Tsodilo Resources Limited Annual Report 2022

Plain-text annual report

Tsodilo Resources Limited Annual Report 2022 TSODILO RESOURCES LIMITED Management’s Discussion and Analysis The Management’s Discussion and Analysis has been authorized for release by the Company’s Board of Directors on May 1, 2023 1Management’s Discussion and Analysis This management’s discussion and analysis (“MD&A”) should be read in conjunction with the consolidated financial statements of the Company and the notes thereto for the years ended December 31, 2022 and 2021. The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Company’s functional and reporting currency is United States dollars and all amounts stated are in United States dollar unless otherwise noted. In addition, the Company has three Botswana operating subsidiaries, Newdico (Pty) Ltd., Gcwihaba Resources (Pty) Ltd. and Bosoto (Pty) Ltd. which have a functional currency of the Botswana Pula. This management’s discussion and analysis has been prepared as at May 1, 2023. Disclosure of a scientific or technical nature in the MD&A was prepared under the supervision of Mr. Macdonald Kahari, the Company’s Qualified Person, as that term is defined in National Instrument 43-101. Some of the statements in this MD&A are forward-looking statements that are subject to risk factors set out in the cautionary note contained herein. Additional information about the Company and its business activities is available on SEDAR at www.sedar.com. OVERVIEW Tsodilo Resources Limited (“Tsodilo” or the “Company”) was organized under the laws of the Province of Ontario in 1996 and continued under the laws of the Yukon in 2002. It is incorporated under laws of the Yukon Territory, Canada, under the Business Corporations Act of Yukon and the address of the Company’s registered office is 1 King Street West, 48th Floor, Toronto ON M5H 1A1 - Canada. The Company currently exists under the Business Corporations Act of Yukon and its common shares are listed on the Canadian TSX Venture Stock Exchange (“TSXV”) under the symbol TSD. Tsodilo is an exploration stage company which is engaged principally in the acquisition, exploration and development of mineral properties in the Republics of Botswana and South Africa. The Company is considered to be in the exploration and development stage given that none of its properties are in production and, to date, has not earned any significant revenues. The recoverability of amounts shown for exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the renewal of exploration licenses, obtaining the necessary permits to operate a mine, obtaining the financing to complete exploration and development, and future profitable production. Outstanding Share Data As of May 1, 2023, 52,338,022 common shares of the Company were outstanding. Of the options to purchase common shares issued to eligible persons under the stock option plan of the Company, 3,606,250 options are outstanding of which 2,512,500 are exercisable at exercise prices ranging from CAD $0.07 - $0.75. Expiry Date January 1, 2028 July 1, 2027 January 1, 2027 May 1, 2026 January 1, 2026 Grant Date January 1, 2023 July 1, 2022 January 1, 2022 May 21, 2021 January 1, 2021 September 21, 2020 September 21, 2025 January 2, 2020 June 6, 2019 January 2, 2019 January 2, 2025 June 6, 2024 January 2, 2024 Grant Price (CAD) Granted Outstanding 650,000 1,000,000 425,000 550,000 275,000 118,750 162,500 375,000 50,000 650,000 1,000,000 425,000 650,000 275,000 425,000 275,000 925,000 260,000 $0.20 $0.29 $0.64 $0.75 $0.47 $0.09 $0.07 $0.17 $0 28 Exercisable 162,500 500,000 318,750 550,000 275,000 118,750 162,500 375,000 50,000 2As of May 1, 2023, 5,304,996 warrants are outstanding and exercisable as follows: Grant Date January 25, 2023 January 25, 2021 February 10, 2021 Expiry Date January 25, 2025 July 25, 2023 August 10, 2023 Grant Price (USD) $0.20 $0.55 $0.55 Granted Outstanding 2,500,941 2,500,941 2,504,055 2,686,038 300,000 300,000 Exercisable 2,500,941 2,504,055 300,000 Principal Shareholders of the Company To the best of the Company’s knowledge, the principal shareholders (greater than 5%) of the Company as of May 1, 2023, are as follows: Name Description Shares Owns, Controls or Directs % of the Issued and Outstanding Shares Azur LLC Investment Trust Lucara Diamond Corporation Diamond Mining Co. David J. Cushing Karsten Busche James M. Bruchs Investor Investor Chairman and CEO 4,996,065 4,476,773 4,327,579 3,785,625 2,888,119 8.59% 8.55% 8.10% 7.23% 5.51% Exploration Activities as at December 31, 2022 Subsidiaries ◊ ◊ ◊ ◊ The Company holds a 100% interest in its Botswana subsidiary, Gcwihaba (Pty) Limited (“Gcwihaba”) which holds four (4) metal (base, precious, platinum group, and rare earth) prospecting licenses and a 5th license is currently under litigation for renewal (a summary of the litigation was provided in Note 13 of the Company’s audited consolidated financial statements for the year ended December 31, 2022). The Company holds a 100% interest in its Botswana subsidiary, Bosoto (Pty) Limited (“Bosoto”), which holds one (1) precious stone prospecting license; PL369/2014 for the area which contains the BK16 kimberlite. The Company holds a 100% interest in Newdico (Pty) Limited (“Newdico”), which provides administrative, operational, exploration, geophysical, and drilling services to the Company’s other subsidiaries. The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its operating subsidiaries are registered. 1. DIAMOND PROJECTS The Company holds one prospecting license for precious stones, registered to Bosoto. This license is summarized in Table 1. Precious Stone Prospecting Licenses as at December 31, 2022 Table 1 Prospecting Km² Grant Expiry or Current Expenditure1 Total Expenditure from License Number Date Renewal Stage Per Annum Grant Date and if held Date (BWP) to Full License Term Rental Work BWP1 USD as at Fee Program 12/31/22 369/2014 1.02 10/01/21 9/30/23 1st Extension 1,000 20,000,000 40,002,000 3,089,586 1 Amounts include services accounted for at market value provided by Tsodilo and its subsidiaries and all expenditure amounts are incremental in nature and qualified by positive results in the evaluation process throughout the license term. 3 1.1 PL369/2014 (BK 16) Bosoto was granted a prospecting license (PL) (PL369/2014) over the BK16 kimberlite pipe effective October 1, 2014. The prospecting license was renewed for an additional two-year period commencing October 1, 2017, and a second two-year renewal application was granted effective October 1, 2019. Bosoto received a two-year extension of the license from the Ministry of Mineral Resources, Green Technology and Energy Security (“MMGE”) for PL369/2014 commencing October 1, 2021. The diamondiferous BK16 kimberlite pipe is located within the Orapa Kimberlite Field (” OKF”) in Botswana and is covered by ~25 meters (m) of Kalahari Group sediments. BK16 is located 37 kilometers (km) east-southeast of the Orapa Diamond Mine AK01, 25 km southeast of the Damtshaa Diamond Mine, and 13 km north-northeast of the Letlhakane Diamond Mine, all operated by Debswana and 28 km east-northeast from Lucara Diamond Corporation's Karowe Mine (AK6). The OKF contains at least 83 kimberlite bodies, varying in size from insignificant dykes to the 110 hectares (ha) AK01 kimberlite pipe. Ages of emplacement are Cretaceous and range from 111 Ma for Lethlakane-DK01 (Letlhakane Mine) to 85 Ma for Orapa-AK01, representing a protracted period of kimberlite magmatism lasting approximately 20 million years. Of the 83 known kimberlite bodies, eleven (11), AK01, AK02, AK07 (Orapa, Debswana); AK06 (Karowe, Lucara Diamond Corporation); BK01, BK09, BK12, and BK15 (Damtshaa, Debswana); DK01 and DK02 (Letlhakane, Debswana); and BK11 (Firestone Diamonds) are currently being or have been mined. In July 2016, Tsodilo Resources Bermuda Limited (“TRBL”) completed a share repurchase and royalty fee agreement with Bosoto’s minority shareholders. The minority shareholders’ 25% equity interest was purchased for a 2% gross proceeds royalty derived from the sale of diamonds mined from Bosoto’s BK16 kimberlite project. The result of this transaction resulted in Tsodilo having a 100% interest in Bosoto and its BK16 exploration project. Summary of Work Performed as at December 31, 2022 The diamondiferous BK16 kimberlite pipe is approximately six (6) hectares in size at the surface and is known to contain rare and valuable Type IIa diamonds. A mini-bulk sampling program was undertaken to obtain an initial determination of the quality and value of the BK16 diamonds. This was successfully undertaken via fourteen (14) 24-inch Large Diameter Drilling (LDD) totaling 3,121 meters. 2,077 tonnes (caliper) of kimberlite were extracted. From this extraction, 243 individual bulk samples were processed at the Company's dense media separation (DMS) plant ahead of X-Ray diamond separation and final hand sorting at the Company's secure recovery unit. The diamond recovery resulted in 509 diamonds weighing 78.403 carats which were studied for value and size frequency distribution (SFD) modelling to model the SFD of the BK16 kimberlite which showed the following: ◊ ◊ ◊ ◊ successfully demonstrated the potential of the BK16 kimberlite to host high value diamonds between US$ 281 to US$ 792 per carat, see Table 2; successfully confirmed the presence of Type IIa diamonds where 3.8% of the diamonds were identified as high-quality Type IIa diamonds consisting predominantly of D color stones; a Size Frequency Distribution study (SFD) of the diamonds recovered from the LDD samples indicates that the size distribution of BK16 could be coarser than several producers in southern Africa. There are indications that BK16 could have a broadly similarly coarse-shaped size distribution to that of the Lucara's Karowe Mine (Botswana), Petra Diamonds' Premier Mine (South Africa), and Lucapa Diamond's Mothae Mine (Lesotho); and, successfully confirmed the potential of BK16 to host large special stones of +10.8 carats where size frequency distribution analysis indicates that 2% to 5% of the total carats may be greater than 10.8 carats (specials) (which compares favorably with Lucara Diamond Corp.'s Karowe Mine (AK6) production of specials). This SFD modeling led to a scoping level range analysis techno-economic modelling of the deposit using some defined variables and options for developing the project. This range analysis suggests that a positive Net 4 Present Value (NPV) project is possible. The range analysis suggests that at diamond values around $350/ct the target could support a well-managed toll treatment operation. As the value increases to $500-550 it would be viable to contemplate a variety of low-capital intensity operations. At values above $600-650/ct, the strategy of developing a stand-alone full-size operation should be pursued. Still, further alternatives involved the utilization of other processing plants in the OKF that are operating beneath their capacity. These encouraging results suggest that BK16 has the potential to become a mineable asset and suggest that the BK16 project employ a surface bulk sample method to augment the Phase 1 LDD sampling for its next Phase II stage of evaluation. Phase I SFD modelled grade, diamond value, and kimberlite value. Table 2 Variable Unit of Measure BK16 Sample Grade cpht Diamond Value US$/carat Kimberlite Value US$/tonne 3.8 177 6.6 Current BK16 SFD Study Min 4 281 11 P20 5 290 15 P80 7 600 38 Max 8 792 67 Heavy Mineral Analysis Botswana International University of Science and Technology (BIUST) performed a heavy mineral chemistry analysis on the VK3 phase from BK16 LDD samples. The study found that: ◊ ◊ The heavy minerals are composed of garnets (mostly eclogitic and pyroxenitic garnets), ilmenite (Mg- ilmenite), Phlogopite (Al-rich kimberlitic Phlogopite), olivine (forsterite and pyroxenes (diopside and enstatite), accompanied by inclusions of Cr-magnetite and trace amounts of omphacite, augite, chromite, barite, and calcite. The xenocrysts provide evidence that the BK16 kimberlite pipe is a Group 1 kimberlite with xenocrysts of eclogitic, pyroxenitic, and ultramafic/mafic MARID suite provenance. Future Plans and Outlook for BK16 The encouraging results from the Phase I program justify moving on to Phase II which is to increase the number of carats recovered significantly by processing a far larger sample which will lead to an increase in the certainty of the grade and diamond value. Phase IIa will consist of the following: Phase IIa Surface Bulk Sampling: Extract ~20,000 metric tonnes of kimberlite to obtain 800 to 1,600 carats of diamonds; Significantly improve the understanding of the grade of the deposit in cpht; Solidify further the accuracy of the high diamond value in US$ per carat; Further confirm the presence and quality of the Type IIa diamond population;      Confirm the presence of larger stones and demonstrate that BK16 will be a significant producer of special stones above 10.8 carats and >100 carat stones;  Carry out hydrogeological, further independent Economic Modelling, an Environmental Impact Assessment, and Feasibility level engineering studies;  Define an inferred resource consisting of the development of geological and domain models, and  geo-statistical analyses of grade ; Further refine the accuracy of the economic fundamentals of the project to move towards detailed feasibility studies and ultimately mining;  Determine Grade, Value per Size Fraction, and Size Fraction Distribution;  Utilize dry XRT and XRT sorting technologies to recover large and small diamond stones, and reduce the risk of diamond damage from crushing; and  Understand mining constraints and the Life of the Mine to select an appropriate plant throughput. 5 The envisioned Phase IIa surface bulk sampling of this type constitutes standard industry practice for diamond exploration of kimberlites like BK16 to gain enough carats for an effective economic analysis. The Phase IIa bulk sample design will be a basic small and shallow box-cut style sample. Twenty-five (25) meters of overburden will be stripped to expose the kimberlite below resulting in a depth of the box-cut design of 30 - 35 meters. Engineering studies undertaken into this surface bulk sample were comprised of a geotechnical characteristic study; a sample location optimization study to maximize the number of diamonds; and, a final optimized pit design optimization which constructs a box-cut design specification optimized pit shell that takes into account geotechnical parameters and grade and tonnage considerations. This final design was signed off by independent engineers. In addition, a detailed rehabilitation plan was created that meets statutory requirements and will ensure the workings and facilities are safe and restore the environment to as close as possible to its natural state. Considering that the BK16 project is at an advanced exploration stage of development the potential for future expansion and growth opportunities, a techno-economic model was undertaken by an independent contractor to provide sound financial evaluation information. If results are positive from this Phase IIa then a further phase of bulk sampling will be undertaken (Phase IIb) for a 5,000 tonnes LDD program plus another 20,000 tonnes of surface bulk sample in Phase IIb. Phase IIa and Phase IIb should provide a total of 1,800 to 3,600 carats and provide a solid foundation for advancing the BK16 project, where it is envisaged that this will lead to mining of the BK16 kimberlite. A technical review of the infrastructure, engineering, project management, environmental, and human resource studies were undertaken by an independent contractor. 1.2 PL217/2016 PL217/2016 was acquired in the second quarter of 2017. The license has an effective date of January 1, 2017, for an initial period of three (3) years followed by two 2-year renewals. The first renewal was granted on June 29, 2020. The license lies within the OKF and is situated some 10 km south of the Orapa Mining area and at the same distance to the west of the Letlhakane Mining lease. It surrounds the Karowe Mining lease, while the BK11 prospect is direct to the east of the licence. Other kimberlites occur along its northern and eastern borders. The licence is highly prospective for kimberlites but also has the potential to contain secondary diamond deposits associated with the paleo-drainage network in the area. The present drainage is to the north and erosion of the kimberlites would have resulted in the residue, including diamonds, to have been transported in the same direction. The focus of the exploration work would therefore be not only on finding kimberlites but also to assess the geomorphology in the search for paleo-channels and alluvial diamond deposits. Summary of Work Performed as at December 31, 2022 A novel mix of remote sensing strategies which involved studying in combination air magnetic surveys; Aster LT1; Aster GED Emissivity; Landsat ETM 7+; Landsat LC08, Landsat 8 False Color, Shuttle Radar Topography Mission (SRTM) digital elevation models (DEM); and regional digitized geology, helped identify several potential alluvial and kimberlite targets for further exploration. Following this study, follow-up magnetometry and gravimetric surveys were undertaken. Detailed ground magnetics surveys over selected targets were conducted in several stages, and totaled 612 survey line kilometers. This further refined the understanding of the area and identified 12 kimberlite targets of which five were a high priority. Additional high-resolution ground gravity surveys followed and were conducted along lines perpendicular to the previously identified paleo-channels and downstream of AK6 and BK11. Modelling of the ground magnetic and ground gravity data led to the identification of several paleo-channels. Where alluvial gravel paleo-channels have characteristically lower densities, and as such can be identified as having a lower gravity value than the surrounding areas. This modelling indicated significant overlaps between these ground 6 geophysical surveys and the remote sensing interpretations for the locations of subsurface paleo-channel alluvial targets. Several prospective paleo-channel targets close to present-day drainages at 15 to 40m below the surface had been noted. A review of the Company’s extensive exploration work was performed in the fourth quarter and it was determined that the gravity data revealed depths to interpreted gravel channels as too deep (up to 30m) and therefore not likely to be channels but caused by sandstones. The Company also believes that there are not enough gravel tonnages to make an economic project. Accordingly, the license was relinquished in its entirety in the 4th quarter. The Company has written off the capitalized cost of $584,643 as impaired as at the year- ended December 31, 2022. 