Oroco Resource Corp. — Interim / Quarterly Report 2021

Jan 30, 2021

OROCO RESOURCE CORP.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED

NOVEMBER 30, 2020

(Expressed in Canadian Dollars)

Unaudited – Prepared by Management

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

The accompanying condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

OROCO RESOURCE CORP.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) (Unaudited) As at

	November 30, 2020	November 30, 2020		May 31, 2020
ASSETS
Current
Cash (Note 9)	$	15,647,723	$	407,226
Receivables		507,973		360,134
Prepaid expenses and advances		392,853		118,888
		16,548,549		886,248
Marketable securities(Note 4(a))		271,044		215,031
Exploration and evaluation assets(Note 6)		29,499,051		27,395,269
Equipment(Note 7)		4,688		5,028
	$	46,323,332	$	28,501,576
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities (Notes 8 and 11)	$	1,188,558	$	1,406,175
Deferred tax liability		13,443		13,443
		1,202,001		1,419,618
Shareholders’ equity
Share capital (Note 9)		45,733,020		35,081,553
Share subscriptions received in advance (Note 9)		7,511,954		-
Reserves (Note 9)		4,493,075		3,051,282
Deficit		(19,718,904)		(18,203,666)
Equity attributable to the Company’s shareholders		38,019,145		19,929,169
Non-controlling interest (Notes 4(b) and 10)		7,102,186		7,152,789
		45,121,331		27,081,958
	$	46,323,332	$	28,501,576

Nature of operations and going concern (Note 1) Contingency (Note 6(a)) Subsequent events (Note 15)

Approved on behalf of the Board:

pproved on behalf of the Board:
“Craig Dalziel” Craig Dalziel – Director	“Steve Vanry”
	Steve Vanry – Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

OROCO RESOURCE CORP.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars) (Unaudited)

Expressed in Canadian Dollars) Unaudited)
	For the Three Months Ended November 30, 2020 For the Three Months Ended November 30, 2019 For the Six Months Ended November 30, 2020 For the Six Months Ended November 30, 2019
Expenses Business development Consulting fees (Note 11) Depreciation (Note 7) Foreign currency loss (gain) Management and director fees (Note 11) Office and general Professional fees (Note 11) Property investigation costs Share-based payment (Notes 9 and 11) Shareholder communications and investor relations Transfer agent and filing fees Travel Operating loss Equity gain (loss) in associated company (Note 4(b)) Interest income (Note 4(b)) Royalty income (Note 5) Loss for the period Unrealized gain (loss) on fair value of marketable securities(Note 4(a)) Loss and comprehensive loss for the period	$ 24,600 $ 17,550 $ 41,790 $ 34,200 64,750 71,611 121,000 139,658 170 206 340 411 21,456 (408) 17,686 2,708 88,375 80,500 170,500 154,500 116,263 61,012 227,217 113,052 164,137 116,248 296,668 166,579 - - - 13,733 1,118,323 159,471 1,211,961 409,567 26,304 105,116 37,125 184,956 12,709 6,558 24,046 11,808 18,835 79,506 21,044 110,751
	(1,655,922) (697,370) (2,169,377) (1,341,923)
	- 6,454 - (13,422) - 22,928 - 45,686 371,059 195,254 603,536 322,970
	371,059 224,636 603,536 355,234
	(1,284,863) (472,734) (1,565,841) (986,689) (196,043) (23,881) 56,013 (113,525)
	$ (1,480,906) $ (496,615) $ (1,509,828) $ (1,100,214)
Loss and comprehensive loss attributable to: Equity holders of the Company Non-controlling interest (Note 10)	$ (1,458,628) $ (496,615) $ (1,459,225) $ (1,100,214) (22,278) - (50,603) -
	$ (1,480,906) $ (496,615) $ (1,509,828) $ (1,100,214)
Basic and diluted loss per common share	$ (0.01) $ (0.00) $ (0.01) $ (0.01)
Weighted average number of common shares outstanding- basic and diluted	167,275,996 102,265,702 160,259,933 100,296,749

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

OROCO RESOURCE CORP .

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian Dollars) (Unaudited)

