Midnight Sun Mining Corp. — Management Reports 2020

May 28, 2020

==> picture [469 x 114] intentionally omitted <==

MIDNIGHT SUN MINING CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2019

As at May 26, 2020

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

1. INTRODUCTION

The following management’s discussion and analysis (“MD&A”) of Midnight Sun Mining Corp. has been prepared as of May 26, 2020. This MD&A should be read in conjunction with the audited consolidated financial statements (“Financial Statements”) of Midnight Sun Mining Corp. and the notes thereto for the year ended December 31, 2019, which have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”). The Financial Statements have been prepared using the accrual basis of accounting except for cash flow information. All figures are expressed in Canadian dollars unless otherwise indicated.

Management is responsible for the preparation and integrity of the Financial Statements, including the maintenance of appropriate information systems, procedures and internal controls. Management is also responsible for ensuring that information disclosed externally, including the financial statements and MD&A, is complete and reliable.

Description of Business

Midnight Sun Mining Corp. (the “Company” or “Midnight Sun”) was incorporated on April 11, 2007 pursuant to the Business Corporations Act of British Columbia. The Company’s principal business activity is acquiring, exploring and evaluating mineral properties and joint venturing or developing these properties further or disposing of them when the evaluation is complete. At December 31, 2019, the Company was in the exploration stage of activity on its jointly held exploration licenses in Zambia, and the Financial Statements include the accounts of its subsidiaries Midnight Sun Mining Zambia Limited (“MSM Zambia”), a company incorporated on October 29, 2013 under the laws of Zambia as well as Midnight Sun One Co. and Midnight Sun Two Co., two companies incorporated in 2018 under the laws of the British Virgin Islands. The Company has consolidated the operations of MSM Zambia since its incorporation.

2. HIGHLIGHTS & SIGNIFICANT EVENTS

Financial Highlights for the Fiscal Year Ended December 31, 2019

• At December 31, 2019, the Company reported total assets of $18,935,012 consisting of current assets of $105,310, exploration and evaluation assets of $18,790,702 and Right-of-Use asset of $39,000

• The Company extended the expiration on the following share purchase warrants:

Number of	Price Original Expiry	New Expiration Date
Warrants
4,458,000	$0.20 October 31, 2019	October 31, 2020
2,575,000	$0.20 November 30, 2019	November 30,2020
1,301,000	$0.20 December 18, 2019	December 18, 2020

• the Company’s earned 60% ownership of the Solwezi Licences has officially been transferred and registered in Zambia with the Patents and Companies Registration Agency. The licenses are held by a Zambian registered company, Zambian High Light Mining Investment Ltd., of which

==> picture [145 x 42] intentionally omitted <==

1 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

Midnight Sun is now a 60% shareholder through the Company’s wholly owned subsidiary, Midnight Sun (BVI) Two Corp. The acquisition will be accounted for as an asset acquisition.

• On August 8, 2019, the Company completed a private placement for gross proceeds of $332,800. The Company sold 2,773,334 units consisting of 2,773,334 shares and 2,773,334 share purchase warrants which enable the holder to purchase one common share in the Company at a price of $0.20 at any time prior August 8, 2021. Finders’ fees of $2,640 were paid in cash in conjunction with the placement. Each Finders’ Warrant entitles the holder to purchase one common share of the Company at a price of $0.20 prior to August 8, 2021.

Corporate Highlights for the Fiscal Year Ended December 31, 2019

• On March 4, 2019, the Company released the results of the initial interpretation of a 3,889 linekilometre Versatile Time Domain Electromagnetic airborne geophysics (“VTEM”) survey conducted on the Solwezi exploration licenses. Analysis of information produced by the survey has expanded the potential at previously identified exploration targets and identified new exploration targets.

Events Subsequent to December 31, 2019

Subsequent to the year ended December 31, 2019:

COVID-19

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or results of operations this time.

