Pasinex Resources : Quarter 1 March 2024 Management Discussion and Analysis

Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Introduction

The following interim Management Discussion & Analysis ("Interim MD&A") of Pasinex Resources Limited (the "Company" or "Pasinex") for the three months ended March 31, 2024, has been prepared to provide material updates to the business operations, liquidity, and capital resources of the Company since its last annual management discussion & analysis, being the Management Discussion & Analysis ("Annual MD&A") for the fiscal year ended December 31, 2023. This Interim MD&A does not provide a general update to the Annual MD&A, or reflect any non-material events since the date of the Annual MD&A.

This Interim MD&A has been prepared in compliance with section 2.2.1 of Form 51-102F1, in accordance with National Instrument 51-102 - Continuous Disclosure Obligations. This discussion should be read in conjunction with the Company's Annual MD&A, audited annual consolidated financial statements for the years ended December 31, 2023 and 2022, together with the notes thereto, and the unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. Where the Turkish Lira is reported it is referenced as TRY.

The Company's unaudited condensed interim financial statements and the financial information contained in this Interim MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") in effect for the fiscal period beginning January 1, 2024. The unaudited condensed interim financial statements have been prepared on a historical basis and compliance with IFRS applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. Accordingly, the information contained herein is presented as of July 8, 2024, unless otherwise indicated.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors (the "Board"), 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 the Company's common shares;

1. 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, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

Further information about the Company and its operations can be obtained from the Secretary of the Company or on SEDAR at www.sedar.com.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this Interim MD&A constitute forward-looking statements; as such term is defined under applicable securities laws. These statements relate to future events or future performance and reflect management's expectations and assumptions regarding the growth, results of operations, performances and business prospects and opportunities of the Company. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "intend", "will", "project", "could", "believe", "predict", "potential", "should" or the negative of these terms or other similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or events to differ materially from those anticipated, discussed or implied in such forward-looking statements. The Company believes the expectations reflected in such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Interim MD&A should be considered carefully and investors should not place undue reliance on them as the Company cannot assure investors that actual results will be consistent with these forward- looking statements.

These statements speak only as of the date of this Interim MD&A. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: (i) general business and economic conditions; (ii) timing and amount of estimated future production (iii) the supply and demand for, deliveries of,

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

and the level and volatility of prices of zinc and other precious metals; (iv) the timing of the receipt of any outstanding regulatory and governmental approvals for the Company's projects; (v) the ability to meet social and environmental standards and expectations; (vi) the availability of financing for the Company's development of its properties on reasonable terms; (vii) the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; (viii) the ability to attract and retain skilled staff; (ix) exploration and development timetables; and (x) capital expenditure and operating cost estimates.

The Company has not been materially impacted by the ongoing conflicts in the Ukraine and Israel, but uncertainty remains surrounding the conflicts and the extent and duration of the impacts that it may have on the Company's ability to operate, on prices for zinc, on logistics and supply chains, on the Company's employees and on global financial markets.

The Pinargozu zinc mine was placed into production without a feasibility study of mineral reserves demonstrating economic and technical viability, and as such, any forward-looking statements related to the performance of the Pinargozu mine may differ materially from actual results. The decision to operate a mine without a technical report or feasibility study creates increased uncertainty. Economic or technical results of the Pinargozu zinc mine may differ materially from forward-looking statements due to reduced zinc grade, variation in estimated mineral resources, increased difficulty in mining and other risks associated with the reliability of internal analytical results, geological interpretation and statistical inferences drawn from drilling and sampling.

These forward-looking statements involve risks and uncertainties relating to, among other things, exploration and development risks, changes in commodity prices, particularly the zinc price, expectations regarding currency fluctuations, possible variation in mineral resources or grade, counter party risk associated with sales of zinc material, access to skilled mining personnel, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government approvals, changes to government regulation and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors contained in this Interim MD&A. Investors should not place undue reliance on forward- looking statements as the plans, intentions or expectations upon which they are based might not occur. The Company cautions that the foregoing list of important factors is not exhaustive. The forward-looking statements contained in this Interim MD&A are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities law.