	Share Capital Reserves Number Amount Share subscriptions received in advance Other comprehensive loss Stock option and warrant Deficit Non- controlling interest Total $ $ $ $ $ $ $ 97,542,405 19,913,512 - (44,125) 2,802,831 (19,420,894) - 3,251,324 3,000,000 1,350,000 - - - - - 1,350,000 - (13,529) - - 4,380 - - (9,149) 4,075,000 652,000 - - - - - 652,000 - - - (113,525) - - - (113,525) - - - - 409,567 - - 409,567 - - - - - (986,689) - (986,689) 104,617,405 21,901,983 - (157,650) 3,216,778 (20,407,583) - 4,553,528 147,367,405 35,081,553 - (208,258) 3,259,540 (18,203,666) 7,152,789 27,081,958 17,600,000 8,910,000 - - - - - 8,910,000 - (477,994) - - 392,120 - - (85,874) 2,805,000 571,427 - - (218,301) - - 353,126 4,375,200 1,648,034 - - - - - 1,648,034 - - 7,511,954 - - - - 7,511,954 - - - 56,013 - - - 56,013 - - - - 1,211,961 - - 1,211,961 - - - - - (1,515,238) (50,603) (1,565,841) 172,147,605 45,733,020 7,511,954 (152,245) 4,645,320 (19,718,904) 7,102,186 45,121,331	Share Capital Reserves Number Amount Share subscriptions received in advance Other comprehensive loss Stock option and warrant Deficit Non- controlling interest Total $ $ $ $ $ $ $ 97,542,405 19,913,512 - (44,125) 2,802,831 (19,420,894) - 3,251,324 3,000,000 1,350,000 - - - - - 1,350,000 - (13,529) - - 4,380 - - (9,149) 4,075,000 652,000 - - - - - 652,000 - - - (113,525) - - - (113,525) - - - - 409,567 - - 409,567 - - - - - (986,689) - (986,689) 104,617,405 21,901,983 - (157,650) 3,216,778 (20,407,583) - 4,553,528 147,367,405 35,081,553 - (208,258) 3,259,540 (18,203,666) 7,152,789 27,081,958 17,600,000 8,910,000 - - - - - 8,910,000 - (477,994) - - 392,120 - - (85,874) 2,805,000 571,427 - - (218,301) - - 353,126 4,375,200 1,648,034 - - - - - 1,648,034 - - 7,511,954 - - - - 7,511,954 - - - 56,013 - - - 56,013 - - - - 1,211,961 - - 1,211,961 - - - - - (1,515,238) (50,603) (1,565,841) 172,147,605 45,733,020 7,511,954 (152,245) 4,645,320 (19,718,904) 7,102,186 45,121,331	Share Capital Reserves Number Amount Share subscriptions received in advance Other comprehensive loss Stock option and warrant Deficit Non- controlling interest Total $ $ $ $ $ $ $ 97,542,405 19,913,512 - (44,125) 2,802,831 (19,420,894) - 3,251,324 3,000,000 1,350,000 - - - - - 1,350,000 - (13,529) - - 4,380 - - (9,149) 4,075,000 652,000 - - - - - 652,000 - - - (113,525) - - - (113,525) - - - - 409,567 - - 409,567 - - - - - (986,689) - (986,689) 104,617,405 21,901,983 - (157,650) 3,216,778 (20,407,583) - 4,553,528 147,367,405 35,081,553 - (208,258) 3,259,540 (18,203,666) 7,152,789 27,081,958 17,600,000 8,910,000 - - - - - 8,910,000 - (477,994) - - 392,120 - - (85,874) 2,805,000 571,427 - - (218,301) - - 353,126 4,375,200 1,648,034 - - - - - 1,648,034 - - 7,511,954 - - - - 7,511,954 - - - 56,013 - - - 56,013 - - - - 1,211,961 - - 1,211,961 - - - - - (1,515,238) (50,603) (1,565,841) 172,147,605 45,733,020 7,511,954 (152,245) 4,645,320 (19,718,904) 7,102,186 45,121,331	Share Capital Reserves Number Amount Share subscriptions received in advance Other comprehensive loss Stock option and warrant Deficit Non- controlling interest Total $ $ $ $ $ $ $ 97,542,405 19,913,512 - (44,125) 2,802,831 (19,420,894) - 3,251,324 3,000,000 1,350,000 - - - - - 1,350,000 - (13,529) - - 4,380 - - (9,149) 4,075,000 652,000 - - - - - 652,000 - - - (113,525) - - - (113,525) - - - - 409,567 - - 409,567 - - - - - (986,689) - (986,689) 104,617,405 21,901,983 - (157,650) 3,216,778 (20,407,583) - 4,553,528 147,367,405 35,081,553 - (208,258) 3,259,540 (18,203,666) 7,152,789 27,081,958 17,600,000 8,910,000 - - - - - 8,910,000 - (477,994) - - 392,120 - - (85,874) 2,805,000 571,427 - - (218,301) - - 353,126 4,375,200 1,648,034 - - - - - 1,648,034 - - 7,511,954 - - - - 7,511,954 - - - 56,013 - - - 56,013 - - - - 1,211,961 - - 1,211,961 - - - - - (1,515,238) (50,603) (1,565,841) 172,147,605 45,733,020 7,511,954 (152,245) 4,645,320 (19,718,904) 7,102,186 45,121,331
	Number Amount	Share subscriptions received in advance	Other comprehensive loss Stock option and warrant	Deficit Non- controlling interest Total
May 31, 2019 Shares issued for cash Share issue costs Shares issued for warrant exercises Unrealized loss on fair value of marketable securities Share-based payment Loss for the period November 30, 2019 May 31, 2020 Shares issued for cash Share issue costs Shares issued for option exercises Shares issued for warrant exercises Share subscriptions received in advance Unrealized gain on fair value of marketable securities Share-based payment Loss for the period November 30, 2020

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

OROCO RESOURCE CORP.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars) (Unaudited)

For the Six Months Ended November 30,

		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$	(1,565,841)	$	(986,689)
Adjusted for items not involving cash:
Depreciation		340		411
Equity loss in associated company		-		13,422
Accrued royalty income		(603,536)		(322,970)
Accrued interest income		-		(45,686)
Foreign exchange		25,103		641
Share-based payment		1,211,961		409,567
Changes in working capital items:
Receivables		(22,774)		3,703
Prepaid expenses and advances		(273,965)		(180,091)
Accounts payable and accrued liabilities		(162,093)		(2,042)
Net cash used in operating activities		(1,390,805)		(1,109,734)
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and evaluation expenditures		(2,155,961)		(489,062)
Deferred acquisition costs		-		(29,000)
Royalty income		450,023		104,518
Advances to associated company		-		(223,146)
Net cash used in investing activities		(1,705,938)		(636,690)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement shares issued		8,910,000		1,350,000
Proceeds from exercise of options		353,126		-
Proceeds from exercise of warrants		1,648,034		652,000
Share subscriptions received in advance		7,511,954		-
Share issue cost		(85,874)		(9,149)
Net cash provided by financing activities		18,337,240		1,992,851
Change in cash		15,240,497		246,427
Cash, beginning of period		407,226		488,402
Cash, end of period	$	15,647,723	$	734,829

Supplemental cash flow information (Note 12)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

1. NATURE OF OPERATIONS AND GOING CONCERN

Oroco Resource Corp. (the “Company”) was incorporated on July 7, 2006 under the Business Corporations Act of British Columbia and is in the business of acquiring and exploring exploration and evaluation assets in Mexico. The Company is listed on the TSX Venture Exchange (the “TSX-V”).

The Company’s head office and principal address is located at #1201 - 1166 Alberni Street, Vancouver, British Columbia, Canada, V6E 3Z3.

The Company is in the exploration stage and has not yet determined whether its exploration and evaluation assets contain reserves that are economically recoverable. The recoverability of amounts shown for exploration and evaluation assets and related deferred exploration expenditures are dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of the mineral properties and upon future profitable production or proceeds from the disposition thereof.

