(the “Company”)

INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS – QUARTERLY HIGHLIGHTS

For the three months ended February 28, 2017

General

This Interim Management’s Discussion and Analysis (“Interim MD&A”) supplements, but does not form part of, the unaudited condensed consolidated interim financial statements of the Company for the three months ended February 28, 2017. The following information, prepared as of May 1, 2017, should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements for three months ended February 28, 2017 and the related notes contained therein. The Company reports its financial position, results of operations and cash flows in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). In addition, the following should be read in conjunction with the Consolidated Financial Statements of the Company for the year ended November 30, 2016 and the related MD&A.  All amounts are expressed in Canadian dollars unless otherwise indicated. The February 28, 2017 financial statements have not been reviewed by the Company’s auditors.

The Company’s public filings, including its most recent unaudited and audited consolidated financial statements can be reviewed on the SEDAR website www.sedar.com.

Forward-looking Statements

This Interim MD&A contains certain statements which constitute forward-looking information within the meaning of applicable Canadian securities legislation (“Forward-looking Statements”). All statements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected in the Forward-looking Statements.  The Forward-looking Statements in this Interim MD&A include, without limitation, statements relating to:

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mineral reserves and resources as they involve the implied assessment, based on estimates and assumptions, that the resources described exist in the quantities predicted or estimated and can be profitably produced in the future;

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the Company’s planned exploration, development and marketing activities for the Bayovar 12 Project;

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the intended use of proceeds received from recent financing activities;

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the sufficiency of the Company’s cash position and its ability to raise equity capital or access debt facilities; and

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maturities of the Company’s financial liabilities or other contractual commitments.

Often, but not always, these Forward-looking Statements can be identified by the use of words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “forecasts”, “scheduled”, “targets”, “possible”, “strategy”, “potential”, “intends”, “advance”, “goal”, “objective”, “projects”, “budget”, “calculates” or statements that events, “will”, “may”, “could” or “should” occur or be achieved and similar expressions, including negative variations.

Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements. Such uncertainties and factors include, among others:  

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uncertainty of mineral reserve and resource estimates;

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risks associated with mineral exploration and project development;

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fluctuations in commodity prices;

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fluctuations in foreign exchange rates and interest rates;

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credit and liquidity risks;

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changes in national and local government legislation, taxation, controls, regulations and political or economic developments in countries in which the Company does or may carry on business;

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reliance on key personnel;

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property title matters;

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local community relationships;

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risks associated with potential legal claims generally or with respect to environmental matters;

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adequacy of insurance coverage;

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dilution from further equity financing;

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competition; and

·

uncertainties relating to general economic conditions.

as well as those factors referred to in the “Risks and Uncertainties” section in this Interim MD&A. 

Forward-looking Statements contained in this Interim MD&A are based on the assumptions, beliefs, expectations and opinions of management, including but not limited to:

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all required third party contractual, regulatory and governmental approvals will be obtained for the exploration and development of the Company’s properties;

·

there being no significant disruptions affecting operations, whether relating to labour, supply, power, damage to equipment or other matter;

·

permitting, exploration and development activities proceeding on a basis consistent with the Company’s current expectations;

·

expected trends and specific assumptions regarding commodity prices and currency exchange rates;

·

prices for and availability of fuel, electricity, equipment and other key supplies remaining consistent with current levels; and

·

the accuracy of the Company’s current mineral resource estimates.

These Forward-looking Statements are made as of the date hereof and the Company disclaims any obligation to update any Forward-looking Statements, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no assurance that Forward-looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on Forward-looking Statements.

Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources

Reserve and resource estimates included in this Interim MD&A have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources and Mineral Reserves. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for public disclosure by a Canadian company of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange Commission ("SEC"), and reserve and resource information contained in this Interim MD&A may not be comparable to similar information disclosed by U.S. companies. In particular, the term "resource" does not equate to the term "reserves". Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.

