DAKOTA GOLD CORP. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

You should read the following discussion and analysis of the Company’s financial
condition and results of operations together with the Company’s financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. This Quarterly Report on Form 10-Q may also contain statistical data
and estimates the Company obtained from industry publications and reports
generated by third parties. Although the Company believes that the publications
and reports are reliable, it has not independently verified their data.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the exhibits attached hereto contain
“forward-looking statements” within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995 concerning our anticipated results and
developments of our operations in future periods, planned exploration and
development of our properties, plans related to our business and other matters
that may occur in the future. These statements relate to analyses and other
information that are based on forecasts of future results, estimates of amounts
not yet determinable and assumptions of management.

Any statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or phrases such as
“expects”, “anticipates”, “plans”, “estimates” or “intends”, the negatives
thereof, variations thereon and similar expressions, or stating that certain
actions, events or results “may”, “could”, “would”, “might” or “will” be taken,
occur or be achieved) are not statements of historical fact and may be
forward-looking statements. Forward-looking statements in this Quarterly Report
on Form 10-Q, include, but are not limited to:

   º the progress, potential and uncertainties of the Company's exploration
     program at its properties located in the Homestake District of South Dakota
     (the "Black Hills Property");
   º the success of getting the necessary permits for future drill programs and
     future project exploration;
   º expectations regarding the ability to raise capital and to continue the
     Company's exploration plans on the Company's properties; and
   º plans regarding anticipated expenditures at the Black Hills Property.

Forward-looking statements are subject to a variety of known and unknown risks,
uncertainties and other factors which could cause actual events or results to
differ from those expressed or implied by the forward-looking statements,
including, without limitation:

•  risks associated with the Company's history of losses and need for additional
financing,
•  risks associated with its limited operating history,
•  risks associated with its properties all being in the exploration stage,
•  risks associated with its lack of history in producing metals from its
properties,
•  risks associated with its need for additional financing to develop a
producing mine, if warranted,
•  risks associated with its exploration activities not being commercially
successful,
•  risks associated with ownership of surface rights at its Black Hills
Property,
•  risks associated with increased costs affecting its financial condition,
•  risks associated with a shortage of equipment and supplies adversely
affecting its ability to operate,
•  risks associated with mining and mineral exploration being inherently
dangerous,
•  risks associated with mineralization estimates,
•  risks associated with changes in mineralization estimates affecting the
economic viability of its properties,
•  risks associated with uninsured risks,
•  risks associated with mineral operations being subject to market forces
beyond its control,
•  risks associated with fluctuations in commodity prices,
•  risks associated with permitting, licenses and approval processes,
•  risks associated with governmental and environmental regulations,
•  risks associated with future legislation regarding the mining industry and
climate change,
•  risks associated with potential environmental lawsuits,
•  risks associated with its land reclamation requirements,
•  risks associated with gold mining presenting potential health risks,
•  risks associated with possible amendments to mining laws, mineral withdrawals
of similar actions,
•  risks associated with any material weaknesses that have been identified in
our internal controls over financial reporting,
•  risks associated with the COVID-19 pandemic,
•  risks associated with cybersecurity and cyber-attacks,
•  risks related to title in its properties,
•  risks related to competition in the gold and silver mining industries,

                                       13

——————————————————————————–

•  risks related to economic conditions,
•  risks related to its ability to manage growth,
•  risks related to the potential difficulty of attracting and retaining
qualified personnel,
•  risks related to its dependence on key personnel,
•  risks related to its SEC filing history, and
•  risks related to its securities.

This list is not exhaustive of the factors that may affect the Company’s
forward-looking statements. Although the Company has attempted to identify
important factors that could cause actual results to differ materially from
those described in forward-looking statements, there may be other factors that
cause results not to be as anticipated, estimated or intended. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, believed, estimated or expected. The Company cautions readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made. Except as required by law, the Company disclaims any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events. The Company qualifies all the
forward-looking statements contained in this Quarterly Report on Form 10-Q by
the foregoing cautionary statements.

