THEMAC Resources : Earnings Document

THEMAC Resources Group Limited

Form 51-102F1

Management's Discussion & Analysis (MD&A)

For the nine months ended March 31, 2024

Dated: May 30, 2024

Suite 1500 - 409 Granville Street

Vancouver, BC

Canada V6C 1T2

THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

This report covers financial and technical information related to the three and nine months ended March 31, 2024, and other relevant information available up to the date of this report. This report should be read in conjunction with the unaudited condensed consolidated interim financial statements for the nine months ended March 31, 2024 and audited financial statements for the year ended June 30, 2023 and the related notes.

Financial results are prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are stated in Canadian dollars unless otherwise indicated.

Additional information related to THEMAC Resources Group Limited ("THEMAC" or the "Company") is available for view on the Company's website at www.themacresourcesgroup.comand under the Company's profile on SEDAR at www.sedarplus.ca.

Cautionary Note on Forward-Looking Statements

When used in this document, words such as 'estimate', 'expect', 'anticipate', 'believe', and similar expressions are intended to identify forward-looking statements. Such statements are used to describe management's future plans, objects, and goals for the Company, and, therefore, involve inherent risks and uncertainties.

Shareholders and prospective investors should be aware that the forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward- looking information involves numerous assumptions, inherent risk, and uncertainties, both general and specific, which contribute to the possibility that the predictions, forecasts, projections, and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events, or such factors which affect this information, except as required by law.

Description of business and project update

The Company was incorporated on February 24, 1997, under the Business Corporations Act (Yukon), Canada. The Company is in the business of developing its Copper Flat Mine in New Mexico ("Copper Flat" or the "Mine") through its subsidiary New Mexico Copper Corporation ("NMCC").

The Company is a reporting issuer in the provinces of British Columbia and Alberta, Canada, and trades its shares on the TSX Venture Exchange ("TSX-V") under the symbol MAC.

Health and Safety

The Company remains committed to the health and safety of its employees, their families and their communities and will continue to take action to comply with recommended best practices to prevent infection and injury.

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

About the Copper Flat Mine

Substantially all the Company's business efforts since the acquisition of Copper Flat have been focused on geologic and engineering studies, securing water rights, and permitting the Mine with a view to bringing it to commercial production.

Copper Flat is a former producing mine located in the Hillsboro Mining District of Sierra County, New Mexico. The mine property is located approximately 150 miles (242 kilometers (km)) south of Albuquerque, New Mexico, and 20 miles (32 km) southwest of Truth or Consequences, New Mexico. The mine property consists of 28 patented lode mining claims, 4 patented placer mining claims, 202 unpatented lode mining claims, 41 unpatented placer mining claims, 9 unpatented mill sites, and 16 fee land parcels in contiguous and non-contiguous land parcels and claim blocks. The surface area of the Company's contiguous and non-contiguous land parcels and mining claims at Copper Flat totals approximately 5,076 acres (1,918 hectares) and the Company controls 100% of the property located within the approximate 2,054 acre (886 hectare) mine area. The project site is characterized as a "brownfields" site as numerous roads, power lines, placer and concentrator tailings, and other surface infrastructure dating from prior mine operations exist on the property.

The Copper Flat deposit is a polymetallic porphyry deposit containing copper, molybdenum, gold, and silver. The mineral grade and recovery have been demonstrated by historic production and metallurgical test work, and through additional assays obtained from the Company's exploration drilling programs. Existing project infrastructure in place at Copper Flat includes a pre-stripped open pit, power lines, water supply well field and freshwater pipeline, access roads, diversion channels, site grading, building foundations, and a tailings storage facility that is planned for replacement. Regional infrastructure in the area surrounding Copper Flat includes interstate and state highways, rail lines, power and communication lines, and several communities. For more information, visit www.themacresourcesgroup.com.

Quintana Minerals Corporation ("Quintana") operated the Mine during the first half of 1982, ending in June 1982 when operations were curtailed due to falling copper prices. During this period, Quintana mined and processed 1.48 million short tons (Mst) of ore to yield 7.4 million pounds ("Mlbs") of copper, 2,301 ounces ("Oz") of gold, and 55,966 Oz of silver. A salable molybdenum product was planned but a molybdenum production circuit was not constructed due to Quintana's short operating period.

The Company carried out exploration activities at Copper Flat from 2009 to 2012 to confirm, characterize, and expand the known extent of the Copper Flat mineralization. NMCC's exploration program included drilling, geologic mapping, geophysical surveys, sampling for mineral content, metallurgical testing, geochemical characterization, geotechnical analysis, and re-assay of samples from prior exploration programs. During this period, the Company completed 47,500 feet of drilling in 48 drill holes. The Company has not performed further exploration activities at Copper Flat after conclusion of the 2012 exploration program.

The Company completed a Feasibility Study in 2013, for restarting the Mine (the "Study").The Study, prepared by M3 Engineering and Technology Corporation ("M3") with input from Independent Mining Consultants and Golder Associates, is summarized in a Canadian Securities Administrators National Instrument 43-101 ("NI 43-101") compliant technical report titled "Copper Flat Project - Form 43-101 Technical Report Feasibility Study", which was issued on November 21, 2013, and is available at www.sedarplus.ca.The Company issued an updated NI 43-101 compliant technical report on April 9, 2020, to update the project economics and project status

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

(the "Updated Study"). The 2020 report, titled "Copper Flat Project, Form NI 43-101F1 Technical Report Project Feasibility Study Update" is posted on SEDAR+.

The Updated Study includes financial analysis on two metal price scenarios: 1) The base case using a long-term copper price of $3.25/lb; and 2) a price upside case using a long-term copper price of $3.60/lb. All other metal prices are held constant between the two scenarios.

The financial return table below is after tax, unlevered and with no escalation in commodity prices.

	NPV@0%	NPV@8%	IRR	Payback
	(US$000)	(US$000)	(%)	(Years)
Base Case	$545,000	$235,000	20.8	3.3
Upside Price Case	$711,000	$338,000	25.6	2.9

Base Case: Copper $3.25/lb, Moly $10.50/lb, Gold $1,300/oz; Silver $16.00/oz

Upside Sensitivity: Copper $3.60/lb, Moly $10.50/lb, Gold $1,300/oz; Silver $16.00/oz

With the Updated Study completed, the Company is satisfied Copper Flat continues to demonstrate robust economics which support ongoing advancement of the permitting and development processes.

The Company has identified the following principal steps needed to bring the Copper Flat Mine into commercial production:

Secure Additional Water Rights

Receive Federal Approvals: EIS; Plan of Operations Approval; CWA 404 (list complete subject to conclusion of financial assurance for reclamation and closure)

Receive State Permits: Air Quality; Groundwater Discharge; Mining; Tailings Dam (Air Quality and Groundwater Discharge Permits complete)

Complete Detail Engineering Hire a Work Force Construct Facilities Commence Operations Achieve Commercial Production

During the nine months ended March 31, 2024, the Company continued to focus efforts on securing a sufficient water supply along with Federal and State approvals to construct, operate, and reclaim the Copper Flat Mine.

Water

Water resources are carefully managed and controlled in the Western United States; in New Mexico, the appropriation of water rights is managed by the New Mexico Office of the State Engineer ("NMOSE").

The Company's hydrogeology consultants have prepared a detailed groundwater model to determine how pumping from the Company's wells might affect the local groundwater table and the Rio Grande over time (the "Hydrogeologic Model"). The Hydrogeologic Model has been reviewed by NMOSE hydrologists and Agency comments have been incorporated into the

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

Hydrogeologic Model. Effects on the level of water in neighboring wells, which is not the same as impairment, have also been projected by the Hydrogeologic Model. Neither the Hydrogeologic Model nor evidence given during the 2016 water rights adjudication hearing indicate any material injury to any other well will occur because of the planned pumping of the Company's water wells. Furthermore, the Company committed in the EIS process to ensure that any well user with demonstrated well impairment will be provided with an alternative water supply at no cost; whether through well deepening (at the cost of the Company) or other appropriate measures.

On September 9, 2010, the Company entered into an option agreement to acquire the water rights related to Copper Flat which comprised of vested and inchoate water rights (collectively, the "Water Rights"). The Company paid US$1,500,000 at the time of the agreement and paid a final amount of US$700,000 in the year ended June 30, 2019. All amounts paid to date relate to vested water rights only, no value was attributed to the inchoate water rights. In addition, as part of the acquisition of the Copper Flat property, the Company also received additional vested and inchoate water rights at the project site (collectively, the "Miscellaneous Water Rights"). In 2017, the State of New Mexico Third District Court (the District Court) ruled that inchoate Water Rights controlled by the Company were invalid and extinguished as the result of non-use and the failure to pursue a continuous plan of development by prior owners of the water rights; leaving the Company with approximately 862 acre feet of vested Water Rights plus a limited amount of the Miscellaneous Water Rights. The Company filed an appeal of this decision in March 2018. At the same time, parties opposing the Company's water rights filed cross appeals protesting the Court recognized water rights. The State Court of Appeals, in a ruling issued in September 2021, affirmed the lower court's rulings on the Water Rights and remanded the decision on the Miscellaneous Water Rights to the District Court for reconsideration. The Company and other parties to this ruling have elected to not pursue further appeal the State Court of Appeals decision. Written briefings have been filed by all parties in response to the Court of Appeals Mandate for Reconsideration and the District Court heard arguments from the parties in June 2022. In August 2023, the Company received the decision from the State of New Mexico Third District Court to reinstate certain water rights for the Copper Flat Project. The Court recognized the vested rights in seven wells totalling 195.92 acre feet per year.

Company actions to supplement the vested water rights include acquiring a lease from the Jicarilla Nation to release 3,000 AF of water per annum into the Rio Grande for use in offsetting groundwater pumping effects projected to reach the Rio Grande. The Jicarilla lease has been authorized and approved by the United States Department of Interior and the United States Bureau of Reclamation, however approval from the State is required before the plan may be implemented.

In April 2019, an agreement to lease 2,400 AF of existing water right for use at the Copper Flat Mine was executed. The water is currently permitted in the Lower Rio Grande ("LRG") Basin for multiple purposes, including commercial and industrial use. An application to NMOSE to change the point of diversion to the Copper Flat production wells and the place and purpose of use to the Copper Flat Mine was filed in August 2019. The application has been protested and an administrative hearing on the application was conducted at the State Engineer's Office in August 2023. The Agency decision on the application is pending.

The Company continues to review options for securing additional water rights and will continue to make appropriate and timely disclosures as developments occur.

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

Permitting

Efforts to achieve federal and state approvals for the mine continued throughout the year ended June 30, 2023.

The proposed operation has been evaluated by the Bureau of Land Management (BLM) through completion of a National Environmental Policy Act ("NEPA") compliant Environmental Impact Statement ("EIS"). The EIS was prepared by the BLM in consultation with several Cooperating Agencies that included the U.S. Fish and Wildlife Service ("USFWS"), the New Mexico Energy, Minerals, and Natural Resources Department, the New Mexico Environment Department, the New Mexico Department of Game and Fish, and the New Mexico Office of the State Engineer.

BLM's issuance of the final Copper Flat Mine EIS ("FEIS") completed an extensive seven-year review. The FEIS identifies potential impacts on the physical, biological and social environment from all phases of the proposed project, including construction, mine operation and closure. The document identifies long-term, cumulative effects from this project and other activities in the region, while considering a reasonable range of alternatives that meet the Agency's legal mandates.

The BLM on August 22, 2019, issued a positive decision on the Copper Flat Mine FEIS. With this decision, the BLM formally approved a mining alternative that aligns with plans used for the Company's state permit applications. With the EIS, the BLM determined that implementation of the approved alternative along with Company commitments to environmental monitoring and protection measures will not cause unnecessary or undue degradation of public lands and the Agency has determined the decision is consistent with other applicable legal requirements. In announcing the decision, the BLM recognized that the Copper Flat Mine will enhance economic development by creating jobs and enabling community growth.

In February 2020, the Company received verification from the U.S. Army Corps of Engineers ("Corps") that its plans for the Copper Flat Mine in Sierra County, NM, are authorized by Nationwide Permit 44 for Mining Activities as required by the Federal Water Pollution Control Act of 1972 (also known as the Clean Water Act). In addition to project designs, the Corps also considered impacts to threatened and endangered species and to historic properties before making its determination that the mine can proceed under Nationwide Permit 44. The pre- construction notice will be refreshed with the Corps for updated verification prior to commencing construction activities.

The NMED Air Quality New Source Review Permit 0365-M3, issued to NMCC for the Copper Flat Mine in 2013, remains in effect.

The NMED Groundwater Discharge Permit DP-1840, issued to NMCC for the Copper Flat Mine in December 2018, remains in effect. The issuance of Permit DP-1840 was appealed to New Mexico's Water Quality Control Commission ("WQCC"), which issued a decision to uphold the permit in September 2019. The WQCC decision was appealed to the NM Court of Appeals, which ruled to uphold the WQCC decision in May 2022. A petition seeking higher court review of the State Court of Appeals decision was denied by the NM Supreme Court in August 2022. With this decision, all appeals regarding the issuance of DP-1840 have been exhausted.

Work to obtain a mining permit from the New Mexico Mining and Minerals Division (MMD) is ongoing. Although the Copper Flat project site is brownfields, the Copper Flat Mine is being permitted as a new mine under Part 6 of the New Mexico Mining Act Regulations. The NMCC

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

permit application package, which includes construction, operation, reclamation and closure plans, has been submitted to MMD, was made the subject of an environmental evaluation approved by MMD, and was determined to be approvable by MMD in a July 13, 2018, letter to NMCC. NMCC is currently developing information to satisfy MMD's requirements for a permit, including holding sufficient water rights for the operation, reclamation, and offsetting of pumping effects on the river and finalization of an approved reclamation bond.

Other permits such as the OSE Dam Safety Permit for the mine's proposed Tailings Storage Facility and an EPA Multi-Sector General Permit for potential storm water discharges at the facility from the Environmental Protection Agency have been re-prioritized and will be addressed in the future once the Company's more immediate priorities are achieved.

External Relations

The Company values positive working relationships with local community members and is taking steps to keep the local public informed of the facts regarding the proposed operation. The Company uses social media, attendance at local events, newspaper articles and op-eds, presentations to local service clubs and governing bodies, public outreach meetings, and tours of the mine site to leaders and interested parties. The City of Elephant Butte, the Village of Williamsburg, and the Sierra County Commission, all representing communities near the proposed mine, have passed resolutions of support for Copper Flat. NMCC maintains an active website and presence on social media platforms such as Facebook (with over 2,000 followers to date), and the Company provides updates through these channels as developments occur.

Company efforts to secure sufficient water for the mine's planned operations and obtain the operating permits continue to be subject to challenge from Project opponents. The Company will continue to make appropriate and timely disclosures to these matters as developments occur.

Metal Prices and Feasibility Financial Summary

The economic update in 2020 of the Feasibility Study includes financial analysis on two metal price scenarios: 1) The base case using a long-term copper price of $3.25/lb; and 2) a price upside case using a long-term copper price of $3.60/lb. All other metal prices are held constant between the two scenarios.

The financial return table below is after tax, unlevered and with no escalation in commodity prices.

	NPV@0%	NPV@8%	IRR	Payback
	(US$000)	(US$000)	(%)	(Years)
Base Case	$545,000	$235,000	20.8	3.3
Upside Price Case	$711,000	$338,000	25.6	2.9

Base Case: Copper $3.25/lb, Moly $10.50/lb, Gold $1,300/oz; Silver $16.00/oz

Upside Sensitivity: Copper $3.60/lb, Moly $10.50/lb, Gold $1,300/oz; Silver $16.00/oz

In the Base Case financial model, approximately 79% of the payable metal value is attributable to copper, 11% to gold, 7% to molybdenum and 3% to silver.

Copper Flat is a past producing copper, gold, silver project with additional molybdenum resources, and project economics may be affected by fluctuations in the price of those commodities. The Company continues to monitor copper prices as the material commodity of the Copper Flat Project

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

while it works through the permitting process. The Company has posted on SEDAR a NI 43-101 Technical Report on the 2013 Feasibility Study and a second NI 43-101 Technical Report to update project economics and report on current project status. Average prices of copper, gold, molybdenum and silver for the period from the publication of the Study will be provided on a go- forward basis. The average monthly prices(1) for the current fiscal year are provided in the table below:

THEMAC Fiscal	Copper	Gold	Silver	Molybdenum
Year	(US$/lb)	(US$/oz)	(US$/oz)	(US$/lb)
Feasibility Study(2)	3.25	1,300	16.00	10.50
FY 2021 Average	3.62	1,850	25.44	10.67
FY 2022 Average	4.37	1,832	23.57	18.81
FY 2023 Average	3.76	1,831	21.79	22.84
Jul 2023	3.83	1,949	24.04	24.42
Aug 2023	3.79	1,920	23.44	24.81
Sep 2023	3.75	1,917	23.24	24.18
Oct 2023	3.60	1,913	22.32	20.93
Nov 2023	3.71	1,985	23.39	17.50
Dec 2023	3.81	2,029	23.99	18.05
Jan 2024	3.78	2,034	22.95	20.01
Feb 2024	3.77	2,023	22.69	19.76
Mar 2024	3.93	2,158	24.45	20.12
FY 2024 YTD	3.78	1,992	23.39	21.09
Average

1. Average Monthly Metal prices:
   cu & mo: lme.com/metals; au & ag: lbma.org.uk/prices-and-data
2. Feasibility Study Updated Prices:
   Base Case: Copper $3.25/lb, Moly $10.50/lb, Gold $1,300/oz and Silver $16.00/oz

Negative trends in metals prices can adversely impact the Company's ability to finance development of the Copper Flat Mine. The Company has reviewed the financial projections of the Study, as updated, and is satisfied that project NPV exceeds the carrying value of the Copper Flat Project value as presented in the statement of financial position in the Company's accompanying condensed consolidated interim financial statements.

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

Project Expenditures

To date, the Company's project development has been funded by loans from the Company's controlling shareholder and has not been generally affected by industry or other economic conditions. However, project finance may be affected by variable commodity prices as the project is advanced.

Expenditures on the Copper Flat Mine are as follows:

			March 31,	June 30,
			2024		2023
Deferred exploration expenditures, beginning of the period	$	47,012,896		$ 44,900,201
Asset retirement obligation			(126,373)		(115,253)
Engineering			236,038		200,520
Legal			527,656	278,633
Permitting			287,201	260,029
Site maintenance			264,869	261,268
Recovery of payables			(825,864)		-
Additions for the period			363,527	885,197
Cumulative foreign currency translation adjustment			1,147,008		1,227,498
Deferred exploration expenditures, end of the period		$	48,523,431		$ 47,012,896

The Company's efforts are driven by the water rights and permitting process at this time and are subject to third party timelines, such as regulatory agency review and decisions. The Company's progress toward its objectives has been estimated in the Permitting discussion above. When material changes occur, they will be communicated.

Material expenditures with respect to permitting relate to the pursuit of the permits as discussed above. This entails legal support, third party specialists in environmental assessments, additional biological assessment and other field work, cost recovery by the BLM and internal staff salaries and benefits.

Legal costs relate materially to legal fees for water rights and permitting activities detailed above, and mining claim/property rights activities.

Direct site expenses relate to salaries of personnel assigned to the mine site and general holding and maintenance costs for the mine site while the Company works through the permitting process.

Financings and Working Capital

Financings

The Company's subsidiary, NMCC, has a loan agreement (the "CAD Loan") with Tulla Resources Group Pty Ltd. ("Tulla"), a mining and natural resource-focused investment firm with a proven track record in the natural resource space. The CAD Loan has a maximum facility of $44,500,000 and bears interest at 20% per annum. The CAD Loan can be repaid by the Company at any time

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THEMAC RESOURCES GROUP LIMITED

Management Discussion & Analysis

For the nine months ended March 31, 2024

without penalty, is unsecured and is payable on demand. Tulla has not made demand for payment. The Company has drawn $43,838,077 against the CAD Loan facility.

NMCC has entered into an additional loan agreement with Tulla (the "USD Loan") denominated in US dollars. The USD Loan has a maximum facility of US$15,000,000 and bears interest at 20% per annum. The USD Loan is unsecured and is payable on demand. The Company has drawn US$14,223,924 against the USD Loan facility as at March 31, 2024.

The Company has provided a guarantee of the repayment of the CAD Loan and USD Loan (together, the "Tulla Loans") on behalf of NMCC.

Mr. Kevin Maloney, Chairman of THEMAC, is a director of Tulla. Refer to "Capital resources" and "Transactions with Related Parties" for additional discussion.

Working Capital

As at March 31, 2024, the Company had working capital deficiency of $174,155,361 (June 30, 2023 - $162,274,558). The significant decrease in working capital relates primarily to the accumulation of amounts due on the Loans.

As at March 31, 2024, the Company had prepaid expenses and deposits of $25,250 (June 30, 2023 - $12,448) consisting of advances to vendors and contractors, lease and rent deposits, and prepaid insurance.

As at March 31, 2024, the Company had trade and other payables of $593,691 (June 30, 2023 - $360,553) not including amounts to related parties of $2,350,153 (June 30, 2023 - $3,228,843). Amounts due to related parties consist of amounts due for expense reimbursement.

Fancher Agreement

The Company has acquired approximately 1,220 acres of land pursuant to the Fancher Agreement within the Copper Flat project area. The total purchase price of the land is US$2,500,000 (the "Purchase Price"). During the nine months ended March 31, 2024, the Company completed the payments against the Fancher Agreement settling the remaining debt obligations.

Debt

As at March 31, 2024, the Company had Loans payable of $171,376,421 (June 30, 2023 - $157,099,809), including interest, relates to the loan agreements with Tulla detailed in the accompanying condensed consolidated interim financial statements. The amounts are due on demand and accrue interest at a simple interest rate of 20% per annum. During the period ended March 31, 2024, the Company drew down $3,563,245 (US$2,637,981) on the USD Loan. The Company has provided a guarantee of the repayment of the Loans on behalf of NMCC.

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