KWG Resources : CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2023 AND 2022

K W G R E S O U R C E S I N C .

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

D E C E M B E R 31, 2023 AND 2022

1

MANAGEMENT'S RESPONSIBILITY

FOR FINANCIAL STATEMENTS

All of the information in the accompanying consolidated financial statements of KWG Resources Inc. is the responsibility of management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards. Where necessary, management has made judgments and estimates in preparing the consolidated financial statements and such statements have been prepared within acceptable limits of materiality.

Management maintains appropriate systems of internal control to give reasonable assurance that its assets are safeguarded and the financial records are properly maintained.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control and exercises this responsibility principally through the Audit Committee. The Audit Committee, which is comprised of Directors, none of whom are employees or officers of the Company, meets with management and the external auditors to review the auditor's report and the consolidated financial statements to satisfy itself that management is properly discharging its responsibilities to the Directors, who approve the consolidated financial statements.

A firm of independent Licensed Public Accountants was appointed by the shareholders to examine the consolidated financial statements and provide an independent professional opinion thereon. The external auditors have free and full access to the Audit Committee with respect to their findings regarding the fairness of financial reporting and the adequacy of internal controls.

Frank C. Smeenk	Thomas E. Masters
President & CEO	Chief Financial Officer
April 26, 2024

2

Independent Auditor's Report

To the Shareholders of KWG Resources Inc.

Opinion

We have audited the consolidated financial statements of KWG Resources Inc. and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as at December 31, 2023 and 2022, and the consolidated statements of operations and comprehensive loss, consolidated statements of changes in equity (deficiency) and consolidated statements of 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 Company as at December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

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. 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 in the consolidated financial statements, which indicates that the Company incurred a net loss during the year ended December 31, 2023 and, as of that date, the Company has certain liabilities past due and its current liabilities exceeded its current assets. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. 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.

Except for the matter described in the Material uncertainty related to going concern section, we have determined that there were no additional key audit matters to communicate in our report.

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 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, 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 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.

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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 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 judgement 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 risks 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.

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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.

The engagement partner of the audit resulting in this independent auditor's report is Jessica Glendinning.

McGovern Hurley LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Ontario

April 26, 2024

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KWG RESOURCES INC.

Consolidated Balance Sheets

		As at	As at
		December 31,	December 31,
(in Canadian dollars)	Notes	2023	2022
ASSETS
Current assets
Cash	5	310,473	921,680
Receivables	6	60,928	423,329
Prepaid expenses		44,304	14,918
Total current assets		415,705	1,359,927
Non-current assets
Cash surrender value of life insurance	7	116,473	68,684
Property and equipment	8	19,555	34,358
Total non-current assets		136,028	103,042
Total assets		551,733	1,462,969
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables and provisions	11,21	4,512,691	3,545,265
Convertible debenture payable	12	1,048,358	931,452
Total current liabilities		5,561,049	4,476,717
Long-term liabilities
Convertible debentures payable	12	790,939	-
Secured convertible promissory note payable	13	25,484,144	23,104,108
Loans payable	14	120,000	100,000
Total long-term liabilities		26,395,083	23,204,108
Total liabilities		31,956,132	27,680,825
Equity (Deficiency)
Share capital	15	52,325,833	50,128,181
Debenture equity	12	6,090,487	5,865,293
Warrants	16	5,522,011	5,487,401
Contributed surplus		28,191,670	21,512,283
Accumulated other comprehensive (loss)		(72,118)	(72,118)
(Deficit)		(123,462,282)	(109,138,896)
Total equity (deficiency)		(31,404,399)	(26,217,856)
Total liabilities and equity (deficiency)		551,733	1,462,969

Nature of operations and going concern (Note 1)

Commitments and contingencies (Notes 9, 12, 13 and 22)

Subsequent events (Note 27)

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

Approved by the Board of Directors
Douglas Flett	Frank Smeenk
Director	Director

3

KWG RESOURCES INC.

Consolidated Statements of Operations and Comprehensive Loss For the years ended December 31, 2023 and 2022

(in Canadian dollars)	Notes	2023	2022
General and administrative	18	(4,669,060)	(4,192,888)
Amortization of property and equipment	8	(19,528)	(18,741)
Write down of intangible assets	10	(3,156)	(2,852)
Accretion expense	12,13,14	(2,499,213)	(843,270)
Stock-based compensation	17	(6,716,015)	-
Exploration and evaluation expenditures	9	(443,946)	(33,316,573)
Gain on foreign exchange		(1,262)	3,347
Loss before the undernoted		(14,352,180)	(38,370,977)
Other income (expenses)
Other income		3,125	3,125
Write down of receivables		(64,331)	(107,812)
		(61,206)	(104,687)
Loss before income taxes		(14,413,386)	(38,475,664)
Deferred income tax recovery	19	90,000	3,206,311
Net loss for the year		(14,323,386)	(35,269,353)
Loss per share (basic and diluted)	20	(0.01)	(0.02)

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

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KWG RESOURCES INC.

