Lexington Gold : Annual Report YE 31 December 2020

LEXINGTON GOLD LTD

(FORMERLY KNOWN AS RICHLAND RESOURCES LTD)

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

LEXINGTON GOLD LTD

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

(1)

LEXINGTON GOLD LTD

CHAIRMAN'S STATEMENT

Dear Fellow Shareholder,

I am pleased to present the Group's final results for the financial year ending 31 December 2020 and to report on the Company's ongoing activities to the date of this statement. Despite the challenges posed by COVID-19, 2020 has been a year of successful transformation for the Company and its shareholders.

During the year, the Company successfully achieved the following:

• Acquisition of 51 per cent. Interest in the Carolina Gold projects via GAR
• Readmission to trading on AIM
• Oversubscribed capital raising in conjunction with the readmission
• Corporate rebranding and name change
• Share consolidation
• Appointment of highly experienced Board members and management team
• Commencement of operations in the USA

Following the successful reverse acquisition of Global Asset Resources Ltd ("GAR"), the associated fundraising, and the readmission to AIM, we are now focussed on unlocking the excellent potential of our gold projects in the USA. All four projects, namely Jones-Keystone-Loflin ("JKL"), Carolina Belle, Jennings-Pioneer, and Argo, are situated in the highly prospective Carolina Super Terrane, a region that has seen both current and historic gold production but with little application of modern exploration techniques. The region is host to a number of multi-million-ounce gold mines with comparative geology to our own projects, and has attracted third party majors such as OceanaGold and Rio Tinto. The Carolinas represent a developed and stable jurisdiction, with modern local infrastructure and ready access to operational resources.

We are implementing modern exploration techniques over all four of our projects. All our projects have seen historical gold mining activities and various stages of exploration work, the data from which we have incorporated into our database and work programme design. The area has also recently been host to similar mining projects progressing from exploration to development as low cost mines, exemplified by the Haile Gold Mine which was explored by Romarco Minerals before being acquired by OceanaGold for over C$850m in 2015.

I am also pleased to have a highly experienced board of directors and management team in place, along with a strong local joint venture partner whose management has a combined experience of over 130 years in exploration in the USA.

Following readmission in November 2020, we have already made significant progress with our gold exploration activities. We have completed a helicopter borne VTEM geophysical survey over the Jennings-Pioneer project which identified two potential anomalies that will be followed up by soil sampling, trenching, and potential drilling. We have also completed a large scale, fixed-wing, airborne geophysical survey over the JKL, Carolina Belle, and Argo projects; the data interpretation and modelling is currently underway. At JKL, our first drilling campaign has recently been completed and we are very encouraged by the sulphide mineralisation that has been intersected in all six holes drilled, since gold at JKL has a known association with sulphides, and we eagerly await the assay results. Lexington Gold has also secured additional mineral exploration rights at the JKL project. The additional mineral rights were adjacent to the project's pre-existing mineral exploration rights, thereby representing a significant enhancement to our existing land package.

Last, but not least, on behalf of the Board I wish to express appreciation for the valued support of the Company's various stakeholders and shareholders.

Edward Nealon

Non-Executive Chairman

10 May 2021

(2)

LEXINGTON GOLD LTD

CHIEF EXECUTIVE'S OPERATIONAL AND FINANCIAL REVIEW

FOR THE YEAR ENDED 31 DECEMBER 2020

1. Overview

On 2 January 2020, the Company announced that the disposal to Fura Gems Inc. of its wholly owned subsidiary, Richland Corporate Ltd, the holder of the Capricorn Sapphire Project (and the Company's loans to Richland Corporate Ltd), had completed further, inter alia, to the requisite approval by Shareholders at a general meeting of the Company held on 19 August 2019 as the disposal constituted a fundamental change of business for the Company.

Pursuant to the successful completion of the disposal, the Company became an AIM Rule 15 Cash Shell on 31 December 2019 and, as such, was required to make an acquisition, or acquisitions, which constitute(s) a reverse takeover under AIM Rule 14 (including seeking re-admission under the AIM Rules for Companies) within six months from completion of the disposal, failing which, the Company's Common Shares would be required to be suspended from trading pursuant to AIM Rule 40. Accordingly, the Company's Existing Common Shares were suspended from trading on 1 July 2020 pending completion of the Acquisition ("Completion") described further below.

On 27 July 2020, the Company announced that it had entered into a binding share purchase agreement to conditionally acquire the entire issued share capital of Global Asset Resources Ltd ("GAR"), a private Australian incorporated company, which, via its wholly owned subsidiary, Global Asset Resources Holdings, Inc., holds a 51 per cent. interest in and operatorship of four gold exploration projects in North and South Carolina in the United States (the "Acquisition"). The Acquisition constituted a reverse takeover transaction pursuant to Rule 14 of the AIM Rules.

The consideration for the Acquisition comprised an aggregate payment on Completion to the Sellers (including the Founder Sellers) and GAR's joint venture partner, Uwharrie Resources Inc. ("URI"), of AU$60,000 (approximately US$43,392) in cash and AU$1.04m (approximately US$752,128) in New Common Shares at the Placing Price. In addition, Lexington Gold made two non-refundable cash payments to GAR of US$29,340 on 31 July 2020 and US$22,818 on 30 September 2020, with such payments utilised to cover certain project costs pending Completion. Furthermore, the Company may also be required to make two additional future conditional deferred consideration payments to the Sellers and URI, in cash or New Common Shares at Lexington Gold's sole discretion, of, in aggregate, AU$1.5m and AU$3m, linked to the achievement of certain performance milestones or the occurrence of certain vesting events during the five year period following Completion.

In connection with the Acquisition, the Company raised, in aggregate, approximately £3.33 million (before expenses) via the issue of 120,989,112 Placing Shares and Subscription Shares to institutional and certain other investors at the Placing Price of 2.75 pence per share. The net proceeds of the Placing and Subscription of approximately £2.53 million were utilised to fund the initial cash consideration in respect of the Acquisition and are being applied on the enlarged group's planned initial two year work programme and requisite working capital requirements.

Due to its transformational nature, the Acquisition constituted a reverse takeover of the Company pursuant to the AIM Rules which was approved by Shareholders at the Annual General Meeting held on 23 November 2020. Following Completion, the Sellers became the beneficial owners of, in aggregate, 18,504,073 New Common Shares representing approximately 7.08 per cent. of the enlarged share capital.

The GAR Projects present a unique opportunity to explore a gold province in a first world country with excellent infrastructure that has seen limited modern exploration. Drilling forms part of the first phase of planned exploration with two of the four projects offering walk-up drill targets. The Jones-Keystone-Loflin Project properties are the most advanced and have previously returned significant drill intercepts that require systematic reverse circulation drilling to test existing mineralised zones that are open at depth and along strike. The Carolina Belle Project has existing historical underground workings that provide a well- defined target horizon virtually untested by drilling.

(3)