Optegra Ventures Inc. - Management Reports 2021

ESSEX MINERALS INC.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Year Ended September 30, 2020

General

The following Management Discussion and Analysis (“MD&A”) should be read in conjunction with the audited financial statements and notes for the year ended September 30, 2020 and 2019. All monetary amounts, unless otherwise indicated, are expressed in Canadian dollars. Additional information relating to the Company can be found on the SEDAR website at www.sedar.com.

The MD&A was approved by the Board of Directors of the Company on January 25, 2021.

The head office and principal address of the Company is located at 3002-1211 Melville Street, Vancouver, BC V6E 0A7, and the registered and records office of the Company is located at 2500- 700 W Georgia Street, Vancouver, BC V7Y 1B3.

Statement of Compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board and Interpretations of the International Financial Reporting Interpretations Committee.

Basis of Presentation

The financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at their fair value as explained in the accounting policies set out below. In addition, these financial statements have been prepared using the accrual basis of accounting except cash flow information.

All amounts are in Canadian dollars unless otherwise stated.

Forward-Looking Statements

Certain statements contained in this document constitute “forward-looking statements”. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “propose”, “progressing”, “anticipate”, “believe”, “forecast”, “estimate”, “expect” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the Company’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s ability to predict or control could cause actual results to differ materially from those contained in the forward-looking statements, which include, without limitation, commodity price volatility, changes in debt and equity markets, increases in costs, interest rate and exchange rate fluctuations, general economic conditions, the ability of the Company to receive continued financial support from related parties and to obtain public equity financing, the ability to generate profitable operations in the future, and the receipt of regulatory approvals on acceptable terms. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements.

Overview

The Company was incorporated on November 19, 2012 under the Business Corporations Act (British Columbia). The Company’s principal business activity is the exploration of mineral properties. The Company currently conducts substantially all of its operations in Canada in one business segment.

The Company is a natural resource company focused on mineral exploration opportunities where it can adopt an option earn-in and joint venture model with proven technical teams which have already expended the time and capital to assemble exploration projects where drill targets have been identified.

On December 22, 2016, the Company received a receipt of the British Columbia Securities Commission for the Long Form Prospectus dated December 20, 2016 (the prospectus). On March 15, 2017, the Company completed an Initial Public Offering and its shares were listed on the TSX Venture Exchange (“TSXV”).

Significant Events and Transactions

5 for 1 Share Consolidation

On January 31, 2020. The Company consolidated all of the issued and outstanding common shares on a five for one basis. The consolidation has reduced the common shares issued and outstanding from 10,425,007 pre-consolidated to 2,085,001 post-consolidated common shares. All shares figures and references have been retroactively adjusted to reflect the share consolidation. Effective January 31, 2020, the common shares of the Company commenced trading on the TSX Venture Exchange on a consolidated basis.

Private Placements

On March 17, 2020, the Company completed the first tranche of a non-brokered private placement financing, issuing 12,675,000 common shares at a price of $0.10 per share for gross proceeds of $1,267,500.

On March 18, 2020, the Company completed the second tranche of a non-brokered private placement financing, issuing 2,325,000 common shares at a price of $0.10 per share for gross proceeds of $232,500. In connection with the March 2020 private placement, the Company paid finder’s fee by issuing 1,451,500 common shares with a fair value of $387,236.

On June 26, 2020, the Company closed the first tranche of a non-brokered private placement for gross proceeds of $1,290,000 and issued 5,160,000 common shares at a price of $0.25 per share. Finders’ fee of $63,000 in cash and 252,000 warrants with a fair value of $75,967 were paid. The finders’ warrants are exercisable at a price of $0.25 for a period of two years from the date of issuance.

On June 30, 2020, the Company closed the second tranche of a non-brokered private placement for gross proceeds of $20,000 and issued 80,000 common shares at a price of $0.25 per share.

On September 21, 2020, the Company completed a non-brokered private placement financing, issuing 5,000,000 common shares at a price of $0.55 per share for gross proceeds of $2,750,000. Finders’ fee of $70,797 in cash, 171,300 common shares with a fair value of $128,475 and 300,000 warrants with a fair value of $194,321 were paid. The finders’ warrants are exercisable at a price of $0.55 for a period of two years from the date of issuance.

Advance for Australian Gold Properties

On May 1, 2020, the Company announced the signing of an earn-in joint venture over three epithermal and orogenic gold properties in Australia assembled by a private Australian company KNX in the Georgetown region of Queensland and the Pine Creek region of the Northern Territory.

The three properties are:

Cumberland

Five granted exploration permits covering 26,000 ha, 30 km from Georgetown, North Queensland, 70 km northwest of the former 3.5 million-ounce Kidston gold mine. The property has the potential to host highgrade epithermal gold mineralization and is currently held 80% by KNX and 20% by another Australian private company, AMD Resources Ltd (“AMD”). The property has a number of drill-ready exploration targets.

Mt. Turner

A granted exploration permit covering 6,000 ha, 30 km northeast of Cumberland with potential to host highgrade epithermal mineralization and large gold-copper porphyry mineralization. This property is held 100% by KNX.

Compass Creek

Three granted exploration permits covering 6,400 ha in Pine Creek goldfield, 28 km north of Kirkland Lake’s 2.5Mtpa Union Reefs mill. The property has the potential to host large high-grade orogenic gold mineralization and is held 80% by KNX and 20% by AMD.

Under the terms of the venture, Essex has the right to earn an initial First Stage Earn-in of 50% of KNX’s interest in the three properties by spending AUD $1,000,000 on exploration by May 2021.

The Company has committed to spend an initial AUD $125,000 within three months to pay for aerial LiDAR mapping and assaying of soil samples to better position initial drill programs and completion of NI 43-101 property reports.

At the end of the First Stage Earn-in, Essex has the right to acquire the balance of KNX’s interest in the properties at independent valuation or earn an additional 25% interest in Mt Turner and 20% interest in Cumberland and Compass Creek by funding a further AUD $3,000,000 on exploration.

As at September 30, 2020 the company had advanced $757,312 (AUD $837,300) to KNX as part of its initial First Stage Earn-in on the KNX properties.

On November 29, 2020, KNX acknowledged that the Company had earned its First Stage Earn-in interest. The Company is awaiting outstanding exploration results before considering future expenditure on the properties.

Gold Stream Joint Venture

On July 13, 2020 the Company entered into a gold stream joint venture agreement with Zola Minerals Inc. (“Zola”), an arm’s length private streaming and royalty company whereby the Company has the option to participate for a 50% interest with respect to the gold re-leach project in Chile “Chile Project” in exchange for $300,000 cash payment to Zola and financing the upfront payment of up to US$4.5 million on the first project. Gross profits generated will be shared 50:50 with Zola, subject to a minimum IRR to the Company of 15% on funds invested.

The Company also has an option to acquire Zola, its subsidiaries or its business based on an independent valuation should the directors of Zola decide to sell any time before July 9, 2021. This option will remain in place, even if no gold streams on the initial projects proceed.

Selected Annual Information

	September	September	30, 2020	September 30, 2019	September 30, 2019		September 30, 2018	September 30, 2018
			$		$			$
Net loss		(2,055,738)			(707,399)			(250,535)
Net loss per share - basic and diluted			(0.16)		(0.34)			(0.12)
Total assets		3,869,899			82,896			563,651
Summary ofperiodic results
The following table sets out	selected quarterly information for the eight most					recent quarters ended
September 30, 2020:
Sep 30,	Jun 30,	Mar 31,	Dec 31,	Sep 30,	Jun 30,		Mar 31,	Dec 31,
2020	2020	2020	2019	2019	2019		2019	2018
(Q4)	(Q3)	(Q2)	(Q1)	(Q4)	(Q3)		(Q2)	(Q1)
$	$	$	$	$		$	$	$
Netloss (1,254,873)	(219,602)	(521,520)	(59,743)	(541,211)	(31,813)		(72,077)	(62,298)
Basic and diluted
loss per share (0.05)	(0.01)	(0.09)	(0.03)	(0.26)	(0.02)		(0.03)	(0.03)

The following table sets out selected quarterly information for the eight most recent quarters ended September 30, 2020:

Results of Operations

Three months ended September 30, Three months ended September 30, Year ended September 30, 2020 2019 2020 Expenses General and administration 5,872 $ 27,526 $ $ 38,356 Investor relations 31,714 - 31,714 Management and consulting fees 121,288 500 436,550 Professional fees 12,083 37,669 121,710 Property investigation costs 374,000 - 681,119 Regulatory and transfer agent fees 13,286 5,460 34,705 Share-based payments 693,783 - 693,783 Traveland promotion - - 12,354	Year ended September 30,
	2019
	$ 41,744
	- 30,500 147,013 - 18,086 - -
Total expenses (1,252,026) (71,155) (2,050,291) Interest expense - (7,400) (2,600) Write-off of receivable (2,847) - (2,847) Write-off of exploration and evaluation assets -(462,656) -	(237,343)

	(7,400) - (462,656)
Net loss (1,254,873) $ (541,211) $ (2,055,738) $	(707,399) $

Three months ended September 30, 2020

The net loss for the quarter ended September 30, 2020 was $1,254,873 compared to net loss of $541,211 for the quarter ended September 30, 2019. Major variances as follows:

For the quarter ended September 30, 2020, share-based payments were $693,783 compared to $Nil for the prior year quarter. The increase is related to the 2,100,000 stock options granted and vested in the current quarter. No stock options were granted or vested in the prior year quarter.
For the quarter ended September 30, 2020, management and consulting fees were $121,288 compared to $500 for the prior year quarter. The increase is related to the management and consulting fees for services provided by the officers of the Company. No management fees were paid in the prior year quarter.
For the quarter ended September 30, 2020, property investigation costs were $374,000 compared to $Nil for the prior year quarter. The increase in property investigation costs is due to the participation fee to the Zola gold steam project, project due diligence and review of prospective financing for potential projects and other opportunities.
For the quarter ended September 30, 2020, investor relations were $31,714 compared to $Nil for the prior year quarter. The increase is related to the new contract entered into by the Company during the current quarter to help handle investor relation communications for the Company.
For the quarter ended September 30, 2020, general and administration were $5,872 compared to $27,526 for the prior year quarter. The decrease is mainly related to a decrease in rent expense during the current quarter period. Rental agreement was terminated in February 2020.
During the three months ended September 30, 2019, the Company decided not to proceed further with the Melba Property. As a result, the Company recorded a write-off of exploration and evaluation assets of $462,656.

Year ended September 30, 2020

The net loss for the year ended September 30, 2020 was $2,055,738 compared to net loss of $707,399 for the year ended September 30, 2019. Major variances as follows:

For the year ended September 30, 2020, share-based payments were $693,783 compared to $Nil for the year ended September 30, 2019. The increase is related to the 2,100,000 stock options granted and vested in the current fiscal year. No stock options were granted or vested in the prior year.
For the year ended September 30, 2020, management and consulting fees were $436,550 compared to $30,500 for the year ended September 30, 2019. Management and consulting fees include director’s fee, fee for services provided by the officers of the Company, and other consulting services. The increase is largely related to the consulting fees paid for developing and identifying capital sources for the Company. In addition, management and consulting fees were paid to the officers of the Company effective April 2020.
For the year ended September 30, 2020, property investigation costs were $681,119 compared to $Nil for the year ended September 30, 2019. The increase in property investigation costs is due to the services provided for supervision of the KNX joint venture properties, participation fee to the Zola gold steam project and for the project due diligence and review of prospective financing for potential projects and other opportunities.
For the year ended September 30, 2020, regulatory and transfer agent fees were $34,705 compared to $18,086 for the year ended September 30, 2019. The increase in regulatory and transfer agent fees is attributable to the Company’s 5 for 1 consolidation of its common shares and a new brokerage firm contracted by the Company to provide market-making services.

For the year ended September 30, 2020, investor relations were $31,714 compared to $Nil for the year ending September 30, 2019. The increase is related to the new contract entered into by the Company during the current quarter to help handle investor relation communications for the Company.
For the year ended September 30, 2020, travel and promotions were $12,354 compared to $Nil for the year ended September 30, 2019. The increase is related to the travel expenses for trips to Australia in connection with the earn-in joint venture transaction. No travel and promotion were recorded during the prior year.
During the year ended September 30, 2019, the Company decided not to proceed further with the Melba Property. As a result, the Company recorded a write-off of exploration and evaluation assets of $462,656.

Liquidity and Capital Resources

As at September 30, 2020, the Company had current assets of $3,107,437 and current liabilities of $198,433 compared to current assets of $82,896 and current liabilities of $370,962 as at September 30, 2019. As at September 30, 2020, the Company had working capital of $2,909,004 compared to working capital deficiency of $280,666 as at September 30, 2019.

Cash as at September 30, 2020 was $2,911,633 compared to $46,793 at September 30, 2019.

The Company has financed its operations primarily from proceeds from the sale of shares and debt.

During the year ended September 30, 2020, the Company completed various non-brokered private placement financings, issuing an aggregate 25,240,000 for aggregate gross proceeds of $5,560,000.

The Company is dependent on the capital markets as its sole source of operating capital and the Company’s capital resources are largely determined by the strength of the TSXV and by the status of the Company’s projects in relation to these markets, and its ability to compete for investor support of its projects. The Company plans to issue more securities at such time as it believes additional capital could be obtained on favourable terms. There can be no assurance that such funds can be available on favourable terms, if at all.

Outstanding Shares

As at September 30, 2020 and the date of this report, the Company has 28,947,801 common shares outstanding.

As at September 30, 2020 and the date of this report, the Company has 552,000 warrants outstanding.

As at September 30, 2020 and the date of this report, the Company has 2,100,000 stock options outstanding and exercisable.

New Accounting Standards and Interpretations

New Accounting Policy

Leases

On October 1, 2019, the Company adopted IFRS 16 – Leases is a new standard which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and lessor. It introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease. The adoption of this new standard did not have a material impact on the financial statements of the Company since the Company does not have any lease.

Related Party Balances and Transactions

Balances

At September 30, 2020, the Company has $4,150 (September 30, 2019 - $94,500) due to related parties included in trade payables and accrued liabilities. These amounts are unsecured, non-interest bearing and have no specified terms of repayment.

As at September 30, 2020, the Company has $24,000 (September 30, 2019 - $Nil) of management and consulting fees paid in advance to the related parties included in prepaid and deposit.

Transactions

During the years ended September 30, 2020 and 2019, the Company has the following related party transactions:

	September 30, 2020	September 30, 2019
	$	$
Management and consulting fees - current directors and officers	150,762	-
Management and consulting fees - former director and officer	4,645	30,000
Professional fees - former officer	6,000	-
Property investigation costs	58,810	-
Share-based payments	693,783	-
	914,000	30,000

Financial Instruments

The Company’s financial instruments are exposed to certain financial risks, including liquidity risk, and interest rate risk.

Liquidity risk

Liquidity risk is the risk that the Company will not meet its financial obligations as they become due. Refer to Note 1 of its financial statements for further details related to the ability of the Company to continue as a going concern.

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2020, the Company had a cash balance of $2,911,663 (September 30, 2019: $46,793) to settle current liabilities of $215,433 (September 30, 2019: $370,960). All of the Company’s financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

Historically, the Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.

The Company’s cash is held in large Canadian financial institutions. The Company has not experience nor is exposed to any significant credit losses. As a result, the Company’s exposure to credit risk is minimal.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. An immaterial amount of interest rate exposure exists in respect of cash balances on the statement of financial position. As a result, the Company is not exposed to material cash flow interest rate risk on its cash balances.

Foreign currency risk

Foreign currency exchange risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s exploration assets are located in Australia and advances to the exploration assets are denominated in Australian dollar. However, given the exploration assets are not fair valued at each reporting date, the Company is not significantly exposed to foreign currency exchange risk.

Fair value of Financial Instruments

The Company’s financial instruments measured at fair value consist of cash, restricted cash, receivables (excluding GST), accounts payable and accrued liabilities, and loan payable. The carrying values of cash, restricted cash, receivables (excluding GST), accounts payable and accrued liabilities, and loan payable approximate their fair values due to their short-term in nature and/or the existence of market related interest rates on the instruments.

Financial instruments measure at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of fair value hierarchy are:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices that are observable for the assets or liabilities either directly or indirectly; and
Level 3 – inputs that are not based on observable market data.

All financial instruments are classified as Level 1.

Subsequent Events

Refer to Note 17 of the financial statements for the year September 30, 2020.

Management Changes

On March 9, 2020, the Company announced the resignation of Yari Nieken as the Company’s President, Chief Executive Officer and as a director. Paul Loudon was appointed as a new director and replaces Mr. Nieken as President and Chief Executive Officer of the Company.

On April 15, 2020, the Company announced the resignation of Usama Chaudhry as the Company’s Chief Financial Officer. Elena Tanzola was appointed as the new Chief Financial Officer and Corporate Secretary of the Company.

On April 15, 2020, the Company announced the resignations of Wilson Yu and Chris Andrews as directors of the Company. The Company appointed James Harris as new director.

On April 15, 2020, the Company appointed Patrick Harford as VP of business development.

On July 13, 2020, the Company announced the resignations of Yuying Liang as directors of the Company. The Company appointed Lewis Meghan as new director.

Capital Management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

The capital structure of the Company consists of shareholder’s equity, comprising issued capital and deficit. The Company is not exposed to any externally imposed requirements. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

Risks and Uncertainties

The Company has limited financial resources and there is no assurance that additional funding will be available to it for further development of its projects or to fulfil its obligations under applicable agreement. 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 favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of the Company’s intended business operations with the possible dilution or loss of such interest. Further, revenues, financings and profits, if any, will depend upon various factors, including the success, if any, of intended business operations. There is no assurance that the Company can operate profitably or that it will successfully implement its plans.

The Company is in development stage and has no operating earnings. The likelihood of success of the Company must be considered in light of the problems, expenses and difficulties, complications and delays frequently encountered in connection with the establishment of any business. The Company operates at a loss and there is no assurance that the Company will ever be profitable.

Since March 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID- 19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods.

ESSEX MINERALS INC. CORPORATE DATA January 25, 2021

HEAD OFFICE

ESSEX MINERALS INC. 3002 - 1211 Melville Street, Vancouver, BC, V6E 0A7 Tel: 1 (604) 681-4653 Email: [email protected]

SOLICITOR

Farris LLP 2005 - 700 W. Georgia Street Vancouver, BC V7Y 1B3 Email [email protected] Jay Sujir Tel: 1 (604) 684-9151

REGISTRAR & TRANSFER AGENT

Computershare Inc. 510 Burrard Street Vancouver, BC V6C 3B9 Tel: 1 (604) 661-9440

AUDITORS

MNP LLP 2200 - 1021 West Hastings Street Vancouver, BC V6E 0C3 Tel: 1 (604) 685-8408 Fax: 1 (604) 685-8594 Email: [email protected]

DIRECTORS AND OFFICERS

Paul Loudon Elena Tanzola James Harris Meghan Lewis Patrick Harford

Director, President, CEO CFO, Corporate Secretary Director Director VP Business Development

INVESTOR CONTACTS

Elena Tanzola Tel: 1 (604) 681-4653 Email: [email protected]

LISTINGS

CAPITALIZATION

Unlimited number of Authorized: common shares, no par value Issued: 28,947,801 Options: 2,100,000 Warrants: 552,000 Escrowed shares: Nil

TSX Venture Exchange Trading Symbol: ESX.V CUSIP #: 297133100