Description of Business

Pasinex Resources Limited ("Pasinex" or the "Company") is a publicly listed company incorporated in British Columbia. The Company's shares are listed on the Canadian Securities Exchange ("CSE") under the symbol "PSE" and on the Frankfurt Stock Exchange ("FSE") under the symbol "PNX". The head office, principal address and registered and records office of the Company are located at 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

Pasinex Resources Limited owns 50% of Horzum Maden Arama ve Isletme Anonim Sirketi ("Horzum AS" or "Joint Venture"), through its 100% owned subsidiary Pasinex Arama ve Madencilik Anonim Sirketi ("Pasinex Arama"). The other 50% owner is Akmetal Madencilik Sanayi ve Ticaret A.S. ("Akmetal"), a private Turkish company. Horzum AS holds 100% of the producing Pinargozu high-grade zinc mine. Horzum AS sells directly to zinc smelters and or refiners through commodity brokers from its mine site in Türkiye. The Company also holds a 51% interest, with an option to increase to an 80% interest of a high-grade zinc exploration project, the Gunman Project, located in Nevada.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Selected Quarterly Information

		Three Months Ended
					March 31,
Financial:		2024			2023
$	663,478
Equity gain from Horzum AS	$		775,762
Consolidated net income (loss)	$	285,772	$		(195,583)
Basic and diluted net income (loss) per share	$	0.00	$		0.00
Net cash (used in) provided by operating activities	$	(180,196)	$		220,486
Weighted average shares outstanding		144,554,371			144,554,371
As at:		December 31,		December 31,
		2024			2023
Total assets	$	3,603,109		$	4,082,136
Total liabilities	$	3,313,261		$	3,564,963
Total shareholders' equity	$	289,848		$	517,173
		Three Months Ended
					March 31,
Horzum AS operational data (100% basis):		2024			2023
	1,503
Zinc product mined (wet) tonnes				2,811
Zinc product sold (wet) tonnes		2,986			2,997
Zinc oxide product average grade sold		NA			NA
Zinc sulphide product average grade sold		49.5%			49.6%
Gross margin (1)		37%			58%
CAD cost per tonne mined (1)	$	789		$	491
USD cash cost per pound of zinc mined (1)	$	0.51		$	0.34

1. see non-GAAP measures

The Company has a 50% joint venture interest in Horzum AS, which is equity accounted. This means in the Pasinex consolidated financial statements:

• Horzum AS net income is shown on one line in the Statement of Income - Equity gain from Horzum AS.
• The investment in Horzum AS is shown on one line on the Statement of Financial Position - Equity investment in Horzum AS.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Highlights

• Subsequent to the quarter end, Horzum AS initiated two separate legal actions, which resulted in the appointment of an interim committee and an authorized trustee to provide oversight of the management of the Joint Venture. In addition, a legal action is on-going by Horzum AS for the recovery of the debt owed by Akmetal.
• For the three months ended March 31, 2024, Pasinex recorded net income of approximately $0.3 million, compared with a net loss of approximately $0.2 million for the three months ended March 31, 2023. The primary reason for the increase in the net income in 2024 versus the net loss in 20232 was that the Company did not incur exploration costs in 2024.
• The operating income in Horzum AS decreased to $1.4 million in the three months ended March 31, 2024, from $2.1 million for the same period in 2023. The decrease was due to higher costs being incurred as a result of inflationary pressures. Gross margin (see non-GAAPmeasures) for the three months ended March 31, 2024, was 37% compared with 58% for the same period in 2023.
• Horzum AS mined 1,503 tonnes of zinc product during the three months ended March 31, 2024, at the Pinargozu mine, compared with 2,811 tonnes of zinc product for the same period in 2023.
• Sales volume was 2,986 tonnes of high-grade zinc sulphide product in the three months ended March 31, 2024, compared with 2,997 tonnes of high-grade zinc sulphide product for the same period in 2023.
• Sales prices per tonne on a USD basis decreased by 2% for zinc sulphide product for the three months ended March 31, 2024, when compared to prices in the same period in 2023. The average USD sales price for the three months ended March 31, 2024, was US$878 per tonne for zinc sulphide product versus US$892 per tonne for zinc sulphide product in the same period in 2023.
• The average grade of the high-grade zinc sulphide product sold was 49.5% zinc per tonne for the three months ended March 31, 2024, compared with 49.6% zinc per tonne for the same period in 2023.
• The CAD cost per tonne mined (see non-GAAPmeasures) increased to $789 per tonne mined for the three months ended March 31, 2024, compared with $491 per tonne mined in the same period in 2023. The USD cash cost per pound of zinc product mined (see non-GAAPmeasures) increased to US$0.51 per pound mined in the three months ended March 31, 2024, from US$0.34 per pound mined in the three months ended March 31, 2023.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Going Concern

