Rhyolite Resources Ltd. — Management Reports 2021

Apr 21, 2021

RHYOLITE RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED DECEMBER 31, 2020 AND THE YEAR ENDED JUNE 30, 2020

BACKGROUND

This management discussion and analysis (“MD&A”) of financial position and results of operations of Rhyolite Resources Ltd. (“Rhyolite” or the “Company”) is prepared as at April 20, 2021 and should be read in conjunction with the audited consolidated financial statements as at December 31 and June 30, 2020 and for the periods then ended and the related notes. Those consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

All dollar figures included therein and in the following MD&A are quoted in Canadian dollars. Additional information relevant to the Company’s activities can be found on SEDAR at www.sedar.com.

FORWARD-LOOKING STATEMENTS

This MD&A includes “forward-looking statements” and “forward-looking information” within the meaning of Canadian securities legislation. All statements included in this MD&A, other than statements of historical fact, are forward-looking statements. When used in this MD&A, words such as “may”, “would”, “could”, “will”, “intend”, “expect”, “believe”, “plan”, “anticipate”, “estimate”, “scheduled”, “forecast”, “predict”, “foresee” and other similar terminology, or sentences/statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved are intended to identify forward- looking statements, which, by their very nature, are not guarantees of the Company’s future operational or financial performance. These statements reflect Rhyolite’s current expectations regarding future events, performance and results, and are accurate only at the time of this MD&A, and may be superseded by more current information.

Forward-looking statements also involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Rhyolite or its mineral projects to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements or information.

In making such statements, Rhyolite has made assumptions regarding, among other things: general business and economic conditions; the availability of additional exploration and mineral project financing; the supply and demand for, inventories of, and the level and volatility of the prices of metals; relationships with strategic partners; changes in regulations; political factors; the accuracy of the Company’s interpretation of exploration results; the geology, grade and continuity of the Company’s mineral deposits; the availability of equipment, skilled labour and services needed for the exploration and development of mineral properties; currency fluctuations; and impact of the COVID-19 pandemic.

Although the forward-looking statements or information contained in this MD&A are based upon what management of Rhyolite believes are reasonable assumptions, Rhyolite cannot assure investors that actual results will be consistent with these forward-looking statements. They should not be read as guarantees of future performance or results. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: the factors discussed below and under "Risks and Uncertainties"; unanticipated changes in general business and economic conditions or conditions in the financial markets; fluctuations in the price of metals; stock market volatility; the availability of exploration capital and financing generally; changes in national and local government legislation; changes to taxation; changes in interest or currency exchange rates; loss of key personnel; inaccurate geological assumptions; actual exploration results, interpretation of metallurgical characteristics of the mineralization, changes in project parameters as plans continue to be refined, future metal prices; competition; unavailability of materials and equipment; government action or delays in the receipt of permits or government approvals; industrial disturbances; and unanticipated events related to health, safety and environmental matters, including unknown impacts related to potential business disruptions stemming from the COVID-19 pandemic or another infectious illness.

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Forward-looking information is designed to help readers understand management’s current views of the Company’s near and longer-term prospects, and it may not be appropriate for other purposes. Rhyolite will not update any forward-looking statements or forward-looking information unless required to by applicable securities laws.

The forward-looking statements contained herein are based on information available and are made as of April 20, 2021.

COMPANY OVERVIEW

Rhyolite is an exploration company with claims to the Paxson Gold Property located in the State of Alaska and has joint ventures to earn up to 80% and 70% in the Brothers Project and Suku Passi Project respectively in Suriname. The Company is listed on the TSX Venture Exchange (“TSX-V”) under the symbol “RYE”.

Paxson Gold Property

The Company holds mineral claims acquired through an internal staking program, in the Paxson Gold Property located in the eastern Alaska Range, southwest of Tok, Alaska. During the period ended December 31, 2020, Rhyolite maintained its mineral claims and compiled geological data of the Paxson Gold Property for review by potential property partners.

In recent years, the Company has not undertaken significant exploration at the Paxson Gold Property except for claim and permitting maintenance as well as basic geological work. The Company is seeking an operating partner to fund the next phase of exploration of this property.

Exploration data for the Paxon Gold Property has been reviewed, verified and compiled by Richard A. Graham, P. Geol., a director of Rhyolite, who is a “qualified person” for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects.

Brothers Project

On October 30, 2020, the Company completed the acquisition of 2777662 Ontario Ltd., a privately-held armslength company which holds an option to acquire an 80% interest in the Brothers Project in Suriname in exchange for 15,546,566 common shares in the Company (the “Transaction”). Upon closing of the Transaction, the Company assumed 2777662 Ontario Ltd.’s option to earn up to an 80% interest in the Brothers Project, which is exercisable by completing the following:

• US$200,000 cash payment within six months of the closing of the Transaction for a 20% interest in the Project. As of December 31, 2020, US$100,000 has been paid by the Company.

• Drill 3,000 metres with minimum committed work capital of US$1 million within 18 months of the closing of the Transaction and cash payment of US$300,000 for a 40% interest.

• Drill an additional 10,000 metres with minimum committed work capital of US$3.5 million within 42 months of the closing of the Transaction, and cash payment of US$400,000 for a 60% interest. If the Company does not earn a 60% interest in the Project, it will return the shares earned to date.

• Deliver a preliminary economic assessment (“PEA”) within 66 months of closing of the Transaction and cash payment of US$500,000 for a 70% interest.

