Temas Resources Corp. - Management Reports 2024

TEMAS RESOURCES CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF THE COMPANY’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

The following Management Discussion & Analysis (“MD&A”) is intended to assist in the understanding of the trends and significant changes in the financial condition and results of operations of Temas Resources Corp. (hereinafter “Temas” or the “Company”) for the years ended December 31, 2023 and 2022 and the notes thereto. The MD&A should be read in conjunction with the audited financial statements for the year ended December 31, 2023. The MD&A has been prepared effective April 25, 2024.

SCOPE OF ANALYSIS

The following is a discussion and analysis of Temas Resources Corp. The Company reports its financial results in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

FORWARD LOOKING STATEMENTS

The information set forth in this MD&A contains statements concerning future results, future performance, intentions, objectives, plans and expectations that are, or may be deemed to be, forward-looking statements. These statements concerning possible or assumed future results of operations of the Company are preceded by, followed by or include the words ‘believes,’ ‘expects,’ ‘anticipates,’ ‘estimates,’ ‘intends,’ ‘plans,’ ‘forecasts,’ or similar expressions. Forwardlooking statements are not guaranteeing of future performance. These forward-looking statements are based on current expectations that involve numerous risks and uncertainties, including, but not limited to, those identified in the Risks Factors section. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. These factors should be considered carefully, and readers should not place undue reliance on forward-looking statements. The Company may not provide updates or revise any forwardlooking statements, except those otherwise required under paragraph 5.8(2) of NI 51-102, whether written or oral that may be made by or on the Company's behalf.

TRENDS

Other than as disclosed in this MD&A, the Company is not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect on its revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

GENERAL BUSINESS AND DEVELOPMENT

Temas Resources Corp. (the “Company”) was incorporated pursuant to the provisions of the British Columbia Business Corporations Act on June 25, 2018, under the name “Clean Earth Chemical Corp.” On August 12, 2019, the Company changed its name to Temas Resources Corp. The Company is in the exploration stage with respect to its mineral property interest and has not yet achieved commercial production. The Company commenced trading on the Canadian Stock Exchange (CSE) on May 19, 2020, under the ticker TMAS and on OTCQB under the ticker TMASF on August 5, 2020.

The Company’s head office and registered and records office is located at 309 – 2912 West Broadway, Vancouver, British Columbia, V6K 0E9.

The Company is a reporting issuer in the Province of British Columbia. All public filings for the Company can be found on the SEDAR website www.sedar.com.

HIGHLIGHTS

La Blache Project

During the year, the Company started to draft its Preliminary Economic Assessment Report for the wholly-owned La Blache project which was completed and filed March 2024. The Company’s exploration activity during 2023 was minimized as it could not obtain a drilling permit in Quebec due to the 2023 summer wildfires. This contributed to the Company not being able to meet its flow through obligations resulting in a $835,018 flow-through and tax and Part XII.6 tax expense.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2023, the Company has a cash balance of $271,236 compared to a cash balance of $789,501 at December 31, 2022. The Company had a working capital deficit of $1,583,101 as at December 31, 2023 (December 31, 2022 - $775,172).

The continuation of the Company as a going concern is dependent on its ability to raise additional capital or debt financing, including on reasonable terms, to meet business objectives toward achieving profitable business operations.

On November 21, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,050,000 units at a price of $0.10 per unit for gross proceeds of $305,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on November 21, 2025. Cash finder’s fee of $2,100 was paid.

On October 23, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,180,000 units at a price of $0.10 per unit for gross proceeds of $318,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on October 23, 2025. Cash finder’s fee of $1,400 was paid. The Company also issued 14,000 agent warrants at $0.15.

On February 28, 2023, the Company issued 100,000 common shares at $0.225 for proceeds of $22,500 in connection with the Crescita Capital equity investment facility.

On December 19, 2022, the Company issued 208,333 flow-through units at a price of $0.72 per unit for gross proceeds of $150,000. Each unit is comprised of one flow-through share and one half-share purchase warrant, each whole warrant is exercisable at $0.90 per common share, and expires three years from the date of issuance. The Company paid cash share issuance costs of $7,500 and issued 18,750 finder’s warrants, exercisable at $0.90 per common share, and expire two years from the grant date. The finder’s warrants have a fair value of $3,868.

