Dated: September 29, 2025
Management's Responsibility for Financial Reporting:
The accompanying interim financial report for the three months ended July 31, 2025 has been prepared by management using accounting policies consistent with International Financial Reporting Standards ("IFRS"). The following discussion is management's assessment and analysis of the results and financial condition of Orex Minerals Inc. (the Company) and should be read in conjunction with the unaudited condensed consolidated interim financial statements and the related notes. Other information contained in this document has also been prepared by management and is consistent with the data contained in the unaudited condensed consolidated interim financial statements.
The Company's certifying officers, based on their knowledge, having exercised reasonable diligence, are also responsible to ensure that the condensed consolidated interim financial statements and Management Discussion and Analysis (together the "filings") do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by these interim filings, and the interim financial report together with the other financial information included in these filings fairly present in all material respects the financial condition, financial performance and cash flows of the Company, as of the date of and for the periods presented in interim filings.
The Board of Directors approves the condensed consolidated interim financial statements together with the other financial information included in the interim filings and ensures that management has discharged its financial responsibilities. The Board's review is accomplished principally through the Audit Committee, which meets periodically to review all corporate filings prior to filing.
Certain statements in this report may constitute forward-looking statements that are subject to risks and uncertainties. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they were made.
In particular, forward looking comments regarding both the Company's plans and operations included in the "Description of Business" with respect to management's planned exploration and other activities, and in "Liquidity", "Commitments" and "Corporate Summary" regarding management's estimated ability to fund its projected costs of exploration work and general corporate costs of operations, and its ability to raise additional funding through placement of the Company's common shares, are plans and estimates of management only and actual results and outcomes could be materially different.
There are many external factors that can adversely affect general workforces, economies and financial markets globally. Examples include, but are not limited to, the COVID-19 global pandemic and political conflict in other regions. It is not possible for the Company to predict the duration or magnitude of adverse results of such external factors and their effect on the Company's business or ability to raise funds.
Description of Business:
The Company is engaged primarily in the acquisition and exploration of "exploration and evaluation assets". SANDRA PROJECT, MEXICO - (Previous name Sandra Escobar Project)
The Sandra Project is situated north of the town of Tepehuanes, Durango, in the heart of the "Mexican Silver Trend", midway between the mining districts of Tovar and Guanacevi and is 75 km west of Endeavour Silver Corp's La Pitarrilla. This prolific trend hosts some of the world's largest silver camps and deposits, including Fresnillo, Guanajuato, La Pitarrilla, La Preciosa, Real de Angeles, and Zacatecas. Excellent infrastructure exists in the Sandra area, including paved road access, electrical power, water and manpower from nearby communities.
The Sandra Project consists of 6,976 hectares of mineral concessions and covers multiple mineralized epithermal quartz veins, stockwork, disseminations and breccia structures. These veins form a high level silver-gold-base metals system, hosted in andesitic and rhyolitic rocks, centered on a large rhyolite dome complex in the north and silver systems in smaller rhyolite dome complexes to the southeast. Intense alteration zones and fluid flooding in permeable formations may also indicate the presence of bulk tonnage silver targets.
On December 19, 2017 the Company announced the signing of a "Letter of Intent" with Pan American Silver Corp. and Canasil Resources Inc. to combine their respective mineral concessions in the Sandra District into a single joint venture project to advance the exploration of the properties.
Through various stages, the planned joint venture would allow Pan American to acquire an undivided 51% of the resultant project following an aggregate expenditure of US$ 5 million. The Company would retain an undivided 26.95% of the resultant project an d Canasil would retain an undivided 22.05% of the resultant project following an aggregate Orex/Canasil expenditure of US$ 1 million.
On October 24, 2018, Canasil announced the signing of a separate "Letter of Intent" to sell their interest in the Sandra Project to Pan American's Mexican subsidiary Plata Panamericana S.A. de C.V.. On June 28, 2019, Canasil Resources Inc. issued a news release announcing the signing of a definitive agreement providing for Pan American Silver to acquire Canasil's interest in the Sandra Project.
