AVRUPA MINERALS LTD. [AVPMF] Filings

1

Avrupa Minerals Ltd. 

Form 20-F Annual Report 

Not Applicable

Item 2.  Offer Statistics and Expected Timetable

Not Applicable

Item 3.  Key Information

As used within this Annual Report, the terms “Avrupa”, “the Company”, “Issuer” and “Registrant” refer collectively to Avrupa Minerals Ltd., its predecessors, subsidiaries and affiliates.

SELECTED FINANCIAL DATA

The following tables set forth and summarize selected consolidated financial data for the Company, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The selected financial data of the Company for the Years Ended December 31, 2020, 2019 and 2018, were audited by DeVisser Gray LLP, Chartered Accountants, as indicated in its audit report which is included elsewhere in this Annual Report. The selected financial data for the Years Ended December 31, 2017 and 2016 were derived from the financial statements of the Company which have been also audited by DeVisser Gray LLP, Chartered Accountants, but are not included herein.

The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in this Annual Report.

The Company has not declared any dividends on its common shares since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings, if any, for use in its operations and the expansion of its business.

Table No. 2 is derived from the financial statements of the Company, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. All per share amounts have been adjusted for the 1 for 4 share consolidation effective December 21, 2020.

Table No. 2

Selected Financial Data

(CDN$ in 000, except per share data)

5

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).  

Table No. 3 sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent annual periods December 31^st, the average rates for the period, and the range of high and low rates for the period.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 3

Canadian Dollar/U.S. Dollar

The exchange rate was $1.23 on April 30, 2021.

Statement of Capitalization and Indebtedness

Not applicable.

Reasons for the offer and use of proceeds

Not applicable.

6

Risk Factors

An investment in the Common Shares of the Company must be considered speculative due to the nature of the Company’s business and the present stage of exploration and development of its non-producing mineral properties. In particular, the following risk factors apply:

The effects of a global pandemic, including the COVID-19 outbreak, may have a negative effect on the Company’s operations and financial condition

The World Health Organization declared the novel coronavirus COVID-19 as a pandemic in March 2020. This declaration has led to numerous emergency measures being instituted in many countries, including Canada, Spain and Portugal. These measures include government and business closures, stay-at-home orders, and limitations placed on work and travel. The continued outbreak of COVID-19, or any other pandemic, could materially and adversely impact the Company’s operations including mineral exploration, its joint-ventures, receipt of necessary government approvals, and regulatory compliance. It may also have a negative effect on the equity and debt markets, which may make raising additional capital more difficult or not available. The full extent of such impacts is outside the Company’s control and may have a significant negative effect on the Company’s operations and financial condition.

Risks Associated with Mineral Exploration

The Company is engaged in the mineral exploration business, which is highly speculative and has certain inherent risks which could have a negative effect on the Company

Mineral exploration is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production.  The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environment protection, the combination of which factors may result in the Company not receiving an adequate return on investment capital.

All of the Company's mineral properties are at the exploration stage and all of the Company's exploration expenditures may be lost

The Company is at the exploration stage on all of its properties and substantial additional work and expenditures will be required in order to determine if any economic deposits occur on the Company’s properties. Mineral exploration is highly risky, and most exploration properties do not contain any economic deposits of minerals. If a property is determined to not contain any economic reserves of minerals, the entire amount spent on exploration will be lost.

The mineral industry is highly competitive

The Company will be required to compete in the future directly with other corporations that may have greater resources.  Such corporations could outbid the Company for potential projects or produce minerals at lower costs which would have a negative effect on the Company’s operations.

Commodity prices may not support corporate profit

The resource industry in general is intensely competitive and there is no assurance that, even if commercial quantities of minerals are discovered and developed, a profitable market will exist for the sale of same.  Factors beyond the control of the Company may affect the marketability of any minerals discovered.  The price of natural resources are volatile over short periods of time, and is affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased

7

The Company's mineral exploration activities are subject to substantial government regulatory requirements

The mineral projects in which the Company has an interest are located in Portugal and Kosovo.  The process for acquiring an interest in mineral concessions in these three countries is different from procedures for acquiring mining claims in Canada or the United States and involves certain risks not applicable in those jurisdictions.

These countries are politically stable European jurisdictions governed by democratically-elected leaders. In each of these countries, the legal, tax, and administrative institutions for business activities are in place, and processes and procedures are established and understood.  In Kosovo, the legal and administrative framework for the mining industry has been established over the past ten years, first by the United Nations Mission in Kosovo and followed-up and further developed by the Kosovo government.  Specifically, a new mining law, established in 2010, exists, and the independent regulator and oversight mechanism is functioning properly.  

In Portugal, the rights and obligations associated with mining concession are governed by Direcção-Geral de Energia e Geologia (“DGEG”).  A complete application, including detail work plans to be carried out, minimum planned amount of investment, the means of financing, financial standing and ability of the applicant, detailed measurements to be used for environmental protection and evidence of advertising such in a county newspaper and the official gazette, is submitted to the DGEG.  Before a decision is made by the DGEG, the DGEG might request clarification of the proposal and further supporting documents and information about the application as well as having a hearing of the consultation office.  Once the application is approved, the DGEG will sign the administrative contract (mining concession) with the applicant as well as publishing an abstract in the official gazette.  In order to keep a mining concession valid and in effect, it is necessary to pay an annual license fee as well as putting up bonds for the claims.  

In Kosovo, Independent Commission of Mines and Minerals (“ICMM”) oversees the exploration license application process.  Under Official Gazette of the Republic of Kosova/Pristina, No. 80/27, Law No 08/L – 163, Article 21, an exploration license can be applied for a parcel of land no greater than 100 square kilometers, with a three-year term.  Extension periods can be granted upon reducing the parcel of land by 50%; each extension is for an additional two years and can be done three times.  To maintain the licenses, the company is required to report by the end of a calendar year all work performed and provide ICMM the financial report.  Environmental safety regulations are followed in accordance to the European standards.

Mineral exploration and mining activities in Portugal and Kosovo may be affected in varying degrees by political instability and government regulations relating to the mining industry.  Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business.  Future operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriations of property, environmental legislation and mine safety.

Changes in these regulations or in their application are beyond the control of the Company and may adversely affect its operations, business and results of operations.  The requirements to comply with these regulations may result in increased costs, as well as delays in obtaining the permits required to conduct operations. Failure to comply with the conditions set out in any permit or failure to comply with the applicable statutes and regulations may result in orders to cease or curtail operations or to install additional equipment.  The Company may be required to compensate those suffering loss or damage by reason of its operating or exploration activities.

On the Federal, Provincial/Territorial and State level, the Company must comply with exploration permitting requirements which require sound operating and reclamation plans to be approved by the applicable government body prior to the start of exploration. Depending upon the type and extent of the exploration activities, the Company may be required to post reclamation bonds and/or assurances that the affected areas will be reclaimed. If the reclamation requires funds in addition to those already allocated, the Company could be forced to pay for the extra work and it could have a significant negative effect upon the Company’s financial position and operations.

8

As the Company’s operations are primarily related to the exploration of our properties in these jurisdictions, many governmental regulations relating to mining activities are not yet application to the Company.

Our potential mining processing operations and exploration activities in these jurisdictions are subject to various laws governing land use, the protection of environment, prospecting, development, production, exports, taxes, labor standards, occupational health, mine safety and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies.  The Company believes that it is in substantial compliance with all material laws and regulations which currently apply to the Company’s activities.  There can be no assurance, however, that all permits which the Company may require for future operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any mining project which the Company might undertake.

Failure to comply with laws and regulations may result in orders being issued thereunder which may cause operations to cease or be curtailed or may require installation of additional equipment.  Violators may be required to compensate those suffering loss or damage by reason of their mining activities and may be subject to fines or penal sanctions if convicted of an offense under such legislation.

Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on the Company or prevent development of the Company’s mining properties.

The jurisdictions that the Company has operations in have environmental legislation that requires that the mining concessionaire to obtain the authorization from the applicable environmental authorities to initiate any exploration or exploitation activity.  Environmental legislation in these jurisdictions imposes potential liability on owners and/or operators of mining facilities which release hazardous substances into the environment and are required to carry out their operations using methods and techniques not liable to cause damage to the environment or the land-owner.

The Company’s title to its properties may be disputed by third parties which could result in the loss of title to its properties

The Company has only done a preliminary title survey of its exploration properties in accordance with industry standards. These procedures do not guarantee the Company’s title and therefore, in accordance with the laws of the jurisdictions in which these properties are situated, their existence and area could be in doubt. Unregistered agreements or transfers, or native land claims, may affect title.  If title is disputed, the Company will have to defend its ownership through the courts, which would likely be an expensive and protracted process and have a negative effect on the Company’s operations and financial condition. In the event of an adverse judgment, the Company would lose its property rights.

Risks Relating to the Financing of the Company

The Company’s auditors have Expressed a “Going Concern” Opinion.

The Company’s auditor has included a “going concern” opinion in its auditors’ report to the Company's consolidated financial statements for the fiscal year ended December 31, 2020. The qualification was included as a result of the Company having no current source of revenue, incurring losses since inception, and the need to obtain additional financing. If the Company is unable to meet its obligations, it will not be able to fulfill its business plan and be forced to reduce certain operations or cease operations altogether.

The Company will require additional financing which could result in substantial dilution to existing shareholders

The Company, while engaged in the business of mineral exploration, is dependent on additional financing for planned exploration programs as outlined herein.  Management anticipates being able to raise the necessary funds by means of equity financing.  The ongoing exploration of the Company’s properties is dependent upon the Company’s ability to

9

obtain financing through the joint venturing of projects, debt financing, equity financing or other means. Such sources of financing may not be available on acceptable terms, if at all.  Failure to obtain such financing may result in delay or indefinite postponement of exploration work on the Company’s exploration properties, as well as the possible loss of its interest in such properties. Any transaction involving the issuance of previously authorized but unissued shares of common stock, or securities convertible into common stock, could result in dilution, possibly substantial, to present and prospective holders of common stock. These financings may be on terms less favorable to the Company than those obtained previously.

The Company has a history of net losses and no operational cash flow to sustain operations and does not expect to begin receiving operating revenue in the foreseeable future

None of the Company’s properties have advanced to the commercial production stage and the Company has no history of earnings or cash flow from operations.  The Company has paid no dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future.  Historically, the only source of funds available to the Company has been through the sale of its common shares. Any future additional equity financing would cause dilution to current stockholders. If the Company does not have sufficient capital for its operations, management would be forced to reduce or discontinue its activities which would likely have a negative effect on the stock price.

Risks Relating to an Investment in the Securities of the Company

The market for the Company’s common stock has been subject to volume and price volatility which could negatively effect a shareholder’s ability to buy or sell the Company’s shares

The market for the common shares of the Company may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (e.g. mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry. Market demand for products incorporating resource commodities fluctuate from one business cycle to the next.  The Company’s common shares can be expected to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding the Company’s business, and changes in estimates and evaluations by securities analysts or other events or factors.  In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small-capitalization companies such as the Company, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies. For these reasons, the price of the Company’s common shares can also be expected to be subject to volatility resulting from purely market forces over which the Company will have no control.  Further, despite the existence of a market for trading the Company’s common shares in Canada, stockholders of the Company may be unable to sell significant quantities of common shares in the public trading markets without a significant reduction in the price of the stock.

The Company has a dependence upon key management employees, the loss or absence of which could have a negative effect on the Company’s operations

The Company strongly depends on the business and technical expertise of its management and key personnel, including Chief Executive Officer and President Paul Kuhn and Chief Financial Officer Winnie Wong.  There is little possibility that this dependence will decrease in the near term.  As the Company’s operations expand, additional general management resources will be required. The Company may not be able to attract and retain additional qualified personnel and this would have a negative effect on the Company’s operations.

Certain officers and directors may have conflicts of interest

Certain of the directors and officers of the Company are also directors and/or officers and/or shareholders of other natural resource companies.  While the Company is engaged in the business of acquiring and exploring mineral properties, such associations may give rise to conflicts of interest from time to time.  The Directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company.  If a conflict of interest arises at a meeting of the board of directors, any director in a conflict must disclose his interest and abstain from voting on such matter.  In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.

10

The Company could be deemed a passive foreign investment company which could have negative consequences for U.S. investors

The Company could be classified as a Passive Foreign Investment Company (“PFIC”) under the United States tax code. If the Company is declared a PFIC, then owners of the Company’s Common Stock who are U.S. taxpayers generally will be required to treat any so-called "excess distribution" received on its common shares, or any gain realized upon a disposition of common shares, as ordinary income and to pay an interest charge on a portion of such distribution or gain, unless the taxpayer makes a qualified electing fund ("QEF") election or a mark-to-market election with respect to the Company’s shares. A U.S. taxpayer who makes a QEF election generally must report on a current basis its share of the Company’s net capital gain and ordinary earnings for any year in which the Company is classified as a PFIC, whether or not the Company distributes any amounts to its shareholders.

U.S. investors may not be able to enforce their civil liabilities against the Company or its directors, controlling persons and officers

It may be difficult to bring and enforce suits against the Company. The Company is a corporation incorporated in Canada under the laws of British Columbia. Three of the Company’s directors and officers are residents outside of the United States and all of the Company’s assets and its subsidiaries are located outside of the United States.  Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States securities laws.  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities under the U.S. Securities Act.

Broker-Dealers may be discouraged from effecting transactions in our common shares because they are considered "Penny Stocks" and are subject to the Penny Stock Rules

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on FINRA broker-dealers who make a market in "a penny stock".  A penny stock generally includes any equity security that has a market price of less than US$5.00 per share that is not registered on certain national securities exchanges or quoted on the NASDAQ system. The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000 in each of the last two years, or US$300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.

In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the US Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities.  Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

As a “Foreign Private Issuer”, the Company is exempt from the Section 14 Proxy Rules and Section 16 of the 1934 Securities Act

The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result is shareholders having less complete and timely data.  The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.

11

DESCRIPTION OF BUSINESS

Introduction

Avrupa’s executive office is located at:

325 Howe Street, Suite 410, Vancouver, British Columbia, Canada V6C 1Z7

Telephone: (604) 687-3520

Facsimile: 1-888-889-4874

E-Mail: info@avrupaminerals.com

Website: www.avrupaminerals.com

The contact person in Vancouver is Winnie Wong, CFO.

The Company's common shares trade on the TSX Venture Exchange under the symbol "AVU".

The authorized share capital of the Company consists of an unlimited number of common shares. As of April 30, 2021, there were 32,738,087 common shares outstanding after adjustment for the 1 for 4 share consolidation effective December 21, 2020.

The Company is a growth-oriented junior exploration and development company focused on aggressive exploration, using a prospect generator model, for valuable mineral deposits in politically stable and prospective regions of Europe, including Portugal and Kosovo.  The Company currently has an interest in an exploration license in Portugal. The Company is also conducting initial exploration on targets in Portugal in order to define high-quality properties for the acquisition of additional exploration licenses.

Corporate Background

The Company was incorporated on January 23, 2008 under the Business Corporations Act of British Columbia under the name Everclear Capital Ltd. On July 7, 2010, the Company changed its name to Avrupa Minerals Ltd.

As of April 30, 2021, the Company has the following subsidiaries:

(1)These companies are in the process of being wound up. 

Currently, the Company conducts mineral exploration in Portugal and Kosovo.

12

History and Development of the Business

Avrupa was incorporated on January 23, 2008 under the Business Corporations Act of British Columbia. The Company became a “Capital Pool Company” as defined in the Exchange’s Listing Policy 2.4 and its common shares began trading on the TSX Venture Exchange (the "Exchange") on September 2, 2008.

As a Capital Pool Company, the principal business of the Company was to identify and evaluate opportunities for the acquisition of an interest in an asset or business and, once identified and evaluated, to negotiate an acquisition or participation subject to receipt of shareholder approval and acceptance for filing by the Exchange.  Until the completion of such a Qualifying Transaction (“QT”), as defined under Exchange Listing Policy 2.4, the Company did not carry on any business other than the identification and evaluation of assets or businesses in this connection.

The Company completed its QT on July 13, 2010 to acquire 90% of the issued and outstanding shares in MAEPA Empreendimentos Mineiros e Participacoes Lda., a private Portugese company (“MAEPA”) and (b) 92.5% of the issued and outstanding shares of Innomatik Exploration Kosovo LLC, a private Kosovo company (“Innomatik”). The Company received the final approval from the Exchange for its QT and its common shares resumed trading under its current name and trading symbol “AVU” on the Exchange as of July 14, 2010. In April 2012, the Company acquired the remaining 10% of MAEPA to own 100% by paying $150,000 cash and issuing 500,000 common shares. In August 2013, the Company acquired the remaining 7.5% of Innomatik to own 100% by issuing 450,000 common shares and paying €100,000.

The Company, through its holding in MAEPA, holds two exploration licenses in Portugal within the Portuguese portion of the Iberian Pyrite Belt in the southern portion in the country. The licenses have been issued to MAEPA by the government of Portugal, and are as follows:

·Alvalade 

·Mertola* 

* The Company has applied to drop the Mertola license but the application has not been processed.

Licenses have varying work commitments, as approved by the government of Portugal, and all licenses carry a 3% net smelter royalty (“NSR”), payable to the government of Portugal.

Business Overview

The Company currently has interests in mineral exploration projects located in Portugal and Kosovo. The Company and all of its properties are at the exploration stage. There is no assurance that a commercially viable resource deposit is present on any of the Company’s properties, and additional exploration is required before it is determined if any property is economically and legally viable.

