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Form 6-K Silver Elephant Mining For: Jun 30

August 16, 2022 7:22 AM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2022

Commission File Number: 000-55985

SILVER ELEPHANT MINING CORP.
(Translation of registrant's name into English)

Suite 1610 – 409 Granville Street
Vancouver, British Columbia, Canada V6C 1T2

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[ x ] Form 20-F   [           ] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [           ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [           ]


SUBMITTED HEREWITH

Exhibits

Exhibit   Description
   
99.1   Condensed Interim Consolidated Financial Statements for the period ended June 30, 2022
99.2   Management’s Discussion and Analysis for the period ended June 30, 2022
99.3   Form 52-109F2 Certification of Interim Filings Full Certificate - CEO
99.4   Form 52-109F2 Certification of Interim Filings Full Certificate - CFO

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  SILVER ELEPHANT MINING CORP.
  (Registrant)
     
Date: August 15, 2022 By: /s/ John Lee
   
    John Lee
  Title: Executive Chairman



 

 

SILVER ELEPHANT MINING CORP.

Condensed Interim Consolidated Financial Statements

 

For the six months ended June 30, 2022 and 2021

(Expressed in Canadian Dollars)

Unaudited - Prepared by Management

 

 

 


NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed interim consolidated financial statements have been prepared by management of the Company and approved by the Company's Audit Committee. The Company's independent auditors have not performed a review of these condensed interim consolidated financial statements in accordance with the standards established for a review of interim financial statements by an entity's auditors.

 


TABLE OF CONTENTS

Condensed Interim Consolidated Statements of Financial Position 4
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) 5
Condensed Interim Consolidated Statements of Changes in Equity 6
Condensed Interim Consolidated Statements of Cash Flows 7
   
1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS 8
2. BASIS OF PRESENTATION AND PREPARATION 9
3. ARRANGEMENT AND TRANSFER OF ASSETS 10
4. SEGMENTED INFORMATION  11
5. CASH AND RESTRICTED CASH EQUIVALENTS  11
6. MARKETABLE SECURITIES  11
7. EQUIPMENT 11
8. MINERAL PROPERTIES 14
9. ROYALTY 18
10. LAND  19
11. INTANGIBLE ASSETS 19
12 PREMIUM ON FLOW THROUGH LIABILITY 19
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 20
14. PROMISSORY NOTE 20
15. SHARE CAPITAL 20
16. NON-CONTROLLING INTEREST 23
17. CAPITAL RISK MANAGEMENT 24
18. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS 24
19. FINANCIAL RISK MANAGEMENT DISCLOSURES 25
20. RELATED PARTY DISCLOSURES 26
21. KEY MANAGEMENT PERSONNEL COMPENSATION  27
22. CONTINGENCIES  27
23. SUBSEQUENT EVENTS 27


SILVER ELEPHANT MINING CORP.

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars) (Unaudited)

  Notes   June 30,
2022
    December 31,
2021
 
ASSETS              
Current assets              
Cash   $ 3,827,488   $ 579,508  
Receivables     119,343     79,036  
Prepaid expenses     267,673     103,931  
Assets held for spin-off     -     40,052,477  
      4,214,504     40,814,952  
Non-current assets              
Restricted cash equivalents     34,500     34,500  
Reclamation deposits     21,055     21,055  
Equipment 7   91,764     41,035  
Mineral properties 8   79,786,492     21,134,876  
Land 10   5,291,642     -  
Intangible assets 11   337,438     -  
TOTAL ASSETS   $ 89,777,395   $ 62,046,418  
               
LIABILITIES AND EQUITY              
Current liabilities              
Accounts payable and accrued liabilities 13, 20 $ 4,024,313   $ 2,502,139  
Promissory note 14   110,877     -  
Premium on flow through shares 12   11,311     -  
Liabilities associated with assets held for spin-off 3   -     6,816,407  
      4,146,501     9,318,546  
Non-current liabilities              
Provision for closure and reclamation     2,037,731     2,037,731  
Promissory note 14   3,629,223        
Total liabilities     9,813,455     11,356,277  
               
Equity              
Share capital 15   216,484,459     214,790,904  
Reserves 15   26,783,599     26,335,247  
Deficit     (209,886,585 )   (191,935,861 )
Equity attributable to owners of parent     33,381,473     49,190,290  
Equity attributable to non-controlling interests 16   46,582,467     1,499,851  
Total equity   $ 79,963,940     50,690,141  
TOTAL LIABILITIES AND EQUITY   $ 89,777,395   $ 62,046,418  

Approved on behalf of the Board:

August 12, 2022   "John Lee"   "Greg Hall        
    John Lee, Director   Greg Hall, director

Contingencies (Note 19)

Events after the reporting date (Note 23)

The accompanying notes form an integral part of these unaudited condensed interim consolidated financial statements.


SILVER ELEPHANT MINING CORP.

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Expressed in Canadian Dollars) (Unaudited)

  Notes   Three months ended June 30,     Six months ended June 30,  
      2022     2021     2022     2021  
General and Administrative Expenses                          
Advertising and promotion   $ 225,130   $ 121,667   $ 273,914   $ 330,602  
Consulting and management fees 20   387,214     436,196     470,574     488,696  
Depreciation and accretion 7   9,527     7,997     10,351     17,646  
Director fees 20   53,492     46,901     88,320     71,201  
Insurance     52,166     21,046     73,582     45,213  
Office and administration     98,273     16,330     120,389     46,335  
Professional fees     606,849     72,633     759,950     182,253  
Salaries and benefits 20   334,568     192,381     476,272     309,216  
Share-based payments 15   429,663     152,971     680,738     244,341  
Stock exchange and shareholder services     139,577     25,612     201,902     89,972  
Travel and accommodation     123,456     1,303     128,653     5,803  
      (2,459,915 )   (1,095,037 )   (3,284,645 )   (1,831,278 )
Other items                          
Costs in excess of recovered coal     93,703     (14,404 )   9,217     (106,947 )
Sale of hay     333,502     -     333,502     -  
Foreign exchange gain (loss)     (112,454 )   23,306     (50,680 )   264,598  
Sale of marketable securities     1,490,195     (600,000 )   649,322     1,000,000  
Impairment of mineral property     (83,556 )   -     (83,553 )   -  
Impairment of NSR     (253,469 )   -     (253,469 )   -  
Interest 14   (49,061 )   -     (49,061 )   -  
Recovery of flow through liability 12   120,914     -     120,914     -  
Loss on debt settlement     (1,431,873 )   -     (1,431,873 )   -  
Reverse of gain on transfer of spin-out assets     (24,210,145 )   -     -     -  
      (24,102,244 )   (591,098 )   (755,681 )   1,157,651  
Net Loss for the period     (26,562,159 )   (1,686,135 )   (4,040,326 )   (673,627 )
Comprehensive loss for the period     (26,562,159 )   (1,686,135 )   (4,040,326 )   (673,627 )
Loss attributable to:                          
Shareholders     (24,780,523 )   (1,686,135 )   (2,258,690 )   (673,627 )
Non-controlling interest 16   (1,781,636 )   -     (1,781,636 )   -  
      (26,562,159 ) $ (1,686,135 )   (4,040,326 ) $ (673,627 )
(Loss) earnings per share attributable to the equity holders of the Company                          
Basic and diluted   $ (0.85 ) $ (0.08 ) $ (0.16 ) $ (0.03 )
Weighted average number of common shares outstanding     25,477,742     20,190,320     24,821,365     19,711,930  

The accompanying notes form an integral part of these unaudited interim consolidated financial statements.


SILVER ELEPHANT MINING CORP.

