Mako Mining : Q1 2024 FS

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

For the three months ended March 31, 2024

(Expressed in United States dollars)

(Unaudited)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Expressed in thousands of United States dollars

(Unaudited)

As at	Note		March 31, 2024		December 31, 2023
ASSETS
Current
	Cash and cash equivalents		$	4,523	$	1,498
	Receivables	4		3,230		511
	Inventories	5		16,168		13,849
	Gold stream derivative asset	6		274		265
	Prepaid expenses, and other advances			497		591
Total current assets			24,692		16,714
Inventories	5		4,136		4,274
Advances and other prepaid expenses			199		289
Exploration and evaluation assets	7		765		765
Mineral property, plant and equipment	8		20,278		19,767
TOTAL ASSETS		$	50,070	$	41,809
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Accounts payable and accrued liabilities	9	$	9,312	$	6,506
	Term loans and derivative liabilities	10		3,277		3,152
Total current liabilities			12,589		9,658
Accrued liabilities	9		983		943
Provision for reclamation and rehabilitation	11		2,680		3,064
Term loans and derivative liabilities	10		4,856		7,516
Total liabilities			21,108		21,181
Shareholders' equity
	Share capital	12		88,723		87,869
	Contributed surplus	12		14,648		12,552
	Accumulated other comprehensive income			1,418		1,324
	Deficit			(75,827)		(81,117)
Total shareholders' equity			28,962		20,628
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	50,070		41,809
Approved by the Audit Committee of the Board of Directors on May 17, 2024
	"John Hick", Audit Committee Chair			"Akiba Leisman", Director

Events after the reporting period (Note 19)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Expressed in thousands of United States dollars, except per share amounts

(Unaudited)

For the three months ended	Note		March 31, 2024		March 31, 2023
Revenue		$	19,162	$	15,814
Production services revenue	6 & 13(d)(ii)		49		102
			19,211		15,916
Cost of sales
Production costs			(7,950)		(6,911)
Write-down of inventories			-		(816)
Depreciation, depletion and amortization			(2,198)		(3,697)
			(10,148)		(11,424)
Mine operating profit			9,063		4,492
Exploration and evaluation expenses			(696)		(692)
General and administrative expenses	16		(1,794)		(1,491)
Other income (expense)
Accretion and interest expense	17		(131)		(443)
Change in provision for reclamation and rehabilitation	11		-		(4)
Change in fair value of derivative liability	10(b)(c)		(375)		(3)
Gain (loss) on gold stream derivative asset	6		10		38
Loss on settlement of reclamation liability	11 (b)		(94)		-
Foreign exchange gain (loss)			(87)		(13)
Interest income			13		2
Income before income taxes			5,909		1,886
Income tax expense			(560)		(499)
Income for the period		$	5,349	$	1,387
Other comprehensive income
Income for the period			5,349		1,387
Items subject to reclassification into statement of income:
Foreign currency translation adjustment			94		3
Other comprehensive income for the period			94		3
Comprehensive income for the period		$	5,443	$	1,390
Basic and diluted income per common share		$	0.08	$	0.02
Weighted average common shares outstanding - basic (thousands)		65,711		65,757
Weighted average common shares outstanding - diluted (thousands)		67,010		65,885

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Expressed in thousands of United States dollars

(Unaudited)

