Company. There can be no assurance that any of the Company’s employees will remain with the Company or that, in the future, the employees will not organize competitive businesses or accept employment with companies competitive with the Company. Furthermore, as part of the Company’s growth strategy, it must continue to hire highly qualified individuals. There can be no assurance that the Company will be able to attract, assimilate or retain qualified personnel in the future, which would adversely affect its business.

General Economic Conditions

Market conditions and unexpected volatility or illiquidity in financial markets may adversely affect the prospects of the Company and the value of its shares.

The Company’s business may be affected by changes in political and market conditions, such as interest rates, availability of credit, inflation rates, changes in laws, and national and international circumstances. Recent geopolitical events and potential economic global challenges such as the risk of higher inflation and energy crises, may create further uncertainty and risk with respect to the prospects of the Company’s business.

General Inflationary Pressures

General inflationary pressures may affect labour and other costs, which could have a material adverse effect on the Company’s financial condition, results of operations and the capital expenditures required to advance the Company’s business plans. There can be no assurance that any governmental action taken to control inflationary or deflationary cycles will be effective or whether any governmental action may contribute to economic uncertainty. Governmental action to address inflation or deflation may also affect currency values. Accordingly, inflation and any governmental response thereto may have a material adverse effect on the Company’s business, results of operations, cash flow, financial condition and the price of the common shares.

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SHARE CAPITAL

Issued

The Company had 32,204,001 common shares issued and outstanding as at February 28, 2025 and 35,687,001 as at June 30, 2025.

Share Purchase Options

The Company had 2,130,000 stock options outstanding as at February 28, 2025 and June 30, 2025.

Warrants

The Company had 7,732,850 share purchase warrants outstanding as at February 28, 2025 and 4,199,850 as at June 30, 2025.

Escrow Shares

The Company has 750,001 common shares held in escrow as at February 28, 2025 and June 30, 2025.