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Montero Mining and Exploration Ltd. Management Reports 2025
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MONTERO MINING AND EXPLORATION LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the year ended December 31, 2024
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
DATE
This Management's Discussion and Analysis ("MD&A") of Montero Mining and Exploration Ltd. ("Montero" or the "Company") has been prepared by management as of April 29, 2025, and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024. The Company's Board of Directors have reviewed and approved this MD&A.
All amounts in the MD&A, condensed interim consolidated financial statements and related notes are expressed in Canadian dollars unless otherwise noted.
All statements, other than of historical facts included herein, including without limitations, statements regarding potential mineralization, reserves and exploration results and future plans and objectives of the Company are forward looking statement and involve various risks and uncertainties, which are detailed in the Section "Risk Factors" of this MD&A. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.
Corporate and Operational Highlights
On April 16, 2025, the Company announced it had finalized its planned use of net proceeds received from its settlement with the United Republic of Tanzania ("Tanzania"). Montero provided notice that it intends to complete a consolidation of its common shares on the basis of six (6) pre-Consolidation Common Shares for one (1) post-Consolidation Common Share.
The Company is seeking shareholder approval to distribute approximately C$15 million to shareholders through a reduction in stated capital (the "Distribution"), consisting of a cash distribution of C$0.30 per Common Share on a pre-Consolidation basis or C$1.80 on a post-Consolidation basis.
On March 4, 2025, the Company received third installment of US$7,000,000 from the settlement with Tanzania. This payment represents the final installment of US$27,000,000.
On February 10, 2025, the Company received the second installment of US$8,000,000 from the settlement with Tanzania.
On January 28, 2025, the Company finalized the distribution of the US$27,000,000 settlement with its litigation funders Omni Bridgeway (Canada). The settlement amount was agreed with Tanzania in the dispute over the expropriation of Montero's Wigu Hill rare earth element project.
The settlement amount of US$27,000,000 is payable over three instalments and is to be distributed as follows:
- First payment of US$12,000,000 received on November 20, 2024, and distributed between Montero. and Omni Bridgeway (Canada), the Company's litigation funder.
- Second payment of US$8,000,000 due by January 31, 2025, to be distributed to Montero and to pay all legal fees.
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
- Third payment of US$7,000,000 due by February 28, 2025, to be distributed entirely to Montero.
After paying funders and legal costs, the net amount due to Montero will be approximately US$14,458,138 (C$20,577,545).
On November 15, 2024, the Company entered into a settlement agreement with the United Republic of Tanzania to end the dispute arising out of the expropriation of the Wigu Hill rare earth element project. Montero agreed to accept a settlement sum of US$27,000,000 (approximately C$38,000,000) payable by Tanzania in 3 payments: 1) US$12,000,000 Payment Received on the November 20, 2024; 2) US$8,000,000 by January 31, 2025; and 3) US$7,000,000 by February 28, 2025.
On September 5, 2024, the Company appointed Timothy Livesey as a Non-Executive Director to Montero's Board of Directors. Montero has granted Timothy Livesey with 400,000 stock options. The stock options have an exercise price of C$0.34 and have a five year term.
On September 4, 2024, the Company granted 4,050,000 stock options to the Board of Directors, Management and Consultants. The stock options have an exercise price of C$0.33 and have a five-year term.
On August 29, 2024, the Company announced that it had closed the second and final tranche of its non-brokered private placement with an aggregate of 2,397,236 common shares at a price of C$0.27 per share, for total gross proceeds of C$647,254. In connection with the closing of the private placement, the Company paid C$3,000 in cash finders' fee.
On August 16, 2024, the Company announced that it had closed the first tranche of its non-brokered private placement with an aggregate of 2,444,444 common shares at a price of C$0.27 per share, for total gross proceeds of C$660,000. In connection with the closing of the private placement, the Company paid C$39,600 in cash finders' fee.
On June 10, 2024, the Company provided an update on the ICSID arbitration proceedings against Tanzania. The Tribunal set new dates for the hearing which was to take place from November 25 to November 29, 2024, at the Paris Arbitration Centre, Paris, France. After the previous hearing date was postponed, the Tribunal preferred to keep the hearing in person and decided to move the hearing dates to accommodate all parties.
On February 29, 2024, the Company settled C$200,000 of trade payables owed various creditors and amounts owing to a related party, by issuing an aggregate of 1,300,813 common shares of the Company with a fair value of C$251,839.
On January 18, 2024, the Company closed a non-brokered private placement by issuing 5,332,997 common shares of the Company at the price of C$0.15 per share, for gross proceeds of $799,950. In connection with the closing of the private placement, the Company paid C$33,000 in cash finders' fee. Certain directors of the Company subscribed for an aggregate of 296,667 common shares under the private placement, with being considered a related party transaction.
3
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
Description of Business
Montero was incorporated on October 5, 2006, under the laws of British Columbia, Canada. The Company is a public company listed on the TSX Venture Exchange in February 2011, and trades under the symbol MON.V. The Company's registered address is 1040 West Georgia Street, Suite 1900, Vancouver, BC, V6E 4H3 and its head office address is Suite 401 - 750 West Pender Street Vancouver, BC, V6C 2T7. Phone: 604-428-7050. Web: www.monteromining.com.
The Company's business is the identification, evaluation, acquisition, exploration, and development of mineral properties to sell or joint venture for monetary benefit to the Company and its shareholders. The Company is involved in an international arbitration dispute for compensation for the expropriation of a mineral property in Tanzania and against the government of Tanzania.
