Rackla Metals Inc. — Management Reports 2021

Mar 18, 2021

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(the “Company”)

MANAGEMENT’S DISCUSSION AND ANALYSIS

Year End Report – December 31, 2020

General

This Management’s Discussion and Analysis (“MD&A”) supplements, but does not form part of, the audited financial statements of the Company for the year ended December 31, 2020. The following information, prepared as of March 17, 2021, should be read in conjunction with the December 31, 2020 financial statements. The Company reports its financial position, results of operations and cash flows in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All amounts are expressed in Canadian dollars unless otherwise indicated.

Additional information relevant to the Company’s activities can be found on SEDAR at (www.sedar.com).

Forward-looking Information

This MD&A contains certain statements which constitute forward-looking information within the meaning of applicable Canadian securities legislation (“Forward-looking Statements”). All statements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected in the Forward-looking Statements. The Forward-looking Statements in this MD&A include, without limitation, statements relating to the Company’s plans for exploration of its properties; the sufficiency of the Company’s cash position; and its ability to raise equity capital or access debt facilities. Often, but not always, these Forward-looking Statements can be identified by the use of words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “forecasts”, “scheduled”, “targets”, “possible”, “strategy”, “potential”, “intends”, “advance”, “goal”, “objective”, “projects”, “budget”, “calculates” or statements that events, “will”, “may”, “could” or “should” occur or be achieved and similar expressions, including negative variations.

Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements. Such uncertainties and factors include, among others:

• the Company’s seeking new prospective mineral properties for acquisition;

• risks associated with mineral exploration;

• fluctuations in commodity prices, foreign exchange rates, and interest rates;

• credit and liquidity risks;

• changes in national and local government legislation, taxation, controls, regulations and political or economic developments in countries in which the Company does or may carry on business;

• reliance on key personnel;

• property title matters and local community relationships;

• risks associated with potential legal claims generally or with respect to environmental matters;

• dilution from further equity financing;

• competition;

• uncertainties relating to general economic conditions; and

Management’s Discussion and Analysis

Year ended December 31, 2020

• risks relating to a global pandemic, including the coronavirus COVID-19, which unless contained could cause a slowdown in global economic growth and impact the Company’s business, operations, financial condition and share price;

as well as those factors referred to in the “Risks and Uncertainties” section in this MD&A.

Forward-looking Statements contained in this MD&A are based on the assumptions, beliefs, expectations and opinions of management, including but not limited to:

• the Company will acquire an interest in a prospective mineral property;

• all required third party contractual, regulatory and governmental approvals will be obtained for the exploration and development of the Company’s properties;

• there being no significant disruptions affecting operations, whether relating to labor, supply, power, damage to equipment or other matters;

• exploration activities proceeding on a basis consistent with the Company’s current expectations;

• expected trends and specific assumptions regarding commodity prices and currency exchange rates; and

• prices for and availability of fuel, electricity, equipment and other key supplies remaining consistent with current levels.

These Forward-looking Statements are made as of the date hereof and the Company disclaims any obligation to update any Forward-looking Statements, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no assurance that Forward-looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on Forward-looking Statements.

Business of the Company

The Company is a Vancouver-based company engaged in the acquisition and exploration of mineral properties. Management has been actively seeking new prospective projects for the Company, while continuing to advance its Rivier Property described below.

On February 12, 2020, the Company closed a private placement financing by issuing 5,000,000 units at $0.10 per unit, raising proceeds of $500,000. Each unit consists of one common share and one warrant entitling the holder to purchase one additional common share of the Company at $0.15 for one year from closing. The term of the warrants was subsequently extended by one year. The proceeds of the placement were used for general working capital purposes.

On January 25, 2021, the Company closed a private placement financing by issuing 8,100,000 units at $0.12 per unit, raising proceeds of $972,000. Each unit consists of one common share and one warrant entitling the holder to purchase one additional common share of the Company at $0.15 for one year from closing. The proceeds of the placement are being used for general working capital purposes.

Due to restrictions on travel and for the safety of our employees because of the COVID-19 pandemic, the Company has curtailed certain operations for the time being. We will resume these operations when it is safe and cost effective to do so.

