Bluestone Resources : 1st Quarter

BLUESTONE RESOURCES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR

THE THREE MONTHS ENDED MARCH 31, 2023

The following Management's Discussion and Analysis ("MD&A") of the financial condition and results of operations of Bluestone Resources Inc. ("Bluestone" or the "Company") constitutes management's review of the factors that affected the Company's financial and operating performance for the three months ended March 31, 2023. The MD&A was prepared as of May 2, 2023, and should be read with the unaudited condensed interim consolidated financial statements and related notes for the three months ended March 31, 2023, which can be found along with other information of the Company on SEDAR at www.sedar.com. All figures are in United States ("U.S.") dollars unless otherwise stated. References to C$ are to Canadian dollars. The unaudited condensed interim consolidated financial statements and related notes for the three months ended March 31, 2023 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") applicable to the preparation of interim financial statements, including International Accounting Standard 34, Interim Financial Reporting.

Forward-Looking Statements

This MD&A contains "forward-looking information" within the meaning of Canadian securities legislation and "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). All statements, other than statements of historical fact, that address activities, events, or developments that the Company believes, expects, or anticipates will or may occur in the future including, without limitation: expectations regarding the approval of an environmental permit amendment, other required permits and expected project timelines; life of mine production and the production profile of the Cerro Blanco Project ("Cerro Blanco" or the "Project"); capital requirements; mineral reserve estimates; forecasts regarding Guatemala's energy mix; expectations that greater private sector engagement will carry out projects of generation and transmission through the development of public-private partnerships; expectations regarding the availability of, and ability to secure, funding; expectations regarding the Company's ability to meet its existing obligations and commitments and fund ongoing operations; expectations regarding the need for, and use of, further funding and sources of same; expectations regarding actual funding requirements; management's expectations regarding the Company's ability to raise equity capital and/or debt as required and the potential that the Company's planned initiatives or other work programs may be postponed or otherwise revised; power availability and cost; the impact of commodity prices; expectations and impacts regarding groundwater dewatering; expectations regarding site land negotiations; estimates regarding working capital requirements; the issuance of common shares under the Loan; expectations relating to social acceptance of the Project and the nature of community and socio-political opposition; the impact of geopolitical conflict, epidemics or pandemics and inflation; the Company's belief that challenges including technical challenges such as hot water management can be managed; the Company's intended approach regarding the payment of dividends; the expected timing of the completion of offsite infrastructure and potential benefits; the Company's ability to attract and retain qualified personnel; expectations regarding climate change regulatory trends and the associated costs of compliance; the objectives and benefits of the feasibility study on Cerro Blanco titled "N.I. 43-101 Technical Report & Feasibility Study of the Cerro Blanco Gold Project, Department of Jutiapa, Guatemala" dated April 6, 2022 with an effective date as of February 22, 2022 and filed on the Company's profile at www.sedar.comon April 6, 2022 (the "Feasibility Study"); and the estimated value of the Project. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to Bluestone and often use words such as "expects", "plans", "anticipates", "estimates", "intends", "may", or variations thereof or the negative of any of these terms.

All forward-looking statements are made based on Bluestone's current beliefs as well as various assumptions made by Bluestone and information currently available to Bluestone. Generally, these assumptions include, among others: the presence of and continuity of metals at the Project at estimated grades; the availability of personnel, machinery, and equipment at estimated prices and within estimated delivery times; currency exchange rates; metals sales prices and exchange rates assumed; appropriate discount rates applied to the cash flows in economic analyses; tax rates and royalty rates applicable to the proposed mining operations; the availability of acceptable financing; the impact of the novel coronavirus pandemic ("COVID-19"); anticipated mining losses and dilution; success in realizing proposed operations; and anticipated timelines for community consultations and the impact of those consultations on the regulatory approval process.

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Bluestone Resources Inc.