Condensed Interim Consolidated Statements of Changes in Equity

(Expressed in Canadian Dollars, except number of shares) (Unaudited)

  Note   Number of
shares
    Share capital     Shares
issuable
    Reserves     Deficit     Total shareholders'
equity (deficiency)
    Non-controlling
interest
    Total equity
(deficiency)
 
Balance December 31, 2020     18,051,883   $ 197,612,182   $ -   $ 24,852,022   $ (185,106,147 ) $ 37,358,057   $ -   $ 37,358,057  
Private placements,
net of share issue costs
15   1,000,000     3,635,275     -     -     -     3,635,275     -     3,635,275  
Shares issued for property acquisition 15   536,363     2,386,815     -     -     -     2,386,815     -     2,386,815  
Shares issuable for property acquisition 15   -     -     3,818,003     -     -     3,818,003     -     3,818,003  
Exercise of stock options 15   99,500     386,507     -     (179,682 )   -     206,825     -     206,825  
Exercise of warrants 15   1,241,189     3,201,001     -     (9,600 )   -     3,191,401     -     3,191,401  
Warrants issued for property acquisition 15   -     -     -     723,845     -     723,845     -     723,845  
Share-based payments 15   -     -     -     412,001     -     412,001     -     412,001  
Gain for the period     -     -     -     -     (673,627 )   (673,627 )   -     (673,627 )
Balance, June 30, 2021     20,928,935   $ 207,221,780   $ 3,818,003   $ 25,798,586   $ (185,779,774 ) $ 51,058,595   $ -   $ 51,058,595  
Balance, December 31, 2021     24,124,945   $ 214,790,904   $ -   $ 26,335,247   $ (191,935,861 ) $ 49,190,290   $ 1,499,851   $ 50,690,141  
Recognition of non-controlling interest 16   -     -     -     -     -     -     46,864,252     46,864,252  
Exercise of warrants 15   10,000     26,000     -     -     -     26,000     -     26,000  
Bonus shares 15   187,049     235,682     -     -     -     235,682     -     235,682  
Share-based payments 15   -     -     -     434,688     -     434,688     -     434,688  
Shares issued to settle liability 15   1,267,145     1,431,873     -     -     -     1,431,873     -     1,431,873  
Spin out transaction 3   -     -     -     13,664     (15,692,034 )   (15,678,370 )   -     (15,678,370 )
Income and comprehensive loss for the period     -     -     -     -     (2,258,690 )   (2,258,690 )   (1,781,636 )   (4,040,326 )
Balance, June 30, 2022     25,589,139   $ 216,484,459   $ -   $ 26,783,599   $ (209,886,585 ) $ 33,381,473   $ 46,582,467   $ 79,963,940  

The accompanying notes form an integral part of these unaudited interim consolidated financial statements.


SILVER ELEPHANT MINING CORP.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars) (Unaudited)

      Six months ended June 30,  
  Notes   2022     2021  
Operating Activities              
Net gain for the period   $ (4,040,111 ) $ (673,627 )
Non-cash items              
Depreciation and accretion 7   10,351     17,646  
Share-based payments 15   434,688     244,341  
Unrealized loss (gain) on marked-to-market securities     -     (1,000,000 )
Share compensation for services     235,682     -  
Spin-out transaction     7,306,851     -  
Loss on debt settlement     1,431,873     -  
      5,479,334     (1,411,640 )
Changes in working capital items              
Receivables     (40,308 )   (41,745 )
Prepaid expenses and reclamation deposits     (163,742 )   4,265  
Accounts payable and accrued liabilities     1,533,486     1,250,944  
Cash flow used in Operating Activities     6,708,770     (198,176 )
Investment Activities              
Mineral properties expenditures     (1,536,640 )   (12,067,794 )
Purchase of equipment     (61,080 )   -  
Land     (5,291,642 )   -  
Intangible assets     (337,438 )   -  
Purchase of marketable securities     -     (1,000,000 )
Cash flow used in Investing Activities     (7,226,800 )   (13,067,794 )
Financing Activities              
Proceeds from share issuance, net of cash share issue costs 15   -     3,635,275  
Proceeds from stock options exercised 15   -     206,825  
Proceeds from exercise of warrants 15   26,000     2,009,401  
Promissory note 14   3,740,010     -  
Lease payments     -     (17,658 )
Cash flow from Financing Activities     3,766,010     5,833,843  
Decrease in cash     3,247,980     (7,432,127 )
Cash, beginning of period     579,508     7,608,149  
Cash, end of period   $ 3,827,488   $ 176,022  

The accompanying notes form an integral part of these unaudited interim consolidated financial statements.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

Silver Elephant Mining Corp. (the "Company", "Silver Elephant" or "ELEF") is incorporated under the laws of the province of British Columbia, Canada. The common shares without par value in the capital of the Company (the "Common Shares") are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "ELEF" and on the Frankfurt Stock Exchange under the symbol "1P2N" and are quoted on the OTCQX® Best Market under the symbol "SILEF". The Company maintains its registered and records office at Suite 1610 - 409 Granville Street, Vancouver, British Columbia, Canada, V6C 1T2.

The Company is a mineral exploration stage company. The Company's projects are the Pulacayo Paca silver-lead-zinc property in Bolivia (the "Pulacayo Project"), the El Triunfo gold-silver-lead-zinc project in Bolivia ("the Triunfo Project"). The Company also owns or holds 100% interests in each of the following projects: (a) the Titan vanadium-titanium-iron project located in Ontario, Canada, (b) the Sunawayo silver-zinc-lead project in Bolivia, (c) the Ulaan Ovoo coal project located in Mongolia, and (d) the Chandgana Khavtgai and Tal coal projects, located in Mongolia; all of which have been fully impaired.

On January 14, 2022, the Company completed a strategic reorganization of Silver Elephant Mining Corp. business through a statutory plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia), dated November 8, 2021.  Pursuant to the Arrangement, the common shares of the Company were consolidated on a 10:1 basis pursuant to the Consolidation and each holder of common shares of the Company received in exchange for every 10 pre-Consolidation common shares held: (i) one post-Consolidation common share of the Company; (ii) one common share of Flying Nickel Mining Corp. ("Flying Nickel"); (iii) one common share of Nevada Vanadium Mining Corp. ("Nevada Vanadium"); and (iv) two common shares of Battery Metals  Royalties Corp. ("Battery Metals").

These condensed interim consolidated financial statements have been prepared under the assumption that the Company is a going concern, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. As at June 30, 2022, the Company has a deficit of $209.9 million. The operations of the Company were primarily funded by the issuance of capital stock and proceeds from option and warrant exercises.

The continued operations of the Company are dependent on its ability to develop a sufficient financing plan, receive continued financial support from related parties, complete sufficient public equity financings or generate profitable operations in the future. These material uncertainties may cast significant doubt on the entity's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue its business.

Risks associated with Public Health Crises, including COVID-19

The Company's business, operations and financial condition could be materially adversely affected by the outbreak of epidemics, pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labor shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company's operations, and the operations of suppliers, contractors and service providers, including smelter and refining service providers, and the demand for the Company's production.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS (cont'd…)

The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company's control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.

As at the date of these consolidated financial statements, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time. In particular, the region in which we operate may not have sufficient public infrastructure to adequately respond or efficiently and quickly recover from such event, which could have a materially adverse effect on the Company's operations. The Company's exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company's workforce at risk

2. BASIS OF PRESENTATION AND PREPARATION

(a) Statement of compliance

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as at and for the year ended December 31, 2021 ("Annual Financial Statements"). However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2021. These unaudited interim financial statements follow the same accounting policies and methods of application as the Annual Financial Statements.

These unaudited condensed interim consolidated financial statements were approved and authorized for issue by the Audit Committee on August 12, 2022.

(b) Use of judgments and estimates

In preparing these interim financial statements, management makes judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.  The significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Annual Financial Statements.

(c) Significant accounting policies and changes in accounting standards

These interim financial statements follow the same accounting policies and methods of application as the Annual Financial Statements.  Accordingly, they should be read in conjunction with the Annual Financial Statements. Unless otherwise stated, these policies have been consistently applied to all period presented.

(d) Basis of consolidation and equity accounting

Subsidiaries are all entities over which the Company has control. The Company controls an entity where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. Subsidiaries are deconsolidated from the date that control ceases. All intercompany balances, transactions, income and expenses, and profits or losses are eliminated on consolidation. Associates are all entities over which the Company has significant influence but not control or joint control. This is generally the case where the Company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognized at cost.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

2. BASIS OF PRESENTATION AND PREPARATION (cont'd…)

(d) Basis of consolidation and equity accounting (cont'd…)

Under the equity method of accounting, an equity investment is initially recorded at cost or at fair value and subsequently adjusted to reflect the Company's share of the net profit or loss of the associate in profit or loss, and the Company's share of movements in other comprehensive income of the investee in other comprehensive income as defined in IAS 28 - Investments in Associates. Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company's interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount of equity-accounted investments is tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use.

These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries:

  Ownership
ASC Holdings Limited 100%
Illumina Silver Mining Corp., 100%
Red Hill Mongolia LLC 100%
Chandgana Coal LLC 100%
Apogee Minerals Bolivia S. A 98%
Battery Metals Royalties Corp 39.7%
Flying Nickel Mining Corp 19.4%
Nevada Vanadium Mining Corp 18.2%

3. ARRANGEMENT AND TRANSFER OF ASSETS

On January 14, 2022, pursuant to the Arrangement, the common shares of the Company were consolidated on a 10:1 basis pursuant to the Consolidation and each holder of common shares of the Company received in exchange for every 10 pre-Consolidation common shares held: (i) one post-Consolidation common share of the Company; (ii) one common share of Flying Nickel (iii) one common share of Nevada Vanadium and (iv) two common shares of Battery Metals.