The consolidated financial statements have been prepared using International Financial Reporting Standards ("IFRS") applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As at December 31, 2024, the Company had not advanced its exploration and evaluation assets to commercial production and is not able to finance day to day activities through operations. The Company's continuation as a going concern is dependent upon the successful results from its mineral property exploration activities and its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. These conditions give rise to substantial doubt about the Company's ability to continue as a going concern. When further funds are required, they will be financed through a private placement of common shares or by debt instruments.
Management has reduced operating costs including voluntary fee reductions from directors, reduced rent and administrative fees and decreased usage of administrative staff and consultants. Management has focused its exploration efforts on the projects it believes will provide the best value to shareholders. It continues its exploration work programs on projects to advance them and seeks joint venture and otherpartners for other projects where no exploration is currently being conducted. Management believes that controlling operating expenses, funding from potential funding partners, borrowings from directors and management, and further private placements will generate the required funding to maintain operations. Although management is committed and expects to raise additional funding, the timing and the nature of the financing is uncertain and there can be no assurances that this will occur. Further details on financing alternatives available to the Company are fully discussed in Liquidity and Capital Resources.
The Company is engaged in the discovery and development of mineral properties for monetary benefit on sale or joint venture. The Company has not yet determined whether its exploration assets contain sufficient mineral reserves, such that their recovery would be viable. In June 2020, the Company decided, due to the continued decline in battery metal prices, also exacerbated by the COVID-19 pandemic to change its focus to exploration in Chile. The Company divested its battery metal projects, reduce its corporate structure, while defending its previous investment in the Wigu Hill rare earth project, where it made a substantial investment and created value from its discovery to development.
The key performance driver for Montero is to develop mineral deposits to create wealth for shareholders by joint venture or outright sale. This will be achieved through acquiring and exploring properties which host the highest potential for future discoveries or development of existing mineral resources into mineable reserves. Management works to rationalize all its significant core holdings to
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
maintain percentage ownership, while working with others to share the risk of development of these properties. Management acquires its exploration assets through the issuance of common shares where possible to preserve the Company's cash reserves.
Management has the necessary skills required to achieve success, both in the technical and financial area with experienced exploration and consulting geologists and those with entrepreneurial and financial experience. Shareholders are represented by a strong management and independent Board of Directors, experienced in financing, exploration, development, and mining.
The Company has access to consulting geologists, metallurgical/chemical and mining engineers and corporate finance and legal counsel with commodity and country expertise in the countries where current interests are held. Consultants are retained through variable or fixed term contracts.
Chilean Focus
Avispa Copper - Molybdenum Project
The Avispa Copper-Molybdenum Project (Avispa Project) comprises a 203 km² area, Avispa and Abeja areas, of 100%-owned exploration mining concessions situated in the Atacama region of northern Chile. It lies within the Paleocene-Eocene Copper-Molybdenum (Cu-Mo) Porphyry Belt, a well-defined mineralized zone running north to south across northern Chile. Avispa is strategically located 50 km north of BHP's Spence Cu-Mo mine, 50 km north of the KGHM/South32 Sierra Gorda Cu-Mo mine, and 50 km west of Codelco's Chuquicamata copper mine, the world's largest open-pit copper mine.
On August 16, 2022, Montero confirmed the potential of the Avispa Project to host porphyry copper-molybdenum (Cu-Mo) mineralization following geological mapping. The study identified Quaternary and Miocene sediments with thicknesses ranging from 20 to 50 meters. Beneath these sediments, altered Cretaceous lithologies were observed, intruded by porphyry rocks. Sampling included 37 grab samples from exposed lithologies and 48 discarded drill rock chips from previous reverse circulation (RC) drilling conducted by BHP, Quantum Pacific, Freeport, and Codelco in the Avispa area. All samples were logged and analyzed using a 48-element assay via four-acid digestion and ICP-MS.
On August 23, 2022, Montero announced assay results from sampling exposed lithologies and RC drill chip piles, which revealed copper anomalies exceeding 100 ppm Cu and molybdenum anomalies ranging between 10-25 ppm Mo. Montero also engaged Fathom Geophysics ("Fathom") to evaluate the project data and refine targets for porphyry-type Cu-Mo deposits.
On September 27, 2022, Montero received a positive report from Fathom Geophysics, which analyzed geochemical data from the Avispa Project and generated a 3D conceptual target indicating potential porphyry mineralization.
In March 2024, Montero streamlined its concession holdings, focusing on the most prospective areas identified through previous exploration programs. The Company remains committed to the Avispa property package, maintaining it in good standing by making concession payments.
During the year ended December 31, 2024, the Company capitalized an additional C$228,424 in costs related to the Avispa Copper Molybdenum Project (December 31, 2023 - C$357,764).
5
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
Figure 1. Location of the Avispa Project (Avispa/Abeja Concessions) and major copper mines in northern Chile
Tanzania
Tanzania Government Dispute - Wigu Hill Retention License Expropriation
Montero acquired the Wigu Hill rare earth property through an earn-in agreement between 2008 and 2010, forming a joint venture with a local partner. The Company after making the initial discovery advanced the project through resource definition, environmental impact assessment, metallurgical test work, and mining studies, all preparatory steps for a Mining License.
In 2015, the project was granted a 5-year Retention License over the property, however, in 2017, Tanzania amended its Mining Act, eliminating Retention Licenses, and in January 2018, all such licenses were cancelled. Despite attempts to resolve the matter amicably, Tanzania did not offer compensation and instead invited an open tender for areas covered by previous Retention Licenses. In response, Montero initiated arbitration proceedings in January 2021. The ICSID tribunal was formed in late 2021 and began addressing procedural matters in 2022, with Montero submitting its Memorial in May 2022, claiming C$90 million, including interest. The Company engaged with Jeantet AARPI and SRK (USA) as legal counsel and Quantum Expert, respectively, with Omni Bridgeway (Canada) as litigation funding partner.
