Stroud Resources Ltd.

FORM 51-102FI

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2020

June 15, 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”) FOR THE THREE MONTHS ENDED MARCH 31, 2020

The following discussion of the results of operations of Stroud Resources Ltd. (“the Company” or "Stroud"), dated June 15, 2020, for the three months ended March 31, 2020 should be read in conjunction with the Company’s condensed interim consolidated financial statements for the three months ended March 31, 2020 and the consolidated financial statements for the year ended December 31, 2019.

All amounts are presented in Canadian dollars, unless otherwise noted. Additional information relating to the Company is available on SEDAR at www.sedar.com .

1. Overview

Stroud Resources Ltd. (the “Company” or “Stroud”) is a junior resource company involved in the acquisition, exploration and development of mineral properties. The Company is listed on the TSX Venture Exchange as a Tier 2 company and trades under the stock symbol "SDR". Stroud is exploring properties hosting silver and gold mineralization in Jalisco, Mexico and has interests in natural gas producing wells in Alberta, Canada.

Management's strategy for building Stroud and maximizing shareholder value is to acquire and explore properties with the potential to host significant economic deposits within prolific mining districts in Mexico, with the objective of enhancing the value of these properties either by direct exploration or through joint ventures with third-parties.

The Company was incorporated on March 18, 1983 and is considered to be in the development stage. The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable. The recoverability of the carrying values of these interests is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financings to complete the development thereof and the future profitable production therefrom or alternatively upon the Company’s ability to dispose of its interests on an advantageous basis. Changes in future conditions could require material write-downs of the carrying values. Future quarterly results, in terms of both corporate and exploration expenditures, may be constrained by difficult market conditions and lack of financing available to junior mining companies.

Mining Industry

The exploration for and development of mineral deposits involves significant risk, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of a mineral deposit may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration programs planned by the Company will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size; grade and proximity to infrastructure; metal prices; and government regulations, including regulations relating to prices; taxes; royalties; land tenure; land use; permitting; importing and exporting of minerals, and environmental protection. The exact effect of these factors cannot be accurately predicted but the combination of these factors may result in the Company not receiving an adequate return on investment.

Forward-Looking Statements

This management’s discussion and analysis may contain statements that are “Forward-looking Statements”. These include statements about the Company’s expectations, beliefs, plans, objectives and assumptions about future events or performance. These statements are often, but not always, made through the use of words or phrases such as “will likely result”, “are expected to”, “will continue”, “anticipate”, “believes”, “estimate”, “intend”, “plan”, “would”, and “outlook” or statements to the effect that actions, events or results “will”, “may”, “should” or “would” be taken, occur or be achieved. Statements and estimates concerning mineral resources may also be deemed to be forward-looking statements in that they involve estimates, based on certain assumptions, regarding the mineralization that would be encountered if and when a mineral deposit were to be developed and mined. Forward-looking statements are not historical facts and are subject to a number of risks and uncertainties beyond the Company’s control. Accordingly, the Company’s actual results could differ materially from those suggested by these forward-looking statements for various reasons discussed throughout this analysis. Forward-looking statements are made on the basis of the beliefs, opinions and estimates of the Company’s management on the date the statements are made and the Company does not undertake any obligation to update forward-looking statements if the circumstances or management’s beliefs, opinions or estimates should change. Readers should not place undue reliance on forward-looking statements.

Operations

On August 28, 2019, the Company consolidated its common shares at the ratio of 1 new share for 10 old shares. This reduced the common shares outstanding to 19,644,065. The share consolidation allowed the Company to close a private placement raising $2,000,000. The financing created a controlling shareholder, which was approved by shareholders at a Special Meeting held on October 23, 2019.

The financing allowed the Company to restructure some of its agreements, pay some accounts payable and convert some debt to shares.

The Company has sufficient funds to conduct a drill program on its Santo Domingo Property in Jalisco Mexico that is designed to reach beyond the near surface drilling previously completed. The Company is completing its drilling permit application and expects to be drilling in the second quarter of 2020.