• Deliver a feasibility study and cash payment of US$1.25 million within 84 months of closing of the Transaction for a 75% interest.

• Within 5 business days after completion of a feasibility study, make a US$2.5 million cash payment for an 80% interest.

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The 96-square-kilometre Brothers Concession (the "Brothers Project" or “Brothers”) is considered one of the more prospective projects on the Guiana Shield in Suriname. Mining and alluvial mining has occurred on the concession since 2009. Brothers is accessible by road and is located approximately 45 kilometres from Newmont's Merian Mine. Brothers is within the same general mineralized lithologic and structural setting as IAMGOLD's Rosebel Gold Mine and Newmont’s Merian Mine (see Figure 2).

Since 2014, samples collected from Brothers Project include 100 channel samples of which 32% are greater than 1 gram per tonne (g/t) gold and 63% of which are greater than 100 parts per million. Three samples exceed 10 g/t with a high of 17.25 g/t. There is a total of 246 grab samples, including 2018 results (see Figure 1). Of these, 84 exceed 1 g/t (34%) and 194 exceed 100 parts per billion (80%). Of these, 22 exceed 10 g/t with a high assay of 105 g/t from the nearby Manse Mine. A sieve analysis demonstrated a value of 135 g/t for the 105 g/t sample.

At the Manse Mine, underground mining by hand of a significant quartz vein, first discovered by alluvial mining, reported 50 kilograms of gold production over 10 months of operation utilizing a small shaft. There are currently three underground levels at Manse with a fourth currently in development. The operator reported grades of 30 to 40 g/t on levels one and two, and approximately 20 g/t on the third. However, these results have not been independently verified. Two samples of tails from the sluice collected during a site visit showed very high gold values of 21.8 and 28.9 g/t, indicating current processing techniques are highly inefficient.

The Savero Project has been a primary target at the Brothers Concession, with the intent of conducting smallscale mining in the saprolite. In March 2015, the southwestern wall showed a zone of parallel to sub parallel, asymmetric quartz reefs that can be classified as tension gashes. These veins have been the main target and are 8 to 10 meters in width. Quartz veins intercepted on the southern wall are white, oxidized and include spots, banded and massive tourmaline, especially near the selvages. Assay results from channel sampling across quartz veins on the northeastern wall of the pit show an average grade of 6.476 g/t over 10 meters and include a high grade sample of 17.25 g/t over 2 meters. Assay results from tailings shows a value of 8.18 g/t.

The greenstone belt of the Guiana Shield is estimated to host approximately 110 million ounces of gold from Venezuela to Brazil.[1] The greenstone belt is part of the Trans-Amazonian orogenic cycle which represents a major deformational event centred around two billion years ago. The rocks of the Trans-Amazonian orogenic cycle and equivalent are a major source of gold production and resources in both South America and Africa, which were linked together prior to the opening of the Atlantic Ocean.

At Brothers, gold is associated with quartz veins that contain tourmaline and iron sulfides. Surrounding rocks are bleached or altered granitic rocks or felsic dikes or both. The vein sets appear to be brittle deformation with minimal shearing or ductile deformation. In the sedimentary rocks within a major shear zone are a second geologic setting that appears to contain potential gold deposits on the Brothers Concession.

1 Source: Bardoux, M., Moroney, M., and Robert, F., 2018. Gold mineralization in the Guiana Shield, Guiana and Suriname, South America: a field trip to the 14th biennial Society for Geology Applied to Mineral Deposits (SGA) meeting; Geological Survey of Canada, Open File 8351, 28 p. https://doi.org/10.4095/306546.

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Figure 1: Assay results plotted with quartz vein trends from the 2018 samples and 11 site visit samples.

Suku Passi Project

On March 31, 2021, the Company completed the acquisition of 2765798 Ontario Ltd. ("ONCorp"), a privatelyheld arms-length company which consolidated the Suku Passi Project (the "SP Project" or “Suku Passi”) in Suriname and holds an option to acquire a 70% interest in the SP Project. Under the terms of the purchase agreement, Rhyolite issued 3,500,000 common shares (the "Consideration") in consideration for all the outstanding share capital of ONCorp (the "March Transaction").

Upon closing of the March Transaction, Rhyolite assumed ONCorp's right to earn up to a 70% interest in the SP Project. The right is exercisable by completing the following:

Suku Passi concession

For a 51% interest:

• Initial cash payment of US$400,000 and issuance of the Consideration shares to the Vendors within 4 weeks from the date of the Suku Passi Joint Venture and Earn-in Agreement (the "SP Agreement Date")

• Cash payment of US$400,000 and committed work capital of US$500,000 within 12 months of the SP Agreement Date

• Cash payment of US$300,000, share payment of US$100,000 and committed work capital of US$1,000,000 within 24 months of the SP Agreement Date

• Cash payment of US$300,000, share payment of US$100,000 and committed work capital of US$1,500,000 within 36 months of the SP Agreement Date

• Cash payment of US$300,000, share payment of US$100,000 and committed work capital of US$2,000,000 within 48 months of the SP Agreement Date

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For a 70% interest:

• Cash payment of US$300,000, share payment of US$100,000 and committed work capital of US$2,500,000 within 60 months of the SP Agreement Date

• Deliver a pre-feasibility study ("PFS") and cash payment of US$2,500,000 within 96 months of the SP Agreement Date

Bob's Pit concession

For a 51% interest:

• Initial cash payment of US$100,000 and issuance of the Consideration shares to the Vendors within 4 weeks from the date of the Bob's Joint Venture and Earn-in Agreement (the "Bob's Agreement Date")

• • Cash payment of US$100,000 within 6 months of the Bob's Agreement Date

• Cash payment of US$150,000, share payment of US$50,000 and committed work capital of US$200,000 on or prior to each of the 12-month, 24-month, 36-month, 48-month and 60-month anniversary of the Bob's Agreement Date

For a 70% interest:

• Deliver a PFS and cash payment of US$750,000 within 96 months of the Bob's Agreement Date

The 335-square-kilometre land package held in five concessions consolidates for the first time the Suku Passi and Bob's concessions on the Guiana Shield in Suriname. The SP Project is accessible by road and is located approximately 20 kilometers from IAMGOLD's world-class Rosebel Mine (see Figure 2).

The Suku Passi and Bob's mineralization extend to the north-northwest based on structural trends, smallscale mining, geophysical interpretation and auger data (see Figure 3).

The mineralized zone is similar to the Rosebel mines and is defined by multiple quartz veins of varying grade and thickness within a siliceous altered rock. Based on channel and grab samples, the mineralized zone seen in the Suku Passi Pit is at least 30 meters in width and is open at depth and along strike in both directions. At the adjoining Bob's Pit, one channel sample panel of 17 meters in width averaged 9.5 grams per tonne and an adjoining panel was 32 meters of 2 grams per tonne. The panels appear to be a sequence of tension veins. In both pits, only small-scale mining with sluice boxes took place and the mining stopped when sap-rock was encountered due to the harder rock encountered.

Grab and channel sampling present a compelling case for the gold potential of Suku Passi. A total of 219 rock chip samples were collected with 19 samples having values greater than 1,000 parts per billion and a high value of 25.5 grams. At Bob's Pit, a total of 276 channel samples were also collected which returned significant gold values. Rhyolite will test around known mineralization exposed in the Suku Passi and Bob's pits, and conduct an airborne geophysical survey and Lidar survey. Drilling is expected to start in the long dry season after initial exploration and expansion of geophysical interpretation, geologic mapping, auger sampling and trenching.

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Figure 2: Brothers and Suku Passi are located on the prolific Guiana Shield.

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Figure 3: Mineralized zones at the Suku Passi and Bob’s pits.

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EXPLORATION UPDATE

The initial field work exploration program in December at the Brothers Project in Suriname has expanded on the gold potential of the concession. Prospecting by small-scale miners working within the Brothers concession have opened new sites exposing quartz veins in the soil profile. High-grade rock samples and channel samples continue to expand the extent of the gold bearing structures at Brothers.

Highlights:

• 41 rock grab samples with the highest values of 42.67 and 20.54 grams per tonne (g/t) of gold (Au). In total, 9 samples were 5 g/t or higher (22%) and 19 were greater than 1 g/t (46%). Good reproducibility was noted in duplicate assaying.

• Two-meter channel samples were collected wherever small-scale miners opened small trenches to prospect. Out of 25 samples, four were over 2 g/t and thirteen were over 0.2 g/t (52%) including:

• 15.54 g/t over 2 meters and 7.59 g/t over 2 meters near the Mike and Jordel workings.

All sampling covered areas of small-scale mining that are within or close to drainages and water. The mineralized quartz veins are associated with structural and silicified zones within granite country rock. Visible gold and high gold values are associated pyrite, silicification, tourmaline and minor chalcopyrite. A Lidar survey, ground geophysics, soil (auger) sampling and trenching are planned to select drill targets in the coming months.

The technical information in this MD&A pertaining to Brothers and Suku Passi has been reviewed, verified and approved by Dr. Dennis LaPoint, PhD who is a Qualified Person (QP) under National Instrument 43-101 "Standards of Disclosure for Mineral Projects". Dr. LaPoint is not considered to be independent for the purposes of National Instrument 43-101.

CORPORATE UPDATE

Management and Board Appointments

On November 23, 2020, the Company announced the appointment of Ms. Cybill Tsung as Chief Financial Officer of the Company. Mr. John Downes has stepped down as Chief Financial Officer.

On December 14, 2020, Tony Chedraoui and Michael Leskovec were elected as new members of the Rhyolite Board of Directors at its Annual General Meeting.

Change of Year-End

In November 2020, the Company’s Board of Directors has resolved to change the Company's fiscal year-end from June 30th to December 31st effective immediately, to align with year-end of the recently acquired subsidiary which holds the option in the Brothers Project in Suriname. The notice for the year-end change required under National Instrument 51-102 has been filed under the Company's profile at www.sedar.com

Private Placement

On November 25, 2020 the Company closed a non-brokered private placement of 15,000,000 common shares of the Company at the price of $0.30 per share for gross proceeds of $4,500,000 (the "Private Placement").

The net proceeds of the Private Placement will be used for the Brothers Project, Suku Passi Project, Paxson Project and for general working capital purpose. All securities issued in connection with the Private Placement are subject to a statutory hold period until March 26, 2021 in accordance with applicable securities laws. No commissions or finders' fees were paid in connection with closing of the Private Placement.

