Metallis Resources Inc. — Management Reports 2020

Mar 24, 2020

METALLIS RESOURCES INC. Management's Discussion and Analysis Year ended December 31, 2019

Introduction

This Management Discussion and Analysis ("MD&A") is dated March 24, 2020 and should be read in conjunction with Metallis Resources Inc.'s ("the Company", "we", "our") annual financial statements for the year ended December 31, 2019 and the related notes thereto. Technical aspects of this MD&A have been reviewed and approved by Metallis Resources' V.P. of Exploration, Mr. David Dupre, P.Geo., designated as a Qualified Person under National Instrument 43-101. This MD&A was written to comply with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations and includes material events and transactions up to the date of this report. Results are reported in Canadian dollars, unless otherwise noted. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results presented for the year ended December 31, 2019, are not necessarily indicative of the results that may be expected for any future period.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of the Company's common shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) if it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

The Company's common shares are listed on Tier 2 of the TSX Venture Exchange ("TSX-V") under the trading symbol "MTS", and on the OTCQB Marketplace under the symbol "MTLFF". Further information about the Company and its operations can be obtained from the Company's office located at Suite # 604 - 850 West Hastings St., Vancouver, BC, V6C 1E1, or from Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

Comment on COVID-19:

On March 11, 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak has continued to spread resulting in adverse public health developments. It has adversely affected global workforces, economies, and financial markets, triggering an economic downturn. It is not possible at this time for the Company to predict the duration or magnitude of the adverse results of the outbreak nor its effects on the Company's business or operations.

The Company takes the threat very seriously and its first priority is the health and safety of its workers. We are following the guidelines, recommendations, orders and proclamations as they are issued by local health authorities and all levels of government in Canada. The Company is sufficiently funded to endure an expected period of reduced business activity and has enacted plans including having workers work-from-home, in order to ensure the continuation of the Company's operations during this period of uncertainty.

Cautionary Note Regarding Forward-Looking Information

This MD&A contains forward-looking statements about the Company's objectives, strategies, financial condition, results of operations, cash flows and businesses. These statements are "forward-looking" because they are based on current expectations, estimates, assumptions, risks and uncertainties. These forward-looking statements are typically identified by future or conditional verbs or variable nouns such as "outlook", "believe", "anticipate", "estimate", "project", "expect", "intend", "plan", and terms and expressions of similar import. Such forwardlooking statements are subject to a number of risks and uncertainties which include, but are not limited to: impacts from COVID-19, cyclical downturn, competitive pressures, dealing with business and political systems in a variety of jurisdictions, repatriation of property in other jurisdictions, payment of taxes in various jurisdictions, exposure to currency movements, inadequate or failed internal processes, people or systems or from external events, safety performance, expansion and acquisition strategy, legal and regulatory risk, extreme weather conditions and the impact of natural or other disasters, specialized skills and cost of labour increases, equipment and parts availability and reputational risk. Actual results could be materially different from expectations if known or unknown risks affect the business, or if estimates or assumptions turn out to be inaccurate. The Company does not guarantee that any forward-looking statement will materialize and, accordingly, the reader is cautioned not to place reliance on such forward-looking statements.

The forward-looking statements in this MD&A are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future, including assumptions regarding the Company's ability to raise additional financing, execute business and operating strategies, and the Company's ability to develop its mineral properties. Discussions regarding the future exploration of the Company's property presumes the assumption that any necessary financings are successfully completed on reasonable and acceptable terms, whether from equity or debt issuance, joint venture or the sale of assets.

The Company disclaims any intention and assumes no obligation to update any forward-looking statement, even if new information becomes available, as a result of future events or for any other reasons, except in accordance with applicable securities laws. Risks that could cause the Company's actual results to materially differ from its current expectations are also discussed in this MD&A.

Description of Business

The Company is a mineral exploration company with its primary focus on gold, copper, nickel, and silver in north-western British Columbia where it holds a 100% interest in 30 contiguous claims comprising the Kirkham Property (the "Property"), covering an area of 10,610 hectares. Twenty of the thirty mineral claims are subject to third-party Net Smelter Return ("NSR") royalties of 2%. The Company is entitled to purchase each 1% increment of the NSR royalty for $500,000.

Over the past 4 years, the Company has spent approximately $7.4 million on exploration of the Property, before tax credits and other expense recoveries. The Property offers multiple targets and types of potential mineralization including high-grade gold, shear vein, porphyry gold-copper and magmatic nickel-copper. The exploration work done by the Company is discussed below under "Results of 2019 exploration program".

The Property is centered at 56 ̊29' N latitude and 130 4̊ 0' W longitude in the south-central part of B.C.'s "Golden Triangle" situated in the Skeena Mining Division, a significant North American exploration region, hosting numerous mineral deposits, operating mines and former producing mines. The Property is accessible only by helicopter. The Company's exploration personnel use part of an existing camp approximately 12 km from the Property. The camp is owned by Altagas Ltd. to support operations at its Forest Kerr hydroelectric project. The Property is proximate to several mines and advanced exploration projects, including Garibaldi Resources' nickel-copper discovery which is immediately to the north of the Property, Barrick Gold's past-producing Eskay Creek Mine which is 15 km to the northeast, the Snip mine (1991-1999) located 28 km to the northwest, and Pretium Resources' Brucejack gold mine which is 30 km to the southeast. As well, Seabridge's KSM and Iron Cap deposits lie 25 km to the southeast.

The Company finished its 2019 drilling program on the Property on October 18, 2019, which saw 4,460 metres ("m") drilled this season. In 2018, drilling totalled 5,094m and an initial 1,648m was drilled in 2017, for total drilling to date of 11,202m.

Mineral exploration involves a high degree of risk. The recoverability of the amounts expended on exploration by the Company is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete its exploration programs, the development of its mineral properties and upon future profitable production, or the proceeds from the disposition of its properties. The Company has not yet determined whether the Property contains economically recoverable reserves. To date, the Company has not earned any revenues and is in the exploration stage. As at December 31, 2019 the Company has positive working capital of $2.1 million.

Results of 2019 exploration program

The 2019 exploration season culminated with the Phase 2 Program (the "Program") totalling 4,460m of drill core, testing 3 targets with 11 holes designed to evaluate the porphyry copper/gold and epithermal gold targets throughout the 7.5 km long Hawilson Monzonite Intrusive Complex ("HM"). We drilled 3 holes at the Cliff target, 2 holes at the Miles prospect and 6 holes at the Cole-Etta target, , as discussed below. Earlier in 2019, the Phase 1 exploration program consisted of extensive geological mapping, prospecting, trenching as well as geochemical soil and rock sampling across high priority targets either previously identified by the Company or identified through off-season detailed data analysis.

Cliff Porphyry System:

Cliff is a large porphyry copper-gold system with an alteration footprint of 4 km x ½ km, covering the southern portion of the 7.5 km long HM. The Cliff porphyry system is near the Triassic-Jurassic unconformity, referred to as the "Red Line" where Jeff Kyba, a former geologist with the B.C. government, theorized that the geologic contact is the key marker for copper-gold mineralization. His theory, published in a BC government paper, was significant because it was the first time anyone had tied the area's discoveries together with a structural explanation.

Prior to 2019, the Company had drilled 9 holes totaling 5,566m at this target. The assay results from the previous drilling programs highlighted broad intervals of significant copper/gold mineralization associated with sericitic-potassic altered monzodiorite intrusions. These results confirmed the continuity of mineralization along this north-south oriented porphyry corridor which extend to a strike-length of 4 km between the Cliff and Nina porphyry centers.

3D geological modeling and interpretation of Worldview 3 remote sensing data, as well as surface mapping, verified a ~60o eastward dip of the HM. This work doubled the width of the Cliff zone at the southern end of the HM with additional porphyry copper/gold potential to the east and southeast. The geology, structure and alteration distribution reflect that the potassic cores of the Cliff porphyry are at deeper levels than tested by most of the previous drill holes. In particular, the work has revealed that the porphyry system is apparently the source of high-grade gold (14 g/t Au in rocks) and the historic placer gold operation in the nearby Fewright Creek (Minfile 104B 223).

All three holes drilled in 2019, totalling 1,464m, intersected significant mineralization, highlighted by KH19-30, which returned 126.5m @ 0.52 g/t gold equivalent* associated with the core potassic altered porphyry. High-grade gold intercepts, as in KH19-28, correlates with intense silicification and massive sulphide and/or late-stage quartz-carbonate veins along syn-mineral tensional faults, identified as future exploration targets. The intensity of alteration, veins and chalcopyrite-pyrite ratios increases with depth. This pattern vectors towards a deeper, high temperature potassic core to be tested in future exploration programs. The 2019 results are tabulated below:

Summary of the Assay Results from the 2019 Drilling at the Cliff Porphyry Zone:
Hole_ID	From(m)	To(m)	Length (m)	AuEq(g/t)*	Au(g/t)	Cu(%)	Mo(g/t)
KH19-28	2.4	59.9	57.5	0.51	0.31	0.14	39.0
KH19-28	109.0	170.0	61.0	0.30	0.27	0.02	16.6
KH19-29	2.75	151.25	148.5	0.34	0.18	0.11	35.4
Incl.	2.75	74.0	71.25	0.48	0.22	0.19	37.9
KH19-30	34.5	200.0	165.5	0.43	0.21	0.16	36.7
Incl.	34.5	161.0	126.5	0.51	0.24	0.19	38.0

*Gold Equivalent Formula: Au g/t+(Cu%*1.27) +(Mo g/t*0.0005) Metal Prices Used: Gold - US$ 1470/oz, Copper - US$ 2.75/lb, Molybdenum - US$10/lb

Two mineralized holes drilled by a previous operator extend the Cliff Zone a further 500m to the north.