The SEC's disclosure standards normally do not permit the inclusion of information concerning "measured mineral resources", "indicated mineral resources" or "inferred mineral resources" or other descriptions of the amount of mineralization in mineral deposits that do not constitute "reserves" by U.S. standards in documents filed with the SEC. You are cautioned not to assume that resources will ever be converted into reserves. You should also understand that "inferred mineral resources" have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. You should also not assume that all or any part of an "inferred mineral resource" will ever be upgraded to a higher category. Under Canadian rules, estimated "inferred mineral resources" may not form the basis of feasibility or pre-feasibility studies except in rare cases. You are cautioned not to assume that all or any part of an "inferred mineral resource" exists or is economically or legally mineable. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of "reserves" are also not the same as those of the SEC, and reserves reported in compliance with NI 43-101 may not qualify as "reserves" under SEC standards. Accordingly, information concerning mineral deposits set forth in this Interim MD&A may not be comparable with information made public by companies that report in accordance with U.S. standards.

Business of the Company

The Company is engaged in the development of the Bayovar 12 phosphate project located in the Sechura desert of northern Peru.  Bayovar 12 is potentially an important South American source of reactive phosphate rock for use as a direct application fertilizer.  The development of new supplies of phosphate is becoming an increasingly important issue for South America given the growing demand and limited supply of phosphate for fertilizer production on the continent, and the current heavy reliance on imported rock.

In early 2016, the Company announced the results of its prefeasibility study on the Bayovar 12 Project. The Company subsequently engaged third party mining consultants to undertake an independent review of the study’s mine plan and production schedule, with a goal of optimizing the project economics.  Following this review, an updated prefeasibility study was filed on SEDAR on June 30, 2016.

In January 2017, Gordon Tainton was appointed President and a Director of the Company.  Mr. Tainton brings many years of experience in the international fertilizer and financial markets and succeeded David Cass who stepped down as President.  Mr. Cass remains as a Director and continues to provide services as a consultant to the Company.

On March 23, 2017, the Company received gross proceeds of $5.0 million by way of a non-brokered private placement, which funds have been allocated for engineering and marketing of the Bayovar 12 Project and for general working capital purposes.

Bayovar 12 Phosphate Project

The Company’sPeruvian subsidiary, Agrifos Peru S.A.C., owns a 70% interest in Juan Paulo Quay S.A.C. (“JPQ”), the titleholder of the Bayovar 12 phosphate mining concession (the “Bayovar 12 Project”). Radius Gold Inc. holds a royalty equal to 2% of the Company’s 70% interest in future phosphate production.  If Radius decides to sell any of its royalty interest in the future, the Company has a first right of refusal.  The Company and Radius have two common directors.

The Bayovar 12 Project is located 70 kilometres south of the city of Piura in northern Peru, close to Vale’s operating Bayovar phosphate mine.  Logistics for the 12,575 hectare concession are excellent, and the project area is accessible year round via a series of sealed roads and highways.  The Pan-American Highway crosses the eastern end of the property and the Chiclayo-Bayovar road transects the property.  A network of un-maintained drill roads and access roads for small surface gypsum mining operations provide four wheel drive vehicle access to the remainder of the property.  Power transmission lines for Vale’s Bayovar Mine, located 15 kilometres to the southwest, transect the Bayovar 12 Project at its northern end.

In order to comply with the requirements of the Peru mining authority for keeping the Bayovar 12 concession in good standing, 80,000 tonnes of gypsum must be extracted in each calendar year, and the Company must contribute 70% of the cost of such extraction.  Management is regularly in discussions with potential purchaser(s) of the gypsum to internal and offshore markets.

Reactive Phosphate Rock (“RPR”)

Most phosphate rock, roughly 85% of global mine production, is used in the manufacture of water-soluble fertilizers or food-grade chemicals.  However, some phosphate rock is reactive enough- usually because the phosphorus mineral apatite contains carbonate in its structure - that under certain soil and climate conditions it can simply be used as a fertilizer and applied directly to the soil without further processing.  Known as RPR (Reactive Phosphate Rock), this naturally occurring phosphate rock can be used as a reliable, low cost slow-release source of phosphorus (P) continuously adding P to the soil over a longer period of time than some manufactured fertilizers.  RPR works best on acid soils with 600-700 millimetres of annual rainfall. Rock from the Bayovar district, known in the fertilizer industry as Sechura Phosphate Rock, is one of a small number of highly reactive phosphate rocks known globally that are suitable for use as a direct application fertilizer.