Management's Discussion & Analysis

For the three months ended March 31, 2023

Forward-Looking Statements (cont'd)

Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of Bluestone to differ materially from those discussed in the forward-looking statements and, even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, Bluestone. Factors that could cause actual results or events to differ materially from current expectations include, among other things: risks related to increasing community opposition to the Project and its effect on permitting and Project timelines; potential changes to the mining method and the current development strategy; risks and uncertainties related to expected production rates; timing and amount of production and total costs of production; risks and uncertainties related to the ability to obtain, amend, or maintain necessary licenses, permits, or surface rights; risks associated with technical difficulties in connection with mining development activities; risks and uncertainties related to the accuracy of mineral resource estimates and estimates of future production, future cash flow, total costs of production, and diminishing quantities or grades of mineral resources; changes in Project parameters as plans continue to be refined; title matters; risks associated with geopolitical uncertainty and political and economic instability in Guatemala; risks related to global epidemics or pandemics and other health crises, including the impact of COVID-19; risks and uncertainties related to interruptions in production; risks related to Project working conditions, accidents or labour disputes; the possibility that future exploration, development, or mining results will not be consistent with Bluestone's expectations; uncertain political and economic environments and relationships with local communities and governmental authorities; risks relating to variations in the mineral content and grade within the mineral identified as mineral resources from that predicted; variations in rates of recovery and extraction; developments in world metals markets; risks related to fluctuations in commodity prices and currency exchange rates; risks related to environmental hazards and infrastructure; compliance with governmental laws and regulations, including anti-corruption laws, and associated costs of compliance; tax risks; reliance on third parties and risk associated with foreign subsidiaries; risks associated with having a limited operational history; risks related to substantial capital requirements; acquisition risk; future sales or issuances of common shares; risks related to competition and dependence on key personnel; risks related to conflicts of interest; uninsurable risks; risks related to changes in climate conditions; risks related to control persons; information technology security risks; litigation risk; geopolitical risks and conflict; and inflation. For a further discussion of risks relevant to Bluestone, see "Risk Factors" in the Company's annual information form ("AIF") for the year ended December 31, 2022, available on the Company's SEDAR profile at www.sedar.com.

Any forward-looking statement speaks only as of the date on which it was made, and except as may be required by applicable securities laws, Bluestone disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results, or otherwise. Although Bluestone believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance, and accordingly, undue reliance should not be put on such statements due to their inherent uncertainty. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

Qualified Person

The scientific and technical disclosure in this MD&A has been reviewed and approved by David Cass, P.Geo., Vice President Exploration, who is a Qualified Person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("N.I. 43-101").

Overview

Bluestone is a Canadian-based precious metals exploration and development company focused on opportunities in Guatemala. The Company's flagship asset is Cerro Blanco, a near surface mine development project located in Southern Guatemala in the department of Jutiapa. The Company's head and registered office is located at 2000 - 885 West Georgia Street, Vancouver, BC, V6C 3E8. The Company trades under the symbol "BSR" on the TSX Venture Exchange ("TSXV") and "BBSRF" on the OTCQB.

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Bluestone Resources Inc.

Management's Discussion & Analysis

For the three months ended March 31, 2023

Highlights for the Three Months Ended March 31, 2023

• On January 30, 2023, the Company announced that it had extended the term of the previously announced $30 million loan (the "Loan") with Zebra Holdings and Investments S.à.r.l, and Lorito Holdings S.à.r.l (the "Lender") that was due to expire March 11, 2023. In consideration for the Loan, the Company will issue 4,000 common shares per month (pro-rated for partial months) for each $1 million of the principal amount outstanding under the Loan from time to time up to March 11, 2024.

Project Updates

Cerro Blanco

The Company has one principal mining property interest, namely Cerro Blanco. Elevar Resources, S.A., formerly Entre Mares de Guatemala S.A., a wholly-owned subsidiary of the Company, is the 100% owner of Cerro Blanco. An exploitation license for Cerro Blanco was granted in 2007. The Company is in the process of amending Cerro Blanco's environmental permit to capture the change from underground to surface mining method.

