Kuya Silver : Financial Statement (December 31, 2023)

KUYA SILVER CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

FISCAL YEAR ENDED DECEMBER 31, 2023

(Expressed in US Dollars)

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of

Kuya Silver Corporation

Opinion

We have audited the accompanying consolidated financial statements of Kuya Silver Corporation (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity, and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit 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 indicates that management estimates additional funding will be required to continue current operations and further advance its existing exploration and evaluation assets in the upcoming year. As stated in Note 1, these events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company'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 current year. 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.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our auditor's report.

Assessment of Impairment Indicators of Exploration and Evaluation Assets ("E&E Assets")

As described in Note 5 to the consolidated financial statements, the carrying amount of the Company's E&E Assets was $24,271,490 as of December 31, 2023. As more fully described in Note 3 to the consolidated financial statements, management assesses E&E Assets for indicators of impairment at the end of each reporting period.

The principal considerations for our determination that the assessment of impairment indicators of the E&E Assets is a key audit matter is that there was judgment made by management when assessing whether there were indicators of impairment for the E&E Assets, specifically relating to the assets' carrying amount which is impacted by the Company's intent and ability to continue to explore and evaluate these assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of indicators of impairment that could give rise to the requirement to prepare an estimate of the recoverable amount of the E&E Assets.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included, among others:

• Evaluating the reasonableness of management's assessment of indicators of impairment for the E&E assets.
• Evaluating the intent for the E&E Assets through discussion and communication with management.
• Assessing compliance with agreements and expenditure requirements including reviewing option agreements and vouching cash payments and share issuances.
• On a test basis, evaluating title to ensure mineral rights underlying the E&E Assets are in good standing.

Estimate of Reclamation Provisions related to Exploration and Evaluation Assets

As described in Note 5 to the consolidated financial statements, the carrying amount of the Company's reclamation provision was $1,815,709 as of December 31, 2023. As more fully described in Note 3 to the consolidated financial statements, management assesses its provision for restoration, rehabilitation and environmental obligations at the end of each reporting period.

The principal considerations for our determination that the estimate of reclamation provisions is a key audit matter are that estimating the costs of such reclamation activities includes significant judgement such as when the reclamation will take place, the time period required to undertake the reclamation, the extent and costing of reclamation activities, regulatory and legislative changes, inflation and discount rates utilized. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their estimate of the net present value of the reclamation provisions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included, among others:

• Assessing the reasonableness of changes in cost estimates against prior year calculations, and timing of expected reclamation activities.
• Evaluating the mathematical accuracy of the reclamation provision model.
• Evaluating the inflation rate and discount rate utilized in the reclamation provision model.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes 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 and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting 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 Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 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 Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Michael MacLaren.

Vancouver, Canada

Chartered Professional Accountants

April 18, 2024

KUYA SILVER CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in US Dollars)

As at December 31,

		2023		2022
ASSETS
Current
Cash	$	2,650,187	$	1,196,879
Receivables		206,138		106,899
Prepaids and advances		149,458		259,128
		3,005,783		1,562,906
Facilities and equipment (Note 4)		6,798		110,070
Exploration and evaluation assets (Note 5)		24,271,490		22,825,721
	$	27,284,071	$	24,498,697
LIABILITIES
Current
Accounts payable and accrued liabilities (Notes 6 and 11)	$	945,236	$	1,103,378
Flow-through share premium (Note 8)		48,492		118,269
		993,728		1,221,647
Reclamation provision (Note 5)		1,815,709		1,852,489
		2,809,437		3,074,136
SHAREHOLDERS' EQUITY
Share capital (Note 8)		44,177,779		37,200,411
Reserves (Notes 8 and 9)		1,507,806		1,219,513
Deficit		(21,210,951)		(16,995,363)
		24,474,634		21,424,561
	$	27,284,071	$	24,498,697
Nature of operations and going concern (Note 1)
Commitments and contingencies (Note 17)
Subsequent events (Notes 9 and 18)

Approved on behalf of the board by:

/s/ "David Stein"		/s/ "Dale Peniuk"
David Stein, Director		Dale Peniuk, Director

The accompanying notes are an integral part of these consolidated financial statements.

KUYA SILVER CORPORATION

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in US Dollars)

For the year ended December 31,

		2023		2022
Property expenses
Exploration and evaluation expenditures
(Notes 5 and 11)	$	2,518,775	$	1,773,259
		(2,518,775)		(1,773,259)
Administrative expenses
Administrative costs		61,496		41,503
Consulting fees (Note 11)		7,431		11,021
Directors' fees (Note 11)		99,988		101,363
Filing fees		32,593		58,998
Management fees		62,236		64,561
Marketing and investor relations		178,117		281,681
Office and miscellaneous		332,072		541,693
Professional fees (Note 11)		296,402		378,100
Share-based compensation (Notes 9 and 11)		316,925		681,610
Shareholder communication		10,786		13,342
Transfer agent		15,634		12,390
Travel		127,311		224,171
Wages and benefits (Note 11)		686,668		1,272,179
Warrants issued for loans payable (Notes 7 and 11)		-		52,012
		(2,227,659)		(3,734,624)
Operating loss		(4,746,434)		(5,507,883)
Accretion expense (Note 5)		(59,693)		(48,162)
Foreign exchange gain (loss)		13,207		(108,981)
Gain on settlement of accounts payable
and accrued liabilities (Note 8)		13,440		4,797
Recognition of flow-through share premium (Note 8)		242,573		657
		209,527		(151,689)
Loss for the year		(4,536,907)		(5,659,572)
Other comprehensive income (loss)
Item that may be reclassified subsequently to profit and loss
Foreign currency translation adjustment		504,337		(1,392,523)
Comprehensive loss for the year	$	(4,032,570)	$	(7,052,095)
Loss per common share - basic and diluted	$	(0.06)	$	(0.12)
Weighted average number of common
shares outstanding - basic and diluted		71,126,641		49,168,739

The accompanying notes are an integral part of these consolidated financial statements.