On July 8, 2019, the Company announced the signing of a "Letter Agreement" with Pan American Silver Corp., through its subsidiary Plata Panamericana SA de CV, regarding a restructured Sandra project. This followed on the news that Pan American had acquired all of the interest of Canasil in the project.
On March 9, 2020 the Company entered into a Joint Venture Letter Agreement to form a joint venture with Pan American to further explore the Sandra Property. The joint venture was formed on March 1, 2021. The Company has a 40% interest and Pan American has a 60% interest in a new joint venture company, Empresa Minera Sandra-Escobar, S.A. De C.V. Pan American and the Company will make their proportionate share of contributions. The Company is the operator.
On October 19, 2020, the Company initiated a field based geological mapping and geochemical sampling program on the Sandra Property to consolidate the two groups of mineral concessions. (News release October 19, 2020)
Field based geological mapping and lithogeochemical sampling programs were conducted on the Sandra Property, with the assistance of Geotech Evaluation and Support ("GES") a Mexican consulting firm, with strict COVID-19 protocols in place. This program was completed in November 2021.
On June 22, 2022, Orex and Pan American initiated Phase-I of a new diamond drilling program on the Sandra Project, to consist of approximately 2,500 to 3,000 metres. The drilling contract was awarded to Globexplore, an experienced diamond drilling service company, utilizing low environmental impact, man-portable drill rigs.
Description of Business (cont'd…):
SANDRA PROJECT, MEXICO - (Previous name Sandra Escobar Project) (cont'd…):
The 2022 Phase-I drilling program has completed eight holes totalling 2,665.30 metres. Most of the holes are reconnaissance on mineralized targets away from the defined Boleras Silver Deposit in the Central and Eastern Corridors. The favourable host unit in the Boleras Deposit area, a rhyolite crystal lithic-tuff, has been extended a further 1.5 kilometres to the northwest (News release on October 5, 2022).
Total diamond drilling to date on the Sandra Project by Canasil, Orex and the Orex-Pan American Joint Venture equals 14,466.65 metres in 84 holes.
Ben Whiting, P.Geo, is the Qualified Person, as defined in National Instrument 43-101, and takes responsibility for the technical disclosure in this report with regards to the Sandra property.
The Company has a minority position on the technical committee and board of directors of EMSE and does not control operationa l decisions. The Company's judgement is that it has significant influence, but not control and accordingly equity accounting is appropriate.
Management assessed the recoverable amount of the investment in associates. Due to the absence of exploration expenditures over the last two years, unpaid concession fees, and the strategic decision by both joint venture partners to sell the property, management determined that the mining concessions to be impaired.
CONETO, MEXICO:
On July 16, 2009, the Company signed a letter of intent to purchase 100% of the core mineral concessions within the Coneto silver-gold mining camp in Durango State, Mexico, in exchange for 2,200,000 common shares of the Company. The definitive purchase agreement, signed on September 1, 2009, was subject to the approval of the TSX Venture Exchange. After receiving TSX Venture Exchange approval, on April 15, 2010, the Company issued 2,200,000 shares to the vendors of the Coneto concessions, valued at
$2,090,000. The Coneto Property is subject to a 2.5% NSR royalty payable to the vendors.
Located in the Mesa Central on the eastern flank of the Sierra Madre Occidental Mountains, Coneto is centrally positioned in the "Mexican Silver Trend". This silver trend, stretching from Guanajuato in the southeast, through the states of Zacatecas and Durango, hosts some of the world's largest silver deposits, including Real de Angeles, Zacatecas, Fresnillo, La Preciosa, and La Pitarilla mining camps.
The Coneto mining camp has a history going back over 400 years. More than 40 epithermal silver-gold quartz veins have been documented in a window of exposed Tertiary Lower Volcanic andesites. Past underground production was achieved on three of the veins down to the water table. Prior to Orex, very little diamond drilling had been carried out within the property in spite of its long history of episodic production.
The Coneto mining camp historically consisted of approximately 3,300 hectares of claims. During 2010, the Company announced its successful applications to locate new mineral concessions called Lomas 3 and Lomas 4, which surround the historical claims. With the addition of these new mineral concessions, the total area of the Coneto Property increased to 16,346 hectares.
The initial work program on this property consisted of detailed structural geology mapping and geochemical sampling in the areas around Calaveras, Colemanito, Promontorio, Loma Verde, Durazno and Impulsora. This program was designed to guide a diamond drilling program. As of December 2009, regional geology mapping at 1:10,000 scale covered 35 sq km and detailed structural geology mapping at 1:500 scale covered 15 sq km. Forty-nine line-kilometres of geochemical sampling, both for soil and rock channel/chip/grab, total 1,794 samples. The Loma Verde, Promontorio and Impulsora sectors yielded multiple anomalous values for gold and silver.
The Phase-I drilling campaign of approximately 5,000 metres of HQ and NQ diameter core commenced in May 2010 and was performed by Major Drilling de Mexico, S.A. de C.V. utilizing a surface UDR-200 rig. A total of 21 holes were completed in the Loma Verde, Durazno, Promontorio, Impulsora, Estrella-Calaveras and Sauce-Palma areas. Over 2,000 drill core samples were submitted for analyses to SGS Mineral Services in Durango, Mexico. The assay results of the drilling campaign were announced by news releases on July 6, 2010, August 9, 2010 and November 1, 2010. Nine holes yielded high values for gold and silver, especially in the Loma Verde and Impulsora areas.
During fiscal 2011, the Company signed a non-binding letter of intent with Fresnillo PLC ("Fresnillo") to jointly explore the contiguous mineral concessions held by the Company and Fresnillo in the Coneto mining district. A definitive Association Agreement was signed on February 2, 2012. The principal terms of the Association Agreement are:
Fresnillo will spend a minimum of US$2,000,000 on exploration during the first year after the necessary exploration permits are obtained (Fresnillo fulfilled this commitment during fiscal 2013). A minimum of 70% of this exploration must be conducted on the Company's concessions. (Note 6)
Fresnillo will have the option to spend an additional US$2,000,000 per year on exploration for each of the following two
years. A minimum of 70% of this exploration must also be conducted on the Company's concessions.
Upon Fresnillo spending an aggregate of US$6,000,000 on exploration activities, the Company and Fresnillo will each contribute their respective Coneto mining concessions to a new company ("NewCo") that initially would be owned 55% by Fresnillo and 45% by the Company.
Fresnillo will have the right to increase its ownership of NewCo to 70% by either completing a prefeasibility study or spending up to an additional US$21,000,000 in the process of preparing a prefeasibility study.
If Fresnillo chooses to not exercise the right to increase its ownership of NewCo to 70%, the costs incurred to complete a prefeasibility study will be shared by Fresnillo and the Company in proportion to their ownership of NewCo; 55% by Fresnillo and 45% by the Company.
Any additional funding required by NewCo will be provided by the Company and Fresnillo in proportion to their respective ownership interests in NewCo at that time.
Fresnillo has a right of first refusal to acquire the Company's ownership interest in NewCo if the Company receives an offer
for its interest in NewCo that it proposes to accept.
During the life of the Association Agreement, in the event that the Company, or any of its subsidiaries, enters into a transaction to acquire an interest in any additional mineral properties in Mexico and then later decides to sell or option out that interest to a third party, Fresnillo will have a right of first refusal to participate in such transaction on the same terms and conditions as offered to the third party.
In conjunction with entering into the Association Agreement with Fresnillo, on February 8, 2012, the Company issued 2,500,000 units to Fresnillo at $0.80 per unit for gross proceeds of $2,000,000 under a non-brokered private placement. Each unit consisted of one common share and one half of one transferable share purchase warrant. Each whole share purchase warrant entitles the holder thereof to purchase one additional common share for 24 months from the date of closing at a price of $1.00 per common share.
A Phase-II diamond drilling program of 31 holes, totalling 11,998 metres, commenced in late August 2012 and a second drill was added in October 2012. The contracted drilling company, Kluane Drilling Ltd., utilized modularized mobile drilling equipment that minimizes the need to construct roads on the property. The total cost for the Phase II drilling program, including pre-drilling geological and geophysical mapping, was $3.3 million, an amount which was entirely funded by Fresnillo per the terms of the Association Agreement.
The results from the 31 diamond drill holes in the Loma Verde, Central Zone, Impulsora, Promontorio and La Bufa areas of the Phase-II program, yielded high grade intercepts of gold and silver in the Loma Verde and La Bufa areas, with results announced in news releases dated November 7, 2012, January 7, and March 25, 2013.
Also in fiscal 2013, a detailed surface trench channel sampling program was initiated on various mineralized structures at Coneto. Results for the Loma Verde, Santo Nino and Impulsora were announced in news releases dated July 10, 2013, August 20, 2013, and October 7, 2013.
On July 2, 2014, a Phase - III diamond drilling program commenced for 30 holes, totalling 11,744 metres. Kluane Drilling Ltd. was awarded the drilling contract and three drilling rigs were utilized.
The results from the Phase - III 30 diamond drill holes in the Promontorio, Impulsora, Loma Verde, La Bufa, and Central areas yielded high-grade intercepts in the Loma Verde and Promontorio areas. Results were announced in news releases dated October 7, November 18 and December 8, 2014.
In August 2014, Fresnillo confirmed that they had met the exploration expenditures of the First Investment Option Stage of $US 4,000,000 and were proceeding directly to the Second Investment Option Stage on the Coneto Project.
In March 2015, plans for a Phase-IV diamond drilling program were prepared, totaling approximately 4,656 metres in 11 holes. This program commenced in 2ndquarter 2015 and was completed in the 3rdquarter 2015. Results were announced in a news release drafted August 10, 2015.
In a news release on September 24th, 2015, the Company announced that the Coneto project earn-in expenditures of US$ 6 million had been reached by Fresnillo. Orex and Fresnillo would then proceed on the basis of a 45% : 55% respective ownership.
On July 1, 2016, the Company and Fresnillo, pursuant to the definitive agreement contributed their respective Coneto mining concessions to a new company, Exploracions y Desarrollos Mineros Coneto S.A.P.I. de C.V. ("EDMC"). The ownership is 55% Fresnillo, 45% by the Company.
In November 2016, a Phase-V diamond drilling program commenced and was completed in February 2017. A total of 11 holes were drilled in 5 target areas for 5,215 metres. These included La Bufa-Santo Nino, Loma Verde Durazno, Promontorio and Descubridora. (News release March 24, 2017)
No exploration activities were conducted on the Coneto Project during the calendar years 2018, 2019 and 2020, due to a review of Fresnillo's exploration portfolio and strategic planning, plus the start of the COVID-19 pandemic. Mineral concessions were maintained in good standing during that period.
Exploration programs were reinitiated for 2021. These have included contracting the services of SGS de Mexico S.A. de C.V. laboratories in Durango, Mexico, for preliminary metallurgical testing, plus SRK Consulting (Canada) Inc. ("SRK") for an independent NI43-101 Resource Estimation study.
Excellent results for gold yielded recoveries exceeding 93% for five of the zones, with the seven zones tested averaging over 90% recovery. The bulk of the gold was recovered in the first 48 hours. Silver recoveries varied from 69.0% to 92.3%, with the av erage silver recovery of 79.6%. Silver recovery percentage was still increasing at the 96 hour mark of the leach tests (news release 4 August 2021).
On October 27, 2021, Orex announced the results from the first resource estimate on six mineralized lodes from the Coneto Gold-Silver Project. This study was conducted by SRK Consulting (Canada) Inc., serving as "Independent Qualified Persons" as defined in National Instrument 43-101.
At a base case cut-off mineral value of $US 74.30 per tonne, the "Inferred Mineral Resource Estimate" yielded 5,325,000 tonnes,
grading 1.67 g/t gold and 112 g/t silver for a gold-equivalent of 3.15 g/t. Total gold 286,000 ounces and silver 19,111,000 ounces