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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

or

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          

Commission File Number: 000-14740

PREMIUM NICKEL RESOURCES LTD.

(Exact Name of Registrant as Specified in Its Charter)

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Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Shares

(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file Reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small Reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a Report on and attestation to its management’s assessment of the effectiveness of its internal control over financial Reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit Report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant's most recently completed second fiscal quarter was approximately US$115.2 million (converted from C$150.6 million based the daily exchange rate of US$1.00 = C$1.3240 (or C$1.00 = US$0.7553) as quoted by the Bank of Canada on June 30, 2023). Solely for purposes of this Annual Report, any Common Shares held by holders of 10% or more of the Company's issued and outstanding Common Shares and Common Shares held by executive officers and directors of the Registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.

As of June 27, 2024, there were 185,708,588 Common Shares issued and outstanding.

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PREMIUM NICKEL RESOURCES LTD.

Annual Report on Form 10-K

For the year ended December 31, 2023

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PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) for the Company (as defined herein), contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this Report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in this Report in greater detail under the heading “Risk Factors”. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date hereof. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless otherwise indicated, all references to “$”,”C$” and “dollars” in this Report refer to Canadian dollars, references to “US$” in this Report refer to United States dollars and references to “BWP” in this Report refer to Botswanan Pula. On December 31, 2023, the daily exchange rate (i) for one United States dollar expressed in Canadian dollars, as quoted by the Bank of Canada, was US$1.00 = C$1.3226 (or C$1.00 = US$0.7561), (ii) for one Botswanan Pula expressed in Canadian dollars, as quoted by Bloomberg LP, was BWP 1.00 = C$0.0990 (or C$1.00 = BWP 10.1049), and (iii) for one Botswanan Pula expressed in United States dollars, as quoted by Bloomberg LP, was BWP 1.00 = US$0.0747 (or US$1.00 = BWP 13.3834).

Item 1. BUSINESS.

Premium Nickel Resources Ltd. (TSXV: PNRL) (the “Company” or “PNRL”) was founded upon the closing of a reverse takeover transaction (the “RTO”) whereby Premium Nickel Resources Corporation (“PNRC”) and 1000178269 Ontario Inc. (“NAN Subco”), a wholly-owned subsidiary of North American Nickel Inc. (“NAN”), amalgamated by way of a triangular amalgamation (the “Amalgamation”) under the Business Corporations Act (Ontario) (the “OBCA”) on August 3, 2022. The common shares of the Company (the “Common Shares”) are now listed and posted for trading on the TSX Venture Exchange (the “Exchange”) under the symbol “PNRL”.

Prior to the RTO, PNRC was a private company existing under the OBCA. PNRC was incorporated to evaluate, acquire, improve and reopen, assuming economic feasibility, a combination of certain assets of BCL Limited (“BCL”) and Tati Nickel Mining Company (“TNMC”) that were in liquidation in Botswana.

In connection with the RTO, the Company was continued under the OBCA and changed its name from “North American Nickel Inc.” to “Premium Nickel Resources Ltd.”

Currently, the Company’s principal business activity is the exploration and evaluation of mineral properties in Botswana through its wholly-owned subsidiaries.

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The following corporate structure chart sets out details of the direct and indirect ownership of the principal subsidiaries of the Company:

Notes:

(1)Premium Nickel Group Proprietary Limited (“PNGPL”) owns the Selkirk Assets (as defined below).

(2)Premium Nickel Resources Proprietary Limited (“PNRPL”) owns the Selebi Assets (as defined below).

The Company has its head and registered office at One First Canadian Place, 100 King Street West, Suite 3400, Toronto, Ontario, Canada M5X 1A4.

The Company is a mineral exploration company focused on the discovery and advancement of high-quality nickel-copper-cobalt-platinum group metals (“Ni-Cu-Co-PGM”) resources. The principal assets of the Company are the Selebi and Selebi North nickel-copper-cobalt (“Ni-Cu-Co”) mines (together, the “Selebi Mines”) in Botswana and related infrastructure (together, the “Selebi Assets”), as well as the nickel, copper, cobalt, platinum-group elements (“Ni-Cu-Co-PGE”) Selkirk mine (the “Selkirk Mine”) in Botswana, together with associated infrastructure and four surrounding prospecting licenses (collectively, the “Selkirk Assets”).

PNRL’s global strategy is to identify the best Ni-Cu-Co-PGM projects and to acquire or invest in opportunities that have high prospectivity in mining friendly jurisdictions located in low-risk countries with rule-of-law, supportive foreign investment and resource acts. PNRL sources projects that fit a strict standard that comply with the Company’s values and principles which stand up against the highest acceptable industry standards. PNRL is committed to governance through transparency, accountability, and open communication within PNRL’s team and stakeholders.

The Company’s principal business activity is the exploration and evaluation of PNRL’s flagship asset, the Selebi Mines and, separately, the Company’s Selkirk Mine, each located in Botswana.

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The Selebi Mines and the Selkirk Mine are permitted with 10-year mining licences and benefit from significant local infrastructure. The Company’s flagship Selebi Mines include two operational shafts, the Selebi and Selebi North shafts, and related infrastructure such as rail, power and roads.

PNRL is headquartered in Toronto, Ontario, Canada and is publicly traded on the Exchange under the symbol “PNRL”.

Summary of Activities

PNRL concluded the 2022 exploration and drilling program at the Selebi Mines in January 2023. This initial Phase 1 drilling program was focused on an area at the western down dip edge of the 2016 historic estimates prepared in accordance with the South African Mineral Resource Committee (“SAMREC”) code. The primary objective of this first phase of surface drilling and borehole electromagnetics (“BHEM”) program at the Selebi Mines was to provide the Company with the relevant information to demonstrate that the mine horizons could be well mineralized beyond the limits of legacy production, and to support the transition to underground resource drilling at both the Selebi North and Selebi deposits.

The BHEM data acquired pursuant to the initial drilling program demonstrates that there are multiple sizable anomalies detected to the north and down plunge of the Selebi Mines infrastructure. Additionally, the results of the drilling, in conjunction with the BHEM program, have provided compelling evidence that the Selebi and Selebi North deposits are part of a large mineralized system, with multiple mineralized horizons present across the three-kilometre area between the Selebi historical mine workings to the south and the Selebi North historical mine workings to the north.

In 2023, PNRL commenced its Phase 2 drill program undertaking a combination of resource and continued exploration drilling at the Selebi Mines to demonstrate the size potential of the Selebi Mines mineral system, with the aim of establishing a current mineral resource estimate (“MRE”) on the Selebi Mines that will serve as the basis for future engineering studies. The resource drilling at the Selebi Mines commenced underground from the Selebi North infrastructure in August 2023 and is currently ongoing with three drills turning. Assay results for completed holes are released as they are received and confirmed by the Company. The Company sees significant potential for expanding the resource estimate from the 2016 historic estimate.

Presently, the Company’s primary objective is to prepare current mineral resource estimates in respect of the Selebi Mines expected in late Q2 or early Q3, 2024. Concurrently, PNRL plans to continue its work at the Selkirk Mine and its surrounding prospecting licences, which is the Company’s second asset in Botswana, located approximately 75 kilometres north of the Selebi Mines. The focus of this work will be to understand the legacy work done by previous owners, which had advanced the Selkirk Mine to a bankable feasibility study for re-development as an open pit mine. The Company plans to include drilling, geoscience and metallurgical work to support a mineral resource estimate in respect of the Selkirk Mine. In 2023, the Company completed test work to evaluate an alternative ore processing and tailings management strategy to those used in previous economic studies, the results of which are set forth in the Selkirk TRS (as defined herein).

For more information relating to exploration and development activities conducted on the Selebi Mines and Selkirk Mine, please see “Properties – Mining Properties – Selebi Mines” and “Properties – Mining Properties – Selkirk Mine” below.

Corporate Social Responsibility

PNRL is committed to conducting its business in a socially responsible and sustainable manner, with a focus on environmental stewardship, health and safety, community engagement and ethical conduct. The Company has established policies and procedures in its Code of Business Conduct and Ethics (the “Code”) to ensure compliance with applicable laws and regulations, as well as industry standards for responsible mining. PNRL recognizes the importance of stakeholder engagement and works closely with local communities, indigenous groups and other stakeholders to ensure their concerns and perspectives are heard and addressed.

Highlights and Key Developments in 2023 and 2024 (to Date):

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Assay results included:

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Exploration and Evaluation Activities

The following table outlines the key milestones, estimated timing and costs of each of the Company’s material projects, the Selebi Mines and the Selkirk Mine, based on the Company’s reasonable expectations and intended courses of action and current assumptions and judgement, with information based as on December 31, 2023.

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Notes:

Readers are cautioned that the above represents the opinions, assumptions and estimates of management considered reasonable at the date the statements are made and, are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those described above. See “Cautionary Note Regarding Forward-Looking Statements”.

Financial Capability

The Company is an exploration stage entity and has not yet achieved commercial production on any of its properties or profitable operations. The business of the Company entails significant risks. The recoverability of amounts shown for mineral property costs is dependent upon several factors including environmental risk, legal and political risk, the establishment of economically recoverable mineral reserves, confirmation of the Company’s interests in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete exploration and re-development and the ability of the Company to attain sufficient net cash flow from future profitable production or disposition proceeds.

As at December 31, 2023, the Company had working capital of $14,999,619 (FY 2022 – $6,024,026 negative working capital) and reported accumulated deficit of $104,566,816 (FY 2022 – $72,190,747).

As at December 31, 2023, the Company had $19,245,628 in available cash (FY 2022 – $5,162,991). There are no sources of operating cash flows. Given the Company’s current financial position and the ongoing exploration and evaluation expenditures, the Company will need to raise additional capital through the issuance of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and re-development of the mineral properties. Although the Company has been successful in its past fund-raising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future.

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Available Information

We file annual, quarterly, and current reports and other information with the SEC. You may read and copy any reports, statement or other information that we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (202) 551-8090 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the Internet site maintained by the SEC at http://www.sec.gov.

The Company’s website is www.premiumnickel.com. The Company’s website is not incorporated in this Report.

Item 1A. RISK FACTORS

An investment in our Common Shares involves a high degree of risk. You should carefully consider the following risk factors before deciding to invest in our Company. If any of the following risks actually occur, our business, financial condition, results of operations and prospects for growth would likely suffer. As a result, you may lose all or part of your investment in our Company.