Rivier Property

The Company has for some years held a 100% interest in 16 Rivier claims and an option to acquire an additional 100 Rivier claims. In April 2018, the Company acquired the 100 optioned claims. As a result, the Rivier Property currently consists of 116 claims owned by the Company and which are in good standing until 2024.

In the summer of 2020, the Company completed a field program at the Rivier Property. As the COVID-19 restrictions eased in the Yukon, The Company mobilized a team to Rivier to conduct this year’s exploration program.

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

The Company completed prospecting, rock chip sampling and geological mapping on the property, focusing on the areas of high gold in soil anomalies identified by previous work on the prospect. The +400 line km airborne magnetic survey conducted over the property by Precision GeoSurveys Inc. was complemented by a ground magnetic susceptibility survey that will enable accurate modelling of the targets. Results from the geochemistry, geology and geophysics programs will be integrated and updated drill targets will be developed for the next field season.

The Rivier Property is located 90 kilometres southeast of Ross River, Yukon and covers lode gold mineralization of the Motherlode type. Previous soil and silt sampling programs have defined a plus two-kilometre-long, strong broad gold and pathfinder anomaly along a faulted contact of an ultramafic body. The anomalous gold in soils appear to be associated with mapped Listwanite alteration of the ultramafic body. With several soil samples running over 2 grams per tonne gold, this broad zone contains potential for significant gold mineralization.

Expo Property

In October 2020, the Company signed an exclusivity agreement to review the Expo Property which is located in the region of the Rivier Property and covers a prominent series of VMS targets in the heart of the Finlayson Lake VMS district. Recent soil geochemistry work and aerial geophysics highlight a 800 x 300 metre Zn/Au soil anomaly which complements past prospecting finds and highlights the potential for discovery. The agreement gave the Company exclusivity to review the data until April 1, 2021. In February 2021, the Company decided to terminate the exclusivity agreement and not pursue an interest in the property.

Qualified Person: Bruce Smith, M.Sc., M.Eng., a member of the Australian Institute of Geoscientists, is the Company’s Qualified Person as defined by National Instrument 43-101, and is responsible for the accuracy of the technical information in this MD&A.

Selected Financial Information

The following table provides financial results for the years ended December 31, 2020, 2019 and 2018:

	2020 ($)	2019 ($)	2018 ($)
Exploration expenditures	68,423	74,937	25,789
General and administrative expenses	152,018	198,110	132,848
Net loss	220,441	273,047	162,701
Basic and diluted lossper share	0.01	0.01	0.01
Total assets	107,564	80,351	160,173
Total liabilities	47,748	308,347	163,030
Shareholders’ equity (deficiency)	59,816	(227,996)	(2,857)

Quarterly Information

The following table provides quarterly information for the eight fiscal quarters ended December 31, 2020:

Quarter Ended	Dec. 31, 2020 ($)	Sep. 30, 2020 ($)	Jun. 30, 2020 ($)	Mar. 31, 2020 ($)	Dec. 31, 2019 ($)	Sep. 30, 2019 ($)	Jun. 30, 2019 ($)	Mar. 31, 2019 ($)
Exploration expenditures	18,122	50,301	-	-	13,310	-	29,689	31,938
General and administrative expenses	59,556	22,859	27,131	42,472	48,733	34,186	76,609	38,582
Net loss	(77,678)	(73,160)	(27,131)	(42,472)	(62,043)	(34,186)	(106,298)	(70,520)
Basic and diluted lossper share	(0.01)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.01)	(0.00)

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

Exploration expenditures for the two most recently completed quarters were related to activity on the Rivier property. Exploration expenditures for all other quarters presented mostly related to the investigation of new property opportunities. General and administrative expenses for the quarter ended June 30, 2019 was higher than the other quarters presented due to a share-based payment expense of $49,033 that relates to fair value of stock options granted.

Results of Operations

Quarter ended December 31, 2020

The quarter ended December 31, 2020 had a net loss of $77,678, compared to $62,043 for the quarter ended December 31, 2019, an increase of $15,635. The net loss for the current quarter consisted of $18,122 in exploration expenditures and $59,556 in general and administrative expenses compared to $13,310 and $48,733, respectively, for the comparative quarter. A notable general and administrative expense increase for the current quarter was in legal fees which was related to investigation of potential business opportunities. Other general and administrative expenses for the current quarter were either similar to or slightly higher than the comparative quarter.