The Company’s exploration and evaluation assets consist of the Santo Tomas, Xochipala, and Salvador properties in Mexico. The outlook for the Company is tied to realizing on the value of its exploration and evaluation assets and marketable securities, raising the financing necessary to maintain operations thereafter, and ultimately on generating future profitable operations. The Company has incurred ongoing losses. Subsequent to November 30, 2020, the Company raised additional funds from the issuance of capital stock (Note 15). Management estimates it will have sufficient funds to operate for the upcoming twelve months.

These condensed interim consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities, the reported expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate.

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

2. BASIS OF PRESENTATION

Statement of compliance

These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"s). They do not include all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements, and, therefore, should be read in conjunction with the Company’s audited consolidated financial statements for the year ended May 31, 2020, prepared in accordance with IFRS as issued by the IASB.

These condensed interim consolidated financial statements were authorized by the Audit Committee and Board of Directors of the Company on January 29, 2021.

Basis of presentation

These condensed interim consolidated financial statements have been prepared on a historical cost basis, using the accrual basis of accounting, except for cash flow information and certain financial assets that are measured at fair value.

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OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

2. BASIS OF PRESENTATION (cont’d…)

Functional and presentation currency

These condensed interim consolidated financial statements are presented in Canadian dollars, unless otherwise noted, which is the functional currency of the parent and of its subsidiaries.

Basis of consolidation

These condensed interim consolidated financial statements include the accounts of the Company and its direct whollyowned subsidiaries. Control exists when the Company possesses power over an investee, has exposure to variable returns from the investee and has the ability to use its power over the investee to affect its returns. Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the condensed interim consolidated financial statements.

	Country of	Percentage of
Name of Subsidiary	Incorporation	Ownership	Principal Activity
Minera Xochipala S.A. de C.V. (“MX”)	Mexico	100%	Exploration in Mexico
0973496 B.C. Ltd.	Canada	100%	Holding company
Altamura Copper Corp. (“Altamura”)	Canada	100%	Holding company
Xochipala Gold S.A. de C.V. (“XG”)	Mexico	71%	Exploration in Mexico
Desarrollos Copper, S.A. de C.V. (“Desarrollos”)	Mexico	100%	Holding company
Ruero International Ltd. (“Ruero”)	Bahamas	50%	Holding company (inactive)

The Company also holds an inactive, nominal company incorporated in Canada, and a majority interest in Aztec Copper Inc. (“Aztec”), an inactive subsidiary incorporated in the United States and its subsidiary, Prime Aztec Mexicana, S.A. de C.V. an inactive subsidiary incorporated in Mexico.

Significant estimates

The preparation of these condensed interim consolidated financial statements requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and are, but are not limited to, the following:

Share-based payment - The fair value of stock options issued are subject to the limitation of the Black-Scholes option pricing model which incorporates market data and which involves uncertainty and subjectivity in estimates used by management in the assumptions. Changes in the input assumptions can materially affect the fair value estimate of stock options.

Valuation of marketable securities - The Company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of, and near term business outlook for, the investee, including factors such as industry and sector performance, changes in technology, and operational and financing cash flow.

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OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

2. BASIS OF PRESENTATION (cont’d…)

Significant estimates (cont’d…)

The carrying value and the recoverability of exploration and evaluation assets - Management has determined that exploration, evaluation and related costs incurred, which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including geologic and other technical information, history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, scoping and feasibility studies, accessible facilities and existing permits.

Valuation of production royalty - The Company is entitled to royalty income as disclosed in Note 5. The Company has estimated the value of the production royalty to be $Nil due to lack of certainty of future ongoing production and values.

Significant judgments

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these condensed interim consolidated financial statements are, but are not limited to, the following:

Determination of functional currency - The functional currency of the Company and its subsidiaries is the currency of the primary economic environment in which each entity operates. The Company has determined the functional currency of each entity to be the Canadian dollar. Determination of the functional currency may involve certain judgments to determine the primary economic environment. The functional currency may change if there is a change in events and conditions which determines the primary economic environment.

Classification of investments as subsidiaries, joint ventures, associated company and portfolio investments - Classification of investments requires judgement as to whether the Company controls, has joint control of or significant influence over the strategic financial and operating decisions relating to the activity of the investee. In assessing the level of control or influence that the Company has over an investment, management considers ownership percentages, board representation as well as other relevant provisions in shareholder agreements. If an investor holds or has the ability to hold 20% or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the investor holds less than 20% of the voting power of the investee, it is presumed that the investor does not have significant influence, unless such influence can be clearly demonstrated. The Company previously accounted for its interest in Altamura as an equity investment as the Company had the ability to convert its advances into an increased interest in Altamura.

Acquisition of a company - The Company acquired shares in companies as further described in Note 4. These companies did not meet the definition of a business under IFRS 3 and accordingly have been accounted for as an acquisition of assets through the issuance of shares in accordance with IFRS 2. Where the acquisition was in steps, the book value of the original interest was adjusted to fair value based on the acquisition date fair value.

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OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

3. SIGNIFICANT ACCOUNTING POLICIES

These condensed interim consolidated financial statements were prepared using the same accounting policies and methods of computation as in the Company’s consolidated financial statements for the year ended May 31, 2020.

4. INVESTMENTS AND ADVANCES

(a) Marketable Securities

During the six months ended November 30, 2020, the Company sold Nil (2019 - Nil) Goldgroup Mining Inc. (“Goldgroup”) shares. As at November 30, 2020, the Company owned 5,601,250 (May 31, 2020 - 5,601,250) Goldgroup shares with a fair value of $196,044 (May 31, 2020 - $140,031). The change in market value of the shares resulted in the recording of other comprehensive gain (loss) of $56,013 for the six months ended November 30, 2020 (2019 - $(112,025)).

The Company owns 375,000 common shares, at a cost of $75,000, in a private British Columbia company (“BC Co.”), related by virtue of a common director, which provides satellite based, geological services to the mining and other industries, which services are able to identify, model and monitor subsurface geological structures. Cost is considered to approximate fair value.

The Company disposed of its investment in common shares of a publicly traded company (“PubCo.”) during fiscal 2020 to hold an amount of nil shares as of May 31, 2020. Comprehensive loss related to the investment in PubCo. for the six months ended November 30, 2020 was $Nil (2019 - $1,500).

