Power Nickel : 2023 Q4 Financial Statement

POWER NICKEL INC.

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2023 AND 2022

(EXPRESSED IN CANADIAN DOLLARS)

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of

Power Nickel Inc.

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Power Nickel Inc. and its subsidiaries (the "Company"), which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statements of loss and comprehensive loss, changes in shareholders' deficiency, and cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

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 its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRS").

Basis of 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 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 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 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's current liabilities exceeded its total assets. 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 Audit Matter

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 period. The 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 of the Material Uncertainty Related to Going Concern described above, we have determined that there are no other key audit matters to communicate in our report.

Other Matter

The consolidated financial statements of the Company for the year ended December 31, 2022 and 2021, were audited by another auditor who expressed an unmodified opinion on those statements on May 1, 2023.

Other Information

Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis for the year ended December 31, 2023, which we obtained prior to the date of this

auditor's report.

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. 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 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 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 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.
• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Company as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes 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 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 on the audit resulting in this independent auditor's report is Julia Zhou.

	DNTW Toronto LLP
April 29, 2024	Chartered Professional
Accountants
Markham, Ontario	Licensed Public Accountants

Power Nickel Inc.

Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

	December 31,	December 31,
As at,		2023		2022
ASSETS
Current	$	216,365
Cash	$	1,275,104
Amounts receivable		1,212,976		268,879
Subscription receivable (note 7)		2,000,000		-
Prepaid expenses		298,493		407,443
Total current assets		3,727,834		1,951,426
Non-current assets		6,315
Equipment (note 4)			9,019
Total assets	$	3,734,149	$	1,960,445
LIABILITIES
Current	$	2,145,469
Accounts payable and accrued liabilities (notes 11 and 13)	$	1,331,063
Due to related parties (note 11)		40,168		181,003
Flow-through liability (note 13)		4,032,096		1,198,392
Advances from shareholders (note 11)		7,000		7,000
Total current liabilities		6,224,733		2,717,458
Non-current liabilities		55,464
Other liabilities (note 6)			55,464
Total liabilities		6,280,197		2,772,922
SHAREHOLDERS' DEFICIENCY		77,376,535
Issued capital (note 7)			70,990,710
Contributed surplus (note 8)		2,648,929		1,974,028
Warrants (note 9)		3,304,353		2,212,080
Deficit		(85,875,865)		(75,989,295)
Total shareholders' deficiency		(2,546,048)		(812,477)
Total liabilities and shareholders' deficiency	$	3,734,149	$	1,960,445
Nature of operations and going concern (note 1)
Commitments and contingencies (notes 5 and 13)
Subsequent events (note 17)
On behalf of the Board:
(Signed) "Terry Lynch"	(Signed) "Peter Kent"
Terry Lynch, Director	Peter Kent, Director

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

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Power Nickel Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars)

		Year ended
		December 31,
		2023		2022
Operating expenses	$	350,000
Administration fees (note 11)	$	336,612
Amortization (note 4)		2,704		3,864
Accretion, bank and interest (income) fees		(2,061)		120,084
Exploration expenditures (note 5)		9,194,079		1,962,536
Foreign exchange loss (gain)		170,293		(30,766)
Investor relations		3,181,461		1,467,170
Office and miscellaneous		109,577		77,997
Professional fees (note 11)		225,982		165,996
Share-based payments (note 8)		937,307		396,606
Transfer and regulatory		66,401		96,242
Travel, promotion and mining shows		111,188		49,634
Total expenses before other items		(14,346,931)		(4,645,975)
Other items		3,531,341
Flow-through liability amortization			396,330
Sale of equipment		-		4,490
Net loss and comprehensive loss for the year	$	(10,815,590)	$	(4,245,155)
Net loss and comprehensive loss per share
- basic and diluted (note 10)	$	0.08	$	0.05
Weighted average number of common shares outstanding
- basic and diluted (note 10)		130,488,597		92,476,021

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

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Power Nickel Inc.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

		Year ended
		December 31,
		2023		2022
Operating activities	$	(10,815,590)
Loss for the year	$	(4,245,155)
Items not affecting cash:		-
Accrued interest and accretion			115,942
Amortization		2,704		3,864
Share-based payments		937,307		396,606
Shares issued for exploration properties		-		4,984
Flow-through liability amortization		(3,531,341)		(396,330)
Changes in non-cash working capital items:		(944,097)
Amounts receivable			(166,191)
Prepaid expenses		108,950		(350,418)
Accounts payable and accrued liabilities		814,406		225,915
Due from related parties		-		(16,928)
Due to related parties		(140,835)		252,402
Net cash used in operating activities		(13,568,496)		(4,175,309)
Financing activities		12,895,000
Proceeds from private placements			4,192,500
Share issuance costs		(516,743)		(166,638)
Repayment of debenture		-		(819,305)
Exercise of options		67,500		14,000
Exercise of warrants		64,000		1,053,169
Net cash provided by financing activities		12,509,757		4,273,726
(Decrease) increase in cash		(1,058,739)		98,417
Cash, beginning of year		1,275,104		1,176,687
Cash, end of year	$	216,365	$	1,275,104

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

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Power Nickel Inc.

Consolidated Statements of Changes in Shareholders' Deficiency

(Expressed in Canadian Dollars)

	Common Shares		Contributed
	Number		Amount		Surplus		Warrants		Deficit		Total
Balance, December 31, 2021	84,785,773	$	68,376,098	$	1,706,007	$	1,290,088	$	(72,059,136)	$	(686,943)
Private placement	28,175,000		2,839,635		-		1,352,865		-		4,192,500
Flow-through liability	-		(1,375,000)		-		-		-		(1,375,000)
Share issuance costs	-		(166,638)		-		-		-		(166,638)
Broker warrants	-		(131,015)		-		131,015		-		-
Share based compensation	-		-		396,606		-		-		396,606
Exercise of warrants	7,021,125		1,418,476		-		(365,307)		-		1,053,169
Exercise of options	100,000		24,170		(10,170)		-		-		14,000
Shares issued for exploration properties	65,789		4,984		-		-		-		4,984
Option expiry	-		-		(118,415)		-		118,415		-
Warrant expiry	-		-		-		(196,581)		196,581		-
Net loss for the year	-		-		-		-		(4,245,155)		(4,245,155)
Balance, December 31, 2022	120,147,687	$	70,990,710	$	1,974,028	$	2,212,080	$	(75,989,295)	$	(812,477)
Private placement	29,155,556		13,143,690		-		1,751,310		-		14,895,000
Flow-through liability	-		(6,365,045)		-		-		-		(6,365,045)
Share issuance costs	-		(516,743)		-		-		-		(516,743)
Broker warrants	-		(85,100)		-		85,100		-		-
Share based compensation	-		-		937,307		-		-		937,307
Exercise of warrants	320,000		79,365		-		(15,365)		-		64,000
Exercise of options	250,000		129,658		(62,158)		-		-		67,500
Warrant expiry	-		-		-		(728,772)		728,772		-
Option expiry	-		-		(200,248)		-		200,248		-
Net loss for the year	-		-		-		-		(10,815,590)		(10,815,590)
Balance, December 31, 2023	149,873,243	$	77,376,535	$	2,648,929	$	3,304,353	$	(85,875,865)	$	(2,546,048)

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

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Power Nickel Inc.

Notes to Consolidated Financial Statements Years Ended December 31, 2023 and 2022 (Expressed in Canadian Dollars)

1. Nature of operations and going concern

Power Nickel Inc. (the "Company" or "Power Nickel") is a mineral exploration company and is in the business of acquiring and exploring mineral properties in Chile and Canada. On July 9, 2021, the Company changed its name from "Chilean Metals Inc." to "Power Nickel Inc.".

The Company is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of British Columbia. The Company's shares are listed on the TSX Venture Exchange ("TSX-V"), and Santiago Stock Exchange, Venture Market. The head office and principal address of the Company are located at the Canadian Venture Building, 82 Richmond Street East, Suite 202, Toronto, Ontario, M5C 1P1. The Company's registered and records office address is at Suite 700 - 595 Burrard Street, PO Box 49290, Vancouver, British Columbia, Canada, V7X 1S8.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements, unregistered claims, aboriginal claims and non-compliance with regulatory and environmental requirements. The Company's property interests may also be subject to increases in taxes and royalties, renegotiation of contracts, and political uncertainty. The Company's Chilean mineral property maintenance payments are in arrears (see note 13) and as a result, the Copiapó Court has been notified by the General Treasury of the Republic of Chile. The Copiapó Court may initiate the auction of the properties. If the Company's claims are put up for auction the Company, as concession holder, is not allowed to place bids on its claims under auction; however, the Company understands that the concession holder may remove a concession from auction by paying the penalty amount which is equal to double the patent amount outstanding. Accordingly, there is a risk that the Company will not be able to retain title to its mineral claims in Chile.

These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business. These consolidated financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern. During the year ended December 31, 2023, the Company incurred a net loss of $10,815,590 (year ended December 31, 2022 - $4,245,155). As at December 31, 2023, the Company has incurred significant losses since inception totaling $85,875,865 (December 31, 2022 - $75,989,295). As at December 31, 2023, the Company has a working capital deficiency of $2,496,899 (December 31, 2022 - working capital deficiency of $766,032); the continuing operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that additional funds will be obtained from external financing to meet the Company's liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These factors indicate the existence of material uncertainties that cast significant doubt as to the Company's ability to continue as a going concern and accordingly use accounting principles applicable to a going concern.

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Power Nickel Inc.

Notes to Consolidated Financial Statements Years Ended December 31, 2023 and 2022 (Expressed in Canadian Dollars)

2. Basis of presentation

Statement of compliance

The Company applies 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").

The policies applied in these consolidated financial statements are based on IFRS, which have been applied consistently to all periods presented. These consolidated financial statements were issued and effective as of April 29, 2024, the date the Board of Directors approved the statements.

Basis of measurement

These consolidated financial statements have been prepared under the historical cost basis, except for the revaluation of certain financial assets and financial liabilities to fair value.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Company's presentation currency. The functional currency of each individual entity is measured using the currency of the primary economic environment in which the entity operates, being the Canadian dollar.

Basis of consolidation

These consolidated financial statements incorporate the assets, liabilities and results of operations of all entities controlled by the Company. The effects of all transactions between entities in the consolidated group have been eliminated.

These consolidated financial statements include the accounts of the Company, its wholly-owned Chilean subsidiary, Minera IPBX Ltda., and its wholly-owned Canadian subsidiaries, Tierra de Oro Resources Ltd. and Consolidated Copper and Gold Inc. (Previously Chilean Metals Exploration Ltd). These consolidated financial statements include the indirectly 100% owned Canadian subsidiaries SPN Metals Exploration Ltd., TDO Metals Exploration Ltd., Pintada Minerals Inc., Pintada Holdings Inc., Palo Negro Mining Inc., Palo Negro Holdings Inc., Verna Exploration Ltd., and Verna Holdings Ltd. The Company also has a 100% indirect interest in three Chilean subsidiaries: Minera Tierra de Oro Ltda., Minera Palo Negro Ltda. and Minera Sierra Pintada Ltda. All material inter-company balances and transactions have been eliminated on consolidation.

Subsidiaries are entities over which the Company has control, where control is defined to exist when the Company is exposed to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases.

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