Star Royalties Ltd. — Interim / Quarterly Report 2021

Nov 24, 2021

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CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in United States (“US”) Dollars) (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3), if an auditor has not performed a review of the condensed interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim financial statements of Star Royalties Ltd. have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with the standards established by the Canadian Institute of Chartered Professional Accountants for a review of interim financial statements by an entity’s auditor.

STAR ROYALTIES LTD.

CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION

(Presented in US Dollars) (Unaudited) As At

	September 30, 2021	December 31, 2020
ASSETS Current Cash and cash equivalents (Note 4) Receivables (Note 5) Prepaid and other Non-current Royalty and stream interests (Note 6)	$ 4,320,714 368,875 68,463 4,758,052 26,911,683 $ 31,669,735	$ 1,988,993 164,017 120,106 2,273,116 10,346,424 $ 12,619,540
LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities (Note 7) Shareholders’ equity Share capital (Note 9) Contributed surplus Accumulated other comprehensive income Deficit	$ 427,619 427,619 30,211,997 3,582,260 423,762 (2,975,903) 31,242,116 $ 31,669,735	$ 134,835 134,835 12,786,743 144,716 459,289 (906,043) 12,484,705 $ 12,619,540

Subsequent event (Note 5)

Approved on behalf of the Board of Directors

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

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

STAR ROYALTIES LTD.

CONDENSED INTERIM STATEMENTS OF LOSS AND OTHER COMPREHENSIVE LOSS (Presented in US Dollars) (Unaudited)

	For the three months ended September 30, 2021	For the three months ended September 30, 2020	For the nine months ended September 30, 2021	For the nine months ended September 30, 2020
Revenue Royalty income Costs of sales Depletion Gross profit Expenses Marketing and shareholder communications Management compensation (Note 8) Office and miscellaneous Professional fees Share-based compensation (Notes 8 and 9) Total operating expenses Other income/(loss) Interest income Foreign exchange income/(loss) Net loss Other comprehensive loss Items that may be reclassified subsequently to profit or loss Currency translation adjustment Total other comprehensive loss Total comprehensive loss	$ 225,458 (144,272) 81,186 43,936 225,247 76,382 152,713 194,210 (692,488) 14,115 199,678 (397,509) (784,017) (784,017) $ (1,181,526)	$ - - - 1,351 45,027 7,664 9,896 - (63,938) 299 (70,726) (135,365) (111,363) (111,363) $ (246,728)	$ 580,478 (404,692) 175,786 121,989 670,963 196,890 548,931 830,241 (2,369,014) 44,562 78,806 (2,069,860) (35,527) (35,527) $ (2,105,387)	$ - -
				-
				2,709 210,652 22,526 23,955 -
				(259,842)
				2,225 (70,726)
				(328,343)
				(131,834)
				(131,834) $ (460,177)
Basic and diluted loss per common share Weighted average number of common shares outstanding – basic and diluted	$ (0.01) 71,098,873	$ (0.01) 9,890,850	$ (0.03) 63,921,705	$ (0.01) 8,493,275

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

STAR ROYALTIES LTD.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Presented in US Dollars) (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period Items not affecting cash: Depletion Foreign exchange (income)/loss Share-based compensation Non-cash working capital items changes: Accounts payable and accrued liabilities Due to related parties Prepaid and other Receivables Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of royalty and stream interests (Note 6) Net cash used by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares (Note 9) Proceeds from issuance of warrants (Note 9) Share issuance costs (Note 9) Exercise of warrants (Note 9) Proceeds from subscriptions received in advance Repurchase of shares Net cash provided by financing activities Change in cash and cash equivalents for the period Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period	$ (2,069,860) 404,692 (78,806) 830,241 297,049 - (92,904) (61,973) (771,561) (16,348,387) (16,348,387) 18,379,529 2,772,665 (1,758,343) 5,799 - - 19,399,650 2,279,638 52,083 1,988,993 $ 4,320,714	$ (328,343) - 70,726 - 24,113 96,050 (3,627) (64,266)
		(205,347)
		(194,567)
		(194,567)
		8,407,573 - (149,684) - 4,365,785 (292,383)
		12,331,291 11,931,377 (207,496) 396,916 $ 12,120,797

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

STAR ROYALTIES LTD.

