Star Royalties Ltd. — Audit Report / Information 2023

Apr 16, 2024

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CONSOLIDATED FINANCIAL STATEMENTS (Presented in United States (“U.S.”) Dollars)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND DECEMBER 31, 2022

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Star Royalties Ltd.

Opinion

We have audited the consolidated financial statements of Star Royalties Ltd. (the Entity), which comprise:

• the consolidated statements of financial position as at December 31, 2023, and December 31, 2022

• the consolidated statements of income and comprehensive income for the years then ended

• the consolidated statements of changes in shareholders’ equity for the years then ended

• the consolidated statements of cash flows for the years then ended

• and notes to the consolidated financial statements, including a summary of material accounting policy information

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2023, and December 31, 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “ Auditor’s Responsibilities for the Audit of the Financial Statements ” section of our auditor’s report.

© 2024 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our auditor’s report.

Evaluation of the fair value of Green Star’s Regen Ag carbon credit contract

Description of the matter

We draw attention to Notes 3 and 7 to the financial statements. The Green Star joint venture accounts for its carbon credit royalty agreements, including the Regen Ag carbon credit contract, as financial instruments at fair value through profit and loss. At each reporting date, the fair value of each active contract is determined using discounted cash flow models taking into consideration various observable and unobservable inputs. Fair value movements of carbon credit royalty contracts impact the equity pickup from the Green Star joint venture when applying the equity method.

The significant unobservable inputs used to measure the Regen Ag contract were the expected volumes of carbon credit units and timing of the delivery of such units over the life of the program, estimated carbon credit pricing, and discount rate (“assumptions”).

Why the matter is a key audit matter

We identified the evaluation of the fair value of Green Star’s Regen Ag carbon credit contract as a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of the Regen Ag carbon contract and the high degree of estimation uncertainty in determining the fair value. In addition, significant auditor judgment and specialized skills and knowledge were required in evaluating the results of our audit procedures due to the sensitivity of the fair value to possible changes in assumptions.

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How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We evaluated the expected volumes of carbon credit units and timing of the delivery of such units by comparing inputs used to calculate carbon credit generation to contractual arrangements, studies, actual results, inquiry with management and third party confirmation.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• Evaluating estimated carbon credit pricing by comparing to historical prices, third party information and forecasts

• Evaluating the discount rate assumption by comparing to an estimate that was independently developed using publicly available third-party sources and data for comparable entities and adjustments for size and specific risk premium.

Other Information

Management is responsible for the other information. Other information comprises:

• the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as

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management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material

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uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure, and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

• Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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Chartered Professional Accountants, Licensed Public Accountants

The engagement partner on the audit resulting in this auditor’s report is Pieter Fourie. Toronto, Canada April 15, 2024

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STAR ROYALTIES LTD.

Consolidated Statements of Financial Position

(Presented in U.S. Dollars)

	As	at
	December 31,2023	December 31,2022
ASSETS Current Cash Receivables (Note 5) Marketable securities (Note 6) Prepaids and other	$ 2,880,019 1,102,357 784,090 35,805	$ 2,478,184 382,543 - 43,621
	4,802,271	2,904,348
Non-current Investment in Green Star joint venture (Note 7) Long-term receivables (Note 5) Royalty and stream interests (Note 8)	27,756,632 604,869 21,439,819	19,689,147 - 24,022,953
	49,801,320	43,712,100
	$ 54,603,591	$ 46,616,448
LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities	$ 783,824	$ 714,955
	783,824	714,955
Shareholders’ equity Share capital (Note 10) Contributed surplus Accumulated other comprehensive loss Retaining earnings	28,803,948 6,588,388 (1,111,519) 19,538,950	28,224,482 6,310,424 (2,534,747) 13,901,334
	53,819,767	45,901,493
	$ 54,603,591	$ 46,616,448

Subsequent event (Note 7, 10 & 14)

Approved on behalf of the Board of Directors

“Alexandre Pernin” Director Alexandre Pernin	“Kylie Dickson” Director Kylie Dickson

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

STAR ROYALTIES LTD.

Consolidated Statements of Income and Comprehensive Income (Presented in U.S. Dollars)

	Year Ended December 31,	Year Ended December 31,
	2023	2022
Revenue Royalty income Costs of sales Depletion	$ 940,499 (439,145)	$ 1,415,498 (701,746)
Gross profit	501,354	713,752
Expenses Marketing and shareholder communications Management and board compensation (Note 9) Share-based compensation (Note 10) Office and miscellaneous Professional fees	27,932 1,770,317 604,954 156,693 281,409	245,846 1,543,823 782,560 248,425 267,287
Total expenses	(2,841,305)	(3,087,941)
Other (loss) income Foreign exchange (loss) gain Interest income Gain on marketable securities (Note 6) Gain on partial disposal of royalty and stream interests (Note 8) Management fees from Green Star joint venture (Note 9) Equity income from Green Star joint venture (Note 7) Loss on dilution of investment in Green Star joint venture (Note 7) Green Star transaction (Note 7)	(55,975) 78,880 164,689 575,829 222,331 8,001,366 (773,977) -	171,575 33,900 - - 269,091 1,080,747 - 18,543,603
Net income before income taxes Income tax expense (Note 13)	5,873,192 (235,576)	17,724,727 (392,784)
Net income	$ 5,637,616	$ 17,331,943
Other comprehensive (loss) income Items that may be reclassified subsequently to profit or loss: Currency translation adjustment	1,208,995	(2,993,904)
Comprehensive income	$ 6,846,611	$ 14,338,039
Basic and diluted income per common share Basic Diluted Weighted average number of common shares outstanding Basic Diluted	$ 0.08 $ 0.07 74,828,360 75,396,607	$ 0.24 $ 0.24 73,126,572 73,721,081

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

STAR ROYALTIES LTD.

