Kincora Copper : Earnings Document

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Kincora Copper Limited

(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

Expressed in Canadian Dollars

For the years ended December 31, 2022 and 2021

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Kincora Copper Limited:

WeOpinionhave audited the consolidated financial statements of Kincora Copper Limited (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2022 and 2021, and the consolidated statements of loss and comprehensive loss, cash flows and changes in shareholders' equity for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those
Basis for Opinion					section of our
standards are further described in the
report. We are independent of the Company in accordance with		International Ethics Standards Board for
Accountants' Code of Ethics for Professional Accountants (IESBA		together with the ethical requirements that are
	Auditor's Responsibilities for		Audit of the Fi ncial Statements
		Code)

relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

MateWe drawial Uncertainattention toy RelatedNote 1 intotheGoingfinancialConcernstatements, which indicates that the Company incurred a net loss of $1,961,000 and net cash used in operating activities of $1,119,000 during the year ended December 31, 2022 and as of that date, the Company had an accumulated deficit of $186,375,000. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, 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 auditAuditmattersMa are those matters, that in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the 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 matter described below to be a key audit matter to be communicated in our report.

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Key Audit Matter			How the Matter was Addressed in the Audit
Carrying value of exploration and evaluation	following:
a sets				Our procedures included, but were not limited to, the
As disclosed in Note 6 as at December 31, 2022, the		We obtained an understanding of the key
Company	held capitalized	exploration	and	•	process associated with management's
evaluation expenditure assets of $13,463,000.		•	review of the exploration and evaluation
The carrying value of exploration and evaluation		assets;
expenditure is assessed for impairment by the		We tested a sample of exploration
Company when facts and circumstance indicate that	•	expenditures incurred in Australia and
the exploration and evaluation expenditure may		Mongolia;
exceed its recoverable amount.				We tested the Company's right to explore,
We considered this a key audit matter because the	•	which included performing title searches
determination as to whether there are any indicators		and obtaining confirmations;
of impairment involves a number of judgments		We evaluated the Company's intention to
including whether the Company has tenure, intends	•	carry out significant exploration and
to perform ongoing exploration and evaluation		evaluation activities;
activity, whether there is sufficient information for a		We reviewed management's assessment on
decision to be made that the area of interest is not	•	impairment indicators on the Mongolian
commercially viable.				and the Australian assets; and
					We assessed the adequacy of the disclosure
Contingent	liability - Tax	Assessment	in		included in the financial statements.
Mongo ia				followings:
			Our procedures included, but were not limited, to the
As disclosed in Note 12, the Company received a	•	We inspected the tax assessment from the
$1,000,000 tax assessment from the Mongolian Tax	•	MTA issued in 2021;
Authority ('MTA") in 2021 related to an acquisition		We obtained the legal opinions prepared by
completed in 2016. The Company refuted the merit
of the assessment. As the Appeal Court ruled against		the Company's legal counsel in 2016 when
the Company's position in a hearing in early 2023,		the acquisition was completed and in 2021
the Company has taken the dispute to the Supreme	•	when the tax assessment was issued by the
Court and timing for hearing is yet to be determined.	•	MTA;
				We obtained legal updates regarding the
We considered this a key audit matter because the		status of the dispute;
•	We reviewed management's assessment of
determination as to whether the tax assessment		probability of the outcome; and
should be accrued as at December 31, 2022 involves		We assessed the adequacy of the disclosure
a number of judgments including probabilities in		included in the financial statements.
outcome and potential payments relating to this
dispute.

ManagementOther Informationis responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis.

Our opinion on the 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 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 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.

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ManagementResponsibilitiesis responsibleof Managementfor theandpreparationThose Chargedand fairwithpresentationGovernanceof theforfinancialthe F nancialstatementsSta ementsin accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the 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.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
A ditor's Re ponsibilities for the Audit of the Financial Sta ements
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
International Standards on Auditing 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 financial statements. As part of an audit in
accordance with International Standards on Auditing, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also
	Identify and assess the risks of material misstatement of the 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
	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 financial statements, including the disclosures,
	and whether the financial statements represent the underlying transactions and events in a manner that
	achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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 period 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.

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

DALE MATHESON CARR-HILTON LABONTE LLP

Vancouver,CHARTEREDBCPROFESSIONAL ACCOUNTANTS

March 30, 2023