2. METALS (BASE & PRECIOUS, PLATINUM GROUP METALS, AND RARE EARTH ELEMENTS) PROJECTS Seven (7) PLs were reissued as initial grants effective October 1, 2018, for a period of three (3) years. Two-year renewal applications were filed in the second quarter of 2021 reducing the overall license package from 4,921 km2 to 2,462 km2 consisting of five (5) prospecting licenses. The reduction in the license area package had no impact on the prospectively of the remaining project area. Four licenses were renewed effective January 1, 2022, while the fifth remains in the renewal process. The details of the Company’s prospecting licences are outlined in Table 3. Table 3: Gcwihaba Metal Licenses as at December 31, 2022 Prospecting Km² Grant Expiry or Current Expenditure* Total Expenditure license Number Date Renewal Stage Per Annum from Grant Date and Date (BWP) if held to Full License Term Rental Work BWP1 USD as at Fee Program 12/31/22 020/2018 454 NA NA In Renewal NA 1,000,000 NA NA 021/2018 573 1/01/22 12/31/23 1st Renewal 2,865 1,000,000 2,005,730 154,914 022/2018 161 1/01/22 12/31/23 1st Renewal 805 1,000,000 2,001,610 154,596 023/2018 492 1/01/22 12/31/23 1st Renewal 2,460 1,000,000 2,004,920 154,852 024/2018 782 1/01/22 12/31/23 1st Renewal 3,910 1,000,000 2,007,820 155,076 619,438 1 Amounts include services accounted for at market value provided by Tsodilo and its subsidiaries and all expenditure amounts are incremental in nature and qualified by positive results in the evaluation process throughout the license term. The exploration work conducted on the Gcwihaba licenses has developed over time and the following targets are currently being explored within Neoproterozoic rocks within the licenses which are comprised of Copper Belt (Lufilian Arc) equivalent meta-sediments (including graphitic phyllites, schists, marbles (carbonates), diamictites, and iron formation), metabasites and gabbros (535 Ma): 1. Xaudum Iron Formation Deposit: Comprised of a magnetite-banded iron formation deposit and iron-rich schists that are contained within the Grand Conglomerate Formation (linked to the Chuos in Namibia); 2. Copper and Cobalt Exploration: Sedimentary Cu/Co (Katanga type sediments) within the entire Neoproterozoic package; 3. Xaudum Gold Exploration: Gold mineralisation linked to the Xaudum Iron Formation; and 4. Rare Earth Element Exploration: Skarn REE and Cu targets. These are secondary targets hosted within marbles (carbonate) rich lithologies and include significant enrichment in REE and Cu. 7 Summary of Work Performed as at December 31, 2022 Exploration for these metals is driven by geophysics as there is no outcrop and there is significant Kalahari cover overburden of sands and calcrete. To this end, the Company has completed: Geophysics: Over 1,800 km2 (~20,000-line km) of detailed ground magnetics which has defined the extent of the highly magnetic XIF. An airborne survey (Spectrem) was flown (16,934-line km) collecting electromagnetic (EM), magnetic, and radiometric data. A 10,392-line km at a 500 m flight line interval airborne gravity survey also was flown. These surveys have contributed greatly to advancing the structural and geological modelling of the area, which have aided immensely in exploration targeting. Drilling and Assaying: 366 core drill holes totalling 77,174 meters of core, including 116 reflex gyro surveys, and over 52,000 samples were sent for assay. Additionally, a 220-hole drill program (13,689 meters) known as the Kalahari Geochemistry Program (KGP) was conducted to test soil overburden for hydromorphic dispersion of copper and other metals from bedrock mineralization via assaying (8,326 samples assayed for As, Au, Bi, Co, Pb, Al, Ca, Cu, Mg, Ni, Zn, and Ag) on a 2 km grid to locate targets for further exploration and drilling. This program identified a number of high-priority targets for further exploration. Xaudum Iron Formation: This is a potential prospect for future mining and has been identified as our key program. To date drilling of Block 1, the northern part of the XIF deposit resulted in a geology and mineralisation model being generated using the Gocad modelling package. This model was used by SRK Consulting (U.K.) to define Gcwihaba’s maiden Mineral Resource Estimate (MRE) in a National Instrument (NI) 43-101 technical report for Block 1, via standard pit optimisation techniques. This Block 1 resource is defined as 441 million tonnes (Mt) grading 29.4% Fe, 41.0% SiO2, 6.1% Al2O3, and 0.3% P and represents Botswana’s first and only iron resource. Davis Tube Recovery (DTR) metallurgical test work showed that all major mineralised units are capable of producing a premium-grade magnetite concentrate product of ~67% Fe. This XIF iron concentrate product will be very similar to the iron ore concentrate fines and pellets feed produced from premium iron ore producers in the U.S., Canada, Brazil, Sweden, etc., and attract a premium value compared to standard global iron ore products. The reported Block 1 Mineral Resource represents only a fraction of the potential XIF mineralization delimited by the ground magnetics. An Exploration Target for the entire strike of the XIF is estimated to be 5 to 7 billion tonnes with grades ranging between 15-40% Fe. This XIF Exploration Target was generated using inversion modelling of the ground magnetic signal which was compared to local drill-hole model volumes to create inversion model volume conversion factors, these values were used to define volumes for the entire XIF which were converted to tonnes via measured density values. It is important to note that the tonnages and grade quoted in this exploration target are conceptual in nature, there has been insufficient exploration to define this fully as a mineral resource, and it is uncertain if further exploration will result in the full target being delineated as a mineral resource. A Phase II evaluation drilling program has begun within the next major XIF magnetic anomaly area, referred to as Block 2 (spilt into Block 2a priority, and Block 2b). The Company created a 3-D model based on these holes focussed on the area around the elongated “C” XIF target. The area is dominated by the DIM Geodomain. Using the Company wireframes, Baker Geological Services Ltd (“BGS”) assessed the potential tonnage and grade within the modelled Block 2a target by creating block models. The extent of the wireframes was limited by a bounding surface so that the model was more restricted to areas around the drilling undertaken. The depth extent of the model was also limited to the approximate depth of the drillholes, being approximately 215m from the surface. It should be noted that the level of study at Block 2a is however considered conceptual at best with limited exploration undertaken. The study noted that: ◊ Using average grades from the assay data and using density values determined from the Block 1 exploration, a minimum tonnage of between 100Mt and 300Mt has been calculated at a grade between 20% Fe and 30% Fe. ◊ Using the Davis Tube results, at a grind size of 80 microns, a contained minimum concentrate of between 20Mt and 60Mt can be determined. 8 755 assay results from 10 drill holes in Block 2a have been returned and confirm that Block 2a located 10 kilometers south of Block 1 is a continuation of the same Block 1 magnetite-rich units which will result in a significant increase in the resource tonnage for the XIF project upon completion of the Block 2a drill program. The Company is looking to expand its XIF resource into Block 2a and these assay results show that the Company can expect a significant resource increase in this area. Assay Results for 10 holes drilled in Block 2a show the following:   Ten (10) evaluation drill holes were drilled within the Block 2a area of the XIF totalling 2,046.40 meters; 1,197.70 meters of highly magnetic magnetite-rich iron mineralization of the same type as seen in Block 1 were intersected;  Drilling results indicate that Block 2a contains the same three magnetite resource lithological units that are seen in Block 1 with the following average grades; and o o o o 35.6% Fe is the average Block 2a grade of the major Banded Magnetite BIF unit coded MBA (inclusive of weathered material);  35.5% Fe was the average Block 1 grade for MBA; 25.1% Fe is the average Block 2a grade of the major Magnetite Diamictite Schist unit coded DIM (inclusive of weathered material);  20.8% Fe was the average Block 1 grade for DIM; 25.0% Fe is the average Block 2a grade of the minor Magnetite Garnet Schist unit coded MGS (inclusive of weathered material);  22.1% Fe was the average Block 1 grade for MGS; These results confirm that the units in Block 2a are a continuation of the same magnetite-rich iron formation 10 kilometers south of Block 1; and o Based on metallurgical Davis Tube Recovery (DTR) magnetic separation (P80 of 80 microns) results for Block 1, a general average high-grade iron concentrate of 66 - 67% Fe and above can be expected from Block 2a;  Block 2a will represent a significant increase in the XIF resource tonnages as it is of a similar size to Block 1. In total, nineteen drillholes are planned to improve the confidence and model in the area, totaling 3,800m of drilling. Drilling in Block 2 will commence in the second quarter of 2023. Geotechnical Test Works: Tsodilo undertook 30 geotechnical lab test works on the important formations for the Xaudum Iron Formation project including those that will make up the majority of the likely pit walls during the mining of the iron. These tests work included 18 Unconfined Compressive Strength (UCS) tests, 8 Brazilian Tensile Strength (BTS) tests, and 4 Direct Shear Strength (DSS) tests. The UCS and the BTS strength tests indicate that the XIF major Geodomains are competent and strong in both dimensions of compression and tension. The UCS mode of failure indicates that DIA, DIAW, and MBW tend to show a preferred mode of failure related to foliation. This is not as common for MBA and CAC. The joint discontinuities tested for DSS lean towards poor and fair characterizations. These are the first set of geotechnical lab tests conducted on the XIF and show that the XIF materials are competent and will result in a good set of geotechnical parameters to be used in the ongoing PEA. These geotechnical lab tests show that the XIF materials are all within standard mechanical rock property ranges and that there will be no geotechnical issues arising from the XIF materials confirming that the XIF will show “normal” pit wall angles Copper and Cobalt Exploration: Tsodilo has identified within the same area the exciting potential for Copper/Cobalt, Rare Earth Elements (REE), and Gold within these same Katanga meta-sediments and associated basement complex. Tsodilo has reviewed and refined its targets to fourteen (14) high-priority Cu and Co targets for further exploration. This work led to a soil sampling program to help define these targets further. 5,071 soil samples were collected and sieved to 180 meshes from the sub-deflation soil zone during the dry season. The first target soil samples were sent for a specialized partial digestion technique which has been specially developed for sampling in covered terrains called TerraLeach at Intertek laboratories Australia. This data was validated and further studied to remove geomorphological controls and highlighted a significant target of 9 interest that has been prioritized for drilling. Further geological interpretation and modelling have been on- going and are designed to aid in delineating zones of alteration, such as albite and Na-feldspar alteration which act as pathfinders for fluid flow zones that may help in defining areas that may have potential for Cu mobility. This geological interpretation program has also aided in our understanding of the geology of the area, where there have been some significant developments in our regional understanding that are being captured and mapped. Rare Earth Element Exploration: The Company has identified at least two significant skarn associated prospects 1822C26 (“C26”) and 1822C27(“C27”) that contain a standard suite of ordinary carbonate, silicate, and phosphate REE minerals of well-established metallurgy that can be exploited easily. The holes in the two skarn anomalies C27 and C26 that stand out as being high in TREO% are as follows:     1822C27_6: C27 skarn anomaly - This hole has the highest TREO recorded at 1.49% at 2m of intervals over 1% TREO and 4m of intervals over 0.1% TREO. 1822C27_2: C26 skarn anomaly - This hole has 1m over 1% TREO but has 45m of intervals over 0.1% TREO. 1822C26_1: C26 skarn anomaly - This hole has 18m of intervals over 0.1% TREO. 1822C26_3: C26 skarn anomaly - This hole has 11m of intervals over 0.1% TREO. The C27 skarn anomaly, which is the larger of the two skarn prospects, has been modeled to a conceptual Exploration Target of 81 Mt to 97 Mt of skarn with grades ranging from 0.05 % to 1.5 % Total Rare Earth Elements Oxide (TREO). The C26 skarn tonnage ranges from 4 Mt to 5 Mt with grades from 0.05 % to 0.5 % TREO. It has to be noted that these numbers are only for the modeled regions where there are drilled holes and do not cover the whole skarn area as modeled from the surface magnetic expression. These conceptual skarn anomaly Exploration Targets were generated by geologically modelling in 3 dimensions using the drill-hole intersections of the skarn anomaly allowing volumes representing the skarn to be generated. These modelled volumes were then turned into the tonnages quoted by using a likely range of densities for this skarn material of 2.5 to 3.0 g/cm3. It is important to note that the tonnages and grades quoted in this exploration target are conceptual in nature, there has been insufficient exploration to define this fully as a mineral resource, and that it is uncertain if further exploration will result in the full target being delineated as a mineral resource. Fifty drillholes, each to be drilled to a depth of 250 m, are planned for drilling to fully define the extent of C26 and C27 skarn deposits. This gives a combined total depth of 12,000 m. Gold Exploration: Several gold anomalies have been seen within some of the Xaudum Iron Formation drill holes and associated facies as described above. This gold project has thus far identified that there is potential for gold mineralization to be associated with the XIF, where an analogy has been drawn to the Homestake gold deposit in South Dakota, US, where phyllites acted as the source for the gold deposited in the XIF material. A detailed review of all data collected to date assisted in identifying several potential gold anomalies for further study within the drill-hole dataset; these have been used to assess the potential for generating Gold targets for further exploration within this Xaudum Iron Formation and associated units. This led to a significant core logging and data mining program to identify current holes that can be processed for gold assay, to date 6 holes have been identified as having potential gold mineralization and are awaiting gold assay. Future Plans and Outlook - Metals Projects Xaudum Iron Formation: The fundamentals for iron ore are strong and iron ore has seen a strong drive that may indicate the beginning of a new super cycle for the commodity, and with this, as a background, the Company is currently exploring options for developing the XIF resource. To this end, the Company has commenced a Preliminary Economic Assessment (PEA) for this project. The objective of this PEA will be to conduct an early- stage economic analysis of the potential viability of the mineral resources and to develop a general strategy to move the project forward, given its premium ore potential. The PEA will include detailed studies into; processing and engineering strategies; equipment and technology requirements; transport and infrastructure requirements; identification of potential environmental and social aspects; associated costs such as capital costs, operational costs, and life-cycle costs; and, anticipated revenues. 10 The Xaudum iron ore project is a national interest project that can be exploited to produce an iron product of 67% Fe and above. This highly attractive and valuable Fe product can also be further beneficiated to other Fe products such as ferroalloys, reduced iron products, and steel. The potential for a small-scale start-up mine supplying magnetite to a small-scale ferrosilicon (FeSi) plant which will sell FeSi products to the mines in Botswana and the mines in the local SADC area is also being explored as a way of initiating mining at a small scale while a larger scale mine and infrastructure can be explored and developed. The Company has entered into a research collaboration endeavor with the Department of Chemical, Materials, and Metallurgical Engineering at the Botswana International University of Science and Technology (BIUST) and Morupule Coal Mine (MCM) to undertake metallurgical studies concerning the potential of generating a Pellet Feed and Direct Reduced Iron (DRI) product from the Xaudum Iron Formation (XIF) utilizing its magnetite and MCM’s coal as a reductant. Commercially, these high-grade pellets and DRI products would be used to produce steel within Botswana, the region, and internationally. Tsodilo has also joined the Walvis Bay Corridor Group (WBCG), as there is currently a Feasibility Study commissioned by the Namibian Ministry of Works and Transport for the part of the corridor called the Trans- Zambezi Railway Extension Grootfontein - Rundu - Katima Mulilo. This Trans-Zambezi Railway Extension line linking Zambia and Namibia is planned to pass through Divundu, Namibia providing access to Walvis Bay, Namibia's deep-sea port. Divundu is located approximately 35 kilometers (22 miles) from the Companies Xaudum Iron license location in Northern Botswana. A series of east-west exploration drillholes across the interpreted XIF are therefore recommended, collaring the holes within the centre of the interpreted XIF. Ideally, two drillholes would be completed at each site, so that the initial hole can determine the dip direction of the hosting geology and allow the second drillhole to optimise the intersection angle and traverse multiple geodomains if present. This type of strategy would allow the XIF Geodomain to be assessed to allow a greater definition to follow-up drilling. Should exploration be successful, infill programs could then be designed to target the most favourable material to allow classified mineral resources to be developed. Copper and Cobalt Exploration: A detailed review of the data is ongoing to further refine exploration priorities incorporating new detailed structural and geological mapping data alongside the recent soil sampling information. This work also includes plotting alteration data logged and assay generated on geological cross sections, interpolation of information into a 2D map, and improved structural interpretations, which will ultimately lead to updated drill target recommendations. The remaining soil samples will be sent for TerraLeach analysis to assist in refining the high-priority Cu and Co targets so focused drilling of these targets can occur. Rare Earth Element Exploration: The next stage for REE exploration is to develop a detailed study of the geology and facies and alterations associated with the skarns and develop a detailed geological and mineralization model of these skarn anomalies. This will lead to the development of an REE exploration target tonnage and grade range that will advance the next stage of REE drilling and exploration program to further define the grade and tonnage of these REE deposits. Gold Exploration: The gold logging program will continue and holes identified sent for gold assay, which will lead to drill-target generation for further exploration. Litigation: On or about June 30, 2021, the Company's wholly owned Botswana subsidiary, Gcwihaba Resources (Pty) Ltd. (Gcwihaba) submitted prospecting