Private Placement

On May 25, 2020, the Company completed a non-brokered private placement by issuing 7,940,185 units at a price of $0.135 per unit for gross proceeds of $1,071,925. Each unit consists of one common share in the capital of the Company and one Common Share purchase warrant. Each Warrant entitles the holder to purchase one Common Share of the Company for a period of twenty-four months from closing, at an exercise price of $0.25. Finder’s fees of $56,577.15 were paid in cash and 419,090 Finder’s Warrants were issued in connection with the Private Placement. Incentive Stock Options

On May 6, 2020, the Company granted an aggregate of 3,000,000 incentive stock options at an exercise price of $0.135 per share to certain directors, officers, employees, and consultants. 350,000 of the options have a term of 1 year, and the remaining 2,650,000 have a term of 5 years.

==> picture [145 x 42] intentionally omitted <==

2 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

Earn-in Agreement

On April 27, 2020, the Company entered into an earn-in and joint venture agreement with Rio Tinto Mining and Exploration Limited (“Rio Tinto”) in which Rio Tinto can earn up to a 75% interest in the Solwezi Licenses. The terms of the agreement are as follows:

• Initial Cash Payment: A cash payment in the amount of USD$700,000 will become payable by Rio Tinto to Midnight Sun upon removal of conditions.

• Initial Work Program: Rio Tinto can fund an initial work program on the Solwezi Licenses by spending USD$3,000,000, of which USD$2,000,000 is a firm commitment, within the next two field season. After completing the firm commitment, a further USD$300,000 will become payable by Rio Tinto to Midnight Sun before Rio Tinto proceeds with the additional expenditures.

• Stage 1: After completing the Initial Work Program, Rio Tinto can earn 51% ownership of the Solwezi Licenses by incurring a further USD$16,000,000 in work expenditures within four years and making a total of USD$1,000,000 in additional scheduled cash payments to Midnight Sun.

• Stage 2: Rio Tinto can earn an additional 14% ownership of the Licences by incurring a further USD$14,000,000 in work expenditures or completing a Feasibility Study within three years of starting Stage 2 and making an additional USD$1,000,000 cash payment to Midnight Sun.

• Stage 3: Rio Tinto can earn an additional 10% ownership of the Licences by incurring a further USD$15,000,000 in work expenditures within two years.

3. EXPLORATION AND EVALUATION ASSETS

60% Option Agreement

On July 30, 2013, the Company, entered into an option agreement (the “Option”) with Kam Chuen, to acquire a 60% interest in two mineral prospecting licenses 14039-HQ-LPL and 12124-HQ-LPL, the Solwezi Licenses, which are held in a Kam Chuen subsidiary, Zambian High Light Mining Investment Limited (“ZHLMIL”). The TSXV approved the Option on December 6, 2013.

Under the final terms of the Option, to earn a 60% interest in the Solwezi Licences Midnight Sun:

• a) Issued a total of 15,333,333 common shares to Kam Chuen or its assigns with 1,333,333 shares issued following TSXV acceptance (issued February 14, 2014; valued at $186,667) and 14,000,000 shares issued on February 15, 2017 (valued at $3,920,000); and

• b) Incurred $3,666,667 in qualifying expenditures on the Solwezi Licenses prior to December 6, 2018 ($4,031,324 incurred prior to December 31, 2017).

Upon the Company fulfilling its share issuance and exploration expenditure requirements, per the Option terms, Kam Chuen transferred 60% ownership interest in ZHLMIL to Midnight Sun and Kam Chuen and Midnight Sun will enter into a joint venture agreement governing the exploration and development of the Solwezi Licenses. The Company and Kam Chuen are negotiating the joint venture and have initiated the ZHLMIL share transfer.

==> picture [145 x 42] intentionally omitted <==

3 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

Solwezi Licenses - Zambia

The Solwezi Licenses cover a total area of 506 square kilometres in the Zambian Copperbelt and are located approximately 15 kilometres from the producing Kinsanshi copper/gold mine and roughly 450 kilometres northwest of the Zambian capital of Lusaka.

On March 1, 2017, the Acting Chief Registrar of Mining Rights issued a new exploration license, 21509HQ-LEL, covering the same ground and replacing the existing license 14039-HQ-LPL. 21059-HQ-LEL is in effect for an initial period of 4 years with the option for future renewals provided the license is maintained in accordance with the contained terms and the Mines and Mineral Development Act, 2015 .