Operations in certain areas are seasonal as the Company cannot conduct certain exploration activities on its properties year-round. The Company is not currently dependent upon market prices for its operations, nor is it dependent upon any patents, licenses or manufacturing processes. The Company’s operations are dependent upon exploration rights and claims as well as the terms of option and/or joint venture agreements on those properties. Please see the individual property descriptions below for the details of each of the Company’s current exploration projects.

Current Effects of COVID-19 Pandemic

The outbreak of Novel Coronavirus (“COVID-19”), which began to spread around the world from Wuhan, China in December 2019, has had a material negative effect on government and business operations globally, including in Canada, Portugal and Spain. In response to the virus and government restrictions, including stay-at-home orders and limited travel, the Company’s personnel, consultants, and advisors began working remotely beginning in March 2020 and continue on a limited basis. These restrictions have resulted in delays in the preparation and audit

13

of the Company’s 2019 financial statements and related filings, and a delay to the start of the planned exploration work on the Company’s Alvalada Project under the Earn-In Joint Venture Agreement with MATSA.

The duration of these delays and impacts on the Company’s operations are outside of the Company’s control and are uncertain and impossible to predict. The COVID-19 pandemic may also result in additional consequences which may negatively affect the Company, including uncertainty in the capital markets which may create difficulty in the Company’s ability to obtain additional financing. Continued restrictions on the Company’s ability to conduct exploration on its mineral properties and extended delays or obstacles in the Company’s ability to obtain additional financing when needed may result in the Company’s having to reduce its planned operations during 2021 and in future periods.

Mineral Properties

The Company currently has interests in 3 mineral exploration properties, including 2 properties in Portugal and 1 property in Kosovo. All of the Company's properties are currently at the exploration stage.

Portugal

The Company through its subsidiary MAEPA, is currently focused in the Portuguese portion of the Iberian Pyrite Belt, a district with over 2,000 years of mining history from at least Roman times.

The licenses in southern Portugal are all exploration contracts with exploration commitments but not environmental liabilities attached to any of the contracts.  These licenses typically have duration of 2+1+1+1 years. In addition, all the licenses have a 3% NSR attached which may be negotiated downwards in certain instances.  

The governing body for Portugal is the Direcao-Geral de Energia e Geologia (“DGEG”).  Typically, from application to issuance of licenses, it takes anywhere from 6-12 months, depending on the government’s ability and efficiency to check the application area for competitive application bids, various liabilities (local or regional,

14

political, and/or technical), and anything that might obstruct exploration progress.  Often the wait for issuance depends on the prior activities and obligations of the responsible government officials, and the desire to make a public showing of the signing ceremony which advertises investment into Portugal.  The Company has experienced a couple of delays due to the change of the political party in power where the Company had to wait for a new minister to be selected, and therefore his/her involvement in the signing ceremony

Despite some exploration properties located on sites with historical operations, the Company does not have any potential environmental liabilities associated with its licenses.

Alvalade Project

The Alvalade joint-venture project is located in southern Portugal in the Portuguese Pyrite Belt. The project consists of one exploration license and covers approximately 115 square kilometers. The Company currently has a 100% interest in the project subject to its joint-venture agreement with MATSA who can earn an 85% interest in the project.

Location and Access

The project is located on the Northwest extension of the Portuguese Pyrite Belt in the southwest portion of the country. The Alvalade Joint Venture is easily accessed by both paved and unpaved roads.  Regional two to four lane paved roads cross the license block east to west and north to south.  Secondary and Tertiary roads form a network that allows access to much of the JV area.  A railroad line, which is used to transport copper and zinc concentrates from the Neves Corvo Mine to the port of Setubal passes through the Alvalade license.  Several large towns, including Grandola, Ferreira do Alentejo, Castro Verde, and Aljustrel lie within or just outside of the borders of the license block.  Electric power lines are ubiquitous, and a number of year-round rivers cross the license area, the main one being the Sado River.

As the Alvalade JV license block is considered to be a pure exploration play, there are no development types of facilities or plants at this time. The Company uses two warehouses for core storage and detailed review of the core, as well as for a small field office.

Regional and Property Geology

Rocks in the area include Devonian sediments, volcanic sediments, felsic sub-volcanic domes, and mafic diabase-like rocks form the package of target rocks in the area that potentially host copper- and zinc-bearing massive sulfide deposits.  These are often covered by younger Carboniferous clastic sediments and turbidites.  About 75% of the license block is covered by Tertiary sediments and/or Quarternary gravels.  The Devonian target rocks, form a unit that is traceable from south of Lisbon, Portugal to near Seville, Spain, which is the Iberian Pyrite Belt (IPB).  The IPB is host to many massive sulfide and stockwork sulfide deposits, which have a history of mining that dates back to Roman times.

The Alvalade JV encompasses the Portuguese part of the IPB that lies just north of the regional Messajana Fault. The giant Aljustrel massive sulfide body lies just to the south of the fault.  Two formerly producing mines, Lousal and Caveira, lie within the property boundaries.  Previous explorers have drilled upwards of 300 holes within the JV area.  However, many of the holes did not penetrate more than a few 10’s of meters into bedrock.  The Company’s compilation and review of the geology and structure of the Alvalade JV licenses indicates the strong possibility of new interpretations for the stratigraphy and the structural framework of the region, allowing for potential discoveries in previously drilled parts of the property block.

Acquisition Details

The Company originally acquired its interest in the property through its acquisition of 90% of MAEPA in July 2010 and increased its interest to 100% (subject to a 3% NSR to the government of Portugal) upon the acquisition of the remaining 10% of MAEPA in April 2012.

15

The Alvalade JV formerly covered 3 licenses (Ferreira do Alentejo, Lousal Alvalade and Canal Caveira). In October 2013, the government of Portugal approved the amalgamation of the three exploration licenses into a single exploration license. The license has a 3% NSR attached which may be negotiated downwards in certain instances.  

In December 2017, the Company signed an exclusivity agreement with a subsidiary of an international mining company, allowing it a right to negotiate the acquisition of an interest in the Alavade property, the Marateca property and the Mertola property for non-refundable payments of €25,000 in respect of each property for a total of €75,000. Such amount was received in December 2017 and was used to offset the expenditures incurred in fiscal 2018.

Former Joint-Venture Agreements

On June 6, 2011, the Company announced that it signed a Memorandum of Understanding (“MOU”) with Antofagasta Minerals S.A. (“Antofagasta”) to undertake exploration for copper-zinc massive sulfide deposits on the Alvalade project.

The agreement covered the three original Avrupa licenses:  Alvalade, Canal Caveira, and Ferriera do Alentejo. The formerly operating Lousal and Caveira copper mines are located within the project area.  Antofagasta completed a US$300,000 Initial Study of the project, which included acquisition of much of the remaining historic data, re-logging of selected drill holes, systematic sampling, and integrated geological and geophysical interpretation of the targeted areas

Under the original agreement, Antofagasta had the option to acquire an undivided 51% interest in the project, which can be exercised by Antofagasta funding or incurring expenditures of an additional US$4 million over three years. After exercise of the first option, Antofagasta would be granted a further option to acquire an additional 24% interest in the project for an aggregate 75% undivided interest, by completing and delivering a Feasibility Study on the project to the Company within five years. The Company was the operator of the joint-venture through the first option period. In February 2014, Antofagasta completed the expenditure of the required US$4 million and earned a 51% interest in the joint-venture.

On February 25, 2014, the Company and Antofagasta signed an amended Joint Venture Agreement. On January 27, 2015, the Company and Antofagasta signed a second amended Joint Venture Agreement which allowed for more interim funding by Antofagasta, an expanded time frame in which to get a feasibility study decision, and a means for Avrupa to be carried to production, if there is a production decision to be made on the project. Antofagasta subsequently earned an additional 9% in the project (60% total) by funding an additional US$2,000,000 on exploration for a total of US$6,300,000.

On August 31, 2015, the Company signed an agreement with Colt Resources Inc. (“Colt”) and Antofagasta, whereby Colt will purchase Antofagasta’s 60% interest in the property for a total of US$7.1 million in incremental payments and a 1% NSR to Antofagasta. With the purchase, Colt became the optionee partner with the Company operating the project. Under the revised joint-venture agreement, Colt could earn up to 80% of the Joint-venture through a combination of exploration expenditures, completion of a feasibility study, and generation of a mine development decision by the end of the year 2023.

Colt subsequently defaulted on its joint-venture obligations. In order to regain a 100% interest in the property, Avrupa entered into an agreement with Colt and Antofagasta. Under the agreement, the Company agreed to forgive approximately €160,000 in debts, assume a deposit on the project of €75,000, and make the following payments to the initial partner on the project in return for increasing its interest in the project from 40% back to 100%:

·Cash payment of US$250,000 on the filing of an initial NI 43-101 compliant resource estimate meeting certain minimum criteria; 

·Staged cash payments totaling US$1,000,000 on the completion of a NI 43-101 compliant feasibility study meeting certain minimum criteria; and  

16

·Staged cash payments totaling US$3,000,000 on the commencement of commercial production from the project. 

MATSA Joint-Venture Agreement

In November 2019, the Company signed a definitive joint-venture agreement with Minas de Aguas Teñidas, S.A. (“MATSA”) to form an earn-in exploration and exploitation joint venture on the Alvalade property. MATSA is a private Spanish mining company which owns and operates three mines in the province of Huelva, Andalusia, Spain. MATSA also holds 1,000 km² of exploration licenses in the Iberian Pyrite Belt. MATSA is a 50:50 joint venture company of Mubadala Investment Company, and Trafigura, an independent commodity trading and logistics house

MATSA and its wholly-owned subsidiary Emisurmin Unipessoal Ltda. (“EUL”) can earn-in to 51% of the Alvalade Project from the Company and its wholly owned subsidiary MAEPA by spending €2.4 million and by paying Avrupa €400,000. MATSA can increase their interest to 85% by providing a bankable feasibility study on any one prospect and by making all required success payments to the Company’s original joint venture partner.

Pursuant to the Agreement, Pormining, Unipessoal Lda. (“PorMining”) was incorporated to hold assets and develop mineral rights (both as defined) of the Alvalade Project. EUL can earn up to an 85% interest in Pormining through the following phases:

·Phase I – First Option; 

·Phase II – Second Option; 

·51/49 Phase; and 

·Phase III – Development and Operation 

Phase I – First Option

Phase I commences on the effective date and continues until the first to occur of the first option exercise date and the termination of the first option. During Phase I, MAEPA will grant EUL the sole and exclusive right to hold an undivided 51% interest in PorMining (the first option) for at least three years from the effective date or the issue of the Experimental Exploitation License (the “EEL”) by DGEG to PorMining. EUL’s right to maintain its 51% interest is conditional upon MATSA:

·Paying €400,000 to the Company on or before the effective date (€200,000 was received in December 2019 and the remaining €200,000 was received in June 2020); 

·Funding expenditures (the first option expenditures) on the mineral rights in an aggregate amount of €2,400,000 (€1,200,000 within the first 12 months following the effective date and €1,200,000 in the next 24 months) on or before three years from the effective date or the issue of the EEL. 

Funding of the first option expenditures is solely at MATSA’s discretion and MATSA may elect to terminate the first option at any time by delivering notice (the first option termination notice) to the Company. MATSA may elect to accelerate the funding of the first option expenditures in order to exercise the first option at an earlier date. If there is a shortfall in the first option expenditures, MATSA may elect to pay such amount on or before the end of the three-year period and the first option expenditures will be deemed to have been satisfied.

Upon MATSA completing all of the requirements of the first option, EUL will have unconditionally earned the 51% interest in PorMining. If the first option is terminated, MAEPA will acquire the 51% interest from EUL for a nominal value, the shares will be cancelled and MAEPA will hold a 100% interest in PorMining.

During Phase I, MAEPA will act as the operator of the mineral rights. PorMining will pay MAEPA an operator’s fee equal to €100,000 per year, paid monthly starting June 16, 2020, funded by MATSA and which shall form part of the first option expenditures. During the year 2020, €54,166 ($82,864) was received. In all other phases,

17

PorMining will be the operator unless it appoints another person to act as operator. The operator is responsible for developing and submitting work programs to the technical committee or the board of directors for consideration and approval and to implement work programs when approved according to the approved budget. The technical committee is comprised of two representatives from each of EUL and MAEPA and will be in effect until the first option exercise date. Thereafter, the board of directors will make all decisions with respect to the mineral rights.

During Phase I, EUL will fund 100% of all maintenance payments (as defined) and approved work programs.

As of December 31, 2020, MATSA has funded a total of €464,450 on the Alvalade project, including the €100,000 guarantee with DGEG. Subsequent to December 31, 2020, MATSA funded another €502,000.

Phase II – Second Option

Phase II commences on the first option exercise date and continues until the first to occur of the second option exercise date and the termination of the second option. On the first option exercise date, the Company will grant EUL the sole and exclusive right and option to acquire an additional 34% (for an aggregate 85% interest) in PorMining (the second option). EUL’s right to exercise the second option is conditional on MATSA satisfying the second option conditions as follows:

·Preparing, funding and delivering to PorMining a feasibility study on the mineral rights within five years of the issuance of the EEL or, provided that DGEG grants an extension to all or part of the EEL, the time period for when the second option conditions must be shall be extended to a maximum of two additional years, for a total of seven years after the issuance of the original EEL; 

·Making proper application for a mining license before the end of the term of the EEL; and 

·Making all progress payments to Antofogasta as set out in the Debt Cancellation Agreement dated June 12, 2017 as follows: 

oUS$250,000 within 60 days after the date of a news release announcing a NI 43-101 compliant technical report having been completed and with results as defined; 

oUS$500,000 within 60 days after the date of a news release announcing completion of a feasibility study with results as defined; 

oUS$500,000 on the one-year anniversary of the date of the news release announcing the feasibility study noted above; 

oUS$750,000 within 60 days of the commencement of commercial production; 

oUS$750,000 on the one-year anniversary of commencement of commercial production; 

oUS$750,000 on the second anniversary of commencement of commercial production; and 

oUS$750,000 on the third anniversary of commencement of commercial production. 

The satisfaction of the second option conditions is solely at MATSA’s discretion and MATSA may elect to terminate the second option at any time by delivering notice (the second option termination notice) to the Company. If the second option is terminated, EUL will be entitled to retain its 51% interest in PorMining, plus an additional 1% interest for every €735,294 of expenditures funded during Phase II and the 51/49 Phase will commence.

Upon MATSA satisfying the second option conditions, EUL automatically earns an additional 34% interest in PorMining for an aggregate interest of 85%.

During Phase II, EUL will fund 100% of all maintenance payments and approved work programs.

51/49 Phase

The 51/49 Phase commences on termination of the second option and continues until the deemed conversion of the interest of a party to a royalty. During the 51/49 Phase, PorMining will remain the operator subject to the terms of the Agreement and the shareholders’ agreement and the activities of the parties with respect to the mineral rights will be continue to be governed by the shareholder’s agreement.

18

If at any time after the 51/49 Phase has commenced EUL’s interest is reduced to below 10% as a result of dilution calculations, its interest will be deemed to be converted to a 1.5% royalty, which royalty shall only be payable up to a maximum total payment of €13,000,000 after which it will no longer be applicable. Upon conversion to the royalty, EUL will have no further rights or interest in respect of the assets under the Agreement or the shareholders’ agreement except for the royalty and the termination provisions apply.

If at any time during the 51/49 Phase MAEPA’s interest is reduced to 15% as a result of dilution calculations, then its interest will be deemed to be converted to a 15% “carried interest” following which MAEPA will not be required to contribute to any further work programs and will not be subject to any further dilution until such time as a feasibility study has been prepared, at which point Phase III will have been deemed to have commenced and MAEPA will have to sell the option.

During the 51/49 Phase, the parties will fund the maintenance payments and contribute to the costs of any approved work and/or development programs in proportion to their proportionate share.

Phase III – Development and Operation

Phase III commences on the second option exercise date and continues until the deemed conversion of the interest of a party to a royalty. Within 90 days of the commencement of Phase III, the Company will transfer its 15% interest in PorMining to MATSA in consideration for €10,000,000 to be paid as follows:

·€3,000,000 upon a construction decision being made by Pormining and all permits having been received from DGEG; 

·€3,000,000 upon commencement of commercial production; and 

·€4,000,000 upon the first anniversary of commencement of commercial production. 

During Phase III, the parties will contribute their respective pro rata share of all approved work programs and budgets.

If at any time after Phase III has commenced MAEPA’s interest is reduced to below 10% as a result of dilution calculations, its interest will be deemed to be converted to a 1.5% royalty as described above for EUL.

In March 2020, pursuant to the Earn-in Joint Venture Agreement, MAEPA and EUL entered into a Quota Transfer Agreement pursuant to which MAEPA split its 100% interest in the share capital of PorMining into two quotas, representing 51% and 49% of the company’s share capital, and sold the 51% quota to EUL for the nominal value of €510.

The Company, MAEPA, MATSA and EUL also entered into the PorMining Lda. Shareholders’ Agreement (the “PorMining Agreement”). Pursuant to the PorMining Agreement:

·PorMining has five directors. From the effective date until the second option exercise date, three will be nominated by EUL and two by MAEPA. Thereafter, four will be nominated by EUL and one will be nominated by MAEPA. Upon the occurrence of the 51/49 Phase and thereafter, EUL is entitled to nominate three directors and MAEPA two directors. In the event of dilution of the interest of EUL or MAEPA, each will be entitled to proportional representation (as described) equal to its then interest;  

·In the event that EUL and/or MAEPA wish to sell or transfer their shares in PorMining, the company has the right of first refusal to purchase all or a portion of the shares. To the extent that PorMining does not exercise its right of first refusal to all of the shares, each of EUL and/or MAEPA has a right of first refusal; and 

·The PorMining Agreement will terminate at such time as there is a final decision regarding the dissolution and liquidation of the company, the parties mutually agree on the termination of the PorMining Agreement or as provided for under the Earn-In Joint Venture Agreement.  

