Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") which we refer to in this report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are not historical facts, they reflect our current expectations, estimates and projections regarding future results and events, including matters related to our mining business, including resource estimates, exploration efforts, results and expenditures, development initiatives at the SJG mine, estimated production and capacity, costs, capital expenditures, expenses, recoveries, gold prices, sufficiency of assets, ability to discharge liabilities, liquidity management, financing needs, environmental compliance expenditures, environmental, social and governance ("ESG") and human capital management initiatives, risk management strategies, capital resources and use, cash flow maximization, mine life and other strategic initiatives. Such forward-looking statements are identified by the use of words such as "believes," "intends," "expects," "hopes," "may," "will", "should," "plan," "projected," "contemplates," "anticipates" or similar words and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking information in this report includes, but is not limited to, statements regarding the beliefs, plans, expectations or intentions of management, as of the date of report, regarding: (i) DynaResource, Inc.'s (the "Company") ability to develop its exploration assets via operational cash flow from gold concentrate production; and (ii) the Company's plans and expectations regarding its proposed 2024 exploration program for its SJG mine. Although the Company believes that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that these expectations will be realized. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements including, without limitation, risks related to: (1) fluctuations in commodity price, particularly gold and silver; (2) the Company's ability to retain or engage qualified employees or contractors necessary to conduct operations at the SJG mine; (3) a decreased demand for gold, silver and other minerals; (4) unexpected difficulties with the milling and the extraction of minerals from the Company's projects; (5) unexpected interruptions and problems encountered in the operation of the SJG mine; (6) factors that delay or cause difficulties in timing of shipments of concentrates by the Company; (7) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges; (8) the possibility that the Company may not have sufficient capital to operate its SJG mine or facilitate the further exploration of the SJG district; (9) inflationary pressures; (10) continued access to financing sources; (11) government orders that may require temporary suspension of operations or effects on our suppliers (12) the effects of environmental and other governmental regulations and government shut-downs; (13) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries; (14) our ability to raise additional financing necessary to conduct our business, make payments or refinance our debt; and (15) other factors beyond the Company's control. Additional risks are discussed in our Annual Report on Form 10K for the year ended December 31, 2024, and other filings with the SEC.

There is a significant risk that such forward-looking statements will not prove to be accurate. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Given current economic volatility and commodity fluctuations, any forward-looking statements or projections may be impacted significantly. Consequently, there is no representation by the Company that actual results achieved will be the same as those forecast. You are cautioned not to place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future results. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Recent Developments

On May 20, 2025, the Company filed a Technical Report Summary ("TRS") for the SJG mine, which was prepared in accordance with S-K 1300. The TRS includes the Company's first declaration of mineral reserves and supports the transition from an Exploration Stage issuer to a Production Stage issuer. The TRS was filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on May 20, 2025, and is incorporated herein by reference as Exhibit 96.1 to this Quarterly Report on Form 10-Q.

This transition to Production Stage has resulted in certain changes in accounting treatment, including the prospective capitalization of development expenditures and the commencement of depreciation on applicable assets, as further described in Note 3 to the unaudited condensed interim consolidated financial statements. Management anticipates that these changes will result in increased capitalized costs and higher depreciation expense in future periods.

Company

The Company is a minerals investment, production, and exploration company, currently advancing its high-grade SJG gold mine in Mexico through its operating subsidiary, DynaMéxico. Activities are focused on exploration, technical evaluation, and project development aimed at expanding the mineral resource base.

The Company conducts operations in Mexico through its wholly-owned subsidiary, DynaMéxico. As of the date of this report, the Company owns 100% of the outstanding shares of DynaMéxico, which in turn holds 100% ownership of the mining concessions, equipment, camp, and related facilities which comprise the SJG mine.

In addition to advancing the SJG mine, the Company has also focused on strengthening its corporate governance practices, with the objective of meeting the listing requirements of additional stock exchanges in the United States and/or Canada.