Tanzania responded with a Counter-Memorial in October 2022, and Montero appointed Timothy Foden as co-counsel in 2023. The arbitration hearing, initially scheduled for December 2023, was postponed and a new date set for 25-28 November 2024 with the hearing to be held in Paris.
On November 15, 2024, the Company entered into a settlement agreement with Tanzania to end the dispute arising out of the expropriation of the Wigu Hill rare earth element project. Montero agreed to
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
accept a settlement sum of US$27,000,000 (approximately $38,000,000) payable by Tanzania in 3 payments: 1) US$12,000,000 Payment Received on 20 November 2024; 2) US$8,000,000 by January 31, 2025. Payment received February 10, 2025; and 3) US$7,000,000 by February 28, 2025. Payment received March 3, 2025.
In order for the agreement to be binding it was contingent on Montero's legal counsel, Boies Schiller Flexner LP ('BSF'), confirming receipt of the first payment. On November 20, 2024, BSF received and confirmed the first payment of US$12,000,000. Once the first payment was completed Montero and Tanzania requested a stay of the arbitration hearings due to commence on November 25, 2024, in Paris, France. The tribunal immediately took note of the parties' joint request.
The conclusion of the ICSID arbitration and payment of the remaining instalments was conditional on Tanzania completing the final two payments, which were made.
The settlement of US$27 million represents approximately 39% of the original C$70 million claim and avoids a costly, lengthy hearing, as well as the risks of an adverse ruling and enforcement challenges, concluding a nearly 7-year dispute. Compensation for expropriation of mining projects which did not reach the productions state are usually based on sunk costs, which in this instance was far exceeded.
Risk Factors
Through its operations, the Company is exposed to various business risks outlined below. Additional risks and uncertainties, including those that we are not aware of now or that we currently deem immaterial, may also adversely affect our business.
- Montero has not been profitable since inception, and it may continue to incur substantial losses.
- The Company operates in the highly speculative business of mining exploration and development and is currently in the exploration stage.
- The Company has not yet determined whether their properties contain enough mineral reserves, such that their recovery would be economically viable.
- The Company is exploring for mineral resources and these commodities are subject to pricing and other risks.
- The Company may not be able to secure adequate financing to support the expenditures required to sustain the Company until profitable operations are achieved.
- The Company operates in foreign jurisdictions and although professional advice is obtained to ensure the Company meets all the local requirements, there may be deficiencies in some areas.
- The Company is subject to foreign government policies and regulations and seeks local advice to assess and comply with local requirements.
- The Company faces currency risks in its operations.
- The Company has limited personnel with various degrees of knowledge concerning their area of expertise and there may be instances where segregation of duties does not exist, and reliance must be placed on outside advisors to assist with complex areas.
The Company undertakes its best efforts to mitigate the above risks using the resources at its disposal but believes that uncertainties and risks do exist in its business operations. Further discussions on risks associated with the Company's operations are elaborated below. Readers should review and consider the financial, operational, permitting and environmental risk factors faced by the Company, which are common to junior exploration companies.
MONTERO MINING AND EXPLORATION LTD. Management's Discussion and Analysis For the year ended December 31, 2024
Industry and Economic Factors Affecting the Company
The Company's future performance is largely tied to the financial markets related to junior exploration companies, which is often cyclical and is currently very unfavorable. The Company continuously monitors several economic factors including the uncertainty regarding rare earth element and phosphate prices and the availability of equity financing for the purposes of mineral exploration and development. The Company's future performance is largely tied to the development of its current mineral property interests and the overall financial markets. Financial markets relating to commodities are likely to continue to be volatile reflecting ongoing concerns about the global economy and potential sovereign defaults throughout the world. Globally companies have been affected negatively by these trends. As a result, the Company may have difficulties raising equity financing for the purposes of mineral exploration and development, particularly without excessively diluting the interests of its current shareholders.
With continued market volatility expected, the Company's current strategy is to continue to conduct limited exploration work on its properties where required and keep these in good standing until access to capital for junior mining companies becomes more available and to seek out other prospective business opportunities including entering into option arrangements and/or joint ventures. The Company believes that this focused strategy will enable it to maintain momentum on key initiatives. These trends may limit the Company's ability to develop and/or further explore its Chilean properties, and/or other property interests that could be acquired in the future. Management regularly monitors economic conditions and estimates their impact on the Company's operations and incorporates these estimates in short-term operating and longer-term strategic decisions.
Exploration, Development and Operating Risks
The exploration for and development of mineral deposits is a speculative venture involving a high degree of risk. Even a combination of careful evaluation, experience and knowledge may not eliminate such risks. While the discovery of a commercially viable ore body may result in substantial rewards, few mineral properties, which are explored, are ultimately developed into producing mines. Unusual or unexpected formations, formation pressures, fires, power outages, labor disruptions, flooding, cave-ins, landslides, and the inability of the Company to obtain suitable machinery, equipment or labor are all risks involved with the execution of exploration programs and the operation of mines. Substantial expenditure may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site, and substantial additional financing may be required.