The aim of the first stage of the joint venture is to delineate a deposit at Sesmarias or at any other targets within the Alvalade License with a significant drill program. Some of those other targets include the past-producing Lousal Mine, the Monte da Bela Vista stockwork zone, and at the past-producing Caveira Mine.

19

Exploration History

At the start of the Initial Study, first-pass review of re-processed regional gravity and magnetics covering the Alvalade license led to the identification of up to ten target areas on the potential Alvalade JV property.  The Company has upgraded three of these areas – Aldeia dos Elvas, Monte da Bela Vista, and Azinheira dos Barros – and has defined drill targets in all three areas for the Alvalade Joint Venture.  Four more of the target districts need further detailed examination, while the other four areas have been temporarily downgraded, though will be re-visited at a later date.  Further first-pass review of recently completed re-processing of regional geophysics, covering the entire three-license block (Canal Caveira, Ferreira do Alentejo, and Alvalade licenses), is continuing.  

On October 19, 2011, the Company announced that work completed to date included re-logging of an additional 31 historic drill holes, collection of approximately 250 more samples from the drill core, re-processing of regional gravity and magnetics data, first-pass selection of specific target areas, including the Azinheira dos Barros and Aldeia dos Elvas locations, detailed re-processing of gravity data for the Aldeia area, and 1:10,000-scale geologic mapping and rock chip sampling at Aldeia and Azinheira.  Integration of geophysical data, geochemical data, and the results of recent surface work in these two districts suggests the potential for multiple drilling targets in both places.

On February 2, 2012, the Company announced the commencement of exploration work in the Portuguese Pyrite Belt under the Alvalade Joint Venture. The budget for work in 2012 was increased to US$2.5 million and approved by Antofagasta. Company geologists re-logged and selectively sampled over 50,000 meters of historic drill core from 194 drill holes completed in the JV area by other companies prior to the Company's acquisition of the property. A Phase 1 exploratory core drilling program was completed by the Company in three separate target areas. The initial program consisted of 8 holes totaling 3,269.8 meters and was designed to test targets located within two windows of exposed Paleozoic volcano-sedimentary rocks that host massive sulfide deposits elsewhere in the Iberian Pyrite Belt. 7 of the 8 holes drilled encountered alteration characteristic of massive sulphide systems in the Iberian Pyrite Belt. These same 7 holes crossed numerous zones of pyritic material, and 1 of the holes, MBV01, contained significant intervals of low-grade copper that may have been transported from a nearby potentially larger zone of copper mineralization.

Results of the re-logging and sampling, combined with the Phase 1 drill results, were used to plan Phase 2 drilling, which commenced in October 2012. The program consisted of 8 drill holes totaling 3,491 meters. 7 of the holes tested new targets along four separate trends of potentially mineralized host rocks. The 8th hole was drilled in the Monte a Bela Vista target area as a follow-up to hole MBV01 drilled in Phase 1, approximately two kilometers north of the past-producing Lousal Mine. The best results were obtained from the follow-up hole, MBV02, which was drilled to 653.1 meters and intercepted long intervals of probable feeder zone-style mineralized stockwork quartz veining, which may be indicative of the presence of a nearby massive sulfide system. Copper results from MBV02 included 45.90 meters (from 7.30 to 53.20 m) grading 0.24% Cu, including 8.05 meters (from 11.80 to 19.85 m) grading 0.39% Cu and 15.80 meters (from 23.70 to 39.50 m) grading 0.44% Cu; and 24.15 meters (from 146.30 to 170.45 m) grading 0.24% Cu, including 1.50 meters (from 154.15 to 155.65 m) grading 1.64% Cu and 7.50 meters (from 159.60 to 167.10 m) grading 0.44% copper. Gold results included 23.70 meters (from 154.15 to 177.85 m) assaying 1.35 g/t Au, including 1.50 meters (154.15 to 155.65 m) of 5.11 g/t gold and 7.45 meters (161.75 to 169.20 m) of 2.16 g/t gold; and 97.50 meters (279.50 to 377.00 m) of 0.40 g/t Au, including 7.00 meters (293.00 to 300.00) of 1.08 g/t Au and 9.50 meters (310.80 to 320.30 m) of 2.30 g/t Au. The hole also included numerous intervals of greater than 0.1% lead and/or zinc.

In March 2013, the Company commenced the Phase 3 drill program. The program was planned for up to 10 drill holes totaling approximately 4,500 to 5,000 meters. Drilling was planned for several areas along the Neves Corvo and Aljustrel target trends, as the Company developed a total of 23 targets of new, high quality targets. The first part of the program targeted the Monte da Bela Vista area where Phase 1 and Phase 2 drill holes MBV01 and MBV02 intersected copper and gold vein mineralization, and around the formerly producing mines at Canal Caveira and Lousal.  Drill results continue to show positive potential at Monte da Bela Vista. Drill hole MBV03

20

intersected several zones of stockwork quartz-sulfide mineralization, including a 65-meter wide zone at a depth of 426 to 491 meters.

Phase 4 drilling commenced in January 2014. One hole was planned for the Monte da Bela Vista West target, located approximately 400 meters to the west of the Monte da Bela Vista mineralization drilled in Phase 3. An additional 6 holes were planned around two new, previously undrilled target areas. These holes will be collared in young cover sediments which may be as thick as 200 meters which completely obscure visual sighting of the target rocks. The holes will be drilled through the sediments and then 30-40 meters into the target basement rocks with the intention of using the information collected from the short drilling in the basement rocks to target vectoring towards true deep massive sulfide targets. The final 3 holes of Phase 4 will be follow-up deep tests from locations indicated from the blind vectoring drilling.

Massive sulfide mineralization was discovered in the second drill hole at the Sesmarias South target area, approximately 7 kilometers south of the past producing Lousal Mine. The area is covered by approximately 100 meters of cover sediment, which completely obscures the target rocks. The mineralized intercept in SES002 totals 16.85 meters.  The intercept includes a zone of massive sulfide mineralization, then underlain by a zone of semi-massive sulfides and strong stockwork sulfide veining.  There follows a narrow shear zone, which is, in turn, underlain by a further zone of strong alteration with anomalous disseminated and stockwork sulfide mineralization.  The analytical results for the Massive and Semi-massive zones are included in the table below:

Six additional holes were drilled in this initial Sesmarias program in the immediate vicinity of the initial Sesmarias massive sulfide intersection (SES002). A total of 1,961 meters were drilled in the general target area. Highlights from the 6 additional holes include:

·SES008, a 650-meter step-out NW from discovery SES002, intersects 5.5 meters of massive sulfide mineralization with positive gold and silver results, and including 5.0 meters @ 0.64% Copper, 0.94% Lead, and 1.54% Zinc. 

·SES006, a 50-meter step-out NW from SES002, intersects 1.5 meters of VMS mineralization @ 1.66% Copper, 2.3% Lead, and 3.66% Zinc. 

A further five holes were then drilled to follow-up on the prior eight-hole program. The highlight of this follow-up program is a thick massive sulfide intercept in drill hole SES010, which started at a depth of 228.40 meters, and continued for 57.85 meters to 286.25 meters depth. Average grades for the entire massive sulfide intercept are: 0.32% copper, 0.61% lead, 1.95% zinc, 0.45 g/t gold, and 25.1 g/t silver. True thickness of the intercept is estimated to be approximately 35 to 40 meters. The joint-venture partners completed 13 holes, over a total strike length of 1,700 meters, at Sesmarias, for a total of 3,807 meters in the general target area. The Sesmarias target zone is heavily faulted, and the rocks are strongly contorted and displaced, which makes exploration extremely difficult. Despite these difficulties, the results from the drill programs continue to clearly indicate the potential for a large-scale mineralized system.

Drilling at the Alvalade project resumed on October 28, 2015 with funding by the new joint-venture partner Colt.  In the new phase of drilling, the partners planned to drill 5,000 to 6,000 meters, mostly in the immediate area of the Sesmarias copper-zinc discovery.

21

On February 3, 2016, the Company announced results from the drilling. Analytical results from four diamond drill holes completed in late 2015 in the area of previously-drilled SES010 (58 meters @ 0.32% Cu, 0.61% Pb, 1.95% Zn, 0.45 g/t Au, 25 g/t Ag) confirm and extend the massive sulfide lens to a present length of 300 meters with a 35-40 meter thickness.  The lens is open to the northwest and down dip to the northeast.  Following are the results from the recent drilling.

Results from recently-completed downhole geophysics, utilizing the “mise-a-la-masse” (MALM) method, combined with historic ground magnetics data, suggest that the sulfide lens may continue another 300 meters or more to the northwest from SES022.  Future drilling will test this target area.

The drill core was transported by Company personnel from the drill sites to a nearby secure storage facility for logging and sampling. The sample intervals were one meter, unless visual inspection of the core indicated that a slightly different interval was necessary to preserve continuity of mineralization and rock type for analysis. One half of the core was collected and sent to the geochemical laboratory, while the remaining half of the core was retained in the core boxes for future reference. All samples were sent by courier or transported by Company personnel to the ALS Minerals sample preparation facility in Seville, Spain. ALS shipped the prepped material to their main European analytical laboratory located in Loughrea, Ireland. The samples were analyzed by ICP methods for copper, lead, zinc, and silver, and by fire assay with an AAS finish for gold. In addition to ALS Minerals quality assurance/quality control (QA/QC) of all work orders, the Joint Venture conducted its own standard, internal QA/QC from results generated by the systematic inclusion of certified reference materials, blank samples, and field duplicate samples. The analytical results from the quality control samples in the Sesmarias work orders have been evaluated, and conform to industry best-practice standards.

Current and Anticipated Exploration

Recent geochemical sampling, using ultra-trace level detection methods to analyze for base metals and a suite of pathfinder elements, in the area of the original SES002 discovery hole, has demonstrated even further northwest extension potential for the SES010 massive sulphide lens. Technical understanding of the sub-surface geology also suggests a possible extension of the lens to the southeast of up to 100 meters. There is also potential for further extension of the SES002 discovery lens, which now appears to be a separate lens from the SES010 lens. It is common to have multiple massive sulphide lenses in Pyrite Belt deposits.

In addition to further downdip and strike length massive sulphide targets found along the 1.8-kilometer trend of Sesmarias mineralization, there are at least four other separate, drill-ready targets in the immediate Sesmarias area, a significant target in the Pombal area located about 10 km southeast of Sesmarias, and several targets at the Monte da Bela Vista stockwork discovery located about 10 km north of Sesmarias, all on the Neves Corvo mineral trend.

22

Furthermore, with completion of recent internal studies of the Sesmarias-Lousal-Monte da Bela Vista area, the Company anticipates the potential and possibility of creating a new mineral district that combines the positive results from the Sesmarias area, located seven kilometers south of the old Lousal Mine, to the Monte da Bela Vista stockwork mineralization, located two kilometers north of Lousal, with the Lousal Mine, itself. Review of historic Lousal Mine resource and production reports suggests that copper/zinc-bearing massive sulphide mineralization remains in the immediate area of the historic mine workings. The Company will work towards establishing a continuum and enlargement of the massive sulphide mineralization between all three target areas.

Ongoing geological review of Sesmarias area core, along with subsequent interpretation and three-dimensional (3D) modeling of the data, suggests a simplified deposition history of mineralization and surrounding rock units. Using the newly developed information, the Company’s geologists see continued potential in the SES002 (“2”) Lens and in the SES010 (“10”) Lens. The new work indicates the possibility that a third lens may be located between widely-spaced drill holes SES008 and SES009 (the “8” Lens).

The 2 Lens is characterized by higher grade mineralization, including 10.85 meters @ 1.81% Cu; 75.27 ppm Ag; 2.57% Pb; 4.38% Zn; 0.13% Sn, although at this point, the extents of the mineralized envelope are undefined. The new 3D modeling suggests that the Lens is oriented in a non-parallel direction to the 10 Lens, which may explain why previous follow-up drilling did not significantly extend the discovery area. The Company also sent massive sulfide mineralization for analysis from previously-drilled hole SES003, which intersected the 2 Lens, but was never analyzed.

The 10 Lens, as defined by previous drilling, currently measures approximately 400 meters long, 30 meters wide, and tested to a depth of nearly 200 meters. It is open to the south, north, and to depth. The new drilling targets its extension to the north and potential for increasing copper and zinc grades.

23

The 8 Lens has been tentatively defined by the area between, and including, two drillholes: SES008 and SES009. Located 500 meters apart, SES008 and SES009 contained narrow zones of sulfide mineralization apparently truncated (from the previous interpretation) by faulting. The SES008 intercept included 5.0 meters @ 0.64% Cu; 36.8 ppm Ag; 0.94% Pb; 1.54% Zn. The SES009 drill hole contained 4.0 meters of pyrite mineralization. The new interpretation suggests that the 8 lens is dipping to the northwest, and that SES008 and SES009 intercepted the outer edge of the mineralized lens.

On November 30, 2018, the Company announced startup of drilling at the Alvalade project. The Company would drill approximately 2,500 meters in five to seven diamond drill holes to enlarge and upgrade at least two lenses of copper- and zinc-bearing massive sulfide mineralization discovered by Avrupa during previous exploration work in the target area.  Drill plans for this program include enlargement/upgrade targets on all three lenses. The recent 3D modeling has given good support for placement of drill collars that will potentially upgrade the Sesmarias prospect.

The Company completed six holes totaling 2,498 meters. The drilling program successfully tested a new exploration model and concepts, with the following important results:

·Provided a much higher degree of predictability in location of mineralization in the immediate Sesmarias Project area, as the new model was tested successfully in all six drill holes;  

·Enlarged the “10” Lens from 300 meters strike length to at least 600 meters long, up to 400 meters wide, and 25 meters thick (SES026 and SES027);  

·Discovered the footwall feeder zone stockwork for the “8” Lens (SES028);  

·Intercepted the edge of the “2” Lens/Horizon (SES025 and SES030);  

·Intercepted a stockwork-stringer sulfide zone above the “10” Lens, providing evidence for a new, fourth lens/horizon, noted for now, as the “26” Horizon (SES026);  

·Showed that mineralization is open to the east up to the bounding fault;  

·Showed that mineralization is open to the west up to the boundary of the Devonian-age Volcano-Sedimentary (VS) host rocks for mineralization and the overlying Tertiary-age gravels and semi-consolidated sediments.  

In March 2019, the Company reported on drilling results at the Alvalade project. Highlights from the program include the following results:

·SES026 intercepted 28.95 meters of 0.48% copper, 0.77 g/t gold, 15.7 ppm silver, 0.52% lead and 1.31% zinc. 

·SES026 extended the “10” Lens by 300 meters to the north from previous drilling. 

·The “10” Lens is now at 600 meters x 300 meters x 25 meters. 

·Mise-à-la-masse (MALM) geophysical anomalism extends another 150 meters past SES026 location. 

·SES028 intercepted the edge of a significant feeder zone stockwork beneath the “8” Lens.  Assays indicated anomalous gold, silver, copper, lead, and zinc throughout the entire length of the stockwork from 373.40 meters to 460.80 meters in depth, beneath the 8 Lens. 

·Discovered a possible new mineralized horizon in SES026, located above the “10” Lens, and intersected it again in SES027 and SES029. 

·Confirmed that the high grade “2” Lens is a fault-bounded fragment of massive sulfide mineralization with origin yet to be determined. Hole SES003, drilled previously on this target, is now also being assayed and will be reported shortly. 

·Continued re-logging of historic drill holes has upgraded targets in the northern portions of the Sesmarias Prospect. 

·Each hole drilled in this exploration phase of the Project has enhanced the revamping of the exploration model.  Combined with strong assay results in SES026, in particular, the information will be used in the next drill targeting exercise for this large area. 

24

SES026 intercepted 28.95 meters of massive sulfide mineralization grading 0.48% copper and 0.77 g/t gold, extending the “10” massive sulfide lens to at least 600 meters in strike length.  The top seven meters of the intercept contained higher grade silver, copper, lead, and zinc, followed by a nine-meter interval of 1.09 g/t gold, as shown in the table below. The hole was collared on a geophysical anomaly which extends a further 150 meters beyond the SES026 location.  At this time, the estimated average dimensions of the 10 Lens are 600 meters long x 300 meters wide x 25 meters thick.  The mineralization is open to the east boundary fault and to the west intersection of the Devonian host rocks and the Tertiary gravels.  The lens appears to be cut by post-mineral dikes to the north and remains open to the south, though faulting may truncate the lens about 100 meters south of SES021.

Mineralization in SES026 showed significantly higher gold values compared to previous drilling on the 10 Lens, as shown below, as well as slightly higher overall copper values.

The Sesmarias Prospect area continues for a further 1000 meters to the north of the area of the present phase of drilling.

SES028 hit 87.40 meters of stockwork quartz-iron sulfide veining that marks the possible edge of a feeder zone for the previously discovered “8” Lens.  Assays indicated anomalous gold, silver, copper, lead, and zinc throughout the entire length of the stockwork from 373.40 meters to 460.80 meters in depth, beneath the 8 Lens. Examples of variable intervals of anomalism include:

25

SES026, SES027, and SES029 intersected a horizon of stockwork quartz-sulfide veining located 20-40 meters above the “10” lens.  While mostly iron sulfides, the location of the horizon suggests potential for another possible mineral layer in the Sesmarias massive sulfide system.