On November 22, 2022, the Company issued 27,777 common shares for gross proceeds of $14,625 in connection with the Equity Investment Facility.

On November 22, 2022, the Company issued 486,111 flow-through units at a price of $0.72 per unit for gross proceeds of $350,000. Each unit is comprised of one flow-through share and one half-share purchase warrant, each whole warrant is exercisable at $0.90 per common share, and expires three years from the date of issuance. The Company paid cash share issuance costs of $21,500, issued 19,444 finder’s warrants, exercisable at $0.72 per common share, and expire three years from the grant date, and issued 18,750 finder’s warrants, exercisable at $0.90 per common share, and expire two years from the grant date. The finder’s warrants have a combined fair value of $11,916.

On November 1, 2022, the Company issued 22,222 common shares for gross proceeds of $12,240 in connection with the Equity Investment Facility.

On October 12, 2022, the Company issued 77,777 common shares for gross proceeds of $44,100 in connection with the Equity Investment Facility.

warrant is exercisable at $0.90 per common share, and expires three years from the date of issuance. The Company paid cash share issuance costs of $30,500 and issued 76,250 finder’s warrants, exercisable at $0.90 per common share, and expire three years from the grant date. The finder’s warrants have a fair value of $43,709.

On August 22, 2022, the Company issued 111,111 common shares for gross proceeds of $57,000 in connection with the Equity Investment Facility.

On August 8, 2022, the Company issued 55,555 common shares for gross proceeds of $29,250 in connection with the Equity Investment Facility.

Equity Investment Facility

On November 18, 2020, the Company entered into a $5,000,000 equity investment facility with Crescita Capital. The Company can draw down funds from the $5,000,000 equity investment facility from time to time during the threeyear term at the Company’s discretion by providing a drawdown notice to Crescita Capital, and in return for each drawdown notice funded by Crescita Capital, the Company will allot and issue fully paid common shares to Crescita Capital.

The shares issued in connection with any drawdown notice will be priced at the higher of (i) the floor price set by the Company and (ii) 90% of the average closing bid price resulting from the following ten days of trading after the drawdown notice (“Pricing Period”). The drawdown notice amount requested by the Company cannot exceed 700% of the average daily trading volume of the Pricing Period.

In connection with the equity investment facility, the Company paid a commitment fee. This fee consisted of a 3% commission to be paid in common shares, at a price of $2.25 per share (67,777 shares valued at $150,000), and warrants equal to 8% of the outstanding common shares of the Company (515,364 warrants valued at $2,560,331). The warrants have an exercise price of $2.25 per common share and expire three years from the grant date. The warrants were fair valued using the Black-Scholes Option Pricing Model using the following assumptions average risk-free interest rate - 0.29%; expected life - 3 years; expected volatility - 100.00%; forfeiture rate - Nil and expected dividends - Nil.

The value of the commitment fee was recorded as a deferred financing charge and is being amortized as share issue costs over the term of the equity investment facility, with amortization charges amounting to $821,762 for the year ended December 31, 2023 (2022 - $891,068). As at December 31, 2023, the carrying amount of the deferred financing charges was $Nil (December 31, 2022 - $821,762).

In November 2023, the three-year term with Crescita ended.

Liability and Income Tax Effect on Flow-through Shares

Funds raised through the issuance of flow‐through common shares are expected to be expended on qualified Canadian mineral exploration expenditures, as defined pursuant to Canadian income tax legislation. The flow‐ through gross proceeds less the qualified expenditures made to date represent the funds received from flow‐through share issuances that have not been spent and are held by the Company for such expenditures.

In December 2020, the Company issued 402,777 flow-through common shares at $9.00 per share for gross proceeds of $3,625,000 and recognized an initial liability for flow-through shares of $606,250. During the years ended December 31, 2021 and 2022, the Company has completed its flow-through spending obligations and has recognized a flow-through recovery of $606,250.