The application of the going concern concept assumes that the Company will continue in operation for at least the next twelve months and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at March 31, 2024, the Company has a deficit of $10,326,318 (December 31, 2023 - $10,612,090) and has a working capital deficiency position of $2,986,005 (December 31, 2023 - working capital deficiency position of $2,645,221). The Company had a net income of $285,772 for the three months ended March 31, 2024, compared with a net loss of $195,583 for the three months ended March 31, 2023 and negative cash flows from operations of $180,196 for the three months ended March 31, 2024 compared with positive cash flows from operations of $220,486 for the three months ended March 31, 2023.

Horzum AS had a net income of $1,242,428 for the three months ended March 31, 2024, compared with a net income of $1,528,961 for the three months ended March 31, 2023. Pasinex Arama received approximately TRY 5.3 million (approximately $0.23 million using the exchange rates on the dates of the various transfers from Horzum AS) in advances and other receivable collections from Horzum AS in the three months ended March 31, 2024, compared with TRY 17.4 million (approximately $1.2 million using the exchange rates on the dates of the various transfers from Horzum AS) in advanced dividend payments from Horzum AS in the three months ended March 31, 2023.

Pasinex Arama transferred USD $80,000 (approximately $107,000 using the exchange rates on the dates of the transfers) to Pasinex Canada in the three months ended March 31, 2024.TRY 12.5 million (approximately $0.9 million using the exchange rates on the dates of the transfers) was transferred to Pasinex Canada by Pasinex Arama in the three months ended March 31, 2023. With the reduction of cash inflows to Canada, partially caused by the decrease in the value of the Turkish Lira against the Canadian Dollar, the Company does not have sufficient cash on hand to fund its ongoing activities for the next 12 months nor does the Company have enough cash on hand to repay all of its outstanding obligations. As at March 31, 2024, Horzum AS has a receivable owing from Akmetal of approximately $35.5 million

Legal Actions

The Company provided an update on May 29, 2024, of the status of two separate legal actions initiated by Pasinex Arama. In connection with the annual shareholders meeting of Horzum AS, the Joint Venture made two separate judicial applications.

The first application was before the Republic of Türkiye Adana 3rd Commercial Court (the "3rd Court") seeking the appointment of an interim management trustee committee (the "Interim Committee") as the term for Horzum AS' board of directors (the "Horzum Board") expired on April 30, 2024. Consequently, Horzum AS became unmanaged due to its inability to appoint the new Horzum Board. The 3rd Court accepted the application and appointed the following persons to the Interim Committee, Prof. Dr. Ömer Korkut (Chairman of the Horzum Board), Ahmet Ferit Savaşçı and Ahmet Yüksel.

The 3rd Court further ordered that, inter alia, (a) the Interim Committee is authorized to act solely for the purpose of making the due payments of Horzum AS and the necessary and mandatory payments for Horzum AS' activities; and (b) the validity of all legal transactions (borrowing, promissory note commitment, disposal, etc.) on behalf of Horzum AS requires the signatures of at least two Interim Committee members. The appointment of the Interim Committee is an interim measure until a final decision is made for the appointment of a fully authorized trustee.

The second application was before the Republic of Türkiye Adana 2nd Commercial Court (the "2nd Court") seeking the appointment of a trustee to Horzum AS: (a) with sole signing authority to use all the powers of Horzum AS' executives;

1. determine the agenda for subsequent meeting of Horzum AS's shareholders (the "Shareholders"); and (c) convene a meeting of Shareholders to ensure continuation of Horzum AS' activities. The 2nd Court approved the appointment of the trustee HALİL ALUMERT (30529131992) on June 4, 2024.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

In the interim, Horzum AS' continues to operate normally and without disruption. In addition, a legal action in the 2nd Court is on-going by Horzum AS for the recovery of the debt owed by Akmetal. The objective of the legal action by Pasinex and Horzum AS is to recover the debt owed by Akmetal in either assets or cash and to restructure or eliminate the Joint Venture with Pasinex assuming control of the management of the Joint Venture.

Pasinex has engaged the legal services of Denton's Canada LLP in Toronto, Canada and two Canadian partners. Pasinex has also engaged the legal services of HBB Hukuk Burosu in Istanbul, Türkiye and two senior Turkish partners as well as a university legal professor who is the Chair of the Legal Department and founder of OZATA Law & Partners. This legal team has further legal and accounting resources available in both Canada and Türkiye.The legal process is underway and Pasinex remains optimistic that a resolution will result from these legal actions, but assurance of success is not certain.

Horzum AS's operations have generated positive operating income in the first three months of 2024, however in the absence of the receipt of additional dividends from Horzum AS, the Company would need to secure funding from either equity financing or additional related party loans to fund its ongoing activities. There can be no assurance that the Company will be able to generate either sufficient dividends from Horzum AS or be able to generate funds from other sources. Accordingly, until Akmetal makes significant payments, these conditions represent a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

Review of Quarterly Consolidated Financial Statements

Three Months Ended March 31, 2024

The following is a summary income statement for Pasinex:

Three Months Ended

				March 31,
		2024		2023
Equity gain from Horzum AS	$	633,478	$	775,762
Exploration costs		(3,280)		(492,731)
General and administration costs		(317,663)		(316,072)
Other income		10,598		844
Interest expense		(36,700)		(34,443)
Foreign exchange gain		155,005		20
Loss on net monetary position		(155,666)		(128,963)
Net income (loss)	$	285,772	$	(195,583)

Equity gain

Horzum AS is considered a joint venture for accounting purposes and as such the Company records its share of net income on one line in the income statement. In the fourth quarter of 2018 an impairment of the Akmetal receivable was recorded. Since the joint venture is equity accounted and because the impairment was so large, the equity loss was capped in the fourth quarter of 2018 so that the investment would not be below zero. The unrecognized loss was applied against equity gains beginning in 2019, and in the fourth quarter of 2022, Horzum AS had recognized all of the equity losses recorded in prior years. Further details on the results of Horzum AS follow below - Review of Horzum AS.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Exploration Costs

Exploration costs represent expenditures incurred at the Gunman Project. For further details on the exploration program at the Gunman Project see - Liquidity and Financial Position - Commitments - Gunman Project.

General and administration costs

		Three Months Ended
				March 31,
		2024		2023
Consulting fees	$	59,756	$	70,990
Investor relations		-		5,573
Management fees and salaries		62,775		65,700
Director fees		24,000		24,000
Office and general		1,945		663
Professional fees		98,317		64,697
Transfer agent and regulatory fees		9,112		3,866
Travel and meals		61,758		80,080
Other		-		503
Total general and adminstrative costs	$	317,663	$	316,072

The largest increase year over year was in professional fees. The majority of the professional fees increase was related to an increase in legal fees incurred in Türkiye but also included increases in audit and tax services. Other costs remained mainly consistent year over year.

Interest Expense

Interest expense increased slightly year over year as the shareholder loan balances increased marginally in the first quarter of 2024.

Loss on net monetary position

Due to various qualitative factors and developments with respect to the economic environment in Türkiye during 2022, including, but not limited to, the acceleration of multiple local inflation indices, the three-year cumulative inflation rate of the Turkish Statistical Institute exceeded 100% in March 2022 and the significant devaluation of the Turkish Lira, Türkiye was designated a hyper-inflationary economy in the second quarter of 2022 for accounting purposes.

Accordingly, IAS 29, Financial Reporting in Hyper-Inflationary Economies, was applied to the Company's unaudited condensed interim consolidated financial statements as the Company's Turkish wholly owned subsidiary, Pasinex Arama, uses the Turkish Lira as its functional currency. As a result, the Company recorded a loss on net monetary position of $155,666 for the three months ended March 31, 2024, compared to $128,963 for the same period in 2023, which relates to the revaluation of Pasinex Arama's share capital.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Review of Horzum AS

Key Performance Indicators (shown on a 100% basis)

		Three Months Ended
				March 31,
		2024		2023
Tonnes mined (wet)		1,503		2,811
Tonnes sold (wet):		2,986
Zinc sulphide product			2,997
Average grades for tonnes sold:		49.5%
Zinc sulphide product			49.6%
CAD cost per tonne mined (1)	$	789	$	491
USD cash cost per pound of zinc product mined (1)	$	0.51	$	0.34

1. See non-GAAP measures

Operating results

Horzum AS mined 46% fewer tonnes in the first quarter of 2024 compared with the same period in 2023. Sales in the first quarter of 2024 included sales of zinc sulphide product mined in the fourth quarter of 2023. Sales going forward in 2024 will be lower than in 2023 given the anticipated lower mining rate in 2024. The average grade of the zinc sulphide product sold was unchanged year over year. The lower number of tonnes mined was also the primary reason for the 60% increase in the cost per tonne mined for the three months ended March 31, 2024, compared with the same period in 2023. The USD cash cost per pound of zinc product mined increased by 50% year over year. Continued increases in the prices of supplies and services were experienced in 2024, which also contributed to the cost per tonne mined and cost per pound of zinc product mined metrics.

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024

Discussion dated: July 8, 2024

Financial results

Below are the statements of operation for Horzum AS for the three months ended March 31, 2024 and 2023.

Statement of Operations

		Three Months Ended
(100% basis - Canadian dollars)				March 31,
	2024		2023
Revenue	$	3,610,140	$	3,604,517
Cost of sales		(2,112,286)		(1,429,427)
Selling, marketing and other distibution		(97,211)		(89,582)
Operating income		1,400,643		2,085,508
Impairment of Akmetal receivable		(3,216,642)		(1,581,210)
General and administrative expenses		(62,309)		(49,891)
Foreign exchange gain		3,156,089		1,275,212
Finance expense		(16,660)		(50,995)
Deferred tax expense		(84,249)		(84,724)
Gain on net monetary position		395,307		377,753
Current income tax expense		(329,751)		(442,692)
Net income	$	1,242,428	$	1,528,961

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Pasinex Resources Limited

Management's Discussion & Analysis

For the Three Months Ended March 31, 2024 Discussion dated: July 8, 2024

Revenue

(100% basis Canadian dollars)

Zinc sulphide product sales Other sales

Total revenue

Three Months Ended

March 31, 2024

Wet Tonnes

CAD

2,986 $ 3,537,248

• 72,892
  2,986 $ 3,610,140

Three Months Ended

March 31, 2023

Wet Tonnes

CAD

2,997	$	3,600,758
-		3,759
2,997	$	3,604,517

Sales metrics were virtually the same year of year. Sales prices per tonne on a USD basis decreased by 2% for zinc sulphide product for the three months ended March 31, 2024, when compared to prices in the same period in 2023. The average USD sales price for the three months ended March 31, 2024, was US$878 per tonne for zinc sulphide product versus US$892 per tonne for zinc sulphide product in the same period in 2023.

Costs of Sales

The cost of sales in the three months ended March 31, 2024, was negatively impacted by higher prices for goods and services.

Operating Income

The operating income in Horzum AS decreased 33 percent in the three months ended March 31, 2024, compared with the same period in 2023, as a result of higher costs being incurred. The gross margin, (see non-GAAPmeasures), for the three months ended March 31, 2024, decreased to 37%, compared with 58%, in the same period in 2023.

Impairment of Akmetal Receivable

In 2018, the Company performed an assessment resulting in the recording of an impairment of the loan receivable from Akmetal as required by IFRS 9. For further discussion see Review of Horzum AS - Akmetal Receivable. The recording of the impairment does not represent the elimination of the loan receivable and as such the Company continues to expect full repayment of the loan receivable in due course.

Foreign Exchange Gain

The functional currency of Horzum AS is the TRY. The foreign exchange gain in both 2024 and 2023 is a result of the revaluation of a portion of the Akmetal receivable, which is denominated in US dollars. The gains are the result of the significant decline in the value of the TRY relative to the US dollar during both 2024 and 2023.

Gain on net monetary position

Türkiye was designated as a hyperinflationary economy in the second quarter of 2022 and as a result, IAS 29 - Financial Reporting in Hyper-Inflationary Economies, has been applied to the summarized financial information for Horzum AS. The effect of inflation on Horzum AS's net monetary position for the current period is included in the statement of operations as a net monetary gain, relating to adjustments on share capital, lease assets and plant and equipment.

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