Steppe Gold : Audited Annual Financial Results of 2023

Consolidated Financial Statements

For the years ended December 31, 2023, and 2022

(Expressed in US Dollars)

INDEPENDENT AUDITOR'S REPORT	April 1, 2024
Edmonton, Alberta

To the Shareholders of Steppe Gold Ltd.

Opinion

We have audited the consolidated financial statements of Steppe Gold Ltd. and its subsidiaries (the Company), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of profit or loss and comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023 and 2022, and the consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

Valuation of inventories and cost of sales

We refer to financial statement summary of material accounting policy information on inventories and related disclosure in Note 4.

At the balance sheet date, the value of inventory amounted to $32,273,000. Inventories were considered as a key audit matter due to the size of the balance and because inventory valuation involves management judgment. According to the financial statements' accounting principles inventories are measured at the lower of production cost and net realizable value based on estimated metal content, with net realizable value approximated as the prevailing and long-term metal prices less estimated future production costs to convert inventories into saleable form and estimated costs to sell. The Company has specific procedures for identifying risk for obsolescence and measuring inventories at the lower of cost or net realizable value.

(continues)

Independent Auditor's Report to the Shareholders of Steppe Gold Ltd. (continued)

To address the risk for material misstatement on inventories, our audit procedures included, amongst other procedures:

• Assessing the compliance of Company's accounting policies over inventory with applicable accounting standards.
• Assessing the inventory valuation processes and practices.
• Evaluating the analyses and calculations made by management with respect the remaining estimated costs to produce finished goods and evaluate the possibility of impairment.

We assessed the adequacy of the Company's disclosures related to inventories and cost of sales.

Valuation of streaming arrangement

We refer to financial statement summary of material accounting policy information on streaming arrangement and related disclosure in Note 12.

At the balance sheet date, the value of streaming arrangement amounted to $20,390,000. Streaming arrangement was considered as a key audit matter due to the size of the balance and because the related valuation involves management judgment. According to the financial statements' accounting principles streaming arrangement has been determined the obligation is a derivative liability to be carried at fair value through profit and loss. The fair value of the stream arrangement has been valued using a discounted cash flow approach with consideration for the contractual terms of the related agreement and using input assumptions including mine production plans, expected production taking into consideration technical feasibility reports, expected forward prices of gold and silver using the COMEX forward contract price and discount rate related to the risk of the forecasted cash flows. The income approach valuation was prepared by an independent valuation specialist and the life of mine production schedule and expectations including expansion plans are based on the information compiled by qualified persons.

To address the risk for material misstatement on the streaming arrangement, our audit procedures included, amongst other procedures:

• Developing an independent point estimate of the fair value of the streaming arrangement, which included assessment of the independently prepared valuation report, the input variables and assumptions utilized.
• Evaluation of the management's experts' competence, capabilities and objectivity in developing the valuation report.
• Evaluate the work of managements experts in assessing the life of the mine and reserve estimates which were utilized in developing the valuation report.

We assessed the adequacy of the Company's disclosures related to the streaming arrangement.

Other Information

Management is responsible for the other information. The other information comprises the information, other than the consolidated financial statements and our auditor's report thereon, which includes Management's Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

(continues)

Independent Auditor's Report to the Shareholders of Steppe Gold Ltd. (continued)

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

(continues)

Independent Auditor's Report to the Shareholders of Steppe Gold Ltd. (continued)

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore, the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would be reasonably expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Justin Rousseau.

"Kingston Ross Pasnak LLP"

Kingston Ross Pasnak LLP

Chartered Professional Accountants

STEPPE GOLD LTD.

Consolidated Statements of Financial Position

(All dollar amounts expressed in thousands of United States Dollars, other than the per share amounts or unless otherwise noted)

			December 31,	December 31,
	Notes	2023	2022
	ASSETS
	Current assets
	Cash	9	6,006	2,515
	Short term investments	-	365
	Receivables and other assets	3	2,488	2,534
	Inventories	4	32,273	24,165
	Assets classified as held for sale	5	13,195	-
Total current assets		53,962	29,579
	Long-term assets	6
	Exploration and evaluation assets	1,581	1,571
	Property, plant and equipment	7	40,999	39,328
	Long term investments	9	324	-
	Deferred tax asset	29	1,425	2,180
Total long-term assets		44,329	43,079
Total assets		98,291	72,658
LIABILITIES AND SHAREHOLDERS' EQUITY
	Current liabilities	10
	Amounts payable and other liabilities	9,759	11,016
	Current portion of streaming arrangement	12	9,343	15,735
	Current portion of lease liability	13	204	154
	Current tax liability	14	1,230	2,386
	Convertible debentures - derivative	63	1,299
	Convertible debentures - loan liability	14	2,863	-
	Gold Prepay loan - Triple Flag	15	-	4,531
	Short term loan - TDB	15	2,857	-
	Liabilities directly associated with assets classified as held for sale	5	959	-
	Total current liabilities		27,278	35,121
	Long-term liabilities	12		12,085
	Long term portion of streaming arrangement	11,047
	Asset retirement obligation	11	2,022	3,398
	Lease liability	13	368	397
	Convertible debentures - loan liability	14	-	1,596
	Long term loan	16	9,575	2,838
Total long-term liabilities		23,012	20,314
Total liabilities		50,290	55,435
Shareholders' equity	17
	Share capital	79,551	55,760
	Warrants	18	-	5,642
	Contributed surplus		23,061	19,559
	Accumulated other comprehensive loss		(15,727)	(16,055)
	Deficit		(38,296)	(47,190)
Total equity attributable to the owners of the Company		48,589	17,716
	Non-controlling interest		(588)	(493)
Total shareholders' equity		48,001	17,223
Total liabilities and shareholders' equity		98,291	72,658

The accompanying notes are an integral part of these consolidated financial statements.

Approved on behalf of the Board:

(Signed) "Bataa Tumur-Ochir"____________, Director

(Signed) "Batjargal Zamba"____________,Director

STEPPE GOLD LTD.

Consolidated Statements of Income and Comprehensive Income

(All dollar amounts expressed in thousands of United States Dollars, other than the per share amounts or unless otherwise noted)

		December 31,	December 31,
	Notes	2023	2022
Continuing operations	19
Revenue	54,239	62,366
Cost of sales	20	(24,833)	(31,547)
Gross profit		29,406	30,819
Exploration and evaluation expenditures	21	(1,062)	(2,130)
Corporate administration	22	(12,161)	(12,980)
Operating profit		16,183	15,709
Finance (costs)/income	23	(4,890)	4,652
Foreign exchange gain/ (loss)		172	(2,821)
Net profit before tax		11,465	17,540
Income tax		(2,129)	(1,823)
Net profit after tax from continuing operations		9,336	15,717
Discontinued operations	5
Loss for the year from discontinued operations	(537)	-
Profit for the year		8,799	15,717
Other comprehensive income for the year
Cumulative translation adjustment from continuing operations		315	(8,264)
Cumulative translation gain from discontinued operations		13	-
Net profit and comprehensive income		9,127	7,453
Net income attributable to shareholders of the Company		8,894	15,956
Net loss attributable to non-controlling interest		(95)	(239)
		8,799	15,717

Net profit and comprehensive income attributable to shareholders of the Company

Net loss attributable to non-controlling interest

9,2227,692

(95)(239)

		9,127	7,453
Basic profit per share		0.099	0.229
Diluted profit per share		0.094	0.186
Weighted average number of common shares	24	90,169,387	69,772,725
outstanding - basic
Weighted average number of common shares	24	94,581,151	85,807,716
outstanding - diluted

The accompanying notes are an integral part of these consolidated financial statements.

STEPPE GOLD LTD.

Consolidated Statements of Cash Flows

(All dollar amounts expressed in thousands of United States Dollars, other than the per share amounts or unless otherwise noted)

	Notes	December 31,	December 31,
	2023	2022
Operating activities
Net profit for the year before tax		10,928	17,540
Adjustments for non-cash items:	14
Change in the fair value of convertible debenture	(1,236)	(673)
Change in the fair value of TDB Gold Sales Loan	15	-	233
Change in the fair value of Triple Flag Gold Prepay loan	325	641
Change in the fair value of Aranjin Convertible Debenture	9	(120)	972
Change in the fair value of investment in Aranjin	9	315	-
Gain on modification of convertible debenture		-	(1,074)
Interest income		(145)	-
Accretion and financing income	20	2,669	698
Depreciation	2,200	4,209
Stock based compensation	17	224	2,672
Share based payments	586	-
Unrealized foreign exchange (loss)	12	(462)	(4,717)
Change in the fair value of stream liability	3,664	(6,315)
Income tax paid		(2,530)	(353)
Operating cash flows before changes in non-cash		16,418	13,833
working capital items
Changes in working capital items:
Inventories		(7,744)	(2,592)
Receivables and other assets		(387)	2,964
Amounts payable and other liabilities		(88)	4,510
Net cash generated by operations		8,199	18,715
Investing activities	7
Acquisition of property, plant and equipment	(5,231)	(5,922)
Net cash (used in) investing activities		(5,231)	(5,922)
Financing activities	15
Proceeds from TDB loan	5,500	-
Proceeds from Private Placement	17	9,020	-
Proceeds from Gold Prepay Loan	15	-	4,800
Proceed from TDB - Phase 2 financing	16	9,600	-
Share issue costs	17	(510)	-
Interest paid on TDB loan		(748)	-
Interest income	14	-	3,561
Interest paid on convertible debentures	(360)	(360)
Interest paid on TDB long term loan		-	(3,499)
Interest paid on Phase 2 financing	15	(215)	-
Repayment of TDB short term loan	(5,500)	-
Repayment of TDB Gold Loan	15	-	(10,695)
Repayment of stream financing	12	(11,094)	(12,793)
Repayment of loan TDB and Capitron	15	-	(53,283)
Loan repayment of Gold Prepay loan - Triple Flag	(4,856)	(910)
Lease obligation payments	13	(245)	(196)
Restricted cash		-	60,181
Net cash generated by/(used in) financing		592	(13,194)
activities
Effect of exchange rate changes on cash held in foreign		(41)	276
currency
Net increase/(decrease) in cash		3,519	(125)
Cash at the beginning of the year		2,515	2,640
Cash at the end of the year*		6,034	2,515

* Includes cash from disposal group held for sale of $28 (Note 5)

The accompanying notes are an integral part of these consolidated financial statements.

STEPPE GOLD LTD.

Consolidated Statements of Changes in Shareholders' Equity

For years ended December 31, 2023 and December 31, 2022

(All dollar amounts expressed in thousands of United States Dollars, other than the per share amounts or unless otherwise noted)

											Non-
	Notes	Number of	Share		Contributed	Warrants		Accumulated other	Deficit	Sub-total	controlling	Total
	shares	capital		surplus		comprehensive loss	interest	equity
											Corundum
Balance as at December 31, 2021			$	$	$	$	$	$	$	$
17	69,548,657	55,292	11,749	11,165	(7,791)	(63,146)	7,269	(254)	7,015
Stock based compensation	541,625	468	2,287	-	-	-	2,755	-	2,755
Comprehensive income/(loss) for the year	18	-	-	-	-	(8,264)	15,956	7,692	(239)	7,453
Warrants	-	-	5,523	(5,523)	-	-	-	-	-
Balance as at December 31, 2022		70,090,282	55,760		19,559	5,642		(16,055)	(47,190)	17,716	(493)	17,223
Balance as at December 31, 2022
17	70,090,282	55,760	19,559	5,642	(16,055)	(47,190)	17,716	(493)	17,223
Private Placement	11,000,000	9,020	-	-	-	-	9,020	-	9,020
Shares issued for acquisition	17	19,437,948	12,332	-	-	-	-	12,332	-	12,332
Share issuance costs	17	-	(510)	-	-	-	-	(510)	-	(510)
Share based payments	17	924,654	586	-	-	-	-	586	-	586
Share based compensation	17	3,077,729	2,363	(2,140)	-	-		223	-	223
Comprehensive income for the year from		-	-	-	-	315	8,894	9,209	(95)	9,114
continuing operations
Comprehensive income for the period		-	-	-	-	13	-	13	-	13
from discontinued operations
18
Warrants	-	-	5,642	(5,642)	-	-	-	-	-
Balance as at December 31, 2023		104,530,613	79,551	23,061	-	(15,727)	(38,296)	48,589	(588)	48,001

The accompanying notes are an integral part of these consolidated financial statements.

STEPPE GOLD LTD.

Notes to Consolidated Financial Statements

For the years ended December 31, 2023 and December 31, 2022

(All dollar amounts expressed in thousands of United States Dollars, other than the per share amounts or unless otherwise noted)

1. Nature of operations

Steppe Gold Ltd. (the "Company", "Steppe" or "Group") was incorporated under the laws of the Ontario Business Corporations Act by Articles of Incorporation dated October 5, 2016. The Company is domiciled in Canada and the address of its registered office changed during March 2023, from 55 Metcalfe St Suite 1300, Ottawa, ON K1P 6L5, Canada to 333 Bay Street, Suite 2400,Toronto, Ontario MS11 2T6.

Effective June 28, 2023, the Company acquired all of the issued and outstanding common shares of Anacortes Mining Corp.('Anacortes'), which owns a 100% interest in the Tres Cruces gold project located in Peru. At the date of acquisition Anacortes was listed on the TSX Venture Exchange and was a reporting issuer in Ontario, Alberta and BC. Anacortes was also listed on the OTC Markets Group (OTCQX). As at December 31, 2023, Company management were in discussions to acquire additional assets in Mongolia (Note 31 Events Occurring After the Balance Sheet Date) and had made the decision to dispose of Anacortes (see Note 5 Disposal Group held for sale).

The Company is focused on operating, developing, exploring and acquiring precious metal projects in Mongolia. The Company's commercially producing mine is the Altan Tsagaan Ovoo Property (the "ATO Project" or "ATO Mine"), located in Eastern Mongolia. During the second quarter ended June 30, 2020, the Company determined commercial production was achieved for the ATO Mine.

These consolidated financial statements incorporate the financial statements of the Company and its wholly-owned and controlled subsidiaries as set out below:

			Ownership	Ownership
Company Name	Country of	Nature of	Interest	Interest
Incorporation	Operations	December 31,	December 31,
			2023	2022
Steppe Gold LLC	Mongolia	Mining	100%	100%
Steppe Investments Limited	British Virgin Islands	Investment	100%	100%
Steppe West LLC	Mongolia	Holding Company	100%	100%
Corundum Geo LLC	Mongolia	Mining	80%	80%
Anacortes Mining Corp.	Canada	Holding Company	100%	-
New Oroperu Resources Inc.	Canada	Holding Company	100%	-
S.A. Mining Ventures Limited	Canada	Holding Company	100%	-
T.C. Mining Inc.	Canada	Holding Company	100%	-
687211 British Columbia Ltd.	Canada	Holding Company	100%	-
Aurifera Tres Cruces SA	Peru	Mining	100%	-

Anacortes has been incorporated in these consolidated financial statements with effect from June 28 2023 (Note 8 Acquisition of subsidiary).

Subsequent to the acquisition of Anacortes the Company was approached by, and held discussions with, a number of interested parties with a view to partnering with the Company or to purchasing Anacortes. On December 30, 2023, the Board approved a proposal from management to enter into a binding term sheet to acquire certain assets in Mongolia and provide the selling company the right of first refusal to purchase Anacortes. The Company entered into the binding term sheet on January 22, 2023. (Note 31Events Occurring After the Balance Sheet Date). Accordingly, Anacortes was deemed to be a disposal group and has been accounted for under IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations.

The COVID-19 pandemic caused major disruptions in the ability of the Company to conduct business in Mongolia, notably with supply chain logistics.

While the impact of the pandemic has now mostly dissipated in Mongolia, transport of certain key reagents across the land border with China remains suspended. Since February 2023, the Company has obtained its key reagent via Russia and this supply route continues to operate effectively. The Company is optimistic that the China border will soon reopen fully.