It is impossible to ensure that the exploration or development programs planned by Montero will result in a profitable commercial mining operation. The decision as to whether a particular property contains a commercial mineral deposit and should be brought into production will depend on the results of exploration programs and/or feasibility studies, and the recommendations of duly qualified engineers and geologists. Several significant factors will be considered, including, but not limited to: (i) the particular attributes of the deposit, such as size, grade, metallurgical characteristics, and proximity to infrastructure; (ii) metal prices, which are highly cyclical; (iii) government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, permitting, importing and exporting of minerals and environmental protection; (iv) ongoing costs of production; (v) availability and cost of additional funding; and (vi) local community and landowner opposition to access mineral rights. The exact effect of these factors cannot be accurately predicted, but one or any combination of these factors may result in Montero not receiving an adequate return on invested capital.
MONTERO MINING AND EXPLORATION LTD. Management's Discussion and Analysis For the year ended December 31, 2024
Additional Capital
The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions as well as the business performance of Montero. The development and exploration of the Company's properties will require substantial additional financing. Such financing can also be sourced by allowing investment groups to obtain equity at the asset level of properties of interest rather than via subscription into the listed Company. Failure to obtain financing may result in delaying or indefinite postponement of exploration, development, or production on any or all of Montero's properties or a loss of a property interest. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to the Company. If additional financing is raised by Montero through the issuance of securities from treasury, control of Montero may change, and security holders may suffer additional dilution.
Environmental Risks and Hazards
All phases of Montero's operations are subject to environmental regulation in the various jurisdictions in which it operates. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company's operations. Environmental hazards may exist on the properties on which Montero holds interests which are unknown to Montero at present and which have been caused by previous or existing owners or operators of the properties or by current or previous surface rights owners. Government and private surface rights property owners' approvals and permits have been submitted as required and future approvals will be required in connection with Montero's operations. To the extent such approvals are required and not obtained, Montero may be curtailed or prohibited from continuing its mining operations or from proceeding with the planned exploration or development of the mineral properties in which it has an interest. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in the exploration or development of exploration properties may be required to compensate those suffering loss or damage by reason of such parties' activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities of exploration companies, or more stringent implementation thereof, could have a material adverse impact on Montero and cause increases in exploration expenses or capital expenditures or require abandonment or delays in development of new exploration properties.
Permitting
Montero's current and future operations will require approvals and permits from various federal and local governmental authorities, and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, taxes, labor standards, health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There is no assurance that delays will not occur in connection with obtaining all necessary renewals of such approvals and permits for the existing operations or additional approvals or permits for any possible
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
future changes to operations. Prior to any development on any of its properties, Montero must receive permits from appropriate governmental authorities. There can be no assurance that Montero will obtain or continue to hold all permits necessary to develop or continue operating at any particular property.
Title to Exploration, Mining Licenses and claims
The validity of Exploration, Mining Licenses and claims generally can be contested, and although Montero has taken steps to acquire the necessary title to its licenses, some risk exists that title to such licenses may be defective. To maintain these licenses, Montero must pay license and claim fees when due and may need to incur certain minimum exploration expenditures annually or risk forfeiture of the licenses and claims any such expenditure made to such time. The Company is also aware of over staking and bureaucratic errors over licenses and claims which are beyond its control. Governments may also change legislation which can have a severe effect on the Company's tenements.
Uninsurable Risks
In the course of exploration, development and production of mineral properties, several risks and, in particular, unexpected or unusual geological or operating conditions, may occur. It is not always possible to fully insure against such risks, and the Company may decide not to insure such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in an increase in costs and a decline in value of the securities of Montero. The Company is not insured against environmental risks. Insurance against environmental risks (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) has not been generally available to companies within the industry. Montero periodically evaluates the cost and coverage of the insurance against certain environmental risks that is available to determine if it would be appropriate to obtain such insurance. Without such insurance, and if Montero becomes subject to environmental liabilities; the payment of such liabilities would reduce or eliminate its available funds or could exceed the funds available to Montero to pay such liabilities and result in bankruptcy. Should Montero be unable to fund fully the remedial cost of an environmental problem it might be required to enter into interim compliance measures pending completion of the required remedy.
Market Factors and Volatility of Commodity Prices
The marketability of mineralized material, which may be acquired or discovered by Montero, will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations in the prices of minerals sought, which are highly volatile, the proximity and capacity of natural resource markets and processing equipment, and government regulations, including regulations relating to prices, taxes, royalties, permitting, land tenure, land use, importing and exporting of minerals and environmental protection. The effect of these factors cannot be accurately predicted, but these factors may result in Montero not receiving an adequate return on invested capital. Prices of certain minerals have fluctuated, particularly in recent years, and are affected by numerous factors beyond the control of Montero. Futuremineral prices cannot be accurately predicted. A severe decline in the price of a mineral being produced or expected to be produced by Montero would have a material adverse effect on Montero and could result in the suspension of exploration or development of mining operations by Montero.
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
Infrastructure
Development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, and government or other interference in the maintenance or provision of such infrastructure could adversely affect Montero's operations, financial condition and results of operations.
Competition
The resource and mining exploration industry is intensely competitive in all of its phases. As a result of this competition, some of which is with large, established mining companies with substantial capabilities and greater financial and technical resources than Montero, the Company may be unable to acquire additional mineral properties on terms it considers acceptable or continue to explore and develop its existing properties.
Exchange Rate Fluctuations
Exchange rate fluctuations may adversely affect Montero's financial position and results. The Company does not currently hedge or otherwise mitigate its foreign currency risks.
Foreign Operations
The Company's property interests are located Chile and are subject to the respective jurisdiction's laws and regulations. The Company is always assessing current developments in policies and regulations and investors should assess the political risks of investing in a foreign country. Variations from the current regulatory, economic and political climate could have an adverse effect on the affairs of the Company.
