Dynacor Group Inc. - Management Reports 2022

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Dynacor Gold Mines Inc.

Management Discussion and Analysis For the year ended

December 31, 2021

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Index

MANAGEMENT DISCUSSION AND ANALYSIS ........................................................................................ 3 Message from the President,..................................................................................................................... 3 Introduction ................................................................................................................................................ 5 Responsibility of financial reports .............................................................................................................. 5 Business and strategy ............................................................................................................................... 6 Covid-19 Update ........................................................................................................................................ 6 1-2021 OVERVIEW AND HIGHLIGHTS ...................................................................................................... 7 2-KEY ECONOMIC TRENDS ....................................................................................................................... 9 Gold market price ...................................................................................................................................... 9 Exchange rates .......................................................................................................................................... 9 3-OVERALL PERFORMANCE ................................................................................................................... 10 4-CONSOLIDATED RESULTS AND GOLD ORE PROCESSING OPERATIONS ................................... 13 Extract from the Consolidated Statement of net income and comprehensive income............................ 13 Production, sales and gross operating margin ........................................................................................ 14 Net income and comprehensive income variance analysis .................................................................... 15 Reconciliation of non-IFRS measures ..................................................................................................... 16 5-CONSOLIDATED CASH FLOW AND LIQUIDITY .................................................................................. 19 6-CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................ 21 7-SELECTED ANNUAL INFORMATION AND QUARTERLY REVIEW ................................................... 23 8-INFORMATION ON OUTSTANDING SHARES ...................................................................................... 24 9-TRANSACTIONS WITH RELATED PARTIES ....................................................................................... 25 10-MINING EXPLORATION PROPERTIES ............................................................................................... 26 11- OUTLOOK 2022 ................................................................................................................................... 26 12-RISKS AND UNCERTAINTIES ............................................................................................................. 27 RISK FACTORS ...................................................................................................................................... 27 OPERATIONAL RISKS ........................................................................................................................... 27 FINANCIAL RISKS .................................................................................................................................. 33 13-JUDGMENTS, ESTIMATES AND ASSUMPTIONS ............................................................................. 35 14-ACCOUNTING POLICIES AND MODIFICATIONS .............................................................................. 36 15-NON-IFRS MEASURES ........................................................................................................................ 36 16-DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING ............................................................................................................................................... 36 17-CAUTION REGARDING FORWARD LOOKING STATEMENTS ........................................................ 37 18-CORPORATE INFORMATION ............................................................................................................. 38

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

MANAGEMENT DISCUSSION AND ANALYSIS

Message from the President,

Dear Shareholders,

The year 2021 has been an exceptional year for Dynacor. Despite difficult conditions due to the COVID-19 pandemic, we have managed to reach and surpass the symbolic milestone of one hundred thousand ounces of gold produced and, as a result, to almost double our sales from US$102 million in 2020 to US$196 million in 2021.

This significant achievement is due to the plant expansion increasing our ore processing capacity, which was implemented ahead of schedule, and most importantly, to the continued hard work and support of our employees during a particularly challenging work period. Without a doubt, our employees are the foundation of the company's continued growth over its 15-year history.

As planned, we expanded our ore supply base and increased our mill capacity to 430 tonnes/day, representing a 25% increase in production capacity. The average grade of ore purchased was also higher than originally forecasted, setting new records for production, sales and earnings. These results allowed us to increase the dividend paid to our shareholders faster than expected, with a 33% increase in June 2021 and an additional 25% increase starting in January 2022.

With these excellent results, we start the new year in a strong financial position that will allow us to make the necessary investments to improve our operations and continue our growth.

Hoping that the worst of the pandemic is behind us, we plan to update our strategic plan and publish its outline later this year. We are confident that we will continue to increase our sales over the next five years, both in Peru and in other jurisdictions.

In 2021, through our subsidiary Veta Dorada, Dynacor was Peru's tenth largest exporter of gold and the largest processor of gold ore derived exclusively from ores produced by artisanal and small-scale miners (ASM). Our goal in 2022 is to expand our business model to other jurisdictions and be the international leader in this type of operation.

To meet this expansion objective, we have begun planning an intensive employee training program and the implementation of actions to improve the traceability of the gold produced in collaboration with our client PX Precinox S.A.

Dynacor also presented its first ESG report in 2021, in which the main results of our environmental, social and governance performance, corresponding to the years 2019 and 2020, were published in a transparent manner. In 2022, we also plan to publish our second ESG report, taking into account material issues that meet the expectations of our stakeholders, who have been consulted.

With regard to the PX-Impact program, whose funds are managed by the International Fund for Artisanal Miners (Fidamar), investments have been made in relation to two main areas of activity: helping ASMs in the formalization process and social investments, mainly for early childhood education and vulnerable populations.

In addition, in order to remain a leader in the ASM gold ore processing market and to continue to grow steadily, we have incorporated actions such as our new code of conduct and human rights policy, among others, to improve the environmental and social sustainability of the company.

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

I would like to take this opportunity to thank all of our employees for their outstanding efforts during 2021, which allowed us to exceed all of our expectations. Also thank our shareholders for their confidence in our business model.

We will continue to strengthen our business model to create value for all our stakeholders.

(S) Jean Martineau

President and CEO, Dynacor Gold Mines inc.

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Introduction

This Management Discussion and Analysis (the “MD&A”) for Dynacor Gold Mines Inc. (“Dynacor” or the “Corporation”) is intended to help the reader understand the strategy, continuing operations and financial performance of the Corporation and comments on the Corporation’s major activities which have occurred during the year ended December 31, 2021, as well as the subsequent period up to March 29, 2022. This MD&A should be read in conjunction with Dynacor’s audited consolidated financial statements as at and for the year ended December 31, 2021 (the “Financial Statements”).

The Corporation has prepared the MD&A with reference to National Instrument 51-102, “Continuous Disclosure Obligations” of the Canadian Securities Administrators.

All amounts are in United States dollars (in “US dollars”), unless otherwise indicated, which is the Corporation’s presentation and functional currency.

Where we say “we”, “us”, “our”, the “Corporation” or “Dynacor”, we mean Dynacor Gold Mines Inc. and/or one or all of its subsidiary, as it may apply. The information provided herein, effective as of March 29, 2022, is based on assumptions related to future events and results, which may vary. Further information on the Corporation and its operations has been filed electronically on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Responsibility of financial reports

Management is responsible for the preparation of the Financial Statements and the MD&A. The Corporation’s Board of Directors (the “Board”) has the responsibility to ensure that management assumes its responsibilities with regards to the preparation of the Financial Statements and the MD&A. To assist management, the Board has created an Audit Committee. The Audit Committee meets with management to discuss the operating results and the financial situation of the Corporation. It then makes its recommendations and submits the Financial Statements and the MD&A to the Board for their review and approval. Following the recommendation of the Audit Committee, the Board has approved the Financial Statements and the MD&A on March 29, 2022.

The Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. Consequently, all comparative financial information presented in the MD&A reflects the consistent application of IFRS. The Financial Statements have been filed electronically on SEDAR at www.sedar.com.

Listing

Dynacor is a publicly traded Corporation listed on the Toronto Stock Exchange (“TSX”) under the symbol “DNG”.

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Business and strategy

Dynacor’s activities consist of the production of gold and silver from the processing of purchased ore and the exploration of its mining properties located in Peru, with the potential for commercial extraction of gold and other precious metals. The Corporation purchases ore from local government registered artisanal ore producers from various regions of Peru which is then processed at its wholly owned milling facility to produce gold dores and silver pellets which are sold internationally at market prices. All the Corporation’s gold sales were with one sole customer. However, management considers economic dependence does not exist as the Corporation can sell its gold to numerous clients worldwide. The Corporation also owns the rights on several mining properties which are at the exploration stage, including its flagship exploration gold, copper, and silver prospect, the Tumipampa property (“Tumipampa”). During 2019, the Corporation has entered into an agreement with a group of artisanal miners for them to extract ore from Tumipampa which we then purchase and transport to our plant for process. A total volume exceeding 1,900 tonnes was extracted since 2019.

The Corporation’s strategy is to maximize shareholders’ value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities. With its ore processing activities, Dynacor has succeeded in implementing and growing a solid source of cash flow which enables the Corporation to fund its current capital need and any exploration and development program of its exploration assets, as well as to face difficult market conditions by not being required to rely on the equity markets to raise capital. During 2021, the Corporation increased its Veta Dorada processing plant capacity by 25% and is looking for additional increase capacity in 2022.

In July 2021, the Corporation obtained a favorable court order for the release of more than 60% of the 2,650 ounces shipment retained by the Peruvian authorities in December 2019. The portion of the shipment subject to the court order was exported during the third quarter. The Corporation cannot predict at this time when the remaining portion of the retained shipment will be released by the authorities and therefore this retained portion is still classified under other non-current assets as at December 31, 2021.

Covid-19 Update

In 2020, the Covid-19 became a worldwide crisis. Following the state of emergency decree in Peru, which was declared on March 16, 2020, the Corporation had to temporarily stop its ore purchase and process operations. On June 6, 2020, the Corporation successfully resumed its operations.