As a result of the Arrangement:

i. certain royalties hold by the Company in certain projects were transferred into its own entity, Battery Metals Royalty Corp ("RoyaltyCo") in exchange for the issuance of 1,785,430 RoyaltyCo shares;

ii. spun-out the Minago Project into its own entity, Flying Nickel Mining Corp. ("NickelCo") in exchange for the issuance of 50,000,000 NickelCo shares, and the assumption of certain liabilities related to the underlying assets;

iii. and spun-out the Gibellini Project into its own entity, Nevada Vanadium Mining Corp. ("VanadiumCo") in exchange for the issuance of 50,000,000 VanadiumCo shares, and the assumption of certain liabilities related to the underlying assets; and

iv. Battery Metals Royalty Corp purchased 22,953,991 of the outstanding shares of both Nevada Vanadium and Flying Nickel in exchange for the issuance of 78,214,750 RoyaltyCo shares to ELEF.

Also, as a result of the Arrangement and Consolidation, each the Company option and warrant holder (the "Holder") is entitled to receive, upon exercise of each such warrant and option ("January 14, 2022 Options and Warrants") at the same original exercise price and in accordance with the terms of such warrant and option, one share of each of Flying Nickel and Nevada Vanadium; two shares of the Battery Metals (collectively, the "Reserved Shares"); and one share of ELEF.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

4. SEGMENTED INFORMATION

The Company operates in one operating segment, being the acquisition, exploration and development of mineral properties.  Geographic segmentation of the Company's non-current assets is as follows:

    June 30, 2022  
    Canada     USA     Mongolia     Bolivia     Total  
Reclamation deposits $ -   $ -   $ 21,055   $ -   $ 21,055  
Equipment   4,600     56,281     6,282     24,601     91,764  
Mineral properties   36,581,090     20,543,447     -     22,661,955     79,786,492  
Land   -     5,291,642     -     -     5,291,642  
Intangible assets   337,438     -     -     -     337,438  
Total $ 36,923,128   $ 25,891,370   $ 27,337   $ 22,686,556   $ 85,528,391  

    December 31, 2021  
    Canada     USA     Mongolia     Bolivia     Total  
Reclamation deposits $ -   $ -   $ 21,055   $ -   $ 21,055  
Equipment   5,111     -     7,391     28,533     41,035  
Mineral properties   -     -     -     21,134,876     21,134,876  
Total $ 5,111   $ -   $ 28,446   $ 21,163,409   $ 21,196,966  

5. CASH AND RESTRICTED CASH EQUIVALENTS

Cash and restricted cash equivalents of the Company are comprised of bank balances and a guaranteed investment certificate which can be readily converted into cash without significant restrictions, changes in value or penalties. 

    June 30, 2022     December 31, 2021  
Cash $ 3,827,488   $ 579,508  
Restricted cash   34,500     34,500  
Total $ 3,861,988   $ 614,008  

As at June 30, 2022, a guaranteed investment certificate of $34,500 (December 31, 2021 - $34,500) has been pledged as collateral for the Company's credit card.

6. MARKETABLE SECURITIES

As a result of the Arrangement, each the Company option and warrant holder (the "Holder") is entitled to receive, upon exercise of each such warrant and option ("January 14, 2022 Options and Warrants") at the same original exercise price and in accordance with the terms of such warrant and option, one share of each of Flying Nickel and Nevada Vanadium; two shares of the Battery Metals, and one share of ELEF (Note 3).

7. EQUIPMENT

On October 10, 2018, the Company signed a lease agreement (the "Lease") with an arms-length private Mongolian company (the "Lessee") whereby the Lessee plans to perform mining operations at the Company's Ulaan Ovoo coal mine and will pay the Company US$2.00 (the "Production Royalty") for every tonne of coal shipped from the Ulaan Ovoo site premises. The Lessee paid the Company US$100,000 in cash (recorded as other income on the consolidated statement of operations) as a non-refundable advance royalty payment and is preparing, at its own and sole expense, to restart and operate the Ulaan Ovoo mine with its own equipment, supplies, housing and crew.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

The Lease is valid for 3 years with an annual advance royalty payment ("ARP") for the first year of US$100,000 which was due and paid upon signing, and US$150,000 and US$200,000 due on the 1st and 2nd anniversary of the Lease, respectively. The ARP can be credited towards the US$2.00 per tonne Production Royalty payments to be made to the Company as the Lessee starts to sell Ulaan Ovoo coal. The 3-year Lease can be extended upon mutual agreement. The first and second anniversary payments due have not been collected and the Company has recorded a full provision in the amount of $470,278 (US$350,000) due to uncertainty of their collection.

 


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

7. EQUIPMENT (cont'd...)

The following table summarizes information regarding the Company's equipment as at June 30, 2022 and December 31, 2021 and 2020:

    Computer
equipment
    Furniture and
equipment
    Vehicles     Mining
equipment
    Total  
Carrying amount, December 31, 2020 $ 1,122   $ 26,733   $ 112,023   $ 13,922   $ 153,800  
Cost                              
Balance, December 31, 2020 $ 101,928   $ 278,845   $ 254,395   $ 24,476   $ 659,644  
Balance, December 31, 2021 $ 101,928   $ 278,845   $ 254,395   $ 24,476   $ 659,644  
Accumulated depreciation                              
Balance, December 31, 2020 $ 100,806   $ 252,112   $ 142,372   $ 10,544   $ 505,844  
Depreciation for the period   1,122     13,716     29,854     2,583     47,275  
Balance, December 31, 2021 $ 101,928   $ 265,828   $ 172,226   $ 13,137   $ 553,119  
Carrying amount, December 31, 2021 $ -   $ 13,017   $ 82,169   $ 11,339   $ 106,525  
Cost                              
Balance, December 31, 2021 $ 101,928   $ 278,845   $ 254,395   $ 24,476   $ 659,644  
Impairment   -     -     -     (4,410 )   (4,410 )
Balance, June 30, 2022 $ 101,928   $ 278,845   $ 254,395   $ 20,066   $ 655,234  
Accumulated depreciation                              
Balance, December 31, 2021 $ 101,928   $ 265,828   $ 172,226   $ 13,137   $ 553,119  
Depreciation for the period   -     2,143     1,279     6,929     10,351  
Balance, June 30, 2022 $ 101,928     267,971     173,505     20,066     563,470  
Carrying amount, June 30, 2022 $ -   $ 10,874   $ 80,890   $ -   $ 91,764  


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

8. MINERAL PROPERTIES

    Pulacayo     Gibellini     Sunawayo     Triunfo     Minago     Total  
Balance, December 31, 2020 $ 17,539,760   $ 13,290,081   $ 513,088   $ 463,665   $ -   $ 31,806,594  
Acquisition costs   -     -     -     -     16,011,151     16,011,151  
Deferred exploration costs:                                    
Licenses, tax and permits   5,200     390,098     -     -     54,276     449,574  
Geological and consulting   2,532,970     1,547,810     765,728     209,260     334,648     5,390,416  
Personnel, camp and general   384,021     789,578     -     -     52,580     1,226,179  
Total additions during year $ 2,922,191   $ 2,727,486   $ 765,728   $ 209,260   $ 441,504   $ 7,066,169  
Balance, December 31, 2021 $ 20,461,952   $ 16,017,567   $ 1,278,816   $ 672,925   $ 16,452,655   $ 54,883,914  
Impairment   -     -     (1,278,816 )   -     -     (1,278,816 )
Transfer to held for sale   -     (16,017,567 )   -     -     (16,452,655 )   (32,470,222 )
Balance, December 31, 2021 $ 20,461,952   $ -   $ -   $ 672,925   $ -   $ 21,134,877  
Transfer from assets held for sale   -   $ 19,959,437     -     -   $ 35,031,008   $ 54,990,445  
Deferred exploration costs:                                    
Licenses, tax and permits   -     327,853     -     -           327,853  
Geological and consulting   917,425     237,235     -     408,408     1,504,567     3,067,635  
Personnel, camp and general   177,481     18,922     -     23,764     45,515     265,682  
Total additions during period $ 1,094,906   $ 20,543,447   $ -   $ 432,172     36,581,090     58,651,615  
Balance, June 30, 2022 $ 21,556,858   $ 20,543,447   $ -   $ 1,105,097   $ 36,581,090   $ 79,786,492  


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

8. MINERAL PROPERTIES (cont'd...)

Pulacayo Project, Bolivia

The Company holds an interest in the Pulacayo Paca silver-lead-zinc project in Bolivia (the "Pulacayo Project").