On November 30, 2018, the Zambian Mining Cadastre issued a renewal of prospecting license 12124-HQLPL as large-scale exploration license, 12124-HQ-LEL, having an expiration date of December 23, 2021. This renewal was granted in accordance with the Mines and Mineral Development Act, 2015 and is the final renewal period available to ZHLMIL. If necessary, prior to the expiration of the license the Company and ZHLMIL will apply for a new license covering the same surface area as 12124-HQ-LEL. There is no guarantee a new license will be granted to the Company or an affiliated entity.

- Exploration Property Expenditures

As at December 31, 2019, the Company had funded the following expenditures on the Solwezi Licenses:

Site and project expenditures	31-Dec-19	Additions 31-Dec-18
Acquisition costs $ Assays Diamond drilling Equipment Field expenses General & administration Geological consulting License Travel and accommodation Total operations funded $	4,136,678$ 326,119 3,043,326 2,566 1,212,272 577,474 1,084,677 260,469 708,731 11,352,312$	- $ 4,136,678 763 325,356 - 3,043,326 (75,033) 77,599 (8,371) 1,220,643 192,768 384,706 44,349 1,040,328 24,916 235,553 31,471 677,260
		210,863 11,141,449

The following table presents the Company’s expenditures relating to mineral properties on a property-byproperty basis for the two most recent financial years.

Solwezi Total Balance, December 31, 2017 $ 7,801,518 $ 7,801,518 Exploration expenditures 3,339,931 3,339,931 Total additions during year 3,339,931 3,339,931 Balance, December 31, 2018 $11,141,449 $ 11,141,449 Exploration expenditures 210,863 210,863 Total additions during year 210,863 210,863 Balance, December 31, 2019 $11,352,312 $ 11,352,312			Solwezi **Total **

==> picture [145 x 42] intentionally omitted <==

4 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

Exploration Property – Activities

The main deposit types being targeted by exploration on the Solwezi Licenses are; Stratiform-type deposits, a common model for many copper deposits within the Zambian Copperbelt, and Hydrothermal-type copper mineralization as found at the nearby Kinsanshi Mine.

Based on historical work, the Company identified six significant exploration targets on the Solwezi Licences. Since signing the Option work has focussed on the following four areas:

• The 22 Zone – a near surface oxide deposit with deep sulphide potential. Limited shallow drill testing returned a best intercept of 5.71% copper over 14.2 metres near surface.

• Mitu – an ore shale hosted copper-cobalt-nickel-gold target with significant size potential. Initial drilling in this area encountered significant copper/cobalt mineralization.

• Dumbwa – initial drilling on a 14-kilometre long soil anomaly has produced multiple copper-cobalt intercepts in the near surface oxides.

• .

• Kifumbwe – a large nickel soil anomaly covering over 6 kilometres of identified strike.

The Company’s recent exploration focus has been Mitu, where in October 2016 “ore shale style” base metal mineralization was discovered on the flank of the Solwezi Dome. Ore shale mineralization is the dominant type of copper-cobalt-nickel deposition in the Zambia-Congo Copperbelt, the largest copper producing area in the world. Mineralization associated with the shale units generally forms in physical “traps” between the contact of the Upper and Lower Roan geological units. This contact zone extends over 17 kilometres on the Solwezi Licenses.

A 12-hole diamond drill program at Mitu in 2016 covered an area of 300 metres on strike and 400 metres down dip. Shale units containing base metal sulphide mineralization were encountered at vertical depths of up to 170 metres. An additional 43 drill holes using air core drilling covered a strike length of approximately 1,200 metres.

During 2017, the Company continued work at Mitu with a program consisting initially of 37 line-kilometres of natural source audio magneto telluric (“NSAMT”) designed to establish the extent of the geophysical footprint of the ore shales. The geophysics were followed by 648 soil samples and 4,755 metres of shallow air core drilling in 119 holes to bedrock to establish that a conductive anomaly indicated by the geophysics correlated with the presence of ore-shale. This program tested 10 kilometres of the 17-kilometre contact area with encouraging results. The geophysics, sampling and air core drilling were followed up with a 15hole, 4,062 metre, diamond drill program to test the grade, physical dimensions and consistency of mineralized ore shales.

