Aquila Resources : 2020 Q4 MD&A

AQUILA RESOURCES INC.

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2020

FORWARD-LOOKING STATEMENT

This MD&A contains certain forward-looking statements, such as statements regarding potential mineralization, resources and exploration results and future plans and objectives of the Company, which are subject to various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements contained are made as of the date of this MD&A and the Company disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise.

GENERAL

The following management discussion and analysis ("MD&A") of financial results is dated March 30, 2021 and reviews the business of Aquila Resources Inc. (the "Company" or "Aquila") for the year ended December 31, 2020, and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2020. This MD&A and the accompanying consolidated financial statements and related notes for the year ended December 31, 2020, have been reviewed by the Company's Audit Committee and approved by the Company's Board of Directors.

The technical content of this MD&A has been read and approved by Andrew Boushy, Technical Advisor to Aquila. Mr. Boushy is a Qualified Person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

This MD&A contains references to both United States dollars and Canadian dollars. All dollar amounts referenced, unless otherwise indicated, are expressed in United States dollars, and Canadian dollars are referred to as "C$".

Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category. The inclusion of inferred mineral resources are considered too speculative geologically to have the economic considerations applied to enable them to be categorized as mineral reserves. The mineral resources in this M&DA were reported using Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Standards.

Additional information regarding the Company, including the risks related to the Company's business and those that are reasonably likely to affect the Company's financial statements in the future, is contained in our continuous disclosure materials, including our most recent Annual Information Form ("AIF"), audited

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consolidated financial statements and Management Information Circular available on SEDAR at www.sedar.com.

ANNUAL HIGHLIGHTS

• In August 2020, the Company announced the results of a positive Preliminary Economic Assessment ("PEA") for the Company's 100% owned Back Forty Project. Key highlights include:
  o After-tax NPV at a 6% discount rate of $176.3 million (approximately C$235 million) with 26.1% IRR at long term consensus metal prices including $1,485 per ounce gold.
  o After-tax NPV of $316.3 million at a 6% discount rate (approximately C$422 million) with 37.8% IRR at spot prices as of August 4, 2020 including $1,998 per ounce gold with gold generating 52% of revenue.

1. Includes the known underground mineral resources at Back Forty, increasing the life of mine to 12 full years.

1. Life of mine production of over 1.5 million gold equivalent ounces with production in Year 1 of 206,000 gold equivalent ounces.

1. Pre-productioncapital costs of $250.4 million benefitting from significant nearby

infrastructure.

• 1. Potential value enhancement through additional exploration as the deposit remains open at depth.
• In January 2020, in a unanimous decision, the United States Court of Appeals for the Seventh Circuit (the "Appeals Court") upheld the dismissal of a lawsuit related to Aquila's Wetlands Permit brought by the Menominee Indian Tribe of Wisconsin (the "Tribe") in the State of Wisconsin. In May 2020, in a unanimous decision, the Appeals Court denied an earlier request by the Tribe for a rehearing of its appeal. This marks the end of the Tribe's federal challenge to the Back Forty Project.
• In August 2020, the Company added two key hires to its team:
• 1. The Company hired Mike Foley as Director of Environment & Infrastructure. Mr. Foley has

32 years of experience as a Civil Engineer in the Upper Peninsula of Michigan and northern Wisconsin.

• 1. The Company hired Bob Mahin as Director of Exploration. Mr. Mahin is a senior level geologist with thirty years of progressive experience guiding mineral exploration programs. Since 1990, Mr. Mahin has been based in Michigan's Upper Peninsula and has gained progressive experience from fieldwork to managing multi-million-dollar exploration programs in the pursuit of gold and base metals.
• In September 2020, the Company held its 2020 annual meeting of shareholders at which the six nominees listed in the management information circular were elected as directors of Aquila. The Company welcomed a new director, Mr. Paul Johnson, to the Board. Mr. Johnson is a mining engineer with 40 years of experience in the mining industry. Prior experience includes serving as Open Pit Project Evaluation Manager for Osisko Gold Royalties and being part of the initial development team for Osisko Mining Corporation's Canadian Malartic project.
• In June 2020, the Company announced that it entered into definitive agreements to amend certain terms of its gold and silver purchase agreements with a subsidiary of Osisko Gold Royalties Ltd ("Osisko") in order to accelerate Aquila's access to a portion of the outstanding funding under the gold purchase agreement and to provide additional flexibility.
• In August 2020, the Company achieved DTC eligibility for its common shares from The Depository Trust Company ("DTC"). The DTC is a subsidiary of the Depository Trust & Clearing Corp. and manages the electronic clearing and settlement for the vast majority of publicly traded equities and other securities in the United States. This electronic method of clearing securities accelerates

