Management's Discussion & Analysis of

Financial Conditions & Results of Operations

For the Three and Nine Months Ended September 30, 2022

CORNERSTONE CAPITAL RESOURCES INC.

Management's Discussion & Analysis of Financial Conditions & Results of Operations for the three and nine months ended September 30, 2022

The following management's discussion and analysis, dated November 28, 2022, should be read in conjunction with Cornerstone Capital Resources Inc. (the "Company" or "Cornerstone")'s unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended September 30, 2022 and 2021 and the audited consolidated financial statements and related notes for the years ended December 31, 2021 and 2020. All dollar amounts are stated in Canadian dollars, unless otherwise noted.

This discussion includes certain statements that may be deemed forward-looking statements. All statements in this discussion, other than statements of historical facts, that address exploration drilling, exploration activities and events or developments that Cornerstone expects are forward-looking statements. Although Cornerstone believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and investors are cautioned that actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include market prices, exploration results, anti-mining sentiment in certain regions of Ecuador, continued availability of capital and financing and general economic, market or business conditions.

Description of Business

Cornerstone is incorporated under the laws of Alberta, Canada and has its principal office in Ottawa, Ontario, Canada. The Company, through its wholly-owned subsidiaries, its 15% shareholding in Exploraciones Novomining S.A. ("ENSA"), and its 12.5% shareholding in La Plata Minerales S.A. ("PLAMIN"), is engaged in the evaluation, acquisition and exploration of mineral properties in Ecuador and Chile. The Company is a prospect generator following the joint venture model, and plans to advance the properties to the drill ready stage and option them to third parties under farm-in/joint venture arrangements, or sell the properties outright. In exceptional cases and subject to the availability of financing, the Company may consider drilling the properties itself without a funding partner.

At September 30, 2022, the Company and its subsidiaries had a total of 21 concessions in Chile and five concessions in Ecuador (not counting the Cascabel concession held by ENSA). The Company's four concessions in Ecuador (not counting the Cascabel concession held by ENSA, the Bramaderos concession held by PLAMIN, and the concessions held by Ecuador's State Mining Company ENAMI EP ("ENAMI") for the benefit of the ENAMI-Cornerstone Ecuador S.A. ("CESA") Strategic Exploration Alliance (the "ENAMI-CESA SEA") - see below under Strategic Alliance with Ecuadorian State Mining Company ENAMI) are Bella Maria, Caña Brava, Tioloma, and Shyri NW (containing the Vetas Grandes prospect).

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Results of Operations

For the three and nine months ended September 30, 2022, compared with September 30, 2021:

During the three and nine months ended September 30, 2022, the Company had a net loss before other comprehensive loss of $2,779,622 and $6,505,341 compared to a net loss before other comprehensive loss of $2,253,251 and $5,459,427 for the three and nine months ended September 30, 2021 respectively. During the three and nine months ended September 30, 2022, the Company had other comprehensive (loss) income of ($89,075,020) and ($93,789,250) compared to ($4,714,230) and ($10,999,870) for the three and nine months ended September 30, 2021 respectively. The other comprehensive loss relates to the change in valuation of the long-term investment in ENSA and the SolGold plc ("SolGold") marketable securities during the period. Refer to the financial statements for the three and nine months ended September 30, 2022, as well as the year ended December 31, 2021, for more details regarding the change in valuation as well as the valuation method used to determine the value of the investment in ENSA.

Expenses from the operations of the Company during the three and nine months ended September 30, 2022, were $2,782,863 and $6,533,861 compared to $2,321,741 and $5,575,338 for the three and nine months ended September 30, 2021. The most notable variances in expenses are:

Exploration and evaluation expenses were $952,118 and $3,107,849 for the three and nine months ended September 30, 2022 compared to $1,475,729 and $3,543,552 for the same periods in 2021. The decrease in expenditure is primarily due to the Company spending less on non-partner-funded projects (primarily Espejo in the ENAMI-CESA SEA and Bella Maria) during the first three quarters of 2022.

General & Administrative expenses were $124,722 and $355,306 for the three and nine months ended September 30, 2022 compared to $115,830 and $310,347 for the same periods in 2021. The increase is due to slightly higher overhead costs for insurance and general expenses compared to 2021.

Share-BasedPayments were $567,359 and $1,310,066 for the three and nine months ended September 30, 2022 compared to $544,627 and $660,633 for the same periods in 2021. The increase is due to timing and price of options granted during the period.

Accounting, audit and legal fees were $1,086,248 and $1,314,211 for three and nine months ended September 30, 2022, compared to $143,729 and $340,122 for the same periods in 2021. The increase is primarily due to increased legal fees incurred in 2022 for the merger of the Company with SolGold announced October 7, 2022. (See "Subsequent Events").

Consulting fees were $182,246 and $538,600 for three and nine months ended September 30, 2022, compared to $177,111 and $627,242 for the same periods in 2021. The decrease in the nine month comparison is primarily due to performance bonuses paid to the CEO and CFO in the prior year. No bonuses have been paid in 2022.