The Company also provided assay results for drill hole SES003 which was drilled on the Alvalade Project in 2014, but not analyzed until 2019 due to its general proximity and similar visible characteristics to drill hole SES002. The SES003 assays were completed now in order to be added into Avrupa’s 3D model of the “2” Lens.  Hole SES002 is the Sesmarias “2” Lens discovery hole, and its assay results are also shown below.  SES003 added approximately 18 meters of dip length to the “2” Lens, as calculated in 2014.  Results from SES003 are comparable to those from SES002, as shown in the tables below.

To date, Avrupa has drilled seven closely-spaced, shallow core holes in the area of SES002 and SES003 to determine possible extent of the “2” Lens. Avrupa also conducted several types of downhole and surface geophysical surveys.  Intercepts of broken massive sulfide mineralization in SES005, SES006, and SES007, along with results from the geophysical work, and review of the actual core material in all of the holes suggested that mineralization comprising the “2” Lens occurred in a fault zone (now understood as the eastern boundary fault described in the news releases of February 11, 2019 and March 11, 2019).  The interpretations from the 2014 drilling program suggested that the possible extents of the “2” Lens were on the order of 100-125 meters dip x 50-75 meters strike, and 5-10 meters thickness, as demonstrated in the following cross section and map view of the mineralization.

The program continues to be highly successful, accomplishing goals of better technical understanding of the Sesmarias mineralizing system and significantly enlarging it. This self-funded drilling program is the seventh phase of drilling to be completed by Avrupa Minerals on the Alvalade license. In addition to further targets in the immediate Sesmarias Project area, additional future drilling is anticipated for the Sesmarias-Lousal-Monte da Bela Vista District, as well as in other Avrupa generated target areas with related Pyrite Belt-style massive sulfide targets and mineralization.

The initiation of the first stage of exploration by MAEPA was delayed due to the COVID-19 situation in Portugal and Spain. Portugal was declared to be in a State of Emergency on March 18^th, 2020 which included the suspension of most government operations and private enterprises. On May 2^nd, the Emergency was cancelled and a multi-phased plan to ease restrictions and reopen the Country and its economy was initiated.

On June 25, 2020, the Company announced that the five-year Experimental Exploitation License (“EEL”) was issued to PorMining for the Alvalade project. Work commenced with the review and full compilation of all historic data from the license area. Initial physical work included re-logging selected Sesmarias core, first logging and sampling of available, prior-to-Avrupa, historic core, geochemical exploration in selected target areas and Sesmarias extensions, and property-wide geophysics.

26

In October 2020, the Company announced that the Company would start a 7,000 to 8,000 meter diamond drilling program at the Alvalade Project. The program would test the Sesmarias copper-zinc massive sulfide discovery along strike to both the north and south, as well as the Monte da Bela Vista stockwork zone, located approximately nine kilometers north of Sesmarias. The Company would also drill at a number of other attractive massive sulfide targets around the 115-square kilometer license during the early stages of the program.

27

The Alvalade Experimental Exploitation license covers at least five target basin areas, each with numerous potential drill target setup locations. Sesmarias has seen the most recent work due to Avrupa’s copperand zinc-bearing massive sulfide discovery in 2014. Other areas, including Monte da Bela Vista, Lousal, and Caveira. still need first-and second-pass, discovery-oriented drilling. An airborne electromagnetic survey to be conducted late in calendar 2020 will cover the license from the Caveira Mine in the north to the south end of the Sesmarias zone. Results of this survey will assist in delineating further massive sulfide targets in this area.

The Joint Venture exploration team would also commence with a thorough compilation and detailed study of the historic Lousal Mine data with the expectation of delineating new, previously untested targets close to and within the old mine workings’ area. The Lousal Mine is located 1.5 kilometers south of Monte da Bela Vista, and about seven kilometers north of Sesmarias, but separated by a major fault zone. Geologically, it is possible that the

28

Sesmarias and Lousal massive sulfide lenses were originally part of the same deposit more than 360 million years ago when Pyrite Belt mineralization formed, but movement along the later fault system separated the zones.

The Company previously acquired a large amount of data for the Lousal Mine which was digitized, but not fully compiled. During 2018, the Company performed a basic review of the data, including a partial collection of annual mine production reports from 1900 to 1988. The reports suggested that miners extracted upwards of 15-20 million metric tonnes of copper-zinciron- bearing massive sulfide material from a number of lenses in the Lousal Mine.

Drilling began on the project in December 2020. In previous work at Sesmarias, Avrupa outlined four immediate target zones around the massive sulfide discovery, beyond downdip targets along the actual mineral lenses, Lens 2, Lens 8, and Lens 10. To date, Lens 8 has seen the least amount of development. Re-logging of previous Avrupa drilling by company and partner geologists along the Sesmarias discovery zone is providing an enhanced look into the targeting for new, additional mineralization. The first holes in this drilling phase will be set to extend Lens 8 towards the area of the “Northern Deep” targets, which will be designated the Brejo area, for both strike-length and dip-length extensions of the copper-zinc-iron sulfide zone. In total, the Company expects to drill 7-8,000 meters in the current program.

In addition to the drilling, a helicopter-supported VTEM electromagnetic survey commenced in mid-December, covering the northern 3/4 of the Alvalade License. The survey will cover four of the five major basins on the property, including Lousal, Monte da Bela Vista, Cabeça Gorda, and Caveira. Results from this program will assist in delineating further massive sulfide targets, particularly in the license area between Sesmarias and the historic Canal Caveira massive sulfide deposit located at the north end of the license. Initial orientation flights over the Sesmarias and Lousal massive sulfide deposits will be of significant value for determining the important geophysical characteristics of these deposits.

On February 24, 2021, the Company presented the initial progress report on drilling to date. Two diamond drill holes, totaling 874 meters, have been completed, and a third hole has been started in the SES008 area, testing northern extensions of the Sesmarias copper-zinc-iron sulfide mineralization. Avrupa discovered massive sulfide mineralization at Sesmarias in 2014, and intermittent drilling since then increased the known strike length of the massive lenses to 1.6 kilometers. The present work is the initial attempt to expand the mineralization to the north from SES008 to the Brejo area (formerly designated as Sesmarias North or Northern Deep target). Wide-spaced, historic drilling suggests strong possibility of massive sulfide mineralization in the Brejo target area.

Hole SES20-031 targeted potential massive sulfide mineralization related to the SES008 intercept. The hole continued to 536 meters depth, in several places intersecting the specific black shale unit that hosts massive sulfide mineralization at Sesmarias and at the Lousal Mine, located six kilometers to the north. Detailed review of the core showed that for its entire length, the drill hole passed through intensely folded rock units of the Volcano-Sedimentary Formation, the general host of mineralization throughout the Iberian Pyrite Belt. Overall, however, the drillhole roughly paralleled the major trend of bedding, allowing only for narrow true widths of mineralized intercepts.

The drillhole skirted or skimmed the main target zone, for the length of the hole. Previous work by Avrupa suggested that individual massive sulfide lenses were oriented ± vertically, but often dipping steeply to the NE. However, detailed re-logging of Sesmarias area core and subsequent first-logging of SES20-031 lead to the conclusion that intense folding of the limb of a much larger, overall westerly-dipping fold system is a realistic reason as to why drilling has not yet cut significant thicknesses of massive sulfide – i.e., the drilling roughly parallels the target host unit and never really crosses mineralization at a favorable angle.

The thickest intercept occurs at 277.70 to 288.45 meters, where drilling skimmed the top of a possible folded/faulted massive sulfide lens. Rocks in the intercept zone are dominantly silica, containing disseminated sulfides, zones of banded sulfide mineralization, sulfide breccias, and one interval of approximately 0.5 meters of massive sulfide material. The intercept includes a 3.8-meter thick, weakly mineralized fault zone. The following table shows the metals’ values of the intercept.

29

Following the completion of SES20-031, a downhole electromagnetic (DEM) survey was performed which produced a strong conductive response in the rocks located above the path of the drill hole. Using this information, the second hole was targeted in the “8” Lens zone directly at the conductor. SES21-032 continued to a depth of 338 meters. At 201 to 211 meters, the drill hole passed through the Sesmarias mineral horizon, a zone of weakly pyritic, quartz vein-rich, broken, graphitic gray and black shales which is interpreted to be the DEM conductor, and likely to represent a distal zone of potential massive sulfide mineralization in the “8” Lens area. The drill hole is now undergoing detail-logging and sampling of the shale zone. The pattern of intense folding and faulting continues in this hole, but it appears that it intersected shale units originally located further away from the main part of the target unit.

Drill hole SES21-033 is planned for a depth of 500 to 600 meters and is designed to target potential downdip massive sulfide mineralization beneath holes SES008 and SES20-031. Following the completion of SES21-033, drilling is scheduled to move to the northwest of SES008 to potentially increase the strike length of the 8 Lens. The geological team continues to assess the historical core in the Brejo area and has started to map geological structures visible in the old Lousal Mine workings. Initial work there clearly shows similarity of ore control characteristics to known Sesmarias massive sulfide mineralization.

Mertola

In June 2014, the Company received a new license for the Mertola project, which is located in the Pyrite belt of southern Portugal. It is east of Neves Corvo, and covers the eastern Portuguese portion of the Sao Domingos VMS target belt.

During 2019, the Company applied to DGEG to drop the Mertola license. As of April 30, 2021, DGEG had not yet processed the application.

Generative work

The Company is continuing prospecting for additional properties in other parts of Portugal, using its experience-amassed database to review old prospects and districts from new angles and to develop wholly new generative ideas. The Company has identified several potential new areas of interest, and maintains excellent relations with both the Mining Bureau and the Geological Survey in Portugal.

Kosovo

The Company advanced its property interests in Kosovo though its 100% owned subsidiary Innomatik Exploration Kosovo (IEK). The Company initially purchased a 92.5% interest in IEK in July 2010. During the year ended December 31, 2013, the Company acquired the remaining 7.5% interest in IEK.

The Slivovo license, located approximately 15 km southeast of Prishtine, the capital city of Kosovo, and covering 15.2 km2, was issued to the Company on June 27, 2012.

On December 31, 2019, the Company wrote down its interest in Slivovo by $143,154 to $1 as the Company was in negotiations with the Kosovo Mining Bureau, along with Byrnecut and Peshter Mining as to how to possibly extend the life of this license. During fiscal 2020, Byrnecut decided not to proceed with advancing Slivovo. Rather than dropping the license and potentially allowing a third party to stake the open land, Innomatik Exploration Kosovo LLC (“IEK”), Byrnecut and Peshter Mining entered into a binding term sheet (the “TS”) whereby the

30

parties set out the terms on which Peshter Mining would surrender the existing tenements, thereby enabling IEK to apply, as sole beneficial owner, for one or more tenements over the entirety of the tenement area. The license was officially released back to the government and IEK reapplied for the vacated license. The application was reviewed by the board of directors of the Mining Bureau, but no decision was made by the time of their final meeting of their term in office, leaving the decision to a new incoming board of directors. While a new board has not been appointed, the Company remains in discussion with the Mining Bureau concerning the issuance of a new exploration license for the Slivovo property. As of December 31, 2020, the Company wrote off $1.

As consideration for Byrnecut ensuring that Peshter Mining complies with its obligations under the TS, IEK must pay to Byrnecut milestone cash payments totaling €375,000 and milestone gold payments totaling 850 troy ounces of gold as follows:

Cash

·€125,000 within 30 days of the first to occur of the completion of a positive bankable feasibility study or the board of directors of IEK making a decision to proceed with the development of a commercial mining operation in respect of all or any part of the tenement area; 

·€125,000 within 30 days of issue of a mining license in respect of all or any party of the tenement area; and 

·€125,000 within 30 days of commencement of construction of a mine within the tenement area. 

Gold

·100 troy ounces within 30 days of commencement of commercial production (“CCP”); 

·175 troy ounces within 30 days of the one-year anniversary of CCP; 

·250 troy ounces within 30 days of the two-year anniversary of CCP; and 

·325 troy ounces within 30 days of the three-year anniversary of CCP. 

Metovit (Kamenica)

On February 14, 2012, the Company announced that it completed an initial round of exploratory drilling in late 2011 on the Kamenica license. Two core holes, totaling 382.6 meters, were completed at two separate targets located about three kilometers apart. The most interesting of the two holes, at the Metovic target, intercepted multiple generations of visible Fe-Zn-Pb sulfide mineralization in pervasive disseminations and stockwork quartz veining, hosted by strongly altered, calcareous silt and sandstones over the entire 193.3-meter length of the hole. The hole bottomed in altered quartz diorite porphyry and brecciated quartz diorite containing fragments of the porphyry. The widespread anomalous sulfide mineralization and strong alteration may indicate the presence of a possible large porphyry-style system within the Kamenica license.

The second hole, at the Grbes target, encountered pyritic gneisses from close to the surface to 120 meters depth, followed by sooty, pyritic black shales and graphitic schists to the bottom of the hole at 189.3 meters.  These strongly altered rock units do not appear at the surface, and are of an older Vardar formation that has been uplifted in this portion of the exploration area.  Further work is necessary to assist in targeting for a possible large mineral system.

The Kamenica license was dropped, but replaced by the fully-overlapping new Metovit application which was been approved by ICMM.  In February 2016, Byrnecut advanced €31,871 for the Company to meet 2016 legal work commitments and further advance this property. The 2016 exploration program included geological and geochemical reviews which continued at the end of 2016 and into the first month of 2017.  About 700 samples were sent to the lab, and the results have been tabulated, compiled and reviewed.  Results of the sampling indicated geochemical anomalism along certain structures crossing the license. However, there were only a few indications of wide zones of potential mineralization. The initial period of the Metovit project expired, and the Kosovo Mining Bureau issued an extension to January 31, 2021.

31

In January 2021, the Company dropped the Metovit property.

Other Kosovo Projects

During calendar 2021, the Company incorporated a wholly-owned subsidiary AVU Kosova LLC.

Germany

The Company had an 85% interest in an exploration license located in the Free State of Saxony, eastern Germany. This exploration license was granted through the mining bureau of the Free State of Saxony, called the Sachsisches Oberbergamt.  The Company received this license in approximately 6 months after application.

Overview

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with IFRS.  The value of the U.S. Dollar in relationship to the Canadian Dollar was $1.28 on December 31, 2020.

The Company has since inception financed its activities through the issuance of equity.  The Company anticipates having to raise additional funds by equity issuance in the next several years, as all of the Company’s properties are at the exploration stage. The timing of such offerings is dependent upon the success of the Company’s exploration programs as well as the general economic climate.

Set out below is the operating and financial review for the financial years ended December 31, 2020, 2019 and 2018. All per share amounts have been adjusted for the 1 for 4 common stock consolidation effective December 21, 2020.

Operating Results

Year ended December 31, 2020 vs. year ended December 31, 2019

During fiscal 2020, the Company continued its focus on the Alvalade property. A new exploration program, including drilled, commenced with funding from MATSA.

The comprehensive loss for the year ended December 31, 2020 was $155,697, or ($0.00) per share, compared to a loss of $2,076,885, or ($0.08) per share, for the year ended December 31, 2019. Mineral exploration expenses were $80,343 (Year ended December 31, 2019 - $566,427), and reimbursement from optionee was $434,982 (2019 - $291,680).

Excluding the non-cash depreciation of $13,303 (2019 - $3,496) and share-based payment of $Nil (2019 - $9,369) related to the grant and vesting of stock options, the Company’s general and administrative expenses totaled $481,056 during the year ended December 31, 2020 (2019 - $535,389), a decrease of $54,333. The decrease was primarily due to lower investor relations fees of $94,314 (2019 - $139,494), a decrease of professional fees of $129,511 (2019 - $191,238), and a decrease in travel to $8,329 (2019 - $35,723). Consulting fees, wages and benefits increased to $192,577 (2019 - $117,278) as Paul Kuhn’s management fee was allocated as a consulting fee in the current year while it was allocated to different properties in 2019. Transfer agent fees rose to $18,648 ($9,472).

32

Other items included interest income of $8 (2019 - $148) and foreign exchange gain of $802 (2019 – loss of $195) due to more favorable exchange rates. Disposal of equipment was $Nil (2019 - gain of $6,643).

During 2020, the Company wrote-off exploration and evaluation assets of $1 which represents the remaining capitalized value of the Slivovo property acquisition cost. During 2019, the Company had a write-down of exploration and evaluation assets of $1,239,994 as the Marateca license was officially dropped, and the capitalized amounts on the Slivovo project were written-down to $1. Write-down of tax deposits was $41,200 which was related to amounts for the dropped properties. Exchange differences arising on the translation of foreign subsidiaries was a loss of $16,786 in 2020 (2019 - gain of $20,714).

During the year ended December 31, 2020, the Company expensed exploration costs totaling $80,343 including $68,960 on Alvalade, $1,968 on Slivovo and $9,415 on other projects in Kosovo.

Year ended December 31, 2019 vs. year ended December 31, 2018

During fiscal 2019, the Company focused on the Alvalade property. The drill program on Sesmarias Prospect was concluded and the definitive Earn-in and Joint-Venture agreement with MATSA on the project was signed.

The comprehensive loss for the year ended December 31, 2019 $2,076,885, or $(0.08) per shares, compared to a comprehensive loss of $1,901,880, or ($0.08) per share, for the year ended December 31, 2018. Mineral exploration expenses were $566,427 (Year ended December 31, 2018 - $2,276,286), which were partially offset by advances from optionees of $291,680 (2018 - $1,189,652). Excluding the non-cash depreciation of $3,496 (2018 - $Nil) and share-based payment of $9,369 (2018 - $141,124) related to the grant and vesting of stock options, the Company’s general and administrative expenses totaled $535,389 during the year ended December 31, 2019 (2018 - $614,322), a decrease of $78,933. The decrease was primarily due to lower consulting fees of $117,278 (2018 - $143,332), lower professional fees of $191,238 (2018 - $231,065), lower travel expense of $35,723 (2018 - $35,723), and decreased office and administrative fees of $19,052 (2018 - $28,686), which were all related to reduced property investigations and corporate activities. Other expenses saw only slight changes, including bank charges of $1,784 (2018 - $4,661), investor relations expense of $139,494 (2018 - $132,189), listing and filing fees of $9,062 (2018 - $8,791), rent expense of $12,286 (2018 - $9,000) and transfer agent fees of $9,472 (2018 - $9,670).

Other items included interest income of $148 (2018 - $1.181), other income of $Nil (2018 - $6,014), and foreign exchange loss of $195 (2018 – loss of $485) which declined due to more favorable exchange rates. Disposal of equipment was a gain of $6,643 (2018 – $Nil).

During 2019, the Company had a write-down of exploration and evaluation assets of $1,239,994 as the Marateca license was officially dropped, and the capitalized amounts on the Slivovo project were written-down to $1.Write-down of tax deposits was $41,200 which was related to amounts for the dropped properties. Exchange differences arising on the translation of foreign subsidiaries was a a gain of $20,714 (2018 – loss of $16,548).

During the year ended December 31, 2019, the Company expensed exploration costs totaling $566,427 including $93,492 on Alvito, $398,196 on Alvalade, $28,812 on other projects in Portugal and $45,927 on other projects in Kosovo.

Year ended December 31, 2018 vs. year ended December 31, 2017

During fiscal 2018, a drill program was successfully completed on the Alvito property, and a drill program was begun on the Sesmarias Prospect located on the Alvalade license which was completed subsequent to the year-end.

The comprehensive loss for the year ended December 31, 2018 was $1,901,880, or ($0.08) per share, compared to a comprehensive loss of $1,879,521, or ($0.08) per share, for the year ended December 31, 2017. Mineral exploration expenses were $2,276,286 (Year ended December 31, 2017 - $1,742,813), which were partially offset

33

Other items included interest income of $1,181 (2017 - $2,068), other income of $6,014 (2017 - $2,837), and foreign exchange loss of $485 (2017 – loss of $11,494) which declined due to more favorable exchange rates. There was no loss on disposal of equipment (2017 – loss of $2,105) or write-down of due from optionee (2017 –loss of $1). During 2018, the Company had write-down of property deposits of $49,962 as the Company determined that cash pledged for work on dropped properties would not be completed and those amounts were written off. This amount was somewhat offset by cash deposited by a former optionee on the Alvalade property which was assigned to the Company. During the year ended December 31, 2017, the remaining acquisition and capitalized exploration expenditures on the Covas property of $71,289 were written down as the project was dropped. Exchange differences arising on the translation of foreign subsidiaries was a loss of $16,548 (2017 – gain of $26,776).

During the year ended December 31, 2017, the Company expensed exploration costs totaling $2,276,286 including $848,219 on Alvalade, $12,898 on Covas, $1,079,479 on Alvito, $225,284 on other projects in Portugal, $Nil on Slivovo, $89,808 on other projects in Kosovo, $Nil in Germany, and $20,598 on others.

Liquidity and Capital Resources

During the year ended December 31, 2020, the Company completed one private placement of its common shares:

On October 23, 2020, the Company completed a non-brokered private placement of 4,219,641 common share units at a price of $0.12 per unit for gross proceeds of $506,357. Each unit consists of one common share and one non-transferable share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.20 per share until October 23, 2023.

As of December 31, 2020, the Company has no outstanding commitments The Company has not pledged any of its assets as security for loans other than €1,000 ($1,561) cash pledge for its exploration licenses in Portugal and is not subject to any debt covenants. The Company issues stock in private placements, option payments from joint venture partners, direct funding by joint venture for the exploration of the Company’s properties, and the exercise of warrants, finders’ warrants, and options. The Company believes that sufficient funding from warrants, options, JV partners and the possible sale of additional equity will allow its efforts to continue throughout 2021. If the market conditions worsen or improve, the Company will make adjustment to budgets accordingly.

The current property exploration budget for fiscal 2021, exclusive of the amounts to be spent by the Company’s’ joint-venture partners, is limited. The Company may file applications for new exploration licenses in Portugal, depending on the available funds. The General and Administrative expenses for 2021 are budgeted at approximately $600,000.

34

The Company has financed its operations through the issuance of common shares. The following sales and issuances of common stock have been completed in the last 5 fiscal years. All share amounts have been adjusted for the 1 for 4 common share consolidation effective December 21, 2020.

Table No. 5

Common Share Issuances

Year Ended December 31, 2020

As at December 31, 2020, the Company had a working capital deficit of $614,342 (December 31, 2019 – working capital deficit of $963,773).

During the year, Operating Activities used cash of ($344,967), including the loss for the year of ($138,911). Items not involving cash include depreciation of $13,303 and write-down of exploration and evaluation assets of $1. Changes in non-cash working capital items include an increase in VAT receivables of ($4,880); an increase in due from optionees of ($27,355); an increase in prepaid expenses and advances of ($23,432); a decrease in other receivables of $602; investment in PorMining used cash of ($765); a decrease in accounts payable and accrued liabilities of ($363,267); an increase in accounts payable owed by optionees of $29,627; an increase in due from/to related parties of $188,949; and exchange difference arising on the translation of foreign subsidiaries was ($18,839).

Investing Activities provided cash of $8,487. Property deposits provided cash of $15,939, and purchase of equipment used cash of $7,452.

Financing Activities provided cash of $483,375. Proceeds from issuance of common shares provided cash of $506,357 and share issue costs used cash of ($22,982).

Cash was $205,238 as of December 31, 2020 compared to cash of $58,343 as of December 31, 2019, an increase of $146,895 during the year.

Year Ended December 31, 2019

As at December 31, 2019, the Company’s working capital was negative $963,773 (December 31, 2018 – working capital deficit of $448,109).

35

During the year, Operating Activities used cash of ($435,249), including the loss for the year of ($2,097,599). Items not involving cash include mineral exploration expenses of $10,996, share-based payments from the granting of stock options of $9,369, depreciation of $3,496, gain on the disposal of equipment of ($6,643), write-down of exploration and evaluation  assets of $1,239,994, and write-down of tax deposits of $41,200.

Changes in non-cash working capital items include a decrease in VAT receivables of $5,266; a decrease in due from optionees of $11,601; a decrease in prepaid expenses and advances of $34,674; a decrease in other receivables of $6,540; a decrease in accounts payable and accrued liabilities of ($101,528); a decrease in accounts payable owed by optionees of ($11,601); an increase in due from/to related parties of $392,145; and exchange difference arising on the translation of foreign subsidiaries was $26,841.

Investing Activities provided cash of $116,848. Net proceeds from the sale of equipment provided cash of $6,643, property deposits provided cash of $116,772, and purchase of equipment used cash of ($6,567).

Financing Activities provided cash of $270,456. Proceeds from issuance of common shares provided cash of $282,000 and share issue costs used cash of ($11,544).

Cash was $58,343 as of December 31, 2019 compared to cash of $106,288 as of December 31, 2018, a decrease of $47,945 during the year.

Year Ended December 31, 2018

As at December 31, 2018, the Company’s working capital was negative $448,109 (December 31, 2017 – working capital of $27,102).

During the year, Operating Activities used cash of ($1,499,073), including the loss for the year of ($1,885,332). Items not involving cash include mineral exploration expenses of $23,796, share-based payments from the granting of stock options of $141,124, and write-down of property deposits of $49,962. Changes in non-cash working capital items include a decrease in VAT receivables of $14,358; an increase in due from optionees of ($14,666); an increase in prepaid expenses and advances of ($24,034); an increase in other receivables of ($93,278); an increase in accounts payable and accrued liabilities of $486,711; a decrease in accounts payable owed by optionees of ($45,464); an increase in due from/to related parties of $39,129; a decrease in funds held for optionees of ($167,910); and exchange difference arising on the translation of foreign subsidiaries was ($23,469).

Investing Activities used cash of ($6,810), with the entire amount from purchase of equipment.

Financing Activities provided cash of $1,261,467. Proceeds from issuance of common shares provided cash of $1,282,000 and share issue costs used cash of ($20,533).

Cash was $106,288 as of December 31, 2018 compared to cash of $350,704 as of December 31, 2017, a decrease of $244,416 during the year.

Critical Accounting Policies and Estimates

The financial statements have been prepared in accordance with International Accounting Standard (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

36

Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis except certain financial instruments which are measured at fair value. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

The consolidated financial statements, including comparatives, have been prepared on the basis of IFRS standards that are effective as at December 31, 2020.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries as follows:

⁽¹⁾ The companies are in the process of being wound up.

All subsidiaries are entities that are controlled, either directly or indirectly. Control is defined as the exposure, or rights, to variable returns from involvement with an investee and the ability to affect those returns through power over the investee. Power over an investee exists when the Company has existing rights that give it the ability to direct the activities that significantly affect the investee’s returns. This control is generally evidenced through owning more than 50% of the voting rights or currently exercisable potential voting rights of a company’s share capital. All of the intra-group balances and transactions, including unrealized profits and losses arising from intra-group transactions, have been eliminated in full. For subsidiaries that the Company controls, but does not own 100% of, the net assets and net profit attributable to outside shareholders are presented as amounts attributable to non-controlling interests in the consolidated statements of financial position and consolidated statements of comprehensive loss.

Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements.  

Interests in Joint Arrangements

A joint arrangement can take the form of a joint venture or joint operation. All joint arrangements involve a contractual arrangement that establishes joint control, which exists only when decisions about the activities that significantly affect the returns of the investee require unanimous consent of the parties sharing control. A joint operation is a joint arrangement in which the Company has rights to the assets and obligations for the liabilities relating to the arrangement. A joint venture is a joint arrangement in which the Company has rights to only the net assets of the arrangement.

Joint ventures are accounted for in accordance with the policy “Investments in Associates and Joint Ventures.” Joint operations are accounted for by recognizing the Company’s share of the assets, liabilities, revenue, expenses and cash flows of the joint operation in the consolidated financial statements.

Investments in Associates and Joint Ventures

Investments over which the Company exercises significant influence and which it does not control or jointly control are associates. Investments in associates are accounted for using the equity method, except when classified as held for sale. Investments in joint ventures as determined in accordance with the policy “Interests in Joint Arrangements” are also accounted for using the equity method.

37

The equity method involves recording the initial investment at cost and subsequently adjusting the carrying value of the investment for the Company’s proportionate share of the profit or loss, other comprehensive income or loss and any other changes in the associate’s or joint venture’s net assets.

The Company’s proportionate share of the associate’s or joint venture’s profit or loss and other comprehensive income or loss is based on its most recent financial statements. Adjustments are made to align any inconsistencies between the Company’s accounting policies and the associate’s or joint venture’s policies before applying the equity method. Adjustments are also made to account for depreciable assets based on their fair values at the acquisition date of the investment and for any impairment losses recognized by the associate or joint venture.

If the Company’s share of the associate’s or joint venture’s losses equals or exceeds the investment in the associate or joint venture, recognition of further losses is discontinued. After the Company’s interest is reduced to zero, additional losses will be provided for and a liability recognized only to the extent that the Company has incurred legal or constructive obligations to provide additional funding or make payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

At each statement of financial position date, management considers whether there is objective evidence of impairment in associates and joint ventures. If there is such evidence, management determines if there is a need to record an impairment in relation to the associate or joint venture.

Foreign currencies

The Company assesses functional currency on an entity by entity basis based on the related fact pattern; however, the presentation currency used in these consolidated financial statements is determined at management’s discretion.

The currency of the parent company, and the presentation currency applicable to these consolidated financial statements, is the Canadian dollar.

Transactions in currencies other than the functional currency are recorded at the rates of the exchange prevailing on dates of transactions.  At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at each reporting date. Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined.  Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

The Company has determined that the functional currency of its wholly-owned subsidiaries in Europe is the Euro and that the functional currency of its wholly-owned subsidiaries in Barbados is the US dollar.  Exchange differences arising from the translation of the subsidiaries’ functional currencies into the Company’s presentation currency are taken directly to the exchange reserve.

Exploration and evaluation assets and expenditure

Exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination.  Exploration and evaluation expenditures are expensed as incurred except for expenditures associated with the acquisition of exploration and evaluation assets through a business combination or asset acquisition which are recognized as assets.  Costs incurred before the Company has obtained the legal rights to explore an area are recognized in the consolidated statement of comprehensive loss.

Capitalized costs, including general and administrative costs, are only allocated to the extent that these costs can be related directly to operational activities in the relevant area of interest where they are considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves.

38

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.

Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

Share-based payment transactions

The share option plan allows the Company’s employees and consultants to acquire shares of the Company.  The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.

The fair value is measured at grant date and each tranche is recognized on a graded-vesting basis over the period during which the options vest.  The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.  At each statement of financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.

Loss per share

The Company presents the basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period.  Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares. In the Company’s case, diluted loss per share is the same as basic loss per share as the effects of including all outstanding options and warrants would be anti-dilutive.

Significant accounting judgments and estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout these consolidated financial statements, and may require accounting adjustments based on future occurrences.  Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and further periods if the revision affects both current and future periods.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the consolidated statement of financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

Critical Judgments

·The analysis of the functional currency for each entity of the Company. In concluding that the Canadian dollar is the functional currency of the parent, management considered both the funds from financing activities and the currency in which goods and services are paid for. The functional currency of its wholly-owned subsidiaries in Europe is the Euros and that the functional currency of its wholly-owned subsidiaries in Barbados is the US dollar as management considered the currencies which mainly influence the cost of  

39

providing goods and services in those subsidiaries. The Company chooses to report in Canadian dollar as the presentation currency; and

·The assessment of indications of impairment of each mineral property and related determination of the net realized value and write-down of those properties where applicable; 

·The determination that the Company will continue as a going concern for the next year; 

·The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company’s interest in PorMining is less than 50%, therefore it does not have the current ability to control the key operating activities of the company. Pursuant to the Shareholders’ Agreement entered into by the companies, MAEPA, a wholly-owned subsidiary of the Company, was appointed operator during the Phase I period and the board of directors of PorMining is comprised of three directors appointed by EUL and two by MAEPA. The operator prepares and submits annual budgets and programs to the board for approval. Management has determined that the Company does not have significant influence over PorMining. Accordingly, the investment in PorMining is accounted for at cost and not as an investment in associate. 

·The estimate that 50% of the tax deposits will be recovered within one to five years. 

Provisions

Provisions are recognized in the consolidated statement of financial position when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefit will be required to settle the obligation.  If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Financial instruments

The following financial assets are classified as measured at amortized cost - cash, due from optionees, certain other receivables and property deposits.

The following financial liabilities are classified as measured at amortized cost – accounts payable and accrued liabilities, accounts payable owed by optionees, due to related parties and long-term loan.

The classification of financial assets is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial asset. Transaction costs with respect to financial instruments classified as fair value through profit or loss are recognized as an adjustment to the cost of the underlying instruments.

The Company’s financial assets are classified into one of the following two measurement categories:

Financial assets held within a business model for the purpose of collecting contractual cash flows (“held to collect”) that represent solely payments of principal and interest (“SPPI”) are measured at amortized cost. Financial assets held within a business model where assets are both held for the purpose of collecting contractual cash flows or sold prior to maturity and the contractual cash flows represent solely payments of principal and interest are measured at FVPL.

Income taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax.  Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

40

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded using the statement of financial position liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  The following temporary differences are not provided for:  goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable loss; nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.  The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted that are expected to apply when temporary differences are expected to settle.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.  To the extent that the Company does not consider it probable that a future tax asset will be recovered, it provides a valuation allowance against that excess.

Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Variation in Operating Results

The Company derives interest income on its bank deposits, which depend on the Company's ability to raise funds.

Management periodically, through the exploration process, reviews results both internally and externally through mining related professionals.  Decisions to abandon, reduce or expand exploration efforts is based upon many factors including general and specific assessments of mineral deposits, the likelihood of increasing or decreasing those deposits, land costs, estimates of future mineral prices, potential extraction methods and costs, the likelihood of positive or negative changes to the environment, permitting, taxation, labor and capital costs.  There cannot be a pre-determined hold period for any property as geological or economic circumstances render each property unique.

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with IFRS.  The value of the Canadian Dollar in relationship to the US Dollar was $1.28 on December 31, 2020.

Research and Development

The Company conducts no Research and Development activities, nor is it dependent upon any patents or licenses.

Trend Information  

The Company knows of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s operations or financial condition.

Off-Balance Sheet Arrangements

The Company has no Off-Balance Sheet Arrangements.

Tabular Disclosure of Contractual Obligations

As of December 31, 2020, the Company had a total of €1,000 ($1,561) cash pledged for its exploration licenses in Portugal.

41

Table No. 6 lists as of April 30, 2021 the names of the Directors of the Company.  The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

Table No. 6

Directors

(1)Member of Audit Committee. 

Members of the audit committee meet periodically to approve and discuss the annual financial statements and each quarterly report before filing and mailing. The committee operates under a written charter as included in the Company's Management Information Circular dated November 6, 2020.  Details of the charter are contained in Item 6, “Board Practices” below.