Key Executives
Montero is dependent on the services of key executives and a small number of highly skilled and experienced consultants and personnel. Locating mineral deposits depends on a number of factors, not the least of which is the technical skill of the exploration personnel involved. Due to the relatively small size of the Company, the loss of these persons or the Company's inability to attract and retain additional highly skilled employees may adversely affect its business and future operations. Montero does not currently carry any key man life insurance on any of its executives.
Conflicts of Interest
Certain of the directors and officers of Montero also serve as directors and/or officers of other companies involved in natural resource exploration and development and consequently there exists the possibility for such directors and officers to be in a position of conflict. Any decision made by such directors and officers involving Montero will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company and its shareholders.
The condensed interim consolidated financial statements have been prepared using International Financial Reporting Standards ("IFRS") applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As at December 31,
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
2023, the Company had not advanced its exploration and evaluation assets to commercial production and is not able to finance day to day activities through operations. The Company's continuation as a going concern is dependent upon the successful results from its mineral property exploration activities and its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. These conditions give rise to substantial doubt about the Company's ability to continue as a going concern. When further funds are required, they will be financed through a private placement of common shares or by debt instruments.
Management has reduced operating costs including voluntary fee reductions from directors, reduced rent and administrative fees and decreased usage of administrative staff and consultants. Management has focused its exploration efforts on the projects it believes will provide the best value to shareholders. It continues its exploration work programs on projects to advance them and seeks joint venture and other partners for other projects where no exploration is currently being conducted.
Management believes that controlling operating expenses, funding from potential funding partners, borrowings from directors and management, and further private placements will generate the required funding to maintain operations. Although management is committed and expects to raise additional funding, the timing and the nature of the financing is uncertain and there can be no assurances that this will occur. Further details on financing alternatives available to the Company are more fully discussed in Liquidity and Capital Resources.
Company Objectives and the Year Ahead
The Company's corporate objectives are to create value by focusing the expertise of its management and Board of Directors on exploring, discovery and development of metals and minerals projects. The Company will endeavor to create value from its properties in Chile through exploration and agreements with other partners to advance the projects, or outright sale.
The Company has elected to change its focus away from battery metals due to the contraction of the global economy and the potential for a deep recession due to the corona virus where diminished demand for battery metals may further depress prices. Montero has exited from its portfolio of battery metals projects as it is difficult to justify exploration. Management has a deep expertise in defining precious metals deposits and the Company has secured a gold asset in Chile in order to add value for shareholders.
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
SELECTED ANNUAL INFORMATION
| Years ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| $ | $ | $ | |
| Expenses | |||
| Consulting, directors', administrative and management fees | 198,770 | 220,304 | 87,216 |
| Directors' fee | 33,167 | - | - |
| Depreciation | 878 | 193 | 282 |
| General and administrative | 108,551 | 134,324 | 150,030 |
| Professional fees | 91,642 | 73,461 | 80,532 |
| Project investigation costs | 29,027 | 36,215 | 12,014 |
| Shareholder and regulatory | 18,357 | 18,191 | 17,384 |
| Stock-based compensation | 1,449,233 | - | - |
| Impairment of exploration and evaluation assets | 279,340 | 97,917 | 294,965 |
| Loss on forgiveness of debt | 170,732 | - | (150,000) |
| Gain on legal settlement | (20,230,850) | - | - |
| Write off of payables | (59,043) | - | - |
| Other | 33,135 | 18,941 | 832 |
| Net income (loss) | 17,877,061 | (599,546) | (493,255) |
| Basic and diluted income (loss) per share | 0.38 | (0.02) | (0.01) |
| Exploration and evaluation assets | 768,625 | 819,541 | 559,694 |
| --- | --- | --- | --- |
| Total assets | 21,671,566 | 862,709 | 598,458 |
| Total liabilities | 745,720 | 1,623,089 | 759,292 |
| Shareholders' equity (deficit) | 20,925,846 | (760,380) | (160,834) |
RESULTS OPERATIONS
Year ended December 31, 2024
The Company's operating expenses during the year ended December 31, 2024, were materially higher compared to the same period of comparative year. Significant changes in the Company's expenses are outlined below:
Consulting, administrative and management fees decreased to $198,770 during the year ended December 31, 2024 compared to $220,304 during the comparative period in 2023 due to lower accounting fees in the current period.
General and administrative costs decreased to $108,551 during the year ended December 31, 2024 from $134,324 during the comparative period in 2023. The decrease costs were mainly due to less travel expenses incurred in the current year period.
Professional fees increased to $91,642 during the year ended December 31, 2024 compared to $73,461 during the comparative period in 2023. This is mainly due to the higher legal fees incurred
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
by the Company in the current period in relation to the Tanzania litigation.
Project investigation costs decreased to $29,027 during the year ended December 31, 2024 compared to $36,215 during the comparative period in 2023. In the prior year period, the higher costs were mainly related to investigation work on a project in Chile.
Stock-based compensation increased to $1,449,233 during the year ended December 31, 2024 compared to $Nil during the comparative period in 2023. In the current year period 4,450,000 stock options were issued.
The Company's net income for the year ended December 31, 2024 was $17,877,061 compared to a net loss of $599,546 for the year ended December 31, 2023. After removing non-cash expenses for stock-based compensation of $1,449,233, the net gain is $16,427,828 compared to a net loss of $599,546 for the year ended December 31, 2023.
