Discovery Silver : Earnings Document

Published: 2025-05-13 21:30:06 ET DSV.TO

Published on 05/13/2025 at 21:30

For the three months ended March 31, 2025 and 2024

(expressed in Canadian dollars)

Unaudited - (Expressed in Canadian dollars, except where otherwise noted)

As at

Notes

March 31,

2025

December 31,

2024

ASSETS

Current

Cash and cash equivalents

15,115,274

29,310,579

Sales tax and other receivables

3,580,729

3,201,221

Prepaids and deposits

300,780

279,481

Investments

193,468

213,147

19,190,251

33,004,428

Non-current

Property and Equipment

3,827,659

2,775,518

Value-added taxes receivable

2,205,777

2,153,568

Mineral properties

90,249,274

84,949,272

TOTAL ASSETS

115,472,961

122,882,786

LIABILITIES

Current

Accounts payable and accrued liabilities

7,736,045

8,359,638

Current portion of lease liabilities

241,483

247,674

7,977,528

8,607,312

Non-current

Other long-term liabilities

1,095,335

1,069,448

Lease liabilities

1,101,475

1,217,813

TOTAL LIABILITIES

10,174,338

10,894,573

SHAREHOLDERS' EQUITY

Share capital

12(b)

222,420,403

220,211,128

Contributed surplus

44,298,090

44,801,220

Warrants

12(e)

17,525,093

Accumulated other comprehensive loss

(435,707)

(1,297,473)

Accumulated deficit

(178,509,256)

(169,251,755)

TOTAL EQUITY

105,298,623

111,988,213

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

115,472,961

122,882,786

Approved on Behalf of the Board on May 13, 2025:

"Jeff Parr" "Murray John"

Jeff Parr - Director Murray John - Director

Unaudited - (Expressed in Canadian dollars, except per share and share information)

Three Months Ended

Notes

March 31,

2025

March 31,

2024

Expenses (income)

General office and other expenses

7,222,564

1,941,475

Interest income

(216,656)

(699,881)

Interest expense

180,391

3,974

Professional fees

662,532

504,024

Exploration and project evaluation expenses

5,170

153,447

Share-based compensation

12(b)

1,673,645

881,496

Gain on fair value remeasurement of investments

(87,633)

(127,441)

Foreign exchange gain

(182,512)

(1,976,289)

Net loss

9,257,501

680,805

Other comprehensive loss (income)

(861,766)

(1,798,885)

Total comprehensive loss (income)

8,395,735

(1,118,080)

Weighted average shares outstanding

Basic

12(b)

401,122,298

395,973,316

Diluted

411,049,173

397,569,644

Net loss per share

Basic and diluted

(0.02)

(0.00)

Three Months Ended

Notes

March 31,

2025

March 31,

2024

Operating Activities

Net loss

(9,257,501)

(680,805)

Items not affecting cash:

Depreciation

82,672

165,302

Accretion

20,327

Share-based compensation

12(b)

1,673,645

881,496

Gain on fair value remeasurement

(87,633)

(127,441)

Unrealized foreign exchange gain

359,073

(1,786,554)

Changes in non-cash operating working capital:

Sales tax and other receivables

(451,451)

(772,964)

Prepaids and deposits

86,014

41,586

Accounts payable and accrued liabilities

(1,144,303)

(1,055,360)

Net cash used in operating activities

(8,719,157)

(3,334,740)

Investing Activities

Acquisition of property and equipment

(1,094,815)

(130,153)

Disposals of property and equipment

7,021

Acquisition of mineral properties

(4,311,036)

(4,330,418)

Net cash used in investing activities

(5,405,851)

(4,453,550)

Financing Activities

Issuance of shares on exercise of options

12(c)

32,500

Principal payment on lease liability

(122,533)

(23,921)

Net cash used in financing activities

(90,033)

(23,921)

Effect of exchange rates on cash and cash equivalents

19,733

(427,371)

Decrease in cash and cash equivalents

(14,195,305)

(8,239,582)

Cash and cash equivalents, beginning of period

29,310,579

58,944,462

Cash and cash equivalents, end of period

15,115,274

50,704,880

Supplemental Cash Flow Information:

Income tax expense paid

Interest paid

Notes

Number of Common

Share Capital

Warrants

Contributed Surplus

Accumulated Other Comprehensive

Loss

Accumulated Deficit

Total Equity

At January 1, 2025

400,461,244

$ 220,211,128

$ 17,525,093

$ 44,801,220

$ (1,297,473)