Consolidated Statements of Changes in Equity (Deficiency)

For the years ended December 31, 2023 and 2022

							Accumu-
							lated
							other
		Share	Debent-		Contributed		compreh-
(in Canadian dollars)	Notes	capital	ure equity	Warrants	surplus	(Deficit)	ensive	Total
							(loss)
Balance, December 31, 2021		41,173,915	4,386,636	2,453,299	23,959,015	(73,869,543)	(72,118)	(1,968,796)
Net loss for the year		-	-	-	-	(35,269,353)	-	(35,269,353)
Exercise of warrants	16	261,841	-	(48,371)	-	-	-	213,470
Exercise of stock options	15	108,555	-	-	-	-	-	108,555
Conversion of debentures	12,15	7,934,080	(4,337,747)	705,668	(3,214,977)	-	-	1,087,024
Expired warrants	16	-	-	(768,245)	768,245	-	-	-
Issue of secured convertible
promissory note	13	-	5,816,404	-	-	-	-	5,816,404
Issue of shares for interest on
secured convertible
promissory note	13,15	510,411	-	-	-	-	-	510,411
Issue of shares for exploration
and evaluation projects	15	35,000	-	-	-	-	-	35,000
Issue of warrants for exploration
and evaluation projects	16	-	-	3,076,572	-	-	-	3,076,572
Issue of shares for services
rendered	15	22,857	-	-	-	-	-	22,857
Private placement	15	81,522	-	68,478	-	-	-	150,000
Balance, December 31, 2022		50,128,181	5,865,293	5,487,401	21,512,283	(109,138,896)	(72,118)	(26,217,856)
Net loss for the year		-	-	-	-	(14,323,386)	-	(14,323,386)
Exercise of stock options	15	80,628	-	-	(36,628)	-	-	44,000
Stock-based compensation	17	-	-	-	6,716,015	-	-	6,716,015
Issue of shares for interest
on secured convertible
promissory note	13,15	2,069,999	-	-	-	-	-	2,069,999
Issuance of convertible
debentures	12	-	250,071	-	-	-	-	250,071
Issue of shares and warrants
for finder's fees	12	47,025	(24,877)	34,610	-	-	-	56,758
Balance, December 31, 2023		52,325,833	6,090,487	5,522,011	28,191,670	(123,462,282)	(72,118)	(31,404,399)

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

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KWG RESOURCES INC.

Consolidated Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(in Canadian dollars)	Notes	2023	2022
		$	$
Cash flows from operating activities
Net (loss) for the year		(14,323,386)	(35,269,353)
Adjustments for
Amortization of property and equipment	8	19,528	18,741
Accretion expense	12,13,14	2,479,213	826,604
Secured convertible promissory note issued for exploration
and evaluation expenditures	13	-	33,000,000
Shares issued for exploration and evaluation expenditures	15	-	35,000
Shares issued for consulting fees	15	-	22,857
Stock compensation costs	17	6,716,015	-
Interest accrued on debenture	12	116,907	262,472
Interest paid by the issuance of shares	13,15	2,069,999	510,411
Convertible debentures issued for services	12,15	60,918	-
Accretion on loans		20,000	16,667
Write down of receivables	6	64,331	107,812
Deferred income tax recovery	19	(90,000)	(3,206,311)
Net change in non-cash working capital balances		1,275,782	1,175,975
Net cash used by operating activities		(1,590,693)	(2,499,125)
Cash flows from financing activities
Proceeds from secured convertible promissory note	13	-	1,500,000
Proceeds from exercise of stock options	15,17	24,000	-
Proceeds from exercise of warrants	16	-	39,520
Proceeds from convertible debenture financing	12	1,008,000	108,555
Net cash provided by financing activities		1,032,000	1,648,075
Cash flows from investing activities
Increase in cash surrender value of life insurance	7	(47,789)	(53,059)
Purchase of property and equipment	8	(4,725)	-
Net cash used by investing activities		(52,514)	(53,059)
Net change in cash and cash equivalents during the year		(611,207)	(904,109)
Cash and cash equivalents - beginning of the year		921,680	1,825,789
Cash and cash equivalents - end of the year	5	310,473	921,680
Change in non-cash working capital balances comprises:
Receivables		18,070	(493,779)
Prepaid expenses		(29,386)	(14,918)
Trade and other payables		1,287,098	1,684,672
Net change in non-cash working capital balances		1,275,782	1,175,975
Additional information - non-cash transactions
Issuance of shares and warrants for settlement of accounts
payable	15	-	323,950
Issue of shares and warrants on conversion of convertible
debenture	15	-	8,639,748
Issuance of convertible debentures for settlement of payables	12	80,590	-
Expired warrants included in contributed surplus	16	-	768,245

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

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