EXHIBIT 99.1

PATAGONIA GOLD CORP.

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the year ended December 31, 2020

April 28, 2021

The following management’s discussion and analysis (“MD&A”) of Patagonia Gold Corp. (hereinafter referred to as the “Company” or “Patagonia”), formerly Hunt Mining Corp. (“Hunt”) and its subsidiaries provides an analysis of the operating and financial results for the year ended December 31, 2020 and a comparison of the material changes in our results of operations and financial condition between the year ended December 31, 2019. This MD&A should be read in conjunction with the Corporation’s annual audited consolidated financial statements for the year ended December 31, 2020.

The annual audited financial statements and the MD&A for the year ended December 31, 2019 were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

These statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Accordingly, the financial amounts presented in this MD&A are prepared under IFRS and where applicable, have been converted from previous results prepared under US GAAP. Upon the reverse acquisition with Patagonia Gold Corp, Patagonia Gold Limited became the ongoing entity for accounting purposes and Patagonia Gold Limited had to switch to reporting under US GAAP as Patagonia Gold Corp. is a registrant with the U.S. Securities and Exchange Commission (“SEC”). The Company prepared its annual consolidated financial statements for the year ended December 31, 2019 and interim financial statements for the three months ended March 31, 2020 in accordance with US GAAP. Effective June 30, 2020, the Company obtained “foreign private issuer” status in accordance with SEC guidelines and became eligible to satisfy its reporting requirements using IFRS. In the second quarter of 2020, the Company switched to reporting under IFRS. Refer to notes 2 and 29 of the December 31, 2020 annual audited consolidated financial statements for more information regarding the restatement from US GAAP to IFRS.

This MD&A includes certain non-IFRS financial performance measures. For a detailed description of these measures, please see “Non-IFRS Financial Performance Measures” section. The amounts presented in this MD&A are in thousands ($’000) of U.S. dollars, except share, per share, per unit amounts and unless otherwise noted.

The Company’s head office and principal business address is Av. Libertador 498 Piso 26, Buenos Aires, Argentina, C1001ABR and the registered office address is 2200 HSBC Building, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8. The Company’s common shares trade on the TSX Venture Exchange (the “Exchange”), under the symbol PGDC. Additional information relevant to the Company’s activities can be found on their website at http://patagoniagold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Management’s Responsibility for Financial Reporting

The financial statements have been prepared by management in accordance with IFRS and have been approved by the Company’s board of directors (the “Board”). The integrity and objectivity of the financial statements are the responsibility of management. In addition, management is responsible for ensuring that the information contained in the MD&A is consistent where appropriate, with the information contained in the financial Statements.

The financial statements may contain certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis to ensure that the financial statements are presented fairly in all material respects.

As the Company is a Venture Issuer (as defined under under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) (“NI 52-109”), the Company and management are not required to include representations relating to the evaluation, design, establishment and/or maintenance of disclosure controls and procedures (“DC&P”) and/or Internal Controls over Financial Reporting (“ICFR”), as defined in NI 52-109, nor has it completed such an evaluation. Inherent limitations on the ability of the certifying officers to design and implement on a cost-effective bases DC&P and ICFR for the issuer may result in additional risks of quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

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Cautionary Note on Forward-Looking Information

This MD&A contains “forward-looking information” and “forward-looking statements” within the meaning of applicable securities laws of Canada and the United States of America (collectively referred to as “forward-looking information”) which relate to future events or the Company’s future performance and may include, but are not limited to, statements about strategic plans, spending commitments, future operations, results of exploration, anticipated financial results, future work programs, capital expenditures and expected working capital requirements. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved.

Readers are cautioned not to place undue reliance on forward looking information and there can be no assurance that forward looking information will prove to be accurate as the Company’s actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied by such forward-looking information if known or unknown risks, uncertainties or other factors affect the Company’s business, or if the Company’s estimates or assumptions prove inaccurate. Therefore, the Company cannot provide any assurance that forward-looking information will materialize. Factors that could cause results or events to differ materially from current expectations expressed or implied by the forward-looking information, include, but are not limited to: fluctuations in the currency markets (such as the Canadian Dollar, Chilean Peso, Great Britain Pound and the United States Dollar); changes in national and local government, legislation, taxation, controls, regulations and political or economic developments in Canada and Argentina or other countries in which the Company may carry on business in the future; operating or technical difficulties in connection with exploration and development activities; risks and hazards associated with the business of mineral exploration and development (including environmental hazards or industrial accidents); risks relating to the credit worthiness or financial condition of suppliers and other parties with whom the Company does business; the presence of laws and regulations that may impose restrictions on mining, including those currently enacted in Argentina; employee relations; relationships with and claims by local communities; availability and increasing costs associated with operational inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses, permits and approvals from government authorities; business opportunities that may be presented to, or pursued by, the Company; challenges to, or difficulty in maintaining, the Company’s title to properties; risks relating to the Company’s ability to raise funds; and the factors identified under “Risk Factors” in this MD&A.

The forward looking information contained in this MD&A are based upon assumptions management believes to be reasonable including, without limitation: financing will be available for future exploration, development and operating activities; the actual results of the Company’s development and exploration activities will be favourable or at least consistent with management’s expectations; operating, development and exploration costs will not exceed management’s expectations; all requisite regulatory and governmental approvals for development projects and other operations will be received on a timely basis upon terms acceptable to the Company, and applicable political and economic conditions will be favourable to the Company such as the continuing support for mining by local governments in Argentina; the price of gold and/or other applicable metals and applicable interest and exchange rates will be favourable to the Company or at least consistent with management’s expectations; no title disputes will exist with respect to the Company’s properties; debt and equity markets and other applicable economic conditions will be favourable to the Company; the availability of equipment and qualified personnel to advance exploration projects and; the execution of the Company’s existing plans and further exploration and development programs for its projects, which may change due to changes in the views of the Company or if new information arises which makes it prudent to change such plans or programs.

All forward-looking-information contained in this MD&A is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates

The Company uses Canadian Institute of Mining, Metallurgy and Petroleum definitions for the terms “proven reserves”, “probable reserves”, “measured resources”, “indicated resources” and “inferred resources”. U.S. investors are cautioned that while these terms are recognized and required by Canadian regulations, including National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), the U.S. Securities and Exchange Commission (“SEC”) does not recognize them.

Canadian mining disclosure standards differ from the requirements of the SEC under SEC Industry Guide 7, and reserve and resource information referenced in this MD&A may not be comparable to similar information disclosed by companies reporting under U.S. standards. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserve”. Under United States 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.

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The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources” or “indicated 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. Disclosure of “contained ounces” in a resource estimate 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 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 in compliance with NI 43-101 may not qualify as “reserves” under SEC standards.

SEC has replaced Industry Guide 7 with subpart 1300 of Regulation S-K which will come into effect on January 1, 2021. The requirements under this new regulation converge with the requirements under NI 43-101 with the exception of a few items.

The Company

On July 24, 2019, the Company and Patagonia Gold Limited (“PGL”) [formerly Patagonia Gold PLC (“PGP”)] completed a reverse acquisition (or reverse takeover, the “RTO”) resulting in Hunt acquiring all issued shares of common stock of PGP in exchange for common shares of Hunt on the basis of 10.76 Hunt shares for each PGP share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80%. The operating name of Hunt Mining Corp. was changed to Patagonia Gold Corp. For more information, see note 25 of the December 31, 2020 audited financial statements.

Comparative information for the Company is that of PGL (accounting acquirer) prior to the reverse acquisition.

Patagonia is a mineral exploration and production Company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties and exploitation of mineral resources and mineral reserves in the Santa Cruz, Rio Negro and Chubut Provinces of Argentina.

The financial statements are presented on a consolidated basis and include the accounts of the Company, its wholly owned and majority owned subsidiary:

Corporation	Incorporation	Percentage ownership	Functional currency	Business purpose
Patagonia Gold S.A. (“PGSA”)	Argentina	95.3	US$	Production and Exploration Stage
Minera Minamalu S.A.	Argentina	100	US$	Exploration Stage
Huemules S.A.	Argentina	100	US$	Exploration Stage
Leleque Exploración S.A.	Argentina	100	US$	Exploration Stage
Patagonia Gold Limited (formerly Patagonia Gold PLC)	UK	100	GBP$	Holding
Minera Aquiline S.A.U.	Argentina	100	US$	Exploration Stage
Patagonia Gold Canada Inc.	Canada	100	CAD$	Holding
Patagonia Gold Chile S.C.M.	Chile	100	CH$	Exploration Stage
Ganadera Patagonia S.R.L.	Argentina	100	US$	Land Holding
1272680 B.C. Ltd (formerly 1494716 Alberta Ltd.)	Canada	100	CAD$	Nominee Shareholder

The Company’s activities include the exploration for and production of minerals from properties in Argentina. On the basis of information to date, properties where it has not yet been determined if economically recoverable ore reserves exist are classified as exploration-stage. Properties where economically recoverable ore reserves exist and are being exploited are classified as production-stage. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties.

On some properties, ongoing production and sales of gold and silver are being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations. As a result, there is increased uncertainty and economic risks of failure associated with these production activities. Despite the sale of gold and silver, these projects remain in the exploration stage because management has not established proven or probable ore reserves required to be classified in either the development or production stage.

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Summary of Consolidated Results of Operations ($’000’s)

	Three months ended December 31,								Year ended December 31,
(in $000’s, except ounces and per share amounts)		2020		2019		Change	%Change		2020		2019		Change	%Change

Operational results
Total gold equivalent ounces – produced ⁽¹⁾		2,851		3,301		(450)	(14%)		10,233		15,562		(5,329)	(34%)
Total gold equivalent ounces – sold ⁽¹⁾		1,895		2,782		(887)	(32%)		11,174		15,463		(4,289)	(28%)

Financial results
Revenue	$	3,380	$	5,016	$	(1,636)	(33%)	$	19,849	$	21,938	$	(2,089)	(10%)
Cost of sales	$	2,367	$	2,705	$	(338)	(12%)	$	13,247	$	17,138	$	(3,891)	(23%)
Exploration expenses	$	511	$	317	$	194	61%	$	2,303	$	2,608	$	(305)	(12%)
Administrative expenses	$	1,801	$	5,302	$	(3,501)	(66%)	$	5,611	$	11,044	$	(5,433)	(49%)
Interest expense	$	143	$	661	$	(518)	(78%)	$	2,100	$	2,131	$	(31)	(1%)
Net income (loss)	$	(2,606)	$	(7,066)	$	4,460	63%	$	(4,381)	$	(12,354)	$	7,973	65%
Net income (loss) per share – basic and diluted	$	(0.007)	$	(0.022)	$	0.015	68%	$	(0.013)	$	(0.044)	$	0.031	70%

(1) Gold equivalent ounces include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market price for the commodities each period. The ratio for three months ended December 31, 2020 was 80.24:1 (2019 – 87.18:1). The ratio for year ended December 31, 2020 was 85.99:1 (2019 – 85.29:1).

Three months ended December 31, 2020 and 2019

Total production decreased during the three months ended December 31, 2020 as the Company had residual heap leach operations at Lomada and Cap-Oeste since February 2019 and this has been decreasing each month due to the mineral depletion in the pile (less stock due to the lixiviation of the mineral). Production was also lower as the Company has not produced concentrate from Mina Martha since April 2020.

The Company earned total revenue of $3,380 during the three months ended December 31, 2020 compared to $5,016 during the same period in 2019. Revenue decreased due to lower amounts of gold equivalent ounces sold during the period. The decrease in revenue was partially offset by higher gold prices during the period.

Cost of sales were $2,367 during the three months ended December 31, 2020 compared to $2,705 during the same period in 2019. Cost of sales decreased due to lower amounts of gold equivalent ounces sold. The 2019 period also included an inventory write-down due to the closure of Lomada and putting Cap-Oeste on care and maintenance.

The Company incurred exploration expenses of $511 during the three months ended December 31, 2020 compared to $317 during the same period in 2019. The increase in exploration expenses was a timing issue as the total of exploration expenses for the year were lower compared to the previous year.

The Company incurred administrative expenses of $1,801 during the three months ended December 31, 2020 compared to $5,302 during the same period in 2019. The decrease in administrative expenses was due to termination payments made during the 2019 period as a result of closing Lomada and putting Cap-Oeste on care and maintenance. In addition, administrative expenses decreased as there were additional professional fees incurred during the 2019 period in connection with the reverse acquisition.

The Company incurred interest expense of $143 during the three months ended December 31, 2020 compared to $661 during the same period in 2019. The decrease in interest expense was due to debt settled by issuing shares in October 2020.

Net loss for the three months ended December 31, 2020 was $2,606 compared to $7,066 during the same period in 2019. The lower net loss was a result of lower administrative expenses and impairment of mineral properties recognized during the 2019 period.

Year ended December 31, 2020 and 2019

Total production decreased during the year ended December 31, 2020 as the Company had residual heap leach operations at Lomada and Cap-Oeste since February 2019 and this has been decreasing each month due to the mineral depletion in the pile (less stock due to the lixiviation of the mineral). Production was also lower as the Company has not produced concentrate from Mina Martha since April 2020.

The Company earned total revenue of $19,849 during the year ended December 31, 2020 compared to $21,938 during the same period in 2019. Revenue decreased due to lower amounts of gold equivalent ounces sold during the period. The decrease in revenue was partially offset by higher gold prices during the period.

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Cost of sales were $13,247 during the year ended December 31, 2020 compared to $17,138 during the same period in 2019. Cost of sales decreased as the 2019 period included an inventory write-down due to the closure of Lomada and putting Cap-Oeste on care and maintenance.

The Company incurred exploration expenses of $2,303 during the year ended December 31, 2020 compared to $2,608 during the same period in 2019. The decrease in exploration expenses was due to devaluation of the Argentinian peso and less focus on exploration activities at the Martha and La Josefina projects.

The Company incurred administrative expenses of $5,611 during the year ended December 31, 2020 compared to $11,044 during the same period in 2019. The decrease in administrative expenses was due to termination payments made during the 2019 period as a result of closing Lomada and putting Cap-Oeste on care and maintenance. In addition, administrative expenses decreased as there were additional professional fees incurred during the 2019 period in connection with the reverse acquisition.

Interest expense remained consistent as the Company incurred expense of $2,100 during the year ended December 31, 2020 compared to $2,131 during the same period in 2019.

Net loss for the year ended December 31, 2020 was $4,381 compared to $12,354 during the same period in 2019. The lower net loss was a result of lower cost of sales and lower administrative expenses and impairment of mineral properties recognized during 2019.

Cash flows for the year ended December 31, 2020 and 2019 ($’000’s)

The Company used $535 of cash in operating activities for the year ended December 31, 2020 compared to $5,009 of cash generated during the same period in 2019. The decrease in cash from operating activities during 2020 was primarily due to lower revenues and timing differences related to receivables and accounts payable and accrued liabilities.

Cash used in investing activities for the year ended December 31, 2020 was $1,501 compared to $3,514 for the same period in 2019. The decrease in cash used in investing activities was a result of fewer additions to the mineral properties.

Cash from financing activities for the year ended December 31, 2020 was $1,102 compared to $593 during the same period in 2019. The increase in cash from financing activities was primarily due to proceeds received from existing loan facilities. The increase in cash was partially offset by repayment of bank indebtedness.

Financial Position ($’000)

Cash

The Company has cash on hand of $819 as of December 31, 2020 compared to $685 as of December 31, 2019.

Receivables

Current receivables are $2,041 as of December 31, 2020 compared to $1,516 as of December 31, 2019. The increase in current receivables is a result of a reclassification of value added tax (“VAT”) recoverable from non-current to current as they are expected to be collected within the next twelve (12) months.

Non-current receivables are $3,544 as of December 31, 2020 compared to $3,814 as of December 31, 2019. The decrease in non-current receivables is a result of reclassification of VAT recoverable to a current receivable as it is expected to be collected within the next twelve (12) months.

Inventory

The Company has inventory of $3,289 as of December 31, 2020 compared to $3,206 as of December 31, 2019. The increase in inventory was mainly due to higher materials and supplies which was partially offset by lower gold held on carbon.

Property, plant and equipment (“PPE”)

The Company has PPE of $13,233 as of December 31, 2020 compared to $15,635 as of December 31, 2019. The decrease in PPE was a result of depreciation charge for the period which was partially offset by capital additions.

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Bank indebtedness

The Company has bank indebtedness of $9,636 as of December 31, 2020 compared to $14,989 as of December 31, 2019. The decrease in bank indebtedness was a result paying down the existing lines of credit used for operational purposes.

Accounts payable and accrued liabilities

The Company has accounts payable and accrued liabilities of $4,384 as of December 31, 2020 compared to $5,992 as of December 31, 2019. The decrease in accounts payable and accrued liabilities was a result of paying down accounts payables and normal fluctuations in operations.

Accounts payable with related parties

The Company has accounts payable with related parties of $144 as of December 31, 2020 compared to $6,717 as of December 31, 2019. The decrease in accounts payable with related parties is a result of a debt settlement whereby the outstanding amounts were repaid by issuing shares. For more information, see “Transactions Between Related Parties” section of the MD&A.

Loan payable and current portion of long-term debt

The Company has loan payable and current portion of long-term debt of $363 as of December 31, 2020 compared to $334 as of December 31, 2019.

Long term debt

The Company has non-current portion of total long-term debt of $14,917 as of December 31, 2020 compared to $12,020 as of December 31, 2019. This includes $14,808 payable to related parties as of December 31, 2020 compared to $11,708 as of December 31, 2019.

In February 2019, the Company announced that Cantomi Uruguay S.A., a company owned and controlled by the Company’s Non-Executive Chairman, Carlos J. Miguens, had provided a two-year $15,000 loan facility that will be utilized to fund the Company’s activities going forward, while the review of the Cap-Oeste underground option is ongoing together with the Feasibility Study of its flagship Calcatreu project. On November 16, 2020, the maturity of the loan was extended to December 31, 2022. All other terms of the loan remain unchanged. As of December 31, 2020, there was $14,808 of principal and interest owing under this loan facility compared to $8,163 as of December 31, 2019.

The remaining debt to related parties included loans payable to the Company’s director Tim Hunt which were assumed as part of the reverse takeover during the 2019 fiscal year. During the year ended December 31, 2020, $4,232 of principal and interest payable to Tim Hunt was repaid by issuing shares. For more information, see “Transactions Between Related Parties” section of the MD&A.

Summary of Segmented Results of Operations for the year ended December 31, 2020 and 2019 ($000’s)

Cap-Oeste

Cap-Oeste produced a total of 6,965 gold equivalent ounces (5,081 ounces of gold and 161,314 ounces of silver) during the year ended December 31, 2020 compared to 10,585 gold equivalent ounces (7,796 ounces of gold and 237,727 ounces of silver) during the same period in 2019. Production decreased as the Company had residual heap leach operations at Cap-Oeste since February 2019 and this has been decreasing each month due to the mineral depletion in the leach pad (due to the lixiviation of the precious metals in the leach pad).

The cash costs of production for the year ended December 31, 2020 were $634 per ounce¹ and $687 per ounce¹ including depreciation and amortization compared to $573 per ounce¹ and $651 per ounce¹ during the same period in 2019.

A total of 7,036 gold equivalent ounces (5,165 ounces of gold and 162,832 ounces of silver) were sold during the year ended December 31, 2020 at an average gross price of $1,765 per ounce¹. During the same period in 2019, a total of 10,985 gold equivalent ounces (8,236 ounces of gold and 234,441 ounces of silver) were sold at an average gross price of $1,357 per ounce¹.

Cap-Oeste generated revenues of $12,417 during the year ended December 31, 2020 compared to $14,903 during the same period in 2019. The decrease in revenues was due to lower amounts of gold equivalent ounces sold, partially offset by the increase in gold price during 2020.

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¹ See Non-IFRS Financial Performance Measures

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Cost of sales were $6,589 during the year ended December 31, 2020 compared to $11,828 during the same period in 2019. Cost of sales decreased as the 2019 period included an inventory write-down due to putting Cap-Oeste on care and maintenance and higher costs at the beginning of 2019 which led to that decision. The decrease in cost of sales was partially offset by the increase in export rights imposed by the Argentinian government in December 2019 from 6.7% to 12%.

Administration expenses of $495 were incurred during the year ended December 31, 2020 compared to $596 during the same period in 2019. The decrease in administrative expenses was due to lower depreciation of the property as a result of lower production.

Lomada de Leiva Project (“Lomada”)

Lomada produced a total of 2,912 ounces of gold during the year ended December 31, 2020 compared to 3,969 ounces of gold during the same period in 2019. Production decreased as the Company had residual heap leach operations at Lomada since February 2019 and this has been decreasing each month due to the mineral depletion in the leach pad (due to the lixiviation of the precious metals in the leach pad).

The cash costs of production for the year ended December 31, 2020 were $714 per ounce¹ and $823 per ounce¹ including depreciation and amortization compared to $437 per ounce¹ and $580 per ounce¹ during the same period in 2019. The increase in cash costs is due to the lower production during 2020.

A total of 3,773 ounces of gold were sold during the year ended December 31, 2020 at an average gross price of $1,718 per ounce¹. During the same period in 2019, a total of 3,461 ounces of gold were sold at an average gross price of $1,372 per ounce¹.

Lomada generated revenues of $6,482 during the year ended December 31, 2020 compared to $4,750 during the same period in 2019. The increase in revenue was due to higher gold prices during the period and sale of a portion of gold held on carbon.

Cost of sales were $4,391 during the year ended December 31, 2020 compared to $3,765 during the same period in 2019. The increase in cost of sales was due to the increase in export rights imposed by the Argentinian government in December 2019 from 6.7% to 12%.

Administrative expenses of $Nil were incurred during the year ended December 31, 2020 compared to $2,860 during the same period in 2019. Administrative expenses decreased as Lomada is 100% depreciated which resulted in all capital expenditures being amortized 100% in 2019.

Martha and La Josefina Projects

The cash costs of production for the year ended December 31, 2020 were $1,421 per ounce¹ and $1,601 per ounce¹ including depreciation and amortization compared to $714 per ounce¹ and $805 per ounce¹ during the same period in 2019. The increase in cash costs is due to the lower production during 2020.

Martha generated revenues of $950 during the year ended December 31, 2020 compared to $2,285 during the same period in 2019. The revenues decreased as the Company did not produce concentrate from Martha since April 2020.

Cost of sales were $2,267 during the year ended December 31, 2020 compared to $1,545 during the same period in 2019. The increase in cost of sales was due to higher maintenance costs as the Company has not produced concentrate from Mina Martha since April 2020.

Exploration expenses of $83 were incurred during the year ended December 31, 2020 compared to $321 during the same period in 2019. The decrease in exploration expenses was due to fewer exploration activities in these projects.

Administrative expenses of $Nil were incurred during the year ended December 31, 2020 compared to $871 during the same period in 2019. The decrease in administrative expenses was due to a reclassification as Martha and La Josefina were owned by Cerro Cazador S.A. “CCSA” during 2019 and effective January 1, 2020, CCSA was merged with PGSA combining the administrative expenses.

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¹ See Non-IFRS Financial Performance Measures

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Calcatreu Project

Exploration expenses of $884 were incurred during the year ended December 31, 2020 compared to $1,300 during the same period in 2019. The decrease in exploration expenses was due to the devaluation of the Argentinian peso.

Administration expenses of $217 were incurred during the year ended December 31, 2020 compared to $279 during the same period in 2019. The decrease in administrative expenses was due the devaluation of the Argentinian peso.

Argentina, Uruguay and Chile

This segment includes the results from the Company’s work on the La Manchuria and La Sarita projects in Argentina, the San José Project in Uruguay and general corporate activities. This segment does not generate revenues and includes costs that are not directly related to other mining properties that are reported as separate segments.

Exploration expenses of $1,336 were incurred during the year ended December 31, 2020 compared to $987 during the same period in 2019. Exploration expenses increased due to higher salaries and regional reconnaissance, geological mapping and sampling related to projects included in this segment.

Administration expenses of $2,946 were incurred during the year ended December 31, 2020 compared to $4,232 during the same period in 2019. The decrease in administrative expenses was due to termination payments made during the 2019 period as a result of closing Lomada and putting Cap-Oeste on care and maintenance.

Interest expense of $318 was incurred during the year ended December 31, 2020 compared to $765 during the same period in 2019. The decrease in interest expense was due to the decrease in loans with Argentinian banks.

United Kingdom

This segment includes the results of Patagonia Gold Limited (“PGL”) (formerly Patagonia Gold PLC) which is a holding company and does not generate any revenues.

Administration expenses of $212 were incurred during the year ended December 31, 2020 compared to $1,433 during the same period in 2019. The decrease in administrative expenses was due to the costs incurred with respect to the reverse acquisition during 2019 and normal overhead costs as PGL was previously a publicly listed Company in United Kingdom.

Interest expense of $610 was incurred during the year ended December 31, 2020 compared to $782 during the same period in 2019. The decrease in interest expense was due to the repayment of bank indebtedness.

North America

This segment includes the results of Patagonia Gold Corp (“PGC”), Patagonia Gold Canada Inc and 1272680 B.C. Ltd (“BC”) (formerly 1494716 Alberta Ltd.).

These entities are holding companies and do not generate any revenues. PGC and BC were acquired as part of the reverse acquisition during 2019 and their results of operations prior to the reverse acquisition are not incorporated in the financial statements.

Administration expenses of $1,285 were incurred during the year ended December 31, 2020 compared to $307 during the same period in 2019. The increase in administrative expenses was due to legal, accounting and other professional fees incurred as a result of being listed on the TSX Venture Exchange. Before the reverse acquisition, administrative expenses were mostly incurred in United Kingdom where PGL was previously listed and after the reverse acquisition, majority of the administrative expenses are incurred in Canada.

Interest expense of $1,171 was incurred during the year ended December 31, 2020 compared to $584 during the same period in 2019. The increase in interest expense was due to additional debt assumed as part of the reverse acquisition during 2019.

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Mineral Properties

The following is a summary of the Company’s operations, together with an update on exploration activities for the year to date. Except as otherwise noted, Donald J. Birak, independent geologist and Registered Member of the Society for Mining, Metallurgy and Exploration (“SME”) and Fellow of the Australasian Institute for Mining and Metallurgy (“AusIMM”), is the Qualified Person who has reviewed and approved the scientific and technical information contained herein.

Calcatreu Project

The Company’s principal project is Calcatreu located in south-central Rio Negro province approximately 80 kilometers south west of the town of Jacobacci. Calcatreu is located in the Jurassic-aged, Somuncura Massif along the NW- to SE-oriented, regional-scale Gastre Fault System; a highly prospective belt of Mesozoic-aged rocks and structures and base and precious metal mineral deposits occurring in both the provinces of Chubut and Rio Negro. The massif is similar in geologic character to the larger Deseado Massif in the province of Santa Cruz to the south. Patagonia has also recently acquired new concessions, bringing its holdings to more than 100,000 ha along this belt in Rio Negro province, bordering Chubut on the north. Calcatreu is a gold and silver project acquired in January 2018 through the acquisition of Minera Aquiline Argentina SA, a subsidiary of Pan American Silver and the Company’s immediate aim is to commence a drilling program to increase the existing mineral resources and advance the project to feasibility study stage during 2020. Precious metal mineralization in the Somuncura Massif, like that on the Company’s Calcatreu property, is largely epithermal in character within quartz-rich veins, vein clusters, stockworks and as disseminations. Sulfide minerals are ubiquitous in the mineral deposits as well as a suite of temporally- and spatially- related gangue minerals typical of epithermal deposits in the massif and elsewhere. More specifically, the gold and silver deposits on the Company’s properties are classified as low and intermediate sulfidation styles of epithermal deposits.

The Calcatreu Deposit is a low sulfidation, epithermal gold and silver system with mineralization outcropping at surface. An independent mineral resource estimate (“MRE”) was completed by Micon International Limited of Toronto in 2004 for the Calcatreu Deposit and disclosed in an NI 43-101 technical report for Aquiline Resources Inc. Mineral resources were estimated for two vein systems on the property: Veta 49 and Nelson and consisted of 6.2 M tonnes of indicated resources grading 3.04 g/t Au and 28.1 g/t Ag and 1.9 M tonnes of inferred resources grading 2.1 g/t Au and 19.4 g/t Ag. In 2018, Cube Consulting Ltd. (“CUBE”) of Australia prepared an updated mineral resource estimate for the Calcatreu project, effective December 31, 2018, which consists of an indicated resource of 9.8 M tonnes grading 2.11 g/t Au and 19.83 g/t Ag (2.36 g/t AuEq) and 8.1 M tonnes of inferred grading 1.34 g/t Au and 13.09 g/t Ag (1.5 g/t AuEq); all contained within Veta 49, Nelson, Belen and Castro Sur veins. Gold equivalent (“AuEq”) values were calculated at a ratio of 81:25:1 Ag/Au. The changes from the previous estimate were due to a revised interpretation of prior and new data collected by the Company. The 2018 exploration work at Calcatreu consisted of project-scale geological mapping along with a pole-dipole, induced polarization and resistivity (IP/Res) geophysical survey, followed by a diamond drill program of 6,495 meters.

A geophysical survey, consisting of 11.2 line kilometers of pole-dipole, induced polarization and resistivity (“IP/Res”), was commissioned by the Company and covered the Trinidad area of the property. In addition, a total of 41.4 line kilometers of ground magnetics surveying was completed at Viuda de Castro. The objective of the two surveys was to detect the presence of hidden, NNE-trending dilational fault and vein sections, similar to those at the outcropping Veta 49, or any other structure with exploration potential for the development of additional mineral resources in the immediate vicinity of the Veta 49 / Nelson deposits. These two mineralized veins host the majority of the indicated and inferred mineral resources at Calcatreu. The surveys resulted in new target definition and ranking. To help with target evaluation, 1,266.7 meters in 33 trenches were dug, and 465 samples were taken in the trenches and 6 rotary air blast (“RAB”) drill holes were drilled in the Piche target and 96 samples were collected from a total of 116 meters drilled. Subsequently, a drill program was designed. The first, and main, part of the drill program consisted of testing covered conceptual geophysical targets, whereas the last few drill holes were focused on expanding the known mineral resources at Veta 49, Belen and Castro Sur, by extrapolating the trend and plunge of known mineralization.

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Using the available drill results and geologic interpretation, CUBE completed an updated, independent NI 43-101 compliant mineral resource estimate (please see the table of the Company’s mineral resources herein and the respective, supporting NI 43-101 technical reports on file at www.sedar.com). The updated mineral resource estimate, completed by CUBE, is tabulated below^{notes 1 and 2}:

Zone	CALCATREU INDICATED RESOURCES
	K Tonnes	Grade (g/t)			Contained Metal (kOz)
	K Tonnes	Au	Ag	AuEq¹	Au	Ag	AuEq¹
Vein 49	6,447	2.45	21.01	2.71	512	4,568	568
Nelson	1,383	1.51	16.94	1.72	67	753	76
Belen	-	-	-	-	-	-	-
Castro Sur	2,010	1.40	14.77	1.58	90	954	102
TOTAL-Indicated	9,841	2.11	19.83	2.36	669	6,275	746
Zone	CALCATREU INFERRED RESOURCES
	K Tonnes	Grade (g/t)			Contained Metal (kOz)
	K Tonnes	Au	Ag	AuEq¹	Au	Ag	AuEq¹
Vein 49	2,863	1.48	13.38	1.64	136	1,231	151
Nelson	1,448	1.42	14.66	1.60	66	682	74
Belen	681	1.61	23.32	1.90	35	511	42
Castro Sur	3,086	1.12	9.81	1.24	111	974	123
TOTAL-Inferred	8,078	1.34	13.09	1.50	348	3,399	390

¹Gold equivalent (“AuEq”) calculations used an 81.25:1 Ag:Au ratio

² NI 43-101 compliant technical report, effective December 31, 2018 and dated May 30, 2019 prepared by Cube Consulting Pty Ltd and on file on www.sedar.com

In 2019, an exploration program was conducted consisting of surface work, a total of 41.28 line kilometers of Pole-Dipole IP-Res conducted over the main Nelson targets and Castro Norte, Fiero, Sabrina and Viuda de Castro areas, and 121.5 line kilometers of Gradient Array IP/Res over Nelson, Sabrina and Mariano. Subsequently, 1,687.2 linear kilometers of ground magnetics surveying, covering 55.44 square kilometers, were undertaken in the project covering several targets including the main V49 and Nelson. The objective was to identify hidden, non-outcropping mineralization in dilatational jogs, blind structures and others. Geologic mapping and sampling were completed over several targets of interest, notably Viuda de Castro, Trinidad, La Cruz, subcrops of the Nelson extension, Piche, La Olvidada and Epu-Peni. The sampling yielded 254 rock chips and 81 new, sawn channels. Overall, approximately 50% of the core of the project was relogged, though up to 80% in some areas such as Veta 49 and Belen.

A RAB drilling campaign and channel (sawn) sampling was on progress in early 2020 when all the activities were paused due to the COVID-19 pandemic. The activities restarted in September 2020. A total of 36 RAB holes were drilled over the main V49 vein and 6 over Piche totaling 740 and 116 meters of drilling respectively and a total of 856 samples. Trenches and saw channel: a total of 1,308.7 mts and 447 samples were taken over the Epu Peñi, Fiero, La Olvidada, Nelson Sur, Piche and Viuda de Castro targets. Geophysics: A total of 1,111.57km of ground Magnetic were surveyed over the extension of the main targets and the new Amancay area, and 18.4km of IP-PDP over Trinidad and Nelson Targets. In December 2020, the baseline (environmental) study began by choosing the contractors and reviewing the information generated in the past. The baseline study aims to contextualize the environmental state before the construction and production of the project begins.

For 2021, the baseline study will continue with field work as well as the surface exploration and geophysics, it is planned to make trenches and continue with the drilling of RAB to obtain information from near surface of the main structures (V49 and Nelson).

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Cap-Oeste Project

Cap-Oeste is located within a six kilometer long, northwest-trending, structural corridor extending six kilometers from the La Pampa prospect in the northwest to the Tango prospect in the southeast. The Cap-Oeste deposit has an identified and delineated strike extent of 1.2 kilometers. Cap-Oeste has been on care and maintenance since February 2019.

The Company has initiated studies to assess the potential technical and economic extraction of a portion of the current mineral resources as defined in the December 2019 CUBE NI 43-101 technical report on file on www.sedar.com. The Company is now focused on evaluating the development of this higher grade part, termed “COSE-Style mineralization”, of the total mineral resources by underground mining. The Company is expecting quotations with respect to potential construction of an underground mine in Cap-Oeste. Material processing options are being considered and may include utilizing the Company’s flotation facilities at Martha, about 100 kilometers to the southeast of Cap-Oeste. The Company has successfully carried out bulk metallurgical tests in the Martha process plant, obtaining favorable precious metal recoveries.

On November 23, 2020, the Company announced that it had received a provisional permit to proceed with the development of the Cap- Oeste gold/silver underground project (the “Project”). Development of the Project will focus on a high-grade portion of the current mineral resources, which lies under and peripheral to the depleted surface mine. The intention is to mine the Cap-Oeste underground resource and truck the ore approximately 100 kilometers to the Martha plant where it will be processed to produce a concentrate.

In the second half of 2020, a general exploration review of the project highlight the Monte Leon Target, 10km to the south of the actual mine, led to metallurgical studies using samples from prior diamond holes, which revealed very good recovery of Au in fresh sulfides. This led to planning a drilling program that will be carried out during the second half of 2021. This target also has the potential for the development of a near-surface, oxidized area and a RAB holes campaign is planned for the second quarter 2021. The Cap-Oeste Project has been put on hold pending the exploration programme to be carried out in Monte Leon.

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On March 9, 2021, the Company announced that it had received a definitive environmental permit for the development of the Cap-Oeste Project.

The Company has reclamation and remediation obligations for Cap-Oeste Project of $0.49 million as of December 31, 2020.

Lomada de Leiva Project (“Lomada”)

The Lomada mine was closed in May 2016 while production from the ongoing leaching continues, though at a reduced output. Given that the ore from the Lomada open pit mine was originally placed on the heap leach pad without crushing, the Company decided to return to Lomada to reprocess this ore. However, in mid-February 2019 the Company took the decision to cease operations and proceed with the closure of Lomada. During the year ended December 31, 2020, the Company was working on re-handling material of leach pad to regenerate the solution percolation and generate new channels of circulation of solution.

The Company has prepared an update to the closure plan presented and approved by the provincial authorities in 2017. The Company received the final approval in November 2019 and started with the work of remediation at the end of 2019. The work on the remediation had been halted due to the COVID-19 pandemic. On October 8, 2020, the Company announced that it had received a preliminary Environmental Permit (“Permit”) for a restart of mining and new leaching operations at its Lomada de Leiva mine in the western part of the Santa Cruz Province of Argentina. Patagonia applied for the Permit in August 2020. The Company has reclamation and remediation obligations for the Lomada de Leiva Project of $3.10 million as of December 31, 2020.

Following receipt of a preliminary permit, the Company restarted mining operations at Lomada de Leiva which was previously closed in February 2019. The Company expects to continue residual production from fresh material placed on the heap leach pad.

On March 9, 2021, the Company announced that it had received a definitive environmental permit for Lomada de Leiva.

Mineral Resources

Cap-Oeste (Santa Cruz, AR) – Cube Consulting Dec 2018; ^Notes¹^{and 2}
Classification	Tonnes (K)	Average Grades (g/t)			Contained Ounces (K)
Classification	Tonnes (K)	Gold	Silver	Gold Equivalent	Gold	Silver	Gold Equivalent
Measured Indicated	3.4 10,554.0	2.92 2.07	46.7 63.2	3.59 2.99	0.3 704.0	5.3 21,448.0	0.4 1,013.0
Meas+Ind	10,557.4	2.07	63.2	2.99	704.3	21,453.3	1,013.4

Inferred	4,895.0	1.37	34.7	1.87	215.0	5,467.0	294.0

Calcatreu (Rio Negro, AR) – Cube Consulting Dec 2018; ^{Notes 3 and 4}
Classification	Tonnes (K)	Average Grades (g/t)			Contained Ounces (K)
Classification	Tonnes (K)	Gold	Silver	Gold Equivalent	Gold	Silver	Gold Equivalent
Measured Indicated	9,841.0	2.11	19.8	2.36	669.0	6,275.0	746.0
Meas+Ind	9,841.0	2.11	19.8	2.36	669.0	6,275.0	746.0

Inferred	8,078.0	1.34	13.1	1.50	348.0	3,399.0	390.0

La Manchuria (Santa Cruz, AR) – Micon 2019; ^{Notes 5 and 6}
Classification	Tonnes (K)	Average Grades (g/t)			Contained Ounces (K)
Classification	Tonnes (K)	Gold	Silver	Gold Equivalent	Gold	Silver	Gold Equivalent
Measured Indicated	474.0	2.59	129.0	3.53	39.5	1,969.0	53.9
Meas+Ind	474.0	2.59	129.0	3.53	39.5	1,969.0	53.9

Inferred	1,836.0	1.30	40.0	1.56	76.5	2,375.0	92.4

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Notes

“K” = Thousands, “g/t” = grams per tonne

Rounding may affect sums and weighted averages

Mineral resources that are not mineral reserves have not demonstrated economic viability

100% basis; Fomicruz has a 5% interest in all Santa Cruz mineral interests.

1.	Cap-Oeste 0.5 g/t AuEq cutoff

2.	Cap-Oeste AuEq = Au + (Ag*69.4)

3.	Calcatreu 0.5 g/t AuEq cutoff

4.	Calcatreu AuEq = Au + (Ag*81.25)

5.	La Manchuria 0.55 AuEq cutoff

6.	La Manchuria AuEq = (Au + Ag)/(Au price*0.32151)

Exploration Update

Exploration during 2020 consisted mainly of regional reconnaissance, geological mapping, sampling, geophysics and drilling carried out at Rio Negro and Santa Cruz projects. The geophysical surveys were ground magnetics and pole-dipole, induced polarization and resistivity (“IP/Res”). During 2020, exploration drilling in Argentina has been concentrated at Calcatreu.

Very few activities were undertaken due to COVID-19 during the first three quarters. During the third quarter of 2020, exploration plans were prepared for the Company’s Santa Cruz Province properties to prioritize targets based on potential to expand the life of the operations. A ranking based on this concept was made and work plans were created to be carried out as soon as the conditions allowed.

Similarly, at Calcatreu, in Rio Negro the main targets were reviewed and ranked, and an exploration and geophysical work plans were delineated for execution once activities are resumed. The group of mining properties was consolidated in the area bordering Río Negro in Chubut.

Several projects with exploration potential were analyzed in the province of San Juan.

Homenaje and Nico Projects

On April 19, 2021, the Company entered into definitive agreements to acquire two projects in Argentina. Patagonia entered into a definitive option agreement dated April 15, 2021 (the “Option Agreement”) with Mirasol Resources Ltd. (“Mirasol”) and Mirasol’s wholly-owned subsidiary Australis S.A. (“Australis” and together with Mirasol, the “Vendors”), which grants Patagonia an option to acquire a 75% undivided interest in and to Australis’ rights and interest in the Homenaje project (the “Homenaje Project”) located in Santa Cruz Province, Argentina. Patagonia also entered into a definitive transfer agreement dated April 15, 2021 (the “Transfer Agreement”) with the Vendors, which grants Patagonia a 100% undivided interest in and to Australis’ rights and interest in the Nico project (the “Nico Project”) located in Santa Cruz Province, Argentina. The Nico Project was previously explored by Mirasol, while the Homenaje Project, which is adjacent to two mining operations, holds targets that have yet to be drilled.

Pursuant to the Option Agreement, Patagonia has an option to earn a 75% interest in the Homenaje Project over six years upon achievement of the following (collectively, the “Earn-In Obligations”):

•	an initial work program over six years of $2.55 million in exploration expenditures, including 2,500 meters of drilling, on the Homenaje Project;

•	expenditures on exploration activities with respect to the Homenaje Project (the “Exploration Expenditures”) of a minimum of $0.4 million over the first 18-months;

•

following completion of the initial Exploration Expenditures and drilling obligations due within the first 30 months, Patagonia must complete a minimum of $0.4 million of Exploration Expenditures in any 12-month period, and a minimum of $0.2 million of Exploration Expenditures in any six-month period; and

•	a pre-feasibility study, prepared in accordance with NI 43-101, for a mineral resource of not less than 300,000 ounces of gold equivalent.

Upon Patagonia completing the Earn-In Obligations, Patagonia and the Vendors will hold 75% and 25%, respectively, in a joint venture company holding the Homenaje Project. If either party’s equity interest is diluted below 10%, it will convert to a 2% NSR royalty.

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Pursuant to the terms of the Transfer Agreement, Patagonia has acquired the Vendors’ interest in the Nico Project in exchange for a 1.5% NSR royalty. If, by the end of third-year, the Nico Project has not been operated as a producing mine, or Patagonia has not produced and shipped minerals in commercial quantities (excluding bulk sampling or pilot plant operations, if any) from the Nico Project for a period of 30 consecutive days, Mirasol will have the right to regain full ownership of the Nico Project at no cost.

Mina Angela

On August 13, 2019, the Company announced an offer letter agreement with Latin Metals Inc. to acquire its Mina Angela property. The Mina Angela property is situated in the Somuncura Massif of southern Argentina and is comprised of 44 individual claims located approximately 50 kilometers east-southeast of Patagonia’s 100% owned Calcatreu gold project. Pan American Silver’s Navidad silver and base metal deposit is located 45 kilometers further to the south-southeast of Mina Angela. In March 2020, Patagonia extended the period by which it must enter into the definitive agreement with a $100 thousand payment to Latin Metals; $50 thousand of which was applied to extend the period to enter into the definitive agreement and $50 thousand of which was a partial prepayment of the first earn-in payment to be made under the definitive agreement.

On September 15, 2020, the Company entered into a definitive option agreement with Latin Metals Inc., which granted the Company an irrevocable option to acquire a 100% interest in the Mina Angela property. Upon signing of the definitive agreement, the Company paid $250 thousand representing the balance of the first earn-in payment. It is expected that the Company will pay the second earn-in payment of $250 thousand within the next six months if it exercises the option to acquire the Mina Angela property. A further and final payment of $500 thousand is expected to be paid within 30 days of verification that the legal restrictions preventing development of mining activity in the Chubut Province and at the Mina Angela property have been lifted in such a manner that the Company thereafter has the ability to perform exploration and exploitation mining activities on the Mina Angela property. In addition, Latin Metals will be entitled to receive a 1.25% Net Smelter Royalty from future productions, half of which can be repurchased by the Company for $1 million.

On March 12, 2021, the Company exercised the option to acquire 100% interest in the Mina Angela property and paid the second earn-in payment of $250 thousand.

La Manchuria Project

In addition to its current mineral resources, the Company’s La Manchuria Project is believed to be prospective for the discovery of new gold and silver mineralization. Exploration work continued with mapping and rock chip sampling over an area of approximately 2,000 hectares (“ha”). Veinlets and narrow breccia zones, indicative of hydrothermal activity, were found at the Magali zone. Anomalous gold values were reported from the Cecilia zone. As a result of these favorable results, a new drill program for La Manchuria, of 2,000m in 14 holes is planned to test geophysical anomalies and to test gold anomalies generated from surface rock chip sampling. An updated NI 43-101 report for this project was completed on September 27, 2019 by Micon International and is on file at www.sedar.com.

Sarita Project

The Sarita Project, located in the SW part of the Deseado Massif approximately 10 kilometers northwest of the Company’s Martha mine and mill, hosts a widespread system of banded, low sulfidation Au-Ag veins, encompassing a small rhyolitic dome complex. Geologically, the area displays very similar structural and stratigraphic characteristics to Martha with Ag-rich, polymetallic, vein-hosted, intermediate sulfidation mineralization. The banded, silver- and gold-bearing quartz veins and quartz vein breccias occur within a set of NNW-SSE striking normal faults and constitute an extensive mineralized vein system, with more than 12 kilometers in total length. Precious and base metal mineralization has been recognized in quartz veins and vein breccias up to 3 meters wide at surface, composed of quartz and sulphides. Rock chips from discrete vein structures or aligned float have returned anomalous gold samples ranging from 0.1 to 83.4 g/t Au and from 100 to 15,444 g/t Ag, in separate samples. To date, 16 diamond drill holes have been drilled for a total of 1,754 m targeting the vein mineralization. Geochemical results from drilling show gold and silver anomalies. Due to poor ground conditions encountered during drilling, core recovery in some of the veins was poor and Au and Ag mineralization may have not been recovered. Other exploration activities at Sarita included geophysical surveys and drilling. Geophysical anomalies were identified by IP/Res lines (7.1 line kilometers) and by detailed ground magnetics (220 hectares) over different targets areas.

During May 2019, a total of 82 RAB holes completing 1,818.4 m, were drilled in the area yielding a total of 1,257 samples for geochemical analysis. In September and October 2019, a second phase of drilling was undertaken, for a total of 2,409 m in 116 holes and 1,361 samples assayed. The RAB drilling defined several shallow, NW-oriented zones of vein-hosted mineralization; notably Veta Maria and Virginia. The Company has plans to follow-up the RAB results with core drilling.

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Martha Project

The Martha Project (“Martha” or “Mina Martha”) is located in the Province of Santa Cruz, Argentina. The closest community is the town of Gobernador Gregores, situated approximately 50 road kilometers to the west-southwest of Martha. The property is the site of past exploration for, and surface and underground mining and recovery of, silver and gold from epithermal veins and vein breccias, previously operated by Coeur Mining Inc. (formerly, Coeur d’Alene Mine Corp.) and Yamana Inc.

The Company acquired Martha as part of its RTO of Hunt in 2019. The land package at Martha consists of approximately 7,850 ha of concessions, various buildings and facilities, surface and underground mining and support equipment, a 480 tonne per day (maximum) crushing, grinding and flotation plant, tailings facility, various stockpiles and waste dumps, employee living and cafeteria quarters, and miscellaneous physical materials. In addition, the Company has access to surface ranch (“estancia”) lands surrounding the mine and mill site that are approximately 35,700 ha in size.

The property was purchased in 2016 by Cerro Cazador SA (CCSA), an Argentine subsidiary of Hunt, from an Argentine subsidiary of Coeur Mining Inc. (Coeur). The intent to purchase was announced February 10, 2016 and closed May 11, 2016 as disclosed by the Company on its website (www.patagoniagold.com). The processing plant at the Martha Project has an estimated useful life of 8 years as it is anticipated that this plant will be used to process mineral from Cap-Oeste underground, Martha Project and from La Josefina Project. Royal Gold Inc. holds a 2% Net Smelter Return (NSR) royalty on all production from the Martha property; the obligation for which transferred from Coeur to the Company (www.royalgold.com). In addition, the provincial government holds a 3% pit-head royalty from future production.

During the first quarter of 2020, a plan for reviewing near-mine targets (less than 5 kilometers away from the mill) was defined. Those remaining targets consist of outcropping veins-veinlets and included Veta del Medio System, Noroeste, Ivana, Martha Oeste, Martha Norte, Futuro and Sugar Hill, among others. A total 77 sawn channels were cut, and after encouraging results at Veta del Medio System, a RAB drill program was carried out to test mineralization at shallow depths. A total of 80 RAB drill holes (1,622.4 m of drilling, ranging from 6 to 25 m in depth) tested several targets.

Highly anomalous drill intercepts, ranging from 1m grading 180 g/t Ag up to 3m grading 2,566 g/t Ag (and 3.5 g/t Au), were returned from the Veta del Medio Norte.

Exploration continues to focus on remaining targets by combining systematic sawn-channelling, ground magnetics surveying and new drilling. During 2020, a total of 103.2 square kilometers of new ground magnetics surveying was completed at Martha.

The Company has reclamation and remediation obligations for the Mina Martha Project of $1.43 million as of December 31, 2020.

La Josefina Project

La Josefina is situated about 450 kilometers northwest of the city of Rio Gallegos, in the Santa Cruz province of Argentina within a scarcely populated steppe-like region known as Patagonia. The La Josefina property occupies 52,800 hectares and makes up approximately 90% of all meters drilled by the Company. The La Josefina Project consists of mineral rights composed by an area of 528 square kilometers established in 1994 as a Mineral Reserve held by Fomicruz. The La Josefina Project comprises 16 Manifestations of Discovery totaling 52,767 hectares which are partially covered by 399 tenements.

In March 2007, the Company (via a subsidiary of Hunt) acquired the exploration and development rights to the La Josefina project from Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”). In July 2007, the Company entered into an agreement (subsequently amended) with Fomicruz which provides that, in the event that a positive feasibility study is completed on the La Josefina property, a Joint Venture Corporation (“JV Corporation”) would be formed by the Company and Fomicruz. The Company would own 81% of the joint venture company and Fomicruz would own the remaining 19%. Fomicruz has the option to earn up to a 49% participating interest in the JV Corporation by reimbursing the Company an equivalent amount, up to 49%, of the exploration investment made by the Company. The Company has the right to buy back any increase in Fomicruz’s ownership interest in the JV Corporation at a purchase price of $200 thousand per each percentage interest owned by Fomicruz down to its initial ownership interest of 19%. The Company can also purchase 10% of the Fomicruz’s initial 19% JV Corporation ownership interest by negotiating a purchase price with Fomicruz. Under the agreement, the Company had until the end of 2019 to complete cumulative exploration expenditures of $18 million and determine if it will enter into production on the property. In October 2019, the agreement was extended until April 30, 2021 which period may be extended for an additional one-year term. At December 31, 2019, the Company had incurred approximately $20 million and is currently in discussions with Fomicruz to develop a plan for production.

An NI 43-101 compliant technical report on La Josefina, dated September 29, 2010 and prepared by UAKO Geological Consulting, is on file on www.sedar.com.

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During 2020, a total of 1,098 line kilometers were surveyed covering the Flaca, Cecilia, Amanda, Pequeña and Cruzada veins. And a total of 124 rock chip samples have been taken.

The Company has renegotiated the terms of the La Josefina and Valenciana properties held by Cerro Cazador and is expecting the new terms to be adjudicated during second half 2021. In the meantime, the exploration program on these properties has been put on hold.

La Valenciana Project

La Valenciana is located in the central-north portion of the Santa Cruz Province, Argentina. The project encompasses an area of approximately 29,600 ha and is contiguous to the Company’s La Josefina property to the east. The La Valenciana project is comprised of 11 Manifestations of Discovery (MDs) covering segments of Estancia Cañadón Grande, Estancia Flecha Negra, Estancia Las Vallas, Estancia La Florentina, Estancia La Valenciana and Estancia La Modesta (inactive ranches). In La Valenciana, exploration has been limited, with more than half of the surface without systematic exploration. Fomicruz carried out preliminary works defining a main vein system of low sulfidation epithermal style, with gold and silver values with base metals. Exploration and subsequent reconnaissance sampling by CCSA added other secondary targets and structures combining a total of 5.70 kilometers mapped veins and stockworks. The limited exploration to date, alteration features and associated structures, and partial coverage by probable post-mineral units suggests that there is still a high degree of discovery potential in the mining block. A new exploration program to define mineralization includes geophysical surveys and shallow drilling in new and known target areas and an intensive prospecting and reconnaissance sampling over the Company’s entire land position, is being considered. Mineral resources have not yet been defined on the La Valenciana property.

Bajo Pobre Property

The Bajo Pobre property covers 3,190 hectares and is mainly on the Estancia Bajo Pobre. The property is located 90 kilometers south of the town of Las Heras. No exploration activity has taken place on the Bajo Pobre Property and no exploration activity is planned for the immediate future. Mineral resources have not yet been defined on the Bajo Pobre property.

Short visits have been carried out to the area during 2020 and a total of 16 samples have been taken. A new review of the project will commence during 2021.

El Gateado Property

In March 2006, CCSA acquired the right to conduct exploration on the El Gateado property through a claim staking process for a period of at least 1,000 days, commencing after the Government issues a formal claim notice, and retain 100% ownership of any mineral deposit found within. El Gateado is a 10,000-hectare exploration concession filed with the Santa Cruz Provincial mining authority. The El Gateado property is located in the north-central part of Santa Cruz province, contiguous to La Josefina on the east.

The Company has not yet received a formal claim notice pertaining to the El Gateado property. Should a mineral deposit be discovered, the Company has the exclusive option to file for mining rights on the property. The surface rights of the El Gateado claim are held by the following Ranches, Estancia Los Ventisqueros, Estancia La Primavera, Estancia La Virginia and Estancia Piedra Labrada. The El Gateado claims are filed with the government under file #406.776/DPS/06.

Mineral resources have not yet been defined on the El Gateado property. No recent exploration activity has taken place on El Gateado Property and no exploration activity is planned for the immediate future.

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Selected Annual Information

The following selected financial data for the Company’s most recently completed financial periods are derived from the audited financial statements of the Company.

	As at and for the Year Ended December 31, 2020 ($’000)	As at and for the Year Ended December 31, 2019 ($’000) (Restated)	As at and for the Year Ended December 31, 2018 ($’000) (Restated)
Revenue	19,849	21,938	48,089
Net income (loss) for the year	(4,381)	(12,354)	(17,590)
Comprehensive income (loss) for the year	(3,023)	(12,008)	(10,591)
Current Assets	6,149	5,407	11,482
Non-current assets	53,919	59,087	44,428
Current Liabilities	14,527	28,032	29,425
Non-current liabilities	24,136	22,674	3,103
Working Capital (Deficit)	(8,378)	(22,625)	(17,943)
Share Capital	7,320	2,588	301
Shareholders’ Equity	21,405	13,788	23,382

Selected Quarterly Information

The following table shows selected financial information related to the results of the Company´s most recent periods.

Fiscal Year	2020				2019
For the quarters ended	Dec	Sep	Jun	Mar	Dec	Sep	Jun	Mar
For the quarters ended	$’000
Revenues	3,380	6,549	4,705	5,215	5,016	6,274	5,778	4,870
Net income (loss) for the period	(2,606)	(1,041)	(177)	(557)	(7,066)	(1,281)	101	(4,108)
Comprehensive Income (Loss) for the period	(875)	(877)	252	(1,523)	(5,897)	(1,567)	(328)	(4,216)
Income (Loss) per share, basic and diluted	(0.007)	(0.003)	(0.001)	(0.002)	(0.022)	(0.004)	0.000	(0.016)

The Company’s results over the past several quarters have been driven primarily by fluctuations in the gold price, input costs and changes in gold equivalent ounces produced. In addition, the Company is also affected by fluctuations in silver price and foreign exchange rates.

The total gold equivalent ounces sold during the 2020 quarters have decreased compared to 2019 but the decrease in gold equivalent ounces sold has been partially offset by higher gold prices during 2020.

In February 2019, the Company reviewed the production profile for 2019 for Cap-Oeste and Lomada. Given the expected lower production volumes from Cap-Oeste and the lower than anticipated recoveries from Lomada, the Company made the decision to close Lomada and put Cap-Oeste on care and maintenance. This resulted in an inventory write-down of $2,368 and impairment charge of $1,996 against mineral properties in 2019.

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The Company incurred higher administrative expenses during the 2019 quarters as a result of the various costs incurred with respect to the reverse acquisition during 2019.

Liquidity and Capital Resources

As of December 31, 2020, the Company had a working capital deficiency of $8,378 (2019 - $22,625). The improvement in the working capital deficiency is a result of the repayment of bank indebtedness and the settlement of debts with related parties. For more information, see “Transactions Between Related Parties” section of the MD&A.

The Company’s capital management objectives are:

• to ensure the Company’s ability to continue as a going concern;

• to fund projects from raising capital from equity placements rather than long-term borrowings;

• to increase the value of the assets of the business; and

• to provide an adequate return to shareholders in the future when new or existing exploration assets

are taken into production.

These objectives will be achieved by maintaining and adding value to existing extraction projects and identifying new exploration projects, adding value to these projects and ultimately taking them through to production and cash flow, either with partners or by the Company’s means.

The Company sets the amount of capital in proportion to its overall financing structure (i.e. equity and financial liabilities). The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

In February 2019, the Company announced that Cantomi Uruguay S.A., a company owned and controlled by the Company’s Non-Executive Chairman, Carlos J. Miguens, had provided a two-year $15,000 loan facility that will be utilized to fund the Company’s activities going forward, while the review of the Cap-Oeste underground option is ongoing together with the Feasibility Study of its flagship Calcatreu project. On November 16, 2020, the maturity of the loan was extended to December 31, 2022. All other terms of the loan remain unchanged. As of December 31, 2020, there is $14,808 (2019 - $8,163) of principal and interest owing under the loan facility.

As of February 2021, Cantomi Uruguay S.A. is no longer a related party as Carlos Miguens no longer has control of the company.

The Company also has access to operating lines of credit. As of December 31, 2020, the Company had drawn $9,636 (2019 - $14,989) under the credit facilities. On November 16, 2020, the Company announced that it had reached an agreement to extend the maturity date of its operating lines of credit from January 31, 2021 to December 31, 2021. Other than the extension of the maturity, all other terms of the operating lines of credit remain unchanged.

COVID-19

On March 11 2020, the World Health Organization (WHO) stated the “public health emergency of international concern” and declared the state of pandemic worldwide due to the COVID-19’s outbreak in Wuhan, China and its subsequent global spread.

Following this statement, on March 19, 2020, the Argentine Government ordered the “Social, Preventive and Compulsory Isolation” (A.S.P.O. for its acronym in Spanish), by Necessity and Urgency Decree No. 297/2020, imposing the borders’ closure and stringent restrictions on domestic circulation of individuals. Such measures comprised several exceptions, including activities that were considered “essential” and, therefore, were excluded from such restrictions. Successive Necessity and Urgency Decrees extended the term of the mentioned measures until November 8, 2020. As of November 9, 2020, by Necessity and Urgency Decree No. 875/2020 and its amendments, it was established the Preventive and Compulsory Social Distancing (Di.S.P.O. for its acronym in Spanish) that is in full force and effect through February 28, 2021 and can be extended for as long as it may be considered necessary in view of the epidemiological situation.

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Subsequently, on December 30, 2020, the Ministry of Health’s Resolution No. 2883/2020, approving the “Strategic COVID-19 Vaccination Plan” in the Republic of Argentina, was issued. It aimed to reduce morbidity, mortality, and socio-economic impacts of the pandemic, based on the stepped and progressive vaccination of certain population groups. As of the date of approval of these financial statements, the said plan is in its initial implementation phase.

Because of the various measures adopted by the Argentine government, and within the scenario of the economic activity’s generalised recession, the Company has implemented a protocol establishing the working conditions to operate in strict compliance with the public health standards issued by national and provincial authorities, in order to minimize the risk of contagion of co-workers, clients and providers, and to enable the business continuity. It is worth emphasising that, as of the date of approval of these financial statements, the COVID-19 pandemic continues to be a prevalent situation, the duration of which is uncertain, and the measures taken by the different authorities (national, provincial, and pertaining to town) in response thereto are constantly evolving.

Although the continuity of the Company’s operation has not been significantly affected, the extent of COVID-19's impact on the operational and financial performance will depend on the evolution of events (including the spread rate and duration, as well as the national and international governmental measures taken in such regard) and on the impact this situation may cause on our main clients, employees, and providers; all of which is uncertain and, at present, not possible to foresee. However, the Company’s Management does not anticipate that such impacts will affect the business continuity or the ability to meet financial commitments in the next twelve (12) months.

Off-balance sheet arrangements

As of December 31, 2020, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to us.

Proposed Transactions

There are no proposed material transactions as of the date of this MD&A. However, as is typical of the mineral exploration and development industry, management continually reviews potential merger, acquisition, investment, and joint venture transactions and opportunities that could enhance shareholder value. There is no guarantee that any contemplated transaction will be concluded.

Transactions Between Related Parties

Cantomi Uruguay S.A.

During the year ended December 31, 2020, the Company incurred interest expense of $703 (2019 - $346) on the loan facility. As of December 31, 2020, there is $14,808 (2019 - $8,163) of principal and interest owing under the loan facility.

As of February 2021, Cantomi Uruguay S.A. is no longer a related party as Carlos Miguens no longer has control of the company.

Tim Hunt

Mr. Hunt is the Company’s Director and second largest shareholder and has provided loans and advances to the Company to fund its operations. These loans and advances have been provided by Mr. Hunt personally and through entities controlled by Mr. Hunt. These obligations were assumed as part of the reverse acquisition during the 2019 fiscal year.

On October 30, 2020, the Company issued $44,040,277 common shares to an entity controlled by Mr.Hunt at a deemed price of approximately $0.30 per share to settle an aggregate face value of $10 million outstanding debt owed by the Company to Mr.Hunt and entities controlled by Mr. Hunt. The converted face value of the debt consisted of $4.82 million of long-term debt with related parties and $5.18 million of accounts payable with related parties.

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Prior to the debt settlement, the fair value of the outstanding debts in the Company’s financial statements was $10.15 million which consisted of $4.23 million of long-term debt with related parties and $5.92 million of accounts payable with related parties.

The remaining balance of $1.45 million owed to Tim Hunt was settled in in the fourth quarter of 2020 by a cash payment of $0.72 million.

As of December 31, 2020, there is $Nil (2019 - $9,919) owed to Mr. Hunt and other entities controlled by Mr. Hunt.

The complete transactions with and amounts owed to related parties are disclosed in note 20 of the accompanying financial statements.

Commitments and Contingencies

Republic Metals Corporation (“Republic”) filed for protection under Chapter 11 of the United States Bankruptcy Code on November 2, 2018 (the “Petition Date”) in the United States Bankruptcy Court for the Southern District of New York. Republic processed material from the Company’s Lomada and Cap-Oeste projects in the Santa Cruz province of Argentina prior to the Petition Date. The Chapter 11 plan of liquidation in the bankruptcy proceedings appointed a Litigation Trustee (the “Trustee”) to handle the Bankruptcy Estate of Republic. The Company received a demand letter (the “Demand Letter”) from the Trustee dated March 17, 2020, demanding repayment of amounts previously paid by Republic to the Company within 90 days before the Petition Date. The Company reviewed the Demand Letter with its independent US counsel and counsel has responded to the Demand Letter. Republic was required to have commenced an action to recover the Preference Amount by November 2, 2020. As of the date of approval of these consolidated financial statements, no litigation has been brought by Republic against the Company. No provision has been accrued in these consolidated financial statements related to the Demand Letter as Management does not anticipate that the Company will have to repay any of the amounts previously received from Republic.

Disclosure of Outstanding Share Data

Normal Course Issuer Bid

On February 19, 2020, the Company announced that it has received approval from the TSX Venture Exchange (“TSXV”) of its Notice of Intention to Make a Normal Course Issuer Bid (the “NCIB”). Under the NCIB, the Company may purchase for cancellation up to 15,897,199 common shares (the “Shares”) (representing approximately 5% of its 317,943,990 issued and outstanding common shares as of February 17, 2020) over a twelve (12) month period commencing on February 21, 2020. During the year ended December 31, 2020, the Company repurchase 155,000 common shares under the NCIB for $17. The NCIB expired on February 20, 2021 and was not renewed.

Shares issued to settle debts

On October 30, 2020, the Company issued 44,040,277 common shares to an entity controlled by a director at a deemed price of approximately $0.30 per share to settle an aggregate face value of $10 million outstanding debt owed by the Company to the director and entities controlled by the director. The converted face value of the debt consisted of $4.82 million of long-term debt with related parties and $5.18 million of accounts payable with related parties.

Prior to the debt settlement, the fair value of the outstanding debts in the Company’s financial statements was $10.87 million which consisted of $4.23 million of long-term debt with related parties and $6.64 million of accounts payable with related parties.

On November 24, 2020, the Company issued 1,201,111 common shares to certain directors at a price of $0.14 per share to settle an aggregate of $0.13 million outstanding directors’ fees.

Private Placement

On March 10, 2021, the Company completed a private placement offering and raised gross proceeds of $9.3 million through the issuance of 104,086,063 units of the Company at a price of $0.09 per unit. Each unit consisted of one common share of the Company and one common share purchase warrant (“Warrant”). Each Warrant entitles the holder thereof to purchase one common share at an exercise price of $0.13 until March 10, 2024.

In connection with the private placement, the Company paid $226 in cash commission and advisory fees to the Agents and issued 2,509,586 compensation options. Each compensation option is exercisable for one unit of the Company at a price of $0.09 per compensation option. Each unit consists of one common share of the Company and one Warrant. Each Warrant entitles the holder thereof to purchase one common share at an exercise price of $0.13 until March 10, 2024.

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As of the date of this MD&A, the Company had 467,116,441 common shares, 104,086,063 warrants and 2,509,586 Agent compensation options outstanding.

Stock options

As of the date of this MD&A, the following stock options were outstanding:

Exercise price (CAD)	Options vested	Options unvested	Total outstanding	Expiry date
$0.065	7,650,000	-	7,650,000	September 25, 2024
$0.160	-	9,600,000	9,600,000	August 13, 2025
	7,650,000	9,600,000	17,250,000

Critical Accounting Policies, Judgments and Estimates

The accounting policies that we follow are set in note 4 of the accompanying financial statements. These accounting policies conform to accounting principles of IFRS and have been consistently applied in the preparation of the financial statements.

Adoption of new accounting standards and amendments

Amendments to IFRS 3, Business Combinations (“IFRS 3”)

The IASB issued an amendment to IFRS 3 to facilitate companies in assessing whether the activities and assets that they acquire under a transaction are the acquisition of a group of assets or a business. The amendment confirmed that a business must include inputs and process and clarified that the process must be substantive; and the inputs and process must together significantly contribute to creating outputs. In addition, the amendment narrowed the definition of a business and added an optional concentration test that can be performed to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets. The amendment was adopted by the Company prospectively effective January 1, 2020. The adoption of this amendment did not have an impact on the consolidated financial statements.

New accounting standards issued but not yet effective

The IASB issued an amendment to IAS 16, Property, Plant and Equipment, to prohibit the deducting from property, plant and equipment amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and its related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The Company will evaluate the impact, if any, on its consolidated financial statements prior to the effective date of January 1, 2022.

The IASB issued an amendment to IAS 1, Presentation of Financial Statements, to clarify one of the requirements under the standard for classifying a liability as non-current in nature, specifically the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendment includes:

•	Specifying that an entity’s right to defer settlement must exist at the end of the reporting period;

•	Clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement;

•	Clarifying how lending conditions affect classification; and

•	Clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments.

The Company will evaluate the impact, if any, on its consolidated financial statements prior to the effective date of January 1, 2023.

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Significant judgments

Preparation of the consolidated financial statements requires management to make judgments in applying the Company's accounting policies. Judgments that have the most significant effect on the amounts recognized in these consolidated financial statements relate to functional currency, income taxes, title to mineral property interests, impairment of mineral properties and provisions and reclamation and closure cost obligations. These judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Functional currency

Management determines the functional currency for each entity. This requires that management assess the primary economic environment in which each of these entities operates. Management’s determination of functional currencies affects how the Company translates foreign currency balances and transactions. Determination includes an assessment of various indicators. In determining the functional currency of the Company’s operations in Canada (Canadian dollar), UK (British Pound) and Argentina (U.S. dollar), management considered the indicators of IAS 21 The Effects of Changes in Foreign Exchange.

Income taxes and taxes receivable

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain and subject to judgment. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law in the various jurisdictions in which it operates. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

The Company has receivables due from the Argentinean government for value-added taxes. Significant estimates and judgments are involved in the assessment of recoverability of these receivables. Changes in management’s impairment assumptions may result in an additional impairment provision, or a reduction to any previously recorded impairment provision, with the impact recorded in profit or loss.

The Company has accrued deferred income tax assets but may not be able to utilize part or all of these assets in the future. The Company only recognizes the expected future tax benefit from these assets if it is considered more likely than not that the tax benefit will be realized. Otherwise, a valuation allowance is applied against deferred tax assets that are not more likely than not to be utilized. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income, including application of existing tax laws in each jurisdiction, assumptions about future metals prices, the macroeconomic environment and results of the Company’s operations. To the extent that future cash flows and taxable income differ significantly from estimates, the Company’s ability to realize deferred tax assets could be impacted. Additionally, future changes in tax laws could limit the ability to obtain the future benefits represented by the deferred tax assets.

Title to mineral property interests

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Impairment of mineral properties

The Company is required to make certain judgments in assessing indicators of impairment of mineral properties. Judgment is required to determine if the right to explore will expire in the near future or is not expected to be renewed. Judgment is required to determine whether substantive expenditures on further exploration for and evaluation of mineral resources in specific areas will not be planned or budgeted. Judgment is required to determine if the exploration for and evaluation of mineral resources in specific areas have not led to the commercially viable quantities of mineral resources and the Company will discontinue such activities. Judgment is required to determine whether there are indications that the carrying amount of a mineral property is unlikely to be recovered in full from successful development of the project or by sale.

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Use of estimates

Our discussion and analysis of results of operations and financial condition are based upon the annual audited financial statements, which have been prepared in accordance with IFRS. The preparation of the financial statements require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible receivables, mineral reserves, inventories, reclamation and remediation obligations, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves, share-based payments, provisions, inventories and the allocation of fair value to assets and liabilities assumed in connection with business combinations. These estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

The Company is also exposed to legal risk. The outcome of currently pending and future proceedings cannot be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not covered, either wholly or partly, under insurance policies and that could significantly influence the business and results of operations.

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Mineral reserves

The Company uses estimates and assumptions related to mineral reserves that are the basis for future cash flow estimates utilized in impairment calculations and units-of production amortization calculations, environmental, reclamation and closure obligations and estimates of recoverable silver and gold in inventories. The Company relies on their technical personnel and independent mining consultants to determine the estimates of mineral reserves. Mineral reserve estimates are based upon engineering evaluations of samplings of drill holes and other openings.

Share-based payments

The Company determines fair value of stock options issued using the Black-Scholes option-pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the future volatility of the stock price, risk-free rate and future employee turnover rates. While management believes that the estimates and assumptions are reasonable, actual results could differ from those estimates.

Provisions

The Company assesses its provision for reclamation and remediation obligations on an annual basis or when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for reclamation and remediation obligations requires management to make estimates of the future costs the Company will incur to complete the reclamation and remediation work required to comply with existing laws and regulations at each mining operation. Actual costs incurred may differ from those amounts estimated. Also, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required to be performed by the Company. Increases in future costs could materially impact the amounts charged to operations for reclamation and remediation. The provision represents management’s best estimate of the present value of the future reclamation and remediation obligation. The actual future expenditures may differ from the amounts currently provided.

Inventories

The measurement of inventories including the determination of its net realizable value involves the use of estimates. Net realizable value is determined with reference to relevant market prices less applicable selling expenses. Estimation is also required in determining the tonnage, recoverable gold and sliver, and in determining the remaining costs of completion to bring inventory into its saleable form. Judgment also exists in determining whether to recognize a provision for obsolescence on materials and supplies included in inventories, and estimates are required to determine salvage value. Estimates of recoverable gold or silver on the leach pads are calculated from the quantities of ore placed on the leach pads, the grade of ore placed on the leach pads and a recovery percentage.

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Business combinations

The acquisition method of accounting for business combinations in accordance with IFRS 3 requires management to determine the fair value of assets acquired and liabilities assumed on the date of the acquisition. In determining and allocating the fair values of assets and liabilities in a business combination, the Company relies on appraisals, internal valuations based on discounted cash flow, historical experience and other reliable information available as of the date of the acquisition.

Non-IFRS Financial Performance Measures

Non-IFRS financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles. Unless otherwise noted, we present the Non-IFRS financial measures of our continuing operations in the tables below.

Cash Costs

The Company uses cash costs to evaluate the Company’s current operating performance. We believe these measures assist in understanding the costs associated with producing gold and silver, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. These measures may not be indicative of operating profit or cash flow from operations as determined under IFRS. The Company believes that allocating cash costs to gold and silver lead based on gold and silver metal sales relative to total metal sales best allows the Company and other stakeholders to evaluate the operating performance of the Company.

Year ended December 31, 2020 (in $’000, except ounces and per unit amounts)
		Martha and La Josefina		Cap-Oeste		Lomada de Leiva
Cost of sales	$	2,267	$	6,589	$	4,391
Less: Depreciation		(346)		(1,106)		(1,143)
Add/(Less): Other charges and timing differences ⁽¹⁾		(1,415)		(1,067)		(1,169)
Cash costs	$	506	$	4,416	$	2,079
Add: Depreciation ⁽²⁾		64		369		317
Cash costs and depreciation	$	570	$	4,785	$	2,396

Ounces produced		356		6,965		2,912

Cash costs per ounce	$	1,421	$	634	$	714
Cash costs and depreciation per ounce	$	1,601	$	687	$	823

(1) These costs include expenses such as royalties, export and refinery costs, and other charges that the Company does not include in cash costs. In addition, these amounts include timing differences related to accrual basis of accounting that the Company excludes from the non-IFRS measure in order to measure the cash costs.

(2) Depreciation is related to the plant, machinery, equipment and vehicles.

Year ended December 31, 2019 (in $’000, except ounces and per unit amounts)
		Martha and La Josefina		Cap-Oeste		Lomada de Leiva
Cost of sales	$	1,545	$	11,828	$	3,765
Less: Depreciation		(115)		(1,366)		(1,340)
Less: Inventory impairment		-		(2,368)		-
Add/(Less): Other charges and timing differences ⁽¹⁾		(711)		(2,029)		(691)
Cash costs	$	719	$	6,065	$	1,734
Add: Depreciation ⁽²⁾		92		826		568
Cash costs and depreciation	$	811	$	6,891	$	2,302

Ounces produced		1,008		10,585		3,969

Cash costs per ounce	$	714	$	573	$	437
Cash costs and depreciation per ounce	$	805	$	651	$	580

(2) Depreciation is related to the plant, machinery, equipment and vehicles.

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Average gross price per ounce sold

Average gross price per ounce sold is calculated by dividing the revenue for the relevant year by the ounces sold.

Year ended December 31, 2020 (in $’000, except ounces and per unit amounts)
		Cap-Oeste		Lomada de Leiva
Revenue	$	12,417	$	6,482

Ounces sold		7,036		3,773

Average gross price per ounce sold	$	1,765	$	1,718

Year ended December 31, 2019 (in $’000, except ounces and per unit amounts)
		Cap-Oeste		Lomada de Leiva
Revenue	$	14,903	$	4,750

Ounces sold		10,985		3,461

Average gross price per ounce sold	$	1,357	$	1,372

Internal Controls Over Financial Reporting and Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate to permit timely decisions regarding public disclosure.

Internal Control over Financial Reporting

The Company’s management, including the CEO and CFO, are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the CEO and CFO and effected by management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

Disclosure controls and procedures and internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed.

Due to its inherent limitations, internal controls over financial reporting and disclosure may not prevent or detect all misstatements. Management will continue to monitor the effectiveness of its internal control over financial reporting and disclosure controls and procedures and may make modifications from time to time as considered necessary.

There were no material changes to the Company’s internal controls during the quarter ended December 31, 2020 that have materially affected, or are likely to materially affect, the Company’s internal controls over financial reporting or disclosure controls and procedures.

Risk Factors

The Company is engaged in exploring and developing mining projects and as such, it is exposed to a number of risks and uncertainties that affect similar companies that carry out activities in the same industry. Some of these possible risks include:

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Exploration risks

Resource exploration, development and operations are highly speculative, characterized by a number of significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate, including, among other things, unprofitable efforts resulting not only from the failure to discover mineral reserves but from finding mineral reserves which, though present, are insufficient in quantity and quality to return a profit from production. Few properties that are explored are ultimately developed into production. The majority of exploration companies fail to ever locate an economic deposit. Substantial expenditures are required to establish mineral reserves. No assurance can be given that minerals will be discovered in sufficient grade or quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. Whether an exploration property will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, and environmental protection. The exact effect of these factors cannot accurately be predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital or not obtaining the required capital to develop any project. The Company will evaluate the political and economic environment in considering any properties for acquisition. There can be no assurance that significant restrictions will not be placed on the exploration areas and any other properties the Company may acquire or its operations. Such restrictions may have a material adverse effect on the Company’s business and results of operation.

Ability to exploit current and future discoveries

It may not always be possible for the Company to participate in the exploitation of successful discoveries. Such exploitation may involve the need to obtain licences or clearances from the relevant authorities, which may not be available on a timely basis or may require conditions to be satisfied and/or the exercise of discretion by such authorities. It may or may not be possible for such conditions to be satisfied, and such conditions may prove uneconomic or not practical. Furthermore, the decision to proceed to further exploration may require the participation of other companies whose interests and objectives may not be consistent with those of the Company. Such further exploitation may also require the Company to meet or commit to financial obligations which it may not have anticipated or may not be able to commit to due to a lack of funds or an inability to raise funds.

Political instability, sovereign and regulatory risk

The Company’s mineral exploration activities and future project development could be affected in varying degrees by political instability and changes in government regulation relating to foreign investment and the mining business, including expropriation. Operations may also be affected in varying degrees by possible terrorism, military conflict, crime, fluctuations in currency rates and high inflation. In addition, from time to time, governments may nationalize private businesses, including mining companies. There can be no assurance that the governments of countries where the Company or its affiliates operate or the governments with whom the Company works will not nationalize mining companies and their assets in the future or impose burdensome obligations or restrictions. There can also be no assurance that foreign governments will not impose burdensome obligations or restrictions on the Company, the Company’s affiliates or their projects, or will not put in place exploitation regulations in a timely manner or on commercial terms sufficiently attractive to the Company to enable development of its projects.

Environmental risk and hazards

There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Governmental approvals and permits are currently and may in future be required in connection with the Company’s operations. To the extent such approvals are required and not obtained, the Company may be curtailed or prohibited from proceeding with planned exploration or development of mineral properties. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws and regulations.

- 26 -

Commodities Price Risk

The profitability of mining operations is significantly affected by changes in the market price of metals and the cost of power, petroleum fuels and oil. The level of interest rates, the rate of inflation, world supply of metals and stability of exchange rates can all cause significant fluctuations in base metal, precious metal, chemical reagent and oil prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. The price of gold, silver and other minerals, and oil has fluctuated widely in recent years. Depending on the price of gold, silver, and the cost of power, chemical reagents, petroleum fuels and oil, cash flow from mining operations may not be sufficient to cover the Company’s operating costs or costs of servicing debt.

Permits and licences

Operations of the Company require or will require licences and permits from various governmental authorities. The Company anticipates that it will be able to obtain in the future all necessary licences and permits to carry on the activities which it intends to conduct, and that it intends to comply in all material respects with the terms of such licences and permits. However, there can be no guarantee that the Company will be able to obtain at all or on reasonable terms, and maintain, at all times, all necessary licences and permits required to undertake its proposed exploration and development or to place its properties into commercial production and to operate mining facilities thereon. In addition, the cost of compliance with changes in governmental regulations has the potential to reduce the profitability of any producing operations or preclude the economic development of any property.

Mining Properties

Acquiring the title to the mining property is a very detailed and prolonged process. Title may be challenged or be subject to legal disputes. Although the Company has researched in the most diligent and fullest possible manner the title to its mining properties, there is no certainty that its title will not be disputed or challenged in the future.

Currency Risk

Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.

As at December 31, 2020, the Company had financial assets and liabilities denominated in the following foreign currencies:

		CAD			AR$			Euro
Cash	$	13		$	641		$	3
Other working capital (deficit) items - net		(190	)		(2,574	)		(340	)
Non-current financial assets		-			638			-
Non-current financial liabilities		-			-			(109	)

Liquidity risk

The Company might incur further debt in order to fund its exploration and operational programs, which would reduce its financial flexibility and could have a material adverse effect on the Company’s business, financial condition or results of operations. The Company’s ability to meet its debt obligations and reduce its level of indebtedness depends on future performance. General economic conditions, mineral prices and financial, business and other factors affect the Company’s operations and future performance. Many of these factors are beyond the Company’s control. The Company cannot assure investors that it will be able to generate sufficient cash flow to pay the interest on its debt or that future working capital, borrowings or equity financing will be available to pay or refinance such debt. Factors that will affect its ability to raise cash through an offering of securities or a refinancing of any debt include financial market conditions and the value of its assets and performance at the time the Company needs capital. The Company cannot assure investors that it will have sufficient funds to make such payments. If the Company does not have sufficient funds and is otherwise unable to negotiate renewals of its borrowings or arrange new financing, it might have to sell significant assets. Any such sale could have a material adverse effect on the Company’s business, operations and financial results.

Failure to obtain additional financing, if required, on a timely basis, could cause the Company to reduce or delay its proposed operations.

- 27 -

The majority of sources of funds expected to be available to the Company for potential acquisitions and its exploration and development projects are in large portion expected to be derived from the issuance of equity. While the Company have been able in the past to obtain equity financing and has secured shareholder loans to undertake planned exploration and development programs, there is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. Although the Company intends to generate operating income and cash flow from mining operations, there can be no assurances that the Company will have sustainable economic operations or be able to generate positive operating income or cash flow from such operations.

Uninsurable Risks

Exploration, development and production operations on mineral properties involve numerous risks, including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other environmental occurrences, as well as political and social instability. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks because of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any further profitability and result in increasing costs and a decline in the value of the securities of the Company.

Tax

The Company runs its business in different countries and strives to run its business in as tax efficient a manner as possible. The tax systems in certain of these countries are complicated and subject to changes. For this reason, future negative effects on the result of the Company due to changes in tax regulations cannot be excluded. Repatriation of earnings to Canada from other countries may be subject to withholding taxes.

Additional risk factors relevant to the Company are included in the Filing Statement dated May 30, 2019 which is available under the Company’s profile on www.sedar.com.

Qualified Persons

The scientific and technical information contained in this MD&A has been reviewed and approved by Donald J. Birak, an independent geologist, Registered Member of the Society for Mining, Metallurgy and Exploration (“SME”), Fellow of the Australasian Institute for Mining and Metallurgy and qualified person as defined under NI 43-101.

EXHIBIT 99.2

Patagonia Gold Corp.

Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(All amounts in thousands of United States Dollars unless otherwise stated)

Index

	Report of independent registered public accounting firm	2
	Consolidated Statements of Financial Position	4
	Consolidated Statements of Loss and Comprehensive Loss	5
	Consolidated Statements of Changes in Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to the Consolidated Financial Statements	8

Report of independent registered public
accounting firm

Grant Thornton LLP

Suite 1600

333 Seymour Street

Vancouver, BC

V6B 0A4

T +1 604 687 2711

F +1 604 685 6569

To the Board of Directors and Shareholders of Patagonia Gold Corp.

Opinion on the financial statements

We have audited the accompanying consolidated statements of financial position of Patagonia Gold Corp. (the “Company”) as of December 31, 2020 and December 31, 2019 and the related consolidated statements of loss and comprehensive loss, consolidated statements of changes in equity, and consolidated statements of cash flows for each of the three years in the period ended December 31, 2020, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Companyas of December31,2020 and December 31, 2019 and the results of itsoperations and itscash flows for each of the three years in the period ended December31,2020, in conformity with International Financial Reporting Standards (“IFRS”).

Material uncertainty related to going concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company incurred a net loss of US$4,381 thousand during the year ended December 31, 2020, and as of that date, the Company had negative working capital of US$8,378 thousand and an accumulated deficit of $190,541 thousand. These conditions, along with other matters as set forth in Note 3, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Other matter - Comparative information

We draw attention to Note 29 to the consolidated financial statements which describes that the Company adopted International Financial Reporting Standards (“IFRS”). These standards were applied retrospectively by management to the comparative information in these consolidated financial statements, including the consolidated statements of financial position as at December 31, 2019, the consolidated statement of loss and comprehensive loss, consolidated statement of changes in equity and consolidated statement of cash flows for the two years ended December 31, 2019 and December 31, 2018, and related disclosures. Our opinion is not modified in respect of this matter.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


Audit \| Tax \| Advisory © Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

We have been the Company’s auditor since February 2020.


Vancouver, Canada	Chartered Professional Accountants
April 28, 2021	Licensed Public Accountants



Audit \| Tax \| Advisory © Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

Patagonia Gold Corp.

Consolidated Statements of Financial Position

(In thousands of U.S. dollars)

	Note		December 31, 2020			December 31, 2019 (restated – note 29)
Current assets
Cash		22	$	819		$	685
Receivables		12, 22		2,041			1,516
Inventories		6		3,289			3,206
Total current assets				6,149			5,407

Non-current assets
Mineral properties		7, 25		15,922			15,457
Mining rights		9		17,195			16,997
Property, plant and equipment		11		13,233			15,635
Goodwill		25		4,009			4,009
Other financial assets		10, 22		16			334
Deferred tax assets		27		-			2,841
Other receivables		13, 22		3,544			3,814
Total non-current assets				53,919			59,087
Total assets			$	60,068		$	64,494

Current liabilities
Bank indebtedness		14	$	9,636		$	14,989
Accounts payable and accrued liabilities		15, 20, 22		4,384			5,992
Accounts payable with related parties		15, 20, 22		144			6,717
Loan payable and current portion of long-term debt		16, 20, 22		363			334
Total current liabilities				14,527			28,032

Non-current liabilities
Long-term debt		17, 22		109			312
Long-term debt with related parties		17, 20, 22		14,808			11,708
Reclamation and remediation obligations		8		5,139			5,803
Deferred tax liabilities		27		4,023			4,795
Other long-term payables				57			56
Total non-current liabilities				24,136			22,674
Total liabilities				38,663			50,706

Shareholders’ equity
Capital stock		19		7,320			2,588
Contributed surplus				186,177			180,269
Accumulated deficit				(190,541	)		(186,135	)
Accumulated other comprehensive income				19,744			18,386
Total shareholders' equity attributable to the parent				22,700			15,108
Non-controlling interest				(1,295	)		(1,320	)
Total shareholders' equity				21,405			13,788
Total liabilities and shareholders’ equity			$	60,068		$	64,494

Commitments and contingencies (note 26)
Going concern (note 3)
Subsequent events (note 30)

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

Approved on Behalf of the Board of Directors

Signed “Christopher van Tienhoven” , Director

Signed “Cristian Lopez Saubidet” , Director

Patagonia Gold Corp.

Consolidated Statements of Loss and Comprehensive Loss

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars)


	Note		2020			2019 (restated – note 29)			2018 (restated – note 29)

Revenue			$	19,849		$	21,938		$	48,089
Cost of sales		6		(13,247	)		(17,138	)		(44,662	)
Gross profit				6,602			4,800			3,427

Operating income (expenses):
Exploration expenses				(2,303	)		(2,608	)		(2,744	)
Administrative expenses		21		(5,611	)		(11,044	)		(10,951	)
Impairment of mineral properties		7		-			(1,996	)		-
Share-based payments expense		19		(382	)		(127	)		(190	)
Interest expense				(2,100	)		(2,131	)		(1,367	)
Total operating expense:				(10,396	)		(17,906	)		(15,252	)

Other income/(expenses)
Interest income				125			191			122
Gain/(loss) on foreign exchange				(785	)		481			(14,404	)
Accretion expense		8		(13	)		(35	)		-
Gain on hyperinflationary net monetary position				-			-			4,448
Other income		23		2,155			-			1,500
Total other income/(expenses)				1,482			637			(8,334	)
Loss – before income taxes				(2,312	)		(12,469	)		(20,159	)

Income tax benefit (expense)		27		(2,069	)		115			2,569
Net loss			$	(4,381	)	$	(12,354	)	$	(17,590	)

Attributable to non-controlling interest				25			(383	)		(1,344	)
Attributable to equity share owners of the parent				(4,406	)		(11,971	)		(16,246	)
				(4,381	)		(12,354	)		(17,590	)
Other comprehensive income (loss) net of tax
Items that will be reclassified subsequently to profit or loss
Foreign currency translation adjustment				1,350			374			7,012
Items that will not be reclassified subsequently to profit or loss
Change in fair value of investment		10		8			(28	)		(13	)
Total other comprehensive income (loss)				1,358			346			6,999
Total comprehensive loss			$	(3,023	)	$	(12,008	)	$	(10,591	)

Weighted average shares outstanding – basic and diluted		18		325,483,780			282,306,312			254,387,482

Net loss per share – basic and diluted		18	$	(0.013	)	$	(0.044	)	$	(0.069	)

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

Patagonia Gold Corp.

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars)

	Capital stock			Accumulated deficit			Accumulated other comprehensive income		Contributed surplus			Total Attributable to parent			Non-controlling interest			Total

Balance - January 1, 2018 (restated – note 29)		31,886			(158,003	)		300		159,193			33,376			407			33,783
Net loss (restated – note 29)		-			(16,246	)		-		-			(16,246	)		(1,344	)		(17,590	)
Expiry of stock options		-			98			-		(98	)		-			-			-
Share reorganization		(31,585	)		-			-		31,585			-			-			-
Other comprehensive income (restated – note 29)		-			(13	)		17,740		(10,728	)		6,999			-			6,999
Share based payments		-			-			-		190			190			-			190
Balance – December 31, 2018 (restated – note 29)		301			(174,164	)		18,040		180,142			24,319			(937	)		23,382

Balance - January 1, 2019		301			(174,164	)		18,040		180,142			24,319			(937	)		23,382
Shares issued in reverse acquisition (note 25)		2,287			-			-		-			2,287			-			2,287
Net loss (restated – note 29)		-			(11,971	)		-		-			(11,971	)		(383	)		(12,354	)
Other comprehensive income (restated – note 29)		-			-			346		-			346			-			346
Share based payments		-			-			-		127			127			-			127
Balance – December 31, 2019 (restated – note 29)		2,588			(186,135	)		18,386		180,269			15,108			(1,320	)		13,788

Balance - January 1, 2020		2,588			(186,135	)		18,386		180,269			15,108			(1,320	)		13,788
Shares repurchased under NCIB (note 19)		(17	)		-			-		-			(17	)		-			(17	)
Shares issued to settle debts (note 19)		4,749			-			-		5,526			10,275			-			10,275
Net loss		-			(4,406	)		-		-			(4,406	)		25			(4,381	)
Other comprehensive income		-			-			1,358		-			1,358			-			1,358
Share based payments		-			-			-		382			382			-			382
Balance – December 31, 2020		7,320			(190,541	)		19,744		186,177			22,700			(1,295	)		21,405

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

Patagonia Gold Corp. Consolidated Statements of Cash Flows For the Years Ended December 31, 2020, 2019 and 2018 (In thousands of U.S. dollars)

	Note		2020			2019 (restated – note 29)			2018(restated – note 29)
Cash flow from operating activities
Net loss			$	(4,381	)	$	(12,354	)	$	(17,590	)
Items not affecting cash
Depreciation of property, plant and equipment		11		2,639			3,028			7,346
Depreciation of mineral properties		7		477			3,456			3,069
Amortization of mining rights		9		100			100			100
Net impairment of assets				-			-			2,260
Share based payment expense		19		382			127			190
Provisions				(677	)		2,419			-
Impairment of mineral properties				-			1,996			-
Write-down of inventory		6		-			2,368			15,147
Accretion expense		8		13			35			-
Restatement for hyperinflation				-			-			(17,047	)
Deferred tax expense/(benefit)				2,069			(115	)		(2,569	)
				622			1,060			(9,094	)
Net change in non-cash working capital items
(Increase)/decrease in receivables				(255	)		3,864			3,840
(Increase)/decrease in deferred tax assets				-			1,793			438
(Increase)/decrease in inventory				239			1,246			1,045
(Increase)/decrease in other financial assets				310			28			-
Increase/(decrease) in accounts payable and accrued liabilities				(1,505	)		(3,124	)		378
Increase/(decrease) in accounts payable and accrued liabilities with related parties				156			301			-
Increase/(decrease) in interest payable				-			(9	)		-
Increase/(decrease) in provision				1			(24	)		(216	)
Increase/(decrease) in transaction taxes payable				(103	)		(126	)		(329	)
				(1,157	)		3,949			5,156
Net cash provided by/(used in) operating activities				(535	)		5,009			(3,938	)

Cash flows from investing activities
Purchase of property, plant and equipment		11		(976	)		(777	)		(4,310	)
Purchase of mineral property		7		(942	)		(2,926	)		(1,243	)
Purchase of mining rights				-			-			(14,612	)
Proceeds from disposal of property, plant and equipment				417			189			7,500
Net cash used in investing activities				(1,501	)		(3,514	)		(12,665	)

Cash flow from financing activities
Bank indebtedness (repayment)				(5,353	)		2,608			7,878
Proceeds from loans with related parties				6,646			8,515			-
Proceeds from loans				-			-			29,938
Repayment of loans				(174	)		(10,530	)		(38,468	)
Shares repurchased under NCIB		19		(17	)		-			-
Net cash provided by/(used in) financing activities				1,102			593			(652	)

Net increase/(decrease) in cash				(934	)		2,088			(17,255	)
Effect of foreign exchange on cash				1,068			(2,057	)		16,625
Cash, beginning of year				685			654			1,284
Cash, end of the year			$	819		$	685		$	654

Taxes paid				(103	)		(126	)		(329	)
Interest paid				(342	)		(416	)		(1,333	)
Supplemental non-cash information
Shares issued to settle debts		19		10,275			-			-
Change in value of investments		10		8			(28	)		(13	)

The accompanying notes form an integral part of these consolidated financial statements

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

1.Nature of business

On July 24, 2019, Patagonia Gold Corp. (PGDC.TSXV – “the Company” or “Patagonia”) [formerly Hunt Mining Corp (“Hunt”, or “Hunt Mining”)] and Patagonia Gold Limited (“PGL”) [formerly Patagonia Gold PLC (“PGP”)] completed a reverse acquisition (or reverse takeover, the “RTO”) resulting in Hunt acquiring all issued shares of common stock of PGP in exchange for common shares of Hunt on the basis of 10.76 Hunt shares for each PGP share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80%. The operating name of Hunt Mining Corp. was changed to Patagonia Gold Corp (“the Company”) (note 25).

Comparative information for the Company is that of PGL (accounting acquirer) prior to the reverse acquisition on July 24, 2019.

Patagonia is a mineral exploration and production company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties and exploitation of reserves in Santa Cruz, Rio Negro and Chubut provinces of Argentina.

The consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:

Corporation	Incorporation	Percentage ownership	Functional currency	Business purpose
Patagonia Gold S.A. (“PGSA”)	Argentina	95.3	US$	Production and Exploration Stage
Minera Minamalu S.A.	Argentina	100	US$	Exploration Stage
Huemules S.A.	Argentina	100	US$	Exploration Stage
Leleque Exploración S.A.	Argentina	100	US$	Exploration Stage
Patagonia Gold Limited (formerly Patagonia Gold PLC)	UK	100	GBP$	Holding
Minera Aquiline S.A.U.	Argentina	100	US$	Exploration Stage
Patagonia Gold Canada Inc.	Canada	100	CAD$	Holding
Patagonia Gold Chile S.C.M.	Chile	100	CH$	Exploration Stage
Ganadera Patagonia S.R.L.	Argentina	100	US$	Land Holding
1272680 B.C. Ltd (formerly 1494716 Alberta Ltd.)	Canada	100	CAD$	Nominee Shareholder

The Company’s activities include the exploration and production of minerals from properties in Argentina and Chile. On the basis of information to date, properties where it has not yet been determined if economically recoverable ore reserves exist are classified as exploration-stage. Properties where economically recoverable ore reserves exist and are being exploited are classified as production-stage. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

2.Basis of presentation

Prior to the reverse acquisition, Patagonia Gold Limited prepared its December 31, 2018 annual consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Upon the reverse acquisition with Patagonia Gold Corp, Patagonia Gold Limited became the ongoing entity for accounting purposes and Patagonia Gold Limited had to switch to reporting under US GAAP as Patagonia Gold Corp. is a registrant with the U.S. Securities and Exchange Commission (“SEC”). The Company prepared its annual consolidated financial statements for the year ended December 31, 2019 and interim financial statements for the three months ended March 31, 2020 in accordance with US GAAP. Effective June 30, 2020, the Company obtained “foreign private issuer” status in accordance with SEC guidelines and became eligible to satisfy its reporting requirements using IFRS. As such, the Company has prepared these consolidated financial statements in accordance with IFRS as issued by IASB. A reconciliation of the restatement from US GAAP to IFRS is included in note 29 for the consolidated statements of financial position as at December 31, 2019 and the consolidated statements of loss and comprehensive loss for the years ended December 31, 2019 and 2018.

The consolidated financial statements were approved by the Company’s Board of Directors on April 28, 2021.

The accounting policies applied in the consolidated financial statements are presented in note 4 and have been applied consistently in all periods presented in the consolidated financial statements, unless otherwise noted.

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting.

The Company’s presentation currency is the US Dollar.

The preparation of the consolidated financial statements require management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Judgments made by management in the application of IFRS that have a significant effect on the consolidated financial statements and estimates with significant risk of material adjustment in the current and following periods are discussed in note 4.

2.Going Concern

3.Going concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent upon, but not limited to, its ability to raise financing necessary to discharge its liabilities as they become due and generate positive cash flows from operations. During theyear ended December 31, 2020, the Company had a net loss of $4,381 (2019 - $12,354) (2018 - $17,590). As atDecember 31, 2020, the Company has negative working capital of $8,378 (2019 - $22,625) and had an accumulated deficit of $190,541 (2019 - $186,135). These aforementioned conditions have resulted in material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and to meet its obligations will be dependent upon generating positive cash flows from operations as well as obtaining debt and equity financing. See note 30 for equity financing completed subsequent to December 31, 2020. However, there can be no assurance that the steps management is taking will be successful. The accompanying consolidated financial statements do not reflect any adjustments in the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. that might result from the outcome of this uncertainty. These adjustments could have a material impact on the consolidated financial statements.

4. Significant accounting policies

The significant accounting policies used in the preparation of these consolidated financial statements are described below.

(a) Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

(b) Consolidation

The Company's consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on consolidation.

The functional currency for the Company and its subsidiaries is determined by the currency of the of the primary economic environment in which it operates. The Company’s functional currency is the Canadian dollar (“CAD”) and the Company’s subsidiaries have functional currencies in United States dollar (“USD”), Chilean Peso (“CH”) and Great Britain Pound (“GBP”). The consolidated financial statements are presented in United States dollars.

Prior to January 1, 2019, the functional currency of Patagonia Gold S.A, Minera Minamalu S.A, Leleque Exploracion S.A, Huemules S.A. and Minera Aquiline Argentina S.A.U was the Argentine Peso and Argentina was designated as an hyperinflationary economy. In accordance with IAS 29, Financing Reporting in Hyperinflationary Economies (“IAS 29”), the financial statements of those subsidiaries had been restated after applying a general price index and translated to USD at closing rates before they were included in the consolidated financial statements.

Management considered primary and secondary indicators in determining functionary currency including the currency that influences sales, purchases and other costs. Other indicators considered by management include the currency in which funds from financing activities were generated. Based on these indicators, management concluded that effective January 1, 2019, the functional currency of Patagonia Gold S.A, Minera Minamalu S.A, Leleque Exploracion S.A, Huemules S.A. and Minera Aquiline Argentina S.A.U became the USD. The change in functional currency for these subsidiaries has been applied prospectively. As these subsidiaries cease to have Argentine Peso as the functional currency, the Company has discontinued the preparation and presentation of the financial statements in accordance with IAS 29. The amounts expressed at the end of the December 31, 2018 reporting period have been treated as the basis for the carrying amounts effective January 1, 2019 and onwards.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recognized at the prevailing exchange rates at the date of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at the reporting date. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the transaction date. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in net income.

These financial statements are translated to their USD equivalents using the following methods:

-	Income and expenses on the statement of loss and comprehensive loss have been translated using the average exchange rates prevailing during the year;

-	Assets and liabilities have been translated using the exchange rate prevailing at the date of the statement of financial position;

-	Translation adjustments are recognized in other comprehensive income (loss).

(d) Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all of risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

The Company classifies its financial assets into the following categories: those to be measured subsequently at fair value through other comprehensive income (FVOCI), fair value through profit and loss (FVTPL) and those to be held at amortized cost. Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.

Generally, the Company does not acquire financial assets for the purpose of selling in the short term and does not have any financial assets measured at FVTPL in either the current or prior year. The Company’s business model is primarily that of “hold to collect” (where assets are held in order to collect contractual cash flows).

See note 22 for the fair value disclosures.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Financial assets held at amortized cost

This classification applies to the Company’s cash and trade receivables, and other receivables which are held under a hold to collect business model and which have cash flows that meet the “solely payments of principal and interest” (SPPI) criteria. At initial recognition, trade and other receivables that do not have a significant financing component, are recognised at their transaction price. Other financial assets are initially recognised at fair value plus related transaction costs; they are subsequently measured at amortized cost using the effective interest method. Any gain or loss on derecognition or modification of a financial asset held at amortized cost is recognised in the consolidated statements of loss and comprehensive loss.

Financial assets held at fair value through other comprehensive income (FVOCI)

This classification applies to the Company’s other financial assets which includes equity investments and a performance bond (note 10). When these financial assets are derecognised, there is no reclassification of fair value gains or losses previously recognised in other comprehensive income.

Impairment of financial assets

A forward-looking expected credit loss (ECL) review is required for financial assets held at amortized cost. Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. The Company considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

The Company applies the “simplified approach” to trade and other receivable balances. The simplified approach in accounting for trade and other receivables records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating these losses, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The general approach incorporates a review for any significant increase in counterparty credit risk since inception.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities are recorded, subsequent to initial recognition, at amortized cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the consolidated statements of loss and comprehensive loss. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the consolidated statements of loss and comprehensive loss on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(e) Cash and equivalents

Cash and equivalents include cash on hand, deposits held with banks and other liquid short-term investments with original maturities of three months or less. The Company has no cash equivalents for all periods presented.

(f) Inventories

Inventory comprises, gold held on carbon, mineral concentrate and mineralized material stockpiles. They are physically measured or estimated and valued at the lower of cost or net realizable value. Net realizable value is the estimated future sales price of the product the Company expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.

Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained mineral ounces is based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile tonnages are verified by periodic surveys.

Cost of inventory is determined by using the weighted average method and comprises direct costs, depreciation, depletion and amortization as well as a portion of fixed and variable overhead costs incurred in converting materials into concentrate and ore, based on the normal production capacity.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Materials and supplies are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.

(g) Mineral properties and exploration and evaluation expenditures

Exploration and evaluation costs are expensed until the determination of the technical feasibility and the commercial viability of the associated project. Exploration costs include costs directly related to exploration and evaluation activities in the areas of interest. The technical feasibility and commercial viability of extracting a mineral resource is considered to be determinable when economically recoverable reserves are determined to exist, the rights of tenure are current and it is considered probable that the costs will be recouped through successful development and exploitation of the area, or alternatively by sale of the property. This determination is normally evidenced by the completion of a technical feasibility study.

Expenditures to develop new mines, to define further mineralization in mineral properties which are in the development or operating stage, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

Should a property be abandoned, its capitalized costs are charged to the consolidated statements of loss and comprehensive loss. The Company charges to the consolidated statements of loss and comprehensive loss the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

(h) Mining rights

Mining rights are rights to explore and mine specified areas of land acquired from the landowner. Mining rights acquired for stated terms in excess of 10 years are capitalized as intangible assets and are measured initially at cost and amortized on a straight-line basis over the term of the rights. Mining rights acquired for undefined terms are capitalized as intangible assets and are measured initially at cost and amortized on a unit of production method over the estimated period of economically recoverable reserves. Amortization is charged to administrative expenses in the consolidated statements of loss and comprehensive loss.

(i) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.

Repairs and maintenance costs are charged to the consolidated statements of loss and comprehensive loss during the period in which they are incurred.

Depreciation is calculated to amortize the cost of the property, plant and equipment over their estimated useful lives using the straight-line and unit of production methods.

Office equipment, vehicles, machinery and equipment, Mina Martha processing plant, and buildings are stated at cost and depreciated straight line over an estimated useful life of 3 to 20 years. Depreciation of plant, other than Mina Martha, is based on a unit-of-production method over the estimated period of economically recoverable reserves. Depreciation begins once the asset is in the state intended for use by management.

The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.

Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains or losses in the consolidated statements of loss and comprehensive loss.

(j) Impairment of long-lived assets

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount of assets is the greater of their fair value less costs to sell and value in use.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Fair value is based on an estimate of the amount that the Company may obtain in a sale transaction on an arm’s length basis. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash generating unit (“CGU”) to which the asset belongs. The Company’s CGUs are the lowest level of identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

Future cash flows are estimated based on estimated quantities of recoverable minerals, expected gold and silver (considering current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans.

Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization other than proven and probable reserves are included when determining the fair value of mine site asset groups at acquisition and, subsequently, in determining whether the assets are impaired. Estimates of recoverable minerals from exploration stage mineral interests are risk adjusted based on management’s relative confidence in such materials. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those risk factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material could ultimately be mined economically. Assets classified as exploration potential have the highest level of risk that the carrying value of the asset can be ultimately realized, due to the lower level of geological confidence and economic modeling.

(k) Reclamation and remediation obligations

The Company records a liability and corresponding asset for the present value of the estimated costs of legal and constructive obligations for future site reclamation and closure activities where the liability is more likely than not to exist and a reasonable estimate can be made of the obligation. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their present values using a risk-free discount rate consistent with the timing of the expected costs, are provided for in full as soon as the obligation to incur such costs arises and can be quantified. On recognition of a full provision, an addition is made to property, plant and equipment of the same amount; this addition is then charged against profits on a unit of production basis over the life of the mine. Closure provisions are updated annually for changes in cost estimates as well as for changes to life of mine reserves, with the resulting adjustments made to both the provision balance and the net book value of the associated non-current asset. The obligation is subsequently adjusted at each period to reflect the passage of time (accretion expense) and changes in the estimated future costs of the underlying obligation.

The Argentine mining regulations require that mine properties be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, and sealing portals at deep mines. The Company accrues for the cost of final mine closure reclamation over the estimated useful mining life of the property. At each period, the Company reviews the entire reclamation liability and makes necessary adjustments for revisions to cost estimates to reflect current experience.

(l) Income taxes

The income tax expense or benefit consists of current and deferred components.

Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the statement of financial position date in each of the jurisdictions.

Deferred tax is recognized in respect of temporary differences between the carrying amount of assets and liabilities in the consolidated statement of financial position and the corresponding tax bases used in the computation of taxable profit. Deferred tax is calculated based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the year of realization or settlement based on tax rates and laws enacted or substantively enacted at the statement of financial position date. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax liabilities are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes.

Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses to the extent it is probable future taxable profits will be available against which they can be utilized. The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other than in a business combination.

Deferred tax assets and liabilities are offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.

The Company operates in multiple jurisdictions which involves dealing with uncertainties and judgments in the application of complex tax regulations. The final taxes paid or recovered are dependent upon many factors including resolutions arising from federal and state audits. The Company changes its tax assets and liabilities in light of the changing facts and circumstances but due to the complexity of the uncertainties in the tax regulations, the ultimate tax liability or asset could be materially different from the Company’s estimate recorded in the consolidated financial statements.

(m) Share-based payments

The Company offers a share option plan for its directors, officers, employees and consultants.

Share options granted to employees and directors are categorised as equity-settled share-based payments. Equity-settled share-based payments are measured at the fair value of goods or services received when the fair value can be reliably estimated. If the fair value of goods and services received cannot be reliably measured, then the fair value of the instrument issued is measured using an appropriate option pricing model at the grant date. For share options granted to directors, officers and employees, the fair value of the options is measured using the Black-Scholes option pricing model. All equity-settled share-based payments are ultimately recognised as an expense in the consolidated statements of loss and comprehensive loss with a corresponding increase to contributed surplus. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods and services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

(n) Earnings (loss) per share

The calculation of earnings (loss) per share (“EPS”) is based on the weighted average number of shares outstanding for each period. The basic EPS is calculated by dividing the income or loss attributable to the equity owners of the Company by the weighted average number of common shares outstanding during the period.

The computation of diluted EPS assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the earnings per share. The treasury stock method is used to determine the dilutive effect of the warrants and share options. When the Company reports a loss, the diluted net loss per common share is equal to the basic net loss per common share due to the anti-dilutive effect of the outstanding warrants and share options.

(o) Revenue recognition

The Company recognizes sales revenue in accordance with IFRS 15 when it has satisfied the following criteria:

-	The Company and the customer have an identifiable contract and are committed to perform their respective obligations;

-	The Company and the customer can identify each other’s rights regarding the goods to be transferred;

-	The Company can identify the payment terms for the goods to be transferred;

-	The risk, timing or amount of the Company’s future cashflows is expected to change as a result of the contract;

-	It is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods that will be transferred to the customer.

The Company produces doré and concentrate that is shipped to third-party refiners and smelters, respectively, for processing. The Company enters into contracts to sell its metal to third-party customers which may include the refiners and smelters that process the doré and concentrate. The Company’s performance obligation in these transactions is generally the transfer of metal to the customer. In the case of doré shipments, the Company generally sells refined metal at market prices agreed upon by both parties. The Company also has the right, but not the obligation, to sell a portion of the anticipated refined metal in advance of being fully refined. When the Company sells refined metal or advanced metal, the performance obligation is satisfied when the metal is delivered to the customer. Revenue and Cost of Sales are recorded on a gross basis under these contracts at the time the performance obligation is satisfied.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

(p) Segment reporting

In accordance with IFRS 8 the management approach is used to identify operating segments. An operating segment is a component of an entity (i) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), (ii) whose operating results are regularly reviewed by the entity's management, and (iii) for which discrete financial information is available. The Company has identified its reportable segments on the basis of their geographic location. As a result, the Company discloses information geographically based on the location of each of its operations and within Argentina on the basis of operating mines and projects under construction.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

(q) Business combinations

A business combination is defined as an acquisition of assets and liabilities that constitute a business. A business is an integrated set of activities and assets that consist of inputs, including non-current assets, and processes, including operational processes, that when applied to those inputs have the ability to create outputs that provide a return to the Company and its shareholders. A business also includes those assets and liabilities that do not necessarily have all the inputs and processes required to produce outputs, but can be integrated with the inputs and processes of the Company to create outputs. When acquiring a set of activities or assets in the exploration and development stage, which may not have outputs, the Company considers other factors to determine whether the set of activities or assets is a business.

Business combinations are accounted for using the acquisition method whereby identifiable assets acquired and liabilities assumed, including contingent liabilities, are recorded at their fair values at the acquisition date. The acquisition date is the date at which the Company obtains control over the acquiree, which is generally the date that consideration is transferred and the Company acquires the assets and assumes the liabilities of the acquiree. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the fair values of the assets at the acquisition date transferred by the Company, the liabilities, including contingent consideration, incurred and payable by the Company to former owners of the acquiree and the equity interests issued by the Company. When the cost of the acquisition exceeds the fair value of the identifiable assets acquired and liabilities assumed, the difference is recognized as goodwill. Acquisition related costs are expensed as incurred.

When asubsidiary is acquired, the fair value of its identifiable assets and liabilities are finalised within 12 months of the acquisition date. Allfair value adjustments are recorded with effect from the date of acquisition and consequently may result in the restatement of previously reported financial results.

(r) Goodwill

Under the acquisition method of accounting, the costs of business combinations are allocated to the assets acquired and liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the fair value of consideration paid over the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill is not amortized; instead it is tested for impairment in the fourth quarter and also when there is an indicator of impairment. At the date of acquisition, goodwill is assigned to the CGU or group of CGUs that is expected to benefit from the synergies of the business combination.

The Company identifies any potential impairment by comparing the carrying value of a CGU or group of CGUs to its recoverable amount. The recoverable amount of a CGU or group of CGUs is the higher of its fair value less costs of disposal and its value in use. Both fair value less costs of disposal and value in use are based on estimates of discounted future cash flows or other valuation methods. Cash flows are projected based on past experience, actual operating results and business plans. When the recoverable amount of a CGU or group of CGUs is less than its carrying value, the recoverable amount is determined for its identifiable assets and liabilities. The excess of the recoverable amount of the CGU or group of CGUs over the total of the amounts assigned to its assets and liabilities is the recoverable amount of goodwill. An impairment charge is recognized for any excess of the carrying value of goodwill over its recoverable amount. Goodwill impairment charges are not reversible.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

(s) Adoption of new accounting standards and amendments

Amendments to IFRS 3, Business Combinations (“IFRS 3”)

(t) New accounting standards issued but not yet effective

•	Specifying that an entity’s right to defer settlement must exist at the end of the reporting period;

•	Clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement;

•	Clarifying how lending conditions affect classification; and

•	Clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments.

The Company will evaluate the impact, if any, on its consolidated financial statements prior to the effective date of January 1, 2023.

5. Critical accounting judgments and estimates

(a) Significant judgments

Functional currency

Income taxes and taxes receivable

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The Company has accrued deferred income tax assets but may not be able to utilize part or all of these assets in the future.The Company only recognizes the expected future tax benefit from these assets if it is considered more likely than not that the tax benefit will be realized. Otherwise, a valuation allowance is applied against deferred tax assets that are not more likely than not to be utilized. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income, including application of existing tax laws in each jurisdiction, assumptions about future metals prices, the macroeconomic environment and results of the Company’s operations. To the extent that future cash flows and taxable income differ significantly from estimates, the Company’s ability to realize deferred tax assets could be impacted. Additionally, future changes in tax laws could limit the ability to obtain the future benefits represented by the deferred tax assets.

Title to mineral property interests

Impairment of mineral properties

(b) Use of estimates

The preparation of these consolidated financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also makes estimates and assumptions concerning the future. The determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience and current and expected economic conditions. Actual results could differ from those estimates.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Mineral reserves

Share-based payments

Provisions

Inventories

Business combinations

6.Inventories

	December 31, 2020		December 31, 2019
	$’000		$’000

Gold held on carbon	$	1,421	$	1,603
Silver and gold concentrate		-		157
Material stockpiles		-		-
Materials and supplies		1,868		1,446
	$	3,289	$	3,206

In February 2019, the Company closed the Lomada project and put the Cap-Oeste project into care and maintenance. As a result, the carrying value of inventory for these projects has been reviewed for impairment and it was determined that the net realizable value of the inventory was less than the costs incurred in establishing the ore stockpile and therefore a write down of $15.1 million was required and is recorded in cost of sales for the year ended December 31, 2018. An additional write down of $2.37 million was recorded during the year ended December 31, 2019. During the year ended December 31, 2020, there was no write down of inventory.

During the year ended December 31, 2020, the Company expensed $8,789 (2019 – $10,890) (2018 - $23,742) of inventories on the consolidated statements of loss and comprehensive loss.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

7.Mineral properties

		Mining assets		Surface rights acquired		Total
		$’000		$’000		$’000
Cost
Balance – January 1, 2019	$	13,425	$	5,032	$	18,457
Reverse acquisition (note 25)		6,830		1,427		8,257
Additions		2,926		-		2,926
Balance - December 31, 2019	$	23,181	$	6,459	$	29,640
Additions		942		-		942
Balance - December 31, 2020	$	24,123	$	6,459	$	30,582

Amortization
Balance - January 1, 2019	$	7,823	$	908	$	8,731
Change for the year		3,456		-		3,456
Impairment		1,996		-		1,996
Balance - December 31, 2019	$	13,275	$	908	$	14,183
Charge for the year		477		-		477
Disposals		-		-		-
Balance - December 31, 2020	$	13,752	$	908	$	14,660

Net book value
December 31, 2019	$	9,906	$	5,551	$	15,457
December 31, 2020	$	10,371	$	5,551	$	15,922

Trilogy Mining Corporation

In January 2016, Patagonia Gold Limited (“PGL”) entered into an earn–in agreement with Trilogy Mining Corporation (“Trilogy”) in relation to the San José Project in Uruguay. This was recognized within mining assets at a cost of $1,996. In December 2019, the Company announced the termination of its option agreement with Trilogy and in exchange received common shares of Trilogy, that will result in PGL owning 42.5% of the then issued and outstanding shares of Trilogy. In connection with the termination of the option agreement, the Company impaired $1,996 of the mining asset related to San José Project in Uruguay during the year ended December 31, 2019.

Lomada project

All development costs incurred with respect to the Lomada project, from September 1, 2010 and onwards, have been capitalized as mineral properties and included under mining assets. The project completed the trial heap leach phase and entered full commercial production in the third quarter of 2013. Amortization is charged based on the unit-of-production method.

In February 2019, the Company reviewed the production profile for Lomada. Given the lower than anticipated recoveries, the Company made the decision to close the Lomada project.

Following receipt of a preliminary permit on October 7, 2020, the Company restarted mining operations at Lomada de Leiva in November 2020, which had been previously closed since in February 2019. The expenses related to the development of the new pit were capitalized as Mineral Properties. The Company expects to continue residual production from fresh material placed on the heap leach pad.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Cap-Oeste project

The Company completed the development of Cap-Oeste Project in September 2016, entered into production in the last quarter of that year. As a result of the experience gained at Lomada, no trial production period was required at Cap-Oeste. Revenue from commercial production was therefore recognised from the outset. The capitalized development costs are amortized based on the unit of production method.

In February 2019, the Company reviewed the production profile for 2019 for Cap-Oeste. Given the expected lower production volumes, the Company made the decision to put Cap-Oeste on care and maintenance until a suitable solution to extract and process the high-grade underground resource from Cap-Oeste has been identified. Residual production continued at Cap-Oeste and the Company continued to capitalize costs under inventories.

Mina Angela

In September 2020, the Company entered into a definitive option agreement with Latin Metals Inc. which granted the Company an irrevocable option to acquire a 100% interest in the Mina Angela property. Pursuant to the definitive agreement, the Company has paid $250 representing the first earn-in payment. The Company shall decide whether to exercise the option no later than six months from the date of the definitive agreement. If the Company elects to exercise the option, they shall pay the second earn-in payment of $250. A further and final payment of $500 is expected to be paid within 30 days of verification that the legal restrictions preventing development of mining activity in the Chubut Province and at the Mina Angela property have been lifted in such a manner that Patagonia has the ability to perform exploration and exploitation mining activities on the property. In addition, Latin Metals Inc. will be entitled to receive a 1.25% Net Smelter Royalty (“NSR”) from future production. The Company has the right to repurchase half of the NSR for $1,000. On March 12, 2021, the Company exercised the option to acquire 100% interest in the Mina Angela property and subsequently paid the second earn-in payment of $250.

Surface rights

The Company owns the surface rights of land encompassing the Estancia La Bajada, Estancia El Tranquilo, Estancia El Rincon, Estancia La Josefina and the Estancia 1° de Abril.

There is a back in right granted to the sellers under Estancia El Rincon’s title deed whereby the Company irrevocably committed to resell the estancia to its former owner in the event that two consecutive years elapse without mining activities. Current activity on this property includes the Lomada Project.

Mina Martha project

On May 6, 2016, the Company acquired the assets of the Mina Martha project from Coeur Mining Inc. (“Coeur”). The Mina Martha project consists of land, mineral rights, a mine camp, offices, a warehouse, maintenance shop, mining facilities including a flotation mill and a tailings retention facility.

La Josefina project

In March 2007, the Company acquired the exploration and development rights to the La Josefina project from Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”) the Santa Cruz provincial mining and petroleum company.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

In July 2007, the Company entered into an agreement (subsequently amended) with Fomicruz which provides that, in the event that a positive feasibility study is completed on the La Josefina property, a Joint Venture Corporation (“JV Corporation”) would be formed by the Company and Fomicruz. The Company would own 81% of the joint venture company and Fomicruz would own the remaining 19%. Fomicruz has the option to earn up to a 49% participating interest in the JV Corporation by reimbursing the Company an equivalent amount, up to 49%, of the exploration investment made by the Company. The Company has the right to buy back any increase in Fomicruz’s ownership interest in the JV Corporation at a purchase price of $0.2 million per each percentage interest owned by Fomicruz down to its initial ownership interest of 19%; the Company can also purchase 10% of the Fomicruz’s initial 19% JV Corporation ownership interest by negotiating a purchase price with Fomicruz. Under the agreement, the Company has until the end of 2019 to complete cumulative exploration expenditures of $18 million and determine if it will enter into production on the property. As at December 31, 2018, the Company had incurred approximately $20 million and is in current discussions with Fomicruz to develop a plan for production. In October 2019, the agreement was extended until April 30, 2021 which period may be extended for an additional one-year term.

8. Reclamation and remediation obligations

The Company is legally required to perform reclamation on sites where environmental disturbance is caused by the development or on-going mining of a property to restore it to its original condition at the end of its useful life. In accordance with IFRS, the Company recognized the fair value of that liability as an asset retirement obligation. The total amount of undiscounted cash flows required to settle the estimated obligation is $5,182 (2019 - $6,053) which has been discounted using a weighted average risk-free rate of 0.19% (2019 – 1.76%) and an inflation rate of 1.36% (2019 – 2.29%).

The following table describes the changes to the Company's asset retirement obligation liability:

	December 31, 2020			December 31,2019
	$’000			$’000
Reclamation and remediation obligation - beginning of year	$	5,803		$	1,274
Reverse acquisition (note 25)		-			2,075
Change in estimate		(677	)		2,419
Accretion expense		13			35
Reclamation and remediation obligation - end of year	$	5,139		$	5,803

The Company reassess the cost of reclamation and remediation obligations periodically given new information regarding changes to the risk-free rate, inflation rate and undiscounted cash flow. During the year ended December 31, 2020 and 2019, the change in estimate relates to revisions to the estimated undiscounted cashflow obligations.

9. Mining rights

		Fomicruz Agreement		Minera Aquiline Argentina		Total
		$’000		$’000		$’000
Balance – January 1, 2019	$	3,288	$	13,187	$	16,475
Amortization		(100)		-		(100)
Exchange differences		-		622		622
Balance - December 31, 2019	$	3,188	$	13,809	$	16,997
Amortization		(100)		-		(100)
Exchange differences		-		298		298
Balance - December 31, 2020	$	3,088	$	14,107	$	17,195

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Fomicruz Agreement

On October 14, 2011, Patagonia Gold, PGSA and Fomicruz entered into a definitive strategic partnership agreement in the form of a shareholders’ agreement (“Fomicruz Agreement”) to govern the affairs of PGSA and the relationship between the Company, PGSA and Fomicruz. Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine Fomicruz’s mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA. The Fomicruz Agreement establishes the terms and conditions of the strategic partnership for the future development of certain PGSA mining properties in the Santa Cruz. The Company will fund 100% of all exploration expenditures on the PGSA properties to the pre-feasibility stage, with no dilution to Fomicruz. After feasibility stage is reached, Fomicruz is obliged to pay its 10% share of the funding incurred thereafter on the PGSA properties, plus annual interest at LIBOR +1% to the Company. Such debt and interest payments will be guaranteed by an assignment by Fomicruz of 50% of the future dividends otherwise payable to Fomicruz on its shares. The Company will manage the exploration and potential future development of the PGSA properties.

The mining rights acquired have been measured by reference to the estimated fair value of the equity interest given to Fomicruz. Management has estimated the fair value of the 10% interest in PGSA acquired by Fomicruz, on or about October 14, 2011 at $4 million. In determining this fair value estimate, management considered many factors including the net assets of PGSA and the illiquidity of the 10% interest. This amount has been recorded as an increase in the equity of PGSA and as a mining right asset. In these financial statements, the increase in equity in PGSA has been recorded as non-controlling interest. The initial share of net assets of PGSA ascribed to the non-controlling interest amounted to $4 million.

Effective January 1, 2020, the Company’s former subsidiary Cerro Cazador S.A merged with PGSA and as a result, Formicruz has a 4.7% interest in the newly merged entity.

Minera Aquiline Argentina Agreement

On January 31, 2018, Patagonia, through a wholly owned subsidiary (Patagonia Gold Canada Inc. “PGCAD”), acquired the Calcatreu gold asset in Rio Negro, Argentina, by way of acquiring 100% of the shares of Minera Aquiline Argentina S.A. (“MASA”), a subsidiary of Pan American Silver Corporation. Total consideration for the acquisition amounted to $15 million. PGCAD has made the initial payment of $5 million on January 31, 2018 and the final payment of $10 million on legal completion on May 18, 2018.

This transaction was accounted for as an asset acquisition and the purchase consideration was allocated to Mining Rights at $14.6 million and other net assets at $0.4 million. These mining rights will be amortized on a unit-of-production method over the estimated period of economically recoverable resources once the project reaches the commercial production phase.

10. Other financial assets

The Company has short-term investments in equity securities which are recorded at fair value through other comprehensive income/(loss). As at December 31, 2020, the fair value of the short-term investments is $16 (2019 - $8).

The Company had a performance bond that was originally required to secure the Company’s rights to explore the La Josefina property. It was a step-up US dollar denominated 2.5% coupon bond, paying quarterly, issued by the Government of Argentina with a face value of $600 and a maturity date of 2035. The bond traded in the secondary market in Argentina. The bond was originally purchased for $247. Since Cerro Cazador S.A. (“CCSA”) fulfilled its exploration expenditure requirement mandated by the agreement with Fomicruz, the performance bond was no longer required to secure the La Josefina project. Therefore, in September 2010 the Company used the bond to secure the La Valenciana project, an additional Fomicruz exploration project.

During the year ended December 31, 2020, the Company sold the performance bond for $400. There were no restrictions of the performance bond prior to the sale. As at December 31, 2019, the fair value of the bond was $326.

Changes in the fair value of these financial assets are recorded as other comprehensive income (loss).

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

11. Property, plant and equipment

	Plant		Buildings		Vehicles and equipment			Improvements and advances			Total
	$’000		$’000		$’000			$’000			$’000
Cost
Balance – January 1, 2019	$	12,945	$	823	$	22,004		$	673		$	36,445
Reverse acquisition (note 25)		2,178		1,156		1,233			-			4,567
Additions		203		-		244			330			777
Disposals		-		-		(560	)		(48	)		(608	)
Transfers		-		-		103			(103	)		-
Balance - December 31, 2019	$	15,326	$	1,979	$	23,024		$	852		$	41,181
Additions		114		-		260			602			976
Disposals		-		-		(14	)		(415	)		(429	)
Balance - December 31, 2020	$	15,440	$	1,979	$	23,270		$	1,039		$	41,728

Accumulated depreciation
Balance - January 1, 2019	$	12,648	$	125	$	10,164		$	-		$	22,937
Disposals		-		-		(419	)		-			(419	)
Depreciation for the year		482		76		2,470			-			3,028
Balance - December 31, 2019	$	13,130	$	201	$	12,215		$	-		$	25,546
Disposals		-		-		(12	)		-			(12	)
Depreciation for the year		272		161		2,528			-			2,961
Balance - December 31, 2020	$	13,402	$	362	$	14,731		$	-		$	28,495

Net book value
December 31, 2019	$	2,196	$	1,778	$	10,809		$	852		$	15,635
December 31, 2020	$	2,038	$	1,617	$	8,539		$	1,039		$	13,233

12.Receivables

		December 31,		December 31,
		2020		2019
		$’000		$’000
Receivable from sale	$	156	$	150
Recoverable value added tax ("VAT")		1,217		880
Other receivables		668		486
Total	$	2,041	$	1,516

13.Other receivables

		December 31,		December 31,
		2020		2019
		$’000		$’000
Recoverable value added tax ("VAT")	$	722	$	1,226
Other receivables		2,822		2,588
Total	$	3,544	$	3,814

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

On 14 October 2011, the Company, its subsidiary PGSA and Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”), the Santa Cruz provincial mining and petroleum company, entered into an agreement in the form of a shareholders’ agreement (“Fomicruz Agreement”) to govern the affairs of PGSA and the relationship between the Company, PGSA and Fomicruz. Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine Fomicruz’s mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA (subsequently reduced to 4.7% after a corporate reorganization whereby the Company’s former subsidiary Cerro Cazador SA merged with PGSA to become one legal entity). The Fomicruz Agreement establishes the terms and conditions of the strategic partnership for the future development of certain PGSA mining properties in the Province. The Company will fund 100% of all exploration expenditures on the PGSA properties to the pre-feasibility stage, with no dilution to Fomicruz. After feasibility stage is reached, Fomicruz is obliged to pay its 10% share of the funding incurred thereafter on the PGSA properties, plus annual interest at LIBOR +1% to the Company. Such debt and interest payments will be guaranteed by an assignment by Fomicruz of 50% of the future dividends otherwise payable to Fomicruz on its shares.

Effective June 2020, Fomicruz and the Company agreed to terminate the Fomicruz Agreement, expressly stating that they have no mutual claims under it. PGSA, Minamalú and Fomicruz have assumed the commitment to enter into a new shareholders agreement within thirty days following the Shareholder’s meeting of PGSA (the “Meeting”) by virtue of which Minamalú becomes a shareholder of PGSA. As of the date of approval of these consolidated financial statements, The Meeting has not been held.

As at December 31, 2020, other receivables include $2,185 (2019 - $1,858) of recoverable costs from Fomicruz related to its share of the funding incurred on the PGSA properties.

The remaining other receivables balance consists of tax receivables.

14. Bank indebtedness

As at December 31, 2020, the Company has bank indebtedness of $9,636 (2019 – $14,989) in the form of operating lines of credit which have an interest rate of 1.8% plus refinancing rate and mature on December 31, 2021. On November 16, 2020, the maturity of the operating lines of credit was extended from January 31, 2021 to December 31, 2021. All other terms of the operating lines of credit remain unchanged.

As at December 31, 2020, the interest rate on the lines of credit is 2.75%. The lines of credit have no specific terms of repayment and the Company renews them every year.

15. Accounts payable and accrued liabilities

	December 31,		December 31,
	2020		2019
	$’000		$’000
Trade accounts payable and accrued liabilities	$	2,510	$	5,102
Income tax		-		-
Other accruals		1,874		890
Accounts payable to related parties (note 20)		144		6,717
Total	$	4,528	$	12,709

16. Loan payable, lease payable and current portion of long-term debt

	December 31,		December 31,
	2020		2019
	$’000		$’000
Current portion of long-term debt(note 17)	$	340	$	200
Leases payable		23		134
Loans payable		-		-
Total	$	363	$	334

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

17. Long-term debt

	December 31,			December 31,
	2020			2019
	$’000			$’000
Loan to related party secured by a letter of guarantee from the Company, at 5% interest per annum, due 2022 (note 20) ⁽¹⁾	$	13,961		$	7,908

Loan to related party secured by assets of the Company payable 5.75% interest per annum, due 2022		448			512

Acquired in reverse acquisition. Unsecured loan payable to related party at 8% interest per annum, due 2022 (note 20 and 25)		-			990

Acquired in reverse acquisition. Unsecured loan payable to related party at 8% interest per annum, due 2021 (note 20 and 25)		-			826

Acquired in reverse acquisition. Unsecured loan payable to related party at 7% interest per annum, due 2021 (note 20 and 25)		-			1,038

Accrued interest on debt		848			946
	$	15,257		$	12,220
Less current portion		(340	)		(200	)
	$	14,917		$	12,020

(1)	On November 16, 2020, the maturity of the loan was extended from March 31, 2021 to December 31, 2022. All other terms of the loan remain unchanged.

Principal payments on long-term debts are due as followed:

Year ending December 31,
2021	340
2022	14,917

18.Net loss per share

Basic and diluted net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the year. There were no dilutive items outstanding for the year as the Company had a net loss and the effect of any stock options would be anti-dilutive.

The net loss per share is as follows:

	December 31,			December 31,				December 31,
	2020			2019				2018
Net loss	$	(4,381	)	$	(12,354	)	$	(17,590	)
Weighted average number of common shares outstanding – basic and diluted		325,483,780			282,306,312			254,387,482
Net loss per share – basic and diluted	$	(0.013	)	$	(0.044	)	$	(0.069	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

19.Capital stock

Authorized:

Unlimited number of common shares without par value

Unlimited number of preferred shares without par value

Issued:


	Number of common			Amount
	share outstanding			$’000
Balance at January 1, 2019		254,355,192		$	301
Share issued in reverse acquisition (note 25)		63,588,798			2,287
Balance at December 31, 2019		317,943,990		$	2,588
Shares issued to settle debts		45,241,388			4,749
Share repurchased		(155,000	)		(17	)
Balance at December 31, 2020		363,030,378		$	7,320

Preferred shares are non-redeemable and non-transferrable with discretionary dividends and hence are classified as equity. Preferred shares shall be issued at a price of $0.30 per share and will not have voting rights. As at December 31, 2020, there were no preferred shares issued by the Company (2019 - $Nil).

Shares issued in reverse acquisition

On July 24, 2019, Hunt concluded an agreement with PGP on the terms of a recommended share for share exchange offer to be made by Hunt for all the issued shares of common stock of PGP in exchange for the common shares of Hunt Mining on the basis of 10.76 Hunt Shares for each PGP Share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80% in Hunt in exchange for all of the issued and outstanding shares of PGP (note 25).

Normal Course Issuer Bid

On February 19, 2020, the Company announced that it has received approval from the TSX Venture Exchange (“TSXV”) of its Notice of Intention to Make a Normal Course Issuer Bid (the “NCIB”). Under the NCIB, the Company may purchase for cancellation up to 15,897,199 common shares (the “Shares”) (representing approximately 5% of its 317,943,990 issued and outstanding common shares as of February 17, 2020) over a twelve (12) month period commencing on February 21, 2020. The NCIB will expire no later than February 20, 2021. Subsequent to December 31, 2020, the NICB expired and was not renewed.

During the year ended December 31, 2020, the Company repurchased 155,000 common shares under the NCIB for $17.

Shares issued to settle debts

On October 30, 2020, the Company issued 44,040,277 common shares to an entity controlled by a director at a deemed price of approximately $0.227 (CAD $0.30) per share to settle an aggregate face value of $10,000 outstanding debt owed by the Company to the director and entities controlled by the director. The converted face value of the debt consisted of $4,822 of long-term debt with related parties and $5,178 of accounts payable with related parties. Following the debt conversion, the face value of the balance of $1,458 in accounts payable owed to the director and entities controlled by the director in respect of interest, wages, rent and administration expenses was settled in full through a cash payment of $720.

Prior to the debt settlement, the fair value of the outstanding debts in the Company’s consolidated financial statements was $10,147 which consisted of $4,233 of long-term debt with related parties and $5,914 of accounts payable with related parties.

The value of the common shares issued was determined to be $4,630 using a fair market value of approximately $0.105 (CAD $0.14) per common share based on the closing price of the Company’s shares on the date of issuance. The resulting $5,517 gain on settlement of debt was recorded under contributed surplus on the consolidated statements of changes in equity.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

On November 24, 2020, the Company issued 1,201,111 common shares to certain directors settle an aggregate of $128 outstanding directors fees. The value of the common shares issued was determined to be $119 using a fair market value of approximately $0.10 (CAD $0.14) per common share based on the closing price of the Company’s shares on the date of issuance. The resulting $9 gain on settlement of director fees was recorded under contributed surplus on the consolidated statements of changes in equity.

Stock options

Under the Company’s share option plan, and in accordance with TSX Venture Exchange requirements, the number of common shares reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 5 years and vest at the discretion of the Board of Directors. In connection with the foregoing, the number of common shares reserved for issuance to: (a) any individual director or officer will not exceed 5% of the issued and outstanding common shares; and (b) all consultants will not exceed 2% of the issued and outstanding common shares.

All equity-settled share-based payments are ultimately recognized as an expense in the consolidated statements of loss and comprehensive loss with a corresponding credit to “Contributed Surplus”. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different to that estimated on vesting.

	Year ended December 31, 2020			Year ended December 31, 2019
	Number of options	Weighted Average Price (CAD)		Number of options		Weighted Average Price (CAD)
Balance, beginning of year	7,650,000	$	0.065	1,706,830		$	13.896
Granted	9,600,000		0.160	7,650,000			0.065
Cancelled	-		-	(1,706,830	)		(13.896	)
Balance, end of year	17,250,000	$	0.118	7,650,000		$	0.065

All outstanding options prior to the RTO were cancelled 40 days after the RTO.

As at December 31, 2020, the following stock options were outstanding:

Exercise price (CAD)	Options vested	Options unvested	Total outstanding	Remaining contractual life (years)	Expiry date
$0.065	7,650,000	-	7,650,000	3.73	September 25, 2024
$0.160	-	9,600,000	9,600,000	4.62	August 13, 2025
	7,650,000	9,600,000	17,250,000	4.23

On September 25, 2019, the Company granted 7,650,000 options to directors, officers, and employees with an exercise price of CAD $0.065 and an expiry date of September 25, 2024. The stock options vest one year after the date of grant. The fair value of the options on grant date was estimated to be $456. The fair value of the options was calculated using the Black-Scholes option pricing model and using the following assumptions:

Discount rate	1.46%
Expected volatility	253.14%
Expected life (years)	5
Expected dividend yield	0%
Forfeiture rate	0%
Stock price	CAD$ 0.06

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

On August 14, 2020, the Company granted 9,600,000 options to directors, officers, and employees with an exercise price of CAD $0.16 and an expiry date of August 14, 2025. The options vest in three equal trances on the first, second and third anniversary of the grant date. The fair value of the options on grant date was estimated to be $1,440. The fair value of the options was calculated using the Black-Scholes option pricing model and using the following assumptions:

Discount rate	0.35%
Expected volatility	172.95%
Expected life (years)	5
Expected dividend yield	0%
Forfeiture rate	0%
Stock price	CAD$ 0.15

During the year ended December 31, 2020, the Company recognized a share-based payments expense of $382 (2019 - $127) (2018 - $190).

20. Related party transactions

Key management personnel include the members of the Board of Directors and executive officers of the Company. Related party transactions and balances not disclosed elsewhere in the consolidated financial statements are as follows:

Name and Principal Position		Remuneration, fees or interest expense	Loans or Advances	Remuneration, fees, or interest payments	Loan payments	Included in Accounts Payable	Included in Loan Payable and Long-term debt
		Year ended December 31,				As at December 31, 2020 and 2019
		$’000	$’000	$’000	$’000	$’000	$’000
A company controlled by a director¹ - admin, office, and interest expenses	2020	262	-	-	6,636	-	-
	2019	-	-	-	-	6,374	-
	2018	-	-	-	-
A company controlled by a director - admin, office, and interest expenses	2020	703	6,053	212	-	126	14,808
	2019	346	7,908	33	-	227	8,163
	2018	66	-	-	-
Directors - salaries and wages	2020	394	-	492	-	18	-
	2019	337	-	317	-	116	-
	2018	293	-	-	-
Director¹ -loans	2020	-	532	962	3,270	-	-
	2019	-	347	-	-	-	3,545
	2018	-	-	-	-
¹ Balances owed to related parties were acquired as part of the reverse acquisition (note 25)

As at December 31, 2020, the Company has $144 in accounts payable owing to related parties which relate primarily to directors fees and office rent. As at December 31, 2019, the Company had $6,717 in accounts payable owing to related parties which related primarily to funds advanced from companies controlled by directors in order to cover exploration costs.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Management Compensation

The remuneration of Directors and Officers of the Company was as follows:

	Year ended December 31,
		2020		2019		2018
Salaries and benefits	$	820	$	375	$	365
Director’s fees		71		30		48
Share-based compensation		230		51		190
Other compensation, including short-term benefits		-		-		173
	$	1,121	$	456	$	776

21. Administrative expenses

	Year ended December 31,
		2020		2019		2018
		$’000		$’000		$’000
General and administrative	$	2,353	$	4,175	$	3,489
Argentina statutory taxes		654		641		581
Professional fees		986		1,566		863
Operating leases		132		130		89
Directors’ remuneration		244		259		257
Loss (gain) on sale of property, plant and equipment		194		(76)		(46)
Depreciation of property, plant and equipment		2,961		3,028		7,346
Depreciation allocated to inventory		(2,605)		(2,501)		(7,087)
Depreciation of mineral properties		477		3,456		3,069
Amortization of mining rights		100		100		100
Impairment of assets		-		-		2,260
Consulting fees		115		18		26
Transaction taxes expense (income)		-		248		4
Total	$	5,611	$	11,044	$	10,951

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

22. Financial instruments

The Company’s financial instruments consist of cash, receivables, other financial assets, bank indebtedness, accounts payable and accrued liabilities, loan payable, interest payable, and long-term debt.

The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

•	Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•	Level 2: inputs, other than quoted prices, that are observable, either directly or indirectly. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the marketplace.

•	Level 3: inputs are less observable, unavoidable or where the observable data does not support the majority of the instruments’ fair value.

Fair value

As atDecember 31, 2020, there were no changes in the levels in comparison to December 31, 2019. The fair values of financial instruments are summarized as follows:

	December 31, 2020				December 31, 2019
	Carrying amount		Fair value		Carrying amount		Fair value
		$‘000		$‘000		$‘000		$‘000
Financial assets

Amortized cost
Cash		819		819		685		685
Receivables and other receivable ¹		3,646		3,646		3,224		3,224

Fair value through other comprehensive income
Other financial assets (Level 1)		16		16		334		334

Financial liabilities

Amortized cost
Bank indebtedness		9,636		9,636		14,989		14,989
Accounts payable and accrued liabilities		4,528		4,528		12,709		12,709
Loan payable and current portion of long-term debt		363		363		334		334
Long-term debt		14,917		14,917		13,026		12,020

¹ Amounts exclude value added tax (“VAT”) recoverable of $1,939 and $2,106 as at December 31, 2020 and December 31, 2019.

Other financial assets are measured based on Level 1 inputs of the fair value hierarchy on a recurring basis.

The carrying value of receivables, other receivable, accounts payable and accrued liabilities and bank indebtedness approximate their fair value because of the short-term nature of these instruments. The Company assessed that there were no indicators of impairment for the financial assets.

The fair values of certain long-term debt in 2019 are lower than carrying value due to certain debts with related parties that were assumed as part of the reverse acquisition during 2019 and measured initially at fair value using a market interest rate, which was lower than the interest rate on the assumed debt. Subsequent to initial recognition, these debts were measured using the effective interest rate method. These debts were settled in full during the year ended December 31, 2020.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high quality financial institutions and limits the amount of credit exposure with any one institution. Receivables consist of trade receivables and VAT recoverable and are not considered subject to significant risk, because the amounts are due from a government and a customer who is considered credit worthy.

Market Risk

Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects interest rate risk and currency risk.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company is exposed to interest rate risk with regards to its bank indebtedness which is comprised of lines of credits at variable interest rates. To the extent that changes in the prevailing market interest rates differ from the interest rates on the Company’s monetary liabilities, the Company is exposed to interest rate price risk.

Currency Risk

As at December 31, 2020, the Company had financial assets and liabilities denominated in the following foreign currencies:

		CAD			AR$			Euro
Cash	$	13		$	641		$	3
Other working capital (deficit) items - net		(190	)		(2,574	)		(340	)
Non-current financial assets		-			638			-
Non-current financial liabilities		-			-			(109	)

Credit Risk

Credit risk arises from the potential that counterparties will fail to satisfy their obligations as they come due. Credit risk is managed by dealing with parties that the Company believes to be creditworthy and by actively monitoring credit exposure and the financial health of the parties. The majority of accounts receivable relate to the sale of gold and silver.

The Company currently maintains a substantial portion of its day-to-day operating cash balances at financial institutions. As at December 31, 2020, the Company had total cash balances of $819 (2019 - $685) at financial institutions, where $Nil (2019 - $Nil) is in excess of federally insured limits.

Liquidity Risk

Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations when they become due. The Company's management is responsible for reviewing liquidity resources to ensure funds are readily available to meet its financial obligations as they come due, as well as ensuring adequate funds exist to support business strategies and operations growth. As at December 31, 2020, the Company had current assets of $6,419 (2019 - $5,407) to settle current liabilities of $14,527 (2019 - $28,032).

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The contractual obligations of the Company's liabilities are as follows:

As of December 31, 2020	Payments Due by Period
	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Bank indebtedness	$9,636	$9,636	-	-	-
Accounts payable and accrued liabilities	4,384	4,384	-	-	-
Accounts payable with related parties	144	144	-	-	-
Loan payable and current portion of long-term debt	363	363	-	-	-
Long-term debt	109	-	109	-	-
Long-term debt with related parties	14,808	-	14,808	-	-
Reclamation and remediation obligations	5,139	-	-	-	5,139
Other long-term payables	57	-	57	-	-
Total	$34,640	$14,527	$14,974	-	$5,139

Concentration risk

The Company has concentrations of credit risk with respect to its trade receivables, the majority of which are concentrated internationally amongst a small number of customers. As at December 31, 2020 and 2019, the Company had two (2) customers that make up the entire balance of the trade receivables. The Company controls credit risk through monitoring procedures, and by performing credit evaluations of its customers, but generally does not require collateral to secure accounts receivable.

23. Other income

As part of the Company´s treasury management, the Company trades certain securities denominated in US dollar and Argentine Peso. The gain on disposition of these securities is recorded as other income on the consolidated statements of loss and comprehensive loss. During the year ended December 31, 2020, the Company recognized a gain of $2,155 (2019 - $Nil).

During the year ended December 31, 2018, the Company sold the COSE Project 1.5% Net Smelter Royalty for total consideration of $1,500.

24. Segment reporting

All of the Company’s operations are in the mineral properties exploration industry with its principal business activity in mineral exploration. The Company conducts its activities primarily in Argentina. All of the Company’s long-lived assets are located in Argentina.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The Company’s net income/(loss) and its geographic allocation of total assets and total liabilities may be summarized as follows:

For the year ended December 31, 2020
	Argentina
		Lomada Project			Cap- Oeste Project			Calcatreu Project			Martha and La Josefina Projects			Argentina Uruguay and Chile			UK			North America			Total
Revenue	$	6,482		$	12,417		$	-		$	950		$	-		$	-		$	-		$	19,849
Cost of sales		(4,391	)		(6,589	)		-			(2,267	)		-			-			-			(13,247	)
Gross profit (loss)	$	2,091		$	5,828		$	-		$	(1,317	)	$	-		$	-		$	-		$	6,602

Operating expense
Exploration expense	$	-		$	-		$	(884	)	$	(83	)	$	(1,336	)	$	-		$	-		$	(2,303	)
Administrative expenses		-			(495	)		(217	)		-			(2,946	)		(212	)		(1,285	)		(5,155	)
Depreciation expense		-			-			(18	)		-			(338	)		(100	)		-			(456	)
Share-based payments		-			-			-			-			-			-			(382	)		(382	)
Interest expense		-			-			(1	)		-			(318	)		(610	)		(1,171	)		(2,100	)
Total operating expense	$	-		$	(495	)	$	(1,120	)	$	(83	)	$	(4,938	)	$	(922	)	$	(2,838	)	$	(10,396	)

Other income/(expense)
Interest income	$	-		$	-		$	1		$	-		$	124		$	-		$	-		$	125
Gain/(loss) on foreign exchange		-			-			713			-			(1,159	)		(369	)		30			(785	)
Accretion expense		(6	)		(3	)		-			(4	)		-			-			-			(13	)
Other expenses		-			-			(297	)		-			2,452			-			-			2,155
Total other income/(expense)	$	(6	)	$	(3	)	$	417		$	(4	)	$	1,417		$	(369	)	$	30		$	1,482

Income/(loss) – before income tax	$	2,085		$	5,330		$	(703	)	$	(1,404	)	$	(3,521	)	$	(1,291	)	$	(2,808	)	$	(2,312	)
Income tax/(benefit)		-			-			138			-			(2,207	)		-			-			(2,069	)
Net income/(loss)	$	2,085		$	5,330		$	(565	)	$	(1,404	)	$	(5,728	)	$	(1,291	)	$	(2,808	)	$	(4,381	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)


For the year ended December 31, 2019
	Argentina
		Lomada Project			Cap- Oeste Project			Calcatreu Project			Martha and La Josefina Projects			Argentina Uruguay and Chile			UK			North America			Total
Revenue	$	4,750		$	14,903		$	-		$	2,285		$	-		$	-		$	-		$	21,938
Cost of sales		(3,765	)		(11,828	)		-			(1,545	)		-			-			-			(17,138	)
Gross profit (loss)	$	985		$	3,075		$	-		$	740		$	-		$	-		$	-		$	4,800

Operating expense
Exploration expense	$	-		$	-		$	(1,300	)	$	(321	)	$	(987	)	$	-		$	-		$	(2,608	)
Administrative expenses		(2,860	)		(596	)		(279	)		(871	)		(4,232	)		(1,433	)		(307	)		(10,578	)
Depreciation expense		-			-			(17	)		(115	)		(234	)		(100	)		-			(466	)
Impairment of mineral properties		-			-			-			-			-			(1,996	)		-			(1,996	)
Share-based payments		-			-			-			-			-			(40	)		(87	)		(127	)
Interest expense		-			-			-			-			(765	)		(782	)		(584	)		(2,131	)
Total operating expense	$	(2,860	)	$	(596	)	$	(1,596	)	$	(1,307	)	$	(6,218	)	$	(4,351	)	$	(978	)	$	(17,906	)

Other income/(expense)
Interest income	$	-		$	-		$	34		$	-		$	157		$	-		$	-		$	191
Gain/(loss) on foreign exchange		-			-			(10	)		1,714			(1,082	)		(467	)		326			481
Accretion expense		(7	)		(12	)		-			(16	)		-			-			-			(35	)
Total other income/(expense)	$	(7	)	$	(12	)	$	24		$	1,698		$	(925	)	$	(467	)	$	326		$	637

Income/(loss) – before income tax	$	(1,882	)	$	2,467		$	(1,572	)	$	1,131		$	(7,143	)	$	(4,818	)	$	(652	)	$	(12,469	)
Income tax/(benefit)		-			-			(869	)		(2,030	)		3,014			-			-			115
Net income/(loss)	$	(1,882	)	$	2,467		$	(2,441	)	$	(899	)	$	(4,129	)	$	(4,818	)	$	(652	)	$	(12,354	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)


For the year ended December 31, 2018
	Argentina
		Lomada Project			Cap- Oeste Project			COSE Project		Argentina Uruguay and Chile			UK			Total
Revenue	$	-		$	48,089		$	-	$	-		$	-		$	48,089
Cost of sales		(1,666	)		(42,996	)		-		-			-			(44,662	)
Gross profit (loss)	$	(1,666	)	$	5,093		$	-	$	-		$	-		$	3,427

Operating expense
Exploration expense	$	-		$	-		$	-	$	(2,744	)	$	-		$	(2,744	)
Administrative expenses		(681	)		(2,388	)		-		(6,890	)		(992	)		(10,951	)
Share-based payments		-			-			-		-			(190	)		(190	)
Interest expense		-			-			-		(977	)		(390	)		(1,367	)
Total operating expense	$	(681	)	$	(2,388	)	$	-	$	(10,611	)	$	(1,572	)	$	(15,252	)

Other income/(expense)
Interest income	$	-		$	-		$	-	$	122		$	-		$	122
Gain/(loss) on foreign exchange		-			-			-		(13,817	)		(587	)		(14,404	)
Gain on hyperinflationary net monetary position		-			-			-		4,448			-			4,448
Other income		-			-			1,500		-			-			1,500
Total other income/(expense)	$	-		$	-		$	1,500	$	(9,247	)	$	(587	)	$	(8,334	)

Income/(loss) – before income tax	$	(2,347	)	$	2,705		$	1,500	$	(19,858	)	$	(2,159	)	$	(20,159	)
Income tax/(benefit)		-			-			-		2,569						2,569
Net income/(loss)	$	(2,347	)	$	2,705		$	1,500	$	(17,289	)	$	(2,159	)	$	(17,590	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

		Total Assets			Total liabilities
		December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
		$’000		$’000		$’000		$’000
Argentina – Cap Oeste	$	14,585	$	16,081	$	1,880	$	2,629
Argentina – Lomada		4,616		4,267		3,808		1,979
Argentina – Calcatreu		15,343		18,036		490		1,591
Argentina – Martha & La Josefina		12,704		14,220		2,298		8,466
Argentina and Chile		8,553		7,308		5,355		5,977
United Kingdom		122		176		15,678		20,240
North America		4,145		4,406		9,154		9,824
Total	$	60,068	$	64,494	$	38,663	$	50,706

25. Reverse acquisition

On July 24, 2019, Hunt completed a reverse acquisition with PGP on the terms that Hunt would acquire all issued shares of common stock of PGP in exchange for common shares of Hunt on the basis of 10.76 Hunt shares for each PGP share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80%.

The purpose of the reverse acquisition was to form an enlarged, junior precious metals explorer and producer focused on the Santa Cruz region of Argentina. In particular, Patagonia Gold’s Cap-Oeste underground resource will gain access to Hunt’s Mina Martha processing plant, which is able to treat such mineralization which is expected to lead to more stable cash flow generation from any planned future development of the Cap-Oeste underground mine, which could be utilized to reduce the combined group’s debt obligations and invest in its exploration and development stage projects, thereby ultimately lowering the risk profile of the combined group.

As a result of the reverse acquisition, former shareholders of PGP acquired control of Hunt, and the substance of the transaction was a reverse acquisition, where the transaction constitutes a business combination for accounting purposes and is accounted for using the acquisition method under IFRS 3. PGP is deemed to be the acquiring company and its assets and liabilities, equity and historical operating results are included at their historical carrying values, and the net assets of Hunt are recorded at the fair value as at the date of the transaction. Transaction costs in the amount of $1,511 were incurred in connection with the reverse acquisition and were expensed as incurred.

The fair value of the equity consideration paid as part of the transaction as well as the fair value of identifiable assets and liabilities acquired are presented below. The Company was unable to obtain the necessary information to recognize and measure all the items exchanged in a business combination. In accordance with IFRS 3, the acquirer is allowed a measurement period of up to one year from the acquisition date to complete the purchase price allocation. As at December 31, 2019, the Company was in the process of gathering the facts and circumstances to complete the assessment of the fair value of Hunt’s property, plant and equipment and mineral properties. On September 1, 2020, the Company had completed the assessment of the fair value of these items and the consolidated financial statements have been updated with the final purchase price allocation.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The following table summarizes the preliminary and final purchase price allocation.

	Preliminary			Adjustment			Final
		$ (’000)			$ (’000)		$ (’000)
Fair value of the Company’s shares (1)	$	2,287		$	-		$	2,287

Less net identifiable assets (liabilities) of the Company
Cash		60			-			60
Accounts receivable		1,183			-			1,183
Prepaid expenses		14			-			14
Inventory		906			7			913
Mineral properties		7,865			391			8,256
Property, plant and equipment		2,210			2,357			4,567
Goodwill		5,715			(1,706	)		4,009
Performance bond		351			-			351
Accounts payable and accrued liabilities		(8,725	)		-			(8,725	)
Bank indebtedness		(400	)		-			(400	)
Loan payable and current portion of long-term debt		(581	)		-			(581	)
Long-term debt		(2,062	)		-			(2,062	)
Accrued interest on debt		(550	)		-			(550	)
Reclamation and remediation obligations		(2,075	)		-			(2,075	)
Deferred tax liabilities		(1,624	)		(1,049	)		(2,673	)
	$	2,287		$	-		$	2,287

(1)	The fair value of 5,908,687 common shares issued to pre-reverse acquisition Hunt shareholders is $2,287 based on the fair value of $0.387 per common share (converted from GBP 0.310 closing stock price of Patagonia Gold Limited prior to the transaction on July 24, 2019).

26. Commitments and contingencies

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

27. Income Taxes

(a) Income tax expense (benefit)

	December 31, 2020				December 31, 2019		December 31, 2018
Current tax expense (benefit)
Current period	$	-		$	47		$	803

Deferred tax expense (benefit)
Current period		2,096			(350	)		(3,372	)
Prior period tax adjustments		(27	)		188			-
Total income tax expense (benefit)	$	2,069		$	(115	)	$	(2,569	)

The actual income tax provision differs from the expected amount calculated by applying the Canadian parent corporate tax rate to income before tax. These differences result from the following:

	December 31, 2020				December 31, 2019		December 31, 2018
Loss before tax	$	(2,312	)	$	(12,469	)	$	(20,159	)
Statutory income tax rate		25%			25%			19%
Expected income tax (benefit)	$	(578	)	$	(3,117	)	$	(3,830	)
Increase (decrease) resulting from:
Non-taxable items		2,005			118			1,281
Change in unrecognized deferred tax assets		534			1,335			4,365
Tax rate changes, tax rate differences		135			1,361			(1,012	)
Prior period tax adjustments		(27	)		188			(3,373	)
Total income tax expense (benefit)	$	2,069		$	(115	)	$	(2,569	)

(b) Components of deferred tax assets and liabilities

	December 31, 2020				December 31, 2019
Deferred tax assets are attributable to the following:

Property, plant and equipment	$	869		$	786
Loss carryforwards		793			2,385
Other		2,898			1,428
Deferred tax assets		4,560			4,599
Set-off of tax		(4,560	)		(1,758	)
Net deferred tax asset	$	-		$	2,841

	December 31, 2020				December 31, 2019
Deferred tax liabilities are attributable to the following:

Property, plant and equipment	$	(5,552	)	$	(4,263	)
Mineral properties		(1,741	)		(1,741	)
Long-term debt		(322	)		(322	)
Other		(968	)		(227	)
Deferred tax liabilities		(8,583	)		(6,553	)
Set-off of tax		4,560			1,758
Net deferred tax liability	$	(4,023	)	$	(4,795	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

		Balance December 31, 2019			Recognized in net income (loss)			Acquired in a business combination		Balance December 31, 2020

Property, plant and equipment	$	786		$	83		$	-	$	869
Loss carryforwards		2,385			(1,592	)		-		793
Other		1,428			1,470			-		2,898
Property, plant and equipment		(4,263	)		(1,289	)		-		(5,552	)
Mineral properties		(1,741	)		-			-		(1,741	)
Long-term debt		(322	)		-			-		(322	)
Other		(227	)		(741	)		-		(968	)
	$	(1,954	)	$	(2,069	)	$	-	$	(4,023	)

		Balance December 31, 2018			Recognized in net income (loss)			Acquired in a business combination			Balance December 31, 2019

Property, plant and equipment	$	580		$	206		$	-		$	786
Loss carryforwards		720			1,665			-			2,385
Other		333			1,095			-			1,428
Property, plant and equipment		-			(3,870	)		(393	)		(4,263	)
Mineral properties		-			-			(1,741	)		(1,741	)
Long-term debt		-			-			(322	)		(322	)
Other		(1,075	)		1,065			(217	)		(227	)
	$	558		$	161		$	(2,673	)	$	(1,954	)

(d) Loss carryforwards

The Company and its subsidiaries have tax loss carryforwards within the jurisdictions in which they operate. These loss carryforwards expire between 2023 and 2040. Deferred tax assets have not been recognized in respect of the following items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits.

Deferred tax assets have not been recognized in respect of the following items:

	December 31, 2020		December 31, 2019

Deductible temporary differences		103,894		102,519
Tax losses		24,204		19,779
		128,098		122,298

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

28. COVID-19

Following this statement, on March 19 2020, the Argentine Government ordered the “Social, Preventive and Compulsory Isolation” (A.S.P.O. for its acronym in Spanish), by Necessity and Urgency Decree No. 297/2020, imposing the borders’ closure and stringent restrictions on domestic circulation of individuals. Such measures comprised several exceptions, including activities that were considered “essential” and, therefore, were excluded from such restrictions. Successive Necessity and Urgency Decrees extended the term of the mentioned measures until November 8, 2020. As of November 9, 2020, by Necessity and Urgency Decree No. 875/2020 and its amendments, it was established the Preventive and Compulsory Social Distancing (Di.S.P.O. for its acronym in Spanish) that is in full force and effect through February 28, 2021 and can be extended for as long as it may be considered necessary in view of the epidemiological situation.

Subsequently, on December 30, 2020, the Ministry of Health’s Resolution No. 2883/2020, approving the “Strategic COVID-19 Vaccination Plan” in the Republic of Argentina, was issued. It aimed to reduce morbidity, mortality, and socio-economic impacts of the pandemic, based on the stepped and progressive vaccination of certain population groups. As of the date of approval of these consolidated financial statements, the said plan is in its initial implementation phase.

Because of the various measures adopted by the Argentine government, and within the scenario of the economic activity’s generalised recession, the Company has implemented a protocol establishing the working conditions to operate in strict compliance with the public health standards issued by national and provincial authorities, in order to minimize the risk of contagion of co-workers, clients and providers, and to enable the business continuity. It is worth emphasising that, as of the date of approval of these consolidated financial statements, the COVID-19 pandemic continues to be a prevalent situation, the duration of which is uncertain, and the measures taken by the different authorities (national, provincial, and pertaining to town) in response thereto are constantly evolving.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

29. Restatement from US GAAP to IFRS

The December 31, 2019 US GAAP consolidated statement of financial position has been reconciled to IFRS as follows:

	As reported US GAAP			Adjustment for final PPA (e)			Adjusted US GAAP			Adjustment reference												As restated IFRS
	As reported US GAAP			Adjustment for final PPA (e)			Adjusted US GAAP			$’000												As restated IFRS
	$’000			$’000			$’000			(a)			(b)			(c)			(d)			$ (’000)

Current assets
Cash	$	685		$	-		$	685		$	-		$	-		$	-		$	-		$	685
Receivables		1,516			-			1,516			-			-			-			-			1,516
Inventories		3,347			-			3,347			(141	)		-			-			-			3,206
Total current assets		5,548			-			5,548			(141	)		-			-						5,407


Non-current assets
Mineral properties		8,610			391			9,001			-			6,456			-			-			15,457
Mining rights		16,997			-			16,997			-			-			-			-			16,997
Property, plant and equipment		10,508			2,196			12,704			2,931			-			-			-			15,635
Goodwill		4,379			(1,706	)		2,673			-			-			1,336			-			4,009
Other financial assets		334			-			334			-			-			-			-			334
Deferred tax assets		4,599			-			4,599			(1,758	)		-			-			-			2,841
Other receivables		3,814			-			3,814			-			-			-			-			3,814
Total non-current assets		49,241			881			50,122			1,173			6,456			1,336			-			59,087
Total assets	$	54,789		$	881		$	55,670		$	1,032		$	6,456		$	1,336		$	-		$	64,494


Current liabilities
Bank indebtedness	$	14,989		$	-		$	14,989		$	-		$	-		$	-		$	-		$	14,989
Accounts payable and accrued liabilities		5,992			-			5,992			-			-			-			-			5,992
Accounts payable with related parties		6,717			-			6,717			-			-			-			-			6,717
Loan payable and current portion long-term debt		334			-			334			-			-			-			-			334
Total current liabilities		28,032			-			28,032			-			-			-			-			28,032


Non-current liabilities
Long-term debt		312			-			312			-			-			-			-			312
Long-term debt with related parties		11,708			-			11,708			-			-			-			-			11,708
Asset retirement obligation		2,812			-			2,812			-			-						(2,812	)		-
Reclamation and remediation obligations		-						-									2,991			2,812			5,803
Deferred tax liabilities		2,693			1,050			3,743			1,052			-			-			-			4,795
Other long-term payables		56			-			56			-			-			-			-			56
Total non-current liabilities		17,581			1,050			18,631			1,052			-			2,991			-			22,674
Total liabilities		45,613			1,050			46,663			1,052			-			2,991			-			50,706


Shareholders’ equity
Capital stock		2,588			-			2,588			-			-			-			-			2,588
Additional paid in capital		181,676			-			181,676			-			-			-			(181,676	)		-
Contributed surplus		-			-			-			-			-			-			180,269			180,269
Accumulated deficit		(174,270	)		(169	)		(174,439	)		10			6,687			(1,655	)		(16,738	)		(186,135	)
Accumulated other comprehensive income (loss)		(575	)		-			(575	)		-			-			-			18,961			18,386
Total shareholders' equity attributable to the parent:		9,419			(169	)		9,250			10			6,687			(1,655	)		816			15,108
Non-controlling interest		(243	)		-			(243	)		(30	)		(231	)		-			(816	)		(1,320	)
Total shareholders' equity		9,176			(169	)		9,007			(20	)		6,456			(1,655	)		-			13,788
Total liabilities and shareholders’ equity	$	54,789		$	881		$	55,670		$	1,032		$	6,456		$	1,336		$	-		$	64,494

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The US GAAP consolidated statement of comprehensive loss for the year ended December 31, 2018 has been reconciled to IFRS as follows:

	As reported US GAAP			Adjustment reference													As restated IFRS
	As reported US GAAP			$’000													As restated IFRS
	$’000			(a)			(b)			(c)			(d)				$’000

Revenue	$	47,441		$	648		$	-		$	-		$	-		$	48,089
Cost of sales		(36,361	)		(8,301	)		-			-			-			(44,662	)
Gross profit		11,080			(7,653	)		-			-			-			3,427

Operating income (expenses):
Other operating income		1,505			-			-			-			(1,505	)		-
Exploration expenses		(1,802	)		3			(367	)		(578	)		-			(2,744	)
Administrative expenses		(6,017	)		(3,100	)		(1,834	)		-			-			(10,951	)
Share-based payments expense		(190	)		-			-			-			-			(190	)
Interest expense		(1,665	)		298			-			-			-			(1,367	)
Total operating expense:		(8,169	)		(2,799	)		(2,201	)		(578	)		(1,505	)		(15,252	)

Other income/(expenses)
Interest income		142			(20	)		-			-			-			122
Loss on foreign exchange		(12,761	)		(1,643	)		-			-			-			(14,404	)
Accretion expense		(578	)		-			-			578			-			-
Gain on hyperinflationary net monetary position		-			4,448			-			-			-			4,448
Other income		-			(5	)		-			-			1,505			1,500
Total other income/(expenses)		(13,197	)		2,780			-			578			1,505			(8,334	)
Loss – before income taxes		(10,286	)		(7,672	)		(2,201	)		-			-			(20,159	)

Income tax benefit		2,440			129			-			-			-			2,569
Net loss	$	(7,846	)	$	(7,543	)	$	(2,201	)	$	-		$	-		$	(17,590	)

Attributable to non-controlling interest		(528	)		(538	)		(220	)		(58	)		-			(1,344	)
Attributable to equity share owners of the parent		(7,318	)		(7,005	)		(1,981	)		58			-			(16,246	)
		(7,846	)		(7,543	)		(2,201	)		-			-			(17,590	)
Other comprehensive income (loss) net of tax
Change in fair value of investment		(13	)		-			-			-			-			(13	)
Foreign currency translation adjustment		(2,824	)		9,836			-			-			-			7,012
Total other comprehensive income (loss)		(2,837	)		9,836			-			-			-			6,999
Total comprehensive income (loss)	$	(10,683	)	$	2,293		$	(2,201	)	$	-		$	-		$	(10,591	)

Weighted average shares outstanding – basic and diluted		254,387,482															254,387,482

Net loss per share – basic and diluted	$	(0.031	)	$	(0.030	)	$	(0.008	)	$	-		$	-		$	(0.069	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The US GAAP consolidated statement of comprehensive loss for the year ended December 31, 2019 has been reconciled to IFRS as follows:

	As reported US GAAP			Adjustment for final PPA (e)			Adjusted US GAAP			Adjustment reference								As restated IFRS
	As reported US GAAP			Adjustment for final PPA (e)			Adjusted US GAAP			$’000								As restated IFRS
	$’000			$’000			$’000				(a)			(b)		(c)			$’000

Revenue	$	21,938		$	-		$	21,938		$	-		$	-		$	-	$	21,938
Cost of sales		(16,430	)		7			(16,423	)		(715	)		-			-		(17,138	)
Gross profit		5,508			7			5,515			(715	)		-			-		4,800

Operating income (expenses):
Exploration expenses		(3,758	)		-			(3,758	)		-			1,150			-		(2,608	)
Administrative expenses		(7,262	)		(169	)		(7,431	)		(157	)		(3,456	)		-		(11,044	)
Impairment of mineral properties		(1,996	)		-			(1,996	)		-			-			-		(1,996	)
Share-based payments expense		(127	)		-			(127	)		-			-			-		(127	)
Interest expense		(2,131	)		-			(2,131	)		-			-			-		(2,131	)
Total operating expense:		(15,274	)		(169	)		(15,443	)		(157	)		(2,306	)		-		(17,906	)

Other income/(expenses)
Interest income		191			-			191			-			-			-		191
Gain/(loss) on foreign exchange		377			-			377			104			-			-		481
Accretion expense		(179	)		-			(179	)		-			-			144		(35	)
Total other income/(expenses)		389			-			389			104			-			144		637
Income (loss) – before income taxes		(9,377	)		(162	)		(9,539	)		(768	)		(2,306	)		144		(12,469	)

Income tax benefit (expense)		(298	)		-			(298	)		413			-			-		115
Net income (loss)	$	(9,675	)	$	(162	)	$	(9,837	)	$	(355	)	$	(2,306	)	$	144	$	(12,354	)

Attributable to non-controlling interest		(122	)		-			(122	)		(30	)		(231	)		-		(383	)
Attributable to equity share owners of the parent		(9,553	)		(162	)		(9,715	)		(325	)		(2,075	)		144		(11,971	)
		(9,675	)		(162	)		(9,837	)		(355	)		(2,306	)		144		(12,354	)
Other comprehensive income (loss) net of tax
Change in fair value of investment		(28	)		-			(28	)					-			-		(28	)
Foreign currency translation adjustment		(28	)		-			(28	)		402			-			-		374
Total other comprehensive income (loss)		(56	)		-			(56	)		402			-			-		346
Total comprehensive income (loss)	$	(9,731	)	$	(162	)	$	(9,893	)	$	47		$	(2,306	)	$	144	$	(12,008	)

Weighted average shares outstanding – basic and diluted		282,306,312			-			282,306,312			-			-			-		282,306,312

Net income (loss) per share – basic and diluted	$	(0.034	)	$	-		$	(0.035	)	$	-		$	(0.009	)	$	-	$	(0.044	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The US GAAP components of shareholders' equity as at January 1, 2018 has been reconciled to IFRS as follows:

		As reported US GAAP			Adjustments			As Restated IFRS

Capital stock	$	31,868		$	18		$	31,886
Accumulated Deficit		(157,399	)		(604	)		(158,003	)
Contributed surplus		-			159,193			159,193
Accumulated other comprehensive income		2,318			(2,018	)		300
Additional paid in capital		149,982			(149,982	)		-
Total attributed to parent	$	26,769		$	6,607		$	33,376
Non-controlling interest		407			-			407
Total	$	27,176		$	6,607		$	33,783

The US GAAP components of shareholders' equity as at December 31, 2018 has been reconciled to IFRS as follows:

	As reported US GAAP			January 1, 2018 Opening balance adjustments as per table above																As restated IFRS
							Adjustment reference
								(a)			(b)			(c)			(d)

Capital stock	$	301		$	18		$	-		$	-		$	-		$	(18	)	$	301
Accumulated Deficit		(164,717	)		(604	)		(7,005	)		(1,981	)		58			85			(174,164	)
Contributed surplus		-			159,193			-			-			-			20,949			180,142
Accumulated other comprehensive income		(519	)		(2,018	)		9,836			-			-			10,741			18,040
Additional paid in capital		181,549			(149,982	)		-			-			-			(31,567	)		-
Total attributed to parent	$	16,614		$	6,607		$	2,831		$	(1,981	)	$	58		$	190		$	24,319
Non-controlling interest		(121	)		-			(538	)		(220	)		(58	)		-			(937	)
Total	$	16,493		$	6,607		$	2,293		$	(2,201	)	$	-		$	190		$	23,382

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The US GAAP consolidated statement of cash flows for the year ended December 31, 2018 has been reconciled to IFRS as follows:

	As reported US GAAP			Adjustment				As restated IFRS
Cash flow from operating activities
Net loss	$	(7,846	)	$	(9,744	)	$	(17,590	)
Items not affecting cash
Depreciation of property, plant and equipment		4,512			2,834			7,346
Depreciation of mineral properties		-			3,069			3,069
Amortization of mining rights		100			-			100
Net impairment of assets		690			1,570			2,260
Share based payment expense		190			-			190
Asset retirement obligation		(712	)		712			-
Write-down of inventory		8,881			6,266			15,147
Accretion expense		578			(578	)		-
Restatement for hyperinflation		-			(17,047	)		(17,047	)
Deferred tax expense/(benefit)		(2,440	)		(129	)		(2,569	)
		3,953			(13,047	)		(9,094	)
Net change in non-cash working capital items
(Increase)/decrease in receivables		3,841			(1	)		3,840
(Increase)/decrease in deferred tax assets		1,548			(1,110	)		438
(Increase)/decrease in inventory		6,932			(5,887	)		1,045
Increase/(decrease) in accounts payable and accrued liabilities		(4,094	)		4,472			378
Increase/(decrease) in other long-term payables		(82	)		82			-
Increase/(decrease) in provision		-			(216	)		(216	)
Increase/(decrease) in transaction taxes payable		(329	)		-			(329	)
		7,816			(2,660	)		5,156
Net cash provided by/(used in) operating activities		11,769			(15,707	)		(3,938	)

Cash flows from investing activities
Purchase of property, plant and equipment		(4,063	)		(247	)		(4,310	)
Purchase of mineral property		(698	)		(545	)		(1,243	)
Purchase of mining rights		(14,612	)		-			(14,612	)
Proceeds from disposal of property, plant and equipment		7,515			(15	)		7,500
Net cash used in investing activities		(11,858	)		(807	)		(12,665	)

Cash flow from financing activities
Bank indebtedness (repayment)		7,877			1			7,878
Proceeds from loans		6,278			23,660			29,938
Repayment of loans		(18,625	)		(19,843	)		(38,468	)
Net cash provided by/(used in) financing activities		(4,470	)		3,818			(652	)

Net increase/(decrease) in cash		(4,559	)		(12,696	)		(17,255	)
Effect of foreign exchange on cash		3,934			12,691			16,625
Cash, beginning of year		1,285			(1	)		1,284
Cash, end of the year	$	660		$	(6	)	$	654

Taxes paid		(329	)		-			(329	)
Interest paid		(634	)		(699	)		(1,333	)
Supplemental non-cash information
Change in value of investments		(13	)		-			(13	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The US GAAP consolidated statement of cash flows for the year ended December 31, 2019 has been reconciled to IFRS as follows:

	As reported US GAAP			Adjustment				As restated IFRS
Cash flow from operating activities
Net loss	$	(9,675	)	$	(2,679	)	$	(12,354	)
Items not affecting cash
Depreciation of property, plant and equipment		1,844			1,184			3,028
Depreciation of mineral properties		-			3,456			3,456
Amortization of mining rights		100			-			100
Net impairment of assets		1,996			(1,996	)		-
Share based payment expense		127			-			127
Asset retirement obligation		1,342			(1,342	)		-
Provisions		-			2,419			2,419
Impairment of mineral properties		-			1,996			1,996
Write-down of inventory		2,368			-			2,368
Accretion expense		179			(144	)		35
Deferred tax expense/(benefit)		298			(413	)		(115	)
		(1,421	)		2,481			1,060
Net change in non-cash working capital items
(Increase)/decrease in receivables		3,863			1			3,864
(Increase)/decrease in deferred tax assets		1,787			6			1,793
(Increase)/decrease in inventory		1,477			(231	)		1,246
(Increase)/decrease in other financial assets		32			(4	)		28
Increase/(decrease) in accounts payable and accrued liabilities		(3,116	)		(8	)		(3,124	)
Increase/(decrease) in accounts payable and accrued liabilities with related parties		301			-			301
Increase/(decrease) in interest payable		-			(9	)		(9	)
Increase/(decrease) in provision		-			(24	)		(24	)
Increase/(decrease) in other long-term payables		(23	)		23			-
Increase/(decrease) in transaction taxes payable		(126	)		-			(126	)
		4,195			(246	)		3,949
Net cash provided by/(used in) operating activities		2,774			2,235			5,009

Cash flows from investing activities
Purchase of property, plant and equipment		(777	)		-			(777	)
Purchase of mineral property		(216	)		(2,710	)		(2,926	)
Proceeds from disposal of property, plant and equipment		113			76			189
Net cash used in investing activities		(880	)		(2,634	)		(3,514	)

Cash flow from financing activities
Bank indebtedness (repayment)		2,608			-			2,608
Proceeds from loans with related parties		8,515			-			8,515
Repayment of loans		(10,530	)		-			(10,530	)
Net cash provided by/(used in) financing activities		593			-			593

Net increase/(decrease) in cash		2,487			(399	)		2,088
Effect of foreign exchange on cash		(2,462	)		405			(2,057	)
Cash, beginning of year		660			(6	)		654
Cash, end of the year	$	685		$	-		$	685

Taxes paid		(126	)		-			(126	)
Interest paid		(416	)		-			(416	)
Supplemental non-cash information
Change in value of investments		(28	)		-			(28	)

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

The following summarizes the significant changes to the Company’s accounting policies upon the transition from US GAAP to IFRS:

a)	Hyperinflationary economies

Under US GAAP, once the Argentine Peso had been designated to be a highly inflationary economy, the Company was required to change the functional currency for those subsidiaries to the Company’s reporting currency USD.

In accordance with IAS 29, Financial Reporting in Hyperinflationary Economies, the Company’s subsidiaries’ financial statements with Argentine Peso functional currency are restated by applying a general price index and translated at closing rates before they are included in the consolidated financial statements. The subsidiary financial statements in hyperinflationary economies have used the Consumer Price Index (IPC) published by the National Institute of Statistics and Census (INDEC) as from January 2017 (base month: December 2016) and the Wholesale Price Index (IPIM) published by the INDEC to date, by computing for the months of November and December 2015, on which no INDEC information is available on changes in the IPIM, the IPC variation in the City of Buenos Aires.

b)	Development and exploration costs

Under US GAAP, development and exploration costs are expensed until the mineralization is classified as proven and probable and determination of the technical feasibility and the commercial viability of the property.

Under IFRS 6, Exploration for and Evaluation of Mineral Resources, the Company shall determine an accounting policy specifying which expenditures are capitalized as mineral properties. The Company has determined that exploration and development costs previously expensed under US GAAP will be capitalized under IFRS for the Cap-Oeste, Lomada de Leiva, Mina Martha and La Josefina mineral properties.

c)	Reclamation and remediation obligations

Under US GAAP, the present value of reclamation and remediation obligations are measured using a credit-adjusted risk free discount rate and the obligation is not remeasured for changes in the risk-free rate as the credit-adjusted risk-free rate used to initially measure the obligation is used for all subsequent reductions in the estimated gross future cash flows. Only if the estimated gross future cash flows are increased is the discount rate changed to reflect the current risk-free rate.

Under IAS 37, Provisions, Contingent Liabilities and Contingent Assets, the present value of reclamation and remediation obligations are measured using a risk-free discount rate at each statement of financial position date.

d)	Presentation differences

Some figures stated under US GAAP have been reclassified to conform with the presentation requirements under IFRS.

e)	Final purchase price allocation

Upon the reverse acquisition of Hunt Mining Corp., the Company was in the process of gathering the facts and circumstances to complete the assessment of the fair value of Hunt’s property, plant and equipment and mineral properties. The Company had recorded provisional amounts for these assets in the previous consolidated financial statements. On September 1, 2020 the Company completed the assessment of the fair value of these items. The December 31, 2019 consolidated financial statements have been restated as if the reverse acquisition was originally accounted for using the final purchase price allocation.

Patagonia Gold Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

(In thousands of U.S. dollars unless otherwise stated)

30. Subsequent events

a)	As of February 2021, Cantomi Uruguay is no longer a related party as Carlos Miguens no longer has control of the Company.


b)	On March 8, 2021, the Company received definitive environmental permits (“Permits”) for both the development of its flagship Cap-Oeste Gold/Silver Project and the restart of its Lomada de Leiva (“Lomada”) Gold Project. These Permits allow for the development and operation of mining operations in the mining friendly Santa Cruz Province in Argentina.


c)	On March 10, 2021, the Company completed a private placement offering and raised gross proceeds of $9.3 million through the issuance of 104,086,063 units of the Company at a price of $0.09 per unit. Each unit consisted of one common share of the Company and one common share purchase warrant (“Warrant”). Each Warrant entitles the holder thereof to purchase one common share at an exercise price of $0.13 until March 10, 2024.


	In connection with the private placement, the Company paid $226 in cash commission and advisory fees to the Agents and issued 2,509,586 compensation options. Each compensation option is exercisable for one unit of the Company at a price of $0.09 per compensation option. Each unit consists of one common share of the Company and one Warrant. Each Warrant entitles the holder thereof to purchase one common share at an exercise price of $0.13 until March 10, 2024.


d)	On March 12, 2021, the Company exercised the option to acquire 100% interest in the Mina Angela property. In connection with the exercising of the option, the Company will pay the second earn-in payment of $250 and a final payment of $500 is expected to be paid within 30 days of the verification that legal restrictions preventing development of mining activity in the Chubut Province and at the Mina Angela property have been lifted in such a manner that Patagonia thereafter has the ability to perform exploration and exploitation mining activities on Mina Angela property. For more information, see note 7.


e)	On April 19, 2021, the Company entered into definitive agreements to acquire two projects in Argentina. Patagonia entered into a definitive option agreement dated April 15, 2021 (the “Option Agreement”) with Mirasol Resources Ltd. (“Mirasol”) and Mirasol’s wholly-owned subsidiary Australis S.A. (“Australis” and together with Mirasol, the “Vendors”), which grants Patagonia an option to acquire a 75% undivided interest in and to Australis’ rights and interest in the Homenaje project (the “Homenaje Project”) located in Santa Cruz Province, Argentina. Patagonia also entered into a definitive transfer agreement dated April 15, 2021 (the “Transfer Agreement”) with the Vendors, which grants Patagonia a 100% undivided interest in and to Australis’ rights and interest in the Nico project (the “Nico Project”) located in Santa Cruz Province, Argentina. The Nico Project was previously explored by Mirasol, while the Homenaje Project, which is adjacent to two mining operations, holds targets that have yet to be drilled.


	Pursuant to the Option Agreement, Patagonia has an option to earn a 75% interest in the Homenaje Project over six years upon achievement of the following (collectively, the “Earn-In Obligations”):


	•	an initial work program over six years of $2.55 million in exploration expenditures, including 2,500 meters of drilling, on the Homenaje Project;
	•	expenditures on exploration activities with respect to the Homenaje Project (the “Exploration Expenditures”) of a minimum of $0.4 million over the first 18-months;
	•	following completion of the initial Exploration Expenditures and drilling obligations due within the first 30 months, Patagonia must complete a minimum of $0.4 million of Exploration Expenditures in any 12-month period, and a minimum of $0.2 million of Exploration Expenditures in any six-month period; and
	•	a pre-feasibility study, prepared in accordance with NI 43-101, for a mineral resource of not less than 300,000 ounces of gold equivalent.


	Upon Patagonia completing the Earn-In Obligations, Patagonia and the Vendors will hold 75% and 25%, respectively, in a joint venture company holding the Homenaje Project. If either party’s equity interest is diluted below 10%, it will convert to a 2% NSR royalty.


	Pursuant to the terms of the Transfer Agreement, Patagonia has acquired the Vendors’ interest in the Nico Project in exchange for a 1.5% NSR royalty. If, by the end of third-year, the Nico Project has not been operated as a producing mine, or Patagonia has not produced and shipped minerals in commercial quantities (excluding bulk sampling or pilot plant operations, if any) from the Nico Project for a period of 30 consecutive days, Mirasol will have the right to regain full ownership of the Nico Project at no cost.

		PATAGONIA GOLD CORP.

Date: May 5, 2021		/s/ Christopher van Tienhoven
		Name: Christopher van Tienhoven Title: Chief Executive Officer

Exhibit		Description of Exhibit

99.1		Management’s Discussion and Analysis for the Year Ended December 31, 2020
99.2		Audited Consolidated Financial Statements for the Years Ended December 31, 2020, 2019 and 2018
99.3		CEO Certification
99.4		CFO Certification
99.5		Press Release dated April 28, 2021

Date: 28 April, 2021	/s/ Christopher van Tienhoven
	Christopher van Tienhoven Chief Executive Officer

Date: 28 April, 2021	/s/ Cristian López Saubidet
	Cristián López Saubidet Chief Financial Officer