During 2018, at Mitu, the Company conducted a 34 line-kilometre NSAMT survey, completed 10,424 metres of air core drilling and drilled 1,503 metres of diamond drilling. In addition, a 3,889-line kilometre VTEM survey covering the entirety of the Solwezi Licenses was conducted, new core storage and logging facilities were constructed, and all available core was relogged. In December of 2018 Midnight Sun received the raw data from the VTEM survey and in February of 2019, received the initial interpretations derived from the data. Based on the VTEM interpretation, the Company has identified 4 new target areas on the Solwezi Licenses and added to its understanding of the 6 previously identified target areas. Midnight Sun is developing priority drill targets at the 22 Zone, Mitu, and the newly identified Western Flank, as

==> picture [145 x 42] intentionally omitted <==

5 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

well as future drill targets on other areas of the Solwezi Licenses based on the results of the VTEM survey and other data.

Since optioning the Solwezi Licenses, Midnight Sun has reviewed all available data generated by the optionor and previous operators. The Company has directly carried out the following activities:

Work			31-Dec-19			Additions			31-Dec-18
Geochemical - sampling Ground Geophysics – NSAMT Airborne Geophysics -VTEM Air Core drilling - metres Air Core drilling - holes RC drilling - metres RC drilling - holes Diamond drilling - metres Diamond drilling- holes			5,928 77.7 kms 3,889 34,639 835 1,276 15 8,829 57			- - - - - - - - -	5,928 77.7 kms 3,889 34,639 835 1,276 15 8,829 57

Richard Mazur, P.Geo., Director of the Company, a Qualified Person under NI 43-101, has reviewed the information contained herein.

4. SELECTED ANNUAL INFORMATION

The following table summarizes selected financial information for the Company for each of its most recently completed financial years. The information set forth below should be read in conjunction with the Financial Statements. All information was prepared in accordance with IFRS.

	Year ended Dec 31, 2019 Year ended Dec 31, 2018 Year ended Dec 31, 2017
	$ $ $
Total revenue Net income (loss) Basic and fully diluted income (loss) per share Total assets Total non-current liabilities Dividends declared	Nil Nil Nil (356,998) (1,458,917) (891,235) (0.00) (0.02) (0.01) 18,935,012 11,455,602 9,400,915 17,256 Nil Nil Nil Nil Nil

Factors which have caused period to period variations in total asset include the availability of equity funding, which is directly linked to exploration activities and payments under the Option. The Company incurred $210,863 in property expenditures during the year ended December 31, 2019 and $3,339,931 during the year ended December 31, 2018.

The net loss for the year ended December 31, 2019 of $356,998 was primarily comprised of accounting and audit fees of $43,944, consulting fees of $67,870, wages and benefits of $55,467 and office and miscellaneous of $52,857. Losses for the year ended December 31, 2018 of $1,458,917 was primarily comprised of a non-cash expense of $611,671 for stock-based payments and general and administrative expenses of $847,246, which reflect administrative expenses incurred in Canada and Zambia. Losses during the year ended December 31, 2017 are attributable to share-based payments of $240,475 and general and administrative expenses of $650,830. General and administrative costs increased during 2017 as the Company incurred significant legal and other costs relating to renewing the Solwezi Licenses and

==> picture [145 x 42] intentionally omitted <==

6 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

formalizing agreements relating to the Solwezi Licenses, increased staffing costs and increased investor relations activities. Management anticipates general and administrative costs will decrease in fiscal 2020 as a result of streamlining management and cost cutting measures implemented during 2019.

5. SUMMARY OF QUARTERLY RESULTS

The tables below present’s selected financial data for the Company’s eight most recently completed quarters, all information was prepared in accordance with IFRS.

	Dec 31 Sept 30 June 30 March 31
	2019 2019 2019 2019
	$ $ $ $
Financial results Net loss for period Basic & diluted loss per share Exploration expenditures	160,150 59,497 56,505 80,846 0.00 0.00 0.00 0.00 133,143 60,670 (38,068) 55,118
Statement of Financial Position Cash Exploration & evaluation assets Total assets Shareholders’ equity	6,969 125,202 37,174 25,293 18,790,702 11,219,169 11,158,499 11,196,567 18,935,012 11,394,008 11,254,299 11,304,930 18,301,797 10,945,861 10,731,433 10,787,122
	December 31 Sept 30 June 30 March 31 2018 2018 2018 2018 $ $ $ $ 81,715 127,073 580,663 669,466 0.00 0.00 0.01 0.01 (4,075) $544,541 $2,331,198 $468,267 207,875 19,161 444,608 1,048,533 11,141,449 11,145,524 10,600,983 8,269,785 11,455,602 11,362,970 11,045,591 9,641,794 10,866,744 9,996,805 10,117,726 9,234,307
	2018 2018 2018
	$ $ $
Financial results Net loss for period Basic & diluted loss per share Explorationexpenditures
Statement of Financial Position Cash Exploration & evaluation assets Total assets Shareholders’ equity

All exploration expenditures relate to work done on the Solwezi Licenses. Net losses for all periods reflect general and administrative costs including legal and accounting. Prior to January 1, 2018, Zambian operations were directed and managed from Canada. In January 2018, the Company added technical and support staff in Zambia and transferred most operational functions to MSM Zambia as the size and scope of the annual program in Zambia increased. The increased activity in MSM Zambia resulted in an initial increase in office, legal, accounting, administrative and staffing costs as reflected in the net losses for the quarters ended March 31 through September 30, 2018. During the quarter ended September 30, 2018 the Company reassessed its administrative processes and significantly reduced administrative costs in both Zambia and Canada. Company management continues to evaluate options to effectively manage costs in both Canada and Zambia while maintaining enough resources to oversee seasonal exploration programs, other property related work and administrative functions.

==> picture [145 x 42] intentionally omitted <==

7 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

6. DISCUSSION OF OPERATIONS

The following discussions address some of the reasons for variations in the quarterly numbers, but as is typical with junior exploration and mining companies there can be significant fluctuation from quarter to quarter. Quarterly results can vary greatly depending on whether the Company is in an active exploration phase or has granted stock options. Activity levels are primarily dependent on the success of the Company’s ongoing exploration and evaluation work and the Company’s ability to raise funds through equity issuances. The granting of stock options can cause a material variation in net loss on a quarterly basis due to the resulting share-based payment charges which can be significant.

Overall Performance & Results of Operations

Three Month Period Ended December 31, 2019

The Company’s loss for the three months ended December 31, 2019, was $160,150, or $0.00 per share, as compared to a loss of $81,715, or $0.00 per share for the three months ended December 31, 2018. The decrease was a result of cost cutting measures and lower activity levels in the current 2019 period.

Major expenses during the three-month period ended December 31, 2019 consisted of accounting and audit fees, $8,010 (2018: $8,727), consulting fees, $64,866 (2018: $25,849), investor and shareholder relations, $10,860 (2018: $16,722), legal fees, $1,786 (2018: $10,556), office services and miscellaneous recovery, $(4,962) (2018: $22,954), regulatory and transfer agent fees, $1,621 (2018: $3,870), share-based payments, $29,019 (2018: $4,084), and wages and benefits, $11,992 (2018: $14,710).

Twelve Month Period Ended December 31, 2019

The Company’s loss for the twelve months ended December 31, 2019, was $356,998, or $0.00 per share, as compared to a loss of $1,458,917, or $0.02 per share for the twelve months ended December 31, 2018. The decrease was primarily a result of cost cutting by MSM Zambia, decreased share-based payments, decreased investor relations activities, reduced reliance on consultants and employees and lower operating levels.

Major expenses during the 12-month period ended December 31, 2019 consisted of accounting and audit fees, $43,944 (2018: $44,611), consulting fees, $67,870 (2018: $251,990), investor and shareholder relations, $43,186 (2018: $187,863), legal fees, $7,900 (2018: $64,894), office services and miscellaneous expenses, $52,857 (2018: $115,932), regulatory and transfer agent fees, $12,370 (2018: $21,234), sharebased payments, $31,439 (2018: $611,671), travel, $nil (2018: $9,695) and wages and benefits, $55,467 (2018: $149,555).

During the 12-month period ended December 31, 2019, $109,394 in cash was used for operating activities and $338,674 in cash was used for exploration and evaluation asset expenditures.

==> picture [145 x 42] intentionally omitted <==

8 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

7. LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2019, the Company had $6,969 in cash. The Company does not have cash flow from operations due to it being an exploration stage company; therefore, financings have been the sole source of funds. At December 31, 2019, the Company had working capital deficit of $510,649 and an accumulated deficit of $7,229,513. In the opinion of management this working capital is insufficient to support the Company’s near term general administrative and corporate operating requirements on an on-going basis.

Liquidity Outlook

In order to finance the Company’s exploration programs and to cover administrative and overhead expenses, the Company raises money through the sale of equity, from the exercise of convertible securities and from optioning its exploration and evaluation assets. Many factors influence the Company’s ability to raise funds, including the health of the resource market, the climate for mineral exploration investment, the Company’s track record, and the experience and calibre of its management. Actual funding requirements may vary from those planned due to several factors, including the progress of exploration activities.

On August 8, 2019, the Company closed a non-brokered private placement for net proceeds of $330,160. Management is encouraged by improving equity markets for mineral exploration programs and anticipates seeking additional sources of funding prior to the end of the fiscal year. Given volatility in equity markets, global economic uncertainty, cost pressures and results of exploration activities there can be no certainty equity funding will be available to the Company or if available funding will be on acceptable terms. Management believes it will be able to raise equity capital as required but recognizes that there will be risks which may be beyond its control.

Capital Resources

The Company has insufficient capital to cover its administrative overhead expenses for the next twelve months. The Company does not currently have capital to fund all budgeted or planned exploration activities on the Solwezi Licenses during 2019. To continue exploring the Solwezi Licenses, Midnight Sun will be required to raise additional capital, and if capital is not available the Company will have to delay some planned exploration expenditures.

8. TRANSACTIONS WITH RELATED PARTIES

The Company’s related parties at December 31, 2019 consist of 8 officers and directors (and their related companies).

Name of Related Party	Position at Dec 31, 2019	Nature of transaction
Allan J. Fabbro	Director & Interim CEO	Director
Fengjie Huang	Director (Zambian subsidiary)	Management services
Mathew Mackenzie	Secretary	Corporate secretary
Richard J. Mazur	Director	Director
Wayne Moorhouse	CFO & COO	Management services
Brett Richards/Richards Enterprises Inc.	Director	Director
Robert A. Sibthorpe / 069426 BC Ltd	VP Exploration & Director	Management services
Tom Ye	Director	Geological services

As at December 31, 2019, $124,589 (December 31, 2018 - $2,085) is due to officers, directors or companies

==> picture [145 x 42] intentionally omitted <==

9 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

with a director in common for cash advances, unpaid geological consulting fees, unpaid wages and bonuses and unpaid expenses. Included in share subscriptions receivable is $54,000 (December 31, 2018 - $Nil) due from a director and officer of the Company. Included in accounts receivable is $26,800 (December 31, 2018 - $29,800) due from a director and officer of the Company.

9. KEY MANAGEMENT COMPENSATION

Compensation paid or accrued to key management and/or their related companies during the years ended December 31, 2019 and 2018 is as follow

	For the Year Ended December31,
Nature of Expenditure	2019 2018
Wages and benefits Consulting fees Share-based payments Total	$24,960 $24,960 67,867 $112,035 - $390,411
	$92,827 $527,406

Key management consists of those individuals having authority and responsibility for, directly or indirectly, planning, directing, and controlling the activities of the Company. Wages are paid to the Company’s Corporate Secretary, Consulting fees are amounts paid to the Company’s former CEO and share-based payments reflect the stock option expense for options granted to the Company’s directors, CFO, Corporate Secretary and a director of ZHLML.

All the above payments and accruals were made in the normal course of operations and have been valued here and in the Financial Statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

10. OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

11. PROPOSED TRANSACTIONS

The Company does not currently have any proposed transactions other than the transactions discussed in this MD&A; however, the Company will continue to review potential property acquisitions in addition to conducting exploration work on its properties.

12. CHANGES IN ACCOUNTING POLICY

Please see note 3 in the Financial Statements.

13. FINANCIAL INSTRUMENTS AND RELATED RISKS

The Board, through the Audit Committee, is responsible for identifying the principal risks facing the Company and ensuring that appropriate risk management systems are developed and implemented. The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk and credit risk in accordance with its risk management framework.

==> picture [145 x 42] intentionally omitted <==

10 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

Financial Instruments

Financial assets

The Company classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Company's accounting policy for each category is as follows:

• Fair value through profit or loss - This category comprises derivatives, or assets acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of operations and comprehensive loss.

• Loans and receivables - These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default.

• Held-to-maturity investments - These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in the statement of operations and comprehensive loss.

• Available-for-sale - Non-derivative financial assets not included in the above categories are classified as available-for- sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the statement of operations and comprehensive loss.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above.

Financial liabilities

The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows:

• Fair value through profit or loss - This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of operations and comprehensive loss.

• Other financial liabilities: This category includes amounts due to related parties and accounts payables and accrued liabilities, all of which are recognized at amortized cost.

Classification

The Company’s cash, deposits, and receivables are classified as loans and receivables. The

Company’s accounts payable and accrued liabilities and due to related parties are classified as other financial liabilities.

==> picture [145 x 42] intentionally omitted <==

11 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

The carrying value of receivables, accounts payable and accrued liabilities, and amounts due to related parties approximated their fair value because of the short-term nature of these instruments.

Related Risks

Interest rate risk

The Company has non-material exposure at December 31, 2019 and 2018 to interest rate risk through its financial instruments.

Currency Risk

As at December 31, 2019 and 2018, the majority of the Company’s cash was held in Canadian dollars, the Company’s functional and reporting currency. The Company is exposed to currency risk due to accounts payable in US Dollars. A 1% change in the foreign exchange rate between the Canadian and US Dollar would result in a fluctuation of $297 on the net loss for the period.

Credit risk

The Company has no significant concentrations of credit risk arising from operations. The Company has some cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by Canadian financial institutions with which it keeps its bank accounts and management believes the risk of loss to be remote. The Company also has $5,534 held with a major financial institution in Zambia. Management believes the risk of loss to be remote.

Liquidity Risk

The Company attempts to manage liquidity risk by maintaining sufficient cash balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short-term obligations. As at December 31, 2019, the Company had $6,969 cash (December 31, 2018 – $207,875) and current liabilities of $615,959 (December 31, 2018 - $588,858). The Company’s current working capital is insufficient to support the Company’s near term general administrative and corporate operating requirements on an on-going basis. The Company intends to raise funds adequate to meet its liquidity needs for the next twelve months via private placement.

Finance Risk

The Company has no source of operating cash flow and no assurance that additional funding will be available to it for further exploration and development of its projects when required. Although the Company has been successful in the past in obtaining financing through the sale of equity securities or joint ventures, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further exploration and development of its properties.

14. RISKS AND UNCERTAINTIES

The Company has no history of profitable operations and its present business is at an early stage. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment and the likelihood of success must be considered in light of its early stage of operations.

==> picture [145 x 42] intentionally omitted <==

12 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

The risks and uncertainties described in this section are not inclusive of all risks and uncertainties to which the Company may be subject.

Early Stage – Need for Additional Funds

The Company has no history of profitable operations and its present business is at an early stage. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of its early stage of operations.

Political Risk

The Company’s operations and investments may be affected by local political and economic developments including: expropriation; nationalization; invalidation of governmental orders; permits or agreements pertaining to property rights; failure to enforce existing laws; failure to uphold property rights; political unrest; labour disputes; limitations on repatriation of earnings; limitations on foreign ownership; inability to obtain or delays in obtaining necessary mining permits; opposition to mining from local, environmental or other non-governmental organizations; government participation; royalties, duties, rates of exchange, high rates of inflation, price controls, exchange controls, currency fluctuations; taxation and changes in laws, regulations or policies; as well as by laws and policies of Canada affecting foreign trade, investment and taxation.

Location Risk

The Company’s property interests are located in remote, undeveloped areas and the availability of infrastructure such as surface access, skilled labour, fuel and power at an economic cost, cannot be assured. These are integral requirements for exploration, development and production facilities on exploration and evaluation assets.

Discovery Risk

Resource property acquisition, exploration, development, and operation is a highly speculative business that involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of precious metals and other minerals may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish economically viable mineral deposits, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the acquisition, exploration or development programs planned by the Company will result in a profitable commercial mining operation. The potential for any project to eventually become an economically viable operation depends on numerous factors including: the quantity and quality of the minerals discovered if any, the proximity to infrastructure, metal and mineral prices (which vary considerably over time) and government regulations. The exact effect these factors can have on any given exploration property cannot accurately be predicted but the effect can be materially adverse.

Environmental Risk

Environmental laws and regulations may affect the operations of Midnight Sun. These laws and regulations set various standards regulating certain aspects of health and environmental quality. They provide for penalties and other liabilities for the violation of such standards and establish, in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are or were conducted. Furthermore, the permission to operate could be withdrawn temporarily where there is evidence of serious breaches of health and safety, or even permanently in the case of extreme breaches. Significant liabilities could be imposed on the Company for damages, clean-up costs or penalties in the event of certain discharges into the environment, environmental damages caused by previous owners of acquired properties

==> picture [145 x 42] intentionally omitted <==

13 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

or non-compliance with environmental laws or regulations. The Company intends to minimize these risks by taking steps to ensure compliance with environmental, health and safety laws and regulations and operating to international environmental standards.

Price Risk

The market price of precious metals and other minerals is volatile and cannot be controlled.

Conflicts

The Company’s directors and officers serve as directors or officers or may be associated with other reporting companies or have significant shareholdings in other public companies. To the extent that such other companies may participate in business or asset acquisitions, dispositions, or ventures in which the Company may participate, the directors and officers of the Company may have a conflict of interest in negotiating and concluding terms respecting the transaction.

Dependence on Key Personnel

The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management's services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company.

Competitive Risk

The mineral industry is intensely competitive in all its phases. The Company competes with many other mineral exploration companies who have greater financial resources and technical capacity.

15. COMMITMENTS

Other than obligations disclosed in the Financial Statements and elsewhere this MD&A the Company does not have any commitments.

16. NATURE OF SECURITIES

The purchase of the Company’s securities involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks. The Company’s securities should not be purchased by persons who cannot afford the possibility of the loss of their entire investment. Furthermore, an investment in the Company’s securities should not constitute a major portion of an investor's portfolio.

==> picture [145 x 42] intentionally omitted <==

14 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

17. DISCLOSURE OF OUTSTANDING SHARE DATA

The table below presents the Company’s common share data as of May 26, 2020.

Price Expiry date	May 26, 2020
Common shares issued and outstanding Securities convertible into common shares: Stock Options $0.25 November 28, 2021 $0.35 August 18, 2022 $0.36 January 31, 2023 $0.135 May 6, 2025 Total Options Warrants $0.48 May 30, 2020 $0.20 October 31, 2020 $0.20 November 30, 2020 $0.20 December 18, 2020 $0.20 August 8, 2021 $0.135 May 26, 2022 $0.135 May 26, 2022 Total Warrants	99,491,966 2,600,000 1,000,000 2,325,000 3,000,000
	8,925,000
	1,041,200 4,458,000 2,575,000 1,301,000 2,773,334 7,940,185 419,000
	20,507,719
Total options & warrants	29,432,719

18. ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS

Additional disclosure concerning Midnight Sun’s general and administrative expenses and exploration and evaluation assets expenditures is provided in the Company’s Financial Statements. These Financial Statements are available on SEDAR at www.sedar.com.

19. APPROVAL

The Board of Directors oversees management’s responsibility for financial reporting and internal control systems through an Audit Committee. This Committee meets periodically with management and annually with the independent auditors to review the scope and results of the annual audit and to review the financial statements and related financial reporting and internal control matters before the financial statements are approved by the Board of Directors and submitted to the shareholders of the Company. The Board of Directors of Midnight Sun has approved the financial statements and the disclosure contained in this MD&A. A copy of this MD&A will be provided to anyone who requests it.

20.

FORWARD LOOKING INFORMATION

Forward-looking statements relate to future events or future performance and reflect management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of operations, environmental risks, permitting risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the

==> picture [145 x 42] intentionally omitted <==

15 | P a g e

MIDNIGHT SUN MINING CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the Year Ended December 31, 2019

use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual financial statements which are filed and available for review on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

21. ADDITIONAL INFORMATION

Additional information is available on SEDAR at www.sedar.com.

==> picture [145 x 42] intentionally omitted <==

16 | P a g e