Year ended December 31, 2020

The net loss for the year ended December 31, 2020 was $220,441 compared to $273,047 for the year ended December 31, 2019, a decrease of $52,606. Exploration expenditures for the current year totaled $68,423 compared to $74,937 for the comparative year, a decrease of $6,514. Exploration expenditures for the current year related to the Rivier property whereas the expenditures in the comparative year consisted mostly of new property investigation costs.

General and administrative expenses for the current year totalled $152,018 compared to $198,110 for the comparative year, a decrease of $46,092. This decrease was primarily due to the current year recording a sharebased expense of $3,253 compared to $49,033 for the comparative year. The share-based payments expense relates to the granting of stock options during the comparative year. Another notable cost decrease for the current year was $8,084 in salaries and benefits which was due in part to cost cutting efforts in response to the COVID-19 pandemic. Notable general and administrative cost increases for the current year were $5,302 in legal fees and $3,213 in travel expenses which were mostly related to investigation of new business opportunities.

Liquidity and Capital Resources

The Company is in the exploration stage and therefore has no cash flow from operations. For as long as the Company owns the Rivier Property, the Company has a commitment to make annual advance royalty payments of $10,000 to the former property owner commencing in April 2021.

As at December 31, 2020, current assets were $36,563 of which $20,560 was cash and $11,251 was the fair value of equity investments. Current liabilities were $47,748, resulting in a working capital deficiency of $11,185. During the 2020 fiscal year, the Company completed a private placement financing for gross proceeds of $500,000 of which a portion of the funds were used to settle existing liabilities and the remainder used for general working capital purposes. Subsequent to December 31, 2020, the Company raised an additional $972,000 for general working capital purposes by way of a private placement financing.

The Company has primarily funded its operations through the issuance of equity financing. The Company expects its current capital resources to be sufficient to cover its corporate operating costs but not potential future mineral property acquisitions or exploration expenditures through the next twelve months. As such, the Company will seek to raise additional capital and believes it will be able to do so, but recognizes the uncertainty attached thereto. Actual funding requirements may vary from those planned due to a number of factors, including the progress of property acquisition and exploration activity.

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

Financial Instruments and Risk Management

The Company is exposed to the following financial risks:

• Market Risk

• Credit Risk

• Liquidity Risk

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout the Company’s financial statements.

General Objectives, Policies and Processes

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s management. The Board of Directors receives periodic reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.

(a) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market prices affecting the Company are comprised of the following types of risk: interest rate risk and equity price risk. The Company is not exposed to the risk related to the fluctuation of foreign currency rates.

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered on cash held with chartered Canadian financial institutions. The Company considers this risk to not be significant.

Equity Price Risk

Equity price risk is the uncertainty associated with the valuation of assets arising from changes in equity markets. The Company’s equity investments are exposed to equity price risk due to the potentially volatile and speculative nature of the businesses in which the equity investments are held. The common shares held in Damara Gold Corp. and Voyager Gold Corp. are monitored by management with decisions on sale taken at Board level. A 10% change in fair value of the shares would result in a $1,125 increase or decrease in comprehensive loss.

(b) Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its cash and equity investments. The Company limits exposure to credit risk by maintaining its cash with chartered Canadian financial institutions. The Company does not have cash or equity investments that are invested in asset-based commercial paper.

(c) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows required by operations and anticipated investing and financing activities. At December 31, 2020, the Company had cash of $20,560 (2019:

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

$13,979) available to apply against short-term business requirements and current liabilities of $47,748 (2019: $308,347). All of the Company’s financial liabilities have contractual maturities of less than 45 days and are subject to normal trade terms.

Related Party Transactions

The Company had transactions during the years ended December 31, 2020 and 2019 with related parties who consisted of directors, officers, and the following companies with common directors:

Relatedparty	Nature of transactions
Gold Group Management Inc. (“Gold Group”)	Shared office and administrative related charges
Radius Gold Inc. (“Radius”)	Geological services
Mill Street Services Ltd.(“Mill Street”)	Management services

During the years ended December 31, 2020 and 2019, the Company reimbursed Gold Group, a company controlled by the Chief Executive Officer of the Company, for the following costs:

	Three months ended	December 31,	Year ended	December 31,
	2020	2019	2020	2019
General and administrative expenses:
Office and administration	$ 8,560	$ 7,362	$ 27,405	$ 26,864
Salaries and benefits	9,469	10,418	31,026	39,110
Shareholder communications	750	-	1,755	254
Transfer agent and regulatory fees	832	44	3,210	3,297
Travel and accommodation	1,093	556	2,857	1,977
	$ 20,704	$ 18,380	$ 66,253	$ 71,502
Exploration expenditures	$ 1,030	$ -	$ 1,030	$ 13,085

Gold Group is reimbursed by the Company for certain shared costs and other business related expenses paid by Gold Group on behalf of the Company. Salaries and benefits costs paid to Gold Group include those for the Chief Financial Officer and Corporate Secretary.

During the year ended December 31, 2020, the Company was charged $7,098 (2019: $7,445) for geological services provided by an employee of Radius, a company with common directors and officers.

Deposits as of December 31, 2020 consist of $61,000 (2019: $61,000) paid to Gold Group and are related to the shared office and administrative services agreement with Gold Group. Upon termination of the agreement, the deposits, less any outstanding amounts owing to Gold Group, are to be refunded to the Company.

Amounts due to related parties as of December 31, 2020 consist of $15,460 (2019: $26,206) due to Gold Group, $6,052 (2019: $7,445) due to Radius for geological services, $376 (2019: $183,750) due to Mill Street, a company owned by the Chief Executive Officer of the Company, for management fees, and $Nil (2019: $50,626) due to the President of the Company for geological fees and expense reimbursement. The balance due to Gold Group is collateralized by a deposit and the balances due to Radius and Mill Street are unsecured and due on demand.

During the year ended December 31, 2020, no stock options were granted to management and directors of the Company (2019: the fair value of stock option granted and recorded as share-based payments was $45,381).

Key management compensation

Key management personnel are persons responsible for planning, directing and controlling the activities of an entity, and include certain directors and officers. Key management compensation comprises:

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

	Three months ended	December 31,	Year ended	December 31,
	2020	2019	2020	2019
Geological fees	$ 2,000	$ 3,500	$ 2,000	$ 39,400
Management fees	10,500	10,500	40,250	42,000
Salaries and benefits*	1,833	2,750	7,516	11,458
Value of stock option grants recorded
as share-basedpayments	-	-	-	12,519
	$ 14,333	$ 16,750	$ 49,766	$ 105,377

*Key management salaries and benefits are included in the salaries and benefits reimbursed to Gold Group.

Other Data

Additional information related to the Company is available for viewing at www.sedar.com.

Share Position and Outstanding Warrants and Options

As at the date of this MD&A, the Company had 33,361,308 common shares issued and outstanding and the following share purchase warrants and incentive stock options are currently outstanding:

SHARE	PURCHASE WARRANTS	PURCHASE WARRANTS
No. of warrants	Exerciseprice	Expiry date
8,100,000	$0.15	January 24, 2022
5,000,000	$0.15	February11,2022*
13,100,000

• Subsequent to December 31, 2020, the expiry date of these options was extended by one year to February 11, 2022

No. of options	STOCK OPTIONS Exerciseprice Expiry date
141,000 460,000 25,000	$0.75 July 19, 2022 $0.10 May 2, 2029 $0.14 May27,2030
626,000

Accounting Policies and Basis of Presentation

The Company’s significant accounting policies and future changes in accounting policies are presented in the audited financial statements for the year ended December 31, 2020.

Future Accounting Changes

The Company will be required to adopt the following standards and amendments issued by the IASB as described below.

IFRS 17 Insurance Contracts

IFRS 17 is a new standard that requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4, Insurance Contracts , and related interpretations.

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

This standard will be effective for the Company’s annual period beginning January 1, 2021. The Company has assessed that the impact of IFRS 17 on its financial statements would not be significant.

Risks and Uncertainties

Global Pandemic

The Company faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial conditions. The Company’s business could be adversely impacted by the effects of the COVID-19 coronavirus which was declared a global pandemic by the World Health Organization in March 2020. COVID-19 infections have been reported globally.