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SELECTED ANNUAL INFORMATION

	December 31,	December 31,		June 30,		June 30,
		2020(1)		2020(2)		2019(2)
Total assets	$	9,943,515	$	2,580,117	$	2,642,052
Total non-current liabilities		-		-		-
Net loss for the period		4,937,203		58,632		84,646
Loss per share - basic and diluted		0.08		0.00		0.00
Dividendspaid		-		-		-

(1) In November 2020, the Company changed its fiscal year-end from June 30th to December 31st. The net loss figures in the table represent loss for the six-month period ended December 31, 2020, and the years ended June 30, 2020 and 2019.

(2) During the period ended December 31, 2020, the Company changed its accounting policy from capitalizing exploration and evaluation acquisition costs to expensing such costs in the period the costs are incurred. The Company has applied the change in accounting policy on a retrospective basis and has therefore revised its June 30, 2020 and 2019 comparatives.

Rhyolite is a resource exploration and development company without operating revenues. The increase in total assets for the six-month period ended December 31, 2020 is mainly due to the acquisition of 2777662 Ontario Ltd. and the November 2020 private placement.

On October 30, 2020, the Company completed the acquisition of 2777662 Ontario Ltd., a privately-held armslength company which holds an option to acquire an 80% interest in the Brothers Project in Suriname in exchange for 15,546,566 common shares in the Company. Upon closing of the Transaction, the Company assumed 2777662 Ontario Ltd.’s option to earn up to an 80% interest in the Brothers Project.

The investment in the Brothers Project is accounted for using the equity method. Under the equity method, the investment in associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee after the date of acquisition. For the six-months ended December 31, 2020, the Company has accumulated the following costs for its equityaccounted-investee:

accounted-investee:
	December 31,
Brothers Project		2020
Acquisition cost	$	3,109,313
Earn-in cash payment		133,340
Mapping and sampling		8,937
Assay		2,094
Consulting fees		28,093
Professional fees		21,376
Field equipment		9,259
Total	$	3,312,412

On November 25, 2020 the Company closed a non-brokered private placement of 15,000,000 common shares at a price of $0.30 per share for gross proceeds of $4,500,000, which further increased the Company’s total assets for the period ended December 31, 2020.

The increase in net loss for the six-month period ended December 31, 2020 is mainly due to a $4.7 million loss recognized on the derivative instrument issued to acquire ONCorp and the increased general and administrative expenses associated with accelerated corporate activities during the period.

When the Company entered into the definitive share purchase agreement to purchase ONCorp on October 13, 2020, the Company’s shares were valued at $0.20 per share. The total consideration for 15,546,566 Rhyolite shares therefore, was valued at $3,109,313 when the Company became a party to the contract. The agreement was accounted for as a derivative instrument to deliver a fixed number of Rhyolite’s shares on a

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future date (Transaction closing date). The Transaction closed on October 30, 2020 and the Company’s shares were valued at $0.50 per share on closing date. The total Consideration, therefore, was valued at $7,773,283 when the Transaction closed. The difference of $4,663,970 between the agreement date and Transaction closing date values was recognized as loss on derivative instrument in the Company’s Statement of Comprehensive Loss for the period.

General and administrative expenses are typically incurred for corporate administration and office facilities, accounting and legal services, consulting fees, transfer agent, listing and filing fees, and other costs required as a publicly-traded company. General and administrative expenses increased for the six months ended December 31, 2020 commensurate with the Company’s increased activities during the period with the acquisition of ONCorp. The Company had nominal level of activities in prior periods and the costs reflect a base level of costs incurred as a publicly-listed entity.

SELECTED QUARTERLY INFORMATION

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

	**December 31, **	**December 31, **	September 30,	September 30,		June 30,		March 31,
		2020		2020(1)		2020(1)		2020(1)
Exploration and evaluation expenditures	$	9,412	$	-	$	-	$	-
Loss on derivative instrument		4,663,970		-		-		-
General and administrative expenses		251,945		11,876		24,392		8,834
Net Loss		4,925,327		11,876		24,392		8,834
Loss per share - basic and diluted		0.08		0.00		0.00		0.00
Total assets		9,943,515		2,565,509		2,580,117		2,593,171
Total liabilities		74,452		13,745		16,477		5,139
Shareholders' equity		9,869,063		2,551,764		2,563,640		2,588,032
	**December 31, **		September 30,			June 30,		March 31,
		2019(1)		2019(1)		2019(1)		2019(1)
Exploration and evaluation expenditures	$	9,655	$	2,863	$	21,715	$	-
Loss on derivative instrument		-		-		-		-
General and administrative expenses		10,683		2,205		15,310		15,537
Net Loss		20,338		5,068		37,025		15,537
Loss per share - basic and diluted		0.00		0.00		0.00		0.00
Total assets		2,604,731		2,634,235		2,642,052		2,664,368
Total liabilities		7,865		17,031		19,780		5,071
Shareholders' equity		2,596,866		2,617,204		2,622,272		2,659,297

(1) During the period ended December 31, 2020, the Company changed its accounting policy from capitalizing exploration and evaluation acquisition costs to expensing such costs in the period the costs are incurred. The Company has applied the change in accounting policy on a retrospective basis and has therefore revised its prior period comparatives.

The changes in the Company’s financial results on a quarter-by-quarter basis are primarily due to fluctuations in the level of activity of the Company’s exploration and evaluation programs, project acquisitions and administration. The Company is a mineral exploration and development company and does not currently generate operating revenue.

The exploration and evaluation expenditures mainly represent costs incurred to maintain the license of the Paxson Gold Property. The project is in care and maintenance state during the eight quarters ended December 31, 2020. The higher costs incurred in the quarter ended June 30, 2019 represent travel costs to the Paxson Gold Property which was a one-time occurrence.

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Loss on derivative instrument for the quarter ended December 31, 2020 represents the change in value of the 15,546,566 Rhyolite shares issued to acquire ONCorp in October 2020. When the Company became a party to the share purchase agreement on October 13, 2020, the Company’s shares were valued at $0.20 per share. When the Company issued the shares on October 30, 2020 upon closing of the Transaction, the Company’s shares were valued at $0.50 per share. The change in value was recognized as loss on derivative instrument for the period.

General and administrative expenses fluctuate based on corporate activity. Prior to the acquisition of ONCorp in October 2020, the Company was in care and maintenance state with minimal corporate and exploration activities. During the quarter ended December 31, 2020, the Company has increased administration costs, listing and filing fees, professional fees, and salaries and benefits commensurate with the Company’s increased activities during the period with the acquisition of ONCorp.

The fluctuations in total assets and shareholders’ equity generally reflect the timing and receipt of equity financing which increased cash resources in certain periods, while continued funding of the Company’s operations decreased cash resources. During the quarter ended December 31, 2020, the Company raised $4,500,000 through a non-brokered private placement which increased the Company’s cash and shareholders’ equity for the period. In the same quarter, the Company issued 15,546,566 Rhyolite shares to acquire ONCorp’s right to earn into the Brother’s project in Suriname. The investment in the Brothers Project is accounted for using the equity method. The Company incurred $3.3 million during the quarter in acquisition costs, milestone payment and exploration activities which increased the Company’s investment in associate during the period.

Total liabilities mainly represent the Company’s trade payables. The balance increased during the quarter ended December 31, 2020 due to increased activities with the addition of the Brothers Project during the period.

RESULTS OF OPERATIONS

	3-Months Ended	3-Months Ended	3-Months Ended	3-Months Ended	6-Months Ended	6-Months Ended		Year Ended
		December 31,		December 31,		December 31,		June 30,
		2020		2019		2020		2020
Exploration expenses	$	9,412	$	9,655	$	9,412	$	12,518
Loss on derivative instrument	$	4,663,970	$	-		4,663,970		-
General and administration expenses:
Office administration and facilities	$	19,000	$	12,000		31,000		48,000
Transfer agent, listing and filing fees		26,381		5,596		27,488		13,081
Accounting and legal		62,751		3,261		63,149		16,181
Consulting fees		95,700		-		95,700		-
Salaries and benefits		28,240		-		28,240		-
Office supplies and services		1,954		307		2,299		1,322
Shareholder information		7,239		813		7,419		1,353
Foreign exchange loss		12,389		272		12,389		351
Interest income		(1,709)		(11,566)		(3,863)		(34,174)
Total general and administration expenses		251,945		10,683		263,821		46,114
Loss and comprehensive loss for theperiod	$	4,925,327	$	20,338	$	4,937,203	$	58,632
Basic and diluted lossper share	$	0.07	$	0.00	$	0.08	$	0.00

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Fourth Quarter Results – Three months ended December 31, 2020 compared to the three months ended December 31, 2019

For the three months ended December 31, 2020, the exploration expenses remained relatively consistent with the same quarter in 2019. The exploration expenditure is mainly made up of the licensing fees for the Paxson Gold Property.

Loss on derivative instrument for the quarter ended December 31, 2020 represents the change in value of the 15,546,566 Rhyolite shares issued to acquire ONCorp in October 2020. When the Company became a party to the share purchase agreement on October 13, 2020, the Company’s shares were valued at $0.20 per share. When the Company issued the shares on October 30, 2020 upon closing of the Transaction, the Company’s shares were valued at $0.50 per share. The change in value was recognized as loss on derivative instrument for the period.

General and administration expenses increased for the quarter ended December 31, 2020 compared to the same quarter in 2019 due to the acquisition of ONCorp and its right to earn into the Brothers Project in Suriname. The Transaction resulted in increased management and corporate services, transfer agent services, listing and filing fees, professional fees, and personnel costs. Before the acquisition of ONCorp, the Company had negligible operating activities and only incurred minimum required expenditures to remain a publicly-listed entity.

For the three months ended December 31, 2020, the Company incurred higher foreign exchange loss due to foreign exchange fluctuation on the Company’s US Dollar (“USD”) balance on hand. The Canadian Dollar strengthened against the USD during the quarter ended December 31, 2020, resulted in a foreign exchange loss on the USD balance at the end of the period. The Company held no foreign currency at the end of December 31, 2019; therefore, only had minimum foreign exchange impact from USD denominated trade payables.

Interest income decreased in the quarter ended December 31, 2020 compared to the same quarter in 2019 mainly due to decrease in benchmark interest rates earned on cash balances.

Year-To-Date Results – Six months ended December 31, 2020 compared to the year ended June 30, 2020

For the six months ended December 31, 2020, the Company reported a loss of $4.9 million compared with a loss of $58,632 for the year ended June 30, 2020. The higher net loss in December 2020 was the result of a $4.7 million non-cash loss recognized on the shares issued to acquire ONCorp in October 2020, as well as the increased general and administration expenses owing primarily to increased activities related to the acquisition of ONCorp and the Company transitioning from a care and maintenance state to operating.

During the 6 months ended December 31, 2020, the Canadian Dollar strengthened against the USD, resulted in a foreign exchange loss on the USD cash balance the Company held at year-end. For the year ended June 30, 2020, the Company had minimal foreign exchange gain/loss due to limited transactions and had no foreign currency held at year-end.

Interest income decreased in the six months ended December 31, 2020 compared to the year ended June 30, 2020 mainly due to decrease in benchmark interest rates earned on cash balances.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2020, the Company had cash and cash equivalents of approximately $6.4 million (June 30, 2020 - $2.6 million) to apply against short-term business requirements and current liabilities of $74,452 (June 30, 2020 - $16,477).

On November 25, 2020 the Company closed a non-brokered private placement for gross proceeds of $4,500,000. The net proceeds are being used for the Brothers Project, Suku Passi Project, Paxson Project and for general working capital purpose.

At December 31, 2020, the Company believed that it had adequate resources to maintain its minimum nearterm obligations, including joint venture earn-in expenditures and general corporate activities, based on its cash position, and the ability to pursue additional sources of financing, including equity placements.

The Company currently has no source of operating cash flow and has no assurance that additional funding will be available to it for additional exploration and development programs at its properties, or to enable the Company to fulfil its obligations under any applicable agreements. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional sources of financing to successfully explore and evaluate its mineral properties and, ultimately, to achieve profitable operations. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration of the Company’s properties and the possible loss of title to such properties. In addition, the spread of COVID- 19 globally has caused and continues to cause considerable disruptions to the world economy, including financial markets and commodity prices and could adversely impact the Company’s ability to carry out plans to obtain additional financing. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s ability to raise capital or conduct exploration activities.

RELATED PARTY TRANSACTIONS

The Company is party to a corporate service agreement with Earlston Management Corp. (“Earlston”), a company that provides key management services to the Company. The Company pays Earlston a fee of $4,000 per month (from July to October 2020) and $7,500 per month (from November to December 2020) and out-of-pocket costs for standard management and office services. Earlston also provides occasional consulting, project management or other support services which are billed separately from the standard rate. The Company incurred $31,000 in office administration and facilities expenditures provided by Earlston for the six months ended December 31, 2020 (year ended June 30, 2020 – $48,000).

Accounts payable and accrued liabilities as at December 31, 2020 includes $8,018 (June 30, 2020 - $4,306) in amounts owing to Earlston.

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.

	6-Months Ended	6-Months Ended		Year Ended
		December 31,		June 30,
		2020		2020
Salaries and benefits	$	25,000	$	-
Share-based payments(1)		-		-
Total keymanagement compensation	$	25,000	$	-

(1) Share-based payments represent the fair value of deferred share units, restricted share units and share purchase options at the date of the grant that is expensed during the year. The fair value of the stock options granted during the reporting period was determined using the Black-Scholes option pricing model.

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CAPITAL MANAGEMENT

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

The properties in which the Company currently has interests are in the exploration stage, as a result, the Company is dependent upon external financings to fund activities. The Company will seek to raise additional amounts as needed by way of equity financing or debt to carry out its planned corporate development and exploration programs and to pay for general administrative costs.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company’s investment policy is to hold cash in interest-bearing bank accounts or highly liquid short-term interest-bearing investments with maturities of one year or less and which can be liquidated at any time without penalties. The Company is not subject to externally imposed capital requirements and does not have exposure to asset-backed commercial paper or similar products. There have been no changes to the Company’s approach to capital management during the period ended December 31, 2020.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

As at December 31, 2020, the Company’s financial instruments comprise cash, amounts receivable and accounts payable and accrued liabilities. The fair values of amounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity. Fair values of financial instruments are classified in a fair value hierarchy based on the inputs used to determine fair values. The levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 – Inputs that are not based on observable market data (unobservable inputs).

As at December 31, 2020, the fair value of cash held by the Company was based on Level 1 of the fair value hierarchy.

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

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 amounts receivable. The Company limits exposure to credit risk by maintaining its cash with large financial institutions. The Company does not have cash that is invested in asset backed commercial paper. The Company’s amounts receivable consists of sales tax refundable from the Canada Revenue Agency and is not subject to significant credit risk.

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 ensures there is sufficient capital to meet short-term operating requirements, after taking into account cash flows from operations and the Company’s holdings of cash. The Company believes that these

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sources are sufficient to cover these likely short-term cash requirements, but that additional funding may be required to meet long-term requirements. As at December 31, 2020, the Company had a cash balance of $6,419,246 to settle current liabilities of $74,452. The Company’s financial liabilities have contractual maturities of 30 days or are due on demand and subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

i. Interest rate risk

Interest rate risk arises from changes in market rates of interest that could adversely affect the Company. The Company currently has no interest-bearing financial instruments other than cash, so its exposure to interest rate risk is insignificant.

ii. Foreign currency risk

Foreign currency risk is the risk that is related to the fluctuation of foreign exchange rates. The Company reports its financial results in Canadian dollars but also undertakes transactions in various foreign currencies, mainly the US dollar. As the exchange rates between the Canadian dollar and these foreign currencies fluctuate, the Company experiences foreign exchange gains and losses. The Company has cash and accounts payable and accrued liabilities that are denominated in foreign currencies, which are subject to currency risk.

The carrying amounts of the Company’s foreign currency denominated monetary assets and liabilities as at December 31, 2020 and June 30, 2020 are as follows:

		December 31,		June 30,
		2020		2020
Cash and cash equivalents	$	627,655	$	-
Accounts payable and accrued liabilities		(21,539)		-
	$	606,116	$	-

As at December 31, 2020, a 10% depreciation or appreciation of applicable foreign currencies against the Canadian dollar would result in an approximate $60,600 decrease or increase in the Company’s comprehensive loss (June 30, 2020 - $Nil).

The Company does not enter into any financial instruments to hedge currency risk, but the Company monitors its foreign exchange exposure.

iii. Price risk

The Company holds no marketable securities or non-cash assets that are classified as financial instruments and, consequently, has no exposure to the price fluctuations of such instruments.

OUTSTANDING SHARE DATA

As of the date of this MD&A, the Company has 86,443,766 common shares and 100,000 stock options outstanding.

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OFF-BALANCE SHEET ARRANGEMENTS

During the period ended December 31, 2020, the Company was not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations, financial condition, capital expenditures, liquidity or capital resources of the Company.

PROPOSED TRANSACTIONS

There are no proposed transactions that have not been disclosed herein.

USE OF ESTIMATES

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates on the resulting effects of the carrying amounts of the Company’s assets and liabilities are accounted for prospectively.

All of the Company’s significant accounting policies and estimates are included in Note 3 of its audited consolidated financial statements for the six month period ended December 31, 2020.

CHANGES IN ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

During the period ended December 31, 2020, the Company has changed its accounting policy from capitalizing exploration and evaluation asset acquisition costs to expensing such costs in the period the costs are incurred. The Company believes that expensing exploration and evaluation acquisition costs as incurred provides more reliable and relevant financial information to the users of its financial statements. While IFRS 6, Exploration for and Evaluation of Mineral Resources allows either treatment, given the challenges in valuing early stage E&E assets, management believes capitalizing these costs do not provide the investors relevant information that would assist them in making a determination of the valuation of the underlying property.

Under the new policy, the cost of acquiring prospective properties and exploration rights is expensed until it has been established that a mineral property is technically feasible and commercially viable as supported by a National Instrument 43-101 – Standards of Disclosure for Mineral Projects feasibility study and a mine development decision has been made by the Company. Thereafter, the Company will capitalize expenditures subsequently incurred to develop the mine, prior to the start of mining operations in accordance with IAS 16 – Property, Plant and Equipment.

The Company has applied the change in accounting policy on a retrospective basis and has therefore adjusted its June 30, 2020 comparatives as follows:

	As	previously				Restated
		reported	Adjustment			Balance
Assets
Mineral properties	$	44,615	$	(44,615)	$	-
Total assets		2,624,732		(44,615)		2,580,117
Equity
Deficit	$	3,759,420	$	44,615	$	3,804,035
Total equity		2,608,255		(44,615)		2,563,640

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New accounting standards and interpretations

Amendments to IFRS 16, Leases (effective for annual reporting periods beginning on or after June 1, 2020) allows lessees not to account for rent concessions as lease modifications if they arise as a direct consequence of COVID-19. Lessees applying the practical expedient will be required to disclose whether it has been applied to all eligible contracts, or, if not, information about the nature of the contracts to which the practical expedient has been applied. Furthermore, the lessees will be required to apply the practical expedient retrospectively, recognizing the cumulative effect of applying the amendment as an adjustment to the opening retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment. These amendments did not impact the Company’s consolidated financial statements or disclosure at the time of adoption.

Standards, amendments and interpretations issued but not yet applied

Amendments to IAS 1, Presentation of Financial Statements (effective January 1, 2023) clarifies the presentation of liabilities in the statement of financial position. The classification of liabilities as current or noncurrent is based on contractual rights that are in existence at the end of the reporting period and is unaffected by expectations about whether an entity will exercise its right to defer settlement. A liability not due over the next twelve months is classified as non-current even if management intends or expects to settle the liability within twelve months. The amendment also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer of cash, equity instruments, other assets, or services to the counterparty. Management is currently assessing the impact of this amendment.

OTHER DATA

Additional information related to the Company is available for viewing under the Company’s profile at www.sedar.com.

CORPORATE GOVERNANCE

The Company’s Board of Directors follows recommended corporate governance guidelines for public companies to ensure transparency and accountability to shareholders. The Audit Committee of the Company fulfills its role of ensuring the integrity of the reported information through its review of the interim and audited annual financial statements prior to their submission to the Board of Directors for approval. The Audit Committee, comprised of three directors, all of whom are independent, meets with management of the Company on a quarterly basis to review the financial statements, including the MD&A, and to discuss other financial, operating and internal control matters as required.

RISKS AND UNCERTAINTIES

The Company is engaged in mineral exploration and development activities which, by nature, are speculative. Due to the high-risk nature of the Company’s business and the present stage of the Company’s various projects, an investment in the Company’s common shares should be considered a highly speculative investment that involves significant financial risks, and prospective investors should carefully consider all of the information disclosed in this MD&A and the Company’s other public disclosures, including the risks described below, prior to making any investment in the Company’s common shares.

The risks below do not necessarily comprise all of the risks faced by the Company. Additional risks not currently known to the Company, or that the Company currently considers immaterial, may also adversely affect the Company’s business, result of operations, financial results, prospects and price of common shares.

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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, the Company’s properties do not have 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.

Title to Mineral Property Risks

The Company does not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history of many mining properties. The Company has diligently investigated and continues to diligently investigate and validate title to its mineral claims; however, this should not be construed as a guarantee of title. The Company cannot give any assurance that title to properties it acquired will not be challenged or impugned and cannot guarantee that the Company will have or acquire valid title to these mineral properties.

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 in order to fund its ongoing operations. Commodity price declines could also reduce the amount the Company would receive on the disposition of its mineral property to a third party.

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 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 its property.

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, Economic and Currency Risks

The Company's property interests and proposed exploration activities in the United States and Suriname are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, and changing political conditions and international monetary fluctuations. Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as mines, could have a significant effect on the Company.

The Company’s equity financings are sourced in Canadian dollars and the Company incurs expenditures in Canadian dollars, US dollars and Surinamese dollars. At this time there are no currency hedges in place. Therefore, a weakening of the Canadian dollar against the US dollar or Surinamese dollar could have an adverse effect on the Company’s operations.

Foreign Operations

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Rhyolite operates in foreign countries, including the United States and Suriname, where there are added risks and uncertainties. Risks of foreign operations include political unrest, labour disputes and unrest, invalidation of governmental orders and permits, corruption, organized crime, theft, war, civil disturbances and terrorist actions, arbitrary changes in law or policies of particular countries (including nationalization of mines), trade disputes, foreign taxation, price controls, delays in obtaining or renewing or the inability to obtain or renew necessary environmental permits, opposition to mining from environmental or other non- governmental organizations, social perception impacting our social license to operate, limitations on foreign ownership, limitations on the repatriation of earnings, limitations on mineral exports and increased financing costs. There can be no assurance that changes in the government or laws, or changes in the regulatory environment for mining companies, or for non-domiciled companies, will not be made, that would adversely affect Rhyolite’s business, financial condition, results of operations and prospects.

Illegal Miners/Mineral Extraction by Third Parties without Title

Artisanal and illegal miners are present at the Company’s joint venture Brothers and Suku Passi projects in Suriname. As the Company further explores and advances mining projects towards production, the Company must enter into discussions with illegal miners operating at these projects. There is a risk that such illegal miners may oppose the Company's operations and this may result in a disruption to the planned development and/or to mining and processing operations; all of which may have an adverse effect on the Company. Illegal miners that operate at Brothers and Suku Passi likely do not meet proper health and safety standards. Accidents may occur and may range from minor to serious, including death.

Regulatory Risks

The mining industry in Suriname and the United States is subject to extensive controls and regulations imposed by various levels of government. All current legislation is a matter of public record and the Company will be unable to predict what additional legislation or amendments may be enacted. Amendments to current laws, regulations and permits governing operations and activities of mining companies, including environmental laws and regulations which are evolving in Suriname and the United States, or more stringent implementation thereof, could cause increases in expenditures and costs, and could affect the Company’s ability to expand existing operations or require the Company to abandon or delay the development of its properties.

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 could cause a decline in the value of the securities of the Company.

Environmental 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

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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.

Competition

The Company competes 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.

Climatic conditions or changes in climate over time can affect exploration, development and future mining activities.

The potential physical impacts of climate change on the Company’s exploration projects is highly uncertain and are particular to the geographic circumstances. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. Climate change is an international concern and as a result poses the risk of changes in government policy including introducing climate change legislation and treaties at all levels of government that could result in increased costs. The trend towards more stringent regulations and carbon-pricing mechanisms aimed at reducing the effects of climate change could impact the Company’s decision to pursue future opportunities, or maintain our existing exploration programs, which could have an adverse effect on our business.

Limited Operating History

The Company has no history of generating profits. The Company expects to continue to incur losses unless and until such time as it develops its properties and commences mining operations. The development of the properties will require the commitment of substantial financial resources. The amount and timing of expenditures will depend on a number of factors, some of which are beyond the Company's control, including the progress of ongoing exploration, studies and development, the results of consultant analysis and recommendations, the rate at which operating losses are incurred and the execution of any further joint venture agreements with strategic parties, if any. There can be no assurance that the Company will generate operating revenues or profits in the future.

Conflicts of Interest

Certain directors and officers of the Company are also directors, officers and/or shareholders of other companies that are similarly engaged in the business of natural resource exploration, development and production. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in a conflict is required under the Business Corporations Act (British Columbia) to disclose their interest.

Impact of Pandemics

All of Rhyolite’s operations are subject to the risk of emerging infectious diseases or the threat of viruses or other contagions or pandemic diseases, including COVID-19. Any outbreak or threat of an outbreak of a virus or other contagions or pandemic disease could have a material adverse effect on the Company’s business, results of operations and financial condition as well as the operations of the Company’s suppliers, contractors, service providers and host communities. The significant ongoing global uncertainty surrounding COVID-19 could also have a negative impact on the Company’s ability to obtain financing. A material spread of COVID19 or other infectious disease could impact the timing and ability of the Company to proceed with planned exploration and development programs. An outbreak could cause governmental agencies to close, or slow down for prolonged periods of time causing delays in regulatory permitting processes. Governments may introduce new or modify existing laws, regulations, orders or other measures that could impede the Company’s

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ability to manage the Company’s operations. The extent to which COVID-19 continues to affect operations will depend on future events which are highly uncertain and cannot be predicted, including the geographic spread, duration of the pandemic, actions taken by government authorities in response to the pandemic, the impacts on global and regional markets and their effect on the Company’s suppliers and service providers.

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