Pangolin Diamonds Corp. — Management Reports 2021

Mar 1, 2021

Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Overview

This Management’s Discussion and Analysis (“MD&A”) of financial results and related data of Pangolin Diamonds Corp. (“Pangolin” or the “Company”) is reported in Canadian dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. To the extent which may be appropriate, this MD&A should be read in conjunction with the interim consolidated financial statements for the periods ended December 31, 2020 and December 31, 2019, and the annual audited consolidated financial statements for the years ended June 30, 2020 and June 30, 2019. Additional information relating to the Company may be accessed through SEDAR at www.sedar.com.

This commentary is as of March 1, 2021. The reader should be aware that historical results are not necessarily indicative of future performance.

Forward-Looking Statements

This MD&A contains forward-looking information which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company, future plans and objectives, competitive positioning, requirements for additional capital, government regulation of operations, environmental risks and the timing and possible outcome of litigation and regulatory matters. All statements other than statements of historical fact, included in this MD&A that address activities, events or developments that the Company expects or anticipates may occur in the future are forward-looking statements. Often, but not always, forward-looking statements can be identified by use of forward-looking words such as “may”, “could”, “would”, “might”, “will”, “expect”, “intend”, “plan”, “budget”, “scheduled”, “estimate”, “anticipate”, “believe”, “forecast”, “future” or “continue” or the negative thereof or similar variations. Forward-looking statements are based on certain assumptions and analyses made by the Company, in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and known and unknown risks, many of which are outside the control of the Company, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements . Important factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among other things, general business, economic, competitive, political and social uncertainties, the actual results of current operations, industry conditions, research and development activities, intellectual property and other proprietary rights, production risks, liabilities inherent in the mining industry, accidents, labour disputes, delays in obtaining regulatory approvals or financing and general market factors, including interest rates, currency exchange rates, equity markets, business competition, changes in government regulations. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause results to differ from those anticipated. Forward-looking statements contained in this MD&A are made as of the date hereof and the Company disclaims any obligation to update any forwardlooking statements, whether as a result of new information, future events, results or otherwise, except as required by applicable securities laws.

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Business Background

Pangolin Diamonds Corp. (the “Company” or “Pangolin”) was incorporated under the Ontario Business Corporations Act on November 9, 2011. The Company is currently engaged in the acquisition, exploration and development of mineral properties in Botswana. The head office and principal address of the Company is 25 Adelaide Street East, Suite 1614, Toronto, Ontario M5C 3A1.

On December 22, 2011, the Company acquired all of the issued and outstanding common shares of Pangolin Diamonds Limited (“PDL”), a private company incorporated under the laws of the Republic of Seychelles. PDL holds, through its subsidiaries Pangolin Diamonds (Pty) Limited (“Pangolin Botswana”) and Geocontracts Botswana (Pty) Limited (“Geocontracts”), prospecting licences relating to diamonds in Botswana. As a result of this transaction, the prior shareholders of PDL obtained a majority interest in the issued and outstanding shares of Pangolin Diamonds Corp.

On March 4, 2013, the Company closed its amalgamation with Key Gold Holding Inc. (“Key Gold”). At shareholder meetings for each of Key Gold and PDL held on January 15, 2013, the amalgamation of Key Gold and PDL, pursuant to an amalgamation agreement dated November 26, 2012, was approved (the “Amalgamation”). In connection with the Amalgamation, Key Gold shareholders received one common share of the Company (“Pangolin Share”) for each two outstanding common shares in the capital of Key Gold and PDL shareholders received one Pangolin Share for each outstanding common share in the capital of PDL.

Pangolin Botswana and Geocontracts are wholly-owned subsidiaries of PDL and were incorporated on January 22, 1987 and March 15, 1989, respectively, under the laws of the Republic of Botswana and have a head office and a registered office at Plot 337/338, Corner Khama Street / Selous Street, Francistown, Botswana. They currently manage and execute Pangolin’s day to day operations and their interest in the Pangolin Botswana Prospecting Licences and Geocontracts Prospecting Licences (as such terms are defined below).

Properties

Pangolin, through its wholly-owned subsidiaries, holds title to various properties (herein, the “Pangolin Properties”). The Pangolin Properties consist of: (i) nine (9) diamond prospecting licences (PL529/2014, PL321/2016, PL380/2018, PL381/2018, PL33/2019, PL34/2019, PL134/2020, PL141/2020, PL172/2020) granted by the Minister of Minerals Resources, Green Technology and Energy Security, of the Republic of Botswana (herein, the “Ministry”) in favour of Pangolin Botswana (the “Pangolin Botswana Prospecting Licences”) and (ii) eight (8) diamond prospecting licences (PL229/2014, PL247/2014, PL 004/2016, PL 005/2016, PL 006/2016, PL 007/2016, PL 008/2016, PL 009/2016) granted by the Ministry in favour of Geocontracts, (the “Geocontracts Prospecting Licences”).