An updated National Instrument 43-101 Technical Report on the Santo Domingo Property was issued November 20, 2017. The Technical report increased measured and indicated mineral resources on the property by 71%.

In September 2017, the Company sold its full interest in the Leckie property in Strathy Township, Ontario to Temagami Gold Inc. for proceeds consisting of cash of $30,000 and 750,000 common shares of Temagami Gold Inc.

The Company incurred a net loss of $123,032 [2019 – $18,768] and a net comprehensive loss of $123,032 [2019 – $18,768] for the three months ended March 31, 2020. Oil and gas revenues decreased by 34% in those three months compared to the same period of 2019, to $5,270 [2019 - $7,937], reflecting lower prices. Oil and gas operating expenses decreased by 2% during 2020 to $5,868 from $5,987 in the same period of 2019. The Company wrote off $73,570 [2019 – $nil] that was spent on its mineral properties in the three months ended March 31, 2020. Administrative expense excluding interest costs, increased to $52,470 from $18,144 in 2019. The change reflects an increase in professional fees. Interest expense of $nil [2019 -$2,574] was recorded for shareholder advances.

The Company had positive working capital of $885,860 at March 31, 2020 compared to a positive working capital of $1,008,892 at December 31, 2019. Cash flows from operations were negative $287,937 for the three months ended March 31, 2020, compared to positive cash flows from operations of $28,282 in 2019. The Company has sufficient funds to conduct a drill program but will need further financing to fund its ongoing general and administrative expenses and to complete further exploration programs. The Company’s future performance will be dependent upon its ability to raise additional funds.

2. New accounting standards and interpretations

Leases

On January 1, 2019, the Company adopted IFRS 16 - Leases ("IFRS 16") which superseded IAS 17 - Leases. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the lessee controls the asset. Control is considered to exist if the customer has the right to obtain substantially all of the economic benefits from the use of an identified asset and the right to direct the use of that asset. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on balance sheet accounting model, with limited exceptions for short-term leases or leases of low value assets.

The Company adopted IFRS 16 on its effective date, using the modified retrospective application method, with the cumulative effect of initially applying the standard recorded as an adjustment to retained earnings and no restatement of comparative information. In transitioning to IFRS 16, the Company analyzed its contracts to identify whether they are or contain a lease arrangement; and concluded there was no impact of the financial statements.

Uncertainty over Income Tax Treatments

On January 1, 2019, the Company has adopted IFRIC 23 - Uncertainty over Income Tax Treatment ("IFRIC 23"). IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The impact of the adoption of this interpretation did not have a material impact on the Company's condensed interim consolidated financial statements.

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2020. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics. The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2020.

3. Mineral Properties and Deferred Costs

Santo Domingo Silver-Gold Project

Stroud holds its interest in its Santo Domingo property through its wholly owned subsidiary, Compañia Minera San Diego y La Espanola S.A. de C.V. ("Compañia Minera"), which holds prospecting and exploration permits for the property. Compañia Minera holds rights to the Santo Domingo II and Nombre de Dios mining concessions, located approximately 80 km northwest of Guadalajara, the capital city of the State of Jalisco, Mexico. The concessions occur in the Hostotipaquillo Mining District, which includes a number of established silver-gold epithermal mineral occurrences, including the well- known Monte del Favor, La Cabrera and Cinco Mines.

The Mexican Mining Law was amended by a Congress Decree dated February 22, 2005, published at the Office Daily of the Federation on April 28, 2005. Under this amendment, exploitation mining concessions are now valid for 50 years and all existing exploration and mining concessions were automatically converted into exploitation mining concessions from January 1, 2006. Compania Minera has leased surface rights from Ejido of Santo Domingo de Guzman to cover the mining concessions and the surrounding area.

On November 20, 2017, the Company issued an updated NI 43-101 Technical Report on the Santo Domingo Property. The report is available online at SEDAR and on the Company’s website.