Three months ended December 31, 2024
The Company's operating expenses during the three months ended December 31, 2024, were materially higher compared to the same period of comparative year. Significant changes in the Company's expenses are outlined below:
Consulting, administrative and management fees decreased to $48,684 during the three months ended December 31, 2024, compared to $50,327 during the comparative period in 2023 due to lower accounting fees in the current period.
General and administrative costs decreased to $31,235 during the three months ended December 31, 2024, from $34,957 during the comparative period in 2023. The decreased costs were mainly due to less travel expenses incurred in the current year period.
Project investigation costs increased to $20,720 during the three months ended December 31, 2024, compared to $748 during the comparative period in 2023. In the current year period, the higher costs were mainly related to investigation work on potential projects.
The Company's net income for the three months ended December 31, 2024, was $19,798,877, compared to a net loss of $186,234 for the three months ended December 31, 2023.
Commitments and Contingencies
The Company has no lease commitments or contingencies.
Segmented Information
The Company has one business segment being the exploration and evaluation of mineral resources. The Company is organized by geographic area and its reportable geographic segment is in Chile.
14
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
SUMMARY OF QUARTERLY RESULTS
| 2024 | ||||
|---|---|---|---|---|
| Q4 | Q3 | Q2 | Q1 | |
| $ | $ | $ | ||
| Consulting, administrative and management fee | 48,684 | 46,458 | 49,689 | 53,939 |
| General and administrative | 31,235 | 17,313 | 20,803 | 39,199 |
| Directors' fee | 33,167 | - | - | - |
| Professional fees | (90,189) | 149,071 | 20,313 | 12,447 |
| Other expenses | 27,901 | 2,321 | 3,626 | 14,415 |
| Impairment of exploration and evaluation assets | 279,340 | - | - | - |
| Gain on legal settlement | (20,230,850) | - | - | - |
| Loss on settlement of debt | 118,893 | - | - | 51,839 |
| Stock-based compensation | - | 1,449,233 | - | - |
| Reversal of payables | (28,000) | (31,043) | - | - |
| Interest expense and other | 10,942 | 3,819 | 8,998 | 9,376 |
| Net income (loss) | 19,798,877 | (1,637,172) | (103,429) | (181,215) |
| Basic and diluted income (loss) per share | 0.38 | (0.00) | (0.00) | (0.00) |
| Exploration and evaluation assets | 768,625 | 1,034,247 | 1,022,830 | 864,010 |
| Total assets | 21,671,566 | 2,089,002 | 1,137,507 | 1,187,902 |
| Total liabilities | 745,720 | 1,077,689 | 1,186,500 | 1,133,466 |
| Shareholders' equity (deficit) | 20,925,846 | 1,011,313 | (48,993) | 54,436 |
| 2023 | ||||
| --- | --- | --- | --- | --- |
| Q4 | Q3 | Q2 | Q1 | |
| $ | $ | $ | $ | |
| Consulting, administrative and management fee (recovery) | 50,327 | 48,968 | 59,902 | 61,105 |
| General and administrative | 34,957 | 30,108 | 32,323 | 36,936 |
| Directors' fee (recovery) | (29,625) | 9,875 | 9,875 | 9,875 |
| Professional fees | 20,099 | 15,794 | 23,142 | 14,428 |
| Other expenses | 8,092 | 18,975 | 22,256 | 5,275 |
| Impairment of exploration and evaluation assets | 97,917 | - | - | - |
| Interest expense and other | 4,467 | 19,978 | 1,962 | (7,466) |
| Net loss | (186,234) | (143,698) | (149,460) | (120,153) |
| Basic and diluted loss per share | (0.00) | (0.00) | (0.00) | (0.00) |
| Exploration and evaluation assets | 819,451 | 865,405 | 760,957 | 582,710 |
| Total assets | 862,709 | 897,252 | 812,045 | 612,381 |
| Total liabilities | 1,623,089 | 1,471,397 | 1,242,492 | 893,366 |
| Shareholders' deficit | (760,380) | (574,145) | (430,447) | (280,985) |
Note: Loss per share amounts disclosed above on a quarterly basis may not necessarily equal the cumulative amounts disclosed in the Company's annual financial statements, due to the timing of changes in the weighted average number of shares throughout the year versus the weighted average number of shares throughout the quarter.
15
MONTERO MINING AND EXPLORATION LTD. Management's Discussion and Analysis For the year ended December 31, 2024
LIQUIDITY AND CAPITAL RESOURCES
The Company held cash and investment of $923,453 as at December 31, 2024, compared to $9,641 as at December 31, 2023.
During the year ended December 31, 2024, the Company used cash of $788,933 and $733,118 in its operating and investing activities respectively, compared to cash of $122,323 and $397,272 used in its operating and investing activities respectively during the year ended December 31, 2023.
During the year ended December 31, 2024, the Company generated cash of $1,929,937 from its financing activities, compared to $524,518 during the year ended December 31, 2023.
On January 18, 2024, the Company closed a non-brokered private placement of 5,332,997 common shares at the price of $0.15 per share, for gross proceeds of $799,950. In connection with the closing of the private placement, the Company paid $33,000 in a cash finder's fee.
On August 16, 2024, the Company closed the first tranche of its non-brokered private placement of 2,444,444 common shares at a price of $0.27 per share, for gross proceeds of $660,000. In connection with the closing of the private placement, the Company paid $39,600 in a cash finder's fee.
On August 29, 2024, the Company closed the second tranche of its non-brokered private placement of 2,397,236 common shares at a price of $0.27 per share, for gross proceeds of $647,254. In connection with the closing of the private placement, the Company paid $3,000 in a cash finder's fee.