Table No. 7 lists, as of April 30, 2021, the names of the Executive Officers of the Company.  The Executive Officers serve at the pleasure of the Board of Directors.  Paul W. Kuhn is a citizen of the United States; Winnie Wong is a citizen of Canada.

Table No. 7

Executive Officers

Paul W. Kuhn joined Avrupa in July 2010 after working with Metallica Mining in Oslo, Norway since August 2008. He has more than 30 years of experience in the minerals exploration business in North America, Central Asia and Europe. He earned an A.B. Degree from Dartmouth College, US, in 1978, and an M.S. Degree from the University of Montana, US, in 1983.  Mr. Kuhn has worked in a variety of geological terrains, exploring for gold, silver, base metals, uranium, and phosphate deposits, and has spent time as a production geologist in the deep underground mines of the Coeur d`Alene Mining District, historically one of the world’s most important silver districts.  Mr. Kuhn has managed successful exploration programs in the US and Turkey, and was involved in a number of base and precious metal discoveries in Turkey, including the Taç and Çorak polymetallic deposits (presently being developed by Mediterranean Resources), the Cerattepe Cu-Au volcanogenic massive sulfide deposit (held by Inmet Mining), the Altıntepe epithermal Au deposit (being developed by Stratex International), the Diyadın Carlin-style Au deposit (developed by Newmont Mining and currently held by Koza Altin), and the Karakartal porphyry Cu-Au deposit (being developed by Anatolia Minerals).  Mr. Kuhn was also involved with the original mapping and description of the Çöpler porphyry Au deposit (presently under mine construction and development by Anatolia Minerals).

42

Winnie Wong received a Bachelor of Commerce Degree (Honours) from Queen’s University in 1996 and is a member of the Institute of Chartered Accountants of British Columbia.  Since July 1, 2001, she has been Vice President of Pacific Opportunity Capital Ltd.  Her role is to manage the financial administration team and to assist Pacific Opportunity Capital Ltd.’s management group on corporate finance projects.  From July 1 to December 31, 2000, Ms. Wong was the controller of Pivotal Corporation, a company providing software, services and support to a variety of businesses.  Between 1996 and 1999, Ms. Wong worked with Deloitte & Touche, Chartered Accountants.  Ms. Wong acts as the CFO and/or Corporate Secretary for other publicly listed companies including Alianza Minerals (since April 2015), Au Gold Corp. (since December 2020), Germinate Capital Ltd. (since August 2020), and Mountain Boy Minerals, (since December 2017). Ms. Wong spends approximately 30% of her time on the affairs of the Company.

Mark T. Brown has been a Chartered Accountant since 1993 and is President of Pacific Opportunity Capital Ltd., a private company which provides small and medium sized companies with financial, equity and management solutions. Mr. Brown received a Bachelor of Commerce Degree from the University of British Columbia in 1990 and is a member of the Institute of Chartered Accountants of British Columbia. He has been a Chartered Accountant since 1993 and serves as President of Pacific Opportunity Capital Ltd., a private company which provides small and medium sized companies with financial, equity and management solutions, from 1997 to the present. From 1990 to 1994, he worked with PricewaterhouseCoopers before becoming controller of Miramar Mining Corporation. In 1996, he became controller of Eldorado Gold Corporation where his duties included debt and equity financings, international acquisitions, corporate reporting and system implementation. He is one of the founders of Rare Element Resources Ltd., a resource exploration company traded on the NYSE MKT and TSX Exchanges. He also is a former and current officer and director of other public companies. His current officer and directorships include: a Director of Almaden Minerals Ltd., a resource exploration company traded on the NYSE MKT and TSX Exchanges; a Director of Almadex Minerals, a mineral exploration company traded on the TSX Venture Exchange; a Director of Alianza Minerals Ltd., a mineral exploration company traded on the TSX Venture Exchange; a Director of Azucar Minerals Ltd., a mineral exploration company traded on the TSX Venture Exchange; a Director of Au Gold Corp., a mineral exploration company traded on the TSX Venture Exchange; Chief Financial Officer of Copper Fox Metals Inc., a mineral exploration company traded on the TSX Venture Exchange; a Director of East West Petroleum Corp., an oil and gas company traded on the TSX Venture Exchange; Chief Financial Officer of Fjordland Exploration Inc., a mineral exploration company traded on the TSX Venture Exchange; Chief Executive Officer and a Director of Germinate Capital Ltd., a capital pool company traded on the TSX Venture Exchange; a Director of Mineral and Financial Investments Limited, an investment company traded on the London Stock Exchange; a Director of Mountain Boy Minerals, a mineral exploration company traded on the TSX Venture Exchange; and a Director of Mich Resources Ltd., a mineral exploration company traded on the Canadian Securities Exchange. Mr. Brown devotes approximately 25% of his time to Company affairs.

Dr. Paul Nelles was one of the founders of the Company’s wholly-owned subsidiary Innomatik Exploration Kosovo LLC (“IEK”) and is currently a non-executive director of IEK. Dr. Nelles is the CEO of Peshter Mining Company J.S.C. that holds the Slivovo license in which the Company has 10.29% interest. Dr. Nelles graduated from TU Berlin in 1972 with a degree in mining engineering and obtained a PhD in mineral processing in 1975. He worked internationally in base metal mining for Metallgesellschaft between 1975 and 1991, at which stage he held the position of General Manager Project Development. In 1991, he was employed as technical director and appointed to the executive board of DESTAG, a leading dimension stone producer and worldwide trader. He was subsequently appointed CEO of the company. Dr. Nelles joined Normandy LaSource in France, as executive director for gold production and industrial minerals in 1997. In 2002, he was appointed as the “Trepca Manager” by the United Nations Mission in Kosovo and was promoted to Deputy Managing Director of the Kosovo Trust Agency in 2004, in charge of all major publicly owned enterprises. Since 2006 he has worked as an independent mining industry advisor. Dr. Nelles devotes approximately 25% of his time to Company affairs.

Paul Dircksen holds an M.S. in Geology from the Mackay School of Mines at the University of Nevada He has a strong technical background, serving as a team member on ten gold discoveries, seven of which later became operating mines. Mr. Dircksen has over 35 years of experience in the mining and exploration industry, serving in executive, managerial, and technical roles at several companies. He has held senior management positions with a number of resource groups including Orvana Minerals, Lacana Gold, The Cordex Group, Brett Resources, and the

43

Bravo Venture Group. Mr. Dircksen is currently a Vice-President of business development and technical services of Timberline Resources Corporation, a public mineral exploration company which is listed on the TSX Venture Exchange and the NYSE Market. Mr. Dircksen devotes approximately 5% of his time to Company affairs.

Frank Högel has a MBA with a focus on financial management, banking, and international business and management from the University of Nürtingen, Germany. He currently serves as the CEO of Peter Beck Performance Funds GbR and sits on the advisory board of Concept Capital Management. Concept Capital is an asset management company focused on evaluating and investing in Canadian resource companies through equity investments, convertible bonds and gold, silver and copper off-take agreements. Mr. Högel also sits on the board of several other public companies listed on the TSX Venture Exchange, including Canamex Gold Corp., Golden Goliath Resources Ltd., Monarca Minerals Inc., Nicola Mining Inc., and Tembo Gold Corp. Mr. Hogel devotes approximately 5% of his time to Company affairs.

Mark Brown, a director of the Company, was formerly a director of Ascent Industries Corp. (“Ascent”), a company listed on the Canadian Securities Exchange. Mr. Brown resigned as a director of Ascent on February 13, 2019. On March 1, 2019, the Supreme Court of British Columbia issued an order granting Ascent’s application for creditor protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) to address near term liquidity issues.  On April 5, 2019, Ascent sold its Canadian Assets for $41.5 million, repaid all liabilities, successfully reorganized as Luff Enterprises Ltd., and was discharged from the CCAA process.

Mark Brown, a director of the Company, was formerly a director of Sutter Gold Mining Inc. (“SGM”) until May 21, 2019.  On May 6, 2019, SGM received a cease trade order issued by the British Columbia Securities Commission for failure to file audited financial statements and Management’s Discussion & Analysis for the year ended December 31, 2018.  SGM’s listing on the TSX Venture Exchange remains suspended until SGM meets TSX Venture Exchange’s requirements and upon the revocation of the cease trade order.  On May 17, 2019, pursuant to an order of the Supreme Court of British Columbia, a receiver was appointed for SGM in order to sell all the assets of SGM and repay the lender.

Except for the two orders detailed above, no Director and/or Executive Officer has been the subject of any other order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he or she is a Director and/or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he or she is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which he or she was selected as a Director or Executive Officer. No members of the Board of Directors are related.

COMPENSATION

The Company has no arrangements pursuant to which directors are compensated by the Company for their services in their capacity as directors, or for committee participation.  There are no director’s service contracts providing for benefits upon termination of employment.

To assist the Company in compensating, attracting, retaining and motivating personnel, the Company grants incentive stock options under a formal Stock Option Plan which was initially adopted by the directors of the Company on July 29, 2008 and subsequently re-approved by shareholders at every Annual Meeting of shareholders thereafter, up to and including the Annual Meeting on December 14, 2020.

Table No. 8 sets forth the compensation paid to the Company’s executive officers and members of its administrative body during the last three years.

44

Table No. 8

Summary Compensation Table

All Figures in Canadian Dollars unless otherwise noted

(1)“Other Compensation” for Paul W. Kuhn is for housing allowance. 

(2)Through May 31, 2019, Paul W. Kuhn’s salary was paid in Euros.  The dollar amounts are calculated based on a conversion rate of Euros to Canadian dollars as at the average rate of the year. 

(3)POC, a company of which Mark Brown is the President and of which Winnie Wong is the Vice President, charged a total of $132,435, $198,158, and $228,445 for rent and accounting and management fees for a team of four people during financial years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.  

(4)Mark T. Brown resigned as Chief Executive Officer and President on July 8, 2010 and Paul W. Kuhn was appointed Chief Executive Officer and President. POC, a company of which Mark Brown is the President and of which Winnie Wong is the Vice President, charged a total of $132,435 $198,158, and $228,445 for rent and accounting and management fees for a team of four people during financial years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. 

No funds were set aside or accrued by the Company during fiscal 2020 to provide pension, retirement or similar benefits for Directors or Executive Officers.

Employment Contracts

In June 2019, the Company and Paul Kuhn agreed to adjust the terms for serving as the Company’s President and CEO. Mr. Kuhn is responsible for providing technical oversight and guidance, establishing corporate goals and objectives, and setting and implementing corporate strategies. Beginning June 1, 2019, Mr. Kuhn receives a fee of $12,500 per month and a rent allowance of €4,000 for the first four months. If the Company is substantially sold or

45

has a change of control, Mr. Kuhn will receive a payment equal to two years of fees. Mr. Kuhn will serve in these roles until terminated in writing by either the Company or Mr. Kuhn. The Company may terminate him at any time without notice or payment in lieu thereof for cause, or at any time without cause by providing six months’ written notice or by paying him in lieu of notice. Mr. Kuhn may leave at any time by providing the Company with three months’ written notice.

Board Practices

The Board of Directors’ mandate is to manage or supervise the management of the business and affairs of the Company and to act with a view to the best interests of the Company. The Company’s corporate governance practices are the responsibility of the Board.

Management has been delegated the responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying out the Company's business in the ordinary course, evaluating business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board facilitates its independent supervision over management by reviewing and approving long-term strategic, business and capital plans, material contracts and business transactions, all debt and equity financing transactions. Through its Audit Committee, the Board examines the effectiveness of the Company's internal control processes. The Board reviews and sets executive compensation and recommends incentive stock options.

The Board facilitates its exercise of independent supervision over management by ensuring that a majority of its members are independent of the Company. Directors are considered to be independent if they have no direct or indirect material relationship with the Company. A "material relationship" is a relationship which could, in the view of the Company's Board, be reasonably expected to interfere with the exercise of a director's independent judgment. Currently, the Company has two non-independent directors. Paul W. Kuhn serves as CEO and President of the Company, and Paul Nelles is a non-executive director of IEK.

The Board considers its size each year when it considers the number of directors to recommend to the shareholders for elections at the annual meeting of shareholders, taking into account the number required to carry out the Board's duties effectively and to maintain a diversity of views and experience. At the Annual General Meeting of Shareholders held on December 14, 2020, shareholders approved the resolution to set the current Board at 5 members. The Board does not have a nominating committee, and these functions are currently performed by the Board as a whole. However, if there is a change in the number of directors required by the Company, this policy will be reviewed. When new directors are appointed, they receive orientation on the Company's business, current projects and the industry. Board meetings may also include presentations by the Company's management and employees to give the directors additional insight into the Company's business.

The Board has found that the fiduciary duties placed on individual directors by the Company's governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual directors' participation in decisions of the Board in which the director has an interest have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.

The Board of Directors met twice in person during fiscal 2020. Various other matters were discussed telephonically during the year and all other matters were approved by resolutions.

Audit Committee

The Audit Committee is a committee of the board of directors to which the Board has delegated its responsibility for oversight of the nature and scope of the annual audit, management’s reporting on internal accounting standards and practices, financial information and accounting systems and procedures, financial reporting and statements and recommending, for Board approval, the audited financial statements and other mandatory disclosure releases containing financial information.  The objectives of the Committee are:

1.To assist directors in meeting their responsibilities (especially for accountability) in respect of the preparation and disclosure of the financial statements of the Company and related matters; 

46

2.To provide effective communication between directors and external auditors appointed by the Company; 

3.To enhance the external auditors’ independence; and 

4.To increase the credibility and objectivity of financial reports. 

Membership of Committee

The Committee shall be comprised of at least three directors of the Company, all of whom shall be “financially literate” as defined by National Instrument 52-110 - Audit Committees. The Board shall have the power to appoint the Committee Chairman.

Meetings

At all meetings of the Committee every question shall be decided by a majority of the votes cast.  In case of an equality of votes, the Chairman of the meeting shall not be entitled to a second or casting vote. A quorum for meetings of the Committee shall be a majority of its members, and the rules for calling, holding, conducting and adjourning meetings of the Committee shall be the same as those governing the Board.

Meetings of the Committee should be scheduled to take place at least four times per year.  Minutes of all meetings of the Committee shall be taken. The Committee shall report the results of meetings and reviews undertaken and any associated recommendations to the Board.

The Committee shall meet with the external auditors at least once per year (in connection with the preparation of the year-end financial statements) and at such other times as the external auditors and the Committee consider appropriate.

Mandate and Responsibilities of Committee

It is the responsibility of the Committee to oversee the work of the external auditors, including resolution of disagreements between management and the external auditors regarding financial reporting. It is the responsibility of the Committee to satisfy itself on behalf of the Board with respect to the Company’s internal control system:

·identifying, monitoring and mitigating business risks; and  

·ensuring compliance with legal, ethical and regulatory requirements. 

It is a responsibility of the Committee to review the annual financial statements of the Company prior to their submission to the Board for approval.  The process should include but not be limited to:

·reviewing changes in accounting principles, or in their application, which may have a material impact on the current or future years’ financial statements; 

·reviewing significant accruals or other estimates such as the ceiling test calculation; 

·reviewing accounting treatment of unusual or non-recurring transactions; 

·ascertaining compliance with covenants under loan agreements; 

·reviewing disclosure requirements for commitments and contingencies; 

·reviewing adjustments raised by the external auditors, whether or not included in the financial statements; 

·reviewing unresolved differences between management and the external auditors; and  

·obtaining explanations of significant variances within comparative reporting periods. 

The Committee is to review the financial statements (and make a recommendation to the Board with respect to their approval), prospectuses, management discussion and analysis and all public disclosure containing audited or unaudited financial information before release and prior to Board approval.  The Committee must be satisfied that adequate procedures are in place for the review of the Company’ disclosure of all other financial information and shall periodically access the accuracy of those procedures.

47

With respect to the appointment of external auditors by the Board, the Committee shall:

·recommend to the Board the appointment of the external auditors; 

·recommend to the Board the terms of engagement of the external auditors, including the compensation of the external auditors and a confirmation that the external auditors shall report directly to the Committee; and  

·when there is to be a change in auditors, review the issues related to the change and the information to be included in the required notice to securities regulators of such change. 

The Committee shall review with external auditors (and the internal auditor if one is appointed by the Company) their assessment of the internal controls of the Company, their written reports containing recommendations for improvement, and management’s response and follow-up to any identified weaknesses.  The Committee shall also review annually with the external auditors their plan for their audit and, upon completion of the audit, their reports upon the financial statements of the Company and its subsidiaries. The Committee must pre-approve all non-audit services to be provided to the Company or its subsidiaries by the external auditors.  The Committee may delegate to one or more members the authority to pre-approve non-audit services, provided that the member(s) report to the Committee at the next scheduled meeting such pre-approval and the member(s) comply with such other procedures as may be established by the Committee from time to time.

The Committee shall review risk management policies and procedures of the Company (i.e. hedging, litigation and insurance).

The Committee shall establish a procedure for:

·the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and 

·the confidential, anonymous submission by employees and agents of the Company of concerns regarding questionable accounting or auditing matters. 

The Committee shall review and approve the Company’ hiring policies regarding employees and former employees of the present and former external auditors of the Company. It shall have the authority to investigate any financial activity of the Company.  All employees of the Company are to cooperate as requested by the Committee.

The Committee may retain any person having special expertise and/or obtain independent professional advice to assist in filling their responsibilities at the expense of the Company without any further approval of the Board.

The current Audit Committee members are Mark T. Brown, Paul Dircksen and Frank Hogel.