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the settlement process for investors and brokers, enabling the stock to be traded over a much wider selection of brokerage firms by coming into compliance with their requirements. The Company's common shares continue to be listed for trading in the United States on the OTCQB market under the symbol AQARF.

FOURTH QUARTER HIGHLIGHTS

• As at December 31, 2020, Aquila had cash of $1.8 million and negative working capital of $0.8 million. This compared to cash of $4.0 million and working capital of $1.6 million at December 31, 2019. The decrease in working capital is primarily due to permitting and legal activities at its Back Forty Project. The Company is focused on securing financing in the near-term.
• In December 2020, the Ingham County Circuit Court in the State of Michigan upheld the final decision of the Michigan Department of Environment, Great Lakes, and Energy ("EGLE") to issue the Back Forty Mining Permit after a lengthy contested case hearing initiated by two petitioners. Subsequent to its issuance by EGLE, the Mining Permit was upheld by the Judge and an environmental review panel made up of technical experts from various fields.

POST QUARTER HIGHLIGHTS

• In February 2021, a resolution supporting the mining industry in Michigan was introduced into the Michigan Senate. The resolution has been reported out of committee without changes and is expected to be adopted by the Senate in the current legislative session.
• On February 1, 2021, the Company appointed Guy Le Bel as President & CEO of Aquila. Barry Hildred transitioned to the role of Executive Chair of the Board of Directors and Ted Munden, outgoing Chair of the Board of Directors, was appointed to the position of Lead Director. Mr. Le Bel brings more than 35 years of experience in business and project development, strategic and financial planning, and permitting in the Americas to Aquila. Most recently, he was CEO and CFO of Golden Queen Mining Ltd. until its acquisition in 2020 by Falco Resources Ltd. Mr. Le Bel holds an MBA Finance from Ecole des Hautes Études Commerciales (Montreal), a Master Applied Sciences, Mining Engineering from the University of British Columbia and a B.Sc. Mining Engineering from Université Laval. He is a Professional Engineer (O.I.Q.).
• In March 2021, Aquila announced that it entered into definitive agreements (the "2021 Stream Agreement Amendments") with Osisko to amend certain terms of the Gold Stream and Silver Stream in order to provide additional flexibility. Under the terms of the 2021 Stream Agreement Amendments, Osisko agreed to adjust certain milestone dates under the Gold Stream and the Silver Stream to align the streams with the current project development timeline.
• In March 2021, Aquila engaged Osisko Technical Services ("OTS") to lead an optimized feasibility study (the "Feasibility Study") for the Back Forty Project. OTS' technical team has a proven track record of project execution. Aquila will leverage the team's combined engineering, permitting, construction and operating expertise to unlock value and advance the Back Forty Project through its next phase of development.
• In January 2021, an administrative law judge for the Michigan Office of Administrative Hearings and Rules (the "Judge") issued a decision denying the prior issuance of the Back Forty Wetlands Permit. In his decision, the Judge determined that Aquila's groundwater model does not provide a reliable identification of wetland impacts and therefore found the permit application to be administratively incomplete. The Judge also determined that Aquila did not provide a complete assessment of potential alternatives to its proposed plan. Aquila has appealed the Judge's decision to the EGLE environmental review panel (the "Panel"). The Panel is expected to render a decision in the second half of 2021. The Panel has the authority to adopt, remand, modify, or reverse, in

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