Cliff demonstrates the continuity of Cu-Au Porphyry mineralization for at least 4 km. The mineralization remains open in most directions, with potential along strike to the north. Of significance, is the tabular distribution of mineralization down the topographic slope representing an ideal open-pit extraction scenario.

From this point, the mineralized Hawilson Porphyry is mainly masked by propylitic alteration for an additional 3.5 km. Metallis utilized porphyry vectoring and fertility tools (PVFTs), which use the chemical compositions of hydrothermal alteration zones to predict the likely direction and distance to mineralized centers. Our existing hyperspectral surveys will augment this work – particularly, to discover higher grade, core zones which can be masked by distal propylitic blankets.

Cliff Porphyry Zone- Previous Drilling Results:
Hole_ID	From(m)	To (m)	Length (m)	AuEq (g/t)*	Au(g/t)	Cu(%)	Mo(g/t)
MD09-01	3.0	334.7	331.7	0.35	0.18	0.13	15.4
Incl.	3.0	54.1	51.1	0.39	0.21	0.14	7.8
Incl.	154.0	334.7	180.7	0.53	0.26	0.20	26.1
MD09-02	70.0	147.4	77.4	0.62	0.24	0.28	51.8
KH17-06	174.0	176.9	2.9	0.48	0.21	0.20	40.9
KH17-07	88.0	168.3	80.3	0.4	0.17	0.17	27.9
KH17-08	3.9	439.4	435.5	0.41	0.25	0.11	37.5
Incl.	3.9	176.0	172.1	0.57	0.3	0.20	32.4
Incl.	86.0	166.0	80.0	0.8	0.44	0.27	33.7
Incl.	310.0	356.0	46.0	0.52	0.32	0.10	135.6
Incl.	380.0	394.0	14.0	0.78	0.65	0.07	89.5
KH18-11	203.5	276.0	72.5	0.37	0.12	0.19	17.6
KH18-12	335.0	381.0	46.0	0.48	0.42	0.04	16.2
KH18-13	222.0	248.0	26.0	0.54	0.49	0.04	5.4
KH18-13	323.0	568.5	245.5	0.40	0.21	0.12	21.2
KH18-14	36.0	95.0	59.0	0.51	0.44	0.03	63.2
KH18-14	306.0	404.8	98.8	0.65	0.62	0.02	11.3
KH18-15	61.0	155.0	94.0	0.31	0.23	0.05	40.6
Incl.	61.0	96.0	35.0	0.38	0.29	0.04	74.3
KH18-15	214.0	264.0	50.0	0.49	0.39	0.06	50.8
KH18-15	321.0	339.0	18.0	0.52	0.5	0.01	4.6
KH18-15	494.0	502.9	8.9	0.51	0.5	0.01	2.0
KH18-16	6.7	315.0	308.3	0.42	0.26	0.12	20.6
Incl.	6.7	148.0	141.3	0.71	0.4	0.23	25.3
			*Gold Equivalent Formula: Au g/t+(Cu%1.27) +(Mo g/t0.0005)Metal Prices Used: Gold - US$ 1470/oz, Copper - US$ 2.75/lb, Molybdenum - US$10/lb

For complete reference, all of the previous Cliff Zone drilling results are included here:

Miles Porphyry System:

In 2019, the eastward dip of the HM noted above led to the discovery of a major porphyry stock named the "Miles zone" immediately to the north of Cliff target. The Miles zone is represented by a large (600m x 300m) monzonite stock with systematic patterns of central potassic alteration surrounded by sericitic and distal propylitic alteration zones. Previous work had delineated a coincident gold and copper soil geochemical anomaly (>100ppb Au, >500ppm Cu).

Historical drilling by other operators at the Miles and Cliff targets consisted of 5 shallow holes which showed increasing copper-gold grades with depth, as well as alteration patterns typical of shallow level porphyry systems as demonstrated by drill hole DDH MD09-03, which assayed 22m @ 0.17% Cu, 0.33g/t Au and 1.04g/t Ag. A series of sub-parallel sheeted quartz veins of epithermal origin in the northeast of the Miles zone correlates with high-grade gold mineralization.

In 2019, the geological team excavated two 20m long trenches and collected 21 continuous rockchip samples for geochemical analysis. One of these trenches returned 2m @ 0.48% Cu and 0.147 g/t Au. A 2m interval returned 3.7 g/t Au and 0.87% Cu in the southern trench.

The 2019 Program at Miles consisted of 761m in two drill holes, targeting fault bounded Monzodiorite with sericitic alteration and sulphide mineralization. The condensed results are tabulated below.

Summary of the Assay Results from the 2019 Drilling at the Miles target:
Hole_ID	From (m)	To (m)	Length (m)	AuEq (g/t)*Au (g/t)			Cu (%) Mo(g/t)
KH19-26No Significant Mineralization
KH19-27	130.5	215.0	84.5	0.35	0.18	0.09	24.6
Incl.	130.5	164.0	33.5	0.48	0.20	0.17	60.4
	Previous Operator's Drilling Results:
MD09-03	150.0	208.0	58.0	0.35	0.21	0.09	30
MD09-05	247.0	301.5	54.5	0.39	0.36	0.02	4.98
*Metal Prices used: Gold = US$1470/oz, Copper = US$2.75/lbMolybdenum =US$10/lb

Cole Target:

The Cole target was first identified during the 2017 filed mapping and prospecting program. The target is represented by typical sub-alkalic porphyry intrusions emplaced as a swarm of north-east trending dikes leaving widespread (1,000m x 800m) hydrothermal alterations that had never been drilled. The mapping indicated a zonation pattern of shallow sericitic alteration (QSP), deeper Chlorite-Sericite alteration (SC) and peripheral propylitic (chlorite-epidote-carbonate) alteration. The contact zones of the HM as well as syn-mineral diorite and feldspar porphyry dikes host cmscale massive sulphide veins and epithermal style sheeted quartz veins. The HM porphyry dikes transition outward into pyrite-pyrrhotite-gold veins.

In 2018, the Company drilled three holes totalling 1,301m. Highlights of that drilling program were as follows:

KH18-18; the first ever drill hole at Cole, intersected porphyry style mineralization in shallow quartz stockwork zones and sulphides carrying 0.94 g/t Au over 9m and 0.42 g/t Au over 10m. The lithology and alteration patterns and airborne geophysics all

vector towards a mineralized system to the southeast;

• KH18-19 discovered a high-grade zone of 11.18 g/t Au over 7.7m including 137 g/t Au over 0.6m associated with shallow intrusion related sulphide veins. The intercept occurred within mesothermal gold-pyrrhotite veins, which commonly transition outward into sheeted quartz-carbonate veins. (Metallis New Release - Nov 20, 2018); and
• KH18-20 drilled along and across the Adam fault cutting through a series of 4-9m gold intercepts ranging from 0.40 to 0.74 g/t AuEq, associated with similar centimetrescale gold-pyrrhotite veins as in KH18-19.

Building on 2018's high-grade drill intercept of 137 g/t Au over 0.6m, in 2019 the exploration team outlined a 1 km long by 200m wide zone of NE oriented faults and epithermal veins along the Cole porphyry system. Over 200 continuous rock-chip samples were collected from 21 trenches excavated along the historic copper and gold geochemical anomalies. Several 2m intervals of continuous trench samples assayed anomalous gold ranging from 0.5 g/t to 1.25 g/t Au in the Cole porphyry system.

The 2019 Program was designed to test the continuity of epithermal high-grade gold and porphyry copper-gold mineralization at the Cole Target. Six drill holes totalling 2,235m were drilled in 2019 to test the porphyry-epithermal transition at the Cole Porphyry system, including the nearby Etta target. The drilling highlights are as follows:

• High-grade gold intervals ranging from 1.34 g/t AuEq* to 2.85 g/t AuEq* in the 2019 drill holes (See Table 1) along with the 137 g/t in KH18-19 from the 2018 program (MTS News Release Nov 29, 2018), have now confirmed the presence of multiple sub-parallel epithermal gold zones along the Adam fault;
• The broad drilling intercepts with up to 0.47 g/t AuEq* (See Table 1) correlate with pervasive green and grey sericitic altered and silicified monzonite dikes highlighting the strong potential of substantial porphyry-type mineralization at depth;
• Field mapping and 3D geological modelling has illustrated multiple sub-parallel porphyry intrusions striking N15°E and dips ~60° to the east demonstrating that untested areas are open laterally and vertically; and
• Remnants of hydrothermal magnetite identified in holes KH19-31 and KH19-33 are now believed to be linked to a very large (2 km x 2 km) magnetic anomaly at the King East target, coincident with low resistivity and anomalous Cu, Au and Mo from soil and rock samples from previous programs.