KUYA SILVER CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Expressed in US Dollars)

For the years ended December 31, 2023 and 2022

	Share Capital
							Foreign
							currency
	Number				Share-based		translation
	of shares		Amount		reserves		reserves		Deficit		Total
December 31, 2021	45,279,981	$	33,172,493	$	1,147,110	$	399,606	$	(11,335,791)	$	23,383,418
Issuance of units for cash (Note 8)	12,041,330		4,085,857		374,411		-		-		4,460,268
Flow-through share premium (Note 8)	-		(118,278)		-		-		-		(118,278)
Share issue costs	-		(538,930)		143,377		-		-		(395,553)
Issuance of common shares on acquisition of
exploration and evaluation assets (Note 5)	1,084,490		399,910		-		-		-		399,910
Issuance of units on settlement of accounts
payable and accrued liabilities	26,000		11,698		1,571		-		-		13,269
Issuance of common shares on settlement of
restricted share units (Notes 8 and 9)	400,000		187,661		(187,661)		-		-		-
Issuance of warrants for loans payable
(Note 8)	-		-		52,012		-		-		52,012
Share-based compensation (Note 9)	-		-		681,610		-		-		681,610
Foreign currency translation	-		-		-		(1,392,523)		-		(1,392,523)
Loss for the year	-		-		-		-		(5,659,572)		(5,659,572)
December 31, 2022	58,831,801	$	37,200,411	$	2,212,430	$	(992,917)	$	(16,995,363)	$	21,424,561

The accompanying notes are an integral part of these consolidated financial statements.

KUYA SILVER CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd…)

(Expressed in US Dollars)

For the years ended December 31, 2023 and 2022

	Share Capital
							Foreign
							currency
	Number				Share-based		translation
	of shares		Amount		reserves		reserves		Deficit		Total
December 31, 2022	58,831,801	$	37,200,411	$	2,212,430	$	(992,917)	$	(16,995,363)	$	21,424,561
Issuance of units for cash (Note 8)	29,166,123		5,875,730		138,331		-		-		6,014,061
Flow-through share premium (Note 8)	-		(175,627)		-		-		-		(175,627)
Share issue costs	-		(299,159)		74,677		-		-		(224,482)
Issuance of common shares on acquisition of
exploration and evaluation assets
(Notes 5 and 8)	4,369,370		1,057,491		-		-		-		1,057,491
Issuance of common shares on exercise of
options (Notes 8 and 9)	200		250		(114)		-		-		136
Issuance of common shares on settlement of
accounts payable and accrued liabilities
(Note 8)	405,405		94,139		-		-		-		94,139
Issuance of common shares on settlement of
restricted share units (Notes 8 and 9)	150,000		65,895		(65,895)		-		-		-
Options forfeited or expired (Note 9)	-		-		(269,307)		-		269,307		-
Warrants expired (Note 8)	-		358,649		(410,661)		-		52,012		-
Share-based compensation (Note 9)	-		-		316,925		-		-		316,925
Foreign currency translation	-		-		-		504,337		-		504,337
Loss for the year	-		-		-		-		(4,536,907)		(4,536,907)
December 31, 2023	92,922,899	$	44,177,779	$	1,996,386	$	(488,580)	$	(21,210,951)	$	24,474,634

The accompanying notes are an integral part of these consolidated financial statements.

KUYA SILVER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in US Dollars)

For the year ended December 31,

		2023		2022
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Loss for the year	$	(4,536,907)	$	(5,659,572)
Adjust for items not involving cash:
Depreciation		85,672		113,315
Accretion expense		59,693		48,162
Share-based compensation		316,925		681,610
Recognition of flow-through share premium		(242,573)		(657)
Warrants issued for loans payable		-		52,012
Unrealized foreign exchange loss		(11,397)		(76,848)
Gain on settlement of accounts payable and accrued liabilities		(13,440)		(4,797)
Gain on disposal of facilities and equipment		(2,477)		-
Change in non-cash working capital items:
Receivables		(103,318)		54,770
Prepaids and advances		114,095		(150,755)
Accounts payable and accrued liabilities		39,824		(36,966)
Net cash used in operating activities		(4,293,903)		(4,979,726)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Disposal of facilities and equipment		20,500		-
Payment for exploration and evaluation assets		(100,000)		(60,000)
Net cash used in investing activities		(79,500)		(60,000)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of share capital		6,014,197		4,460,268
Share issue costs		(188,463)		(391,502)
Proceeds from loans payable		-		232,141
Repayment of loans payable		-		(232,141)
Net cash provided by financing activities		5,825,734		4,068,766
Change in cash		1,452,331		(970,960)
Effect of foreign exchange on cash		977		15,228
Cash, beginning of year		1,196,879		2,152,611
Cash, end of year	$	2,650,187	$	1,196,879
Supplemental cash flow information (Note 12)

The accompanying notes are an integral part of these consolidated financial statements.