Gabriel Resources : 2023 Second Quarter Report

Management's Discussion and Analysis

This Management's Discussion and Analysis ("MD&A") provides a commentary to enable a reader to assess material changes in the financial condition and results of operations of Gabriel Resources Ltd. ("Gabriel" or the "Company") and its subsidiary companies (together the "Group") as at, and for the three and six-month periods ended June 30, 2023 and 2022.

The MD&A should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto of the Company as at and for the three and six-month periods ended June 30, 2023 and 2022 ("Financial Statements"). The Financial Statements have been prepared in condensed format in accordance with International Financial Reporting Standards ("IFRS") as applicable to the preparation of interim financial statements, including International Accounting Standard IAS 34 ('Interim Financial Reporting'). The Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company as at and for the year ended December 31, 2022, which have been prepared in accordance with IFRS.

All amounts included in the MD&A are in Canadian dollars ("$"), unless otherwise specified. This report is dated as of August 3, 2023 and the Company's public filings can be reviewed on the SEDAR website (www.sedar.com).

This MD&A contains forward-looking statements about the Company's objectives, strategies, financial condition, operations and businesses within the Group. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based upon the beliefs, expectations, reasonable investigation and opinions of management of the Company ("Management") as of the date of this MD&A. All forward-looking statements, including those not specifically identified herein are made subject to the cautionary language beginning on page 28. Readers are advised to refer to the cautionary language when reading any forward-looking statements.

Overview

Gabriel is a Canadian resource company with its common shares ("Common Shares") listed on the TSX Venture Exchange ("Exchange"). Gabriel's activities over many years were focused principally on the exploration, permitting and development of the Roșia Montană gold and silver project in Romania (the "Project"). The Project, one of the largest undeveloped gold deposits in Europe, is situated in an area known as the Golden Quadrilateral in the South Apuseni Mountains of Transylvania, Romania, an historic prolific mining district that has been mined intermittently for over 2,000 years.

The exploitation concession license for the Project ("License") is held by Roșia Montană Gold Corporation S.A. ("RMGC"), a Romanian company in which Gabriel owns an 80.69% equity interest, with the 19.31% balance held by Minvest Roșia Montană S.A. ("Minvest RM"), a Romanian State-owned mining company.

Upon obtaining the License in 1999, RMGC along with Gabriel and its subsidiary companies focused substantially all of their management and financial resources on exploration, identifying and defining the size of the four ore bodies together with the size, scope and feasibility of the Project, building strong community relations, surface rights acquisitions, rescue archaeology and environmental assessment and permitting. . Gabriel invested over US$760 million to develop the Project and to define two valuable mineral deposits at the Rodu-Frasin (epithermal gold and silver) site and Tarniţa (porphyry copper-gold) site, both within the Bucium area located in the vicinity of Roşia Montană ("Bucium Projects").

Despite the Group's fulfilment of its legal obligations and its development of the Project as a high- quality, sustainable and environmentally-responsible mining project, using best available techniques, the Romanian State unlawfully blocked and prevented the implementation of the Project and the Bucium Projects without compensation in contravention of the applicable legal and administrative processes and requirements.

Gabriel made repeated attempts to engage with the Government of Romania to find a way forward believing that the interests of all stakeholders would be best served if an amicable resolution could be reached. However, in the absence of any willingness by the Romanian authorities to engage in dialogue, Gabriel was left with no alternative but to pursue arbitration proceedings against Romania in July 2015. Since that time, the arbitration has become the Company's core focus.

Accordingly, any information set out in this MD&A relating to the Project, the License, and the Group's development activities in Romania is for background purposes only and should not be interpreted as being indicative of the Company's expectations as at the date of this document regarding the future development of the Project.

ICSID Arbitration

On July 21, 2015, the Company and its wholly-owned subsidiary, Gabriel Resources (Jersey) Ltd. (together "Claimants"), filed a request for arbitration ("Arbitration Request") before the World Bank's International Centre for Settlement of Investment Disputes ("ICSID") against the Romanian State (the "Respondent") pursuant to the provisions of international bilateral investment protection treaties which the Romanian Government has entered into with each of the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Reciprocal Protection of Investments (together the "Treaties") ("ICSID Arbitration").