The 2019 exploration and drilling results established that the Cole target as a structurally controlled porphyry system transitions westward into epithermal gold veins. Multiple sub-parallel porphyry intrusions and hydrothermal breccia bodies along faults result in an extensive (800m x 300m) footprint of sericitic alteration including a linear (300m x 50m) zone and gold-bearing pyrrhotitepyrite and quartz-carbonate veins.

Mineralization including 1.34 g/t AuEq* to 2.85 g/t AuEq* in the 2019 drill holes (Table 1) and 137 g/t Au in KH18-19 assayed from the 2018 program (MTS News Release Nov 2018), confirmed the emplacement of multiple sub-parallel epithermal gold veins along the Adam fault. These veins

mainly occur along the footwall of the Adam fault and remain open at depth and to the south. The on-going advanced porphyry vectoring and fertility tools ("PVFT") coupled with field observations and drill logs suggest both porphyry copper-gold and epithermal-type gold potential at Cole target. Metallis' technical team is planning a strategic exploration and drilling program that will test the expansion of near surface epithermal gold mineralization whilst simultaneously targeting the deeper porphyry copper-gold mineralization.

Drill holes KH19-31 and KH19-33 tested a magnetic anomaly on the eastern fringe of the Cole porphyry system. Significantly, KH19-33 intersected a section of mineralized monzonite with hydrothermal biotite and magnetite. This magnetic feature is linked to the King East target, which represents a very large coincident magnetic-high and resistivity-low anomaly extended over an area of 2 km x 2 km. The calculated vertical gradient ('CVG") magnetic data show multiple north-south trending magnetic lineaments in King East, which reflect the structurally controlled porphyry intrusions and dikes propagated between Cole and King East targets. Moving forward, exploration efforts will aim to test mineralization in both the high-mag and low-mag zones in between. Several gold showings, monzonite dykes and gold-in-soil anomalies have also been documented near the southern margin of King East target which highlights the presence of porphyry style mineralization to be tested with future exploration and drilling programs.

	Summary of the 2019 Assay Results at Cole Porphyry System:
Hole_ID	Depth (m)	From (m)	To (m)	Length (m)	AuEq*.(g/t)	Au(g/t)	Cu(%)	Mo(g/t)
KH19-23	307.0	59.9	105.0	45.1	0.38	0.36	0.03	5.1
	including	62.4	63.4	1.0	2.03	1.92	0.09	68.6
KH19-23		228.0	237.0	9.0	0.47	0.44	0.02	4.8
KH19-24	445.0	30.5	33.0	2.5	1.34	0.44	0.56	67.2
KH19-24		224.0	272.6	48.6	0.21	0.11	0.06	31.6
KH19-24		379.0	392.0	13.0	0.43	0.31	0.07	39.3
KH19-25	461.0	34.6	55.6	21.0	0.47	0.36	0.07	30.5
	including	41.2	42.0	0.8	2.45	2.38	0.01	15.2
	including	54.8	55.6	0.8	2.85	2.67	0.10	19.0
KH19-25		210.0	289.5	79.5	0.20	0.11	0.05	19.2
KH19-31	451.0	No significant values
KH19-32	255.0	76.7	112.0	35.3	0.35	0.32	0.01	1.7
KH19-33	316.0	No significant values

*Gold Equivalent Formula: Au g/t+(Cu%*1.27) +(Mo g/t*0.0005) Metal Prices Used: Gold - US$ 1470/oz, Copper - US$ 2.75/lb, Molybdenum - US$10/lb

Metallis technical team is encouraged by the results from field mapping and drill data, which has provided us with significant information to reconstruct the anatomy of faults, porphyry intrusions and alteration patterns. These features commonly vector toward the core zones of the Cliff and Cole porphyry systems with a vertical extent of approximately 1,000m. Based on the exploration and drilling programs to date, Metallis geologists have now outlined a robust magmatic-hydrothermal complex with porphyry copper-gold systems clustered over a strike length of 7.5km. The drilling

assays provided a much better understanding of the control of mineralization which will allow the exploration team to delineate the high-grade zones in future programs.

Etta Target

The Etta epithermal veins were first identified during the 2018 field mapping and prospecting. These veins occur at the northern end of the mineralized HM, immediately to the west of the Cole porphyry system. The exploration team outlined a narrow zone of NE-trending, cm-scale sheeted quartz-carbonate-sulphide (Pyrite-Chalcopyrite) veins anomalous in gold, copper and silver. These veins are emplaced in silicified propylitic altered sedimentary rocks peripheral to the HM. A grab sample (Y060741) from one of the epithermal veins assayed 13.2 g/t Au, 795 g/t Ag, 0.5% Cu and 1.3% Zn while a nearby wall-rock sample returned 1.14 g/t Au, 1.18% Cu and 67 g/t Ag.

In 2019, the exploration team initially excavated two trenches and collected continuous rock-chip samples for geochemical analyses. The assays highlight 18 g/t Au over 0.2m in a drusy textured epithermal quartz veins, and 0.56 g/t Au and 0.31% Cu over 0.9m within massive pyrite-pyrrhotite veins.

Other targets at Kirkham, not drilled in 2019:

Nina Porphyry System

The Nina porphyry system, located about 1.5 km to the north of Cliff target, was first identified during the 2017 field mapping program, when most of the rock grab samples in this area returned values greater than 0.15% Cu and up to 0.67 g/t gold. This target is represented by an extensive (400m x 300m) zone of exposed phyllic alteration coincident with a linear, very strong resistivity and magnetic anomaly which is outboard from the mineralized HM.

In 2018, Metallis tested the continuity of the HM responsible for the gold-rich porphyry and epithermal mineralization. A 1 km step-out drill hole (KH18-17) at Nina totalling 344m discovered typical porphyry copper-gold mineralization over 180m of HM. This first pass drilling at Nina intersected the tip of an intense potassic alteration zone of 17m of 0.77 g/t gold-equivalent ("AuEq") and 15m of hydrothermal breccia carrying 0.41 g/t AuEq mainly in a silicified and sulphide-rich matrix. (Gold equivalent values represent the combined assayed gold and copper values, converted to equivalent gold). Those assays confirmed the continuity of a 4 km long porphyry corridor allowing the Company to also expand on the known gold-rich mineralization at the Cliff porphyry system.

3D geological modeling and ground follow up work in 2019 established that the Nina porphyry system is associated with the eastward dipping (50°) HM dikes along the Adam fault system. Field mapping and prospecting outlined the lateral extension of hydrothermal breccias, irregular goldbearing quartz veins and sulphide lenses to the north. Further work and sampling are required to assess the porphyry and high-grade gold potential at the Nina target.

King East Target

The King East Target is an extensive (2 km x 2 km) zone of north-south trending normal faults, magnetic and resistivity anomalies coincident with a strong copper-gold-moly geochemical signature in rocks and soil. The 2019 ground-based program included field traverses to establish the correlation of the available datasets. Late in the 2019 season, the team conducted additional

surface mapping and selective rock sampling in areas under vegetation cover to better understand the geology and refine drill targets. The Company is evaluating the assay results from the 32 samples taken during the season, of which 6 samples contained anomalous gold ranging from 0.3 - 0.8 g/t Au.

3D geological modeling has indicated multiple, NE-trending, magnetic lineaments along normal faults coincident with a strong geochemical signature of anomalous gold, copper and molybdenite has identified an apparently deeper porphyry copper-gold system at King East which the company intends to test in the future.

Thunder North

Following the discovery by Garibaldi Resources Corp. of massive Ni-Cu sulphide mineralization at its E&L ("Nickel Mountain") Project towards the end of the 2017 field season, Metallis carried out initial 2017 exploration and identified a 200m x 200m wide diorite intrusive body cut by narrow, 1-5m thick mafic rocks (diorites/gabbros) interpreted to be slightly differentiated with up to 7.5 wt.% MgO. The prospect covers an area of approximately 10 sq. km, located immediately south of on the western flank of the Eskay Rift. The northern Property boundary shares over 10 km with Garibaldi, and the Nickel Mountain project is about 1.5 km north of the Property border. Thunder North is strategically located along the "Red line" in the western margin of the Eskay rift.

In 2017, the Company also drilled its initial hole (KH17-09) at Thunder North, collared adjacent to mafic intrusions to test a pyritic gossan within andesitic volcanic and diorite rocks. The drill hole intersected structurally controlled intense gossan along a composite intrusive pluton referred to as the "Lehto Pluton" hosted by Stuhini group rocks. The textural and mineralogical characteristics the intrusive rocks indicate the presence of mafic intrusions within the Lehto Pluton that has seen no historic exploration for nickel sulfide mineralization, therefore exploration for mafic intrusions (gabbros) is the key to discover the emplacement of small open-system intrusions like those at Nickel Mountain.

