For the Six months ended April 30, 2024

Management Discussion & Analysis

(Expressed in Canadian dollars)

1

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the six months ended April 30, 2024

Expressed in Canadian Dollars

INTRODUCTION

Date Prepared: 24th June 2024

This Management Discussion and Analysis, ("MDA") covers the operations of Canaf Investments Inc. ("Canaf" or the "Corporation") for the six months ended April 30, 2024 and should be read in conjunction with the unaudited Consolidated Financial Statements for the six months ended April 30, 2024 and the audited Consolidated Financial Statements for the year ended October 31, 2023 and related notes. The Financial Statements are presented in accordance with International Financial Reporting Standards ("IFRS"). Canaf's accounting policies are described in Note 2 of the unaudited Consolidated Financial Statements for the six months ended April 30, 2024 and the audited Consolidated Financial Statements for the year ended October 31, 2023. The consolidated financial statements together with this MDA are intended to provide investors with a reasonable basis for assessing the financial performance of the Corporation.

All dollar amounts are expressed in Canadian dollars, the presentation currency of the Corporation, unless otherwise stated. The Corporation's listing on the TSX-V is also quoted in Canadian Dollars. Effective April 21, 2023 the Corporation changed its presentation currency to Canadian dollars (previously US dollars). This change in presentation currency has been applied retrospectively as if the new presentation currency had always been the Corporation's presentation currency.

Additional information relating to the Corporation is available on SEDAR at www.sedarplus.ca. or at Corporation's website at www.canafinvestments.com.

2

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

DESCRIPTION OF BUSINESS

Canaf is a British Columbia Corporation having continued from Alberta, with two wholly owned subsidiaries in South Africa, Quantum Screening and Crushing (Pty) Limited ("Quantum"), and Canaf Investments (Pty) Ltd, ("Canaf Ltd").

Quantum, through its 70% owned subsidiary, Southern Coal (Pty) Ltd. ("Southern Coal"), processes anthracite coal into de-volatised anthracite (calcined anthracite) for sale mostly to steel and ferromanganese manufacturers as a substitute product for coke.

Canaf Investments (Pty) Ltd, incorporated in 2019, acts as Canaf's South African holding company with the intention of creating a diverse Corporation focused on sustainable and long-term growth sectors within South Africa. Canaf Investments (Pty) Ltd owns 100% of Canaf Estate Holdings (Pty) Ltd., ("CEH") and 100% of Canaf Agri (Pty) Ltd.

Southern Coal - Calcined Anthracite, South Africa

Southern Coal produces calcined anthracite, which is primarily sold as a substitute to coke in sintering processes, by feeding anthracite coal through its rotary kiln, at temperatures between 900 and 1100 degrees centigrade; the volatiles are driven off and the effective carbon content increased. Southern Coal supplies world leading steel and ferromanganese producers in South Africa from its operation near Newcastle, KwaZulu Natal.

Canaf Estate Holdings - Property Investments, South Africa

CEH is a property investment company focused on acquiring, redeveloping and renting properties primarily within the suburbs of the old Johannesburg CBD. CEH made its first property acquisition in August 2019, and as at April 30, 2024 owned 7 properties, with a total value of approximately R10.4 million. The CEH property portfolio is projecting to generate net pre-tax returns of approximately 14%.

Canaf Agri - Agriculture Projects, South Africa

Newly incorporated, Canaf Agri is exploring investment opportunities in the agriculture sector in South Africa.

3

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

OVERALL PERFORMANCE AND OUTLOOK

The six months ended April 30, 2024 demonstrates another strong financial performance for the Corporation. Sales for the six months ended April 30, 2024 increased by 22% compared to the previous year, generating year-to-date revenues of CAN$15,819,050 (2023: CAN$12,975,798). For the period, the Corporation recorded a net income for shareholders of CAN$780,406 (2023: CAN$733,008), up 6.5% on the same period last year which reflects an earnings per share year to date of CAN$0.0165/per share.

The strong improvement in sales in comparison to the previous year is due to increased sales tonnes as well an upward adjustment to pricing caused by increased cost of raw materials. Increases to the overhead cost bases have resulted in reduced net margins against a growing sales base primarily as a result of Southern Coal absorbing some operational costs to assist its core customers as well as appreciating the global downward trend in the coal and reductant market.

As predicted, Q2 2024 represented a 35% reduction in sales compared with Q1 2024 (Q2: CAN$6,202,779, Q1: CAN$9,616,272) caused by key customers temporarily reducing their output and carrying out maintenance projects, however Q3 is currently expected to see a recovery of sales closer to that of Q1.

The Corporation's property division (CEH) acquired another property during the last quarter and remains on track to grow its value to between R15million and R20million by the end of the financial year. The Corporation remains positive on the opportunity of investing in CEH and remains on track to generate a pre-tax yield of approximately 14% by the end of financial year.

The Corporation continued to support the local community, suppliers, businesses and students via various social development programs, learnerships, and enterprise funding schemes for new businesses. Total contributions for the six-month period amounted to approximately CAN$47,653 which represents similar spend levels to the first 6 months of 2023.

The Corporation continues to explore new investment opportunities both aligned to the existing calcining business, as well as in new sectors. A South African investment division is also being explored and the Corporation hopes that this will be formalised before the end of the current year. The Corporation remains focused on long-term sustainable, and socially responsible growth, within South Africa.

Effective 21st April 2023, the Corporation changed its reporting currency from US dollars to Canadian dollars. This change in reporting currency has been applied retrospectively as if the new currency has always been the Corporation's reporting currency. Management decided to change its reporting currency to Canadian Dollars, so it aligns with the

currency of its primary listing on the Toronto Stock Exchange.

As of April 30, 2024, shareholder equity stood at CAN$10.1 million, which relates to a book value per share of CAN$0.213.

4

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

Selected Financial Information

The following financial information is derived from the Corporation's audited consolidated financial statements for the six months ended April 30, 2024 and 2023.

6 Months Ended

Apr 30

2024

2023

CAN$

CAN$

Revenues

15,819,050

12,975,798

Cost of Sales

(14,458,699)

(11,376,476)

Gross Profit

1,360,351

1,599,323

Expenses

(468,856)

(446,375)

Interest Income

334,166

236,561

Other Income

337

15,101

Net Income for the year (before tax)

1,225,999

1,404,611

Income Tax Recovery (Expense)

(371,813)

(394,057)

Net Income for the year

854,185

1,010,554

Attributable to the Shareholders

780,406

733,008

Attributable to the Non-Controlling Interest

73,779

277,546

Adjusted EBITDA

981,971

1,311,784

2024

2023

Total Assets

13,271,195

13,618,505

Total Equity

11,067,268

10,094,281

Non- GAAP Performance Measures

The Corporation has included additional financial performance measures in this MD&A, such as adjusted EBITDA. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Corporation's underlying performance of its core operations and its ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

*Reconciliation of Adjusted EBITDA and Profit

6 Months Ended

Apr 30

2024

2023

CAN$

CAN$

Net Income for the year

854,185

1,010,554

Interest Received

(334,166)

(236,561)

Foreign Exchange Losses

60

16,092

Depreciation and Amortization

90,079

127,643

Income Taxes

371,813

394,057

Adjusted EBITDA

981,971

1,311,784

Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, foreign exchange gain (loss) and other revenues (expenses) as historically calculated by the Corporation.

5

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION (B-BBEE)

As part of Southern Coal's B-BBEE transformation program, Amandla Amakhulu (Pty) Ltd, ("AAM"), a 100% black, privately owned, and ringfenced, company incorporated in South Africa, acquired 30% of the issued shares of Southern Coal, from Canaf's wholly owned subsidiary, Quantum, for the value of 18 million Rand. The financial effective date for the transaction is August 1, 2018.

Quantum in return received cumulative, redeemable preference shares in AAM in the amount of the purchase price. These preference shares shall provide preferential dividends, until redeemed by AAM. These dividends will be secured by an irrevocable direction from AAM to Southern Coal to pay Quantum such dividends from any distribution to AAM. Dividends of CAN$87,709 were paid during the six months ended April 30, 2024. During the year ended October 31, 2023, dividends paid totalled CAN$155,538 (2022: CAN$133,772).

CLAIM AGAINST KILEMBE MINES LIMITED

In August 2006, the Corporation, then known as Uganda Gold Mining, announced the termination of any further investment into its Kilembe Copper-Cobalt Project in Uganda. Since 2007, the Corporation has been involved in a legal dispute with Kilembe Mines Limited, ("KML"), wherein the Corporation seeks general damages, special damages and costs of the Arbitration from KML for breach of contract. In January 2013, the high court of Uganda referred the case back to arbitration for determination.

After a change of Arbitrators, the parties agreed to the appointment of a replacement Arbitrator, Mr. Didas Nkurunziza. The replacement Arbitrator's appointment was confirmed on the 19th of April 2022. It was agreed that the Arbitration bifurcated, with the first part being a determination of the breach and thereafter, if breach is found, an assessment of the quantum of loss.

Following the filing of the respective parties' cases, the Arbitral Tribunal delivered its Award on the 26th of April 2023 disallowing both Canaf's claim and KML's counterclaim. In disallowing the claims, the Tribunal based on an issue outside the scope of the reference, raised by itself after the conclusion of the arbitration proceedings, with the parties being denied an opportunity to call further evidence to clarify on that issue.

It is on this basis that an Application has been filed to the Uganda High Court on behalf of Canaf to set aside this Award and refer the dispute back for determination before another arbitrator. The dispute is pending hearing before the Uganda High Court.

6

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024 Expressed in Canadian Dollars

RESULTS OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 2024

The Corporation reports a net income for the six months ended April CAN$1,010,554), a reduction of CAN$156,368 (15%) in comparison to the same of CAN$15,819,050 (2023: CAN$12,975,798).

30, 2024 of CAN$854,185 (2023: period the previous year, on revenues

3 Months Ended

6 Months Ended

April 30

Apr 30

2024

2023

Variance

2024

2023

Variance

CAN$

CAN$

CAN$

%

CAN$

CAN$

CAN$

%

Sales

6,202,779

6,434,585

(231,807)

(4%)

15,819,050

12,975,798

2,843,252

22%

Cost of Sales

(5,534,761)

(5,527,899)

(6,861)

(0%)

(14,458,699)

(11,376,476)

(3,082,223)

27%

Gross Profit (Loss)

668,018

906,686

(238,668))

(26%)

1,360,351

1,599,323

(238,972)

(15%)

Expenses

General and

(254,303)

(219,080)

(35,223)

16%

(468,795)

(430,283)

(38,512)

9%

Administrative

Foreign Exchange

(58)

(16,168)

16,110

(100%)

(60)

(16,092)

16,031

(100%)

Gain

Total expenses

(254,361)

(235,248)

(19,113)

8%

(468,856)

(446,375)

(22,481)

5%

Interest Income

174,541

132,154

42,387

32%

334,166

236,561

97,605

41%

Other Income

(1,771)

11,477

(13,248)

(115%)

337

15,101

(14,764)

(98%)

Income (Loss) Before

586,426

815,068

(228,642)

(28%)

1,225,999

1,404,611

(178,612)

(13%)

Income Taxes

Income Tax Recovery

(209,051)

(243,674)

34,624

(14%)

(371,813)

(394,057)

22,243

(6%)

(Expense)

Net Income (Loss) for

377,376

571,394

(194,018)

(34%)

854,185

1,010,554

(156,368)

(15%)

the period

Sales

Sales growth during the six months totalled 22%, with sales achieved of CAN$15,819,050, compared with CAN$12,975,798 for the six months ended April 30, 2023. The increase in sales is as a result both of increased sales tonnes coupled with an upward adjustment of sales price.

As at April 30, 2024 CEH owned seven properties in its portfolio, with the seventh property acquired in April 2024. Rental income for the six months was CAN$85,824 across the properties. Deposits of CAN$332,507 account for three pending properties, two of which have transferred to the Company since the period end, which will bring the overall property portfolio value to approximately CAN$1.0m.

7

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

Cost of Sales

Cost of sales have increased by 27% compared to the same 6-month period last year (2024: CAN$14,458,699; 2023: CAN$11,376,476), slightly higher than sales, which increased by 22%. Margins subsequently decreased by 3.7% year to date compared with the previous 6 months (2024: 8.6%; 2023: 12.3%), primarily as a result of Southern Coal absorbing some operational costs to ensure it remains competitive within the reductant market.

3 Months Ended Apr 30

6 Months Ended Apr 30

2024

2023

2024

2023

CAN$

CAN$

CAN$

CAN$

Inventories, Beginning of the Year

1,807,704

692,742

1,533,269

1,414,011

Analysis Fees

5,155

3,663

9,340

8,261

Depreciation

40,465

56,211

81,669

118,744

Electricity

30,323

35,322

54,374

72,594

Fuel, Oil and Lubricants

43,883

80,144

124,464

177,215

Professional and Project Management Fee

10,122

-

20,610

-

Medical Expenses

2,058

3,131

4,037

5,348

Product Purchases

5,044,376

5,420,952

13,680,307

9,997,873

Protective Clothing

7,047

6,319

11,971

12,921

Provident Fund

9,644

8,893

19,393

18,169

Machinery Rental

78,051

73,299

146,678

144,961

Repairs and Maintenance

77,461

74,201

199,175

157,090

Salaries and Benefits

123,663

115,839

274,507

249,935

Transportation

1,248

77,656

45,345

119,828

Inventories, End of the Quarter

(1,746,440)

(1,120,473)

(1,746,440)

(1,120,473)

5,534,761

5,527,899

14,458,699

11,376,476

8

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

General and Administrative Expenses:

3 Months Ended

6 Months Ended

April 30

April 30

2024

2023

Variance

2024

2023

Variance

CAN$

CAN$

CAN$

%

CAN$

CAN$

CAN$

%

Bank Charges and Interest

829

2,992

2,163

72%

3,695

5,964

2,269

38%

Consulting Fees

34,396

46,016

11,620

25%

66,635

71,635

5,000

7%

Management Fees

23,179

6,355

(16,824)

(265%)

48,836

23,610

(23,226)

(98%)

Directors Incentives

25,000

22,250

(2,750)

(12%)

41,000

39,250

(1,750)

(4%)

Office, Insurance and Sundry

58,220

46,914

(11,306)

(24%)

111,228

95,491

(15,737)

(16%)

New Ventures

6,765

-

(6,765)

(100%)

9,838

-

(9,838)

(100%)

Professional Fees

61,603

49,924

(11,679)

(23%)

107,946

98,503

(9,443)

(10%)

Promotion

662

388

(274)

(71%)

714

388

(325)

(84%)

Telephone

2,762

3,136

375

12%

5,946

6,424

478

7%

Transfer Agent and Filing Fees

12,617

11,265

(1,352)

(12%)

13,717

12,388

(1,329)

(11%)

Travel

5,638

15,692

10,054

64%

13,588

27,782

14,194

51%

Broad-Based Black Economic

22,633

14,147

(8,486)

(60%)

47,653

48,848

1,194

2%

Empowerment

(9%)

254,303

219,080

(35,223)

(16%)

468,795

430,283

(38,512)

Foreign Exchange gain

58

16,168

16,110

(100%)

60

16,092

16,031

(100%)

Expenses

254,361

235,248

(19,113)

(8%)

468,856

446,375

(22,481)

(5%)

Interest Income

(174,541)

(132,154)

42,387

32%

(334,166)

(236,561)

97,605

41%

Other Income

1,771

(11,477)

(13,248)

(115%)

(337)

(15,101)

(14,764)

(98%)

81,592

91,618

10,026

11%

134,353

194,712

60,360

31%

Expenses

General and administrative expenses are 9% higher than the same 6 months of the previous year (2024: CAN$468,795;

2023: CAN$430,283). Increased expenditure relates to new ventures and inflationary pressures on wages and other back-office expenses

Interest Income

Interest income for cash in hand and earned on the loan to AAM was 41% higher compared to the same 6-month period in the previous year (2024: CAN$334,166; 2023: CAN$236,561), as a result of higher cash balances held in high interest accruing accounts.

Other Income

Other income last financial year primarily relates to rental income generated from property held outside of CEH's portfolio.

9

CANAF INVESTMENTS INC.

Management Discussion and Analysis for the Six months ended April 30, 2024

Expressed in Canadian Dollars

SIX MONTHS ENDED APRIL 30, 2024: BY SECTOR

3 Months Ended

6 Months Ended

Quantum(1)

April 30, 2024

Apr 30, 2024

Canaf

Other

Total

Quantum

Canaf

Other

Total

Investments(2)

Investments(2)

CAN$

CAN$

CAN$

CAN$

CAN$

CAN$

CAN$

CAN$

Sales

6,157,570

45,209

-

6,202,779

15,733,226

85,824

-

15,819,050

Cost of Sales

(5,529,224)

(5,536)

-

(5,534,761)

(14,424,676)

(34,023)

-

(14,458,699)

Gross Profit (Loss)

628,346

39,673

-

668,018

1,308,550

51,801

-

1,360,351

Gross Margin

10%

88%

-

11%

8%

60%

-

9%

Expenses

General and

(104,370)

(47,397)

(102,537)

(254,303)

(216,124)

(69,309)

(183,362)

(468,795)

Administrative

Foreign Exchange

-

-

(58)

(58)

-

-

(60)

(60)

Loss

Total expenses

(104,370)

(47,397)

(102,595)

(254,361)

(216,124)

(69,309)

(183,422)

(468,856)

Interest Income

163,105

8,312

3,124

174,541

317,339

10,534

6,294

334,166

Other Income

(1,771)

-

-

(1,771)

337

-

-

337

Income (Loss) Before

685,310

588

(99,471)

586,426

1,410,101

(6,974)

(177,129)

1,225,999

Income Taxes

  1. Quantum relates to Quantum and its 70% owned anthracite calcining business (Southern Coal).
  2. Canaf Investments relates to its wholly owned subsidiaries, Canaf Estates Holdings and Canaf Agri (yet to generate income).

10

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Disclaimer

Canaf Investments Inc. published this content on 24 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 June 2024 23:12:10 UTC.