During the 2022 year, the Company issued 1,541,666 flow-through common shares at an average price of $0.72 for gross proceeds of $1,110,000 and recognized an initial liability for flow-through shares of $143,750. The $1,110,000 flow-through funds were required to be incurred by December 31, 2023. As at December 31, 2023, the Company had spent $405,185 of the $1,110,000 flow-through obligation leaving a shortfall of $704,815. The Company will incur income tax and penalties associated with this shortfall for itself and for investors. As at December 31, 2023, the Company has accrued $671,869 in estimated taxes payable.

EXPLORATION AND PROPERTY

La Blache Property, Quebec, Canada

On September 23, 2020, the Company purchased a 100% interest in the La Blache property in Core-Nord, Quebec from Cloudbreak Discovery Corp. and Cronin Services Ltd. (collectively known as “Vendors”) for an aggregate of 2,222,222 shares in the Company, $60,000 in cash payments and delivery of an NSR royalty of 2%, subject to the right of the Company to repurchase one-half of the NSR royalty (1%) for $2,500,000 at any time.

DAB Property, Quebec, Canada

On January 15, 2020, the Company entered into an option agreement with Contigo Resources Ltd. (“Contigo”) to acquire a 100% interest in the 124 claims comprising the DAB property. Under the terms of the option agreement, the Company needs to undertake the following to exercise its option:

make cash payments of $25,000 (paid) on January 15, 2020 and $50,000 (paid) on January 15, 2021 (paid); and
issue 1,111,111 common shares of the Company to Contigo on January 15, 2020 (issued).

Per the terms of the option agreement, Contigo retains a 2% net smelter royalty (“NSR”) on the DAB property. The Company can purchase 50% of the NSR at any time for a cash payment of $1,500,000.

Piskanja Borate Project, Serbia

On June 16, 2021, the Company entered into an option and joint venture agreement with Erin Ventures Inc. and Balkan Gold D.O.O. Temas has the right and option to earn up to a 50% undivided interest in the Piskanja Borate Project located in Serbia by incurring €10,500,000 in work expenditures on the project. As initial consideration for the option, the Company issued 27,777 common shares, valued at $103,750, and 27,777 common share purchase warrants with an exercise price of $2.88 per share expiring August 4, 2025, valued at $75,425. On December 23, 2022, the Company terminated the option and joint venture agreement, therefore, no longer has an interest in this project.

Lac Brule, Quebec, Canada supplemental

To augment the Company’s claims acquired through staking, on August 19, 2021, the Company had entered into a purchase agreement to acquire a 100% interest in an additional mineral claim comprising the Lac Brule property. Under the terms of the agreement, the Company made a cash payment of $10,000 and issued 5,555 common shares of the Company to the seller at a value of $19,000. Per the terms of the option agreement, the seller retains a 1% net smelter royalty (“NSR”) on the additional mineral claim. The Company can purchase 50% of the NSR at any time for a cash payment of $500,000.

The carrying value of the Company’s mineral properties is as follows:

	Lac Brule La Blache DAB	Piskanja Total
December 31, 2021	$ 29,000 $ 5,827,721 $ 550,000	$ 179,175 $ 6,585,896
Technical services	- - -	127,638 127,638
Impairmentprovision	- - -	(306,813) (306,813)
December 31, 2022	$ 29,000 $ 5,827,721 $ 550,000	$ - $ 6,406,721
Renew claims	20,317	20,317
December 31, 2023	$ 29,000$ 5,848,038$ 550,000	$ -$ 6,427,038

Title to exploration and evaluation assets involves certain inherent risks due to the difficulties of determining the validity of certain claims and problems arising from the frequently ambiguous conveyance history characteristic of many mineral properties. The Company has investigated the titles to its exploration and evaluation assets and, to the best of its knowledge, the titles to its property are in good standing.