Consolidated Statements of Cash Flows (Presented in U.S. Dollars)

	Year Ended December 31,
	2023 2022
OPERATING ACTIVITIES Net income Items not affecting cash: Depletion Share-based compensation Foreign exchange loss (gain) Gain on marketable securities (Note 6) Gain on partial disposal of royalty and stream interests (Note 8) Equity income from Green Star joint venture (Note 7) Loss on dilution of investment in Green Star joint venture (Note 7) Green Star transaction (Note 7) Non-cash working capital items changes: Accounts payable and accrued liabilities Prepaids and other Receivables	$ 5,637,616 $ 17,331,943 439,145 701,746 604,954 782,560 55,975 (171,575) (164,689) - (575,829) - (8,001,366) (1,080,747) 773,977 - - (18,543,603) 303,131 319,130 8,689 14,483 192,790 (121,616)
Net cash used in operating activities	(725,607) (767,679)
INVESTING ACTIVITIES Proceeds from partial disposal of royalty and stream interests (Note 8) Investment in Green Star joint venture	1,148,710 - - (901,451)
Net cash provided by (used in) investing activities	1,148,710 (901,451)
Net change in cash Effect of exchange rate changes on cash Cash, beginning of the period	423,103 (1,669,130) (21,268) (12,892) 2,478,184 4,160,206
Cash, end of theperiod	$ 2,880,019 $ 2,478,184

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

STAR ROYALTIES LTD.

Consolidated Statements of Changes in Shareholders’ Equity (Presented in U.S. Dollars)

	Share Capital Contributed surplus Accumulated other comprehensive income (loss) Number Amount	(Deficit) Retained earnings Total
Balance, December 31, 2021 Shares issued on vesting of restricted share units Expiry of broker warrants Share-based compensation Income and other comprehensive income	72,740,141 $ 28,008,825 $ 5,888,237 $ 459,157 511,904 215,657 (215,657) - - - (144,716) - - - 782,560 - - - - (2,993,904)	$ (3,575,325) $ 30,780,894 - - 144,716 - - 782,560 17,331,943 14,338,039
Balance, December 31, 2022	73,252,045 $ 28,224,482 $ 6,310,424 $ (2,534,747)	$ 13,901,334 $ 45,901,493
Shares issued for compensation (Note 10) Shares issued on vesting of restricted share units (Note 10) Share-based compensation (Note 10) Reclassification of currency translation adjustment to loss on dilution of investment in Green Star joint venture (Note 7) Income and other comprehensive income	935,614 252,476 - - 774,046 326,990 (326,990) - - - 604,954 - - - - 214,233 - - - 1,208,995	- 252,476 - - - 604,954 - 214,233 5,637,616 6,846,611
Balance, December 31, 2023	74,961,705 $ 28,803,948 $ 6,588,388 $ (1,111,519)	$ 19,538,950 $ 53,819,767

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

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS

Star Royalties Ltd. (the “Company”) is incorporated under the Canada Business Corporations Act . The Company is a precious metals royalty and streaming investment company. The Company conducts its green royalty investments through Green Star Royalties Ltd. (“Green Star”), a joint venture (Note 7). The head office, records office, and principal address of the Company is 1601-110 Yonge Street, Toronto, Ontario, M5C 1T4. The Company’s common shares and warrants are listed on the TSX Venture Exchange (“TSX-V”) under the symbols “STRR” and STRR.WT”, respectively. The publicly traded warrants expired on February 19, 2024 (Note 10). The Company’s common shares are also traded on the OTCQX under the symbol “STRFF”.

The Company’s consolidated financial statements as at December 31, 2023 and for the year that ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Although the Company has not generated substantial revenue, the Company believes that with the cash balance at December 31, 2023, the anticipated royalty income from Keysbrook, and the management fees from Green Star, it has sufficient resources to fund operations and commitments for at least twelve months from the balance sheet date.

These consolidated financial statements were approved and authorized for issue by the board of directors of the Company (the “Board of Directors”) on April 15, 2024.

2. BASIS OF PREPARATION

(a) Statement of Compliance

These consolidated financial statements, including comparatives, have been prepared using accounting policies consistent with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”).

(b) Basis of Measurement

These consolidated financial statements are presented in United States dollars. The Canadian dollar is the functional currency of the Company, its subsidiaries, and joint operations. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21 The Effects of Changes in Foreign Exchange Rates . These consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at their fair value as set out in the accounting policies in Note 4.

(c) Translation of Transactions and Balances

These consolidated financial statements are presented in United States dollars. The Company’s functional currency is Canadian dollar. Assets and liabilities are translated at the closing exchange rate at the date of the balance sheet. Income and expenses are translated at the average exchange rates during the period and all resulting exchange differences are charged to the currency translation adjustment in other comprehensive income.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Monetary assets and liabilities denominated in foreign currencies are re-measured at the rate of exchange at each financial position date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.

(d) Prior Year Comparatives

Certain comparative figures have been reclassified to conform with the current year’s presentation.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

3. USE OF JUDGEMENTS AND ESTIMATES

Judgments and Estimates

The preparation of these consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates.

The most significant judgements relate to the following:

Accounting for Royalty and Stream Interests

The Company from time to time will acquire royalty and stream interests. Each royalty and stream interest agreement has its own unique terms and significant judgment is required to assess the appropriate accounting treatment.

Impairment of Royalty and Stream Interests

Assessment of impairment of royalty and stream interests at the end of each reporting period requires the use of judgments, assumptions and estimates when assessing whether there are any indicators that give rise to the requirement to conduct a formal impairment test on the Company’s royalty and stream interests. Indicators which could trigger an impairment test include, but are not limited to, a significant change in operator reserve and resource estimates, industry, or economic trends, current or forecast commodity prices, and other relevant operator information. The assessment of fair values requires the use of estimates and assumptions for recoverable production, long-term commodity prices, discount rates, reserve/resource conversion, foreign exchange rates, future capital expansion plans and the associated production implications.

In addition, the Company may use other approaches in determining fair value which may include judgment and estimates related to (i) dollar value per ounce or pound of reserve/resource; (ii) cash-flow multiples; and (iii) market capitalization of comparable assets. Changes in any of the assumptions and estimates used in determining the fair value of the royalty and stream could impact the impairment analysis.

Estimation of Depletion

The Company’s royalty, stream, and other production-based interests that generate economic benefits are considered depletable and are depleted on a unit-of-production basis over the units of production that are expected to generate the cash flows that will be attributable to the Company. These calculations require the use of estimates and assumptions, including the estimated quantity of commodities to be received, the recovery rates, and payable rates. Changes to these assumptions may impact the depletion rates used. Changes to depletion rates due to new information are accounted for prospectively.