renewal license applications for its Xaudum Iron Formation project in northwest Botswana. Of the then current 7 licenses, two licenses were relinquished in their entirety and 5 were submitted for renewal. Collectively 50% of the combined license area in the 7 licenses was relinquished pursuant to Section(s) 17 and 19 of the Mines and Minerals Act. 11 Four of the five licenses that contain the vast bulk of the exploration target in the Xaudum Iron Formation project were renewed as submitted, effective January 1, 2022, while the fifth license, PL020/2018, continued in renewal. Despite periodic inquiries as to the license renewal status, Tsodilo was first apprised of a possible reason for the continued delay on April 26, 2022, when the Minister of Minerals and Energy (MME) informed Gcwihaba that part of the area included in license PL020/2018 is in the buffer zone surrounding the Okavango Delta, a UNESCO World Heritage Property, and that any prospecting activities in that area would be subject to environmental assessment measures. On April 27, 2022, Gcwihaba promptly responded by reminding the MME that the license in question has existed in its present form since 2008, six years before the buffer zone was (i) established; (ii) prior to establishment of the current buffer zone in 2014, significant exploration had already been conducted in that area and a compliant NI 43-101 Inferred Mineral Resource Statement prepared by SRK was submitted to the MME identifying a mineral resource of 441 Mt grading 29.4% Fe; (iii) Company’s identified mineral resource; and (iv) times without any controversy. when it was established in 2014, the current buffer zone encroached on a portion (169 Mt) of the the prospecting license including this area has since that time been renewed and re-granted multiple Gcwihaba also expressed complete agreement that prospecting, and mining activities were permitted in the buffer zone subject to various environmental standards and practices spelled out in Botswana law, and further affirmed its commitment to comply with all such requirements and to develop the Xaudum Iron Formation project in an environmentally friendly manner. With apparent agreement as to the facts and applicable law, and with renewed and unequivocal assurance from Gcwihaba that it would be sensitive to environmental issues and would fully comply with all laws and regulations in this regard, it was expected that any concerns had been more than addressed and that the PL020/2018 license would now be renewed in short order. However, in a letter received on June 15, 2022, despite its earlier clear statements to Tsodilo that exploration and mining could be conducted in the buffer zone, and a history of similar statements by the Botswana government in multiple earlier UNESCO filings, the Ministry advised that the PL020/2018 license would not be renewed if it included any areas located within the buffer zone. In an effort to reach a mutually acceptable resolution, the Company filed a revised renewal application reducing the buffer zone area of the license block to only an area proximate to a paved airport landing strip, a hospital and a shopping center all established, extended or rebuilt after 2014 and all within the buffer zone. To date, the Company has received no response to the revised license application. While the bulk of the Company’s Xaudum Iron Formation resource remains free of any dispute, the area within the buffer zone is of sufficient value that the Company believes further efforts are appropriate to protect shareholder interest, and further believes that the conduct of the Botswana government in connection with the license renewal process has left no recourse other than seeking resolution in the courts. Accordingly, litigation was initiated on October 31, 2022 and an oral hearing was held in the High Court in Maun, Botswana on April 18, 2023. A decision on the matter is expected in the 3rd quarter of 2023. For more detailed information on all the above, and in the interest of transparency, the Company has established a landing page regularly updated to include all records related to this matter. Please see: https://tsodiloresources.com/s/MMGE.asp.html. 12 3. Newdico (Proprietary) Limited (“Newdico”) - Botswana The Company holds a 100% interest in Newdico (Pty) Limited (“Newdico”) which held one (1) industrial mineral (granite & dolerite) license. The license lies within the Central District of Botswana just to the east of the town of Nata and has an area of 266 km2. The license is prospective for granites/granitic materials and dolerites which are industrial minerals used mainly in the construction industry as aggregate. This granite when crushed into a granular aggregate material of various sizes can be suitable for use either on its own or with the addition of cement, lime, or a bituminous binder in construction. Important applications include concrete, manufactured sand, mortar, road stone, asphalt, railway ballast, drainage courses, and bulk fill. Summary of Work Performed as at December 31, 2022 A desktop study of the regional geophysical magnetic data was undertaken in the license area to delineate granite and/or dolerite buried beneath the Kalahari. The local geology is characterized by basement complex outcropping mainly in the northeast corner of the Dukwe area, which is to the east of the license area. There is some exposure around the Matsitama river where it was mapped as gneiss and was described as varying in texture “from fine-grained and granulitic – or schistose – to medium or coarse-grained and granitic” falling into two broad lithological types; the feldspathic schists and amphibolitic schist. Overlaying the complex is a succession of Dukwe formations which is the lowest part of the Karoo Supergroup. It comprises sedimentary rocks from the lower part, including beds of sandstone. The upper member is a sequence of varved shales within a thin bed gritty pellet conglomerate. Overlying the Dukwe formation are successions of the Mosu and Ntane sandstones. Capping the Ntane sandstones are the Karoo flood basalts, and these can be inferred from the magnetic structures within the license area. The Total Magnetic data was reduced to the pole, from which various filters were applied to obtain the first and second derivatives, Analytical Signal and Tilt derivative maps were utilized enabling an interpretation to be performed. Magnetic “granitic textures” were visible from these maps and inferred granite was outlined. Eight drill targets were located to drill shallow holes to a depth just below the Kalahari, which is expected to be less than 50 m. However, in the 4th quarter of 2022, a review of available geological, geophysical, and hydrogeological data indicated a thick Kalahari and basaltic cover, making it uneconomical to exploit. There are no outcrops within the license area and exploration to find an economical deposit was driven by geophysics. The Company, therefore, decided to relinquish the license in its entirety. The Company has written off the capitalized cost of $291,678 as impaired as at the year-ended December 31, 2022. 4. Idada Trading 361 (Pty) Limited (“Idada”) – Barberton Gold Project, South Africa The Company holds a 70% interest in its South African subsidiary, Idada. Idada made an application for an exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in February 2012. During the second quarter of 2015, notice was received from the Department of Mineral Resources, South Africa which granted the Company the prospecting rights for gold and silver in the applied-for area subject to certain subsequent conditions being met. The Company has fulfilled those requirements and the Prospecting Right, together with the EMP, was executed and became effective on April 7, 2016. The Prospecting Right was been granted for a term of five years effective as of May 2015. Notices were sent to all surface owners of the five farms informing the owners of our intent to access the property to commence exploration activities. Three landowners, holding most of the target ground, denied access. This issue has been submitted to the Department of Mineral Resources (DMR) for resolution. During the third quarter of 2019, the Company was informed that certain portions of our license areas were designated as a World Heritage site by UNESCO. UNESCO has informed the Company that by the Operational Guidelines for the Implementation of the World Heritage Convention, UNESCO is investigating the situation that the Company brought to their attention. UNESCO has informed the Company that according to IUCN, the Advisory Body to the intergovernmental World Heritage Committee concerning nominations of natural heritage sites on the World Heritage List, the overlapping prospecting license on the western portion of the property or 13 of the presence of Tsodilo Resources Ltd was not brought to the attention of IUCN during the evaluation process. The documentation related to the evaluation and inscription of the site on the World Heritage list from UNESCO’s website at: http://whc.unesco.org/en/list/1575/documents . As the responsibility for nominating sites to the World Heritage List and the management and protection of the World Heritage properties inscribed is under the authority of the State Party of South Africa, UNESCO advised the Company that they would be contacting the appropriate South African office for clarification. To date, it is the Company’s understanding that neither the Department of Mineral Affairs (DMA) nor the Department of Environmental Affairs (DEA) has responded to UNESCO’s inquiry. In addition to UNESCO’s inquiries, the Company also contacted the DMA for guidance and received a response, but before the issue could be dealt with the South African government was shut down due to the COVID-19 virus. The Company will continue our efforts to engage the DMA once the government resumes its activities on a full-time basis. In the interim, the Company has filed a renewal application to protect our license rights. In the fourth quarter of 2021, the Company determined to stop all efforts to perfect its licenses rights as all efforts to contact its Black Empowerment Partner and the DMA and DEA have failed as all parties are not responsive. The Company has written off the capitalized cost of $7,650 as impaired as at the year-ended December 31, 2021. Exploration Activities as at December 31, 2022 Exploration and evaluation additions for the year-ended December 31, 2022 are summarized as follows: Bosoto Botswana Newdico Gcwihaba Botswana Botswana Project BK 16 Project PL 217 Bosoto Project PL091 Metals Precious Precious Total Industrial TOTAL Stones Stones Minerals Drilling Expenditures $ 2,180 $ 147 $ 2,327 Amortization Drill Rigs, Vehicles & Trucks 4,022 Geophysics Lab Analyses & Assays License Fees Maintenance, & Consumables Salaries, Wages & Services 150 837 80 8,849 17,455 -- 150 -- 117 6,446 6,309 4,022 300 837 197 15,295 23,764 $ 457 49,371 -- -- 150 6,385 7,787 $ 8,149 $10,933 4,887 22,346 19,157 820 6,704 13,814 58,280 22,646 19,994 1,167 28,384 45,365 Balance at December 31, 2022 $33,573 $13,169 $46,742 $64,150 $75,877 $186,789 14 Exploration and evaluation additions for the period ended December 31, 2021 are summarized as follows: Bosoto Botswana Newdico Gcwihaba Project Project BK 16 PL 217 Bosoto Botswana Botswana Project PL091 Metals Precious Precious Total Industrial TOTAL Stones Stones Minerals Drilling Expenditures $ 5,175 $ 64 $ 5,239 $ 265 $ 10,676 $16,180 Amortization Drill Rigs, Vehicles & Trucks Geophysics Lab Analyses & Assays License Fees Maintenance, & Consumables Salaries, Wages & Services 4,479 2,898 -- 89 12,644 55,604 -- 2,898 -- 65 6,672 38,037 4,479 5,796 -- 154 19,316 93,641 54,980 2,898 -- 119 6,239 50,879 5,442 2,898 1,832 1,647 64,901 11,592 1,832 1,920 13,854 39,409 52,130 196,650 Balance at December 31, 2021 $80,889 $47,736 $128,625 $115,380 $88,479 $332,484 LIQUIDITY AND CAPITAL RESOURCES As at December 31, 2022, the Company had a negative working capital of ($2,570,493) [2021: ($1,791,640)], which included cash of $40,049 (2021: $4,713). These funds are managed in-house in accordance with specific investment criteria approved by the board of directors, the primary objective being the preservation of capital to assure funding for exploration activities. As at December 31, 2022, term notes payable in the amount of $1,606,046 were outstanding from a related party. The notes have an annual interest rate of 8% and one of the notes carry a termination fee of 10% upon early redemption of the note for which there is an embedded derivative arising – the fair value of this is NIL. In addition, at the option of the note holder, the December 2018 note can be converted to stock at the discretion of the holder during future private placements that raise a minimum of CAD $500,000, of those future private placements at the price of the private placement. The remaining notes are due on demand. The notes payable at December 31, 2022 are summarized as follows: Date Balance 12/31/2021 Changes in 2022 Balance 12/31/2021 31-Dec-18 $273,006 30-Jun-19 31-Dec-19 01-Oct-20 21-Jun-21 27-Jul-21 28-Aug-21 27-Sep-21 31-Dec-21 30-Jun-22 21-Sep-22 30-Sep-22 31-Dec-22 Total 207,242 57,684 192,042 26,500 26,500 27,000 25,500 102,235 451,159 25,000 100,738 91,440 Interest Rate 8% Termination Fee $27,300 Maturity Date 31-Dec-23* 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL On Demand On Demand On Demand On Demand On Demand On Demand On Demand On Demand On Demand 19-Dec-22** On Demand On Demand $273,006 207,242 57,684 192,042 26,500 26,500 27,000 25,500 102,235 451,159 25,000 100,738 116,440 $937,709 $668,337 $1,606,046 $27,300 15 *During the year-ended December 31, 2022, $273,006 of notes payable had its maturity extended from December 31, 2022 to December 31, 2023. ** The promissory note of $25,000 dated September 21, 2022 has been repaid subsequent to year end.  On June 30, 2022, a promissory note was issued for $451,159 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.On September 30, 2022 a promissory note was issued for $100,739 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%  On September 21, 2022 a promissory note was issued for $25,000. The note matured on December 19, 2022 and has an annual interest rate of 8%.  On September 30, 2022 a promissory note was issued for $100,738 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.  On December 31, 2022 a promissory note was issued for $91,440 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. As at December 31, 2021, term notes payable had outstanding balances of $937,709 from related parties, contractors and employees as settlement of compensation, service fees and expenses payable. The notes payable at December 31, 2021 are summarized as follows: Date Balance December 31, 2020 Changes in 2021 Balance December 31, 2021 Interest Rate Termination Fee Maturity Date 1-Oct-18 31-Dec-18 31-Jan-19 30-Jun-19 30-Sep-19 31-Dec-19 01-Oct-20 21-Jun-21 27-Jul-21 28-Aug-21 27-Sep-21 31-Dec-21 $5,819 ($5,819) 347,579 (74,573) 85,000 (85,000) 293,687 (86,445) 36,462 95,146 192,042 (36,462) (37,462) -- 26,500 26,500 27,000 25,500 102,235 Total $1,055,735 ($118,026) $-- 273,006 -- 207,242 -- 57,684 192,042 26,500 26,500 27,000 25,500 102,235 $937,709 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% $-- -- 27,300 30-Dec-22* -- -- NIL On Demand -- -- NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand $27,300 *During the year-ended December 31, 2021, $273,006 of notes payable had its maturity extended from December 31, 2021 to December 31, 2022.         On January 5, 2021, $295,616 were retired vis-à-vis private placement participation. On February 10, 2021, $19,800 in promissory notes were paid in cash. On February 11. 2021, $10,345 in promissory notes were paid in cash. On June 21, 2021, a promissory note was issued for $26,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On July 27, 2021, a promissory note was issued for $26,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On August 28, 2021, a promissory note was issued for $27,000 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On September 27, 2021, a promissory note was issued for $25,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On December 31, 2021, a promissory note was issued for $102,235 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. 16Financial Instruments The carrying amounts reflected in the consolidated Statement of Financial Position for cash, accounts receivable, accounts payable and accrued liabilities, lease liabilities, and loan notes payable approximate their fair values due to the maturities of these instruments. Certain of the Company’s warrants are classified as derivative liabilities and are recorded at their estimated fair value. There are no warrants outstanding in any of the reporting periods. Due to the nature of the Company’s operations, there is no significant credit or interest rate risk. Operating Activities Cash outflow used in operating activities before working capital adjustment decreased to an outlay of ($804,138) for the year-ended December 31, 2022 from an outlay of ($1,030,572) for the year-ended December 31, 2021. Overall operating expenses decreased for the year-ended December 31, 2022 by $156,068 when compared to the year-ended December 31, 2021. Large operating expense changes for 2022 include corporate remuneration decrease of $50,146, investor relations decrease of $143,016, and stock-based compensation increase of $47,573 when compared to 2021. Impairment write-off of exploration and evaluation was the largest increase for the year-ended December 31, 2022 of $867,078 compared to 2021. Other services income in 2022 increased by $23,463 when compared to 2021. The impact on Comprehensive loss for the year was foreign exchange translation loss of $528,864 in 2022 compared to a loss of $586,801 in 2021. 