Supplemental Information

Supplemental Information
		Exploration Expenditures
	Year ended December 31, 2023			Year ended December 31, 2022
	La Blache	Lac Brule	Total	La Blache	Lac Brule	Total
Exporation Drilling (recovery)	-355,906	-	-355,906	1,382,349	-	1,382,349
Assaying	159,534	-	159,534	228,760	-	228,760
Metallurgical testing	-	-	-	123,278	-	123,278
Technical Services	263,421	-	263,421	574,411	613,961	1,188,372
Geological Consulting	-	-	-	40,000	20,000	60,000
	$ 67,049	$ -$	67,049 $2,348,798$633,961$			2,982,759

INVESTMENTS

ORF Technologies

On March 26, 2021, the Company purchased a 50% interest in ORF Technologies Inc. (“ORF”) for $600,000. ORF Technologies Inc. holds a portfolio of patents related to mineral extraction. The Company has accounted for the investment in ORF using the equity method of accounting.

Temas has finalized a 50% acquisition of ORF Technologies Inc. ORF has developed several patented, innovative leaching and solvent extraction processes. With the ORF transaction, in conjunction with MetaLeach™, Temas believes that these combined technologies will make a difference in helping to alleviate the significant environmental impact that results from present-day mineral processing.

Pursuant to the Acquisition, Temas acquired 50% of the outstanding shares of ORF in exchange for a cash payment of $600,000. In closing, the parties entered into a shareholders’ agreement governing their rights and obligations going forward, including development and dividend policies, and pre-emptive rights to existing shareholders to acquire positions of other existing shareholders. With the 50% acquisition of ORF, Temas’ objectives are to achieve and provide the lowest cost processing alternative for specialty, strategic and rare earth metals producers.

Transaction Highlights:

COST-EFFICIENCIES: TiO2 technology developed by ORF proved 144.8% more cost-efficient than conventional processes. The Company anticipates comparable cost efficiencies in the production of nickel, iron, gold, rare earth metals and many more.
MORE ENVIRONMENTALLY FRIENDLY: The Recovery Technologies offer a significant reduction in carbon footprint when compared to conventional processing methods.
COMPLEMENTARY ACQUISITIONS: ORF provides a suite of technologies that will complement and work alongside the licensing agreement with Metaleach™. The ORF technology suite is also capable of supporting Temas Resources’ internal La Blache projects as well as unrelated third-party mining projects.

The Company structured the acquisition to ensure the existing principals responsible for developing the technologies at ORF would have a significant vested interest in the ongoing commercial success of the technologies. ORF was established as a holding company for intellectual property developed by Process Research Ortech (“PRO”), a company established in 1990 during the privatization of the Ontario Research Foundation’s (“ONT”) metallurgical testing facilities. ONT was created as an independent corporation by a provincial Act in 1928.

For the year ended December 31, 2023, the Company recorded an equity loss of $8,635 (2022 - $17,408) relating to its investment in ORF. Due to minimal activity and the lack of necessary cash flow, the Company recorded an impairment of $563,116 during the year.

SHARE CAPITAL AND OUTSTANDING SHARE DATA

Common Shares

Authorized – Unlimited Common shares without par value.

Issued and Outstanding as at date of this MD&A: 22,727,218, December 31, 2023: 16,062,386 (December 31, 2022: 9,676,830).

On March 27, 2023, the Company settled outstanding fees of $25,000 for 55,555 common shares with an issue price of $0.45.

On February 28, 2023, the Company issued 100,000 common shares at $0.225 for proceeds of $22,500 in connection with the Crescita Capital equity investment facility.

On November 22, 2022, the Company issued 27,777 common shares for gross proceeds of $14,625 in connection with the Equity Investment Facility.

On November 1, 2022, the Company issued 22,222 common shares for gross proceeds of $12,240 in connection with the Equity Investment Facility.

On October 12, 2022, the Company issued 77,777 common shares for gross proceeds of $44,100 in connection with the Equity Investment Facility.

On August 31, 2022, the Company issued 847,222 flow-through units at a price of $0.72 per unit for gross proceeds of $610,000. Each unit is comprised of one flow-through share and one half-share purchase warrant, each whole warrant is exercisable at $0.90 per common share, and expires three years from the date of issuance. The Company paid cash share issuance costs of $30,500 and issued 76,250 finder’s warrants, exercisable at $0.90 per common share, and expire three years from the grant date. The finder’s warrants have a fair value of $43,709.