In 2018, to better understand the geology and geophysical signatures, the Company carried out several lithologic and remote sensing surveys to correlate with the downhole geology and selective core assays. The first batch of 25 thin section petrography was carried out at the University of British Columbia, Mineral Deposit Research Unit ("UBC/MDRU"), whereas the second batch of 55 thin sections study, including petrographic determination of 15 samples were conducted by Vancouver Petrographics. The results of this study confirmed the presence of olivine gabbros in the Lehto Pluton; a source of the olivine gabbro floats with 25-26 wt.% MgO in the Harrymel Creek, adjacent to the Iliad prospect

The 2018 nickel exploration program at Thunder North also consisted of:

• A high-resolution Airborne VTEM survey with 83.3m line-spacing designed to test the conductive targets on the scale of E&L. This survey was followed by a 2nd Airborne VTEM survey with flight lines perpendicular to the previous survey leading to achieve the vertical "Z" component of the VTEM response which indicates the depth of a conductor;

• Results of the above VTEM Survey generated 25 coincident conductive and magnetic anomalies, outside of the footprint of the Neogene volcanic center. This highlights the potential to identify conductive sulfide mineralization in association with magnetic gabbroic rocks;

• A 5-day field mapping and prospecting program on the most intriguing geophysical anomalies in the Thunder North area. This program outlined extensive outcrops of the Hazelton Betty Creek unit of black shale to south near Terwilligan Creek. This is the stratigraphic position of Garibaldi's Nickel Mountain Gabbro Complex. Seventeen rock samples were also collected for thin section microscopy analysis: and

• Two drill holes of 195m and 191m depth tested coincident magnetic and electromagnetic anomalies at the edge of the Eocene volcanic center and encountered magnetite-rich volcanic rocks that explained the geophysical response.

Following the earlier confirmation of the presence of olivine gabbros at Thunder North through petrographic work, the exploration team along with one of the Company's technical advisors, Dr. Peter Lightfoot spent five days on the Property to further evaluate Property-wide nickel potential, with the following highlights:

• a) Field investigations confirmed the presence of gabbros at the "K9" target within the Thunder North along the southwestern extension of the >~12km trend known as the Nickel Mountain Gabbro Complex;
• b) Ground-based follow-up on nickel sulphide targets was focused on mafic intrusions at both the "K9" target and the southern flank of the Lehto pluton which contains fragments of gabbro and may be the source of olivine gabbro boulders identified in the drainage; and
• c) Mapping and prospecting identified outcropping Nickel Mountain-type leucocratic gabbros at "K9" prospect located ~1.5km southwest of E&L deposit. Soil and selective rock-chip samples have been collected for geochemical and petrogenetic analysis. Depending on the results, the Company plans to carry out detailed studies aimed at the source of the mafic rocks and their potential to host magmatic nickel sulphide mineralization.

Thunder South

In 2019, the interpretation and groundwork follow up of VTEM resistivity and remote sensing alteration anomalies led to the discovery of a broad 400m2shear zone exposed by a receding glacier at Thunder South. The shear zone is characterized by intense folding, faulting and stringers of sulphides prospective for high-grade gold mineralization.

The exploration carried out reconnaissance mapping focused on the structural fabric, shear patterns and orientation of the quartz-carbonate veins and collected 14 rock samples for geochemical analysis. Some of the quartz-carbonate and pyrite-arsenopyrite veins occurred at the interface of Rhyolite and mudstone units.

Community relations

In February 2020, the Company renewed its Communications Agreement with the Tahltan Central Government ("TCG"), the administrative body of the Tahltan Nation, located in northwest British Columbia, whose traditional territory encompasses the Property. The initial Agreement was signed in February 2018. The TCG protects Tahltan Aboriginal rights and title, the ecosystems and natural

resources of the Tahltan traditional territory by managing sustainable economic development and supporting the cultural wellness of the Tahltan community. The agreement establishes a solid framework and collaborative working arrangement between the parties, based on open dialogue, transparent communications and cooperation with regards to the company's exploration activities on the Property. The agreement also offers opportunities for cultural, economic and educational support for Tahltan members.

Representatives of the TCG toured the Property in 2018 and received an update of the Company's exploration and drilling activities, its environmental and reclamation policies and standards, and its socio-economic measures related to local communities. In 2019, the timing did not allow for an elders' field visit, but the Company did update the TCG regarding its 2019 exploration. The summary was provided to the TCG and interested band members during the mining industry's "Roundup" week in January 2020. The Company intends to continue its participation in job fairs and other exploration-related community events held in northern BC and has hired Tahltans in each of its 2017-2019 field seasons. At the date of this report however, those activities are on provincially mandated curtailment or suspension due to COVID-19. For more information about the TCG, visit www.tahltan.org.

Metallis reclaims its work sites including the drilling and helicopter landing pads once the exploration results have been thoroughly reviewed. The Company has historically used 19 different sites on the Property of which 15 have been reclaimed, with 4 being retained for use in 2020.

QAQC and Analytical Procedures

Metallis has adopted a rigorous quality assurance and quality control ("QA/QC") program to ensure best practices in sampling diamond drill core and surface rock chip and soil samples. Typical samples are approximately 1 kg of rock chips and/or soil samples, as well as 2m lengths of NQ size diamond drill core, which are delivered to ALS Global's preparation facility in Terrace, BC. The materials were initially crushed to 70% pass 2mm fraction, and then a 250g split was pulverized to better than 85% passed a 75-micron screen. The geochemical analyses were performed by ALS in Vancouver using multi-element 4-Acid digest ICP-MS package (ME-MS61). Gold was analyzed by fire assay technique Au-ICP21. In addition to the internal QAQC program by ALS, Metallis inserted 10% lab certified standards, blanks and field duplicates into the overall sampling stream. ALS is a global testing, inspection and certification business with facilities and laboratories in dozens of global locations; and is an ISO/IEC 17025:2005 accredited laboratory independent of the Company.

New accounting standard: IFRS 16 – Leases

Introduction

This new standard on leases supersedes IAS 17, Leases, and related interpretations and sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard is effective for fiscal years beginning on or after January 1, 2019 and was therefore adopted by the Company on that date. Its purpose is to report information that faithfully represents lease transactions and provides financial statement users with a base to assess the amount, timing, and uncertainties of cash flows arising from leases. The main effect of IFRS 16 is the introduction of a single lessee accounting model requiring a lessee to recognize assets and liabilities for almost all leases, effectively eliminating the off-balance sheet treatment of many leases that were historically classified as operating leases.

Rules and methodology

At inception, the Company assesses whether a contract is or contains a lease. The assessment involves the exercise of judgment about whether the lease depends on a specified asset, whether the Company obtains substantially all the economic benefits for the use of that asset during the lease term, and whether the Company has the right to direct the use of the asset. If the lease contains an extension option that the Company considers reasonably certain to be exercised, the term of lease for the purpose of adopting IFRS 16 becomes the base lease plus the renewal option, including any associated costs. If the lease includes a purchase option, the cost of the purchase is included in the calculation of lease payments. Lease payments may include fixed and variable components, and only non index-linked variable payments are excluded from IFRS 16 with such variable payments accounted for on an expense-as-incurred basis.

Once the leases and their terms are identified, the Company recognizes a right-of-use ("ROU") asset and a lease liability at the commencement of the lease. The lease liability is recognized as the present value of the net remaining lease payments, discounted at an interest rate otherwise required if the asset was acquired through a financing arrangement, using the effective interest method. The ROU assets are initially measured based on the present value of the lease payments not yet made at the date of adoption, plus initial direct costs and obligations to refurbish the asset, less any incentives received. ROU assets are included in Equipment, and the lease liability is included in current and non-current lease liability.

Lease liabilities are subsequently reduced by the lease payments made and increased by the interest cost on the liability. Depreciation is typically recorded on the ROU asset on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. The ROU assets are also subject to testing for impairment if there is an indicator for impairment.

When a company subleases a ROU asset, it shall classify the sublease as an operating lease only if the head lease is a short-term lease; otherwise the sublease is classified as a finance lease. When the sublease is classified as a finance lease, the lessor derecognizes the portion of the ROU asset pertaining to the head lease that it transfers to the sublessee, at the sublease commencement date, but continues to account for the original lease liability. The sublessor recognizes a net investment in sublease and evaluates it for impairment and may use the discount rate in the head lease to measure the net investment in sublease. The Company recognizes finance income on the net investment in the lease, and income or an expense reduction relating to variable lease payments received which were not included in the measurement of the net investment in the lease.

Impacts from the adoption of IFRS 16

Upon adoption of IFRS 16 for the first time, the Company first considered the following practical expedients permitted by the standard:

• the use of a single discount rate to a portfolio of leases with similar characteristics;
  • accounting for operating leases than have remaining terms of less than 12 months as at January 1, 2019;
• the exclusion of low-value leases;
  • the use of hindsight to determine lease terms where there exist options to extend or terminate; and
• the exclusion of initial direct costs in the measurement of ROU assets at the date of adoption

Accordingly, the Company elected not to recognize ROU assets and liabilities for leases where the total lease term is less than or equal to 12 months. The Company also elected, for certain low-value assets, to treat them as operating leases and to expense-as-incurred. The payments for such shortterm and low-value leases are recognized in the statement of operations and comprehensive loss on a straight-line basis over the lease term.

The only finance leases identified are the Company's offices premise leases, which fall under the scope of IFRS 16. Upon adoption, the Company used the modified retrospective method, also known as the cumulative catch-up method, resulting in the recognition of a ROU asset and a lease liability on the date of adoption. This method did not require restatement of comparative figures.