17 Annual Information (in US Dollars) Net income (loss) for the year Basic loss per share Basic diluted loss per share Total other comprehensive income (loss) Total comprehensive income (loss) for the year Basic comprehensive loss per share Diluted comprehensive loss per share Total assets Total long-term liabilities Cash dividend Fiscal Year December 31 2022 ($2,019,718) ($0.04) ($0.04) ($528,864) ($2,548,582) ($0.05) ($0.05) $5,808,293 $10,950 $-- Fiscal Year December 31 2021 Fiscal Year December 31 2020 ($1,316,206) ($0.03) ($0.03) ($586,801) ($1,903,007) ($0.04) ($0.04) $7,066,474 $17,055 $-- ($654,974) ($0.01) ($0.01) ($171,480) ($826,404) ($0.02) ($0.02) $7,377,506 $-- $-- Quarterly Information (in US Dollar) Fiscal Period ended December 31, 2020 Net income (loss) for the period Basic income (loss) per share Diluted basic income (loss) per share Comprehensive income (loss) for the period Basic comprehensive income (loss) for the period Quarter 1 Quarter 2 Quarter 3 Quarter 4 ($89,776) ($0.00) ($0.00) ($1,209,629) ($0.03) ($124,636) ($0.00) ($0.00) ($145,209) ($0.00) $320,401 $0.01 $0.01 $452,654 $0.01 ($760,913) ($0.02) ($0.02) $75,780 $0.00 Diluted comprehensive income (loss) per share ($0.03) ($0.00) $0.01 $0.00 Total assets Total long-term liabilities Quarterly Information (in US Dollar) Fiscal Period ended December 31, 2021 Net income (loss) for the period Basic income (loss) per share Diluted basic income (loss) per share Comprehensive income (loss) for the period Basic comprehensive income (loss) for the period $6,637,478 $-- $6,693,750 $-- $6,982,140 $-- $7,377,506 $-- Quarter 1 Quarter 2 Quarter 3 Quarter 4 ($56,792) ($0.00) ($0.00) ($589,817) ($0.01) ($463,100) ($0.01) ($0.01) $14,660 $0.00 ($281,075) ($0.00) ($0.00) ($724,917) ($0.01) ($515,239) ($0.01) ($0.01) ($602,933) ($0.01) Diluted comprehensive income (loss) per share ($0.01) $0.00 ($0.01) ($0.01) Total assets Total long-term liabilities Quarterly Information (in US Dollars) Fiscal Period ended December 31, 2022 Net income (loss) for the period Basic income (loss) per share Diluted basic income (loss) per share Comprehensive income (loss) for the period Basic comprehensive income (loss) for the period $7,431,730 $-- $7,621,126 $-- $7,162,146 $-- $7,066,474 $17,055 Quarter 1 Quarter 2 Quarter 3 Quarter 4 ($158,632) ($0.00) ($0.00) ($7,511) ($0.00) ($275,537) ($0.01) ($0.01) ($1,114,199) ($0.02) ($253,528) ($0.01) ($0.01) ($1,074,523) ($0.02) ($1,332,021) ($0.03) ($0.03) ($352,349) ($0.01) Diluted comprehensive income (loss) per share Total assets Total long-term liabilities ($0.00) $7,261,148 $17,478 ($0.02) $6,415,393 $16,200 ($0.02) $5,605,069 $14,969 ($0.01) $5,808,293 $10,950 18Investing Activities Cash flow applied in investing activities decreased to ($128,488) for the year-ended December 31, 2022 (2021: $286,416). Total expenditures of $186,769 on exploration properties for the year-ended December 31, 2022 were attributable to the Gcwihaba, Newdico and Bosoto projects in northwest Botswana. There were limited expenses or funding of the exploration projects in these years as the Covid-19 pandemic reduced operation activities. Financing Activities The Company finances its corporate and exploration activities through the issuance of equity units by way of non-brokered private placements. Each unit has consisted of one common share of the Company and one warrant with each full such warrant entitling the holder to purchase one common share of the Company for a purchase price equal to the unit price for a period of two years from the date of issuance For the year year-ended December 31, 2022, 337,500 stock options were exercised for $29,502 (C$38,375). In the first quarter of 2021, the Company raised USD $1,151,821 (C$1,465,702) net of issuance costs by selling equity capital in the form of units. Each unit was priced at C$0.50 and includes one common share and one warrant entitling the holder thereof to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price of USD $0.55. On July 12, 2021 options were exercised for $34,136 (C$42,500). On September 30, 2021 warrants were exercised in USD $0.55 per share for $79,090. On December 31, 2021 warrants were exercised in USD $0.55 per share for 21,001. On December 31, 2021 options were exercised for $45,674 (C$58,375). In the third quarter of 2017, the Company reached an agreement with Sandstorm Gold Ltd. ("Sandstorm") (NYSE MKT: SAND, TSX: SSL) to grant royalties on three projects in consideration of the payment of $1,500,000. The package of assets in the Royalty Sale includes: 1. 2. 3. the grant of a 1% NSR on the Company's wholly owned Botswana subsidiary Gcwihaba Resources (Pty) Ltd. prospecting metal licenses in northwest Botswana; the grant of a 1% GPR on the Company's Botswana wholly owned subsidiary Bosoto (Pty) Ltd. precious stone prospecting license (PL217/2016) located in the Orapa Kimberlite Field; and, the grant of a 1% NSR on the Company's 70% owned South African subsidiary Idada 361 (Pty) Ltd. gold and silver prospecting license located in the Barberton Greenstone Belt in the Mpumalanga province of South Africa. Sandstorm shall have a right of first refusal with respect to any third-party bona fide offers to purchase a metal or precious stone royalty on the properties. On July 23, 2020, the Company reached an agreement with TBM (Pty) Ltd. ("TBM") to grant royalties on its Botswana subsidiary Gcwihaba (Pty) Ltd. ("Gcwihaba") seven (7) metal licenses (base and precious minerals, platinum group metals and rare-earth elements) projects in consideration of the payment of $500,000 USD. On January 25, 2021, the Company closed the first tranche of a private placement financing (the "Financing") for gross proceeds to the Company of C$1,343,019. Pursuant to the Financing, the Company issued 2,686,038 units of securities of the Company (the "Units") at a subscription price of C$0.50 per Unit. Each Unit is comprised of one common share in the capital of the Company ("Common Share") and one common share purchase warrant ("Warrant"). Each Warrant entitles the holder thereof to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price of USD$0.55. On February 10, 2021, the Company closed the second and final tranche of the Financing for gross proceeds to the Company of C$150,000. Pursuant to the Financing, the Company issued 300,000 units of securities of the Company at a subscription price of C$0.50 per Unit. Each Unit is comprised of one common share in the capital 19 of the Company ("Common Share") and one common share purchase warrant. Each Warrant entitles the holder thereof to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price of USD$0.55. Tsodilo expects to raise the amounts required to fund the Gcwihaba and Bosoto projects and corporate general and administration expenses, by way of non-brokered private placements and joint ventures. On March 4, 2021, the Company’s stock began trading on the US OTCQB Venture Market under the symbol "TSDRF". RESULTS OF OPERATIONS On a consolidated basis, the Company recorded a comprehensive net loss of ($2,548,582) for the year-ended December 31 2022 – ($0.04) per common share, compared to a comprehensive net loss of ($1,903,007) for the year-ended December 31, 2021 ($0.03) per common share. Total capitalized exploration expenditures including amortization of property, plant and equipment used in exploration activities on all projects amounted to net $5,572,595 as at December 31, 2022 compared to $6,813,782 as at December 31, 2021. Total capitalized exploration expenditures incurred on the Newdico project as at December 31, 2022 was $NIL compared to 239,705 as at December 31, 2021. Additions of $64,150 in 2022 were offset by exchange translations and impairment in 2022. Total capitalized exploration expenditures incurred on Gcwihaba’s projects as at December 31, 2022 were $2,242,106 compared to $2,369,157 as at December 31, 2021. Additions of $75,877 in 2022 were offset by exchange translations in 2022. Total capitalized exploration expenditures incurred on Bosoto’s projects as at December 31, 2022 were $3,330,489 compared to $4,204,920 as at December 31, 2021. Additions of $46,742 in 2022 were offset by exchange translations and impairment in 2022. A table is presented in the Exploration and Evaluation Additions section above with specific details. PERSONNEL At December 31, 2022, the Company and its subsidiaries employed fifteen (15) compared to fifteen (15) at December 31, 2021, including senior officers, administrative and operations personnel including those on a short-term service basis. RISKS AND UNCERTAINTIES Operations of the Company are speculative due to the high-risk nature of its business which includes acquisition, financing, exploration and development of diamond and metal properties (collectively “mineral”). Material risk factors and uncertainties, which should be taken into account in assessing the Company's activities, include, but are not necessarily limited to, those set below. Any one or more of these risks and others could have a material adverse effect on the Company. COVID-19 Global pandemic and Geopolitical risks Measures and guidelines implemented by the Government of Botswana in late March 2020 which allowed the Company’s exploration and evaluation activities to remain operational albeit limited throughout the pandemic restrictions have gradually been rolled back as vaccination levels within Botswana have increased. Most of the Company’s workforce (+99%) have been vaccinated. Although significant progress has been made in this area, the Company continues to operate under its approved crisis management plan, designed to protect the health and well-being of our employees in Botswana and elsewhere as well as the financial well-being of the business. The Company has continued with regular health screening, temperature checks and the use of infrared measurements to prevent the spread of COVID-19. Although many countries around the world have removed the public health measures implemented to reduce the spread of COVID-19, uncertainty remains. It is possible that Tsodilo’s operations could be impacted in a number of ways including, but not limited to: a suspension of exploration and evaluation activities, disruptions to supply chains and worker absenteeism due to illness. While the impact of COVID-19 is expected to be temporary, the current circumstances remain dynamic and the impacts on our financial position or operations cannot be reasonably estimated at this time. 20 In February 2022, Russia commenced a military invasion of Ukraine. In response, many jurisdictions have imposed strict economic sanctions against Russia and its interests. While the Company does not have any operations in Ukraine or Russia, its business may be impacted as the conflict and economic sanctions may give rise to indirect impacts, including but not limited to, increased fuel prices, supply chain challenges and disruptions, logistics and transport disruptions and heightened cybersecurity disruptions and threats. Increased fuel prices and ongoing volatility of such prices may have adverse impacts on the Company’s costs of doing business. The implications could result in a global economic downturn that could adversely affect the Company’s business. The continuance or escalation of the military conflict between Russia and Ukraine and the corresponding economic sanctions imposed on Russia may also result in increased volatility in the market for the Company’s securities and could have other effects which are currently unknown. The Company cannot accurately predict the impact that ongoing conflict in Ukraine will have on its financial position or operations. Uncertainty about judgments, estimates and assumptions made by management during the preparation of the Company’s consolidated financial statements related to potential impacts of the COVID- 19 pandemic and the Ukraine-Russia conflict on revenue, expenses, assets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected. Covid-19 Pandemic Relief In the first Quarter of 2020, the Company initiated efforts to get Covid-19 relief from expenditure and work requirements on our prospecting licenses due to the exceptional and debilitating global effects of the Covid-19 pandemic. In June 2020, the Ministry of Mineral Resources, Green Technology and Energy Security informed those holding prospecting licenses that they would entertain granting relief from work and expenditure requirements on a case-by-case basis. Applications for relief were filed for the Gcwihaba and Bosoto licenses and on January 8, 2021 the Ministry in accordance with Section 22 of the Mines and Minerals Act, approved the cancellation of one (1) year of prospecting programme of Bosoto Prospecting License Nos. PL 369/2014 and PL 217/2016 and Gcwihaba Prospecting Licenses Nos. PL 020 - 026/2018 with effect from April 1, 2020. Additional Funding Requirements Further development and exploration of the various mineral projects in which the Company holds an interest depends upon the Company's ability to obtain financing through equity or debt financing, joint ventures or other means. While the Company has been successful in the past in obtaining financing through the sale of equity securities and royalty transactions, there can be no assurance that the Company will be successful in obtaining additional financing in the amount and at the time required and, if available, that it can be obtained on terms satisfactory to the Company. The accompanying consolidated audited financial statements for the year-ended December 31, 2022, have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. The Company incurred a loss of ($2,019,718) and comprehensive loss of ($2,548,582) during the year ended December 31, 2022 and as of that date, the Company had an accumulated deficit of $53,170,284 and negative working capital of ($2,570,493). Management has carried out an assessment of the going concern assumption and has concluded that the cash position of the Company is not sufficient to finance exploration and resource evaluation at the projected levels, and to finance continued operations for the 12-month period subsequent to December 31, 2022. The continuity of the Company’s operations is dependent on raising future financing for working capital, the continued exploration and development of its properties and for acquisition and development costs of new projects. Management believes that it will be able to secure the necessary financing through a combination of the issue of new equity or debt instruments, the entering into of joint venture arrangements or the exercise of warrants and options for the purchase of common shares. However, there is no assurance the Company will be successful in these actions. There can be no assurance that adequate financing will be available, or available under terms favorable to the Company. 21 Should it be determined that the Company is no longer a going concern, adjustments, which could be significant, would be required to the carrying value of assets and liabilities. The consolidated financial statements do not reflect the adjustments to the carrying value of assets and liabilities, or the impact on the consolidated statement of operation and comprehensive income (loss), and consolidated statement of financial position classifications that would be necessary were the going concern assumption not appropriate. Failure to obtain equity or debt financing on a timely basis may cause the Company to postpone its exploration and development plans or forfeit rights in some of its projects. Uncertainties Related to Mineral Resource Estimates There is a degree of uncertainty attributable to the calculation of mineral resources and corresponding grades being mined or dedicated to future production. Until resources are actually mined and processed, the quantity of resources and grades must be considered as estimates only. In addition, the quantity and value of reserves or resources may vary, depending on mineral prices. Any material changes in the quantity of resources, grades or stripping ratio may affect the economic viability of the Company's properties. In addition, there is no assurance that recoveries in small-scale laboratory tests will be duplicated in larger-scale tests under on-site conditions, or during production. Determining the economic viability of a mineral project is complicated and involves a number of variables. Commodity Prices and Marketability The mining industry, in general, is intensely competitive and there is no assurance that, even if commercial quantities of minerals are discovered, a profitable market will exist for the sale of minerals produced. Factors beyond the control of the Company may affect the marketability of any minerals produced and which cannot be accurately predicted, such as market fluctuations, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, any combination of which factors may result in the Company not receiving an adequate return on investment capital. Prices received for minerals produced and sold are also affected by numerous factors beyond the Company's control such as international economic and political trends, global or regional consumption and demand and supply patterns. There is no assurance that the sale price of minerals produced from any deposit will be such that they can be mined at a profit. Currency Risk The Company's business is mainly transacted in Botswana Pula and U.S. dollar currencies. As a consequence, fluctuations in exchange rates may have a significant effect on the cash flows and operating results of the Company in either a positive or negative direction. Foreign Operations Risk The Company's current significant projects are located in Botswana. This exposes the Company to risks that may not otherwise be experienced if its operations were domestic. The risks include, but are not limited to, environmental protection, land use, water use, health safety, labor, restrictions on production, price controls, currency remittance, and maintenance of mineral tenure and expropriation of property. There is no assurance that future changes in taxes or such regulation in the various jurisdictions in which the Company operates will not adversely affect the Company's operations. Although the operating environments in Botswana are considered favorable compared to those in other developing countries, there are still political risks. These risks include, but are not limited to terrorism, hostage taking, military repression, expropriation, extreme fluctuations in currency exchange rates, high rates of inflation and labor unrest. Changes in mining or investment policies or shifts in political attitudes may also adversely affect the Company's business. Mineral Exploration and Development The business of exploring for minerals and mining is highly, speculative in nature and involves significant financial and other risks which even careful evaluation, experience and knowledge may not eliminate. There is no certainty that expenditures made or to be made by the Company in exploring and developing mineral 22 properties in which it has an interest will result in the discovery of commercially mineable deposits. Most exploration projects do not result in the discovery of commercially mineable deposit. While discovery of a mineral deposit may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish reserves by drilling and to construct mining and processing facilities at a site. There can be no guarantee that exploration programs carried out by the Company will result in the development of profitable mining operations. Title Matters Any changes in the laws of Botswana and South Africa relating to mining could have a material adverse effect to the rights and title to the interests held in those countries by the Company. No assurance can be given that applicable governments will not revoke or significantly alter the conditions of applicable exploration and mining authorizations nor that such exploration and mining authorizations will not be challenged or impugned by third parties. Infrastructure Exploration, development, mining and processing activities depend on the availability of adequate infrastructure. Reliable roads, bridges, sewer and water supply are important determinants which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance of provision of such infrastructure could adversely affect activities and profitability of the Company. Uninsured Risks The mining business is subject to a number of risks and hazards including, but not limited to, environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, cave~ ins, pit wall failures, flooding, rock bursts, periodic interruptions due to inclement or hazardous weather conditions and other acts of God. Such risks could result in damage to mineral properties or facilities, personal injury or death, environmental damage, delays in exploration, development or mining, monetary losses and possible legal liability. The Company maintains insurance against certain risks that are associated with its business in amounts that it believes to be reasonable at the current stage of operations. There can be no assurance that such insurance will continue to be available at economically acceptable premiums or will be adequate to cover any future claim. Key Personnel The Company is dependent upon on a relatively small number of key employees, the loss of any of whom could have an adverse effect on the Company. The Company currently does not have key personal insurance on these individuals. New Standards, Amendments and Interpretations Adopted There are no other standards which the Company would have been required to adopt in the period. New Standards, Amendments and Interpretations Not Yet Effective Certain pronouncements were issued by the ISAB or the IFRS Interpretive Committee that are mandatory for accounting periods beginning January 1, 2023 or later periods. These standards are not expected to have a material impact on the Company. Classification of Liabilities as Current or Non-current (Amendment to IAS 1) The amendment to IAS 1 provides a more general approach to the classification of liabilities based on the contractual agreements in place at the reporting date. These amendments are effective for the reporting dates beginning on or after January 1, 2023. 