Functional Currency

Functional currency is the currency of the primary economic environment in which the Company and its subsidiaries operate. If indicators of the primary economic environment are mixed, then management uses its judgement to determine the functional currency that most faithfully represents the economic effect of underlying transactions, events, and conditions.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

3. USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)

Investment in Joint Arrangement

Judgement is required to determine when the Company has joint control of a contractual arrangement, which requires a continuous assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. Judgement is also required to classify a joint arrangement as either a joint venture or a joint operation. Classifying the arrangement requires the Company to assess its rights and obligations arising from the arrangement. Specifically, the Company considers the legal form of the separate vehicle, the terms of the contractual arrangement and other relevant facts and circumstances. This assessment often requires critical judgement, and a different conclusion on joint control, or whether the arrangement is a joint venture or a joint operation, may have a material impact on the accounting treatment.

The Green Star joint venture accounts for its carbon credit royalty agreements, including the Regen Ag carbon credit contract, as financial instruments at fair value through profit or loss according to IFRS 13 Fair Value Measurement . At each reporting date, the fair value of each active contract is determined using discounted cash flow models taking into consideration various observable and unobservable inputs as set out in Note 7. Fair value movements of carbon credit royalty contracts impact the equity pickup from the Green Star joint venture when applying the equity method. Each carbon credit royalty agreement has its own unique terms and significant judgement is required to assess the appropriate accounting treatment. Significant estimates and assumptions in the fair value measurement of material carbon credit royalty contracts in Green Star are included in Note 7.

4. MATERIAL ACCOUNTING POLICIES

Basis of Consolidation

The financial statements consist of the consolidation of the financial statements of the Company and its subsidiaries. All significant intercompany transactions, balances, revenues, and expenses have been eliminated upon consolidation. Subsidiaries are entities over which the Company has control, including the power to govern the financial and operating policies in order to obtain benefits from their activities.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are de-consolidated from the date that control ceases.

Joint Arrangements

The Company has assessed the nature of its joint arrangement and determined it to be a joint venture. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Company accounts for its investment in the joint venture using the equity method in accordance with IAS 28 Investment in Associates and Joint Ventures . Under the equity method, the Company’s initial investment is subsequently increased or decreased to recognize the Company’s share of net income and losses of the joint venture, after any adjustments necessary to give effect to uniform accounting policies, any other movement in the joint venture’s reserves, and for impairment losses after the initial recognition date. The Company’s share of income and losses of the joint venture is recognized in net income during the period. Dilution gains and losses arising from changes in the Company’s interest in the joint venture are recognized in the consolidated statements of income and comprehensive income. The accounting policies of the joint venture are consistent with the policies described herein.

Cash

Cash comprises of cash on hand recorded at amortized cost.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

4. MATERIAL ACCOUNTING POLICIES (CONTINUED)

Financial Instruments

Financial Assets

The Company classified its financial assets in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”), or at amortized cost. The determination of the classification of financial assets is made at initial recognition.

The Company’s accounting policy for each of the categories is as follows:

Financial Assets at FVTPL : Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statement of income and comprehensive income. Realized and unrealized gains and losses arising from changes in the fair value of financial assets held at FVTPL are included in the consolidated statements of income and comprehensive income.

Financial Assets at Amortized Cost : A financial asset is measured at amortized cost if the objective of the business model is to hold the financial asset for the collection of contractual cash flows, and the asset’s contractual cash flows are comprised solely of payments of principal and interest. They are classified as current assets or non-current assets based on their maturity date and are initially recognized at fair value and subsequently carried at amortized cost less any impairment.

Impairment of financial assets at amortized cost : The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

The following table shows the classification of the Company’s financial assets:

Financial asset	Classification
Cash	Amortized cost
Receivables (current and long-term)	Amortized cost
Marketable securities	FVTPL

Financial Liabilities

The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was incurred. The Company's accounting policy for each category is as follows:

Other financial liabilities - This category includes accounts payable and accrued liabilities, which is recognized at amortized cost using the effective interest method.

Transaction costs in respect of financial instruments at fair value through profit or loss are recognized in the consolidated statements of income and comprehensive income immediately, while transaction costs associated with all other financial instruments are included in the initial measurement of the financial instrument.

The following table shows the classification of the Company’s financial liabilities under:

Financial liability	Classification
Accountspayable and accrued liabilities	Amortized cost

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

4. MATERIAL ACCOUNTING POLICIES (CONTINUED)

Marketable securities

Securities held for trading are traded on a recognized securities exchange, are recorded at fair values based on quoted closing bid prices at the consolidated statement of financial position dates or closing bid prices on the last day the security traded if there were no trades at the consolidated statement of financial position dates with both realized and unrealized gains and losses recorded in profit or loss.

Royalty and Stream Interests

Royalty and stream interests consist of acquired royalty and stream contracts and agreements. Royalty and stream interests acquired in an asset acquisition are recorded at cost and capitalized as either tangible or intangible assets with finite lives depending on the nature of the royalty or stream. They are subsequently measured at cost less accumulated depletion and accumulated impairment losses, if any. The cost of the royalty and stream interest is comprised of its purchase price and any costs directly attributable to acquiring the asset. Project evaluation costs that are not related to a specific agreement are expensed in the period incurred.

Producing royalty and stream interests are depleted using the units-of-production method over the life of the property to which the interests relate, which are estimated using available information of proven and probable reserves. The Company relies on information available to it under contracts with operators and/or public disclosures for information on reserves and resources from the operators of the producing mineral interests.

Acquisition costs of exploration-stage royalty and stream interests are capitalized and are not depleted until such time as revenue-generating activities begin.

Impairment of Royalty and Stream Interests

Evaluation of the carrying values of each royalty and stream is undertaken when events or changes in circumstances indicate that the carrying values may not be recoverable. Impairment is assessed at the level of cash-generating units, which are identified as the smallest identifiable group of assets that generates cash inflows and largely independent of the cash inflows from other assets. This is usually at the individual royalty or other interest level for each property from which cash inflows are generated.

An assessment is made at each reporting period if there is any indication that a previous impairment loss may no longer exist or has decreased. If indications are present, the carrying value of the royalty or stream is increased to the revised estimate of its recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount net of depletion that would have been determined had no impairment loss been recognized for the royalty or stream in previous periods.

Royalty and stream interests classified as exploration and evaluation assets are assessed for impairment whenever indicators of impairment exist in accordance with IFRS 6 . An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount.