CONSENDED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Presented in US Dollars) (Unaudited)

Share Capital

	Number (Note 9)	Amount	Subscriptions received in advance	Contributed surplus	Accumulated other comprehensive income	Deficit	Total
Balance, December 31, 2019 Shares re-purchased related to acquisition of royalty interests (Note 9) Share cancellation (Note 9) Shares issued for cash Share issuance costs – cash Share issuance costs – broker warrants Shares issued to settle amount due to related parties Subscriptions received in advance Loss and other comprehensive loss Balance, September 30, 2020	7,833,334 (2,833,333) (2,500,000) 20,670,656 - - 384,000 - - 23,554,657	$ 484,033 (292,383) - 8,618,656 (357,397) (144,716) 183,735 - - $ 8,491,375	$ 210,530 - - (210,530) - - - 4,365,785 - $ 4,365,785	$ - - - - - 144,716 - - - $ 144,716	$ 7,669 - - - - - - - (131,834) $ (124,165)	$ (106,150) - - - - - - - (328,343) $ (434,493)	$ 596,082 (292,383) - 8,408,126 (357,397) - 183,735 4,365,785 (460,177) $ 12,443,218
Balance, December 31, 2020 Shares issued on initial public offering and overallotment exercised Share issuance costs Shares issued for royalty Warrants issued for royalty Exercise of warrants Share-based compensation Loss and other comprehensive loss Balance, September 30, 2021	33,018,137 38,055,500 - 1,659,304 - 7,200 - - 72,740,141	$ 12,786,743 18,379,529 (1,534,786) 574,249 - 6,262 - - $ 30,211,997	$ - - - - - - - - $ -	$ 144,716 2,773,665 (223,557) - 57,659 (463) 830,240 - $ 3,582,260	$ 459,289 - - - - - - (35,527) $ 423,762	$ (906,043) - - - - - - (2,069,860) $ (2,975,903)	$ 12,484,705 21,153,194 (1,758,343) 574,249 57,659 5,799 830,240 (2,105,387) $ 31,242,116

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

STAR ROYALTIES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

1. NATURE AND CONTINUANCE OF OPERATIONS

Star Royalties Ltd. (formerly Oxford Royalties Ltd.) (the “Company”) was incorporated in Canada under the Canada Business Corporations Act on February 15, 2018. The Company changed its name on January 24, 2020. The Company is a precious metals and green royalty and streaming investment company. The head office, records office, and principal address of the Company is 902-18 King Street East, Toronto, Ontario, M5C 1C4. The Company listed its common shares and warrants on the TSX Venture Exchange in February 2021 under the symbols “STRR” and STRR.WT”, respectively. The Company’s common shares are also traded on the OTCQX under the symbol “STRFF”.

In February 2021, the Company completed its initial public offering (“IPO”) and issued 34,286,000 units of the Company at a price of CAD$0.70 per unit, as described in Note 8, and commenced trading on the TSX Venture Exchange (“TSX-V”) under the symbol “STRR”. As a result of the proceeds generated from the IPO as well as the cash that was on hand September 30, 2021, the Company believes that it is in a position to meet its obligations and other commitments in the normal course.

These condensed interim financial statements were approved and authorized for issue by the Board of Directors of the Company on November 23, 2021.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The full extent and impact of the COVID-19 pandemic are unknown and to date has included volatility in financial markets, a slowdown in economic activity and volatility in commodity prices. The Company completed a review of all operations on which the Company holds royalty, stream and other interests to identify the impacts of COVID-19. Based on the review COVID-19 was not considered to have a material impact on any of the Company’s investments and as such at September 30, 2021, the Company has not recorded any adjustments directly attributable to the COVID19 pandemic.

2. BASIS OF PREPARATION

(a) Statement of compliance

These condensed interim financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including International Accounting Standards (“IAS”) 34 “Interim Financial Reporting”.

This condensed interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that this financial report be read in conjunction with the annual audited financial statements of the Company for the year ended December 31, 2020. The accounting policies applied in preparation of these condensed interim financial statements are consistent with those applied and disclosed in the Company’s audited financial statements for the year ended December 31, 2020. In addition, the Company adopted the following accounting policy in relation to share-based compensation:

Share-based compensation

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 earnings (loss) 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.

STAR ROYALTIES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

2. BASIS OF PREPARATION (CONTINUED)

At the end of the reporting period, the Company updates its estimate of the number of awards that are expected to vest and adjusts the total expense to be recognized over the vesting period.

(b) Basis of measurement

The condensed interim 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 3 of the audited annual financial statements for the year ended December 31, 2020.