The ICSID Arbitration seeks compensation for the loss and damage suffered by the Claimants resulting from the Respondent's breaches of the Treaties' protections.

On July 30, 2015, ICSID registered Gabriel's request for the institution of arbitration proceedings to resolve the dispute. The original arbitral tribunal ("Tribunal") was constituted on June 21, 2016. The current members of the Tribunal are Prof. Pierre Tercier (Switzerland), Mr. Horacio Grigera Naón (Argentina) and Prof. Zachary Douglas (Australian).

The ICSID Arbitration process is well advanced and the Claimants and the Respondent (together "Parties") await a final decision, an arbitral award, to be rendered by the Tribunal (an "Award"). To date, and in accordance with the procedural timelines established by the Tribunal, the Parties have filed a large number of substantial written submissions and participated in two hearings on the merits of the claim. Key milestones in the ICSID Arbitration proceedings have been disclosed at length in Gabriel's prior quarterly and annual filings. In the 2023 year to date such milestones include:

• On November 8, 2022, the Tribunal invited the Parties to confer and agree on a schedule for the exchange of their cost statements, which were filed with the Tribunal by the Parties simultaneously in two rounds of submissions on December 16, 2022 and January 6, 2023.
• On May 30, 2023, the Tribunal informed the Parties that it had received a request from certain non-governmental organizations (or 'non-disputing parties') who have opposed the Project for many years. ("NGO Amici") for leave to add a further submission to the record of the case. Following representations from the Parties, the Tribunal rejected the NGO Amici's request on June 27, 2023.
• On July 14, 2023, a Romanian citizen submitted an application to introduce a further non- disputing party submission to the record. The Tribunal rejected this application on July 31, 2023 noting, amongst other things, that it does not require any further information from potential non-disputing parties at this stage in the proceedings.

As at the date of this document the Tribunal is yet to render an Award. In April 2023, the President of the Tribunal advised the Parties that the Tribunal's latest deliberations took place in March 2023 and that the Tribunal was working hard to prepare the Award and deliver it to the Parties in a timely manner. Furthermore, in the procedural order made by the Tribunal on June 27, 2023 in respect of the NGO Amici application, the Tribunal noted that its decision-making at this stage is almost complete.

There is, however, no specified timeframe in the ICSID Rules applicable to this case in which an Award is to be rendered by the Tribunal. Accordingly, there is no certainty as to when the written Award will be issued or whether further procedural steps may be required by the Tribunal prior to the issuance of an Award. Any Award may be subject to a request for annulment by either Party, albeit such annulment application can only be made on very limited grounds under the ICSID Convention.

There can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or be completed or settled within any specific or reasonable period of time. The resources necessary in pursuing the ICSID Arbitration are substantial and the costs, fees and other expenses and commitments payable in connection with the ICSID Arbitration may differ materially from Management's expectations.

If an Award concludes that Romania has breached the Treaties and is required to pay compensation to the Claimants, the Company will take appropriate steps to enforce and recover such an Award and to defend any annulment proceedings brought by Romania. In such circumstances, the enforcement and recovery of an Award may present material challenges and take a number of years.

A summary of the procedural aspects of the ICSID Arbitration, together with copies of the procedural orders of the Tribunal and the principal submissions, are available on ICSID's website.

Liquidity

Cash and cash equivalents at June 30, 2023 were $7.0 million.

The Company's average monthly cash usage during Q2 2023 was $1.0 million (Q1 2023: $0.7 million), primarily reflecting the consistent level of ongoing operational cost and limited ICSID Arbitration activity quarter on quarter.

At the end of Q2 2023, accruals for costs in respect of the ICSID Arbitration amounted to $4.6 million (Q1 2023: $4.5 million), reflecting the continuation of a fee agreement in respect of the deferred payment of certain ICSID Arbitration costs until an Award is issued (see "Contingent Liabilities" below).

Management continues to keep under review the Company's activities in order to identify areas to further rationalize expenditures.