On August 22, 2022, the Company issued 111,111 common shares for gross proceeds of $57,000 in connection with the Equity Investment Facility.

On August 8, 2022, the Company issued 55,555 common shares for gross proceeds of $29,250 in connection with the Equity Investment Facility.

Stock Options

As at the date of this MD&A the Company had 1,386,500, and at December 31, 2023, the Company had 1,478,167 stock options respectively (December 31, 2022: 461,296) outstanding with 877,042 stock options exercisable.

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Subsequently to the year-end, 75,000 of stock options were exercised

On November 29, 2023, the Company granted 401,500 stock options to the CEO of the Company exercisable at $0.20 per option for a period of 4 years. The options vest over two years from issuance (fully vested by May 29, 2025). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 3.60%; expected life – 5 years; expected volatility – 182.93%; forfeiture rate - Nil and expected dividends – Nil.

On November 21, 2023, the Company granted 300,000 stock options to a consultant of the Company exercisable at $0.125 per option for a period of 5 years. The options vest over one year from issuance (fully vested by November 21, 2024). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 3.74%; expected life – 5 years; expected volatility – 183.46%; forfeiture rate - Nil and expected dividends – Nil.

On August 2, 2023, the Company granted 760,000 stock options to consultants, directors and officers of the Company exercisable at $0.105 per option for a period of three years. The options are vested immediately. The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average riskfree rate – 4.43%; expected life – 3 years; expected volatility – 187.79%; forfeiture rate - Nil and expected dividends – Nil.

On March 14, 2022, the Company granted 16,667 stock options to an officer of the Company exercisable at $1.08 per option for a period of three years. The options are vested immediately. The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 1.94%; expected life – 3 years; expected volatility – 99.77%; forfeiture rate - Nil and expected dividends – Nil.

On February 2, 2022, the Company granted 72,222 stock options to various directors, officers, and consultants of the Company at an exercise price of $1.26 per option. The options will expire in five years and vest immediately on the grant date. The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 1.61%; expected life – 5 years; expected volatility – 100.00%; forfeiture rate - Nil and expected dividends – Nil.

Share Purchase Warrants

As at the date of this MD&A the Company had 9,830,873 warrants outstanding and at December 31, 2023, the total share purchase warrants outstanding are as follows:

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Weighted Remaining
Number of Average Life
Wrrants Exercise price (In Years) Expiry Date
499,861 $ 0.90 1.67 August 31, 2025
243,056 $ 0.90 1.90 November 22, 2025
19,444 $ 0.72 1.90 November 22, 2025
18,750 $ 0.90 0.90 November 22, 2024
104,167 $ 0.90 1.97 December 19, 2025
18,750 $ 0.90 0.97 December 19, 2024
3,194,000 * $ 0.15 1.81 October 23, 2025
3,050,000 ** $ 0.15 1.89 November 21, 2025
7,148,028 $ 0.24 1.84
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*Subsequent to the year-end, 214,000 of warrants were exercised.
** Subsequent to the year-end, 75,000 of warrants were exercised.

RESULTS OF OPERATIONS

SELECT FINANCIAL INFORMATION

During the year ended December 31, 2023, the Company incurred a net loss of $2,233,150 (2022 - $4,024,414 net loss). Included in the period ended December 31, 2023 loss was share-based payments of $91,370 (2022 - $154,223) for the issuance of options to management and consultants and $515,889 (2022 – $281,404) for consulting fees which increased as the Company became more active during the year. Investor relation fees of $95,267 were also incurred (2022 – $344,222), which decreased as the programs that were in wound down.

During the year ended December 31, 2023, the Company also incurred exploration expenditures of $422,982 (2022 - $2,982,759) as the drafting of the PEA continued (was filed in April 2024). The Company’s exploration activity during 2023 was minimized as it could not obtain a drilling permit in Quebec due to the 2023 summer wildfires. This contributed to the Company not being able to meet its flow through obligations resulting in a $835,018 flow-through and tax and Part XII.6 tax expense.

The Company’s investment in and loan to ORF Technologies was impaired during the year causing a $621,875 write down.