3. USE OF ESTIMATES, ASSUMPTIONS AND JUDGEMENTS

Significant Accounting Judgments and Estimates

The preparation of these condensed interim 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 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.

In preparing these condensed interim financial statements, the Company applied the significant accounting judgements and estimates as disclosed in Note 2 of the audited financial statements for the year ended December 31, 2020.

4. CASH AND CASH EQUIVALENTS

September 30, 2021	September 30, 2021	December 31, 2020
Cash Guaranteed investment certificates Total	$ 4,320,714 - $ 4,320,714	$ 856,094 1,132,899 $ 1,988,993

5. RECEIVABLES

September 30, 2021	September 30, 2021	December 31, 2020
Goods and service tax (“GST”) receivable Royalty receivable Total	$ 143,417 225,458 $ 368,875	$ 153,710 10,307 $ 164,017

Subsequent to September 30, 2021, the Company received the royalty receivable of $225,458.

STAR ROYALTIES LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

6. ROYALTY AND STREAM INTERESTS

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As at September 30, 2021, the following are mining royalties:
Baavhai Uul Bayan Undur Elk Gold Keysbrook Total
December 31, 2019 $ 144,040 $ 153,669 $ - $ - $ 297,709
Additions during the year - - - 3,163,116 3,163,116
- - -
Depletion during the year (5,740) (5,740)
Foreign currency translation 3,106 3,315 - 102,712 109,133
Closing, December 31, 2020 $ 147,146 $ 156,984 $ - $ 3,260,088 $ 3,564,218
Additions during the period - - 10,707,457 - 10,707,457
- - -
Depletion during the period (404,692) (404,692)
Foreign currency translation 388 414 24,998 14,885 40,685
Closing, September 30, 2021 $ 147,534 $ 157,398 $ 10,732,455 $ 2,870,280 $ 13,907,668
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As at September 30, 2021, the following are steam interest:

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Copperstone Total
December 31, 2019 $ - $ -
Additions during the year 6,537,566 6,537,566
- -
Depletion during the year
Foreign currency translation 115,150 115,150
Closing, December 31, 2020 $ 6,652,716 $ 6,652,716
Additions during the period 6,008,948 6,008,948
- -
Depletion during the period
Foreign currency translation (27,457) (27,457)
Closing, September 30, 2021 $ 12,634,207 $ 12,634,207
As at September 30, 2021, the following are carbon credit royalties:
Elizabeth
Metis LSFN Forest Total
December 31, 2019 $ - $ - $ -
Additions during the year - 117,366 117,366
- - -
Depletion during the year
Foreign currency translation - 12,124 12,124
Closing, December 31, 2020 $ - $ 129,490 $ 129,490
Additions during the period 242,502 - 242,502
- - -
Depletion during the period
Foreign currency translation (2,525) 341 (2,184)
Closing, September 30, 2021 $ 239,977 $ 129,831 $ 369,808
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Of the total net book value as at September 30, 2021, $2,870,280 (December 31, 2020 - $3,260,088) is depletable and $24,041,403 (December 31, 2020 - $7,086,336) is non-depletable.

STAR ROYALTIES LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

6. ROYALTY AND STREAM INTERESTS (CONTINUED)

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Carbon Credit
Mining Royalties Steam Interests Royalties Total
December 31, 2019 $ 297,709 $ - $ - $ 297,709
Additions during the year 3,163,116 6,537,566 117,366 9,818,048
- -
Depletion during the year (5,740) (5,740)
Foreign currency translation 109,133 115,150 12,124 236,407
Closing, December 31, 2020 $ 3,564,218 $ 6,652,716 $ 129,490 $ 10,346,424
Additions during the period 10,707,457 6,008,948 242,502 16,958,907
- -
Depletion during the period (404,692) (404,692)
Foreign currency translation 40,685 (27,457) (2,184) (11,044)
Closing, September 30, 2021 $ 13,907,668 $ 12,634,207 $ 369,808 $ 26,911,683
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Copperstone

In February 2021, the Company made the second instalment payment of $6,000,000 pursuant to the purchase and sale agreement in respect of the Copperstone asset (the “Streaming Agreement”) with Sabre Gold Mines Corp. (“Sabre Gold”) (formerly Arizona Gold Corp.). Total acquisition costs of $8,948 were incurred.

On June 28, 2021, the Streaming Agreement was amended whereby the previously defined final tranche payment date was removed and was replaced by certain closing conditions having to be met by Sabre Gold.

Elizabeth Metis Settlement

In July 2021, the Company executed a definitive royalty purchase agreement and gross revenue royalty agreement with Elizabeth Metis Settlement (“EMS”) to acquire a 13.5% gross revenue royalty on EMS’ revenue share from the creation and sale of emission reduction benefits (including carbon offset credits and emission reduction credits) from forested lands located in EMS in Alberta, Canada for a total consideration of $238,569 (CAD$300,000) in cash. Total acquisition costs of $3,933 were incurred.

Elk Gold

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 and owned and operated by Gold Mountain Mining Corp. for $10,000,000 in cash, 1,659,304 common shares valued at $574,249 (CAD$730,094) and 829,652 common share purchase warrants valued at $57,659 (CAD$73,307). Each common share purchase warrant will be exercisable at CAD$0.70 until September 29, 2023. Total acquisition costs of $75,549 were incurred.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited)

STAR ROYALTIES LTD.

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

September 30, 2021	September 30, 2021	December 31, 2020
Accounts payable and accrued liabilities Share issuance costs payable	$ 427,619 - $ 427,619	$ 7,766 127,069 $ 134,835

8. RELATED PARTY TRANSACTIONS

Related parties include key management personnel, and individuals or companies controlled by key management personnel. Key management personnel include those persons having 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, Chief Business Development Officer, and Chief Financial Officer.

During the three and nine months ended September 30, 2021 and 2020, the Company entered into the following transactions with related parties:

	Three months ended September 30, 2021	Three months ended September 30, 2020	Nine months ended September 30, 2021	Nine months ended September 30, 2020
Management compensation Marketing and shareholder communications Share-based compensation	$ 226,637 17,413 194,210 $ 438,260	$ 45,635 1,342 - $ 46,977	$ 671,720 49,653 830,241 $ 1,551,614	$ 210,652 2,709 - $ 213,361

9. SHAREHOLDERS’ EQUITY

(a) Authorized

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

(b) Share consolidation

The Board of Directors authorized a five-to-one share consolidation, which was passed at the shareholders’ meeting on November 30, 2020 and took effect on December 4, 2020. The number of issued and outstanding shares, broker warrants, and per share amounts have been retrospectively restated for all periods presented unless otherwise stated.

(c) Issued share capital

During the nine months ended September 30, 2021, the Company entered into the following transactions:

• a) In February 2021, the Company completed its initial public offering of 34,286,000 units of the Company at a price of CAD$0.70 per unit for gross proceeds of $18,974,650 (CAD$24,000,200). Each unit consists of one common share and one publicly traded warrant. Each publicly traded warrant entitles the holder to purchase one common share at an exercise price of CAD$1.00 per common share until February 19, 2024. The gross proceeds of $18,974,650 were allocated between common shares and publicly traded warrants and recorded as $16,562,159 to share capital and $2,412,491 to contributed surplus.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

STAR ROYALTIES LTD.

9. SHAREHOLDERS’ EQUITY (CONTINUED)

• b) In March 2021, the syndicate of underwriters for the Company’s IPO exercised a portion of the overallotment option granted to them. As a result of the exercise, the Company issued an additional 3,769,500 common shares at a price of CAD$0.611 per common share and 5,142,900 publicly traded warrants at a price of CAD$0.089 per warrant for combined gross proceeds of $2,178,545 (CAD$2,760,883). The gross proceeds of $2,178,545 were allocated between common shares and publicly traded warrants and recorded as $1,817,370 to share capital and $361,175 to contributed surplus.

• c) Share issuance fees paid in cash totalled $1,758,343 in relation to the Company’s IPO and the exercise of the over-allotment option granted to the syndicate of underwriters. The share issuance costs of $1,758,343 were recorded against share capital in the amount of $1,534,786 and contributed surplus in the amount of $223,557.

• d) Issued 7,200 common shares for publicly traded warrants exercised for gross proceeds of $5,799. The Company allocated $463 to share capital which was the fair value of share purchase warrants exercised.

• e) In September 2021, the Company issued 1,659,304 common shares at a price of CAD$0.44 valued at $574,249 (CAD$730,094) and 829,652 warrants with a fair value of $57,659 (CAD$73,307) pursuant to the Elk Gold royalty acquisition (Note 6). Each warrant entitles the holder to purchase one common share at an exercise price of CAD$0.70 per common share until September 29, 2023. The fair value of the warrants was estimated using the Black-Scholes option pricing model assuming a life expectancy of 2 years, a risk-free rate of 0.53%, a forfeiture rate of 0%, and a share price volatility of 60%.