The Pulacayo Project mining rights are recognized by two legally independent contractual arrangements, one covering all, except the Apuradita deposit, from a mining production contract (the "Pulacayo MPC") between the Company and the Corporación Minera de Bolivia ("COMIBOL"), a Bolivian state mining company, and the original holder of the rights, executed on October 3, 2019. The Pulacayo MPC grants the Company the 100% exclusive right to develop and mine at the Pulacayo and Paca concessions for up to 30 years against certain royalty payments. In connection with the Apuradita deposit, its rights are covered by a second contractual arrangement, with the Bolivian Jurisdictional Mining Authority, acting for the Government of Bolivia, which is in process of formalization, as a mean of recognition of the acquired rights to what was originally the mining concession. Until such time as the contract is formalized, all mining rights, as recognized in the Bolivian Mining Law 535, can be exercised by the holder of the ex-concession.

Pursuant to the Pulacayo MPC, ASC Bolivia LDC Sucursal Bolivia ("ASC"), a subsidiary of the Company, has committed to pay monthly rent of US$1,000 to COMIBOL and US$1,500 monthly rent to the Pulacayo Ltda. Mining Cooperative until the Pulacayo Project starts commercial production.

During the year ended December 31, 2019, the Company assessed whether there was any indication that the previously recognized impairment loss in connection with the Pulacayo Paca property may no longer exist or may have decreased. The Company noted the following indications that the impairment may no longer exist:

  • the Company signed a mining production contract granting the Company the 100% exclusive right to develop and mine at the Pulacayo Paca property;
  • the Company renewed its exploration focus to develop the Pulacayo Paca property in the current year;
  • the Company re-initiated active exploration and drilling program on the property;
  • the Company completed a positive final settlement of Bolivian tax dispute.

As the Company identified indications that the impairment may no longer exist, the Company completed an assessment to determine the recoverable amount of the Pulacayo Paca property. In order to estimate the fair-value of the property the Company engaged a third-party valuation consultant and also utilized level 3 inputs on the fair value hierarchy to estimate the recoverable amount based on the property's fair value less costs of disposal determined with reference to dollars per unit of metal in-situ. With reference to metal in-situ, the Company applied US$0.79 per ounce of silver resource to its 36.8 million ounces of silver resources and US$0.0136 per pound of zinc or lead in resource to its 303 million pounds of zinc and lead.

The Company also considered data derived from properties similar to the Pulacayo Paca Property. The data consisted of property transactions and market valuations of companies holding comparable properties, adjusted to reflect the possible impact of factors such as location, political jurisdiction, commodity, geology, mineralization, stage of exploration, resources, infrastructure and property size.

As the recoverable amount estimated with respect to the above was $31.4 million an impairment recovery of $13,708,200 was recorded during the year ended December 31, 2019.

On September 7, 2020, the Company announced that it had entered into a binding sales and purchase agreement (the "Sunawayo SPA") with a private party (the "Sunawayo Vendor") to acquire the Sunawayo silver-lead mining project (the "Sunawayo Project"). Subject to the provisions of the Sunawayo SPA, the Sunawayo Vendor agreed to irrevocably transfer the mining rights of the Sunawayo Project to the Company for consideration of US$6,500,000, which payment consists of US$300,000 paid on execution of the Sunawayo SPA, with the remaining US$6,200,000 to be paid in cash over a one-year period in twelve equal monthly installments, starting March 1, 2021


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

8. MINERAL PROPERTIES (cont'd...)

Sunawayo Project, Bolivia

During the year ended December 31, 2021, the Company suspended the Sunawayo property installment payments pending verification of the status of Sunawayo title and environmental permit (held by the Sunawayo Vendor) with authorities. The Company has notified the Sunawayo Vendor of their breach of certain disclosure representations in the Sunawayo SPA. To date, the Company has made one payment totaling US$300,000 and has no further contractual obligations unless it wishes to pursue the SPA further to acquire Sunawayo. As such, the Company has determined there is an indicator of potential impairment of the carrying value of the Sunawayo property as the option agreement is no longer in good standing. As a result, in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources and IAS 36, Impairment of Assets, at December 31, 2021, the Company assessed the recoverable amount of the Sunawayo property exploration costs and determined that its value in use is $nil. As at December 31, 2021, the recoverable amount of $nil resulted in an impairment charge of $1,278,817 against the value of the deferred exploration costs, which was reflected on the consolidated statement of income (loss) and comprehensive income (loss).

The impaired value of $Nil for deferred exploration costs at Sunawayo property at June 30, 2022 (December 31, 2021- $Nil) remains unchanged.

Triunfo Project, Bolivia

On July 13, 2020, the Company announced that it had entered into an agreement (the "Triunfo Agreement") with a private party (the "Triunfo Vendor") for the right to conduct mining exploration activities (the "Exploration Right") within the El Triunfo gold-silver-lead-zinc project in La Paz District, Bolivia (the "Triunfo Project") and the right, at the Company's election, to purchase the Triunfo Project for US$1,000,000 (the "Purchase Right") and together with the Exploration Right, the "Triunfo Rights").  The Purchase Right can be exercised at any time after the Triunfo Vendor completes the required Bolivian administrative procedures for the Triunfo Project until July 13, 2025 or such further period as the parties may agree.  To secure the Triunfo Rights, the Company paid the Triunfo Vendor US$100,000 upon execution of the Triunfo Agreement.  Until the Company exercises its Purchase Right, beginning in 2021 the Company must pay the Triunfo Vendor US$50,000 on June 15 of each year to maintain the Triunfo Rights.  The Company may elect to terminate the Triunfo Agreement at any time.  If the Company exercises the Purchase Right, the Triunfo Vendor will maintain up to a 5% interest of the profits, net of taxes and royalties, derived from the sale of concentrate produced from the Triunfo Project (the "Residual Interest").

On June 15, 2021, the Company paid US$50,000 to maintain their Purchase Right to the Triunfo Vendor.

If the Company exercises the Purchase Right, the Company may reduce some or all of the Residual Interest at any time by making a lump sum payment to the Triunfo Vendor at any time to reduce some or all of the Residual Interest as follows:

  • the Residual Interest may be extinguished for US$300,000;
  • the Residual Interest may be reduced by 4% for US$250,000;
  • the Residual Interest may be reduced by 3% for US$200,000;
  • the Residual Interest may be reduced by 2% for US$150,000; or
  • the Residual Interest may be reduced by 1% for US$100,000.

Minago project

On January 14, 2022, pursuant to the Arrangement, Flying Nickel issued 50,000,000 common shares in consideration for Minago Nickel project mineral property assets and the assumption of certain liabilities related to the underlying assets. The fair value of Minago project of $35,000,000 was determined based on Flying Nickel's private placement, pursuant to which 10,094,033 common shares were issued with a fair value of $0.70 per share.

The Minago Project is located in northern Manitoba, Canada within the southern part of the Thompson Nickel Belt.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

8. MINERAL PROPERTIES (cont'd...)

Minago royalty

On January 14, 2022, under the terms of the Arrangement and pursuant to the royalty agreement between Flying Nickel and ELEF dated August 25, 2021 ("Minago Royalty Agreement"), Flying Nickel has granted and agreed to pay, among other things, in each fiscal quarter where the average price per pound of nickel as reported on the Nominated Metals Exchange or Substitute Metals Exchange (in each case as defined in the Minago Royalty Agreement) in the event such pricing is not reported on the Nominated Metals Exchange exceeds $15.00, a royalty equal to two per cent (2%) of returns in respect of all mineral products produced from certain mineral claims and leases in Manitoba, Canada which comprise Flying Nickel's Minago nickel property after the commencement of commercial production. Each royalty payment will be provisional and subject to adjustment in accordance with the Minago Royalty Agreement.

Glencore Net smelter royalty

The Minago property claims are subject to a net smelter return ("NSR") royalty interest (the "Glencore Royalty") retained by Glencore Canada Corporation ("Glencore"). The Glencore Royalty in respect of nickel, shall for any calendar quarter be: (i) 2% NSR royalty when the London Metals Exchange 3-month nickel price is equal to or greater than US$13,227.74 per tonne in that quarter; and (ii) a 1% NSR when the London Metals Exchange 3-month nickel price is less than US$13,227.74 per tonne in that quarter. The Glencore Royalty in respect of other minerals, metals and concentrates, shall be a 2% NSR. In the event that the Glencore Royalty consists of a 2% NSR royalty, Flying Nickel may purchase a portion of the royalty interest which represents in the aggregate no more than 1% of the royalty interest for $1,000,000. The Glencore Royalty interest shall never be less than a 1% NSR.

Gibellini project

On January 14, 2022, pursuant to the Arrangement, Nevada Vanadium issued 50,000,000 common shares in consideration for Gibellini Vanadium project mineral property assets and the assumption of certain liabilities related to the underlying assets. The fair value of Gibellini project of $19,938,896, as determined based on Nevada Vanadium's proposed private placement, pursuant to which 2,982,500 common shares were issued with a fair value of $0.40 per share.

The Gibellini vanadium project is comprised of the Gibellini, Louie Hill and Bisoni vanadium deposits and associated claims located in the State of Nevada, USA.

