Jazz Resources : JZR - Q3FY2022 - MD&A

JAZZ RESOURCES INC.

NINE MONTHS ENDED MARCH 31, 2022

MANAGEMENT'S DISCUSSION AND ANALYSIS

Notice to Readers

This Management Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited condensed interim consolidated financial statements of Jazz Resources Inc. ("Jazz" or "the Company") for the three and nine- month period ended March 31, 2022, and the related notes which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

1.1 Date

This MD&A is prepared as of May 27, 2022. Unless otherwise stated, all dollar figures stated herein are expressed in Canadian dollars. The Canadian dollar is the functional currency of both the parent company and its wholly owned subsidiary.

1.2 Overview

The Company is a junior mining resource company focused on acquiring, exploring and developing mineral properties. Prior to year ended June 30, 2021, the Company was focused on the development of the Teddy Glacier and Spider properties located in the Revelstoke and Camborne mining districts of British Columbia, Canada.

On January 20, 2021, Jazz closed its acquisition from Coltan Gold Minerals Inc. ("Coltan") of Coltan's interest in and to a JV Royalty Agreement (as defined below) respecting the Vila Nova gold exploration and development project located in Amapa, Brazil. Pursuant to a purchase and sale agreement between the Company and Coltan dated September 2, 2020, the Company acquired all of Coltan's interest in a JV Royalty Agreement dated July 6, 2020 ("JV Royalty Agreement") between Coltan and Eco Mining Oil & Gaz Drilling and Exploration EIRELI ("Eco"), wherein Jazz shall have the option and right to acquire a 50% net profits interest in the Vila Nova property. Pursuant to the terms of the JV Royalty Agreement, in order to exercise the option and acquire the rights thereunder, the Company must make the following payments to Eco, subject to satisfactory project assessment prior to each stage of funding:

1. an initial payment of USD$500,000 to fund the 2,000 m drilling program and related costs needed to complete the business plan to construct a 1,280 t/d bulk exploitation program on the Vila Nova property (payment made by third party prior to acquisition of the JVRA);
2. a second payment of USD$500,000 (paid); and
3. a final payment of USD$5,000,000, or as mutually agreed between the parties.

As of March 31, 2022, $5,680,994 ($4,199,930 USD) (June 30, 2021 $2,892,959) had been paid to Eco in relation to the payments for the option and acquisition of the profits interest. Additional payments totaling $506,268 ($400,000 USD) were made subsequent to March 31, 2022. The intention is to fund as much as the project needs to be profitable, at which time Eco will repay the advanced funds to the Company prior to any profit participation splits as described below. Eco and Jazz will mutually agree on when the option and acquisition of the profits interest has been completed. The intent for the funding was to produce a functioning mill to process the gold ore. Original expectations of the size of the mill have been downgraded, thus, the full $6M USD may not be needed.

If exercised and all required payments are made (and after the loans have been repaid), Jazz shall receive a 50% net profits interest from all products and minerals produced from the Vila Nova property and exclusive rights to explore and develop the property, including initiating and carrying out commercial production. Eco will remain the sole operator of all mining-related activity on the property, including environmental remediation. In the event the agreement is terminated, any cash advances made will convert into a two-year loan bearing 6% interest.

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Jazz will have the right, at any time, prior to completing the payments under the JV Royalty Agreement, to give notice to Eco to terminate the JV Royalty Agreement, and all payments (either previously made by Coltan or currently made by Jazz) to Eco will be secured and converted to a loan bearing interest at 6% per annum for a two-year term.

As consideration for Coltan's interests in the JV Royalty Agreement, the Company issued to Coltan 5,125,000 common shares. Coltan cannot own, upon exercise of its right to acquire the additional common shares, more than 19.5% of the issued and outstanding shares of the Company, without approval by the disinterested shareholders of the Company.

Summary of Activities at Vila Nova Mining Site

The Company has commenced exploration and development on the Vila Nova property, which includes 2,000 m of drilling and the completion of a resource estimate and a preliminary economic assessment by GE21 Mining Consultoria Mineral of Brazil ("GE21"). In March 2021, GE21 commenced core drilling and sampling and trenching of tailings where 1400m of diamond drilling was completed.

Assays from fifteen samples from two different accumulations of tailings materials were received. Initial results from the fifteen samples average 19.4 g/tonne gold with a range from zero to 49.9 g/tonne gold. The fifteen samples represented fifteen widely spaced auger tests ranging from 4-12 meters depth. Five auger test holes were from the "Stockpile" area and ten were from the "Big Dam" tailings location on the Vila Nova Gold Project, a property that was previously hand-mined over the last 90 years with generally poor recoveries with up to 70% of the gold remaining in the waste materials.