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Exploration and evaluation assets

Net exploration expenditures of $952,118 (September 30, 2021 - $1,475,729) and $3,107,849 (September 30, 2021 - $3,543,552) were incurred during the three and nine months ended September 30, 2022. Please also see text in the "Results of Operations Section" labelled Exploration and evaluation

expenses.

Three months ended

Nine months ended

September 30,

September 30,

September 30,

September 30,

2022

2021

2022

2021

Geographical

Exploration and

Exploration and

Exploration and

Exploration and

Evaluation

Evaluation

Evaluation

Evaluation

Area

expenditures

expenditures

expenditures

expenditures

$

$

$

$

Chile

3,444

(319)

5,529

(899)

Ecuador

948,674

1,476,048

3,102,320

3,544,451

952,118

1,475,729

3,107,849

3,543,552

Exploration expenditures incurred in Ecuador for the three and nine months ended September 30, 2022 have decreased by $527,374 and $442,131, respectively, compared to September 30, 2021, as a result of a decrease in expenditures on non-partner funded projects. Exploration expenditures in Chile increased by $3,763 and $6,428, respectively, compared to September 30, 2021, as a result of slightly higher legal and administrative costs.

On August 28, 2019, Sunstone Metals Inc. ("Sunstone") had spent the required amount to acquire its initial 51% interest in the Bramaderos property. On January 7, 2020 the farm-in arrangement was amended to provide Sunstone with an 87.5% interest, leaving the Company with a 12.5% interest carried by Sunstone through to the start of commercial production and repayable at Libor plus 2% out of 90% of Cornerstone's share of earnings or dividends from Bramaderos.

Financial Conditions, Liquidity and Capital Resources

At September 30, 2022, the Company had cash balances of $2,346,461 (December 31, 2021 - $6,228,822) and current liabilities of $1,314,934 (December 31, 2021 - $540,056). To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, the Board of Directors of Cornerstone (the "Board of Directors") considers securing additional funds through equity, partnering transactions or sale of assets. All the Company's financial liabilities are normally paid within 30 days and are subject to normal trade terms. The Company has no source of operating cash flow to fund its exploration and development projects. Funding for projects requires equity financing or partner funding. The Company has limited financial resources and there is no assurance that funding will always be available to allow the Company to fulfill its obligations on existing or future exploration projects.

Outstanding Share Data

At September 30, 2022, the Company had 36,921,279 common shares outstanding. The Company had 2,451,875 stock options outstanding at September 30, 2022, at various exercise prices as shown in the following table, and no warrants outstanding at September 30, 2022:

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Exercise

Options

Contractual

Options

Options

Years

Expiry date

Grant date

remaining to

price

outstanding

Life (years)

vested

unvested

maturity

12-Jul-22

12-Jul-17

$9.05

-

5

-

-

0.00

12-Sep-2312-Sep-18

$4.30

811,875

5

811,875

-

0.31

05-Aug-2406-Aug-19

$4.00

500,000

5

500,000

-

0.38

09-Aug-2610-Aug-21

$4.00

490,000

5

326,667

163,333

3.86

29-Mar-27

29-Mar-22

$4.50

275,000

5

91,667

183,333

4.50

13-Jul-27

13-Jul-22

$3.29

375,000

5

125,000

250,000

4.79

2,451,875

1,855,209

596,666

On July 12, 2022, 375,000 options to purchase common shares of the Company at an exercise price of $9.50 per option (the "options") expired unexercised.

On July 13, 2022, the Board of Directors of the Company granted 375,000 stock options to directors and officers. These options were priced at $3.29, have an expiry date of July 13, 2027, and vest in three equal tranches over an 18-month period with the first tranche vesting immediately..

Financial Instrument Risk

The Corporation's financial assets and financial liabilities are exposed to various risk factors that may affect the fair value presentation or the amount ultimately received or paid on settlement of its assets and liabilities. A summary of the major financial instrument risks and the Corporation's approach to the management of these risks are highlighted below.

Credit risk

Credit risk refers to the potential loss arising from any failure by counterparties to fulfill their obligations, as and when they fall due. It is inherent to the business that potential losses may arise due to the failure of its counterparties to fulfill their obligations on maturity periods or due to adverse market conditions. The Company's financial assets exposed to credit risk are primarily composed of cash, and accounts receivable (trade and other). Maximum exposure is equal to the carrying values of these assets. The Company's cash is held at several large financial institutions. Funds are kept in Canadian banks in CAD and USD accounts and transferred on a monthly basis as needed to Ecuador and Chile, whose banking systems and standards for professional services are comparable to those in North America.

As of the date of the MD&A, the Company's receivables are with the Canadian government and other recognized creditworthy third parties.

Foreign currency risk

The Company transacts much of its business in US dollars, the currency of Ecuador, and therefore is subject to foreign exchange risk on US dollar receivables, trade payables and cash balances. The Company attempts to mitigate these risks by keeping its expected US dollar expenditures in US dollar accounts (which helped to avoid the adverse impact of a decline in the value of the Canadian dollar). The Company believes that it adequately manages its foreign exchange risk, and the risk is minimal. The following table shows the net exposures in US dollar accounts presented in Canadian dollars.

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Disclaimer

Cornerstone Capital Resources Inc. published this content on 26 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 November 2022 00:04:08 UTC.