Southern Arc Minerals : MD&A – September 30, 2022

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2022 AND 2021

(Unaudited - Expressed in Canadian dollars)

SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the three months ended September 30, 2022 and 2021

This Management's Discussion and Analysis ("MD&A"), prepared as of November 17, 2022, should be read in conjunction with the unaudited condensed interim financial statements of Southern Arc Minerals Inc. ("Southern Arc" or the "Company") for the three months ended September 30, 2022 and the audited consolidated financial statements for the year ended June 30, 2022 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 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.

In late February 2022, Russia launched a large-scale military attack on Ukraine. The invasion significantly amplified already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including Canada. In response to the military action by Russia, various countries, including Canada, the United States, the United Kingdom and European Union issued broad-ranging economic sanctions against Russia. Such sanctions (and any future sanctions) and other actions against Russia may adversely impact, among other things, the Russian economy and various sectors of the economy, including but not limited to, financials, energy, metals and mining. Accordingly, the actions discussed above and the potential for a wider conflict could increase financial market volatility and cause severe negative effects on regional and global economic markets. As a result, the Company's business, financial condition, and results of operations may be negatively affected by economic and other consequences from Russia's military action against Ukraine and the sanctions imposed in response to that action.

On March 11, 2020, the novel coronavirus outbreak ("COVID-19") was declared a pandemic by the World Health Organization. Although the Company has not been significantly impacted to date, the extent of the impact of COVID-19 on future periods will depend on future developments, including the duration or resurgence of the pandemic, related government responses and the impact on the global economy, which are uncertain and cannot be predicted. 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. The accompanying financial statements for the period ended September 30, 2022 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

	September 30, 2022		June 30, 2022		June 30, 2021
Total assets	$	1,108,327	$	1,153,454	$	2,564,390
Working capital		1,048,091		1,100,148		1,452,975
Total liabilities		57,003		49,871		61,242
Net (loss) income		(65,005)		(1,399,420)		5,274,035
Basic and diluted (loss) income per share	$	(0.00)	$	(0.06)	$	0.22

At the date of this MD&A, the Company had approximately $990,000 in working capital, which consists of the Company's current assets including the Company's investments in shares of Japan Gold Corp., Rise Gold Corp. and Adriatic Metals Plc., net of current liabilities.

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SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the three months ended September 30, 2022 and 2021

RECENT EVENTS

In October 2020, the Company completed a return of capital 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:

		Carrying value
	# of	- October 16,
	securities	2020
Common shares of Japan Gold Corp.	40,021,489	$ 7,264,003
Common shares of Rise Gold Corp.	2,734,388	2,654,385
Common shares of Adriatic Metals Plc	1,655,187	3,246,843
		$13,345,231

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)

On the record date of October 16, 2020, the distribution was recognized at the fair value of the assets distributed of $20,088,749 resulting in a gain on distribution of $6,743,518 which is recognized in net income. The fair value of the shares distributed was based on the quoted market value of those shares, a level one input.

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.

During the period ended September 30, 2021, the Company sold all its remaining shares in PT Ancora for proceeds of $563,945. The Company also sold 125,322 of its shares in Adriatic for proceeds of $302,783.

During the year ended June 30, 2022, a total of 5,084,100 warrants with weighted average exercise price of $0.40 expired unexercised. On August 9, 2022, a total of 12,500,000 warrants with an exercise price of $0.40 expired unexercised

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SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the three months ended September 30, 2022 and 2021

SUMMARY OF QUARTERLY RESULTS

		September 30,	June 30,	March 31,	December 31,
		2022	2022	2022	2021
	Total assets	$1,108,327	$1,153,454	$1,399,131	$1,835,510
	Working capital	1,048,091	1,100,148	1,349,070	1,795,624
	Net loss	65,005	225,920	453,182	234,712
	Basic and diluted loss per share	0.00	0.06	0.02	0.01
		September 30,	June 30,	March 31,	December 31,
		2021	2021	2021	2020
	Total assets	$2,099,674	$2,564,390	$3,582,672	$3,889,258
	Working capital	2,031,435	1,452,975	1,613,996	1,969,548
	Net (loss) income	(485,606)	(679,438)	(158,400)	5,993,058
	Basic and diluted (loss) income per share	(0.02)	(0.04)	0.01	0.27

During the quarter ended September 30, 2021, the Company sold its investments in PT Ancora and Adriatic for proceeds of $866,728, which increased its working capital compared to June 30, 2021. During the quarter ended December 31, 2020, the Company had an increase in net income (from $114,815 on September 30, 2020 to $5,993,058) due to the a gain recorded from the return of capital transaction.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

During the three-month period ended September 30, 2022, the Company had a net loss of $65,005 compared to a net loss of $485,606 for the three-month period ended September 30, 2021. Significant fluctuations occurred in the following categories:

1. The Company recognized an unrealized loss on its investment in warrants of $1,002 (September 30, 2021: $391,348).

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash position at September 30, 2022 was $980,375 compared to $1,045,281 at June 30, 2022. As at September 30, 2022, the Company's working capital was $1,048,091 compared to a working capital of $1,100,148 at June 30, 2022.

Net cash used in operating activities for the period ended September 30, 2022 was $64,906 compared to cash used in operating activities of $96,490 during the period ended September 30, 2021.

Net cash from activities during the period ended September 30, 2022 was $Nil (September 30, 2021: $866,728 due to the sale of the Company's Ancora and Adriatic shares during the year).

There were no financing activities during the periods ended September 30, 2022 and 2021.

The 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 16, 2020, the Company distributed certain of its investment securities with a carrying value of $13,345,231 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 next twelve-month period. However, the Company will be required to obtaining additional financing in order to fund additional

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SOUTHERN ARC MINERALS INC.

Management's Discussion and Analysis

For the three months ended September 30, 2022 and 2021

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. These material uncertainties may cast significant doubt upon the Company's ability to continue as a going concern.

RELATED PARTY TRANSACTIONS

Key management and personnel compensation

Key management personnel include the directors and officers of the Company.

Key management compensation for the period ended September 30, 2022 consisted of management fees of $60,000 (September 30, 2021 - $60,000) paid to two private companies controlled by the Chief Executive Officer and Chairman of the Company. Management fees include administrative, finance, accounting, investor relations and consulting services.

The Company also reimbursed a private company controlled by the Chief Executive Officer and Chairman of the Company $7,500 in occupancy costs (September 30, 2021 - $7,500). As at September 30, 2022, the Company had a deposit balance of $4,706 (June 30, 2022 - $4,706) for its occupancy costs.

The above transactions are recorded at the consideration established and agreed to by the related parties.

CURRENT SHARE DATA

As at the date of this MD&A, the Company has 22,898,283 common shares issued, of which 22,768,283 are outstanding and 130,000 are treasury shares.

As at September 30, 2022 and the date of this MD&A, the Company has no share options or share purchase warrants outstanding.

RISKS AND UNCERTAINTIES

The Company's business could be significantly adversely affected by the effects of any widespread global outbreak of contagious diseases. A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downtown that could affect demand for the Company's products and likely impact operating results. In particular, the outbreak of COVID- 19 has had a negative impact on global financial conditions. The Company cannot accurately predict the impact COVID-19 will have on the Company's business, including its ability to obtain financing or third parties' ability to meet their obligations with the Company, as well as due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. The Company has not been significantly impacted to date, the extent of the impact of COVID-19 on future periods will depend on future developments, including the duration or resurgence of the pandemic, related government responses and the impact on the global economy, which are uncertain and cannot be predicted.

Due to the Russian invasion to Ukraine, various countries, including Canada, the United States, the United Kingdom and European Union issued broad-ranging economic sanctions against Russia. The ramifications of the hostilities and sanctions may not be limited to Russia, Ukraine and Russian and Ukrainian companies and may spill over to and negatively impact other regional and global economic markets (including Europe, Canada and the United States), companies in other countries (particularly those that have done business with Russia and Ukraine) and on various sectors, industries and markets for securities and commodities globally, such as oil and natural gas. The extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted. While we expect any direct impacts to our business to be limited, the indirect impacts on the economy and on the mining industry and other industries in general could negatively affect our business and may make it more difficult for us to raise equity or debt financing. In addition, the impact of other current macro-economic factors on our business, which may be exacerbated by the war in Ukraine - including inflation, supply chain constraints and geopolitical events - is uncertain.

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