The risks and uncertainties discussed in this Report are not the only ones facing the Company. In evaluating an investment in the Company, the risks and uncertainties described below should be carefully considered. If any such risks actually occur, the business, financial condition and/or liquidity and results of operations of the Company could be materially adversely affected. In this event, the value of the Common Shares could decline and shareholders could lose all or part of their investment.

Further, the Company’s view of risks is not static, and readers are cautioned that there can be no assurance that all risks to the Company, at any point in time, can be accurately identified, assessed as to significance or impact, managed or effectively controlled or mitigated. There can be additional new or elevated risks to the Company that are not described herein or in the Company’s public filings to date.

Economics of Developing Mineral Properties

Substantial expenses are required to establish mineral resources and mineral reserves through drilling, to develop metallurgical processes to extract metal from ore and to develop the mining and processing facilities and infrastructure at any site chosen for mining. No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operation or that the funds required for development can be obtained on a timely basis.

The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond the Company’s control and which cannot be predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. Depending on the price of minerals produced, the Company may determine that it is impractical to commence or continue commercial production.

Negative Operating Cash Flow and Reliance on Additional Financing to Maintain and Continue Operations

The Company has negative cash flow from operations. As a result of the expected expenditures to be incurred by the Company for the exploration and advancement of the Company’s material projects, the Company anticipates that negative operating cash flows will continue until one or both of the Company’s material projects enters commercial production (if at all). There can be no assurance that the Company will generate positive cash flow from operations in the future.

The Company will require additional capital in order to fund its future activities for its material projects and maintain and grow its operations. To the extent that the Company continues to have negative operating cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. Furthermore, additional financing, whether through the issue of additional equity and/or debt securities and/or project level debt, will be required to continue the development of the Company’s material projects and there is no assurance that additional capital or other types of financing will be available or that these financings will be on terms at least as favourable to the Company as those previously obtained, or at all. Should the Company require additional capital to continue its operations, failure to raise such capital could result in the Company going out of business.

From time to time, the Company may issue new shares, seek debt financing, dispose of assets, or enter into transactions to acquire assets or shares of other corporations. These transactions may be financed wholly or partially with debt, which may temporarily increase the Company’s debt levels above industry standards.

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Failure to obtain additional financing or to achieve profitability and positive operating cash flows will have a material adverse effect on its financial condition and results of operations.

Lack of Established Mineral Resource or Reserves

The Company is a mineral exploration and development company that is focused on the redevelopment of the previously producing nickel, copper and cobalt resource mines owned by the Company in the Republic of Botswana. To that end, the Company’s properties have no established mineral resources or mineral reserves at this time. While the Selebi project has historical mineral resource estimates, the Company has not yet published a current mineral resource estimate on the Selebi project. As such, these historical mineral resource estimates may not be reliable.

Further, there is no assurance that any of the Company’s projects can be mined profitably. Accordingly, it is not assured that the Company will realize any profits in the short to medium term, if ay all. Any profitability in the future from the business of the Company will be dependent upon development and commercially mining an economic deposit minerals, which in itself is subject to numerous risk factors.

The exploration and development of mineral deposits involves a high degree of financial risk over a significant period of time that even a combination of management’s careful evaluation, experience and knowledge may not eliminate. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to establish resources and reserves by drilling and to construct mining and processing facilities at a particular site. It is impossible to ensure that current work programs of the Company will result in profitable commercial mining operations. The profitability of the Company’s operations will be, in part, directly related to the cost and success of its work programs, which may be affected by a number of factors. Substantial expenditures are required to establish mineral reserves that are sufficient to support commercial mining operations.

Mineral Exploration and Development

The Company’s projects are in their exploration stages. The exploration of mineral deposits involves significant financial risks over a prolonged period of time, which may not be eliminated even through a combination of careful evaluation, experience and knowledge.

Development of the Company’s properties will occur only after obtaining satisfactory exploration results. Few properties which are explored are ultimately developed into economically viable operating mines. There is no assurance that the Company’s mineral exploration activities will result in the discovery of a body of commercial ore on its exploration properties. Several years may pass between the discovery and development of commercial mineable mineralized deposits.

Most exploration projects do not result in the discovery of commercially-mineralized deposits. The commercial viability of exploiting any precious or base-metal deposit is dependent on a number of factors including infrastructure and governmental regulation, in particular those relating to environment, taxes and royalties. No assurance can be given that minerals will be discovered of sufficient quality, size and grade on any of the Company’s properties to justify a commercial operation.

Exploration projects also face significant operational risks including but not limited to an inability to obtain access rights to properties, accidents, equipment breakdowns, labour disputes (including work stoppages and strikes), impact of health epidemics and other outbreaks of communicable diseases and other unanticipated interruptions.

Uninsured Risk and Hazards

Mining is capital intensive and subject to a number of risks and hazards, including environmental pollution, accidents or spills, industrial and transportation accidents, labour disputes, changes in the regulatory environment, natural phenomena (such as inclement weather conditions, earthquakes, pit wall failures and cave-ins) and encountering unusual or unexpected geological conditions. Such risks and hazards might impact the Company’s business. Consequently, many of the foregoing risks and hazards could result in damage to, or destruction of, the Company’s mineral properties or future processing facilities, personal injury or death, environmental damage, delays in or interruption of or cessation of their exploration or other activities, delay in or inability to receive required regulatory approvals, or costs, monetary losses and potential legal liability and adverse governmental action. The Company may be subject to liability or sustain loss for certain risks and hazards against which it does not or cannot insure or against which it may reasonably elect not to insure because of the cost. This lack of insurance coverage could result in material economic harm to the Company.

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Volatility of Common Share Price

The price of common shares may be affected by global macroeconomic developments and market perceptions of the attractiveness of particular industries and location of assets, which may increase the volatility of common share prices. The price of common shares will also be affected by the Company’s financial conditions or results of operations as reflected in its liquidity position and earnings reports.

Other factors unrelated to the Company’s operations and performance that may have an affect on the price of common shares include: the lessening in trading volume and general market interest in the Company’s securities may affect an investor’s ability to trade significant numbers of shares; the size of the Company’s public float may limit the ability of some institutions to invest in the Company’s securities; and a substantial decline in the price of common shares that persists for a significant period of time could cause the Company’s securities to be delisted further reducing market liquidity.

As a result of any of these factors, the market price of common shares at any given point in time may not accurately reflect the Company’s long-term value. Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. The Company may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management’s attention and resources.

Volatility of Commodity Prices

The advancement of the Company’s properties is dependent on the future prices of minerals and metals. As well, should any of the Company’s properties eventually enter commercial production, the Company’s profitability will be significantly affected by changes in the market prices of minerals and metals.

Base and precious metals prices are subject to volatile price movements, which can be material and occur over short periods of time and which are affected by numerous factors, all of which are beyond the Company’s control. Such factors include, but are not limited to, actual and expected macroeconomic and political conditions, interest and exchange rates, inflation or deflation, fluctuations in the value of the U.S. dollar and foreign currencies, global and regional supply and demand, speculative trading, the costs of and levels of base and precious metals production, the availability and costs of substitutes, investments by commodity funds and other actions of participants in the commodity markets. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems, the strength of and confidence in the U.S. dollar (the currency in which the prices of base and precious metals are generally quoted), and political developments. The effect of these factors on the prices of base and precious metals, and therefore the economic viability of any of the Company’s exploration projects, cannot be accurately determined. The prices of commodities have historically fluctuated widely, and future price declines could cause the development of (and any future commercial production from) the Company’s properties to be impracticable or uneconomical. As such, the Company may determine that it is not economically feasible to commence commercial production at some or all of its properties, which could have a material adverse impact on the Company’s financial condition and results of operations. In such a circumstance, the Company may also curtail or suspend some or all of its exploration and development activities.

Governmental Regulation

Operations, development and exploration on the Company’s properties will be affected to varying degrees by: (i) government regulations relating to such matters as environmental protection, health, safety and labor; (ii) mining law reform; (iii) restrictions on production, price controls, and tax increases; (iv) maintenance of claims; (v) tenure; and (vi) expropriation of property. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company’s operations. Changes in such regulation could result in additional expenses and capital expenditures, availability of capital, competition, reserve uncertainty, potential conflicts of interest, title risks, dilution, and restrictions and delays in operations, the extent of which cannot be predicted. The Company is at the exploration stages on all of its properties. Exploration on the Company’s properties requires responsible best-exploration practices to comply with the Company’s policies, government regulations, and maintenance of claims and tenure.

If any of the Company’s projects advance to the development stage, those operations will also be subject to various laws concerning development, production, taxes, labour standards, environmental protection, mine safety and other matters. In addition, new laws governing operations and activities of mining companies could have a material adverse impact on any project in the mine development stage that the Company may possess.

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Permits, Licenses and Approvals

The operations of the Company require licences and permits from various governmental authorities. The Company believes it holds or is in the process of obtaining all necessary licences and permits to carry on the activities which it is currently conducting under applicable laws and regulations. Such licences and permits are subject to changes in regulations and in various operating circumstances. There can be no guarantee that the Company will be able to obtain all necessary licences and permits that may be required to maintain its mining activities or advance its mineral properties. In addition, if the Company proceeds to production on any exploration property, it must obtain and comply with permits and licences which may contain specific conditions concerning operating procedures, water use, the discharge of various materials into or on land, air or water, waste disposal, spills, environmental studies, abandonment and restoration plans and financial assurances. There can be no assurance that the Company will be able to obtain such permits and licences or that it will be able to comply with any such conditions.

Environmental Regulations

All phases of the Company’s operations are subject to environmental regulation in the jurisdictions in which the Company operates. Environmental legislation is evolving in a manner which has been subject to stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed properties and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulations, if any, will not adversely affect the Company’s operations. The cost of compliance with changes in governmental regulations has the potential to preclude entirely the economic development of a property. The Company has or will, as applicable, adopt environmental practices designed to ensure that it will comply with or exceed all environmental regulations currently applicable to it.

Changes in tax legislation or accounting rules could affect the profitability of the Company

Changes to, or differing interpretation of, taxation laws in Canada, Botswana, or any of the countries in which the Company’s assets or relevant contracting parties are located, could result in some or all of the Company’s profits being subject to additional taxation. No assurance can be given that new taxation rules or accounting policies will not be enacted or that existing rules will not be applied in a manner which could result in the Company’s profits being subject to additional taxation or which could otherwise have a material adverse effect on the Company’s profitability, results of operations, financial condition and the trading price of the Company’s securities. In addition, the introduction of new tax rules or accounting policies, or changes to, or differing interpretations of, or application of, existing tax rules or accounting policies could make acquiring additional resource properties by the Company less attractive to counterparties. Such changes could adversely affect the Company’s ability to acquire new assets or make future investments.

Financial Risk

The Company is also exposed to risks relating to its financial instruments and foreign currency. It is anticipated that the Company will operate in Canada, Greenland and Botswana and undertake transactions denominated in foreign currencies such as United States dollars, Euros, Danish Krones and the Botswanan Pula, and consequently is exposed to exchange rate risks. The Company will also be exposed to equity price risk; the movements in individual equity prices or general movements in the level of the stock market may potentially have an adverse impact on the Company’s earnings. The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken.

Risks of Doing Business outside Canada

The Company’s material mineral projects are located in the Republic of Botswana. The Company’s anticipated operations outside North America could subject the Company to a variety additional risks that may negatively impact its business and operations including any of the following: changes in rules and regulations (including required royalties); failure of local parties to honour contractual relations; delays in obtaining or the inability to obtain necessary governmental permits; opposition to mining from environmental or other non-governmental organizations; limitations on foreign ownership; limitations on the repatriation of earnings; economic or tax policies; tariffs and trade barriers; regulations related to customs and import/export matters; longer payment cycles; tax issues; currency fluctuations and exchange controls; rates of inflations; challenges in collecting accounts receivable; cultural and language differences; employment regulations; crimes, strikes, riots, civil disturbances, terrorist attacks, and wars; and deterioration of political relations with Canada or other governments or sanctions imposed by Canada or other governments. There will also be currency exchange risks in connection with the operations of the Company’s foreign mineral assets, including the Selebi project and the Selkirk project.

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In addition, Botswana is considered an emerging market. Emerging market investments generally pose a greater degree of risk than investments in more mature market economies because the economies in the developing world are more susceptible to destabilization resulting from domestic and international developments. Further, the current, or a future government may adopt substantially different policies, take arbitrary action which might halt exploration or production, re-nationalize private assets or cancel contracts, or cancel mining or exploration rights, any of which could result in a material and adverse effect on the Company’s results of operations and financial condition. For details on the Company’s operations in Botswana, see “Operations in Emerging Markets”.

Dependent on Business and Technical Expertise of Management Team

The Company is dependent on the business and technical expertise of its management team. If it is unable to rely on this business and technical expertise, or if any of the expertise is inadequately performed, the business, financial condition and results of the operations of the Company could be materially adversely affected until such time as the expertise could be replaced.

Acquisition of Botswanan Assets

On January 31, 2022, PNRC, an indirect wholly-owned subsidiary of the Company, closed the acquisition of the Selebi project. However, pursuant to the terms of the acquisition, PNRC has to comply with certain milestone payments, which if not satisfied, will result in the Selebi project reverting to the BCL Liquidator. There are approximately US$55 million in contingent post- closing milestone payments due to the BCL Liquidator in connection with the Selebi project, with (A) US$25 million due upon the Selebi mining licence renewal date, and (B) another US$30 million due upon the earlier of the commissioning and start of production at the Selebi project or four years from the Selebi mining licence renewal date. The failure of PNRC to comply with all the post-closing covenants and contingent milestone payments relating to Selebi project (if and when those milestones are achieved), can materially adversely affect the business, operations and financial conditions of the Company and impact the market prices of the Common Shares. In addition, PNRL closed its purchase of the Selkirk project in August 2022.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

We, like other companies in our industry, face several cybersecurity risks in connection with our business. Our business strategy, results of operations, and financial condition have not, to date, been materially affected by risks from cybersecurity threats. During the reporting period, we have not experienced any material cyber incidents, nor have we experienced a series of immaterial incidents, which would require disclosure.

We intend to implement a formal cybersecurity program in the future. The program will be aimed at safeguarding the confidentiality, integrity, and availability of our essential systems and information, and will be designed to detect and mitigate risks from cybersecurity threats to our data and our systems. Central to our future cybersecurity efforts will be a robust incident response plan designed to address potential cyber incidents swiftly and effectively.

In designing and evaluating our cybersecurity program, we intend to adopt the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF 2.0”) as a guiding principle. It is important to clarify that our use of the NIST CSF 2.0 will be for guidance purposes to frame our risk identification, assessment and management processes and will not equate to compliance with any specific technical standards or requirements.

The key components of our future cybersecurity program are expected to include:

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Cybersecurity Governance

The governance of cybersecurity risks is a critical function of our Board which has a key role in the oversight of cybersecurity and related technology risks. The Board is tasked with monitoring the effectiveness of our cybersecurity risk management program as implemented by management.

The Board will receive regular updates from management on the state of cybersecurity risks facing the Company. This includes briefings on any significant cyber incidents and ongoing risk management efforts.

The responsibility for day-to-day management of cybersecurity risks lies with our management team, including the Chief Financial Officer and Chief Executive Officer. This team will be at the forefront of our cybersecurity initiatives, coordinating both internal and external resources to anticipate, identify, and mitigate cyber threats. Our approach will include regular updates from our third-party security expert consultant, leveraging intelligence from various sources, and utilizing advanced security tools to protect our digital environment.

Operations in Emerging Markets

The Company has its material properties and operating subsidiaries in Botswana. It is possible that operating in Botswana may expose the Company to a certain degree of political, economic and other risks and uncertainties. In conducting its operations in Botswana, the Company has, among other things: (i) engaged and maintained experienced management and technical teams located in Botswana and/or with extensive experience in operating properties in Africa; (ii) certain members of the board and management routinely visit the Company's Botswana properties; (iii) retained advisors and technical experts in Botswana including its local counsel, Bookbinder Business Law (“Bookbinder”); and (iv) generally maintained robust internal control over its foreign subsidiaries, all of which are more particularly described below.

Subsidiaries and Operations in Botswana

The Company's principal business activity in Botswana is the re-development of the Selebi Mines and the Selkirk Mine (together, the "Botswana Assets").

The establishment and development of PNGPL and PNRPL, each of which is a Botswanan entity, adds an additional regulatory framework within which the Company operates and is supplementary to the regulatory framework existing in Canada. The Company holds its interest in the Selebi Assets and the Selkirk Assets indirectly through its 100% owned subsidiaries, PNRPL and PNGPL respectively.

The Company's operating entities in Botswana are governed in accordance with applicable local laws and entity-wide governance principles. The directors and management of the Company's operating entities in Botswana are generally comprised of a majority of senior management employees and where required by local laws, local residents, who are generally longstanding local management level employees, or local corporate counsel. In addition, certain members of the Company's management have experience conducting business in Botswana, as detailed below, where the Company has maintained operations since 2021. Operating in Botswana requires greater internal controls and adherence to a regulatory framework which creates challenges in relation to decision-making, communication, and compliance. The Company has experienced management and has retained legal advisors and consultants to help facilitate adherence to regulatory requirements in order to meet this challenge.

Employees and Consultants

Upon the closing of the asset acquisition of the Selebi Mine, the Company started to develop its own local workforce. As of December 31, 2023, The Company had 193 employees at its Botswana operations, of which 177 were engaged in technical work including geology, drilling, geophysics, engineering and care and maintenance, and 16 were engaged in back-office support and logistics.

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The Company is committed to promoting a safe and healthy workplace environment, and actively participates in training programs to ensure employees are aware of proper safety and health procedures. The Company also provides resources and support for employees' mental and emotional wellbeing.

The Company values diversity and inclusivity and strives to create a workplace culture that respects and values all employees' backgrounds and identities.

The Company offers competitive compensation and benefits packages, including housing allowance, health insurance, and employee assistance programs. The employees receive performance evaluations and feedback regularly, and the Company encourages ongoing professional development and training.

The Company has implemented measures to protect employee data privacy and maintain confidentiality, in accordance with applicable laws and regulations.

Experienced Board and Management

In addition to their experience with the Company, the Company's board and management also has extensive experience operating in Africa, managing investments and projects in Botswana, Burkina Faso, Namibia, South-Africa, and the Democratic Republic of Congo. Furthermore, they bring diverse expertise in areas such as global strategy, finance, exploration, technology, and corporate development. Their collective experience spans several decades and includes successful ventures in both public and private sectors. Certain members of the board, management and senior officers of the Company have made trips to Botswana to gain a deeper understanding of the Company's operations and projects as well as to impart their experience and knowledge of the local business, culture, and practices to the other members of the board and officers.

The Company also relies on the expertise of its local Botswana-based key personnel, Mr. Borris Kamstra, Mr. Kneipe Setlhare, Mr. Karabo Monepe, and Mr. McDonald Raditladi, all of whom have extensive mining and government relations experience in Botswana. These individuals are in regular contact with management and attend regular management meetings. Below are details of their experience as it relates to the Company's Botswanan operations as well as the local context more broadly.

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The Company's technical, metallurgical and ESG teams (which includes, among others, Sharon Taylor, Peter Lightfoot, Gerry Katchen, Phillip Mackey and Mike Ounpuu, Siri Genik and Shamil Tumisang Agosi) also have significant experience with international projects, particularly in Africa (including experiences with BCL specifically or involved in projects in Botswana and Africa, in general).

Overall, the Company benefits from the collective wealth of expertise and experience in the Company's business and operations in Botswana of its board, management, locally based key personnel and technical teams.

Use of and Reliance on Experts and Local Advisors

The Company has retained Bookbinder, a Botswanan law firm to advise on various corporate and regulatory legal issues, including the Company's right to conduct business in Botswana, title verification over the Botswanan Assets, and has relied on advice from Bookbinder with respect to such matters. Additionally, the Company has retained G-Mining Services, a mining engineering and construction management company who is familiar and has been involved in the Selebi Mines since the Company acquired them, along with other engineering or geoscientific services firms, including SRK Consulting, SLR Consulting, DRA Global, SGS Mineral Services. The Company ensures that any such counsel or provider retained has their credentials vetted and referenced, with considerable diligence and adherence to local licences, professional associations, and regulators.

The Company's officers and directors benefit from the advice and guidance provided by its Botswanan legal advisor as well as key personnel based in Botswana of new developments in local mining regimes and new requirements that come into force from time to time, as they pertain to and affect the Company's business and operations in Botswana. Any material developments are subject to oversight and discussion at the Company's board level.

Language, Cultural Differences and Business Practices

English is the official language of Botswana, in which the Audit and Risk Management Committee (the “ARMC”) of the Company and the Company's external auditors are proficient. The most widely spoken language in Botswana is Setswana. The languages spoken by the board, management and technical team of the Company and its subsidiaries include Afrikaans, English, Setswana, French, Mandarin, Italian and Spanish.

The financial records of the Company and both PNGPL and PNRPL, existing under the laws of Botswana are maintained in English. The Company does not believe that any material language or cultural barriers exist.

Item 2. PROPERTIES.

Mining Properties

To determine material mining operations in properties with subpart 1300 of SEC Regulation S-K, management considered both quantitative and qualitative factors, assessed in the context of the Company’s overall business and financial condition. The Company concluded that, as of the date of the filing of this Report, the Company’s only material mining properties are the Selebi Mines and the Selkirk Mine. The Company will update its assessment of individually material mines on an annual basis.

The Company also holds an interest in certain exploration stage properties located in Southwest Greenland and Canada, however, the Company has determined that such properties are not independently material to the Company at this time. For more information, see below under the headings “Maniitsoq Nickel-Copper-PGM Project, Southwest Greenland” and “Canada Nickel Projects – Sudbury, Ontario”.

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Selebi Mines

The information that follows relating to the Selebi Mines is derived from, and in some instances is an extract from, the technical report summary entitled “Technical Report Summary on the Selebi Mines, Central District, Republic of Botswana” dated June 27, 2024 (with an effective date of May 31, 2024) prepared for the Company by SLR (as defined herein) (the “Selebi TRS”), prepared in compliance with the SEC’s Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K (the “SEC Mining Rules”). Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Selebi TRS, which has been filed as Exhibit 96.1 to this Report. The Selebi TRS is incorporated herein by reference and made a part hereof. In the event that we determine that any modifying factors, estimates and other scientific and technical information in the report materially change, we may update or file a new technical report in the future. The Selebi Mines is an exploration stage property.

Pursuant to Item 1302(b)(5) of Regulation S-K (17 C.F.R. §229.1302(b)(5)), the Company states that the Selebi TRS was prepared by SLR Consulting (Canada) Ltd. The qualified persons of SLR meet the qualifications specified under the definition of “qualified person” under Item 1300 of Regulation S-K.

Property Description and Location

The Selebi Mines are located in Botswana approximately 150 km southeast of the city of Francistown, and 410 km northeast of the national capital Gaborone. The Selebi Mines are readily accessed via paved and gravel roads from the town of Selebi-Phikwe, located just north of the mining licence. With a population of approximately 52,000, the town is accessed via a well-maintained paved road that branches due east from the major A1 highway at the town of Serule, 57 km from the Selebi Mines.

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The Selebi Mines infrastructure includes two mines, currently on care and maintenance, Selebi (#2 Shaft) and Selebi North (#4 Shaft), and associated surface infrastructure.

Land Tenure

The Selebi Mines consists of a single mining licence covering an area of 11,504 ha. The mining licence is centred approximately at 22°03’00”S and 27°47’00”E.

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Mining licence 2022/1L was granted to PNRPL on January 31, 2022 over the Selebi Mines deposits discovered under mining licence 4/72. The original licence which had been granted to BCL on March 7, 1972, covered both Selebi and Phikwe project areas, was amended several times and renewed once, and was set to expire on March 6, 2022. The new mining licence is limited to the Selebi and Selebi North deposits and their surrounding areas and expires May 26, 2032.

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History

Exploration in the Selebi Mines area was initiated in 1959 by Bamangwato Concessions Limited (Bamangwato) and included soil geochemistry, geological mapping, trenching, and diamond drilling over the then combined Selebi-Phikwe area. The Selebi and Phikwe discoveries were made in 1963 and 1967, respectively and a single mining lease was granted to Bamangwato in 1967 covering both areas.

Bamangwato changed its name to BCL in 1977 and operated the combined Selebi-Phikwe project from 1970 until its closure in 2016. Nickel and copper ore was mined from an open pit at Phikwe (1971 to 1980), as well as four distinct underground production areas namely Phikwe (1981 to 2016), Southeast Extension (at Phikwe, 1997 to 2016), Selebi North (1990 to 2016) and Selebi (1980 to 2016). Head grades declined from 2010 to 2015 and in October 2016 BCL was placed into provisional liquidation and all its operations put under care and maintenance.

PNRC submitted an indicative offer to the BCL Liquidator in June 2020 for the purchase of select assets owned by BCL. On March 24, 2021, PNRC signed an exclusivity MOU with the BCL Liquidator that would govern a six-month exclusivity period to complete additional due diligence and related purchase agreements on the Botswana Ni-Cu-Co assets formerly operated by BCL.

The Selebi Mines was acquired by PNRC, a private corporation formed under the laws of the Province of Ontario, on January 31, 2022 through its wholly-owned indirect subsidiary, PNRPL.

On September 28, 2021, PNRC announced that it had executed the definitive asset purchase agreement (the Selebi Purchase Agreement) with the Liquidator to acquire the Selebi Mines including the related infrastructure and equipment formerly operated by BCL. The acquisition closed on January 31, 2022, transferring the Selebi Mines and new Selebi mining lease to PNRC.

The current mining licence is smaller and covers the Selebi Mines and their surrounding areas only. The Selebi Mines were originally covered under mining licence 4/72 which also covered the Phikwe mines and associated infrastructure, including the concentrator and smelter plants used to process ore from both Selebi and Phikwe.

Geological Setting, Mineralization and Deposit

The eastern portion of Botswana forms part of the Limpopo Mobile Belt (LMB) which represents a deep crustal section through an orogenic province between the Kaapvaal and Zimbabwe Cratons.

The Selebi Mines occurs in highly deformed and metamorphosed Archean gneisses near the north margin of the central zone (CZ) of the LMB. The CZ region is characterized by complex structural fold patterns accompanied by regional and cataclastic metamorphism with grades ranging from amphibolite to granulite facies and cataclastic tectonites.

The deposits in the Selebi Mines area are categorized as ortho-magmatic nickel-copper sulphide-type deposits. They are hosted within amphibolite and understood as a tectono-metamorphically modified tholeiitic magma parents with an immiscible sulphide melt which has undergone all the phases of deformation that have affected the enclosing gneisses. They form part of the Selebi-Phikwe belt of intrusions that also contain the Phikwe, Dikoloti, Lentswe, and Phokoje deposits.

All mineralization horizons pinch and swell, are conformable to the gneissic foliation, and are hosted within or at the hanging wall contact of amphibolite with the gneissic country rocks. Mineralization horizons range in thickness from very thin to over 20 m thick and are commonly one to three metres thick (deposit dependent). Orientation follows country rock foliation, and the zones can dip moderately to steeply, and can extend from 150 m to over 2,000 m.

The principal sulphide minerals are pyrrhotite, chalcopyrite, and pentlandite which occur in massive, semi-massive, and disseminated form. Pyrite occurs as localized overgrowth. Magnetite occurs as rounded inclusions in massive sulphides and as later overgrowths.

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Exploration

Exploration work completed at the Selebi Mines from 2021 to May 2024 consisted of the sourcing and digitization of existing historical information, confirming collar and down hole location information of selected historical holes, and drilling. PNRL also completed gyro, electromagnetic surveys (BHEM), televiewer, and downhole physical property surveys on selected high priority historical and recent exploration holes. A focussed structural model over a portion of the Selebi deposit was developed by SRK Consulting Ltd. (SRK), and a 3D model of mineralization for use in targeting was created at Selebi North by SLR.

Early due diligence work in 2019 highlighted an off-hole BHEM anomaly in a 2010 drill hole located down-plunge of the Selebi deposit. The collection of new gyro data confirmed that the off-hole anomaly lies at the downdip edge of the modelled Selebi mineralization which was intersected by a drill hole which reported an estimated true thickness interval of 38.5 m averaging 1.58% Ni and 2.44% Cu, including 21.4 m of 2.34% Ni and 3.39% Cu. This drill hole intersection is located approximately 300 m down plunge of the existing mine workings and approximately 1,200 m below surface and provides support to the potential establishment of mineral resources at depth at the Selebi deposit.

Selebi North mineralization is also open at depth, and additional potential to establish mineral resources occurs there. Given the basin structure, it is possible that the Selebi North mineralization extends at depth and flattens to the south, while also potentially extending southward.

Mineral Processing and Metallurgical Testing

The historical BCL operations consisted of an integrated mining, concentrating, and smelting complex which operated for over 40 years over the Selebi Phikwe project area. The smelter processed Selebi and Phikwe concentrates and toll treated nickel concentrates received from the Nkomati Nickel Mine (a joint venture (JV) between Norilsk Nickel Africa Pty. Ltd. and African Rainbow Minerals) and the Phoenix Mine (TNMC, later a subsidiary of BCL). The concentrator plant and smelter were placed on care and maintenance in 2016 and are located adjacent to the Selebi Mines at the historical Phikwe Mine.

PNRL intends to use pre-concentration methods to separate the minerals from waste materials to produce a mill feed and flotation to produce a concentrate for commercial sale, or for further refining, and does not plan to restart the existing concentrator or smelter. Concentrate options will be investigated in the next phase of work and include a bulk concentrate and separate nickel and copper concentrates. In 2021, PNRL carried out due diligence work that included metallurgical sampling and testing. Metallurgical study programs were carried out by SGS Canada Inc. (SGS) in Lakefield, Ontario in 2021 and 2023 for separate copper and nickel concentrate production at a conceptual level. The conceptual process flowsheet developed by SGS includes the key unit operations of crushing, grinding, and flotation.

PNRL and DRA collaborated in the analyses of historical data collected on key flotation parameters observed in the production of separate nickel and copper concentrates, such as metal upgrade ratios and mass pull, to simulate estimated metal grades and recoveries for bulk concentrate.

Selkirk Mine

The information that follows relating to the Selkirk Mine is derived from, and in some instances is an extract from, the technical report summary entitled “Technical Report Summary on the Selkirk Nickel Project, North East District, Republic of Botswana” dated June 27, 2024 (with an effective date of May 31, 2024) prepared for the Company by SLR (the “Selkirk TRS”), prepared in compliance with the SEC Mining Rules. Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Selkirk TRS, which has been filed as Exhibit 96.1 to this Report. The Selkirk TRS is incorporated herein by reference and made a part hereof. In the event that we determine that any modifying factors, estimates and other scientific and technical information in the report materially change, we may update or file a new technical report in the future. The Selkirk Mine is an exploration stage property.

Pursuant to Item 1302(b)(5) of Regulation S-K (17 C.F.R. §229.1302(b)(5)), the Company states that the Selkirk TRS was prepared by SLR. The qualified persons of SLR meet the qualifications specified under the definition of “qualified person” under Item 1300 of Regulation S-K.

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Property Description and Location

The Selkirk Mine is located in the northeast of Botswana approximately 28 km southeast of the city of Francistown, and 450 km northeast of the national capital Gaborone.

The Selkirk Mine is accessed year-round via paved and gravel roads from Gaborone and Francistown. The Selkirk Mine infrastructure includes relict surface infrastructure supporting the historical underground mine, and the original decline. The Selkirk Mine is quite flat, and beyond the mine footprint is covered in grassland with dispersed and clusters of trees typical of a tree savanna biome.

Land Tenure

The Selkirk Mine consists of a single mining licence covering an area of 1,458 ha (14.58 km²) and four prospecting licences covering a total of 12,670 ha (126.7 km²). The mining licence, 2022/7L, is centred approximately at 21°19’13” S and 27°44’17” E and is held by PNGPL, a subsidiary of PNRL. The mining licence was renewed for ten years commencing on May 27, 2022, ending on May 26, 2032. The four prospecting licences (PL050/2010, PL051/2010, PL210/2010, and PL071/2011) are valid for a period of two years effective from October 1, 2022.

History

Anglo American Corporation of South Africa (AAC) established the presence of nickel and copper occurrences at the sites of the ancient copper workings in the area in 1929. Significant exploration started in the mid-1960s by the Tati Territory Exploration Company (TTE). The first exploration campaigns included soil sampling, trench sampling, ground geophysics, and diamond drilling. At least four exploration and mining companies have worked on the Selkirk Mine since the 1960s and extensive work has been done to characterize the economic potential of the property.

The Selkirk underground mine was operated from 1989 to 2002 by TNMC, a company created specifically to exploit the deposit. More than 1 Mt of material grading 2.6% Ni and 1.6% Cu was extracted from a semi-elliptical deposit of massive sulphide up to 20 m thick. Since 2003, extensive exploration has been completed to characterize the lower-grade/higher-tonnage halo of disseminated sulphides both surrounding and down plunge (south) of the mined-out high-grade mineralization. Exploration and conceptual studies were conducted by Lion Ore Mining Pty Ltd (Lion Ore) and subsequently by Norilsk Nickel Group of Companies (Norilsk Nickel) through their ownership in TNMC.

Geological Setting, Mineralization, and Deposit

The Selkirk Mine lies within the Tati granite-greenstone belt of the Zimbabwe Craton. The mineralized body of the Selkirk deposit is hosted within the Selkirk Formation (>1 km thick) which consists mainly of dacitic and rhyolitic volcaniclastic rocks and minor amounts of mafic volcanic rocks, quartzites, and quartz sericite schists. The Selkirk Formation hosts the Phoenix, Selkirk, and Tekwane meta-gabbronoritic intrusions and the Sikukwe meta-peridotite intrusion and the area around the project hosts intrusive magmatic nickel-copper-platinum group element (Ni-Cu-(PGE)) sulphide deposits, namely the Phoenix deposit, as well as the Tekwane and Cinderella exploration prospects.

Two styles of mineralization are found at Selkirk: (1) massive sulphides (mined-out), located within the metagabbro intrusion as well as small, massive sulphide accumulations at the base of the taxitic metagabbro intrusive, and (2) matrix and disseminated sulphides as a halo surrounding and down-dip of the mined-out massive sulphide body. The disseminated zone that once included the mined-out sulphide lens, lies 50 m to 100 m above the basal contact of the footwall quartz diorite and mimics the footwall contact. Currently available drilling suggests that the shallow, previously mined, massive sulphide lens was synformal in shape and measured up to 70 m to 90 m wide, averaged 20 m thick, and had a plunge extent of 200 m.

The disseminated sulphide mineralization surrounding the massive sulphides is also synformal in shape, averages 120 m wide and 100 m to 150 m thick and plunges shallowly to the south at 20°. It is defined from surface over a distance of 900 m and remains open at depth. Mineralization consists of pentlandite, pyrrhotite, chalcopyrite and pyrite. At least three generations of dykes crosscut the mineralized metagabbro. Numerous faults traversing the deposit have been described in surface and underground mapping, none of which present significant displacement at the deposit scale. The Selkirk metagabbro host has been attributed an age of 2.7 Ga.

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Exploration

Exploration work completed by PNRL to date has consisted of the sourcing and digitization of existing historical information, confirming collar location information on selected historical holes, re-logging selected drill core, sampling mineralized drill core found untouched on surface, and submitting a number of samples for proof-of-concept metallurgical testing. PNRL has also initiated an internal study into the feasibility of the open pit concept and is exploring conceptually with limiting test information several different processing options. Work to validate the existing drill core information through field duplicate and pulp duplicate re-analysis in ongoing with the intention of reporting an updated Mineral Resource estimate at the Selkirk Mine in the future.

Mineral Processing and Metallurgical Testing

PNRL intends to use flotation to produce a concentrate for commercial sale or for further refining. Concentrate options will be investigated in the next phase of work and include a bulk concentrate and separate nickel and copper concentrates. Metallurgical study programs were carried out by SGS Canada Inc. (SGS) in Lakefield, Ontario in 2021 and 2023 for separate copper and nickel concentrate production at a conceptual level. The conceptual process flowsheet developed by SGS includes the key unit operations of crushing, grinding, and flotation.

PNRL analyzed select SGS test results on key flotation parameters observed in the production of separate nickel and copper concentrates to simulate estimated metal grades and recoveries for bulk concentrate.

Infrastructure

The area is in a rural district and the available infrastructure is minimal. Strategic services (e.g., electricity and water supplies) could be provided by the Botswana Power Corporation and from existing governmental water pipelines within the Francistown Road Reserve, and potable water could be sourced on site from boreholes. A railway line crosses the western margin of the Selkirk area.

Maniitsoq Nickel-Copper-PGM Project, Southwest Greenland

The Maniitsoq project is centred on the 75 kilometre by 15 kilometre Greenland Norite Belt which hosts numerous high-grade nickel-copper sulphide occurrences associated with mafic and ultramafic intrusions. The property is located 100 kilometres north of Nuuk, the capital of Greenland, and is accessible year-round either by helicopter or by boat from Nuuk or Maniitsoq, the latter located on the coast approximately 15 kilometres to the west. The Company acquired the Maniitsoq project in 2011 due to its potential for the discovery of significant magmatic sulfide deposits in a camp-scale belt. The Maniitsoq property consists of three exploration licences, Sulussagut No. 2011/54 and Ininngui No. 2012/28 comprising 2,689 and 296 square kilometres, respectively, and the Carbonatite property No. 2018/21 (63 square kilometres), and a prospecting licence, No. 2020/05, for West Greenland. The Greenland properties have no mineral resources or reserves.

The three licences, 2011/54, 2012/28 and 2018/21, have sufficient accrued work credits to keep the property in good standing until December 2023, at which time a reduction in the size of the property will be required. Licence 2012/28 expired on December 31, 2023, however the government of Greenland had extended the renewal and reduction deadline to March 22, 2024. An application for renewal and reduction of exploration licence 2012/28 was submitted and the Company has recently received the signed renewal document. The reduction of MEL 2011/54 from 265 km2 to 110.9 km2 has no material impact on potential for discovery of an economic deposit as all mineral prospects are retained. The reduction of 2011/54 has not yet been submitted. The prospecting licence is in effect until December 31, 2024.

Exploration Activities

No exploration work was carried out in Greenland in 2023. Remaining targets were reviewed and prioritized in preparation for a potential field program in 2023, which was deferred. A quote was received in Q2 2023 for computer assisted target generation.

Prior to the closing of the RTO, the Maniitsoq property had a book value of $36,692,516. As the transaction is accounted for as a capital transaction with North American Nickel Inc. (as the Company was then named) being identified as the accounting acquiree, the net assets of NAN were measured at fair value. Upon the completion of the RTO, the Company switched its focus to the re-development of the Botswana assets with the result that limited resources (management time, capital, etc.) have since been allocated or will be allocated to the Greenland assets. Management believes that facts and circumstances exist to suggest that the carrying amount of the Maniitsoq property at August 3, 2022 exceeds its fair value. As a result, the carrying value of the Greenland assets was reduced to nil as of August 3, 2022, for a total impairment of $36,692,516.

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During year ended December 31, 2023, the Company incurred $66,486 in exploration expenditures on the Maniitsoq property, which is comprised of the Sulussugut, Ininngui, Carbonatite and 2020/05 licences. These expenditures were recorded as general exploration expense in the consolidated statements of comprehensive loss. No material expenditures or activities are contemplated on the Maniitsoq property at this time.

Canadian Nickel Projects - Sudbury, Ontario

Post Creek Property

The Post Creek property is located 35 kilometres east of Sudbury in Norman, Parkin, Alymer and Rathburn townships and consists of 73 unpatented mining claim cells in two separate blocks, covering a total area of 912 hectares held by the Company. The Company acquired the property through an option agreement in April 2010, which was subsequently amended in March 2013. As at the date of this Report, the Company holds a 100% interest in the Post Creek property and is obligated to pay advances on a net smelter return of $10,000 per annum, which will be deducted from any payments to be made under the net smelter return.

The Post Creek property lies adjacent to the Whistle Offset Dyke Structure which hosts the past–producing Whistle Offset and Podolsky Cu-Ni-PGM mines. Post Creek lies along an interpreted northeast extension of the corridor containing the Whistle Offset Dyke and Footwall deposits and accounts for a significant portion of all ore mined in the Sudbury nickel district and, as such, represents favourable exploration targets. Key lithologies are Quartz Diorite and metabreccia related to offset dykes and Sudbury Breccia associated with Footwall rocks of the Sudbury Igneous Complex which both represent potential controls on mineralization.

No exploration work was completed in 2023 on the Post Creek Property. The claims have sufficient work credits to keep them in good standing until 2025. No material expenditures or activities are contemplated on the Post Creek property at this time.

Halcyon Property

The Halcyon property is located 35 kilometres northeast of Sudbury in the Parkin and Aylmer townships and consists of 63 unpatented mining cells for a total of 864 hectares. Halcyon is adjacent to the Post Creek property and is approximately 2 kilometres north of the producing Podolsky Mine of FNX Mining. The property was acquired through an option agreement and as at the date of this Report, the Company holds a 100% interest in the Halcyon property and is obligated to pay advances on a net smelter return of $8,000 per annum, which will be deducted from any payments to be made under the net smelter return.

No exploration work was completed on the Halcyon Property in 2023. The claims are in good standing through 2025. No material expenditures or activities are contemplated on the Halcyon property at this time.

Quetico Property

The Quetico property is located within the Thunder Bay Mining District of Ontario and consists of 99 claim cells in two blocks. Cells were acquired to assess: (a) the Quetico Sub-province corridor, which hosts intrusions with Ni-Cu-Co-PGM mineralization related to a late 2690 Ma Archean magmatic event; and (b) the Neoproterozoic (1100 Ma MCR) magmatic event and related intrusions.

No work was carried out on the Property in 2023. Of the 99 claims, 46 claims expired in April 2023, with the remaining in good standing until April 2024. These claims will be allowed to expire on April 26, 2024.

Just prior to the finalization of the RTO, the Canadian assets had a book value of $2,535,873. However, this amount has been completely written off as of August 3, 2022, which coincided with the closing date of the RTO. This decision was made due to the Company’s shift in focus towards the re-development of the Botswana assets. Consequently, the allocation of management time and capital resources to the Canadian assets has been limited, both in the past and moving forward. During the period from August 3 to December 31, 2022, the Company incurred an additional $21,739 in exploration and licence related expenditures for the Canadian properties and the expenditures were recorded as general exploration expense in the consolidated statements of comprehensive loss.

During the year ended December 31, 2023, the Company incurred $51,513 in acquisition and exploration related costs related to the Post Creek, Halcyon and Quetico properties. The costs were recorded as general exploration expense in the consolidated statements of comprehensive loss. No material expenditures or activities are contemplated on the Quetico property at this time.

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Item 3. LEGAL PROCEEDINGS.

We have no knowledge of any material, active, pending or threatened legal, administrative or judicial proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

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Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

The Common Shares are listed and posted for trading on the Exchange under the symbol “PNRL”. In addition, the Common Shares are currently quoted on the OTCQX Best Market under the symbol “PNRLF.”

Holders

As of June 27, 2024, there were 361 holders of record of Common Shares, based on information provided by the Company’s transfer agent. The holders of Common Shares are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of Common Shares have no preemptive rights and no right to convert their Common Shares into any other securities. There are no redemption or sinking fund provisions applicable to the Common Shares.

Dividends

We have not paid, and do not in the foreseeable future intend to pay, any dividends on the Common Shares. The declaration and payment of future dividends to holders of our Common Shares will be at the discretion of the Board and will depend upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors deemed relevant by the Board.

Recent Sales of Unregistered Securities

The following tables outline the number of Common Shares and securities that are convertible into Common Shares issued by the Company during the year ended December 31, 2023.

Common Shares

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Notes:

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Convertible Securities

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Notes:

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

There was no repurchase activity by the Company in respect of Common Shares during the year ended December 31, 2023.

Certain Canadian Federal Income Tax Considerations for U.S. Residents

The following general summary describes the principal Canadian federal income tax considerations under the Income Tax Act (Canada) (the “Tax Act”) generally applicable to a holder who is a beneficial owner of our Common Shares and who, at all relevant times, (i) is not, and is not deemed to be, resident in Canada for purposes of the Tax Act and any applicable income tax treaty or convention, (ii) is resident in the United States for purposes of the Treaty (as defined below) and is fully entitled to all benefits of the Treaty, (iii) deals at arm’s length with us, and is not affiliated with us, for purposes of the Tax Act, (iv) holds our Common Shares as capital property for purposes of the Tax Act, and (v) does not use or hold, and is not deemed to use or hold, our Common Shares in the course of carrying on, or otherwise in connection with, a business in Canada for purposes of the Tax Act (a “U.S. Resident Holder”). Special rules, which are not discussed in this summary, may apply to a U.S. Resident Holder that is an insurer carrying on an insurance business in Canada and elsewhere or an “authorized foreign bank” (as defined in the Tax Act). Generally, our Common Shares will be considered to be capital property to a holder provided that the holder does not use or hold such shares in the course of carrying on a business of trading or dealing in securities and such holder has not acquired them or been deemed to have acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary is based upon the current provisions of the Tax Act and the regulations thereunder (the “Regulations”) in force as of the date hereof, our understanding of the administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) published in writing by the CRA prior to the date hereof, and the Canada-United States Tax Convention as amended by the Protocols thereto prior to the date hereof (the “Treaty”). This summary also takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that all such Tax Proposals will be enacted in their present form. However, no assurances can be given that the Tax Proposals will be enacted in the form proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences applicable to a holder of our Common Shares and, except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.

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This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of our Common Shares, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of our Common Shares is made. Accordingly, holders and prospective holders of our Common Shares should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our Common Shares in their particular circumstances.

Currency

For the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of our Common Shares (including dividends, adjusted cost base and proceeds of disposition) must be expressed in Canadian dollars based on the rate quoted by the Bank of Canada for the applicable day or such other rate of exchange that is acceptable to the Canada Revenue Agency.

Dividends

Dividends paid or credited, or deemed to be paid or credited, on our Common Shares to a U.S. Resident Holder will be subject to Canadian withholding tax. Under the Tax Act, the rate of Canadian withholding tax is 25% of the gross amount of such dividends, which rate is subject to reduction under the Treaty. Under the Treaty, the rate of Canadian withholding tax on dividends paid or credited, or deemed to be paid or credited, on our Common Shares to a U.S. Resident Holder who is the beneficial owner of the dividends is reduced to 15% or, in the case of a U.S. Resident Holder that is the beneficial owner of the dividends and is a corporation that beneficially owns at least 10% of our voting shares, the rate is reduced to 5%. U.S. Resident Holders who may be eligible for a reduced rate of withholding tax on dividends pursuant to the Treaty should consult with their own tax advisors with respect to taking all appropriate steps in this regard.

Disposition of Common Shares

A U.S. Resident Holder generally will not be subject to tax under the Tax Act in respect of any capital gain realized on a disposition or deemed disposition of a Common Share unless the Common Share constitutes (or is deemed to constitute) “taxable Canadian property” (as defined in the Tax Act) of the U.S. Resident Holder at the time of disposition and the U.S. Resident Holder is not entitled to relief under the Treaty.

Generally, a Common Share will not constitute “taxable Canadian property” of a U.S. Resident Holder at a particular time provided that the Common Share is listed on a “designated stock exchange” (as defined in the Tax Act, which currently includes Tiers 1 and 2 of the Exchange) at that time, unless, at any time during the 60-month period that ends at that time, both: (i) one or any combination of (a) the U.S. Resident Holder, (b) persons with whom the U.S. Resident Holder did not deal at arm’s length for purposes of the Tax Act and (c) partnerships in which the U.S. Resident Holder or a person described in (b) holds a membership interest (directly or indirectly through one or more partnerships), own 25% or more of the issued shares of any class or series of our Company, and (ii) more than 50% of the fair market value of the Common Share was derived directly or indirectly from one or any combination of: (a) real or immovable property situated in Canada, (b) “timber resource properties” (as defined in the Tax Act), (c) “Canadian resource properties” (as defined in the Tax Act) or (d) options in respect of, or interests in, or for civil law rights in, any of the foregoing, whether or not the property exists. If the Common Shares are not listed on any designated stock exchange, the Common Shares would generally be “taxable Canadian property” of a U.S. Resident Holder at any time if, at any particular time during the 60-month period that ends at that time, the condition described in (ii) above is met. Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, a Common Share may be deemed to be “taxable Canadian property”.

In the case of a U.S. Resident Holder for whom our Common Shares constitute “taxable Canadian property”, no Canadian taxes will generally be payable on a capital gain realized on the disposition or deemed disposition of such shares by reason of the Treaty, unless the value of such shares is derived principally from “real property situated in Canada” for purposes of the Treaty at the time of the disposition. U.S. Resident Holders for whom Common Shares may constitute “taxable Canadian property” should consult their own tax advisor as to the Canadian federal income tax consequences of the disposition, including potential compliance requirements and withholding under Section 116 of the Tax Act.

Item 6. [RESERVED].

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report. This discussion and analysis below include forward-looking statements that are subject to risks, uncertainties and other factors described in the “Risk Factors” section that could cause actual results could differ materially from those anticipated in these forward- looking statements as a result of various factors. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We caution you to read the “Cautionary Note Regarding Forward-Looking Statements” section of this Report.

The following management’s discussion and analysis (this “MD&A”) should be read in conjunction with the audited consolidated financial statements of the Company and accompanying notes thereto for the fiscal years ended December 31, 2023 and 2022 (the “Annual Financial Statements”). This MD&A is intended to assist the reader to assess material changes in the financial condition of the Company during the year ended December 31, 2023, and the results of operations of the Company for the twelve-month periods ended December 31, 2023 (“FY 2023”) and December 31, 2022 (“FY 2022”). The Annual Financial Statements and the financial information contained in this MD&A were prepared in accordance with US GAAP.

In this MD&A, unless the context otherwise requires, references to the Company or PNRL refer to Premium Nickel Resources Ltd. and its consolidated subsidiaries. All monetary amounts in the discussion are expressed in Canadian dollars unless otherwise indicated.

This MD&A contains forward-looking information within the meaning of applicable securities laws. All forward-looking information, including information not specifically identified herein, is made subject to cautionary language in this MD&A. Readers are cautioned to refer to the disclosure in this Report under the heading “Cautionary Note Regarding Forward-Looking Statements” when reading any forward-looking information.

Selected Financial Information

The following amounts are derived from the Company’s consolidated financial statements prepared under US GAAP.

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Net loss of $32,376,069 for FY 2023 was higher by $5,069,719 compared to a loss of $27,306,350 for FY 2022. The greater loss for FY 2023 was due to an increase in general and administration expenses fees relating to the expansion of personnel within the management team and operation team in Botswana as well as increase in depreciation, partially offset by a decrease in share-based payment.

Total Assets

Total assets as at December 31, 2023 increased by a net amount of $16,812,562 from the end of FY 2022. The change is mainly attributable to an increase in cash of $14,082,637, an increase in prepaid expenses and other receivables of $157,790 and an increase in property, plant and equipment of $5,093,829.

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Investment in Exploration and Evaluation Assets

Investment in exploration and evaluation assets in the years 2022 and 2023 is related to the acquisition of the Selebi Mines and the Selkirk Mine, the cost of which were capitalized, and the exploration and evaluation activities, the costs of which were expensed as incurred as the assets are still in the exploration and pre-development stage. As at December 31, 2023, the recorded amount of investment, including capitalized and expensed, in the Company’s exploration and evaluation assets totaled $48,120,084 compared to $31,823,982 as at December 31, 2022. Principal factors contributing to this change were expenditures related to the acquisition and evaluation of the Selebi Mines and increased exploration and evaluation activities on the Selebi Mines and the Selkirk Mine in FY 2023 relative to FY 2022.

Current and Non-Current Liabilities

Total liability as at December 31, 2023 increased by a net amount of $13,759,865 from the year ended December 31, 2022. The change is mainly due to the increase in Term Loan of $17,956,423 upon the closing of the financings in June and December 2023 as well as increase in NSR option liability of $2,750,000. The increase was partially offset by the payment in full in June 2023 of the promissory note to Pinnacle Island LP in the amount of $7,637,329.

Overall Performance and Results of Operations

As at the date of this Report, the Company has not earned revenue nor proved the economic viability of its projects. The Company’s expenses are not subject to seasonal fluctuations or general trends other than factors affecting costs such as inflation and input prices. The Company’s expenses and cash requirements will fluctuate from period to period depending on the level of activity at the projects based on factors related to raising capital to fund expenditures. Comparisons of activity made between periods should be viewed with this in mind.

The following table summarizes the Company’s Statement of Comprehensive Loss for the twelve-month periods ended December 31, 2023 and Statement of Comprehensive Loss for the twelve-month periods ended December 31, 2022.

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Year Ended December 31, 2023 and December 31, 2022

The Company incurred a net loss of $32,376,069 in FY 2023 compared to a loss of $27,306,350 in FY 2022 resulting in a higher loss by $5,069,719 (year-over-year). The higher loss in 2023 was largely due to a gain of $8,974,901 in fair value movement of the 15% warrants granted to NAN and subsequently cancelled upon the RTO, offset partially by a decrease in share-based payment.

The following higher expenditures in FY 2023 compared to FY 2022 also contributed to the higher FY 2023 loss:

The higher loss in FY 2023 was partially offset by the following lower expenditures in FY 2023 compared to FY 2022:

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Cash Flows

The following table summarizes the cashflows:

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Operating Activities

Net cash used in operating activities in FY 2023 was $30,891,318 compared to $25,588,522 in FY 2022. The increase in net cash used in operating activities during FY 2023 was mainly driven by an increase in cash operating costs as a result of increasing operational activities in Botswana following the purchase of the Selebi Assets and the Selkirk Assets, and a lower working capital compared to FY 2022.

Investing Activities

In FY 2023, the cash flows used in investing activities amounted to $2,480,139 compared to a positive cash flow received from investing activities of $1,736,019 in FY 2022. Spending on acquisition of exploration and evaluation assets as well as property, plant and equipment in FY 2023 were lower at $5,230,139 compared to $9,315,898 in FY 2022 but the higher spending in FY 2022 were offset by cash received from the RTO. Higher expenditures in FY 2022 was due to the acquisition costs of the Selebi and Selkirk Mines.

Financing Activities

During FY 2023, cash flows from financing activities amounted to $46,938,326 compared to $28,773,774 in FY 2022. Higher cash flows during FY 2023 are attributed to increased equity and debt financing transactions when compared to FY 2022, resulting in a higher cash balance at the end of FY 2023 of $19,245,628 compared to a cash balance of $5,162,991 at the end of FY 2022. See “Financing” for more details.

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Financial Position

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The Company’s cash balance on December 31, 2023 increased from the amount held on December 31, 2022, primarily due to the financing completed on December 14, 2023.

Other non-current assets increased by $369,925 and trade payables and accrued liabilities increased by $254,430 as at December 31, 2023 compared to the amount as at December 31, 2022. These working capital items increased as a result of increased corporate activities.

The slight increase in exploration and evaluation assets for $16,171 was mainly attributable to a foreign exchange rate difference. Property, plant and equipment increased by $4,177,162 as at December 31, 2023 and was primarily driven by additional purchases of exploration equipment, furniture and fixtures, vehicles, computers and software.

The Company’s lease liability was $1,611,143 as at December 31, 2023, lower by $1,120,251 compared to $2,731,394 as at December 31,2022. The first instalment of the purchase price of Syringa Lodge was made during FY 2023, resulting in a reduction of the lease liability.

The Company repaid the Pinnacle Island LP promissory note in full on June 28, 2023, resulting in a nil balance at December 31, 2023.

The increase in term loan and share capital is mainly due to the three financing transactions completed during FY 2023. Please refer to “Liquidity – Financings” below.

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Liquidity

Capital Resources

At the end of FY 2023, the Company incurred a net loss of $32,376,069 and reported an accumulated deficit of $104,566,816 (FY 2022 – $72,190,747). At the end of FY 2023, the Company required additional funds to continue its planned operations and meet its future obligations, commitments and forecasted expenditures through December 31, 2024. Management is aware, in making its assessment, of material uncertainties related to events and conditions that may cast a substantial doubt upon the Company’s ability to continue as a going concern, and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The accompanying Annual Financial Statements do not reflect the adjustments to the carrying values of assets and liabilities, expenses and financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be material. In assessing whether a going concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period.

Going Concern

As at December 31, 2023, the Company had $19,245,628 in available cash (FY 2022 – $5,162,991). There are no sources of operating cash flows. Given the Company’s current financial position and the ongoing exploration and evaluation expenditures, the Company will need to raise additional capital through the issuance of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and re-development of the mineral properties. Although the Company has been successful in its past fund-raising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future.

Financings

During the year ended December 31, 2023, the Company completed the following financing transactions:

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Use of Proceeds

The following table provides a summary of the principal uses of proceeds of the 2023 financings.

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Notes:

Working Capital

As at December 31, 2023, the Company had working capital of $14,999,619 (December 31, 2022 – $6,024,026 negative working capital), calculated as total current assets less total current liabilities. The increase in working capital is mainly due to an increase in cash from financings, an increase in other current assets, a decrease in the Pinnacle Island LP indebtedness due to repayment, offset by an increase in accounts payable and accrued liabilities.

Contractual Obligations and Contingencies

Selebi Assets

As per the Selebi asset purchase agreement (the “Selebi APA”), the aggregate purchase price payable to the seller for the Selebi Assets is the sum of US$56,750,000 which amount shall be paid in three instalments:

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As per the terms and conditions of the Selebi APA, the Company has the option to cancel the second and third payments and give back the Selebi Assets to the liquidator in the event the Company determines that the Selebi Assets are not economical. The Company also has an option to pay in advance the second and third payments in the event the Company determines that the Selebi Assets are economical. The Company’s accounting policy, as permitted by IAS 16 – Property, Plant and Equipment, is to measure and record contingent consideration when the conditions associated with the contingency are met. As of December 31, 2023, none of the conditions of the second and third instalment are met. Hence, these amounts are not accrued in the Annual Financial Statements.

In addition to the Selebi APA, the purchase of the Selebi Assets is also subject to a contingent compensation agreement as well as a royalty agreement with the liquidator.

Phikwe South and the Southeast Extension

On August 16, 2023, the Company announced that it had entered into a binding commitment letter with the Liquidator of BCL to acquire a 100% interest in two additional deposits, Phikwe South and the Southeast Extension, located adjacent to and immediately north of the Selebi North historical workings.

The upfront cost to the Company to acquire these additional mineral properties is US$1,000,000. In addition, the Company has agreed to additional work commitments of USD 5,000,000 in the aggregate over the next four years. As a result of the extension of the Selebi mining licence, the remaining asset purchase obligations of the Company outlined in the Selebi APA will each increase by 10%, US$5,500,000 in total, while the trigger events remain unchanged.

Selkirk Mine

In regard to the Selkirk Assets, the purchase agreement does not provide for a purchase price or initial payment for the purchase of the assets. The Selkirk purchase agreement provides that if the Company elects to develop Selkirk first, the payment of the second Selebi instalment of US$25 million would be upon the approval by the Minister of MMRGTES of the Company’s Section 42 and Section 43 applications (further extension of the Selkirk mining licence and conversion of the Selkirk mining licence into an operating licence, respectively). For the third Selebi instalment of US$30 million, if Selkirk were commissioned earlier than Selebi, the payment would trigger on Selkirk’s commission date.

Right-of-Use Assets

On July 9, 2022, the Company executed a sales agreement with Tuli Tourism Pty Ltd. (“Tuli”) for the Syringa Lodge in Botswana and obtained possession of the property in August 2022. Pursuant to the sales agreement, the aggregate purchase price payable to the seller is $3,213,404. A deposit of $482,011 was paid on August 17, 2022. The balance is payable in two instalments of $1,365,697 on each of August 1, 2023 and August 1, 2024. The first instalment has been made. In addition to the above purchase price, the Company will pay to Tuli agreed interest in twelve equal monthly instalments of $13,657 each, followed by twelve equal monthly instalments of $6,828.

On March 14, 2023, the Company entered into a drilling equipment supply agreement with Forage Fusion Drilling Ltd. (“Forage”) of Hawkesbury, Ontario to purchase specific drilling equipment on a “rent to own” basis with the purchase price to be paid in monthly payments. Pursuant to the agreement, the aggregate purchase price payable to Forage is $2,942,000. A deposit of $1,700,000 was paid in March 2023. The balance is payable in twelve equal monthly instalments of $103,500. The equipment arrived at the site in July 2023.

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Post Creek

Commencing August 1, 2015, the Company is obligated to pay advances on a net smelter return of $10,000 per annum. During each of FY 2022 and YTD 2023, the Company paid $10,000, which will be deducted from any payments to be made under the net smelter return.

Halcyon

Commencing August 1, 2015, the Company is obligated to pay advances on a net smelter return of $8,000 per annum. During each of FY 2022 and FY 2023, the Company paid $8,000, which will be deducted from any payments to be made under the net smelter return.

Related Party Transactions

Related party transactions are summarized below and include transactions with the following individuals or entities:

Key management (defined as members of the Board and senior officers) compensation was related to the following:

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As a result of the EdgePoint Financing on June 28, 2023 and increase of the Term Loan by the Additional Principal Amount on December 14, 2023 (the “EdgePoint Transactions”), Cymbria and certain other funds managed by EdgePoint (the “Financing Parties”) have acquired a total of 16,037,800 Common Shares, representing approximately 10.7% of the Company’s issued and outstanding Common Shares. The Financing Parties also acquired on closing an aggregate of 6,024,000 warrants with a three-year term and an exercise price of $1.4375 which, if exercised, together with the Common Shares acquired at closing would result in the Financing Parties holding approximately 14.2% of the Common Shares in the aggregate (calculated on a partially diluted basis). As the result of the EdgePoint Transactions, the Financing Parties are related parties of PNRL. During the year ended December 31, 2023, the Company paid interest of $793,392 to the Financing Parties (December 31, 2022 – Nil).

During the year ended December 31, 2022, ThreeD Capital Inc. subscribed for a further 1,279,069 common shares of PNRC, for a further investment of $3,064,582 (US$2,427,076) (2021 – $374,123). As of December 31, 2023, ThreeD Capital Inc. beneficially owned 5,906,622 Common Shares (December 31, 2022 – 8,662,347 Common Shares), constituting approximately 3.96% (December 31, 2022 – 7.5%) of the issued and outstanding Common Shares.

Contingent Liabilities

There are no environmental liabilities associated with the Selebi Assets and the Selkirk Mine as at the acquisition dates as all liabilities prior to the acquisitions are the responsibility of the sellers, BCL and TNMC, respectively. The Company has an obligation for the rehabilitation costs arising subsequent to the acquisitions. As of December 31, 2023, management is not aware of or anticipating any contingent liabilities that could impact the financial position or performance of the Company related to its exploration and evaluation assets.

The Company’s exploration and evaluation assets are affected by the laws and environmental regulations that exist in the various jurisdictions in which the Company operates. It is not possible to estimate the future contingent liabilities and the impact on the Company’s operating results due to future changes in the Company’s re-development of its projects or future changes in such laws and environmental regulations.

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Segmented Disclosure

The Company operates in one reportable operating segment being that of the acquisition, exploration and evaluation of mineral properties in three geographic segments being Botswana, Greenland and Canada. The Company’s geographic segments are as follows:

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Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements as at December 31, 2023.

Financial Instruments and Financial Risk Management

The Company thoroughly examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include interest rate risk, credit risk, liquidity risk and currency risk. The carrying value of cash, trade payables and accrued liabilities approximate their fair value due to their short-term nature. The fair value of the amended and restated promissory note, vehicle financing and lease liability are equal to their carrying values as all these amounts carry a fixed interest rate. The fair value of the Term Loan carries a fixed interest rate and is equal to the carrying value. The fair value of the deferred share units is the closing price of the Common Shares at the end of each reporting period. Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significance of inputs in making the measurements. The levels of the fair value hierarchy are defined as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Inputs for the asset or liability that are not based on observable market data.

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On December 31, 2023, the fair value of cash and the deferred share units are based on Level 1 measurements.

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The Company’s accounting policies regarding financial instrument classification, measurement, impairment and derecognition are described in the Annual Financial Statements (see Note 2).

Critical Accounting Judgments, Estimates And Assumptions

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that can affect reported amounts of assets, liabilities, revenue and expenses and the accompanying disclosures. Estimates and assumptions are continuously evaluated and are based on management’s historical experience and on other assumptions believed to be reasonable under the circumstances. However, different judgments, estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The area involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are:

Critical Accounting Judgements:

(a)RTO – fair value

The fair value of the consideration exchanged for the RTO are based on various factors such as the fair value of the assets acquired or liabilities assumed, the fair value of equity instruments issued, and any related acquisition costs.

The assumptions and estimates used in arriving at fair value figures are based on management’s judgments and relevant market data. The fair value of the equity instruments issued is determined based on market prices or valuation techniques that take into account factors such as expected share price volatility.

(b)Recoverability of exploration and evaluation assets

The ultimate recoverability of the exploration and evaluation assets with a carrying value of $8,594,798 at December 31, 2023, is dependent upon the Company’s ability to obtain the necessary financing to complete the exploration and development and commence profitable production at its projects, or alternatively, upon the Company’s ability to dispose of its interests therein on an advantageous basis. A review of the indicators of potential impairment is at minimum carried out at each period end.

Management undertakes a periodic review of these assets to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount of the assets is made. An impairment loss is recognized when the carrying value of the assets is higher than the recoverable amount and when mineral license tenements are relinquished or have lapsed. In undertaking this review, management of the Company is required to make significant estimates of, among other things, discount rates, commodity prices, availability of financing, future operating and capital costs and all aspects of project advancement. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of the assets.

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(c)Restoration provisions

Management’s best estimates regarding the restoration provisions are based on the current economic environment. Changes in estimates of contamination, restoration standards and restoration activities result in changes to provisions from period to period. Actual restoration provisions will ultimately depend on future market prices for future restoration obligations. Management has determined that the Company has no restoration obligations at December 31, 2023.

(d) Going concern

Consolidated financial statements are prepared on a going concern basis unless management either intends to liquidate the Company or has no realistic alternative to do so. Assessment of the Company’s ability to continue as a going concern requires the consideration of all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. This information includes estimates of future cash flows and other factors, the outcome of which is uncertain. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast substantial doubt upon the Company’s ability to continue as a going concern those uncertainties are disclosed.

Critical Accounting Estimates

(a) Valuation of share-based compensation and warrants

The Company estimates the fair value of warrants and options using the Black-Scholes Option Pricing Model which requires significant estimation around assumptions and inputs such as expected term to maturity, expected volatility and expected forfeiture rates. Note 13 of the consolidated financial statements contains further details of significant assumptions applied to these areas of estimation.

(b)Deferred tax

Tax benefits from uncertain tax positions may be recognized when it is probable that the Company will be able to use deductible temporary differences against taxable profit: (i) whether a tax position, based solely on its technical merits, is probable to be sustained upon examination, and (ii) measuring the tax benefit as the expected value or most likely amount taking into consideration which method better predicts the realized amounts upon ultimate settlement.

Furthermore, the Company uses the asset and liability method in accounting for deferred taxes and mining duties. Under this method, deferred taxes are recognized for future income tax. In preparing these estimates, management is required to interpret substantially enacted legislation as well as economic and business conditions along with management’s tax and corporate structure plans which may impact taxable income in future periods.

(c)Estimated useful lives and depreciation of property, plant and equipment

Depreciation of property, plant and equipment is dependent upon estimates of useful lives which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The audited financial statements of Premium Nickel Resources Ltd. as of December 31, 2023 and 2022 are appended to this Report beginning on page F-1.

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CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2023 and 2022

In accordance with generally accepted accounting principles in the United States and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission and stated in Canadian dollars, unless otherwise indicated

INDEX

Management’s Responsibility for Financial Reporting

Independent Auditor’s Report

Consolidated Financial Statements

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MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements, and the notes thereto, of Premium Nickel Resources Ltd., formerly North American Nickel Inc., and its subsidiaries have been prepared by management in accordance with International Financial Reporting standards. Management acknowledges responsibility for the preparation and presentation of the consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company’s circumstances.

Management, in discharging these responsibilities, maintains a system of internal controls designed to provide reasonable assurance that its assets are safeguarded, only valid and authorized transactions are executed and accurate, timely and comprehensive financial information is prepared. However, any system of internal controls over financial reporting, no matter how well designed and implemented, has inherent limitations and may not prevent or detect all misstatements.

The Board of Directors, principally through the Audit Committee, is responsible for reviewing and approving the consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities.

The consolidated financial statements have been audited by MNP LLP, Chartered Professional Accountants, Licensed Public Accountants, who were retained by the Company to audit the consolidated financial statements and provide an independent auditor’s report thereon. The auditor’s report outlines the scope of their examination and their opinion on the consolidated financial statements. MNP LLP has full and free access to the Board of Directors.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of Premium Nickel Resources Ltd.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Premium Nickel Resources Ltd. and its subsidiaries (the “Company”) as at December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023 and 2022, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Material Uncertainty Related to Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring net losses and has no source of operating cash flows, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the “Critical Audit Matters” section of our report.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Financing – Valuation of Complex Financial Instruments

Critical Audit Matter Description

As described in Note 10, 12 and 13 to the consolidated financial statements, the Company closed a financing transaction on June 28, 2023, for aggregate proceeds of approximately $33,999,200. The financing transaction consists of three separate transactions issued concurrently, which comprised of an equity offering of units for $16,249,200, a three year term loan of $15,000,000 and an option payment of $2,750,000 to acquire a 0.5% net smelter returns royalty on the Company's Selebi Mines and Selkirk Mine in certain circumstances upon payment of further consideration. The Company exercised significant judgment when estimating the fair value of the individual transactions.

On December 14, 2023, the Company amended the term loan by $5,882,353 to $20,882,353. The modification has been accounted for as a non-substantial modification of the existing term loan.

Audit procedures performed to evaluate the reasonableness of the estimates and assumptions used required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of valuations specialists.

Audit Response

We responded to this matter by performing procedures in relation to assessing the accounting for the individual transactions. Our audit work in relation to this included, but was not restricted to, the following:

-Obtained and reviewed agreements entered into by the Company.

-Discussed key terms of the agreements with the Company's legal counsel.

-Confirmed key terms of the agreements with the appropriate parties.

Going Concern

Critical Audit Matter Description

As described in Note 1, the Company, being in the exploration stage, is subject to risks and challenges similar to companies in a comparable stage. These risks include the challenges of securing adequate capital for exploration and operational risks inherent in the mining industry, and global economic and metal price volatility and there is no assurance management will be successful in its endeavors. The ability of the Company to continue operations as a going concern is ultimately dependent upon achieving profitable operations and its ability to obtain adequate financing. To date, the Company has not generated profitable operations from its resource activities and will need to invest additional funds in carrying out its planned exploration and operational activities. Management has prepared future cash flow forecasts, which involves judgement and estimation of key variables, such as planned financing and capital and operational

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expenditures. Future economic conditions and effects of key events subsequent to the year end, such as debt and equity financing, also impacted management's judgements and estimates. We identified the Company's ability to continue as a going concern as a critical audit matter because auditing the Company's going concern assessment is complex and involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts, planned refinancing actions and other assumptions used in the Company's going concern analysis. The Company's ability to execute the planned refinancing actions are especially judgmental given that the global financial markets and economic conditions have been, volatile. This matter is also described in the "Material Uncertainty Related to Going Concern" section of our report.

Audit Response

We responded to this matter by performing procedures over management's assessment of the Company's ability to continue as a going concern. Our audit work in relation to this included, but was not restricted to, the following: