Candelaria Mining : Jan 31, 2022 Q3 MD&A

Third Quarter - January 31, 2022

Management's Discussion and Analysis

For the nine months ended January 31, 2022

(Expressed in Canadian dollars, unless otherwise noted)

April 1, 2022

For further information on the Company, reference should be made to its public filings on SEDAR at www.sedar.com. Information is also available on the Company's website at www.candelariamining.com. This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited condensed consolidated interim financial statements for nine months ended January 31, 2022 and audited consolidated financial statements for the year ended April 30, 2021, and related notes thereto which have been prepared in accordance with International Financial Reporting Standards. The MD&A contains certain forward-looking statements, so please review the disclaimers that are provided on the last page of the report.

OVERVIEW

Candelaria Mining Corp. (the "Company"), is a British Columbia registered public company listed on the TSX Venture Exchange ("TSXV") under the trading symbol "CAND" and the OTC Best Market ("OTCQX") under the trading symbol "CDELF". The Company was incorporated under the Business Corporations Act of British Columbia on January 23, 2012. The Company's registered and records office is located at Suite 1200, 750 West Pender Street, Vancouver, BC, Canada, V6C 2T8. The address of the Company's head office is 1201 - 1166 Alberni Street, Vancouver, BC V6E 3Z3.

Candelaria Mining is a Canadian-based gold exploration company with a portfolio of highly prospective projects in Mexico, one of the world's best mining jurisdictions. Candelaria currently own 100% of the Caballo Blanco and the Pinos Gold Projects.

HIGHLIGHTS - NINE MONTHS ENDED JANUARY 31, 2022

On September 22, 2021, the Company closed the first tranche of a non-brokered private placement of 17,622,494 units at a price of $0.45 per unit for gross proceeds of $7,930,122.

Each unit consisted of one common share of the Company and one-half of a common share purchase warrant, with each full warrant entitling the holder thereof to acquire one common share of the Company at a price $0.65 for a period of 36 months following the closing of the offering.

The first tranche includes the subscription of 13,333,333 Units by Agnico Eagle Mines Limited ("Agnico Eagle") for gross proceeds of $6,000,000. This increased Agnico Eagle's holding to approximately 19.41% of the basic shares outstanding, on a partially diluted basis. Prior to the Offering Agnico Eagle held 10,120,000 (7.9%) of the Company's common shares.

All securities issued in connection with the Offering will be subject to a hold period of four months plus a day from the date of issuance and the resale rules of applicable securities legislation.

Ramon Perez and Neil O'Brien, each a director of the Company, subscribed for 888,888 Units ($400,000) and 50,000 Units ($22,500), respectively, under the first tranche of the offering. The insider subscriptions

Third quarter ended - January 31, 2022

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Third Quarter - January 31, 2022

constitute "related party transactions" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Securityholders in Special Transactions ("MI 61-101"). The Company has relied on the exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in Sections 5.5(a) and 5.7(1)(a), respectively, of MI 61-101 in respect of the Insider Subscriptions.

On October 29, 2021, the Company closed the second and final tranche of a non-brokered private placement with the issuance of 1,136,997 units at a price of $0.45 per unit for gross proceeds of $511,648. Each unit consisted of one common share of the Company and one-half of a common share purchase warrant, with each full warrant entitling the holder thereof to acquire one common share of the Company at a price $0.65 for a period of 36 months following the closing of the offering.

Armando Alexandri (COO) and Mike Struthers (CEO), subscribed for 622,222 Units ($280,000) and 91,111 Units ($41,000), respectively, in the final tranche.

Gross proceeds raised from the final offering will be used for general corporate purposes. Combining with first tranche, which closed on September 22, 2021, the total proceeds raised was $8,441,770, with a total issuance of 18,759,491 Units.

On November 5, 2021, the Company commenced trading on the OTCQX under the symbol "CDELF". The listing on the OTCQX helps to provide our U.S. investors with increased liquidity and trading access.

CABALLO BLANCO DISTRICT, STATE OF VERACRUZ, MEXICO

Ownership: 100% Candelaria Mining Corp.

Background:

The Caballo Blanco licence area is located on the eastern coast of Mexico in the state of Veracruz, 65 kilometers northwest of the city of Veracruz. The most advanced project in the licence area, La Paila, was subject to a PEA in 2012 (refer NI43-101 Technical Report, May 2012, Goldgroup Mining Inc.) which envisaged a low CAPEX, conventional open pit / heap leach mining operation targeting approximately 100,000 ounces of gold production annually. Further geological and exploration works by the Company since acquiring Caballo Blanco have included an updated pit-constrained resource estimate for La Paila (refer Candelaria Mining Corp. NI43-101 Technical Report, April 2017), and additional exploration activities in the wider licence area, including at the seven additional high-priority targets in the Northern and Highway Zones.

In accordance with the Company's accounting policy, non-current assets, including Caballo Blanco, are reviewed at each reporting date to determine whether there are any indicators of impairment. An impairment is recognized (during year ended April 30, 2019) when the carrying amount exceeds the recoverable amount.

Since acquiring the asset in July 2016, the Company has engaged with government authorities, community members and stakeholders, and undertaken additional exploration work including drilling and sampling programs. Candelaria also closed a strategic investment with Agnico Eagle Mines Limited in 2017 for $9.7 million for 9.9% ownership in the Company (as at the date of the report, the ownership percentage is 7.8%).

Activities during the reporting period have included continued exploration activities in and around the priority targets within the licence area (refer below), and ongoing engagement with local community groups.

Caballo Blanco is subjected to two separate underlying royalty commitments as defined below:

1. Almaden Minerals Limited retains a 1.5% NSR
2. An (arm's length) 3rd party retains an NSR as follows:

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• 1.25% NSR up to 1,000 tonnes per day
• 1.00% NSR from 1,001 to 1,500 tonnes per day
• 0.75% NSR from 1,501 to 10,000 tonnes per day
• 0.5% NSR from 10,001 or more tonnes per day

Outlook:

The Company has recently defined an exploration program aimed at testing all of the high-priority targets within the district, as well as expanding the current resource at La Paila. The program comprises two phases:

• Phase 1: Approximately 9,000m and 9 months duration (including permitting), for a cost of $4.4 million. This will include drill testing of all of the Northern Zone priority targets (La Paila north-east; La Paila south-west; Bandera Norte; Bandera Sur; Las Cuevas); target definition and testing at the large epithermal anomaly at Highway North; and targeting works for porphyry type mineralization at La Luz South.
• Phase 2: Approximately 19,000m and 18 months duration, for a cost of $6.0 million. This will include resource infill drilling at La Paila; target testing at La Luz South; target definition and testing at Highway Central; and additional regional reconnaissance and target definition works.

The first phase of this program is fully funded.

The actual program may of course vary depending on discoveries made during Phase 1.

This field work is expected to commence in Q1 2022. An expanded geological team is being created in Veracruz and preparations for the field program are advancing.

PINOS GOLD PROJECT, STATE OF ZACATECAS, MEXICO

Ownership: 100%

Background:

The Pinos property and historical mining district is located in the municipality of Pinos, Zacatecas state in north-central Mexico near the town of Pinos, Zacatecas. The property lies 405 air-kilometres northwest of Mexico City and is 67 km west-northwest of the city of San Luis Potosí, 113 km east-southeast of the city of Zacatecas, and 85 km northeast of the city of Aguascalientes.

The plant and offices are located at ≈ 22° 18' 45" N Latitude and 101° 35' 26.5" W Longitude. The property lies in the Mexican Altiplano at elevations ranging from 2,360 to 2,800 m above sea level. Excellent location within the Fresnillo - Guanajuato Trend, containing the current major mines of Minera Frisco, Fresnillo and Pan American Silver.

Royalties:

On November 25, 2020, the Company sold a 0.5% net smelter return ("NSR") royalty on production from the Pinos Project to Empress Royalty Corp. ("Empress") for US$750,000. Empress also purchased an additional 0.5% NSR royalty from a previous royalty holder on the Pinos Project, for a total of a 1.0% NSR royalty. The Company can buyback 0.25% from Empress for US$937,500.

The Pinos Project is subject to total NSR royalties of 2.0% including the two NSR royalties held by Empress.

Project Progress:

During the reporting period the Company has continued to advance the Pinos project through the following

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activities:

1. Granted HSEC permits by the Mexican Labor and Health Departments after completing all necessary requirements (including the COVID-19 protocols). There were no accidents or COVID- 19 infections during last calendar quarter of 2021.
2. Updated geological interpretations of high-grade mineralization in the Peñitas and Natividad/San Francisco areas to define an infill drill program to support the updated structural interpretations, and to test higher grade mineralised ore shoots. This included the findings from a review of the major structural controls on mineralisation by an independent consultant with the aim of increasing knowledge of the district and to predict new high-grade zones.
3. Drilling permit application granted for Peñitas, Natividad and San Francisco zones.
4. Initiated geological mapping of the El Africano zone. The Company expects this to be completed in the first calendar quarter of 2022, and will then proceed with initial drilling.
5. Continued the maintenance of protected species at the Pinos nursery as required by Mexican environmental authorities and the CITES Convention.

Outlook:

The Company is currently arranging financing to construct the Pinos project. It is anticipated that the financing will consist of a combination of debt and equity to meet the needs for initial capital costs, working capital and general corporate spending.

In parallel the Company is undertaking the following initiatives to further enhance project value:

• Further enhancements to structural interpretations of the Pinos vein systems with input from an internationally recognised expert in structural controls on epithermal gold mineralised systems. The purpose of this study work is to better understand the controls on higher grade gold mineralization prior to final design of an in-fill drilling program.
• An additional infill drilling program for portions of the veins in the mine re-start area, to further build resource confidence (migrating more resources to Measured and Indicated categories), and further improve definition of higher-grade production targets in other lodes such as Natividad and San Miguel.
• Updates to mine designs and production plans as a result of the above, to maximise early-stage throughput grades and production rates from the re-start mine.
• A preliminary assessment of the resource potential within and around old workings in the old Pinos district as extensions along strike and at depth from old workings (most old workings ceased at the water table elevation). This provides a prioritised resource expansion program to continue to build on district-scale resources.

Concluding these work strands, coupled with resolving funding options, will enable the board to make a decision on construction at Pinos in Q1 / Q2 2022. The construction schedule for the Pinos Mine is between 12-14 months duration, and the project is fully permitted for construction and production, and major contracts are prepared.

Furthermore, it remains an intention for the Company to update the 2018 Pinos Preliminary Economic Assessment (PEA), and this is likely to be published during late 2022.

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LIQUIDITY AND CAPITAL RESOURCES

A summary of the Company's cash position and changes in cash and cash equivalents for:

(Tabled amounts are expressed in		Three months ended		Nine months ended
thousands of Canadian dollars)		January 31			January 31
		2022		2021		2022		2021
Cash used in operating activities	$	(1,406)	$	(870)	$	(4,393)	$	(2,547)
Cash flow from investing activities		(61)		974		(186)		958
Cash flow from financing activities		-		-		8,310		2,055
Increase (decrease) in cash		(1,467)		104		3,731		466
Cash and cash equivalents, end of period	$	4,488	$	492	$	4,488	$	492

As at January 31, 2022, the Company's net working capital was $3.8 million compared to net working capital deficit of $1.9 million as at April 30, 2021. The net working capital improved due to the closing of $8.4 million of private placement in the current period.

Cash outflow from operating activities for the current period ended January 31, 2022 was higher than 2021 as the Company increased its corporate activities due to the closing of $8.4 million of private placement in the current period.

Cashflow from investing activities in the current period ended January 31, 2022 was solely related to mill equipment expenditure in preparation to develop the Pinos project.

Cash inflow from financing activities was higher in the current period ended January 31, 2022 when compared with 2021. This was mainly due to the closing of $8.4 million of private placement in the current period, which did not occur in the prior year.

The Company's ability to continue as a going concern is dependent on the Company's ability to raise funds.

Third quarter ended - January 31, 2022

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