Tsodilo Resources Limited

==> picture [445 x 39] intentionally omitted <==

Management’s Discussion and Analysis

FOR THE YEAR ENDED DECEMBER 31, 2019

The Management’s Discussion and Analysis has been authorized for release by the Company’s Board of Directors on June 14, 2020

Management’s Discussion and Analysis

This management’s discussion and analysis (“MD&A”) should be read in conjunction with the consolidated financial statements of the Company and the notes thereto for the years ended December 31, 2019 and 2018. The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Company’s functional and reporting currency is United States dollars and all amounts stated are in United States dollar unless otherwise noted. In addition, the Company has three Botswana operating subsidiaries, Newdico (Pty) Ltd., Gcwihaba Resources (Pty) Ltd. and Bosoto (Pty) Ltd. which have a functional currency of the Botswana Pula, and a South African subsidiary, Idada 361 (Pty) Ltd. which has a functional currency of South African Rand. This management’s discussion and analysis has been prepared as at June 14, 2020.

OVERVIEW

Tsodilo Resources Limited (“Tsodilo” or the “Company”) was organized under the laws of the Province of Ontario in 1996 and continued under the laws of the Yukon in 2002. It is incorporated under laws of the Yukon Territory, Canada, under the Business Corporations Act of Yukon and the address of the Company’s registered office is 161 Bay Street, P.O. Box 508 Toronto, Ontario, Canada, M5J 2S1. The Company currently exists under the Business Corporations Act of Yukon and its common shares are listed on the Toronto Venture Stock Exchange (TSX-V) under the symbol TSD.

Tsodilo is an exploration stage company which is engaged principally in the acquisition, exploration and development of mineral properties in the Republics of Botswana and South Africa. The Company is considered to be in the exploration and development stage given that none of its properties are in production and, to date, has not earned any significant revenues. The recoverability of amounts shown for exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the renewal of exploration licenses, obtaining the necessary permits to operate a mine, obtaining the financing to complete exploration and development, and future profitable production.

The Company is also actively reviewing additional diamond and base and precious metal opportunities within southern Africa.

Outstanding Share Data

As of June 14, 2020, 45,347,310 common shares of the Company were outstanding. Of the options to purchase common shares issued to eligible persons under the stock option plan of the Company, 3,250,000 options are outstanding of which 2,481,250 are exercisable at exercise prices ranging from CAD $0.07 - $0.85.

Outstanding Options	Outstanding Options	Outstanding Options	Outstanding Options
Expiry Date	No. of Option Shares Outstanding	Exercisable	Exercise Price(CAD)
September 1,2020	100,000	100,000	$0.70
January4,2021	200,000	200,000	$0.72
April 8,2021	250,000	250,000	$0.79
January2,2022	200,000	200,000	$0.69
April 3,2022	400,000	400,000	$0.85
January2,2023	200,000	200,000	$0.65
March 26,2023	500,000	450,000	$0.55
January2,2024	200,000	150,000	$0.28
June 6,2024	925,000	462.500	$0.17
January2,2025	275,000	68,750	$0.07
Total	3,250,000	2,481,250

As of June 14, 2020, there are no warrants outstanding.

Principal Shareholders of the Company

To the best of the Company’s knowledge, the principal shareholders (greater than 5%) of the Company as of June 14, 2020, are as follows:

Description	Shares Owns, Controls or Directs	% of the Issued and Outstanding Shares
Private Investment Vehicle	4,996,065	11.02%
Diamond Mining Company	4,476,773	9.87%
Investor	4,327,579	9.54%
Chairman and CEO	2,285,619	5.04%
Global Mining Company	2,272,727	5.01%

Exploration Activities 2019

Subsidiaries

The Company holds a 100% interest in its Botswana subsidiary, Gcwihaba (Pty) Limited (“Gcwihaba”) which holds seven (7) metal (base, precious, platinum group, and rare earth) prospecting licenses.
The Company holds a 100% interest in its Botswana subsidiary, Bosoto (Pty) Limited (“Bosoto”), which holds two (2) precious stone prospecting licenses; PL369/2014 for the area which contains the BK16 kimberlite and precious stone prospecting license PL217/2016.
The Company holds a 100% interest in Newdico (Pty) Limited. (“Newdico”), which holds one (1) industrial minerals prospecting license PL091/2019, effective January 1, 2020. Newdico also provides administrative, operational, exploration, geophysical and drilling services to the Company’s other subsidiaries.
The Company holds a 70% interest in its South African subsidiary, Idada Trading 361 (Pty) Limited (“Idada”), which holds a gold and silver exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area.
The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its operating subsidiaries are registered.

1. DIAMOND PROJECTS

The Company holds two prospecting licences for precious stones, registered to Bosoto. These licenses are summarized in Table 1.

Table 1

Precious Stone Prospecting Licenses as at December 31, 2019

PL Number	Km²	Grant Date	Expiry or Renewal Date	Current Stage	Expenditure1 Per Annum (BWP)	Expenditure1 Per Annum (BWP)	Total Expenditure from Grant Date and if held to Full License Term	Total Expenditure from Grant Date and if held to Full License Term
					Rental Fee	Work Program	BWP	USD as at 12/31/2019
PL 369/2014	1.02	10/01/19	9/30/21	2ndRenewal	1,000	20,000,000 20,000,000	40,002,000	3,815,750
PL 217/2016	TBD2	TBD2	TBD2	1stRenewal	TBD2	TBD2	TBD2	TBD2

1 Amounts include services accounted for at market value provided by Tsodilo and its subsidiaries and all expenditure amounts are incremental in nature and qualified by positive results in the evaluation process throughout the license term. 2 As at June 14, 2020, the license is currently in the renewal process.

1.1 PL369/2014 (BK 16)

Bosoto was granted prospecting license (PL369/2014) over the BK16 kimberlite pipe effective October 1, 2014. The prospecting license was renewed for an additional two-year period commencing October 1, 2017 and a second two-year renewal application was granted effective October 1, 2019.

The diamondiferous BK16 kimberlite pipe is located within the Orapa Kimberlite Field (” OKF”) in Botswana and covered by ~25 meters (m) of Kalahari Group sediments. BK16 is located 37 kilometers (km) east-southeast of the Orapa Diamond Mine AK01, 25 km southeast of the Damtshaa Diamond Mine, and 13 km north-northeast of the Letlhakane Diamond Mine, all operated by Debswana and 28 km east-northeast from Lucara Diamond Corporation's Karowe Mine (AK6).

The OKF contains at least 83 kimberlite bodies, varying in size from insignificant dykes to the 110 hectares (ha) AK01 kimberlite pipe. Ages of emplacement are Cretaceous and range from 111 Ma for Lethlakane-DK01 (Letlhakane Mine) to 85 Ma for Orapa-AK01, representing a protracted period of kimberlite magmatism lasting approximately 20 million years. Of the 83 known kimberlite bodies, eleven (11), AK01, AK02, AK07 (Orapa, Debswana); AK06 (Karowe, Lucara Diamond Corporation); BK01, BK09, BK12 and BK15 (Damtshaa, Debswana); DK01 and DK02 (Letlhakane, Debswana); BK11 (Firestone Diamonds), are currently being or have been mined.

In July 2016, Tsodilo Resources Bermuda Limited completed a share repurchase and royalty fee agreement with its Bosoto (Pty) Ltd minority shareholders. The minority shareholders’ 25% equity interest was purchased for a 2% gross proceeds royalty derived from the sale of diamonds mined from Bosoto’s BK16 kimberlite project. The result of this transaction resulted in Tsodilo having a 100% interest in Bosoto and its BK16 exploration project.

Summary of Work Performed as at December 31, 2019

The Company was granted the prospecting license in October 2014 and moved to undertake detailed ground magnetic and gravity surveys over the license area which defined the surface area of BK16 as ~5.9 ha which is a substantial increase from the previous historical estimate of 3.5 ha. A 3,662-meter (m) core drilling program followed which led to a significantly updated geological model identifying the main kimberlite phases and revealed that the dilution zone around the historical shaft and tunnel system was limited to an upper central part of the kimberlite rather than covering the entire kimberlite as previously proposed.

To assess the diamond value of the kimberlite, a Phase I mini-bulk sampling program consisting of fourteen (14) 24-inch Large Diameter Drilling (LDD) drill-holes totaling 3,121 meters was initiated. This program extracted 2,077 tonnes (calipered) of kimberlite. These LDD drill-holes were advance drilled by a 3,220 m core pilot drill-hole program which tested the geological model for accuracy ahead of the LDD program.

The Phase I LDD samples (243) were processed at the Company’s dense media separation (DMS) plant ahead of X-Ray diamond separation and final hand sorting at the Company’s secure recovery unit. The diamond recovery resulted in 509 diamonds weighing 78.403 carats.

Diamonds recovered in the Phase I program were studied by third-party qualified industry experts who concluded:

sample average price for this sample was US$176.44 per carat (see, Table 2);
BK16 contains very high-quality diamonds dominated by highly marketable shapes and contained no boart;
diamond breakage was very low; and,
3.8% of these diamonds were positively identified as Type IIa of mainly D color.

The Company retained the services of an industry leading expert in size frequency distribution (SFD) modelling to model the

SFD of the BK16 kimberlite. The SFD of the diamonds recovered from the LDD samples indicated that the size distribution of BK16 could be coarser than several producers in southern Africa. There are indications that BK16 could have a broadly similarly coarse shaped size distribution to that of the Lucara’s Karowe Mine (Botswana), Petra Diamonds’ Premier Mine (South Africa), and Lucapa Diamond’s Mothae Mine (Lesotho). This course distribution could be extrapolated to indicate that

BK16 has the potential to host ~2-5% large special stone of over 10.8 carats in size (which compares favorably with Lucara Diamond Corp.’s Karowe Mine (AK6) production of specials.

The SDF modelling was further used to extrapolate the likely in-situ or “run of mine” value and grade of BK16, where the diamond value was modelled at US$ 281 to US$ 792 and the grade was modelled at 4 to 8 carats per hundred tonne (cpht), see the detailed breakdown in Table 3. These were achieved by forward modelling to a full kimberlite run of mine projection based on the SFD data for the Phase I LDD diamonds. The SFD study concluded that there is a clear under sampling of coarse stones thus far at BK16 which adds significant uncertainty to the grade and value modelled. This uncertainty is explained by the fact that the current 2,077 dry metric tonne LDD sample represents a distinct under sampling of the true SFD of the BK16 kimberlite (~0.01% of the total kimberlite body). This under sampling explains why the sample grade and diamond value are well below the modelled grade and value, and thus why the value and grade modeling reported are so important and should be considered a more accurate reflection of a likely BK16 run of mine production.

This SFD modeling lead to a scoping level range analysis Techno-economic modelling of the deposit using some defined variables and options for developing the project. The variables and options considered as part of this analysis were:

Two main alternatives were considered, a 1 Mtpa and 2 Mtpa mine. For each of these alternatives several geological, processing (mining and treatment) and economic factors were considered.
Low $300 /ct vs. Mid $500 /ct vs. High $650 /ct using the estimated grade (average ~ 5.5 cpht)
Toll treatment option vs. Build Own Plant vs. Treat at a refurbished plant
Discount rate 6.5%, with flat USD/BWP exchange rate and flat diamond price vs. Discount rate 5%, with divergent USD/BWP exchange rate and diamond price rises by 3% vs. Discount rate 8%, with fixed USD/BWP exchange rate and flat diamond price.
Other inputs into the model were sample results from the Phase 1 LDD bulk samples; geostatistical estimating of the grade; several potential mine designs; an economic model based on estimates for CAPEX and OPEX for each option were considered.

A combination of the alternatives considered here produced 27 outputs for each alternative considered. This returned a range of possible project Net Present Values (NPV) considering all the options. This range analysis suggests that a positive NPV project is very much possible up to around 150 million USD NPV. The range analysis suggests that at diamond values around $350/ct the target could support a well-managed toll treatment operation. As the value increase to $500-550 it would be viable to contemplate a variety of low-capital intensity operations. At values above $600-650/ct the strategy of a developing a stand-alone full-size operation should be pursued.

These encouraging results suggest that BK16 has the potential to become a mineable asset, and suggest that the BK16 project employ a surface bulk sample method to augment the Phase 1 LDD sampling for its next stage of evaluation.

Table 2

Phase I diamond valuation details.

Parcel	# of Diamonds	Total Carats	US$ / Carat
1	94	17.045	$195.45
2	130	17.700	$196.37
3	278	43.195	$161.03
All	502	77.940	$176.44

Table 3

Phase I SFD modelled grade, diamond value and kimberlite value.

Variable	Unit of Measure	BK16 Sample	Min	Current BK16 SFD Study P20 P80 Max	Current BK16 SFD Study P20 P80 Max	Current BK16 SFD Study P20 P80 Max
Grade	cpht	3.8	4	5	7	8
Diamond Value	US$/carat	177	281	290	600	792
Kimberlite Value	US$/tonne	6.6	11	15	38	67

Future Plans and Outlook for BK16

The encouraging results from the Phase I program justifies moving onto Phase II which is to increase the number of carats recovered significantly by processing a far larger sample which will lead to an increase in the certainty of the grade and diamond value. Phase IIa will consist of the following:

Phase IIa Surface Bulk Sampling:

Extract ~20,000 metric tonnes of kimberlite to obtain 800 to 1,600 carats of diamonds;
Significantly improve the understanding of the grade of the deposit in carats per hundred tonnes (cpht);
Solidify further the accuracy of the high diamond value in US$ per carat;
Further confirm the presence and quality of the Type IIa diamond population;
Confirm the presence of larger stones and demonstrate that BK16 will be a significant producer of special stones above 10.8 carats and >100 carat stones;
Define an inferred resource; and,
Further refine the accuracy of the economic fundamentals of the project to move towards detailed feasibility studies and ultimately mining.

Since the completion of Phase I, the Company has been developing the Phase IIa program with third-parties to ensure that sufficient carats are obtained in the most cost effective and viable manner. It was determined that a surface bulk sample of a box-cut style design will be the most economic and viable option for Phase IIa. To this end a number of contract mining companies were contacted to quote on this surface bulk sample. Tsodilo has held advanced discussions with Trollope Botswana (Trollope) for the purpose of undertaking the box-cut style surface bulk sampling program on behalf of the Company. Trollope is the main contract mining company at Lucara’s Karowe mine (AK6) located 25 kilometers south-west of BK16. Trollope has the experience and expertise to conduct this surface bulk sample in an efficient, safe and professional manner.

The envisioned Phase IIa surface bulk sampling of this type constitutes standard industry practice for diamond exploration of kimberlites like BK16 to gain enough carats for an effective economic analysis. The Phase IIa bulk sample design will be a basic small and shallow box-cut style sample. Twenty-five (25) meters of over-burden will be stripped to expose the kimberlite below resulting in a depth of the box-cut design of 30 - 35 meters. The bulk sample design plans are being finalized and these along with a rehabilitation design will be verified by an independent qualified mining engineer prior to final consultation with and approval by the Department of Mines (DOM).

This will be followed up by a 5,000 tonnes LDD program plus another 20,000 tonnes of surface bulk sample in phase IIb. Phase IIa and Phase IIb should provide a total of 1,800 to 3,600 carats from (for 4 cpht to 8 cpht) and provide a solid foundation for progressing the BK16 project.

1.2 PL217/2016

PL 217/2016 was acquired in the second quarter of 2017. The license has an effective date of January 1, 2017 for an initial period of 3 years followed by two 2-year renewals. During the quarter a letter was sent to the Department of Mines and staff

at the Ministry of Minerals and Resources, Green Technology and Energy Security detailing some further explanation of our Modification to the Prospecting program for Bosoto PL21/2016 that was filled in the last quarter, where we modified the expenditures and expanded on the rational for these modifications, and is currently pending.

Further to this, a relinquishment report and first renewal application was filed with the Department of Mines during the 3[rd] quarter 2019 relinquishing 49.2% of the current licenses and retaining 50.8 %, see Table 4 below.

Table 4

Details of relinquished areas

	Details of relinquished areas	Details of relinquished areas	Details of relinquished areas
PL Number	Area (km2) Original Relinquish Renew			Percentage Area (%) Relinquish Renew
PL217/2016	580	285.28	294.72	49.2%	50.8%

The license lies within the OKF and is situated some 10 km south of the Orapa Mining area and with the same distance to the west of the Letlhakane Mining lease. It surrounds the Karowe Mining lease, while the BK11 prospect is directly to the east of the licence. Other kimberlites occur along its northern and eastern borders. The licence is highly prospective for kimberlites but also has the potential to contain secondary diamond deposits associated with the paleo-drainage network in the area. The present drainage is to the north and erosion of the kimberlites would have resulted in the residue, including diamonds, to have been transported in the same direction. The focus of the exploration work would therefore be not only on finding kimberlites but also to assess the geomorphology in the search for paleo-channels and alluvial diamond deposits.

Summary of Work Performed as at December 31, 2019

A novel mix of remote sensing strategies which involved studying in combination air magnetic surveys; Aster LT1; Aster GED Emissivity; Landsat ETM 7+; Landsat LC08, Landsat 8 False Color, Shuttle Radar Topography Mission (SRTM) digital elevation models (DEM); and regional digitized geology, helped identify a number of potential alluvial and kimberlite targets for further exploration.

This initial investigation lead to a program of ground magnetics surveys over these targets which were conducted in two stages, and totaled 246 survey line km. This further refined the understanding of the area and identified 12 kimberlite targets of which 5 are high priority. Additional high-resolution ground gravity surveys followed and were conducted along lines perpendicular to the previously identified paleo-channels and also down stream of AK6 and BK11. Modelling of the ground magnetic and ground gravity data led to the identification of a number of paleo-channels. Where alluvial gravel paleochannels have characteristically lower densities, and as such can be identified as having a lower gravity than the surrounding area. This modelling indicated significant overlaps between these ground geophysical surveys and the remote sensing interpretations for the locations of subsurface paleo-channel alluvial targets. Several prospective paleo-channel targets close to present-day drainages at ~15 to 40 meters below surface have been noted. Those channels may contain alluvial diamonds sourced from AK6 (Karowe / Lucara Diamond Corp.) and BK11 (Firestone Diamonds) and could contain large diamonds that are characteristic of AK6.

The OKF’s age ranges from 101 Ma to at least 88 Ma indicating that the erosion levels of the various kimberlites will be different. These differences have geomorphological implications which have led to a refinement of our understanding of the alluvial potential in the area and led to the development of a new geomorphological model of the area in order to prioritise targets, where there are now 4 high priority alluvial targets, alongside the 5 high priority kimberlite targets.

A detailed ground magnetic survey was conducted in the quarter over a small annexed portion of the license located just east of the Letlhakane Mine which up till now was not studied in detail. This was to investigate some subtle kimberlite anomalies in the regional aeromagnetic data, and also to map out any ancient paleo-channels within the area. A total of 49 north-south regular lines and 1 tie line (oriented east-west for levelling purposes) were completed, covering 201-line kilometres in total. The average length of the regular and tie lines was 4 km and 2.4 km respectively. The number of magnetic points recorded was 53,487 and the grid area was 9.5 km[2] . The results for this ground magnetic survey conclude there is no potential for either a kimberlite or a diamondiferous paleo-channel within this part of the license, as the paleo-flow direction is in the wrong direction to source diamonds from the Letlhakane mine. Further to this, it was determined that some paleochannels are infilled with basalt which is older than the kimberlites in the area. As such no further work is warranted and hence this small annexed area has been wholly relinquished.

Future Work on PL217/2016

The initial exploration results for the remaining ground within this prospecting license are encouraging and require further investigation. The next exploration program will consist of:

further high-definition ground magnetic surveys over the license to further test for other potential diamondiferous paleo-channels;
a soil sampling program has been planned to help delineate drilling targets by identifying kimberlite indicator areas around some of the kimberlite targets identified;
this will lead to a prioritized drill program to test the alluvial targets and the kimberlite targets.
If successful and diamonds are identified in either the alluvial targets or the kimberlite targets this will led to a bulk sampling programs of these successful prospects.

2. METALS (BASE & PRECIOUS, PLATINUM GROUP METALS, AND RARE EARTH ELEMENTS) PROJECTS

The Company’s current seven Prospecting Licences have evolved with time into a package which covers some 4,920.50 km² (Table 5).

Table 5: Gcwihaba Metal Licenses as at December 31, 2019

PL Number	Km²	Grant Date	Expiry or Renewal Date	Current Stage	Expenditure Per Annum (BWP)*	Expenditure Per Annum (BWP)*	Total Expenditure from Grant Date and if held to Full License Term	Total Expenditure from Grant Date and if held to Full License Term
					Rental Fee	Work Program	BWP	USD as at 12/31/2019
PL 020/2018	570.00	10/01/18	9/30/21	Initial Grant	2,850	240,000+	248,550	23,709
PL 021/2018	964.90	10/01/18	9/30/21	Initial Grant	4,825	240,000+	254,475	24,274
PL 022/2018	317.10	10/01/18	9/30/21	Initial Grant	1,586	240,000+	244,758	23,347
PL 023/2018	978.60	10/01/18	9/30/21	Initial Grant	4,893	240,000+	254,679	24,294
PL 024/2018	807.30	10/01/18	9/30/21	Initial Grant	4,037	240,000+	252,111	24,049
PL 025/2018	454.50	10/01/18	9/30/21	Initial Grant	2,273	240,000+	246,819	23,544
PL 026/2018	828.10	10/01/18	9/30/21	Initial Grant	4,141	240,000+	252,423	24,061
	4,920.50				24,605		1,753,815	166,278

1st year 70,000 BWP; 2nd year 80,000 BWP; and 3rd year 90,000 BWP

The exploration work conducted on the Gcwihaba licenses has developed over time and the following targets are currently being explored within Neoproterozoic rocks within the licenses which are comprised of Copper Belt (Lufilian Arc)-equivalent meta-sediments (including graphitic phyllites, schists, marbles (carbonates), diamictites, and iron formation), metabasites and gabbros (535 Ma):

Xaudum Iron Formation – which comprises a banded magnetite deposit and iron rich schists that are contained within the Grand Conglomerate Formation (linked to the Chuos in Namibia);
Sedimentary Cu/Co (Katanga type sediments) within the entire Neoproterozoic package;
Xaudum Gold Project – Gold mineralisation linked to the Xaudum Iron Formation; and
Skarn REE and Cu targets – These are secondary skarn targets generated within the marbles (carbonates) rich lithologies and include secondary enrichment in REE and Cu.

These targets are explored in more detail below.

2.1 XAUDUM IRON FORMATION (XIF)

The metal licenses which contain the XIF project and the prospective copper targets, were renewed in their entirety effective October 1, 2018 for an initial term of three (3) years with two 2-year renewals.

The XIF is a banded magnetite iron formation intimately associated with glacial diamictites of the Grand Conglomerate (Chuos equivalent) and is the cause of the large Xaudum Magnetic Anomaly that extends over 35 km in a north-south direction with several magnetite bands that occur over a width of several kilometres.

Summary of Work Performed as at December 31, 2019

Exploration of the XIF is driven by geophysics as there is no outcrop and there is significant Kalahari cover overburden of sands and calcrete. To this end, the Company has completed over 1,800 km[2 ] (~20,000-line kms) of ground magnetics to define the extent of the highly magnetic XIF, which has been used to drive the resource drilling program. Drilling of Block 1, at the northern part of the XIF deposit, was completed with 156 drill holes totalling 30,935 meters of drilling (~19 miles). This drilling resulted in a geology and mineralisation model being generated using the Gocad modelling package. This model was used by SRK Consulting (U.K.) to define Gcwihaba’s maiden Mineral Resource Estimate (MRE) in a National Instrument (NI) 43101 technical report for Block 1, via standard pit optimisation techniques. This Block 1 resource is defined as 441 million tonnes (Mt) grading 29.4% Fe, 41.0% SiO2, 6.1% Al2O3 and 0.3% P. and represents Botswana’s first and only iron resource. Davis Tube Recovery (DTR) metallurgical test work showed that all major mineralised units are capable of producing a premium grade magnetite concentrate product of ~67% Fe. This XIF iron concentrate product will be very similar to the iron ore concentrate fines and pellets feed produced from premium iron ore producers in the U.S., Canada, Brazil, Sweden etc. and attract a premium value compared to standard global iron ore products.

The reported Block 1 Mineral Resource represents only a fraction of the potential XIF mineralization delimited by the ground magnetics. An Exploration Target for the entire strike of the XIF is estimated to be 5 to 7 billion tonnes with grades ranging between 15-40% Fe. This XIF Exploration Target was generated using inversion modelling of the ground magnetic signal which was compared to local drill-hole model volumes to create inversion model volume conversion factors, these values were used to define volumes for the entire XIF which were converted to tonnes via measured density values. It is important to note that the tonnages and grade quoted in this exploration target is conceptual in nature, there has been insufficient exploration to define this fully as a mineral resource and that it is uncertain if further exploration will result in the full target being delineated as a mineral resource.

A Phase II evaluation drilling program has begun within the next major XIF magnetic anomaly area, referred to as Block 2. This Phase II evaluation is expected to result in a significant XIF mineral resource upgrade where the company expects in due course to define ~2 billion tonnes of total Fe mineralisation based on our Exploration Target understanding.

Future Plans and Outlook for the XIF Project

The XIF will produce a premium ore concentrate, these premium ore concentrates with an Fe content above 65% Fe can increase high quality steel output and produce substantially lower waste and emissions as higher-grade ore uses substantially less coal per unit of steel than the cheaper lower grade ores that have been the previous main stay for global steel production. Global demand for these high-grade premium iron ore products and high end concentrate products like the XIF will produce are currently out stripping demand for normal lower grade direct shipping iron ore products from standard producers in Australia, India and South Africa etc. and currently command an even higher premium than they have historically over standard ores. As such the company is currently exploring options for developing the XIF resource. To this end the Company is looking to initiate a Preliminary Economic Assessment (PEA) for this project. The objective of this PEA will be to conduct an early stage economic analysis of the potential viability of the mineral resources and to develop a general strategy to move the project forward, given its premium ore potential. The PEA will include detailed studies into; processing and engineering strategies; equipment and technology requirements; transport and infrastructure requirements; identification of potential environmental and social aspects; associated costs such as capital costs, operational costs, and lifecycle costs; and, anticipated revenues. The potential for a small scale start-up mine supplying magnetite to a small scale ferrosilicon (FeSi) plant which will sell FeSi products to the mines in Botswana and the mines in the local SADC area is also being explored as a way of initiating mining at a small scale while a larger scale mine and infrastructure can be explored and developed.

2.2 SEDIMENTARY Cu/Co (KATANGA TYPE SEDIMENTS)

General geology

Southeast and east of the XIF Iron project are north-north-west to north-north-east trending mineralized meta-sediments within the Katanga type sediments of the Neoproterozoic sequence. This meta-sedimentary sequence is very similar to the parts of the stratiform Cu-Co (Copper-Cobalt) province of the Central African Copper Belt (CACB) and is identical to the host rocks of the Kalumbila Cu-Ni-Co deposit in western Zambia. These phyllites (black shales), meta-pelites, meta-arenites, and marbles (carbonates) with evidence of evaporate minerals, in particular bear strong resemblance to the Mwashya rocks in Zambia. Most lithologies are mineralized with pyrite, pyrrhotite, chalcopyrite and bornite.

The majority of these Katangan Group meta-sediments intersected in drilling are interpreted to belong to the Mwashya SubGroup (phyllites, marbles, and meta-pelites units) of the Roan Group, or the Grand Conglomerate Formation (diamictite and associated units) of the Nguba Group, occurring on each side of the ‘basement high’. The majority of the drilling has taken place within these two stratigraphic groups. The drilling has shown diamictite alternating with phyllite, marble, and metapelite packages which is attributed to repetition by bedding-parallel thrust faults. The distribution of magnetite-facies XIF is restricted to the diamictite on the western side of the basement-high, and this probably reflects differences in seawater chemistry and sedimentary basin inputs across the ‘basement high’ during the Sturtian Glaciation.

Summary of Work Performed as at December 31, 2019

Tsodilo has explored metal targets within these Katanga meta-sediments for a number of years with some success in identifying Cu and Co metal target areas and proof of concept for further exploration. This led to Tsodilo entering into a joint venture (JV) with First Quantum Minerals Ltd (FQM) in 2013. Whereby FQM signed a Memorandum of Understanding (MoU) with Tsodilo Resources Ltd. (Tsodilo) in April, 2013 and an ‘Earn-in Option Agreement’ in November, 2013 for FQM to earn up to 70% interest in Gcwihaba’s metals prospecting licenses excluding any rights to iron. FQM’s and Tsodilo have collectively undertaken the following notable exploration data collection activities that have contributed to metal exploration to date:

366 core drill samples totaling 77,174 meters of core, including 116 reflex gyro surveys of these holes, and over 51,000 samples sent for assay. These helped identify the geological profile of the area, develop a geological model, a stratigraphic comparison to the CACB, and identify general areas for further exploration;
220-hole drill program (13,689 meter) known as the Kalahari Geochemistry Program (KGP) was conducted to test the soil overburden for hydromorphic dispersion of metals from bedrock mineralization on a 2 km grid to locate targets for further exploration and drilling. These holes were sampled every 2m and sent for ICP assay analysis (8,326 samples assayed for As, Au, Bi, Co, Pb, Al, Ca, Cu, Mg, Ni, Zn, and Ag). A regolith research specialist from CSIRO in Australia was retained to assist in this soil overburden assessment and aid in target identification. This program identified a number or high priority targets for further exploration, although it is notable only one was drilled to date.
20,000-line km of ground magnetic data helped to define geological structures and features. An airborne electromagnetic survey (Spectrem) was flown (16,934-line km) collecting electromagnetic (EM), magnetic and radiometric data. An airborne gravity survey also was flown but due to technical problems the area was reduced to 10,392-line kms at a 500 m flight line interval. These surveys contributed in advancing a significant structural and geological model for the region that aided greatly in exploration targeting;
162 water samples were collected from a combination of KGP, drill holes, government water boreholes and hand dug water wells in local villages. These were tested for pH and Eh, and sent for multi-element ICP analysis, and some separate Cu-isotope analysis. This data helped identify bedrock source anomalies and added to target definition alongside the KGP data set.

In January 2016, FQM notified Tsodilo that it was to terminated the Earn-in Agreement on the back of a major drop in the global copper price. FQM identified a number of targets but not explored, as a result Tsodilo initiated a review of all data collected over the area to further define these and other targets that have either been superficially examined or not investigated at all. This review resulted in defining fourteen (14) high priority Cu and Co targets for further exploration. This work led to a soil sampling program to help define these targets further. 5,071 soil samples were collected and sieved to 180 mesh from the sub-deflation soil zone during the dry season. The first targets soil samples were sent for a specialized partial digestion technique which has been specially developed for sampling in covered terrains called TerraLeach at Intertek laboratories Australia. This data was validated and further studied to remove geomorphological controls and highlighted a significant target of interest that has be prioritized for drilling.

Further to this, 4 drill-holes have been identified as “under explored for copper” and will be assed for copper. A further review of the copper targets generated by First Quantum (FQM) was conducted. Targets selected in-house were then compared to these FQM targets developed from the shallow Kalahari Geochemistry Program (KGP) holes. There is significant overlap between the two target sets and a review of the data is ongoing to further refine exploration priorities incorporating new detailed structural and geological mapping data alongside the recent soil sampling information.

Future Plans and Outlook for the Katanga Meta-Sediments Project

The remaining soil samples will be sent for TerraLeach analysis to assist in refining the high priority Cu and Co targets so focused drilling of these targets can occur. This will be backed up by further detailed local structural and geological reviews of these target areas to define the structures and features that will be targeted during this drilling program.

2.3 Xaudum Gold Project – Gold mineralisation linked to the Xaudum Iron Formation

Some Gold anomalies have been seen within some of the Xaudum Iron Formation drill holes and associated facies as described above. This gold project has thus far identified that there is potential for gold mineralization to be associated with the XIF, where an analogy has been drawn to the Homestake gold deposit in South Dakota, US, where phyllites acted as the source for the gold deposited in the XIF material.

A detailed review of all data collected to date assisted in identifying a number of potential gold anomalies for further study within the drill-hole data set, these have been used to assess the potential for generating Gold targets for further exploration

within this Xaudum Iron Formation and associated units. This led to a significant core logging and data mining program to identify current holes that can be processed for gold assay, to date 6 holes have been identified as having potential gold mineralization and are awaiting gold assay.

Future Plans and Outlook for the Xaudum Gold Project

The gold logging program will continue and holes identified sent for gold assay, which will lead to drill target generation for further exploration.

2.4 Skarn Rare Earth Elements (REE) and Cu target Project

There are 3 main Skarn anomalies that have been explored drilled by the company these are:

1822C27 skarn anomaly target: this skarn anomaly also known as C27 has had 7 holes drilled into it by the Company;
1822C26 skarn anomaly target: this skarn anomaly also known as C26 has had 5 holes drilled into it by the company; and
1822C10 skarn anomaly: this skarn anomaly also known as C26 has had 4 holes drilled into it by the company.

The C26 and C27 anomalies are somewhat spatially associated over a large area allowing for a significant tonnage of mineralization to be seen over these two anomalies. The C10 anomaly is separated but appears to be a similar style of skarn anomaly again but is also of significant size. Significant REE and Cu mineralization has been identified in these skarn anomalies.

The drilling into these skarn anomalies has identified that the skarn development is within the carbonate rich marbles, and carbonate rich schist rocks within these anomalies. There are also mafic intrusive identified and some granitic like intrusive seen in these anomalies. The skarn anomalies are composed of endo-skarn and exo-skarn with sulphide and magnetite skarn alteration mineralization, plus some associated retrograde alterations. These skarn and alteration facies are significantly enriched in REE up to ~ 1.5 % Total Rare Earth Oxides (TREO) in some intervals over 1m. These are often associated with some Cu and Co mineralization also.

Early indications show that there could be the potential to hold 10’s of millions of tonnes of TREO and some associated Cu within these skarns at the range of 0.05% to 1.5% TREO.

Future Plans and Outlook for the Skarn REE and Cu target Project

The next stage is to develop a detailed study of the geology and facies and alterations associated with the skarns and develop a detailed geological and mineralization model of these skarn anomalies. This will lead to the development of a REE exploration target tonnage and grade range that will advance the next stage of REE drilling and exploration program to further define the grade and tonnage of these REE deposits.

3. Newdico (Proprietary) Limited (“Newdico”) – Botswana

The Company holds a 100% interest in Newdico (Pty) Limited. (“Newdico”), which holds one (1) industrial minerals prospecting license PL091/2019, effective January 1, 2020 for a period of three (3) years expiring December 31, 2022. The license comprises 266 square kilometers and has a proposed minimum spending commitment inclusive of annual license fees of BWP 131,330 ($12,527 USD) as at January 1, 2020) if held for the entire license period.

Newdico also provides administrative, operational, exploration, geophysical and drilling services to related companies.

4. Idada Trading 361 (Pty) Limited (“Idada”) – Barberton Gold Project, South Africa

Barberton is situated in the De Kaal Valley at the southeastern edge of De Kaap Valley pluton and is fringed by the Makhonjwa Mountains (Barberton Mountain Land). The Barberton area has a long and colorful history of gold production producing an estimated 360 tonnes of Au between 1884 and 2012, worth over $13 trillion USD at today’s gold prices. However, it is noted that around 70% of this was extracted from four main mines Sheba, New Consort, Fairview and Agnes.

A detailed high-quality aerial survey over the Barberton region in 2011 identified hidden structures and faults that were unknown prior to the survey. This survey has suggested that the Saddleback-lnyoka Shear Zone and the southwesterly extension of the Barbrook and Sheba faults are possibly continuous to the northwest rather than turning south as previously inferred. These fault and shear zones are vitally important and are the main host of gold in the region. As such this new structural interpretation led to the company to apply for ground over this new northwest extension of this fault system, via its South African subsidiary Idada in the anticipation that it may host significant gold mineralization.

The Company holds a 70% interest in its South African subsidiary, Idada. Idada made application for this exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in February 2012. This application was accepted in February 2013 and consultation was conducted with interested and affected parties in April and June 2013. An Environmental Management Plan (EMP) was submitted in April 2013 and a site visit was made by various governmental departments (DMR, EWT, and REMDEC) in September 2013. During the second quarter 2015, notice was received from the Department of Mineral Resources, South Africa which granted the Company the prospecting rights for gold and silver in the applied for area subject to certain subsequent conditions being met. The Company has fulfilled those requirements and the Prospecting Right, together with the EMP, was executed and became effective on April 7, 2016. The Prospecting Right has been granted for a term of five years effective May 2015.

Notices have been sent to all surface owners of the five farms informing the owners of our intent to access the property to commence exploration activities. Three land owners, holding most of the target ground, have denied access. This issue has been submitted to the Department of Mineral Resources (DMR) for resolution.

During the 3[rd] quarter 2019, the Company was informed that certain portions of our license areas were designated as a World Heritage site by UNESCO. UNESCO has informed the Company that in accordance with the Operational Guidelines for the Implementation of the World Heritage Convention, UNESCO are investigating the situation that the Company brought to their attention. UNESCO has informed us that according to IUCN, the Advisory Body to the intergovernmental World Heritage Committee concerning nominations of natural heritage sites on the World Heritage List, the overlapping prospecting license on the western portion of the property or of the presence of Tsodilo Resources Ltd was not brought to the attention of IUCN during the evaluation process. The documentation related to the evaluation and inscription of the site on the World Heritage List from UNESCO’s website at: http://whc.unesco.org/en/list/1575/documents.

As the responsibility for nominating sites to the World Heritage List and the management and protection of the World Heritage properties inscribed is under the authority of the State Party of South Africa, UNESCO advised us that the would be contacting the appropriate South African office for clarification. To date, it is our understanding that neither the Department of Mineral Affairs (DMA) nor the Department of Environmental Affairs has responded to UNESCO’s inquiry. In addition to UNESCO’s inquiries, we also contacted the DMA for guidance and received a response but before the issue could be dealt with the South African government was shut down due to the COVID-19 virus. We will continue our efforts to engage the DMA once the government resumes its activities on a full-time basis. In the interim, we have filed a renewal application to protect our license rights.

Summary of Work Performed as at December 31, 2019

A desktop study of all published and available geological, geochemical, and geophysical data was undertaken to define the geology, and structural regime of the area, including the dip of the target fault structure. This study also incorporated various remote sensing data sets including open source Landsat satellite imagery and Aster hyperspectral data, this has enhanced our understanding of the geomorphology and the interplay this has with the geology, the important local weathering regimes and soil occurrences. All the known gold and base metal occurrences in the immediate area were georeferenced and added to the database. This led to the East Northeast – West Southwest orientated mineralized thrust fault zones being incorporated into our detailed geological interpretation, including areas that intersect the main target fault zone located on the property, and as such have been highlighted for priority exploration. This has given the company all the information it requires to move into the next “ground truthing” phase of the exploration program.

Future Plans and Outlook for the Barberton Gold Project

Once the issues with the surface owners and UNESCO have been resolved the Company will commence a mapping exercise based on the geological information acquired by the desktop study to verify the local geology, various geological features, and soil types. Some soil and/or stream samples are planned to be taken, which will be followed by a detailed ground magnetic survey to cover the main shear/fault zone in the area to help define drill target locations so to intersect this structural feature, and identify if there is any significant gold mineralization present in the license.

Exploration and evaluation additions for the period ended December 31, 2019 are summarized as follows:

		Bosoto		Idada		Gcwihaba
		Botswana		S. Africa		Botswana
	Project	Project	Total	Precious		Metals	TOTAL
	BK 16	PL 217	Precious	Metals
			Stones
Drilling Expenditures	$ 16,122	$ 1,018	$ 17,140		$--	$15,941	$ 33,081
Amortization Drill Rigs, Vehicles & Trucks	41,085	33,198	74,283		--	19,131	93,,414
GIS & Geophysics	--	--	--		--	--	--
Lab Analyses & Assays	8,395	--	8,395		--	--	8,395
License Fees	--	--	--		--	2,257	2,257
Office, Maintenance, & Consumables	26,973	4,631	31,604		--	15,108	46,712
Salaries, Wages & Services	121,273	108,906	230,179		--	128,346	358,525
Balance at December 31, 2019	$213,848	$147,753	$361,601		$--	$180,783	$542,384

Exploration and evaluation additions for the period ended December 31, 2018 are summarized as follows

		Bosoto			Idada		Gcwihaba
		Botswana			So.		Botswana
					Africa
	Project	Project		Total			Metals	TOTAL
	BK 16	PL 217		Precious	Precio
				Stones	us
					Metal
					s
Plant Operations	$ 171,709	$	-	$171,709		$ --	$ --	$ 171,709
Drilling Expenditures	40,401	10,056		50,457		--	19,741	70,198
Amortization Drill Rigs, Vehicles & Trucks	49,436	34,395		83,831		--	24,280	108,111
GIS & Geophysics	12,842	8,123		20,965		--	15,698	36,663
Lab Analyses & Assays	7,750		--	7,750		--	14,447	22,197
License Fees	--		--	--		--	3,539	3,539
Office, Maintenance, & Consumables	116,217	66,603		182,820		--	66,836	249,656
Salaries, Wages & Services	463,479	134,702		598,181		--	99,010	697,191
Balance at December 31, 2018	$861,834	$253,879		$1,115,713		$--	$243,551	$1,359,264

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2019, the Company had a negative working capital of ($1,564,441) [2018: (426,402)], which included cash of $5,599 (2018: $7,481). These funds are managed in-house in accordance with specific investment criteria approved by the board of directors, the primary objective being the preservation of capital to assure funding for exploration activities. On September 28, 2017, the Company sold royalty interest for $1,500,000 (see Financing Activities below).

Short Term Notes as of December 31, 2019

Date	Base Amount	Interest Rate	Termination Fee	Maturity Date
1-Oct-18	$20,000	8%	$2,000	30-Sep-20
31-Dec-18	444,343	8%	44,434	30-Dec-20
31-Jan-19	85,000	8%	8,500	30-Dec-20
30-June -19	293,687	8%	8,646	30-Dec-20
30-Sept- 19	98,146	8%	3,646	30-Dec-20
31-Dec -19	95,146	8%	3,746	30-Dec-20
	$1,036,322		$70,972

Financial Instruments

The carrying amounts reflected in the consolidated Statement of Financial Position for cash, accounts receivable, accounts payable, accrued liabilities and loan notes payable approximate their fair values due to the maturities of these instruments. Certain of the Company’s warrants are classified as derivative liabilities and are recorded at their estimated fair value. The liability recognized at December 31, 2019 for those warrants is NIL (2018: NIL). Due to the nature of the Company’s operations, there is no significant credit or interest rate risk.

Operating Activities

Cash outflow used in operating activities before working capital adjustment increased to a loss of ($386,567) from the year ended December 31, 2019 from a loss of ($766,479) for the year ended December 31, 2018. Most operating

expenses were decreased for the year ended December 31, 2019 in total by $238.391 compared to 2018. The large operating expense reductions for 2019 were in stock based compensation $110,229 compared to 2018 of $252,336, and Administrative expenses $170,256 compared to 2018 of $206,578. The largest impact on (loss) for the year were the net rental income for equipment of $303,053 in 2019, $19,090 in 2018 and realized gain on disposal of plant, property and equipment of $201,600 in 2019, $11,584 in 2018. The largest impact on Comprehensive loss for the year was foreign exchange translation change gain of $115,543 in 2019, compared to a loss of ($660,663) in 2018.

REMAINDER OF PAGE LEFT BLANK INTENTIONALLY

Annual Information	Fiscal Year	Fiscal Year	Fiscal Year	Fiscal Year	Fiscal Year
(in US Dollars)	December 31	December 31		December 31
	2019	2018			2017
Net loss for the year	($297,611)	($1,015,437)			($1,301,378)
Basic loss per share	($0.01)		($0.03)		($0.03)
Basic diluted loss per share	($0.01)		($0.03)		($0.03)
Total other comprehensive income (loss)	115,543	(660,663)			373,806
Total comprehensive income (loss) for the year	($182,068)	($1,676,100)			($927,572)
Basic comprehensive loss per share	($0.00)		($0.04)		($0.02)
Diluted comprehensive loss per share	($0.00)		($0.04)		($0.02)
Total assets	$7,742,854	$7,158,233			$7,845,863
Total long-term liabilities	--	$464,343			--
Cash dividend	--		--		--

Quarterly Information (in US Dollar)	Quarter 1	Quarter 2	Quarter 3		Quarter 4
Fiscal Period ended December 31, 2018
Net income (loss) for the period	($285,524)	($239,001)	($208,679)		($282,233)
Basic income (loss) per share	($0.01)	($0.00)		($0.00)	($0.01)
Diluted basic income (loss) per share	($0.01)	($0.00)		($0.00)	($0.01)
Comprehensive income (loss) for the period	$151,822	($1,061,034)	($351,854)		($415,034)
Basic comprehensive income (loss) for the period	($0.00)	($0.02)		($0.01)	($0.01)
Diluted comprehensive income (loss) per share	($0.00)	($0.02)		($0.01)	($0.01)
Total assets	$8,074,849	$7,157,478	$6,982,227		$8,227,394
Total long-term liabilities	--	--		--	$464,343
Quarterly Information (in US Dollars)	Quarter 1	Quarter 2	Quarter 3		Quarter 4
Fiscal Period ended December 31, 2019
Net income (loss) for the period	($64,605)	($65,588)	$66,043		($233,461)
Basic income (loss) per share	($0.00)	($0.00)		($0.00)	($0.01)
Diluted basic income (loss) per share	($0.00)	($0.00)		($0.00)	($0.01)
Comprehensive income (loss) for the period	$35,244	(51,766)	(246,799)		81,253
Basic comprehensive income (loss) for the period	($0.00)	($0.00)		($0.01)	($0.00)
Diluted comprehensive income (loss) per share	($0.00)	($0.00)		($0.01)	$0.00
Total assets	$7,370,351	$7,530,085	$7,370,436		$7,742,854
Total long-term liabilities	$549,343	$624,107	$613,337		--

Investing Activities

Cash flow applied in investing activities decreased to ($136,580) for the year ended December 31, 2019 [2018: ($1,239,569)].

Total expenditures of $338,180 on exploration properties for the year ended December 31, 2019 were attributable to the Gcwihaba and Bosoto projects and NIL on the Idada project in Barberton, South Africa. There are no material expenses or funding for the exploration of the Newdico projects in 2019 as a prospecting application was mostly pending in 2019 to be granted December 19, 2019 to be effective January 1, 2020. Newdico received proceeds on the disposal of equipment of $210,600 for the period-ended December 31, 2019.

Financing Activities

The Company finances its corporate and exploration activities through the issuance of equity units by way of nonbrokered private placements. Each unit has consisted of one common share of the Company and one or one-half a warrant with each full such warrant entitling the holder to purchase one common share of the Company for a

purchase price equal to the unit price for a period of two to five years from the date of issuance. No private placements took place in 2019 and 2018.

In the third quarter of 2017, the Company reached an agreement with Sandstorm Gold Ltd. ("Sandstorm") (NYSE MKT: SAND, TSX: SSL) to grant royalties on three projects in consideration of the payment of $1,500,000.

The package of assets in the Royalty Sale includes:

the grant of a 1% NSR on the Company's wholly owned Botswana subsidiary Gcwihaba Resources (Pty) Ltd. prospecting metal licenses in northwest Botswana;
the grant of a 1% GPR on the Company's Botswana wholly owned subsidiary Bosoto (Pty) Ltd. precious stone prospecting license (PL217/2016) located in the Orapa Kimberlite Field; and,
the grant of a 1% NSR on the Company's 70% owned South African subsidiary Idada 361 (Pty) Ltd. gold and silver prospecting license located in the Barberton Greenstone Belt in the Mpumalanga province of South Africa.

Sandstorm shall have a right of first refusal with respect to any third-party bona fide offers to purchase a metal or precious stone royalty on the properties.

Short term notes as of December 31, 2019:

Date	Base Amount	Interest Rate	Termination fee	Maturity Date
1-Oct-18	$20,000	8%	$2,000	30-Sep-20
31-Dec-18	$444,343	8%	$44,343	30-Dec-20
1-Feb-19	$85,000	8%	$8,500	31-Jan-21
30-Jun-19	$86,456	8%	$ 8,645	30-Dec-20
30-Sept-19	$36,462	8%	$ 3,646	30-Dec-20
31-Dec-19	$37,462	8%	$ 3,746	30-Dec-20

On June 30, September 30 and December 31, 2019, short-term promissory notes were issued for $207,231 and $61,684, and $57,684 respectively to an employee, who is a director of the Company. The notes are payable on demand and has an annual interest rate of 8%.

Date	Base Amount	Interest Rate	Termination fee	Maturity Date
30-Jun-19	$207,231	8%	NA	NA
30-Sept-19	$61,684	8%	NA	NA
31-Dec-19	$57,684	8%	NA	NA

Tsodilo expects to raise the amounts required to fund the Newdico, Gcwihaba, Bosoto and Idada projects and corporate general and administration expenses, by way of non-brokered private placements and joint ventures.

RESULTS OF OPERATIONS

On a consolidated basis, the Company recorded a comprehensive net loss of ($182,068) for the year-ended December

31, 2019 ($0.00) per common share, compared to a comprehensive loss of ($1,676,100) for the year- ended December 31, 2018 ($0.04) per common share.

Total capitalized exploration expenditures including amortization of property, plant and equipment used in exploration activities on all projects amounted to net $7,391,765 as at December 31, 2019 compared to $6,699,462 as

at December 31, 2018. Total capitalized exploration expenditures incurred on Gcwihaba’s projects as at December 31, 2019 were $2,988,090 compared to $2,752,504 as at December 31, 2018. Additions of $180,783 were increased by exchange translations in 2019. Total capitalized exploration expenditures incurred on Bosoto’s projects as at December 31, 2019 were $4,395,453 compared to $3,939,056 as at December 31, 2018. Additions of $361,601 were increased by exchange translations in 2019. Total capitalized exploration expenditures incurred on Idada’s projects as at December 31, 2019 were $8,112 compared to $7,902 as at December 31, 2018. There were no additions and the difference was from exchange translations in 2019. The principal components of the Gcwihaba exploration program was the further detailing of drill targets. The Bosoto PL369/2014 commenced different studies with respect to collecting a 20,000 ton sample via a box-cut methodology. The Bosoto PL217/2016 was centered on further clarification and review of the geophysical data over kimberlite targets. A table is presented in the Exploration and Evaluation Additions section above with specific details.

PERSONNEL

At December 31, 2019, the Company and its subsidiaries employed fifteen (15) compared to seventeen (17) at December 31, 2018, including senior officers, administrative and operations personnel including those on a short-term service basis.

YEAR-ENDED DECEMBER 31, 2019

The year-ended December 31, 2019 was a normal operating period. Operating expenses were reduced for the yearended December 31, 2019 to $800,760 compared to 2018 of $1,039,151. Rental income was increased for the yearended December 31, 2019 to $303,053 from 2018 of $19,090. Gain on the disposal of equipment was increased for the year ended December 31, 2019 to $201,600 from 2018 of $11,584.

RISKS AND UNCERTAINTIES

Operations of the Company are speculative due to the high-risk nature of its business which includes acquisition, financing, exploration and development of diamond and metal properties (collectively “mineral”). Material risk factors and uncertainties, which should be taken into account in assessing the Company's activities, include, but are not necessarily limited to, those set below. Any one or more of these risks and others could have a material adverse effect on the Company.

Additional Funding Requirements

Further development and exploration of the various mineral projects in which the Company holds an interest depends upon the Company's ability to obtain financing through equity or debt financing, joint ventures or other means. While the Company has been successful in the past in obtaining financing through the sale of equity securities and royalty transactions, there can be no assurance that the Company will be successful in obtaining additional financing in the amount and at the time required and, if available, that it can be obtained on terms satisfactory to the Company.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. The Company incurred a loss of $297,611 and comprehensive loss of $182,068 during the year ended December 31, 2019 and as of that date, the Company had an accumulated deficit of $49,179,436 and negative working capital of ($1,564,440). Management has carried out an assessment of the going concern assumption and has concluded that the cash position of the Company is not sufficient to finance exploration and resource evaluation at the

projected levels, and to finance continued operations for the 12-month period subsequent to December 31, 2019. The continuity of the Company’s operations is dependent on raising future financing for working capital, the continued exploration and development of its properties and for acquisition and development costs of new projects.

Management believes that it will be able to secure the necessary financing through a combination of the issue of new equity or debt instruments, the entering into of joint venture arrangements or the exercise of warrants and options for the purchase of common shares. However, there is no assurance the Company will be successful in these actions. There can be no assurance that adequate financing will be available, or available under terms favorable to the Company. The Company received $1,500,000 from the sale of royalties on September 28, 2017.

As at December 2019, notes payable were issued for $1,036,322 from related parties, contractors and employees as settlement of compensation, service fees and expenses payable. The notes have an annual interest rate of 8% and are due September 30, 2020 and December 30, 2020. Except for the short-term promissory notes, the notes carry a termination fee of 10% upon early redemption of the notes for which there is an embedded derivative arising – the fair value of this is $NIL. There was no material gain / (loss) arising on this. In addition, at the option of the note holders, the notes can be converted to stock during future private placements at the price, that raise a minimum of CAD $500,000, of those future private placements. $721,803 of the notes was from related parties (see note 9 ).

Date	Base Amount	Interest Rate	Termination fee	Maturity Date
1-Oct-18	$ 20,000	8%	$ 2,000	30-Sep-20
31-Dec-18	444,343	8%	44,434	30-Dec-20
31-Jan-19	85,000	8%	8,500	30-Dec-20
30-June -19	293,687	8%	8,646	30-Dec-20
30-Sept- 19	98,146	8%	3,646	30-Dec-20
31-Dec -19	95,146	8%	3,746	30-Dec-20
	$1,036,322		$70,972

Should it be determined that the Company is no longer a going concern, adjustments, which could be significant, would be required to the carrying value of assets and liabilities. These consolidated financial statements do not reflect the adjustments to the carrying value of assets and liabilities, or the impact on the consolidated statement of operation and comprehensive income (loss), and consolidated statement of financial position classifications that would be necessary were the going concern assumption not appropriate.

Failure to obtain equity or debt financing on a timely basis may cause the Company to postpone its exploration and development plans or forfeit rights in some of its projects.

Uncertainties Related to Mineral Resource Estimates

There is a degree of uncertainty attributable to the calculation of mineral resources and corresponding grades being mined or dedicated to future production. Until resources are actually mined and processed, the quantity of resources and grades must be considered as estimates only. In addition, the quantity and value of reserves or resources June vary, depending on mineral prices. Any material changes in the quantity of resources, grades or stripping ratio June affect the economic viability of the Company's properties. In addition, there is no assurance that recoveries in small-

scale laboratory tests will be duplicated in larger-scale tests under on-site conditions, or during production. Determining the economic viability of a mineral project is complicated and involves a number of variables.

Commodity Prices and Marketability

The mining industry, in general, is intensely competitive and there is no assurance that, even if commercial quantities of minerals are discovered, a profitable market will exist for the sale of minerals produced. Factors beyond the control of the Company June affect the marketability of any minerals produced and which cannot be accurately predicted, such as market fluctuations, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, any combination of which factors June result in the Company not receiving an adequate return on investment capital. Prices received for minerals produced and sold are also affected by numerous factors beyond the Company's control such as international economic and political trends, global or regional consumption and demand and supply patterns. There is no assurance that the sale price of minerals produced from any deposit will be such that they can be mined at a profit.

Currency Risk

The Company's business is mainly transacted in Botswana Pula and U.S. dollar currencies. As a consequence, fluctuations in exchange rates June have a significant effect on the cash flows and operating results of the Company in either a positive or negative direction.

Foreign Operations Risk

The Company's current significant projects are located in Botswana. This exposes the Company to risks that may not otherwise be experienced if its operations were domestic. The risks include, but are not limited to, environmental protection, land use, water use, health safety, labor, restrictions on production, price controls, currency remittance, and maintenance of mineral tenure and expropriation of property. There is no assurance that future changes in taxes or such regulation in the various jurisdictions in which the Company operates will not adversely affect the Company's operations. Although the operating environments in Botswana are considered favorable compared to those in other developing countries, there are still political risks. These risks include, but are not limited to terrorism, hostage taking, military repression, expropriation, extreme fluctuations in currency exchange rates, high rates of inflation and labor unrest. Changes in mining or investment policies or shifts in political attitudes may also adversely affect the Company's business.

Mineral Exploration and Development

The business of exploring for minerals and mining is highly, speculative in nature and involves significant financial and other risks which even careful evaluation, experience and knowledge June not eliminate. There is no certainty that expenditures made or to be made by the Company in exploring and developing mineral properties in which it has an interest will result in the discovery of commercially mineable deposits. Most exploration projects do not result in the discovery of commercially mineable deposit. While discovery of a mineral deposit June result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses June be required to establish reserves by drilling and to construct mining and processing facilities at a site. There can be no guarantee that exploration programs carried out by the Company will result in the development of profitable mining operations.

Title Matters

Any changes in the laws of Botswana and South Africa relating to mining could have a material adverse effect to the rights and title to the interests held in those countries by the Company. No assurance can be given that applicable governments will not revoke or significantly alter the conditions of applicable exploration and mining authorizations nor that such exploration and mining authorizations will not be challenged or impugned by third parties.

Infrastructure

Exploration, development, mining and processing activities depend on the availability of adequate infrastructure. Reliable roads, bridges, sewer and water supply are important determinants which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance of provision of such infrastructure could adversely affect activities and profitability of the Company.

Uninsured Risks

The mining business is subject to a number of risks and hazards including, but not limited to, environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, cave~ ins, pit wall failures, flooding, rock bursts, periodic interruptions due to inclement or hazardous weather conditions and other acts of God. Such risks could result in damage to mineral properties or facilities, personal injury or death, environmental damage, delays in exploration, development or mining, monetary losses and possible legal liability. The Company maintains insurance against certain risks that are associated with its business in amounts that it believes to be reasonable at the current stage of operations. There can be no assurance that such insurance will continue to be available at economically acceptable premiums or will be adequate to cover any future claim.

Key Personnel

The Company is dependent upon on a relatively small number of key employees, the loss of any of whom could have an adverse effect on the Company. The Company currently does not have key personal insurance on these individuals.

New Standards, Amendments and Interpretations Adopted

There are no other standards which the Company would have been required to adopt in the period.

New standards adopted as at January 1, 2019

IFRS 16, Leases (“IFRS 16”)

IFRS 16 replaced IAS 17 ‘Leases’ and three related Interpretations. It completes the IASB’s long-running project to overhaul lease accounting. Leases will be recorded in the statement of financial position in the form of a right-of-use asset and a lease liability. In addition, the nature of expenses related to those leases will now change because IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are two important reliefs provided by IFRS 16 for assets of low value and short-term lease of less than 12 months.

IFRS 16 standard is effective for annual periods beginning on or after 1 January 2019.

The Company adopted IFRS 16 on January 1, 2019 with modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognized as an adjustment at the date of initial application. Comparative information is not restated. The Company believes the impact of adopting IFRS 16 is not material.

RELATED PARTY TRANSACTIONS

Remuneration of Key Management Personnel of the Company

Short term employee remuneration and benefits Stock based compensation Other long-term benefits* Total compensation attributed to key management personnel	2019 2018 $265,002 $430,002 102,016 230,901 101,946 113,724
	$468,964 $774,627

*Benefits include $28,736 of accrued leave through December 31, 2019 (2018: $28,736

During the year, an individual related to the CEO provided administrative and management services to the Company in 2019 and was remunerated in 2019 as at September 30 in the amount of $41,000 (2018: $36,000).
During the year, individuals related to key management personnel of the Company, received $5,536 in stock based compensation during the period (2018: $2,086).
During the year, board members were issued notes in the amount of $665,464 (See note 5 above for details).
As at December 31, 2019, there was a total of $56,935 (2018: $103,082) payables to related parties included within accounts payable and accrued liabilities.

There are no other related party transactions.

OUTLOOK

Precious stones and metals exploration remain a high-risk undertaking requiring patience and persistence. Despite difficult capital markets in the junior resource sector and the general decrease in commodity prices, the Company remains committed to international commodity exploration through carefully managed programs.

The Company does not invest in financial instruments, nor does it do any hedging transactions.

ADDITIONAL INFORMATION

Additional information relating to Tsodilo Resources Limited is available on its website at,

www.TsodiloResources.com or through SEDAR at www.sedar.com

FORWARD-LOOKING STATEMENTS

This Quarterly Financial Report, including this MD&A, contains certain forward-looking statements related to, among other things, expected future events and the financial and operating results of the Company. Forward-looking statements are based on the opinions, assumptions and estimates of management as of the date such statements are made, and they are subject to a number of known and unknown risks, uncertainties and other factors which June cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Such assumptions include: the Company’s ability to obtain necessary financing; the Company’s expectations regarding the economy generally, results of operations and the extent of future growth and performance; and assumptions that the Company’s activities will not be adversely disrupted or impeded by development, operating or regulatory risk. The

Company believes that expectations reflected in this forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information included in this MD&A should not be unduly relied upon.

There can be no assurance that such statements will prove to be accurate, as the Company’s results and future events could differ materially from those anticipated in this forward-looking information as a result of those factors discussed in or referred to under the heading “Risks and Uncertainties” in the Company’s AIF, as well as changes in general business and economic conditions, changes in interest and foreign currency rates, the supply and demand for, deliveries of and the level and volatility of prices of rough diamonds, costs and availability of power and diesel, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and recoverability assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources) and unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalations, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job actions, adverse weather conditions, and unanticipated events relating to health safety and environmental matters).

Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date the statements were made, and the Company does not assume any obligations to update or revise them to reflect new events or circumstances, except as required by law.

“s”

James M. Bruchs Chairman and Chief Executive Officer

Gary A. Bojes Chief Financial Officer

AI assistant

Tsodilo Resources Limited — Management Reports 2020

43484_rns_2020-06-15_2fc73a01-9a34-4ce6-9656-f7ab0279fba0.pdf