The Gibellini group of claims were acquired on June 22, 2017, through leasehold assignments from the claimant and then-holder of the Gibellini mineral claims (the "Gibellini Lessor"). Under the Gibellini mineral lease agreement (the "Gibellini MLA"), the company leased this core group of claims, which originally constituted the entire Gibellini Project, by, among other things, agreeing to pay to the Gibellini Lessor annual advance royalty payments. These payments are tied, based on an agreed formula not to exceed US$120,000 per year, to the average vanadium pentoxide price of the prior year (each an "Advance Royalty Payment"). Upon commencement of production, the obligation to make Advance Royalty Payments will cease and the company will instead maintain its acquisition through lease of the Gibellini group of claims by paying to the Gibellini Lessor, a 2.5% net smelter return royalty (the "Gibellini NSR Payments") until a total of US$3 million is paid. Thereafter, the Gibellini NSR will be reduced to 2% over the remaining life of the mine (and referred to thereafter, as "Production Royalty Payments"). Upon commencement of production, any Advance Royalty Payments that have been made will be deducted as credits against the Gibellini NSR Payments or Production Royalty Payments, as applicable. The lease is for a term of 10 years, expiring on June 22, 2027, which can be extended for an additional 10 years, at the Company's option. On April 19, 2018, the Gibellini MLA was amended to grant the Company the option, at any time during the term of the Gibellini MLA, which ends on June 22, 2027, to require the Gibellini Lessor to transfer their title over all of the leased mining claims (excluding four claims which will be retained by the Gibellini Lessor) (the "Transferred Claims") to the Company in exchange for US$1,000,000, which will be deemed an Advance Royalty Payment (the "Transfer Payment").


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

8. MINERAL PROPERTIES (cont'd...)

A credit of US$99,027 in favour of the Company towards the Transfer Payment was paid upon the execution of the amendment, with a remaining balance of US$900,973 on the Transfer Payment due and payable by the Company to the Gibellini Lessor upon completion of transfer of the Transferred Claims from the Gibellini Lessor to the Company. The Advance Royalty Payment obligation and Production Royalty Payments will not be affected, reduced or relieved by the transfer of title. On June 22, 2020, the Company paid US$50,000 (2019 - US$120,000, 2018 - US$101,943) of the Advance Royalty Payment to the Gibellini Lessor. During year 2020, the Company expanded the land position at the Gibellini Project, by staking a total of 32 new claims immediately adjacent to the Gibellini Project.

The Bisoni Group

On September 18, 2020, the company completed the acquisition of the Bisoni vanadium property situated immediately southwest of the Gibellini Project pursuant to an asset purchase agreement (the "Bisoni APA") dated August 18, 2020, with Cellcube Energy Storage Systems Inc. ("Cellcube"). The Bisoni property comprised of 201 lode mining claims. As consideration for the acquisition of the Bisoni property under the Bisoni APA, the Company issued 4 million Common Shares (the "Bisoni APA Shares") and paid $200,000 cash to Cellcube. Additionally, subject to TSX approval, if, on or before December 31, 2023, the price of European vanadium pentoxide on the Metal Bulletin (or an equivalent publication) exceeds US$12 a pound for 30 consecutive days, the Company will issue to Cellcube additional Common Shares with a value of $500,000 calculated based upon the 5-day volume weighted average price of the Common Shares immediately following the satisfaction of the vanadium pentoxide pricing condition.

Louie Hill Net Smelter

The Gibellini property is subject to a net smelter return ("NSR") royalty interest retained by the Former Louie Hill Lessors. The Royalty Agreement provides Nevada Vanadium to pay the following royalties to the Former Louie Hill Lessors as an advance royalty: (i) US$75,000 upon Nevada Vanadium achieving Commercial Production (as defined in the Royalty Agreement) at the Gibellini Project; (ii) US$50,000 upon the Nevada Vanadium selling, conveying, transferring or assigning all or any portion of certain claims defined in the Royalty Agreement to any third party and (iii) annually upon the anniversary date of July 10, 2018, and the anniversary date of each year thereafter during the term of the Royalty Agreement: (a) if the average vanadium pentoxide price per pound as quoted on www.metalbulletin.com (the "Metal Bulletin") or another reliable and reputable industry source as agreed by the parties, remains below US$7.00/lb during the preceding 12 months, US$12,500; or (b) if the average vanadium pentoxide price per pound as quoted on Metal Bulletin or another reliable and reputable industry source as agreed by the parties, remains equal to or above US$7.00/lb during the preceding 12 months, US$2,000 x average vanadium pentoxide price per pound up to a maximum annual advance royalty payment of US$28,000. Further, Nevada Vanadium will pay to the Former Louie Hill Lessors a 2.5% net smelter return royalty (the "Louie Hill NSR") payable on vanadium pentoxide produced from the area of the Former Louie Hill Claims contained within the Current Louie Hill Claims. Nevada Vanadium may purchase three-fifths of the Louie Hill NSR at any time for US$1,000,000, leaving the total Louie Hill NSR payable by Nevada Vanadium at 1.0% for the remaining life of the mine. Any Louie Hill Advance Royalty Payments that have been made at the time of Commercial Production will be deducted as credits against future payments under the Louie Hill NSR. The payments under the Royalty Agreement will continue for an indefinite period and will be payable as long as Nevada Vanadium, its subsidiaries, or any of their permitted successors or assigns holds a valid and enforceable mining concession over the area.

9. ROYALTY INTERESTS

Balance, December 31, 2021 $ -  
Royalty interest transferred under Arrangement   624,901  
Less: Impairment   (624,901 )
Balance, June 30, 2022      


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

9. ROYALTY INTERESTS (cont'd …)

On January 14, 2022, under the terms of the Arrangement, the Company acquired five mineral property net smelter royalty agreements ("Transferred Royalties") pursuant to a purchase and sale agreement entered into between Battery Metals and the Company (the "Royalty Transfer Agreement"). The Royalty Transfer Agreement provided for the purchase of the Transferred Royalties by the Company for total consideration of 1,785,430 Common Shares with a fair value of $624,901.

During the period ended June 30, 2022, the Company assessed whether there were indicators of potential impairment of the royalty interests. Due to the absence of technical reports confirming the proven and probably reserves of the mineral products and the uncertainty of the development and commencement of commercial production, the Company determined there is an indication of impairment and recognized an impairment loss of $624,901.

The Transferred Royalties are comprised of the following:

(a) Ilumina Royalty Agreement

The Company will receive a two per cent (2%) royalty on all mineral products produced from certain mineral leases in Bolivia if the average price per ounce of silver exceeds $30.

(b) Minago Royalty Agreement

The Company will receive a two per cent (2%) royalty on all mineral products produced from certain mineral claims and leases in Manitoba after the commencement of commercial production if the average price per pound of nickel exceeds $15.

(c) Nevada Vanadium Royalty Agreement

The Company will receive a two per cent (2%) royalty on all mineral products produced from certain mineral claims and/or leases in Nevada, United States of America after the commencement of commercial production if the average V205 Vanadium Pentoxide Flake 98% price per pound exceeds $12.

(d) Titan Royalty Agreement

The Company will receive a two per cent (2%) royalty on all mineral products produced from certain mineral claims and leases in Manitoba after the commencement of commercial production if the V205 Vanadium Pentoxide Flake 98% price per pound exceeds $12.

(e) Asia Mining Royalty Agreement

The Company will receive a two per cent (2%) royalty on all mineral products produced from certain mineral claims, other than coal produced from the Ulaan Ovoo Property in Mongolia after the commencement of commercial production and $2.00 per tonne of coal extracted from the royalty area.

10. LAND

During the six months ended June 30, 2022 Nevada Vanadium Mining Corp purchased a parcel of land located in the state of Nevada, USA. Nevada Vanadium paid US$3,000,000. 

11. INTANGIBLE ASSETS

During the six months ended June 30, 2022 Nevada Vanadium Corp purchased a domain name vanadium.com at $23,461. During the six months ended June 30, 2022 Flying Nickel purchased a domain name nickel.com at $313,977. Domain names do not have expiration dates.

12. PREMIUM ON FLOW-THROUGH SHARES

During the period ended December 31, 2021, Flying Nickel recognized a deferred premium of flow-through shares of $139,471.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

12. PREMIUM ON FLOW-THROUGH SHARES (cont'd)

A continuity of the premium on flow-through shares is as follows:

    As at June 30, 2022  
Liability assumed under the plan of Arrangement $ 132,225  
Liability incurred on flow-through shares issued   -  
Settlement on expenditures made recorded as other income   (120,914 )
Balance, end of period $ 11,311  

13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities of the Company consist of amounts outstanding for trade and other purchases relating to development and exploration, along with administrative activities.  The usual credit period taken for trade purchases is between 30 to 90 days.

    June 30,
2022
    December 31,
2021
 
Trade accounts payable $ 3,999,314   $ 2,460,953  
Accrued liabilities   -     41,186  
Balance, end of period $ 3,999,314   $ 2,502,139  

14. PROMISSORY NOTE

During the period ended June 30, 2022 Nevada Vanadium LLC entered into a US$3,000,000 promissory note. The note bears interest rate of 5.5%. The note is repayable in four annual payments of US$251,045, the first payment to be made on April 6, 2023. The last payment of US$2,770,852 to be made on April 6, 2027. During the six months ended June 30, 2022 Nevada Vanadium Mining Corp recorded $49,061 in interest expense related to this note.

15. SHARE CAPITAL

(a) Authorized

The authorized share capital of the Company consists of an unlimited number of Common Shares. At June 30, 2022, the Company had 25,589,139 (December 31, 2021 - 24,124,945) Common Shares issued and outstanding.

On January 14, 2022, the Company's share capital was consolidated on the basis of one (1) new share for each ten (10) old shares. All common share, warrant, option and per share amounts have been retroactively adjusted.

(b) Equity issuances

During the six months ended June 30, 2022

Pursuant the Company's equity incentive plant dated September 1, 2021, the Company issued 187,049 bonus shares with a fair value of $1.26 per Common Share to the company's directors, officers, employees, and consultants valued at $235,682.

A total of 10,000 share purchase warrants with an exercise price of $2.60 were exercised for total proceeds of $26,000.

The Company issued 1,267,145 shares to settle liability related to assets held for sale. The fair value of the shares issued was $1,431,874


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

15. SHARE CAPITAL (cont'd…)

During the year ended December 31, 2021

On February 5, 2021, the Company closed its non-brokered private placement (the "February 2021 Placement") through the issuance of 10,000,001 Common Shares at a price of $0.375 per Common Share. The February 2021 Placement raised gross cash proceeds of $3,750,000.  The Company paid $73,875 in cash as finder's fees.

On February 10, 2021, under the terms of the APA the Company acquired the Minago Project for aggregate consideration of US$11,675,000, which consisted of a US$6,675,000 ("Property Payment") credit against certain secured debt owed by Victory Nickel to the Company at closing and US$5,000,000 in the Company common shares ("Consideration Shares") to be issued over a one-year period. In satisfaction of the Consideration Shares to be issued, an initial tranche of 5,363,630 Consideration Shares at a value of $2,386,815 was issued on February 9, 2021. A further US$2,000,000 worth of Consideration Shares will be issued on or before August 31, 2021, and a further US$1,000,000 worth of Consideration Shares on or before December 31, 2021 (Note 9).  The Company recorded the obligation to issue the Consideration shares in equity at a value of $3,818,003.

4,711,890 Common Share purchase warrants were exercised for total proceeds of $1,189,401 and 105,000 stock options were exercised for total proceeds of $28,825.

(c) Share-based compensation plan

The Company has a 10% rolling equity-based compensation plan in place, as approved by the Company's shareholders on September 10, 2021 (the "2021 Plan"). Under the 2021 Plan the Company may grant stock options, bonus shares or stock appreciation rights to acquire the equivalent of a maximum of 20,947,753 of the Company's Common Shares. All stock options and other share-based awards granted by the Company, or to be granted by the Company, since the implementation of the 2021 Plan will be issued under, and governed by, the terms and conditions of the 2021 Plan.  The stock option vesting terms are determined by the Board of Directors on the date of grant with a maximum term of 10 years.

The following is a summary of the changes in the Company's stock options from December 31, 2020 to June 30, 2022:

    Number of Options     Weighted average exercise price  
Outstanding, December 31, 2020   1,027,250     $3.10  
Granted   680,000     $2.60  
Expired   (5,000 )   $2.00  
Cancelled   (25,000 )   $2.60  
Exercised   (99,500 )   $2.10  
Outstanding, December 31, 2021   1,577,750     $3.00  
Expired   (141,000 )   $4.00  
Outstanding, June 30, 2022   1,436,750     $2.86  

As of June 30, 2022, the following the Company stock options were outstanding:

Share-based payment expenses resulting from stock options are amortized over the corresponding vesting period. Share-based payments charged to operations and assets were allocated between deferred mineral properties, and general and administrative expenses.  Share-based payments are allocated between being either capitalized to deferred exploration costs where related to mineral properties or expensed as general and administrative expenses where otherwise related to the general operations of the Company. 


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

15. SHARE CAPITAL (cont'd…)

(c) Share-based compensation plan (cont'd)

The six months ended June 30, 2022, included $680,738 (2021 - $91,370) in share-based payment costs related to stock options expensed as general and administrative expenses and $42,995 (2021 - $61,912) capitalized to mineral properties. The share-based payment expenses were calculated using the Black-Scholes option pricing model and the following weighted average assumptions: risk-free interest rate - 1.46; expected life - 4.4 years; expected volatility - 106%; and expected dividends - Nil.

Expiry date   Exercise price     Options
outstanding
    Exercisable     Unvested  
September 22, 2026 $ 2.60     650,000     232,500     417,500  
May 24, 2026 $ 3.70     30,000     20,625     9,375  
August 17, 2025 $ 5.00     72,000     63,000     9,000  
May 4, 2025 $ 2.20     203,125     203,125     -  
November 1, 2024 $ 4.40     110,000     110,000     -  
July 29, 2024 $ 2.00     144,875     144,875     -  
October 17, 2023 $ 3.30     61,000     61,000     -  
April 6, 2023 $ 2.80     59,750     59,750     -  
February 20, 2023 $ 3.10     20,000     20,000     -  
September 1, 2022 $ 3.50     86,000     86,000     -  
          1,436,750     1,000,875     435,875  

(d) Share purchase warrants

The following is a summary of the changes in The Company's share purchase warrants from December 31, 2020 to June 30, 2022:

    Number of Warrants     Weighted average exercise price  
Outstanding, December 31, 2020   2,657,107     $2.30  
Issued   335,405     $4.50  
Expired   (254,691 )   $2.60  
Exercised   (1,268,341 )   $2.60  
Outstanding, December 31, 2021   1,469,480     $2.50  
Expired   (11,666 )   $2.60  
Exercised   (10,000 )   $2.60  
Outstanding, June 30, 2022   1,447,814     $2.39  

As of June 30, 2022, the following share purchase warrants were outstanding:

Expiry date   Exercise price     Number of warrants
June 30, 2022
 
September 22, 2022 $ 2.60     21,305  
October 21, 2022 $ 2.60     14,100  
May 1, 2023 $ 1.60     463,800  
May 20, 2023 $ 1.60     496,200  
February 8, 2023 $ 4.76     300,000  
          1,295,405  


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

16. NON-CONTROLLING INTEREST

The following table presents information for non-controlling interest in the Company's subsidiaries Battery Metals Royalties Corp, Flying Nickel Mining Corp and Nevada Vanadium Mining Corp. at June 30, 2022:

    Flying Nickel
Mining Corp.
    Nevada
Vanadium
Mining Corp
    Battery Metals
Royalty Corp.
    Total  
Non-controlling interest percentage   80.6%     77.0%     60.3%        
Assets                        
Current $ 3,935,346   $ 100,754   $ -   $ 4,036,100  
Non-current   33,365,334     25,914,831     -     59,280,165  
                         
Liabilities                        
Current   291,894     598,559     37,206     927,659  
Non-current   -     3,629,223     -     3,629,223  
                         
Net assets $ 37,008,786   $ 21,787,803   $ (37,206 ) $ 58,759,383  
                         
Non-controlling interest at recognition $ 29,833,152   $ 16,771,750   $ (22,435 ) $ 46,582,467  

The following table presents the loss and comprehensive loss attributable to non-controlling interest:

    Flying Nickel
Mining Corp.
    Nevada
Vanadium
    Battery Metals     Total  
Non-controlling interest, December 31, 2021 $ 1,499,851   $ -   $ -     1,499,851  
Non-controlling interest, recognition   41,114,252     21,105,768     (15,355,768 )   46,864,252  
Net loss   (993,750 )   (244,024 )   (543,862 )   (1,781,636 )
Non-controlling interest, June 30, 2022 $ 41,620,353   $ 20,861,744   $ (15,899,630 ) $ 46,582,467  

17. CAPITAL RISK MANAGEMENT

Management considers its capital structure to consist of share capital, share purchase options and warrants. The Company manages its capital structure and makes adjustments to it, based on the funds available to, and required by the Company in order to support the acquisition, exploration and development of mineral properties.  The Board of Directors does not establish quantitative returns on capital criteria for management.  In order to facilitate the management of its capital requirement, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors.  The annual and updated budgets are approved by the Board of Directors.

The properties, to which the Company currently has an interest in, are in the exploration stage; as such, the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and development and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. There were no changes in managements approach to capital management during the period ended June 30, 2022.  Neither the Company nor its subsidiaries are subject to externally imposed capital requirements.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

18. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Fair Value Measurements

Fair value hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means; and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.  The following table sets forth the Company's financial assets measured at fair value by level within the fair value hierarchy.

    Level 1     Level 2     Level 3  
Financial assets                  
Cash, December 31, 2021 $ 579,508     -     -  
Cash, June 30, 2022 $ 3,827,488     -     -  

Categories of financial instruments

The Company considers that the carrying amount of all its financial assets and financial liabilities measured at amortized cost approximates their fair value due to their short-term nature. Restricted cash equivalents approximate fair value due to the nature of the instrument. The Company does not offset financial assets with financial liabilities.  There were no transfers between Level 1, 2 and 3 for the period ended June 30, 2022.

The Company's financial assets and financial liabilities are categorized as follows:

    June 30, 2022     December 31, 2021  
Fair value through profit or loss            
Cash $ 3,827,488   $ 579,508  
Amortized cost            
Receivable $ 119,343   $ 79,036  
Restricted cash equivalents $ 34,500   $ 34,500  
Reclamation deposits $ 21,055   $ 21,055  
Accounts payable $ 4,024,313   $ 2,502,139  


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

19. FINANCIAL RISK MANAGEMENT DISCLOSURES

(a) Liquidity risk

Liquidity risk is the risk that an entity will be unable to meet its financial obligations as they fall due.  The Company manages liquidity risk by preparing cash flow forecasts of upcoming cash requirements.  As at June 30, 2022, the Company had a cash balance of $3,827,488 (December 31, 2021 - $579,508).  As at June 30, 2022 the Company had accounts payable and accrued liabilities of $4,024,313 (December 31, 2021 - $2,502,139), which have contractual maturities of 90 days or less.

The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support normal operation requirements as well as the growth and development of its mineral property interests.  The Company coordinates this planning and budgeting process with its financing activities through the capital management process in normal circumstances.

(b) Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is exposed to credit risk primarily associated to cash and cash equivalents, restricted cash equivalents and receivables, net of allowances. The carrying amount of financial assets included on the statements of financial position represents the maximum credit exposure.

(c) Market risk

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company's cash and restricted cash equivalents primarily include highly liquid investments that earn interest at market rates that are fixed to maturity. Due to the short‐ term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of June 30, 2022. The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity.

(ii) Foreign currency risk

The Company is exposed to foreign currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in Canadian dollars. The Company has exploration and development projects in Mongolia and Bolivia and undertakes transactions in various foreign currencies.  The Company is therefore exposed to foreign currency risk arising from transactions denominated in a foreign currency and the translation of financial instruments denominated in US dollars, Mongolian tugrik, and Bolivian boliviano into its functional and reporting currency, the Canadian dollar. 

Based on the above, net exposures as at June 30, 2022, with other variables unchanged, a 10% (December 31, 2021 - 10%) strengthening (weakening) of the Canadian dollar against the Mongolian tugrik would impact net loss with other variables unchanged by $252. A 10% strengthening (weakening) of the Canadian dollar against the Bolivian boliviano would impact net loss with other variables unchanged by $2,224. A 10% strengthening (weakening) of the US dollar against the Canadian dollar would impact net loss with other variables unchanged by $8,400.  The Company currently does not use any foreign exchange contracts to hedge this currency risk.


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

19. FINANCIAL RISK MANAGEMENT DISCLOSURES (cont'd…)

(c) Market risk (cont'd…)

(iii) Commodity and equity price risk

Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. Commodity prices fluctuate on a daily basis and are affected by numerous factors beyond the Company's control.  The supply and demand for these commodities, the level of interest rates, the rate of inflation, investment decisions by large holders of commodities including governmental reserves and stability of exchange rates can all cause significant fluctuations in prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments. The Company is also exposed to price risk with regards to equity prices. Equity price risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general movements in the level of the stock market.

The Company closely monitors commodity prices, individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company. Fluctuations in value may be significant.

20. RELATED PARTY DISCLOSURES

The Company had related party transactions with the following companies, related by way of directors and key management personnel:

  • Linx Partners Ltd., a private company controlled by John Lee, Director, CEO and Executive Chairman of the Company, provides management and consulting services to the Company.
  • MaKevCo Consulting Inc., a private company 50% owned by Greg Hall, Director of the Company, provides consulting services to the Company.
  • Sophir Asia Ltd., a private company controlled by Masa Igata, Director of the Company, provides consulting services to the Company.

A summary of related party transactions by related party is as follows:

    Six months ended June 30,  
Related parties   2022     2021  
Directors and officers $ 543,209   $ 509,771  
Linx Partners   297,848     590,000  
MaKevCo Consulting Inc.   22,080     19,900  
Sophir Asia Ltd.   22,080     18,100  
  $ 885,217   $ 1,137,771  

A summary of the transactions by nature among the related parties is as follows:

    Six months ended June 30,  
Related parties   2022     2021  
Consulting and management $ 572,424   $ 295,000  
Directors' fee   88,320     71,201  
Mineral properties   117,660     578,071  
Salaries   106,813     193,500  
  $ 885,217   $ 1,137,772  


SILVER ELEPHANT MINING CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the six and three months ended June 30, 2022 and 2021
(Expressed in Canadian Dollars) (Unaudited)

 

20. RELATED PARTY DISCLOSURES (cont'd…)

As at June 30, 2022, amounts due to related parties were $333,848 (December 31, 2021 - $68,888) represent $36,000 payable to the Company directors and $297,848 payable to Linx Partners Ltd. and included in accounts payable and accrued liabilities.

21. KEY MANAGEMENT PERSONNEL COMPENSATION 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors of the Company.

    Six months ended June 30,  
Key management personnel   2022     2021  
Salaries and short term benefits   237,540   $ 220,969  
Directors' fee   88,320     71,201  
Share based payments   236,006     198,884  
    533,384   $ 491,053  

22. CONTINGENCIES

The Company accrues for liabilities when it is probable, and the amount can be reasonably estimated.

As a result of the Arrangement, each of the Company option and warrant holder (the "Holder") is entitled to receive, upon exercise of January 14, 2022 Options and Warrants at the same original exercise price and in accordance with the terms of such warrant and option, one share of each of Flying Nickel and Nevada Vanadium; two shares of the Battery Metals (collectively, the "Reserved Shares"); and one share of the Company.

As at January 14, 2022, the Company had a total of 11,644,256 (Flying Nickel - 2,911,064, Nevada Vanadium - 2,911,064, and Battery Metals  - 5,822,128) Reserved Shares. The Company entered into agreements with certain Holders pursuant to which the Company can sell some or all the Reserved Shares currently held by the Company on behalf of the Holders in order to obtain working capital.  Any Reserved Shared held in-trust, but not delivered, due to the expiry of unexercised January 14, 2022 Options and Warrants shall be returned to the Company, of which none have been returned to date. As of June 30, 2022, Management is unable to assess the likely results and potential liabilities related to the Reserved Shares.

23. SUBSEQUENT EVENTS

Subsequent to the period ended June 30, 2022 the Company proposed to undertake a non-brokered private placement of up to 3 million units of the Company at a price of $0.50 per unit to raise aggregate gross proceeds of up to $1,500,000. Each unit will consist of one common share of the Company and one-half share purchase warrant with each whole warrant entitling the holder to purchase one additional share of the Company at a price of $0.65 per share for 3 years. The securities issued as part of the placement will be subject to a hold period of four months plus one day from the date of issue. Closing of the placement is expected to occur on or about September 20, 2022. A 6% Finder's Fees, of cash or Units, may be payable in connection with Placement.