Staffing

The Company currently has 3 part-time employees (2019 – 4; 2018 – 6) in geology and exploration, and 2 executive officers (2019 – 2; 2018 – 2). Of the employees, 2 are located in Portugal and 1 in Kosovo.

Management, administrative and secretarial functions in Vancouver are provided by Pacific Opportunity Capital Ltd., a private company of which Mark T. Brown, a director of the Company, is the president and director.

Share Ownership

The Registrant is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.  The Registrant is not controlled by another corporation as described below.

Table No. 9 lists, as of April 30, 2021, Directors and Executive Officers who beneficially own the Registrant's voting securities and the amount of the Registrant's voting securities owned by the Directors and Executive Officers

48

as a group.  All share amounts have been adjusted for the 1 for 4 common share consolidation effective December 21, 2020.

(1)112,500 of these shares represent currently exercisable stock options and 25,000 represent currently exercisable share purchase warrants. 

(2)93,750 of these shares represent currently exercisable stock options. 

(4)62,500 of these shares represent currently exercisable stock options. 

(5)200,000 are common shares. 127,000 are currently exercisable stock options and 200,000 are currently exercisable share purchase warrants. 

(6)126,448 are common shares, and 62,500 represent currently exercisable stock options 

Based upon 32,738,087 common shares outstanding as of April 30, 2021, share purchase warrants and Stock options held by each beneficial holder exercisable within sixty days as detailed in Table No. 14 “Stock Options Outstanding” below.

The Registrant is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.  The Registrant is not controlled by another corporation as described below.  The Company's common shares are issued in registered form and the following information is taken from the records of TSX Trust Company, 650 West Georgia Street, Suite 2700, Vancouver, BC V6B 4N9.

On December 31, 2020, the shareholders' list for the Company's common shares showed 64 registered shareholders, including depositories, and 32,738,087 common shares issued and outstanding. Of the total registered shareholders, 19 are resident in Canada holding 28,989,708 common shares, or 89% of the total issued and outstanding; 32 shareholders are resident in the United States holding 2,255,423 common shares, or 7% of the issued and outstanding, and 13 shareholders are resident of other nations holding 1,492,956 common shares, or 4% of the issued and outstanding.

The Company is aware of one person/company who beneficially own 5% or more of the Registrant's voting securities. Table No. 10 lists as of April 30, 2021 persons and/or companies holding 5% or more beneficial interest in the Company’s outstanding common stock.

49

5% or Greater Shareholders

(1)4,260,334 are common shares. 2,317,834 of these common shares are held by Pacific Opportunity Capital Ltd. a private company controlled by Mark T. Brown. 1,650,000 of the common shares are held in Mr. Brown’s RRSP. 156.250 common shares are held in the name of Spartacus Management Inc., a private company over which Mr. Brown has control; 6,600,000 are held in Mr. Brown’s RRSP, and 136,250 are held by Mr. Brown directly. 143,750 of these shares represent currently exercisable common share purchase options. 407,500 are currently exercisable share purchase warrants held by Pacific Opportunity Capital Ltd., and 75,000 are warrants held by Spartacus Management Inc. 

Based upon 32,738,087 common shares outstanding as of April 30, 2021, share purchase warrants and Stock options held by each beneficial holder exercisable within sixty days as detailed in Table No. 14 “Stock Options Outstanding” below.

No shareholders of the Company have different voting rights from any other shareholder.

RELATED PARTY TRANSACTIONS

The Company had the following related party transactions for the years ended December 31, 2020, December 31, 2019, and December 31, 2018:

(a)Pacific Opportunity Capital Ltd., a company controlled by Mark Brown, a director of the Company 

(b)Paul L. Nelles is a director.  

(d)Mark T. Brown is a Director of the Company. The $16,000 advance is non-interest bearing without specific terms of repayment. 

The financial statements as required under Item #18 are attached hereto and found immediately following the text of this Annual Report.  The audit report of DeVisser Gray LLP, Chartered Accountants, is included herein immediately preceding the financial statements and schedules.

50

Current Legal Proceedings

The Company knows of no material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any other material proceeding or pending litigation.  The Company knows of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

Dividends

The Company has not declared any dividends on its common shares since inception and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings, if any, for use in its operations and the expansion of its business.

As of December 31, 2020, the end of the Company's most recent fiscal year, the authorized capital of the Company consisted of an unlimited number of common shares without par value.  There were 32,738,087 common shares issued and outstanding as of December 31, 2020 and April 30, 2021, after adjusting for the 1 for 4 common share consolidation effective December 21 2020.

NATURE OF TRADING MARKET

The Company's common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada under the stock symbol is “AVU”. The CUSIP number is 05453A207. The Company's common shares are not registered to trade in the United States in the form of American Depository Receipts (ADR's) or similar certificates.

Table No. 11 lists the high, low and closing sale prices on the TSX Venture Exchange for the Company's common shares for:

·each of the last six months ending April 30, 2021; 

·each of the last twelve fiscal quarters ending the three months ended March 31, 2021; and 

·each of the last five fiscal years ended December 31, 2020. 

Per share prices have been adjusted for the 1 for 4 common share consolidation effective December 21, 2020.

The Company was incorporated on January 23, 2008 under the Business Corporations Act of British Columbia. The Company became a “Capital Pool Company” as defined in the Exchange’s Listing Policy 2.4 and its common shares began trading on the Exchange on September 2, 2008. The Company completed its Qualifying Transaction (“QT”) on July 13, 2010 to acquire 90% of the issued and outstanding shares in MAEPA Empreendimentos Mineiros e Participacoes Lda., a private Portugese company (“MAEPA”) and (b) 92.5% of the issued and outstanding shares of Innomatik Exploration Kosovo LLC, a private Kosovo company (“Innomatik”).  The Company received the final approval from the Exchange for its QT and its common shares resumed trading under its current name and trading symbol “AVU.V” as of July 14, 2010.

51

Table No. 11

TSX Venture Exchange

Common Shares Trading Activity

On September 12, 2012, the Company’s common shares began trading on the Frankfurt Stock Exchange in Germany under the symbol “8AM”. Table 11a lists the high, low and closing sale prices on the Frankfurt Stock Exchange for the Company's common shares since inception of trading.

Table No. 11a

Frankfurt Stock Exchange

Common Shares Trading Activity

Table No. 12 lists, as of April 30, 2021, share purchase warrants outstanding, the exercise price, and the expiration date of the share purchase warrants. Amounts have been adjusted to reflect the 1 for 4 common share consolidation effective December 21, 2020.

52

Share Purchase Warrants Outstanding

*These warrants contain a forced exercise price. If the closing price of the Company’s shares is $0.80 or greater for a period of 20 consecutive trading days, the warrants will expire on the earlier of the 30^th day after such notice is given or the original expiry date. 

American Depository Receipts.

Not applicable.

Other Securities to be Registered

Not applicable

Current Canadian Trading Market

The Company's common stock is currently listed and trading on the TSX Venture Exchange (“TSX-V”).

The TSX-V was created through the acquisition of the Canadian Venture Exchange by the Toronto Stock Exchange.  The Canadian Venture Exchange was a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange which took place on November 29, 1999. On August 1, 2001, the Toronto Stock Exchange completed its purchase of the Canadian Venture Exchange from its member firms and renamed the Exchange the TSX Venture Exchange. The TSX-V currently operates as a complementary but independent exchange from its parent.

The initial roster of the TSX-V was made up of venture companies previously listed on the Vancouver Stock Exchange or the Alberta Stock Exchange and later incorporated junior listings from the Toronto, Montreal and Winnipeg Stock Exchanges. The TSX-V is a venture market as compared to the TSX Exchange which is Canada’s senior market and the Montreal Exchange which is Canada’s market for derivatives products.

The TSX-V is a self-regulating organization owned and operated by the TSX Group.  It is governed by representatives of its member firms and the public.

The TSX Group acts as a business link between TSX Venture Exchange members, listed companies and investors. TSX-V policies and procedures are designed to accommodate companies still in their formative stages and recognize those that are more established. Listings are predominately small and medium sized companies.

Regulation of the TSX Venture Exchange, its member firms and its listed companies is the responsibility of Investment Industry Regulatory Organization of Canada ("IIROC"). IIROC is a not-for-profit, independent Canadian self-regulatory organization that, among other things, oversees trading in exchanges and marketplaces.

IIROC administers, oversees and enforces the Universal Market Integrity Rules (“UMIR”). To ensure compliance with UMIR, IIROC monitors real-time trading operations and market-related activities of marketplaces and participants, and also enforces compliance with UMIR by investigating alleged rule violations and administering any settlements and hearings that may arise in respect of such violations.

53

Investors in Canada are protected by the Canadian Investor Protection Fund (“CIPF”). The CIPF is a private trust fund established to protect customers in the event of the insolvency of a member of any of the following Self-Regulatory Organizations: the TSX Venture Exchange, the Montreal Exchange, the TSX, the Toronto Futures Exchange and the IIROC.

Share Capital

The Company has financed its operations through the issuance of common shares through private placements, and the exercise of stock options. The changes in the Company’s share capital during the last 3 fiscal years, as adjusted for the 1 for 4 common share consolidation effective December 21, 2020, are as follows:

On October 23, 2020, the Company completed a non-brokered private placement of 4,219,641 common share units at a price of $0.12 per unit for gross proceeds of $506,357. Each unit consists of one common share and one non-transferable share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.20 per share until October 23, 2023.

During the year ended December 31, 2019, the Company conducted two private placements of its common shares. On February 25, 2019, the Company completed the third tranche of a non-brokered private placement by issuing 500,000 units at a price of $0.20 per unit for gross proceeds of $100,000. Each unit consists of one common share and one non-transferable warrant, with each warrant exercisable at a price of $0.40 until February 25, 2022. If, however, the closing price of the Company’s common shares are C$0.80 or greater for a period of 20 consecutive trading days, the warrants will expire on the earlier of the 30^th day after such notice is given and the original expiry date. On December 18, 2019, the Company completed a non-brokered private placement by issuing 910,000 units at a price of $0.20 per unit for gross proceeds of $182,000. Each unit consisted of one common share and one-half of one non-transferable warrant, with each full warrant entitling the holder to purchase one additional common share at a price of $0.20 until December 18, 2021.

During the year ended December 31, 2018, the Company completed two private placements of common shares. On March 28, 2018, the company completed a non-brokered private placement by issuing 1,718,750 Units at a price of $0.32 per Unit for gross proceeds of $550,000. Each Unit consisted of one common share and one non-transferable warrant, with each warrant exercisable into one additional common share at a price of $0.48 until March 26, 2020. On November 9, 2018, the Company closed the first tranche of a non-brokered private placement of 2,500,000 Units at a price of $0.20 per Unit for gross proceeds of $500,000, and on December 17, 2018 closed the second tranche by issuing 1,160,000 Units at price of $0.20 for gross proceeds of $232,000. Each Unit consists of one common share and one non-transferable warrant, with each warrant exercisable into one additional common share at a price of $0.40 until November 9, 2021 for the first tranche and until December 17, 2021 for the second tranche. If, however, the closing price of the Company’s common shares is $0.80 or greater for a period of 20 consecutive trading days, the warrants will expire on the earlier of the 30^th day after such notice is given and the original expiry date.

Shares Issued for Assets Other Than Cash

No shares have been issued for assets other than cash in the most recent five fiscal years.

Shares Held By Company

No Disclosure Necessary-

54

Stock Options

Stock Options to purchase securities from Registrant can be granted to Directors, Officers, Employees and Consultants of the Company on terms and conditions acceptable to the regulatory authorities in Canada, notably the TSX Venture Exchange.

The Company has a Rolling Stock Option Plan (the "Plan") which is required to be approved by shareholders annually. The Plan was initially adopted by the directors of the Company on July 29, 2008 and subsequently re-approved by shareholders at every Annual Meeting of shareholders thereafter, up to and including the Annual Meeting held on December 14, 2020. Under the Plan, stock options may be issued to qualified Officers, Directors, Employees and Consultants. The number of common shares reserved for issuance under the Plan is 10% of the currently issued common shares of the Company.

Under the Plan, the exercise price of the option may not be less than the closing price of the common shares on the TSX Venture Exchange on the day immediately preceding the date of grant, less the applicable discount allowed by the policies on the TSX Venture Exchange. An option granted under the Plan must be exercised within a period of five years from granting. Within this five year period, the Company's Board of Directors may determine the limitation period during which an option may be exercised and whether a particular grant will have a minimum vesting period. Any agreement to decrease the option price of options previously granted to insiders will require the approval of "disinterested shareholders", which is defined as approval by a majority of the votes cast at the Meeting other than votes attaching to shares of the Company beneficially owned by insiders of the Company to whom options may be granted under the Plan, and associates of such persons.

A complete copy of the Company’s Stock Option Plan as approved by shareholders at the Annual General Meeting held on June 5, 2012 has been included as an exhibit to the Company’s Form 20-F Registration Statement.

The names and titles of the Directors/Executive Officers of the Registrant to whom outstanding stock options have been granted and the numbers of common shares subject to such options are set forth in Table No. 13 as of April 30, 2021, as well as the number of options granted to Directors and all employees as a group.

Table No. 13

Stock Options Outstanding

55

Resolutions/Authorization/Approvals

-No Disclosure Necessary-

Memorandum and Articles of Association

The Company was incorporated on January 23, 2008 under the Business Corporations Act of British Columbia under the name “Everclear Capital Ltd.” On July 7, 2010, the Company changed its name to “Avrupa Minerals Ltd.” At the Annual and Special Meeting of shareholders held on December 14, 2020, shareholders approved the adoption of new Company Articles.

There are no restrictions on the business the Company may carry on in the Articles of Incorporation.

Under the Company’s articles and bylaws any director or senior officer that has a disclosable interest in a contract or transaction shall be liable to account to the Company for any profits that accrue to the director or senior officer under or as a result of the contract or transaction unless disclosure is made thereof and the contract or transaction is approved in accordance with the provisions of the Business Corporations Act of British Columbia. A director is not allowed to vote on any transaction or contract with the Company in which he has a disclosable interest unless all directors have a disclosable interest in that transaction or contract, in which case all of those directors may vote on such resolution. A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual's duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act of British Columbia.

Section 16 of the Company’s bylaws address the duties of the directors, while Part 8 discusses the Borrowing Powers. The Company may, if authorized by the directors, may:

56

a)borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate 

b)issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate; 

c)guarantee the repayment of money by any other person or the performance of any obligation of any other person; and 

d)mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company. 

Any bonds, debentures or other debt obligations of the Company may be issued at a discount, premium or otherwise, and with any special privileges as to redemption, surrender, drawings, allotment of or conversion into or exchange for shares or other securities, attending and voting at general meetings of the Company, appointment of directors and otherwise, and may, by their terms, be assignable free from any equities between the Company and the person to whom they were issued or any subsequent holder thereof, all as the directors may determine.

There are no age limit requirements pertaining to the retirement or non-retirement of directors and a director need not be a shareholder of the Company. At each annual general meeting of the Company, all the directors shall retire and the shareholders shall elect a Board of Directors consisting of the number of directors for the time being set pursuant the Company's Articles. A retiring director shall be eligible for re-election.

The remuneration of the directors may from time to time be determined by the directors or, if the directors shall so decide, by the shareholders. Such remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such who is also a director. Directors shall be paid such reasonable travelling, hotel and other expenses as they incur in and about the business of the Company and if any director shall perform any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director or shall otherwise be specially occupied in or about the Company's business, he may be paid a remuneration to be fixed by the Board or, at the option of such director, by the Company in general meeting, and such remuneration my be either in addition to or in substitution for any other remuneration that he may be entitled to receive.

Subject to the Business Corporations Act of British Columbia, a director may hold any office or place of profit with the Company, other than the office of auditor with the Company, in conjunction with his office of director for such period and such terms as the directors may determine. No director or intended director shall be disqualified by his office from contracting with the Company. Subject to compliance with the Business Corporations Act of British Columbia, a director or his firm may act in a professional capacity for the Company, other than as auditor, and he or his firm shall be entitled to remuneration for professional services as if he were not a director.

Section 21 deals with indemnification and payment of expenses of directors and officers. Subject to the provisions of the Business Corporations Act of British Columbia, the directors shall cause the Company to indemnify and pay all eligible penalties and expenses of an eligible party and, where appropriate, the heirs and personal or other legal representatives of an eligible party in accordance with the provisions of the Business Corporations Act of British Columbia. Each director, alternate director and officer is deemed to have contracted with the Company on the terms of the indemnity contained in Article 21.1. The failure of a director, alternate director, or officer of the Company to comply with the provisions of the Business Corporations Act of British Columbia or these Articles shall not invalidate any indemnity to which he is entitled under this Part. The directors may cause the Company to purchase and maintain insurance for the benefit of eligible parties.

57

Section 27 covers the Nomination of Directors and Advance Notice Provisions which covers the nomination of persons for election to the Board of Directors of the Company. Nominations may be made at any annual or special meeting of shareholders if one of the purposes of the meeting was for the election of directors. Nominations may be made:

(a)by or at the direction of the board, including pursuant to a notice of meeting; 

(b)by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act; or 

(c)by any person (a “Nominating Shareholder”): (A) who, at the close of business on the date of the giving of the notice provided for in Section 27 and on the record date for notice of such meeting, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who complies with the notice procedures set forth in Section 27. 

For a nomination to be made by a Nominating Shareholder, the Nominating Shareholder mush have given timely notice in proper written form to the Secretary of the Company at the principal executive offices of the Company. No person shall be eligible for election as a director unless nominated in accordance with Section 27. The Chairman of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the required procedures and, if any such nomination is not in compliance, to declare that such defective nomination shall be disregarded. The Board may, in its sole discretion, waive any requirement of Section 27.