23 Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies These amendments continue the IASB's clarifications on applying the concept of materiality. These amendments help companies provide useful accounting policy disclosures, and they include: requiring companies to disclose their material accounting policies instead of their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and do not need to be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material. The IASB also amended IFRS Practice Statement 2 to include guidance and examples on applying materiality to accounting policy disclosures. These amendments are effective for reporting periods beginning on or after January 1, 2023. Amendments to IAS 8 – Definition of Accounting Estimates These amendments clarify how companies distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and clarifications on accounting estimates. The distinction between the two is important because changes in accounting policies are applied retrospectively, whereas changes in accounting estimates are applied prospectively. Further, the amendments clarify that accounting estimates are monetary amounts in the financial statements subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. These amendments are effective for reporting periods beginning on or after January 1, 2023. RELATED PARTY TRANSACTIONS Remuneration of Key Management Personnel of the Company Short term employee remuneration and benefits Stock based compensation Total compensation attributed to key management personnel For the year ended December 31 2022 2021 $333,333 238,221 $571,554 $298,000 270,792 $568,792  During the year an individual related to the CEO provided administrative and management services to the Company and was remunerated in 2022 in the amount of $48,000 (2021: $48,000).  During the year, an individual related to key management personnel of the Company received $12,229 in stock-based compensation during the period (2021: $5,970).  During the period, a board member was issued notes in the amount of $643,337 (2021: $207,736).  As at December 31, 2022, there was a total of $26,852 (2021: $112,611) payables to related parties included within accounts payable and accrued liabilities. The amounts are unsecured, non-interest bearing and are due on demand. OUTLOOK Precious stones and metals exploration remain a high-risk undertaking requiring patience and persistence. Despite difficult capital markets in the junior resource sector and the general decrease in commodity prices, the Company remains committed to international commodity exploration through carefully managed programs. The Company does not invest in financial instruments, nor does it do any hedging transactions. ADDITIONAL INFORMATION Additional information relating to Tsodilo Resources Limited is available on its website at: www.TsodiloResources.com or through SEDAR at www.sedar.com 24 FORWARD-LOOKING STATEMENTS The Annual Report, including this MD&A, contains, contains certain forward-looking statements related to, among other things, expected future events and the financial and operating results of the Company. Forward- looking statements are based on the opinions, assumptions and estimates of management as of the date such statements are made, and they are subject to a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Such assumptions include: the Company’s ability to obtain necessary financing; the Company’s expectations regarding the economy generally, results of operations and the extent of future growth and performance; and assumptions that the Company’s activities will not be adversely disrupted or impeded by development, operating or regulatory risk. The Company believes that expectations reflected in this forward- looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information included in this MD&A should not be unduly relied upon. There can be no assurance that such statements will prove to be accurate, as the Company’s results and future events could differ materially from those anticipated in this forward-looking information as a result of those factors discussed in or referred to under the heading “Risks and Uncertainties” in the Company’s AIF, as well as changes in general business and economic conditions, changes in interest and foreign currency rates, the supply and demand for, deliveries of and the level and volatility of prices of rough diamonds, costs and availability of power and diesel, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and recoverability assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources) and unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalations, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job actions, adverse weather conditions, and unanticipated events relating to health safety and environmental matters). Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date the statements were made, and the Company does not assume any obligations to update or revise them to reflect new events or circumstances, except as required by law. James M. Bruchs Chairman and Chief Executive Officer Gary A. Bojes Chief Financial Officer 25 [This page left blank intentionally] 26TSODILO RESOURCES LIMITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 27Financial Reporting Responsibility of Management The annual report and consolidated financial reporting and internal control. The Audit statements have been prepared by management. Committee is composed of three directors, all of The consolidated financial statements have been whom qualify as unrelated directors and are prepared in accordance with International independent of management and free from any Financial Reporting Standards and include interest or business relationship which could, or amounts that are based on informed judgments could be perceived to materially interfere with and best estimates. The financial information their ability to act in the best interests of the presented in this annual report is consistent Company. The Audit Committee reviews the annual with the consolidated financial statements. financial statements before they are presented to Management acknowledges responsibility for the the Board of Directors for approval and considers fairness, integrity and objectivity of all the independence of the auditors. The consolidated financial statements for the year ended December 31, 2022 have been audited by Crowe MacKay LLP, external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. Their report follows hereafter. information contained in the annual report including the consolidated financial statements. Management is also responsible for the maintenance of financial and operating systems, which include effective controls to provide reasonable assurance that assets are properly protected and that relevant and reliable financial information is produced. Our independent auditors have the responsibility of auditing the consolidated financial statements and expressing an opinion on them. The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfills its responsibilities for financial James M. Bruchs Chairman and Chief Executive Officer May 1, 2023 Dr. Gary A. Bojes Chief Financial Officer May 1, 2023 28Crowe MacKay LLP 1100 - 1177 West Hastings Street Vancouver, BC V6E 4T5 Main +1 (604) 687-4511 Fax +1 (604) 687-5805 www.crowemackay.ca Independent Auditors' Report To the Shareholders of Tsodilo Resources Limited Opinion We have audited the consolidated financial statements of Tsodilo Resources Limited (the "Group"), which comprise the consolidated statements of financial position as at December 31, 2022 and December 31, 2021 and the consolidated statements of operations and comprehensive income (loss), shareholders' equity and 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 Group as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards. 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 Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and 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 of the consolidated financial statements which describes the material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the year ended December 31, 2022. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be a key audit matter to be communicated in our report. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Recoverability of Exploration and Evaluation Assets As disclosed in Note 3 of the consolidated financial statements, the carrying value of exploration and evaluation assets represents a significant asset of the Group. Refer to Note 2 of the consolidated financial statements for a description of the accounting policy and significant judgments applied to exploration and evaluation assets. 29At each reporting period end, management applies judgment in assessing whether there are any indicators of impairment relating to exploration and evaluation assets. If there are indicators of impairment, the recoverable amount of the related asset is estimated in order to determine the extent of any impairment. Indicators of impairment may include (i) the period during which the entity has the right to explore in the specific area has expired during the year or will expire in the near future and is not expected to be renewed; (ii) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; (iii) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and (iv) sufficient data exists to indicate that the carrying amount of the mining claims and deferred exploration costs is unlikely to be recovered in full from successful development or by sale. Why the matter was determined to be a key audit matter We considered this a key audit matter due to (i) the significance of the exploration and evaluation assets balance and (ii) the judgments made by management in its assessment of indicators of impairment related to exploration and evaluation assets, which have resulted in a high degree of subjectivity in performing audit procedures related to these judgments applied by management. How the matter was addressed in our audit We have evaluated management’s assessment of impairment indicators per IFRS 6 Exploration for and Evaluation of Mineral Resources, including but not limited to: - Reviewing the Group’s rights to explore in the relevant exploration areas and assessing whether the rights to tenure remained current at balance date; - Considering the status of the relevant exploration areas by holding discussions with management, and reviewing the Group’s exploration plan and directors’ minutes; - Assessing whether any data exists to suggest that the carrying value of the exploration and evaluation assets is unlikely to be recovered through development or sale; and - Assessing the adequacy of the related disclosures in Note 2 and Note 3 of the consolidated financial statements. 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. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above 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 the other information prior to the date of this auditors' report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditors' report. We have nothing to report in this regard. 30Responsibilities 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 International Financial Reporting Standards, 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 Group’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 Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditors' 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 auditors' 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 the 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 judgment 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 risk 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. 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 Group’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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' 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 auditors' report. However, future events or conditions may cause the Group 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. 31• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 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 on the audit resulting in this independent auditors' report is Diana Huang. "Crowe MacKay LLP" Chartered Professional Accountants Vancouver, Canada May 1, 2023 32Tsodilo Resources Limited Consolidated Statements of Financial Position (In United States dollars) ASSETS Current Cash Accounts receivable and prepaid expenses Total Current Assets Exploration and evaluation assets (note 3) Property, plant and equipment (note 4) Total Assets LIABILITIES Current Accounts payable and accrued liabilities (note 9) Short-term lease liability (note 6) Notes payable (notes 5 and 9) Total Current Liabilities Long-term lease liability (note 6) Total Liabilities SHAREHOLDERS' EQUITY Share capital (note 7) Contributed surplus (note 7) Commitment to issue shares Foreign translation reserve Deficit Total Equity Total Liabilities and Equity December 31 2022 December 31 2021 $ 40,049 57,767 97,816 5,572,595 137,882 $5,808,293 $ 1,057,599 4,664 1,606,046 2,668,309 10,950 2,679,259 50,944,960 12,198,392 95,068 (6,939,102) (53,170,284) 3,129,034 $5,808,293 $ 4,713 35,970 40,683 6,813,782 212,009 $7,066,474 $ 890,036 4,578 937,709 1,832,323 17,055 1,849,378 50,896,526 11,881,374 -- (6,410,238) (51,150,566) 5,217,096 $7,066,474 Nature of operations and going concern (note 1) Commitments and contingencies (note 12) Subsequent events (notes 5 and 15) See accompanying notes to the consolidated financial statements. APPROVED ON BEHALF OF THE BOARD OF DIRECTORS Jonathan R. Kelafant Chairman, Audit Committee James M. Bruchs Chairman & CEO 33Tsodilo Resources Limited Consolidated Statements of Operations and Comprehensive Income (Loss) (In United States dollars) Year Ended December 31 Administrative Expenses Corporate remuneration Corporate travel and subsistence Investor relations Legal and audit Filings and regulatory fees Administrative expenses Stock-based compensation (note 7) Other Income (Expense) Impairment of exploration and evaluation (note 3) Other income, net of cost Interest income Foreign exchange gain (loss) Gain/(Loss) for the Year Other Comprehensive Gain/(Loss) Foreign currency translation Total Other Comprehensive Gain/(Loss) Total Comprehensive Income (Loss) for the Year 2022 2021 $ 496,162 $ 546,308 1,742 23,773 86,879 42,427 230,968 335,950 1,217,901 (876,351) 75,955 -- (1,421) (801,817) (2,019,718) (528,864) (528,864) ($ 2,548,582) -- 166,789 98,364 37,449 236,682 288,377 1,373,969 (9,273) 52,492 2 14,542 57,763 (1,316,206) (586,801) (586,801) ($1,903,007) Basic and diluted loss per share ($0.04) ($0.03) Weighted average number of shares outstanding 49,658,622 48,994,653 See accompanying notes to the consolidated financial statements. 34 Tsodilo Resources Limited Consolidated Statements of Changes in Shareholders’ Equity (In United States dollars except for shares) 2022 Share Capital Contributed Surplus Shares Issued Amount Stock-based compensation & Other Commitment to issue shares Foreign Translation Reserve Deficit Total Equity Balance January 1, 2022 Options exercised Commitment to issue shares Stock-based compensation Comprehensive loss 49,499,581 $50,896,526 48,434 -- -- -- 337,500 -- -- -- $11,881,374 (18,932) -- 335,950 -- $-- -- 95,068 -- -- ($6,410,238) -- -- -- (528,864) ($51,150,566) -- -- -- (2,019,718) $5,217,096 29,502 95,068 335,950 (2,548,582) Balance December 31, 2022 49,837,081 $50,944,960 $12,198,392 $95,068 ($6,939,102) ($ 53,170,284) $3,129,034 See accompanying notes to the consolidated financial statements. 2021 Share Capital Contributed Surplus Shares Issued Amount Stock-based compensation & Other Foreign Translation Reserve Deficit Total Equity Balance January 1, 2021 Units Issued Options exercised Warrant exercised Stock-based compensation Comprehensive loss 46,166,060 2,986,038 165,500 181,983 -- -- $49,518,357 1,151,821 126,257 100,091 -- -- $11,639,437 -- (46,440) -- 288,377 -- ($5,823,437) -- -- -- -- (586,801) ($49,834,360) $5,499,997 1,151,821 -- 79,817 -- 100,091 -- 288,377 -- (1,903,007) (1,316,206) Balance December 31, 2021 49,499,581 $50,896,526 $11,881,374 ($6,410,238) ($51,150,566) $5,217,096 See accompanying notes to the consolidated financial statements. 35 Tsodilo Resources Limited Consolidated Statements of Cash Flows (In United States dollars) Cash provided by (used in): Operating Activities Net Loss for the Year Adjustments for non-cash items: Impairment on exploration and evaluation Interest on lease liability Foreign exchange loss (gain) Stock-based compensation Net change in non-cash working capital balances (note 14) Investing Activities Additions to exploration properties Additions to plant, property & equipment Financing Activities Issuance (payment) of notes payable Issuance of common shares and warrants - cash Commitment to issue shares Cost of issuance Options exercised Cash payments on lease Impact of exchange on cash Change in cash - for the year Cash - beginning of year Cash - end of year Supplemental cash flow information – note 14 See accompanying notes to the consolidated financial statements. Years Ended December 31 2022 2021 ($2,019,718) ($1,316,206) 876,351 1,858 1,421 335,950 (804,138) 832,943 28,805 (128,488) -- (128,488) 25,000 -- 95,068 -- 22,575 (6,203) 136,440 (1,421) 35,336 4,713 $ 40,049 9,273 2,526 (14,542) 288,377 (1,030,572) 530,890 (499,682) (267,583) (18,833) (286,416) (30,145) 795,435 -- (21,908) 34,137 (6,870) 770,649 14,542 (907) 5,620 $ 4,713 36 Tsodilo Resources Limited Notes to the Consolidated Financial Statements For the Years ended December 31, 2022 and 2021 (All amounts are in U.S. dollars unless otherwise noted) 1. NATURE OF OPERATIONS AND GOING CONCERN Tsodilo Resources Limited (“Tsodilo” or “the Company”) is an exploration stage company which is engaged principally in the acquisition, exploration and development of mineral properties in the Republic of Botswana. The Company is considered to be in the exploration and development stage given that none of its properties are in production and, to date, have not earned any revenues. The recoverability of amounts shown for exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the renewal or extension of exploration licenses, obtaining the necessary permits to operate a mine, obtaining the financing to complete exploration and development, and future profitable production. The Company is incorporated under the laws of the Yukon Territory, Canada, under the Business Corporations Act of Yukon and the address of the Company’s registered office is 1 King Street West, 48th Floor, Toronto, Ontario, Canada, M5H 1A1. The Company currently exists under the Business Corporations Act of Yukon and its common shares are listed on the Canadian TSX Venture Stock Exchange (“TSXV”) under the symbol TSD. On March 4, 2021, the Company’s stock began trading on the US OTCQB Venture Market under the symbol "TSDRF"; the Company continues to trade on the Canadian Toronto Stock Exchange Venture Exchange (“TSX Venture”) under the symbol “TSD.V.” These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. The Company incurred a loss of ($2,019,718) and comprehensive loss of ($2,548,582) during the year ended December 31, 2022 and as of that date, the Company had an accumulated deficit of $53,170,284 and negative working capital of ($2,570,493). The Company has not generated any revenues or cash flows from operations since inception and does not expect to do so for the foreseeable future. The Company’s continuation as a going concern depends on its ability to successfully raise financing. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company; therefore giving rise to a material uncertainty which may cast significant doubt as to whether the Company’s cash resources and working capital will be sufficient to enable the Company to continue as a going concern for the 12-month period after the date of these consolidated financial statements. Consequently, management is pursuing various financing alternatives to fund operations and advance its business plan. To facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The Company may determine to reduce the level of activity and expenditures further, or divest of certain mineral property assets, to preserve working capital and alleviate any going concern risk. The consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future; and do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. COVID-19 Global pandemic and Geopolitical risks Measures and guidelines implemented by the Government of Botswana in late March 2020 which allowed the Company’s exploration and evaluation activities to remain operational albeit limited throughout the pandemic restrictions have gradually been rolled back as vaccination levels within Botswana have increased. Most of the Company’s workforce (+99%) have been vaccinated. Although significant progress has been made in this area, the 37 Company continues to operate under its approved crisis management plan, designed to protect the health and well-being of our employees in Botswana and elsewhere as well as the financial well-being of the business. The Company has continued with regular health screening, temperature checks and the use of infrared measurements to prevent the spread of COVID-19. Although many countries around the world have removed the public health measures implemented to reduce the spread of COVID-19, uncertainty remains. It is possible that Tsodilo’s operations could be impacted in a number of ways including, but not limited to: a suspension of exploration and evaluation activities, disruptions to supply chains and worker absenteeism due to illness. While the impact of COVID-19 is expected to be temporary, the current circumstances remain dynamic and the impacts on our financial position or operations cannot be reasonably estimated at this time. In February 2022, Russia commenced a military invasion of Ukraine. In response, many jurisdictions have imposed strict economic sanctions against Russia and its interests. While the Company does not have any operations in Ukraine or Russia, its business may be impacted as the conflict and economic sanctions may give rise to indirect impacts, including but not limited to, increased fuel prices, supply chain challenges and disruptions, logistics and transport disruptions and heightened cybersecurity disruptions and threats. Increased fuel prices and ongoing volatility of such prices may have adverse impacts on the Company’s costs of doing business. The implications could result in a global economic downturn that could adversely affect the Company’s business. The continuance or escalation of the military conflict between Russia and Ukraine and the corresponding economic sanctions imposed on Russia may also result in increased volatility in the market for the Company’s securities and could have other effects which are currently unknown. The Company cannot accurately predict the impact that ongoing conflict in Ukraine will have on its financial position or operations. Uncertainty about judgments, estimates and assumptions made by management during the preparation of the Company’s consolidated financial statements related to potential impacts of the COVID-19 pandemic and the Ukraine-Russia conflict on revenue, expenses, assets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Statement of Compliance with International Financial Reporting Standards These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These consolidated financial statements have been authorized for release by the Company’s Board of Directors on May 1, 2023. (b) Basis of Preparation These consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as fair value through profit or loss which are stated at their fair value. These consolidated financial statements are presented in United States dollars and include the accounts of the Company and the following direct and indirect subsidiaries: Entity Tsodilo Resources Bermuda Limited (“TRBL”) [Bermuda] Bosoto (Proprietary) Limited (“Bosoto”) [Botswana] Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”) [Botswana] Newdico (Proprietary) Limited (“Newdico”) [Botswana] Idada Trading 361 (Pty) Ltd. (“Idada”) [South Africa] 2022 100% 100% 100% 100% 70% 2021 100% 100% 100% 100% 70% The accounting policies set out below have been applied consistently to all periods and years presented. 38 (c) Significant Accounting Judgments, Estimates and Assumptions The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Significant judgments are required with respect to the assessment of impairment of the Company’s exploration and evaluation assets, the determination of the functional currency of the Company and its subsidiaries, potential tax exposures given the company operates in multiple jurisdictions, and the going concern assumptions. In particular, the carrying value of the Company’s exploration and evaluation assets is dependent upon the Company’s determination with respect to the future prospects of its exploration and evaluation assets and the ability of the Company to successfully complete the renewal or extension process for its exploration properties as required. The quantification of potential tax exposures is dependent on the relevant tax authorities’ acceptance of the Company’s positions. (d) Earnings (Loss) per Common Share Earnings (loss) per share calculations are based on the net income (loss) attributable to common shareholders for the year divided by the weighted average number of common shares issued and outstanding during the year. Diluted earnings per share calculations are based on the net income (loss) attributable to common shareholders for the year divided by the weighted average number of common shares outstanding during the year plus the effects of dilutive common share equivalents. This method requires that the dilutive effect of outstanding options and warrants issued be calculated using the treasury stock method. This method assumes that all common share equivalents have been exercised at the beginning of the year (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of common shares during the year. The incremental number of common shares that would be issued is included in the calculation of diluted earnings per share. (e) Exploration and Evaluation Assets Exploration and evaluation assets include acquired mineral use rights for mineral properties held by the Company. The amount of consideration paid (in cash or share value) for mineral use rights is capitalized. The amounts shown for exploration and evaluation assets represents all direct and indirect costs relating to the acquisition, exploration and development of exploration properties, less recoveries, and do not necessarily reflect present or future values. These costs will be amortized against revenue from future production or written off if the exploration and evaluation assets are abandoned or sold. The Company has classified exploration and evaluation assets as intangible in nature. Depletion of costs capitalized on projects put into commercial production will be recorded using the unit-of-production method based upon estimates of proven and probable reserves. Proceeds received from farm-out agreements or recoveries of costs are credited against the cost of related claims. Ownership of exploration and evaluation assets involves certain inherent risks, including geological, commodity prices, operating costs, and permitting risks. Many of these risks are outside the Company’s control. The ultimate recoverability of the amounts capitalized for exploration and evaluation assets is dependent upon the delineation of economically recoverable ore reserves, the renewal or extension of exploration licenses, obtaining the necessary financing to complete their development, obtaining the necessary permits to operate the mine, and realizing profitable production or proceeds from the disposition thereof. Exploration and evaluation assets are tested for impairment if facts or circumstances indicate that impairment exists. Examples of such facts and circumstances are as follows: - the period for which the Company has the right to explore in the specific area has expired during the 39 period or will expire in the near future, and is not expected to be renewed; - - - substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. (f) Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following terms: Hangar Vehicles Furniture and equipment over remaining life of land lease 5 Years 3 – 4 Years An item of property, plant 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, plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized. (g) Cash Cash consists of cash held in banks and petty cash. (h) Foreign Currency Translation (i) Functional and presentation currency The Company’s functional and presentation currency is the United States dollar (“U.S. Dollar”). The functional currencies of the Company’s subsidiaries are as follows: Tsodilo Resources Bermuda Limited (”TRBL”) U.S. Dollar Gcwihaba Resources (Pty) Limited (“Gcwihaba”) Botswana Pula Newdico (Pty) Limited Bosoto (Pty) Limited Idada Trading 361 (Pty) Ltd (“Newdico”) Botswana Pula (“Bosoto”’) ("‘Idada”) Botswana Pula South African Rand Each subsidiary and the Company’s parent entity determine their own functional currency and items included in the financial statements of each entity are measured using that functional currency. (ii) Transactions and balances Transactions in foreign currencies are initially recorded by applying the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at the exchange rate prevailing at the reporting date. (iii) Translation of foreign operations As at the reporting date the assets and liabilities of Gcwihaba, Newdico, Bosoto, and Idada are translated into the presentation currency of the Company at the rate of exchange prevailing at the reporting date and their revenue and expenses are translated at the average exchange for the period. On consolidation, 40 the exchange differences arising on the translation are recognized in other comprehensive income (loss) and accumulated in the foreign currency translation reserve. If Gcwihaba, Newdico, Bosoto, and Idada were sold, the amount recognized in the foreign currency reserve would be reallocated to profit or loss as part of the gain or loss on disposal. (i) Income Taxes Current taxes are the expected tax payable or receivable on the local taxable income or loss for the year, using the local tax rate enacted or substantively enacted at the reporting date, and includes any adjustments to tax payable or receivable in respect of previous years. Deferred income taxes are recorded using the liability method whereby deferred tax is recognized in respect to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they are realized or settled, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax is not recognized for temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting, nor taxable profit or loss. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (j) Share-based Compensation The Company follows the fair value method of accounting for stock option awards granted to employees and directors, whereby services are rendered as consideration for equity instruments (equity-settled transactions). The fair value of stock options is determined by the Black-Scholes Option Pricing model with assumptions for risk-free interest rates, dividend yields, volatility of the expected market price of the Company’s common shares and an expected life of the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based on historical experience and future expectations. The fair value of direct awards of stock is determined by the quoted market price of the Company’s stock. Share-based compensation is amortized over the vesting period of the related stock option. When options are forfeited any charges already recognized relating to unvested options are reversed. When an award is cancelled by the entity or by the counterparty, any remaining element of fair value of the award is expensed immediately through profit or loss. When an award expires unexercised the fair value originally allocated to the aware remains in contributed surplus. The Company uses graded or accelerated amortization which specifies that each vesting tranche must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is subsequently amortized separately and in parallel from the grant date. Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates. 41 (k) Severance Benefits Under Botswana law, the Company is required to pay severance benefits for full-time employees upon the completion of 5 years of continued service if the employee so elects or upon the termination of employment. Severance is earned at the rate of one day per month for an employee with less than five years of service and two days per month for employees with greater than five years of service. The specifics and benefits of the severance program mandated in Botswana are extended to full-time employees residing and working outside of Botswana. The cost of these severance benefits is accrued over the year of service until the benefit becomes payable. Portions of the severance expenses are capitalized to exploration and evaluation assets. (l) Financial Assets initially recorded at fair value and designated upon inception into Under IFRS 9, all financial assets are one of the following three categories: amortized cost, fair value through other comprehensive income (“FVOCI”) or at fair value through profit or loss (“FVTPL”). All of the Company’s financial assets are classified as amortized cost, being subsequently measured at amortized cost using the effective interest rate method. The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve-month expected credit losses. The Company shall recognize in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized. The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are recognized in profit or loss. (m) Financial Liabilities All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or at amortized cost. Financial liabilities classified as at amortized cost are initially recognized at fair value less directly attributable transaction costs. After initial recognition, at amortized cost are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expenses over the relevant year. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability. The Company’s accounts payable and accrued liabilities, lease liability, and notes payable are classified as at amortized cost. Financial liabilities classified as FVTPL include warrants with exercise prices denominated in a currency other than the Company’s functional currency. Derivatives, including separated embedded derivatives are also classified as FVTPL and recognized at fair value with changes in fair value recognized in earnings unless they are designated as effective hedging instruments. Fair value changes on financial liabilities classified as FVTPL are recognized in earnings. Transaction costs associated with FVTPL liabilities are expensed as incurred. The Company derecognizes a financial liability when its contractual obligations are discharged or canceled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. 42 (n) Impairment of Assets At the end of each reporting period, the Company assesses each cash-generating unit to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of the fair value less cost to sell and the value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessment of the time value of money and the risk of a specific asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the year. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Exploration and evaluation assets are assessed for impairment indicators under IFRS 6. When an impairment subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. (o) Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities and includes, but is not limited to, key management personnel, directors, affiliated companies, and project partners. A transaction is considered to be a related party transaction when there is a transfer of resources, services or obligations between related parties. (p) Share Capital The Company engages in equity financing transactions to obtain the funds necessary to continue operations and explore and evaluate resource properties. These equity financing transactions may involve issuance of common shares or units. A unit comprises a certain number of common shares and a certain number of share purchase warrants (“Warrants”). Depending on the terms and conditions of each equity financing agreement (“Agreement”), the Warrants are exercisable into additional common shares prior to expiry at a price stipulated by the Agreement. Warrants that are part of units are valued using residual value method which involves comparing the selling price of the units to the Company’s share price on the announcement date of the financing. The market value is then applied to the common share, and any residual amount is assigned to the Warrants. Warrants that are issued as payment for agency fee or other transaction costs are accounted for as share issue costs and are recognized in equity. When warrants are forfeited or are not exercised at the expiry date, the amount previously recognized in equity is transferred from reserves to deficit. In situations where share capital is issued, or received, as non-monetary consideration and the fair value of the asset received, or given up is not readily determinable, the fair market value (as defined) of the shares is used to record the transaction. The fair market value of the shares issued, or received, is based on the trading price of those shares on the appropriate exchange on the date the shares are issued. (q) Provision for Environmental Rehabilitation The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of exploration and evaluation assets and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mining assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is depreciated on the same basis as mining assets. The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded 43 directly to mining assets with a corresponding entry to the rehabilitation provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the year. As at December 31, 2022 and 2021, the Company has determined that it does not have any decommissioning obligations. (r) Lease Liability Accounting Policy At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases of right-of-use assets are recognized at the lease commencement date at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, and otherwise at the Company’s incremental borrowing rate. At the commencement date, a right-of-use asset is measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received. Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term, except where the lease contains a bargain purchase option a right-of-use asset is depreciated over the asset’s useful life. (s) New Standards, Amendments and Interpretations Not Yet Effective Certain pronouncements were issued by the ISAB or the IFRS Interpretive Committee that are mandatory for accounting periods beginning January 1, 2023 or later periods. These standards are not expected to have a material impact on the Company. Classification of Liabilities as Current or Non-current (Amendment to IAS 1) The amendment to IAS 1 provides a more general approach to the classification of liabilities based on the contractual agreements in place at the reporting date. These amendments are effective for the reporting dates beginning on or after January 1, 2023. Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies These amendments continue the IASB's clarifications on applying the concept of materiality. These amendments help companies provide useful accounting policy disclosures, and they include: requiring companies to disclose their material accounting policies instead of their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and do not need to be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material. The IASB also amended IFRS Practice Statement 2 to include guidance and examples on applying materiality to accounting policy disclosures. These amendments are effective for reporting periods beginning on or after January 1, 2023. Amendments to IAS 8 – Definition of Accounting Estimates These amendments clarify how companies distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and clarifications on accounting estimates. The distinction between the two is important because changes in accounting policies are applied 44 in accounting estimates are applied prospectively. Further, the retrospectively, whereas changes amendments clarify that accounting estimates are monetary amounts in the financial statements subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. These amendments are effective for reporting periods beginning on or after January 1, 2023. 3. EXPLORATION AND EVALUATION ASSETS: Exploration and evaluation assets are summarized as follows Bosoto Botswana Project BK 16 Precious Stones Project PL 217 Precious Stones Bosoto Total Idada S. Africa Precious Metals Gcwihaba Botswana Metals TOTAL Newdico Botswana Project PL091 Industrial Minerals Stones Balance at December 31, 2020 Additions Net Exchange Differences Impairment Balance at December 31, 2021 Impairment Balance at December 31, 2022 $3,759,919 80,889 (273,284) $671,771 $4,431,690 128,625 (355,395) 47,736 (82,111) $141,691 115,380 (17,366) $7,792 $2,482,154 $7,063,327 332,484 88,479 (572,756) (199,853) -- (142) -- -- -- -- (7,650) (1,623) (9,273) 3,567,524 637,396 4,204,920 239,705 Additions 33,573 13,169 46,742 64,150 Net Exchange Differences (270,608) (65,892) (336,500) (12,177) -- (584,673) (584,673) (291,678) -- -- -- -- 2,369,157 6,813,782 75,877 186,769 (202,928) (551,605) -- (876,351) $3,330,489 $ -- $3,330,489 $ -- $ -- $2,242,106 $5,572,595 Exploration and evaluation additions for the year-ended December 31, 2022 are summarized as follows: Bosoto Botswana Project BK 16 Precious Stones Project PL 217 Precious Stones Bosoto Total Newdico Botswana Project PL091 Industrial Minerals Gcwihaba Botswana Metals TOTAL Drilling Expenditures $ 2,180 $ 147 $ 2,327 $ 457 $ 8,149 $10,933 Amortization Drill Rigs, Vehicles & Trucks 4,022 Geophysics Lab Analyses & Assays License Fees 150 837 80 -- 150 -- 117 300 837 197 Maintenance, & Consumables Salaries, Wages & Services 8,849 17,455 6,446 6,309 15,295 23,764 -- -- 150 6,385 7,787 4,887 22,346 19,157 820 6,704 13,814 58,280 22,646 19,994 1,167 28,384 45,365 4,022 49,371 Balance at December 31, 2022 $33,573 $13,169 $46,742 $64,150 $75,877 $186,769 45 Exploration and evaluation additions for the year-ended December 31, 2021 are summarized as follows: Bosoto Botswana Project BK 16 Precious Stones Project PL 217 Precious Stones Bosoto Total Gcwihaba Botswana Metals Newdico Botswana Project PL091 Industrial Minerals TOTAL Drilling Expenditures $ 5,175 $ 64 $ 5,239 $ 265 $ 10,676 $16,180 Amortization Drill Rigs, Vehicles & Trucks Geophysics Lab Analyses & Assays License Fees Maintenance, & Consumables Salaries, Wages & Services 4,479 2,898 -- 89 12,644 55,604 -- 2,898 -- 65 6,672 38,037 4,479 5,796 -- 154 19,316 93,641 54,980 2,898 -- 119 6,239 50,879 5,442 2,898 1,832 1,647 13,854 52,130 64,901 11,592 1,832 1,920 39,409 196,650 Balance at December 31, 2021 $80,889 $47,736 $128,625 $115,380 $88,479 $332,484 General Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of permits and the potential for problems arising from government conveyance accuracy, prior unregistered agreements or transfers, native land claims, confirmation of physical boundaries, and title may be affected by undetected defects. The Company does not carry title insurance. Exploration and Evaluation Assets (Royalties) In the third Quarter 2017, the Company reached an agreement with Sandstorm Gold Ltd. (“Sandstorm”) (NYSE MKT: SAND, TSX: SSL) to grant royalties on three projects in consideration of the payment of $1,500,000 USD. The package of assets in the Royalty Sale includes:    the grant of a 1% Net Smelter Return (NSR) on the Company’s wholly owned Botswana subsidiary Gcwihaba Resources (Pty) Ltd. prospecting metal licenses in northwest Botswana; the grant of a 1% Gross Proceeds Royalty (GPR) on the Company’s Botswana wholly owned subsidiary Bosoto (Pty) Ltd. precious stone prospecting license (PL217/2016) located in the Orapa Kimberlite Field; and, the grant of a 1% NSR on the Company’s 70% owned South African subsidiary Idada 361 (Pty) Ltd. gold and silver prospecting license located in the Barberton Greenstone Belt in the Mpumalanga province of South Africa. Sandstorm shall have a right of first refusal with respect to any third-party bona fide offers to purchase a metal or precious stone royalty on the properties. On July 23, 2020, the Company reached an agreement with TBM (Pty) Ltd. ("TBM") to grant royalties (Royalty income) on its Botswana subsidiary Gcwihaba (Pty) Ltd. ("Gcwihaba") then seven (7) metal prospecting licenses in consideration of the payment of $500,000 USD. The package of assets in the Royalty Sale includes:  the grant of a 0.5% Net Smelter Return or Net Mineral Return on Gcwihaba's five (5) prospecting metal licenses in northwest Botswana. Gcwihaba Resources (Pty) Ltd (“Gcwihaba”) - Botswana In 2017, Gcwihaba, a wholly owned subsidiary of the Company, held twenty-one (21) metal (base, precious, platinum group, and rare earth) Prospecting Licenses (PL) in the North-West district of which seven (7) were then 46 in renewal. The 21 licenses were relinquished and the core seven licenses were given an initial grant effective October 1, 2018. These new licenses have an initial grant term of three (3) years to be followed by 2 two-year renewal periods. The relinquishment of the aforementioned licenses or portions thereof did not cause a reduction or change in the continuing overall exploration program nor impact the chances of the overall success of the program. Two-year renewal applications were filed in the second quarter of 2021 reducing the overall license package from 4,021 km2 to 2,465 km2 consisting of five (5) prospecting licenses. The reduction in the license area package had no impact of the prospectivity of the project area. On November 30, 2021, PL’s 021- 024/2018 were renewed for a two-year term effective January 1, 2022. PL020 is pending approval. The four licenses combined have a minimum exploration expenditure requirement of 8,020,080 BWP ($619,438 USD as at December 31, 2022. The fifth license is currently the subject of litigation, see note 13 for a summary description. Bosoto (Pty) Ltd (“Bosoto”) - Botswana Tsodilo was granted PL369/2014 over the BK16 kimberlite pipe through its 100% owned Botswana subsidiary, Bosoto, effective October 1, 2014. The prospecting license was renewed for an additional two-year period commencing October 1, 2017 and a second two-year renewal application was granted effective October 1, 2019. On June 21, 2021, a two-year extension of the license was granted effective October 1, 2021. PL 217/2016 was acquired in the second quarter of 2017. The license had an effective date of January 1, 2017 for an initial period of 3-years followed by two 2-year renewals. The first renewal was granted on June 29, 2020 to be effective July 1, 2020. A review of the Company’s extensive exploration work on PL217/2016 was performed in the fourth quarter and it was determined that there is not enough gravel tonnage to make an economic project. Accordingly, one of the two the licenses were relinquished in its entirety in the 4th quarter. The Company has written off the capitalized cost of $584,673 as impaired for that one license as at the year-ended December 31, 2022. Newdico (Pty) Ltd (“Newdico”) - Botswana The Company holds a 100% interest in Newdico, which held one (1) industrial mineral (granite & dolerite) license. In the 4th quarter, a review of available data indicated that it is uneconomical to exploit. The Company decided to relinquish the license in its entirety. The Company has written off the capitalized costs of $291,678 as impaired as at the year-ended December 31, 2022. Idada Trading 361 (Pty) Ltd (“Idada”) – South Africa The Company holds a 70% interest in its South African subsidiary, Idada. Idada made application for an exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in February 2012. The Prospecting Right was subsequently granted for a term of five years effective as of May 2015. During the third quarter 2019, the Company was informed that certain portions of our license areas were designated as a World Heritage site by UNESCO. As a result the Company was not granted a renewal of its exploration license. The license comprises 9,033 hectares and all expenditures were curtailed until such time as access to the license area is provided. In the fourth quarter of 2021, the Company determined to stop all efforts to protect its license rights as all efforts to contact its Black Empowerment Partner and the DMA and DEA have failed as all parties are not responsive. During the year ended December 31, 2021, the property was impaired in full. Covid-19 Pandemic Relief In the first Quarter of 2020, the Company initiated efforts to get Covid-19 relief from expenditure and work requirements on our prospecting licenses due to the exceptional and debilitating global effects of the Covid-19 47 pandemic. In April 2020, the Ministry of Mineral Resources, Green Technology and Energy Security informed those holding prospecting licenses that they would entertain granting relief from work and expenditure requirements on a case-by-case basis. Applications for relief were filed for the Gcwihaba and Bosoto licenses and on January 8, 2021 the Ministry in accordance with Section 22 of the Mines and Minerals Act, approved the cancellation of one (1) year of prospecting program of Bosoto Prospecting License No. PL 369/2014 and PL 217/2016, and Gcwihaba Prospecting Licenses Nos. PL 020 – 026/2018 with an effect date from April 1, 2020. 4. PROPERTY, PLANT, AND EQUIPMENT Cost Hangar Vehicles Furniture and Equipment Right of Use Asset Total As at December 31, 2020 $183,140 $ 802,513 Additions -- -- Foreign Exchange Difference (14,400) (63,100) As at December 31, 2021 Foreign exchange Difference As at December 31, 2022 168,740 (14,260) $154,480 739,413 (62,487) $676,926 $ 440,968 18,833 (33,305) 426,496 (34,572) $391,924 27,211 (1,468) 25,743 (2,176) $23,567 $-- $ 1,426,621 Accumulated Depreciation As at December 31, 2020 Depreciation Foreign exchange Difference As at December 31, 2021 Depreciation Foreign Exchange Difference Hangar Vehicles Furniture and Equipment Right of Use Asset $81,343 19,734 (3,315) 97,762 17,633 (5,008) $789,465 5,321 (62,386) 732,400 4,755 (62,063) $307,727 34,697 (29,352) 313,072 31,005 (29,968) $-- 5,149 -- 5,149 4,887 (609) As at December 31, 2022 $110,387 $675,092 $314,109 $9,427 $1,109,015 Net book value As at December 31, 2021 $70,978 $7,013 $113,424 $20,594 $212,009 As at December 31, 2022 $44,093 $1,834 $77,815 $14,140 $137,882 For the year ended December 31, 2022, $58,280 (2021: $64,901) in depreciation has been capitalized under exploration properties. 46,044 (112,273) 1,360,392 (113,495) $1,246,897 Total $1,178,535 64,901 (95,053) 1,148,383 58,280 (97,648) 48 5. NOTES PAYABLE As at December 31, 2022, notes payable in the amount of $1,606,046 were outstanding from a related party. The notes have an annual interest rate of 8% and one of the notes carry a termination fee of 10% upon early redemption of the note for which there is an embedded derivative arising – the fair value of this is NIL. In addition, at the option of the note holder, the December 2018 note can be converted to stock at the discretion of the holder during future private placements that raise a minimum of CAD $500,000, of those future private placements at the price of the private placement. The remaining notes are due on demand. The notes payable at December 31, 2022 are summarized as follows: Date Balance 12/31/2021 Changes in 2022 Balance 12/31/2022 Interest Rate Termination Fee Maturity Date 31-Dec-18 30-Jun-19 31-Dec-19 01-Oct-20 21-Jun-21 27-Jul-21 28-Aug-21 27-Sep-21 31-Dec-21 30-Jun-22 21-Sep-22 30-Sep-22 31-Dec-22 $273,006 $-- $273,006 207,242 57,684 192,042 26,500 26,500 27,000 25,500 102,235 -- -- -- -- -- -- -- -- -- -- -- -- 451,159 25,000 100,738 91,440 207,242 57,684 192,042 26,500 26,500 27,000 25,500 102,235 451,159 25,000 100,738 91,440 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% $27,300 31-Dec-23* NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL 19-Dec-22** NIL On Demand NIL On Demand Total $937,709 $668,337 $1,606,046 $27,300 *During the year-ended December 31, 2022, $273,006 of notes payable had its maturity extended from December 31, 2022 to December 31, 2023. ** The promissory note of $25,000 dated September 21, 2022 has been repaid subsequent to year end.     On June 30, 2022, a promissory note was issued for $451,159 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On September 21, 2022, a promissory note was issued for $25,000. The note matured on December 19, 2022 and has an annual interest rate of 8%. On September 30, 2022, a promissory note was issued for $100,738 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. On December 31, 2022, a promissory note was issued for $91,440 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. 49The notes payable at December 31, 2021 are summarized as follows: Date Balance 12/31/2020 Changes in 2021 Balance 12/31/2021 Interest Rate Termination Fee Maturity Date 1-Oct-18 31-Dec-18 31-Jan-19 30-Jun-19 30-Sep-19 31-Dec-19 01-Oct-20 21-Jun-21 27-Jul-21 28-Aug-21 27-Sep-21 $5,819 ($5,819) 347,579 (74,573) 85,000 (85,000) $-- 273,006 -- 293,687 (86,445) 207,242 36,462 95,146 192,042 -- -- -- -- (36,462) (37,462) -- 26,500 26,500 27,000 25,500 -- 57,684 192,042 26,500 26,500 27,000 25,500 102,235 $937,709 31-Dec-21 102,235 Total $1,055,735 ($118,026) -- 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% $-- -- 27,300 31-Dec-22* -- -- NIL On Demand -- -- NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand NIL On Demand $27,300 *During the year-ended December 31, 2021, $273,006 of notes payable had its maturity extended from December 31, 2021 to December 31, 2022.  On January 5, 2021, $295,616 were retired vis-à-vis private placement participation.  On February 10, 2021, $19,800 in promissory notes were paid in cash.  On February 11, 2021, $10,345 in promissory notes were paid in cash.  On June 21, 2021, a promissory note was issued for $26,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.  On July 27, 2021, a promissory note was issued for $26,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.  On August 28, 2021, a promissory note was issued for $27,000 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.  On September 27, 2021, a promissory note was issued for $25,500 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%.  On December 31, 2021, a promissory note was issued for $102,235 to an employee, who is a director of the Company. The note is payable on demand and has an annual interest rate of 8%. 6. LEASE LIABILITY Lease liability opening balance Additions Payments Accretion Exchange difference Lease liability ending balance Less current portion Long-term portion December 31 2022 $ 21,633 -- (6,203) 1,858 (1,674) 15,614 (4,664) $ 10,950 2021 $ -- 27,211 (6,870) 2,526 (1,234) 21,633 (4,578) $ 17,055 During the year ended December 31, 2021 the Company recognized right of use assets and a corresponding lease liability of $27,211. The incremental borrowing rate for the lease liability recognized was 10%. No other lease liability activity occurred during the year ended December 31, 2022. 50 7. SHARE CAPITAL (a) Common Shares Authorized, Issued and outstanding The authorized capital stock of the Company comprises an unlimited number of common shares with no par value. Issued and outstanding: 49,837,081 Common Shares as at December 31, 2022 and 49,499,581 at December 31, 2021. 1) Issued during the year ended December 31, 2022:  On July 12, 2022, 237,500 (C$0.09) options were exercised for proceeds of $16,452 (C$21,375). The fair value of $10,206 (C$13,276) was reclassified from contributed surplus to share capital.  On July 12, 2022, 100,000 (C$0.17) options were exercised for proceeds of $13,050 (C$17,000). The fair value of $8,726 (C$11,350) was reclassified from contributed surplus to share capital. 2) Issued during the year-ended December 31, 2021:  On January 25, 2021, 2,686,038 Units were issued at a price of C$0.50 for proceeds to the Company of $1,038,468 (C$1,321,409). Each unit includes one common share and one warrant entitling the holder thereof to purchase one Common Share until the close of business on January 25, 2023 at USD $0.55. $17,312 (C$21,610) of issuance costs were netted against the proceeds.  