Mining and processing of RPR is simpler and cheaper than the manufacture of more complex fertilizers.  The rock is mined, usually crushed and sieved into different size fractions, and sometimes washed or made into granules for ease of handling and use.  The main perceived cost advantages of RPR over processed phosphates are therefore lower capital investment, lower processing costs, lower use of raw materials, and lower energy use during processing.

Prefeasibility Study

(NOTE:  all amounts in this section of the interim MD&A are in U.S. dollars)

In January 2016, the Company announced the results of the independent NI 43-101 pre-feasibility study on the Bayovar 12 Project. The Company subsequently engaged third party mining consultants to undertake an independent review of the study’s mine plan and production schedule, with a goal of optimizing the project economics.  Following this review, an updated pre-feasibility study (“Updated PFS”) was filed on SEDAR on June 30, 2016 and is available on our website www.focusventuresltd.com.  

The Updated PFS includes the following key changes-in-scope over the earlier pre-feasibility study:

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one large processing plant instead of the staged commissioning of two smaller ones.

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owner-operated instead of contractor-operated overburden stripping.

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doubling of pre-production overburden stripping.

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a simplified mine plan and production schedule.

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larger and more efficient loading and hauling equipment.

·

a more logical and staged buildout of the tailings storage facility.

These changes-in-scope increased capital cost, decreased operating cost and in turn significantly improved the financial performance of the project including payback in 3.9 years and an after-tax net present value_7.5of $458 million.  Detailed highlights and a comparison of the Updated PFS results with the earlier study are set out in the following table:

Life-of-Mine Highlights and Comparison with PFS

Item	Updated PFS	PFS	Variance %
Financial Model
After-Tax NPV7.5, $M	457.7	252.9	+ 81.2
IRR, %	26.3	17.2	+ 53.5
Payback, years	3.9	6.6	- 40.9
Capital Cost, $M	167.7	127.3	+ 31.7
Sustaining Capital, $M	193.6	230.3	- 15.9
Undiscounted Cash Flow, $M	1,150.9	846.9	+ 35.9
Product Price Deck, $/t	$145/$185	$145/$185	-
Open Pit Mine
Life, years	20	20	-
Waste, Mt	422.5	367.6	+ 14.6
Ore, Mt	58.8	52.3	+ 12.4
Waste/Ore	7.2	7.1	-
Pre-Production Waste, Mt	23.9	12.4	+ 92.7
Cash Cost Ore, $/t mined	13.92	19.51	- 24.7
Cash Cost Product, $/t	39.72	52.28	- 24.7
Process Plant
Tonnage Processed, M	58.8	52.3	+ 12.4
Tonnage Product, M	20.8	18.5	+ 12.4
Tonnage Product Years 1-5, M	4.75	3.50	+ 35.7
Cash Cost Product, $/t	8.01	10.49	- 23.6
Total Project
Cash Cost Product, $/t	60.20	75.44	- 20.2
Cash Margin Product, $/t	104.80	89.56	+ 17.1

Project Description

The Bayovar 12 Project is a conventional truck-loader open pit mine and a process plant that is designed to produce 24% and 28% P₂O₅ direct application phosphate rock fertilizer (“DAPR”) “products”.  Phosphate ore will be mined at a rate of 8,000 tonnes per day from 13 overburden-covered and laterally-continuous sedimentary phosphate beds, interlayered with diatomite waste or “interburden”.  Overburden, interburden and phosphate ore are free-digging and do not require drilling or blasting.  Ongoing back-filling of the open pit is an integral part of a mine plan that is designed for progressive closure.  The average Waste/Ore (“W/O”) ratio is 7.2/1.

The beneficiation process is simple and chemical-free using sea-water washing, scrubbing and de-sliming. Solid tailings and waste water will be stored in an adjacent tailings-evaporation pond (“TSF”).  Fertilizer product will be trucked 40 kilometres to a dedicated seaborne loading facility.

The project is in an established phosphate mining district.  At full capacity it will produce 1 million tonnes of fertilizer product per year over an initial mine life of 20 years and will supply a rapidly-growing market for natural and plant-ready DAPR products.