The majority required for the passage of a special resolution or a special separate resolution shall be 2/3 of the votes cast on the resolution.

The rights, preferences and restrictions attaching to each class of the Company’s shares are as follows:

The authorized share structure of the Company consists of an unlimited number of common shares without par value.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Directors may from time to time declare and authorize payment of such dividends, if any, as they deem advisable and need not give notice of such declaration to any shareholder. Dividends are subject to the rights, if any, of shareholders holding shares with special rights as to dividends. No dividend shall be paid otherwise than out of funds and/or assets properly available for the payment of dividends and a declaration by the directors as the amount of such funds or assets available for dividends shall be conclusive.

The Company may by resolution of its directors make any changes to the authorized share structure as may be permitted under Section 54 of the Business Corporations Act of British Columbia, or in its name as may be permitted under Section 263 of the Business Corporations Act of British Columbia, and may by resolution of its directors make or authorize the making of any alterations to these Articles and the notice of articles as may be required by such changes. The Company may by ordinary resolution create or vary special rights and restrictions as provided in Section 58 of the Business Corporations Act of British Columbia. No alteration, as provided in Article 9, will be valid as to any part of the issued shares of any class unless the holders of all the issued shares of that class consent to the alteration in writing or consent by special separate resolution. The Company may alter its Articles by resolution of its directors and, if required by such alteration, may by resolution of its directors alter the Notice of Articles.

Subject to the provisions of the Business Corporations Act of British Columbia, the Company or the Directors on behalf of the Company, may pay a reasonable commission or allow a reasonable discount to any person in consideration of his purchasing or agreeing to purchase, whether absolutely or conditionally, any shares, debentures, share rights, warrants or debenture stock in the Company, or procuring or agreeing to procure purchasers, whether absolutely or conditionally, for any such shares, debentures, share rights, warrants or debenture stock. The Company may also pay such brokerage as may be lawful.

58

An annual general meeting shall be held once every calendar year at such time (not being more than 15 months after the annual reference date for the preceding calendar year) and place as may be determined by the Directors. The Directors may, as they see fit, convene an extraordinary general meeting. An extraordinary general meeting, if requisitioned in accordance with the Business Corporations Act of British Columbia, shall be convened by the Directors or, if not convened by the Directors, may be convened by the requisitionists as provided in the Business Corporations Act of British Columbia.

There are no limitations upon the rights to own securities.

There are no provisions that would have the effect of delaying, deferring, or preventing a change in control of the Company.

There is no special ownership threshold above which an ownership position must be disclosed.

The Company may alter its Notice of Articles, Articles and share structure in the following manner:

1. by directors' resolution or ordinary resolution, as determined in each case by the directors,  

a. create one or more classes or series of shares and, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares and alter the identifying name of any of its shares;

b. establish, increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares;

c. if the Company is authorized to issue shares of a class of shares with par value, decrease the par value of those shares or if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

d. change unissued shares with par value into shares without par value or vice versa or change all or any of its fully paid issued shares with par value into shares without par value;

e. create, attach, vary or delete special rights or restrictions for the shares of any class or series of shares, if none of those shares have been issued;

f. subdivide all or any of its unissued, or fully paid issued, shares, and g. authorize alterations to the Articles that are procedural or administrative in nature or are matters that pursuant to the Articles are solely within the directors' powers, control or authority.

A copy of the Company’s new Articles is filed as an exhibit to this 20-F Annual Report.

Material Contracts

1.On June 3, 2011, the Company signed a Memorandum of Understanding (“MOU”) with Antofagasta Minerals S.A. (“Antofagasta”) to undertake exploration on the Alvalade project   The MOU covers three exploration licenses:  Alvalade, Canal Caveira, and Ferriera do Alentejo. Antofagasta completed a US$300,000 initial study of the project.  Upon successful completion of the initial study, on December 22, 2011, the Company entered into the Alvalade Joint Venture agreement with Antofagasta whereas the Company granted to Antofagasta the option to acquire an undivided 51% interest in the project, which can be exercised by Antofagasta funding or incurring expenditures of an additional US$4 million over three years.  After exercise of the first option, Antofagasta will be granted a further option to acquire an additional 24% interest in the project, for an aggregate 75% undivided interest, by completing and delivering a Feasibility Study on the project to the Company within five years.  The Company operates the  

59

joint venture through the first option period. A copy of this agreement has been filed as an exhibit to the Company’s 20-F Registration Statement.

2.On May 18, 2011, the Company signed an agreement to option out the Covas Tungsten Project to Blackheath Resources Inc. (“Blackheath”). Under the terms of the agreement, Blackheath has the option to earn a 51% interest in the project by spending €300,000 in exploration on the project before March 20, 2013, of which €150,000 (spent) is a firm commitment and must be spent by March 20, 2012. Blackheath can then earn an additional 19% by spending an additional €700,000 for a total interest of 70% for total expenditures of €1,000,000, by March 20, 2014.  Blackheath can also earn another 15% for a total interest of 85% by completing a pre-feasibility study (as defined by NI 43-101 regulations) on the property by March 20, 2016. During the year ended December 31, 2011, Blackheath completed the €150,000 exploration commitment by incurring €26,127 directly, reimbursing €64,687 for MAEPA’s exploration expenses and advancing €59,186 to the Company for future exploration work. A copy of this agreement has been filed as an exhibit to the Company 20-F Registration Statement.  

Exchange controls

Canada has no system of exchange controls.  There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors.  There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company's securities, except as discussed in ITEM 10, ”Taxation" below.

Restrictions on Share Ownership by Non-Canadians:  There are no limitations under the laws of Canada or in the organizing documents of Avrupa on the right of foreigners to hold or vote securities of Avrupa, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.

Taxation

The following summary of the material Canadian federal income tax consequences are stated in general terms and are not intended to be advice to any particular shareholder. Each prospective investor is urged to consult his or her own tax advisor regarding the tax consequences of his or her purchase, ownership and disposition of common stock. The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder’s particular circumstances.

This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arm’s length with the Company, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the "Tax Act" or “ITA”) and the Canada-United States Tax Convention (the “Tax Convention”) as at the date of the Annual Report and the current administrative practices of Canada Customs and Revenue Agency. This summary does not take into account provincial income tax consequences.

Management urges each holder to consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.

60

Canadian Income Tax Consequences

Disposition of Common Stock

The summary below is restricted to the case of a holder (a “Holder”) of one or more common shares (“Common Shares”) who for the purposes of the Tax Act is a non-resident of Canada, holds his Common Shares as capital property and deals at arm’s length with the Company.

Dividends

A Holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rates as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on his Common Shares. Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other case, 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares

A Holder who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the common Share constituted “taxable Canadian property” as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arm’s length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the Company.

A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the ten years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one half of the capital gain (“taxable capital gain”) in computing his taxable income earned in Canada. The Holder may, subject to certain limitations, deduct one half of any capital loss (“allowable capital loss”) arising on disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains of any of the three preceding years or any subsequent year.

United States Federal Income Tax Consequences

The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury Regulations, published Internal Revenue Service (“IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed,

61

possible on a retroactive basis, at any time.  In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company. Each holder and prospective holder of common shares of the Company is advised to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company applicable to their own particular circumstances.

U.S. Holders

As used herein, a (“U.S. Holder”) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services.

This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distribution on Common Shares of the Company

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal Income tax liability or, alternatively, individuals may be deducted in computing the U.S. Holder’s United States Federal taxable income by those individuals who itemize deductions.  (See more detailed discussion at “Foreign Tax Credit” below).  To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Dividend income will be taxed at marginal tax rates applicable to ordinary income while preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust.  There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale of other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.

Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

62

Under current Treasury Regulations, dividends paid on the Company’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Company’s common shares paid in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

For individuals whose entire income from sources outside the United States consists of qualified passive income, the total amount of creditable foreign taxes paid or accrued during the taxable year does not exceed $300 ($600 in the case of a joint return) and an election is made under section 904(j), the limitation on credit does not apply.

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax.  This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his/her or its worldwide taxable income in the determination of the application of this limitation. The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and management urges holders and prospective holders of common shares of the Company to consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (I) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company.  Preferential tax rates apply to long-term capital gains of U.S. Holders, which are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders, which are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted, but individuals may not carry back capital losses. For U.S. Holders, which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company.

63

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% (50% after the first tax year) or more of the Company’s gross income for such year was derived from certain passive sources (e.g. from interest income received from its subsidiaries), the Company would be treated as a “foreign personal holding company.”  In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income.

The Company does not believe that it currently has the status of a “foreign personal holding company”. However, there can be no assurance that the Company will not be considered a foreign personal holding company for the current or any future taxable year.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Company’s outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1297 of the Code, depending upon the percentage of the Company’s income which is passive, or the percentage of the Company’s assets which is held for the purpose of producing passive income.

The rule governing PFICs can have significant tax effects on U.S. shareholders of foreign corporations who are subject to U.S. Federal income taxation under alternative methods at the election of each such U.S. shareholder.  As a PFIC, each U.S. shareholder’s income or gain, with respect to a disposition or deemed disposition of the PFIC’s shares or a distribution payable on such shares will generally be subject to tax at the highest marginal rates applicable to ordinary income and certain interest charges, unless the U.S. shareholder has timely made a “qualified electing fund” election or a “mark-to-market” election for those shares.

A U.S. shareholder who elects to treat the PFIC as a Qualified Electing Fund ("QEF"), as defined in the Code, (an "Electing U.S. Holder") will be required to currently include in his income, for any taxable year in which the corporation qualifies as a PFIC, his pro-rata share of the corporation's (i) "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder, and (ii) "ordinary earnings" (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the U.S. Holder's taxable year in which the corporation’s taxable year ends, regardless of whether such amounts are actually distributed. A QEF election also allows the Electing U.S. Holder to generally treat any gain realized on the disposition of his common shares (or deemed to be realized on the pledge of his common shares) as capital gain; treat his share of the corporation's net capital gain, if any, as long-term capital gain instead of ordinary income, and either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the corporation's annual realized net capital gain and ordinary earnings.

The procedure a U.S. Holder must comply with in making a timely QEF election will depend on whether the year of the election is the first year in the U.S. Holder's holding period in which the corporation is a PFIC. If the U.S.

64

shareholder makes a QEF election in such first year, then the U.S. shareholder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files a tax return for such first year. If, however, the corporation qualified as a PFIC in a prior year during the U.S. shareholder’s holding period, then the U.S. shareholder may make a retroactive QEF election, provided he has preserved his right to do so under the protective statement regime or he obtains IRS permission.

If a U.S. shareholder has not made a QEF Election at any time (a "Non-electing U.S. Holder"), then special taxation rules under Section 1291 of the Code will apply to gains realized on the disposition (or deemed to be realized by reason of a pledge) of his common shares, and certain "excess distributions" by the corporation. An excess distribution is a current year distribution received by the U.S. shareholder on PFIC stock to the extent that the distribution exceeds its ratable portion of 125% of the average amount received by the U.S. shareholder during the preceding three years.

A Non-electing U.S. shareholder generally would be required to pro-rate all gains realized on the disposition of his common shares and all excess distributions over the entire holding period for the common shares. All gains or excess distributions allocated to prior years of the U.S. shareholder (other than years prior to the first taxable year of the corporation during such U.S. Holder's holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest marginal tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. shareholder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing non-corporate U.S. shareholder must treat this interest charge as "personal interest" which is wholly non-deductible. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.

If a corporation is a PFIC for any taxable year during which a Non-electing U.S. shareholder holds common shares, then the corporation will continue to be treated as a PFIC with respect to such common shares, even if it is no longer by definition a PFIC. A Non-electing U.S. shareholder may terminate this deemed PFIC status by electing to recognize a gain, which will be taxed under the rules for Non-Electing U.S. Holders, as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC. If the corporation no longer qualifies as a PFIC in a subsequent year, then normal Code rules and not the PFIC rules will apply with respect to a U.S. shareholder who has made a QEF election.

In certain circumstances, a U.S. Holder of stock in a PFIC can make a “qualified electing fund election” to mitigate some of the adverse tax consequences of holding stock in a PFIC by including in income its share of the corporation’s income on a current basis. However, the Company does not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. Management urges US persons to consult with their own tax advisors with regards to the impact of these rules.  

Controlled Foreign Corporation

A Controlled Foreign Corporation (CFC) is a foreign corporation more than 50% of whose stock by vote or value is, on any day in the corporation’s tax year, owned (directly or indirectly) by U.S. Shareholders. If more than 50% of the voting power of all classes of stock entitled to vote is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own actually or constructively 10% or more of the total combined voting power of all classes of stock of the Company could be treated as a “controlled foreign corporation” under Subpart F of the Code.  This classification would affect many complex results, one of which is the inclusion of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts.

65

In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation which is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company (accumulated in corporate tax years beginning after 1962, but only while the shares were held and while the Company was “controlled”) attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to the United States Shareholders of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders. The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to the U.S. Holders that are less than 10% shareholders. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.

The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holder’s federal income tax liability.

Filing of Information Returns

Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and management urges United States Investors to consult their own tax advisors concerning these requirements.

Statement by Experts

The Company’s auditors for its financial statements as at December 31, 2020, 2019 and 2018 was DeVisser Gray LLP, Chartered Accountants. Their audit report is included with the related financial statements within this Annual Report.

Documents on Display

All documents incorporated in the Company’s 20-F Registration Statement and this Annual Report may be viewed at the Company’s Executive Office located at 410 – 325 Howe Street, Vancouver, British Columbia, Canada, V6C 1Z7.

The Company competes with other resource companies for exploration properties and possible joint venture agreements.  There is a risk that this competition could increase the difficulty of concluding a negotiation on terms that the Company considers acceptable.

The Company’s property interests in Portugal, Germany and Kosovo make it subject to foreign currency fluctuations and inflationary pressures which may adversely affect the Company’s financial position, results of operations and cash flows. The Company is affected by changes in exchange rates between the Canadian Dollar and foreign functional currencies. The Company does not invest in foreign currency contracts to mitigate the risks. A 1% change in the absolute rate of exchange in US dollars and Euros would affect its net loss by $200.

As the Company is currently in the exploration phase and has no producing mineral properties, it is not currently exposed to commodity price risk.

66

Not Applicable

Not Applicable

Not Applicable

Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as December 31, 2020. The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2020, were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by the Company for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with IFRS.  The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review of the interim and annual financial statements.  Management reviewed the results of their assessment with the Company’s Audit Committee.

Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all possible misstatements or frauds.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control - Integrated Framework (2013), which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2020.

67

Limitations on the Effectiveness of Controls

The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud.  A control system, no matter how well designed 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, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been 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 management override of the control.  The design of any system of controls 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 achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Form 20-F Annual Report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not have an “audit committee financial expert” serving on its audit committee.  The Company’s Audit Committee consists of three directors (two independent), all of whom are both financially literate and very knowledgeable about the Company’s affairs.  Because the Company’s structure and operations are straightforward, the Company does not find it necessary at the current time to augment its Board with a financial expert.

The Board has not adopted a written code of ethics. However, the Board views good corporate governance as an integral component to the Company’s success. It has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law and the restrictions placed by the applicable corporate legislation on an individual director’s participation in decisions of the Board in which the director has an interest have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.

The audit committee is directly responsible for the appointment, compensation and oversight of auditors; the audit committee has in place procedures for receiving complaints and concerns about accounting and auditing matters; and has the authority and the funding to engage independent counsel and other outside advisors.

The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals required by this policy / procedure.  The decisions of any Audit Committee member to whom authority is delegated to pre-approve a service shall be presented to the full Audit Committee at its next scheduled meeting.

68

In accordance with the requirements of the US Sarbanes-Oxley Act of 2002 and rules issued by the Securities and Exchange Commission, we introduced a procedure for the review and pre-approval of any services performed by DeVisser Gray LLP, including audit services, audit related services, tax services and other services.  The procedure requires that all proposed engagements of DeVisser Gray LLP for audit and permitted non-audit services are submitted to the finance and audit committee for approval prior to the beginning of any such services.

Fees, including reimbursements for expenses, for professional services rendered by DeVisser Gray LLP to the Company are detailed below.

--- No Disclosure Necessary ---

--- No Disclosure Necessary ---

--- No Disclosure Necessary ---

--- No Disclosure Necessary ---

--- No Disclosure Necessary ---

The Company has provided financial statements pursuant to ITEM #18.

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with IFRS.

The financial statements as required under ITEM #18 are attached hereto and found immediately following the text of this Annual Report.  The audit report of DeVisser Gray LLP, Chartered Accountants, is included herein immediately preceding the financial statements.

(A)  The financial statements thereto as required under ITEM #18 are attached hereto and found immediately following the text of this Annual Report.  The audit report of DeVissser Gray LLP, Chartered Accountants, for the audited financial statements is included herein immediately preceding the audited financial statements.

69

·Audited Financial Statements 

·Independent Auditors Report of DeVisser Gray LLP, Chartered Accountants, dated April 28, 2021. 

·Consolidated Statements of Financial Position at December 31, 2020, and December 31, 2019. 

·Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, December 31, 2019 and December 31, 2018. 

·Consolidated Statements of Cash Flows for the years ended December 31, 2020, December 31, 2019 and December 31, 2018. 

·Consolidated Statements of Changes in Equity for the years ended December 31, 2020 and December 31, 2019. 

·Notes to Financial Statements 

(B)  Index to Exhibits:

1.Certificate of Incorporation, Certificates of Name Change, Articles of Incorporation, Articles of Amalgamation and By-Laws: