Metallis Resources Inc. - Management Reports 2021

METALLIS RESOURCES INC. Management’s Discussion and Analysis Year ended December 31, 2020

Introduction

This Management Discussion and Analysis (“MD&A”) is dated March 19, 2021 and should be read in conjunction with Metallis Resources Inc.’s (“the Company”, “we”, “our”) annual financial statements for the year ended December 31, 2020 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. The financial data included in this MD&A had been prepared in accordance with International Financial Reporting Standards (“IFRS”) and related interpretations. 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, 2020 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”, on the OTCQB Marketplace under the symbol "MTLFF" and on the Frankfurt Stock Exchange under the symbol “0CVM”. The Company is a reporting issuer in British Columbia, Alberta and Ontario, Canada. 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.

Comments 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, creating public health issues around the world. The rollout of approved vaccines began in December 2020 and it is expected that most Canadians will be inoculated by the fall of 2021, but it may take several years for global populations to be vaccinated, the timeline of which cannot be estimated. The outbreak has adversely affected global workforces, economies and financial markets. It is not possible at this time for the Company to predict the duration or magnitude of the continuing adverse results of the outbreak nor its effects on the Company’s business or operations. However, we note that the Company’s capitalized exploration costs as at December 31, 2020 of $8.8 million are not impaired, that a successful drilling program was completed in the summer, and that credit risks to the Company

remain unaffected as most receivables are government tax credits and GST/HST, the collectability of which is unaffected by COVID-19.

Like many organizations, at the outset of the pandemic we utilized measures including work-fromhome policies, teleconferencing and limiting the number of workers in the office and at other work locations. We developed a Worksafe BC compliant COVID-19 Safety Plan which coordinated with similar plans developed by our exploration subcontractors. These actions ensured the continuation of the Company’s operations and exploration work through this period of uncertainty and will continue to be utilized, when and as required. A financing completed in October 2020 ensures that the Company is sufficiently funded for its exploration and working capital needs over the ensuing year.

The Company’s top priority remains the health and safety of its workers. Metallis’ Health, Safety, Environment and Social Responsibility Committee adopted COVID-19 BC government protocols and guidelines for all aspects of our operations. Following our Health and Safety Plans for our office and field operations in conjunction with our key exploration subcontractors, we began field operations on July 2, 2020, and facilitated a successful drilling program which ended on November 4, 2020. Comparatively, the exploration season in 2019 ran from July 4 to October 19.

Our Tahltan First Nations partners established very rigorous health and safety measures to keep the virus out of their communities, while allowing certain members to remain employed in the mining and other industrial sectors. Those measures have been successful to date. The Tahltans’ COVID19 protocols are regularly updated for their communities and are also shared with their exploration and other mining partners.

- 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: effects and impacts from coronavirus disease 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 and Recent Highlights

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.

The Property is centered at 56 ̊29’ N latitude and 130 ̊40' 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 that hosts numerous mineral deposits, operating mines and former mines. The Property is accessible only by helicopter and is proximate to several mines and advanced exploration projects, including Garibaldi Resources’ nickel-copper discovery, which is immediately to the north of the Property, Skeena Resources’ 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 has incurred total cumulative Property exploration costs of $9.6 million since 2014, before tax credits and other expense recoveries. A total of 15,022m has been drilled by the Company to date including 3,820m in 2020. The Company’s exploration has identified multiple targets and mineral deposit types including shear vein gold, epithermal gold-silver, porphyry gold-copper and magmatic nickel-copper. Over recent years, exploration work has led to certain geological understandings, resulting in changes in key target focus. The following list represents the key targets and opportunities currently being considered by the technical team:

Cliff Porphyry System with upside in copper-gold grades and size potential;
Miles Porphyry System and its high-grade gold potential;
Cole Porphyry System and its high-grade gold potential;
King East Target with Porphyry, shear-vein gold and/or VMS potential; and
Thunder North (K-9) Target and its Ni-Cu potential.

The Company announced the assay results of drill hole KH20-37 on February 10, 2021 and continues to review and assess the results of the remaining 5 drill holes. Drilling this year has confirmed increasing mineral grades with depth and has yielded several long intervals of mineralization, as further discussed below. The team is excited about planning its exploration and drilling for 2021.

Corporate Outlook

With $2.2 million cash and cash equivalents on hand, the Company is well positioned to execute its 2021 exploration programs, especially following up a successful 2020 drilling campaign.

Management also remains optimistic about market sentiment in the junior exploration space in general; global government spending remains high and is fueling commodity price strength. The Company has a good relationship with the Tahltan Central Government, its First Nations partner, and works proactively with all its key stakeholders. In addition, the Golden Triangle region continues to be a significant draw for Canadian mining investment.

The Company’s 2021 property exploration is expected to include:

Drilling followed by laboratory assays and metallurgical test work;
Geological mapping and acquisition of LiDAR Digital Elevation Model and Orthophotos;
Geochemical sampling and analysis;
Airborne geophysical Z-TEM and Sky-TEM surveys, data processing and modelling; and
Petrographic and geochronological studies as part of MDRU’s BC Porphyry Project.

2020 Exploration Summary

The Company’s field exploration camp was situated at the McLymont Staging Area located approximately 12 km to the north of the Property and was operated by Matrix Aviation Solutions Inc. (“Matrix”). Most of the 2020 work program was concentrated at the Cliff, Miles and King East Targets. The Company drilled six holes totalling 3,820m, with four of the holes at Cliff/Miles.

Cliff/Miles Target:

Cliff/Miles 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 Hawilson Monzonite Complex (“HM”). The system is near the Triassic-Jurassic unconformity, referred to as the “Red Line” which is a key geologic guide for copper-gold mineralization. The “Miles Zone” marks the northward continuation of the Cliff porphyry system. 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. These zones are subsequently displaced by a series of northerly trending normal and strike-slip faults; some of which are identified as a favorable host for gold mineralization.

The 2020 drilling program utilized results from 3D modeling and surface mapping and was designed to test the Induced Polarization (“IP”) response over the HM along with the depth potential at the Miles target, which is part of the 4km long Cliff Porphyry system. (See News Release September 8, 2020). Discovery hole KH20-37 at Miles successfully tested the deeper IP resistivity anomalies whilst cutting across the HM dikes and a succession of calcareous and siliceous rocks. The core is shown to carry high-grade gold which is unusual in a typical porphyry system. The assays from hole KH20-37 confirm that gold-grades improve with depth.

Summary of 2020 assay results from hole KH20-37 at Miles:

==> picture [434 x 74] intentionally omitted <==

----- Start of picture text -----

Length Au Cu Ag Mo AuEq CuEq
Hole_ID From (m) To (m)
(m) (g/t) (%) (g/t) (ppm) (g/t) (%)
KH20-37 133.00 139.00 6.00 1.33 0.02 2.53 4.52 1.38 1.14
496.00 579.00 83.00 0.63 0.03 0.41 26.07 0.68 0.56
incl. 547.00 579.00 32.00 1.21 0.02 0.35 7.37 1.24 1.02
----- End of picture text -----**

Recovery is assumed to be 100% as no metallurgical data is available. The AuEq and CuEq equivalent grades are for comparative purposes only. Calculations use metal prices of US$1,700/oz gold, US$20/oz silver, US$3.0/lb copper and US$9.0/lb Molybdenum. **Lengths are downhole drilled core lengths. Drilling data to date is insufficient to determine true width of mineralization. Intervals are calculated using a notional 0.20 g/t AuEq, a maximum of ten meters of internal dilution for porphyry-style mineralization and no top cut is applied.

The Highlights and Summary Descriptions of hole KH20-37 are tabulated below:

KH20-37 intersected 1.21 g/t Au over 32 meters (“m”) within a broader gold zone of 0.63 g/t Au over 83 m associated with highly silicified limey siltstone and sandstone units proximal to the HM Porphyry intrusions;
KH20-37 discovered a near surface epithermal quartz-carbonate vein breccia with semimassive pyrite containing 1.33 g/t Au over 6m including 3.97 g/t Au over 1.8m;
The discovery of significantly higher gold grades in sediments now expands the mineralized corridor as a very large (200m wide x 500m long and 600m deep) footwall block coincident with a prominent IP Resistivity anomaly. The dimensions of the block are open in all directions; and
Remnant potassic alteration highlight the potential of copper-gold core below 600m.

Prior to 2020, the Company had drilled 12 holes totaling 10,026 at Cliff. Assay results from the Company’s previous drilling programs highlighted broad intervals of significant copper/gold mineralization associated with sericitic-potassic altered monzodiorite intrusions and breccias. These results confirmed the continuity of mineralization along this north-south oriented porphyry corridor which extends through the Cliff, Miles and Nina porphyry centers.

Three dimensional (3D) geological modeling, structural analysis, as well as surface mapping, identified a combination of dip-slip and strike-slip faults. The structural deformation led to variable thicknesses, dip, and plunge of the HMC. This work expanded the vertical and lateral distribution of porphyry copper/gold mineralization and helped design the 2020 deep drilling program at the Cliff porphyry system.

Hole KH20-37 was part of the Company’s 3,820m 2020 drill program (the “Program”) focused on the southern 4 km section of the HM. The Program was designed to test the application of Induced Polarization (“IP”) technologies over the HM and outline the dimensions of the silicified gold zone with higher gold grades at depth (See News Release September 8, 2020).

Drilling KH20-37 from east to west at 60° inclination was exceptionally effective in cutting across the HM and the entire stratigraphic column that hosts the gold zone. It also tested the southern part of a large resistivity anomaly and confirmed the targeted deeper high-grade gold mineralization within the explanatory siliceous sediments. Pervasive alteration and silicification in KH20-37 confirmed the continuity of mineralization all along the 4km long Cliff/Miles porphyry corridor. The fault bounded porphyry dikes, breccias, alteration patterns and copper-gold grades all suggest features that are characteristics of the outer shell of a calc-alkaline porphyry system.

Some of the high-grade mineralization has been discerned in the sericitic alteration that overprint the early potassic alteration. The mineralization remains open at depth and extend to the north and to the south.

The Gold-rich mineralization in KH20-37 and previous drill holes now confirm that mineral grades do increase with depth. The gold grade in KH20-37 is twice that encountered in MD09-03 and MD09-05 which barely tested the upper part of the IP Resistivity High, 400m directly above the 83m intercept being reported. The structural architecture and the assays from KH20-37 and other holes in the area highlight the substantial upside potential for expansion of the gold zone along strike and again, as is the case with Red Chris and Saddle North, confirm that grade increases with depth. The Company now has enviable options including a near-surface bulk-tonnage and potential deep high-grade underground-style mineralization.

The on-going 3D geological and structural modelling has revealed that the gold-rich corridor at Miles is associated with west dipping siliciclastic rocks and sub-parallel porphyry intrusions, which extend northward for additional 3.5 km forming the Cole Porphyry System.

Other targets:

Cole Target:

The Cole Porphyry system defines the northern extent of the 7.5 km long Hawilson Monzonite Complex near the Triassic-Jurassic unconformity. The Cole target is represented by porphyry style mineralization associated with NNE-trending (015º) linear monzodiorite and diorite dikes hosted by Stuhini group rocks and unconformably overlain by Hazelton group rocks to the west. The first drilling at the Cole target in 2018 intersected multiple cm-scale gold-bearing massive sulphide veins highlighted by 137 g/t Au over 0.6 meters, similar to the gold-bearing veins found at the Snip mine, which produced 1.1 million ounces of gold at an average grade of 27.5 g/t from 1991 to 1999. (MINFILE, 2015: Snip, 104B 250; BC Ministry of Energy and Mines).

Evaluation of the 2019 drilling results indicated strong structural control of mineralization in the Cole porphyry system. Gold-rich mineralization tends to occur in both hanging and footwall of the northerly trending Adam fault system. Elevated gold-grades between 4.0 to 137.0 g/t Au are commonly associated with quartz-carbonate-sulphide veins constrained along NE-trending, synmineral conjugate faults.

The 2019 exploration and drilling results established the Cole target as a structurally controlled porphyry system transitioning 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. These linear zones are characterized by intense quartz stock work, disseminations, and veins of pyrite + pyrrhotite ± chalcopyrite and 0.35 to 1.0 g/t gold mineralization, subsequently cut by swarm of late-mineral barren dikes.

Mineralization, including 1.34 g/t AuEq to 2.85 g/t AuEq in the 2019 drill holes 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 PVFTs coupled with field observations and drill logs suggest both porphyry copper-gold and epithermal-type gold potential at the 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 coppergold mineralization.

Metallis’ technical team is encouraged by the results from field mapping and drill data, which has provided significant data points to reconstruct the anatomy of faults, porphyry intrusions and alteration patterns. These features commonly vector toward the core zones of the complicated Cole porphyry system 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 system that formed the Cole porphyry complex. The structural setting and 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.

King East Target:

King East target represents a large (2km x 2km) coincident magnetic and resistivity anomaly overlapped with scattered zones of sericitic alteration within the upper Triassic Stuhini Group rocks. Previous work discovered numerous narrow gold-bearing veins, small intrusive stocks and anomalous Au, Cu and Mo anomalies from sub-crop and trenches in the area. The intrusive rocks include 1-4m wide diorite dikes and amygdaloidal to aphanitic intermediate intrusive stock as exposed to the south of King Creek. In 2018 Metallis geologists mapped NNE-trending diorite porphyry dikes; recognized as the potential source of anomalous Cu and Mo in soils. The rock grab samples collected from porphyritic units and sulphide rich sediments also returned slightly anomalous Cu and Au grades.

The calculated vertical gradient (‘CVG”) magnetic results show multiple north-south trending magnetic lineaments at King East, which reflect the stratigraphy and structurally controlled porphyry dikes and volcanics propagated between the Cole and King East targets. The geology and structural framework, diorite dikes and its geochemical signature of King East highlights the potential of porphyry as well as strata-bound VMS type mineralization. Remnants of hydrothermal magnetite identified in the Cole drill holes may also relate to the King East magnetic anomaly. The current interpretation of the geology and alteration, geophysical and geochemical patterns identify King East as a deep-seated porphyry copper-gold target, like Seabridge’s Deep Kerr and Johnny Mountain porphyry targets.

The on-going 3D geological modeling, and NE-trending, magnetic lineaments with a strong geochemical signature of anomalous gold, copper and molybdenite, not only highlight the potential of a deeper porphyry copper-gold system, but also indicate the presence of stratabound mineralization at King East which the company intends to test in the future.

Thunder North:

Thunder North prospect lies on the southern flank of the Nickel Mountain Gabbro complex. Mapping and prospecting over the last couple of years confirmed the presence of mafic to ultramafic rocks associated with the Nickel Mountain and Texas Creek intrusive complexes extended into Thunder North prospect. Following the 2017 discovery of massive Ni-Cu sulphides at E&L, the Metallis team carried out multiple surface exploration programs of mapping, sampling, and evaluation of VTEM magnetic and conductive anomalies clustered in the northern part of the property. Petrographic thin section analysis at the University of British Columbia, Mineral Deposit Research Unit (“UBC/MDRU”), confirmed the presence of olivine gabbronorite at Thunder North, which contain up to 8.5 wt.% MgO, comparable to some of the differentiated gabbros in Nickel Mountain.

Exploration work completed at Nickel Mountain illustrates that disseminated and massive Ni-CuCo-Ag-Au-PGE sulfide mineralization is associated with taxitic and orbicular-textured olivine gabbros (Garibaldi Resources, NR Feb 19, 2019). The Nickel Mountain gabbros extends into Thunder North. The differentiated mafic intrusions with chaotic textures and breccias are recognized as an important feature of nickel sulphide ore deposits. The trans-tensional structural architecture of the western margin of the Eskay Rift is a key control on the emplacement of small open system intrusions as in Nickel Mountain.

Ground-based follow-up on nickel sulphide targets at Thunder North was focused on ultramafic intrusions at both the “K9 Creek” target and along the southern flanks of the Texas Creek suite “Lehto Pluton” complex, which contains fragments of differentiated gabbro (Pyroxenite), likely the source of the olivine gabbro boulders with 25-26 wt.% MgO found along Harrymel Creek. Outcropping Leucocratic gabbros are mapped at Thunder North “K9 Creek” target located ~1.5km southwest of E&L deposit along the ~12km trend of the Nickel Mountain Gabbro Complex. The presence of Nickel Mountain Gabbros at “K9 Creek” target and its proximity to the E&L deposits suggests the possibility of variable-textured taxitic gabbros with potential of magmatic NickelCopper sulphide mineralization in the area.

Evaluation of the VTEM magnetic and conductive anomalies outside of the footprint of the magnetite-bearing basalts and Neogene volcanics also reflect the potential of small open systems with magmatic sulphide mineralization, particularly along the ~12km long Nickel Mountain gabbro trend, where the mafic rocks have a higher MgO content as seen in the E&L Gabbros and Pyroxenite varieties.

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 and the Company is expecting to enter into a 2021 Communications Agreement with the TCG. 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 encourages support for Tahltan cultural, economic, and educational initiatives .

Also, in February 2020, the Company executed an Opportunity Sharing Agreement with the TCG, to provide further commercial opportunities for Tahltans and their businesses, deepening the Company’s supply lines for exploration services, materials, and transportation. The Company also supports certain Tahltan community events, youth causes, exploration symposiums and job fairs in local communities situated near the Company’s mineral properties. In 2020 however, most community events in Tahltan territory were suspended or cancelled due to COVID-19. Business activity throughout their traditional territories is being carefully managed by the TCG with strict travel and access policies. The TCG’s protective measures are regularly updated and communicated to their constituents and exploration partners. To date, these polices have successfully kept their communities free of COVID-19, critically important due to a high proportion of elders, senior citizens and limited local medical resources.

The Company and Tahltans held a ZOOM meeting in January 2021 to discuss our 2020 exploration and drilling programs. 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, and in 2020, COVID mitigation measures also prevented any visits. The Company has hired Tahltans in each of its past four exploration seasons. The Company will continue to update TCG for all its socio-economic and environmental management and hirings, subject to local health and safety policies. For more information about the TCG, visit www.tahltan.org .

Reclamation

The Company upholds high environmental standards with respect to all of its environmental interactions. It remediates and reclaims its work sites including the drilling and helicopter landing pads once the exploration results have been thoroughly reviewed. The Company has historically used 21 different sites on the Property of which 17 have been reclaimed, with 4 being retained for use in 2021. The exploration camp at the McLymont staging area was demobilized at the end of the season; some of the camp hardware is stored in containers on-site at the staging area, but most of the camp was removed by Matrix, the camp manager.

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 HQ and NQ size diamond drill core which is sawn, one half retained for archival purposes and one half is for analysis, which are delivered to the assay lab. For 2020, the Company’s samples and drill core are being assayed by MSA LABS which has facilities in Terrace and Langley, BC, following the same QA/QC protocols as those used for ALS Global which was the lab contracted by the Company in 2019. MSA LABS is a provider of geochemical laboratory services for the exploration and mining industries and is an ISO 17025 (Testing and Calibration) and ISO 9001 (Quality Management System) accredited laboratory independent of the Company.

For both 2019 and 2020, the drill core 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 MSA LABS in 2020. In addition to the internal QAQC program by MSA LABS, Metallis inserted 10% lab certified standards, blanks, and field duplicates into the overall sampling stream.

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 Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018

Total assets	$ 11,519,497 $ 8,869,466 $ 7,115,920
Total liabilities	(326,416) (391,962) (78,254)
Shareholders’ equity (deficiency)	11,193,081 8,477,504 7,037,666
Major operating expense items
Consulting fees	418,125 319,950 322,675
Advertising, marketing, promotion	107,837 59,229 159,066
Investor relations	61,500 45,000 17,500
Regulatory and transfer agent fees	41,202 42,832 80,439
Professional fees	36,691 39,504 80,981
Share-based compensation	160,156 - 1,115,162

Net loss	$ (561,808) $ (360,401) $ (1,803,627)
Basic and diluted loss per share	$ (0.01) $ (0.01) $ (0.06)

Analysis of annual operations for 2020 compared to 2019:

The Company’s net loss in 2020 was $561,808, an increase of $201,407 from 2019. The net loss is comprised of operating expenses and other income/expense items. Operating costs in 2020 were $937,465 compared to $627,115 in 2019, an increase of 49%. Other income, net of other expenses, was $375,657 compared to $266,714 in 2019. Operating expenses rose mainly because of stockbased compensation and higher consulting fees, advertising and marketing costs and investor relations fees, as further explained below. Other income and expenses include other income on settlement of flow-through share premium liability, interest income, finance expenses and loss on sale of marketable securities, also as further explained below.

The Company’s Stock Option Plan provides for full vesting of options at the time of grant and oneyear vesting for stock options granted to investor relations providers. Share-based compensation is calculated using the Black-scholes option pricing model and for 2020 includes $140,000 relating to the value of stock options vested at grant and $20,156 as the value of investor relations options that vested in 2020, together totalling $160,156. No stock options were granted in 2019 and no stock-based compensation expense was recorded in 2019. Further details are provided under “Stock options” later in this MD&A.

Consulting fees rose $98,175, consisting of an increase to independent consultants of $141,975, offset by a reduction of $43,800 to management. In addition to management, consultants are engaged on occasion for varying contractual periods and for specific tasks and roles. Fees were paid to management in 2020 at the same rate as 2019, but 2019 also included fees paid to the corporate secretary who resigned later that year, and who’s duties were assumed by the CFO with no change in remuneration. Other consulting fees to third parties in 2020 includes two Germany-

based marketing agencies that were engaged to help the Company navigate the European capital markets and facilitate institutional and resource fund introductions. The Company signed a oneyear contract with these groups which expires in September 2021, and which required the prepayment of fees.

Advertising marketing and promotion was $107,837, increasing $48,608 from $59,229 in 2019. Earlier in 2020, the Company engaged a US marketing firm to introduce new investors to the Company through internet marketing channels. In addition, Metallis began a marketing program with Stockhouse Media which served to advertise the Company to a broader audience. The Company also continues its branding activities with a Canadian mining news and blogging marketer that began in June 2019. These additional expenditures in 2020 are considered vital to maintaining a presence to investors through this uncertain, pandemic-impacted period.

Investor relations fees increased in 2020 to $61,500 from $45,000 in 2019. The Company’s IR consultant is Nicosia Capital Corp. ("Nicosia"), which provides communication services and market awareness but does not provide market-making services. First engaged in August 2018 at $3,500/mth, the agreements have been renewed each six-months. The fees rose $1,000 per month in October 2019 and then rose another $2,500 per month in October 2020 when the agreement was renewed for a one-year period at $7,000 per month. The IR provider and its employee Frank Lagiglia have recently been more involved in the affairs of the Company, managing and assessing the results of the marketing and branding activities undertaken by the Company. Nicosia also communicates with investors and shareholders, addresses investor inquires and holds regular meetings with management. In October 2020, the Company granted Mr. Lagiglia 100,000 stock options exercisable for five years at $0.40 per share, and which vest quarterly over a one-year period.

Office and general expenses declined $13,766 in 2020. Higher office costs in 2019 included the costs of moving the Company’s head office on July 1, 2019. In 2020, COVID-19 protocols resulted in the closure of the Company’s office from mid-March to late May, reducing certain costs.

Other income and expenses increased $109,113 in 2020, from $266,714 to $375,657, mainly due to higher other income on settlement of flow-through share premium liability, which was $339,908. This line item is a book entry, recorded when the Company incurs qualifying exploration expenses using funds from a flow-through private placement. It reflects the proportion of qualifying exploration expenses incurred during the respective year, relative to the total flow-though financing, as applied to the flow-through share premium liability. The book entry moves that portion of the liability to other income. The flow-through share premium is the fair value of the flow-through shares issued in excess of their fair market value at the time of issuance, when only flow-through securities are issued. When a financing includes regular and flow-through units, the premium is the price differential between the two types of units/shares concurrently issued. Qualifying exploration expenses are those exploration expenses incurred subsequent to the flowthrough financing, which “flow” to the flow-through subscribers as a deduction on their personal income tax returns. The amount of $339,908 recorded in 2020 includes $227,786 in respect of the remaining unexpended flow-through funds raised in 2019 that were spent in 2020, and $112,122 in respect of exploration costs incurred in 2020 using funds from the 2020 flow-through financing.

With regard to key cash flows, the Company spent $2.5 million on exploration, net of recoveries, in 2020 (2019 - $2.5 million). Private placement proceeds were $3.3 million in 2020 and $1.85 million in 2019. Tax credit receipts in 2020 were $809,081 consisting of the 2019 and 2018 BC Mineral Exploration Tax Credits. No such tax credit was received in 2019. In 2019, the Company recorded proceeds from the exercise of warrants totalling $419,770, while none was received in

Operating activity disbursements were $856,924 in 2020, and 75% of all cash outflows went towards exploration. In 2019, 80% of all cash outflows went towards exploration. Overall, cash declined in 2020 by $703,551, compared to a decline of $748,881 in 2019.

Analysis of annual operations for 2019 compared to 2018:

The Company’s net loss in 2019 of $360,401 was $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 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.

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 its first agreement with investor relations consultant Nicosia for a six-month period at a rate of $3,500 per month. 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. With regard to depreciation, it rose as a result of the application of IFRS 16 on January 1, 2019 which capitalizes, and then depreciates, the value of leased premises.

All other expense categories declined in 2019 compared to 2018: advertising, marketing and promotion, professional fees, regulatory and transfer agent fees, rent, and travel. As explained above, the declines were mainly due to certain other non-recurring costs that were only incurred in 2018. However, the decline of rent expense in 2019 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.

Share-based 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.

Analysis of annual cash flows, 2019 compared to 2018:

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 one 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.

Quarterly Information

	Three		Three	Three	Three
	Months		Months	Months	Months
	Ended		Ended	Ended	Ended
	December 31,	September 30,		June 30,	March 31,
	2020		2020	2020	2020
Total assets	$ 11,519,497	$ 8,834,393		$ 8,548,322	$ 8,693,285
Total liabilities	(326,416)		(586,828)	(321,161)	(342,125)
Shareholders’ equity	11,193,081		8,247,565	8,227,161	8,351,160
Select operating expenses:
Advertising, marketing, promotion	33,541		53,483	1,361	19,452
Consulting fees	163,405		95,000	83,220	76,500
Professional fees	31,684		1,232	3,612	163
Regulatory and transfer agent	8,921		4,010	17,888	10,383
Share-based compensation	160,156		-	-	-
Net income (loss)	(321,869)		10,404	(123,999)	(126,344)
Earnings (loss) pershare-basic	(0.01)		0.00	(0.00)	(0.00)

	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
Select 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)

Results of Operations

Three months ended December 31, 2020 compared to three months ended September 30, 2020:

The Company had a net loss for the current Q4 2020 period of $321,869 (Q3 2020 – net income of $10,404), composed of operating costs of $439,766 (Q3 2020 - $201,476) and other income totalling $117,897 (Q3 2020 - $211,880). The other income items include other income on settlement of flow-through premium liability of $112,122 (Q3 2020 - $204,895), interest income of $6,374 (Q3 2020 - $7,674), finance income of $601 (Q3 2020 - $688), and amortization of discount of $1,200 (Q3 2020 - $1,377).

Other income on settlement of flow-through premium liability reflects the incurrence of qualifying exploration costs of $1,009,096 (Q3 2020 - $1,145,5670). These flow-through qualifying expenditures proportionately reduce the flow-through premium liability, offsetting the amount to “other income on settlement of flow-through premium liability” in the amounts of $112,122 (Q3 2020 - $204,895). As at December 31, 2020, there were $363,254 of qualifying expenditures yet to be incurred in relation to a flow-through private placement of $1,372,350 completed in October 2020.

Interest income was earned from short-term money market instruments during the current and prior periods. Finance income and amortization of discount reflect period to period changes in net investment in lease and lease liability, respectively.

Operating costs rose $238,290 in the current quarter, or which $160,156 was stock-based compensation. The remaining operating costs rose $78,133 or 39% in the current quarter compared to the prior quarter, largely due to an increase of $68,405 in third-party consulting fees. Other key impacts to operating costs came from a $7,500 increase in IR fees, a $9,987 reduction in office expenses, an $19,942 reduction in advertising and marketing, an increase of $30,452 in professional

fees and a $4,911 reduction in regulatory and transfer agent fees. The following paragraphs discuss these operating expenses.

With regard to consulting fees, the Company engaged two consultancy groups in Germany in Q3 2020 for a one-year term to provide capital markets assistance and develop strategies for increasing investor interest and inquiries about Metallis, within the constraints presented by COVID-19 measures.

Investor relations fees to Nicosia increased to $7,000 per month starting in October 2020. Nicosia has been the Company’s investor relations consultant since 2018. Fees paid during the current period were $21,000 compared to $13,500 in the prior quarter. In the current quarter, the Company also granted 100,000 stock options to Frank Lagiglia, (the principal of Nicosia), exercisable at $0.40 per share for 5 years. The stock options vest over a one-year period and are the Company’s first grant of stock options to Nicosia or its principal.

Office and general expenses include corporate and liability insurance premiums, communications, supplies, website hosting and IT fees, printing costs and dues, fees and subscriptions, with changes expected from period to period. Such costs were $13,325 in Q4 2020 and $23,313 in Q3 2020.

The decrease in advertising and marketing costs in Q4 2020 reflects the completion in the middle of Q4 of a contract with Think Ink Marketing Data and Email Services, a California limited liability company, to place targeted digital media advertising to target retail investors specifically. They did this by utilizing well know publishers such as Yahoo Finance to place native ads through media buys and then retargeting investors through other platforms at a later stage. We also used their email distribution lists to disseminate our press releases. Our goal was to elevate the brand awareness of Metallis in the US to a new audience of investors. Management felt that such an endeavor was needed during the pandemic, which caused a tightening of the overall liquidity in the mining sector, after an initial market rebound from April through June. The contract resulted in the payment of $40,612 in Q3 2020 and $20,367 in Q4 2020, a reduction of $20,245 in Q4.

Professional fees in Q4 2020 include the annual audit accrual of $30,000, with the balance of $4,498 being legal fees.

Management now expects its 2021 operating costs to average $200,000 per quarter, an increase of $25,000 per quarter compared to expectations in Q3 2020. The increase reflects new consulting fees in Europe which are expected to terminate in September 2021, and higher local IR fees. The impacts of COVID-19 on travel and face-to-face interactions have necessitated additional spending on marketing, including efforts in Europe, and an expansion of web-based advertising initiatives to improve shareholder liquidity and assist with fundraising goals. Other operating cost factors such as regulatory fees, rent, professional fees and office and general expenses are expected to remain similar to recent periods.

In the current period, the Company disbursed $1,436,075 (Q3 2020 - $938,717) on property exploration, as the exploration season ran from July 2020 to early October 2020 with the majority of exploration related cash outflows occurring in Q4 2020. The Company also disbursed $307,879 (Q3 2020 - $256,178) on operating activities. The higher operating cost outflow compared to Q3, in addition to the payment of operating costs, was from the payment of accounts payable and the prepayment of certain third-party consulting fees.

In Q4 2020, the Company received gross $3,304,350 from a private placement, while in Q3 2020 only $10,000 was received.

Net cash in the current period increased from $760,824 to $2,297,180.

Three months ended December 31, 2020 compared to three months ended December 31, 2019:

The Company had a net loss in Q4 2020 of $321,869 and net income in the comparative period of $41,729. Operating costs were $439,766 (Q4 2019 - $153,560) and other income and expenses totalled income of $117,897 (Q4 2019 - $195,289). Other income and expenses are detailed on the statements of operations and comprehensive income (loss) and includes interest income, finance income (from premises sublease), amortization of discount (interest on lease liability), other income on settlement of flow-through share premium liability, unrealized gain (loss) on marketable securities and loss on sale of marketable securities. The other income was $77,393 higher in 2019, mainly due to higher other income on settlement of flow-through share premium liability, which was $180,006 in 2019 and $112,122 in 2020, resulting from qualifying exploration expenditures of $940,951 and $1,009,096 in 2019 and 2020, respectively.

Operating costs increased $286,206 in Q4 2020 compared to 2019 of which $160,156 was stockbased compensation with the balance of the increase being $126,049. The most significant differences were consulting fees of $163,405 (2019 - $63,000) and advertising, marketing and promotion of $33,541 (2019 - $14,719). These two items comprise 95% of the increase in total operating expenses, not including stock-based compensation. Consulting fees to related parties were the same in the current and comparative periods at $54,000, but third-party consulting fees increased from $9,000 to $109,405. This increase reflects the engagement in 2020 of German capital markets advisors at a cost of $81,000 (2019 - $nil), plus $28,405 (2019 - $9,000) of general consulting including office administration, corporate communications and website management. Advertising and marketing costs rose $18,822 which can be entirely attributed to the costs of a US internet campaign, briefly discussed above in the section “ Analysis of annual operations for 2020 compared to 2019:”

All other operating expenses (not including consulting fees and advertising and marketing costs) totalled $82,664 (2019 - $75,841). Such similar expense levels are expected, given the company has the same staffing, same office and same general operating structure. We also note that the Q4 operating expenses include a $30,000 audit accrual in each of 2020 and 2019.

Liquidity and capital management

The Company endeavors to maintain appropriate levels of capital and liquidity. Sufficient liquidity is required to meet liabilities and obligations as they become due. The Company has no commercial operations or source of revenue, no long-term debt other than a lease liability, and no externally imposed capital requirements other than those specified under continuous listing requirements. The Company's capital is therefore its issued share capital. The capital required for operations and property exploration is expected to continue to come from the issuance of common shares or units for the foreseeable future. The Company's objectives of capital and liquidity management are to fund critical exploration work, meet on-going liabilities, maintain creditworthiness, continue as a going concern, and to ultimately maximize returns for shareholders over the long term. The Company continually assesses its internal, exploration and financing risks and their potential impacts on operations. This approach has allowed the Company to maintain sufficient capital balances over recent years to mitigate unexpected cash flow shortfalls.

The capital for operations and property exploration has historically come primarily from proceeds from the issuance of common shares. Most recently, a private placement financing in October 2020

raised $3.3 million, sufficient for the ensuing year’s working capital requirements and 2021 exploration programs. Depending on the results from the 2020 exploration and drilling, additional funding may still be required in 2021. The recently completed private placement included $1.4 million of flow-through financing of which $1.0 million was spent subsequent to the financing, up to December 31, 2020. The balance of $0.3 million will be spent on qualifying exploration expenditures in 2021, as part of an exploration program expected to be similar in scope to the work done in 2020 and 2019. The balance of the financing, $1.9 million, is unencumbered and available for both further property work and general working capital.

At the date of this report, the Company has total working capital of $2.1 million as follows:

Working capital, March 19, 2021 Cash and cash equivalents Receivables Prepaid expenses and retainers Due from related parties Accounts payable and accrued liabilities Flow through premium liability Short term lease liability Total net working capital	($000’s) $ 2,001 129 125 9 (70) (40) (37)
	$ 2,117

Outstanding share information

The total number of common shares outstanding as of the date of this report is 44,060,433 shares, unchanged from December 31, 2020.

The only shares issued in 2020 were in relation to the private placement in October 2020 that raised $3,314,350, consisting of 4,855,000 non-flow-through units at $0.40 per unit for proceeds of $1,942,000 and 3,049,666 flow-through units at a price of $0.45 per flow-through unit for proceeds of $1,372,350. Total share issuance costs of $56,603 were incurred, consisting of filing fees of $20,488, finders’ fees of $24,150 and 53,666 finders’ warrants exercisable into common shares at a price of $0.40 per share for a three-year period, which were valued at $11,965 using the BlackScholes pricing model. Each non-flow-through unit consists of one common share and one nonflow-through, non-transferable share purchase warrant entitling the holder to purchase one additional common share at a price of $0.60 per share for a 3-year-period. Each flow-through unit consists of one flow-through common share and one non-flow-through, non-transferable share purchase warrant entitling the holder to purchase one additional non-flow-through common share at a price of $0.68 per share for a 3-year period.

The flow-through shares issued under the 2020 private placement will qualify as “flow-through shares” for the purpose of the Income Tax Act (Canada) (the “Act”). The proceeds of the flowthrough private placement will be incurred on “Canadian exploration expenses” (within the meaning of the Act). Subsequent to December 31, 2020, the Company renounced these expenses to the purchasers with the effective date of December 31, 2020.

Stock options

At the date of this report, there are 3,485,000 stock options outstanding, unchanged from December 31, 2020. During the year ended December 31, 2020, there were 450,000 stock options granted to consultants, exercisable at $0.40 per share for five years. 350,000 of the options vested upon grant and 100,000 of the stock options granted to the Company’s investor relations consultant vest over a one-year period. The fair values of the vested options were determined to be $140,000 in respect of the 350,000 consultant’s options and $20,156 in respect of the investor relations options. As at December 31, 2020, the unrecognized share-based compensation is $19,844 (2019 - $Nil).

The following parameters were used for determination of fair value of the option grants described above:

e:
	2020
Risk-free interest rate	0.35%
Expected life	5 years
Annualized volatility	135.6%
Forfeiture rate	0%
Dividends	0%

Changes in stock options:

nges in stock options:
	Number of stock options outstanding Weighted average exercise price
Balance, December 31, 2018 Options terminated Balance, December 31, 2019 Options granted Balance, December 31, 2020	3,085,000 $ 0.63 (50,000) 1.35
	3,035,000 $ 0.62 450,000 0.40
	3,485,000 $ 0.59

The outstanding stock options at the date of this report are as follows:

	Number of	Vested and	Exercise
Expiry Date	Options	exercisable	Price ($)
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
October6,2025	450,000	375,000	0.40
Total outstandingoptions	3,485,000	3,410,000

Warrants

The following table shows changes in warrants over the past two years:

	Number of Warrants outstanding Weighted average exercise price
Balance at December 31, 2018 Warrants exercised Warrants expired Balance at December 31, 2019 Warrants issued Balance at December 31, 2020	3,713,743 $ 1.08 (1,061,050) 0.40 (1,704,122) 1.21
	948,571 $ 1.60 7,958,332 0.63
	8,906,903 $ 0.73

The fair value of the 53,666 finders’ warrants exercisable at $0.40 per share for three years, issued pursuant to the private placement in 2020, was calculated to be $11,965 using the Black-Scholes option pricing model, using the assumptions listed below. (Fair value is particularly impacted by stock price volatility, determined using historical share prices for a term equivalent to the expected life of the warrants).

Risk-free interest rate	0.23%
Expected life	3 years
Annualized volatility	93.7%
Forfeiture rate	0%
Dividends	0%
Weighted averagefairvalue of finders’warrants	$0.22

As at the date of this report, there are 7,958,332 share purchase warrants outstanding as follows:

No. of warrants			No. of warrants
outstanding		Number of	outstanding
at December 31,	Number of	Warrants	at March 19,	Exercise
2020	Warrants issued	Expired	2020	Price	Expiry Date
948,571	-	948,571	-	$ 1.60	January 26, 2021
4,805,000	-	-	4,805,000	0.60	October 7, 2023
2,383,000	-	-	2,383,000	0.68	October 7, 2023
7,000	-	-	7,000	0.40	October 7, 2023
50,000	-	-	50,000	0.60	October 16, 2023
666,666	-	-	666,666	0.68	October 16, 2023
46,666	-	-	46,666	0.40	October 16, 2023
8,906,903		-	7,958,332

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. Dave Dupre (Vice-President of Exploration).

During the year ended December 31, 2020, there were no changes to the Company's Board of Directors or the management team.

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 when she resigned as an officer;
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;
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; and
f) Etruscus Resources Corp., a public company related through two common directors and a common officer, subleases office space from the Company and shares certain administrative expenses.

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:

	Transactions for	Transactions for	Transactions for	Balance		Balance
	the	year ended	the year ended	payable as	at	payable as	at
	December 31, 2020		December 31,	December 31,		December 31,
			2019	2020		2019
Avanti Consulting Inc.	(a)	$ 132,000	$ 132,000	$	-	$	-
Lever Capital Corp.	(b)	84,000	84,000		-		-
S. Oates	(c)	-	43,800		-		-
D.G. Dupre and Associates Inc.	(d)	60,000	57,500		-		-
DRW Geological Consultants Ltd.	(e)	2,500	6,000	210			-
Etruscus Resources Corp.	(f)	-	-		-	943
Total		$ 278,500	$323,300	$ 210		$ 943

The Company subleases ½ of its office space to Etruscus Resources Corp. (“ETR”), a public Company related by two common directors and a common officer. The sublease began July 1, 2019 under a three-year term. The companies also share certain office expenses. Accordingly, day-to-day operations occasionally have receivables or payables due from or to ETR, respectively. As at December 31, 2020, there were no intercompany amounts owing between the Company and ETR. As at December 31, 2019, the Company owed ETR $943.

Advisory Board

On April 29, 2020, the Company announced the appointments of Dr. Farhad Bouzari and Andrew McIntosh to the Company’s Technical Advisory Board, joining founding member Lawrence Roulston (appointed April 2014) and Stephen Wetherup (appointed April 2017). Both Dr. Bouzari and Mr. McIntosh bring a high level of technical expertise, adding invaluable knowledge to support the work being carried out on the Property.

Dr. Farhad Bouzari:

Dr. Bouzari obtained his Ph.D. from Queen’s University in 2003. Over the past 25 years he has worked extensively on porphyry and allied deposits, their features and establishing techniques to improve exploration decision-making. Since 2006 he has been Research Associate with the Mineral Deposit Research Unit - MDRU. His experience lays with the anatomy and evolution of porphyry systems particularly their distal and deep features and application of mineralogical and geochemical techniques in exploration targeting. Dr. Bouzari’s experience includes research on various regions and deposits in British Columbia such as Copper Mountain, Woodjam, Highland Valley Copper, Mount Polley, Mount Milligan and Red Chris. Currently, Dr. Bouzari is the principal investigator of the MDRU’s project on porphyry vectoring techniques in advanced argillic altered rocks of British Columbia.

Andrew McIntosh:

Mr. McIntosh has a B.Sc. and over 25 years of mineral exploration experience. Andrew has worked for companies such as Teck, Cominco, BHP and Highland Valley Copper along with the Geological Survey of Canada. He has also provided consulting services to numerous companies as a geologist and data specialist. He has worked for McElhanney, a BC engineering company, ~~si~~ nce 2001, where he is currently a project manager for GIS, LIDAR mapping, and geological data services.

Dr. Bouzari’s expertise of the space-time evolution and vectorizations of porphyry deposits, in tandem with the GIS and 3D modelling work of Mr. McIntosh helped the exploration team produce a robust geological and alteration model of all the porphyry systems along the 7.5km HM. This model supported the team’s efforts in identifying deeper targets that were drilled this year.

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.

Risk Factors

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.

Investing in 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.

COVID-19

Future economic and business process impacts caused by the pandemic cannot be estimated. The nature of the COVID-19 pandemic is changing as new variants are identified and governments continue to adapt their protocols. There can be no certainty that any vaccines developed or under development will maintain their effectiveness over longer periods of time. Future operating disruptions and volatile supply chain price changes may continue to occur as a result of the pandemic. Government regulations may change at any time, impacting operating procedures, including possible economic closures. Financial markets continue to be impacted by the pandemic, and global government deficit spending is also contributing to future economic uncertainties.

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 suffer dilution of their investment and unusually large financings could result in a change of control of the Company.

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

Increasing public scrutiny of mining projects and a general global increase in environmental concerns has been addressed by the mining industry by including both the local and broader communities and other stakeholders in planning and development processes, and being transparent through communications, dialogue and education. Garnering community and public support for continued exploration, future mine development and construction includes public engagement and involvement of key community stakeholders throughout the exploration and development process. The Company’s resource properties lie within the traditional territory of the Tahltan Nation, a key stakeholder with which the Company has executed Communication and Opportunity Sharing Agreements. The Tahltans’ main areas of concern are environmental stewardship and the sharing or transfer of economic benefits. The Company regularly updates the Tahltans to keep them aware of corporate changes and the progress of exploration, while the Tahltans keep their industry partners apprised of their community activities and health and safety measures. 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, net investment in sublease, accounts payable, lease liability and due to related parties.

As at December 31, 2020, the Company had cash on hand of $1,096,012 (2019 - $353,357) and Guaranteed Investment Certificates and money market instruments totalling $1,201,168 (2019 - $1,240,272), for total cash and cash equivalents of $2,297,180 (2019 - $1,593,629).

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 (loss) and any fair value change in excess of the amount attributable to changes in credit risk is recognized in profit and loss.

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 (loss) or through profit or loss); and
ii) those to be measured at amortized cost using the effective interest method.

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, all financial instruments held by the Company are measured at amortized cost, although 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 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 are measured based on Level 1 inputs of the fair value hierarchy.

Critical judgements and estimates

In preparing these 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 expenses. 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 for the year ended December 31, 2020 are the same as those described in the annual financial statements for the year ended December 31, 2019.

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 statements of operations and comprehensive income (loss), including share price volatility and risk-free interest rates, and similar inputs used in accounting for the valuation of

finders’ warrants;

e) The valuation of flow-through share premium liability is an estimate;
f) 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
g) The assumption that the Company is a going concern and will continue operating for the foreseeable future, being 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, which management believes the collectability of these amounts to be assured.

The Company shares an office with ETR and is expected to have amounts due from or to ETR at each period end. These amounts are considered at low risk of default, due to their relatively small scale, management having some influence over the operations of ETR 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, 2020, the Company had cash and cash equivalents of $2,297,180 (December 31, 2019 - $1,593,629) to settle total current liabilities of $306,498 (December 31, 2019 - $334,514). Long term liabilities consist of a lease liability of $19,918 (December 31, 2019 - $57,448). With the closing of a $3.3 million private placement in October 2020, the Company has sufficient liquidity for its field exploration programs, including drilling, and working capital requirements over the ensuing year. Additional funds may be required depending on the scope of exploration work undertaken in 2021.

The Company has historically relied on equity financings and asset sales to satisfy its capital requirements and will continue to depend upon equity capital as necessary and may also enter into earn-in arrangements or the sale of certain property interests if necessary or advantageous to the Company. 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.

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, 2020, are the responsibility of management. In the preparation of these reports, judgements and estimates, previously discussed in this MD&A, 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.

AI assistant

Metallis Resources Inc. — Management Reports 2021

46149_rns_2021-03-22_38aa810b-92f4-46b8-b559-17b213481972.pdf

Introduction

Comments on COVID-19:

- Cautionary Note Regarding Forward Looking Information

Description of Business and Recent Highlights

Corporate Outlook

2020 Exploration Summary

Cliff/Miles Target:

Summary of 2020 assay results from hole KH20-37 at Miles:

Other targets:

Cole Target:

King East Target:

Thunder North:

Community relations

Reclamation

QAQC and Analytical Procedures

Selected Annual Financial Information

Quarterly Information

Results of Operations

Liquidity and capital management

Outstanding share information

Stock options

Warrants

Directors, Officers and Related Parties

Advisory Board

Dr. Farhad Bouzari:

Andrew McIntosh:

Off Balance Sheet Arrangements

Risk Factors

COVID-19

Financing

Possible Trading Suspension or Delisting

Dilution

Reliance on Management

Title to mineral resource properties

Industry and mineral exploration risks

Community relations

Financial instruments

Critical judgements and estimates

Financial Risks

Credit Risk

Liquidity Risk

Interest rate risk

Foreign currency risk

Management’s Responsibility for the Financial Statements

Corporate Governance

More from Metallis Resources Inc.

Metallis Resources Inc. Management Reports 2021