Project Improvements, Expansion and Increased Output

Since 2015, the Company has carried out limited site-scale processing and operational activities at the SJG mine to support its exploration and evaluation programs. These activities have been directed toward enhancing the technical understanding of the deposit, optimizing on-site infrastructure, and advancing project development. In 2022, the Company expanded its exploration efforts at the SJG mine with the objective of increasing the project's mineral resource base, primarily targeting gold mineralization.

From initial small-scale operations averaging 100 tons per 24-hour operating day in 2015, throughput has steadily increased, reaching an average of approximately 700 tons per day in 2024. In 2023 alone, daily processing volumes rose by 30%, from 550 tons to 700 tons per day.

For 2025, the Company expects to increase average daily throughput to approximately 800 tons, with installed capacity now in place to support up to approximately 1,000 tons per day.

Summary of Mining and Mill Operations

Annual Results from 2018 to 2024:

In 2024, on-site operational activities at the SJG mine resulted in the processing of approximately 257,676 tons of material and the production of approximately 25,677 gross ounces of gold ("Au Oz"). After applying dry weight adjustments pursuant to settlement terms with the buyer, approximately 22,003 Au Oz were sold.

Quarterly Results for the Three and Six Months Ended June 30, 2025 and 2024:

Mill feed grades and recovery rates are based on internal estimates derived from assay data and estimated weights of material processed.

The decrease in feed grade at the processing facility resulted from a planned reduction in the mining of certain high-grade zones in accordance with the mine plan, as well as higher dilution encountered in the processed material. Increased throughput at the SJG mine also contributed to a greater volume of lower-grade ore being treated. To support throughput, the Company opened a new development area at San Pablo during the fourth quarter of 2023, and an additional target zone, La Mochomera, in May 2024, which is expected to yield higher-grade material at depth.

San Jose de Gracia Gold Project S-K 1300 Technical Report Summary

The Company released its S-K 1300 Technical Report Summary (the "Report") for the San Jose de Gracia mine in Sinaloa Mexico. The Report includes the Company's Initial Mineral Reserve Estimate, which outlines a high-grade Proven and Probable Mineral Reserve of 250,000 gold ozs for the San Jose de Gracia mine. This initial Mineral Reserve Estimate and Report was prepared by the independent firm P&E Mining Consultants Inc ("P&E"), with metallurgical test work completed by Sepro Systems Inc ("Sepro") laboratories in Vancouver, B.C, and process plant review and operations aspects by D.E.N.M. Engineering Ltd. These independent groups of Qualified Persons have reviewed and approved the contents of this news release. The Report was filed by the Company with the Security and Exchange Commission on EDGAR, on May 20, 2025.

Highlights Include:

Mineral Reserves

The Mineral Reserves and Mineral Resource are as follows;

Table 1: Mineral Reserves for the San José de Gracia Project

Notes:

Mineral Resources

Table 2: Mineral Resources for the San José de Gracia Project

Notes:

Economic Analysis

For the current 7 year mine life exploiting the Tres Amigos, San Pablo and Mochomera orebodies the following was the key economic results from the study.

Table 3: Key Economic Parameters

Sensitivity Analysis

The after-tax NPV sensitivities to ±20% changes in gold metal price, gold head grade, gold metallurgical recoveries, OPEX and CAPEX are presented in Figure 1 and Table 4 below. The after-tax base case NPV's is most sensitive to the gold metal price followed by gold metallurgical recoveries and gold head grades followed by OPEX, and then CAPEX.

Figure 1: After-Tax NPV @ 5% Sensitivity Parameter Values

Table 4: After-Tax NPV @5% Sensitivity Graph

The San Jose de Gracia mine exhibits strong leverage to gold prices, especially with long-term gold price expectations exceeding the base case assumptions made in this report. At current spot prices above $3,200 per gold ounce, after tax NPV would be expected to materially exceed $133.3 million.

2025 SECOND QUARTER HIGHLIGHTS

Operational Performance

During the second quarter of 2025, the Company continued to advance the optimization program at the SJG mine. This program is focused on increasing process plant throughput and recoveries, improving maintenance and equipment utilization, and ultimately enhancing operational efficiencies and profit margins at the SJG mine.

