Pasinex Resources : Management Discussion & Analysis for the Year Ended December 31, 2022

Pasinex Resources Limited

Management's Discussion & Analysis

For the Years Ended December 31, 2022 and 2021

Discussion dated: May 1, 2023

Introduction

This management's discussion and analysis ("MD&A") of the financial condition and results of operations of Pasinex Resources Limited (the "Company" or "Pasinex") should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2022.

Management is responsible for the preparation of the financial statements and MD&A. The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. All dollar figures in this MD&A are expressed in Canadian dollars, unless stated otherwise.

This MD&A has been prepared as of May 1, 2023.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors (the "Board"), considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of the Company common shares;

1. there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

Further information about the Company and its operations can be obtained from the Secretary of the Company or on SEDAR at www.sedar.com.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this MD&A constitute forward-looking statements; as such term is defined under applicable securities laws. These statements relate to future events or future performance and reflect management's expectations and assumptions regarding the growth, results of operations, performances and business prospects and opportunities of the Company. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "intend", "will", "project", "could", "believe", "predict", "potential", "should" or the negative of these terms or other similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or events to differ materially from those anticipated, discussed or implied in such forward-looking statements. The Company believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should be considered carefully and investors should not place undue reliance on them as the Company cannot assure investors that actual results will be consistent with these forward-looking statements.

These statements speak only as of the date of this MD&A. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: (i) general business and economic conditions; (ii) timing and amount of estimated future production (iii) the supply and demand for, deliveries of, and the level and volatility of prices of zinc and other precious metals; (iv) the timing of the receipt of any outstanding regulatory and governmental approvals for the Company's projects; (v) the ability to meet social and environmental standards and expectations; (vi) the availability of financing for the Company's development of its properties on reasonable terms; (vii) the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; (viii) the ability to attract and retain skilled staff; (ix) exploration and development timetables; and (x) capital expenditure and operating cost estimates.

The Company has not been materially impacted by the ongoing conflict in the Ukraine, but uncertainty remains surrounding the conflict and the extent and duration of the impacts that it may have on the Company's ability to

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Years Ended December 31, 2022 and 2021

Discussion dated: May 1, 2023

operate, on prices for zinc, on logistics and supply chains, on the Company's employees and on global financial markets.

The Pinargozu zinc mine was placed into production without a feasibility study of mineral reserves demonstrating economic and technical viability, and as such, any forward-looking statements related to the performance of the Pinargozu mine may differ materially from actual results. The decision to operate a mine without a technical report or feasibility study creates increased uncertainty. Economic or technical results of the Pinargozu zinc mine may differ materially from forward-looking statements due to reduced zinc grade, variation in estimated mineral resources, increased difficulty in mining and other risks associated with the reliability of internal analytical results, geological interpretation and statistical inferences drawn from drilling and sampling.

These forward-looking statements involve risks and uncertainties relating to, among other things, exploration and development risks, changes in commodity prices, particularly the zinc price, expectations regarding currency fluctuations, possible variation in mineral resources or grade, counter party risk associated with sales of zinc material, access to skilled mining personnel, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government approvals, changes to government regulation and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors contained in this MD&A. Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur. The Company cautions that the foregoing list of important factors is not exhaustive. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities law.

Description of Business

Pasinex Resources Limited ("Pasinex" or the "Company") is a publicly listed company incorporated in British Columbia. The Company's shares are listed on the Canadian Securities Exchange ("CSE") under the symbol "PSE" and on the Frankfurt Stock Exchange ("FSE") under the symbol "PNX". The head office, principal address and registered and records office of the Company are located at 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

Pasinex Resources Limited owns 50% of Horzum Maden Arama ve Isletme Anonim Sirketi ("Horzum AS" or "Joint Venture"), through its 100% owned subsidiary Pasinex Arama ve Madencilik Anonim Sirketi ("Pasinex Arama"). The other 50% owner is Akmetal Madencilik Sanayi ve Ticaret A.S. ("Akmetal"), a private Turkish company. Horzum AS holds 100% of the producing Pinargozu high-grade zinc mine. Horzum AS sells directly to zinc smelters and or refiners through commodity brokers from its mine site in Türkiye. The Company also holds a 51% interest, with an option to increase to an 80% interest of a high-grade zinc exploration project, the Gunman Project, located in Nevada.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Years Ended December 31, 2022 and 2021

Discussion dated: May 1, 2023

Selected Annual Consolidated Information

				Years Ended December 31,
		2022		2021		2020
Financial:
Equity gain from Horzum AS	$	3,928,724	$	200,062	$	3,298
Assigned dividend	$	1,095,289	$	-	$	-
Consolidated net income (loss)	$	2,043,173	$	(129,678)	$	(1,252,426)
Basic and diluted net income (loss) per share	$	0.01	$	0.00	$	(0.01)
Net cash provided by (used in) operating activities	$	1,838,461	$	480,034	$	826,390
Weighted average shares outstanding		144,554,371		144,554,371		144,554,371
				As At December 31,
		2022		2021		2020
Total assets	$	4,082,136	$	2,871,768	$	2,114,081
Total liabilities	$	3,564,963	$	3,993,880	$	3,454,502
Total shareholders' deficiency	$	517,173	$	(1,122,112)	$	(1,340,421)
				Years Ended December 31,
		2022		2021		2020
Horzum AS operational data (100% basis):
Zinc product mined (wet) tonnes		13,766		10,608		12,123
Zinc product sold (wet) tonnes		13,013		8,620		11,248
Lead product sold		54		-		145
Zinc oxide product - average grade sold		37.8%		31.0%		30.0%
Zinc sulphide product - average grade sold		50.1%		49.0%		48.0%
Zinc sulphide product - low-grade - average grade sold		18.8%		NA		NA
Lead product - average grade sold		53.0%		NA		54.8%
Gross margin (1)		72%		50%		13%
CAD cost per tonne mined (1)	$	380	$	383	$	313
USD cash cost per pound of zinc product mined (1)	$	0.28	$	0.36	$	0.37

1. see non-GAAP measures

The Company has a 50% joint venture interest in Horzum AS, which is equity accounted. This means in the Pasinex consolidated financial statements Pasinex's share in Horzum AS net income is shown on the income statement as Equity gain from Horzum AS.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Years Ended December 31, 2022 and 2021

Discussion dated: May 1, 2023

Highlights

• For the year ended December 31, 2022, Pasinex recorded a net income of approximately $2.04 million, compared with a net loss of approximately $0.13 million for 2021. The primary reason for the increase in the net income was the increase in equity gain 2022, which was partially offset by higher general and administration costs and exploration costs incurred in Nevada in 2022.
• The operating income in Horzum AS increased to $12.9 million in 2022 from $3.7 million in 2021. This substantial increase was due to higher revenue generated from higher sales prices. The increased sales prices were the result of higher worldwide zinc prices in 2022 along with selling a greater proportion of high-grade zinc sulphide product in 2022 compared with 2021. The higher sales prices also resulted in the gross margin (see non-GAAP measures) for the year ended December 31, 2022, increasing to 72% versus 50% in 2021.
• Horzum AS declared a dividend to be paid to its shareholders of which Pasinex Arama was entitled to TRY 42.2 million. Pasinex Arama has received all of this amount. Total cash received from Horzum AS during 2022 was approximately $4.5 million.
• It was announced on July 1, 2022, that Horzum AS and Pasinex Arama had filed legal actions against the mining ministry in Türkiye, T.C. Maden ve Petrol Iserl Genel Mudurlugu ("MAPEG") following their decision not to extend the principal mining operational license of Horzum AS beyond April 15, 2023, and the Akkaya operational exploration license of Pasinex Arama. The Joint Venture and Pasinex Arama jointly conducted negotiations with MAPEG subsequent to that announcement and on November 30, 2022, it was reported that the extension of the principal mining operational license of Horzum AS and the Akkaya operational exploration license of Pasinex Arama had both been received. Both licenses have been extended to November 2032 in Adana Province in Türkiye. In particular, the receipt of the principal mining operational license of Horzum AS allows the Joint Venture to continue generating positive cash flows.
• Horzum AS had another zero-fatality year at the Pinargozu Mine with a total of 194,504 fatality free hours having been worked at the Pinargozu Mine in 2022. Horzum AS did report four serious injuries and twelve lost-time injuries during the year.
• Horzum AS mined 13,766 tonnes of zinc product during 2022, at the Pinargozu mine, compared with 10,608 tonnes of zinc product in 2021. Mine production increased in 2022 due to an increase in available ore product resulting from the development of the Fourth Adit in 2021. Production for 2022 fell short of the amount forecasted, as Horzum AS experienced water issues at the beginning of the year and was not able to increase its monthly production level in the later months of the year.
• Sales volumes increased in 2022 to 13,067 tonnes of zinc and lead product, compared with 8,620 tonnes in 2021, primarily as the result of having higher available tonnes to sell as production increased during the year. This included 11,577 tonnes (2,871 tonnes in 2021) of high-grade zinc sulphide product.
• Average sales prices per tonne on a USD basis improved by approximately 80% and 4%, for zinc oxide product and high-grade zinc sulphide product, respectively, between 2022 to 2021. The average USD sales price for the year ended December 31, 2022, was US$865 (2021 - US$480) per tonne for zinc oxide product and US$1,121 (2021 - US$1,078) per tonne for high-grade zinc sulphide product.
• The average grade of the high-grade zinc sulphide product sold was 50.1% zinc per tonne for the year ended December 31, 2021, compared with 48.6% zinc per tonne in the same period in 2021. The average grade of the zinc oxide product sold increased to 37.8% zinc per tonne for the year ended December 31, 2022, compared with 31.3% zinc per tonne in the same period in 2021.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Years Ended December 31, 2022 and 2021

Discussion dated: May 1, 2023

• The CAD cost per tonne mined (see non-GAAP measures) dropped slightly in 2022, to $380 per tonne mined, compared with $383 per tonne mined in 2021. The cost per tonne metric in 2022 compared with 2021, was helped by increased mined tonnes in 2022. This decrease was partially offset by higher costs being incurred in 2022, including increased royalties payable as a result of higher sales values per tonne.
• The USD cash cost per pound of zinc product mined (see non-GAAP measures) dropped to US$0.28 per pound in 2022 from US$0.36 per pound in 2021 as the average grade of zinc product mined increased in 2022 compared with 2021, which resulted in more pounds of zinc being produced.
• The Joint Venture completed 9,345 metres of underground and surface diamond core drilling in 2022 compared with a forecast of 10,000 metres and completed 1,743 metres of exploration and development adit development during 2022 versus a forecast of 1,200 metres.
• The Company earned a 51% interest in the Company's Gunman Project during the year after having completed a portion of a multi-phased exploration program in Nevada.
• Subsequent to December 31, 2022, Pasinex Arama received approximately TRY 17.5 million ($1.2 million using the exchange rates on the dates of the various transfers from Horzum AS), in advanced dividends. Of this amount approximately TRY 15.5 million ($1.1 million using the exchange rates on the dates the various transfers) was transferred from Pasinex Arama to Pasinex Canada.

Going Concern

The application of the going concern concept assumes that the Company will continue in operation for at least the next twelve months and will be able to realize its assets and discharge its liabilities in the normal course of operations. At December 31, 2022, the Company has a net equity deficit of $10,302,322 (December 31, 2021 - net equity deficit of $12,049,182) and has a working capital deficiency position of $2,413,755 (December 31, 2021 - $2,956,668). The Company had a net income of $2,043,173 for the year ended December 31, 2022 (2021 - net loss of $129,678) and positive cash flows from operations of $1,838,461 for the year ended December 31, 2022 (2021 - negative cash flows from operations of $480,034) and accordingly does not have enough cash on hand to fund its payables and its expected non-discretionary obligations for the next 12 months.

It was announced on July 1, 2022, that Horzum AS and Pasinex Arama had filed legal actions against the mining ministry in Türkiye, T.C. Maden ve Petrol Iserl Genel Mudurlugu ("MAPEG") following their decision not to extend the principal mining operational license of Horzum AS beyond April 15, 2023, and the Akkaya operational exploration license of Pasinex Arama. The Joint Venture and Pasinex Arama jointly conducted negotiations with MAPEG subsequent to that announcement and on November 30, 2022, it was reported that the extension of the principal mining operational license of Horzum AS and the Akkaya operational exploration license of Pasinex Arama had both been received. Both licenses have been extended to November 2032 in Adana Province in Türkiye. In particular, the receipt of the principal mining operational license of Horzum AS allows the Joint Venture to continue generating positive cash flows.

Horzum AS has had a profitable year in 2022, producing in excess of $18.0 million in revenues and generating approximately $12.9 million in profits. Pasinex Arama received approximately TRY 57.2 million (approximately $4.5 million using the exchange rates on the dates of the various transfers from Horzum AS) in dividend, advanced dividends and other receivable collections from Horzum AS in the twelve months ended December 31, 2022, compared with approximately TRY 2.1 million ($200,062 using the exchange rate on the dates of the transfers from Horzum AS) in 2021. Pasinex Arama collected the full amount of the dividend that was declared in 2022.

Approximately TRY 52.7 million (approximately $4.1 million using the exchange rates on the dates of the transfers) was transferred to Pasinex Canada by Pasinex Arama in 2022. Both Pasinex Canada and Pasinex Arama now have sufficient cash on hand to fund their ongoing activities for the next 12 months, but the Company does not have enough cash on hand to repay all of its outstanding obligations.

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