Capital Resources

Private Placement

On June 8, 2023, the Company completed a non-brokered private placement (the "2023 Private Placement") of 24,782,212 common shares of the Company ("Common Shares") at a price of $0.26 each for gross proceeds of US$4.75 million (approximately $6.4 million). The Company will use the proceeds from the 2023 Private Placement to finance the ongoing costs of the ICSID Arbitration and for general working capital requirements.

Future Financing Requirements

On the basis of the Company's balance of cash and cash equivalents as at June 30, 2023, and taking into account: (i) the fee agreement in respect of the deferral of payment of certain ICSID Arbitration costs (see "Contingent Liabilities" below)); and (ii) the deferral of a portion of salary and fees for certain employees and directors (see also "Contingent Liabilities" below), the Company believes that it has sufficient cash necessary to fund general working capital requirements together with the material estimated costs associated with advancing the ICSID Arbitration through to December 2023.

At that time the Tribunal may not have yet reached a decision. As noted above, there can be no assurances that the ICSID Arbitration will advance in a customary or predictable manner or be completed or settled within any specific or reasonable period of time, and further procedural steps may be required to be completed prior to the issuance of an Award.

Accordingly, post December 2023, Gabriel will require further funding in order to pursue the long- term activities required to see the ICSID Arbitration through to its conclusion (which may include, as appropriate, costs of any potential annulment proceedings and/or costs of enforcement of any Award) and for general working capital purposes, including to preserve its remaining assets, such as its License and associated rights and permits.

Notwithstanding the Company's recent and historic funding, there is a risk that sufficient additional financing may not be available to the Company on acceptable terms, or at all. As noted below, the market and timing of any additional financing could also be adversely affected by the effects of COVID-19 and the Russia-Ukraine conflict, amongst other factors.

Other Recent Developments

RMGC - Government Audits and Investigations

Since the filing of the ICSID Arbitration, RMGC has been subjected to several Value Added Tax ("VAT") audits and other investigations by the Romanian National Agency for Fiscal Administration ("ANAF"), an agency of the Romanian Ministry of Finance, the Ministry charged with Romania's defense of the ICSID Arbitration. The timing, scope and manner of implementation of these audits and investigations are, in the view of Gabriel and RMGC, excessive and retaliatory to the Company's pursuit of the ICSID Arbitration.

VAT Audits and Inspections

In July 2017, RMGC was served with a decision by ANAF assessing a liability for value-added- tax in the amount of RON 27 million (approximately $8.6 million) (the "VAT Assessment") together with an additional demand in respect of related interest and penalties for RON 18.6 million (approximately $6.0 million). RMGC challenged the VAT Assessment and following a December 2020 hearing, the High Court of Cassation and Justice handed down judgment upholding a 2019 Court of Appeal annulment of the VAT Assessment. This decision is final and conclusive.

In July 2022, two separate ANAF inspection teams commenced further VAT reviews of RMGC which involved the reopening of 30 previously audited periods from February 2016 to September 2021. In September and October 2022, RMGC was notified of ANAF's decision to fully reimburse the amounts challenged by RMGC. A further VAT inspection, auditing the period from October 2021 to December 2021, was closed on October 27, 2022 with the decision to fully reimburse the VAT amount requested by RMGC for the period.

Prosecutor Office and ANAF Investigation

In November 2013, RMGC was informed of an investigation by the Ploiesti Public Prosecutor's Office into the principals/key shareholders of a group of companies known as the "Kadok Group". The public prosecutor subsequently extended the investigation of the Kadok Group to other companies, including RMGC which had had a short-term commercial relationship with the Kadok Group in 2012.

In 2015, less than two months after Gabriel filed its Request for Arbitration against Romania, the public prosecutor mobilized a directorate of ANAF to pursue an investigation of RMGC that has continued for over eight years as of the date of this MD&A.

In March 2020, RMGC was informed that the authorities had closed the file in relation to the commercial relationship between RMGC and the Kadok Group but that another prosecutor's office would continue an investigation of the commercial relations between RMGC and a list of service providers.

The ad hoc investigations pursued by ANAF over the past eight years has covered a broad range of operational activities and transactions of RMGC, and several of its suppliers, consultants, and advisors, covering an extensive period spanning 1997 to 2023.