The impact of IFRS 16 on the financial statements of the Company are summarized in the following tables, which include the following leases:

• a) In June 2018, the Company entered into a lease agreement for the use of office space until September 2020. The lease payments include a fixed portion of $1,000 per month, increasing to $1,042 in October 2019, and a variable cost portion, but only the fixed portion is within the scope of IFRS 16. Accordingly, a lease liability of $18,139 was recognized on January 1, 2019, following the adoption of IFRS 16. The Company valued the ROU asset as being equal to the lease liability of $18,139 on the date of adoption. The lease liability was measured at the present value of the remaining lease payments, discounted at the Company's incremental borrowing rate of 8%, as at January 1, 2019. The lease liability was included within current and long-term liabilities in the statements of financial position and was amortized over the lease term following the effective interest method, until its surrender on July 1, 2019 when the lease was terminated without penalty;
• b) On July 1, 2019, the Company entered into a new three-year lease in new premises at a fixed monthly cost of $3,375. A lease liability of $108,420 was recognized on July 1, 2019, with a corresponding ROU asset. The lease liability was measured at the present value of the remaining lease payments, also discounted at the Company's incremental borrowing rate of 8%. The lease liability is included within current and long-term liabilities in the statements of financial position and is amortized over the lease term following the effective interest method; and
• c) On July 1, 2019 the Company subleased ½ of its new office space to Etruscus Resources Corp. ("ETR"), a public company related by two common directors and a common officer, following the same terms as the head lease. The Company classified the sublease as a finance lease. One-half of the ROU value of $108,420 that was recognized under the new lease was derecognized in respect of the sublease, for which a Net investment in sublease of $54,210 was recorded and for which finance income is recognized over the term of the sublease.

A lease liability of $18,139 was recognized on the date of adoption January 1, 2019, and is reconciled to the operating lease obligations as of December 31, 2018 as follows:

Operating lease obligations as of December 31, 2018	$ 19,458
Discounting using the January 1, 2019 incremental borrowing rate	(1,319)
Lease liability recognized as of January 1, 2019	$ 18,139
Current portion	$ 10,050
Long-term portion	8,089
Total lease liability, January 1, 2019	$ 18,139

The lease liability as at December 31, 2019 is shown in the following table:

	Office lease	Office lease
	1/1/19to 6/30/19	7/1/19to 12/31/19	Total
Balance at inception	$18,139	$ 108,420	$ 126,559
Lease payments	(6,000)	(20,250)	(26,250)
Amortization of discount	637	3,932	4,569
Termination of lease July 1, 2019	(12,776)	-	(12,776)
Balance, end of period	$	-$92,102	$92,102
Short-term portion of lease liability	$	-$34,654	$34,654
Long-term portion of lease liability		-57,448	57,448
Total lease liability	$	-$92,102	$ 92,102

Maturity analysis of long-term lease liability:

	2021	2022	Total
Long-term lease liability	$ 37,530	$ 19,918	$ 57,448

	Date ofadoption	Year ended	As at
	January 1,2019	December31, 2019	December 31,2019
Changes to statements of financialposition:
Equipment-Right of use assetNet investment in sublease	$18,139-		$45,17646,051
Current liabilities	(10,050)		(34,654)
Long term liabilitiesDeficit	(8,089)-		(57,448)875
	$-		$-
Changes to Statements of operations:
Operating expenses:Increase in depreciation		$14,476
Decrease in rentexpense		(26,250)
Net decrease in operating expenses:		(11,774)
Other:
Increase in finance income on sublease		(1,966)
Increase in finance income on surrender of lease		(79)
Increase in amortization of discountDecrease in rental income		4,56910,125
Netincreasein loss for the year		$875

Effects of IFRS 16 on the Company's financial statements:

Maturity analysis of lease payments receivable and reconciliation to net investment in sublease:

	2020	2021	2022	Total
Undiscounted lease payments receivable	$ 34,891	$ 34,891	$ 17,445	$ 87,227
Variable cost portion	(14,641)	(14,641)	(7,320)	(36,602)
Undiscounted finance lease payments	20,250	20,250	10,125	50,625
Finance income	(2,923)	(1,485)	(166)	(4,574)
Net investment in sublease	$ 17,327	$ 18,765	$ 9,959	$ 46,051

	LeaseDatedJune 21,2018	LeaseDatedJuly 1,2019	SubleaseDatedJuly 1,2019	Total
Sublease income: variable lease costs,recorded as a credit to rent expense	$-	$-	$ (7,320)	$ (7,320)
Variable lease costs not included in financeleases, recorded underrent expense	5,423	14,640	-	20,063
Other-rentsexpensed as incurred	-	-	-	167
Total net rent expense	$5,423	$ 14,640	$ (7,320)	$12,910

Rent and non-finance lease transactions for the year ended December 31, 2019:

Selected Annual Financial Information

The following table provides a brief summary of the Company's financial operations. For more detailed information, refer to the Annual Financial Statements.

	Year EndedDecember 31,2019	Year EndedDecember 31,2018	Year EndedDecember 31,2017
Total assets	$ 8,869,466	$ 7,115,920	$ 4,989,285
Total liabilities	(391,962)	(78,254)	(76,369)
Shareholders' equity (deficiency)	8,477,504	7,037,666	4,912,916
Major operating expense items
Consulting fees	319,950	322,675	254,350
Investor relations	45,000	17,500	4,500
Advertising, marketing, promotion	59,229	159,066	45,397
Professional fees	39,504	80,981	42,976
Regulatory and transfer agent fees	42,832	80,439	25,484
Share-based compensation	-	1,115,162	295,895
Net loss	$ (360,401)	$ (1,803,627)	$ (473,290)
Basic and diluted loss per share	$(0.01)	$(0.06)	$(0.02)

Analysis of annual operations for 2019 compared to 2018:

The Company's net loss in 2019 of $360,401 is $1,443,226 less than the net loss in 2018. The two primary differences, which comprise 94% of the reduction in net loss, are share-based compensation of $nil (2018 - $1,115,162) and other income on settlement of flow-through premium liability of $234,337 (2018 - $17,605). Options were granted in 2018, giving rise to the share-based compensation, calculated pursuant to the Black-Scholes pricing model, and a private placement

flow-through financing completed in 2019 was recorded at a premium valuation which was partially amortized to income as a result of certain qualifying exploration costs incurred after the financing, and up to December 31, 2019. Other key reductions in net loss include advertising marketing and promotion which in 2019 decreased $99,837, professional fees which decreased $41,477 and regulatory and transfer agent fees which decreased $37,607. These costs declined in 2019 due to certain non-recurring costs in 2018, namely, the listing of the Company's shares on the OTCQB, and the sponsorship of a US trade show. In 2019, the only key increase was office and general which rose $20,358, mainly due to the move of the Company office to new premises. Overall, general corporate activities remained consistent with the same size of office staff compared to 2018: at December 31, 2019 there were 5 individuals working for the Company.

Total operating expenses, not including share-based compensation, were $627,115 (2018 - $774,734). As noted above, certain expenses declined, and others increased. Total consulting fees remained consistent at $319,950 (2018 - $322,675). Increases, other than office and general noted above, were also seen in investor relations fees of $45,000 (2018 - $17,500) and depreciation of $19,473 (2018 - $7,572). On August 1, 2018 the Company entered into an agreement with investor relations consultant Nicosia Capital Corp. ("Nicosia"), for a six-month period at a rate of $3,500 per month. Nicosia provides shareholder communication services, market awareness and promotional activities but does not provide market-making services. On February 1, 2019, the agreement was extended for an additional 6-month term to July 31, 2019, with the same terms and conditions. The contract was renewed August 1, 2019 with a fee increase to $4,500 per month effective October 1, 2019. Depreciation rose as a result of the application of IFRS 16, which capitalizes, and then depreciates, the value of the leased premises.

All other expense categories declined: advertising, marketing and promotion, professional fees, regulatory and transfer agent fees, rent, and travel. As explained above, the declines were mainly due to one-time costs incurred in 2018. However, the decline of rent expense is from the effects of IFRS 16 which moved the fixed portion of lease payments to the balance sheet.

Other income and expenses include finance income and other gains and losses. Interest income of $47,323 (2018 - $64,164) reflects interest income from short-term money market investments which declined in 2019 proportionate to the lower average amounts on hand available for investment compared to 2018. Finance costs of $4,569 (2018 - $nil) reflect the amortization of the lease liability pursuant to IFRS 16.

Other income on settlement of flow-through premium liability is $234,337 (2018 - $17,605) and reflects the proportion of qualifying exploration expenses incurred during the respective period, relative to the total flow-though financing, as applied to the flow-through share premium. The flowthrough share premium is the fair value of the flow-through shares issued in excess of their fair market value at the time of issuance. The qualifying exploration expenses are those exploration expenses incurred subsequent to the flow-through financing, which "flow" to the flow-through subscribers' as a deduction on their personal income tax returns, and which reduces the flowthrough premium liability which was recorded at the time of the issuance(s) of flow-through common shares.

The Company's Stock Option Plan provides for full vesting of options at the time of grant. Sharebased compensation is calculated using the Black-scholes option pricing model, and the calculated amount of $1,115,162 was relatively large in 2018 due to the high option grant prices of $1.35 and $1.05. The Company has not issued any stock options to investor relations individuals or entities, which would be required to vest over a one-year period.

