Murphy Oil
Annual Report 2021

Plain-text annual report

MURCHISON MINERALS LTD. CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2021 AND 2020 (Expressed in Canadian Dollars) Independent Auditor’s Report To the Shareholders of Murchison Minerals Ltd. Opinion We have audited the consolidated financial statements of Murchison Minerals Ltd. and its subsidiary (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, consolidated statements of equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2021 and 2020 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”). Basis for opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company had continuing losses and is not generating positive cash flows from operations. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Other information Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. Page 1 In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risks of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 2 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The engagement partner of the audit resulting in this independent auditor’s report is Koko Yamamoto. McGovern Hurley LLP Chartered Professional Accountants Licensed Public Accountants Toronto, Ontario March 9, 2022 Page 3 MURCHISON MINERALS LTD. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) As at December 31, ASSETS Current Assets Cash Amounts receivable and prepaid expenses (Note 6) Total current assets Investment (Note 7) Property and equipment (Note 8) Total assets LIABILITIES Current Liabilities Accounts payable and accrued liabilities (Note 14) Loan payable (Note 16) Flow-through share premium liability (Note 15) Total current liabilities Loan payable (Note 16) Total liabilities EQUITY Share capital (Note 10) Reserves (Notes 11 and 12) Deficit Total equity Total equity and liabilities 2021 2020 $ 1,792,033 $ 319,396 2,062,411 90,923 2,111,429 2,153,334 2,584 110,864 3,402 71,580 $ 2,224,877 $ 2,228,316 $ 211,305 $ 10,578 191,896 100,439 - 130,459 413,779 230,898 29,385 - 443,164 230,898 35,881,469 1,876,352 (35,976,108) 32,305,495 1,019,705 (31,327,782) 1,781,713 1,997,418 $ 2,224,877 $ 2,228,316 Nature and Continuance of Operations (Note 1) Commitments and Contingencies (Notes 9 and 15) Subsequent events (Note 17) Approved on Behalf of the Board: "signed" "signed" Jean-Charles Potvin Director Denis Arsenault Director The accompanying notes are an integral part of these consolidated financial statements - 1 - MURCHISON MINERALS LTD. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars) For the years ended December 31, EXPENSES Exploration expenses (Note 9) Professional fees Management fees and salaries (Note 14) Office and general Regulatory and transfer agent Investor relations Share-based payments (Notes 12 and 14) Loss before other income and expenses Interest income Flow-through shares premium Unrealized loss (gain) on marketable securities (Note 7) Loss for the year Loss per share - basic and diluted Weighted average number of common shares outstanding - basic and diluted $ 2021 2020 4,099,155 $ 40,122 345,217 58,274 16,511 171,318 435,905 1,781,549 41,309 215,213 63,380 10,396 127,054 301,170 5,166,502 2,540,071 (4,958) (399,632) 818 (3,347) (429,413) (1,206) $ 4,762,730 $ 2,106,105 $ 0.04 $ 0.03 115,846,480 71,316,783 The accompanying notes are an integral part of these consolidated financial statements - 2 - MURCHISON MINERALS LTD. CONSOLIDATED STATEMENTS OF EQUITY (Expressed in Canadian Dollars) Balance, December 31, 2019 Loss for the year Issuance of common shares (net of issue costs) Issuance of stock options Issuance of warrants Expiry of warrants Balance, December 31, 2020 Balance, December 31, 2020 Loss for the year Issuance of common shares (net of issue costs) Issuance of stock options / share-based compensation Expiry of stock options Issuance of warrants Exercise of warrants Expiry of warrants Balance, December 31, 2021 Reserves Equity settled share-based payments reserve Share Capital Warrants reserve Deficit Total $ 29,934,685 - 2,370,810 - - - $ 532,660 - - 301,170 - - $ 32,305,495 $ 833,830 $ 32,305,495 - 3,566,424 - - - 9,550 - $ 833,830 - - 435,905 (107,710) - - - $ 212,475 $ (29,434,152) $ - - - 185,875 (212,475) (2,106,105) - - - 212,475 1,245,668 (2,106,105) 2,370,810 301,170 185,875 - $ $ 185,875 $ (31,327,782) $ 1,997,418 185,875 $ (31,327,782) $ - - - - 544,696 (9,550) (6,694) (4,762,730) - - 107,710 - - 6,694 1,997,418 (4,762,730) 3,566,424 435,905 - 544,696 - - $ 35,881,469 $ 1,162,025 $ 714,327 $ (35,976,108) $ 1,781,713 The accompanying notes are an integral part of these consolidated financial statements - 3 - MURCHISON MINERALS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars) For the years ended December 31, CASH (USED IN) PROVIDED BY: OPERATING ACTIVITIES Loss for the year Share-based payments Flow-through shares premium Unrealized loss (gain) on marketable securities Amortization Net change in non-cash working capital items: Amounts receivable and prepaid expenses Accounts payable and accrued liabilities Net cash flows used by operating activities INVESTING ACTIVITIES Acquisition of property and equipment Net cash flows used by investing activities FINANCING ACTIVITIES Issuance of common shares and warrants exercise Issue costs Loan repayments Issuance of promissory note Repayment of promissory note Net cash flows provided by financing activities NET CHANGE IN CASH CASH, BEGINNING OF THE YEAR CASH, END OF THE YEAR SUPPLEMENTAL CASH FLOW INFORMATION Finders’ warrants issued Equipment purchase financed through loan 2021 2020 $ (4,762,730) $ (2,106,105) 301,170 (429,413) (1,206) 16,163 435,905 (399,632) 818 25,852 (4,699,787) (2,219,391) (228,473) 110,866 73,264 64,670 (4,817,394) (2,081,457) (21,550) (76,687) (21,550) (76,687) 4,852,394 (280,205) (3,623) - - 2,960,703 (174,495) - 200,000 (200,000) 4,590,602 2,786,208 (270,378) 2,062,411 628,064 1,434,347 $ 1,792,033 $ 2,062,411 $ 41,110 43,586 $ - - The accompanying notes are an integral part of these consolidated financial statements - 4 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 1. NATURE AND CONTINUANCE OF OPERATIONS Murchison Minerals Ltd. (the "Company" or “Murchison”) was incorporated under the Canada Business Corporations Act on July 25, 2001. The principal business of the Company is the acquisition, exploration and evaluation of mineral property interests. The primary office is located at 5063 North Service Road, Suite 100, Burlington, Ontario, Canada, L7L 5H6. The consolidated financial statements were approved by the Board of Directors on March 9, 2022. The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that planned exploration and evaluation programs will result in profitable mining operations. The continuance of the Company is dependent upon completion of the acquisition of the exploration and evaluation properties, the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and future profitable production or, alternatively, upon disposition of such property at a profit. Changes in future conditions could require material write downs of the carrying values of the Company's assets. Although the Company has taken steps to verify title to its exploration and evaluation properties, in accordance with industry standards for the current stage of exploration of such property, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements and noncompliance with regulatory and, environmental requirements. The Company's assets may also be subject to increases in taxes and royalties, renegotiation of contracts, currency exchange fluctuations and restrictions and political uncertainty. As at December 31, 2021, the Company has a cumulative deficit of $35,976,108 (December 31, 2020 - $31,327,782), continuing losses and is not yet generating positive cash flows from operations. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue its operations as a going concern. These consolidated financial statements were prepared on a going-concern basis in accordance with International Financial Reporting Standards ("IFRS"). Funding for operations has been obtained primarily through private share offerings. Future operations are dependent upon the Company's ability to finance expenditure requirements and upon the achievement of profitable operations. Management believes it will be successful in raising the necessary funding to continue operations in the normal course of operations; however, there is no assurance that these funds will be available on terms acceptable to the Company or at all (See Note 17). These consolidated financial statements do not include adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue operations. Such adjustments could be material. 2. SIGNIFICANT ACCOUNTING POLICIES Statement of compliance These consolidated financial statements, including comparatives, have been prepared in accordance with IFRS. Basis of presentation These consolidated financial statements have been prepared on a historical cost basis except for investment which has been presented at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information. - 5 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of consolidation Subsidiaries are entities over which the Company has control, where control is defined to exist when the Company is exposed to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are de-consolidated from the date control ceases. The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. All intercompany transactions, balances, income and expenses are eliminated upon consolidation. The following companies have been consolidated within these consolidated financial statements: Company Murchison Minerals Ltd. Flemish Gold Corp. Exploration and evaluation properties Registered Principal activity Ontario, Canada Ontario, Canada Parent company Exploration company The acquisition costs of exploration and evaluation properties are expensed the consolidated statements of loss in the period incurred, as permitted under IFRS 6, Exploration for and Evaluation of Mineral Resources. The acquisition costs of exploration and evaluation properties include the cash consideration and the estimated fair market value of share-based payments issued for such property interests. Exploration costs are expensed in the period incurred. Option payments which are solely at the Company’s discretion are recorded as acquisition costs as they are made. Administrative expenditures are expensed in the period incurred. Government grants Government grants are transfers of resources to an entity by government in return for past or future compliance with certain conditions relating to the operating activities of the entity. Government assistance is action by government designed to provide an economic benefit that is specific to an entity or range of entities qualifying under certain criteria. Government grants and assistance are recognized where there is a reasonable assurance that the grants and assistance will be received, and conditions will be complied with. Government grants and assistance are recognized as an offset to the expenses to which they relate. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognized in profit or loss of the period in which it becomes receivable. Property and equipment Property and equipment are carried at cost, less accumulated amortization and accumulated impairment losses. The cost of an item of property and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Repairs and maintenance costs are charged to profit or loss during the period in which they are incurred. - 6 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and equipment (Continued) An asset's residual value, useful life and amortization method are reviewed, and adjusted if appropriate, on an annual basis. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss. Where an item of property and equipment consists of major components with different useful lives, the components are accounted for as separate items of property and equipment. Expenditures incurred to replace a component of an item of property and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized. Amortization is recognized based on the cost of an item of property and equipment, less its estimated residual value, over its estimated useful life at the following rates: Detail Exploration equipment Buildings Financial instruments Rate 3 years 20 years Method Straight-line Straight-line Financial assets at amortized cost are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured using the effective interest method, less any impairment losses. A financial asset is classified as fair value through profit and loss (“FVPL”) if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated as FVPL if the Company manages such investments and makes purchases and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Realized and unrealized gains and losses are reflected in the consolidated statement of loss. Transaction costs associated with FVPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset. The Company has designated its investments in marketable securities as FVPL. Financial liabilities at amortized cost are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest and any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or (where appropriate) to the net carrying amount on initial recognition. Financial liabilities are de-recognized when the obligations are discharged, cancelled or expired. Impairment of financial assets: Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been negatively impacted. Evidence of impairment could include: - 7 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (continued) • • • significant financial difficulty of the issuer or counterparty; or default or delinquency in interest or principal payments; or the likelihood that the borrower will enter bankruptcy or financial re-organization. The carrying amount of financial assets is reduced by any impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of a provision for expected credit losses. When an account receivable is considered uncollectible, it is written off against the provision for expected credit losses account. Changes in the carrying amount of the provision for expected credit losses are recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement of loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. Financial instruments recorded at fair value: Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: • • • Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). As at December 31, 2021, the Company’s Investment on the consolidated statement of financial position was recorded at Level 1 with a fair value of $2,584 (December 31, 2020 - $3,402). Impairment of non-financial assets At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. In addition, long-lived assets that are not amortized are subject to a periodic impairment assessment. The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration. Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks, on hand and short-term money market investments with original maturities of 90 days or less which are readily convertible into a known amount of cash. The Company’s cash and cash equivalents are invested with major financial institutions in business accounts and are available on demand by the Company. When cash and cash equivalents include an amount to be incurred in relation to a flow-through commitment, an amount equal to the minimum commitment is kept in a separate bank account. As at December 31, 2021 and 2020, the Company had no cash equivalents. - 8 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Provisions A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The Company had no material provisions at December 31, 2021 and December 31, 2020. Share-based payment transactions The fair value of stock options granted to employees is recognized as an expense over the vesting period with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company. The fair value is measured at the grant date and recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option-pricing model, taking into account the terms and conditions upon which the options were granted. At each reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options that are expected to vest. Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Unexercised expired and modified stock option values are transferred to deficit. Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive loss. When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the transaction is measured at the fair value of the equity instrument granted. Income taxes Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. - 9 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Equity Share capital, stock options, warrants and broker units are classified as equity. Incremental costs directly attributable to the issuance of shares, warrants and broker units are recognized as a deduction from equity and allocated between share capital and warrants. Expired stock options and warrants are transferred to deficit. Flow-through shares The Company finances some exploration expenditures through the issuance of flow-through shares. The resource expenditure deductions for income tax purposes are renounced to investors in accordance with the appropriate income tax legislation. When the common shares are offered, the difference (“premium”) between the amount recognized in common shares and the amount the investors pay for the shares is recognized as a flow-through share related liability which is reversed into the consolidated statement of loss when the eligible expenditures are incurred. The amount recognized as a flow-through share related liability represents the difference between the quoted price of the common shares and the amount the investor pays for the flow-through shares. The Company indemnifies the subscribers of flow-through shares for additional taxes payable by the subscribers if the Company does not meet its expenditure requirements. Restoration, rehabilitation and environmental obligations A legal or constructive obligation to incur restoration, rehabilitation and environmental costs may arise when environmental disturbance is caused by the exploration, development or ongoing production of a property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalized at the start of each project to the carrying amount of the asset, as soon as the obligation to incur such costs arises. Discount rates using a pretax rate that reflects the time value of money are used to calculate the net present value. These costs are charged against profit or loss over the economic life of the related asset, through amortization using either a unit-of-production or the straight-line method as appropriate. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. Costs for restoration of subsequent site damage that is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses. The Company has no material restoration, rehabilitation and environmental costs as at December 31, 2021 and December 31, 2020 as the disturbance to date is minimal. Loss per share The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. The diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all warrants, finders’ warrants and stock options outstanding that may add to the total number of common shares. Diluted loss per share does not include the effect of stock options, warrants and finders’ warrants as they are anti-dilutive. See Notes 11 and 12. Warrants Warrants are recognized at fair value on the date of grant and are measured using the Black-Scholes option pricing model. Unexercised expired warrants are transferred to deficit. - 10 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Significant accounting judgments and estimates The preparation of financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amounts, events or actions, actual results may differ from those estimates. The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to: - Assets’ carrying values and impairment charges In the determination of carrying values and impairment charges, management looks at the recoverable amount, being the higher of value in use and fair value less costs to sell in the case of non-financial assets and at objective evidence, significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period. - Income and other taxes The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company's provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company's income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company's interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made. - Share-based payments Management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based non-vested share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgment is used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates. The Company currently estimates the expected volatility of its common shares based on historical volatility taking into consideration the expected life of the options and warrants. Contingencies See Note 15. New and future accounting policies During the year ended December 31, 2021, the Company adopted a number of amendments and improvements of existing standards. These included amendments to IFRS 9 and IFRS 16. These new standards and changes did not have any material impact on the Company’s consolidated financial statements. Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2022. Many are not applicable or do not have a significant impact to the Company and have been excluded. The Company is currently assessing the impact of these standards on the consolidated financial statements. - 11 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) New and future accounting policies (Continued) IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined, however early adoption is permitted. IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023. IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify that when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. costs a company would avoid if it did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are effective for annual periods beginning on January 1, 2022. 3. CAPITAL MANAGEMENT The Company manages its capital with the following objectives: • • to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and to maximize shareholder return through enhancing the share value. The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis. The Company considers its capital to consist of equity, comprising share capital, reserves and deficit which at December 31, 2021 totalled $1,781,713 (December 31, 2020 - $1,997,418). The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. The forecast is regularly updated based on its exploration and development activities. Selected information is regularly provided to the Board of Directors of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the years ended December 31, 2021 and 2020. The Company is not subject to any capital requirements imposed by a regulator or lending institution. 4. FINANCIAL RISK FACTORS The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign exchange rate and commodity price risk). - 12 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 4. FINANCIAL RISK FACTORS (Continued) Risk management is carried out by the Company's management team under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. There have been no changes in the risks, objectives, policies and procedures during the years ended December 31, 2021 and 2020. 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 cash balances and amounts receivable. Cash is held with reputable banks, from which management believes the risk of loss to be remote. Financial instruments included in amounts receivable consist of sales tax receivable and refundable tax credits from government authorities in Canada. Management believes that the credit risk concentration with respect to financial instruments included in amounts receivable is remote. 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 December 31, 2021, the Company had a cash balance of $1,792,033 (December 31, 2020 - $2,062,411) to settle accounts payable, accrued liabilities and loan payable of $251,268 (December 31, 2020 - $100,439). All of the Company's financial liabilities generally have contractual maturities of less than 30 days and are subject to normal trade terms, except for the loan payable as disclosed in Note 16. 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 prices. Interest rate risk The Company has cash balances and no interest-bearing debt other than the loan payable at a fixed interest rate. The Company's current policy is to invest excess cash in certificates of deposit or interest bearing accounts at major Canadian chartered banks. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its Canadian chartered banks. Management believes that interest rate risk is minimal as cash investments have maturities of three months or less. Commodity price risk Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability of development depends upon the world market price of commodities. Commodity prices have fluctuated widely in recent years. There is no assurance that, even as commercial quantities of base and/or precious metals may be produced in the future, a profitable market will exist for them. A decline in the market price of commodities may also require the Company to reduce its mineral resources, which could have a material and adverse effect on the Company’s value. As at December 31, 2021, the Company is not a commodities producer. As a result, commodity price risk may affect the completion of future equity transactions such as equity offerings and the exercise of stock options and warrants. This may also affect the Company's liquidity and its ability to meet its ongoing obligations. Sensitivity analysis Based on management's knowledge and experience, the Company believes the following movements are “reasonably possible” over a one-year period: (i) Based on cash balances earning interest at December 31, 2021, a 1% change in interest rates would result in a corresponding interest income change of approximately $17,900 for the one-year period. - 13 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 5. CATEGORIES OF FINANCIAL INSTRUMENTS Financial assets: Amortized cost Cash FVPL Investment Financial liabilities: Amortized cost Accounts payable and accrued liabilities Loan payable December 2021 December 2020 $ 1,792,033 $ 2,062,411 2,584 3,402 $ 211,305 $ 39,963 100,439 - As of December 31, 2021 and December 31, 2020, the fair value of all the Company's current financial instruments approximates the carrying value, due to their short-term nature. 