	Number of			Contributed		Accumulated		Deficit
		Share capital		other
	shares						Total
	(000s)				surplus	comprehensive
						income (loss)
Balance at December 31, 2022	65,743	$	88,021	$	12,087	$	1,402	$	(87,840)	$	13,670
Common shares issued on RSU vesting	76		185		(185)		-		-		-
Share-based compensation	-		-		71		-		-		71
Net loss	-		-		-		-		1,387		1,387
Other comprehensive loss	-		-		-		3		-		3
Balance at March 31, 2023	65,819	$	88,206	$	11,973	$	1,405	$	(86,453)	$	15,131
Shares cancelled (NCIB)	(268)		(337)		-		-		(76)		(413)
Share-based compensation	-		-		579		-		-		579
Net income	-		-		-		-		5,412		5,412
Other comprehensive loss	-		-		-		(81)		-		(81)
Balance at December 31, 2023	65,551	$	87,869	$	12,552	$	1,324	$	(81,117)	$	20,628
Shares cancelled (NCIB)	(118)		(152)		-		-		(59)		(211)
Shares issued on exercise of options	287		472		(127)		-		-		345
Common shares issued on RSU vesting	30		74		(74)		-		-		-
Common shares issued to settle
reclamation liability	297		460		-		-		-		460
Capital contribution (Note 10 (a))	-		-		2,050		-		-		2,050
Share-based compensation	-		-		247		-		-		247
Net income	-		-		-		-		5,349		5,349
Other comprehensive income	-		-		-		94		-		94
Balance at March 31, 2024	66,047	$	88,723	$	14,648	$	1,418	$	(75,827)	$	28,962

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in thousands of United States dollars

(Unaudited)

For the three months ended	Note	March 31, 2024		March 31, 2023
Operating activities
Income (loss) for the period	$	5,349	$	1,387
Interest received
Non-cash items:
Accretion and interest expense		127		437
Depreciation, depletion and amortization		2,241		3,740
Change in provision for reclamation and rehabilitation		-		4
Writedown of inventory		-		816
Lease interest		4		5
Loss on settlement of liability		94		-
Change in fair value of derivative liability		375		3
Gain on gold stream derivative asset		(10)		19
Share-based payments		246		71
Unrealized foreign exchange loss		93		(4)
	$	8,519	$	6,478
Changes in non-cash working capital	15	(3,284)		(5,039)
Net cash provided by operating activities		5,235		1,439
Investing activities
Expenditures on mineral property, plant and equipment		(989)		(365)
Net cash used in investing activities	$	(989)	$	(365)
Financing activities
Purchase of common shares - NCIB		(211)		-
Common shares issued on exercise of options		346		-
Repayment of Sailfish Silver Loan		(818)		-
Repayment of Sailfish Loan Derivative Liability		-		(947)
Payment to GR Silver on settlement of ARO		(500)		-
Payments on lease liability		(25)		(24)
Net cash used in financing activities	$	(1,208)	$	(971)
Effect of foreign exchange on cash and cash equivalents		(13)		15
Change in cash and cash equivalents		3,025		118
Cash and cash equivalents, beginning of the period		1,498		523
Cash and cash equivalents, end of period	$	4,523	$	641

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2024

All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)

1. NATURE OF OPERATIONS

Mako Mining Corp. ("Mako" or the "Company") was incorporated on April 1, 2004, under the laws of the Yukon Territory and continued into British Columbia under the British Columbia Corporations Act. The Company is listed on the TSX Venture Exchange ("TSX-V") under the symbol MKO. The address of the Company's corporate office and principal place of business is Suite 700 - 838 West Hastings Street, Vancouver, BC, V6C 0A6, Canada.

Mako is a gold mining and exploration company. The Company's primary asset is the San Albino mine, an open pit mine located in Nicaragua, which commenced commercial production on July 1, 2021. In addition to its mining operation, Mako continues to explore its other concessions in Nicaragua.

2. BASIS OF PRESENTATION

1. Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"), as applicable to the preparation of interim financial statements including International Accounting Standard ("IAS") 34, Interim Financial Reporting. Accordingly, they do not include all the information and notes to the consolidated financial statements required by IFRS Accounting Standards for annual financial statements and should be read in conjunction with the Company's most recent audited consolidated financial statements for the year ended December 31, 2023.

These condensed interim consolidated financial statements were approved for issuance by the Board of Directors on May 17, 2024.

(b) Basis of presentation

The accounting policies and methods used in the preparation of these condensed interim consolidated financial statements are the same as those applied in the Company's most recent audited consolidated financial statements for the year ended December 31, 2023 except for:

Amendments to IAS 1 - Presentation of Financial Statements

In October 2022, the IASB issued amendments to IAS 1 titled Non-currentLiabilities with Covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override and incorporate the previous amendments, Classification of Liabilities as Current or Non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective for annual periods beginning on or after January 1, 2024, and the adoption of these amendments did not have an effect on our financial statements.

These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at fair value.

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2024

All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)

1. Basis of consolidation

These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances, revenues and expenses have been eliminated upon consolidation.

Subsidiaries are included in the condensed interim consolidated financial statements from the date of acquisition or control until the date of disposition or until control ceases. Control exists when the Company has exposure or rights to variable returns from its involvement with an entity, and the ability to affect those returns through its power over the entity.

The condensed interim consolidated financial statements of the Company include the following subsidiaries:

	Referred	Place of	Ownership
Subsidiary	to as	incorporation	interest	Principal activity
Gold Belt, S.A.	"Gold Belt"	Nicaragua	100%	Holds mineral interest in Nicaragua, exploration
				activities.
Nicoz Resources, S.A.	"Nicoz"	Nicaragua	100%	Holds mineral interest in Nicaragua, San Albino
				mine and exploration activities.
Mako US Corp.	"Mako US"	United States	100%	Incorporated on June 19, 2019, service company

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of these condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Outlined below are the key areas which require management to make significant judgements, estimates and assumptions in determining carrying values.

(a) Estimated mineral resources

Mineral resources are estimates of the amount of metal that can be extracted from the Company's properties, considering both economic and legal factors. The Company estimates the quantity and/or grade of its mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires judgments to interpret the complex geological data. Calculating mineral resources is based upon factors such as estimates of metallurgical recoveries along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the mineral resources may affect the Company's financial position in a number of ways, including:

• asset carrying values may be affected due to changes in estimated future cash flows;
• depreciation charges in the Company's consolidated statement of comprehensive income (loss) may change when such charges are determined by the unit-of-production basis, or when the useful lives of assets change; and

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2024

All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)

1. • provision for reclamation liabilities balances may be affected as the estimated timing of reclamation activities is adjusted for changes in the estimated mine life as determined by the available mineral resources.
2. Silver obligations

The carrying value of the Sailfish Silver Loan represents management's best estimate of the fair value of the arrangement. The fair value incorporates estimates of silver prices and discount rates. Judgment was made in determining that it is a derivative. (Refer to note 12(c)).

(c) Wexford Loan

The Wexford Loan is measured at amortized cost and will be accreted to maturity over the term using the effective interest method. The Company used an effective interest rate of 18%, the estimated market interest rate for non- related parties based on comparable debt, when valuing the Revised Wexford Loan upon initial recognition.

(d) Deferred income taxes

The determination of income tax expense and deferred income tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretation of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred income taxes or the timing of tax payments.

(e) Impairment of non-current assets

Management applies significant judgment in its assessment and evaluation of asset or cash generating units at each reporting date to determine whether there are any indications of impairment. The Company considers both internal and external sources of information when making the assessment of whether there are indications of impairment for the Company's mineral properties, plant and equipment. External sources of information considered are changes in the Company's economic, legal and regulatory environment, which it does not control, but affect the recoverability of its mining assets. Internal sources of information the Company considers include the manner in which mining properties and plant and equipment are being used or are expected to be used and indications of economic performance of the assets. Calculating the fair value less costs of disposal of cash generating units for impairment tests requires management to make estimates and assumptions with respect to future production levels, operating, capital and closure costs, future metal prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis.

(f) Reclamation and remediation provisions

Reclamation and remediation provisions represent the present value of estimated future costs for the reclamation of the Company's mines and properties. These estimates include assumptions as to the cost of services, timing of the reclamation work to be performed, inflation rates, foreign exchange rates and interest rates. The reclamation and closure estimates are more uncertain the further into the future the activities are to be performed.

The actual cost to reclaim a mine may vary from the estimated amounts because there are uncertainties in factors used to estimate the cost and potential changes in regulations or laws governing the reclamation of a mine. Management periodically reviews the reclamation requirements as new information becomes available and will assess the impact of new regulations and laws as they are enacted. Any changes to assumptions will result in an

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2024

All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)

adjustment to the provision which affects the Company's liabilities and either its mineral property, plant and equipment or statement of income.

(g) Depreciation, depletion and amortization

The Company uses the units of production method to deplete mineral properties and the straight-line method to amortize plant and equipment. The calculation of the unit of production rate and the useful life and residual values of plant and equipment, and therefore the annual depletion and depreciation expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of changes in the Company's mine plans, changes in the estimation of mineral resources and changes in the estimated remaining life or residual value of plant and equipment.

(h) Stockpiled ore and ore in-circuit net realizable value

Management applies significant judgment in developing the NRV of stockpiled ore and ore in-circuit inventory, including assumptions related to estimated recoverable ounces of gold within stockpiled ore and ore in-circuit inventory, the estimated forecasted gold price per ounce, estimated costs of completion and selling expenses.

4. RECEIVABLES

	As at		March 31, 2024		December 31, 2023
	Trade receivable	$	2,984	$	304
	Other		246		207
		$	3,230	$	511
5. INVENTORIES
	As at		March 31, 2024		December 31, 2023
	Stockpiled ore	$	10,466	$	9,265
	Ore in-circuit		1,595		1,232
	Finished metal		401		278
	Supplies and spare parts		3,706		3,074
	Disclosed as non-current:		16,168		13,849
	Stockpiled ore		4,136		4,274
		$	20,304	$	18,123

As at March 31, 2024, ore in-circuit, finished metal and stockpiled ore was recorded at cost. As at December 31, 2023, ore in-circuit and finished metal were recorded at cost, and stockpiled ore was recorded at NRV. During the three months ended March 31, 2023, stockpiled ore was written down by $816,000.

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2024

All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)

1. GOLD STREAM DERIVATIVE ASSET
   Gold stream derivative asset arises from the amended gold stream agreement the Company entered into with Sailfish Royalty Corp ("Sailfish") (also refer to note 13(c)) in November 2018 whereby the Company received $1,096,051 (the "Gold Stream Advance") which was recorded as a credit to the mineral property. At that time, it was determined to be a disposition of mineral interest. In return for the Gold Stream Advance, the Company is required to deliver 4% of gold production to Sailfish and is to receive a payment at 25% of the market price of the gold delivered. Effectively the Company sold 4% of the gold mineralization relating to the mineral property and is being paid for services relating to the processes required to obtain the finished metal. As the price of gold is not closely related to the price of the services being provided, the contract to provide these services contains an embedded derivative that requires separation from the host contract.
   The contract to deliver to Sailfish its 4% of gold production, in return for 25% of the market value of the gold delivered, contains an embedded derivative that was previously of minimal value. This derivative consists of a "swap" of the variable payment based on the price of gold for the fixed price implied by the contract. As at March 31, 2024, this derivative was determined to be an asset of $274,484 (December 31, 2023 - $264,900) based on current spot and future gold prices, and projected deliveries under the contract, all of which is disclosed as a current asset in the statement of financial position.
   For the three months ended March 31, 2024, the Company delivered a total of 91 (2023 -338) ounces of gold to Sailfish, pursuant to this agreement. In exchange the Company received $48,509 (2023 - $159,691) and there was a change in fair value on the derivative of $9,584 for the three months ended March 31, 2024 (2023 - $37,737).
2. EXPLORATION AND EVALUATION ASSETS

The following exploration and evaluation assets (acquisition costs) are located in Nicaragua:

		Potrerillos		El Jicaro		Total
Balance, March 31, 2024 and December 31, 2023	$	645	$	120	$	765

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