Analysis of annual operations for 2018 compared to 2017:

The Company's net loss in 2018 of $1,803,627 is $1,330,337 higher than 2017's net loss of $473,290. The net loss is composed of share-based compensation of $1,115,162 (2017 - $295,895), other operating costs of $774,734 (2017 - $422,578), and other gains and income credits of $86,269 (2017 - $245,183). Share-based compensation arises from the fair value computations over the vesting periods of stock option grants. With the exception of investor relations options grants (of which there are currently none), the Company's Stock Option Plan provides for full vesting of options at the time of grant. Share-based compensation is calculated using the Black-scholes option pricing model, and the calculated amount was much larger in 2018 due to the much higher option grant prices of $1.35 and $1.05, compared to $0.39 options granted in 2017. Higher other operating costs in 2018 are reflected primarily by consulting fees of $322,675 (2017 - $254,350), advertising marketing and promotion of $159,066 (2017 - $45,397), professional fees of $80,981 (2017 - $42,976) and regulatory and transfer agent fees of $80,439 (2017 - $25,484), which together account for 83% (2017 - 87%) of other operating costs. The other gains and income credits are composed of interest income from short-term money market investments, other income on settlement of flow-through share premium liability which reflects the Company's incurrence of sufficient qualifying flow-through exploration expenses, unrealized gains on marketable securities and gains from the reversals of other liabilities, as detailed in the statements of operations and comprehensive loss.

Regarding the increase in operating costs, advertising, marketing and promotion costs rose $113,669 in 2018 compared to 2017 largely due to the costs of introducing Metallis to the US marketplace, which included participation in two US resource trade shows and the listing of the Company's shares on the OTCQB marketplace, as well as some magazine/periodical advertising; professional fees and regulatory and transfer agent fees together rose $92,960 in 2018 of which $78,109 related to the OTCQB listing costs; and consulting fees rose $68,325 as corporate overhead increased to support the expanded exploration activity which more than doubled from 2017. Office and general expenses rose $36,603 during the year due to increases in IT, printing, news dissemination costs, insurance and general supplies.

Analysis of annual cash flows:

In 2019, the Company raised a total gross amount of $2,275,371 (2018 - $2,839,393) from issuing equity, of which $1,855,601 (2018 - $2,181,713) was from private placements, $419,770 (2018 - $618,680) was from the exercise of warrants and $nil (2018 - $39,000) was from the exercise of stock options. Issuance expenses were $13,009 (2018 - $26,178) representing 0.7% (2018 – 0.9%) of the gross private placement proceeds. The Company completed on flow-through private placement in 2019 and one non-flow-through private placement in 2018.

In 2019, the Company also sold its marketable securities, consisting of 225,000 shares of Seahawk Ventures Inc. for net proceeds of $70,907, shares which had been held since 2013. The Company received interest income of $49,600 (2018 - $64,164) from the investment of cash resources in short-term money market instruments.

The Company spent $2,531,756 (2018 - $3,233,791) on the Kirkham property during the year. The 2018 amount includes $401,070 (US $300,000) to acquire a pre-existing 2% Net Smelter Returns royalty, which means the total exploration outflows declined 12% in 2019 compared to 2018. Operating cost outflows were $574,890 (2018 - $678,995), a decline of 15%, now averaging approximately $48,000 (2018 - $57,000) per month. The Company's monthly operating cost

outflows are lower than 2018 primarily because of the 2018 costs relating the OTCQB listing process and US trade show attendance, neither of which were incurred in 2019.

The Company ended 2019 with $1,593,629 in cash and cash equivalents.

	Three	Three	Three	Three
	Months	Months	Months	Months
	Ended	Ended	Ended	Ended
	December 31,	September 30,	June 30,	March 31,
	2019	2019	2019	2019
Total assets	$ 8,869,466	$ 8,724,169	$ 6,902,973	$ 6,930,597
Total liabilities	(391,962)	(831,954)	(44,021)	(53,224)
Shareholders' equity	8,477,504	7,892,215	6,858,952	6,877,373
Key operating expenses:
Advertising, marketing, promotion	14,719	19,555	10,215	14,740
Consulting fees	63,000	85,950	85,500	85,500
Professional fees	34,498	113	4,831	62
Regulatory and transfer agent	1,668	8,024	25,269	7,871
Share-based compensation	-	-	-	-
Net income (loss)	41,729	(88,866)	(152,971)	(160,293)
Earnings (loss) per share-basic	0.00	(0.00)	(0.00)	(0.00)

Quarterly Information

	Three	Three	Three	Three
	Months	Months	Months	Months
	Ended	Ended	Ended	Ended
	December 31,	September 30,	June 30,	March 31,
	2018	2018	2018	2018
Total assets	$ 7,115,920	$ 7,795,488	$ 7,287,841	$ 7,176,046
Total liabilities	(78,254)	(478,424)	(67,386)	(29,988)
Shareholders' equity	7,037,666	7,317,064	7,220,455	7,146,058
Key operating expenses:
Advertising, marketing, promotion	105,365	27,344	14,284	12,073
Consulting fees	85,500	82,500	76,500	78,175
Professional fees	38,857	2,375	17,735	22,014
Regulatory and transfer agent	2,023	25,641	35,948	16,827
Share-based compensation	-	1,115,162	-	-
Net income (loss)	(281,378)	(1,276,053)	(155,853)	(90,343)
Earnings (loss) per share-basic	(0.01)	(0.04)	(0.00)	(0.00)

Results of Operations

Three months ended December 31, 2019 compared to three months ended September 30, 2019

The Company had net income (loss) for the current Q4 2019 period of $41,729 (Q3 2019 - $(88,866)), composed of operating costs of $153,560 (Q3 2019- $163,232), interest income of $11,694 (Q3 2019 - $10,854), finance income on sublease of $942 (Q3 2019 - $1,024), amortization of discount of $1,885 (Q3 2019 - $1,968), other income on settlement of flow-through premium liability of $180,006 (Q3 2019 - $54,331), net loss on sale of marketable securities of $12,343 (Q3 2019 - $nil) and unrealized gain on marketable securities of $16,875 (Q3 2019 - $10,125).

Operating costs declined 6% in Q4 compared to Q3, and are comprised primarily of consulting fees of $63,000 (Q3 2019 - $85,950), professional fees of $34,498 (Q3 2019 - $113), office and general of $18,557 (Q3 2019 - $26,588), and advertising marketing and promotion of $14,719 (Q3 2019 - $19,555) which together represent 85% (Q3 2019 - 81%) of all operating expenses. Remaining operating costs are $22,786 (Q3 2019 - $31,026) and include depreciation, investor relations, regulatory and transfer agent fees, rent and travel.

Consulting fees declined from $85,950 to $63,000 as a result of the departure of the former corporate secretary/office manager, who's responsibilities and tasks have been and will continue to be performed by existing personnel. The Company currently has 3 full-time and 3 part-time individuals, which is one person less than 2018 and 2019. Professional fees rose from $113 in Q3 2019 to $34,498 in Q4 2019 substantially due to the accrual of the $30,000 audit fee for 2019. Office and general expenses declined 30% mainly because all of the costs associated with the move of the Company office at the beginning of Q3 2019 were incurred in Q3 2019. Other office and general expenses are recurring and include corporate and liability insurance premiums, communications, supplies, website and IT management, printing costs and dues, fees and subscriptions. Finally, advertising, marketing and promotion declined $4,836 or 25% as the Company had paid about $6,000 in the previous quarter for a summer internet market awareness campaign.

Investor relations fees paid to Nicosia were $13,500 (Q3 2019 - $10,500) reflecting a $1,000 per month increase effective October 1, 2019. To date, no investor relations stock options have been granted to Nicosia, or any other individual or entity.

Management expects its operating costs, not including share-based compensation, to average approximately $130,000 per quarter in 2020, about 16% less than the 2019 average of $155,000 per quarter and about 33% less than the 2018 average of $193,000 per quarter. Overall, the decline is primarily due to lower consulting fees, fewer web-based marketing campaigns expected in 2020, and the fact that the prior periods included CSE and OTCQB listing costs and office moving costs.

Other income on settlement of flow-through premium liability reflects the incurrence of $940,951 of qualifying exploration expenses incurred during the respective period, relative to the 2019 flowthough financing of $1,855,601, as applied to the flow-through share premium of $462,123. The comparative amount of other income on settlement of flow-through premium liability of $17,605 reflects the incurrence in 2018 of $82,157 of qualifying exploration expenses following the lookback rule, relating to a flow-through financing in 2017 totalling $540,610.

Interest income is mainly from the Company's short-term GIC investments. Amortization of discount is the interest on lease liabilities, amortized using the effective interest method.

The unrealized gains and losses on marketable securities related to the Company's holdings of 225,000 Seahawk Ventures Corp. shares, listed on the CSE Exchange under the symbol "SHV", reflecting period-to-period fluctuations of the market price of SHV shares which the Company recognized at each period end. In Q4 2019, the Company sold all of its SHV shares for total proceeds of $70,907, recording a taxable capital gain of $23,657.

In Q4 2019, the Company completed the final two tranches of a flow-through private placement totalling 968,638 flow-through common shares issued at a price of $0.88 per share, recording proceeds of $852,401 and issuance costs of $6,318. In Q3 2019, the Company completed the first tranche of the flow-through private placement totalling 1,140,000 flow-through common shares issued at $0.88 per flow-through common share, recording proceeds of $1,003,200 and issuance costs of $6,691. A total of $285,220 was also received from the exercise of share-purchase warrants during Q3 2019. All of the warrants exercised in Q3 2019 were at $0.40 per share except for 35,000 warrants exercised at $0.80 per share, resulting in the total issuance of 295,050 common shares.

In Q4 2019, the Company disbursed cash of $1,195,455 (Q3 2019 - $1,102,704) on property exploration. The exploration program began on June 30, 2019 and ended on October 23, 2019. Approximately 77% of the disbursements relate to drilling, helicopter support and camp accommodations, with the largest component being drilling.

Three months ended December 31, 2019 compared to three months ended December 31, 2018:

The Company had net income during the period of $41,729 (Q4 2018 – net loss $281,378), consisting of operating costs of $153,560 (Q4 2018 - $290,281), interest income of $11,694 (Q4 2018 - $12,278), finance income on sublease of $942 (Q4 2018 – $nil), amortization of discount of $1,885 (Q4 2018 - $nil), net loss on sale of marketable securities of $12,343 (Q4 2018 - $nil), unrealized gain on marketable securities of $16,875 (Q4 2018 - net loss $3,375), and other income on settlement of flow-through premium liability of $180,006 (Q4 2018 - $nil).

Total operating costs declined period-on-period by $136,721 or 47%. Three primary factors contributed to this decline: Consulting fees declined from $85,500 to $63,000, advertising marketing and promotion declined from $105,365 to $14,719, and travel declined from $18,490 to $2,213) which together account for $129,423 or 95% of the reduction in operating costs.

The large decline in advertising, marketing and promotion is due mainly to two non-recurring items in 2018: a Q4 2018 US trade show sponsorship of $75,000, and $8,100 for a web-based email campaign in 2018 that was not renewed in 2019. Travel declined as there was no US trade show travel in 2019. The decline in consulting fees is mainly a consequence of the departure of the former corporate secretary / office manager at the end of Q3 2019.

Other operating costs were, in aggregate, very similar across both periods and includes depreciation, investor relations, office and general, rent, professional fees, and regulatory and transfer agent fees which together totalled $78,054 (Q4 2018 - $80,926).

Liquidity and capital management

Capital is defined as the Company's share capital. The Company's objectives when managing capital are to fund critical exploration work, meet its on-going liabilities, continue as a going concern, maintain creditworthiness and to ultimately maximize returns for shareholders over the long term. Meeting current and future liabilities and obligations as a non-revenue early stage explorer requires mid-term planning with respect to financing, by considering current and future

cash needs and consideration of the Company's internal, exploration and financing risks at any particular time. The Company endeavors to maintain sufficient capital balances over the periods to alleviate unexpected cash flow shortfalls.

The capital for operations and property exploration has historically come primarily from proceeds from the issuance of common shares. Funds raised from equity financings and the sale of assets prior to 2017 was sufficient to continue early stage exploration of the Property and cover corporate overhead, without excess dilution to the shareholders due to the limited amounts of financing raised. In 2017 and 2018, higher equity prices and liquidity provided opportunities for the Company to complete several private placements at successively higher prices which served to mitigate excessive dilution as it financed the 2017, 2018 and approximately 62% of the 2019 exploration programs and all working capital through 2019. A flow-through financing of $1.9 million completed in October 2019 has left $0.9 million for exploration in 2020. Additional funding may be required in 2020 depending upon the scope of exploration undertaken.

The Company remains well capitalized and has working capital at the date of this report of $2.0 million as follows:

Working capital, March 24,2020	($000's)
Cash and cash equivalents	$ 1,992
Receivables	14
BC tax credit receivable	269
Accounts payable and accrued liabilities	(60)
Short term lease liability	(35)
Flow through premium liability	(191)
Total net working capital	$ 1,989

Up to December 31, 2019, the Company incurred $940,951 of flow-through eligible expenses and pursuant to the $1,855,601 flow-through private placement completed in Q4 2019, will be spending the remaining unexpended flow-through funds of $914,650 on eligible property expenditures in 2020. Should the exploration season be curtailed or otherwise impaired by the effects from COVID-19, the Company expects that the government will introduce certain measures to provide relief in such situations like this. Aside from the required exploration spend, there remains $1.0 million of current net working capital which is unencumbered and available for further property work and/or general working capital.

Outstanding share information

The total number of common shares outstanding as of the date of this report is 36,155,767 shares, unchanged from December 31, 2019.

Stock options

Expiry Date	Number ofOptions	Vested andexercisable	ExercisePrice( $ )
April 23, 2021	1,175,000	1,175,000	0.10
August 18, 2022	760,000	760,000	0.39
July 13, 2023	1,000,000	1,000,000	1.35
August 9, 2023	100,000	100,000	1.05
Total outstanding options	3,035,000	3,035,000

At the date of this report, there are 3,035,000 stock options outstanding, unchanged from December 31, 2019 as follows:

Warrants

As at the date of this report, there are 948,571 share purchase warrants outstanding, unchanged from December 31, 2019 as follows:

Warrantsoutstandingat December 31,	Number ofWarrants	Number ofWarrants	No. of warrantsOutstandingMarch 24,	ExercisePrice per
2019	expired	Exercised	2020	share	Expiry Date
948,571	-	-	948,571	1.60	January 26, 2021

Directors, Officers and Related Parties

The directors of the Company are Fiore Aliperti, Jon Lever, Michael Sikich and Dr. David Webb. The officers are Mr. Aliperti (CEO), Mr. Lever (CFO), and Mr. Dupre (Vice-President of Exploration).

During the year ended December 31, 2019, there were no changes to the Company's Board of Directors. Within the management team however, corporate secretary Mrs. Sameen Oates resigned on July 8, 2019 from her officer's position and remained as office manager through September 30, 2019 at which time she left the Company. Her corporate secretarial responsibilities and duties are being performed by existing personnel.

The following related parties include directors and key management personnel, including those entities in which such individuals may hold positions that result in them having control or significant influence over the financial or operation policies of these entities:

• a) Avanti Consulting Inc., a company controlled by the current Chief Executive Officer and director, provides consulting services to the Company;

• b) Lever Capital Corp., a company owned by the current Chief Financial Officer and director, provides consulting services to the Company;

• c) The Company's Corporate Secretary provided general administrative services, bookkeeping and corporate secretarial services to the Company up to July 8, 2019;

• d) D. G. Dupre and Associates Inc., a company that is controlled by the Vice President of Exploration, provides geological consulting services to the Company, the amounts of which are capitalized as geological costs under exploration and evaluation assets; and

• e) DRW Geological Consultants Ltd. is a company controlled by a director of the company and which provides occasional geological consulting services to the Company, the amounts of which are capitalized under exploration and evaluation assets

The aggregate value of fee-based transactions (exclusive of share-based compensation) and outstanding balances relating to the above noted related parties are as follows:

	Transactionsforthe year endedDecember 31,2019		Transactions forthe year endedDecember 31,2018	Balancepayable as atDecember 31,2019		Balancepayable as atDecember 31,2018
Avanti Consulting Inc.Lever Capital Corp.S. OatesD.G. Dupre and Associates Inc.DRW Geological Consultants	(a)(b)(c)(d)(e)	$ 132,00084,00043,80057,5006,000	$ 125,00077,00082,00060,000	$	----	$	----
Total		$ 323,300	$ 344,000	$	-	$	-

Other related party transactions

During the year ended December 31, 2019, directors, officers and management exercised 302,444 warrants at $0.35 per share for total proceeds of $105,855, all during Q2 2019.

As at December 31, 2019, the Company owed ETR $943 (2018 - $nil) for exploration costs, paid on behalf of the Company.

During the year ended December 31, 2019, the Company recorded receivables from ETR arising primarily from exploration expenses paid on ETR's behalf. ETR utilized some of the Company's exploration subcontractor relationships, mainly involving its work camp arrangements. At no time did the Company advance any cash to ETR. ETR and the Company also share an office and the Company expects general day-to-day operations to occasionally have receivables or payables due from or to ETR. The Company received an undertaking from ETR to repay the exploration costs owing, firstly out of its next financing transaction, and should it be insufficient then the balance would be repaid out of each consecutive subsequent financing transaction until such amounts are repaid. For the upcoming 2020 exploration season, ETR expects to have all critical vendor relationships in place and directly pay for all of its exploration expenses going forward.

As at December 31, 2019, all amounts had been repaid to the Company, as shown in the following schedule:

Transactions-EtruscusResources Corp.	Paid on behalf ofETR during theAmountsyear endedrepaid byDecember 31, 2019ETR		BalanceReceivable as atDecember 31,2019		Balancereceivable as atDecember 31,2018
Exploration costs:
Camp and accommodations	$ 182,448	$ 182,448	$	-	$	-
Helicopter	63,501	63,501		-		-
Other exploration	20,268	20,268		-		-
Office rent and administration	27,061	27,061		-
GST	14,262	14,262
Total	$ 307,540	$ 307,540	$	-	$	-

Off Balance Sheet Arrangements

As of the date of this report, the Company does not have any long-term commitments or off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company. Leases, formerly treated as off-balance sheet arrangements, are now subject to accounting standard IFRS 16, effective January 1, 2019, whereby lease liabilities and right-of-use asset amounts are recognized on the balance sheet and are then amortized over the lease term.

Risk Factors

Investing in the common shares of the Company has risks. Prospective investors should carefully consider the risks described below, together with all of the other information included in this MD&A before making an investment decision. If any of the following risks materialize or occur, the business, financial condition or results of operations of the Company could be harmed. In such an event, the trading price of the common shares could decline, and prospective investors may lose part or all of their investment.

