Southern Arc Minerals : MD&A – March 31, 2021

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED

MARCH 31, 2021 AND 2020

(Unaudited- Expressed in Canadian dollars)

SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the nine months ended March 31, 2021 and 2020

This Management's Discussion and Analysis ("MD&A"), prepared as of May 27, 2021, should be read in conjunction with the unaudited condensed interim financial statements of Southern Arc Minerals Inc. ("Southern Arc", or the "Company") for the nine months ended March 31, 2021 and the audited consolidated financial statements for the year ended June 30, 2020 and related notes thereto, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are stated in Canadian dollars unless otherwise indicated. Additional information related to the Company can be found on SEDAR at www.sedar.com and on the Company's website at www.southernarcminerals.com.

Statements in this MD&A that are not historical facts are "forward-looking statements" that are subject to risk factors set out in a cautionary note contained herein. Readers are cautioned not to put undue reliance on forward-looking statements.

COMPANY OVERVIEW

Southern Arc Minerals Inc. ("Southern Arc" or "the Company") was incorporated in British Columbia, Canada on August 19, 2004. The Company is a Canadian company focused on creating value through project generation and strategic investments in mineral resource companies with a focus on gold and copper-gold. The Company's head office is located at Suite 650 - 669 Howe Street, Vancouver, British Columbia, Canada, V6C 0B4.

The Company is listed on the NEX board of the TSX Venture Exchange under the symbol "SA.H". To date, the Company has not generated revenues from operations and is focused on creating value through project generation and strategic investments in mineral resource companies with a focus on gold and copper-gold.

On March 11, 2020, the novel coronavirus outbreak ("COVID-19") was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company's business are not known at this time. These impacts could include an impact on the Company's ability to obtain debt and equity financing to fund ongoing investing activities as well as our ability to conduct business. These conditions result in significant uncertainties that may cast substantial doubt about the Company's ability to continue as a going concern. These financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

FINANCIAL SNAPSHOT

Total assets		March 31, 2021		June 30, 2020		June 30, 2019
$	3,582,672	$	15,328,170	$	17,455,389
Working capital		1,613,996		1,393,436		471,347
Total liabilities		43,036		169,515		1,589,773
Net income		5,949,473		53,467		4,622,204
Net income attributable to the Company		5,949,473		53,467		5,442,472
Basic income per share	$	0.30	$	0.00	$	0.38
Diluted income per share	$	0.30	$	0.00	$	0.35

At the date of this MD&A, the Company had approximately $1.5 million in working capital, which includes the Company's investments in shares of PT Ancora Tbk, Japan Gold Corp., Rise Gold Corp. Adriatic Metals Plc. and its investment in warrants of Adriatic Metals Plc.

- 2 -

SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the nine months ended March 31, 2021 and 2020

RECENT EVENTS

In October 2020, the Company completed a return of capital transaction (the "Transaction") by way of a court approved plan of arrangement under the Business Corporations Act (British Columbia). Pursuant to the plan of arrangement, the Company exchanged each of its outstanding common shares for one new Class A common share and one redeemable share of the Company. The Class A common shares have similar rights as the old common shares and are listed on the NEX board of the TSX Venture Exchange. The redeemable shares were immediately redeemed in exchange for the distribution of the following securities to the shareholders of the Company on a pro-rata basis:

	# of	Carrying value
	- October 16,
	securities	2020
Common shares of Japan Gold Corp.	40,250,000	$ 7,388,531
Common shares of Rise Gold Corp.	2,750,000	2,667,500
Common shares of Adriatic Metals Plc	1,664,668	3,246,103
		$13,302,134

For each common share of Southern Arc, a shareholder of Southern Arc received:

• 1 Class A of Southern Arc (NEX: SA.H),
• 1.7577751 common shares of Japan Gold Corp. (TSXV: JG),
• 0.12009743 common shares of Rise Gold Corp. (CSE: RISE),
• 0.0726999 ordinary shares of Adriatic Metals plc. (LSE: ADT1)

As the Company held 130,000 of its own shares in treasury, it received distribution of 228,510 common shares of Japan Gold Corp., 15,612 common shares of Rise Gold Corp., and 9,481 ordinary shares of Adriatic Metals plc.

Other events

On March 9, 2020, the Company advanced an unsecured, non-interest-bearing loan to Japan Gold in the principal amount of $1,000,000. This loan had a six-month term maturing on September 9, 2020. In consideration for the loan, the Company received a cash fee of 5% of the amount of the loan ($50,000) and 500,000 non-transferable share purchase warrants of Japan Gold. Each warrant entitles the Company to purchase one common share of Japan Gold at $0.40 per share until March 9, 2021. The fair value of these warrants was determined to be $35,609 using the Black-Scholes pricing model and the following weighted average assumptions: Risk-free interest rate - 1.58%; expected volatility - 75%; share price of $0.32 and strike price - $0.40; expected life of warrants - 1 year.

On May 22, 2020 and June 1, 2020, Japan Gold completed private placements of a total of 34,278,000 units at a price of $0.25 per unit. Each unit consisted of one common share of Japan Gold and one half of a transferable common share purchase warrant exercisable at $0.40 per share for a period of 24 months. Of the units issued by Japan Gold, 4,000,000 units were issued to the Company in exchange for the settlement of the $1,000,000 loan. The Company recognized a gain on the settlement of the loan of $156,813 as the fair value of the shares and warrants received exceeded the carrying value of the loan.

On January 6, 2020, the Company closed the second and final tranche of a non-brokered private placement. The Company sold 850,000 common shares at a price of $0.35 per share for gross proceeds of $297,500 which were all purchased by John Proust, the Company's CEO and Chairman.

On November 1, 2019, the Company closed a non-brokered private placement through the issuance of 2,150,000 common shares at a price of $0.35 per share for gross proceeds of $752,500. No finder's fees were paid in connection with the financing and proceeds were used for working capital. An Individual/entities related to John Proust, the Company's Chairman and CEO, purchased 1,150,000 shares ($402,500) of the private placement. Morris Kid, a director of the Company, purchased 155,050 shares ($54,268) of the private placement.

- 3 -

SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the nine months ended March 31, 2021 and 2020

PROPERTY REVIEW AND OUTLOOK

Indonesia - PT Ancora Indonesia Resources, Tbk

On December 12, 2017, the Company completed the sale of its 90% owned West Lombok Property (the "Property") to PT Ancora Indonesia Resources, Tbk ("PT Ancora"), in consideration for a cash payment of US$2,000,000 and a granting of a 3% Net Smelter Return royalty. Under the terms of the agreement, PT Ancora has the right to buy back the NSR from the Company at any time by paying an additional US$2 million. The Company used the cash proceeds from the sale to acquire 100 million shares of PT Ancora (4.81% of PT Ancora's issued and outstanding) from third parties in a private transaction.

PT Ancora is an Indonesian company listed on the Indonesia Stock Exchange (OKAS:IJ).

SUMMARY OF QUARTERLY RESULTS

		March 31,	December 31,	September 30,	June 30,
		2021	2020	2020	2020
	Total assets	$3,582,672	$3,889,258	$17,254,533	$ 15,328,170
	Working capital	1,613,996	1,969,548	1,467,298	1,393,436
	Net income (loss)	(158,400)	5,993,058	114,815	(54,536)
	Net income (loss) attributable to the Company	(158,400)	5,993,058	114,815	(54,536)
	Basic income (loss) per share	(0.01)	0.27	0.01	(0.00)
	Diluted income (loss) per share	(0.01)	0.27	0.01	(0.00)
		March 31, 2020	December 31, September 30, 2019	June 30, 2019
			2019
	Total assets	$ 12,930,662	$ 15,656,601	$16,896,929	$17,455,389
	Working capital	2,035,814	3,340,517	1,846,582	471,347
	Net income (loss)	(703,993)	(980,680)	1,792,676	275,120
	Net income (loss) attributable to the Company	(703,993)	(980,680)	1,792,676	169,455
	Basic income per share	(0.04)	(0.06)	0.12	0.02
	Diluted income per share	(0.04)	(0.06)	0.12	0.01

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2021

During the three-month period ended March 31, 2021, the Company had a net loss of $158,400 compared to a net loss of $703,993 for the three-month period ended March 31, 2020. Significant fluctuations occurred in the following categories:

1. The Company recognized a realized and unrealized loss on its investments of $370 (March 31, 2020: $347,949).
2. The Company did not record any losses for its share of holdings in Japan Gold as the Company no longer accounts for that investment as an investment in associate subsequent to the return of capital transaction. During the three-month period ended March 31, 2020 the Company recorded a loss of 273,432 on its equity investment in Japan Gold.
3. During the quarter ended March 31, 2021, the Company recorded a gain on fair value adjustment on derivative liability of $Nil (March 31, 2020: gain of $43,088).

- 4 -

SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the nine months ended March 31, 2021 and 2020

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2021

During the nine-month period ended March 31, 2021, the Company had a net income of $5,949,473 compared to $108,003 for the nine-month period ended March 31, 2020. Significant fluctuations occurred in the following categories:

1. During the nine-month period ended March 31, 2021, the Company completed the return of capital and recorded a gain of $6,698,969.
2. The Company recognized a realized and unrealized gain on its investments of $161,973 prior to the return of capital (March 31, 2020: loss of $590,069)
3. The Company also recorded its share of the loss in its investment in Japan Gold of $239,690 prior to the return of capital (March 31, 2020: $891,467).
4. During the nine-months ended March 31, 2021, the Company recorded a gain on fair value adjustment on derivative liability of $Nil (March 31, 2020: gain of $1,538,727). This difference resulted from the reversal of the derivative liability upon the termination of the call option Augusta had on 5,000,000 of the Company's common shares of Tethyan.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash position at March 31, 2021 was $919,659 compared to $349,773 at June 30, 2020. As at March 31, 2021, the Company's working capital was $1,613,996 compared to a working capital of $1,393,436 at June 30, 2020.

Net cash used in operating activities for the period ended March 31, 2021 was $693,607 compared to cash provided by used in operating activities of $374,845 during the period ended March 31, 2020.

Net cash used in investing activities for the period ended March 31, 2021 was $126,042 (March 31, 2020 - $Nil). $4,849 was used to purchase equipment and $130,891 was received from sale of Available for sale investments. During the period ended March 31, 2020, the Company repaid an advance of $1,000,000.

Net cash provided by financing activities during the period ended March 31, 2021 was $1,137,451 (March 31, 2020: $1,433,900). This included proceeds of $1,163,084 from the exercise of options and warrants and lease payments of $25,633 for the Company's office lease (December 31, 2019: $548,600 and $151,133 respectively).

These condensed interim financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company does not currently generate any revenues or have operations that generate cash flows. Accordingly, the Company relies on funding received from the sale of investments and financing received from the issuance of common shares or loans and borrowings to finance its strategic investment activities and general and administrative costs. On October 30, 2020, the Company distributed certain of its investment securities with a carrying value of $13,302,134 to the shareholders of the Company. Subsequent to the distribution, the Company's business plan is to continue making strategic investments in resource companies with a focus on gold and copper-gold. Based on current plans, the Company has sufficient cash to finance its general and administrative expenses and other current obligations for the twelve-month period. However, the Company will be required to obtaining additional financing in order to fund additional investments or exploration projects. While the Company has been successful at securing financing in the past, there can be no assurance that it will be able to do so in the future.

- 5 -