Mineral Resource and Reserve Estimates

A systematic and wide-spaced 62-hole, 5,971 metre diamond drilling program delineated a continuous 34 km² near-surface diatomite sequence containing 13 flat-lying sedimentary phosphate beds. These beds are open to extension over the remaining 91 km² of the concession.

In order to support the PFS Mineral Resource Estimate, IMC completed a review of the geology and resource block models. IMC then developed an independent Reserve Estimate through the construction of a 20-year open pit shell contained within the Mineral Resource model and based on DAPR prices of $145/t and $185/t for 24% and 28% P₂O₅ products, respectively. The reader is cautioned that Mineral Resources that are not mineral reserves do not have demonstrated economic viability. In addition, the reader is reminded that the reported Mineral Resource is inclusive of the open pit-constrained Mineral Reserve.

Bayovar 12 Mineral Resources and Reserves Estimates (Dry Tonnes)

Resources*	Tonnes, M	% P2O5
Measured	17.7	13.16
Indicated	209.5	13.04
Inferred	102.2	13.11
Reserves	Tonnes, M	% P2O5
Proven	14.4	12.74
Probable	44.4	13.00
Total Reserves	58.8	12.94

* Minimum thickness, grade cut off and other mining parameters were not applied. Resource Estimation includes 16 phosphate beds. Reserve Estimation considers the uppermost 13 phosphate beds.

Mining Schedule

The Bayovar 12 phosphate deposit is ideally suited for large-scale open pit development.  It consists of a 40 metres thick, laterally continuous and near-surface mineralized zone overlain by 30 metres of overburden.  All volumes in the open pit are free-digging; drilling and blasting are not required.

The planned open pit shape is that of a progressively larger hand-fan and is divided into 13 mining phases.  Each phase has multiple working faces in order to efficiently sequence overburden stripping, ore and interburden mining to ensure regular delivery of ore to the process plant.  Haulage profiles and cycle times were optimized for each of the 13 mining phases.  Waste volumes account for 89% of mine production tonnes.  By continuously placing waste as backfill in mined-out phases of the open pit, haulage distances are minimized and the ex-open pit waste storage footprint is reduced.  Excluding backfill, the open pit at its deepest point will be 76 metres below surface.

The open pit will feed the process plant at a nominal rate of 8,000 tonnes per day or 2.7 million tonnes per year.  An accelerated program of pre-production and Year 1 waste stripping, totaling 46.8 million tonnes, is designed to maintain a balanced Life-of-Mine (“LOM”) W/O ratio at 7.2/1.  Low specific gravity of the mined volumes allows for the use of over-sized loading and hauling equipment of the kind often used in coal mining.  Overburden and thicker interburden beds will be mined with 31 m³ front-end loaders and loaded into 110 m³ capacity haul trucks.  Individual phosphate beds and thin interburden layers will be mined with GPS-controlled continuous surface miners.  Over the initial 20 year mine life the open pit will deliver 58.8 million tonnes of ore to the process plant and 424 million tonnes of waste, of which 111 million tonnes will be placed in surface storage, 308 million tonnes as in-pit backfill and 5 million tonnes as construction material for the TSF embankments.

Ore Processing

The process plant, operating at 85% of nominal capacity and without the use of chemical additives, will process on an annual basis 2.7 million tonnes of ore and produce 1 million tonnes of natural DAPR fertilizer products.  The beneficiation process is simple and consists of drum washing with seawater and recycled process water, size classification, attrition scrubbing, hydraulic classification, filtering and rotary drying.  By adjusting the cut point for fines in the tertiary classifying hydrosizer, the process plant is designed to produce, on a batch basis, either a 24% or a 28% P₂O₅ product.  Phosphate recoveries are forecast at 81.5% and 66.4% for each product, respectively. Infrastructure required for the process plant includes a 16 kilometre - 138 kV transmission line and a 45 kilometre – 32” seawater supply pipeline.

Capital Cost Estimate

The Capital Cost to design, permit, pre-strip, construct and commission the open pit mine, process plant and ancillary facilities and utilities is estimated at $167.7 million.  Some 90% of total equipment costs were derived from vendor quotes.  Working capital of $40 million is estimated separately and carried in the financial analysis.

Capital Cost Estimate

Area	$M
Direct Costs
Pre-stripping	41.2
Lease Mining Equipment Deposit	18.2
Tailings Storage Facility	10.3
General Site Costs	2.5
Process Plant	20.6
Seawater Supply Pipeline	18.1
138kV Transmission Line	5.2
Tailings Line	2.2
Ancillaries	12.2
Total Direct Costs	130.5
Indirect Costs
Contractor Indirects	7.7
EPCM Services & Commissioning	4.6
Vendor Reps	0.7
Freight / Duties	4.6
Spare Parts and Initial Fills	1.5
Owner’s Costs	2.5
Total Direct Costs	21.6
Subtotal	152.1
Contingency 20%*	15.6
Total Project	$167.7

*Contingency was not applied to Pre stripping, Primary Mine Equipment, Tailings Storage Facility, Spare Parts and Owner's Costs

Operating Cost Estimate

LOM operating costs have been developed for mining, processing, G&A and transportation in First Quarter 2016 U.S. dollars.  At a W/O ratio of 7.2/1 the LOM cost to mine 1 tonne of ore is $14.69.  Improved cash mining costs and product costs are the direct result of a larger capital investment in the project and increased productivity.  These in turn provide the opportunity for consistently strong cash operating margins over the initial 20 year mine life.

Average LOM Cash Mining Cost per Tonne of Ore Mined

Area	Tonnes	$ / tonne	$ / ore tonne
Ore	1.0	2.20	2.20
Overburden	3.5	1.92	6.09
Interburden	3.7	1.56	5.63
Total Cash Cost Ore			$13.92

Average LOM Cash Operating Cost per Tonne of Product

Area	$ / tonne product
Mining	39.72
Processing	8.01
G&A	2.38
Transportation	10.09
Total Cash Cost Product	$60.20

Financial Analysis

After-Tax Undiscounted Annual and Cumulative Cash Flows, based on operational plans presented in the Updated PFS, are summarized in the graph below.  Working Capital of $40 million, interest payments, royalties and closure and reclamation costs have been included in the financial analysis.  Key After-Tax metrics include a NPV_7.5 $457.7 million, IRR 26.3% and Payback 3.9 years.

Sensitivity

Sensitivity analyses – as measured against a systematic range of 50/50 product pricing scenarios – are presented graphically as financial outcomes in terms of forecast After-Tax Undiscounted Cash Flow, NPV_7.5 and Payback Period, as set out below.

Project Sensitivity to Average Product Price

Project Execution Plan

The forecast Project Schedule to complete a Bankable Feasibility Study, engineer, permit, pre-strip, construct and commission an open pit mine and process plant at the Bayovar 12 Project is presented in the chart below.

Forecast Project Execution Schedule

Marketing

The Company is investigating the opportunity for potential production of RPR from the Bayovar 12 Project, targeting local Latin American agricultural markets, the Malaysian and Indonesian palm oil industry, and organic farmers.  Preliminary visits have been undertaken to Brazil and Argentina to talk to fertilizer consumers and market intelligence groups. The Company is also in communication with Malaysian and Indonesian fertilizer companies interested in securing future production of RPR from Bayovar 12.

Extensive testwork has been completed by third parties on the effectiveness of Sechura RPR as a direct application fertilizer on different crops and soil types. Both the International Fertilizer Development Center in the US and the New Zealand Ministry of Agriculture and Fisheries has carried out research into its use on a variety of soil types and crop species.  One of the key findings from the New Zealand work was that the ongoing use of RPR produces a reservoir of residual phosphorus in the soil, due to the build-up of reserves of slow dissolving RPR over the first few years, after which the release-rate of phosphorus comes into equilibrium with the application rate.  This ‘residual effect’ provides a major income benefit to farmers during periods when lower farm incomes restrict fertilizer inputs.

The Company is actively investigating exporting its potential product to Asia to meet the growing demand for RPR fertilizer for the palm oil industry, in addition to South and North American markets. With the recent change in management, the Company is currently in the process of reviewing its marketing strategies for direct application of phosphate and also the traditional phosphate fertilizer production market.

Project Outlook

The Company is looking to secure strategic partners to participate in the development of the Bayovar 12 Project and is in discussions with several groups to facilitate introductions to fertilizer manufacturers across the region.  Additionally the Company has been attending international fertilizer industry conferences and conducting meetings with phosphate consumers, traders and shipping companies interested in the Bayovar 12 Project as a future supply of rock phosphate.

Qualified Person: Mr. David Cass, a Director of the Company, is a member of the Association of Professional Engineers and Geoscientists of British Columbia and the Company’s Qualified Person as defined by National Instrument 43-101, and is responsible for ensuring that the technical information contained in this interim MD&A is an accurate summary of the original reports and data provided to or developed by the Company.

Selected Quarterly Information

The following table provides information for the eight fiscal quarters ended February 28, 2017:

	First Quarter ended Feb. 28, 2017 ($)	Fourth Quarter ended Nov. 30, 2016 ($)	Third Quarter ended Aug. 31, 2016 ($)	Second Quarter ended May 31, 2016 ($)	First Quarter ended Feb. 29, 2016 ($)	Fourth Quarter ended Nov. 30, 2015 ($)	Third Quarter ended Aug. 31, 2015 ($)	Second Quarter ended May 31, 2015 ($)
Total interest and other income	79	497	1,355	1,404	1,699	531	1,072	697
Exploration expenditures	132,825	411,236	644,560	262,407	414,465	1,812,410	989,892	1,520,392
Loss from continuing operations     Total     Basic & diluted     loss per share	(114,740) (0.00)	(2,752,570) (0.02)	(513,406) (0.00)	(431,667) (0.00)	(810,959) (0.01)	(2,464,331) (0.02)	(1,769,636) (0.02)	(2,086,049) (0.03)
Loss attributed to equity shareholders of the Company     Total     Basic & diluted     loss per share	(128,462) (0.00)	(2,042,576) (0.03)	(503,092) (0.00)	(429,808) (0.00)	(809,291) (0.01)	(2,461,597) (0.02)	(1,706,899) (0.02)	(2,012,917) (0.03)

Exploration expenditures for all quarters presented mostly relate to the Company’s Bayovar 12 Project.  Exploration expenditures for the quarter ended November 30, 2015 were particularly higher due to the preparation of a prefeasibility study while the exploration expense for the quarter ended May 31, 2015 was on the higher side due to a drill program performed during that period. The loss from continuing operations for the quarter ended November 30, 2016 was higher than the preceding quarters in 2016 due to a write-down of $531,213 on the Company’s gypsum mineral interest and a loss on a sales tax reassessment.  The loss on sales tax reassessment however, did not impact the loss attributed to equity shareholders of the Company during that same period because that expense was allocated entirely to the non-controlling interest.

Results of Operations

All references to ‘net loss’ in the results of operations discussion below refers to the loss and comprehensive loss attributed to equity shareholders of the Company.

Quarter ended February 28, 2017

For the three month period ended February 28, 2017, the Company had a net loss of $114,740 compared to a net loss of $810,959 for the three month period ended February 29, 2016, a decrease of $696,219. The current quarter net loss was lower due in part to a foreign exchange gain of $132,612 being recorded compared to a foreign exchange loss of $241,458 for the comparative quarter.  Both the current and comparative quarters recorded write-downs of accounts payables and accrued liabilities of $244,781 and $316,513 respectively. Also contributing to the significantly lower net loss for the current quarter were exploration expenditures which were $132,825 compared to $414,465 in the comparative quarter, a decrease of $281,640.

General and administrative expenses during the current quarter were $359,040 compared to $471,265 for the comparative quarter, a decrease of $112,225. Significantly impacting both the current and comparative quarters were finance expenses of $209,469 and $227,970, respectively. This finance expense is related to the Sprott Loan and consists of interest charges and accretion of capitalized transaction costs. Other notable cost decreases during the current quarter were regarding salaries and benefits, shareholder communications, and travel and accommodation which were the result of cost cutting efforts. Accounting and legal costs were higher in the current quarter due the timing of audit fees.

Mineral Property Expenditures

During the period ended February 28, 2017, the Company recorded net exploration costs on the Bayovar 12 Project totalling $132,825.

The most significant exploration costs for the period were for salaries and geological and other consulting fees. Exploration costs also include the Peruvian value added tax which is treated as an expense due to the uncertainty of it being refunded.

Included in exploration expenditures during the current period are costs of $67,269 and cost recoveries totaling $97,144 relating to the gypsum extraction operation.

Financial Condition, Liquidity and Capital Resources

The Company had cash resources of $1,022,915 and a working capital deficit of $4,413,041 as of February 28, 2017 compared to cash resources of $202,118 and a working capital deficit of $5,426,699 at November 30, 2016.

On March 23, 2017, the Company closed a private placement of 100,000,000 units at $0.05 per unit for gross proceeds of $5,000,000. Each unit consists of one common share and one full share purchase warrant entitling the holder to purchase an additional common share exercisable for five years at a price of $0.10. The Company paid $153,623 cash and issued a total of 2,214,100 share purchase warrants as finders’ fees in connection with the financing. As of February 28, 2017, the Company had received $1,125,000 towards this private placement. Proceeds from this private placement are intended to be spent on engineering and marketing of the Bayovar 12 Project and for general working capital purposes, including paying down a portion of the Sprott Loan principal and settling other current liabilities.

During the 2015 fiscal year, the Company received US$5.0 million from the Sprott Loan, of which US$4.0 million was immediately paid to the shareholders of JPQ for the Company’s 70% interest in the Bayovar 12 Project. The Sprott Loan is subject to an interest rate of 12% per annum, payable monthly, and an extended maturity date of September 30, 2019.  In June 2015, the Company made a loan repayment of US$1.5 million and on March 24, 2016, made an anniversary fee payment of US$105,000 in cash. On July 19, 2016, the Company issued 2,740,340 shares with a value of $274,034 to Sprott for a loan extension fee. The outstanding principal balance as of February 28, 2017 was $4,636,800 (US$3,500,000) and subsequently on April 5, 2017, the Company used a portion of the recent $5.0 million private placement proceeds to repay US$500,000 towards the Sprott Loan, bringing the outstanding principal balance to US$3.0 million.

Pursuant to the Sprott Loan, the Company is required to maintain a minimum cash balance of $500,000 and minimum working capital of $250,000 during the term of the Sprott Loan. These requirements were waived by the lender of the Sprott Loan for the period from October 2016 to February 2017, however, in accordance with the applicable guidance under IFRS, given the lender did not waive the right to defer settlement for at least the next 12 months, the Company is required to classify the Sprott Loan as a current liability as of November 30, 2016 and February 28, 2017.

As of February 28, 2017, working capital also includes gypsum inventory with a carrying cost of $615,578. The Company is currently investigating opportunities to sell its gypsum inventory.

The Company expects its current capital resources to be sufficient to cover its general and administrative costs and Sprott Loan interest obligations, and to fund property development programs through the next twelve months. Actual funding requirements may vary from those planned due to a number of factors, including the progress of property development activity. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future.

Related Party Transactions

See Note 16 of the condensed interim consolidated financial statements for the three months ended February 28, 2017 for details of related party transactions which occurred in the normal course of business.

Other Data

Additional information related to the Company is available for viewing at www.sedar.com.

Share Position and Outstanding Warrants and Options

The Company’s outstanding share position as at May 1, 2017 is 232,239,110 common shares and the following share purchase warrants and incentive stock options are currently outstanding:

WARRANTS
No. of warrants	Exercise price	Expiry date
20,000,000	$0.265	June 2, 2017
1,540,000	$0.075	June 21, 2017
4,542,832	$0.075	July 6, 2017
18,672,000	$0.15(1)	November 11, 2020
102,214,100	$0.10	March 22, 2022
146,968,932

 ⁽¹⁾ The exercise price for these warrants is $0.15 until November 11, 2018 and then $0.20 until November 11, 2020.

STOCK OPTIONS
No. of options	Exercise price	Expiry date
720,000	$0.19	January 14, 2019
75,000	$0.30	June 28, 2021
1,305,000	$0.21	June 19, 2022
150,000	$0.21	July 10, 2022
2,260,000	$0.22	December 17, 2023
45,000	$0.22	January 14, 2024
15,000	$0.26	June 4, 2024
4,570,000

Risks and Uncertainties

Mineral Property Exploration and Mining Risks

The business of mineral deposit exploration and extraction involves a high degree of risk. Few properties that are explored ultimately become producing mines. At present, the Company’s Bayovar 12 Project does not have a known commercially viable ore deposit, with the exception of a small gypsum surface mining operation on the property.  The Company’s mineral property is also located in an emerging nation and consequently may be subject to a higher level of risk compared to developed countries. The main operating risks include: securing adequate funding to maintain and advance exploration properties; ensuring ownership of and access to mineral properties by confirmation that option agreements, claims or leases are in good standing; and obtaining permits for drilling and other exploration activities.  

Title to Mineral Property Risks

The Company does not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history of many mining properties. The Company has diligently investigated and continues to diligently investigate and validate title to its mineral claims; however, this should not be construed as a guarantee of title. The Company cannot give any assurance that title to properties it acquired will not be challenged or impugned and cannot guarantee that the Company will have or acquire valid title to these mineral properties.  

Commodity Price Risk

The Company is exposed to commodity price risk. Declines in the market price of phosphate may adversely affect the Company’s ability to raise capital in order to fund its ongoing operations. Commodity price declines could also reduce the amount the Company would receive on the disposition of its mineral property to a third party and gypsum price declines could impact the Company’s ability to sell its gypsum inventory.

Financing and Share Price Fluctuation Risks

The Company has limited financial resources, no source of operating cash flow other than proceeds from sales of mineral properties or mineral property rights, and has no assurance that additional funding will be available to it for further exploration and development of its projects. Further exploration and development of the Company’s projects may be dependent upon the Company’s ability to obtain financing through equity or debt financing or other means. Failure to obtain this financing could result in delay or indefinite postponement of further exploration and development of its projects which could result in the loss of one or more of its properties.

Securities markets have at times in the past experienced a high degree of price and volume volatility, and the market price of securities of many companies, particularly those considered to be exploration stage companies such as the Company, have experienced wide fluctuations in share prices which have not necessarily been related to their operating performance, underlying asset values or prospects. There can be no assurance that these kinds of share price fluctuations will not occur in the future, and if they do occur, how severe the impact may be on the Company’s ability to raise additional funds through equity issues.

Political, Regulatory and Currency Risks

The Company is currently operating in a country that has a relatively stable political and regulatory environment. However, changing political aspects may affect the regulatory environment in which the Company operates and no assurances can be given that the Company's plans and operations will not be adversely affected by future developments. The Company's property interests and proposed exploration activities in emerging nations are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, and changing political conditions and international monetary fluctuations.

The Company’s equity financings are sourced in Canadian dollars but for the most part it incurs its expenditures in Peruvian Soles and US dollars. At this time there are no currency hedges in place. Therefore a weakening of the Canadian dollar against the Peruvian Sole or US dollar could have an adverse impact on the amount of exploration conducted.

Insured and Uninsured Risks

In the course of exploration, development and production of mineral properties, the Company is subject to a number of hazards and risks in general, including adverse environmental conditions, operational accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods, and earthquakes.  Such occurrences could result in damage to the Company’s properties or facilities and equipment, personal injury or death, environmental damage to properties of the Company or others, delays, monetary losses and possible legal liability.

Although the Company may maintain insurance to protect against certain risks in such amounts as it considers reasonable, its insurance may not cover all the potential risks associated with its operations.  The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums or for other reasons. Should such liabilities arise, they could reduce or eliminate future profitability and result in increased costs, have a material adverse effect on the Company’s results and a decline in the value of the securities of the Company.

Environmental Risks

The activities of the Company are subject to environmental regulations issued and enforced by government agencies. Environmental legislation is evolving in a manner that will require stricter standards and enforcement and involve increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There can be no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on properties in which the Company holds interests which are unknown to the Company at present.

Community Risks

The activities of the Company may be subject to negotiations with the local communities on or nearby its mineral property concessions for access to facilitate the completion of geological studies and exploration work programs. The Company’s operations could be significantly disrupted or suspended by activities such as protests or blockades that may be undertaken by such certain groups or individuals within the community.

Competition

The Company will compete with many companies and individuals that have substantially greater financial and technical resources than the Company for the acquisition and development of its projects as well as for the recruitment and retention of qualified employees.