6. AMOUNTS RECEIVABLE AND PREPAID EXPENSES Sales tax receivable Prepaid expenses and advances 7. INVESTMENT December 2021 December 2020 $ 247,327 $ 72,069 81,703 9,220 $ 319,396 $ 90,923 The Company's investment is classified as fair value through profit and loss (“FVPL”) and is carried at fair value. The balance is comprised of the following: Number of shares December 2021 December 2020 First Mining Gold Corp. 8,612 $ 2,584 $ 3,402 The Company holds 8,612 (2020 – 8,612) common shares of First Mining Gold Corp. The unrealized loss of $818 for the year ended December 31, 2021 (December 31, 2020 – unrealized gain of $1,206) was recognized on the consolidated statement of loss. 8. PROPERTY AND EQUIPMENT Year ended December 31, 2020 Opening net book amount Additions Amortization for the period Closing net book amount Buildings Exploration equipment Total $ - 48,866 (2,151) $ 11,056 $ 27,821 (14,012) 11,056 76,687 (16,163) $ 46,715 $ 24,865 $ 71,580 - 14 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) At December 31, 2020 Cost Accumulated amortization Net book amount Year ended December 31, 2021 Opening net book amount Additions Amortization for the period Closing net book amount At December 31, 2021 Cost Accumulated amortization Net book amount $ 48,866 (2,151) $ 42,037 $ (17,172) 90,903 (19,323) $ 46,715 $ 24,865 $ 71,580 $ 46,715 $ - (2,440) 24,865 $ 65,136 (23,412) 71,580 65,136 (25,852) $ 44,275 $ 66,589 $ 110,864 $ 48,866 (4,591) $ 107,173 $ 156,039 (40,584) (45,175) $ 44,275 $ 66,589 $ 110,864 Exploration equipment with a net book value of $33,533 as at December 31, 2021 (2020 - $nil) is used as security for the loan arrangement described in Note 16. 9. EXPLORATION AND EVALUATION PROPERTIES Brabant Lake Property – Saskatchewan As at December 31, 2021, the Company holds a 100% interest in certain claims forming the Brabant Lake property in Saskatchewan. HPM Property - Quebec As at December 31, 2021, the Company holds a 100% interest in certain claims forming the HPM property in Quebec. Barraute-Landrienne Property - Quebec On April 28, 2021, the Company entered into an agreement with Gestion Aline Leclerc Inc. (“GAL”) granting Murchison an option to earn 100% in 75 mineral claims, by making payments totaling $500,000 and property expenditures of $1.0 million over a 6-year period. The first payment of $20,000 is due on April 28, 2022. GAL will retain a royalty of 1% of net smelter returns (NSR) on future production. The 1% NSR can be acquired anytime by the Company for $1.0 million. - 15 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 9. EXPLORATION AND EVALUATION PROPERTIES (Continued) The following table details the payments and exploration commitments on an annual basis. Timeline on or before April 28, 2022 Cash Payments or Number of Consideration Shares $20,000 cash Expenditures $200,000 (1) 1. 2. on or before April 28, 2023 3. on or before April 28, 2024 4. 5. 6. on or before April 28, 2025 on or before April 28, 2026 on or before April 28, 2027 TOTAL (1) See Note 17. $20,000 cash $30,000 cash $30,000 cash $200,000 ($400,000 cumulative) $200,000 ($600,000 cumulative) $200,000 ($800,000 cumulative) $200,000 or equivalent in common shares at the 20-day VWAP Price, or a combination of both, at the option of Murchison $200,000 ($1,000,000 cumulative) $200,000 or equivalent in common shares at the 20-day VWAP Price, or a combination of both at the option of Murchison $100,000 cash and $400,000 or equivalent in common shares at the 20-day VWAP Price, or a combination of both at the option of Murchison Nil $1,000,000 The following table sets out the exploration expenses for the last two years: Brabant Lake Amortization Drilling General Administrative Geology Geophysics Metallurgy Acquisition and Staking Total Brabant Lake HPM Drilling Geology Geophysics Acquisition and Staking Total HPM Barraute-Landrienne Geology Geophysics Acquisition and Staking Total Barraute-Landrienne Total exploration expenses December 31, 2021 December 31, 2020 $ $ $ $ $ 24,546 1,531,547 5,084 96,283 71,277 66,451 300 1,795,488 1,619,833 209,622 254,453 80,166 2,164,074 39,663 97,430 2,500 139,593 4,099,155 $ $ $ $ $ 16,163 868,116 2,000 292,709 371,275 - 4,421 1,554,684 - 86,425 135,008 5,432 226,865 - - - - 1,781,549 - 16 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 9. EXPLORATION AND EVALUATION PROPERTIES (Continued) Government Assistance The Saskatchewan Targeted Mineral Exploration Incentive (“TMEI”) supports the diversification of Saskatchewan's mineral sector by encouraging exploration for base metals, precious metals, and diamonds as well as other components such as airborne geophysical data and complementary ground-based geoscience investigations. The TMEI provides up to $50,000 financial assistance in the form of a grant to eligible exploration companies that undertake exploration drilling for base metals, precious metals, or diamonds. In 2021 and 2020, the Company received $50,000 each year under the TMEI in relation to the drilling completed at the Brabant Lake project in Saskatchewan. These amounts have been recorded as a reduction of the Brabant Lake exploration drilling expenses on the statement of loss for the years ended December 31, 2021 and 2020. 10. SHARE CAPITAL (a) Authorized Share Capital The Company’s authorized share capital consists of an unlimited number of common shares. (b) Issued Balance - December 31, 2019 Issuance of common shares (ii) Issuance of flow-through shares (i)(ii)(iii)(iv) Flow-through premium (i)(ii) Warrants (ii) Issue costs (i)(ii) Balance – December 31, 2020 Balance - December 31, 2020 Issuance of common shares (v)(vi) Issuance of flow-through shares (vi) Exercise of warrants Flow-through premium (vi) Warrants (v)(vi) Issue costs (v)(vi) Balance – December 31, 2021 Number 64,688,449 6,614,600 27,633,128 - - - 98,936,177 Number 98,936,177 23,500,000 30,737,571 436,037 - - - 153,609,785 $ $ $ $ Amount 29,934,685 429,949 2,530,754 (229,523) (185,875) (174,495) 32,305,495 Amount 32,305,495 1,880,000 2,920,069 61,874 (461,069) (544,697) (280,203) 35,881,469 (i) On June 24, 2020, the Company completed a non-brokered flow-through private placement and issued 2,285,714 flow- through common shares priced at $0.0875 per share for gross proceeds of $200,000 of which, $17,143 was allocated to the flow-through premium. Finders’ fees of $12,000 were also paid. - 17 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 10. SHARE CAPITAL (Continued) (ii) On July 23 and August 13, 2020, the Company completed two tranches of a non-brokered private placement for gross proceeds of $841,949. The Company issued 6,614,600 common share units at a price of $0.065 per unit and issued 5,150,000 flow-through units at a price of $0.08 per FT unit. Each common share unit consisted of one common share of the Company and one full common share purchase warrant. Each warrant entitled the holder to acquire one additional common share for a period of eighteen months at an exercise price of $0.12 per warrant. Each FT unit consisted of one flow-through common share and one-half non flow-through common share purchase warrant with each full warrant being exercisable under the same terms. Finders’ fees of $29,910 were paid in relation to the private placement and $128,170 was allocated to the flow-through premium. The fair value of the warrants was estimated at $182,760 using the Black-Scholes option model pricing with the following assumptions: expected dividend yield of 0%, expected volatility of 147% based on historical trading of the Company’s shares, risk-free interest rate of 0.26%, expected life of 1.5 years and share price of $0.045. An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 375,000 flow-through units for gross proceeds of $290,000. See Note 14. (iii) On December 9, 2020, the Company completed a non-brokered flow-through private placement and issued 4,210,525 flow- through common shares priced at $0.095 per share for gross proceeds of $400,000 of which, $84,210 was allocated to the flow- through premium. Finders’ fees of $24,000 were paid. (iv) On December 29 and 30, 2020, the Company completed a non-brokered flow-through private placement in tranches and issued 15,986,889 flow-through common shares priced at $0.095 per share for gross proceeds of $1,518,754. Finder’s fees totalling $76,402 were paid and an aggregate of 534,233 finders’ warrants were issued. Each finder’s warrant entitled the holder to acquire one common share of the Company at a price of $0.12 per share until December 31, 2021. A director of the Company participated in the private placement for a total of $427,500. See Note 14. The fair value of the finders’ warrants was estimated at $12,855 using the Black-Scholes option model pricing with the following assumptions: expected dividend yield of 0%, expected volatility of 85%, risk-free interest rate of 0.20%, expected life of 1 year and share price of $0.10. (v) On March 5, 2021, the Company completed a non-brokered private placement and issued 10,000,000 common share units at a price of $0.08 per unit for gross proceeds of $800,000. Each unit consisted of one common share of the Company and one- half common share purchase warrant. Each full warrant entitled the holder to acquire one additional common share until September 5, 2022 at an exercise price of $0.12 per common share. All securities issued pursuant to the private placement were subject to a four month hold period from the date of issue. The fair value of the warrants was estimated at $120,670 using the Black-Scholes option model pricing with the following assumptions: expected dividend yield of 0%, expected volatility of 109%, risk-free interest rate of 0.29%, and expected life of 1.5 years. Issue costs of $6,313 were allocated to the warrants. Finder’s fees totaling $18,000 were paid under the private placement. A director and officers of the Company acquired an aggregate of 4,150,000 units in the private placement for a total of $332,000. See Note 14 - 18 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 10. SHARE CAPITAL (Continued) (vi) On October 21, 2021, the Company completed a $4,000,069 private placement by issuing issued 13,500,000 common share units at a price of $0.08 per unit and 30,737,571 flow-through units at a price of $0.095 per flow-through unit. Each common share unit consisted of one common share of the Company and one-half common share purchase warrant. Each full warrant entitled the holder to acquire one additional common share for a period of twelve months at an exercise price of $0.12 per warrant. Each FT unit consisted of one flow-through common share and one-half non flow-through common share purchase warrant with each full warrant being exercisable under the same terms. Finders’ fees of $198,005 were paid in relation to the private placement and 2,178,997 finder’s warrants valued at $41,110 were issued under the same terms as the warrants issued as part of the units. Also, $461,069 was allocated to the flow-through premium. The fair value of the warrants issued as part of the common share units and flow-through units was estimated at $538,010 using the Black-Scholes option model pricing with the following assumptions: expected dividend yield of 0%, expected volatility of 109% based on historical trading of the Company’s shares, risk-free interest rate of 0.77%, expected life of 1 year and share price of $0.071. An officer and a director of the Company acquired, in aggregate, 10,000,000 units and 4,863,100 flow-through units for total gross proceeds of $1,261,995. See Note 14. 11. WARRANTS AND FINDERS’ WARRANTS The following summarizes the warrants and finders’ warrants activity for the years ended December 31, 2021 and 2020: Balance - December 31, 2019 Expired Issued Balance – December 31, 2020 Balance - December 31, 2020 Issued Exercised Expired Balance – December 30, 2021 Number of Warrants Grant Date Weighted Average Fair Value Exercise Price 16,264,023 (16,264,023) 9,723,833 9,723,833 $ $ 212,475 (212,475) 185,875 185,875 $ $ 0.10 0.10 0.12 0.12 Number of Warrants Grant Date Weighted Average Fair Value Exercise Price $ 9,723,833 29,297,785 (436,037) (278,196) 38,307,385 $ 185,875 544,696 (9,550) (6,694) 714,327 $ $ 0.12 0.12 0.12 0.12 0.12 As at December 31, 2021, the Company had warrants and finders’ warrants outstanding as follows: Date of Grant July 23, 2020 August 13, 2020 March 5, 2021 October 21, 2022 Exercise Grant Date Number of Warrants Price ($) Fair Value ($) 8,372,100 637,500 5,000,000 24,297,785 38,307,385 0.12 0.12 0.12 0.12 157,622 12,008 114,357 430,340 714,327 - 19 - Expiry Date January 23, 2022 February 13, 2022 September 5, 2022 October 21, 2022 Remaining Contractual Life (years) 0.07 0.12 0.68 0.81 0.62 MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 12. STOCK OPTIONS The Company maintains a stock option plan whereby certain key employees, officers, directors and consultants may be granted stock options for common shares of the Company. The maximum number of common shares that is issuable under the plan was fixed at 10% of the number of common shares issued and outstanding (a maximum of 5% of the number of common shares issued and outstanding may be held by any one person). Options expire after a maximum period of five years following the date of grant. Vesting provisions are determined at the time of each grant. The following summarizes the stock option activity for the years ended December 31, 2021 and 2020: Balance - December 31, 2019 Granted (i) (ii) Balance – December 31, 2020 12. STOCK OPTIONS (Continued) Balance - December 31, 2020 Granted (iii)(iv)(v)(vi)(vii) Expired Balance – December 31, 2021 Number of Stock Options 5,155,000 4,100,000 9,255,000 Weighted Average $ Exercise Price 0.12 0.10 0.11 Number of Stock Options 9,255,000 5,525,000 (500,000) 14,280,000 Weighted Average Exercise Price 0.11 0.12 0.25 0.11 $ $ (i) On July 20, 2020, the Company granted 400,000 stock options exercisable at $0.10 for 5 years to an investor relations consultant of the Company. The grant date fair value of $23,200 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.34%, expected volatility – 116%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options are vesting over 1 year with 25% every 3 months. The share-based compensation expense is recognized based on the vesting periods and $16,270 was recorded on the consolidated statement of loss for the year ended December 31, 2020. (ii) On December 31, 2020, the Company granted 3,700,000 stock options exercisable at $0.10 for 5 years to directors and officers of the Company. The options grant date fair value of $284,900 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.39%, expected volatility – 116%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $284,900 fair value was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2020. (iii) On April 14, 2021, the Company granted 200,000 stock options exercisable at $0.095 for 5 years to an officer of the Company. The grant date fair value of these options of $9,800 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.95%, expected volatility – 113%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $9,800 fair value was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021. (iv) On May 25, 2021, the Company granted 500,000 stock options exercisable at $0.095 for 5 years to a director, an officer, a consultant and employees of the Company. The grant date fair value of these options of $26,000 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.86%, expected volatility – 109%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $26,000 fair value was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021. - 20 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 12. STOCK OPTIONS (Continued) (v) On July 2, 2021, the Company granted 200,000 stock options exercisable at $0.095 for 5 years to an advisor of the Company. The grant date fair value of these options of $10,800 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.96%, expected volatility – 101%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $10,800 fair value was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021. (vi) On October 11, 2021, the Company granted 1,000,000 stock options exercisable at $0.08 for 5 years to an officer of the Company. The grant date fair value of these options of $59,000 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 1.20%, expected volatility – 98%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately for 700,000 options and 300,000 vesting on April 11,2022. The fair value of $50,150 of the vested options was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021. (vii) On December 20, 2021, the Company granted 3,625,000 stock options exercisable at $0.13 for 5 years to directors, officers, consultants and employees of the Company. The grant date fair value of these options of $351,625 was estimated using the Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 1.22%, expected volatility – 101%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately except for 200,000 options to vest on May 1, 2022. The fair value of $332,225 of the vested options was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021. As at December 31, 2021, the Company had incentive stock options issued to directors, officers, employees and key consultants of the Company outstanding as follows: Date of Grant January 10, 2018 March 6, 2019 December 23, 2019 July 20, 2020 December 31, 2020 April 14, 2021 May 25, 2021 July 2, 2021 October 11, 2021 December 20, 2021 Options Outstanding(1) Exercise Price ($) Grant Date Fair Value ($) Expiry Date Weighted Average Remaining Contractual Life (years) 710,000 645,000 3,300,000 400,000 3,700,000 200,000 500,000 200,000 1,000,000 3,625,000 14,280,000 0.19 0.095 0.085 0.10 0.095 0.095 0.095 0.095 0.08 0.13 0.11 121,410 59,340 244,200 23,200 284,900 9,800 26,000 10,800 59,000 351,625 1,190,275 January 10, 2023 March 6, 2024 December 23, 2024 July 20, 2025 December 31, 2025 April 14, 2026 May 25, 2026 July 2, 2026 October 11, 2026 December 20, 2026 1.03 2.18 2.98 3.55 4.00 4.29 4.40 4.50 4.78 4.97 3.85 (1) All options are exercisable, except for 500,000 as per (vi) and (vii) above. - 21 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 13. INCOME TAXES (a) Provision for income taxes Major items causing the Company’s income tax to differ from the combined Canadian federal and provincial statutory rate of 27% (2020 - 27%) were as follows: Combined Canadian statutory income tax rate Loss before income taxes Expected income tax recovery based on the statutory rate Adjustment to expected income tax benefit: Permanent differences and other Deferred tax assets not recognized Deferred income tax provision (recovery) (b) Deferred income tax 2021 $ 27% (4,762,730) 2020 $ 27% (2,106,105) (1,276,000) (564,000) 117,000 1,159,000 - 81,000 483,000 - Deferred income tax assets have not been recognized in respect of the following deductible temporary differences: Capital losses Non-capital losses Resource properties Share issue costs - Canada Other 2021 $ 20,209,000 18,735,000 5,675,000 390,000 74,000 2020 $ 20,209,000 17,530,000 5,399,000 236,000 519,000 Total 45,083,000 43,893,000 (c) As at December 31, 2021, the Company had approximately $5,675,000 (2020 - $5,399,000) of Canadian development and exploration expenses and foreign exploration and development expenses, which, under certain circumstances, may be utilized to reduce taxable income of future years. (d) Tax loss carry-forwards As at December 31, 2021, the Company had approximately $18,735,000 of non-capital losses in Canada, which may be used to reduce taxable income in future years. These losses expire from 2025 to 2041. - 22 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 14. RELATED PARTY TRANSACTIONS a) Remuneration of directors and officers was as follows: Salaries and benefits Share-based payments 2021 2020 $ 330,940 380,250 $ 215,213 284,900 $ 711,190 $ 500,113 For the year ended December 31, 2021, the salaries and benefits amount above includes $144,875 (2020 - $98,250) for fees invoiced by a corporation controlled by the CFO of the Company for his services and $138,000 (2020 - $116,963) for fees invoiced by the Executive Chairman (former CEO until October 11, 2021) of the Company for his services as CEO and Executive Chairman. The salaries and benefits also includes $48,065 (2020 - $nil) for fees invoiced by a corporation controlled by the new CEO of the Company for his services as CEO. Included in accounts payable and accrued liabilities at December 31, 2020 is $nil (2020 - $19,650) owed to corporation controlled by the CFO, $nil (2020 - $12,335) owed to the Executive Chairman and $5,923 owed to the CEO. The amounts payable are unsecured, non-interest bearing and have no fixed terms of repayment. b) Promissory Note On March 27, 2020, the Company issued a $200,000 promissory note to Vyco Limited (“Vyco”). The amount owing under this promissory note bore interest at an annual rate of 5.0% and, in the event that the principal amount was not repaid in full by the due date of June 30, 2020, the interest accrued at the rate of 10% per annum from the due date until payment was effected. Vyco is a corporation controlled by a family trust. Mr. Donald K. Johnson, director of the Company, is a discretionary beneficiary of such trust and President of Vyco. The promissory note was repaid on September 9, 2020 along with interest of $6,493. c) Private Placements As part of the private placement completed on March 5, 2021, a director and officers of the Company subscribed for 4,150,000 units pursuant to this private placement for aggregate gross proceeds of $332,000. See Note 10. As part of the private placement completed on October 21, 2021, a director and an officer of the Company acquired, in aggregate, 10,000,000 common share units and 4,863,100 flow-through units for total gross proceeds of $1,261,995. See Note 10. An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 375,000 flow-through units for gross proceeds of $290,000 in the private placement closed on July 23, 2020. As part of the private placement completed on December 30, 2020, a director of the Company subscribed for 4,500,000 flow-through common shares for gross proceeds of $427,500. See Note 10. 15. COMMITMENTS AND CONTINGENCIES Management Contracts The Company entered into consulting agreements for the services of its President and CEO, CFO and Executive Chairman. Under the agreements, additional payments totalling $775,000 are be made upon the occurrence of a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in the consolidated financial statements. The commitment upon termination of the agreements is $295,000, in aggregate. The minimum commitment due within one year under the terms of the agreements is $296,400, in aggregate. - 23 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 15. COMMITMENTS AND CONTINGENCIES (Continued) Property Option Agreement On April 28, 2021, the Company optioned certain claims forming the Barraute-Landrienne property whereby Murchison can earn 100% in 75 mineral claims, by making payments totaling $500,000 and property expenditures of $1.0 million over a 6- year period. See Notes 9 and 16. Flow-Through Obligation As at December 31, 2021, the Company has to incur $1,215,325 in qualifying exploration expenditures by December 31, 2022 to meet its flow-through commitments. At this time, management anticipates meeting that obligation and as a result, no additional provisions are required. The flow-through agreements require the Company to renounce certain tax deductions for Canadian exploration expenditures incurred on the Company’s mineral properties to flow-through participants. The Company indemnified the subscribers for any related tax amounts that become payable by the subscribers as a result of the Company not meeting its expenditure commitments. COVID-19 The Company’s operations could be significantly adversely affected by the effects of the global spread of the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a pandemic by the World Health Organization in March 2020. The Company has followed the instructions and advice of Federal and Provincial health authorities, as well as industry-wide best practice guidelines, and has limited travel and field activities to help control the spread of COVID-19 and protect local communities. Since March 2020, the impacts the COVID-19 pandemic on its operations were minimal. The Company cannot predict other pandemic uncertainties, including the duration of the pandemic, the ultimate severity of the disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the impact on schedules and timelines for planned operations or exploration programs. In addition, this widespread health crisis and related business lockdowns have adversely affected the economies and financial markets of many countries at different levels that could eventually affect the Company’s operations and ability to finance its planned operations. Environmental The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. 16. LOAN PAYABLE In June 2021, the Company financed the purchase of an exploration vehicle in the amount of $43,586. The loan bears an interest rate of 7.89% and is repayable over 60 monthly payments of $881 and is secured by the vehicle. The balance payable at December 31, 2021 was $39,963 of which $10,578 is due within the next 12 months. Undiscounted payments over successive years are as follows: 2022 2023-2026 Total contractual cash flows Less: interest $ $ 10,578 37,022 47,600 (7,637) Obligation at December 31, 2021 $ 39,963 - 24 - MURCHISON MINERALS LTD. Notes to the Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in Canadian Dollars) 17. SUBSEQUENT EVENTS Stock Options On January 24, 2022, the Company granted 200,000 stock options at an exercise price of $0.135 to a consultant for a period of for five years. The options vest over 18 months (1/3 on grant date, 1/3 in 9 months and 1/3 in 18 months). GAL Agreement On January 28, 2022, the GAL agreement as disclosed in Note 9 was amended to reflect an exploration commitment change from $200,000 down to $140,000 in the first year of the option agreement. The cumulative expense exploration commitments over the years from 2023 to 2026 remained the same. Warrants Exercised In January and February 2022, a total of 7,025,000 warrants were exercised at a price of $0.12 for aggregate gross proceeds of $843,000. The warrants had expiry dates between January 23, 2022 and February 13, 2022. A total of 1,984,600 warrants expired unexercised on January 23, 2022 and February 13, 2022. End of Notes to Financial Statements - 25 - MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2021 This Management’s Discussion and Analysis (“MD&A”) is intended to supplement the consolidated financial statements and notes of Murchison Minerals Ltd. (the “Company” or “Murchison”) for the year ended December 31, 2021 with comparatives for the same period a year earlier. The consolidated financial statements including comparative figures have been prepared by the Company in accordance with International Financial Reporting Standards (“IFRS”) applicable to preparation of financial statements. This MD&A should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2021, which are available on the Company’s website (www.murchisonminerals.com). This MD&A covers the most recently completed financial year end and the subsequent period up to March 9, 2022. The information is presented in Canadian dollars unless stated otherwise. OVERALL PERFORMANCE Description of Business ‐ Murchison is a Canadian based exploration company focused on nickel-copper-cobalt exploration at the 100%-owned HPM project in Quebec and the exploration and development of the 100%-owned Brabant- silver deposit located on the Brabant Lake property (the McKenzie (the “Deposit”) VMS zinc “Property”) in north central Saskatchewan. The Company also has an option to earn 100% interest in the Barraute-Landrienne zinc-silver-gold project in Quebec. The Company expects to acquire additional properties as attractive opportunities are identified. The Company does not have any projects that generate revenue at this time. The Company’s ability to carry out its business plan in the future rests entirely on its ability to secure equity and other financings or realize cash from the sale of assets. copper ‐ ‐ ‐ Trends The financing, exploration and development of any properties the Company holds or may acquire in the future will be subject to a number of factors including the commodity prices for minerals, applicable laws and regulations, political conditions, currency fluctuations, the hiring of qualified people, and obtaining necessary services in jurisdictions where the Company operates. The current trends relating to these factors could change at any time and negatively affect the Company’s operations and business. Apart from these, the risk factors noted under the heading “Uncertainties and Risk Factors” and “Forward Looking Statement” included in this MD&A, management is not aware of any other trends, commitments, events or uncertainties that would have a material effect on the Company’s business, financial condition or results of operations. The Company’s operations could be significantly adversely affected by the effects of the global spread of the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a pandemic by the World Health Organization in March 2020. The Company has followed the instructions and advice of Federal and Provincial health authorities, as well as industry-wide best practice guidelines, and has limited travel and field activities to help control the spread of COVID-19 and protect local communities. The Company cannot accurately predict the impact the COVID-19 pandemic will have on its operations, including uncertainties relating to the duration of the pandemic, the ultimate severity of the disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the impact on schedules and timelines for planned operations or exploration programs. OUTLOOK In October 2021, the Company appointed Troy Boisjoli as President and Chief Executive Officer. Jean- Charles Potvin maintains an active role in the Company as Murchison’s Executive Chairman. During 2022 the Company will be continuing its exploration activities, in Quebec, at the HPM project. The MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Company is planning to expand VTEM coverage over the entirety of the HPM project area. Subsequently, the Company will then be commencing a prospecting program this spring/summer, while also drilling high- priority targets. Additionnally, the Company will be advancing the Brabant-McKenzie (BMK) project through commencing comprehensive desktop studies on results to date, with the following objectives i) define drilling plan to optimize the BMK mineral resource focussing on expanding high-grade domains and testing open areas on strike and down dip, and ii) define exploration plans to test blue sky potential along the BMK trend. The Company also plans to increase its investor relations activities with the objective of getting wider recognition of the Company’s exploration activities to current and potential investors. This will also be achieved by Murchison’s attendance at several resource specific conferences. There are no known legal, political, environmental or other risks that could materially affect the potential development of Company’s exploration projects. Management is of the opinion that it will be able to maintain the status of its current exploration obligations and to keep its properties in good standing. Advancing exploration at the mineral properties will require substantially more financial resources. In the past, the Corporation has been able to rely on its ability to raise financing via equity private placements. Management’s main objective is to advance its current projects and maximize their potential via the use of different exploration techniques available. The long-term goal remains to develop the Company’s properties and achieve commercial production. The Company may enter into partnerships in order to fully exploit the production potential of its exploration assets. MINERAL PROPERTIES – EXPLORATION ACTIVITIES HPM PROPERTY – QUEBEC At HPM, a VTEM airborne geophysical survey started on April 14, 2021 to follow up on promising prospecting results on its 100%-owned HPM Ni-Cu-Co project in Quebec. The Geotech VTEM 655-line kilometre survey over the HPM property was flown 100 metre line spacing and was concluded on April 30, 2021. Based on the VTEM survey Condor Consulting defined 55 discrete conductive trends totaling 42 km in cumulative length, varying in strike extent from 290 m to 2.3 km. In June, Murchison completed a field program focused on the mapping and sampling of historical showings and targets, as well as select EM conductors newly identified during the VTEM survey of the property earlier in 2021. Six newly identified target areas and historical mineral showings were comprehensively surveyed and sampled using the Beep Mat and backpack drill combination; significant sulphide mineralization was successfully discovered and sampled in five of the six locations explored in this program. During the program, significant sulphide mineralization on surface at the PYC showing over a strike length in excess of 1.7 km was identified. In total, 58 short backpack drill holes were completed and 100 litho-geochem samples were collected. The results were announced on August 16, 2021 and confirmed widespread nickel-copper-cobalt surface mineralization across the entirety of the traced 1.7 km strike length of sulphide mineralization. The results are from grab samples and short backpack drill core samples, featuring assays as high as 1.28% nickel equivalent or 2.59% copper equivalent (0.79% Ni, 0.14% Cu, 0.15% Co) from 0.83 metre of backpack drill core. The assay results also confirm mineralization south-east of the PYC target at the newly discovered Dix showing, which assayed as high as 0.90% nickel equivalent or 1.83% copper equivalent (0.44% Ni, 0.39% Cu, 0.10% Co) from 0.45 metre of backpack drill core. See press release dated June 29, 2021 and August 16, 2021 for full details. Subsequent to the results of the field program, the Company planned a drill program designed to test the subsurface continuation of the significant nickel-copper-cobalt surface mineralization discovered at the PYC target. The inaugural drill program was announced on November 2, 2021, and was completed in early December. In total 1,781 metres of drilling were completed in 8 holes with all holes completed at the PYC target. Of the 1.95 km long PYC target, 550 metres of strike length was ultimately tested with significant 2 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 sulphide mineralization noted in all holes. The Company has thus far received assays for 2 holes (PYC21- 007 and 008) of which both intersected broad intervals of nickel-copper-cobalt sulphide mineralization. Hole PYC21-007 intersected a composite thickness of 62.21 metres of mineralization at 0.24% nickel equivalent (0.14% Ni, 0.07% Cu, 0.03% Co) and Hole PYC21-008 intersected a composite thickness of 69.9 metres at 0.24% nickel equivalent (0.13% Ni, 0.06% Cu, 0.03% Co) (see press release dated March 07, 2022 for full assay and interval details). The mineralization intersected is prospective for low grade bulk tonnage. The remaining assays for the other 6 holes are pending. Simultaneous with the Q4/2021 drill program, prospecting at the Syrah target was also completed. The crews have now mapped sulphide mineralization over a strike length of approximately 375 metres corresponding with a 600 metre long geophysical anomaly. Samples collected returned up to 0.83% Ni Eq. (0.58% Ni, 0.24% Cu, 0.05% Co). The Syrah target is considered highly prospective to host significant mineralization at depth and is a high priority drill target. As a result of the field observations from the 2021 prospecting and drill program, in early December Murchison quadrupled it mineral tenements from 13,897 hectares to 57,586 hectares. The claims cover the majority of the eastern Haut-Plateau region in one contiguous claim block with localized exclusions and Murchison now has a dominant land package in the region. The new claims cover an area where rafts of paragneiss reside within a highly prospective assemblage of norite, gabbro, and anorthosite intrusive rocks which host the nickel-copper-cobalt occurrences. These rock assemblages are similar to those rock types found at other prestigious nickel mining camps, such as Voisey’s Bay. The HPM project continues to show tremendous promise with its numerous gossanous nickel-copper- cobalt-bearing outcrops spatially linked to historical airborne EM anomalies. The HPM property has developed into an exploration project with mining camp scale prospectivity. Historically, exploration and drilling on the HPM property focused on the immediate area around the Barre de Fer showing. The anomalous Ni-Cu-Co results from mafic/ultramafic intrusions which are located throughout the HPM Project and demonstrate significant exploration potential across the entirety of the project area. The HPM property lies within the Grenville Province’s Allochthonous Belt and is host to numerous Ni-Cu- Co showings associated with mafic to ultramafic intrusions, including the high-grade Barre de Fer magmatic nickel sulphide occurrence. The Barre de Fer occurrence returned up to 1.74% Ni, 0.90% Cu, and 0.09% Co over 43.18 m in historic diamond drilling. BRABANT LAKE PROPERTY – SASKATCHEWAN The Property is owned 100% by Murchison is strategically located along Highway 102 approximately 175 kilometres northeast of the town of La Ronge and near major infrastructure, including grid power. The Property consists of the Brabant-McKenzie VMS Deposit and multiple known mineralized showings and identified geophysical conductors over approximately 57-kilometre strike length of favourable geological horizon, all of which remain under-explored and mostly untested. The 627 km2 Property shares geological characteristics, including similar age, with the Flin Flon and Lynn Lake volcanogenic massive sulphide (VMS) mining camps in Manitoba. Drilling In January 2021, the Company initiated a drilling program targeting various targets identified during previous geophysical surveys and field exploration programs where a total of 3,925 metres (14 holes) were drilled. 1,938 metres (6 holes) were in drilled in the Deposit area, 771 metres (2 holes) in the Zn-Cu Betty Zone, 925 metres (3 holes) in the Main Lake target and 351 metres (3 holes) in three high-priority regional drill targets. The drill program was completed in the last week of March 2021. The best intercept observed in the winter 2021 drill program was from hole BM21-004 which assayed 9.07% zinc, 0.81% copper, 0.26% 3 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 lead, 0.11 g/t gold and 35.11 g/t silver over 15.35 metres (80 to 95% true thickness). The hole was designed to expand the indicated resources at the Deposit as well as to collect material for metallurgical testing. The drill results from the regional targets all intersected distal VMS style sulphide iron formation mineralization but failed to intersect any notable economic mineralization. Drilling at the Main Lake target intersected very strong VMS type alteration with hole ML21-002 intersecting two lens of sulphide mineralization. First interval assayed 0.84% zinc, 0.36% copper and 8.5 g/t silver over 3.59 metres (149.5 to 153.15m) and includes 0.47 metres of 3.6% zinc, 0.2% copper and 6.6 g/t silver. The second interval assayed 1.27% zinc, 0.03% copper, and 14.75 g/t silver over 4.08 metres (176.5 to 180.59m) and includes 1.01 metres of 4.71% zinc, 0.04% copper and 21.2 g/t silver. Holes BZ21-001 (381 metres) and BZ21-002 (330 metres) drilled at the Betty Zone both intersected VMS mineralization similar to what is observed at the Deposit. The observed mineralization consists of a narrow interval of abundant sphalerite and chalcopyrite. The best intercept was observed in hole BZ21-002 which intersected 4.40% zinc, 1.33% copper, 12.95 g/t silver from 280.73 to 281.65 metres (0.92 m) including 0.42 m at 3.76% zinc, 2.40% copper, 21.70 g/t silver and 0.12 g/t gold. The Company drilled 2 holes in July 2021 at the Betty Zone. The 877 metre program consisted of two diamond drill holes targeting the observed borehole geophysical anomaly at the Betty Zone. Both holes intersected a thick interval of graphite mineralization which effectively explains the borehole anomaly and was later confirmed by a subsequent borehole EM geophysical survey. The second hole BZ21-004 (473 metres) intersected narrow zinc rich VMS sulphide mineralization which assayed 1.93% ZnEq over 2.70 metres including 3.88% ZnEq over 0.66 metres. The mineralization encountered is considered prospective and requires follow-up drilling along strike to fully test VMS mineralization potential. . The sulphide mineralization encountered is not conductive and did not respond to the borehole geophysical survey. Both drill holes, BZ21-003 and BZ21-004 encountered graphite mineralization that fully explained the targeted geophysical anomaly. The lack of geophysical response of the zinc mineralization is attributed to a very-high amount of sphalerite (zinc sulphide) that is not conductive. The presence of VMS-style sphalerite mineralization demonstrates a fertile system warranting future exploration that will be guided by updated geologic modelling. The mineralization observed at Main Lake and the Betty Zone indicate the potential for additional VMS mineralization outside of the Deposit. The Brabant project has mining camp potential and both of these target areas are on strike with the Deposit and require future follow-up to locate more significant sulphide mineralization. Metallurgy August 2021, the Company announced the results from preliminary metallurgical testing on core samples collected from the Deposit. The results indicate that a simple flotation test using a coarse grind with a rougher and scavenger circuit was able to upgrade the zinc grade from 9.13% to 27% with a 98% recovery. A further 4-stage cleaner flotation test resulted in a zinc concentrate of 50.2% with an 85.06% recovery. The recycling of cleaner tails is expected to result in an overall net zinc recovery of at least 90%. Precious metals were concentrated in the 4th stage cleaner tail material with a grade of 180 g/t silver and 1.13 g/t gold. Excellent results for copper recovery were also achieved with the simple rougher and scavenger flotation test increasing the grade to 2.19% with 92.9% recovery and the 4-stage cleaner flotation resulting in a grade of 4.12% with a 74.7% recovery. These preliminary results are highly encouraging and it is assumed they can be improved through further optimization. Please see press release dated August 10, 2021 for full results. BARRAUTE-LANDRIENNE PROPERTY - QUEBEC On April 28, 2021, the Company entered into an agreement with Gestion Aline Leclerc Inc. (“GAL”) granting Murchison an option to earn 100% in 75 mineral claims covering 2,377 hectares, by making payments totaling $500,000 and property expenditures of $1.0 million over a 6-year period. The first payment of 4 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 $20,000 is due on April 28, 2022. GAL will retain a royalty of 1% of net smelter returns (NSR) on future production. The 1% NSR can be acquired anytime by the Company for $1.0 million. The claims, split into 4 blocks are located in the Barraute-Landrienne mining camp, approximately 60 km north of Val-d'Or, and about 4 km northwest of the municipality of Barraute in Québec and were selected targeting new zinc-silver-gold deposits. These four blocks of claims are believed to host some of the best untested geological/geophysical base-metal targets in the area and are considered ready for drilling. Exploration work completed throughout the past several years by GAL and others resulted in a new geological interpretation suggesting the correlation of the Abcourt-Barvue Mine stratigraphy within the Barraute property. Further west, the Landrienne property hosts several untested isolated Megatem geophysical anomalies, near felsic-mafic volcanic contacts. TMC Geophysics out of Val-d’Or was contracted to complete a combined magnetic, electromagnetic and induced polarization ground survey over the historic Megatem geophysical anomalies at the Barraute A, B and Landrienne B properties. The work was commenced on July 22, 2021 and completed on August 25th, 2021. In total 15.735 km of mag, 5.8 km of IP, and 15.2 km of EM was completed. EM anomalies were located and interpretation of the results is ongoing. The Barraute mining camp hosts several mineralized showings and polymetallic metal deposits including the substantial 15.7 Mt zinc-silver Abcourt-Barvue deposit located at only 2 km from the Barraute property. Zinc-silver mineralization was discovered in the region in 1950. The Abcourt-Barvue deposit of Abcourt Mines Inc. was in operation during two periods: between 1952 and 1957 by Barvue Mines Limited and between 1985 and 1990 by Abcourt. In all, 5,002,19 metric tonnes grading 38.74 g/t silver and 2.98% zinc were mined from the Barvue open pit and 632,319 metric tonnes grading 131.65 g/t silver and 5.04% zinc were mined from underground production. These newly acquired properties are located near all infrastructure and human resources for exploration and possible future operations. Qualified Persons The scientific and technical disclosures included in this MD&A have been reviewed by John Shmyr, P.Geo., VP Exploration, a registered member of the Professional Engineers and Geoscientists of Saskatchewan and current holder of a special authorization with the Ordre des Géologues du Québec. Mr. Shmyr is a Qualified Person as defined by National Instrument 43-101. Access to Properties The Company’s access to its Canadian properties is dependent on climate and weather conditions. The Brabant property in Saskatchewan is accessible all year round. All projects in Québec can be accessed from January to September as weather limits the activities during other times of the year. ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS The following table sets out the exploration expenses for the last two years: HPM, Quebec Drilling Geology Geophysics Mineral Property & Staking Total HPM December 31, 2021 December 31, 2020 $ 1,619,833 209,622 254,453 80,166 $ 2,164,074 $ $ - 86,425 135,008 5,432 226,865 5 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Brabant Lake, Saskatchewan Amortization Drilling General Administrative Geology Geophysics Metallurgy Mineral Property & Staking Total Brabant Lake Barraute-Landrienne, Quebec Geology Geophysics Mineral Property and Staking Total Barraute-Landrienne Total exploration expenses RESULTS OF OPERATIONS December 31, 2021 December 31, 2020 $ 24,546 1,531,547 5,084 96,283 71,277 66,451 300 $ 1,795,488 $ $ 16,163 868,116 2,000 292,709 371,275 - 4,421 1,554,684 December 31, 2021 December 31, 2020 $ $ $ 39,663 97,430 2,500 139,593 $ $ - - - - 4,099,155 $ 1,781,549 For the year ended December 31, 2021, the Company incurred a loss of $4,762,730 (2020 - $2,106,105). The increase of $2,656,625 is mainly related to the following factors: 1. higher exploration expenses of $2,317,606 (2021 - $4,099,155 vs 2020 - $1,781,549) as the Company completed a summer field program, a geophysical survey and a 1,781 metre drilling program at the HPM. 2. higher management fees and salaries of $130,004 (2021 - $345,217 vs 2020 - $215,213) related to hire of a new President and CEO and bonuses paid to officers, and; 3. higher non-cash share-based payments of $134,735 (2021 - $435,905 vs 2020 - $301,170) as the Company granted more options in 2021 which translated into a higher fair value. 6 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 SELECTED ANNUAL INFORMATION The following table sets out financial performance highlights for the last three years and was prepared in accordance with IFRS. December 31, 2021 December 31, 2020 December 31, 2019 Interest Income Operating Expenses (1) Loss Basic and Diluted loss per share Total Assets Exploration Expenses $4,958 $4,730,597 $4,762,730 $0.04 $2,224,877 $4,099,155 $3,347 $2,238,901 $2,106,105 $0.03 $2,228,316 $1,781,549 $7,732 $1,341,001 $1,470,586 $0.03 $1,611,786 $894,935 (1) The exploration expenses are included in operating expenses and share-based payments are excluded from operating expenses. The interest income fluctuation from year to year is the direct result of the cash balance and short-term investments available in each of the years. The timing of equity financing and ensuing exploration and operating expenses are the main factors affecting the level of funds invested from time to time. The variation in the interest rates also has an impact on the interest income but such variation has been minimal for the years 2019 to 2021. The higher loss in 2021 was related to the increased exploration activities at HPM during the year. In 2020 and 2019, the majority of the exploration was on Brabant Lake. The total assets in 2021 and 2020 included $1.79 million and $2.06 million in cash respectively compared to $1.43 in 2019. SELECTED QUARTERLY RESULTS Total Assets Current Assets Non-current Assets Total Liabilities Interest Income Loss Loss Per Share (1) (i) Loss per share remains the same on a diluted basis Fourth Quarter 2021 $ 2,224,877 2,111,429 113,448 443,164 1,788 2,173,753 0.02 Total Assets Current Assets Non-current Assets Total Liabilities Interest Income Loss Loss Per Share (1) Fourth Quarter 2020 $ 2,228,316 2,153,334 74,982 227,906 406 540,295 0.01 Third Quarter 2021 $ 379,466 280,639 98,827 159,350 308 811,766 0.01 Third Quarter 2020 $ 871,386 791,516 79,870 347,843 320 371,675 0.00 Second Quarter 2021 $ 1,390,752 1,283,008 107,744 370,157 1,226 509,351 0.00 Second Quarter 2020 $ 580,520 497,054 83,466 358,980 103 86,718 0.00 First Quarter 2021 $ 1,750,731 1,680,207 70,524 258,682 1,636 1,267,860 0.01 First Quarter 2020 $ 628,930 543,461 85,469 490,679 2,518 1,107,417 0.02 Due to the nature of the business, the cash balance and short-term investments generating interest income are subject to fluctuations from quarter to quarter. The timing of equity financing and ensuing exploration 7 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 and operating expenses are the main factors affecting the level of funds invested from time to time. The variation in interest rates also has an impact on the interest income. In Q4/21, the Company raised gross proceeds of $4,000,069 via the completion of a private placement. The total liability at the end of Q4/21 included 191,896 in non-cash flow-through share liability. The loss in Q4/21 includes $1.85 million in exploration expenses. The non-current assets increase during 2021 is related to the acquisition of exploration equipment. In Q1/21, the Company completed a private placement for gross proceeds of $800,000. In Q4/20, the Company raised gross proceeds of $1,918,754 in two flow- through private placements. The total liability at the end of Q4/20 included 130,459 in non-cash flow- through share liability. In Q3/20, the Company raised gross proceeds of $841,949 via a private placement. In Q2/20, the Company completed a $200,000 flow-through private placement and received a financial assistance payment of $50,000 under the Targeted Mineral Exploration Incentive program from the Government of Saskatchewan which was related to the drilling completed in the winter 2020. In Q1/20, the loss includes exploration expenses of $1,277,846 related to drilling and geophysical surveys at the Brabant Lake project. LIQUIDITY AND CAPITAL RESOURCES As at December 31, 2021, the Company had a cash of $1,792,033 and working capital (excluding flow- through share premium liability) of $1,889,546 (December 31, 2020 – $2,062,411 and $2,052,895, respectively). The Company’s excess cash, when available, is deposited into interest-bearing accounts or invested in redeemable GICs with major Canadian chartered banks. As at December 31, 2021, the Company had amounts receivable and prepaid expenses totaling $319,396 which included sales tax receivable of $247,327 and prepaid expenses of $72,069. During 2021, the Company acquired exploration equipment at a cost of $65,136, which included the purchase of an exploration vehicle in the amount of $43,586. This amount was financed via a loan bearing an annual interest rate of 7.89% and is repayable over 60 monthly payments of $881. The balance payable at December 31, 2021 was $39,963. The December 31, 2021, consolidated financial statements were prepared in accordance with accounting principles applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge liabilities in the normal course of business. The Company’s ability to continue as a going concern is always dependent on its ability to raise new funds to meet its obligations and continue its exploration activities. Equity Financing The Company’s exploration projects are at an early stage and it has not yet been determined whether any of its properties contain economically recoverable ore. As a result, the Company has no current sources of revenue and has relied on the issuance of shares to generate the funds required to further its projects. Private Placements On March 5, 2021, the Company completed a non-brokered private placement and issued 10,000,000 common share units at a price of $0.08 per unit for gross proceeds of $800,000. Each unit consisted of one common share of the Company and one-half common share purchase warrant. Each full warrant entitles the holder to acquire one additional common share until September 5, 2022 at an exercise price of $0.12 per common share. Finder’s fees totaling $18,000 were paid under this private placement. Insiders of the Company acquired an aggregate of 4,150,000 units in this private placement for a total of $332,000. On October 21, 2021, the Company completed a $4,000,069 private placement by issuing issued 13,500,000 units at a price of $0.08 per unit as well as 30,737,571 flow-through units at a price of $0.095 8 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 per flow-through unit. Finder’s fees of $198,005 were paid in relation to the private placement. Insiders acquired 10,000,000 units and 4,863,100 flow-through units for aggregate proceeds of $1,261,995. Warrants As part of the March 5, 2021 private placement, the Company issued 5,000,000 warrants at an exercise price of $0.12 per warrant expiring 18 months expiring September 5, 2022. As part of the October 21, 2021 private placement, the Company issued 22,118,788 warrants and 2,178,997 finders warrants all exercisable at $0.12 until October 21, 2022. In October and November 2021, 180,000 warrants issued in July 2020 were exercised for proceeds of $21,600. In November 2021, 256,037 finder’s warrants issued in December 2020 were exercised for proceeds of $30,724. The balance of 278,196 finder’s warrants expired on December 30, 2021. In January and February 2022, a total of 7,025,000 warrants were exercised at a price of $0.12 for aggregate gross proceeds of $843,000. The warrants had expiring dates between January 23, 2022 and February 13, 2022. A total of 1,984,600 warrants with expiry dates between January 23, 2022 and February 13, 2022 were not exercised and expired. Stock Options On April 14, May 25 and July 2, 2021, the Company granted a total of 900,000 stock options exercisable at $0.095 for a period of 5 years. All options vested immediately. On October 11, 2021, the Company granted 1,000,000 stock options exercisable at $0.08 for a period of five years of which 700,000 vested immediately and 300,000 will vest on April 11, 2022. On December 20, 2021, the Company granted 3,625,000 stock options exercisable at $0.13 for 5 years to directors, officers, consultants and employees of the Company. All options vested immediately except for 200,000 vesting on May 1, 2022. General The Company’s ability to successfully acquire mineral projects or recover amounts expended on mineral properties is conditional on its ability to secure financing when required. The Company expects to meet additional financing requirements through equity financing. The Company may seek other alternatives for financing in the future depending on market conditions and exploration results; however, there can be no assurance that such financing attempts will be successful. The impact on our business and the cost and availability of financing remain uncertain and could affect our overall liquidity. Commitments and Obligations Management Contracts The Company entered into consulting agreements for the services of its President and CEO, CFO and Executive Chairman. Under the agreements, additional payments totalling $775,000 are be made upon the occurrence of a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in the consolidated financial statements. The commitment upon termination of the agreements is $295,000, in aggregate. The minimum commitment due within one year under the terms of the agreements is $296,400, in aggregate. Property Option Agreement On April 28, 2021, the Company optioned certain claims forming the Barraute-Landrienne property whereby Murchison can earn 100% in 75 mineral claims covering 2,377 hectares, by making payments totaling $500,000 and property expenditures of $1.0 million over a 6-year period. 9 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Flow-Through Obligation As at December 31, 2021, the Company has to incur $1,215,325 in qualifying exploration expenditures by December 31, 2022 to meet its flow-through commitments. At this time, management anticipates meeting that obligation and as a result, no additional provisions are required. The flow-through agreements require the Company to renounce certain tax deductions for Canadian exploration expenditures incurred on the Company’s mineral properties to flow-through participants. The Company indemnified the subscribers for any related tax amounts that become payable by the subscribers as a result of the Company not meeting its expenditure commitments. COVID-19 The Company’s operations could be significantly adversely affected by the effects of the global spread of the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a pandemic by the World Health Organization in March 2020. The Company has followed the instructions and advice of Federal and Provincial health authorities, as well as industry-wide best practice guidelines, and has limited travel and field activities to help control the spread of COVID-19 and protect local communities. The Company cannot accurately predict the impact the COVID-19 pandemic will have on its operations, including uncertainties relating to the duration of the pandemic, the ultimate severity of the disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the impact on schedules and timelines for planned operations or exploration programs. In addition, this widespread health crisis and related business lockdowns have adversely affected the economies and financial markets of many countries, resulting in an economic downturn that could affect the Company’s operations and ability to finance its planned operations. Environmental The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The Company has no long-term contractual obligations other than the loan payable as disclosed above. OFF-BALANCE SHEET ARRANGEMENTS The Company has no off-balance sheet arrangements. TRANSACTIONS WITH RELATED PARTIES a) Remuneration of directors and the officers was as follows: Salaries and benefits Share-based payments 2021 2020 $ 330,940 380,250 $ 215,213 284,900 $ 711,190 $ 500,113 For the year ended December 31, 2021, the salaries and benefits amount above includes $144,875 (2020 - $98,250) for fees invoiced by a corporation controlled by the CFO of the Company for his services and $138,000 (2020 - $116,963) for fees invoiced by the Executive Chairman (former CEO until October 11, 10 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 2021) of the Company for his services as CEO and Executive Chairman. The salaries and benefits also includes $48,065 (2020 - $nil) for fees invoiced by a corporation controlled by the new CEO of the Company for his services as CEO. Included in accounts payable and accrued liabilities at December 31, 2021 is $nil (2020 - $19,650) owed to corporation controlled by the CFO, $nil (2020 - $12,335) owed to the Executive Chairman and $5,923 owed to the CEO. The amounts payable are unsecured, non-interest bearing and have no fixed terms of repayment. Promissory Note b) On March 27, 2020, the Company issued a $200,000 promissory note to Vyco Limited (“Vyco”). The amount owing under this promissory note bore interest at an annual rate of 5.0% and, in the event that the principal amount was not repaid in full by the due date of June 30, 2020, the interest accrued at the rate of 10% per annum from the due date until payment was effected. Vyco is a corporation controlled by a family trust. Mr. Donald K. Johnson, director of the Company, is a discretionary beneficiary of such trust and President of Vyco. The promissory note was repaid on September 9, 2020 along with interest of $6,493. Private Placements c) As part of the private placement completed on March 5, 2021, a director and officers of the Company subscribed for 4,150,000 units pursuant to this private placement for aggregate gross proceeds of $332,000. As part of the private placement completed on October 21, 2021, a director and an officer of the Company acquired, in aggregate, 10,000,000 common share units and 4,863,100 flow-through units for total gross proceeds of $1,261,995. An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 500,000 flow-through units for gross proceeds of $290,000 in the private placement closed on July 23, 2020. As part of the private placement completed on December 30, 2020, a director of the Company subscribed for 4,500,000 flow-through common shares for gross proceeds of $427,500. PROPOSED TRANSACTIONS The Company continues to evaluate quality exploration projects and financing opportunities. There are no transactions currently pending. CHANGES IN ACCOUNTING POLICIES New and future accounting policies Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2022. Many are not applicable or do not have a significant impact to the Company and have been excluded. The Company is currently assessing the impact of these standards on the consolidated financial statements. IAS 16 - Property, Plant and Equipment was amended. The amendments introduce new guidance, such that the proceeds from selling items before the related property, plant and equipment is available for its intended use can no longer be deducted from the cost. Instead, such proceeds are to be recognized in profit or loss, together with the costs of producing those items. The amendments are effective for annual periods beginning on January 1, 2022. IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a 11 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 business. The effective date of these amendments is yet to be determined, however early adoption is permitted. IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023. IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify that when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. costs a company would avoid if it did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are effective for annual periods beginning on January 1, 2022. IFRS 3 – Business Combinations (“IFRS 3”) was amended. The amendments introduce new exceptions to the recognition and measurement principles in IFRS 3 to ensure that the update in references to the revised conceptual framework does not change which assets and liabilities qualify for recognition in a business combination. An acquirer should apply the definition of a liability in IAS 37 – rather than the definition in the Conceptual Framework – to determine whether a present obligation exists at the acquisition date as a result of past events. For a levy in the scope of IFRIC 21, the acquirer should apply the criteria in IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. In addition, the amendments clarify that the acquirer should not recognize a contingent asset at the acquisition date. The amendments are effective for annual periods beginning on January 1, 2022. FINANCIAL INSTRUMENTS Financial assets: Amortized cost Cash and cash equivalents FVPL Investments Financial liabilities: 2021 2020 $ 1,792,033 $ 2,062,411 2,584 3,402 Amortized cost Accounts payable and accrued liabilities Loan payable $ 211,305 39,963 $ 100,439 - As of December 31, 2021 and December 31, 2020, the fair value of all the Company's financial instruments approximates the carrying value, due to their short-term nature, except as for the investment which is presented at fair value. As at December 31, 2021, the Company’s Investment on the consolidated statements of financial position was recorded at level 1 with a fair value of $2,584 (2020 - $3,402). 12 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Significant accounting judgments and estimates: The preparation of consolidated financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates. The areas that require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to the following: • • • Assets’ carrying values and impairment charges In the determination of carrying values and impairment charges, management looks at the higher of recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period. Income and other taxes Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Share-based payments Management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based non-vested share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgments used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates. The Company currently estimates the expected volatility of its common shares based on historical volatility taking into consideration the expected life of the options and warrants. 13 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Capital Management: The Company manages its capital with the following objectives: • • to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions and to maximize shareholder return through enhancing the share value. The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing basis. The Company considers its capital to consist of equity, comprising share capital, reserves and deficit. The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. The forecast is regularly updated based on its exploration and development activities. Selected information is regularly provided to the Board of Directors of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the years ended December 31, 2021 and 2020. The Company is not subject to any capital requirements imposed by a regulator or lending institution. ADDITIONAL INFORMATION Outstanding Shareholders’ Equity Data As of March 9, 2022, the following are outstanding: • • • Common Shares Stock Options Warrants 160,634,785 14,280,000 29,297,785 Uncertainties and Risk Factors An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Such investment should be undertaken only by investors whose financial resources are sufficient to enable them to assume these risks and who have no need for immediate liquidity in their investment. Prospective investors should carefully consider the risk factors that have affected, and which in the future are reasonably expected to affect, the Company and its financial position. In addition to the risks outlined below, Murchison has identified the extreme volatility occurring in the financial markets as a significant risk for the Company. As a result of the market turmoil, investors are moving away from assets they perceive as risky to those they perceive as less so. Companies like Murchison are considered risk assets and as mentioned above are highly speculative. The volatility in the markets and investor sentiment may make it difficult for the Company to access the capital markets to raise the funds required for its future expenditures. Exploration, Development and Operating Risks Mining operations generally involve a high degree of risk. The Company’s operations are subject to all the hazards and risks normally encountered in the exploration, development and production of gold, precious metals and other minerals, including unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and possible legal liability. Although adequate precautions to minimize risk will be 14 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 taken, milling operations are subject to hazards such as equipment failure or failure of retaining dams around tailings disposal areas which may result in environmental pollution and consequent liability. The exploration for and development of mineral deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of a mineral-bearing structure may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by The Company will result in a profitable commercial mining operation. Whether a gold or other mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as quantity and quality of mineralization and proximity to infrastructure; mineral prices which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in The Company not receiving an adequate return on invested capital. There is no certainty that the expenditures made by the Company towards the search and evaluation of gold or other minerals will result in discoveries of commercial quantities of gold or other minerals. Country Risk The Company may conduct business in jurisdictions and some countries in which the title to its properties may be uncertain or where access to infrastructure, or political stability, or security, among other things, may be unknown, or known, and prevent, or severely compromise, the Company from carrying out business. It may be that the Company accepts some or all of these risks, to the extent that they can be determined at all, in favour of acquiring properties with exceptional exploration and development potential, and may ultimately be prevented from exploring and developing those properties for any number of reasons which may, or may not, be predictable, foreseeable, or manageable. Current Economic Conditions There are significant uncertainties regarding the price of precious metals and other minerals and the availability of equity financing for the purposes of mineral exploration and development. The prices of precious metals and other minerals have fluctuated substantially over the past several years. The Company’s future performance is largely tied to the development of its current mineral properties and the overall financial markets. Current financial markets are likely to be volatile for the remainder of the calendar year, reflecting ongoing concerns about the stability of the global economy and global growth prospects. As well, concern about global growth has led to sustained drops in the commodity markets for commodities other than gold. As a result, the Company may have difficulties raising equity financing for the purposes of mineral exploration and development, particularly without excessively diluting present shareholders of the Company. These economic trends may limit the Company’s ability to develop and/or further explore its mineral property interests. Limited Operating History The Company has a limited history of operations, is in the early stage of exploration and must be considered a start-up company. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. It is common in new mining operations to experience unexpected problems and delays. In addition, delays in the commencement of mineral production often occur. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment or successfully establish mining operations and the likelihood of success must be considered in light of its early stage of operations. 15 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 Reliability of Resource Estimates There is no certainty that any mineral resources identified in the future on any of the Company’s properties will be realized. Until a deposit is actually mined and processed the quantity of mineral resources and grades must be considered as estimates only. In addition, the quantity of mineral resources may vary depending on, among other things, metal prices. Any material change in quantity of mineral resources, grade or stripping ratio may affect the economic viability of any project undertaken by the Company. In addition, there can be no assurance that gold recoveries or other metal recoveries in small-scale laboratory tests will be duplicated in a larger scale test under on-site conditions or during production. Fluctuations in gold and other base or precious metals prices, results of drilling, metallurgical testing and production and the evaluation of studies, reports and plans subsequent to the date of any estimate may require revision of such estimate. Any material reductions in estimates of mineral resources could have a material adverse effect on the Company’s results of operations and financial condition from time to time. Insurance and Uninsured Risks The Company’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to The Company’s properties or the properties of others, delays in mining, monetary losses and possible legal liability. Although the Company may in the future maintain insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance will not cover all the potential risks associated with a mining company’s operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to liability for pollution or other hazards which may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations. Environmental Risks and Hazards All phases of the Company’s operations are subject to environmental regulation in the jurisdictions in which it operates. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on the properties on which the Company holds interests which are unknown to the Company at present and which have been caused by previous or existing owners or operators of the properties. Government approvals and permits are currently and may in the future be required in connection with the Company’s operations. To the extent such approvals are required and not obtained, the Company may be curtailed or prohibited from continuing its exploration or mining operations or from proceeding with planned exploration or development of mineral properties. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease 16 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities of mining and exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in exploration expenses, capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties. Infrastructure Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources 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 or provision of such infrastructure could adversely affect the Company’s operations, financial condition and results of operations. Land Title No assurances can be given that there are no title defects affecting property or any other property interests of the Company. Title insurance generally is not available, and the Company’s ability to ensure that it has obtained secure claim to individual mineral properties or mining concessions may be severely constrained. Furthermore, the Company has not conducted surveys of the claims in which it holds an interest and, therefore, the precise area and location of such claims may be in doubt. Accordingly, the Company’s mineral properties may be subject to prior unregistered liens, agreements, transfers or claims, including native land claims, and title may be affected by, among other things, undetected defects. In addition, the Company may be unable to operate its properties as permitted or to enforce its rights with respect to its properties. Competition The mining industry is competitive in all of its phases. The Company faces strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, precious and base metals. Many of these companies have greater financial resources, operational experience and technical capabilities than the Company. As a result of this competition, the Company may be unable to maintain or acquire additional attractive mining properties on terms it considers acceptable or at all. Consequently, the Company’s revenues, operations and financial condition could be materially adversely affected. Additional Capital The development and exploration of the Company’s properties will require substantial additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production on any or all of the Company’s properties or even a loss of property interest. The primary source of funding available to the Company consists of equity financing. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company. Commodity Prices The price of the Company’s common shares, the Company’s financial results and exploration, development and mineral development activities may in the future be significantly adversely affected by declines in the price of precious metals or other minerals. The price of precious metals and other minerals fluctuates widely and is affected by numerous factors beyond the Company’s control such as the sale or purchase of commodities by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, the political and economic conditions of major mineral-producing countries 17 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 throughout the world, and the cost of substitutes, inventory levels and carrying charges. Future serious price declines in the market value of precious metals or other minerals could cause continued development of and commercial production from the Company’s properties to be impracticable. Depending on the price of precious metals and other minerals, cash flow from mining operations may not be sufficient and the Company could be forced to discontinue production and may lose its interest in, or may be forced to sell, some of its properties. Future production from the Company’s mineral exploration properties is dependent upon the prices of precious metals and other minerals being adequate to make these properties economic. In addition to adversely affecting the Company’s future resource or reserve estimates, if any, and its financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed. Government Regulation The development and mineral exploration activities of the Company are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people and other matters. In addition, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not otherwise be applied in a manner which could limit or curtail production or development in any of the jurisdictions in which the Company operates. Amendments to other current laws and regulations governing mineral exploration and development or more stringent implementation thereof could also have a substantial adverse impact on the Company. Dividend Policy No dividends on the common shares have been paid by the Company to date. Payment of any future dividends will be at the discretion of the Company’s board of directors after taking into account many factors, including the Company’s operating results, financial condition and current and anticipated cash needs. Dilution to the Company Common Shares As of March 9, 2022, the Company had 160,634,785 common shares and 43,577,785 convertible securities issued and outstanding. The increase in the number of securities issued and outstanding and the possibility of sales of such shares may have a depressive effect on the price of the common shares. In addition, as a result of such additional securities, the voting power of the existing shareholders in the Company will be diluted. Key Executives The Company is dependent on the services of key executives, including the directors of Murchison and a small number of highly skilled and experienced executives and personnel. Due to the relatively small size of the Company, the loss of these persons or the Company’s inability to attract and retain additional highly skilled employees may adversely affect its business and future operations. Conflicts of Interest Certain directors and officers of the Company also serve as directors and/or officers of other companies involved in natural resource exploration and development and consequently there exists the possibility for such directors and officers to be in a position of conflict. Any decision made by any of such directors and officers involving Murchison should be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of Murchison and its shareholders. In addition, each of the directors is required to declare and refrain from voting on any matter in which such directors may have a conflict of interest in accordance with the procedures set forth in the Canada Business Corporations Act and other applicable laws. 18 MURCHISON MINERALS LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021 FORWARD-LOOKING STATEMENTS This document contains forward-looking statements based on the Company’s current expectations. Forward-looking information can often be identified by forward looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate” or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those presented in this document. Accordingly, the Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change, unless required by law. Readers are cautioned not to place undue reliance on forward-looking information. 19 

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