The Company is dependent upon its ability to raise additional funds to support its operations and it may require additional financing since it is an exploration stage company with no current sources of revenue. Funding options available to the Company are outlined below.
Montero is a publicly traded corporation listed on the TSX Venture Exchange and plans to utilize the public market to raise the additional funds it requires, either through brokered or non-brokered private placements. The Company issues shares where possible for mineral property acquisitions as well as for debt settlements when practicable. In addition, the Company negotiates favorable funding terms for its mineral property payments where possible and amends the agreements, if required, to coincide with the Company's cash funds available. Montero works with its other exploration partners in exploring for its mineral properties to share the costs and risks in exploring them. The Company has also obtained loan financing from related parties when required.
Management has reduced operating costs including voluntary fee reductions from directors, reduced rent and administrative fees and decreased usage of administrative staff and consultants. Management has focused its exploration efforts on the projects it believes will provide the best value to shareholders. It continues its exploration work programs on projects to advance them and seeks joint venture and other partners for other projects where no exploration is currently being conducted.
Management believes that a reduction in operating expenses, funding from potential funding partners, borrowings from directors and management, and further private placements will generate the required funding to maintain operations. Although management is committed and expects to raise additional funding, the timing and the nature of the financing is uncertain and there can be no assurances that this will occur.
The Company grants stock options to promote the profitability and growth of the Company by
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
facilitating the efforts to attract and retain its directors, officers, and consultants. As of December 31, 2024, there were 4,450,000 stock options outstanding.
OFF-BALANCE SHEET ARRANGEMENTS
Montero does not utilize off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
The Company incurred the following transactions with management, directors, officers, or companies which have directors in common, or in which the directors have significant influence and interests.
| Year ended December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| $ | $ | |
| Consulting and management (1)(2) | 163,261 | 192,651 |
| Directors' fee | 33,167 | - |
| General and administrative | 14,714 | 11,846 |
| Stock-based compensation | 1,269,859 | - |
| Total remuneration of directors and key management personnel | 1,481,001 | 204,497 |
(1) Consulting and management fees includes accounting, administrative and corporate services provided by a company controlled by the CFO.
(2) Consulting and management fees includes services provided by the CEO.
The following amounts due to related parties are included in trade and other payables:
| December 31 | December 31, | |
|---|---|---|
| 2024 | 2023 | |
| $ | $ | |
| Due to related parties | 471,766 | 1,153,048 |
| Promissory note | 216,986 | 266,120 |
| Total | 688,752 | 1,419,168 |
The amounts due to related parties represent amounts due to directors and officers or companies which have directors in common, or in which the directors have significant influence and interests. These amounts are unsecured, non-interest bearing and are due within twelve months. The promissory notes are interest bearing at 5.0% per annum. The unpaid principal amount, and accrued and unpaid interest from prior year, is due and payable in full on or before December 31, 2024.
During 2023, the Company received additional loans from an officer of the Company for an aggregate amount of $202,000. These loans are unsecured, bear interest at 5% per annum and are due and payable in full including accrued interest on or before December 31, 2024.
On February 29, 2024, the Company partially settled $139,274 of a related party loan owing to the CEO by issuing 905,849 common shares of the Company.
On September 17, 2024, the Company paid $60,928 of a related party loan owing to the CEO. On February 28, 2025, the Company paid $218,618 for the promissory notes and interest owing to
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
the CEO.
CRITICAL ACCOUNTING ESTIMATES
Not applicable as the Company is a venture issuer.
CHANGES IN ACCOUNTING POLICIES AND INITIAL ADOPTION
There were no changes to the Company's accounting policies during the year or the adoption of new accounting standards. Refer to Note 3 of the Company's annual consolidated financial statements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT, INCLUDING MANAGEMENT OF CAPITAL
Capital Management
The Company manages its capital to ensure that it will be able to continue as a going concern, while supporting the Company's business and maximizing the return to its stakeholders. The Company's capital structure is adjusted based on management's decisions to issue debt or equity instruments to fund expenditures. In order to maximize ongoing exploration efforts, the Company does not pay dividends. The Company's Board of Directors does not establish quantitative return on capital criteria, but rather relies on the expertise of management and other professionals to sustain future development of the business. The capital of the Company consists of equity attributable to owners of the parent comprised of share capital, stock options and warrants.
The Company's principal assets are in the exploration and evaluation stage and, as a result, the Company currently has no source of operating cash flow. In order to facilitate the management of capital and exploration of its mineral properties, the Company needs to raise capital when required to complete its projects and for working capital. The sources of future funds presently available to the Company are through the issuance of new share capital, through the exercise of stock options and/or warrants or through divestiture of certain assets. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions, as well as the business performance of the Company. There can be no assurances that the Company will be successful in its efforts to arrange additional financing, when required, on terms satisfactory to the Company.
Management prepares operating budgets to forecast its financing requirements in advance and review their capital management approach on an ongoing basis and believe that this approach is reasonable, given the relative size of the Company. The Company's investment policy is to hold cash in interest-bearing accounts at high credit quality financial institutions to minimize risk and maximize liquidity. The Company's overall strategy remains unchanged from the prior period. The Company is not subject to any externally imposed capital requirements.
Risk Management and Financial Instruments
The Company operates in the mining industry and faces a number of risks that could adversely affect the Company's operations. These risks include industry risk, credit risk, liquidity risk, interest rate risk, foreign currency risk, and commodity price risk. Management reviews and develops policies for managing each of these risks which are summarized below.