	Goldgroup	Goldgroup		Altamura	Altamura		BC	Co.
	Number	Amount		Number	Amount		Number	Amount
May 31, 2019	5,601,250	$	308,069	5,950,000	$	-	375,000	$	75,000
Disposals	-		-	-		-	-		-
Consolidated	-		-	(5,950,000)		-	-		-
Fair value adjustment	-	(168,038)		-		-	-		-
Fair value reclassification	-		-	-		-	-		-
May 31, 2020	5,601,250	$	140,031	-	$	-	375,000	$	75,000
Fair value adjustment	-		56,013	-		-	-		-
November30,2020	5,601,250	$	196,044	-	$	-	375,000	$	75,000
	PubCo.						Total
	Number	Amount						Amount
May 31, 2019	75,000	$	18,375					$	401,444
Disposals	(75,000)		(22,280)						(22,280)
Consolidated	-		-						-
Fair value adjustment	-		2,625					(165,413)
Fair value reclassification	-		1,280						1,280
May 31, 2020	-	$	-					$	215,031
Fair value adjustment	-		-						56,013
November 30, 2020	-	$	-					$	271,044

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OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

4. INVESTMENTS AND ADVANCES (cont’d…)

(b) Equity Investment and Advances in/to Altamura

During the six months ended November 30, 2020, the Company advanced to and/or paid on behalf of Altamura $Nil (2019 - $223,146) and accrued interest owed of $Nil (2019 - $45,686) for total outstanding advances of $Nil (May 31, 2020 - $Nil) (the “Advances”).

The Company entered into three agreements with Altamura dated effective September 27, 2018: (i) an option agreement, as amended, (the “Altamura Option Agreement”) pursuant to which the Company acquired a three year option (the “Option”), the exercise of which was approved by the shareholders of the Company and the TSX-V, to acquire all of the equity in Altamura not already held by the Company, in consideration for 39,800,000 shares of the Company; (ii) a loan agreement, as amended, (the “Altamura Loan Agreement”) pursuant to which the Company agreed to lend up to US$700,000 to Altamura, inclusive of Advances to date, but exclusive of interest and management services, and (iii) an amended and restated share option agreement (the “Advances Conversion Agreement”) pursuant to which, in the event that the Company did not exercise the Option, the Company could convert all Advances to Altamura into common shares of Altamura at a price of US$0.057 per share at any time within the first six months after the expiry of the Option. The Advances were secured by promissory notes and bore interest of 12% per annum. Prior to its acquisition by the Company, Altamura was considered to be a related party by virtue of share ownership by companies controlled by key management or their family members.

The Company exercised its option as per the Altamura Option Agreement on March 2, 2020 and issued 39,800,000 common shares, at a value of $0.31 per share, for the acquisition of all of the issued and outstanding shares of Altamura and its subsidiaries. The subsidiaries include: the then 67% owned Mexican subsidiary, XG.; the wholly owned Mexican subsidiary, Desarrollos; and the 50% owned Bahamian subsidiary, Ruero. The main asset of the companies acquired is the interest in the Santo Tomas Properties in Mexico (Note 6).

For accounting purposes, the acquisition was treated as an asset acquisition. As such, effective as at the date of closing, the fair value assigned to the identified assets acquired and liabilities assumed are presented below:

Purchase price:
Common shares	$	12,338,000
Equity investment		1,843,609
Transaction costs		31,717
	$	14,213,326
Allocation of purchase price:
Cash	$	4,552
Receivables		19,986
Exploration and evaluation assets (Note 6(a))		24,412,316
Accounts payable and accrued liabilities		(845,043)
Advancespayable		(1,335,298)
		22,256,513
Non-controlling interest (Note 10)		(8,043,187)
	$	14,213,326

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OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

4. INVESTMENTS AND ADVANCES (cont’d…)

(b) Equity Investment and Advances in/to Altamura (cont’d…)

Information on the equity investment is as follows:

As at November 30, 2020, the Company’s equity investment in Altamura, including dilution gains, less its share of Altamura’s accumulated losses was $Nil (May 31, 2020 - $Nil). The Company’s share of Altamura’s equity loss during the six months ended November 30, 2020 was $Nil (2019 - $13,422).

A reconciliation of the equity balance and advances is as follows:

		Altamura
Equity investment
May 31, 2019	$	312,347
Loss for the year		(15,953)
Fair value adjustment(1)		1,547,215
Adjustment on acquisition		(1,843,609)
Total equity investment as at November 30 and May 31, 2020	$	-
Advances
May 31, 2019	$	680,596
Additions		262,631
Repayments		(76,355)
Interest		66,801
Adjustment on acquisition		(933,673)
Total advances as at November 30 and May 31, 2020	$	-
Management services
May 31, 2019	$	346,500
Additions		55,125
Adjustment on acquisition		(401,625)
Total management services as at November 30 and May 31, 2020	$	-
Total equity investment, advances, and management services
as at November 30 and May 31, 2020	$	-

(1) Acquisition date fair value adjustment on purchase of Altamura based on value of common shares issued for remaining interest.

5. CERRO PRIETO ROYALTY

Pursuant to the sale of the Company’s interest in the Cerro Prieto Property to Goldgroup in fiscal 2013, Goldgroup agreed to pay to the Company a production royalty (the “Production Royalty”) quarterly in arrears. The Production Royalty, payable for each month in which the monthly average of the daily PM London gold fix is in excess of US$1,250 per ounce, is calculated at the rate of 20% of the dollar value of that excess for each ounce of gold produced from the property during that month, to a maximum royalty of US$90 per ounce. This Production Royalty will be payable for each of the first 90,000 ounces of gold produced from the Property (approximately 68,000 ounces have been produced as at November 30, 2020).

During the six months ended November 30, 2020, the Company recorded $603,536 (2019 - $322,970) in royalty revenue.

6

OROCO RESOURCE CORP.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

6. EXPLORATION AND EVALUATION ASSETS

EXPLORATION AND EVALUATION ASSETS
	Santo Tomas Properties Xochipala Property Total
May 31, 2020 Acquisition costs Cash Deferred exploration expenditures Community relations Consultants Data, analysis, and models Fieldwork and supplies Geologists Lease payments, assessment fees and taxes Travel November30,2020	$ 26,982,978 $ 412,291 $ 27,395,269
	26,194 - 26,194
	26,194 - 26,194
	35,912 - 35,912 417,266 - 417,266 66,000 - 66,000 1,245,498 - 1,245,498 195,050 - 195,050 111,750 - 111,750 6,112 - 6,112
	2,077,588 - 2,077,588
	$ 29,086,760 $ 412,291 $ 29,499,051
	Santo Tomas Properties Xochipala Property Total
May 31, 2019 Acquisition costs Acquisition of Altamura (Note 4(b)) Acquisition of Aztec Cash Deferred exploration expenditures Community relations Consultants Fieldwork and supplies Geologists Lease payments, assessment fees and taxes Travel May 31,2020	$ 1,036,926 $ 380,217 $ 1,417,143
	24,412,316 - 24,412,316 202,459 - 202,459 29,559 - 29,559
	24,644,334 - 24,644,334
	97,374 - 97,374 9,740 - 9,740 747,073 - 747,073 259,639 25,629 285,268 178,993 6,445 185,438 8,899 - 8,899
	1,301,718 32,074 1,333,792
	$ 26,982,978 $ 412,291 $27,395,269

7

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

(a) Santo Tomas Properties, Sinaloa State, Mexico

Papago 17, La China II and AMP Santo Tomas Red 1 Concessions

The Company, through MX, holds a 77.5% interest in each of the Papago 17, La China II and AMP Santo Tomas Red 1 concessions (collectively, the “Santo Tomas Properties”) which are contiguous to the concessions held by XG which cover the known core of the Santo Tomas mineralized structure (the “Core Concessions”). The Santo Tomas Properties were acquired for a total cash payment of $47,247 and the issuance of 2,000,000 common shares, valued at $240,000. All three concessions comprising the Santo Tomas Properties are subject to a 2% net smelter royalty (“NSR”).

Rossy Concession

During the year ended May 31, 2020, the Company, through MX, entered into a letter agreement (the “Rossy Agreement”) for the acquisition of an 80% interest in the Rossy mineral concession, which is also contiguous to the Santo Tomas Properties (hereafter included within the term “Santo Tomas Properties”). Upon approval by Mexican tax authorities of a payment plan for the payment by the vendor of accrued concession duties, the Company and the vendor will enter into and register a formal agreement for the transfer of the interest to the Company, pursuant to which the Company will pay the balance of the consideration of US$125,000, to be paid over two years, issue 300,000 common shares, and agree to the granting to third parties of an aggregate 1.5% NSR.

Core Concessions

During the year ended May 31, 2020, the Company entered into a purchase agreement (“Data Agreement”), as amended, pursuant to which the Company acquired geological data, analysis and models related to the Santo Tomas Properties and the Core Concessions in consideration for 500,000 common shares, valued at $137,500, and US$500,000, to be paid by way of one payment of US$50,000 at the time of signing the agreement (paid), a second payment of US$50,000 (paid) and a final payment of US$400,000. The final payment of US$400,000 payment is due upon the direct or indirect sale, assignment or transfer of the Core Concessions to a third party.

XG holds a registered 100% interest in the Core Concessions. The registration of this interest had previously been impeded by a 2016 judgment (the “Judgment”) from a claim by Aztec and its Mexican subsidiary, Prime Aztec Mexicana, S.A. de C.V. against Compania Minera Ruero, S.A. de C.V. (“CMR”), the then registered holder of the Core Concessions, Fierce Investments Ltd. (“Fierce”), and Ruero. The Judgment and a related annotation in the Mexican Public Registry of Mining (the “PRM”) were nullified in 2019. On December 20, 2019, the transfer of the Core Concessions from CMR to XG was registered in the PRM.

8

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

(a) Santo Tomas Properties, Sinaloa State, Mexico (cont’d…)

Core Concessions (cont’d…)

On November 8, 2019, the Company exercised its option (the “Aztec Share Option”) to purchase 40,000,000 shares of Aztec (the “Aztec Shares”) held by Fierce, being greater than 90% of the issued and outstanding shares of Aztec. The Aztec Shares constitute the primary consideration paid by Aztec in the transaction which was the basis of Aztec’s claim that resulted in the Judgement. Aztec disputed Fierce’s ownership of the Aztec Shares, which dispute was decided in favour of Fierce by the Superior Court of the State of Arizona. Pursuant to an assignment agreement dated September 3, 2019, the Company took an assignment of Altamura’s right to purchase the Aztec Shares under the Aztec Share Option in consideration for the reimbursement of Fierce’s legal fees related to Fierce’s legal action in Arizona, and of the consideration paid for the grant of the Aztec Share Option. On October 1, 2019, at a meeting of the shareholders of Aztec held pursuant to an order of the Superior Court of Arizona, Craig Dalziel, CEO of the Company, was elected as the sole director of Aztec. Acquisition costs of $202,459 were recorded for the acquisition of Aztec. The acquisition of Aztec was for its claim to the Santo Tomas property; no value was attributed to other assets or liabilities of the company.

In fiscal 2020, the Company acquired Altamura (Note 4) and its related subsidiaries, whose main asset is its interest in the Core Concessions. The acquisition value attributed to the properties was $24,412,316 (Note 4(b)).

Subsequent to the acquisition of Altamura, the Company acquired an additional 4% of XG for conversion of intercompany debt of $1,000,000 into equity resulting in a charge to deficit of $885,850 (Note 10).

Altamura also holds an option to acquire all of the remaining interest in XG held by the sole other shareholder of XG (currently 29%) for US$16,000,000 (the “XG Option”), subject to a 1% NSR (the “Option NSR”), 0.5% of which may be bought back for US$2,000,000. The Company’s interest in the Core Concessions is subject to an NSR of 1.5%, in favour of ATM Mining Corp., a company owned by the spouse of the Company’s CEO, Craig Dalziel, and an arm’s length third party (the “ATM NSR”). 0.5% of the ATM NSR will be cancelled if the Option NSR is granted, with the result that the Core Concessions will, upon the buy-back of half of the Option NSR, if granted, be subject to a maximum 1.5% NSR.

Altamura has certain fee obligations, as amended, (the “Fee Agreement”), related to the Core Concessions as follows:

(i) US$600,000 payable within twelve months of title to the Core Concessions being registered to XG in the PRM (occurred) (US$200,000 has been paid as at November 30, 2020). As at November 30, 2020, the Company has $519,066 (US$400,000) (May 31, 2020 - $688,380 (US$500,000)) owed due to the registration of the Core Concessions (Note 8).

Altamura has certain contingent fee obligations (the “Contingent Fee Agreement”), related to the Core Concessions as follows:

• (i) upon the direct or indirect sale, assignment or transfer of the Core Concessions in a transaction intended to be final disposition:

• A. pay 10% of the sale price, to a maximum of US$3,600,000, (inclusive of the first US$600,000); and

• B. pay 1.5% of the sale price, to a maximum of US$4,100,000, of which up to $1,000,000 is payable to David Rose, an officer of the Company.

9

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

(a) Santo Tomas Properties, Sinaloa State, Mexico (cont’d…)

Core Concessions (cont’d…)

Altamura has entered into agreements pursuant to which it granted an aggregate 15% interest in the Core Concessions (the “Contractual Interest”) in consideration for: i) assistance with resolving the legal challenges to XG’s acquisition of registered title to the Core Concessions; ii) assistance with regard to the Company’s assembly of a controlling interest in the Santo Tomas Properties, including; A) the assignment to the Company of majority interests in the Santo Tomas Properties; and (B) the right to cause the assignment to the Company of majority interests in other additional properties; and (iii) technical and geological services. The Contractual Interest is subject to dilution down to an aggregate 10% on a pro-rata basis upon the funding of up to $30,000,000 of expenditures on the combined Core Concessions and the Santo Tomas Properties.

(b) Xochipala Property Guerrero State, Mexico

The Xochipala Property, located in Guerrero State, Mexico, is comprised of the contiguous 100% owned Celia Gene and Celia Generosa concessions. MX acquired the Xochipala Property in 2007.

(c) Salvador Property, Guerrero State, Mexico

The Salvador Property is a mining concession 100% owned by MX.

10

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

OROCO RESOURCE CORP.

7. EQUIPMENT

EQUIPMENT
	Automotive equipment Computer equipment Leaseholds Office furniture Total
Cost May 31, 2019 Additions May 31, 2020 Additions November 30, 2020	$ 15,948 $ 23,110 $ 10,017 $ 3,070 $ 52,145 - - - - -
	15,948 23,110 10,017 3,070 52,145 - - - - -
	$ 15,948 $ 23,110 $ 10,017 $ 3,070 $ 52,145
Depreciation May 31, 2019 Charge for the year May 31, 2020 Charge for the period November30,2020	11,895 22,538 9,049 2,813 46,295 406 171 194 51 822
	12,301 22,709 9,243 2,864 47,117 182 60 77 21 340
	$ 12,483 $ 22,769 $ 9,320 $ 2,885 $ 47,457
Net book value May 31, 2020	$ 3,647 $ 401 $ 774 $ 206 $ 5,028
November30,2020	$ 3,465 $ 341 $ 697 $ 185 $ 4,688

The Company rents office space under an operating lease, included in office and general, with monthly payments of $6,100.

8. ACCOUNTS PAYABLE AND ACRRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following:

	November 30, 2020 May 31, 2020
Accounts payable Accrued liabilities Amount owed on Core Concession registration (Note 6(a))	$ 423,168 $ 265,423 246,324 452,372 519,066 688,380
	$ 1,188,558 $ 1,406,175

11

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

9. SHARE CAPITAL AND RESERVES

Authorized

An unlimited number of common shares without par value.

Issued share capital

During the six months ended November 30, 2020, the Company issued:

• i. 12,100,000 units at a price of $0.60 per unit by way of a private placement for total proceeds of $7,260,000, with each unit consisting of one common share and one-half of one share purchase warrant. Each whole share purchase warrant will entitle the holder to acquire an additional common share at a price of $0.90 per common share, for a period of 24 months from the date of issue. The Company paid a total of $54,719 in cash for fees and issued 575,000 finder’s warrants. Each finder’s warrant entitles the holder to purchase one common share at a price of $0.60 per common share, for a period of 24 months from the date of issue. The finder’s warrants were valued at $381,732, calculated using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 0.26%, a dividend rate of nil%, a forfeiture rate of nil% and volatility of 100%;

• ii. 5,500,000 units at a price of $0.30 per unit by way of a private placement for total proceeds of $1,650,000, with each unit consisting of one common share and one-half of one share purchase warrant. Each whole share purchase warrant will entitle the holder to acquire an additional common share at a price of $0.42 per common share, for a period of 24 months from the date of issue. The Company paid a total of $31,155 in cash for fees and issued 40,800 finder’s warrants. Each finder’s warrant entitles the holder to purchase one common share at a price of $0.42 per common share, for a period of 24 months from the date of issue. The finder’s warrants were valued at $10,388, calculated using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 0.28%, a dividend rate of nil%, a forfeiture rate of nil% and volatility of 92%;

• iii. 2,805,000 common shares, pursuant to the exercise of options, for proceeds of $353,126; and

• iv. 4,375,200 common shares, pursuant to the exercise of warrants, for proceeds of $1,648,034.

During the six months ended November 30, 2019, the Company issued:

• i. 3,000,000 units at a price of $0.45 per unit by way of a private placement for total proceeds of $1,350,000, with each unit consisting of one common share and one-half of one share purchase warrant. Each whole share purchase warrant will entitle the holder to acquire an additional common share at a price of $0.70 per common share, for a period of 24 months from the date of issue. The Company paid a total of $9,149 in cash for fees and issued 19,200 finder’s warrants. Each finders’ warrant entitles the holder to purchase one common share at a price of $0.45 per common share, for a period of 24 months from the date of issue. The finder’s warrants were valued at $4,380, calculated using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 1.34%, a dividend rate of nil%, a forfeiture rate of nil% and volatility of 105%; and

• ii. 4,075,000 common shares, pursuant to the exercise of warrants, for proceeds of $652,000.

Share subscriptions received in advance

As at November 30, 2020, included in cash was $7,511,954 (2019 - $Nil) for share subscription funds received in advance (Note 15(ii)).

12

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

OROCO RESOURCE CORP.

9. SHARE CAPITAL AND RESERVES (cont’d…)

Warrants

Warrant transactions are summarized as follows:

	Number of	Weighted average
	warrants	exercise price
Balance, outstanding as at May 31, 2019	7,530,000	$ 0.25
Issued	2,794,000	0.57
Exercised	(4,125,000)	0.16
Balance, outstanding as at May 31, 2020	6,199,000	0.45
Issued	9,415,800	0.74
Exercised	(4,375,200)	0.38
Expired	(12,500)	0.32
Balance, outstanding as at November30,2020	11,227,100	$ 0.72

Warrants outstanding as at November 30, 2020 are as follows:

			Weighted
			average
Number of			remaining life
warrants	Exercise price		(years)	Expiry date
972,500	$	0.70	0.68	August 6, 2021(1)
19,200		0.45	0.68	August 6, 2021
450,000		0.70	0.80	September 19, 2021(2)
644,600		0.42	1.28	March 11, 2022(3)
2,515,800		0.42	1.58	June 30, 2022(4)
6,050,000		0.90	1.79	September 15, 2022(5)
575,000		0.60	1.79	September 15, 2022
11,227,100

(1) Subsequent to period end, 185,000 warrants were exercised (Note 15).

(2) Subsequent to period end, 80,000 warrants were exercised (Note 15).

(3) Subsequent to period end, 278,342 warrants were exercised (Note 15).

(4) Subsequent to period end, 753,334 warrants were exercised (Note 15).

(5) Subsequent to period end, 75,000 warrants were exercised (Note 15).

Stock options

The Company has a rolling stock option plan, whereby from time to time, at the direction of the Board of Directors, stock options may be granted to employees, consultants, directors and officers. The number of shares reserved for issuance under the plan shall not exceed 10% of the issued and outstanding common shares of the Company. The exercise price of each option is based on the market price of the Company’s common stock at the date of the grant. Options may be granted for a maximum of five years and vesting is determined by the Board of Directors.

During the six months ended November 30, 2020, a total of 2,600,000 (2019 - 450,000) stock options were granted to certain officers, directors, and consultants of the Company with a fair value of $1,269,034 (2019 - $142,411) using the Black-Scholes option pricing model. During the six months ended November 30, 2020, the Company recognized $1,211,961 (2019 - $409,567) as share-based payment for the fair value of the stock options.

13

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

OROCO RESOURCE CORP.

9. SHARE CAPITAL AND RESERVES (cont’d…)

Stock options (cont’d…)

The fair value of options granted was estimated on the grant date using the Black-Scholes option pricing model with weighted average assumptions as follows:

	For the Six	For the Six
	Months Ended	Months Ended
	November 30, 2020	November 30, 2019
Risk-free interest rate	0.27%	1.37%
Expected option life in years	3.0	3.0
Expected stock price volatility	99%	118%
Expected forfeiture rate	0%	0%

Option transactions are summarized as follows:

	Number of	Weighted average
	options	exercise price
Balance, outstanding as at May 31, 2019	7,900,000	$ 0.19
Granted	1,650,000	0.35
Exercised	(400,000)	0.20
Forfeited	(3,200,000)	0.23
Balance, outstanding as at May 31, 2020	5,950,000	$ 0.22
Granted	2,600,000	0.73
Exercised	(2,805,000)	0.13
Balance, outstanding as at November 30, 2020	5,745,000	$ 0.49
Balance, exercisable as at November30,2020	4,635,000	$ 0.49

Options outstanding as at November 30, 2020 are as follows:

				Weighted
	Number of			average
Number of	exercisable			remaining life
options	options	Exercise price		(years)	Expiry date
1,405,000	1,405,000	$	0.225	0.90	October 24, 2021
300,000	300,000		0.250	1.15	January 24, 2022
100,000	100,000		0.350	1.42	May 1, 2022
300,000	300,000		0.550	1.49	May 28, 2022
100,000	100,000		0.550	1.54	June 14, 2022
100,000	100,000		0.550	1.76	September 4, 2022
300,000	180,000		0.250	2.33	April 1, 2023
540,000	120,000		0.300	2.42	May 1, 2023
200,000	50,000		0.500	2.59	July 2, 2023
2,400,000	1,980,000		0.750	2.77	September 8, 2023
5,745,000	4,635,000

14

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

9. SHARE CAPITAL AND RESERVES (cont’d…)

Reserves

As at November 30, 2020, the Company had a Stock Option and Warrant Reserve balance of $4,645,320 (May 31, 2020 - $3,259,540) consisting of warrant valuations associated with warrants issued in connection with various private placements and share-based compensation associated with stock option grants to employees, consultants, directors and officers.

As at November 30, 2020, the Company had an Other Comprehensive Loss balance of $152,245 (May 31, 2020 - $208,258).

10. NON-CONTROLLING INTEREST

As at November 30, 2020, the equity attributable to the 29% non-controlling interest in XG is as follows:

		XG
May 31, 2019	$	-
Non-controlling interest on acquisition of XG (Note 4(b))		8,043,187
Dilution of 4% interest (from 33% to 29%) (Note 4(a))		(885,850)
Share of loss for the year		(4,548)
May 31, 2020		7,152,789
Share of loss for the period		(50,603)
November 30, 2020	$	7,102,186

As at November 30, 2020 and for the six months ended November 30, 2020, summarized financial information about XG is as follows:

		Total
Current assets	$	628,211
Non-current assets		25,837,394
Current liabilities		(41,733)
Non-current liabilities		(2,530,784)
Loss and comprehensivelossforthe period		(176,932)

15

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

OROCO RESOURCE CORP.

