Tesoro Minerals Corp. — Interim / Quarterly Report 2021

Sep 29, 2021

TESORO MINERALS CORP.

MANAGEMENT DISCUSSION & ANALYSIS

FOR THE NINE MONTHS ENDED JULY 31, 2021

TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

Date of This Report

This management discussion and analysis (“MD&A”) of financial position and results of operations is prepared as of September 29, 2021 and should be read in conjunction with the audited consolidated financial statements for the year ended October 31, 2020 and the unaudited condensed interim financial statements for the nine months ended July 31, 2021 of Tesoro Minerals Corp. (“Tesoro” or the “Company”) which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). All dollar amounts included therein and in the following MD&A are expressed in Canadian dollars except where noted.

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. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

Caution on Forward-looking Information

‐ In making and providing the forward looking information included in this MD&A the Company’s assumptions may include among other things: (i) assumptions about the price of metals; (ii) that there are no material delays in the optimization of operations of the exploration and evaluation assets; (iii) assumptions about operating costs and expenditures; (iv) assumptions about future production and recovery; (v) that there is no unanticipated fluctuation in foreign exchange rates; and (vi) that there is no material deterioration in general economic conditions. Although management believes that the assumptions made and the expectations represented by such information are reasonable, there can be no assurance that the forward‐looking information will prove to be accurate. By its nature, forward‐looking information is based on assumptions and involves known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements, or results, to be materially different from future ‐ results, performance or achievements expressed or implied by such forward looking information. Such risks, uncertainties and other factors include among other things the following: (i) decreases in the price of base metals; (ii) the risk that the Company will continue to have negative operating cash flow; (iii) the risk that additional financing will not be obtained as and when required; (iv) material increases in operating costs; (v) adverse fluctuations in foreign exchange rates; and (vi) environmental risks and changes in environmental legislation.

This MD&A (See “Risks and Uncertainties”) and the Company’s annual information form contain information on risks, ‐ uncertainties and other factors relating to the forward looking information. Although the Company has attempted to ‐ identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward looking information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of the factors are beyond the Company’s control. Accordingly, readers ‐ should not place undue reliance on forward looking information. The Company undertakes no obligation to re-issue or update forward-looking information as a result of new information or events after the date of this MD&A except as may ‐ be required by law. All forward looking information disclosed in this document is qualified by this cautionary statement.

Risk and Uncertainties

The Company is subject to a number of risks and uncertainties due to the nature of its business. The Company’s exploration and development activities expose the Company to various financial and operational risks that could have a significant impact on its level of operating cash flows in the future. Readers are advised to study and consider risk factors stressed below.

The following are identified as main risk factors that could cause actual results to differ materially from those stated in any forward-looking statements made by, or on behalf of, the Company.

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TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

Financing

The Company’s future financial success depends on the ability to raise additional capital from the issue of shares or the discovery of properties which could be economically justifiable to develop. Such development could take years to complete and resulting income and cash flow, if any, is difficult to determine. The sales value of any mineralization potentially discovered by the Company is largely dependent upon factors beyond the Company’s control, such as the market value of the products produced.

General Resource Exploration Risks and Competitive Conditions

The resource exploration industry is an inherently risky business with large capital expenditures and volatile metals markets. The marketability of any minerals discovered may be affected by numerous factors that are beyond the Company’s control and which cannot be predicted, such as market fluctuations, mineral markets and processing equipment, and changes to government regulations, including those relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. This industry is intensely competitive and there is no guarantee that, even if commercial quantities are discovered, a profitable market will exist for their sale. The Company competes with other junior exploration companies for the acquisition of mineral claims as well for the engagement of qualified contractors. Metal prices have fluctuated widely in recent years, and they are determined in international markets over which the Company has no influence.

Governmental Regulation

Regulatory standards continue to change, making the review process longer, more complex and, therefore, more expensive. Exploration and development on the Company’s properties is affected by government regulations relating to such matters as environmental protection, health, safety and labour, mining law reform, restrictions on production, price control, tax increases, and maintenance of claims and tenure. There is no assurance that future changes in such regulations couldn’t result in additional expenses and capital expenditures, decreasing availability of capital, competition, reserve uncertainty, title risks, and delays in operations. The Company relies on the expertise and commitment of its management team, advisors, employees and contractors to ensure compliance with current laws.

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

Overall Performance

Description of Business

Tesoro Minerals Corp. is a publicly held mineral exploration company focused on mineral exploration and development in North and South America in areas where management has extensive past experience. The Company is listed on the TSX Venture Exchange under the symbol “TES”.

Management and the Board of Directors are focused on creating shareholder value, by ensuring that capital is committed towards exploration, while focusing on, and balancing the costs of operating a public company within a prospective emerging market.

Investment

During the year ended October 31, 2015, the Company entered into a Share Purchase Agreement (the “Agreement”) with Oro Exploration Ltd. (“Oro”) to sell 100% of the outstanding shares of the Company’s 100% owned Colombian subsidiary, Oro Barracuda S.A.S. (“OBSAS”).

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TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

In January 2016, the Company completed the Agreement and received 550,000 shares of Oro, valued at $27,500, which was 10% of the issued share capital in Oro after the initial private placement of shares. The Company also has the option to participate at the 10% level in future financings of Oro, and retains a Right of First Offer on any mineral property generated by Oro excluding those currently held by OBSAS. The Company has also retained a 1% net smelter royalty (“NSR”) on any OBSAS mineral title. Oro has the right to buy back the NSR for $1,000,000 USD.

Results of Operations

On December 8, 2020, Nuevo Arcoiris S.A.C., the Company’s Peruvian subsidiary, received authorization through two Supreme Decrees to acquire and hold mineral rights and other related rights on 21 mineral concessions located in the department of Piura from the Peruvian Ministry of Energy and Mines. These Supreme Decrees permit an entity that is considered foreign controlled to hold mineral and other rights in areas that are within 50 kilometres of Peru’s national borders and allow the entity to conduct mineral exploration work.

On January 20, 2021, Tesoro announced that the Peruvian government pass a third Supreme Decree that repealed the previous two Supreme Decrees issued on December 8, 2020.

The Company has been working with its Peruvian legal counsel and LQG Consultants to consider appropriate actions and potential avenues to address the repeal of the Supreme Decrees permitting mineral title and exploration activities.

Discussion of Operations and Financial Condition

Nine months ended July 31, 2021 and July 31, 2020

During the nine months ended July 31, 2021, the Company incurred a loss of $316,968 compared to a loss of $149,891 for the comparative period in 2020. More significant differences in certain categories of expenses are as follows:

• Consulting fees for the nine months ended July 31, 2021 were $39,046 compared to $8,818 for the comparative period in 2020, an increase of $30,228, due to an more consulting fees incurred during the current period.

• Office service and supplies for the nine months ended July 31, 2021 were $5,116 compared to $15,259 for the comparative period in 2020, a decrease of $10,143, due to cost saving efforts taken by management during the current period.

• Professional fees for the nine months ended July 31, 2021 were $68,741 compared to $24,550 for the comparative period in 2020, an increase of $44,191, mainly as a result of legal costs incurred by the Company during the current period.

• Property investigation costs for the nine months ended July 31, 2021 were $165,649 compared to $69,383 for the comparative period in 2020, an increase of $96,266, due to exploration expenditures and annual mineral concession fees incurred in Peru during the current period.

Three months ended July 31, 2021 and July 31, 2020

During the three months ended July 31, 2021, the Company incurred a loss of $133,502 compared to a loss of $46,461 for the comparative period in 2020. More significant differences in certain categories of expenses are as follows:

• Consulting fees for the three months ended July 31, 2021 were $24,736 compared to $8,818 for the comparative period in 2020, an increase of $15,918, due to an more consulting fees incurred during the current period.

• Office service and supplies for the three months ended July 31, 2021 were $352 compared to $10,510 for the comparative period in 2020, a decrease of $10,158, due to cost saving efforts taken by management during the current period.

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TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

• Professional fees for the three months ended July 31, 2021 were $28,817 compared to $6,825 for the comparative period in 2020, an increase of $21,992, mainly as a result of legal costs incurred by the Company during the current period.

• Property investigation costs of for the three months ended July 31, 2021 were $67,134 compared to $8,800 for the comparative period in 2020, an increase of $58,334, mainly as a result of exploration expenditures and annual mineral concession fees incurred in Peru during the current period . The annual mineral concession fees paid entitle the Company to maintain its 22 concessions in Peru for 12 months.

Summary of Quarterly Results

The following is a summary of the Company’s financial results for the eight most recently completed quarters which have been prepared using accounting policies consistent with IFRS:

				Basic and
		Loss for		diluted loss per
Quarterly period ended		the period		common share
July 31, 2021	$	(133,502)	$	(0.00)
April 30, 2021	$	(83,346)	$	(0.00)
January 31, 2021	$	(99,120)	$	(0.00)
October 31, 2020	$	(94,222)	$	(0.00)
July 31, 2020	$	(46,461)	$	(0.00)
April 30, 2020	$	(65,980)	$	(0.00)
January 31, 2020	$	(37,451)	$	(0.00)
October 31, 2019	$	(104,795)	$	(0.00)
July 31, 2019	$	(141,134)	$	(0.00)

Liquidity

In management’s view, given the uncertainty of the nature of the Company’s operations, the most relevant financial information relates primarily to current liquidity, solvency and planned expenditures. The Company’s financial success will be dependent upon the acquisition of an existing business or, if the Company focuses on the resource sector, the acquisition of a viable property and the discovery of economically recoverable reserves. Such development may take years to complete and the amount of resulting income, if any, is difficult to determine.

As at July 31, 2021, the Company reported working capital $13,980 (October 31, 2020 – $196,820) (see “Non-GAAP Financial Measure”). The Company will require additional financing to fund further exploration at its key projects, investigations and/or evaluations of potential new acquisitions and thereafter, to fund any extensive development and expansion of such acquisitions. In light of the continually changing financial markets, there is no assurance that funding by equity subscriptions will be possible at the times required or desired by the Company.

Non-GAAP Financial Measure

The Company uses “working capital” to assess liquidity and general financial strength and is calculated as current assets less current liabilities[(1)] . Working capital does not have any standardized meaning prescribed by IFRS and is referred to as a “Non-GAAP Financial Measure.” It is unlikely for Non-GAAP Financial Measures to be comparable to similar measures presented by other companies.

• (1) Working capital is calculated as current assets (July 31, 2021 - $81,354; October 31, 2020 - $227,770), less current liabilities (July 31, 2021 - $67,374; October 31, 2020 - $30,950).

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TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

Liquidity Risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at July 31, 2021, the Company had a cash balance of $71,272 (October 31, 2020 – $220,059) to settle current liabilities of $67,374 (October 31, 2020 – $30,950).

Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to its liquid financial assets including cash and receivables. The carrying value of these instruments represents the Company’s maximum exposure to credit risk. The Company believes it has no significant credit risk.

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

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. As at July 31, 2021, interest rate risks on cash and on the Company’s obligations are not considered significant.

b) Price risk

The Company has no contractual commodity price risk. The Company’s ability to continue with its exploration program is also indirectly subject to commodity prices. Commodity price risk is significant to the Company. Much of this is out of the control of management and will be dealt with based on circumstances at any given time.

Capital Resources

On December 8, 2020, the Company completed a non-brokered private placement financing raising aggregate gross proceeds of $150,000 by the issuance of 3,000,000 units at $0.05 per unit. Each unit consisted of one common share and one transferable common share purchase warrant. Each warrant will entitle the holder to purchase one additional share at a price of $0.10 per share for a period of two years from the date hereof. In connection with the private placement, the Company paid a cash finder’s fee of $5,700. The Company also paid other share issuance costs of $10,172.

On August 20, 2021, the Company completed a non-brokered private placement financing raising aggregate gross proceeds of $250,000 by the issuance of 5,000,000 units at $0.05 per unit. Each unit consisted of one common share and one transferable common share purchase warrant. Each warrant will entitle the holder to purchase one additional share at a price of $0.10 per share for a period of two years from the date hereof. In connection with the private placement, the Company paid a cash finder’s fee of $15,000.

Off Balance Sheet Arrangements

As at July 31, 2021 and October 31, 2020, the Company had no off-balance sheet arrangements.

Transactions with Related Parties

There were no related party transactions for the period ended July 31, 2021 and 2020.

Proposed Transactions

Except for those disclosed herein, as at the date of this MD&A there are no proposed transactions that the Board of Directors, or senior management who believe that confirmation of the decision by the board is probable, has decided to proceed with.

Critical Accounting Estimates

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TESORO MINERALS CORP. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2021

The preparation of financial statements in conformity with IFRS requires estimates and assumptions that affect the amounts reported in financial statements.

Significant accounting judgments that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the financial statements include, but are not limited to determination of functional currency of the Company and its wholly-owned subsidiaries; and the going-concern assumption:

As at July 31, 2021, the Company has not yet achieved profitable operations, has an accumulated deficit of $41,481,001 (October 31, 2020 – $41,164,033), and has incurred losses since inception. The Company has limited financial resources, no sources of operating cash flows and no assurances that sufficient funding will be available to continue to carry on its business and develop its mineral properties. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Company’s ability to continue as a going-concern. The continuing operations of the Company are dependent upon obtaining necessary financing to meet the Company’s commitments as they come due and to finance future exploration and development of potential business acquisitions, economically recoverable reserves, securing and maintaining title and beneficial interest in the properties and upon future profitable production. Failure to continue as a going-concern would require that assets and liabilities be recorded at their liquidation values, which might differ significantly from their carrying values. The financial statements do not include adjustments that would be necessary should the Company be unable to continue as a going-concern. These adjustments could be material.

Outlook

Exploration Update and Objectives

The Company’s business model has been to research, evaluate, acquire properties, add value through exploration, and undertake business decisions to develop projects to production through joint venture or sale of assets.

Outstanding Share Data

As at the date of this MD&A, the Company has:

• 87,017,549 common shares issued and outstanding; and

• 15,823,000 warrants outstanding.

Changes to Management

On April 21, 2021, the Company announced that the Board of Directors had accepted the resignation of Mr. Peter Tegart as President, Chief Executive Officer and a Director of the Corporation.

In light of Mr. Tegart's resignation, the Board appointed Mr. Scott McLean, P.Geo., FGC as Interim President & Chief Executive Officer. Mr. McLean will oversee the Corporation and be responsible for the day-to-day operations of Tesoro’s business until such time as a new President and CEO is appointed.

Management’s responsibility for financial statements

The information provided in this report, including the financial statements is the responsibility of Management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgements and have been properly reflected in the accompanying financial statements.

September 29, 2021

On behalf of Management and the Board of Directors,

“Scott McLean”

Interim President, Chief Executive Officer, and Director

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