In May 2021, the Company announced that Eco had entered into an agreement to acquire, install and operate a gravimetric plan capable of processing up to 800 tonnes of ore per day. In June 2021, the Company announced that sampling conducted on the property had returned multiple samples running as high as 10-50 grams per tonne over thicknesses averaging about 3 meters over the 111.7 hectares. Because of the variations in values the Company continued to make additional test holes to establish an overall definitive grade and tonnage. From work conducted to date, the Company estimated exploration target of between 7.8 and 9.5 million tonnes grading between 2.4 to 3.0 grams per tonne. Pursuant to a geological report on the Vila Nova Gold Project prepared in June 2021 by geological engineer Hamilton Antonio Giampietro of GENESIS GEOLOGIA ME located in Macapa, Amapa State, Brazil, Mr. Giampietro concludes that an average grade of 2.7 grams gold per tonne can be considered, for a projected contained gold content of in excess of 700,000 ounces within the 111.7 hectares in nine separate accumulations of previously mined materials.

The Company has received more encouraging results from its exploration efforts:

• Sampling conducted on the property to date has returned multiple samples running as high as 10-50 grams per tonne over thicknesses averaging about 3 meters over the 111.7 hectares. Considerable variation in values to date will require many additional test holes to establish an overall definitive grade and tonnage. From work conducted to date an estimated exploration target of between 7.8 and 9.5 million tonnes grading between 2.4 to 3.0 grams per tonne can be estimated.
• On October 21, 2021, the Company reported that drilling on the bedrock portion of the Vila Nova gold project has intersected veins totaling 23.09 meters grading 31.58 g/t (one ounce per tonne) at a vertical depth of 74.47 meters in Hole VN-3 (Cord. 0.4075N, 51.7359W). The intersection represents three quartz veins within a 37.78 meter interval that averages 19.3 g/t (0.62 oz) over the entire interval. True width of the unit is estimated at 80% of down-hole length in steeply dipping units that subcrop below the 20 meters of unconsolidated tailings and rubble from previous hand mining. Nineteen (19) holes were drilled over 2,000 meters. The foregoing results were derived from the results of five (5) holes, and assays are pending on the remaining fourteen (14) holes.
• On October 28, 2021, the Company reported that drilling undertaken on the bedrock portion of the Vila Nova gold project has intersected multiple veins with visible gold in all four drill holes, including the previously reported veins totaling 23.09 meters grading 31.58 g/t (one ounce per tonne) at a vertical depth of 74.47 meters in Hole VN-3 (Cord. 44.416N, 418.157W). The aforementioned intersection represents three quartz

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veins within a 37.78-meter interval that averages 19.3 g/t (0.62 oz) over the entire interval. True width of the unit is estimated at 60% of down-hole length in steeply dipping units that sub-crop below the 20 meters of unconsolidated tailings and rubble from previous hand mining.

• The Company along with its partner in Brazil, Eco Mining, completed the assembly of the 800 ton per day mill at the Vila Nova Gold Project in Amapa state, Brazil in April 2022 and expects to begin testing the mill in June 2022.

The reader is cautioned that, as assays have not been completed on the remaining holes, these results are selective and may not represent the values over the property in general.

Other activities

During the period, the Company completed a private placement of 1,866,670 units of the Company at a price of $0.75 per unit for total proceeds of $1,400,000. Each unit is comprised of one common share of the Company and one share purchase warrant, with each warrant entitling the holder to acquire one additional common share at a price of $1.10 per share at any time up to 18 months.

The Company also had warrant exercises where 4,310,361 of common shares were issued for total proceeds of $1,530,628.

In addition, the Company issued an additional $186,000 of unsecured convertible debentures for a total of $2,650,000 (the "Debentures"). The Debentures will mature two (2) years from the date of issuance and shall bear interest at a rate of 8% per annum, payable and compounded annual. The principal sum or any portion thereof, may be converted into units of the Company at a conversion price of $0.30 per unit, commencing on the date that is six (6) months from the date that the Debentures are issued. Each unit shall be comprised of one common share (a "Conversion Share") and one share purchase warrant (a "Warrant"). Each Warrant shall entitle the holder to acquire one additional common share (a "Warrant Share") of the Company at a price of $0.30 per share for a period of eighteen (18) months from the date that the Warrants are issued.

During the period, the Company repaid $718,749 of principal and accrued interest on these Debentures.

Subsequent to March 31, 2022, the Company also announced that it intends to complete a non-brokered private placement of units of the Company at a price of $0.80 per unit, for aggregate gross proceeds to the Company of $1,700,000.

On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic. The potential economic effects within the Company's industry and in the global markets, including possible disruptions in the Company's operations, and measures being introduced at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and social distancing) to date have not had a material impact on the Company's operations and ability to access capital. The Company has implemented a specific response plan, informed by measures recommended by public health agencies. The Company has been able to modify and adapt to the changing business environment without a material impact to the Company's operations and access to capital. Management continues to evaluate additional potential operational and financial risks to the Company at the date these financial statements were approved, May 27, 2022.

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1.3 Selected Quarterly Information

The Company had net loss of $246,709 and $786,964 for the three and nine-month periods ended March 31, 2022, compared to a net loss of $219,392 and $334,434 for the same periods ended March 31, 2021.

The Company saw its assets increase from approximately $7.5M as at June 30, 2021, to approximately $9.2M as at March 31, 2022. The increase in total assets was due to an increased investment in deferred acquisition of net profits interest in the JVRA from Coltan Gold Minerals Inc for the Vila Nova property during the period.

The Company saw its liabilities decrease from approximately $3.4M as at June 30, 2021, to approximately $3.0M as at March 31, 2022. The decrease was due to a repayment of convertible debentures and loans during the period.

1.4 Results of Operations for the three and nine-month periods ended March 31, 2022

This review of the results of operations should be read in conjunction with the condensed interim consolidated financial statements of the Company for the three and nine-month periods ended March 31, 2022.

Overview

For the three and nine-month periods ended March 31, 2022, the Company had net losses of $246,709 and $786,964 compared to net losses of $219,392 and $334,434 for the same period ended March 31, 2021. The increase was largely due to professional fees and consulting fees incurred during the current period in relation to the JVRA with Eco, Mining, the accretion and interest expenses related to the convertible debentures, and the share-based compensation related to the options granted.

Expenses

Overall, activities for the Company have ramped up significantly over the year. More administrative costs, public company and professional fees were needed to manage the additional work involved. In addition, the Company

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recorded share-based compensation from the issuance of options, as well, it had interest and accretion expense for the issuance of convertible debt was incurred where it was not recorded in the prior year.

General and administrative expenses totaled $246,709 and $789,172 for the three and nine-month periods ended March 31, 2022 where in the previous year for the same period it was $219,392 and $334,434.

For the nine-month period ended March 31, 2022, the largest expense items were accretion of $197,903, interest of $121,369, professional fees of $127,164 consulting fees of $130,240, as well as share-based compensation of $117,146. These items accounted for approximately 88% of the Company's total general and administrative expenses.

1.5 Summary of Quarterly Results

						Three Months Ended
		31-Mar		31-Dec		30-Sep		30-Jun		31-Mar		31-Dec		30-Sep		30-Jun
		2022		2021		2021		2021		2021		2020		2020		2020
		$		$		$		$		$		$		$		$
Total Revenues		Nil		Nil		Nil		Nil		Nil		Nil		Nil		Nil
Net Loss		(246,709)		(289,321)		(250,936)		(134,040)	(219,392)		(67,187)		(47,856)	(62,324)
Net Loss per share	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.01)	$	(0.02)	$	(0.01)	$	(0.01)	$	(0.02)

1.6 Liquidity

Working Capital

As at March 31, 2022, the Company had $251,963 (June 30, 2021 - $1,082,495) cash on hand and working capital deficiency of $2,804,257 as compared to a deficiency of $2,258,908 at June 30, 2021. The decrease in working capital was primarily due to the advancements of funds in relation to the JVRA and repayment of loans and convertible debt during the period.

As at March 31, 2022, the Company had amounts receivable of $609 (June 30, 2021 - $17,067), accounts payable of $1,274,450 (June 30, 2021 - $1,291,133), loans payable of $ nil (June 30, 2021 - $7,708), and balance owed to related parties of $33,164 (June 30, 2021 - $50,833).

Outlook

The future operations of the Company are dependent on its ability to raise sufficient funds to carry out its exploration activities. Although early results from the Vila Nova property are promising, there is no assurances the amount of gold ore is economically accessible and in order for the Company to realize on any return on its investment could still require a significant amount of investment and raising additional capital to fund operations. The Company along with its partner in Brazil, Eco Mining, completed the assembly of the 800 ton per day mill at the Vila Nova Gold Project in Amapa state, Brazil in April 2022 and expects to begin testing the mill in June 2022.