Canuc Resources Cda : 2022 - Q2 - MD&A

CANUC RESOURCES CORPORATION (Formerly Santa Rosa Silver Mining Corp.)

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE PERIOD ENDED JUNE 30, 2022

INTRODUCTION

The following discussion of the results of operations and financial condition ("MD&A") of Canuc Resources Corporation ("Canuc" or "the Corporation") prepared as of August 12th, 2022 consolidates Management's reviewof the factors that affected the Corporation's financial and operating performance for the year ended June 30, 2022, and factors reasonably expected to impact on future operations and results. This discussion should be read in conjunction with the quarterly consolidated financial statements of the Corporation for the periods ended June 30, 2022 and December 31, 2021 together with the notes thereto. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results for the period ended June 30, 2021 are not necessarily indicative of the results that may be expected for any future period.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Canuc's common shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

The Corporation's financial statements, as well as additional information, are available at www.sedar.com.The Corporation's reporting currency is the Canadian dollar and all amounts disclosed herein are in Canadian dollars, unless otherwise stated.

The Corporation is listed on the TSX-V under the symbol CDA. The registered office is located at 130 Queens Quay East, Suite 607, Toronto, Ontario, M5A 3Y5.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

Except for statements of historical fact relating to the Corporation, certain information contained in this MD&A constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the potential of the Corporation's properties; the future prices of base and precious metals; success of exploration activities; cost and timing of future exploration and development; the estimation of mineral reserves and mineral resources; conclusions of economic evaluations; requirements for additional capital; and other statements relating to the financial and business prospects of the Corporation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or"be achieved". Forward-looking information is based on the reasonable assumptions, estimates, analysis andopinions of management made in light of its experience and its perception of trends, current conditions andexpected developments, as well as other factors that management believes to be relevant and reasonable inthe circumstances at the date that such statements are made, and is inherently subject to known and unknownrisks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Corporation to be materially different from those expressed or implied by such forward-

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looking information, including but not limited to risks related to: unexpected events and delays during permitting; the possibility that future exploration results will not be consistent with the Corporation's expectations; timing and availability of external financing on acceptable terms and in light of the current decline in global liquidity and credit availability; future prices of precious metals; currency exchange rates; government regulation of mining operations; failure of equipment or processes to operate as anticipated; risks inherent in precious metals exploration and development including environmental hazards, industrial accidents, unusual or unexpected geological formations; and uncertain political and economic environments. Although management of the Corporation has attempted to identify important factors that could cause actualresults to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Corporation does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

DESCRIPTION OF THE BUSINESS

The Corporation is a junior resource corporation focused, through its subsidiary Minera Stramin S. de R.L. de C.V. ("Minera Stramin"), on the acquisition, exploration and development of the San Javier Project, a silver-gold-copper exploration project located in the state of Sonora in northwest Mexico, roughly 134 km southeast of the Sonora capital city of Hermosillo. This project presently has no NI 43-101 resources or reserves. As a result of its business combination with the Former Canuc, the Corporation also has natural gas interests in Texas, U.S.A. held through its subsidiary Midtex Oil & Gas Corporation ("Midtex").

The Corporation is a mineral exploration company and, accordingly, the Corporation is dependent upon equity financings and the optioning and/or sale of resource or resource-related assets for funding. The Corporation's oil and gas assets are currently producing net income. The recoverability of the carrying value of exploration and evaluation projects, and ultimately the Corporation's ability to continue as a going concern, is dependent upon this oil and gas income and upon the Corporation's ability to finance exploration of its projects through equity financings and the optioning and/or sale of resource or resource-related assets.

Prospective investors should carefully consider the risk factors described in the section entitled "Risks and Uncertainties" below.

MERGER BETWEEN CANUC AND SANTA ROSA

On February 21st 2017 Canuc executed a business combination agreement dated August 26th, 2016 (the "Transaction"). The Transaction involved the combination of Former Canuc and Santa Rosa by way of an amalgamation of Santa Rosa and a wholly owned subsidiary of Canuc, to form one company as a wholly owned subsidiary of Canuc. Pursuant to the amalgamation, all issued and outstanding securities in the capital of Santa Rosa were converted into like issued and outstanding securities of Canuc on a two-for one basis. This Transaction resulted in 22,365,000 shares being issued to Santa-Rosa shareholders. All Santa Rosa options and warrants were converted to options and warrants of Canuc, on the same two-for-one basis.

After evaluating all the facts surrounding this Transaction, Management determined that IFRS 3, Business Combinations, was applicable and the Transaction was accounted for as a business combination with Santa Rosa as the acquirer for accounting purposes.

The following table summarizes the fair value of the total consideration deemed issued by Santa Rosa to acquire Former Canuc and the fair value of assets acquired, and liabilities assumed.

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	Purchase Price
	Common shares issued	$	2,037,350
	Share-based compensation		103,095
	Warrants		363,610
	Total Purchase Price	$	2,504,055
	Net Assets Acquired
	Cash	$	1,267
	Receivables and prepaids		35,588
	Oil and gas properties and interests (i)		349,519
	Accounts payable and accrued liabilities		(336,429)
		$	49,945
	Goodwill	$	2,454,110

The Corporation used a discounted cash flow model to estimate the expected future cash flows from its oil and gas properties and interests. Expected future cash flows are based on estimates of future production and commodity prices, operating costs and forecast capital expenditures based on the life of production as at the acquisition date.

Goodwill resulted from the acquisition of Former Canuc, and primarily relates to price paid over the net assets acquired. Goodwill was assessed as having "day 1 impairment" and has been written off.

ACQUISITION OF FULL CIRCLE ENERGY

On November 2nd 2018 Canuc executed a business combination agreement dated September 25th, 2018 (the "Transaction"). The Transaction involved the combination of Full Circle Energy Ltd by way of an amalgamation of Full Circle Energy and a wholly-owned subsidiary of Canuc, to form one company as a wholly owned subsidiary of Canuc. Pursuant to the amalgamation, all issued and outstanding securities in the capital of Full Circle Energy Ltd were converted into like issued and outstanding securities of Canuc on a one-for one basis. This Transaction resulted in 11,810,000 shares being issued to Full Circle Energy shareholders.

After evaluating all the facts surrounding this Transaction, Management has determined that IFRS 3, Business Combinations, is not applicable. The Transaction was accounted for as an asset purchase.

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THE SAN JAVIER SILVER-GOLD PROJECT

The following description is based, in part, on the Corporation's National Instrument 43-101 Technical Report titled "NI 43-101 Technical Report on the San Javier Project, State of Sonora, Mexico"1, dated August 17th 2016 prepared by Seymour M. Sears, B.A., B.Sc., P.Geo. of Sears, Barry and Associates Limited of Sudbury, Ontario (the "Technical Report"). Mr. Sears is an independent Qualified Person under National Instrument 43-101.

Through its Mexican subsidiary, Minera Canuc SA. de CV, the Corporation currently holds title, has an option to acquire title and/or has title pending issue to 26 contiguous mineral concessions. The concessions cover 851.9 hectares.

On May 22nd 2018 the company announced that it had released from option two of the San Javier claims which were held at that time. These 2 claims, which represented just over 8% of the total claim package held at that time, were deemed to have metal budgets insufficient to support their option costs. The remaining claims which were held at that time are owned outright.

Net Smelter Return royalties totaling 1.5% on production of metals from San Javier are held by four individuals.

The San Javier district is located along the western margin of the Sierra Madre Occidental Physiographic Province and the terrain is characterized by steep hills cut by v-shaped valleys. It has a long mining history, both for precious metals and for anthracite coal. There are no detailed production records for the area.

The Corporation's San Javier Project is interpreted to lie on the eastern end of an east-west trending volcano-sedimentary basin referred to as the Barranca Basin. This basin may have originally developed as a pull-apart basin, formed along the axis of a major transform fault. The San Javier Project area has undergone faulting, fracturing and igneous activity as evidenced by complex structural features and local felsic to mafic intrusive bodies. This geological environment is favorable for the emplacement of several types of mineral deposit including epithermal vein, IOCG, porphyry and other intrusive related deposit types.

Exploration on the property focuses on three styles of mineralization observed within the San Javier concessions. These include:

• quartz veining and vein breccias, having northeasterly strikes and southeasterly dips,
• silica and clay alteration associated with igneous dykes, and
• quartz stockwork breccias.

All mineralization types appear to be related to linear fault structures that pass through the project area. Large oxidized and clay altered zones observed in the project area may represent the presence of porphyry or iron-oxide-copper-gold style mineralization. The styles of mineralization are broadly classified as intrusion related in the Technical Report. The concessions cover numerous showings of mineralization. Many concessions provide evidence of artisanal mine workings.

There are several areas within the San Javier property that have historical mine workings and accessible exploration adits. One of these is Cerro Colorado, on the Las Bellotas Concession in the center of the San Javier Property. These workings include two areas with underground and open-cut workings, named Jasmin and Cerro Colorado (also known as La Colorada). It appears that both workings may be accessed by an adit which is named the Carlotita Adit. The extent of the underground workings at Cerro Colorado is currently unknown. Lying between the Santa Rosa Mine and Cerro Colorado, within the Las Bellotas Concession, are two other old adits of unknown age (most likely late 19th or early 20th century).

1Although as a private Corporation at the time the Corporation did not fall under NI43-101, this report and related disclosure followed the requirements and standards of NI43-101 regarding technical disclosure and were filed on SEDAR by Canuc Resources Inc. as part of its filings related to the Amalgamation.

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Numerous other short adits and shallow shafts/pits are located within the Project. The geological significance of these is presently unknown, other than to indicate a wide distribution of mineralized material. In 2020 extensive old workings and multiple adits were also found on the Corporation's newly acquired El Tule claim area. This area has become the focus of increased exploration interest.

TABLE 1: San Javier Project Claims

Name	Area (ha)	Statu
		s
Las Bellotas	39.9930	Title In name of Corporation
El Mlmbres	59.0017	Title In name of Corporation
El Mimbres	15.0000	Title in name of Corporation
El Mlmbres 3 Fracc 1	25.3124	Title In name of Corporation
El Mlmbres 3 Fracc 2	2.1730	Title In name of Corporation
El Mimbres 4	5.8833	Title in name of Corporation
El Mimbres 5	8.4180	Title in name of Corporation
El Mimbres 6	20.0000	Title in name of Corporation
El Mlmbres 7 Fracc 1	6.00130	Title In name of Corporation
El Mlmbres 7 Fracc 2	1.0000	Title In name of Corporation
El Mimbres 7 Fracc 3	1.0000	Title in name of Corporation
El Mimbres 7 Fracc 4	1.00130	Title in name of Corporation
El Mlmbres 8	57.7693	Title In name of Corporation
Orlon 4-A	12.5142	Title In name of Corporation
El Mimbres 6	20.0000	Title In name of Corporation
El Mimbres 5	8.4180	Title In name of Corporation
Restauradora	5.0000	Title in name of Corporation
Wild Hog	5.0000	Title in name of Corporation
Tule 1	151.1443	Title in name of Corporation
San Javier Fracc. 1	43.2817	Purchased - title transfer
San Javier Fracc. 2	72.5148	Purchased - title transfer
Orion 3	99.4666	Purchased - title transfer
Orion 2 Fracc. 2	9.6003	Purchased - title transfer
Orion 5	192.0000	Purchased - title transfer
San Javier F1 (FINA Area)	14.5381	Staking - title transfer in progress
San Javier F2 (FINA Area)	4.2746	Staking - title transfer in progress
Total	851.8879	Ha

TRENDS

The Corporation is a Canadian precious metal exploration company. The Corporation's future financial success will be dependent on management's successful development of the San Javier Project. Such development may take years to complete, and the resulting income, if any, is difficult to determine with certainty. To date, the Corporation has not produced any revenues from metal production.

There are significant uncertainties regarding the prices of precious metals and the availability of equity financing for the purposes of exploration and development. The future performance of the Corporation is largely tied to the outcome of its exploration activities, the development of its property interests and other prospective business opportunities, and the overall financial markets.

Financial markets are likely to continue to be volatile, reflecting ongoing concerns about the stability of the global economy and global growth prospects. Uncertainty in the financial markets has also led to increased difficulties in raising funds for junior exploration companies. Companies worldwide have been affected particularly negatively by these trends. As a result, the Corporation may have difficulties raising equity financing for the purposes of precious metal exploration and development, particularly without excessively

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