Patagonia Gold : Annual Report for the Year Ended December 31 2023

Patagonia Gold Corp.

Consolidated Financial Statements

For the Years Ended December 31, 2023 and 2022

(All amounts in thousands of United States Dollars unless otherwise stated)

Index
Independent Auditor's Report	2
Consolidated Statements of Financial Position	5
Consolidated Statements of Loss and Comprehensive Loss	6
Consolidated Statements of Changes in Equity	7
Consolidated Statements of Cash Flows	8
Notes to the Consolidated Financial Statements	9

1

Independent Auditor's Report

Grant Thornton LLP

Suite 1600

333 Seymour Street Vancouver, BC V6B 0A4

T [phone] F [phone]

To the Board of Directors and Shareholders of Patagonia Gold Corp.

Opinion

We have audited the consolidated financial statements of Patagonia Gold Corp. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023, and December 31, 2022 and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023, and December 31, 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards").

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 3 of the consolidated financial statements which indicates the Company incurred a net loss of US$6,407 thousand during the year ended December 31, 2023, and as of that date had an accumulated deficit of US$212,227 thousand. These conditions, along with other matters as set forth in Note 3, indicate that a material uncertainty exists that may cast significant doubt about the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our auditor's report.

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Information Other than the Consolidated Financial Statements and Auditor's Report Thereon

Management is responsible for the other information. The other information comprises the Management Discussion and Analysis but does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because of the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Robert J. Riecken.

Vancouver, Canada	Chartered Professional Accountants
April 26, 2024	Licensed Public Accountants

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Patagonia Gold Corp.

Consolidated Statements of Financial Position

As at December 31, 2023 and 2022

(Stated in thousands of U.S. dollars)

Current assets	Note		2023		2022
Cash		$	185	$	231
Receivables	12		352		2,021
Inventories	6		4,167		4,653
Total current assets			4,704		6,905
Non-current assets
Mineral properties	7		14,753		14,893
Mining rights	9		16,358		16,163
Property, plant and equipment	11		9,416		10,644
Goodwill			4,009		4,009
Other financial assets	10		2		9
Other receivables	13		332		1,671
Total non-current assets			44,870		47,389
Total assets		$	49,574	$	54,294
Current liabilities
Bank indebtedness	14	$	538	$	8,945
Accounts payable and accrued liabilities	15		1,689		5,953
Accounts payable with related parties	15,19		164		285
Current portion of long-term debt	16		213		386
Total current liabilities			2,604		15,569
Non-current liabilities
Long-term debt	16		36,259		20,019
Reclamation and remediation obligations	8		3,281		4,069
Deferred tax liabilities	26		170		1,837
Total non-current liabilities			39,710		25,925
Total liabilities			42,314		41,494
Shareholders' equity
Capital stock	18		11,250		11,244
Contributed surplus			190,161		190,026
Accumulated deficit			(212,227)		(205,926)
Accumulated other comprehensive income			19,686		18,960
Total shareholders' equity attributable to the parent			8,870		14,304
Non-controlling interest			(1,610)		(1,504)
Total shareholders' equity			7,260		12,800
Total liabilities and shareholders' equity		$	49,574	$	54,294

Going concern (note 3)

Subsequent events (notes 14, 18 and 27)

The accompanying notes form an integral part of these consolidated financial statements.

Approved on Behalf of the Board of Directors

Signed "Christopher van Tienhoven _ , Director	___Signed "Cristian Lopez Saubidet___, Director

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Patagonia Gold Corp.

Consolidated Statements of Loss and Comprehensive Loss For the Years Ended December 31, 2023 and 2022 (Stated in thousands of U.S. dollars)

	Note		2023		2022
Revenue		$	8,220	$	12,340
Cost of sales	6		(9,902)		(14,635)
Gross loss			(1,682)		(2,295)
Operating expenses:
Exploration expenses			(3,737)		(5,374)
Repairs and maintenance			(724)		(513)
Depreciation, depletion and amortization	20		(498)		(1,899)
Administrative expenses	21		(4,867)		(5,491)
Share-based payments expense	18		(135)		(349)
Interest expense	16		(2,788)		(3,395)
Total operating expenses			(12,749)		(17,021)
Other income/(expenses)
Interest income			232		194
Gain on foreign exchange			1,066		2,428
Accretion expense	8		(282)		(305)
Other income	23		5,356		10,709
Total other income			6,372		13,026
Net loss - before income taxes			(8,059)		(6,290)
Income tax benefit	26		1,652		1,962
Net loss		$	(6,407)	$	(4,328)
Attributable to non-controlling interest			(106)		(112)
Attributable to equity share owners of the parent			(6,301)		(4,216)
Other comprehensive income (loss) net of tax			(6,407)		(4,328)
Change in fair value of investment	10		(7)		(6)
Foreign currency translation adjustment			733		(911)
Total other comprehensive income (loss)			726		(917)
Total comprehensive loss		$	(5,681)	$	(5,245)
Weighted average number of common shares outstanding - basic
and diluted	17		470,595,500		466,566,441
Net loss per share - basic and diluted	17	$	(0.014)	$	(0.009)

The accompanying notes form an integral part of these consolidated financial statements.

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Patagonia Gold Corp.

Consolidated Statements of Changes in Equity For the Years Ended December 31, 2023 and 2022 (Stated in thousands of U.S. dollars)

					Accumulated
			Accumulated		other	Contributed		Total		Non-
			comprehensive	Attributable	controlling
	Capital stock		deficit		income		surplus		to parent		interest		Total
Balance - January 1, 2022	$	11,244	$	(201,710)	$	19,877	$	189,677	$	19,088	$	(1,392)	$	17,696
Net loss		-		(4,216)		-		-		(4,216)		(112)		(4,328)
Other comprehensive loss		-		-		(917)		-		(917)		-		(917)
Share based payments (note 18)		-		-		-		349		349		-		349
Balance - December 31, 2022	$	11,244	$	(205,926)	$	18,960	$	190,026	$	14,304	$	(1,504)	$	12,800
Balance - January 1, 2023	$	11,244	$	(205,926)	$	18,960	$	190,026	$	14,304	$	(1,504)	$	12,800
Shares issued to settle debt (note 18)		50		-		-		-		50		-		50
Share repurchased under NCIB (note 18)		(44)		-		-		-		(44)		-		(44)
Net loss		-		(6,301)		-		-		(6,301)		(106)		(6,407)
Other comprehensive income		-		-		726		-		726		-		726
Share based payments (note 18)		-		-		-		135		135		-		135
Balance - December 31, 2023	$	11,250	$	(212,227)	$	19,686	$	190,161	$	8,870	$	(1,610)	$	7,260

The accompanying notes form an integral part of these consolidated financial statements.

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Patagonia Gold Corp.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2023 and 2022 (Stated in thousands of U.S. dollars)

	Note		2023			2022
Cash flow from operating activities
Net loss		$	(6,407)	$	(4,328)
Items not affecting cash
Depreciation of property, plant and equipment	11		1,516			1,735
Depletion of mineral properties	7		140			1,322
Amortization of mining rights	9		100			100
Share based payment expense	18		135			349
Provisions	8		(1,070 )		(2,424)
Write-down of inventory	6		1,028			1,475
Loss due to theft	6		820			-
Interest payable			2,061			781
Accretion expense	8		282			305
Gain on sale of asset			(160 )		-
Deferred tax expense/(benefit)			(1,652 )		(1,962)
Net change in non-cash working capital items
(Increase)/decrease in receivables			3,008			241
(Increase)/decrease in inventory			(1,196)		(2,090)
(Increase)/decrease in other financial assets			7			-
Increase/(decrease) in accounts payable and accrued liabilities			(4,267)		(853)
Increase/(decrease) in accounts payable and accrued liabilities with related parties			(71)		77
Increase/(decrease) in provision			-			(8)
Increase/(decrease) in transaction taxes payable			(12)		(49)
Net cash used in operating activities
		(5,738)		(5,329)
Cash flows from investing activities
Purchase of property, plant and equipment	11		(454)		(207)
Purchase of mineral property	7		-			(103)
Proceeds from disposal of property, plant and equipment	11		160			24
Net cash used in investing activities			(294)		(286)
Cash flow from financing activities
Bank indebtedness (repayment)			(8,407)		2,239
Proceeds from loans			14,210			3,700
Repayment of loans			(204)		(355)
Share repurchased under NCIB			(44)		-
Net cash provided by financing activities			5,555			5,584
Net decrease in cash			(477)		(31)
Effect of foreign exchange on cash			431			(29)
Cash, beginning of year			231			291
Cash, end of the year		$	185		$	231
Taxes paid			(12)		(49)
Interest paid			(443)		(2,341)
Supplemental non-cash information
Shares issued to settle debt	18		50			-
Change in value of investments	10		(7)		(6)

The accompanying notes form an integral part of these consolidated financial statements.

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Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2023 and 2022

(Stated in thousands of U.S. dollars unless otherwise stated)

1. Nature of business

On July 24, 2019, Patagonia Gold Corp. (PGDC.TSXV - "the Company" or "Patagonia") [formerly Hunt Mining Corp ("Hunt", or "Hunt Mining")] and Patagonia Gold Limited ("PGL") [formerly Patagonia Gold PLC ("PGP")] completed a reverse acquisition (or reverse takeover, the "RTO") resulting in Hunt acquiring all issued shares of common stock of PGP in exchange for common shares of Hunt on the basis of 10.76 Hunt shares for each PGP share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80%. The operating name of Hunt Mining Corp. was changed to Patagonia Gold Corp.

Patagonia is a mineral exploration and production company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties and exploitation of reserves in Santa Cruz, Rio Negro and Chubut provinces of Argentina.

The consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:

		Percentage	Functional
Corporation	Incorporation	ownership	currency	Business purpose
Patagonia Gold S.A. ("PGSA")	Argentina	95	US$	Production and Exploration Stage
Minera Minamalu S.A.	Argentina	100	US$	Exploration Stage
Huemules S.A.	Argentina	100	US$	Exploration Stage
Leleque Exploración S.A.	Argentina	100	US$	Exploration Stage
Patagonia Gold Limited (formerly
Patagonia Gold PLC)	UK	100	GBP$	Holding
Minera Calcatreu S.A.U. (formerly
Minera Aquiline S.A.U.)	Argentina	100	US$	Exploration Stage
Patagonia Gold Canada Inc.	Canada	100	CAD$	Holding
Patagonia Gold Chile S.C.M.	Chile	100	CH$	Exploration Stage
Ganadera Patagonia S.R.L.	Argentina	100	US$	Land Holding
1272680 B.C. Ltd (formerly 1494716
Alberta Ltd.)	Canada	100	CAD$	Nominee Shareholder

The Company's activities include the exploration for and production of minerals from properties in Argentina and Chile. On the basis of information to date, properties where it has not yet been determined if economically recoverable reserves exist are classified as exploration-stage. Properties where economically recoverable reserves exist and are being exploited are classified as production-stage. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties.

On some properties, ongoing production and sales of gold and silver are being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations. As a result, there is increased uncertainty and economic risks of failure associated with these production activities. Despite the sale of gold and silver, these projects remain in the exploration stage because management has not established proven or probable reserves required to be classified in either the development or production stage.

2. Basis of presentation

The Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS Accounting Standards") as issued by International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee. The policies applied in the Company's consolidated financial statements are based on IFRS Accounting Standards effective for the year ended December 31, 2023.

The consolidated financial statements were approved by the Company's Board of Directors on April 26, 2024.

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting.

The accounting policies applied in the consolidated financial statements are presented in note 4 and have been applied consistently in all periods presented in the consolidated financial statements, unless otherwise noted.

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Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2023 and 2022

(Stated in thousands of U.S. dollars unless otherwise stated)

The Company's presentation currency is the US Dollar.

The preparation of the consolidated financial statements require management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Judgments made by management in the application of IFRS Accounting Standards that have a significant effect on the consolidated financial statements and estimates with significant risk of material adjustment in the current and following periods are discussed in note 4.

. Going Concern 3. Going concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company's ability to continue as a going concern is dependent upon, but not limited to, its ability to raise financing necessary to discharge its liabilities as they become due and generate positive cash flows from operations. During the year ended December 31, 2023, the Company had a net loss of $6,407 (2022 - $4,328). As at December 31, 2023, the Company has positive working capital of $2,100 (2022 - negative working capital $8,664) and had an accumulated deficit of $212,227 (2022 - $205,926). These aforementioned conditions have resulted in material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and to meet its obligations will be dependent upon generating positive cash flows from operations as well as obtaining debt and equity financing. However, there can be no assurance that the steps management is taking will be successful. The accompanying consolidated financial statements do not reflect any adjustments in the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. These adjustments could have a material impact on the consolidated financial statements.

4. Material accounting policies

The material accounting policies used in the preparation of these consolidated financial statements are described below.

(a) Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value.

(b) Consolidation

The Company's consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on consolidation.

(c) Foreign currency translation

The functional currency for the Company and its subsidiaries is determined by the currency of the primary economic environment in which it operates. The Company's functional currency is the Canadian dollar ("CAD") and the Company's subsidiaries have functional currencies in United States dollar ("USD"), Chilean Peso ("CH") and Great Britain Pound ("GBP"). The consolidated financial statements are presented in United States dollars.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recognized at the prevailing exchange rates at the date of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at the reporting date. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the transaction date. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in net income.

These financial statements are translated to their USD equivalents using the following methods:

• Income and expenses on the statement of loss and comprehensive loss have been translated using the average exchange rates prevailing during the year;
• Assets and liabilities have been translated using the exchange rate prevailing at the date of the statement of financial position;
• Translation adjustments are recognized in other comprehensive income (loss).

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