Pasinex Resources : Quarter 2 June 2023 Management Discussion and Analysis

Pasinex Resources Limited

Management's Discussion & Analysis

For the Three and Six Months Ended June 30, 2023 and 2022

Discussion dated: August 29, 2023

Introduction

The following interim Management Discussion & Analysis ("Interim MD&A") of Pasinex Resources Limited (the "Company" or "Pasinex") for the three and six months ended June 30, 2023, has been prepared to provide material updates to the business operations, liquidity, and capital resources of the Company since its last annual management discussion & analysis, being the Management Discussion & Analysis ("Annual MD&A") for the fiscal year ended December 31, 2022. This Interim MD&A does not provide a general update to the Annual MD&A, or reflect any non- material events since the date of the Annual MD&A.

This Interim MD&A has been prepared in compliance with section 2.2.1 of Form 51-102F1, in accordance with National Instrument 51-102 - Continuous Disclosure Obligations. This discussion should be read in conjunction with the Company's Annual MD&A, audited annual consolidated financial statements for the years ended December 31, 2022 and 2021, together with the notes thereto, and the unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2023, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. Where the Turkish Lira is reported it is referenced as TRY.

The Company's unaudited condensed interim financial statements and the financial information contained in this Interim MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") in effect for the fiscal period beginning January 1, 2023. The unaudited condensed interim financial statements have been prepared on a historical basis and compliance with IFRS applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. Accordingly, the information contained herein is presented as of August 29, 2023, unless otherwise indicated.

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's common shares; (ii) 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 Interim 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 Interim 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 Interim 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

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three and Six Months Ended June 30, 2023 and 2022

Discussion dated: August 29, 2023

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 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 Interim 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 Interim 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 Three and Six Months Ended June 30, 2023 and 2022

Discussion dated: August 29, 2023

Selected Quarterly Information

		Three Months Ended			Six Months Ended
				June 30,				June 30,
Financial:		2023		2022		2023		2022
$	821,044			$	1,596,806
Equity gain from Horzum AS	$	-	$	-
Dividend income from Horzum AS	$	779,128	$	-	$	779,128	$	4,072,320
Consolidated net income (loss)	$	1,107,117	$	(890,345)	$	911,534	$	2,743,999
Basic and diluted net income (loss) per share	$	0.01	$	(0.01)	$	0.01	$	0.02
Net cash (used in) provided by operating activities	$	(48,669)	$	1,313,517	$	171,817	$	2,083,338
Weighted average shares outstanding		144,554,371		144,554,371		144,554,371		144,554,371
As at:						June 30,		December 31,
						2023		2022
Total assets					$	3,957,660	$	4,082,136
Total liabilities					$	2,867,477	$	3,564,963
Total shareholders' equity					$	1,090,183	$	517,173
		Three Months Ended			Six Months Ended
				June 30,				June 30,
Horzum AS operational data (100% basis):		2023		2022		2023		2022
	1,954				4,765
Zinc product mined (wet) tonnes			3,264			7,804
Zinc product sold (wet) tonnes		2,993		3,155		5,990		6,119
Zinc oxide product average grade sold		NA		41.6%		NA		37.8%
Zinc sulphide product average grade sold		48.4%		49.5%		47.8%		50.9%
Gross margin (1)		53%		82%		56%		78%
CAD cost per tonne mined (1)	$	496	$	413	$	493	$	358
USD cash cost per pound of zinc mined (1)	$	0.36	$	0.29	$	0.36	$	0.27

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:

• Horzum AS net income is shown on one line in the Statement of Income - Equity gain from Horzum AS.
• The investment in Horzum AS is shown on one line on the Statement of Financial Position - Equity investment in Horzum AS.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three and Six Months Ended June 30, 2023 and 2022

Discussion dated: August 29, 2023

Highlights

• For the three and six months ended June 30, 2023, Pasinex recorded net income of approximately $1.1 million and $0.9 million, respectively, compared with a net loss of approximately $0.9 million for the three months ended June 30, 2022, and a net income of approximately $2.7 million for the six months ended June 30, 2022. The primary reason for the decrease in the net income in 2023 versus 2022 was that dividend income was considerably higher in 2022 than in 2023. Also, higher general and administration costs and higher exploration costs contributed to the decrease in 2023.
• The operating income in Horzum AS decreased to $1.6 million and $3.6 million, in the three and six months ended June 30, 2023, respectively, from $4.8 million and $8.1 million for the same periods in 2022. The decreases were due to lower revenue as sales prices and the number of tonnes sold declined in 2023 compared with 2022 and costs were higher due to inflationary pressures. Gross margin (see non-GAAPmeasures) for the three and six months ended June 30, 2023, were 53% and 56%, respectively, compared with 82% and 78% for the same periods in 2022.
• Horzum AS mined 1,954 tonnes and 4,765 tonnes of zinc product during the three and six months ended June 30, 2023, respectively, at the Pinargozu mine, compared with 3,264 tonnes and 7,804 tonnes of zinc product for the same periods in 2022. Mine production was negatively impacted by a temporary halt in activity at the Pinargozu mine to ensure the safety and well-being of the Joint Venture's employees, after the tragic earthquakes in Türkiye in the first quarter of 2023. Second quarter production in 2023 was negatively impacted by the ingress of rainwater that rendered some of the deeper areas below the 541-metre level inaccessible.
• Sales volumes were 2,993 tonnes and 5,990 tonnes of high-grade zinc sulphide product in the three and six months ended June 30, 2023, respectively, compared with 3,041 tonnes and 5,571 tonnes of high-grade zinc sulphide product for the same periods in 2022. Sales in 2022 also included 493 tonnes of oxide product and 55 tonnes of lead product.
• Sales prices per tonne on a USD basis decreased by 47.9% for zinc sulphide product for the six months ended June 30, 2023, when compared to prices in the same period in 2022. The average USD sales prices for the six months ended June 30, 2023, were US$704 per tonne for zinc sulphide product versus US$1,353 per tonne for zinc sulphide product in the same period in 2022. Sales prices were lower due to lower worldwide sales prices and a lower average grade of product sold.
• The average grade of the high-grade zinc sulphide product sold was 47.8% zinc per tonne for the six months ended June 30, 2023, compared with 50.9% zinc per tonne for the same period in 2022.
• The CAD cost per tonne mined (see non-GAAPmeasures) increased to $493 per tonne mined for the six months ended June 30, 2023, compared with $358 per tonne mined in the same period in 2022. The USD cash cost per pound of zinc product mined (see non-GAAPmeasures) increased to US$0.36 per pound in the six months ended June 30, 2023, from US$0.27 per pound for the same period in 2022.
• During the quarter ended June 30, 2023, at an Ordinary General Assembly Meeting, Horzum AS declared and approved a dividend, a legal reserve distribution and approved advance dividend distributions totalling approximately TRY 81.0 million (approximately $5.5 million using the exchange rate on the date the dividend, the legal reserves distribution and the advanced dividend distributions were declared and approved). Pasinex Arama will be entitled to receive up to approximately TRY 57.0 million (approximately $3.9 million using the exchange rate on the date the dividend, the legal reserves distribution and the advanced dividend distributions were declared).

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three and Six Months Ended June 30, 2023 and 2022

Discussion dated: August 29, 2023

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. As at June 30, 2023, the Company has a net equity deficit of $9,390,788 (December 31, 2022 - $10,302,322) and has a working capital deficiency position of $1,240,043 (December 31, 2022 - working capital deficiency position of $2,413,755). The Company had a net income of $1,107,117 and $911,534 for the three and six months ended June 30, 2023, respectively, (three and six months ended June 30, 2022 - net loss of $890,345 and net income of $2,743,999, respectively) and positive cash flows from operations of $171,817 for the six months ended June 30, 2023 (six months ended June 30, 2022 - positive cash flows from operations of $2,083,338).

Horzum AS had a net income of $1,634,085 and $3,163,046 in the three and six months ended June 30, 2023, respectively, ($4,109,028 and $6,033,237 in the same periods in 2022). Pasinex Arama received TRY 22.4 million (approximately $1.5 million using the exchange rates on the dates of the various transfers from Horzum AS) in advanced dividend and other receivable collections from Horzum AS in the six months ended June 30, 2023, compared with TRY 42 million (approximately $3.4 million using the exchange rates on the dates of the various transfers from Horzum AS) in dividend and other receivable collections from Horzum AS in the six months ended June 30, 2022. Approximately TRY 15.5 million (approximately $1.1 million using the exchange rates on the dates of the transfers) has been transferred to Pasinex Canada by Pasinex Arama in the six months ended June 30, 2023, (approximately TRY 38.75 million for the same period in 2022 (approximately $3.13 million using the exchange rates on the dates of the transfers). With the reduction of cash inflows to Canada, partially caused by the decrease in the value of the Turkish Lira against the Canadian Dollar, the Company does not have sufficient cash on hand to fund its ongoing activities for the next 12 months nor does the Company have enough cash on hand to repay all of its outstanding obligations.

At an Ordinary General Assembly Meeting held in May 2023, Horzum AS declared a dividend totalling approximately TRY 46.0 million (approximately $3.2 million using the exchange rate on the date the dividend was declared) of which Pasinex Arama was entitled to TRY 23.0 million (approximately $1.6 million using the exchange rate on the date the dividend was declared) as a result of its 50% ownership in Horzum AS. In addition, Akmetal has assigned to Pasinex Arama, 20% of its entitlement to the declared dividend. The value of the assignment of the dividend was approximately TRY 9.2 million (approximately $0.6 million using the exchange rate on the date the dividend was declared). This amount will be deducted from the value of the Akmetal receivable. Therefore, Pasinex Arama's total entitlement from the declared dividend is approximately TRY 32.2 million (approximately $2.2 million using the exchange rate on the date the dividend was declared).

In addition, at the same Ordinary General Assembly Meeting, Horzum AS also approved the distribution of its legal reserves totalling approximately TRY 11.2 million (approximately $0.8 million using the exchange rate on the date the distribution was approved). Pasinex Arama was entitled to TRY 5.6 million (approximately $0.4 million using the exchange rate on the date the distribution was approved) as a result of its 50% ownership in Horzum AS. In addition, Akmetal has assigned to Pasinex Arama, 20% of its entitlement to the distribution. The value of the assignment of the distribution was approximately TRY 2.2 million (approximately $0.2 million using the exchange rate on the date the distribution was approved). This amount will be deducted from the value of the Akmetal receivable. Therefore, Pasinex Arama's total entitlement from the distribution is approximately TRY 7.8 million (approximately $0.6 million using the exchange rate on the date the distribution was approved).

This brings the total amount owing to Pasinex Arama to approximately TL 40.0 million (approximately $2.8 million using the exchange rate on the date the dividend and distribution were declared and approved). As noted above Pasinex Arama has already received TRY 22.4 million in advanced dividend distributions in 2023 plus it had received TL 5.0 million in advanced dividend distributions in 2022, which leaves a remaining amount to be collected as of the date of these unaudited condensed interim consolidated financial statements of TRY 12.6 million.

Finally, at the same Ordinary General Assembly Meeting, Horzum AS also approved further additional advanced dividend distributions of up to TRY 24 million (approximately $1.6 million using the exchange rate on the date the

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