In the event of a viable diamond deposit being discovered, it is necessary to negotiate the terms of any mining lease with the Botswana Government. Important principles governing such negotiations are that the Botswana Government will maximize the return to the People of Botswana, subject to the licensee receiving a reasonable return on investment. In the case of large, rich deposits such as De Beers’ Jwaneng and Orapa Diamond Mines, the Botswana Government has acquired a 50% interest in the deposit via a holding company, Debswana. History has shown that the working interests negotiated range between a 0% or no interest, up to a 50% interest.

The Botswana Government retains a 10% royalty on the gross market value of produced diamonds and can select to participate in development by contributing its share of development costs. Nomathata Diamonds, a company incorporated in the Republic of the Seychelles, which is controlled by a major shareholder, Dr. Leon Daniels, who is also a director as

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

well as the Chief Executive Officer and President of the Company, holds a 1.15% net smelter royalty on new diamond deposit discoveries – calculated on the same basis as the Botswana Government’s royalty. During the quarter, Nomathata Diamonds agreed to sell a portion of its royalty Umgeni Holdings International Limited (“Umgeni”) for proceeds of $300,000. Umgeni an arm’s length company, now holds a 3.75% gross overriding royalty of an amount equal to 97% of gross proceeds from the sale of diamonds ("GOR") and a 3.75% NSR on an amount equal to 97% of gross proceeds from the sale of base and precious metals in Pangolin’s Malatswae, Moenyenana and Motloutse diamond projects.

Malatswae Project

Property Description and Location

Pangolin’s Malatswae Diamond Property is located in the Central Province of the Republic of Botswana. It is comprised of eight contiguous Prospecting Licences issued by the Ministry under the terms of the Mines and Minerals Act 1999 (“the Act”) with a total area of 2,953.4 km[2] . The Licences are issued for “precious stones” only, in effect for diamonds, and carry no right to any other mineral.

Under the Act, a Prospecting Licence is issued for an initial period of up to three years, and then may be twice renewed for periods not exceeding two years each, giving a maximum possible validity of seven years. At least 50% of the area of a Licence must be relinquished at first and second renewals, except that physically contiguous and co-dated Licences may be treated as one area.

The holder of a Prospecting Licence is expected to carry out an agreed exploration program which is described in the Licence document, and to spend not less than amounts set out in the Licence during each year of the Licence validity. Failure to do so may result in an application for the renewal of the Licence being refused.

Prospecting Licences are administered by The Director, Department of Mines, to whom applications are made, and to whom work done on the Licence must be reported on a quarterly basis. The Licence holder is required to pay a rental of BWP5.00/km[2] /year during the validity of the Licence (subject to certain minimums). The maximum permissible area for a Prospecting Licence is 1,000 km[2] , but blocks of multiple licences are permitted.

A Prospecting Licence does not give the right to mine, and diamonds recovered during the course of prospecting operations are the property of the State, and may not be sold.

Current Malatswae Prospecting Licences

The Malatswae Property is situated in northeast Botswana within the Central (administrative) District. The Property is made up of eight Prospecting Licences as described in Table 1 below:

Table 1 . Malatswae Prospecting Licences

Malatswae Project PLS

	Prospecting Licence	Validity	Validity	Surface Area	Pangolin Botswana Pangolin Botswana
		From	To
1	380/2018	01-Oct-18	30-Sep-21	52 km2
2	381/2018	01-Oct-18	30-Sep-21	614 km2

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

3	529/2014	01-Oct-20	30-Sep-22	199.4 km2	Pangolin Botswana Pangolin Botswana Geocontracts Geocontracts Geocontracts
4	034/2019	01-Oct-19	30-Sep-22	478.4 km2
5	008/2016	01-Oct-19	30-Sep-21	431 km2
6	009/2016	01-Oct-19	30-Sep-21	494 km2
7	247/2014	01-Oct-20	30-Sep-22	197.7 km2
			Total	2466.5 km2

A renewal application was submitted for PL 529/2014 and it has been renewed for a period of two years from 01 October 2020 to 30 September 2022. Prospecting Licences 380/2018 and 381/2018 have been granted for a three year period from 01 October 2018 to 30 September 2021. Renewal of PL 247/2014 was submitted on 30 June 2019 and the renewal application has been. Prospecting Licences 008/2016 and 009/2016 have been renewed for a further two year period from 01 October 2019 to 30 September 2021. A new Prospecting Licence PL 34/2019, covering an area of 478.4 square kilometres has been issued in favour of Pangolin Diamonds (Pty) Limited for a three year period from 01/10/2019 to 30/09/2022.

Exploration to Date

Pangolin previously held PLs 561/2009 and 562/2009 which partly overlap with the present Malatswae Property. These were not renewed at first renewal in 2012, but were succeeded by PLs 247/2014 and 529/2014.