SUMMARY OF FINANCIAL RESULTS FOR MOST RECENTLY COMPLETED PERIODS

The following table summarizes the financial results of operations for the period ended December 31, 2023 and 2022:

	December 31, 2023	December 31, 2022
	$	$
Expenses	(2,233,150)	(4,024,414)
Net loss	(2,233,150)	(4,024,414)
Lossper share - basic & diluted	(0.21)	(0.49)

RELATED PARTY TRANSACTIONS

Key management personnel at the Company are the directors and officers of the Company.

During the year ended December 31, 2023, the Company incurred:

Consulting fees of $270,000 (2022 - $315,500) to a company owned by a director of the Company
Exploration technical services of $22,000 (2022 - $Nil) to a company owned by a director of the Company
Consulting fees of $3,000 (2022 - $Nil) to a former CFO
Consulting fees of $12,097 (2022 - $Nil) to a company owned by CEO
Payroll-related expenses of $Nil (2022 - $180,000) to an officer of the Company
Consulting fees paid to a former director $Nil (2022 - $9,643)
Consulting fee paid to directors or officers $Nil (2022- $101,261)
Share-based payments of $91,370 (2022 - $133,966) to officers, directors and companies with common officers and directors.

As of December 31, 2023, loans and receivable includes:

$67,500 (December 31, 2022 - $67,500) prepaid deposit paid to a company owned by a director of the Company
$Nil (December 31, 2022 – $25,000) is due to a former director of the Company
$476,007 (December 31, 2022 – $222,372) payable to a company owned by a director of the Company
$209 (December 31, 2022 - $Nil) payable to a company owned by a director of the Company
$135,000 (December 31, 2022 - $135,000) due to a former officer of the Company
$Nil (December 31, 2022 – $70,000) due to ORF Technologies Inc.
$96,406 (December 31, 2022 – Nil) loan from a Company owned by a director and a former CEO

On July 14, 2023, the Company entered a $140,000 secured loan agreement (“Secured Loan”) with a company controlled by a director of the Company. The Secured Loan carries an interest rate of 12% per annum, paid in advance quarterly with a maturity date of July 13, 2024, and secured by the assets of the Company. During the year ended December 31, 2023, the Company repaid $50,000 of the loan as part of the November 2023 private placement (Note 8) and accrued interest of $6,406. As at December 31, 2023 the balance owing on the Secured Loan is $96,406.

All loans except for the loan from the Secured Loan are non‐interest bearing and due on demand. All related party transactions are in the normal course of operations and have been measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

SUBSEQUENT EVENTS

On March 27, 2024, the Company entered into an option agreement to earn 100% interest in the La Blache Lake Extension Property. Pursuant to the option agreement, the Company must issue an aggregate of $275,000 in common shares and pay an aggregate of $350,000 in cash over a 48[th] month period.

On April 8, 2024, the Company completed the first tranche of a non-brokered private placement whereby the Company issued 5,943,690 units at a price of $0.20 per unit for gross proceeds of $1,188,738. Each unit is comprised of one common share and one-half common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.40 expiring on April 8, 2026.

CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

Basis of Measurement

These financial statements have been prepared on a historical cost basis, except for financial instruments classified in accordance with measurement standards under IFRS. All dollar amounts presented are in Canadian dollars unless otherwise specified. The condensed interim financial statements have been prepared using IFRS principles applicable

to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due.

Income Taxes

Income tax is recognized in profit or loss except to the extent that it relates to items recognized in other comprehensive income of loss or directly in equity, in which case it is recognized in other comprehensive income or loss or equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

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 end of the reporting period applicable to the period of expected realization or settlement. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the assets and liabilities on a net basis. Deferred tax assets and liabilities are offset when there is a legally right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same tax authority and the group intends to settle its current tax assets and liabilities on a net basis.