$ (169,251,755)

$ 111,988,213

Share-based

compensation

12b

1,673,645

Shares issued on

exercise of options

12c

50,000

57,946

(25,446)

32,500

Shares issued on

exercise of RSU's

12d

1,837,129

2,151,329

(2,151,329)

Net loss and total

comprehensive loss

for the year

861,766

(9,257,501)

(8,395,735)

At March 31, 2025

402,348,373

$ 222,420,403

$ 17,525,093

$ 44,298,090

$ (435,707)

$ (178,509,256)

$ 105,298,623

Note

Number of Common

Share Capital

Warrants

Contributed Surplus

Accumulated Other Comprehensive

Income

Accumulated Deficit

Total Equity

At January 1, 2024

395,862,249

216,194,163

17,525,093

42,660,494

1,397,720

(148,356,364)

129,421,106

Share-based

compensation

881,496

Shares issued on

redemption of RSUs

12d

777,466

1,104,002

(1,104,002)

Net loss and total

comprehensive

income for the period

1,798,885

(680,805)

1,118,080

At March 31, 2024

396,639,715

217,298,165

17,525,093

42,437,988

3,196,605

(149,037,169)

131,420,682

Discovery Silver Corp. ("Discovery Silver" or the "Company") is principally engaged in the acquisition, exploration and development of mineral properties, with a focus on advancing assets capable of supporting profitable operations and generating attractive returns for all stakeholders. The Company has exposure to silver through its current primary asset, the Cordero Project in Chihuahua, Mexico, a large-scale, silver-dominant polymetallic deposit with the potential to become one of the world's largest silver producers over a long mine life. On January 27, 2025, the Company announced a definitive agreement to acquire 100% of Newmont Corporation's interest in the Porcupine Complex ("Porcupine" or the "Complex") in and near Timmins, Ontario, Canada and on April 15, 2025, the acquisition closed. (Note 21). Through the addition of Porcupine, the Company will become a Canadian-based gold producer, with multiple operating mines, in a historic gold camp. The Company is focusing on integrating the operations, growing production, enhancing efficiency, and advancing numerous exploration opportunities within the Complex.

The Company was incorporated on October 10, 1986 under the laws of British Columbia and on June 13, 2017, the Company's name was changed to Discovery Metals Corp. On April 14, 2021, the Company's name was changed to Discovery Silver Corp. The Company is listed on the Toronto Stock Exchange (the "Exchange" or "TSX") under the symbol "DSV", and on the Frankfurt Stock Exchange under the symbol "1CU0". The Company's head office is located at Suite 701 - 55 University Avenue, Toronto, Ontario, M5J 2H7.

The Company's Board of Directors authorized the issuance of these unaudited condensed interim consolidated financial statements as at and for the three months ended March 31, 2025 and 2024 (the "Interim Financial Statements") on May 13, 2025.

These Interim Financial Statements for the three months ended March 31, 2025, and 2024, have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"). As such, certain disclosures required by IFRS Accounting Standards have been condensed or omitted. These Interim Financial Statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto as at and for the years ended December 31, 2024 and 2023 (the "Consolidated Financial Statements"). The Company's interim results are not necessarily indicative of its results for a full year.

These Interim Financial Statements have been prepared on a going concern basis which contemplates the realization of assets and discharge of all liabilities in the normal course of business. The Company has, to date, relied on cash received from share issuances in order to fund its exploration and other business objectives. At March 31, 2025, the Company had working capital (defined as current assets less current liabilities) of $ 11,212,723 (December 31, 2024 - $24,397,116), shareholders' equity of

$105,298,623 (December 31, 2024 - $111,988,213) and an accumulated deficit of $178,509,256 (December 31, 2024 - $169,251,755).

These Interim Financial Statements have been prepared using the same accounting policies and methods of application as those disclosed in note 3 to the Company's Consolidated Financial Statements as at and for the years ended December 31, 2024 and 2023.

The interim financial statements are presented in Canadian dollars ("CAD") unless otherwise noted. The interim financial statements include the accounts of the Company and its wholly owned subsidiaries.

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are consolidated from the date control is transferred to the Company and are de-consolidated from the date control ceases. The interim financial statements include all the assets, liabilities, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions. The interim financial statements include the financial condition and results of operations of the Company and its subsidiaries as outlined below.

The Company's principal subsidiaries and its geographic locations are as follows:

Direct Parent Company

Location

Ownership

Percentage

Properties

Minera Titán S.A. de C.V.

Mexico

100%

Cordero

Dome Mine Ltd.(1)

Canada

100%

Porcupine Complex

(1) Acquisition effective April 15, 2025 (note 21)

All intercompany assets, liabilities, equity, income, expenses, and cash flows arising from intercompany transactions have been eliminated on consolidation.

The Consolidated Financial Statements are presented in Canadian dollars which is the functional and presentation currency of the Company. The functional currency for the entities through which the Company conducts its operations is determined depending upon the primary economic environment in which they operate. The functional currency of the Mexican subsidiaries is the Mexican peso ("MXP"). As a result of the acquisition of the Porcupine Complex, the Company is currently evaluating a change in functional and presentation currency to USD.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that

date. Non-monetary items that are measured in terms of historical cost in foreign currencies are not re-translated. Total foreign exchange gains and losses are recognized in the condensed interim statements of loss and the unrealized portion is reported separately in the condensed interim consolidated statement of cash flows. The foreign exchange differences arising from the translation of the subsidiary with functional currency different than the consolidated functional currency are recognized as currency translation adjustments in other comprehensive income in the condensed interim consolidated statement of (income) loss and total comprehensive income.

On initial acquisition, mineral properties and equipment are valued at cost, being the purchase price and the directly attributable costs of acquisition. The Company capitalizes cash and share-based payments made to acquire mineral properties. Land is stated at cost less any impairment in value and is not depreciated. Exploration and evaluation costs are capitalized if a pre-feasibility study demonstrates that future economic benefits are probable. Upon disposal or abandonment, the carrying amount of mineral properties are derecognized and any associated gains or losses are recognized in profit and loss.

Depreciation

Depreciation is recognized in earnings or loss on a straight-line basis over the estimated useful lives of each part of an item (component), since this most closely reflects the expected pattern of consumption of economic benefits embodied in the asset. The estimated useful lives for assets and components that are depreciated on a straight-line basis range from three to 10 years.

Depreciated assets

Useful Life

Computer equipment and software

3 years

Vehicles

4 years

Office equipment and furniture

5 to 10 years

Buildings and machinery

5 to 10 years

Impairment

The carrying values of mineral properties are reviewed each reporting period or upon the occurrence of events or changes in circumstances indicating that the carrying values of assets may not be recoverable. If any such indicator exists, then an impairment test is performed by management. Indicators of impairment may include (i) the period during which the entity has the right to explore in the specific area has expired during the year or will expire in the near future; (ii) substantive expenditure on further exploration for and evaluation of mineral reserves and resources in the specific area is neither budgeted nor planned; (iii) sufficient data exists to support that extracting the reserves and resources will not be technically feasible or commercially viable based on technical studies or desktop studies; and (iv) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed

the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior periods. A reversal of an impairment loss is recognized immediately in earnings or loss.

Where an item of mineral properties and equipment is disposed of, it is derecognized and the difference between its' carrying value and net sales proceeds is disclosed as earnings or loss on disposal in the consolidated financial statements of operations and total comprehensive loss. Any items of mineral properties and equipment that cease to have future economic benefits are derecognized with any gain or loss included in the financial year in which the item is derecognized.

Exploration and evaluation expenditures are comprised of costs that are directly attributable to: researching and analyzing existing exploration data, conducting geological studies, exploratory drilling and sampling, examining and testing extraction and treatment methods, and compiling economic studies. Exploration expenditures are costs incurred in the search for resources suitable for commercial exploitation. Evaluation expenditures are costs incurred in determining the technical feasibility and commercial viability of a mineral resource. Exploration and evaluation expenditures are capitalized when there is a high degree of confidence in the project's viability and thus it is probable that future economic benefits will flow to the Company. When a project is considered to no longer have commercially viable prospects for the Company, exploration and evaluation costs in respect of that property are assessed as impaired and written off to the statement of loss and total comprehensive loss. The Company also assesses mineral property costs for impairment when other facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

Adoption of New Accounting Standards

There were no new standards, or amendments to standards and interpretations adopted by the Company, effective January 1, 2025.

Future Accounting Standards and Interpretations

Classification and Measurement of Financial Instruments (Amendment to IFRS 9 and IFRS 7)

The amendments clarify that financial assets and financial liabilities are recognized and derecognized at settlement date except for regular way purchases or sales of financial assets and financial liabilities meeting conditions for a new exception. The new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems earlier than the settlement date.

They also provide guidelines to assess contractual cash flow characteristics of financial assets, which apply to all contingent cash flows, including those arising from environmental, social, and governance

ESG linked features. Additionally, these amendments introduce new disclosure requirements and update others.

This amendment is effective for annual periods beginning on or after January 1, 2026. The impact of

these amendments on the Company's financial statements has not yet been evaluated.

Presentation and Disclosure in Financial Statements ("IFRS 18")

IFRS 18 replaces IAS 1 - Presentation of Financial Statements, which sets out presentation and base disclosure requirements for financial statements. The changes, which mostly affect the income statement, include the requirement to classify income and expenses into three new categories -operating, investing and financing - and present subtotals for operating profit or loss and profit or loss before financing and income taxes.

Further, operating expenses are presented directly on the face of the income statement - classified either by nature (e.g. employee compensation), by function (e.g. cost of sales) or using a mixed presentation. Expenses presented by function require more detailed disclosures about their nature.

IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in the financial statements, introduces new disclosure requirements for management-defined performance measures ("MPMs") and eliminates classification options for interest and dividends in the statement of cash flows. Non-GAAP measures that meet the definition of MPMs will be subject to the disclosure requirements

This amendment is effective for annual periods beginning on or after January 1, 2027. The impact of

these amendments on the Company's financial statements has not yet been evaluated.

The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires management to make judgments and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, contingent liabilities, income and expenses. Actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and applied prospectively.

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the interim financial statements for the three months ended March 31, 2025, are consistent with those applied and disclosed in note 5 of the Consolidated Financial Statements for the years ended December 31, 2024 and 2023. The Company's interim results are not necessarily indicative of its results for a full year.

March 31,

December 31,

2025

2024

Cash

14,765,274

28,960,579

Cash equivalents

350,000

15,115,274

29,310,579

Cash equivalents include marketable securities with short-term maturities of three months or less at inception and no restrictions on redemption.

March 31,

December 31,

2025

2024

Sales and value-added tax receivable (a)

5,731,358

5,271,893

Other receivables

55,148

82,896

5,786,506

5,354,789

The Company pays sales in Canada ("HST") and its Mexican subsidiaries pay value-added tax, Impuesto al Valor Agregado ("IVA") on the purchase of goods and services. Both HST and IVA paid is recoverable but subject to review and assessment by the respective tax authorities - Canada Revenue Agency ("CRA") and the Mexican tax authority ("SAT"). The complex application process and detailed review by SAT in Mexico can impact the collectability and timing of refunds.

The Company has classified 100% of the HST receivable balance of $750,931 as a current asset as amounts are refunded by the CRA within twelve months following the return being filed. The Company exercises judgement in classifying the current and non-current portions of the IVA receivable balance however, the timing of refunds can vary based on SAT's review process. IVA which is estimated to be collected within the next twelve months is recorded as a current receivable while IVA expected to be collective beyond twelve months is classified as a non-current receivable. The Company has recorded $2,774,650 as the current portion of the IVA receivable, and $2,205,777 as a non-current receivable.

Equipment

Vehicles

Office, Furniture &

Other

Computer

Total

Cost

Balance at January 1, 2025

1,136,897

412,419

2,485,101

346,622

4,381,039

Additions

4,072

1,056,000

34,743

1,094,815

Disposals

Currency translation

adjustment

18,209

4,765

28,127

2,756

53,857

Balance at March 31, 2025

1,159,178

417,184

3,569,228

384,121

5,529,711

Accumulated depreciation

Balance at January 1, 2025

(413,416)

(389,981)

(489,846)

(312,278)

(1,605,521)

Additions

(18,803)

(8,315)

(48,769)

(6,786)

(82,673)

Currency translation

adjustment

(11,115)

(4,476)

4,704

(2,971)

(13,858)

Balance at March 31, 2025

(443,334)

(402,772)

(533,911)

(322,035)

(1,702,052)

Carrying amount

Equipment

Vehicles

Office, Furniture &

Other

Computer

Total

At January 1, 2025

723,481

22,438

1,995,255

34,344

2,775,518

At March 31, 2025

715,844

14,412

3,035,317

62,086

3,827,659

Equipment

Vehicles

Office, Furniture

& Other

Computer

Total

Cost

Balance at January 1, 2024

1,255,535

427,535

759,733

358,330

2,801,133

Additions

83,084

38,923

1,744,794

19,553

1,886,354

Disposals

(7,021)

Currency translation

adjustment

(201,722)

(54,039)

(12,405)

(31,261)

(299,427)

Balance at December 31, 2024

1,136,897

412,419

2,485,101

346,622

4,381,039

Accumulated depreciation

Balance at January 1, 2024

(336,448)

(332,853)

(343,261)

(277,125)

(1,289,687)

Additions

(89,410)

(70,282)

(178,730)

(40,639)

(379,061)

Currency translation

adjustment

12,442

13,154

32,145

5,486

63,227

Balance at December 31, 2024

(413,416)

(389,981)

(489,846)

(312,278)

(1,605,521)

Carrying amount

Equipment

Vehicles

Office, Furniture

& Other

Computer

Total

At January 1, 2024

919,087

94,682

416,472

81,205

1,511,446

At December 31, 2024

723,481

22,438

1,995,255

34,344

2,775,518

The Company following table summarizes the changes in right-of-use assets within plant and equipment:

Leased assets

Total

At January 1, 2024

388,833

ROU Additions

1,737,604

Depreciation

(144,774)

At December 31, 2024

1,981,663

ROU Additions

1,056,000

Depreciation

(14,707)

At March 31, 2025

3,022,956

At January 1, 2024

80,395,288

Currency translation adjustment

(6,601,988)

Additions

11,155,972

At December 31, 2024

84,949,272

Currency translation adjustment

868,461

Additions

4,431,541

At March 31, 2025

90,249,274

Costs Capitalized to the Cordero Mineral Property

March 31,

2025

December 31,

2024

Permitting and Legal

29,857

268,800

Mining duties

510,748

924,944

Camp cost, site access and vehicles

118,538

1,718,556

Salaries and benefits

1,077,914

3,743,562

Project evaluation and geophysics

92,483

3,722,861

Administrative and other expenses

146,231

344,985

Environment, Social and Governance

40,327

432,264

Land Acquisition(1)

2,415,443

4,431,541

11,155,972

(1)On March 19, 2025, the Company acquired 66 hectares of land for USD$1.8M and now owns 100% of the land required for the development of the Cordero property.

March 31,

December 31,

2025

2024

Trade and other payables(1)

1,977,703

1,936,828

Salaries and benefits payable(2)

1,865,133

3,243,341

Accrued liabilities(3)

3,893,209

3,179,469

7,736,045

8,359,638

(1)At March 31, 2025 and December 31, 2024, trade and other payables were comprised primarily of amounts payable for business development and environmental studies.

(2)Salaries and benefits payable were comprised of short-term incentive amounts payable to executive management and employees.

(3)Accrued liabilities is comprised primarily of the final instalment of USD$2,500,000 related to the acquisition of land during 2023 to be paid in May 2025 (note 10).

March 31,

December 31,

2025

2024

Lease liabilities

1,342,958

1,465,487

Less: current portion

241,483

247,674

Non-current portion

1,101,475

1,217,813

(1)During 2022, the Company renewed the corporate office lease for an additional five-year term at an incremental borrowing rate of 3.95%, and during 2024 the Company signed a 30-year surface access agreement in Mexico at an incremental borrowing rate of 10.91%.

Unlimited common shares with no par value; and

Unlimited preferred voting shares with no par value.

Note

Common Shares

Amount

At January 1, 2024

395,862,249

216,194,163

Shares issued on exercise of options

12c

3,468,450

2,625,456

Shares issued on exercise of RSUs

12d

1,130,545

1,391,509

At December 31, 2024

400,461,244

220,211,128

Shares issued on exercise of options

12c

50,000

57,946

Shares issued on exercise of RSUs

12d

1,837,129

2,151,329

At March 31, 2025(1)

402,348,373

222,420,403

(1)Refer to Note 13 for equity issued subsequent to March 31, 2025.

The non-cash share-based compensation expense for the three months ended March 31, 2025, was

$1,673,645 (year ended March 31, 2025 - $881,496).

The Company has adopted a rolling 10% stock option plan (the "Option Plan") which provides that the Company's Board of Directors (the "Board") may grant options to purchase common shares of the Company to directors, officers, employees and service providers, with the number of options being limited to 10% of the issued common shares at the time of granting of options. This 10% limit is in aggregate and is shared with the Company's RSU and DSU plans (note 12d). The Board in its sole discretion may determine any vesting provisions for options. The exercise price shall be determined by the directors of the Company at the time of grant in accordance with the provisions of the Option Plan. The expiry date for an option shall not be more than ten years from the grant date.

There were no options granted during the three months ended March 31, 2025 or 2024. Option transactions and the number of options outstanding are summarized as follows:

Outstanding

Weighted Average Exercise Price

At January 1, 2024

19,993,658

1.44

Options exercised

(3,468,450)

0.49

Options forfeited

(673,333)

1.93

At December 31, 2024

15,851,875

1.63

Options exercised

(50,000)

0.65

At March 31, 2025

15,801,875

1.63

At March 31, 2025, the options outstanding and exercisable are as follows:

Options Outstanding

Options Exercisable

Exercise Price

Number

Weighted average

remaining life

Weighted average

exercise price

Number

Weighted average

remaining life

Weighted average

exercise price

$0.47

2,930,000

0.07

$0.47

2,930,000

0.07

$0.47

$1.89

4,696,875

0.79

$1.89

4,696,875

0.79

$1.89

$2.08

300,000

0.95

$2.08

300,000

0.95

$2.08

$1.77

200,000

1.59

$1.77

200,000

1.59

$1.77

$2.05

5,575,000

1.77

$2.05

5,184,375

1.77

$2.05

$1.76

400,000

2.03

$1.76

400,000

2.03

$1.76

$1.38

100,000

2.15

$1.38

100,000

2.15

$1.38

$1.42

1,600,000

2.82

$1.42

533,333

2.82

$1.42

15,801,875

0.64

$1.63

14,344,583

0.57

$1.64

Black-Scholes pricing models require the input of highly subjective assumptions. Volatility is estimated based on average daily volatility based on historical share price observations over the expected term of the option grant.

The Company has adopted rolling 10% DSU and RSU Plans, that share the 10% threshold with the 10% rolling Option Plan (note 12c). The combined aggregate total Options, DSUs, and RSUs granted cannot exceed 10% of the issued and outstanding common shares of the Company.

The DSU Plan provides that the Board may grant DSUs to non-executive directors of the Company, to be settled in cash or common shares of the Company, at the discretion of the Board. The RSU Plan provides that the Board may grant RSUs to eligible officers, and employees, to be settled in cash or common shares of the Company, at the discretion of the Board. The Board in its sole discretion may determine any vesting provisions for DSUs and RSUs. The following tables reflect the continuity of RSUs and DSUs granted and redeemed.

Number of RSU's

Weighted average market price on

redemption

At January 1, 2024

3,491,631

RSUs granted

3,239,529

RSUs redeemed

(1,130,545)

0.82

At December 31, 2024

5,600,615

RSUs granted

3,428,689

RSUs redeemed

(1,837,129)

1.57

At March 31, 2025

7,192,175

The RSUs are each redeemable for one common share of the Company and vest annually in three equal tranches beginning on the first anniversary of each grant date.

Number of DSU's

Weighted average market price on

redemption

At January 1, 2024

1,475,997

DSUs granted

900,000

At December 31, 2024

2,375,997

DSUs granted

877,284

At March 31, 2025

3,253,281

The DSUs vest on the first anniversary of each grant date but may only be redeemed on the termination date of a director, in accordance with the DSU Plan.

Warrants are classified as equity, separately from common shares and are valued at their fair value on grant date using the Black-Scholes pricing model. There were 3,900,000 warrants issued on closing of the Transaction on April 15, 2025 (note 21) (three months ended March 31, 2024 - nil issued or outstanding).

Exploration and project evaluation expenditures are those costs not directly attributable to the Cordero Project. These costs include permitting, surface access, drilling, mapping, sampling and assaying, geophysics, salaries and benefits and other costs pertaining primarily to the Company's property-wide exploration program. During the three months ended March 31, 2025, the Company spent $5,170 in exploration expenses (three months ended March 31, 2024 - $153,447).

Three Months Ended

March 31,

2025

2024

Travel

44,500

57,123

Salaries and benefits

1,073,389

1,084,487

Shareholder communication and investor relations

218,498

90,443

Filing and transfer agent fees

264,608

129,326

Rent

56,268

55,261

Depreciation

82,672

165,302

General office and other

468,386

359,533

Business development(1)

5,014,243

7,222,564

1,941,475

(1) Costs include legal, consulting, advisory and other expenses primarily related to the evaluation and acquisition of the Porcupine Complex.

Three Months Ended

March 31,

2025

2024

Legal

747

31,754

Audit, tax and accounting

286,047

148,153

Consulting and other

375,738

324,117

662,532

504,024

The Company defines capital as its shareholder's equity (comprised of issued share capital, contributed surplus and deficit). The Company's objectives when managing capital are to support the Company's main activities of identifying, defining, and developing mineral deposits, with the goal of creating shareholder value, as well ensuring that the Company will be able to meet its financial obligations as they become due.

The Company manages its capital structure to maximize its financial flexibility to enable the Company to respond to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The current excess funds realized from the non-brokered private placements are invested in highly liquid, interest-bearing marketable securities with no restrictions on redemption.

At March 31, 2025, the Company does not have any long-term debt outstanding and is not subject to any externally imposed capital requirements or debt covenants. There was no change to the Company's approach to capital management during the three months ended March 31, 2025.

The Company's financial instruments consist of cash and cash equivalents, other receivable and deposits, investments in marketable securities, accounts payable and accrued liabilities and lease liabilities.

Cash and cash equivalents, accounts receivable and deposits are classified as receivables and are measured at amortized cost using the effective interest method. Investments in marketable securities are classified as receivables and are measured at fair value through profit and loss. Accounts payable and accrued liabilities are classified as other financial liabilities and are measured at amortized cost. These financial instruments approximate their fair value due to their short-term nature.

The fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Financial instruments are classified into one of three levels in the fair value hierarchy according to the degree to which the inputs used in the fair value measurement are observable.

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3: Inputs that are not based on observable market data.

At March 31, 2025 the Company had no financial instruments classified as Level 2 or 3.

The Company is exposed to financial risks, including credit risk, liquidity risk, currency risk, interest rate risk and price risk. The aim of the Company's overall risk management strategy is to reduce the potential adverse effect that these risks may have on the Company's financial position and results. The Company's Board of Directors has overall responsibility and oversight of management's risk management practices. Risk management is carried out by the Board through the Audit Committee and Nominating and Corporate Governance Committee with the policies being recommended for approval by the Board of Directors at least annually or when changes are required.

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. At March 31, 2025, the Company had a cash and cash equivalents balance of $15,115,274 (December 31, 2024 - $29,310,579) to settle current liabilities of $7,977,528 (December 31, 2024 - $8,607,312). The Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

At March 31, 2025, the Company has no sources of revenue to fund its operating and development expenditures and has historically relied solely on non-brokered private placements to fund its operations. The Company's cash balance at March 31, 2025 is sufficient to fund the 2025 work program related to current operations as well as the existing administrative needs. The Company may require additional financing to accomplish long-term strategic objectives. Future funding may be obtained by means of an equity or debt financing (refer to note 21 for an update on equity and debt financing).

Credit risk is the risk that one party to a financial instrument will fail to fulfill an obligation and cause the other party to incur a financial loss. The Company's cash and cash equivalents, short-term investments, accounts receivable and prepaids and deposits are exposed to credit risk. The Company has assessed the credit risk on its cash and cash equivalents and short-term investments as low as its funds are held in several highly rated Canadian financial institutions.

The Company's maximum exposure to credit risk related to certain financial instruments as identified below, approximates the carrying value of these assets on the Company's unaudited condensed interim consolidated statements of financial position.

March 31,

December 31,

2025

2024

Cash and cash equivalents

15,115,274

29,310,579

Other receivables

55,148

82,896

Deposits

96,756

114,501

15,267,178

29,507,976

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and equity prices.

Interest rate risk

The Company has significant cash balances and no interest-bearing debt. The Company's

current policy is to invest excess cash in high-yield savings accounts or other highly liquid

interest-bearing short-term investments. The Company regularly monitors its cash management policy.

Foreign currency risk

The Company's functional currency is the Canadian dollar. At March 31, 2025, cash balances were held primarily in Canadian and US dollars. Foreign currency risk is the risk that the value of the Company's financial instruments denominated in foreign currencies will fluctuate due to changes in foreign exchange rates. Changes in the exchange rate between foreign currencies and the Canadian dollar could have a significant impact on the Company's financial position, results of operations, and cash flows.

The Company does not currently use derivative instruments to reduce its exposure to foreign currency risk, however exchange rates are continually monitored for any significant changes. A portion of the Company's exploration expenses are paid in USD, and over the past two years the Company converted a portion of its CAD cash balances into USD to reduce its currency risk exposure related to the CAD.

The Company is mainly exposed to foreign currency risk on financial instruments (consisting of trade payables) denominated in USD and MXP.

At March 31, 2025 and December 31, 2024, the Company had the following foreign currency denominated trade payables:

March 31,

December 31,

2025

2024

United States dollar

3,795,463

3,798,895

Mexican Peso

912,658

898,268

4,708,121

4,697,163

It is estimated that a 10% fluctuation in the United States Dollar and Mexican Peso against the Canadian Dollar would affect net loss at March 31, 2025 by approximately $470,812 (December 31, 2024 - $469,716).

Price risk

The Company is exposed to price risk with respect to commodity prices and prices of equity securities. Equity security price risk is defined as the potential adverse impact on the Company's net income or loss due to movements in individual prices of equity securities or price movements in the stock market generally. Commodity price risk is defined as the potential adverse impact on net income or loss and economic value due to commodity price movement and volatility. The Company closely monitors commodity prices, particularly as they relate to base and precious metals, and movements in the price of individual equity securities, and movements in the stock market generally, to assist in determining the appropriate course of action to be taken by the Company.

Operating segments are components of an entity whose operating results are regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance and for which separate financial information is available.

The Company has one operating segment, which is involved in the exploration and development of polymetallic mineral deposits. All of the Company's mineral properties are located in Mexico.

Segment performance is evaluated based on several operating and financial measures, including net loss and total comprehensive loss, which is measured consistently with net loss and total comprehensive loss in the consolidated financial statements.

The net loss and total comprehensive loss (income) are distributed by geographic region as follows:

Three Months Ended March 31,

2025

20234

Canada

8,210,423

1,106,319

Mexico

185,312

(2,224,399)

Total comprehensive loss (income)

8,395,735

(1,118,080)

Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as well as those personnel with responsibility for the oversight of the Company's activities. The Company has determined that key management personnel consist of executive and non-executive members of the Company's Board of Directors and corporate officers.

Related party transactions for the years ended March 31, 2025 and 2024 are as follows:

Three Months Ended

March 31,

Transaction Type

Nature of Relationship

2025

2024

Non-cash share-based payments

Directors and officers

881,496

818,418

Salaries and benefits

Officers

727,297

670,666

Director fees

Directors

87,500

1,696,293

1,576,584

A summary of amounts due to related parties:

March 31,

December 31,

Transaction Type

Nature of Relationship

2025

2024

Salaries and benefits payable

Directors, officers, and employees

1,865,133

3,243,111

1,865,133

3,243,111

On April 15, 2025, the Company announced the completion of the previously announced acquisition (the "Transaction") of Newmont Corporation's Porcupine Operations (the "Porcupine Complex" or "Porcupine") for a total consideration of USD$425 million. The consideration paid to Newmont on closing of the Transaction consisted of USD$200 million in cash and USD$75 million through the issuance of approximately 119.7 million common shares of Discovery, and USD$150 million of deferred consideration to be paid in four annual cash payments of USD$37.5 million commencing on December 31, 2027.

To fund the Transaction and provide liquidity in support of operating and growing the Porcupine Complex, Discovery received approximately USD$555 million of financing (the "Financing Package"), including USD$400 million related to royalty and debt agreements with Franco Nevada Corporation ("Franco Nevada") and approximately USD$155 million from a bought deal public offering of subscription receipts (the "Bought Deal"). As part of the Financing Package with Franco-Nevada, on closing of the transaction, the Company issued 3,900,000 share purchase warrants, exercisable at $0.95 with a 3-year expiry.

The Bought Deal closed on February 3, 2025 and pursuant to the requirement of the Toronto Stock Exchange a special meeting was held on March 27, 2025 to obtain shareholder approval (the "Special Meeting"). Pursuant to the Bought Deal, the Company issued an aggregate of 275,000,000 Subscription Receipts at an issue price of C$0.90 per Subscription Receipt, for gross proceeds of C$247,500,000, which included 25,000,000 Subscription Receipts issued pursuant to the exercise, in full, of the over-allotment option granted to the underwriters in connection with the Bought Deal. With the closing of the Transaction, the common shares of Discovery issuable pursuant to the 275,000,000 Subscription Receipts were automatically issued through CDS Clearing and Depository Services Inc. in accordance with the terms of the Subscription Receipts, as applicable, on a one-for-one basis and the Subscription Receipts were delisted as at the close of business on April 15, 2025.

Prior to the closing of the Transaction, Porcupine was transferred into a newly formed corporation, Dome Mine Ltd. pursuant to an asset purchase agreement. On closing of the Transaction, all of the issued and outstanding common shares of Dome Mine Ltd. were sold to Discovery pursuant to a share purchase agreement.

Disclaimer

Discovery Silver Corp. published this content on May 14, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 14, 2025 at 01:29 UTC.