(d) Broker Warrants

As at September 30, 2021, the following broker warrants were outstanding:

	Number of Weighted Average broker Exercise Price warrants CAD
Balance, December 31, 2020 Granted Balance, September 30, 2021	669,300 $ 0.625 - 669,300 $ 0.625

The broker warrants expire between March 18, 2022 and March 30, 2022.

(e) Publicly Traded Warrants

As at September 30, 2021, the following publicly traded warrants were outstanding:

	Number of Weighted Average publicly traded Exercise Price warrants CAD
Balance, December 31, 2020 Granted Exercised Balance, September 30, 2021	- - 39,428,900 $ 1.00 (7,200) $ 1.00 39,421,700 $ 1.00

The publicly traded warrants expire on February 19, 2024.

STAR ROYALTIES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

9. SHAREHOLDERS’ EQUITY (CONTINUED)

(f) Share Purchase Warrants

As at September 30, 2021, the following share purchase warrants were outstanding:

	Number of Weighted Average share purchase Exercise Price warrants CAD
Balance, December 31, 2020 Granted Balance, September 30, 2021	- - 829,652 $0.70 829,652 $ 0.70

The share purchase warrants expire on September 29, 2023.

(g) Stock Options

The Company has an equity compensation plan, 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. The equity compensation plan received shareholders’ approval at the Annual General and Special Meeting held on June 23, 2021.

On February 19, 2021, the Company issued 3,735,000 stock options to officers and directors of the Company with an exercise price of CAD$0.70 per share. The stock options expire on February 19, 2031 and vest 25% on grant and 25% annually over three years.

On June 23, 2021, upon receiving shareholders’ approval on the equity compensation plan, the Company revised the earlier fair value estimate so that the amounts recognized for services received in respect of the grant are based on the grant date fair value. The weighted average fair value per stock option as determined on June 23, 2021 was CAD$0.34. The fair value of the options was estimated using the Black-Scholes option pricing model assuming a life expectancy of 10 years, a risk-free rate of 1.21%, a forfeiture rate of 0%, and a share price volatility of 60%. During the nine months ended September 30, 2021, the Company recorded share-based compensation of $586,634 in relation to stock options.

Stock option transactions are summarized as follows:

	Number of Stock Options	Weighted Average Exercise Price
Balance, December 31, 2020 Granted Balance, September 30, 2021 Vested and exercisable,September 30,2021	- 3,735,000 3,735,000 933,750	$ - 0.70 $ 0.70 $0.70

The outstanding stock options expire on February 19, 2031.

STAR ROYALTIES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

9. SHAREHOLDERS’ EQUITY (CONTINUED)

(h) RSUs

Pursuant to the equity compensation plan, which was approved by shareholders at the Annual General and Special Meeting on June 23, 2021, 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 19, 2021, the Company granted 1,250,005 RSUs to officers and directors of the Company. The RSUs vest over three years. On June 23, 2021, upon receiving shareholders’ approval on the equity compensation plan, the Company revised the earlier fair value estimate so that the amounts recognized for services received in respect of the grant are based on the grant date fair value. The weighted average fair value per unit as at June 23, 2021 was CAD$0.54. During the nine months ended September 30, 2021, the Company recorded share-based compensation of $243,606 in relation to RSUs.

10. SEGMENT INFORMATION

For the three and nine months ended September 30, 2021, the Company had revenue of $225,458 and $580,478 respectively (three and nine months ended September 30, 2020 - $Nil and $Nil, respectively) from one of its royalties located in Australia.

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

September 30, 2021	September 30, 2021	December 31, 2020
United States Canada Australia Mongolia	$ 12,634,207 2,870,280 11,102,264 304,932 $ 26,911,683	$ 6,652,716 3,260,088 129,490 304,130 $ 10,346,424

11. 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 and cash equivalents, receivables and accounts payable and accrued liabilities, approximates fair value due to the short-term nature of the financial instruments. Cash and cash equivalents and receivables are classified as amortized cost. Accounts payable and accrued liabilities are classified as amortized cost.

STAR ROYALTIES LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Presented in US Dollars) (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

12. COMMITMENTS

As at September 30, 2021, the Company had the following contractual obligations:

Accounts payable		Less than 1 year	1to 3 years	Over3 years	Total
		$ 181,346 $ 181,346	$ - $ -	$ - $ -	$ 181,346 $ 181,346