On February 10, 2021, 300,000 units were issued at a price of C$0.50 for proceeds to the Company of $113,353 (C$144,293). Each unit includes one common share and one warrant entitling the holder thereof to purchase one Common Share until the close of business on January 25, 2023 at USD $0.55. $4,596 (C$5,707) of issuance costs were netted against the proceeds.  On July 12, 2021, 50,000 options were exercised for proceeds of $34,137 (C$42,500). The fair value of $18,875 (C$23,500) was reclassified from contributed surplus to share capital.  On September 30, 2021, 143,801 warrants were exercised for proceeds of USD $79,090.  On December 31, 2021, 38,182 warrants were exercised for proceeds of USD $21,001.  On December 31, 2021, 115,500 options were exercised for proceeds of $45,680 (C$58,375). The fair value of $27,365 (C$40,245) was reclassified from contributed surplus to share capital. (b)Warrants As at December 31, 2021 and 2022, the following warrants were outstanding: Expiry Exercise price (USD) Warrants outstanding July 25, 2023* August 10, 2023* $0.55 $0.55 $0.55 2,504,055 300,000 2,804,055 Remaining contractual life (years) 0.56 0.61 0.57 *During the year-ended December 31, 2022, the expiry of the options has been extended from January 25, 2023 and February 10, 2023 to July 25, 2023 and August 10, 2023. Outstanding as at December 31, 2020 Issued Exercised Outstanding as at December 31, 2021 and 2022 Number of Warrants Weighted Average Exercise Price -- 2,986,038 (181,983) 2,804,055 -- $0.55 $0.55 $0.55 51  On January 25, 2021, the Company issued 2,686,038 warrants with an exercise price of $0.55, expiring on January 25, 2023. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity instruments. The values of the units are equal to the value of the common shares at the issuance date.  On February 10, 2021, the Company issued 300,000 warrants with an exercise price of $0.55, expiring on February 10, 2023. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity instruments. The values of the units are equal to the value of the common shares at the issuance date.  On September 30, 2021, 143,801 warrants were exercised for proceeds of USD $79,090.  On December 31, 2021, 38,182 warrants were exercised for proceeds of USD $21,001. No warrants were issued, exercised or expired during the year ended December 31, 2022. (c) Stock Option Plan The Company has a stock option plan (“SOP”) providing for the issuance of options that cannot exceed 9,830,420 shares of common stock. The Company may grant options to directors, officers, employees, and contractors, and other personnel of the Company or its subsidiaries. The exercise price of each option cannot be lower than the market price of the shares being the closing price of the Company’s common shares on the TSX Venture Exchange the day before the grant date. Options generally vest ratably over an eighteen month period, beginning with the date of issuance and every 6 months thereafter, and expire in five years from the date of grant as determined by the Board of Directors. On May 20, 2021, shareholders voted to increase the number of common shares of the Corporation reserved for issuance pursuant to the Stock Option Plan to 9,830,340 to reflect an amount equal to 20% of the outstanding common shares outstanding as at May 20, 2021. The following Table summarizes the Company’s stock option activity for the years ended December 31, 2022 and 2021: Outstanding as at December 31, 2020 Granted Exercised Expired Outstanding as at December 31, 2021 Granted Exercised Expired Outstanding as at December 31, 2022 Number of Options Weighted Average Exercise Price 2,706,250 925,000 (165,500) (425,000) 3,040,750 1,425,000 (337,500) (547,000) 3,581,250 C$0.48 C$0.67 C$0.61 C$0.76 C$0.49 C$0.39 C$0.12 C$0.80 C$0.43 2022  On January 1, 2022, the company granted 425,000 options at C$0.64.  On January 2, 2022, 125,000 stock options exercisable at C$0.69 expired.  On April 3, 2022, 350,000 stock options exercisable at C$0.85 expired.  On July 1, 2022, the company granted 1,000,000 options at C$0.29.  On July 12, 2022, 237,500 (C$0.09) options were exercised for proceeds of $16,452 (C$21,375).  On July 12, 2022, 100,000 (C$0.17) options were exercised for proceeds of $13,050 (C$17,000).  On November 21, 2022, 72,000 stock options exercisable at C$0.75 expired. 52 2021  On January 4, 2021, 175,000 stock options exercisable at C$0.72 expired.  On January 1, 2021, the Company granted 275,000 options at C$0.47.  On April 8, 2021, 250,000 stock options exercisable at C$0.79 expired.  On May 20, 2021, the Company granted 650,000 options at C$0.75.  On July 12, 2021, 50,000 options exercisable at C$0.85 were exercised.  On December 31, 2021, 25,000 options exercisable at C$0.07 were exercised.  On December 31, 2021, 12,500 options exercisable at C$0.09 were exercised.  On December 31, 2021, 50,000 options exercisable at C$0.69 were exercised.  On December 31, 2021, 28,000 options exercisable at C$0.75 were exercised. The weighted average trading price of the Company's shares on the dates of the exercises of stock options was C$0.70 (2021 - C$0.71) for the year ended December 31, 2022. The following assumptions were used in the Black Scholes option pricing model to fair value the stock options granted during the years ended December 31, 2022 and 2021: Expected lives 2022 2021 3.95 years 3.97 years Expected volatilities (based on Company’s historical prices) 113.56-116.22% 103.6-109.7% Expected dividend yield Risk free rates Weighted average fair value of option 0% 0% 1.11-2.84% 0.26-0.58% $0.30 $0.49 The following table summarizes stock options outstanding as at December 31, 2022: Options Outstanding Options Exercisable Exercise Price (C$) Number of Outstanding Options Weighted Average Exercise Prices (C$) Weighted Average Remaining Contractual Life (Years) Number of Exercisable Options Weighted Average Exercise Prices (C$) Weighted Average Remaining Contractual Life (Years) C$0.65 C$0.55 C$0.28 C$0.17 C$0.07 C$0.09 C$0.47 C$0.75 C$0.64 C$0.29 175,000 450,000 50,000 375,000 162,500 118,750 275,000 550,000 425,000 1,000,00 0 3,581,250 C$0.65 C$0.55 C$0.28 C$0.17 C$0.07 C$0.09 C$0.47 C$0.75 C$0.64 C$0.29 C$0.43 0.01 0.23 1.00 1.43 2.01 2.72 3.00 3.39 4.00 4.50 2.85 175,000 450,000 50,000 375,000 162,500 118,750 275,000 550,000 212,500 250,000 2,618,750 C$0.65 C$0.55 C$0.28 C$0.17 C$0.07 C$0.09 C$0.47 C$0.75 C$0.64 C$0.29 C$0.44 0.01 0.23 1.00 1.43 2.01 2.72 3.00 3.39 4.00 4.50 2.31 53 8. INCOME TAXES The recovery of income taxes varies from the amounts that would be computed by applying the Canadian federal and provincial statutory rate for 2022 of approximately 27% (2021: 27%) to loss before income taxes as follows: Loss for the year Income tax rate Expected income tax recovery Foreign operation taxed at lower rates Permanent differences Change in benefits not recognized Provision for income taxes December 31, 2022 December 31, 2021 ($2,019,718) ($1,316,206) 27.00% ($545,324) 50,135 78,807 416,382 $ -- 27.00% ($355,376) 4,420 76,654 274,302 $ -- As of December 31, 2022, the following deferred tax assets and liabilities have been recognized: Property, Plant and Equipment Exploration & Evaluation Assets Deferred tax liabilities Tax losses carried forward Net deferred income tax asset recorded December 31, 2022 December 31, 2021 ($19,000) (2,066,000) (2,085,000) 2,085,000 $-- ($24,000) (2,424,000) (2,448,000) 2,448,000 $-- As at December 31, 2022, the Company has unrecognized deductible temporary differences aggregating to $14,434,000 (2021: $13,082,000), that are available to offset future taxable income. However, these temporary differences relate to companies with a history of losses, and as a result are not recognized. Losses carried forward - Botswana Losses carried forward - Canada Other December 31, 2022 $4,812,000 9,263,000 359,000 December 31, 2021 $4,232,000 8,435,000 415,000 $14,434,000 $13,082,000 The Canadian tax losses of $9,263,000 (2021: $8,435,000) expire from 2026 through to 2042. The majority of Botswana tax losses can be carried forward indefinitely with the remainder expiring within five years. 54 9. RELATED PARTY TRANSACTIONS Remuneration of Key Management Personnel of the Company Short term employee remuneration and benefits Stock-based compensation Total compensation attributed to key management personnel For the year ended December 31 2022 2021 $333,333 238,221 $571,554 $298,000 270,792 $568,792  During the year, an individual related to the CEO provided administrative and management services to the Company and was remunerated in 2022 in the amount of $48,000 (2021: $48,000).  During the year, an individual related to key management personnel of the Company received $NIL in stock-based compensation during the year (2021: $5,970).  During the year, a board member was issued notes in the amount of $643,337 (2021: $207,736).  As at December 31, 2022, there was a total of $26,852 (2021: $112,611) payables to related parties included within accounts payable and accrued liabilities. The amounts are unsecured, non-interest bearing and are due on demand. There are no other related party transactions. 10. SEGMENTED INFORMATION The Company is operating in one industry. As at December 31, 2022 the Company’s property, plant and equipment in Botswana was $137,882 (2021: $212,009) and exploration and evaluations properties in Botswana were $5,572,595 (2021: $6,813,782). 11. FINANCIAL INSTRUMENTS The Company’s financial instruments include cash, accounts receivable, accounts payable and accrued liabilities, lease liabilities and notes payable. The fair value of financial instruments is determined by valuation methods depending on hierarchy levels as defined below: 1. 2. 3. Level 1 of the fair value hierarchy includes unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 of the hierarchy includes inputs that are observable for the asset or liability, either directly or indirectly; and Level 3 includes inputs for the asset or liability that are not based on observable market data. The Company has no financial instruments measured at fair value. Risk Exposure and Management The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include liquidity risk, credit risk, foreign exchange risk, and interest rate risk. Where material these risks are reviewed and monitored by the Board of Directors. (a) Capital Management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and exploration of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. The Company depends on external financing to fund its activities. The capital structure of the Company currently consists of common shares and stock options. The Company manages the capital structure and 55 makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, acquire or dispose of assets or adjust the amount of cash on hand. The Company anticipates continuing to access equity markets to fund continued exploration of its mineral properties and the future growth of the business. However, there is no guarantee that such financing will be available when required. There has been no change in the Company’s approach to capital management during 2022. The Company is not subject to externally imposed capital requirements. (b) Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company is considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in order to continue its exploration programs. Despite previous success in acquiring these financings, there is no guarantee of obtaining future financings. The Company has a working capital deficiency of $2,570,493 at December 31, 2022 (2021: $1,791,640). (c) Credit Risk Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet it contractual obligations. The Company’s credit risk is primarily attributable to its cash balances. The Company limits exposure to credit risk through maintaining its cash with high-credit quality financial institutions. The majority of the Company’s cash is held with a major Canadian based financial institution. (d) Interest Rate Risk The Company’s exposure to interest rate risk arises from the interest rate impact on its cash. Because the cash is held on deposit at financial institutions and may be withdrawn at any time, and the notes payable have fixed interest rates, the Company’s exposure to interest rate risk is not significant. (e) Foreign Exchange Risk The Company is exposed to currency risks on its Pula denominated working capital balances due to changes in the USD/BWP exchange rate. Based on the net Pula denominated financial instruments exposures as at December 31, 2022, a ten percentage change in the exchange rate would result in approximately a $36,444 [2021: ($84,000)] impact to the Company’s net comprehensive income/(loss). The Company issues equity in Canadian dollars and the majority of its expenditures are in U.S. dollars. The Company purchases U.S. dollars based on its near term forecast expenditures and does not hedge its exposure to currency fluctuations. 12. COMMITMENTS AND CONTINGENCIES Prospecting Licenses The Company holds prospecting licenses which require the Company to spend a proposed minimum amount on prospecting over the period of the licenses. The Company has mineral interest commitments with its Bosoto and Gcwihaba licenses. The Company is to make exploration expenditures of approximately $3,089,586 (40,002,000 BWP) by September 30, 2023 on its PL369/2014 Bosoto license and approximately $619,438 (8,020,080 BWP) by December 31, 2023 on its Gcwihaba licenses. 56 Lease & Service Commitments Currently, the aggregate minimum annual payments are as follows: Year Facility Term BWP 2023 2023 2023 2023 Hangar Maun1 2/01/2016 – 12/31/2026 Shakawe Plot2 1/01/2021 – 12/31/2025 2/01/2022 – 1/31/2023 Letlhakane Plot4 2/21/2018 – 12/31/2068 Gaborone3 Total Yearly Rental Services 24,527 - 98,000 - 163,512 77,880 - 29,998 Total 188,039 77,880 98,000 29,998 USD* $14,523 6,015 7,570 2,317 $30,425 *aggregate costs converted at January 1 of the current calendar year 1 Newdico purchased the hangar facility from Commercial Holdings (Pty) Ltd. (CHPT) in February 2016. The hangar facility resides on a commercial plot located at the Maun International Airport rented by CHPT from Civil Aviation Authority of Botswana (CAAB). The purchase agreement called for a transfer of the CPHT/CAAB lease to Newdico upon purchase of the hangar facility. The parties all agree to the transfer to take place but to date, the lease transfer has not occurred. The lease has an effective date of January 1, 2016 and continues for 10 years at 8% escalation annually which may be reviewed very three (3) years at market and commercial rates. As at February 1, 2023, the monthly lease payment is 13,710 BWP / month in addition to a fee of 15% of monthly rental for security and general maintenance at the airport complex. 2 The lease has an effective date of January 1, 2021 and is renewable at the Company’s option for an additional 6 years expiring on December 31, 2025. The monthly lease payment is 6,490 BWP increasing 420 BWP annually in each successive year. 3 The twelve month service agreement has an effective date of February 1, 2023 and is renewable at the company’s option for an additional year expiring January 31, 2024. The monthly lease payment is 8,000 BWP/month. 4 The lease term has an effective date of February 2018. Newdico’s obligations under the lease are effective as of October 1, 2020. The lease cost is 29,998 BWP per annum which may be reviewed every five (5) years at market and commercial rates. The lease has a term of fifty (50) years cancelable by either party on six (6) months notice. 13. Litigation On or about June 30, 2021, the Company's wholly owned Botswana subsidiary, Gcwihaba Resources (Pty) Ltd. (Gcwihaba) submitted prospecting renewal license applications for its Xaudum Iron Formation project in northwest Botswana. Of the then current 7 licenses, two licenses were relinquished in their entirety and 5 were submitted for renewal. Collectively 50% of the combined license area in the 7 licenses was relinquished pursuant to Section(s) 17 and 19 of the Mines and Minerals Act. Four of the five licenses were renewed as submitted, effective January 1, 2022, while the fifth license, PL020/2018, continued in renewal. It was determined that the license remaining up for renewal is in the buffer zone surrounding the Okavango Delta, a UNESCO World Heritage Property, and that any prospecting activities in that area would be subject to environmental assessment measures. The Minister of Minerals and Energy informed Gcwihaba that the license would not be renewed if it included any areas located within the buffer zone. The Company has filed a renewed application and has initiated litigation in the belief that no laws or regulations have been broken and that the license should be renewed. Litigation is underway and the outcome of litigation cannot be known at this time. 5714. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS Net change in non-cash working capital balances: (Increase) decrease in accounts receivable and prepaid expenses Increase (decrease) in accounts payable and accrued liabilities Increase in notes payable for operating activities Total Non-cash Financing and Investing Activities: Issuance of common shares for accounts payable and accrued liabilities lliabilitiliabilitiedliabilities Issuance of common shares for notes payable Reclassification of accounts payable to notes payable Lease assets acquired Fair value of options exercised 15. SUBSEQUENT EVENTS On January 1, 2023, the company granted 650,000 options exercisable at C$0.20. On January 2, 2023, 175,000 stock options exercisable at C$0.65 expired. On March 25, 2023, 450,000 stock options exercisable at C$0.55 expired. For the year ended December 31 2022 2021 ($ 27,065) $ 24,593 216,671 643,337 277,010 229,287 $832,943 $530,890 $ 6,927 $ -- $ 228,449 $ 295,616 $ 643,337 $ (207,735) $ -- $ 18,932 $ 27,211 $ -- On January 25, 2023, 2,500,941 units were issued at a price of C$0.20 for proceeds to the Company of $368,394 (C$500,188). Each unit includes one common share and one warrant entitling the holder thereof to purchase one common share until the close of business on January 25, 2025 at USD $0.20. 58 Corporate Information DIRECTORS James M. Bruchs, Chairman McLean, Virginia Appointed as director in 2002 Jonathan R. Kelafant Lexington, Virginia Appointed as director in 2007 Thomas S. Bruington Vancouver, British Columbia Appointed as director in 2013 Mark Scowcroft Victoria, Seychelles Appointed as director in 2015 Blackie Marole Gaborone, Botswana Appointed as director in 2017 OFFICERS James M. Bruchs, B.Sc., J.D. Chairman and Chief Executive Officer Appointed in 2002 Gary A. Bojes, CPA, Ph.D. Chief Financial Officer Appointed in 2007 Bettina Bruchs, M.A. Corporate Secretary Appointed in 2018 CORPORATE HEAD OFFICE 1 King Street West, 48th Floor Toronto, ON M5H 1A1 Canada Telephone: (416) 800-4214 Facsimile: (416) 987-4369 Website: www.TsodiloResources.com E-Mail: info@TsodiloResources.com AUDITORS Crowe Mackay LLP Vancouver, Canada LEGAL COUNSEL Norton Rose Fulbright, LLP Toronto, Ontario REGISTRAR AND TRANSFER AGENT Computershare Trust Company of Canada Toronto, Ontario STOCK EXCHANGE LISTINGS TSX Venture Exchange Trading Symbol: TSD OTCQB (US) Trading Symbol: TSDRF Frankfurt Stock Exchange Trading Symbol TZO -bc-

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