The extent to which COVID-19 may impact the Company’s business, including its operations and the market for its securities, will depend on future developments which cannot be predicted, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the outbreak. The continued spread of COVID-19 globally could materially and adversely impact the Company’s business, financial condition and results of operations including without limitation, employee health, workforce productivity, increased insurance premiums, limitations on travel, the availability of industry experts and personnel, restrictions to any drill programs and/or the timing to process drill and other metallurgical testing, and other factors that will depend on future developments beyond the Company’s control.

The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating and supply chain delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit ratings, credit risk and inflation.

Mineral Property Exploration and Mining Risks

The business of mineral deposit exploration and extraction involves a high degree of risk. Few properties that are explored ultimately become producing mines. At present, none of the Company’s properties has a known commercial ore deposit. The main operating risks include: securing adequate funding to maintain and advance exploration properties; ensuring ownership of and access to mineral properties by confirmation that option agreements, claims and leases are in good standing; and obtaining permits for drilling and other exploration activities.

Joint Venture Funding Risk

The Company’s strategy includes seeking partners through joint ventures to fund exploration and project development. The main risk of this strategy is that funding partners may not be able to raise sufficient capital in order to satisfy exploration and other expenditure terms in a particular joint venture agreement. As a result, exploration and development of one or more of the Company’s property interests may be delayed depending on whether the Company can find another partner or has enough capital resources to fund the exploration and development on its own.

Commodity Price Risk

The Company is exposed to commodity price risk. Declines in the market price of gold, base metals and other minerals may adversely affect the Company’s ability to raise capital or attract joint venture partners in order to fund its ongoing operations. Commodity price declines could also reduce the amount the Company would receive on the disposition of one of its mineral properties to a third party.

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Rackla Metals Inc.

Management’s Discussion and Analysis

Year ended December 31, 2020

Financing and Share Price Fluctuation Risks

The Company has limited financial resources, has no source of operating cash flow and has no assurance that additional funding will be available to it for further exploration and development of its projects. Further exploration and development of one or more of the Company’s projects may be dependent upon the Company’s ability to obtain financing through equity or debt financing or other means. Failure to obtain this financing could result in delay or indefinite postponement of further exploration and development of its projects which could result in the loss of one or more of its properties.

Securities markets have at times in the past experienced a high degree of price and volume volatility, and the market price of securities of many companies, particularly those considered to be exploration stage companies such as the Company, have experienced wide fluctuations in share prices which have not necessarily been related to their operating performance, underlying asset values or prospects. There can be no assurance that these kinds of share price fluctuations will not occur in the future, and if they do occur, how severe the impact may be on the Company’s ability to raise additional funds through equity issues.

Political and Regulatory Risks

The Company is currently operating in Canada which has a stable political and regulatory environment. However, changing political aspects may affect the regulatory environment in which the Company operates.

Insured and Uninsured Risks

In the course of exploration, development and production of mineral properties, the Company is subject to a number of hazards and risks in general, including adverse environmental conditions, operational accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods, and earthquakes. Such occurrences could result in damage to the Company’s properties or facilities and equipment, personal injury or death, environmental damage to properties of the Company or others, delays, monetary losses, and possible legal liability.

Although the Company may maintain insurance to protect against certain risks in such amounts as it considers reasonable, its insurance may not cover all the potential risks associated with its operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums or for other reasons. Should such liabilities arise, they could reduce or eliminate future profitability and result in increased costs, have a material adverse effect on the Company’s results and a decline in the value of the securities of the Company.

Environmental and Social Risks

The activities of the Company are subject to environmental regulations issued and enforced by government agencies. Environmental legislation is evolving in a manner that will require stricter standards and enforcement and involve increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors, and employees. There can be no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on properties in which the Company holds interests which are unknown to the Company at present. Social risks are considered low in Canada, the principal country of operation of the Company, but a change in social expectations could add new layers of risk to the viability of exploration and development properties.

Competition

The Company will compete with many companies and individuals that have substantially greater financial and technical resources than the Company for the acquisition and development of its projects as well as for the recruitment and retention of qualified employees.

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Rackla Metals Inc.