Permit amendment application

The environmental permit amendment application was submitted to the Guatemalan national authorities in 2021. The amendment application is a comprehensive document that covers all aspects of the Project in detail, building on the historical data and the previously approved 2007 Environmental Impact Assessment, to incorporate the new surface mining method. The Company has been in regular contact with the relevant authorities as they complete their technical reviews, including site visits and providing responses to questions and comments on the application. As part of the permit review process, the Guatemala Ministry of Environment (the "MARN") completed their site visit in January 2023. The Company is waiting for the formal response with comments and questions from the MARN to conclude the technical review of the Project.

Mita Geothermal Project ("Mita Geothermal")

The Company owns a 100% interest in Mita Geothermal through its wholly-owned subsidiary, Geotermia Oriental de Guatemala, S.A. ("Geotermia"). Mita Geothermal is a geothermal energy resource located adjacent to Cerro Blanco and is 7 kilometers from the Pan American Highway near the town of Asuncion Mita, in the region of Jutiapa in Guatemala. In November of 2015, the Government of Guatemala granted Geotermia a 50-year license to build and operate up to a 50- megawatt geothermal plant.

It is currently forecasted that Guatemala's energy matrix will transition to a more renewable mix as Guatemala has stated it is promoting more renewable energy usage and expanding the regional market. It is expected that greater private sector engagement will carry out projects of generation and transmission through the development of public-private partnerships. The Company continues to evaluate advancement options for Mita Geothermal as these developments occur.

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Bluestone Resources Inc.

Management's Discussion & Analysis

For the three months ended March 31, 2023

Results of Operations for the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The Company's net loss for the three months ended March 31, 2023, totaled $3,225,505 or $0.02 per share as compared to a net loss of $6,689,664 or $0.04 per share for the three months ended March 31, 2022. Significant expenditures and variances are as follows:

	Three Months Ended	Three Months Ended	(Increase) Decrease in
	March 31, 2023	March 31, 2022	Net Loss
Exploration and evaluation expenses (1)	$1,344,263	$5,226,272	$3,882,009
General and administration
Salaries and wages (2)	574,868	546,001	(28,867)
Share-based compensation	480,300	629,108	148,808
Office and general	205,485	388,806	183,321
Professional fees	83,296	141,340	58,044
Corporate listing and filing fees	49,348	60,635	11,287
Advertising and promotion	20,053	70,806	50,753
	(2,757,613)	(7,062,968)	4,305,355
Interest income	44,037	26,135	17,902
Finance expenses	(179,931)	(16,564)	(163,367)
Accretion expense	(216,160)	(110,766)	(105,394)
Gain on disposal of property, plant &
equipment	98,456	-	98,456
Other income	-	3,901	(3,901)
Foreign exchange loss	(39,363)	(720)	(38,643)
Loss before income tax	(3,050,574)	(7,160,982)	4,110,408
Income tax (expense) recovery (3)	(174,931)	471,318	(646,249)
Net loss	($3,225,505)	($6,689,664)	$3,464,159

1. Exploration and evaluation expenses for the three months ended March 31, 2023 and 2022, were for the following:

	Three Months Ended	Three Months Ended
	March 31, 2023	March 31, 2022
Cerro Blanco general and exploration expenditures	$1,196,106	$2,878,431
Corporate social responsibility and community relations	76,804	599,590
Cerro Blanco feasibility study, preliminary economic
assessment and pre-development expenditures	-	1,661,618
Mita Geothermal evaluation	-	2,364
Depreciation	71,353	84,269
	$1,344,263	$5,226,272

1. General and administration salaries and wages were higher for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, due to severance expenses.
2. Income tax (expense) recovery is due to the (increase) decrease of a deferred income tax liability due to the effects of foreign exchange on the tax basis of property, plant and equipment and the exploration and evaluation asset in Guatemala. The tax basis of the assets in Guatemala still exceeds the accounting basis, but the excess which existed at the date of acquisition is treated as a permanent difference for tax accounting purposes.

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Bluestone Resources Inc.

Management's Discussion & Analysis

For the three months ended March 31, 2023

Summary of Quarterly Results

The following table summarizes selected financial data reported by the Company for the three months ended March 31, 2023, and the previous seven quarters. The Company's unaudited condensed interim consolidated financial statements are reported under IFRS applicable to interim financial reporting.

	March 31,	December	September	June 30,	March 31,	December	September	June 30,
	2023	31, 2022	30, 2022	2022	2022	31, 2021	30, 2021	2021
Current assets	$2,420,618	$2,445,187	$2,297,623	$3,805,526	$12,163,984	$18,962,861	$32,547,978	$42,179,739
Property, plant and
equipment	22,748,998	23,639,371	24,158,370	24,959,094	24,013,184	22,221,840	14,201,894	9,046,892
Exploration and
evaluation assets	30,126,433	30,126,433	30,126,433	30,126,433	30,126,433	30,126,433	30,126,433	30,126,433
Total assets	57,035,212	57,956,356	58,326,913	60,659,906	68,080,431	73,080,302	78,642,612	83,116,580
Current liabilities	12,919,451	11,161,780	8,576,932	5,826,246	5,930,381	4,839,224	4,316,707	2,732,570
Working capital (deficit)	(10,498,833)	(8,716,593)	(6,279,309)	(2,020,720)	6,233,603	14,123,637	28,231,271	39,447,169
Net loss	(3,225,505)	(2,480,949)	(5,204,946)	(8,317,451)	(6,689,664)	(7,269,408)	(7,129,181)	(7,537,260)
Basic and diluted loss
per share	(0.02)	(0.02)	(0.03)	(0.06)	(0.04)	(0.05)	(0.05)	(0.05)
Weighted avg. shares
outstanding	151,261,519	151,198,411	151,164,655	151,149,788	150,682,416	150,188,918	150,158,483	150,144,563

Increases in property, plant and equipment during 2021 and 2022 were mainly due to purchases of land required for the Cerro Blanco open pit development scenario. Increases in current liabilities during 2021 and 2022 were mainly due to the Loan payable (see "Liquidity and Capital Resources") and liabilities relating to the purchases of land. Quarterly results mainly fluctuate due to the level of exploration and evaluation activities, such as drilling programs and engineering activities, and fluctuations in the C$/US$ rate. There are no seasonal fluctuations in the results for the presented periods.

Liquidity and Capital Resources

Cash increased by $118,348 during the three months ended March 31, 2023, from $1,743,139 as at December 31, 2022, to $1,861,487 as at March 31, 2023. Cash utilized in operating activities during the three months ended March 31, 2023, was $2,890,976 (three months ended March 31, 2022 - $6,896,178). Cash generated by investing activities during the three months ended March 31, 2023, was $1,007,038 (three months ended March 31, 2022 - cash used of $1,255,046), mainly from the disposal of property, plant and equipment. During the three months ended March 31, 2023, the Company generated cash from financing activities, mainly from drawing on a loan facility, of $2,000,000 compared to $497,328 during the three months ended March 31, 2022.

As at March 31, 2023, share capital was $180,000,654 and was comprised of 151,319,367 issued and outstanding common shares (December 31, 2022 - $179,878,018 comprised of 151,236,141 shares outstanding). The increase in outstanding common shares during the three months ended March 31, 2023, was due to shares issued in relation to the Loan. Reserves, which increased due to the vesting of stock options, were $12,650,942 (December 31, 2022 - $12,170,642). As a result of the net loss for the three months ended March 31, 2023, the deficit at March 31, 2023, increased to $171,664,339 from $168,438,834 at December 31, 2022. Accordingly, shareholders' equity on March 31, 2023, was $31,908,150 compared to $34,544,293 at December 31, 2022.

At present, the Company's operations do not generate cash inflows and its financial success is dependent on its ability to advance Cerro Blanco and Mita Geothermal. This can take many years and is subject to factors that are beyond the Company's control. See "Risks and Uncertainties".

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