Significant Accounting Judgments and Estimates

The preparation of these financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Certain of the Company’s accounting policies and disclosures require key assumptions concerning the future and other estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities or disclosures within the next fiscal year. Where applicable, further information about the assumptions made is disclosed in the notes specific to that asset or liability. The critical accounting estimates and judgments set out below have been applied consistently to all periods presented in these financial statements.

a) Ability to continue as a going concern – evaluation of the ability of the Company to realize its strategy for funding its future needs for working capital involves making judgments.

b) Investment in associate – determination of ORF as an associate of the Company requires making judgments about ownership and control.

c) Impairment – an evaluation of whether or not an asset is impaired involves consideration of whether indicators of impairment exist. Factors which could indicate impairment exists include: significant underperformance of an asset relative to historical or projected operating results, significant changes in the manner in which an asset is used or in the Company’s overall business strategy, the carrying amount of the net assets of the Company being more than its market capitalization or significant negative industry or economic trends. In some cases, these events are clear. However, in many cases, a clearly identifiable event indicating possible impairment does not occur. Instead, a series of individually insignificant events occur over a period of time leading to an indication that an asset may be impaired. Events can occur in these situations that may not be known until a date subsequent to their occurrence. When there is an indicator of impairment, the recoverable amount of the asset is estimated to determine the amount of impairment, if any. If indicators conclude that the asset is no longer impaired, the Company will reverse impairment losses on assets only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Similar to determining if an impairment exists, judgment is required in assessing if a reversal of an impairment loss is required.

Investment in Associate

Investments in which the Company has the ability to exert significant influence, but does not have control, are accounted for using the equity method of accounting whereby the original cost of the investment is adjusted each reporting period for the Associate’s share of earnings, losses, dividends and other changes to the investment’s capital structure during the current reporting period.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Set out below is a comparison, by category, of the carrying amounts and fair values of all of the Company’s financial instruments that are carried in the condensed interim financial statements and how the fair value of financial instruments is measured .

Financial and Capital Risk Management

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are described below.

Level 1 ‐ unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 ‐ inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 ‐ inputs that are not based on observable market data.

The Company enters financial instruments to finance its operations in the normal course of business.

The Company has no financial instruments carried at fair value. The Company’s cash, accounts receivable, loan receivable, accounts payable and accrued liabilities and loan payable are recorded at fair value and subsequently measured at amortized cost.

The Company is exposed to varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes. The type of risk exposure and the way in way in which such exposure in managed is provided as follows:

Foreign exchange risk

The Company’s functional and reporting currency is the Canadian dollar and major purchases are transacted in Canadian dollars. As a result, the Company’s exposure to foreign currency risk s minimal.

Credit risk

The Company’s cash is largely held in large Canadian financial institutions. The Company does not have any asset‐ backed commercial paper. The Company maintains cash deposits with Schedule A financial institution, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk.

Interest rate risk

Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates, but it does not believe it is currently subject to any significant interest rate risk.

Liquidity risk

The Company’s ability to continue as a going concern is dependent on management’s ability to raise the required funding through future equity issuances and through short‐term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments.

Price risk

The ability of the Company to explore its mineral properties and the future profitability of the Company are directly related to the market price of precious metals. The Company monitors precious metals prices to determine the appropriate course of action to be taken by the Company.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

MANAGEMENT’S RESPONSIBILITY

Management is responsible for all information contained in this report. The December 31, 2023 financial statements have been prepared in accordance with IFRS and include amounts based on management’s informed judgments and estimates.

RISKS AND UNCERTAINTIES

An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Only investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment should undertake such investment. Prospective investors should carefully consider the risk and uncertainties that have affected, and which in the future are reasonably expected to affect, the Company and its financial position.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this discussion, including information as to future activities, events and financial or operating performance of the Company and its projects, constitute forward-looking statements. Such forwardlooking statements involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated activities, events or results implied or expressed in such forwardlooking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, “believes”, or variations of such words and phrases. Forward-looking information may also be identified in statements where certain actions, events or results “may”, “could", "would”, “might” or “will be taken”, “occur” or “be achieved”.

Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made.

Many factors could cause actual activities and events and the Company’s actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. These include metal prices, exploitation and exploration successes, continued availability of capital and financing and general economic, market or business conditions.

These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise. Investors are cautioned that forward-looking statements are not guarantees of future performance and accordingly investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainly therein.

OTHER INFORMATION

Additional information on the Company is available on SEDAR at www.sedar.com.