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
Industry Risk
The Company is engaged primarily in the mineral exploration field, which is subject to inherent risks of success as well as compliance with environmental, political and regulatory requirements. The Company is potentially at risk for environmental reclamation obligations associated with resource property interests. As well, the Company operates in foreign countries and is subject to local political risks, as well as local regulatory requirements regarding ownership and maintenance of mineral licenses. Management is of the opinion that they have the expertise to address these risks and makes all efforts to conduct their business in compliance with local industry standards, however environmental and local industry laws and practices are complex, and there is no certainty that all exposure to liability or costs have been mitigated.
Credit Risk
Credit risk is the risk of loss associated with a counter-party's ability to fulfil its payment obligations. The Company's primary exposure to credit risk is attributable to its cash and cash equivalents, as well as other receivables. This risk relating to cash and cash equivalents is considered low since the Company only invests its cash in major banks which are high credit quality financial institutions. The other receivables primarily comprise local sales tax refunds due from governmental agencies and other sundry amounts, as such, management considers the risk with their collection minimal. The cash and cash equivalents are invested in short-term investment certificates for periods less than 90 days. The other receivables are due in less than 90 days.
Liquidity Risk
Liquidity risk arises through the excess of financial obligations due over available financial assets at any point in time. The Company's objective in managing liquidity risk is to maintain sufficient readily available cash in order to meet its liquidity requirements and to develop budgets to forecast cash requirements in advance of their requirements. As discussed previously, the Company currently does not have a source of operating cash flow and must raise funds for its exploration and evaluation programs and for general working capital. There are risks associated with raising the funds required, and there can be no assurances that the Company will be successful in its efforts to arrange additional financing on terms satisfactory to the Company. The Company's trade and other payables are generally due within 90 days, with all amounts due within twelve months.
Interest Rate Risk
Interest rate risk refers to the risk that the fair values of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk on its cash equivalents, which represent excess cash invested in short-term investments and these accrue interest at variable market rates. The Company monitors these investments with its need for cash flow and is satisfied with the return on these investments, given the timing of the need for cash in the Company. The effect of changes in interest rates is not significant to the Company.
19
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates in Canada, Chile, Namibia, South Africa and Tanzania and portions of its expenditures are incurred in US dollars, South African Rand and Tanzanian Shillings. The Company's presentation currency is the Canadian dollar, the Chilean and Tanzanian subsidiaries' functional currency is the United States dollar, and the South African and Namibian subsidiaries' functional currency is the Canadian dollar. The value of financial assets and liabilities denominated in currencies other than the functional currency of the entity to which they relate is not significant.
Commodity Price Risk
The Company is exposed to price risk with respect to commodity prices. Commodity price risk is the potential adverse impact on earnings and economic value of its exploration and evaluation assets, due to commodity price movements and volatilities. The Company monitors commodity prices (primarily lithium, and rare earth elements) to determine the appropriate course of action to be taken by the Company.
Our business, financial condition and results of operations may be negatively affected by economic and other consequences from Russia's military action against Ukraine and the sanctions imposed in response to that action.
In late February 2022, Russia launched a large-scale military attack on Ukraine. The invasion significantly amplified already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including Canada. In response to the military action by Russia, various countries, including Canada, the United States, the United Kingdom and European Union issued broad-ranging economic sanctions against Russia. Such sanctions (and any future sanctions) and other actions against Russia may adversely impact, among other things, the Russian economy and various sectors of the economy, including but not limited to, financials, energy, metals and mining. Accordingly, the actions discussed above and the potential for a wider conflict could increase financial market volatility and cause severe negative effects on regional and global economic markets.
While we expect any direct impacts to our business to be limited, the indirect impacts on the economy and on the mining industry and other industries in general could negatively affect our business and may make it more difficult for us to raise equity or debt financing.
OTHER MD&A REQUIREMENTS
DISCLOSURES FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE
The information required on the Company's exploration and evaluation assets are readily available from the Company's consolidated financial statements for the year ended December 31, 2024, and therefore are not required to be repeated here.
20
MONTERO MINING AND EXPLORATION LTD.
Management's Discussion and Analysis
For the year ended December 31, 2024
DISCLOSURE OF OUTSTANDING SHARE DATA
The information on the Company's share capital including numbers of shares outstanding, details of any conversion features, number of shares issuable on conversion of stock options and warrants, etc. are detailed in the Company's consolidated financial statements for the year ended December 31, 2024. The number of common shares outstanding as of the date of this report on April 29, 2025, is 50,122,975 shares. As at the date of this report, the company has 4,450,000 options and no warrants outstanding.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Except for statements of historical fact relating to Montero, certain information contained in this MD&A constitutes "forward-looking information" under Canadian securities legislation.
Forward-looking information estimates and statements that Montero's future plans, objectives and goals, including words to the effect that Montero or management expects a stated condition or result to occur. Forward-looking information can be identified by the use of forward-looking terminology 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". Since forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks related to: unexpected events and delays during permitting; the possibility that future exploration results will not be consistent with the Company's expectations; timing and availability of external financing on acceptable terms and in light of the current decline in global liquidity and credit availability; the uncertainty of conducting activities within a joint venture structure; currency exchange rates; government regulation of mining operations; failure of equipment or processes to operate as anticipated; risks inherent in mineral exploration and development including environmental hazards, industrial accidents, unusual or unexpected geological formations; Although management of Montero has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such 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 information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.
Additional disclosures pertaining to the Company's technical report, management information circulars, material change reports, press releases and other information are available on the SEDAR+ website at www.sedarplus.ca.