Rathdowney Resources Ltd. — Interim / Quarterly Report 2021

Aug 20, 2021

RATHDOWNEY RESOURCES LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Expressed in Canadian dollars, unless otherwise stated)

(Unaudited)

In accordance with subsection 4.3(3) of National Instrument 51-102, management of the Company advises that the Company's auditors have not performed a review of these interim financial statements.

Rathdowney Resources Ltd. Condensed Consolidated Interim Statements of Financial Position

(Unaudited - Expressed in Canadian dollars)

		June 30	December 31
	Notes	2021	2020
ASSETS
Current assets
Cash	4	$156,780	$490,559
Amounts receivable and other assets	5	69,873	60,357
Total current assets		226,653	550,916
Non-current assets
Equipment	3	5,244	5,994
Total non-current assets		5,244	5,994
Total assets		$231,897	$556,910
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Amounts payable and other liabilities		$186,313	$182,827
Balance payable to related parties	10	8,936,593	8,414,402
Total current liabilities		9,122,906	8,597,229
Non-current liabilities
Loans payable	7	1,811,335	1,774,387
Total non-current liabilities		1,811,335	1,774,387
Total liabilities		10,934,241	10,371,616
Shareholders' deficiency
Share capital	8	58,141,018	58,141,018
Reserves		4,471,552	4,231,207
Accumulated deficit		(73,314,914)	(72,186,931)
Total shareholders' deficiency		(10,702,344)	(9,814,706)
Total liabilities and shareholders' deficiency		$231,897	$556,910

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

/s/ Rene Carrier /s/ David Copeland

Director Director

Rene Carrier David Copeland

Condensed Consolidated Interim Statements of Comprehensive Loss

(Unaudited - Expressed in Canadian dollars)

		Three months ended June 30,		Six months ended June 30,
	Notes	2021	2020	2021		2020
Expenses
Exploration		$387,708	$364,095	$707,546	$	667,989
Engineering		3,938	19,522	7,956		27,401
Geological		29,221	32,640	62,434		60,267
Site activities		143,739	152,160	266,387		326,250
Sustainability		210,621	159,185	370,442		252,424
Travel		189	588	327		1,647
Administration		163,155	242,856	341,976		443,389
Legal, accounting and audit		58,086	33,105	132,487		155,953
Office and administration		72,165	112,021	135,526		142,234
Shareholder communications		32,024	44,638	58,864		84,867
Travel		(895)	46,253	(846)		46,996
Trust and filing		1,775	6,839	15,945		13,339
Share-based payments	9	20,100	55,620	40,200		55,620
Administration		20,100	55,620	40,200		55,620
Loss before the following:		570,963	662,571	1,089,722		1,166,998
Interest income		(264)	(1,036)	(1,088)		(1,144)
Finance expenses	7	18,576	21,598	36,948		49,110
Foreign exchange (gain) loss		1,150	(36,175)	2,401		(33,988)
Loss before income tax		590,425	646,958	1,127,983		1,180,976
Income tax expense		–	–	–		–
Loss for the period		$590,425	$646,958	$1,127,983	$	1,180,976
Other comprehensive loss (income)
Items that will not be reclassified to profit or loss:
Net change in fair value of marketable securities		$–	(550,000)	$–	$	(176,000)
Items that may be subsequently reclassified to net loss
Foreign currency translation adjustment		(1,555)	$37,244	5,145		35,610
Total other comprehensive loss (income)		$(1,555)	(512,756)	$5,145	$	(140,390)
Total comprehensive loss		$588,870	$134,202	$1,133,128	$	1,040,586
Basic and diluted loss per share		$0.00	$0.00	$0.01	$	0.01
Weighted average number of common shares outstanding		177,176,883	171,599,613	177,176,883		166,650,396

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

Rathdowney Resources Ltd. Condensed Consolidated Interim Statements of Cash Flows

(Unaudited - Expressed in Canadian dollars)

			Six months ended June 30,
	Notes	2021	2020
Cash flows from (used in) operating activities:
Loss for the period		$ (1,127,983)	$ (1,180,976)
Adjustments for:
Amortization	3	750	1,227
Equity-settled share based payments		40,200	55,620
Finance expenses	7	36,948	49,110
Interest income		(1,088)	(1,144)
		(1,051,173)	(1,076,163)
Amounts receivable and other assets		(9,516)	(41,032)
Amounts payable and other liabilities		3,486	(20,451)
Balance payable to related parties		522,191	620,582
		(535,012)	(517,064)
Income taxes paid		–	–
Cash used in operating activities		(535,012)	(517,064)
Cash flows from investing activities:
Interest received		1,088	1,144
Cash provided by investing activities		1,088	1,144
Cash flows from financing activities:
Loan proceeds	7	–	214,797
Subscription received from private placement	8	195,000	–
Cash provided by financing activities		195,000	759,131
Increase (decrease) in cash		(338,924)	243,211
Effect of exchange rate fluctuations		5,145	(37,126)
		(333,779)	206,085
Cash, beginning of period		490,559	55,574
Cash, end of period		$156,780	$261,659
		156,780
Supplementary cash flow information:
Non-cash financing and investing activities:
Shares from private placement issued to settle directors loans	7	$–	$801,840

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

Condensed Consolidated Interim Statements of Changes in Equity (Deficiency)

(Unaudited - Expressed in Canadian dollars)

	Notes	Share capital					Reserves
						Foreign	Share	Equity		Total
					Investment	currency	purchase	settled	Subscriptions	shareholders'
		Number		Accumulated	revaluation	translation	warrants	employees	received for	equity
		of shares	Amount	deficit	reserve	reserve	reserve	benefits	shares	(Deficiency)
Balance at January 1, 2020		161,701,178	$ 57,111,483	$ (69,731,992)	$ (3,784,000)	$ 213,832	$ 2,594,061	$ 4,611,391	$–	$ (8,985,225)
Equity settled share-based payments	9	–	–	–	–	–	–	55,620	–	55,620
Share issued pursuant to private placements		14,957,491	982,097	–	–	–	–	–	–	982,097
Warrants issued pursuant to private placement	8	–	–	–	–	–	364,077	–	–	364,077
Other comprehensive income for the period		–	–	–	176,000	(37,126)	–	–	–	138,874
Loss for the period		–	–	(1,180,976)	–	–	–	–	–	(1,180,976)
Balance at June 30, 2020		176,658,669	$ 58,093,580	$ (70,912,968)	$ (3,608,000)	$ 176,706	$ 2,958,138	$ 4,667,011	$–	$ (8,625,533)
Balance at January 1, 2021		177,176,883	$ 58,141,018	$ (72,186,931)	$ (3,592,857)	$ 213,315	$ 2,958,138	$ 4,652,611	$–	$ (9,814,706)
Equity settled share-based payments	9	–	–	–	–	–	–	40,200	–	40,200
Other comprehensive income for the period		–	–	–	–	5,145	–	–	–	5,145
Subscriptions received for private placement,
net of transaction costs	8	–	–	–	–	–	–	–	195,000	195,000
Loss for the period		–	–	(1,127,983)	–	–	–	–	–	(1,127,983)
Balance at June 30, 2021		177,176,883	$ 58,141,018	$ (73,314,914)	$ (3,592,857)	$ 218,460	$ 2,958,138	$ 4,692,811	$ 195,000	$ (10,702,344)

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

Notes to the Condensed Consolidated Interim Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

1. Nature of Operations and Going Concern

Rathdowney Resources Ltd. ("Rathdowney" or the "Company") is a public company incorporated on April 3, 2008, under the laws of the Province of British Columbia, Canada. The address of the Company's corporate office is the 14th Floor, 1040 West Georgia Street, Vancouver, BC, Canada V6E 4H1.

The condensed consolidated interim financial statements (the "Interim Financial Statements") of the Company as at for the three and six months ended June 30, 2021, comprise the Company and its subsidiaries (together referred to as the "Group" and individually as "Group entities"). Rathdowney Resources Ltd. is the ultimate legal parent entity of the Group.

The Group is in the process of advancing its mineral property interests and has not yet determined whether its mineral property interests contain economically recoverable mineral reserves. The Group has outlined mineral resources and completed a Preliminary Economic Assessment, which indicates strong potential financial returns for an operation at Project Olza. If the Group's on-going technical work confirms these projections, the Project could possibly be economic.

The Group's continuing operations are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Group to obtain the necessary financing to continue the exploration and development of its mineral property interests and to obtain the permits necessary to mine, and on future profitable production or proceeds from the disposition of its mineral property interests. General market conditions for junior exploration companies have resulted in depressed equity prices. These Interim Financial Statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future.

As at June 30, 2021, the Group had cash of $156,780 (December 31, 2020 –$490,559), a working capital deficiency, and a shareholders' deficiency. Of the total current liabilities of the Group at June 30, 2021 $8,936,593 (December 31, 2020 – $8,414,402) are payable to related parties (note 10).

These material uncertainties cast significant doubt on the ability of the Group to continue as a going concern.

The Group is continually seeking opportunities for additional funding and has reasonable expectation that it will succeed in raising additional funds when necessary. However, there can be no assurance that the Group will obtain the required additional financial resources to continue its current operational base. If the Group is unable to obtain adequate additional financing, it will need to curtail its expenditures further, until additional funds can be raised through financing activities. In the current year, the Company is taking steps to conserve cash and reduce expenses by closing a non operating subsidiary. Management believes that it is able to maintain its core mineral rights in good standing for the next 12-month period.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

These Interim Financial Statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Group be unable to continue as a going concern.

2. Significant Accounting Policies

(a) Statement of compliance

These Interim Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting ("IAS 34"). Accordingly, these Interim Financial Statements do not include all of the information and footnotes required by International Financial Reporting Standards ("IFRS") for complete financial statements for year-end reporting purposes. These Interim Financial Statements should be read in conjunction with the Company's audited consolidated financial statements as at and for the year ended December 31, 2020, which were prepared in accordance with IFRS and are publicly available at www.sedar.com. Results for the period ended June 30, 2021, are not necessarily indicative of future results.

These Interim Financial Statements were authorized for issuance by the Audit Committee of the Company on August 20, 2021.

(b) Significant accounting estimates and judgments

The preparation of Interim Financial Statements in conformity with IAS 34 requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from such estimates. There was no change in the use of estimates and judgments during the current period as compared to those described in note 2 of the Company's audited consolidated financial statements for the year ended December 31, 2020.

(c) Recent Accounting Pronouncements

Amendments to IAS 16, Property, Plant and Equipment

The amendments clarify the accounting for the net proceeds from selling any items produced while bringing an item of property, plant and equipment ("PPE") to the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments prohibit entities from deducting amounts received from selling items produced from the cost of PPE while the Group is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items will be recognized in profit or loss. The amendments are effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted. The amendments apply retrospectively, but only to assets brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the Group first applies the amendments.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

3. Equipment

	Fittings &			Total
				99,760
				99,760
				93,766
–		750		750
79,095		15,421		94,516
$–	$	5,244	$	5,244
				Total
				99,760
				91,627
642		1,497		2,139
79,095		14,671		93,766
$–	$	5,994	$	5,994
$$$$	ComputerEquipment79,09579,09579,095ComputerEquipment79,09578,453	$$$$	Equipment20,66520,66514,671Fittings &Equipment20,66513,174	$$$$

Depreciation has been included in the loss for the period and has been classified as exploration expenses – site activities.

4. Cash

The Group's cash at June 30, 2021, and December 31, 2020, consisted of cash on hand and was invested in business accounts.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

5. Amounts Receivable and Other Assets

	June 30,2021	December 31,2020
Government taxes refundable	$34,280	$35,796
Deposits and advances	6,101	190
Prepaid expenses	29,492	24,371
Total	$69,873	$60,357

6. Mineral Property Interests

The Company holds interests in mineral exploration concessions in the Republic of Poland.

(a) Poland

In 2010, Rathdowney acquired the contiguous Zawiercie and Rokitno exploration concessions, collectively named "Project Olza", in the Upper Silesian zinc-lead mining district in the Republic of Poland through its wholly owned subsidiary.

The Rokitno concession was issued to Rathdowney Polska by the Ministry of the Environment in May 2010 and the Zawiercie concession was issued in July 2010, which allowed for exploration for zinc and lead for a period of five years. The permits and the associated usufruct agreements grant right of surface access to the permit holder; however, this must be undertaken by arrangement with individual landowners, who must be informed in writing in advance of any drilling activity on their land.

Rathdowney Polska also signed an agreement for use of the historical geological information on its Rokitno and Zawiercie concessions. Additionally, Rathdowney Polska has submitted updates to the geological documentation required (in addition to other legal requirements) for the subsequent granting/renewal of a concession for mineral exploitation to the Minister of Environment. In November 2014, the Zawiercie and Rokitno concessions were renewed to May 2020. In October 2020, the Zawiercie concession was renewed for an additional five years until October 2025. The Company expects to further extend the Rokitno concession in the ordinary course of business.

The Company also has acquired rights the Zawiercie concession outside of the area of geological documentation for five years and the Company has applied for rights to the Rokitno concession outside of the area of geological documentation.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

7. Loans Payable

The continuity of the Loans is as follows:

	June30,2021	December31,2020
Balance at the beginning of the period	$1,774,387	$2,313,870
Loans received	–	214,800
Interest accrued during the period	36,948	87,557
Loan settlement by participation inprivate placement1	–	(801,840)
Repayment of loans principal during theperiod	–	(40,000)
Total	$1,811,335	$1,774,387

Notes to the table:

1. In April 2020, the Company completed a private placement. On April 29, 2020, certain directors converted $801,840 of existing loand into the private placement.

8. Capital and Reserves

(a) Authorized share capital

At June 30, 2021, and December 31, 2020, the authorized share capital was comprised of an unlimited number of common shares without par value.

(b) Financing

The Group received subscriptions for 5,571,424 shares in the private placement totalling $195,000. The first tranche of private placement was closed after the reporting period (note 13).

(c) Share purchase Warrants

The following summarizes share purchase warrants (each warrant redeemable for one common share) at the beginning and end of the period:

		Six month ended June 30, 2021
Exerciseprice percommonshare ($)	Expiry date	Beginningbalance	Issued	Exercised	Expired	Endingbalance
	Warrants issued pursuant to private placement 2
0.11	April 29, 2025	7,613,934	–	–	–	7,613,934
0.11	May 20, 2025	1,555,000	–	–	–	1,555,000
Grand Total		9,168,934	–	–	–	9,168,934

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

				Six months ended June 30, 2020
Exercise
price per
common		Beginning				Ending
share ($)	Expiry date	balance	Issued	Exercised	Expired	balance
	Warrants issued pursuant to loan 1
0.12	July 9, 2020	833,333	–	–	–	833,333
	Warrants issued pursuant to private placement 3
0.11	April 29, 2025	–	7,613,934	–	–	7,613,934
0.11	May 20, 2025	–	1,555,000	–	–	1,555,000
Grand Total		833,333	9,168,934	–	–	10,002,267

Note to previous tables:

1. The Company issued warrants to the $100,000 loans received in July 2018.

2. The Company issued warrants pursuant to the April 21, 2020 private placement.

9. Equity-Settled Share-Based Payments

(a) Share Purchase Option compensation plan

The following reconciles the Group's share purchase options ("Options") issued pursuant to the Group's incentive plan outstanding for the three months ended June 30, 2021 and 2020:

	2021			2020
		Weighted		Weighted
		average		average
	Number of	exercise price	Number of	exercise price
Continuity of options	options	($/option)	options	($/option)
Beginning Balance	5,190,000	$ 0.33	8,072,000	$ 0.32
Expired	–	–	(1,760,000)	$ 0.33
Cancelled	–	–	(250,000)	$0.12
Ending Balance	5,190,000	$ 0.33	6,062,000	$ 0.33

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

Share purchase options outstanding as at the reported dates: June 30, 2021 December 31, 2020 Exercise prices ($) Number of options outstanding Number of options exercisable Weighted Average Remaining contractual life (years) Number of options outstanding Number of options exercisable Weighted Average Remaining contractual life (years) 0.33 5,190,000 5,190,000 0.67 5,190,000 5,190,000 1.17 Total 5,190,000 5,190,000 0.67 5,190,000 5,910,000 1.17

(a) Deferred Share Units ("DSUs")

The following summarizes the changes in the Company's DSUs:

Number of DSUs	Sixmonths ended June 30
	2021
Outstanding –beginning balance	2,601,843	2,000,000
Granted	921,250
		589,518
Outstanding –ending balance	3,523,093	2,589,518
Vested –ending balance	3,523,093	2,589,518

10. Related Party Transactions

The components of the balance payable to related parties, other than loans payable (note 7), are as follows:

	June 30,2021	December31,2020
Key management personnel (note 10(a))	$1,880,586	$1,820,785
Hunter Dickinson Services Inc. (note 10(b))	7,056,007	6,593,617
Total	$8,936,593	$8,414,402

(a) Key management personnel

Key management personnel ("KMP") consist of directors and officers of Rathdowney and its material subsidiaries.

Note 7 includes the details of certain loans from directors.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

Transactions with key management personnel, other loans payable, were as follows:

	Three months endedJune 30			Six months endedJune 30
		2021	2020		2021		2020
Employee benefits:
Amounts paid or payable to HDSI forservices of KMP employed by HDSI		$ 168,085	$	186,534	$	284,045	$	342,770
Amounts paid or payable to KMP or toan entity owned by a KMP		31,250		82,414		62,500		159,803
		199,335		268,948		346,545		502,573
Share-based payments		20,100		55,620		40,200		55,620
Total	$	219,435	$	324,568	$	386,745	$	558,193
Other amounts:
Office rent paid	$	–	$	1,503	$	–	$	1,503

Short-term employee benefits include salaries, director's fees and amounts paid to HDSI (note 10 (b)) for services provided to the Company and its subsidiaries by HDSI personnel who serve as executive directors and officers for the Company. Certain key management personnel are paid through private companies controlled by them, which provide technical or administrative services to the Company at market rates.

(b) Entities with significant influence over the Group

The Company's management believes that certain entities have the power to participate in the financial or operating activities of the Group. Several directors and other key management personnel of those entities, who are close business associates, are also key management personnel of the Group.

Hunter Dickinson Services Inc. ("HDSI")

HDSI is a private company with certain directors and other key management personnel in common with the Company. David Copeland, a director of the Company, is also a director of HDSI.

Pursuant to an agreement dated July 2, 2010, HDSI provides geological, corporate development, corporate communications, administrative and management services to the Company at annually agreed rates. HDSI also incurs third party costs on behalf of the Company.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

Transactions with HDSI were as follows:

	Three months endedJune 30				Six months endedJune 30
	2021		2020		2021		2020
Services rendered by HDSI:
Technical	$	135,036	$	154,985		$ 237,335		$ 275,209
Engineering		–		–		1,250		–
Environmental and communityrelations		35,620		20,280		66,820		33,800
Geological		5,460		10,660		14,484		15,740
Site activities		93,956		124,045		154,781		225,669
General and administrative		68,529		89,489		119,251		161,810
Management, financial &administration		56,843		72,916		101,332		132,075
Shareholder communication		11,686		16,573		17,919		29,735
Total	$	203,565	$	244,474	$	356,586	$	437,019
Reimbursement of third party
expenses	$	43,599	$	42,064	$	114,607	$	101,049
Conferences and travel		(919)		(36)		(901)		707
Information technology		33,000		33,000		66,000		66,000
Insurance		–		750		28,560		21,129
Office supplies and other		14,518		8,350		20,948		13,213

11. Employees Benefits Expenses

The amount of employees' salaries and benefits (including share-based payments) included within various expenses are:

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian dollars, unless otherwise stated, except per share, options or warrant)

	Three months ended		Six months ended
	June 30		June 30
	2021	2020	2021	2020
Exploration	$213,056	$254,281	$391,269	$495,709
Administration	102,916	163,054	187,953	257,509
Total	$315,972	$417,335	$579,222	$753,218

12. Fair Value

At June 30, 2021 and December 31, 2020, the carrying values of the Company's financial assets and financial liabilities approximate their fair values.

13. Events After The Reporting Period

Subsequent to June 30, 2021 on August 6, 2021, the Company closed a first tranche of the private placement issuing 28,821,996 common shares at a price of $0.035 per share for a gross proceeds of CAD$1,008,770. Each unit consist of one common share of the Company and one common share purchase warrant. Each warrant can be exercised for a five year period from the Closing date at $0.10 per warrant share. In the event that the closing price of the common shares of the Company is at or above $0.20 per share for a period of 10 consecutive trading days during the warrant exercise period, the warrant expiry date shall accelerate to the date that is 60 days after the eligible acceleration date.