An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount, which is the higher of its fair value less costs of disposal (“FVLCD”) and its value in use (“VIU”). Estimated future cash flows are calculated using estimated production, sales prices and a discount rate. Estimated future production is determined using current reserves and the portion of resources expected to be classified as mineral reserves, as well as exploration potential expected to be converted into reserves. Estimated sales prices are determined by reference to an average of long-term metal price forecasts by research analysts and management’s expectations. The discount rate is estimated using an average discount rate incorporating research analyst views used to value precious metal royalty and streaming companies.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

4. MATERIAL ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

The Company has determined that each unit of a commodity that is delivered to a customer under a royalty, or working interest arrangement is a performance obligation for the delivery of a good that is separate from each other unit of the commodity to be delivered under the same arrangement.

For royalty interests, revenue is recognized in accordance with the relevant terms of the specific royalty agreement. Such terms may stipulate that the Company has a right to revenue upon settlement from the end customer to the operator of the royalty property or when control of the relevant commodity is transferred to the end customer by the operator of the royalty property. At this point in time the Company has an unconditional right to payment. Revenue is measured at the fair value of the consideration received or receivable when management can reliably estimate the amount, pursuant to the terms of the royalty agreement with the operator of each mining property. In some instances, the Company will not have access to sufficient information to make a reasonable estimate of consideration to which it expects to be entitled and, accordingly, revenue recognition is deferred until management can make a reasonable estimate. Differences between estimates and actual amounts are adjusted and recorded in the period that the actual amounts are known.

Income per Share

The Company presents basic income per share for its common shares, calculated by dividing the net income attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted income per share is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants, and similar instruments is computed using the treasury stock method. Diluted income per share does not adjust the net income attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.

Share-Based Payments

Share-based payments are arrangements in which the Company receives goods or services in consideration for its own equity instruments granted to non-employees. These are accounted for as equity settled share-based payment transactions and measured at the fair value of goods and services received. If the fair value of the goods or services received cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity instruments granted at the date the Company receives the goods or services.

The Company grants share-based awards in the form of stock options and restricted share units (“RSUs”). The stock options and RSUs are equity-settled awards. The Company determines the fair value of the awards on the date of grant. This fair value is expensed to the statement of income and comprehensive income using a graded vesting attribution method over the vesting period of the awards, with a corresponding credit to contributed surplus. When the share options or share units are exercised, the applicable amounts of contributed surplus are transferred to share capital.

Income Taxes

Income tax expense comprises of current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income.

Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at year-end, adjusted for amendments to taxes payable with regards to previous years. It also includes applicable Australian withholding taxes on the Company’s royalty income from Keysbrook.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

4. MATERIAL ACCOUNTING POLICIES (CONTINUED)

Deferred tax is recorded using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the date of the consolidated statement of financial position.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it does not recognize the asset.

Income tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets against tax liabilities and when they relate to income tax levied by the same tax authority and the Company intends to settle its tax assets and liabilities on a net basis.

Related Party Transactions

Parties are considered related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Such parties include key management personnel of the Company. Parties are also considered related if they are subject to common control, joint control, or significant influence. A transaction is considered a related party transaction when there is a transfer of resources or obligations between related parties.

Adoption of New Accounting Standards

The following standards were effective and implemented for the annual period as of January 1, 2023:

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

This amendment requires companies to provide more specific disclosures about their accounting policies and the judgments made in applying these policies that have the most significant effect on the financial statements. The new definition of significant accounting policies, now material accounting policy information, is broader in scope, capturing accounting policy information that is important to understanding the judgments made in preparing the financial statements, and those policies that require the most significant judgments and estimates by the Company. There was no significant impact to the Company’s disclosure of accounting policies because of the amendments.

• Definition of Accounting Estimates (Amendments to IAS 8)

The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. There was no significant impact to the current period or comparative periods presented because of these amendments.

• Deferred Tax related to Assets and Liabilities arising from Single Transaction (Amendment to IAS 12)

This amendment clarifies the accounting for deferred tax arising from single transactions, such as business combinations and asset acquisitions, by requiring companies to recognize deferred tax for temporary differences that arise from the initial recognition of assets and liabilities in a single transaction. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.

Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

STAR ROYALTIES LTD.

4. MATERIAL ACCOUNTING POLICIES (CONTINUED)

New Accounting Standards Issued But Not Yet Effective

Certain new accounting standards have been published that are not mandatory for the current period and have not been early adopted. The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted.

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

This amendment clarifies that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period. This amendment is effective for annual reporting periods beginning on or after January 1, 2024. The Company does not expect the adoption of this amendment to have a material impact on its consolidated financial statements.

5. RECEIVABLES

	December 31,	December 31,	December 31,	December 31,
		2023		2022
Goods and service tax receivable	$	12,686	$	77,046
Royalty receivables		182,367		305,497
Receivable–Sabre Gold (Note 8)		1,512,173		-
Total	$	1,707,226	$	382,543
Current	$	1,102,357	$	382,543
Non-Current	$	604,869	$	-

6. MARKETABLE SECURITIES

	Number of
	Common Shares Held			Fair	Value
	December 31, December	31,	December 31,		December 31,
	2023 2022			2023		2022
Sabre Gold Mines Corp.	7,407,407	-	$	784,090	$	-

On November 1, 2023, the Company received 7,407,407 common shares of Sabre Gold Mines Corp. as part of the partial disposal on the gold stream over the Copperstone Mine (Note 8). The shares were restricted from trading until March 1, 2024. An adjustment to fair value as at December 31, 2023 resulted in an unrealized gain of $164,689 (2022 - $Nil).

7. INVESTMENT IN GREEN STAR JOINT VENTURE

Green Star is a carbon credit royalty investment company and a joint venture between the Company, Agnico Eagle Mines Limited (“Agnico Eagle”) and Cenovus Environmental Opportunity Fund Ltd. (“Cenovus”). Green Star was incorporated in Canada under the Canada Business Corporations Act on June 15, 2020 and domiciled in Canada.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

7. INVESTMENT IN GREEN STAR JOINT VENTURE (CONTINUED)

On May 27, 2022, the Company’s then subsidiary, Green Star, completed the closing of a non-brokered private placement of 15,384,620 shares at a price of CAD$1.00 per Green Star class A share (each a “Green Star Share”) for total gross proceeds of CAD$15,384,620 (the “Agnico Private Placement”) with Agnico Eagle and the Company’s management and Board of Directors. Following the closing of the Agnico Private Placement, Green Star owned 61.9% by the Company, 35% by Agnico Eagle, and 3.1% by the Company’s management team and Board of Directors.

Prior to the closing of the Agnico Private Placement, Green Star was a wholly-owned subsidiary of the Company. Contemporaneously with the closing of the Agnico Private Placement, the Company entered into a unanimous shareholders’ agreement and a co-investment and environmental attribute purchase agreement with Agnico Eagle to establish joint control. These agreements provide certain rights to Agnico Eagle for its holding of the Green Star Shares, which includes board of directors and technical committee nomination, the right to co-invest in green opportunities, and rights to first offer to participate in future offerings, among other things.

Due to the change in governance structure on Green Star resulting from the joint arrangement entered into with Agnico Eagle, the Company derecognized assets and liabilities of Green Star from its consolidated financial statements as of the closing date of the Agnico Private Placement and recorded an investment in joint venture in accordance with IFRS 11 Joint arrangement and IAS 28 Investment in Associates and Joint Ventures .

As a result of the Agnico Private Placement in May 2022, the Company recorded a gain of $18,543,603 in the consolidated statement of income and comprehensive income representing a fair value gain on Green Star’s Regen Ag carbon credit contract (the “Regen Ag contract”) with Anew Climate LLC (“Anew”, formerly Blue Source, LLC). Upon the recognition of the gain on the Regen Ag contract, the Company derecognized Green Star’s net assets of $19,626,315 (comprised of $18,543,603 Regen Ag contract and $1,082,712 in other royalty assets) and recorded its investment in the Green Star joint venture of $19,626,315 (CAD$25,000,000). The initial investment the Green Star joint venture was based on fair value of Green Star Shares at CAD$1.00 per share. Transaction costs of $186,492 were incurred and capitalized to Investment in joint venture.

In December 2023, Green Star completed a private placement of 14,134,620 shares with Cenovus at a price of CAD$1.50 per share for total gross proceeds of $15,594,126 (CAD$21,201,930) (the “Cenovus Private Placement”). Green Star incurred $1,042,566 in share issuance costs associated with the Cenovus Private Placement. The Company continues to account for Green Star as an investment in joint venture as Cenovus became a party of the unanimous shareholders’ agreement and the co-investment and environmental attribute purchase agreement along with Agnico Eagle to establish joint control. Following the closing of the Cenovus Private Placement, Green Star is now owned 45.9% by Star Royalties, 25.9% by Agnico Eagle, 25.9% by Cenovus and 2.3% by the management team of the Company and Green Star and the Company’s Board of Directors. This resulted in a 16% reduction in ownership of Green Star and a dilution loss of $773,977.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

7. INVESTMENT IN GREEN STAR JOINT VENTURE (CONTINUED)

The following table discloses the continuity of the Company’s investment in Green Star joint venture as at December 31, 2023:

		Investment in
	Joint Venture
Balance as at December 31, 2021	$	-
Initial recognition		19,626,315
Transaction costs		186,492
Equity income for the year		1,080,747
Foreign currency translation		(1,204,407)
Balance as at December 31, 2022	$	19,689,147
Equity income for the year		8,001,366
Loss on dilution		(559,744)
Foreign currency translation		625,863
Balance as at December 31, 2023	$	27,756,632

Summarized financial information in respect of the Company’s investment in Green Star joint venture as at and for the year ended December 31, 2023:

	As	at
	December 31, 2023	December 31, 2022 (Note 2d)
Assets Cash Other current assets Non-current financial assets Liabilities Current liabilities Non-current liabilities	$ 20,820,836 137,142 52,334,489 1,462,816 11,381,000	$ 6,531,374 68,114 31,825,415 21,168 6,881,000
Net assets (100%)	$ 60,448,651	$ 31,522,735
Star Royalties’ share of net assets	$ 27,745,931	$19,514,072
	Year Ended December 31, 2023	Period from May 27, 2022 to December 31, 2022
Royalty income Depletion	$ 25,900 (14,822)	$ - -
Gross profit Operating expenses Other (loss) income Fair value gain on financial assets Deferred tax expenses	11,078 (1,412,938) (953,872) 19,358,263 (4,476,000)	- (449,548) 1,454,781 8,032,591 (7,292,000)
Net income (100%)	$ 12,526,531	$ 1,745,824
Star Royalties’ share of net income	$ 8,001,366	$1,080,747

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

7. INVESTMENT IN GREEN STAR JOINT VENTURE (CONTINUED)

Green Star’s non-current financial assets of $52,334,489 (2022 - $31,825,415) consist of $52,122,785 (2022 - $31,603,917) in carbon credit royalty investments and $211,704 (2022 - $221,498) in other royalty investments.

Green Star Regen Ag, USA

In April 2022, Green Star entered into an expansion of its agreement with Anew Climate, LLC (“Anew”, formerly Blue Source, LLC) for the Regen Ag project, originally entered into in December 2021, to create premium, verified carbon offset credits that would reward the adoption of regenerative agriculture practices by North American farmers. Under the agreement, Green Star will be financing a regenerative agriculture carbon program being developed and managed by Anew for total cash contribution of $20,625,000. Cash will be available to growers in the CarbonNOW program through Locus Agricultural Solutions (“Locus AG”).

Locus AG is actively recruiting growers under this project until a total of 1,320,000 acres of farmland across the United States have been adopted into the program. Green Star commenced initial funding of the investment in June 2022 and contributed a total of $5,502,257 as of December 31, 2023. Subsequent to December 31, 2023, Green Star funded $579,319 on March 22, 2024, and contributed a total contribution of $6,081,576 to date.

On May 27, 2022, Green Star recorded a gain on the Regen Ag contract as the result of the closing of the Agnico Private Placement. On December 31, 2023, the Company determined the fair value of Regen Ag contract to be $50,673,174. For the year ended December 31, 2023, the Company recognized a total fair value gain of $18,737,594.

On December 4, 2023, Green Star, Locus AG and Anew executed a term sheet to revise the operating structure of its existing royalty investment into Locus AG’s regenerative agriculture carbon farming program, CarbonNOW. Green Star subsequently entered into an agreement with Locus AG and Anew and certain of their affiliates on January 17, 2024, to name Locus AG the project operator and formal manager of CarbonNOW. Anew will continue to provide project development and technical services and will lead the project’s validation and verification efforts, as well as conduct carbon credit marketing and sales. Green Star has agreed to revise its proceeds sharing agreement that is currently with an affiliate of Anew and will partner directly with Locus AG for a 30% gross revenue royalty on CarbonNOW. Green Star’s total cash contribution of $20,625,000 remains unchanged but the royalty term has been extended from 10 years to 20 years.

The fair values of the Regen Ag contract were estimated in accordance with the revised operating structure as described in the term sheet executed in December 2023 and the agreement signed in January 2024 using a discounted cash flow model taking into consideration of the following significant unobservable inputs:

• Expected volumes of carbon credit units and timing of the delivery of such units over the life of the program;

• • Carbon credit pricing assumptions, and

• Discount rate

The significant three unobservable inputs used to measure the Regen Ag contract were as follows. Note that the table of assumptions and sensitivity analysis provided below are presented on a 100% basis.

	December 31,	December 31,
	2023	2022
Expected volumes of carbon credits over life of program (10 to 20 years)	48.8 million	27.6 million
Carbon credit pricing assumptions	$24-$40	$21-$27
Discount rate	20%	21%

For the year ended December 31, 2023, the impact of a reasonable 5% increase/decrease in the estimated carbon credit pricing assumption, with all other variables held constant, would result in an increase/decrease in the fair value of the Regen Ag contract of $2.4 million and a resulting impact on the profit and loss of the Company of $1.1 million.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

7. INVESTMENT IN GREEN STAR JOINT VENTURE (CONTINUED)

For the year ended December 31, 2023, the impact of a reasonable 5% increase/decrease in the estimated volumes of carbon credits, with all other variables held constant, would result in an increase/decrease in the fair value of the Regen Ag contract of $2.5 million and a resulting impact on the profit and loss of the Company of $1.1 million.

For the year ended December 31, 2023, the impact of a reasonable 1% increase/decrease in the estimated discount rate, with all other variables held constant, would result in an increase/decrease in the fair value of the Regen Ag contract of $3.2 million and a resulting impact on the profit and loss of the Company of $1.5 million.

8. ROYALTY AND STREAM INTERESTS

Cost Mining Royalties Stream Interests Carbon Credit & Other Royalties	Total
Balance, December 31, 2021 $ 14,325,961 $ 12,646,387 $ 370,170 Additions - - 722,078 Deconsolidation - - (1,082,712) Foreign currency translation (900,850) (790,587) (9,536)	$ 27,342,518 722,078 (1,082,712) (1,700,973)
Balance, December 31, 2022 $ 13,425,111 $ 11,855,800 $ - Partial disposal - (2,586,464) - Foreign currency translation 322,787 158,813 -	$ 25,280,911 (2,586,464) 481,600
Balance, December 31, 2023 $ 13,747,898 $ 9,428,149 $ -	$ 23,176,047
Accumulated depletion Mining Royalties Stream Interests Carbon Credit & Other Royalties	Total
Balance, December 31, 2021 $ 630,945 $ - $ - Depletion 701,746 - - Foreign currency translation (74,733) - -	$ 630,945 701,746 (74,733)
Balance, December 31, 2022 $ 1,257,958 $ - $ - Depletion 439,145 - - Foreign currency translation 39,125	$ 1,257,958 439,145 39,125
Balance, December 31, 2023 $ 1,736,228 $ - $ -	$ 1,736,228
Net book value
As at December 31, 2022 $ 12,167,153 $ 11,855,800 $ - As at December 31, 2023 $ 12,011,670 $ 9,428,149 $ -	$ 24,022,953 $ 21,439,819

Of the total net book value as at December 31, 2023, $11,718,646 (December 31, 2022 - $11,881,009) is depletable and $9,721,173 (December 31, 2022 - $12,141,944) is non-depletable.

The Company’s royalty and stream interests consisted of the following:

Mining Royalties

Baavhai Uul, Mongolia

In July 2019, the Company purchased a 1.5% of Gross Revenue of any product extracted, produced, sold, and marketed from the Property located in Sukhbaatar Province in Mongolia from ION Energy LLC for a total consideration of $141,306.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

8. ROYALTY AND STREAM INTERESTS (CONTINUED)

Bayan Undur, Mongolia

In October 2019, the Company purchased a 2% net smelter returns royalty on all products produced from the Bayan Undur Property and a right of first refusal on any potential future metals stream on the Bayan Undur Property located in Bayankhongor Aimag, Bayan Undur Soum, Mongolia from Bayan Undur Resource LLC for a total consideration of $152,450.

Elk Gold, British Columbia, Canada

In September 2021, the Company acquired an existing 2% net smelter return royalty from Almadex Minerals Ltd. on the Elk Gold Mine (“Elk Gold”) located in BC, Canada. Elk Gold is owned and operated by Gold Mountain Mining Corp. for a total acquisition cost of $10,702,142.

Keysbrook, Western Australia, Australia

In October 2020, the Company acquired an existing 2.0% minerals royalty from Resource Capital Fund VI L.P. on the Keysbrook mineral sands mine (“Keysbrook) located in Western Australia, Australia. It is owned and operated by Keysbrook Leucoxene Pty Ltd. for a total acquisition cost of $3,163,116.

Stream Interests

Copperstone, Arizona, USA

In November 2020, the Company, and Sabre Gold Mines Corp. (“Sabre Gold”) (formerly Arizona Gold Corp.) entered into a definitive $18,000,000 gold purchase and sale (the “Streaming Agreement”) to finance the restart of underground operations and gold production at the Copperstone Gold Mine (“Copperstone”) in Arizona, USA. The $18,000,000 advance payment under the Streaming Agreement would be provided in three equal instalments, with the first $6,000,000 instalment paid on the initial closing and the second tranche paid in February 2021. On June 28, 2021, the Streaming Agreement was amended whereby the previously defined final tranche payment was removed and was replaced by certain closing conditions having to be met by Sabre Gold. Total acquisition costs of $12,546,514 included $12,000,000 in cash consideration, and $546,514 in transaction costs.

On October 31, 2023, the Company completed an amendment with Sabre Gold to restructure its existing gold streaming agreement on the Copperstone Gold Mine (the “Third Amending Agreement”) and recorded a gain of $575,829 in the consolidated statement of income and comprehensive income. Under the Third Amending Agreement to the gold purchase and sale agreement between the Company, Sabre Gold, American Bonanza Gold Corp., and Bonanza Exploration Inc., the Copperstone stream was revised from 6.6% of gold produced with production-based step-downs to a flat 4% of gold produced for the duration of Copperstone’s life-of-mine. Pursuant to the Third Amending Agreement, the Company received $1,148,710 (CAD$1,550,000) in cash and 7,407,407 shares of Sabre Gold on November 1, 2023 (Note 6). Additionally, the Company will receive a combination of cash and shares of marketable securities in the amount of $907,304 (CAD$1,200,000) in September 2024 and $604,869 (CAD$800,000) in September 2025 (Note 5).

9. RELATED PARTY TRANSACTIONS

Related parties include key management personnel, individuals or companies controlled by key management personnel, and Green Star. Key management personnel include those with authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Board of Directors and corporate officers, including the Company’s Executive Chairman, Chief Executive Officer, Chief Investment Officer, and Chief Financial Officer.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

9. RELATED PARTY TRANSACTIONS (CONTINUED)

During the year ended December 31, 2023, and 2022, key management compensation was as follows:

	Year ended December 31,
	2023 2022
Management and board compensation Marketing and shareholder communications Severance Share-based compensation	$ 1,428,127 $ 1,163,318 - 24,726 - 137,622 591,553 782,560
	$ 2,019,680 $2,108,226

Pursuant to the amended management services agreement between the Company and Green Star dated September 19, 2022, the Company received management fees of $222,331 for the year ended December 31, 2023 (2022 - $269,091).

10. SHAREHOLDERS’ EQUITY

(a) Authorized

The Company is authorized to issue an unlimited number of common shares without par value.

(b) Issued Share Capital

During the year ended December 31, 2023, the Company entered into the following transactions:

• i.) In January 2023, the Company issued 935,614 common shares valued at $252,476 (CAD$341,499) in relation to compensation.

• ii.) In February 2023, the Company issued 774,046 common shares valued at $326,990 (CAD$442,286) in relation to vested restricted share units (“RSUs”).

During the year ended December 31, 2022, the Company entered into the following transactions:

• i.) In February 2022, the Company issued 416,665 common shares valued at $176,492 (CAD$225,001) in relation to vested RSUs.

• ii.) In March 2022, the Company reclassed $144,716 (CAD$192,696) relating to the expired broker warrants, from contributed surplus to retained earnings (deficit).

• iii.) In September 2022, the Company issued 95,239 common shares valued at $39,165 (CAD$51,429) in relation to vested RSUs.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

10. SHAREHOLDERS’ EQUITY (CONTINUED)

(c) Publicly Traded Warrants

As at December 31, 2023, the following publicly traded warrants were outstanding:

	Number of publicly	Weighted average
	traded warrants	exercise price
		CAD
Balance, December 31, 2021	39,421,700	$ 1.00
Granted	-	-
Exercised	-	-
Balance, December 31, 2023 and 2022	39,421,700	$1.00

The publicly traded warrants expired on February 19, 2024.

(d) Share Purchase Warrants

As at December 31, 2023, the following share purchase warrants were outstanding:

				Weighted average
			Number of share	exercise price
			purchase warrant	CAD
Balance, December	31,	2021	829,652	$ 0.70
Granted			-	-
Balance, December	31,	2022	829,652	$ 0.70
Expired			(829,652)	0.70
Balance, December	31,	2023	-	$-

The share purchase warrants expired on September 29, 2023.

(e) Stock Options

The Company has an equity compensation plan, reapproved on June 20, 2023, under which it is authorized to grant stock options, RSUs and performance share units, or some combination thereof up to 10% of its outstanding common shares.

On February 21, 2023, the Company issued 1,525,000 stock options to officers and directors of the Company with an exercise price of CAD$0.50 per share. The stock options expire on February 21, 2033 and vest over three years in equal portions on the anniversary of the grant date. The fair value per stock option as determined on the grant date was CAD$0.25.

On February 21, 2022, the Company issued 625,000 stock options to officers and directors of the Company with an exercise price of CAD$0.60 per share. The stock options expire on February 21, 2032 and vest over three years in equal portions on the anniversary of the grant date. The fair value per stock option as determined on the grant date was CAD$0.40.

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

10. SHAREHOLDERS’ EQUITY (CONTINUED)

Stock option transactions during the years ended December 31, 2023 and 2022 were as follows:

	Number of options	Weighted average
		exercise price
		CAD
Balance, December 31, 2021	3,735,000	$ 0.70
Granted	625,000	0.60
Forfeited	(335,000)	0.70
Balance, December 31, 2022	4,025,000	$ 0.68
Granted	1,525,000	0.50
Expired	(335,000)	0.70
Balance, December 31, 2023	5,215,000	$ 0.63
Balance exercisable, December 31, 2023	2,507,083	$0.69

The following table summarizes information concerning outstanding and exercisable options at December 31, 2023:

Exercise prices	Number of options	Number of options	Weighted average life
CAD	outstanding	exercisable	(years)
0.70	3,065,000	2,298,750	7.14
0.60	625,000	208,333	8.15
0.50	1,525,000	-	9.15
	5,215,000	2,507,083	7.85

The fair value of the options was estimated using the Black-Scholes option pricing model with the following weightedaverage assumptions:

	2023	2022
Risk-free interest rate	2.76%	1.78%
Expected price volatility	56.93%	56.48%
Expected life	10 years	10 years
Expected dividendyield	-	-

During the year ended December 31, 2023, the Company recorded share-based compensation expenses of $285,410 (2022 - $283,947) in relation to vesting stock options in share-based compensation in the consolidated statements of income and other comprehensive income.

(f) RSUs

Pursuant to the equity compensation plan reapproved on June 20, 2023, the Company is authorized to issue RSUs to directors, officers, employees, or consultants. The RSUs entitle holders to common shares of the Company upon vesting, based on vesting terms determined by the Board of Directors at the time of grant.

On February 21, 2023, the Company granted 611,925 RSUs to officers and directors of the Company. The RSUs granted are vested over three years in equal portions on the anniversary of the grant date. The fair value per unit on the grant date was CAD$0.39, being the share price on the IFRS grant date.

On February 21, 2022, the Company granted 1,215,000 RSUs to officers and directors of the Company. The RSUs granted are vested over three years in equal portions on the anniversary of the grant date. The fair value per unit on the grant date was CAD$0.60, being the share price on the IFRS grant date.

Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

STAR ROYALTIES LTD.

10. SHAREHOLDERS’ EQUITY (CONTINUED)

During the year ended December 31, 2023, the Company recorded share-based compensation expenses of $319,544 (2022 - $498,613) in relation to RSUs in share-based compensation in the consolidated statements of income and other comprehensive income.

11. SEGMENT INFORMATION

The Company organizes and manages the business under (i) Star Royalties and (ii) Green Star joint venture. The operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (“CEO”) who fulfills the role of the chief operating decision-maker. The CEO is responsible for assessing the performance of the Company’s operating segments, including reviewing financial information from Green Star joint venture (Note 7) and is responsible for resources allocation.

For the year ended December 31, 2023, the Company had mining royalty income of $785,254 from a royalty located in Australia (2022 - $1,309,523), $155,245 from a royalty located in Canada (2022 - $105,975) and equity income of $8,001,366 from Green Star joint venture located in Canada (2022 – $1,080,747).

The Company has non-current assets in the following geographic locations:

	December 31, 2023	December 31,2022
United States	$ 9,428,149	$ 11,855,800
Canada	38,494,073	29,682,263
Australia	1,586,074	1,887,893
Mongolia	293,024	286,144
	$ 49,801,320	$43,712,100

Investment in Green Star joint venture of $27,756,632 (December 31, 2022 - $19,689,147) and long-term receivable of $604,869 (Note 5) (December 31, 2022 - $Nil), included in non-current assets, are located in Canada.

12. FINANCIAL AND CAPITAL RISK MANAGEMENT

Financial assets and liabilities are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement requires judgement and may affect placement within the fair value hierarchy levels. The hierarchy is as follows:

• Level 1: quoted prices (unadjusted) 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).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying value of cash, receivables, and accounts payable and accrued liabilities, approximates fair value due to the short-term nature of the financial instruments.

The fair value of long-term receivable is determined using the discounted cash flow method using discount rates based on adjusted observable market rates.

Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

STAR ROYALTIES LTD.

12. FINANCIAL AND CAPITAL RISK MANAGEMENT (CONTINUED)

Risk Management

The Company is exposed to varying degrees to a variety of financial instrument-related risks:

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 cash held at a large Canadian financial institution in interest-bearing accounts. The Company has no investment in asset-backed commercial paper.

The Company’s receivables consist of royalty receivable, long term receivable and goods and services tax receivable from the Government of Canada.

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 manages liquidity risk by maintaining sufficient cash balances to meet its liquidity requirements and through its capital management.

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.

a) Interest Rate Risk

The Company’s exposure to interest rate risk arises from the interest rate impact on cash. The Company’s practice has been to invest cash at floating rates of interest, in order to maintain liquidity, while achieving a satisfactory return for shareholders. There is minimal risk that the Company would recognize any loss as a result of a decrease in the fair value of any guaranteed bank investment certificates included in cash as they are held with large financial institutions. As at December 31, 2023, the Company is not exposed to significant interest rate risk.

b) Foreign Currency Risk

The Company’s functional currency is the Canadian dollar with the reporting currency of the Company being the U.S. dollar. The Company undertakes certain transactions denominated in U.S. dollars and is therefore exposed to fluctuations in the foreign exchange rates between the U.S. dollar relative to the Canadian dollar. For the year ended December 31, 2023, the impact of a 10% increase or decrease in the U.S. dollar relative to the Canadian dollar would result in an increase or decrease in net income of $199,458 (For the year ended December 31, 2022: $260,253).

c) Price Risk

The Company is exposed to price risk with respect to commodity prices on the royalty and stream agreements and share price of marketable securities on hand. Currently, the Company’s revenue is not hedged to provide shareholders with full exposure to changes in the market prices of the commodities and the share price of marketable securities on hand. For the year ended December 31, 2023, the impact of a 10% increase or decrease in the share price of the marketable securities on hand would result in an increase or decrease in net income of $103,704 (For the year ended December 31, 2022: $Nil).

STAR ROYALTIES LTD. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

12. FINANCIAL AND CAPITAL RISK MANAGEMENT (CONTINUED)

Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern to pursue the acquisition of royalty and stream interests and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In the management of capital, the Company includes its components of shareholders’ equity.

The Company manages the capital structure and adjusts it considering changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the amount of cash.

The Company currently is not subject to externally imposed capital requirements.

13. INCOME TAXES

A reconciliation of income taxes at statutory rates with the reported taxes for the year ended December 31, 2023 and 2022 are as follows:

2023	2022
Net income before income taxes $ 5,873,192	$ 17,724,727
Expected income tax expense at statutory tax rate of 26.5% $ 1,556,000 Permanent differences 98,000 Non-taxable gain on deconsolidation of subsidiary - Equity income from Green Star joint venture (2,120,000) Loss on dilution of investment in Green Star joint venture 205,000 Withholding taxes 235,576 Change in unrecognized deferred tax asset 261,000	$ 4,697,000 81,000 (4,914,000) (286,000) - 392,784 422,000
Income tax expense $ 235,576	$ 392,784

The significant components of the Company’s deferred tax assets and liabilities are as follows:

		2023		2022
Deferred tax assets (liabilities)
Marketable securities	$	(22,263)	$	-
Non-capital losses		22,263		-
Net deferred tax assets	$	-	$	-

The Company has not recognized deferred tax assets in respect of the following deductible temporary differences:

			Expiry Date
		2023	Range
Royalty and stream interests	$	4,438,000	N/A
Share issuance costs		775,000	N/A
Non-capital losses available for futureperiod		3,233,990	2039-2043

STAR ROYALTIES LTD.

Notes to the Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 (Presented in U.S. Dollars)

13. INCOME TAXES (CONTINUED)

The Company has a $26.7 million taxable temporary difference associated with the investment in Green Star joint venture on which no deferred tax liability has been recognized.

14. SUBSEQUENT EVENT

Subsequent to December 31, 2023, the Company entered into the following transactions:

• a) On February 21, 2024, 1,713,358 RSUs were granted to management of the Company. The RSUs granted vest over three years in equal portions on the anniversary of the grant date.