Operational results for Q2 2025 showed improved performance across several critical operational metrics due to the ongoing optimization program. The average underground development was 1,268 meters per month in Q2 2025, compared to 383 meters per month in Q2 2024. This increase allowed the mine to access over 20 production stopes. Expanded development work also led to the discovery of two new mineralized veins - one at the Tres Amigos mine and one at La Mochomera - which are currently being evaluated as potential additional high-grade ore sources. Process plant reliability also improved. Electrical refurbishment and preventative maintenance programs resulted in ball mill availability exceeding 91% for the quarter. Additionally, the flotation circuit underwent an optimization and refurbishment program, which required staged shutdowns of individual flotation cells for repair.

Milled ore for Q2 2025 was 66,834 tons (approximately 734 tons per day), consistent with Q1 2025 production of 67,670 tons. With the current high ball mill availability, the Company is evaluating cost-effective strategies to utilize additional processing capacity of approximately 100 wet tons per day. Gold metal recoveries for the quarter averaged 74.6%, similar to the 74% gold recovery achieved in Q1 2025.

During Q2 2025, metal production totaled 1,898 ounces of gold in April, 2,007 ounces in May, and 1,796 ounces in June. Total metal production for Q2 2025 was 5,701 ounces of gold, in line to Q1 2025 production of 5,781 ounces. The average gold feed grade was 3.63 g/t for Q2 2025 and Q1 2025.

Mine development for Q2 2025 was slightly ahead of budget with 3,804 meters of development completed, compared to 3,490 meters in Q1 2025. The completion of new development drifts enabled the Company to have more than 20 stopes into production by the end of the quarter. This additional mining flexibility is expected to positively impact ore tonnage and grades in the coming months. The Company has also completed a capital works program to enhance mine ventilation across all three mines. Improved ventilation time has resulted in an improvement in working conditions and faster re-entry times following blasting activities. Planning for a central Raise Bore ventilation shaft in the La Mochomera and San Pablo mine occurred during the quarter and this will further optimization the mine ventilation.

Detailed Activities by Deposit:

Tres Amigos

Original mine planning at Tres Amigos anticipated closure by the end of Q1 2025. However, geological reinterpretations and targeted short exploration drifts identified two additional mineralized structures - the Victoria and Alexa veins - located within 40 meters of existing underground infrastructure.

To date approximately 10,000 tonnes of high-grade ore has been extracted from this high-grade structure. In addition, a new ore drive was completed on the upper levels of the Tres Amigos North Zone, providing access to a high-grade ore face. Mining from this face contributed to Q1 2025 production and is expected to continue throughout 2025. This new access will also enable future diamond drilling to test the north and south extensions of the deposit, with the goal of increasing inventory.

San Pablo Viejo and San Pablo Sur

Throughout Q2 2025, the Company continued mining multiple faces at the San Pablo deposit while advancing development toward the deeper southern extensions.

San Pablo Viejo and San Pablo Sur are expected to remain the primary sources of gold production through 2025 and 2026, with additional upside potential beyond that horizon. Particularly promising is the South Extension at the 500 level, which could yield high-grade ("Bonanza"-style) gold mineralization in the short to mid-term. Ongoing development efforts are positioning the mine for continued growth, including expansion deeper into the La Mochomera vein system.

La Mochomera

The La Mochomera vein is also expected to be a significant source of gold production in 2025 and 2026, with especially promising high-grade potential at depth. During Q1 2025, development activities intersected a previously unrecognized high-grade mineralized structure, now designated as the "532 Vein". The significance and potential of this new discovery are currently being evaluated.

OUTLOOK (SJG MINE)

With the development progress achieved in Q2 2025 and the increase in mining faces now available to the Company, management remains confident in the ongoing progress and long-term performance of the SJG mine. The Company's focus for the remainder of the year is to further improve production and grade through the implementation of additional operational enhancements and development work resulting in more downtime than anticipated.

While the Company made significant headway in the second quarter of 2025, optimization efforts will continue to focus on improving gold ore grades to the mill, throughput rates, and recoveries. San Pablo Sur, San Pablo, La Mochomera and the Tres Amigos ore bodies are expected to remain the main contributors to production in the year ahead. Further development in these areas will also be a key focus to access additional high-grade zones and mining faces.

The capital works program to add a primary gravity gold circuit to the processing plant is now on schedule for completion and commissioning in Q3 2025. The program involves the installation of three new Falcon gravity concentrators. These concentrators will

be installed downstream of the ball mills to recover the significant portion of the free gold present in the San Pablo, San Pablo Sur, and La Mochomera deposits.

A new tailings dam was completed during Q3 2024, with an estimated storage capacity of 670,751 cubic meters, distributed over two stages to accommodate up to three years of additional tailings. The third-stage facility is currently in use, and planning for construction of the fourth stage is underway. The Company has also begun evaluating a potential location for a third tailings storage facility at the SJG mine. These studies include environmental and geotechnical surveys to identify a preferred site.

Results for the Three and Six Months Ended June 30, 2025 and 2024

REVENUE: Revenue for the six months ended June 30, 2025 and 2024 was $29,582,687 and $20,512,458, respectively. Revenue for the three months ended June 30, 2025 and 2024 was $15,886,286 and $11,083,602, respectively. The increase was primarily due to higher tonnage mined and processed, as well as higher realized gold prices.

During the first quarter of 2025, the Company's provisional gold assays (based on internal lab results) indicated higher gold content than was ultimately realized upon final settlement. This variance was attributed to the presence of coarse, "nuggety" gold in the ore, which can cause significant assay fluctuations. After identifying this issue, in early March the Company implemented enhanced laboratory QA/QC protocols to better account for coarse gold during analysis. Subsequent assay results have aligned within acceptable tolerances relative to final buyer assays, confirming the effectiveness of these measures. The settlement adjustment related to first quarter production of $1.4 million was recorded in the second quarter of 2025, when final assays were received and reconciled. The Company continues to monitor its assaying processes to ensure accurate reporting of gold production going forward.

MINE PRODUCTION COSTS: Mine production costs for the six months ended June 30, 2025 and 2024 were $12,053,888 and $12,766,527, respectively. Mine production costs for the three months ended June 30, 2025 and 2024 were $5,865,640 and $6,551,953, respectively. These costs were directly related to the extraction of ore, including the costs of removing waste material to access mineralized ore for processing at the mill. During the six months ended June 30, 2025, the Company mined 64,032 tons of material compared to 56,931 tons in the six months ended June 30, 2024.

MILL PRODUCTION COSTS APPLICABLE TO SALES: Mill production costs applicable to sales for the six months ended June 30, 2025 and 2024 were $2,920,868 and $2,710,405, respectively. Mill production cost applicable to sales for the three months ended June 30, 2025 and 2024 were $1,820,016 and $1,231,743, respectively. These expenses relate to milling, packaging, and shipping gold and other precious metal products. The increase was due to the increase in tonnage processed.

CAMP, WAREHOUSE AND FACILITIES: These represent the costs of supporting the mining facilities including housing, food, security and warehouse operations. Camp, warehouse and support facility costs for the six months ended June 30, 2025 and 2024 were $2,906,747 and $2,781,371, respectively. Camp, warehouse and facilities costs for the three months ended June 30, 2025 and 2024 were $1,492,072 and $1,336,146, respectively. The increase in costs recorded for the six months ended June 30, 2025 was primarily driven by higher personnel counts associated with expanded operations.

TRANSPORTATION: Transportation costs for the six months ended June 30, 2025 and 2024 were $2,576,850 and $2,574,371, respectively. Transportation costs for the three months ended June 30, 2025 and 2024 were $1,252,973 and $1,161,409, respectively. These were the costs of transporting material between the mine and the mill, and delivery of the concentrate to the customer for treatment and sale.

PROPERTY HOLDING COSTS: Property holding costs for the six months ended June 30, 2025 and 2024 were $73,962 and $87,382, respectively. Property holding costs for the three months ended June 30, 2025 and 2024 were $37,826 and $43,335, respectively. These costs primarily consist of taxes on mining concessions, land leases, and other direct costs of associated with maintaining the SJG mine. These costs remain relatively consistent year over year.

FACILITIES EXPANSION COSTS: Facilities expansion costs for the six months ended June 30, 2025 and 2024 were $Nil and $2,093,480, respectively. Facilities expansion costs for the three months ended June 30, 2025 and 2024 were $Nil and $1,305,671, respectively. The expenses reported for the six months ended June 30, 2024 reflected significant expenditures reported for the second phase expansion of the milling facility and mining infrastructure to additional mining areas at SJG that did not recurr in 2025.

EXPLORATION DRILLING: Exploration drilling expenditures for the six months ended June 30, 2025 and 2024 were $130,124 and $1,299,834, respectively. Exploration drilling expenditures for the three months ended June 30, 2025 and 2024 were $22,274 and $379,349, respectively. The Company continues exploration drilling program for the purpose of updating the Company's Mineral Reserve and Resource Estimate.

GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expenses for the six months ended June 30, 2025 and 2024 were $3,044,538 and $2,267,836, respectively. General and administrative expenses for the three months ended June 30, 2025 and

2024 were $1,794,294 and $1,098,987, respectively. These represent corporate overhead not directly attributable to site operations, including management, accounting, and legal expenses.

STOCK-BASED COMPENSATION EXPENSE: Stock-based compensation expense was $826,664 and $822,500 for the six months ended June 30, 2025 and 2024 respectively. Stock-based compensation expense for the three months ended June 30, 2025 and 2024 was $574,957 and $822,500, respectively and was related to the vesting of restricted stock awards issued in 2024 combined with shares awarded in 2025.

DEPRECIATION AND DEPLETION: Depreciation and depletion expense for the six months ended June 30, 2025 and 2024 were $408,537 and $14,687, respectively. Depreciation and depletion expense for the three months ended June 30, 2025 and 2024 were $245,971 and $7,344, respectively. With the Company's transition from Exploration Stage to Production Stage under S-K 1300, the Company began capitalizing mine development costs and commenced depreciation and depletion charges on a units-of- production basis.

ACCRETION EXPENSE. Accretion expense for the six months ended June 30, 2025 and 2024 was $9,972 and $9,130, respectively. Accretion expense for the three months ended June 30, 2025 and 2024 was $4,986 and $4,565, respectively. The Company began accreting its asset retirement obligation on January 1, 2024, related to estimated costs to decommission the milling plant and tailings pond at the estimated life of the mines in operation at the establishment of the ARO in 2023 as a result of the expansion of the milling operation.

OTHER INCOME (EXPENSE): Other income (expense) for the six months ended June 30, 2025 and 2024 was $(1,450,199) and $(361,291), respectively. Included in other income in 2025 was interest expense of $(775,677), change in derivative of $(267,649) currency exchange gain of $162,866 and other expense consisting primarily of the write off of foreign tax receivable of $569,739. The increase in the derivative liability was primarily due to the increase in the Company's common stock value. Included in other income in 2024 was interest expense of $(835,337), change in derivative of $445,892, currency exchange gain of $23,192 and miscellaneous income of $4,962.

OTHER COMPREHENSIVE INCOME: Other comprehensive income includes the Company's net income (loss) plus the unrealized currency exchange gain for the period. The Company's other comprehensive income for the six months ended June 30, 2025 and 2024 consisted of unrealized currency gains (loss) of $967,622 and $(497,552), respectively, resulting from fluctuations.

Liquidity and Capital Resources

As of June 30, 2025, the Company had negative working capital of $25,756,115 comprised of current assets of $10,841,430 and current liabilities of $36,957,545. This represented an increase of $7,512,591 from the Company's negative working capital of $18,243,524 as of December 31, 2024, primarily due to increased cash used in investing activities during the first half of 2025, and higher accounts payable and accrued liabilities as of June 30, 2025.

Net cash provided by operating activities for the six months ended June 30, 2025 was $2,961,710 compared to a use of $4,728,189 during the six months ended June 30, 2024. The improvement in the cash flow from operations was primarily attributable to the Company's income generated in the first half of 2025, driven by increased revenue and lower mine operating costs.

Cash used in investing activities for the six months ended June 30, 2025 totaled $5,921,315 compared to $6,755 during the six months ended June 30, 2024. The increase reflected $4.9 million in capitalized mine development costs incurred beginning January 2025 following the issuance of the Company's Maiden Mineral Reserve Estimate under Reg. S-K 1300 and the resulting change to the Company's capitalization policies. See Note 3 of the unaudited condensed interim consolidated financial statements. Expenditures reported for the expansion of mining facilities, which totaled $2,093,480 during the three months ended June 30, 2024, would typically have been capitalized but were expensed because the SJG mine lacked proven and probable mineral reserves prior to January 2025.

Cash provided by financing activities for the six months ended June 30, 2025 and 2024 was $133,756 and $2,998,222, respectively. The net cash provided by financing activities during the six months ended June 30, 2025 came from $2,650,000 of advances from the company's Revolving Credit Line ("RCL") offset by $2,440,069 in payments on the RCL and $76,175 in operating lease payments. In the six months ended June 30, 2024 the Company raised $2,500,000 from the sale of Series E Preferred Stock and drew $3,000,000 in advances on the RCL offset by $2,437,500 of payments on the RCL and $64,278 in operating lease payments.

Through June 30, 2025, the Company's available liquidity and operations have been financed primarily through its operations and the revenue generated from the sale of product.

Although the Company has incurred positive net income and net cash inflows from operating activities for the six months ended June 30, 2025, there were many expenditures associated with investing activities which were made that were not expended for the production of revenue during the current period, such as underground development and mine expansion costs. If these expenses had not been made,

the Company's net decrease in cash would have been minimized. The Company believes its cash and cash receipts from its revenue arrangement, proceeds from the sale of equity and proceeds from borrowing will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months from the date these financial statements were available for issuance. Future capital requirements will depend on many factors, including the Company's rate of mining, milling, and exploration activities and growth. To the extent that existing capital and revenue growth are not sufficient to fund future activities, the Company may need to raise capital through additional equity or debt financings. Additional funds may not be available on terms favorable to the Company or at all. Failure to raise additional capital, if needed, could have a material adverse effect on the Company's financial position, results of operations and cash flows.

Off-Balance Sheet Arrangements

As of June 30, 2025, the Company had no off-balance sheet arrangements that would have a material adverse effect on its financial condition, results of operations, or liquidity.

Plan of Operation

The plan of operation for 2025 includes the continued enhancement of site infrastructure and processing capabilities, along with expanded exploration drilling at the SJG mine. During 2024, the Company processed an average of approximately 700 tons of material per day. For the first six month of 2025 an average of 730 tons of material per day was processed and for the second half of 2025, the Company anticipates increasing daily processing throughput to an average of 800 tons per day. The Company now has processing capacity of up to 850 tons per day, with a target rate of 800 tons per day. The Company has initiated development as part of its exploration activities on additional target areas (Victoria and Palos Chinos structures) which are anticipated to yield higher-grade material for processing. The Company expects that a combination of higher-grade feed material, increased processing throughput, and higher gold prices will produce a significant increase in revenue in 2025, as part of its ongoing exploration and project advancement efforts.

The Company plans to continue its exploration drilling program from underground and commence drilling from surface in the second half of 2025. Management and geologists will make decisions based on drill results, corporate strategies, market conditions, surface mapping, sampling, and target generation. The Company has contracted with a "Qualified Person," within the meaning of S-K 1300, to interpret the collected data and compile a formal Mineral Resource Estimate update which was filed on May 20, 2025.

Capital Expenditures

Primary capital expenditures in 2025 have been directed toward increasing underground infrastructure development and enhancing processing capacity at the SJG mine. Average underground development in Q2 2025 was 1,268 meters per month, compared to 380 meters per month in 2024. Processing systems have been upgraded through the installation of new concentrators and the repurposing of the original grinding mill. Additional equipment acquisitions and infrastructure improvements have also enhanced site access and operational capacity. The company is planning a major Ventilation Upgrade in the La Mochomera and San Pablo mines with the installation of a central Raise Bore ventilation shaft. Works for this shaft are scheduled to commence in Q4 2025. Effective January 1, 2025, capital expenditures are capitalized in accordance with S-K 1300. See Note 3 of the unaudited condensed interim consolidated financial statements.

Exploration Activity

The Company continues to invest in exploration spending on near-mine extensions as well as geological studies and reinterpretations. The Company completed an S-K 1300 Mineral Resource Estimate in Q2 2025 covering San Pablo Sur, San Pablo, La Mochomera and the Tres Amigos ore bodies which includes development proposals for additional exploration of ore veins in the short and mid-term.

The Company expects to start near-mine extension drilling in Q4 2025 and expand exploration to surrounding areas by year-end. Exploration will focus on growing the known resources at the SJG mine.

The Company intends to prioritize exploration of high-grade underground targets that can be readily incorporated into the mine plan, as well continue the regional program to better understand the broader potential of the SJG land package. Additionally, planning for deeper and lateral drilling between the San Pablo and Tres Amigos veins has highlighted the potential to extend high-grade underground resources at the SJG mine, especially in areas previously considered discontinuous due to faulting. The Company has identified opportunities to develop San Pablo, San Pablo Sur, La Mochomera, and Tres Amigos exploration potential. At the La Mochomera deposit, the Company plans to explore southward toward the historic Palos Chinos and Purisima mines, which operated over 100 years ago as high-grade producers. Of note is the Palos Chinos exploration target, located within 40 meters of the existing La Mochomera mine infrastructure.

In June 2025, the Company provided an update on exploration activities at its 100%-owned San Jose de Gracia gold project in Sinaloa, Mexico. This update included the preliminary identification of two potential high-grade mineralized zones situated adjacent to existing mine infrastructure. These zones are currently under evaluation for future exploration and development potential.

Note: Assay results referenced in this Quarterly Report on Form 10-Q are based on internal laboratory analyses conducted at the San Jose de Gracia plant. They have not been verified by an independent third-party laboratory and do not conform to disclosure standards such as S-K 1300 or NI 43-101.

Over the past six months, the Company has been compiling and interpreting geological, geochemical, geophysical, and historical mining data to support an exploration diamond drilling program planned for later in 2025. This review has led to the identification of the Victoria zone, a previously undocumented mineralized structure located approximately 40 meters from the upper-level development at the Tres Amigos mine (see Figures 1 and 2). Similarly, analysis of historical workings mining activity has highlighted the potential of the Palos Chinos zone, situated near active workings at Mochomera (see Figure 3). Both zones are undergoing early-stage evaluation through exploration drifting, geological mapping, channel sampling, and internal bulk sampling. Material is being processed at the San José de Gracia plant to assess mineralization, metallurgy, and gold recovery characteristics.

Victoria Target (Tres Amigos Mine Area)

Geological and structural analysis at the Tres Amigos working face has led to the identification of an exploration target in the previously underexplored hanging wall of the Tres Amigos vein system. Subsequent development drifting toward this target has resulted in the discovery of a previously undocumented mineralized vein approximately 1.5 meters in width (see Figure 3). To date, a total of 110 meters of drifting has been completed on two sublevels (550 and 540 levels, spaced 10 meters apart), alongside the collection and analysis of 1,069 channel samples. In addition, the Company has mined and processed a bulk sample of approximately 10,000 tonnes, with internal assay results indicating an estimated average grade of 8 grams per tonne gold. Based on the current exploration work, the Victoria zone is considered to have a conceptual exploration target of approximately 100,000 tonnes grading between 7 and 8 grams per tonne gold, representing a potential of ~25,000 ounces of contained gold.

Note: The potential quantity and grade of the Victoria target are conceptual in nature. There has been insufficient exploration to define a mineral resource, and it is uncertain if further work will result in the delineation of a mineral resource.

Figure 1: Plan view of the existing underground infrastructure at Tres Amigos, highlighting the location of the newly identified Victoria vein in the hanging wall zone.

Figure 2:Photograph of the Victoria vein, highlighting a vein width of 1.5 meters and abundant sulphide mineralization, including chalcopyrite, pyrite, galena, and sphalerite, characteristic of this high-grade gold-bearing structure.

Palos Chinos

Exploration drifting toward the historical Palos Chinos vein system has advanced to approximately 70 meters from current mine workings. Observations from this development, combined with historical mapping from 1999-2000, suggest a second near-infrastructure exploration target. Preliminary evaluation indicates a conceptual exploration target of approximately 90,000 tonnes grading 5 to 6 g/t per tonne gold, representing a potential of ~15,000 ounces of contained gold.

Cautionary Statement: The potential quantity and grade of the Palos Chinos target are conceptual in nature. There has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the delineation of a mineral resource.

The ongoing exploration drifts have encountered minor disseminated mineralized structures within the footwall of the Palos Chinos structure, supporting the potential for additional mineralization along the trend (see Figure 3).

Figure 3: Image showing existing underground infrastructure at the Mochomera vein system, showing the special relationship to the newly identified Victoria vein and its proximity to the Palos Chinos exploration drift.

Figure 4: Photograph of a mineralized vein exposed in the drift development advancing toward the main Palo Chinos vein.

Detailed mapping and sampling conducted in 1999 and 2000 across multiple levels of the historical Palos Chinos workings confirmed that the mined-out section of the Palos Chinos vein generally averages between 1.0 and 1.5 meters in thickness, with a steep westerly dip ranging from 60° to 80°. Along strike, several mineralized shoots were identified, displaying key structural and mineralogical characteristics, including:

• A shift in strike orientation from south to southeast;

• A localized shallowing of dip angles between 35° to 40°;

• Vein thickening to between 2 and 4 meters;

• Increased development of chlorite-rich stockwork adjacent to the vein;

• Elevated gold grades, including individual samples grading up to 92.5 g/t Au over 0.7 meters; and

• A mineralized shoot transect averaging 7.6 g/t Au over 7.6 meters, including 13.4 g/t Au over 3.4 meters within the main Palos Chinos vein (see Table 1).

In total, 180 samples were collected along the Palos Chinos trend from both surface exposures and underground workings. Of these, 74 samples were taken directly from the Palos Chinos vein and adjacent mineralized hanging wall and footwall zones. Based on this dataset, the Palos Chinos vein returned an average grade of 11.4 g/t Au over an average width of 1.2 meters. Additionally, mining above the Palos Chinos level exposed a parallel, laterally continuous hanging wall vein located approximately 4 to 5 meters above the main structure. Three samples collected from this vein returned gold grades ranging from 11.3 to 18.5 g/t Au and also contained notable concentrates of copper, with localized lead and zinc values over narrow widths. A summary of significant historical assay results from the Palos Chinos vein is provided in Table 1.

Table 1: Summary of significant historical assay results samples from the Palos Chinos vein.

The reported average vein thickness of 1.2 meters is derived from the mean of all individual sample interval widths and does not reflect the full extent of the historically mined zone between the Palos Chinos and Saramiento levels. To determine the broader mineralized envelope, a representative channel potential sample transect spanning the interval between the Palos Chinos vein and a parallel hanging wall structure returned an average of 7.4 g/t Au over 7.6 meters (see Table 1). These results indicate that portions of the Palos Chinos trend may exhibit sufficient thickness, grade continuity, and structural geometry to be amenable to mechanized mining, subject to further drilling, geotechnical evaluation, and mine planning studies.

Figure 5: Assay results from a representative channel sample transect extending from the footwall contact, across the Palos Chinos vein and associated chlorite stockwork zone, to the hanging wall vein. The composite interval averages 7.4 g/t Au over 7.6 meters (true width), with notable enrichment in gold, silver, and copper across discrete intervals

Production Stage

The Company is currently classified as a Production Stage issuer under S-K 1300. Prior to January 1, 2025, the Company was considered an Exploration Stage issuer, having engaged in mining, milling, and extraction activities without having established proven and probable mineral reserves.