Highlights from the report include:

Measured and indicated mineral resources increased to 25.74M silver equivalent ounces from 15.05M.
Inferred mineral resources increased to 13.39M silver equivalent ounces from 10.68M.
La Rayas vein indicates a mineralized zone, 35 metres wide by 300 metres deep and over 700 metres along strike.
Guadalupe vein is typically 15 to 30 metres wide.
Five additional veins have been identified for future exploration, deeper into the hillside.

The Report confirms Measured and Indicated, and Inferred Mineral Resources as set out in the table below:

Classification	Tonnes	Goldg/t	Silverg/t	Silver Eq. g/t	Ounces Gold	Ounces Silver	Ounces Ag Eq.
Measured	3,148,834	0.51	107.40	144.21	51,370	10,136,145	13,952,515
Indicated	2,932,967	0.43	94.07	124.93	40,242	8,874,620	11,785,663
Measured and Indicated	6,081,801	0.47	100.97	134.91	91,612	19,010,765	25,738,178

Inferred	3,482,160	0.39		119.56	43,228	10,083,932	13,387,222

Cut-off grade was 45 grams per tonne silver equivalent over a three metre true width and a gold-silver ratio of 72:1 Continuity of mineralization was established by drilling on 50 metre centres, and using a specific gravity of 2.65

In 2014, the Company recorded an impairment in its Santo Domingo property of $12,136,042, given the difficult market conditions for raising capital for junior exploration companies and the Company's lack of financing for further exploration on this property at this time.

A 2008 labour dispute involving the Company's Mexican subsidiary has resulted in a judgment against the Company with a with a maximum exposure of U.S. $660,000. The Company has accrued costs related to the Santo Domingo projects of $19,485 [2019 - $19,485]. The Company settled the suit with a payment of US $15,000 subsequent to the end of the year.

The Company was obligated to pay Eagle Graphite Incorporated (formerly Amerix Precious Metals Corporation) ["Eagle"] a royalty fee of 5% from any of the Company's net proceeds of sale of minerals to a maximum of CAD $1,000,000. In August 2019, the Company paid Eagle $100,000 and the royalty was reduced to 2.5% of net proceeds to a maximum of CAD $500,000. The Company has the right to purchase this royalty for $300,000 any time prior to August 21, 2021.

An additional amount of US $2,450,000 was to be paid in quarterly installments to a prior owner, if and when revenue is generated from minerals extracted by Compañia Minera, commencing three months after the start of commercial production. Each quarterly installment will be equal to 0.5% of the net smelter return (defined as revenue received by Compañia Minera from the sale of smelter minerals). In 2011, the Company paid US $100,000 to the prior owner and the owner agreed to reduce the additional amount to be paid to US $2,325,000. In September 2014, the Company paid US $30,000 to the prior owner and the owner agreed to reduce the additional amount to be paid to US $2,285,000.

The Company re-negotiated the terms of the royalty with the owner in September 2019. Under the new agreement, the total royalties outstanding are US $1,160,000. The Company has the right to purchase the royalty for US $685,000 any time prior to September 7, 2021. The Company paid US $25,000 and an additional US $210,000, subsequent to the end of the year.

The Company determined there were indicators of impairment as at March 31, 2020, December 31, 2019, and 2018 due to the prolonged decrease in commodity prices and uncertainty regarding the status of the property and therefore tested the property for impairment. The Company estimated the recoverable amount as fair value less cost to sell using a multiple of resources and determined that a write-down of the property to a nil balance was required.

In order to maintain the Company’s mineral concessions and titles in good standing, the Company is required to maintain a prescribed minimum of annual exploration expenditure and pay fees semi-annually to the Secretaria de Economia in Mexico. Failure to make the annual concession payments or incur the minimum annual exploration expenditures, to the satisfaction of the Mexican authorities, or a determination that the expenditures incurred are not qualifying expenditures, may result in the cancellation or forfeiture of the mineral concessions. Management believes that all payments made are appropriate and current.

The Company has signed a new agreement with the owners of the surface rights on the Santo Domingo property. The new agreement extends for 5 years and requires Stroud to make payments of approximately US $6,000 per annum.

The Company is currently seeking drilling permits to complete a drill program on the property, at depth.

Hislop Gold Project

During 2016, the Company sold its interest in the Hislop Gold Project to a private entity. The Company retains a net smelter royalty of one half of one percent (.5% NSR) which can be re-purchased for $1,000,000.

Leckie Gold Project

During 2017, the Company sold its interest in the Leckie Gold Project for proceeds of cash of $30,000 and 750,000 shares of a private company. Stroud maintains a 1% NSR royalty on the property which can be purchased for $1,000,000.

Oil and Gas Properties

The Company generates cash flow through a 3.75% interest in six natural gas wells in central Alberta. The properties are operated by Gain Energy Inc. The Company's proportionate share of the revenue from these properties, net of operating expenses, is received from the operator on a monthly basis.

4. Results of Operations

5. Liquidity and Capital Resources

The Company has sufficient cash to complete a drilling program on its Santo Domingo property, Beyond that and to continue its operations for the foreseeable future the Company will require additional financing which, if not raised, would result in the curtailment of activities or the sale, option or joint venturing of assets, to the extent appropriate counterparties can be found. The Company's ability to continue to meet its obligations and carry out its planned exploration activities is uncertain and dependent upon its ability to obtain further funds. There can be no assurances that the Company will be able to raise sufficient financing or on terms acceptable to management. The outcome of these matters cannot be predicted at this time and, accordingly, these matters create a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. If the going concern assumption is not appropriate, adjustments will be necessary to carrying amounts and classification of assets, liabilities and expenses in the condensed interim consolidated financial statements. Such adjustments could be material.

6. Off-Balance Sheet Arrangements

As of the date of this filing, the Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect upon its results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.

7. Transactions with Related Parties

In accordance with IAS 24, key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and nonexecutive) of the Company. The remuneration of directors and key management of the Company was as follows:

Administrative fees Director fees	2020 2019
	$ 7,500 $ 7,500 11,250 11,250
	$18,750 $18,750

8. Proposed transactions

The Company has not entered into any significant transactions, nor is it currently reviewing any such transaction, which requires board approval, shareholder approval or regulatory approval.

9. Critical Accounting Estimates

The Company’s significant accounting policies are presented in Note 3 of the condensed interim consolidated financial statements for the three months ended March 31, 2020.

10. Financial Instruments

A discussion of the Company’s financial instruments can be found in Notes 3 and 4 of the condensed interim consolidated financial statements for the three months ended March 31, 2020.

11. Disclosure of Outstanding Share Data as at June 15, 2020

	Number or Principal Amount Outstanding	Maximum Number of Common Shares Issuable
Common Shares outstanding Stock Options outstanding Stock Options outstanding	36,853,003 4,444,444 2,130,000	N/A 4,444,444 2,130,000
Maximum common shares issuable 43,427,447

12. Other MD&A Disclosure

The following table sets forth, for the quarter indicated, information relating to the Company’s revenue, net loss and loss per common share for the eight most recently completed fiscal quarters.

	Revenues	Net Income (Loss)	Basic and Diluted Net Income (Loss) per Share
June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019	6,772 6,952 6,980 7,937 5,759 8,222 5,474	(69,636) (45,420) (220,290) (18,768) (26,142) (297,183) 504,065	(0.004) (0.002) (0.011) (0.001) (0.001) (0.015) 0.014 (0.006)
March 31,2020	5,270	(123,032)

Additional information relating to the Company, including its annual and quarterly financial statements, is available on SEDAR at www.sedar.com, and on the Company’s website at www.stroudsilver.com.

AI assistant

Stroud Resources Ltd. Interim / Quarterly Report 2020

44466_rns_2020-06-15_1f1002b0-1e10-45ef-9a55-07c25fba5582.pdf