This management’s discussion and analysis should be read in conjunction with the
Company’s financial statements and notes thereto as set forth herein. Readers
are also urged to carefully review and consider the various disclosures made by
the Company, which attempt to advise interested parties of the factors which
affect its business, including without limitation, the disclosures made under
“Risk Factors” of its most recent Form 10-K.

The Company’s unaudited financial statements are stated in United States dollars
and are prepared in accordance with United States generally accepted accounting
principles.

Since the Company is an exploration stage company and has not generated revenues
to date, its business is subject to numerous contingencies and risk factors
beyond its control, including exploration and development risks, competition
from well-funded competitors, and its ability to manage growth.

Overview

The Company’s goal is to create stockholder value through the acquisition,
responsible exploration, and future development of high caliber gold properties
in the Homestake District of South Dakota (the “Homestake District“). Management
and the technical teams cumulatively have several hundred years of international
mining and exploration experience. Key personnel have more than fifty combined
years of mining and exploration experience in the Homestake District, mostly
with the Homestake Mining Company, as well as other exploration companies that
have operated in the region. The Company believes this experience uniquely
positions the Company and will allow it to leverage its direct experience and
knowledge of past exploration and mining activities in the Homestake District.
Combined with the use of modern exploration and mining techniques, and new
geologic understanding from experience in other mines, new research and
information extracted from its new geophysical surveys, the Company hopes to
focus its programs and build upon dominance where the historic Homestake Mining
Company left off in the 1990’s.

The Homestake District has yielded approximately 44.6 million ounces of gold
production with most of it coming from within a small area. The production
ledges of the old mine define a cumulative surface projection area of much less
than 3 square miles. Homestake Mining Company’s historic gold production and
exploration in the Homestake District was overwhelmingly focused on the
underground mine. Modern statistical studies of ore deposit trends and
understanding of the distribution of large gold camps around the world
identifies that large gold deposits generally form in distinct camps and
normally occur in clusters that show predictable distributions (Zipf’s Law
Applied to Ore Deposits). The Company believes this might be true for the
Homestake District. Outside of the mine area, the Homestake District has been
underexplored and lacks the modern exploration efforts required to search for
other deposits especially under the cover of younger rocks that dominate the
surface.

Since 2012, the Company has consistently pursued a strategy of expanding its
portfolio of brownfield properties located exclusively within the Homestake
District to build a dominant land position with the goal of consolidating
possible mineral potential. Property acquisitions are focused and based on past
exploration, the access to proprietary data sets the Company has assembled over
the years, and new research and remote data acquisition (Magnetics, Gravity and
Radiometric) that was recently conducted over the district that hosts the
Homestake Gold Deposit.

The Company has not established that any of its projects or properties contain
proven or probable mineral reserves under S-K 1300 nor do they guarantee their
exploration work will ever establish an economic gold deposit. The Company
believes the Homestake District is in a safe, low-cost jurisdiction with
well-developed infrastructure and is in a favorable regulatory environment in
which authorities have consistently demonstrated a willingness to work with
responsible operators to permit well-planned compliant projects.

                                       14

——————————————————————————–

Planned Activities
The Company’s planned activities in fiscal 2023 will be focused on advancing
exploration drilling on its Maitland, Richmond Hill, and City Creek projects. In
addition, work is planned to continue exploration, permitting studies, and
targeting activities on its Blind Gold and Tinton projects to bring them to a
drilling stage.

The Company’s technical group and consultants are continuously modeling and
evaluating data acquired through its regional high-definition airborne magnetic
survey, supplemented by ground gravity surveys completed in 2021, to enhance
possible drill targets, as well as to screen targets on other brownfields areas
of interest within the district. Field sampling and mapping programs have been
initiated at the Richmond Hill, City Creek, and the Barrick Option property. The
Company continues to locate, evaluate, and add to the historic information in
its regional and project level data sets much of which is from the 145-year-old
Homestake Mining Company files acquired in the Barrick Option agreement but also
from other private and public sources.

Permitting and site preparations were completed for the first drilling program
on the iron-formation target and other tertiary-age replacement targets in the
Maitland area and drilling commenced in early 2022. There are now three drill
rigs operating on the property – two at Maitland and one at Richmond Hill.
Permit and environmental field work for the Blind Gold and Tinton project areas
has also been initiated. Targets in some of the other brownfield areas may also
be identified and advanced for drilling as exploration activities continue
throughout the year.

              Table: Fiscal Year 2023 Proposed

Cash Exploration Expenditures (millions)
General & administrative

                               $ 4.7

Drilling, Field programs/Met Testing/Data Compilation $ 15.5
Property Acquisition

                                   $ 6.3
TOTAL                                                  $26.5

The Company’s projects are all at the exploration stage and do not generate
revenues. The Company has not established that any of its properties or projects
contain proven or probable mineral reserves as defined under S-K 1300.
Expenditure projections are subject to numerous contingencies and risk factors
beyond the Company’s control, including exploration and development risks,
competition from well-funded competitors, and the Company’s ability to manage
growth and assessments of ongoing exploration activities and results. The
Company cannot offer assurance that its expenses will either meet or exceed its
projections.

Liquidity and Capital Resources
The Company is in the exploration-stage and does not generate revenues. As such,
the Company finances its operations and the acquisition and exploration of its
mineral properties through the issuance of common stock, and the Company could
be materially adversely affected if it is unable to raise capital because of
market or other factors.

As of June 30, 2022, the Company had working capital of $34,130,021 and its
retained earnings as of June 30, 2022, was $7,257,175. The Company had a net
loss for the three months ended June 30, 2022, of $5,808,725.

During the three months ended June 30, 2022, the Company issued a total of
37,500 shares of common stock for proceeds of $12,000 pursuant to the exercise
of stock options.

During the upcoming year, the Company plans cash expenditures for exploration of
approximately $26.5 million.

The timing of expected expenditures is dependent upon a number of factors,
including the availability of contractors. The Company has sufficient funds for
funding its activities for the remainder of the current fiscal year.

Results of Operations

Three months ended June 30, 2022, and 2021

Revenue

The Company had no operating revenues for the three months ended June 30, 2022,
and 2021. We are not currently profitable. We had a net loss of $5,808,725 for
the three months ended June 30, 2022 (three months ended June 30, 2021 –
$12,842,724).

                                       15

——————————————————————————–

Exploration Costs

During the three months ended June 30, 2022 and 2021, our exploration costs
totaled $3,771,517 and $2,183,641, respectively. The increase year over year
primarily related to the continuation of exploration drilling and related
activities which commenced in January 2022. In addition, the Company funded the
airborne geophysical survey and increased the review and compilation of
historical geological data. Included in these costs were payments of annual
claim maintenance fees related to our mineral properties. The increase was
partially offset by a decrease from $1,583,859 of exploration-related
stock-based compensation expense for the three months ended June 30, 2021 to
$337,066 for the three months ended June 30, 2022.

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2022
and 2021 were $3,308,661 and $10,728,748, respectively. These expenditures were
primarily for legal, accounting & professional fees, investor relations and
other general and administrative expenses necessary for our operations. The
decrease year over year was primarily due to a decrease in stock-based
compensation allocated to administration expenses of $1,585,451 for the three
months ended June 30, 2022 (three months ended June 30, 2021 – $9,245,013). The
higher amount from the June 30, 2021 period primarily related to the issuance of
1,450,000 shares of common stock as compensation. With the increased capital
available, the organization grew from twelve employees to over thirty, which
resulted in increased general and administrative costs (excluding stock-based
compensation) to $1,723,210 during the three months ended June 30, 2022 (three
months ended June 30, 2021 – $1,483,735). The organization grew to support
advancing the exploration activities, which include drilling activities in the
current fiscal year.

We had losses from operations for the three months ended June 30, 2022 and 2021
totaling $7,080,178 and $12,912,389, respectively. We had a loss before income
tax for the three months ended June 30, 2022 of $7,027,449 (three months ended
June 30, 2021 – $13,017,704) and a deferred tax benefit of $1,218,724 (three
months ended June 30, 2021 – $174,980), leading to a net loss for the period of
$5,808,725 (three months ended June 30, 2021 – $12,842,724). The effective rate
for the quarter is less than the statutory rate due to a lower tax benefit for
stock-based compensation related to Restricted Share Units which settled during
the period, when compared to what was recognized during the vesting period for
those units. We incurred interest expense from notes payable for the three
months ended June 30, 2022 and 2021, respectively, in the amounts of $0 and
$37,977.

Cash flows used in operating activities

During the three months ended June 30, 2022 and 2021, the Company’s cash flows
used in operating activities were $6,210,344 and $1,940,227, respectively. Cash
used in operations for the three months ended June 30, 2022 increased year over
year as the Company increased the amount of land staking and associated annual
claim maintenance costs. In addition, the company completed an airborne
geophysical survey and engaged additional personnel to review and commence the
compilation of historical geological data obtained through the Barrick option
agreements. The Company also continued drilling and related activities which
commenced in January 2022.

Cash flows used in investing activities

During the three months ended June 30, 2022 and 2021, cash used in investing
activities was $160,723 and $1,041,821, respectively. In the three months ended
June 30, 2022, the cash used for investing activities consisted primarily of
$37,883 for the acquisition of mineral properties and $102,840 for the purchases
of property and equipment. In the three months ended June 30, 2021, the cash
used for investing activities consisted of $901,203 for the acquisition of
mineral properties and $140,618 for the purchases of property and equipment.

Cash flows from financing activities

During the three months ended June 30, 2022 and 2021, cash flows from financing
activities were $12,000 and $16,870,059, respectively. In the three months ended
June 30, 2022, the Company issued 37,500 shares pursuant to the exercise of
stock options for cash proceeds of $12,000. In the three months ended June 30,
2021, the Company issued shares for net proceeds of $351,075, and DTRC issued
shares for net proceeds of $16,895,534 and repaid $376,550 to extinguish a
related party note.

Off-Balance Sheet Arrangements
As of June 30, 2022 and 2021, the Company had off-balance sheet arrangements for
annual payments in relation to annual mineral lease payments related to certain
properties under option as disclosed in Note 3 of the financial statements.

                                       16

——————————————————————————–

Critical Accounting Estimates
Management’s discussion and analysis of financial condition and results of
operations is based on the Company’s financial statements, which have been
prepared in accordance with US GAAP. Preparation of financial statements
requires management to make assumptions, estimates and judgments that affect the
reported amounts of assets, liabilities, revenues, costs and expenses, and the
related disclosures of contingencies. Management bases its estimates on various
assumptions and historical experience, which are believed to be reasonable;
however, due to the inherent nature of estimates, actual results may differ
significantly due to changed conditions or assumptions. On a regular basis,
management reviews the accounting policies, assumptions, estimates and judgments
to ensure that the Company’s financial statements are fairly presented in
accordance with US GAAP. However, because future events and their effects cannot
be determined with certainty, actual results could differ from the Company’s
assumptions and estimates, and such differences could be material. Management
believes that the following critical accounting estimates and judgments have a
significant impact on the Company’s financial statements: valuation of options
granted to directors and officers using the Black-Scholes model and fair value
of mineral properties. The accounting policies are described in greater detail
in Note 2 to the Company’s audited annual financial statements in the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2022. There have
been no material changes to the Company’s critical accounting policies and
estimates as compared to the Company’s critical accounting policies and
estimates described in the Form 10-K.

© Edgar Online, source Glimpses