Pangolin also previously held PLs 063/2011, which lay to the north of PL 561/2014, and PL 100/2011 which lay to the west of PL 247/2014. PL 100/2011 was prospected for possible alluvial diamonds in channels in the basal Kalahari Group. PLs 063/2011 and 100/2011 lapsed on 30 June 2017 and no renewal applications were submitted.

The first diamond in the area of the MSC Advance Project (MSC) area was found in samples collected under PL 562/2009 but not processed before the licence lapsed. This prompted the re-application for the area, now PL 247/2014.

Pangolin’s exploration approach has been based primarily on soil sampling for kimberlite indicator minerals. This has been supplemented with the interpretation of government aeromagnetic data, plus groundmagnetic surveys over selected aeromagnetic anomalies. Where required, other geophysical methods such as gravity, ground penetrating radar (GPR) controlled source audio-magnetotellurics (CSAMT), audiotellurics and EM have been applied to selected targets. Borehole siting to date has been largely based on geophysics on targets proximal to indicator mineral recoveries.

The Company has carried out extensive soil sampling programmes and to date the complete record of the soil samples, both historical and by Pangolin, totals over 10,000 samples from within the Malatswae Property. The historical database is from the work of De Beers and Kukama Exploration.

Regional soil sampling programmes were completed over PL247/2014 and PL 529/2014 following the discovery of a diamond during 2013.

PL 380/2018 was specifically applied for to evaluate soil sampling techniques. The Prospecting Licence is 52 km[2] and allows for a focus area. The area was previously sampled on a 1 km x 1 km basis. No results of significance were

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

obtained and the area was relinquished during the First Relinquishment period of PL 247/2014. The area has now been resampled on a 500 m x 500 m grid system collecting larger volume samples at the higher sample density. The higher density and larger volume of soil samples have produced several positive results which have been followed up with detailed grid sampling and groundmagnetic surveys. The exploration programme is in progress.

Sampling in PL 529/2014 has produced more than 300 kimberlitic garnets from the MTS Grid in an area of less than 2 km[2] . An assessment of the surfaces of the garnets suggests more than one source within the sampled area. Three diamonds have been recovered from soil samples collected within the MTS Grid. The MTS Grid has been covered with a detailed gravity and groundmagnetic surveys as well as a single orientation CSAMT survey.

The MTS Grid area has a paucity of kimberlitic ilmenites. In contrast, the MSC area is characterised by a higher ilmenite/garnet ratio. It is believed that different kimberlite groups are the sources of the indicators and diamonds at the two focus areas.

Four additional soil sample grids have been developed, MAL 001, MAL 007, MAL 010, and 529/11T. Diamonds have been recovered from the MAL 001, MAL 007, MAL 010 and 529/11T grids. A single diamond has been recovered from area MAL 157. In total, diamonds have been recovered from nine (9) geographically separate sampling grids within the Malatswae Project area.

Within the project area detailed soil sampling, geophysics, core drilling and percussion drilling were completed to follow up the recovery of diamonds and kimberlite indicators. To date, a kimberlite dyke was discovered in PL529/2014 at MAL 001.

Regional soil sampling in late 2013 located a single diamond in the Malatswae project area. The area where the diamond was discovered is now being defined as the MSC Advance Project (MSC area) within PL247/2014. An application was presented to the Department of Mines for a Prospecting Licence over a large area centred on the diamond's location. Initial follow-up close-spaced soil sampling recovered a further eight diamonds, several pyrope garnets, numerous picro-ilmenites, olivines and a fragment of mantle-derived garnet peridotite. This subsequent set of indicator minerals feature primary textures suggesting a proximal source.

High density, detailed loam sample grids have been established over a number of areas within the MSC Project area and the soil sampling has been completed. A total of nineteen diamonds have been reported from the MSC Grid area. Additional gravity, groundmagnetic, AMT and EM surveys are in progress.

Results of Operations

During calendar Q4/2020, the field operations continued to be focused on following up aeromagnetic targets with groundmagnetic surveys and soil sampling. The pace of the field programme has gradually increased after the gradual release of Lockdown conditions. While COVID-19 regulations have necessitated changes in field operations and sporadic Lockdowns have hampered staff availability, the Company has managed to adapt to the conditions and progress is satisfactory. Early, heavy rains have affected access to the field staff and have retarded the soil sampling programmes.

Exploration Planning

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Soil sampling will continue to be conducted in the MSC Project area and surrounding areas. Areas of anomalous indicator counts in the MSC area will be subjected to detailed geophysical surveys.

Groundmagnetic surveys will continue to be conducted over selected aeromagnetic anomalies in PL381/2018, PL034/2019 and PL529/2014. These aeromagnetic anomalies will also be covered with orientation and, where necessary, with detailed soil sampling programmes.

Motloutse Diamond Project

The Motloutse Diamond Project is located in eastern Botswana and is comprised of nine diamond PLs as described below:

PANGOLIN DIAMONDS (PTY) LTD

	Prospecting Licence	Validity	Validity	Surface Area
		From	To
1	321/2016	01-Oct-20	31-Sep-22	457.5 km2
2	004/2016	01-Oct-19	30-Sep-21	483.2 km2
3	005/2016	01-Oct-19	30-Sep-21	674 km2
4	006/2016	01-Oct-19	30-Sep-21	455 km2
5	007/2016	01-Oct-19	30-Sep-21	227.3km2
6	229/2014	01-Oct-20	30-Sep-22	211.3 km2
7	134/2020	01-Oct-20	30-Sep-23	1000km2
8	141/2020	01-Oct-20	30-Sep-23	445.3 km2
9	172/2020	01-Oct-20	30-Sep-23	1000 km2
	Total			4953.6km2

Property Description and Status

Renewal has been applied for PL 229/2014 and PL321/2016 and both Prospecting Licences have been renewed for a further two year period from 01 October 2020 to 30 September 2022.

Four of the Moenyenana Project prospecting licences (PL 004/2016, PL 005/2016, PL 006/2016 and PL 007/2016) have been included in Motloutse Project. These Prospecting Licences have been renewed for a two year period from 01 October 2019 to 30 September 2021. Three new Prospecting Licences (PL134/2020, PL141.2020 and PL172/2020) have been issued to Pangolin Diamonds for a period of three years from 01 October 2020 to 30 September 2020.

Exploration to Date

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Historically, the first authenticated diamonds in Botswana were found within the boundaries of PL 229/2014. The source of the diamonds has not been discovered.

A number of diverse aeromagnetic targets were followed up on the ground with both soil sampling and geophysical surveys. This programme was undertaken to filter different types of aeromagnetic anomalies identified within the Motloutse Project area. A number of anomalies have been tested since the inception of the Motloutse Project. To date no kimberlite has been discovered. This programme is in progress.

A soil sample grid, the MSD Grid, was established over an area where a diamond was found and independently reported during an exploration programme in 1996. Initially a total of 132 samples were collected on a 50m x 50m x 100 litre basis. A number of indicators were recovered from the soil samples, including one diamond. Several of the indicators have surface textures indicating a proximal source.

Subsequently, additional soil sampling programmes were undertaken over the grid area. These samples were collected on a 25m x 25m grid and the samples returned additional indicators. The assessment of the indicator surfaces are indicative of a proximal source and detailed geophysical surveys were conducted over the MSD Grid area, including groundmagnetometry, VLF and AMT. Data interpretation to date suggests that the source of the indicators may be a dyke system with possible enlargements. An extension grid to the area where the historical diamond was found has been sampled on a 50m x 50m grid. The samples returned a few positive results, suggesting that the interpreted dyke system may extend over a distance of 1.3 km.

Three trenches totaling 420m of trenching to a depth of 3 metres have been completed over the MSD Grid area. The samples have been processed for kimberlite indicator minerals. No indicators were recovered from the underlying Karoo sediments, indicating that the indicators are not from Karoo sediments but from a local kimberlitic source.

Regional soil sampling on a 1km x 1km basis has been completed over PL 229 and the samples have been processed through the in-house 1 tph Dense Media plant. Most of the samples were negative. A few samples returned single indicators. These positive samples are being followed up with additional sampling grids over the positive results.

During a joint venture between AMPAL and De Beers in the mid 1990’s a kimberlitic garnet anomaly was identified in PL 52/1990 which is now located in the western part of PL 229/2016. The conclusion drawn by De Beers was that these garnets originated from the Orapa kimberlite field 150 kilometres to the west.

Orientation sampling conducted by Pangolin has recovered garnets from this AMPAL Garnet Anomaly (AGA) area. A study of the surface conditions of the garnets recovered by Pangolin suggests that the garnets have a local derivation and not distal from the Orapa kimberlite field. The initial orientation results obtained by Pangolin from the AGA area have prompted Pangolin to define the AGA area as a special project area to discover the source of the kimberlite indicators historically recovered from the AGA area.

Historical sampling by previous exploration companies have reported diamonds up to 2.4 carats along the drainage of the Motloutse river. The reported diamonds have prompted commencement of sampling of the subsidiary streams draining into the Motloutse from the north in PL229/2014 and PL321/2016.

Results of Operations

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

During calendar Q4/2020, the field operations continued to be focused on following up aeromagnetic targets with groundmagnetic surveys and soil sampling. Aeromagnetic targets have been selected for groundmagnetic surveys within the newly issued prospecting licences. These groundmagnetic surveys have commenced. In addition, soil sampling of the aeromagnetic targets have also commenced.

Soil sampling at the MSD grid in Pl229/2014 continued during the quarter.

Exploration Planning

Soil sampling will continue to be conducted in the MSD Project area in PL229/2014 and surrounding areas. The MSD grid will be subjected to detailed geophysical surveys.

Groundmagnetic surveys will be conducted over selected aeromagnetic anomalies in PL134/2020, PL 1414/2020 and PL 172/2020.

Kweneng Project

Prospecting Licence 33/2019 has been granted to Pangolin Diamonds (Pty) Limited for a period of three years from 01 October 2019 to 30 September 2022. The prospecting licence is located in the Kweneng District and covers an area of 998.4 km[2] . The area was previously explored by De Beers. They reported the recovery of chromites. An assessment of the chromite chemistry has identified a significant number of chromites recovered by De Beers as having compositions similar to that of chromites recovered as diamond inclusions. The regional felsic volcanics are not the source of these chromites. In addition, some of the chromites have compositions consistent with a derivation from a highly reduced mantle and inconsistent with a derivation from volcanics extruded at surface.

Exploration to Date

Five targets have been followed up with groundmagnetic surveys. Soil samples have been collected over three of the targets. Drilling has identified an ultramafic dyke associated with mantle chromites in the KW04 valley.

Results of Operations

Due to COVID-19 movement restrictions over the Kweneng area exploration activities started slowly during this quarter. To overcome the restrictions of movement across COVID Zones the Company has relocated soil sample teams to be resident within the COVID Zone in which the Kweneng Project is located. The relocation of field staff has been successful and over 1000 soil samples have been collected. The soil samples are currently being processed and the concentrates from the samples are being assessed. Indicators have been recovered from some of the termite hill samples in the KW04 valley. Not all the results are available at this time and it is to early to assess the results.

Early, heavy rains has affected the progress of soil sampling during Q4/2020. Drilling within the KW04 valley has confirmed a strike length of the ultramafic dyke discovered in March 2020. AT least two dykes have now been identified. Drilling has indicated a maximum width of 14 metres horizontal for one of the dykes.

Exploration Planning

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Operations in the Kweneng Project will be focused on soil sampling for the time being until such time that COVID movement conditions have been improved in the area. Sampling of target areas outside of the KW04 valley area will continue during the next quarter. The sampling of termite hills within the KW04 valley will continue.

Yashomann Option Agreement

Pangolin Diamonds has entered into an Option Agreement with Yashomann Industries Limited Yashomann) to explore PL280/2015 for diamonds. PL280/2015 is located in the Central District of Botswana and is situated in the headwater region of the Motloutse River where the first diamonds were discovered in Botswana.

During the Option Period Pangolin Diamonds has the right to explore for kimberlites withinPL280/2015 during which geophysical surveys, soil sampling and drilling will be employed towards kimberlite discovery. The indicator mineral suite of any discovered kimberlite will be analysed to determine the diamond window signature for the individual kimberlite.

Depending on the results of the Option Period work programme Pangolin may elect to enter into a Joint Venture to explore the diamond potential of discovered kimberlites within PL 280/2015.

Pangolin is entitled to earn from Yashomann within an identified Project a 51% Participating Interest by essentially producing 500 carats of acidized +1.5 mm diamonds from the defined Project during the Joint Venture Phase 1 Work Plan. Any diamonds recovered during the Option Period will be considered part of the required 500 carats required to complete the Phase 1 Work Plan of the Joint Venture.

Pangolin is entitled to earn from Yashomann within an identified Project an 80% Participating Interest by completing the requirements of the Joint Venture Phase 2 Work Plan. The requirements for the Phase 2 Work Plan is to produce a bankable feasibility study for the Project.

The Option Period shall terminate at the earlier of the JV Operative date or July, 31 2021. A total of 47 aeromagnetic targets within PL280/2015 were selected for groundmagnetic surveys. These surveys have been completed and are currently being assessed.

Orientation soil sampling has been completed over 39 targets. Rain and elephants have hampered access to some of the targets and the targets located within Sua Pan will not be sampled for indicators as there are no termites active within the salt pans. The processing of the orientation soil samples collected over the accessible aeromagnetic targets is in progress. To date orientation samples over three targets have produced anomalous kimberlite indicator results. These targets have been selected for detailed grid soil sampling.

Exploration Planning

Operations in the Yashomann Option area will be focused on groundmagnetic surveys and soil sampling for the time being.

Additional Disclosure for Venture Issuers Without Significant Revenue

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

During the period ended December 31, 2020 and December 31, 2019 the Company incurred the following exploration and evaluation expenditures:

		2020		2019
Exploration drilling	$	-	$	16,867
Exploration sample analysis		4,104		-
Fuels and oils		8,986		1,365
Motor vehicle expenses		12,808		9,304
Field consumables and equipment		2,719		2,806
Repairs and maintenance		238		179
General exploration expenses		42,322		143,197
	$	71,177	$	173,718

Results of Operations

Quarterly Results

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Revenue

The Company did not have any revenue for the period ended December 31, 2020.

Share-Based Compensation

Share-based compensation for the period ended December 31, 2020 totalled $nil (Period ended December 31, 2019 - $213,300).

Costs and Expenses

Costs and expenses for the period ended December 31, 2020 were $213,451 and included the following categories: Exploration and evaluation expenditures, consulting and professional fees, administration costs, travelling, depreciation, stock based compensation and investor relations expenses.

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Loss1

Pangolin had a net loss of $213,451 for the quarter ended December 31, 2020. Exploration activities accounted for $71,177, consulting fees of $24,000, administrative costs of $82,945, investor relations, promotion and travel of $nil, professional fees of $17,094, and a foreign exchange loss of $18,235. Stock-based compensation totalled $nil.

Liquidity

Pangolin has financed its operations to date by the issuance of common shares and the sale of royalty interests. The Company presently has no debt or other operating credit facilities. Pangolin had working capital of $93,771 and cash of $236,917 as at December 31, 2020 as compared to working capital of $169,874 and cash of $316,945 as at June 30, 2020. Further financing will be required for working capital and exploration expenditures. The Company is uncertain whether it can obtain, in the current environment, financing to complete its current work programs. This and other conditions reflect a material uncertainty that casts significant doubt about the Company’s ability to continue as a going concern.

Capital Resources

Pangolin has no sources of revenue. The availability of equity capital, and the price at which additional equity could be issued, will be dependent upon the success of Pangolin’s exploration activities, and upon the state of the capital markets generally. Additional financing may not be available on terms favourable to Pangolin or at all.

Off-Balance Sheet Arrangements

Pangolin does not have any off-balance sheet arrangements.

Transactions with Related Parties

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

Compensation of Key Management Personnel of Company:

The remuneration of directors and other key members of management personnel during the period ended December 31, 2020 and 2019 were as follows:

		2020		2019
Share-based payments	$	nil	$	162,000
Consulting fees (CFO)	$	18,000	$	18,000
Consulting fees included in exploration expenses (CEO)	$	23,739	$	23,000

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

Related party transactions:

As at December 31, 2020 and June 30, 2019, respectively, the Company had the following balances receivable from (payable to) related parties that are not subsidiaries of the Company:

		2020		2019
Shareholders’ loans (CEO)	$	(25,198)	$	(22,159)

Shareholders’ loans payable are unsecured, non-interest bearing and due on demand.

During the three and six months ended December 31, 2020, the Company incurred legal fees of $1,475 and $9,161, respectively, (three and six months ended December 31, 2019 - $8,807 and 15,432, respectively) charged by a law firm of which a director of the Company is a partner. Included in amounts payable as at December 31, 2020 was $nil (June 30, 2020 - $nil) owing to this law firm.

During the three and six months ended December 31, 2020, the Company incurred rent expense of $4,500 and $9,000, respectively, (three and six months ended December 31, 2019 - $4,500 and $9,000, respectively) charged by a director of the Company for use of a facility in Botswana. As at December 31, 2020, $18,000 (June 30, 2020 - $9,000) was included in amounts payable and accrued liabilities pertaining to rent incurred.

Included in accounts payable is $3,260 (June 30, 2020 - $3,260) owed to the Company's Chief Financial Officer and $64,782 (2019 - $77,111) owed to the Company's Chief Executive Officer who is also a director of the Company for consulting fees and sundry expense reimbursements. This amount is unsecured, non-interest bearing, with no fixed terms for repayment.

Contingency

Environmental contingencies

The Company’s exploration activities are subject to various federal and international laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company may make in the future, expenditures to comply with such laws and regulations.

Contingency

Pursuant to a share purchase agreement dated December 22, 2011, as amended November 8, 2012, and December 1, 2013, the Company has agreed to pay Leon Daniels, the former majority shareholder of PDL and a current director and officer of the Company, $1,200,000 in the event that the Company discovers at least ten kimberlites in connection with its properties, payable within 24 months of the discovery of such kimberlites, provided that each such kimberlite is “diamondiferous” as verified by a Qualified Person (as such term in defined in NI 43-101). In addition, the parties have agreed that for a kimberlite to be diamondiferous, it must be a kimberlite in which a “macro” diamond is contained –

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

namely a diamond being greater than 0.5 mm in size. If a known diamondiferous kimberlite is acquired by the Company, it will not be counted as one of the 10 as described above. There have been no such kimberlites discovered by the Company to date.

Flow ‑ through indemnifications

Flow-through agreements require the Company to renounce certain tax deductions for Canadian exploration expenditures incurred on the Company’s mineral properties to flow-through participants. The Company indemnified the subscribers for any related tax amounts that become payable by the subscribers as a result of the Company not meeting its expenditure commitments. The Company has not fully met all of its expenditure commitments for previous flow-through financings. If the Canadian Revenue Agency (“CRA’) determined that the Company was not compliant with their flow-through expenditure commitments, the Company may be liable to indemnify subscribers for any related tax amounts.

Consulting agreements

The Company entered into a consulting agreement with an individual to perform functions as the Chief Financial Officer of the Company for a monthly fee of $6,000. This agreement was renewed in December 2020, and stipulates a 90 day notice provision in the event of termination.

The Company has also entered into a consulting agreement, effective September 1, 2017, with an individual to perform functions as the Chief Executive Officer of the Company for a monthly fee of US $6,000. This agreement was renewed in December 2020, and stipulates a 90 day notice provision in the event of termination.

Royalty Agreement

The Botswana government retains a 10% net royalty on the market value of produced diamonds and can select to participate in development by contribution of its share of development costs. Nomathata Diamonds Inc., a corporation incorporated in the Republic of the Seychelles, which is controlled by a significant shareholder who is also a director and officer of the Company, holds a 1.15% net smelter royalty ("NSR") calculated on the same basis as the government’s royalty.

On April 1, 2018, the Company signed an option agreement (the “Agreement”) with Makanwu Civil Blasting (PTY) Ltd. (“MCB”), a private company incorporated under the laws of the Republic of Botswana. Under the Agreement, MCB has granted Pangolin the sole and exclusive option to earn up to a 75% interest in respect of MCB’s precious stone AK10 Diamond Project located in the Central District of Botswana, Africa. In connection with this Agreement, the Company signed a joint venture agreement on June 30, 2018 which will come into effect at such time as the interest is earned under the option agreement.. The Company extended this option through December 31, 2020.

On November 27, 2018, the Company announced it had reached an agreement with Umgeni Holdings International Limited ("Umgeni") under which Umgeni has agreed to acquire a royalty interest in Pangolin’s Licences located within the Central District of Botswana, as well as an area defined as the Adjacent Area of Interest for $600,000. Umgeni is a private company of which Dr. Christopher Jennings is a beneficiary of the sole shareholder that initially purchased a 1.3% GOR and a 1.3% NSR for $600,000 in May of 2017.

Under the terms of the agreement, Umgeni agreed to pay Pangolin an additional $600,000, (of which all $600,000 had been received during the year ended June 30, 2020), for a total of $1,200,000 in funding to date to acquire the following

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

royalty interests in Pangolin’s Malatswae, Moenyenana and Motloutse diamond projects: a 2.6% gross overriding royalty on diamonds ("GOR") and a 2.6% net smelter returns royalty on base and precious metals ("NSR") over the Licences issued to Pangolin Diamonds (Pty) Limited and Geocontracts Botswana (Pty) Limited, located within the Central District of the Republic of Botswana, as well as a defined Adjacent Area of Interest.

During the quarter, Nomathata Diamonds agreed to sell a portion of its royalty Umgeni Holdings International Limited (“Umgeni”) for proceeds of $300,000. Umgeni an arm’s length company, now holds a 3.75% gross overriding royalty of an amount equal to 97% of gross proceeds from the sale of diamonds ("GOR") and a 3.75% NSR on an amount equal to 97% of gross proceeds from the sale of base and precious metals in Pangolin’s Malatswae, Moenyenana and Motloutse diamond projects.

Proposed Transactions

Pangolin has not entered into and has no current plans to enter into any asset or business acquisitions or dispositions.

Forward Looking Information (additional disclosure)

The following information provides further clarification with respect to the Company’s forward-looking information.

Forward-looking statements	Assumptions	Risk factors
Potential of the Company’s properties to contain diamond deposits	Financing will be available for future exploration and development of the Company’s properties; the actual results of the Company’s exploration and development activities will be favourable; operating, exploration and development costs will not exceed the Company’s expectations; the Company will be able to retain and attract skilled staff; all requisite regulatory and governmental approvals for exploration projects and other operations will be received on a timely basis upon terms acceptable to the Company, and applicable political and economic conditions are favourable to the Company; the price of diamonds and applicable interest and exchange rates will be favourable to the Company; no title disputes exist with respect to the Company’s properties	Diamonds price volatility; uncertainties involved in interpreting geological data and confirming title to acquired properties; the possibility that future exploration results will not be consistent with the Company’s expectations; availability of financing for and actual results of the Company’s exploration and development activities; increases in costs; environmental compliance and changes in environmental and other local legislation and regulation; interest rate and exchange rate fluctuations; changes in economic and political conditions; the Company’s ability to retain and attract skilled staff
The Company’s ability to meet its working capital needs at the current level for the twelve- month period ending December 31,2021.	The operating and exploration activities of the Company for the twelve-month period ending December 31, 2021, and the costs associated therewith,willbe	Changes in debt and equity markets; timing and availability of external financing on acceptable terms; increases in costs; environmentalcompliance and

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

The Company expects to incur further losses in the development of its business Should the Company not raise sufficient capital, it may cease to be a reporting issuer	consistent with the Company’s current expectations; debt and equity markets, exchange and interest rates and other applicable economic conditions are favourable to the Company	changes in environmental and other local legislation and regulation; interest rate and exchange rate fluctuations; changes in economic conditions
The Company’s ability to carry out anticipated exploration on its property interests	The exploration activities of the Company for the twelve-month period ending December 31, 2021, and the costs associated therewith, will be consistent with the Company’s current expectations; debt and equity markets, exchange and interest rates and other applicable economic conditions are favourable to the Company	Changes in debt and equity markets; timing and availability of external financing on acceptable terms; increases in costs; environmental compliance and changes in environmental and other local legislation and regulation; interest rate and exchange rate fluctuations; changes in economic conditions; receipt of applicable permits
Plans, costs, timing and capital for future exploration and development of the Company’s property interests, including the costs and potential impact of complying with existing and proposed laws and regulations	Financing will be available for the Company’s exploration and development activities and the results thereof will be favourable; actual operating and exploration costs will be consistent with the Company’s current expectations; the Company will be able to retain and attract skilled staff; all applicable regulatory and governmental approvals for exploration projects and other operations will be received on a timely basis upon terms acceptable to the Company; the Company will not be adversely affected by market competition; debt and equity markets, exchange and interest rates and other applicable economic and political conditions are favourable to the Company; the price of diamonds will be favourable to the Company; no title disputes exist with respect to the Company’s properties	Diamond price volatility, changes in debt and equity markets; timing and availability of external financing on acceptable terms; the uncertainties involved in interpreting geological data and confirming title to acquired properties; the possibility that future exploration results will not be consistent with the Company’s expectations; increases in costs; environmental compliance and changes in environmental and other local legislation and regulation; interest rate and exchange rate fluctuations; changes in economic and political conditions; the Company’s ability to retain and attract skilled staff
Management’s outlook regarding future trends	Financing will be available for the Company’s exploration and operating activities; the price of diamonds will be favourable to the Company	Diamond price volatility; changes in debt and equity markets; interest rate and exchange rate fluctuations; changes in economic and political conditions
Prices and pricevolatilityfor	The price ofdiamondswillbe	Changesindebt and equitymarkets

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

diamonds	favourable; debt and equity markets, interest and exchange rates and other economic factors which may impact the price of diamondswillbefavourable	and the spot price of diamonds; interest rate and exchange rate fluctuations; changes in economic and political conditions

Significant Accounting Policies

Significant Accounting Judgments and Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values, include, but are not limited to:

(i) Income, Value Added, Withholding and Other Taxes

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

(ii) Existence of Decommissioning and Restoration Costs and the Timing of Expenditure

Decommissioning, restoration and similar liabilities are estimated based on the Company’s interpretation of current regulatory requirements and constructive obligations and are measured at fair value. Fair value is determined based on the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or similar liabilities that may occur upon decommissioning of the mine. Such estimates are subject to change based on changes in laws and regulations and negotiations with regulatory authorities.

‐ (iii) Share based Payments

‐ ‐ Management determines costs for share based payments using market based valuation techniques. The fair value of the market ‐ based and performance ‐ based share awards are determined at the date of grant using generally

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Pangolin Diamonds Corp. TSXV: PAN MANAGEMENT’S DISCUSSION & ANALYSIS December 31, 2020

accepted valuation techniques. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviours and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.

Management’s Responsibility for Financial Statements

The preparation of the financial statements is the responsibility of management. In the preparation of the statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the financial statements. Management maintains a system of internal controls to provide reasonable assurance that Pangolin’s assets are safeguarded and to facilitate the preparation of relevant and timely information.

RISK FACTORS RELATING TO PANGOLIN

Pangolin’s common shares should be considered highly speculative due to the nature of Pangolin’s business and the present stage of its development and the location of its properties in Botswana. For a more complete listing of the risk factors relating to Pangolin, please refer to the Company’s MD&A for the year ended June 30, 2020.

Share Capital

As at the date of this MD&A, there are 186,232,618 common shares outstanding, 75,563,343 warrants outstanding at an exercise price of between $0.05 and $0.15 per share and 10,365,000 stock options outstanding at an exercise price of between $0.05 and $0.15.

Trends

Pangolin is not aware of any trend, commitment, event or uncertainty that is reasonably expected to have a material effect on Pangolin’s business, financial condition or results of operations as of the date of this MD&A, except as otherwise disclosed herein or except in the ordinary course of business.

Subsequent Events

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