Financing

The Company may not be successful at raising future financing and if it expends all of its cash on hand, it could therefore become insolvent or face bankruptcy proceedings. Without sufficient funds, it may not be able to carry on operations, and it may not be able to continue to develop or even maintain its exploration and evaluation assets. If the only alternative is to sell the Company's assets, any funds received may not be sufficient to allow the Company to continue as a going concern.

Possible Trading Suspension or Delisting

The Exchange may suspend from trading or delist the securities of the Company where the Company has failed to submit documents to the Exchange in the time periods required or has otherwise failed to meet minimum standards. Suspension from trading of the common shares may, and delisting of the common shares will, result in the regulatory securities authorities issuing a consolidated interim cease trade order against the Company. In addition, delisting of the common shares will result in the cancellation of all currently issued and outstanding common shares of the Company held by insiders. Trading in the common shares of the Company may be halted at other times for other reasons also.

Dilution

If the Company issues treasury shares to finance acquisition or participation opportunities, or to raise exploration funds and working capital, shareholders may suffer dilution of their investment and/or control of the Company could change.

Reliance on Management

The Company is relying solely on the past business success of its directors and officers to identify, acquire and develop strategic assets of merit. The success of the Company is dependent upon the efforts and abilities of its directors and officers and from the results of exploration. The loss of any of its directors or officers could have a material adverse effect upon the business and prospects of the Company.

Title to mineral resource properties

Although the Company conducts title reviews of its properties in accordance with industry practice, title to mineral exploration permits and mineral claims cannot be guaranteed and may be subject to regulatory changes and possible expropriation or cancellation. To the extent financing is not available, resource property fees and claim payments, work commitments, rental payments and option payments, if any, may not be completed and could result in a loss of property ownership or earning opportunities for the Company.

Industry and mineral exploration risks

Mineral exploration is highly speculative in nature, involves many risks and is frequently nonproductive. There is no assurance that the Company's exploration efforts will be successful. At present, the Company's Property does not contain any proven or probable reserves. Success in establishing reserves is a result of several factors, including the quality of the project itself. Substantial expenditures are required to establish reserves or resources through drilling, to develop metallurgical processes, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Because of these uncertainties, no assurance can be given that planned exploration programs will result in the establishment of mineral resources or reserves. Furthermore, the Company may be subject to industry risks which could not be reasonably predicted in advance, such as labour disputes, natural disasters, or estimation errors.

Community relations

Public scrutiny of mining projects has brought corporate social responsibilities, community relations and higher ethical standards into the strategic planning process. Community and public support for continued exploration and future mine development requires public engagement and involvement of key stakeholders throughout the exploration and development process. Key areas of concern include the sharing or transfer of economic benefits and environmental stewardship. The lack of a social license to operate could impair the value of the Company's resource properties or delay or prevent exploration, development or construction activities.

Financial instruments

The Company's financial instruments consist of cash and cash equivalents, receivables, deposits, marketable securities and accounts payable.

The Company classifies its financial assets and financial liabilities in the following measurement categories:

• i) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and
• ii) those to be measured at amortized cost using the effective interest method.

The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or other comprehensive income (loss).

Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at fair value through profit or loss (irrevocable election at the time of recognition). Any fair value changes attributable to changes in credit risk for liabilities designated at fair value through profit and loss are recorded in other comprehensive income and any fair value change in excess of the amount attributable to changes in credit risk is recognized in profit and loss.

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

Except for cash and cash equivalents and marketable securities, all financial instruments held by the Company are measured at amortized cost. Nevertheless, the fair values of these financial instruments approximate their carrying value due to their short-term maturities. The fair values of cash and cash equivalents and marketable securities are measured at fair value through profit or loss and any changes to fair value subsequent to initial recognition are recorded in profit or loss for the period in which they occur. Finance income and finance costs arising from financial assets and financial liabilities respectively, are recorded in profit and loss.

Fair values of financial instruments are classified in a fair value hierarchy based on the inputs used to determine fair values, as follows:

The three levels of the fair value hierarchy are:

• Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities;
• Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
  • Level 3 Inputs that are not based on observable market data, with fair value measurement derived from valuation techniques.

The fair values of cash and cash equivalents and marketable securities are measured based on Level 1 inputs of the fair value hierarchy.

Critical judgements and estimates

In preparing these condensed interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty in 2019 were the same as those described in the annual financial statements for the year ended December 31, 2018, except for the new significant judgements related to lessee and lessor accounting under IFRS 16 which are summarized below.

The effect of a change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Significant assumptions about the future and other sources of estimation uncertainty that management has made 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:

• a) The carrying value of the investment in exploration and evaluation assets and the recoverability of the carrying value, which are included in the statement of financial position;
• b) The Company has taken steps to verify title to exploration and evaluation assets in which it has an interest, but these procedures do not guarantee the Company's title. Properties may be subject to prior agreements or transfers and title may be affected by undetected defects;
• c) Significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite the Company's belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made;
• d) The inputs used in accounting for share-based compensation expense in the statement of operations and comprehensive loss, including share price volatility and risk-free interest rates;
• e) The significant judgements, estimates and assumptions made by management as they relate to IFRS 16 - Leases, primarily include evaluating the appropriate discount rate to use to discount the lease liability, the determination of the lease term when the lease contains an extension option, and assessing if the Company is reasonably certain that it would exercise an extension option; and such judgements, estimates and assumptions affect the present value of the lease liabilities, the value of the right-ofuse assets, the value of the net investment in sublease and the amounts recognized in

income and expense, including depreciation, rent expense, finance expense and finance income; and

f) The assumption that the Company is a going concern and will continue in operating for the foreseeable future and at least one year is a judgment.

Financial Risks

The Company's financial risk exposures and their impact on the Company's financial instruments are summarized below:

Credit Risk

Credit risk arises from the potential that one or more counterparties fail to meet their obligations. The Company is normally exposed to credit risk through its cash and cash equivalents and receivables. The Company manages credit risk associated with its cash and cash equivalents by using reputable financial institutions, from which management believes the risk to be remote. Receivables generally consists of recoverable Canadian sales taxes, accrued interest and Canadian mineral exploration tax credits receivable, and management believes the collectability of all of these amounts to be assured.

The Company shares an office with related party ETR, and during 2019 paid some of ETR's exploration costs. All amounts were repaid by ETR during the year ended December 31, 2019. However, for the period ended September 30, 2019, there were amounts receivable from ETR. These amounts are also considered at low risk of default, due to management having some influence over the operations of ETR, the receipt of an undertaking from ETR to repay any amounts owing out of its next subsequent financing transaction(s) and the early stage of ETR's exploration cycle. Accordingly, collection of amounts due from related party is also believed to be assured.

Liquidity Risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2019, the Company has cash and cash equivalents of $1,593,629 (December 31, 2018 - $2,342,510) to settle total current liabilities of $334,514 (December 31, 2018 - $78,254). The only long-term liability is a lease liability of $57,448 that matures in 2022.

Management believes that the Company has sufficient liquidity for its 2020 exploration programs and its working capital needs over the ensuing year but may need more financing depending upon the scope of 2020 exploration to be undertaken.

The Company has historically relied on equity and debt financings and asset sales to satisfy its capital requirements and will continue to depend upon equity capital and debt as necessary and may also enter into earn-in arrangements or the sale of certain property interests. There can be no assurance the Company will be able to obtain its future financings on acceptable terms. The ability of the Company to continue on this course will depend, in part, on the prevailing market conditions and the market interest in financing the Company's mineral property exploration programs, and the scope of such programs.

Interest rate risk

The Company is not exposed to risk in the event of interest rate fluctuations. The Company has no long-term debt other than a lease liability, has not entered into any interest rate swaps or other financial arrangements that mitigate the exposure to interest rate fluctuations, and current interest rates remain historically low. For these reasons the Company believes it is not subject to material risks should interest rates change.

Market risk

The Company was exposed to market risk because of the fluctuating values of its publicly traded marketable securities. The Company has no control over these fluctuations and did not hedge its marketable securities. The Company sold all of its marketable securities during the year ended December 31, 2019.

Foreign currency risk

The Company's functional currency is the Canadian dollar and an immaterial amount of transactions are in other currencies. Management believes the foreign exchange risk derived from currency conversions is not significant and therefore does not hedge its foreign exchange risk.

Management's Responsibility for the Financial Statements

Information provided in this report, and the Company's financial statements for the year ended December 31, 2019, are the responsibility of management. In the preparation of these reports, judgements and estimates are sometimes necessary to make a determination of future value for certain assets or liabilities. Management believes such judgements and estimates have been carefully exercised and are properly reflected in the financial statements. Management maintains a system of internal controls to provide reasonable assurances that the Corporation's assets are safeguarded and to facilitate the preparation of relevant and timely information.

Corporate Governance

The Company's Board of Directors and its committees substantially follow the recommended corporate governance guidelines for public companies to ensure transparency and accountability to the shareholders. The current Board of four individuals is comprised of two independent members and two executive officers. The audit committee consists of three members comprised of two independent directors and the chief executive officer. The compensation committee consists of three members, of which two are independent, and the health, safety, environment and social responsibility committee consists of two members.