Vaccination campaign in Peru has progressed significantly in the second half of 2021 and the Corporation continued taking actions to protect its employees and suppliers as it pursued its operational growth. Although the pandemic appears to be losing strength worldwide, we cannot predict at this time if further waves of the virus in the near future could have a material impact on the Corporation’s activities, cash flow and liquidities.

Although the Corporation succeeded going through the crisis with limited effect, the duration and future impacts of this pandemic are still unknown, therefore it could have a prospective material impact on the Corporation’s activities, cash flow and liquidities. The Corporation has taken and will continue to take actions to minimize any eventual impacts.

The Covid-19 virus crisis and economic uncertainties impacted stock markets. The markets will remain volatile at least until this world crisis ends.

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

1-2021 OVERVIEW AND HIGHLIGHTS

OVERVIEW

Dynacor completed 2021 with both production and financial historical high performances on its way to its eleventh (11[th] ) consecutive year of profit. The Corporation achieved production record of 106,862 AuEq ounces powering total sales to $196 million a significant 93% increase compared to 2020, and a net income of $11.8 million.

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In mid-2021, the Corporation completed the expansion of its Veta Dorada plant reaching 430 tpd (+25% throughput compared to the previous 345 tpd). Thanks to its year opening high level of ore inventory and increasing volume of ore supplied, the mill has been able to operate at full capacity throughout the year averaging a 368 tpd processing rate.

The year 2020 was marked by the Covid-19 pandemic who led to a mandatory three-month shut-down of its Veta Dorada plant operations.

HIGHLIGHTS

( Variance % compared to 2020 are calculated based on rounded figures)

Operational

Increasing ore volume supplied. With a new record volume of ore supplied (more than 140,000 tonnes in 2021) and even though the mill ran at full capacity, the Corporation increased its year-end ore inventory level to over 14,000 tonnes which represents more than one month of production supply;
Increased plant capacity. In Q2-2021, the plant capacity was increased by 25%;
Highest volume processed. In 2021, the Veta Dorada plant processed a historical high volume of 134,269 tonnes of ore (368 tpd average) compared to 77,978 tonnes in 2020 (274 tpd excluding the impact of the temporary shut-down due to the Covid-19 pandemic), a 34% increase;
Increased grade of ore processed. The average grade of ore processed in 2021 increased by 20% compared to 2020;
Historical high gold production. In 2021, gold equivalent production amounted to 106,862 AuEq ounces compared to 51,369 AuEq ounces in 2020 a significant 108% increase.
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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Financial

Solid cash position . Cash on hand of $27.1 million at year-end 2021 compared to $11.9 million in 2020;
Higher gold production boost overall financial performance. Significant increases in all financial aspects;
Surpassed revised earning per share guidance by 20%. Dynacor recorded an historical high net income of $11.8 million in 2021 ($0.30 or CA$0.38 per share) compared to $4.3 million ($0.11 or CA$0.15 per share) in 2020;
Sales surged to almost $200 million . Thanks to an historical production of 106,862 AuEq ounces, sales of 109,303 AuEq ounces amounted to $195.9 million in 2021 compared with $101.5 million in 2020 a 93% increase;
Increased gross operating margin . Gross operating margin of $27.1 million in 2021, compared to $13.6 million in 2020;
Increased operating income . Operating income of $21.2 million compared to $9.5 million in 2020;
Strong cash gross operating margin . Cash gross operating margin of $269 per AuEq ounce sold[(1)] compared to $276 in 2020;
EBITDA surged to a record high . EBITDA[(2)] of $23.5 million, compared to $11.7 million in 2020;
Robust cash flows . Cash flows from operating activities before change in working capital items of $15.1 million ($0.39 per share)[(3)] compared to $8.6 million ($0.22 per share) in 2020.

Return to Shareholders

Monthly dividend policy. Since February 2021, a monthly dividend replacing a quarterly dividend is paid. Dividends totaling $2.5 million (CA$3.2 million) were paid in 2021;
Share buy-back . 441,340 common shares repurchased for $0.9 million (CA$ 1.2 million);
Increased dividends . A 33% increase in monthly dividends paid from June 2021, followed by an additional 25% increase from January 2022. On an annual basis, the 2022 dividend will represent CA$0.10 per share or more than 3% dividend yield based on the year-end 2021 share price;
Increased share price . On December 31, 2021, the market value of our share was CA$3.16 vs. CA$1.79 on December 31, 2020.

( Detailed variance calculations and explanations are contained in section 4)

(1) Cash gross operating margin per AuEq ounce is in US$ and is calculated by subtracting the average cash cost of sale per equivalent ounces of Au from the average selling price per equivalent ounces of Au and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

(2) EBITDA: “Earnings before interest, taxes and depreciation” is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. The Corporation uses this non-IFRS measure as an indicator of the cash generated by the operations and allows investor to compare the profitability of the Corporation with others by canceling effects of different assets basis, effects due to different tax structures as well as the effects of different capital structures. EBITDA is calculated on p.16 of this MD&A. See the “Non-IFRS Measures” section 15 of this MD&A.

(3) Cash-flow per share is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. This measure is calculated on p.16 of this MD&A. See the “Non-IFRS Measures” section 15 of this MD&A. The Corporation uses this non-IFRS measure which can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

2-KEY ECONOMIC TRENDS

Gold market price

During 2021, the market price of gold averaged $1,800/oz in 2021, compared to $1,770/oz in 2020, a 1.7% increase.

Below, the charts of the overall market price of gold for 2021 and 2020. In 2021, the gold market price fluctuated between $1,683/oz and $1,943/oz.

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So far in 2022, gold price has progressively increased averaging 1,874$/oz at 28 March. This will impact our level of sales and margin of Q1-2022.

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Exchange rates

The quarter-end and quarterly average exchange rates for 2021 and 2020 were as follows:

December 31 (closing rate) Q-4 (average rate) September 30 (closing rate) Q-3 (average rate) June 30 (closing rate) Q-2 (average rate) March 31 (closing rate) Q-1 (average rate) Total year (average rate)	US$/CA$ 2021 2020 1.268 1.273 1.260 1.303 1.274 1.334 1.260 1.332 1.239 1.363 1.228 1.385 1.258 1.419 1.266 1.345 1.254 1.341	US$/Soles 2021 2020
		3.985 3.618 4.012 3.602 4.128 3.595 4.043 3.544 3.929 3.519 3.794 3.428 3.762 3.435 3.660 3.394 3.877 3.494

Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Exchange rates (continued)

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During 2021, the US dollar has gained significant value over the Peruvian Sol (+10.1%) after gaining +9.1% in 2020.

The Corporation has not entered into any hedging contracts.

3-OVERALL PERFORMANCE

In 2021, more than 140,000 tonnes of ore were delivered to Veta Dorada, enabling the plant to run at its full capacity and processed over 134,000 tonnes of ore during the year.

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The level of tonnes processed represents a historical high for the Corporation.

(1) Considering 285 potential working days in 2020 (considering Covid-19 restrictions forcing plant shut-down between 16 March and 5 June 2020) and 365 days for all other years.
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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

3-OVERALL PERFORMANCE (continued)

In 2021, the number of tonnes processed increased throughout the year and notably between Q2 and Q3 due to the 25% plant increase capacity and the high level of ore inventory.

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Overall, in 2021, the average grade of ore processed increased by 20% compared to 2020. However, the Q4 production was affected by a significant decrease in average ore grade.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

3-OVERALL PERFORMANCE (continued)

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The 2021 gold production beneficiated from the increased capacity and from higher ore grades. In 2020 the Corporation gold production had suffered from the significant year over year decrease in grades of ore processed and the three-month forced shut-down, consequence of the Covid-19 pandemic.

As illustrated on page 9, the gold market average price was $1,800/oz in 2021compared to $1,770/oz in 2020 significantly higher than the three preceding years ($1,393/oz in 2019, $1,268/oz in 2018 and $1,257/oz in 2017). Our sales and our gross margin are impacted by both the gold market price and its trend (upward or downward).

Total sales for the year 2021 amounted to $195.9 million compared to $101.5 million in 2020. The increase is mainly due to a higher gold production and higher ounces sold.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

4-CONSOLIDATED RESULTS AND GOLD ORE PROCESSING OPERATIONS

Extract from the Consolidated Statement of net income and comprehensive income

(in $’000) Sales Cost of sales Gross operating margin General and administrative expenses Other projects Operating income Income before income taxes Current income tax expense Deferred income tax expense Net income and comprehensive income Earnings per share Basic Diluted	For the years ended December 31, 2021 2020
	195,906 101,533 (168,850) (87,928)
	27,056 13,605 (5,808) (3,944) (34) (145)
	21,214 9,516 20,639 8,958 (8,339) (3,427) (519) (1,196) 11,781 4,335 $0.30 $0.11 $0.30 $0.11

Total sales for the year 2021 were almost twice the sales of 2020. The increase is mostly explained by the increased number of gold ounces sold (+$92.0 million).

The gross operating margin beneficiating from the significant increase in sales amounted to $27.1 million in 2021 (13.8% of sales) compared to $13.6 million in 2020 (13.4% of sales).

General and administrative expenses amounted to $5.8 million in 2021. The 47.3% increase compared to 2020 is mainly due to increases in salaries expenses (ref. increase in level of activity), professional fees and in profit sharing.

The 2021 net income was again affected by the recording of a $0.7 million deferred income tax expense (non-cash) resulting from the declining value throughout the period of the Peruvian Sol against the US$ and consequently FX variances applied on long term assets local tax basis. At the end of 2021, a deferred tax liability totaling $2.0 million is recorded in this respect. Based on the current value of the Peruvian Sol vs. the US$, this deferred tax liability is expected to decrease in Q1-2022.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Production, sales and gross operating margin

Gold production and sales for the years and fourth quarters ended December 31, 2021 and 2020, are summarized as follows:

Gold Production (ounces) Gold Production (AuEq ounces) Gold sales (AuEq ounces) Total sales Total cash cost of sales(1) Cash gross operating margin(2) Depreciation Gross Operating margin Gross Operating Margin per AuEq ounce sold ($/ounce) Average gold market price ($/ounce) Cash gross operating margin per AuEq ounce sold Average selling price Average cash cost of sales(3) Cash gross operating margin(4)	For the years ended December 31, 2021 2020 ounces ounces 104,853 50,477 106,862 51,369 109,303 57,344 ($‘000) ($‘000) 195,906 101,533 (166,492) (85,717) 29,414 15,816 (2,358) (2,211) 27,056 13,605 248 237 1,800 1,770 $/ounce *() $/ounce** () 1,792 1,771 (1,523) (1,495) 269* 276	Fourth quarters ended December 31,
		2021 2020

		ounces ounces
		27,308 21,835
		27,826 22,263
		28,053 20,635

		($ ‘000) ($ ‘000)
		50,279 38,568
		(42,299) (32,629)
		7,980 5,939
		(610) (570)
		7,370 5,369
		263 260

		1,795 1,873

		$/ounce *() $/ounce** (*)
		1,792 1,869
		(1,508) (1,581)
		284 288

(*) per AuEq ounce sold

The cash gross operating margin amounted to $269/oz in 2021 vs. $276/oz in 2020. The decrease is mostly due to higher cost of ore purchased.

(1) Cash cost of sales is the cost of sales and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. See the “non-IFRS Measures” section 15 of this MD&A.

(2) Cash gross operating margin is calculated by deducting to the sales the cash cost of sales and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. See the “non-IFRS Measures” section 15 of this MD&A.

(3) Average cash cost of sales is calculated by dividing the cash cost of sales by sales volume in ounces and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

(4) Cash gross operating margin per AuEq ounce is calculated by subtracting the average cash cost of sale per equivalent ounces of Au from the average selling price per equivalent ounces of Au and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

These non-IFRS measures are used by management as indicators of the gross amount of cash which could be generated from the production of one unit (ounce) of gold.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Net income and comprehensive income variance analysis

The variance in the net income and comprehensive income between 2020 and 2021 is as follows:

(in million $) Net income 2020 Increase in gross operating margin Increase in general administrative expenses Decrease in other project expenses Decrease in write-off of exploration and evaluation assets Increase in foreign exchange loss Increase in current income tax expenses Decrease in deferred income tax expenses Total variances Net income 2021	2020 vs. 2021 4.3 13.5 (1.9) 0.1 0.2 (0.2) (4.9) 0.7
	7.5
	11.8

The gross operating margin variance and general administrative expenses which represents the main variance in net income were explained in the previous pages.

The variance in the net income and comprehensive income between Q4-2020 and Q4-2021 is as follows:

(in million $)	Q4-2020 vs. Q4-2021
Net income Q4-2020	1.4
Increase in gross operating margin	2.0
Increase in general administrative expenses	(0.2)
Decrease in foreign exchange loss	0.1
Increase in current income tax expenses	(0.7)
Decrease in deferred income tax expenses	1.4
Total variances	2.6
Net income Q4-2021	4.0

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Reconciliation of non-IFRS measures (in $'000) Reconciliation of net income and comprehensive income to EBITDA(1) Net income and comprehensive income Income taxes expense (current and deferred) Financial expenses Depreciation EBITDA(1) Reconciliation of net cash flow from operating activities before change in working capital items per share(2) Net cash flow from operating activities before change in working capital items (in $'000) Basic weighted average number of common shares outstanding (‘000) Net cash flow from operating activities before change in working capital items per share(2)	For the years ended December 31, 2021 2020
	11,781 4,335 8,858 4,624 229 178 2,639 2,514
	23,507 11,651
	15,069 8,559 38,867 38,843
	$0.39 $0.22

(1) EBITDA: “Earnings before interest, taxes and depreciation” is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-IFRS measure as an indicator of the cash generated by the operations and allows investor to compare the profitability of the Corporation with others by canceling effects of different assets basis, effects due to different tax structures as well as the effects of different capital structures. See the “Non-IFRS Measures” section 15 of this MD&A.

(2) Net cash-flow from operating activities before change in working capital per share is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. See the “Non-IFRS Measures” section 15 of this MD&A. The Corporation uses this non-IFRS measure which can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Ore processing production statistics and financial summary

Below is the table explaining the variances between the twelve-month periods ended December 31, 2021 and 2020.

Ore processing production statistics summary	Year 2021	Comments and explanations over variances	Year 2020	Variance in %
Tonnes processed	134,269	Due to the record ore purchases in 2021, to the 25% increase in plant capacity to 430 tpd and to the shut- downofoperationsinQ2-2020.	77,978	72.2
Average daily tonnes processed(1)	368	Consistent with variances in tonnesprocessed.	213	72.8
Average daily tonnes processed excluding Covid-19 plant shut-down(2)	368	Consistent with variances in tonnes processed and respective potential working days.	274	34.3
Ounces produced (Au)	104,853	Higher tonnage of ore processed at a higher average grade.	50,477	107.7
Ounces produced (AuEq ounce)	106,862	Higher tonnage of ore processed at a higher average grade.	51,369	108.0
Ounces sold (AuEq ounce)	109,303	In line with the production and the delayed shipments.	57,344	90.6
Financial summary
Sales (millions $)	195.9	Increase due to higher production and ounces sold (+$92.0 million) at higher selling prices (+$2.4 million) compared to 2020.	101.5	93.0
Average selling price per AuEq ounce sold ($)	1,792	Consistent with the market gold price.	1,771	1.2
Gross operating margin (millions $)	27.1	Increase mainly attributable to higher sales.	13.6	99.3
Gross operating margin (% of sales)	13.8%	In line with last year.	13.4%	3.0
Gross operating margin per AuEq ounce sold ($)	248	Consistent with the increase in average selling price and thegross operatingmargin as a % of sales.	237	4.6
Cash gross operating margin per AuEq ounce sold ($)	269	Cash cost of sales slightly impacted by higher purchased cost of ore.	276	(2.5)
EBITDA (millions $)	23.5	Consistent with the increase in gross operating margin.	11.7	100.9
Cash flows before changes in working capital items (millions $)	15.1	Consistent with the increase in gross operating margin, partially offset by higher general and administrative expenses and by current income taxes.	8.6	75.6
Net cash flow from operating activities before change in working capital items per share ($)	0.39	Consistent with the increase in cash flow before changes in working capital items.	0.22	77.3
Net income (millions $)	11.8	Increase mainly attributable to the higher gross operation margin (+$13.5 million) partially offset by an increase in general and administrative expenses (-$1.9 million) and in the income tax charge (-$4.2 million).	4.3	174.4
Earnings per share ($)	0.30	In line with changes in net income and the number of outstanding shares.	0.11	172.7

( Variance % are calculated based on these rounded figures)

(1) considering 365 days in 2021 and 366 days in 2020
(2) Considering 285 potential working days in 2020 (considering Covid-19 restrictions in Peru forcing mandatory plant shut-down between 16 March and 5 June 2020)
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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Ore processing production statistics and financial summary (continued)

Below is the table explaining the variances between the three-month periods ended December 31, 2021 and 2020.

Ore processing production statistics summary	Q4- 2021	Comments and explanations over variances	Q4- 2020	Variance in %
Tonnes processed	38,287	Due to the record ore purchases in Q4-2021 and to the 25% increase in plant capacity to 430 tpd.	28,769	33.1
Average daily tonnes processed(1)	416	Consistent with variances in tonnes processed.	313	32.9
Ounces produced (Au)	27,308	Higher tonnage of ore processed slightly offset by a lower average grade.	21,835	25.1
Ounces produced (AuEq ounce)	27,826	Higher tonnage of ore processed slightly offset by a lower average grade.	22,263	25.0
Ounces sold (AuEq ounce)	28,053	In line with production and variance in inventories.	20,635	35.9
Financial summary
Sales (millions $)	50.3	Increase due to higher production and ounces sold (+$13.9 million) at lower selling prices (-$2.1 million) compared to 2020.	38.5	30.6
Average selling price per AuEq ounce sold ($)	1,792	Consistent with the market gold price.	1,869	(4.1)
Gross operating margin (millions $)	7.4	Increase attributable to higher sales.	5.4	37.0
Gross operating margin (% of sales)	14.7%	Variance mainly attributable to the slightly upward trend in gold market price in Q4-2021 vs. downward trend in Q4-2020.	13.9%	5.8
Gross operating margin per AuEq ounce sold ($)	263	Consistent with the decrease in average selling price and increase in gross operating margin as a % of sales.	260	1.2
Cash gross operating margin per AuEq ounce sold ($)	284	Cash cost of sales slightly impacted by higher cost of ore.	288	(1.4)
EBITDA (millions $)	6.7	Consistent with the increase in gross operating margin.	4.8	39.6
Cash flows before changes in working capital items (millions $)	4.4	Consistent with the increase in gross operating margin.	3.1	41.9
Net cash flow from operating activities before change in working capital items per share ($)	0.11	Consistent with the increase in gross operating margin.	0.08	37.5
Net income (millions $)	4.0	Increase mainly attributable to the higher gross operation margin (+$2.0 million) and by a decrease in the income tax charge (+$0.7 million).	1.4	185.7
Earnings per share ($)	0.10	In line with changes in net income and the number of outstanding shares.	0.04	150.0

( Variance % are calculated based on these rounded figures)

(1) considering 92 potential quarter calendar working days

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

5-CONSOLIDATED CASH FLOW AND LIQUIDITY

The impacts of all the activities impacting the Corporation’s cash flow are summarized below:

(in $'000) Operating activities Net income, adjusted for non-cash items Change in working capital items Net cash (used in) from operating activities Investing activities Acquisition of property, plant and equipment, net of proceeds from disposals Additions to exploration and evaluation assets Net cash used in investing activities Financing activities Bank loan Payment on asset retirement obligation Repayment of lease obligations Proceeds from the exercise of stock options Repurchase of common shares Dividends paid Net cash from (used in) financing activities Change in cash during the period Effect of exchange rate changes on cash Cash, beginning of the period Cash, end of the period	For the years ended December 31, 2021 2020 $ $ 15,069 8,558 6,802 2,663 21,871 11,221 (3,207) (743) (8) (27) (3,215) (770) - (3,015) (123) - (224) (594) 389 207 (916) (207) (2,540) (1,724) (3,414) (5,333) 15,242 5,118 (11) 7 11,868 6,743 27,099 11,868	Three-month periods ended December 31, 2021 2020 $ $
		4,412 3,096 7,037 (6,608)
		11,449 (3,512)
		(1,120) (500) 7 13
		(1,113) (487)
		- - - - (48) (104) 72 - (473) (207) (619) (439)
		(1,068) (750)
		9,268 (4,749) 28 44 17,803 16,573
		27,099 11,868

Operating activities

For the year ended December 31, 2021, the cash flow from operations, before changes in working capital items, amounted to $15.1 million compared to $8.6 million for the year ended December 31, 2020. Net cash from operating activities amounted to $21.9 million compared to $11.2 million for the year ended December 31, 2020. Changes in working capital items amounted to $6.8 million compared to $2.7 million for the year ended December 31, 2020.

During Q4-2021, the cash flow from operations, before changes in working capital items, amounted to $4.4 million, compared to $3.1 million during Q4-2020. Net cash from operating activities amounted to $11.4 million compared to (-$3.5 million) during Q4-2020. Changes in working capital items amounted to $7.0 million compared to (-$6.6 million) during Q4-2020.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Investing activities

During the year ended December 31, 2021, the Corporation invested a net amount of $3.2 million ($0.7 million for the year ended December 31, 2020). This amount includes investments at the plant notably in relation to its capacity increase (+25% throughput level), improvements in production processes and new vehicles. All investments have been financed with internally generated cash-flows.

Additions to exploration and evaluation assets were limited to the maintaining and safekeeping of assets in 2021 and 2020.

Financing activities

In 2021, due to the changes in the dividend policy, a quarterly dividend and eleven monthly dividends totaling CA$0.082 per share were disbursed for a total consideration of $2.5 million (CA$ 3.2 million). In 2020, four quarterly dividends totaling CA$0.060 per share were disbursed for a total consideration of $1.7 million (CA$ 2.3 million).

In 2021, 441,340 common shares were repurchased under the Corporation normal course issuer bid share buyback program for a total cash consideration of $0.9 million (CA$ 1.2 million) (149,185 shares for a total cash consideration of $0.2 million (CA$0.3 million in 2020)).

In 2021, the Corporation received $0.4 million (CA$ 0.5 million) mainly from some of its Directors for the exercise of purchase options ($0.2 million in 2020 (CA$ 0.3 million)).

In 2021, the Corporation made repayments of lease liabilities and assets retirement obligations for $0.2 million ($0.6 million in 2020).

Working capital and liquidity

As at December 31, 2021, the Corporation’s working capital amounted to $36.4 million, including $27.1 million in cash ($25.4 million, including $11.9 million in cash at December 31, 2020).

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

6-CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(in $'000) Cash Accounts receivable Inventories Property, plant and equipment Right-of-use assets Exploration and evaluation assets Other assets Total assets Trade and other payables Asset retirement obligations Current tax liabilities Deferred tax liabilities Lease liabilities Shareholders' equity Total liabilities and equity Share price at closing	As at December 31, As at December 31, 2021 2020
	27,099 11,868 8,407 8,434 14,764 13,401 20,759 19,677 341 834 18,516 18,510 1,471 3,572
	91,357 76,296
	11,680 7,082 3,553 3,604 2,217 1,124 1,555 1,036 343 706 72,009 62,744
	91,357 76,296
	CA$3.16 CA$1.79

Assets and short-term liabilities

At December 31, 2021, total assets amounted to $91.4 million ($76.3 million as at December 31, 2020).

Included in the finished goods-Gold dore bars are the remaining portion of the 2,650 ounces of gold related to the December 2019 shipment still retained by the Peruvian authorities for control and investigation procedures which have been slowed down due to the Covid-19 situation. We cannot predict when the remaining portion of the shipment will be released by the authorities and therefore, we have classified them under other non-current assets.

Accounts receivable amount to $8.4 million ($8.4 million as at December 31, 2020) and are mainly comprised of trade receivable that were collected in early January 2022 ($3.2 million), two months of current sales taxes (IGV) ($4.7 million) which were fully collected subsequent to year-end and net advances to suppliers for ore purchases ($0.1 million).

Property, plant and equipment amount to $20.8 million ($19.7 million as at December 31, 2020) and are mainly comprised of the Veta Dorada Plant and capitalized rehabilitation costs.

Total exploration and evaluation assets amounted to $18.5 million ($18.5 million as at December 31, 2020) and are mainly comprised of accumulated capitalized exploration work performed at Tumipampa.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Long-term liabilities and contractual commitments and contingencies

Payment due by period (in 000’ $)
	Within 1	1 to 2	2 to 5	Beyond
Contractual commitments	year	years	years	5 years	Total
Trade and other payables	8,866	-	-	-	8,866
Other commitments with suppliers	345	120	100	-	565
Leases liabilities(1)	125	50	78	177	430
Short-term leases	60	-	-	-	60
Asset retirement obligation(2)	154	-	-	4,592	4,746
Total	9,550	170	178	4,769	14,667

(1) The amount is different from the amount disclosed in the Financial Statements as it includes overall interest calculated to the term of the related agreement.

(2) The amount is different from the amount disclosed in the Financial Statements as it represents the undiscounted value of the remaining proposed work program as per the supporting valuation report.

In 2021 and 2020, the Corporation met all its obligations. The Corporation’s operations are governed by regulations regarding the protection of the environment. Subject to these regulations, the Corporation must implement progressive measures for rehabilitation work as part of its operations. Management reviews its asset retirement obligation (“ARO”) on a regular basis.

(in million $) Veta Dorada Plant Tumipampa Total future asset retirement obligation	As at December 31, As at December 31, 2021 2020
	3.4 3.3 0.2 0.3
	3.6 3.6

This estimate is subject to change following developments on each site, modifications to laws and regulations or as new information becomes available. As at December 31, 2021, the Corporation has constituted letters of credit in favor of the MEM for $2.1 million ($1.8 million as at December 31, 2020) to secure closure plans of its production facilities and exploration projects.

As of December 31, 2021, the future value of the provision for closure of facilities and exploration projects is $4.7 million ($4.9 million as at December 31, 2020), which is estimated to be disbursed in periods up to 17 years.

On October 26, 2021 the Corporation’s Peruvian subsidiary received a notice of assessment from the local tax authorities for the fiscal year 2015 in the amount of $6.4 million (25.6 million Soles) including $4.1 million (16.3 million Soles) in penalties and interests. The main item of the assessment relates to the ore purchased transactions from certain suppliers, qualified as non genuine transactions by the local tax authorities and therefore considered by the authorities as non-deductible expenses.

The Corporation and its legal tax counsel strongly believe that ore purchases are genuine deductible transactions. Therefore, the Corporation contested this claim. As at December 31, 2021 no provision has been recorded for the deductibility of ore purchases. Any provision would be recognized in the Corporation's consolidated financial statements if an unfavorable outcome becomes probable.

Shareholders’ equity

In 2021, 264,594 share purchase options were exercised, 67,575 DSU settled, and 441,340 shares were repurchased, resulting in a $0.5 million share capital increase.

Other than results from operations and capital increases, transactions affecting the shareholders’ equity are reflected in the financing activities section.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Capital resources and capital management

The Corporation generates cash flow from its ore processing activities. This positive cash flow is re-invested in the commercial operations, capital investments and exploration activities. The Corporation has access to the capital market and may eventually need from time to time to turn to the financial market in order to fund any exploration program, capital requirement and project or investment opportunities. As at December 31, 2021, the Corporation has enough resources to meet its commitments for the upcoming year, however management is always looking at financing or investment opportunities which could benefit to the growth of the Corporation.

The Corporation’s capital structure consists of common shares, stock options and deferred share units (“DSUs”). The Corporation manages its capital structure and makes changes pursuant to economic conditions and conditions related to its assets. The Corporation has the ability to raise capital when it is necessary to meet its requirements and therefore, it does not have a specific target debt to capital ratio. The Corporation also possesses the ability to raise debt to maintain a balance between debt and shareholders’ equity.

The Corporation is not subject to any externally imposed capital. The Corporation’s objectives in managing capital are the following:

i. to preserve the capacity to continue its operations in order to maximize the return to its shareholders and maintain an optimal capital structure in order to increase the shareholders’ equity in the long term.
ii. to ensure the Corporation has sufficient capital to meet its short-term needs and ensure the development of its projects and mining activities.
iii. to satisfy the external requirements with regards to capital needed in respect of any lending agreements.
iv. to maintain an optimal capital structure in order to minimize the cost of debt financing.

The Corporation is not subject to any externally imposed capital requirements. However, for the Corporation’s Peruvian subsidiary, the General Corporate Law (Peru) establishes that a minimum of 10% of the distributable profit of each year must be allocated to a legal reserve account, until this account reaches 20% of its capital ($3.0 million at December 31, 2021 and $2.6 million as at December 31, 2020). Dynacor may transfer the funds from this legal reserve account, but the Corporation will be obliged to replace these funds in the subsequent year.

Off-balance sheet transactions

The Corporation did not enter any significant off-balance sheet transactions in 2021.

7-SELECTED ANNUAL INFORMATION AND QUARTERLY REVIEW

Selected annual information

	Financials (in $ Million) Total Sales Net income Net income per share (basic) (in US $) Total assets	2021 195.9 11.8 $0.30 91.4	2020 101.5 4.3 $0.11 76.3	2019 102.5 5.2 $0.13 74.8

Sales are driven by volume of gold produced and sold and by the fluctuation of gold market price. The net income is mainly impacted by the trend of gold market price.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Quarterly review

(Unaudited, in accordance with IAS 34)

2021 2020

Financials (in $'000) Sales Cost of sales Depreciation General and administrative expenses Loss (gain) on foreign exchange Income tax expenses Net income (loss) Acquisition of property, plant and equipment Additional exploration and evaluation Gross operating margin (%) Earnings per share ($) Basic Diluted	Q4 50,279 42,909 682 1,374 (25) 1,964 3,995 1,241 (8) 14.7% 0.10 0.10	Q3 61,941 54,075 666 1,224 80 2,967 3,518 562 (3) 12.7% 0.09 0.09	Q2 42,777 36,260 648 2,002 189 2,106 2,162 1,142 20 15.2% 0.06 0.06	Q1 40,909 35,606 643 1,208 100 1,821 2,106 494 (2) 13.0% 0.05 0.05	Q4 38,568 33,198 642 1,192 35 2,658 1,385 521 (13) 13.9% 0.04 0.04	Q3 24,089 20,834 633 915 18 774 1,249 313 12 13.5% 0.03 0.03	Q2 8,007 7,975 599 747 (3) (70) (685) 12 - 0.4% (-0.02) (-0.02)	Q1 30,869 25,920 640 1,090 65 1,262 2,385 7 28 16.0% 0.06 0.06

Fourth quarter results (refer to section 4 for variance analysis).

8-INFORMATION ON OUTSTANDING SHARES

Data concerning outstanding shares (as at March 29, 2022)

Number

Common shares DSUs Share purchase options

38,643,747 420,855 1,132,906

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

9-TRANSACTIONS WITH RELATED PARTIES

Key management personnel

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation as a whole. The Corporation has determined that key management personnel consists of members of the Board of Directors, corporate officers, including the Corporation’s Chief Executive Officer, Chief Financial Officer and Vice President Operations.

Remuneration recorded to key management personnel can be summarized as follows:

Salaries, benefits and directors’ fees(1) Share-based compensation(2)	Years ended 2021 $ 1,120,670 270,801 1,391,471	December 31, 2020 $
		839,037 142,645
		981,682

(1) Net of non-recurring government grants in 2020.

(2) Represents the share-based compensation costs charged to the consolidated statement of comprehensive income during the year.

Transactions

In June 2021, a loan of $101,000 (CA$125,000) was made to the Corporation’s President and CEO to facilitate the exercise of 70,000 share purchase options at a price of CA$1.78 which had come to maturity. During 2021, the loan and accrued interests were reimbursed.

Other related parties

In the normal course of operations and at fair value, being the amount of consideration determined and agreed to by the related parties, for the years ended December 31, 2021 and 2020:

A firm of which an officer of the Corporation is a partner, charged legal professional fees amounting to $101,441 for the year ended December 31, 2021 ($50,366 for the year ended December 31, 2020).

A Director charged consulting fees relating to the revision of health, safety and environmental procedures and amounting to $34,907 for the year ended December 31, 2021 ($23,014 for the year ended December 31, 2020).

The Corporation’s gold sales, at market price in effect at the time of delivery, were done with one sole customer of which its president is a director of the Corporation since August 12, 2020.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

10-MINING EXPLORATION PROPERTIES

Tumipampa

Location and Geological Context

Tumipampa is located 500 km from Lima, Peru, in the Circa district, Province of Abancay, Department of Apurimac. Tumipampa’s concessions cover an area of 7,027 hectares and are located geographically on the eastern slopes of the Andes Mountain Range between 4,200 and 4,800 metres above sea level. The northern part of Tumipampa straddles the limestones of the host Ferrobamba deposit ‘Tintaya’ skarn-type (copper-gold), which is recognized as a major world class deposit of this type with more than 139 million tonnes at 1.23% Cu and 0.23g/t Au. The Tintaya mine is located 197 km northeast of Tumipampa. Moreover, major deposits have been recently unearthed at Los Chancas (355 million tons at 0.62% Cu, 0.05%Mo and 0.039g/t Au) (Southern Copper), Las Bambas (1.13 billion tonnes of 0.77% Cu,0.05 – 0.068 g/t Au and 0.01% Mo) (MMG Limited) and Constancia-which just began production (Hudbay), which are located on either side and near Tumipampa, respectively. All these major deposits are part of a belt of porphyry type deposits Cu-Au Skarn-related batholiths Andahuaylas-Yauri, an intrusive that is 300 km long and 150 km wide.

Currently, all of the land surrounding Tumipampa is claimed by major mining companies such as Southern Copper, MMG Limited, Buenaventura, Golden Ideal Gold Mining (China), Super Strong Mining (China) and Bear Creek Mining.

11- OUTLOOK 2022

Ore processing

For 2022, the Corporation forecasted sales[(1) ] in the range of $200-220 million representing growth of 4-14% over 2021 final production sales. This would result in a net income in the range of $11-13 million ($0.28-0.33 per share) (CA$0.36-0.42 per share).

Dynacor’s 2022 capital budget ranging between $5-8 million includes sustainable capital at the Veta Dorada plant. The Corporation intends to increase the mill capacity later this year.

The Corporation is continuing to assess other opportunities of growth in Peru as well as in other jurisdictions.

(1) Using opening 2022 market gold price

Exploration

The Corporation has planned for 2022, a $1.0 million 2,735-meter 8-hole drilling program on the Tumipampa project. This program is subject to the Corporation reaching a work agreement with local communities.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

12-RISKS AND UNCERTAINTIES

RISK FACTORS

The Corporation’s main activities consist of the production of gold and silver from the processing of mineral material purchased from small scale artisanal miners registered with the Peruvian government and the exploration of its mining properties located in Peru, with the potential for commercial extraction of gold and other precious metals. There have been very limited or no exploration activities during the last three years. Such activities involve a high degree of risk and must be considered highly speculative due to the financial and operational risks inherent to the exploration and development of its mineral resource properties. The inherent risks of the Corporation’s activities may affect its profitability and level of operating cash flow. Prospective buyers of the common shares of the Corporation should give careful consideration to all information contained or incorporated by reference in this document (or MD&A) and, in particular, the following risk factors:

OPERATIONAL RISKS

ENVIRONMENTAL MATTERS

The Corporation’s operations are subject to environmental regulations, which can make operations expensive or prohibit them altogether. The Corporation may be subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products that could occur as a result of its mineral exploration, development and production. In addition, other environmental hazards may exist on a property in which the Corporation directly or indirectly holds an interest which are unknown to the Corporation at present which have been caused by previous or existing owners or operators of the property. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties.

To the extent the Corporation is subject to environmental liabilities, the payment of such liabilities or the costs that it may incur to remedy environmental pollution would reduce funds otherwise available to it and could have a material adverse effect on the Corporation. If the Corporation is unable to fully remedy an environmental problem, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy. The potential exposure may be significant and could have a material adverse effect on the Corporation.

The Corporation proceeds with regular testing of its critical business environmental factors to prevent risk and is subject to regular government inspections. However, those procedures do not eliminate the potential risks.

LICENSES AND PERMITS

As part of its ore processing activities or future projects, the Corporation is required to obtain several permits. Although the Corporation believes it will obtain the required permits, there is no assurance it will receive such permits or it may face administrative delays in doing so, which could impact its current or future operations.

At December 31, 2021, the Corporation operates a plant located on a land owned by the regional government of Arequipa with a right of usage valid until March 23, 2036. Although the Corporation believes it will be able to renew this right of usage after March 23, 2036, it may face administrative delays in doing so, which could impact its future operations.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

LICENSES AND PERMITS (continued)

Should the exploration activities of the Corporation be successful, it may not be able to obtain the necessary licenses or permits to conduct or pursue its exploration and mining operations on its properties, and thus would realize no benefit from its exploration activities on its properties. At December 31, 2021, the Corporation is looking for an agreement with local communities before it can start the anticipated drilling campaign on the disseminated area of the Tumipampa project. Although the Corporation considers it will obtain the required approval in reasonable term, there is a risk that could further delay its exploration operations and impact the value of its exploration properties.

POLITICAL AND COUNTRY RISK

The principal mineral property interests of the Corporation are located in Peru. The Corporation believes that Peruvian government supports the development of its natural resources by national and foreign companies as equals. However, there is no assurance that future political and economic conditions in Peru will not result in the government adopting different policies regarding foreign ownership of mineral resources, tax regime, exchanges rates, environmental protection, labour relations and the repatriation of capital and earnings. The possibility that the current or a future government may adopt extreme policies such as expropriation of assets, cannot be ruled out. The Corporation's current and future mineral exploration and processing activities could be impacted by widespread civil unrest and rebellion. Country risk refers to the risk of investing in a country, dependent on changes in the business environment that may adversely affect operating profits or the value of assets in a specific country. For example, financial factors such as currency controls, devaluation or regulatory changes, nationalization, or social stability factors such as mass riots, civil war and other potential events contribute to increase companies' operational risks. It is important to point out that since its operation began in Peru, the Corporation has not suffered from any of these risks.

In addition, mining and tax regimes in foreign jurisdictions are subject to different interpretations and constant changes and revisions in the ordinary course. For example, our interpretation and the interpretation of our tax advisors or tax experts, applied in accordance to the law to our transactions and activities, may not coincide with the interpretation of the tax authorities. As a result, transactions have been and may, in the future, be challenged by the tax authorities and could result in significant taxes, penalties and interest.

Artisanal mining in Peru is governed by the Peruvian formalization process managed by the Ministry of Energy and Mines (MEM), which requires miners to be registered into the process of formalization and be identified as such. The Corporation has adopted processes to ensure its mineral material purchases only from duly registered miners; however, there is no certainty that such processes will assure that no transaction may occur with miners who, while duly registered, do not comply in certain respects with the regulations.

SUPPLY AND QUALITY OF FEEDSTOCK

The Corporation’s operations involve the purchase of mineral ore from small scale artisanal miners which is then used to supply the production of its southern Peru Chala plant. The increase in production and revenues of the Corporation will notably depend on the availability of the mineral ore being supplied by local producers. To mitigate this risk, the Corporation works with over 600 suppliers of mineral ore and is expending its geographical presence in Peru.

As the Corporation does not mine its own ore, it does not have entire control over the volume of mineralized material and ore grade purchased from its suppliers. Therefore, this situation can have an impact over the volume of gold produced and gold sales. The Corporation mitigates this risk by working with a minimum cut-off purchase grade, when possible, to ensure best efficiency and profitability of its plant operations.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

WATER SUPPLY

Our operations require significant quantities of water for ore processing and related support facilities. Our operations in Peru may be in areas where water is scarce. Continuous production at our plant site is dependent on our ability to access adequate water supply. Insufficient water supply, as a result of new regulations or otherwise, could materially adversely affect our financial condition and results of operation.

LABOUR AND EMPLOYMENT RELATIONS

We are dependent on our workforce to process our mineralized material. We have a very long and good relationship with our local employees and workforce. We provide our employees with quality health and safety work environment and measures as well as workplace training sessions to help in keeping their trust and satisfaction in all of our working premises. However, this situation may not prevent in the future a strike or work stoppage at our facilities. Labour disruptions could have a material adverse impact on our financial condition and results of operation.

PRODUCTION AND COST ESTIMATES

No assurance can be given that the intended or expected production schedules or the estimated cash costs and capital expenditures will be achieved. Failure to achieve production or cost estimates or material increases in costs could have an adverse impact on our future cash flows, profitability, results of operations and financial condition. Many factors may cause delays or cost increases, including labour issues, disruptions in power, transportation or supplies, and mechanical failure. In addition, short-term operating factors, such as the processing of new or different ore material and ore grades, may cause a mining operation to be less profitable in any particular period.

DEPENDENCE ON MANAGEMENT

The success of the operations and activities of the Corporation is dependent to a significant extent on the efforts and abilities of its management team. See "Directors and Officers" for details of the Corporation's current management. The Corporation does not maintain key employee insurance for any of its officers and employees. The Corporation depends on key personnel and cannot provide assurance that it will be able to retain such personnel. Failure to retain such key personnel could have a material adverse effect on the Corporation's business and financial condition.

COMPETITION

The Corporation is in competition with other processing companies in Peru. Although the Corporation has been able in the past, to maintain and even increase its market share and build a solid reputation with its suppliers and in that field of operation, there can be no assurance that it will indefinitely retain its position in this market. The Corporation is increasing efforts on the ground to develop the growth of its processing business. The Corporation is also in competition with other mining companies for the acquisition of interests in precious and base metal mining exploration properties. In the pursuit of such acquisition opportunities, the Corporation competes with several Canadian and foreign companies that may have greater financial and other resources. Although the Corporation has acquired many such assets in the past, there can be no assurance that its acquisition efforts will succeed in the future.

SHARE PRICE VOLATILITY

In recent years, the securities markets in Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, has experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.

Unfortunate events such as the Covid-19 virus pandemic and the current conflict in Ukraine, impacted stock markets. There can be no assurance that those kinds of events and that continual fluctuations in price will not occur.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

INSURANCE RISK

The mining industry is subject to significant risks that could result in damage to or destruction of property and facilities, personal injury or death, environmental damage and pollution, delays in production, expropriation of assets and loss of title to mining claims. No assurance can be given that insurance to cover the risks to which the Corporation's activities are subject will be available at all or at commercially reasonable premiums. The Corporation currently maintains available insurance within ranges of coverage that it believes to be consistent with industry practice for companies of a similar stage of development. The Corporation carries liability insurance with respect to its mineral exploration operations, but it is not currently covered by any form of environmental liability insurance, since insurance against environmental risks (including liability for pollution) or other hazards resulting from exploration and development activities is prohibitively expensive. The payment of any such liabilities would reduce the funds available to the Corporation. If the Corporation is unable to fully fund the costs of remedying an environmental problem, it might be required to suspend operations or entered into costly interim compliance measures pending completion of a permanent remedy.

LITIGATION

All industries, including the mining industry, are subject to legal claims, with and without merit. The Corporation may, in the future, be involved in various legal proceedings. While the Corporation believes it is unlikely that the final outcome of these legal proceedings will have a material adverse effect on the financial position or results of operations, defense costs will be incurred, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the resolution of any particular legal proceeding will not have a material adverse effect on the Corporation's future cash flow, results of operations or financial condition. There are no significant proceedings against the Corporation as at the date of this report.

INCREASED COSTS AND COMPLIANCE RISKS OF BEING A PUBLIC CORPORATION

Legal, accounting, and other expenses associated with public company reporting requirements have increased significantly in the past few years. The Corporation anticipates that costs may continue to increase with recently adopted or proposed corporate governance related requirements.

The Corporation also expects these new rules and regulations may make it more difficult and more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for the Corporation to attract and retain qualified individuals to serve on its board of directors or as executive officers.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

ANTI-CORRUPTION LAWS

The Corporation’s operations are governed by, and involve interactions with, many levels of government in two countries. Its operations take place in jurisdictions ranked unfavorably under Transparency International’s Corruption Perception Index. The Corporation is required to comply with anti-corruption and anti-bribery laws, including the Criminal Code, the Canadian Corruption of Foreign Public Officials Act, as well as similar laws and compliance statements in Peru, where the Corporation conducts its business. In recent years, there has been a general increase in both the frequency of enforcement and the severity of penalties under such laws, resulting in greater scrutiny and punishment to companies convicted of violating anticorruption and anti-bribery laws. Furthermore, a company may be found liable for violations by not only its employees, but also by its contractors and third-party agents. Although the Corporation is implementing policies to mitigate such risks, including internal monitoring, reviews and audits, and policies to ensure compliance with such laws, such measures may not assure a permanent and total effectiveness in ensuring that the Corporation, its employees, contractors or third-party agents will comply strictly with such laws. If the Corporation finds itself subject to an enforcement action or is found to be in violation of such laws, this may result in significant penalties, fines and/or sanctions imposed on the Corporation resulting in a material adverse effect on the Corporation’s reputation, business, financial condition and results of operations.

STAGE OF DEVELOPMENT

Exploration and development projects have no operating history upon which to base estimates of future operating costs and capital requirements. Mining projects frequently require a number of years and significant expenditures during the mine development phase before production is possible. Development projects are subject to the completion of successful feasibility studies, obtention of necessary governmental permits and securing necessary financing. The economic feasibility of such development projects is based on many factors such as estimation of reserves, metallurgical recoveries, future metal prices, and capital and operating costs of such projects. Exploration and development of mineral deposits thus involve significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. In fact, a mine must generate sufficient revenues to offset operating and development costs such as the costs required to establish reserves by drilling, to develop metallurgical processes, to construct facilities and to extract and process metals from the ore. Once in production, it is impossible to determine whether current exploration and development programs at any given mine will result in the replacement of current reserves with new reserves.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

MINING INDUSTRY AND MINING PROJECTS

The Corporation is subject to risks and hazards inherent to the mining industry, including fluctuations in metal prices, costs of constructing and operating a mine as well as processing and refining facilities in a specific environment, availability of economic sources of energy and adequacy of water supply, adequate access to the site, unanticipated transportation costs, delays and repair costs resulting from equipment failure, changes in the regulatory environment (including regulations relating to prices, royalties, duties, taxes, restrictions on production, quotas on exportation of minerals, as well as the costs of protection of the environment and agricultural lands), and industrial accidents and labour actions or unrest. The occurrence of any of these factors could materially and adversely affect the development of a project and as a result materially and adversely affect the Corporation’s business, financial condition, results of operations and cash flow. The Corporation is also subject, through its activities, to risks normally encountered in mining operations. Blasting, drilling, mining and processing of ore comprise risks and hazards such as environmental hazards, including discharge of pollutants or hazardous chemicals, unanticipated grade and tonnage of ore to be mined and processed, unusual or unexpected adverse geological or geotechnical formation, or unusual or unexpected adverse operating conditions, slope failure, rock bursts, cave-ins, failure of pit walls or dams, fire, and natural phenomena and "acts of God" such as inclement weather conditions, floods, earthquakes and other hazards. These occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. The Corporation may incur liability as a result of pollution and other casualties and may not be able to insure fully or at all against such risks, due to political reasons, unavailability of coverage in the marketplace or other reasons or may decide not to insure against such risks as a result of high premiums or for other reasons. This can result in delayed production, increase in production costs or liability. Paying compensation for obligations resulting from such liability may be very costly and could have an adverse effect on the Corporation’s financial position.

RISKS RELATED TO STATUTORY AND REGULATORY COMPLIANCE

Existing and possible future laws, regulations and permits governing operations and activities of ore processing and exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Corporation business and cause increases in capital expenditures or require abandonment or delays in exploration.

The current and future operations of the Corporation, from exploration through development activities and commercial production, are and will be governed by applicable laws and regulations governing mineral claims acquisition, prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in exploration activities and in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.

Failure to comply with applicable laws, regulations and permits may result in enforcement actions there under, including the forfeiture of claims, orders issued by regulatory or judicial authorities requiring operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or costly remedial actions. The Corporation may be required to compensate those suffering loss or damage by reason of its mineral exploration activities and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits. The Corporation is not currently covered by any form of environmental liability insurance. See "Insurance Risk" above.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

TITLE RISKS

Although title to its exploration properties has been reviewed by or on behalf of the Corporation, no assurance can be given that there are no title defects affecting the properties. Title insurance generally is not available for mining claims in Peru, and the Corporation's ability to ensure that it has obtained secure claim to individual mineral properties may be severely constrained. The Corporation has not conducted surveys of all the claims in which it holds direct or indirect interests; therefore, the precise area and location of such claims may be in doubt. Accordingly, the properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, the Corporation may be unable to conduct work on the properties as permitted or to enforce its rights with respect to its properties. To this date, the Corporation has not encountered any issues to this regard.

CONFLICT OF INTERESTS

The Corporation's directors and officers may serve as directors or officers of other resource companies or have significant shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which the Corporation may participate, the directors of the Corporation may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Corporation's directors, a director who has such a conflict will disclose its interests and abstain from voting for or against the approval of such participation or such terms. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. The directors of the Corporation are required to act honestly, in good faith and in the best interests of the Corporation. In determining whether or not the Corporation will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the degree of risk to which the Corporation may be exposed and its financial position at that time. As well, a director of the Corporation is an officer of the Corporation largest customer, however he will abstain from voting for or against any decision to be taken with respect to any issues concerning this customer. See "Directors and Officers".

FINANCIAL RISKS

COVID-19 AND ANY OTHER PANDEMIC

Global markets have been adversely impacted by the Covid-19 pandemic and could be impacted by other emerging infectious diseases and/or the threat of outbreaks of viruses, other contagions or epidemic diseases in the future. The Covid-19 pandemic has resulted in a widespread crisis that has adversely affected the economies and the financial markets of many countries which could still adversely affect the Corporation’s business and the market price of its securities.

Many industries, including the mining industry, have been impacted by the international response to Covid19 which led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in global consumer activity.

Even though the Corporation has established efficient sanitary and health protection protocols, any significant resurgence of the virus or any other damageable virus may include disruptions of the Corporation activities for any unpredictable period of time, and which may impact the Corporation’s financial performance and health. The Corporation has also implemented changes to its business as deemed appropriate to mitigate any potential impacts to its business, employees, contractors and stakeholders.

Until such time the spread of Covid-19 will be contained worldwide, the Corporation will continue to monitor developments with respect to Covid-19, as new restrictions could be imposed by governments.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

EXPORTATION RISK

The Corporation currently exports all its gold production from Peru, on a regular basis. Any control or event which may delay temporarily the Corporation’s ability to export its production could have a significant impact of its working capital and financial situation.

METAL PRICE VOLATILITY

Factors beyond the control of the Corporation may affect the marketability of any ore or minerals processed at the Corporation's plant facilities. Resource prices have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the Corporation's control including international economic and political trends, conflicts, inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and increased production due to new and improved extraction and production methods. The effect of these factors cannot accurately be predicted.

Gold prices historically have fluctuated widely and are influenced by a number of factors beyond the control or influence of the Corporation. Some factors that affect the price of gold include: industrial and jewelry demand; central bank lending or purchases or sales of gold bullion; forward or short sales of gold by producers and speculators; future level of gold productions; and rapid short-term changes in supply and demand due to speculative or hedging activities by producers, individuals or funds. Gold prices are also affected by macroeconomic factors including: confidence in the global monetary system; expectations of the future rate of inflation; the availability and attractiveness of alternative investment vehicles; the general level of interests rates; the strength of, and confidence in the U.S. dollar, the currency in which the price of gold is generally quoted, and other major currencies; global and regional political or economic events; and costs of production of other gold producing companies whose costs are denominated in currencies other than the U.S. dollar. All of the above factors can, through their interaction, affect the price of gold by increasing or decreasing the demand for or supply of gold.

FOREIGN EXCHANGE RATE FLUCTUATIONS

The Corporation's activities and offices are currently located in Canada and Peru. Gold is sold in international markets at prices denominated in U.S. dollars. The functional currency of the Corporation is the United States dollar. However, some of the costs associated with the Corporation's activities in Canada and Peru may be denominated in currencies not directly related to the price of the U.S. dollar. Any appreciation of these currencies vis-à-vis the U.S. dollar could increase the Corporation's cost of doing business in these countries. In addition, the U.S. dollar is subject to fluctuation in value vis-à-vis the Canadian Dollar and Soles. The Corporation does not utilize hedging programs to any degree to mitigate the effect of currency fluctuations.

ACCESS TO CAPITAL MARKETS

To fund its growth, the Corporation may be dependent on securing the necessary capital through loans or permanent capital. The availability of this capital is subject to general economic conditions and lender and investor interest in the Corporation’s projects. To ensure the availability of capital, the Corporation maintains an investor relations program in order to inform all shareholders and potential investors of the Corporation’s developments.

FUTURE FINANCING

The success of future ore processing expansion or exploration programs and other transactions related to concessions or other projects could have a significant impact on the need for capital. If Dynacor decides to develop one of its properties, it must ensure that it has access to the required capital. The Corporation could finance its need of capital by using working capital, by arranging partnerships with other companies, through equity financing, by taking on long-term debt or any combination thereof. However, nothing guarantees that the Corporation will succeed in getting the necessary financing with reasonable terms.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

REPUTATIONAL RISK

The consequence of reputational risk is a negative impact to the Corporation’s public image, which may influence its ability to acquire future mining projects and retain or attract key employees. Reputational risk may arise under many situations including, among others, cyber-attacks and media crisis. Prior to acquire a project, the Corporation mitigates reputational risk by performing due diligence, which includes a review of the mining project, the country, the scope of the project and local laws and culture. Once the decision to participate in a mining project has been taken, the Corporation continues to assess and mitigate reputational risk through regular Board and Board’s Committees reviews.

CYBERSECURITY THREATS

Our operations depend, in part, on how well we and our suppliers protect networks, technology systems and software against damage from a number of threats, including viruses, security breaches and cyberattacks. Cybersecurity threats include attempts to gain unauthorized access to data or automated network systems and the manipulation or improper use of information technology systems. The failure of any part of our information technology systems could, depending on the nature of any such failure, materially adversely impact our reputation, financial condition and results of operations. Although we have not to date experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not incur such losses in the future. Our risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats.

We are equipped to monitor closely all random attack however as cyber threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any system vulnerabilities.

13-JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of consolidated financial statements (refer to note 5 of the Financial Statements) requires management to make judgments, estimates and assumptions on the reported amounts of assets and liabilities, and revenues and expenses. The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may be substantially different.

The significant accounting estimates are those that require assumptions on matters that are substantially uncertain at the time of the estimate, that should the assumptions be modified, it would have a material impact on the reported earnings or the financial position of the Corporation. A description of the Corporation’s main accounting policies can be found in the consolidated Financial Statements, filed electronically on SEDAR at www.sedar.com.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

14-ACCOUNTING POLICIES AND MODIFICATIONS

Changes in accounting policies and policies issued but not yet effective

There were no changes in accounting policies during the year. Please refer to note 3 of the Annual Consolidated Financial Statements.

15-NON-IFRS MEASURES

Throughout this document, the Corporation has provided measures prepared according to IFRS as well as some non-IFRS financial performance measures. Because the non-IFRS performance measures do not have any standardized definition prescribed by IFRS, they may not be comparable to similar measures presented by other companies. The Corporation provides these non-IFRS financial performance measures as they may be used by some investors to evaluate our financial performance. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial performance measures were reconciled to reported IFRS measures within the document. (Refer to sections 1 and 4 for description and reconciliation of those non-IFRS measures).

16-DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure controls and procedures (“DC&P”)

The CEO and the CFO of the Corporation are responsible for establishing and maintaining the Corporation’s DC&P, including adherence to the Disclosure Policy adopted by the Corporation. The Disclosure Policy requires all staff to keep senior management fully apprised of all material information affecting the Corporation so that they may evaluate and discuss this information and determine the appropriateness and timing for public release. The CEO and CFO evaluated the effectiveness of the Corporation’s DC&P as required by Multilateral Instrument 52-109 issued by the Canadian Securities Administrators. They concluded that as of December 31, 2021, the Corporation’s DC&P were effective. Since the December 31, 2021 evaluation, there have been no adverse changes to the Corporation’s DC&P and they continue to remain effective.

Internal control over financial reporting (“ICFR”)

Management has developed a system for ICFR in order to provide reasonable assurance with regards to the reliability of the financial information published and the preparation of the consolidated financial statements in accordance with IFRS. The CEO and the CFO evaluated the effectiveness of the ICFR as at December 31, 2021, based on the framework and criteria established in Internal Control – Integrated Framework as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, and based on their evaluation, management has concluded that the Corporation’s ICFR were effective.

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

Limitations of controls and procedures

The Corporation’s management, including the CEO and CFO, believe that any DC&P or ICFR, no matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any systems of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a costeffective control system, misstatements due to error or fraud may occur and not be detected.

Changes to ICFR

No changes were made to our ICFR during the year ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our ICFR.

17-CAUTION REGARDING FORWARD LOOKING STATEMENTS

Statements contained in this document that are not historical facts are regarded as forward-looking statements. These statements may involve risk, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Many factors could cause such differences, including: volatility in market metal prices; changes in foreign currency exchange rates and interest rates; unexpected variations in geological conditions of a property of erroneous geological data; environmental risks including increased regulatory constraints; unexpected adverse mining conditions; adverse political conditions, and changes in government regulations and policies. Although the Corporation believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this document. The Corporation has not committed to maintaining this forward-looking information unless so required by law.

(s) Jean Martineau Jean Martineau President and Chief Executive Officer

(s) Leonard Teoli CPA, CA Leonard Teoli Vice-President and Chief Financial Officer

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Dynacor Gold Mines Inc. December 31, 2021

Management Discussion and Analysis

18-CORPORATE INFORMATION

Dynacor Gold Mines Inc. Corporate Office 625 René Lévesque Ouest Suite 1200 Montreal, Québec, Canada H3B 1R2 Tel.: (514) 393-9000 Fax: (514) 393-9002 Website: http://www.dynacor.com Twitter:http://twitter.com/DynacorGold

Directors and Officers

Pierre Lépine, CPA, CA - Chairman of the Board Jean Martineau- President and CEO Roger Demers, FCPA, FCA, ASC- Director Réjean Gourde, Ing- Director Isabel Rocha, B.Eng. MSc. MBA- Director Philippe Chave, Ing- Director Rocio Rodriguez-Perrot, LLB- Director Leonard Teoli, CPA, CA- VP Finance and CFO Jorge Luis Cardenas, Ing- VP Operations René Branchaud, LLB- Corporate Secretary

Legal Counsel

Lavery, de Billy LLP

Auditors

Raymond Chabot Grant Thornton LLP

Transfer Agent

TSX Trust Company (Canada)

Exchange listings

Toronto Stock Exchange – DNG

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AI assistant

Dynacor Group Inc. — Management Reports 2022

46127_rns_2022-03-30_a05f6f8c-a59a-4a31-94f6-f8ce68adbbfa.pdf

Dynacor Gold Mines Inc.

MANAGEMENT DISCUSSION AND ANALYSIS

Message from the President,

Dear Shareholders,

(S) Jean Martineau

Introduction

Responsibility of financial reports

Listing

Business and strategy

Covid-19 Update

1-2021 OVERVIEW AND HIGHLIGHTS

OVERVIEW

HIGHLIGHTS

Operational

Financial

Return to Shareholders

( Detailed variance calculations and explanations are contained in section 4)

2-KEY ECONOMIC TRENDS

Gold market price

Exchange rates (continued)

3-OVERALL PERFORMANCE

3-OVERALL PERFORMANCE (continued)

3-OVERALL PERFORMANCE (continued)

4-CONSOLIDATED RESULTS AND GOLD ORE PROCESSING OPERATIONS

Production, sales and gross operating margin

(*) per AuEq ounce sold

Net income and comprehensive income variance analysis

Ore processing production statistics and financial summary

Ore processing production statistics and financial summary (continued)

5-CONSOLIDATED CASH FLOW AND LIQUIDITY

Operating activities

Investing activities

Financing activities

Working capital and liquidity

6-CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Assets and short-term liabilities

Shareholders’ equity

Capital resources and capital management

Off-balance sheet transactions

7-SELECTED ANNUAL INFORMATION AND QUARTERLY REVIEW

Selected annual information

Quarterly review

8-INFORMATION ON OUTSTANDING SHARES

Data concerning outstanding shares (as at March 29, 2022)

Number

9-TRANSACTIONS WITH RELATED PARTIES

Key management personnel

Transactions

Other related parties

10-MINING EXPLORATION PROPERTIES

Tumipampa

Location and Geological Context

11- OUTLOOK 2022

Ore processing

Exploration

12-RISKS AND UNCERTAINTIES

RISK FACTORS

OPERATIONAL RISKS

ENVIRONMENTAL MATTERS

LICENSES AND PERMITS

LICENSES AND PERMITS (continued)

POLITICAL AND COUNTRY RISK

SUPPLY AND QUALITY OF FEEDSTOCK

WATER SUPPLY

LABOUR AND EMPLOYMENT RELATIONS

PRODUCTION AND COST ESTIMATES

DEPENDENCE ON MANAGEMENT

COMPETITION

SHARE PRICE VOLATILITY

INSURANCE RISK

LITIGATION

INCREASED COSTS AND COMPLIANCE RISKS OF BEING A PUBLIC CORPORATION

ANTI-CORRUPTION LAWS

STAGE OF DEVELOPMENT

MINING INDUSTRY AND MINING PROJECTS

RISKS RELATED TO STATUTORY AND REGULATORY COMPLIANCE

TITLE RISKS

Dynacor Group Inc. Management Reports 2022