Philippine Metals Inc.

  • Date: 2016-02-29

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PHILIPPINE METALS INC. FORM 51-102F1 MANAGEMENT DISCUSSION AND ANALYSIS NINE MONTH PERIOD ENDED DECEMBER 31, 2015 (expressed in Canadian Dollars)

1.1

Introduction and Date

The following Interim Management Discussion and Analysis (MD&A) provides a detailed analysis of the business of Philippine Metals Inc. (the “Company”) for the nine month period ended December 31, 2015. This MD&A should be read together with the company’s condensed consolidated interim financial statements for the nine months ended December 31, 2015 (the “Interim Financial Statements”) and related notes attached. Information in this MD&A should also be read in conjunction with the Company’s audited consolidated financial statements and the related notes for the year ended March 31, 2015 and the Management Discussion and Analysis for the year then ended. Those Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). This MD&A reflects information available as at February 29, 2016. All financial information in this MD&A related to the periods ended December 31, 2015 and December 31, 2014 has been prepared in accordance with IFRS. All amounts are stated in Canadian dollars unless otherwise indicated. The information provided in this document is not intended to be a comprehensive review of all matters and developments concerning the Company. The information contained herein is not a substitute for detailed investigation or analysis on any particular issue. Additional information related to the Company is available for view on SEDAR at www.sedar.com or the Company’s website at www.philippinemetals.com.

Management’s Responsibility for the Financial Statements Information provided in this MD&A, including financial information extracted from the Interim Financial Statements, is the responsibility of management. In the preparation of the Interim Financial Statements, estimates are sometimes necessary to make a determination of future value for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying Interim Financial Statements.

Forward Looking Statements Certain information included in this discussion may constitute forward-looking statements. Statements in this document that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements. Readers are cautioned not to put undue reliance on forward-looking statements.

1.2

Business Overview

Philippine Metals Inc. is incorporated in Alberta, Canada and is primarily engaged in the exploration and development of resource properties. The Company trades on the TSX Venture Exchange as a Tier 2 issuer under the symbol “PHI” and also trades on the Frankfurt Exchange under the symbol “PM7”. To date, the Company has not earned significant revenues and is considered to be in the exploration stage. The Company’s mineral properties under development are described herein. The financial statements referenced herein have been prepared in accordance with IFRS with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. Continued operations of the Company are dependent on the Company's ability to complete public equity financing, or to generate profitable operations in the future.

1

1.3

Overall Performance

Highlights During the three-month period ended December 31, 2015 the Company: 

In view of the continuing challenging operating environment, continued its care and maintenance approach and is minimizing expenditures related to its Cuatro Ciénegas Project in Mexico;



Provided formal and final notification to Citygroup Philippines Corporation (“Citygroup”) and Canaan Richfield Inc. (“CRI”) that it intended to drop the Taurus and Suhi exploration permits and offered to return the properties;



Recorded a net loss of $38,359 or $0.01 per share as compared to a net loss of $152,635 or $0.03 per share for the period ended December 31, 2014;



Incurred no deferred exploration costs during the period in the Philippines;



At December 31, 2015, had working capital deficit of $394,964, including cash of $46,455 and unsecured non-interest bearing loans of $295,957, which are expected to converted to equity as part of the private placement;



Continued to promote discussions to identify potential partners for its Philippine projects but to date has not formalized any interest;



Continued to monitor matters relating to its Malitao and Dilong exploration permit applications but was unable to progress matters with the MGB; and



Received unsecured non-interest bearing loans of $45,957, which will be converted to equity upon closing of the private placement, pending receipt of the approval of the TSX Venture Exchange.

Compania Minera Coronado S.A. de C.V. On April 22, 2015, the Company, Santa Fe Corporation (“Santa Fe”) and Santa Fe's wholly-owned subsidiaries, 0803198 B.C. Ltd. and 0803203 B.C. Ltd., entered into a purchase agreement (the “Purchase Agreement”) pursuant to which, on July 8, 2015, the Company completed the acquisition of all of the issued and outstanding shares of Compania Minera Coronado S.A. de C.V. (“Coronado”), which holds a 100% interest in the Cuatro Ciénegas Project (the "Transaction”). Pursuant to the Purchase Agreement, the Company paid total cash consideration of $150,000 to Santa Fe to acquire all of the issued and outstanding shares of Coronado. The Company made a $25,000 upfront cash payment to Santa Fe on signing of a letter of intent executed in November 2014 and paid a further $35,000 upon executing the Purchase Agreement in April 2015. The remaining $90,000 was paid on July 8, 2015, upon the closing of the Transaction. The $25,000 payment in November 2014 was recorded as deferred acquisition costs as at March 31, 2015. The Company incurred transactions costs totaling $54,980 in connection with the Transaction. From the perspective of the Company, the Transaction represents a business combination under IFRS 3 “Business Combinations”. Under the acquisition method, the identifiable assets and liabilities acquired or assumed are measured at fair value. The following table summarizes the recognizable assets and liabilities acquired and assumed by the Company from the Transaction. As at July 8, 2015 Assets Exploration and evaluation assets 150,000 Net assets acquired

$

150,000

Cash consideration paid

$

150,000

The fair value of the net assets acquired is the cash consideration paid by the Company for the shares of Coronado pursuant to the Transaction. 1

As Coronado was inactive prior to the date of its acquisition and had no revenues or expenses, had the business combination been reported from as of the beginning of the fiscal year of April 1, 2015, the consolidated pro forma net loss for the nine month period ended December 31, 2015, is the same as actual. Private placement On April 20, 2015, the Company amended the terms of the previously announced financing related to the Molycomex transaction and announced that it was undertaking an offering of up to 7,000,000 common shares of the Company through a non-brokered private placement at a price of $0.05 per share, for gross proceeds of up to $350,000. Proceeds from this financing will be used to repay proceeds from loans used to complete the Transaction and for general working capital purposes. During the nine month period ended December 31, 2015, the Company received unsecured non-interest bearing loans of $295,957 that pursuant to the receipt of executed subscription agreements will be converted to equity upon closing of the private placement. In addition, accounts payable to unrelated third parties in connection with Transaction costs of approximately $54,000 settled on behalf of the Company, will be converted to equity upon closing of the private placement. As of the date of this MD&A, the closing of the private placement is pending receipt of the approval of the TSX Venture Exchange.

1.4

Exploration and Evaluation Assets and Activity

As at December, 2015, the Company, through its subsidiaries, is operating in the Mexico and the Philippines with respect to three mineral projects: the recently acquired Cuatro Ciénegas Project in Mexico; and in the Philippines, the Malitao Project and the Dilong Project. On October 27, 2015, the Company provided formal and final notification to Citygroup Philippines Corporation (“Citygroup”) and Canaan Richfield Inc. (“CRI”) that following offers being made to return to them the Taurus and Suhi exploration permits and tenement rights, respectively, the Company would allow the exploration permits to expire unless Citygroup and CRI cooperated to effect the transfers of the properties in a timely manner. Mexico Cuatro Ciénegas Project In view of the continuing global negative metals markets and related challenging equity and debt capital markets facing mining companies, in particular mineral exploration and development companies, the Company has adopted a care and maintenance approach and is minimizing expenditures related to its Cuatro Ciénegas Project in Mexico. During the period following completion of the Transaction to December 31, 2015, the Company capitalized exploration and development costs of $36,775 in respect of concession taxes paid. Philippines The Company remains dedicated to realizing some value from its Philippine assets, but in completing the Transaction, Company management recognized the need to diversify geographically the asset base of the business. Visible reforms in government regulation of the mining sector in the Philippines have been limited and issues relating to the Company’s Malitao and Dilong EPAs remain unresolved in spite of management’s best efforts to press for an expeditious resolution. The Company also continued to experience delays in the renewal of its Taurus Block and Suhi tenement exploration permits. Management of the Company has been working to identify potential investors and/or partners for its projects in the Philippines and is pursuing discussion with potential interested parties but, to date, has been unable to secure any investors or partners. Over the last couple of years the Company has been carefully managing and actively down-sizing its operations in the Philippines, reflecting the various challenges faced in advancing its projects. During the fiscal 2016, the Company terminated its back-office services agreement and consulting agreement with PMCPI’s acting President, and took action to eliminate costs associated with the Taurus Project, before the decision to offer to return the Project to Citygroup and CRI. Taurus and Suhi properties (the “Taurus Project”) As at December 31, 2015, the Company wrote off all related deferred exploration costs relating to the Taurus Block and Suhi tenements incurred during the nine month period then ended, amounting to $3,058 and $655 (year ended March 31, 2015 $40,024 and $7,029) respectively. Pending receipt of formal notification of the cancellation of the Taurus and Suhi exploration permits or their transfer to Citygroup and CRI, the Taurus Block and Suhi tenements are each carried at a nominal value of $1. 2

The Company is unable to determine if there are any further costs associated with a return of the properties to Citygroup and CRI and has not accrued any related amounts in the financial statements during the current period. Malitao property The Malitao exploration permit application (“EXPA”) has not yet been approved by the DENR and an exploration permit has not been granted. In fiscal 2011, Olpaten Resources Corporation (“Olpaten”) filed an adverse claim against the Company in regards to its Malitao EXPA. The matter remains before the relevant body of the DENR awaiting resolution. At March 31, 2013, on the basis that there has been limited progress toward a resolution of the adverse claim filed by Olpaten, the Company wrote off all acquisition costs and deferred exploration costs related to the property to a nominal amount of $1. The Company has continued to write off all related deferred exploration costs and, as at December 31, 2015, wrote off all deferred exploration costs incurred during the nine month period then ended, recording an impairment charge amounting to $575 (year ended March 31, 2015 - $15,044). The Company did not incur any acquisition costs during the period (year ended March 31, 2015 - $Nil). Dilong property In February 2011, the Company received notification from DENR that its Dilong EXPA had been cancelled. The Company has filed with the MGB office the appropriate objection notice to have the application re-instated. At this time, the likelihood of the outcome is uncertain and there has been no progress toward a re-instatement of the Dilong EXPA. At March 31, 2013, on the basis that there has been limited progress toward a resolution of the cancellation of the Dilong EXPA, Company wrote off all acquisition costs and deferred exploration costs related to the property to a nominal amount of $1. Since that time the Company has continued to write off all related deferred exploration costs. During the nine month period ended December 31, 2015, the Company did not incur any acquisition costs or deferred exploration costs (year ended March 31, 2015 - $6,878). During the nine-month period ended December 31, 2015, deferred expenditures relating to the acquisition, exploration or permitting of the Company’s exploration and evaluation assets totaled $186,779 (year ended March 31, 2015 - $68,975) comprised of $150,000 (year ended March 31, 2015 - $Nil) of acquisition costs and $36,775 (year ended March 31, 2015 $68,975) of deferred exploration costs: Cuatro Ciénegas Acquisition costs, March 31, 2015 Additions during the period Acquisition costs, December 31, 2015 Deferred exploration costs, March 31, 2015 Additions during the period: Camp costs Communications Community relations Consulting Licenses & permits, concession taxes Mapping & sampling

Impairment provision Deferred exploration costs, December 31, 2015 Total exploration and evaluation assets, December 31, 2015

$

150,000

Taurus $

Dilong 1 $

-

150,000

1

$

1

-

Malitao

Suhi

Total

1 $ -

1

1 -

1

1

$

4 150,000 150,004

-

-

-

-

36,775 -

206 66 121 2,662 3

-

575 -

655 -

206 66 121 3,892 36,775 3

36,775

3,058

-

575

655

41,063

(3,058)

-

(575)

(655)

(4,288)

-

-

-

-

36,775

36,775 $ 186,775

$

1 $

1

$

1 $

-

1

$ 186,779

3

1.5

Summary of Annual Results

Total revenues Net loss and comprehensive loss Net loss per share – basic and fully diluted Total assets Working capital Long-term and financial liabilities Shareholders’ equity (1)

IFRS Year ended March 31, 2015 ($)

IFRS Year ended March 31, 2014 ($)

IFRS Year ended March 31, 2013 ($)

Nil (563,761) (0.11) 90,695 (56,487) Nil (30,821)

Nil (509,886) (0.10) 628,787 531,249 Nil 532,940

Nil (5,139,385) (1.03) 1,165,264 1,036,177 Nil 1,042,826

Subsequent to the quarter ended September 30, 2013, the Company effected the consolidation of the Company’s common shares on an eight-old-shares-for-one-new basis. All references to per common share amounts have been retroactively restated to reflect this common share consolidation.

The increased loss in the year ended March 31, 2015 is largely attributable to costs incurred during the year relating to the Transactions while the lower loss in the year ended March 31, 2014 includes the effect of a $62,648 gain on the sale of equipment in the Philippines and also reflects a lower level of exploration activity and associated operational costs in the Philippines and other cost saving measures implemented by the Company. The increased loss in the year ended March 31, 2013 reflects the $4,330,044 impairment provision recorded against the Company’s exploration and evaluation assets.

1.6

Results of Operations for the Three Months ended December 31, 2015

During the three month period ended December 31, 2015 the Company recorded a net loss and comprehensive loss of $38,359 or $0.01 per share as compared to a net loss and comprehensive loss of $152,635 or $0.03 per share for the three month period ended December 31, 2014. In addition to general and administrative expenses of $33,424 (2014 - $141,666), the loss for the three-month period included foreign exchange loss of $4,988 (2014 - $495 loss). During the prior year period the Company recorded an impairment provision of $10,969 against deferred exploration costs capitalized during the period. The Company did not capitalize any deferred exploration costs during the current period. The Company’s general and administrative expenses are analysed below: General and Administrative Expenses Accounting and audit fees Administration fees Amortization Consulting fees Insurance Legal fees Management fees Office and miscellaneous Rent and utilities Telephone Transaction costs Transfer agent and filing fees Travel and related Total General and Administrative Expenses

Three Months ended December 31, 2015 ($)

Three Months ended December 31, 2014 ($)

7,000 18,351 1,562 625 873 1,500 353 3,160 -

12,791 8,332 240 2,687 2,475 1,011 53,787 4,696 6,299 527 19,672 1,574 7,575

33,424

141,666

The lower G&A expenditure during the three-month period ended December 31, 2015 of $33,424 (2014 - $141,666) reflects management’s efforts to minimize expenditures in Canada, including the suspension indefinitely of management fees in Canada, and to eliminate expenditures in the Philippines following management’s decision to return the Taurus and Suhi tenements to Citygroup and CRI. Administration fees increased reflecting the payment during the period of fees to the administrator of the Company’s Guernsey subsidiaries. The Company incurred no transaction costs during the period (2014 - $19,672). 4

1.7

Results of Operations for the Nine Months ended December 31, 2015

During the nine-month period ended December 31, 2015, the Company recorded a net loss and comprehensive loss of $177,094 or $0.04 per share as compared to a net loss and comprehensive loss of $414,555 or $0.08 per share for the nine-month period ended December 31, 2014. In addition to general and administrative expenses of $168,990 (2014 - $359,788) the loss for the nine-month period included loss on foreign exchange of $3,934 (2014 – $1,921 loss), and an impairment provision of $4,288 (2014 - $54,767) to provide against deferred exploration costs capitalized on the Philippine exploration and evaluation assets during the nine-month period. The Company’s general and administrative expenses are analysed below: General and Administrative Expenses Accounting and audit fees Administration fees Depreciation Consulting fees Insurance Legal fees Management fees Office and miscellaneous Rent and utilities Telephone Transaction costs Transfer agent and filing fees Travel and related Total General and Administrative Expenses

Nine Months ended December 31, 2015 ($)

Nine Months ended December 31, 2014 ($)

27,862 37,851 662 3,517 4,991 7,515 10,542 6,953 6,350 1,472 54,980 6,295 -

37,965 55,256 782 12,201 7,425 12,874 160,629 19,519 14,226 1,860 19,672 9,576 7,803

168,990

359,788

During the nine-month period ended December 31, 2015, the Company managed and minimized its expenditures in Canada and in the Philippines while matters relating to the Malitao and Dilong EPAs remained before the MGB and the Company awaited the renewal of the Taurus and Suhi exploration permits. The reduction in general and administrative expenses is substantially attributable to the suspension indefinitely of management fees as previously described, the effect of which is partly offset by Transaction costs of $54,980 (2014 - $19,672). During the nine-month period ended December 31, 2015, the Company paid $125,000 to Santa Fe (year ended March 31, 2015 - $25,000) relating to the Transaction that was completed on July 8, 2015. The Company made no other payments relating to the acquisition of its projects in the Philippines during the period (year ended March 31, 2015 – $Nil). Through August 2015, the Company continued to maintain a small-scale presence at its Taurus Project to support its permitting efforts and community relations activities. Since that time the Company has aggressively cut is expenditures in the Philippines, which is reflected during the nine-month period ended December 31, 2015,when the Company capitalized project exploration costs on its Philippine properties of $4,288 (year ended March 31, 2015 - $68,975) as follows: Taurus Project (Taurus Block) $3,058 (year ended March 31, 2015 - $40,024); Taurus Project (Suhi Blocks) - $655 (year ended March 31, 2015 - $7,029); Dilong Project - $Nil (year ended March 31, 2015 - $6,878); and Malitao Project - $575 (year ended March 31, 2015 - $15,044). At the period end, the Company wrote off all related deferred exploration costs for the Taurus Block ($3,058), Suhi Blocks ($655), Dilong Project ($Nil), and Malitao Project ($575). During the nine-month period the Company received unsecured non-interest bearing loans of $295,957. As at December 31, 2015, the Company had total assets of $264,438 compared to $90,695 as at March 31, 2015. The significant majority of the Company’s asset value is represented by the carrying value of the Company’s exploration and evaluation assets and cash. Subsequent Events There is no material event that has occurred subsequent to December 31, 2015 not already disclosed herein. 5

1.8

Summary of Quarterly Results

Selected information derived from the Company’s unaudited interim financial statements for the past eight quarters is as follows: Three Months Ended December 31, 2015 Total revenues Net loss and comprehensive loss Total assets Working capital deficit Long-term liabilities Total expenses Net (loss) profit per share – basic and diluted

$

Nil (38,359) 264,438 394,694 33,424 (0.01)

Three Months Ended September 30, 2015 $

Three Months Ended December 31, 2014 Total revenues Net loss and comprehensive loss Total assets Working capital Long-term liabilities Total expenses Net loss per share – basic and diluted

$

Nil (152,635) 248,174 92,476 141,666 (0.03)

Nil (48,266) 254,175 366,335 59,014 (0.01)

Three Months Ended June 30, 2015 $

Three Months Ended September 30, 2014 $

Nil (152,032) 376,622 209,870 118,658 (0.03)

Nil (90,470) 252,067 (181,715) 87,072 (0.02)

Three Months Ended March 31, 2015 $

Three Months Ended June 30, 2014 $

Nil $ (109,888) 513,881 421,632 99,465 (0.02)

Nil (149,206) 90,695 (56,487) 122,398 (0.02)

Three Months Ended March 31, 2014 Nil (121,862) 628,787 531,249 119,971 (0.02)

The increased loss in the quarter ended September 30, 2014 reflects the write off of the deferred exploration costs relating to the Taurus permit renewal fees incurred during the period. The loss in the quarter ended March 31, 2015, includes transaction costs of $43,065 relating to the Transactions. The decreasing losses in the quarters June 2015 through December 2015 reflect the impact of management’s efforts to reduced general and administrative expenses over the period.

1.9

Liquidity and Capital Resources

As at December 31, 2015, the Company had working capital deficit of $394,694 (year ended March 31, 2015 – deficit working capital of $56,487) including cash of $46,455 (year ended March 31, 2015 - $20,289). The decrease in working capital is substantially attributable to approximately $296,000 of non-interest bearing loans issued during the period, a portion of the proceeds of which were used to complete the Transaction and fund related transaction costs and other general and administrative expenses during the period. There were no other financing activities during the nine month period ended December 31, 2015. Cash used in investing activities during the period totaled $166,105 (2014 – $Nil), representing the cash consideration paid to Santa Fe during the period ($125,000) and deferred exploration expenditures at the Cuatro Ciénegas Project. December 31, 2015 Cash Working capital (deficit) Shareholders’ equity

$

46,455 394,694 (207,915)

March 31, 2015 $

20,289 (56,487) (30,821)

As at December 31, 2015, the Company had 46,625 stock options outstanding but as at the close of trading on the date immediately prior to the date of this MD&A, the exercise price of these options is greater than the Company’s share price.

6

The Company currently has no operating revenues other than interest income but has been successful in meeting its acquisition and exploration capital and other operational funding requirements by completion of equity placements. The Company is considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in order to continue its exploration programs. Despite success in completing these financings, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. If adequate financing is not available when required, the Company may be required to delay, scale back or eliminate various programs and may be unable to continue in operation. The Company expects to incur further losses in the development of its business, all of which cast substantial doubt on the Company’s ability to continue as a going concern. The Company will require additional financing in order to meet its ongoing levels of corporate overhead and discharge its liabilities as they come due. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future. On April 22, 2015, the Company announced that it was undertaking an offering of up to 7,000,000 common shares of the Company through a non-brokered private placement at a price of $0.05 per share, for gross proceeds of up to $350,000. Proceeds from this financing will be used to repay proceeds from loans used to complete the Transaction and for general working capital purposes. During the nine-month period ended December 31, 2015, the Company received unsecured non-interest bearing loans of $295,957 that pursuant to the receipt of executed subscription agreements will be converted to equity upon closing of the private placement. In addition, accounts payable to unrelated third parties of approximately $54,000 settled on behalf of the Company, will be converted to equity upon closing of the private placement. As of the date of this MD&A, the closing of the private placement is pending receipt of the approval of the TSX Venture Exchange. The Company will require further funding to cover its general and administrative expenses and any project expenses for the next 12 months. The Company may seek such additional financing through debt or equity offerings, but there can be no assurance that such financing will be available on terms acceptable to the Company or at all. Any equity offering will result in dilution to the ownership interests of the Company’s shareholders and may result in dilution to the value of such interests.

1.10

Off-Balance Sheet Arrangements

The Company has no-off balance sheet arrangements other than what is reported in the Interim Financial Statements. The Company`s off-balance sheet commitments are related to its mineral properties detailed in Note 6 to the Interim Financial Statements. In accordance with the Dilong Deed of Assignment, monthly payments of US$2,500 are payable to the original Dilong EPA holders (the “Heirs”) until the Dilong EPA is approved by the DENR. However, the total cumulative amount of such monthly payments is to be recognized as a deduction against a US$25,000 payment due when the DENR approves the Dilong EPA. In view of the actions taken by the DENR to cancel the Dilong EPA, the Company initiated discussions with the Heirs in early 2013 to amend and clarify the payments due pursuant to the Dilong Deed of Assignment. Accordingly, in February 2013, the Company suspended any further monthly payments pending the outcome of the discussions to amend the Deed of Assignment. The Company has presented to and discussed proposals with the Heirs but no amendment has been agreed nor are there any ongoing discussions currently. The Company is also required to make all payments necessary to maintain the Suhi tenements in good standing, including any permit renewal or other required expenditures, otherwise ownership of the tenement EPs reverts back to the original holder of the tenement EPAs. On October 27, 2015, the Company provided formal and final notification to Citygroup Philippines Corporation (“Citygroup”) and Canaan Richfield Inc. (“CRI”) that following offers being made to return to them the Taurus and Suhi EPs and tenement rights, respectively, the Company would allow the exploration permits to expire unless Citygroup and CRI cooperated to effect the transfers of the properties in a timely manner. The Company is unable to determine if there are any further costs associated with the return of the properties and has not accrued any related amounts in the Interim Financial Statements during the current period.

7

In addition, in respect of the granting of the Malitao and Dilong Project exploration permits the following payments would also become due: 

Malitao Project – a lump-sum equal to US$275,000 less the cumulative balance of monthly payments made previously payable upon the granting of the exploration permit. As at June 30, 2013, the Company had made monthly payments totalling US$275,000. Subsequent equal instalments ($91,666.67, less any monthly instalments paid) are due on the first, second and third anniversary of the granting of the exploration permit totalling US$275,000 in aggregate; and



Dilong Project – US$25,000 per year on each anniversary date of the granting of the exploration permit up to a maximum of US$375,000. Monthly payments outlined above terminate at the time the exploration permit is granted (pending the outcome of discussions to amend the Deed of Assignment).

1.11

Transactions with Related Parties

During the nine month periods ended December 31, 2015, the Company entered into the following transactions with related parties: a)

Purchase of services:

Rent to a company controlled by an officer and director of the Company Legal services fees to law firms in which the Company’s and its subsidiary’s corporate secretaries are partners b)

December 31, 2015 $ 4,600

December 31, 2014 $ 3,600

10,562

10,562

Key management compensation: Key management includes the President, CEO and CFO and, until August 31, 2015, the former President and the former Treasurer of the Company’s Philippine subsidiary. The compensation paid or payable to key management or companies controlled by them for director and/or management services is shown below:

Fees reported as management fees of $10,543 (2014 - $160,629) and consulting fees of $1,558 (2014 - $21.122) A company controlled by a director and officer of the Company’s subsidiary relating to accounting and administrative services c)

December 31, 2015 $

December 31, 2014 $

12,101

181,751

12,000

27,000

Accounts payable to (receivable from) related parties:

Key management or companies controlled by them for management and consulting services and related out-of-pocket expenses Law firms in which the Company’s and its subsidiary’s corporate secretaries are partners for legal services A company controlled by a director and officer of the Company’s subsidiary for a deposit relating to administrative and accounting services Prepaid to a company controlled by a director and officer of the Company for office rent

December 31, 2015 $

March 31, 2015 $

2,032

9,954

15,058

6,040 15,994

-

(6,000)

-

(600)

Amounts due to related parties are due to officers and companies controlled by directors and officers, are unsecured, are non-interest bearing and have no specific terms of repayment. 8

1.12

Outstanding Share Data

The following table summarizes the outstanding share capital as of the date of this MD&A: Number of shares issued or issuable Common shares

5,539,535

Preferred shares Stock options

45,625

During the period 21,250 options expired unexercised. There were no other security transactions during the nine-month period ended December 31, 2015 impacting the Company’s share capital or other securities. For further information and details concerning outstanding share data and options see Note 8 of the Interim Financial Statements.

1.13

Financial Risk Management and Financial Instruments

Financial risk factors The Company’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk and price risk), credit and liquidity risk. The Company’s Interim Financial Statements do not include all financial risk management information and disclosures required in the annual financial statements; the Interim Financial Statements and this MD&A should be read in conjunction with the Company’s annual financial statements for the year ended March 31, 2015. In addition, with the acquisition of Coronado and the Cuatro Ciénegas Project in Mexico, and is therefore exposed to foreign exchange risk arising from transactions denominated in Mexican peso. There have been no changes in the risk management approach or in any risk management policies since the year end. Fair value estimation The Company’s financial instruments consist of cash, restricted cash, receivables, accounts payable and accrued liabilities and accounts payable to related parties and loans payable. The fair values of the Company’s accounts receivable, accounts payable and accrued liabilities, accounts payable to related parties and loans payable approximate their carrying values due to the short-term nature of these instruments. The fair values of cash and restricted cash are based on level 1 inputs of the fair value hierarchy.

1.14

New Accounting Policies

Accounting policies The Interim Financial Statements have been prepared in accordance with IAS 34, “Interim financial reporting”. The Interim Financial Statements should be read in conjunction with the annual financial statements for the year ended March 31, 2015, which have been prepared in accordance with IFRSs. The accounting policies adopted in the Interim Financial Statements are consistent with those adopted in the previous financial year ended March 31, 2015.

9

Estimates The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results may differ from those estimates. In preparing the Interim Financial Statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual financial statements for the year ended March 31, 2015.

1.15

Risk Factors

Readers should carefully consider the Risk Factors as set out in the Company’s MD&A for the year ended March 31, 2015 (available on the SEDAR website at www.sedar.com), before deciding whether to invest in the common shares of the Company. In addition, the reader’s attention is directed to the going concern risk highlighted in Note 1 of the Interim Financial Statements and in the “Liquidity and capital resources” section of this MD&A. The operations of the Company are speculative due to the high risk nature of its business which includes the acquisition, financing, permitting, exploration, development of mining properties. These risk factors could materially affect the Company’s future operations and could cause actual events to differ materially from those described in forward-looking statements relating to the Company The risks and uncertainties incorporated in this section by reference are not inclusive of all the risks and uncertainties the Company may be subject to, and other risks may apply, but are considered by management to be the most important in the context of the Company’s business. In addition, following the completion of the Transaction, the operations of the Company are could be materially affected by risks and uncertainties specific to mining exploration and development in Mexico. Coronado’s mineral exploration and mining activities in Mexico may be adversely affected in varying degrees by changing government regulations relating to the mining industry or shifts in political conditions that increase the costs related to Coronado’s activities or maintaining its properties. Operations may also be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income or royalty taxes, expropriation of property, environmental legislation and legislation related to mine safety.

1.16

Internal and Disclosure Controls over Financial Reporting

The Alberta Securities Commission in which the Company is registered has exempted Venture Issuers from certifying disclosure controls and procedures, as well as, Internal Controls of Financial Reporting as of December 31, 2007, and thereafter. Since the Company is a Venture Issuer, it is now required to file basic certificates, which it has done for the nine month period ended December 31, 2015. The Company makes no assessment relating to the establishment and maintenance of disclosure controls and procedures as defined under Multilateral Instrument 52-109 as at December 31, 2015.

1.17

Outlook

The Company's primary focus for the foreseeable future will be to complete the private placement to recapitalize the Company’s balance sheet. Additionally, the Company will need to begin to focus on raising additional capital to ensure that business has sufficient working capital to fund its minimum ongoing general and administrative costs and is in the process of reviewing the next steps for the Cuatro Cienegas Project. Management will continue actively seek potential partners for its remaining projects in the Philippines.

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