11. RELATED PARTY TRANSACTIONS

The Company considers key management personnel to consist of directors and officers. The following expenses were incurred with key management personnel:

		For the Six		For the Six
	Months Ended		Months Ended
	November 31, 2020		November 30, 2019
Management and director fees	$	170,500	$	122,000
Consulting		9,000		12,000
Professional fees		53,500		51,000
Share-based payment		661,139		-
Total	$	894,139	$	185,000

As at November 30, 2020 included in accounts payable and accrued liabilities was $307,032 (May 31, 2020 - $319,386) owing to officers and directors. The amounts owing are unsecured, non-interest bearing and have no fixed repayment terms.

12. SUPPLEMENTAL CASH FLOW INFORMATION

UPPLEMENTAL CASH FLOW INFORMATION
		For the Six		For the Six
		Months Ended		Months Ended
		November 31, 2020		November 30, 2019
Non-cash transactions not included in investing or financing activities
Exploration and evaluation assets included in accounts
payable	$	150,459	$	33,138
Deferred acquisition costs allocated to exploration and
evaluation assets		-		29,559
Advances to associated company allocated to exploration and
evaluation assets		-		76,355
Allocation of fair value of options exercised		218,301		-
Finder’s warrants issued included in share issue costs		392,120		4,380
Unrealized adjustment on fairvalue of marketable securities		56,013		113,525

16

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

OROCO RESOURCE CORP.

13. SEGMENTED INFORMATION

The Company operates in one segment being the acquisition and exploration of exploration and evaluation assets located in Mexico. Geographic information is as follows:

As at November 30, 2020

		Canada		Mexico	Total
Equipment	$	1,223	$	3,465 $	4,688
Exploration and evaluation assets		-		29,499,051	29,499,051
Other assets		16,178,966		640,627	16,819,593
Totalassets	$	16,180,189	$	30,143,143 $	46,323,332

As at May 31, 2020

		Canada		Mexico	Total
Equipment	$	1,381	$	3,647 $	5,028
Exploration and evaluation assets		-		27,395,269	27,395,269
Other assets		1,092,583		8,696	1,101,279
Totalassets	$	1,093,964	$	27,407,612$	28,501,576

14. FINANCIAL INSTRUMENT RISK AND CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to identify, pursue and complete the exploration and development of mineral properties, to maintain financial strength, to protect its ability to meet its on-going liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for shareholders over the long term. The Company does not have any externally imposed capital requirements to which it is subject. Capital of the Company comprises shareholders’ equity. There has been no significant change in the Company’s objectives, policies and processes for managing its capital during the six months ended November, 2020.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. The Company’s investment policy is to invest its cash in financial instruments in high credit quality financial institutions with terms to maturity selected with regards to the expected timing of expenditures from continuing operations.

Fair value hierarchy

The Company’s financial instruments recorded at fair value require disclosure about how the fair value was determined based on significant levels of inputs described in the following hierarchy:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and value to provide pricing information on an ongoing basis.

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1. Prices in level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

17

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

14. FINANCIAL INSTRUMENT RISK AND CAPITAL MANAGEMENT (cont’d…)

Fair value hierarchy (cont’d…)

Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

Management of Financial Risk

The carrying value of cash, receivables, and accounts payable and accrued liabilities approximated their fair value because of the short-term nature of these instruments. Cash is measured at a level 1 of the fair value hierarchy. The Goldgroup shares recorded in marketable securities are measured at a level 1 of the fair value hierarchy and the BC Co. shares recorded in marketable securities are measured using level 3 of the fair value hierarchy. Investments classified within level 3 have significant unobservable inputs. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. The investments are based on cost at time of acquisition.

The Company’s financial instruments are exposed to certain financial risks, which include credit risk, liquidity risk, and market risk.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its bank accounts. The bank accounts are mainly held with a major Canadian bank and this minimizes the risk to the Company.

Liquidity Risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its financial obligations when they are due. The Company manages liquidity risk through the management of its capital structure and financial leverage as outlined above. The Company monitors its ability to meet its short-term expenditures by raising additional funds through share issuance when required. All of the Company’s financial liabilities have contractual maturities of 30 days or due on demand and are subject to normal trade terms.

Foreign Exchange Risk

The Company’s property interests in Mexico make it subject to foreign currency fluctuations, which may adversely affect the Company’s financial position, results of operations and cash flows. The Company is affected by changes in exchange rates between the Canadian dollar and foreign currencies. The Company does not invest in derivatives to mitigate these risks. The effect of a 10% change in the foreign exchange rate on the cash held in foreign currencies at November 30, 2020 is $136,000.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk.

18

OROCO RESOURCE CORP. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited) November 30, 2020

14. FINANCIAL INSTRUMENT RISK AND CAPITAL MANAGEMENT (cont’d…)

Management of Industry Risk

The Company is engaged in mineral exploration and manages related industry risk issues directly. The Company may be at risk for environmental issues and fluctuations in commodity pricing as well as changes in foreign government policy. Management is not aware of and does not anticipate any significant environmental remediation costs or liabilities in respect of its current operations; however, it is not possible to be certain that all aspects of environmental issues affecting the Company, if any, have been fully determined or resolved.

15. SUBSEQUENT EVENTS

Subsequent to November 30, 2020, the Company:

• i. issued 1,371,676 common shares pursuant to the exercise of warrants, for proceeds of $686,304;

• ii. issued 12,900,000 units at a price of $1.20 per unit for total proceeds of $15,480,000, of which $7,511,954 was received with subscriptions for of units prior to November 30, 2020. Each unit is comprised of one common share and one-half of one common share purchase warrant, exercisable at a price of $1.60 per common share, for a period of two years from the date of issue. The Company paid a total of $50,000 in cash for finder’s fees, issued 38,400 units, and issued 120,000 finders’ warrants. Each unit is comprised of one common share and one-half of one common share purchase warrant, exercisable at a price of $1.60 per common share, for a period of two years from the date of issue. Each finder’s warrant entitles the holder to purchase one common share at a price of $1.20 per common share, for a period of two years from the date of issue; and

• iii. paid US$150,000 as per the Fee Agreement (Note 6(a)).

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