 

 

 

Management's Discussion and Analysis of Financial Condition and
Results of Operations

For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

 

 

 


TABLE OF CONTENTS

1. INTRODUCTION 1
   
2. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 3
   
3. SIX MONTHS HIGHLIGHTS AND SIGNIFICANT EVENTS 5
   
4. ARRANGEMENT AND TRANSFER OF ASSETS 6
   
5. PROPERTY SUMMARY 7
   
6. SUMMARY OF QUARTERLY RESULTS 31
   
7. DISCUSSION OF OPERATIONS 31
   
8. LIQUIDITY AND CAPITAL RESOURCES 35
   
9. COMMITMENTS AND CONTINGENCIES 37
   
10. RELATED PARTY DISCLOSURES 37
   
11. CRITICAL ACCOUNTING POLICIES AND ESTIMATES 38
   
12. FINANCIAL INSTRUMENTS AND RELATED RISKS 41
   
13. RISKS AND UNCERTAINTIES 43
   
14. DISCLOSURE CONTROLS AND PROCEDURES 44
   
15. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 45
   
16. PROPOSED TRANSACTIONS 45
   
17. DISCLOSURE OF OUTSTANDING SHARE DATA 45
   
18. OFF-BALANCE SHEET ARRANGEMENTS 45

SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

1. INTRODUCTION

This Management's Discussion and Analysis (this "MD&A") of Silver Elephant Mining Corp. (formerly Prophecy Development Corp.) and its subsidiaries (the "Company" or "Silver Elephant", or 'ELEF") was prepared by management as at August 12, 2022, and was reviewed, approved, and authorized for issue by the Company's Audit Committee. The following discussion of performance, financial condition and future prospects should be read in conjunction with the condensed interim consolidated financial statements of the Company and notes thereto for the six months ended June 30, 2022, prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34 Interim Financial Reporting, as issued by the International Accounting Standards Board. This MD&A should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2021, which were prepared in accordance with IFRS (the "Annual Financial Statements"), and the related Management's Discussion and Analysis (the "Annual MD&A") dated March 30, 2022, as well as the Company's Annual Report, dated March 30, 2022 (the "2021 Annual Report"), all of which are available under the Company's SEDAR profile at www.sedar.com.

The information provided herein supplements but does not form part of the financial statements. Financial information is expressed in Canadian dollars, unless stated otherwise. All references to "$" or "dollars" in this MD&A refer to Canadian dollars. References to "US$" or "USD" in this MD&A refer to United States dollars. Readers are cautioned that this MD&A contains "forward-looking statements" and that actual events may vary from management's expectations. Readers are encouraged to read the cautionary note contained herein regarding such forward-looking statements. Information on risks associated with investing in the Company's securities, as well as information about mineral resources under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") are contained in the 2020 Annual Report which is available under the Company's SEDAR profile at www.sedar.com.

Description of Business

The Company amalgamated under the laws of the Province of British Columbia, Canada. The Company's Common Shares (the "Common Shares", and each, a "Common Share") are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "ELEF" and on the Frankfurt Stock Exchange under the symbol "1P2N" and are quoted on the OTCQX under the symbol "SILEF".

On January 14, 2022, the Company's share capital was consolidated on the basis of one (1) new Common Share for each ten (10) old Common Shares (the "Consolidation"). All Common Share, warrant, option and per Common Share amounts have been retroactively adjusted.

On January 14, 2022, the Company completed a strategic reorganization of Silver Elephant Mining Corp. business through a statutory plan or arrangement (the "Arrangement"). Pursuant to the Arrangement, the common shares of the Company were consolidated on a 10:1 basis and each holder of common shares of the Company received in exchange for every 10 pre-Consolidation common shares held: (i) one post-Consolidation common share of the Company; (ii) one common share of Flying Nickel Mining Corp. ("NickelCo" or "Flying Nickel"); (iii) one common share of Nevada Vanadium Mining Corp. ("VanadiumCo" or "Nevada Vanadium"); and (iv) two common shares of Battery Metals Royalty Corp. ("RoyaltyCo" or "Battery Metals").

Also, pursuant to the Arrangement:

i. certain royalties presently held by ELEF in certain projects were transferred into its own entity, RoyaltyCo;

ii. the Minago Project was spun-out into its own entity NickelCo;

iii. the Gibellini Project was spun-out into its own entity VanadiumCo.

Silver Elephant Mining Corp. is a mineral exploration and development stage company. The Company's principal projects are the Pulacayo Paca silver-lead-zinc property located in the Potosí Department, Antonnio Quijarro Province, Bolivia (the "Pulacayo Project").


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Pulacayo Project comprises seven mining areas covering an area of approximately 3,560 hectares of contiguous areas centered on the historical Pulacayo mine and town site. The Pulacayo Project is located 18 kilometers east of the town of Uyuni in the Department of Potosí, in southwestern Bolivia. It is located 460 kilometers south-southeast of the national capital of La Paz and 150 kilometers southwest of the City of Potosí, which is the administrative capital of the department. The Pulacayo Project is fully permitted with secured social licenses for mining.

The Pulacayo Project mining rights are recognized by two legally independent contractual arrangements, one covering all, except the Apuradita deposit, from a mining production contract (the "Pulacayo MPC") between the Company and the Corporación Minera de Bolivia ("COMIBOL"), a Bolivian state mining company, and the original holder of the rights, executed on October 3, 2019. The Pulacayo MPC grants the Company the 100% exclusive right to develop and mine at the Pulacayo and Paca concessions for up to 30 years against certain royalty payments. It is comparable to a mining license in Canada or the United States. In connection with the Apuradita deposit, its rights are covered by a second contractual arrangement, with the Bolivian Jurisdictional Mining Authority, acting for the Government of Bolivia, which is in process of formalization, as a mean of recognition of the acquired rights to what was originally the mining concession. Until such time as the contract is formalized, all mining rights, as recognized in the Bolivian Mining Law 535, can be exercised by the holder of the ex-concession.

Other Projects

The Company also owns or holds 100% interests in each of the following projects: (a) the El Triunfo gold-silver-lead-zinc project in Bolivia, (b) the Titan vanadium-titanium-iron project located in Ontario, Canada, (c) the Ulaan Ovoo coal project located in Selenge Province, Mongolia, and (d) the Chandgana Khavtgai and Tal coal projects, located in Khentii Province, Mongolia (collectively, the "Projects"). At this time, the Company does not consider any of the Projects to be material to the Company for the purposes of NI 43- 101.

General Corporate Information:

As of June 30, 2022, and May 16, 2022, the Company had: (i) 25,589,139 Common Shares issued and outstanding; (ii) 1,436,750 stock options, each exercisable for the purchase of one Common Share, outstanding; (iii) 1,447,814 Common Share purchase warrants, each exercisable for the purchase of one Common Share, outstanding respectively. Transfer Agent and Registrar

Computershare Investor Services Inc.
3rd Floor, 510 Burrard Street,
Vancouver, BC, Canada, V6C 3B9
Tel: +1 (604) 661-9400
   
Investor and Contact Information

All financial reports, news releases and corporate information can be accessed by visiting the Company's website at: www.silverelef.com.
Investor & Media requests and queries: Email: [email protected]
Head Office and Registered Office

Suite 1610 - 409 Granville Street,
Vancouver, BC, Canada, V6C 1T2
Tel: +1 (604) 569-3661 

Directors and Officers

As at the date of this MD&A, The Company's directors and officers were as follows:

Directors Officers
John Lee (Chief Executive Officer
and Executive Chairman)
Ronald Espell, Vice-President, Environment and Sustainability
Danniel Oosterman, Vice-President, Exploration
Greg Hall Joaquin Merino-Marquez, Vice-President, South American Operations
Masa Igata Zula Kropivnitski, Chief Financial Officer
Marc Leduc Robert Van Drunen, Chief Operating Officer
   
Audit Committee Corporate Governance and Compensation Committee
Greg Hall (Chair) Greg Hall (Chair)
Masa Igata Masa Igata
Marc Leduc Marc Leduc


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

2. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A constitute "forward-looking statements" within the meaning of United States securities laws and "forward-looking information" within the meaning of Canadian securities laws and are intended to be covered by the safe harbors provided by such regulations (such forward-looking statements and forward-looking information are collectively referred to herein as "forward-looking statements"). These forward-looking statements concerns matters anticipated developments in the Company's continuing and future operations in the United States, Canada, Bolivia and Mongolia, and the adequacy of the Company's financial resources and financial projections.

Forward-looking statements in this MD&A are frequently, but not always, identified by words such as "expects", "anticipates", "intends", "believes", "estimates", "potentially" or similar expressions, or statements that events, conditions or results "will", "may", "would", "could" or "should" occur or are "to be" achieved, and statements related to matters which are not historical facts. Information concerning management's expectations regarding the Company's future growth, results of operations, performance, business prospects and opportunities may also be deemed to be forward-looking statements, as such information constitutes predictions based on certain factors, estimates and assumptions subject to significant business, economic, competitive and other uncertainties and contingencies, and involve known and unknown risks which may cause the actual results, performance, or achievements to be different from future results, performance, or achievements contained in the forward- looking statements. Such forward-looking statements include but are not limited to statements regarding the Company's planned and future exploration and/or development of the Pulacayo Project, the Gibellini Project and the Titan Project; permitting and feasibility of the Gibellini Project; the volatility of the novel coronavirus ("COVID-19") outbreak as a global pandemic; political instability and social unrest in Bolivia and other jurisdictions where the Company operates; the Revised Pulacayo Technical Report (as defined herein), including the anticipated filing thereof; the Company's goals regarding exploration, and development of, and production from its projects, and regarding raising capital and conducting further exploration and developments of its properties; the Company's future business plans; the Company's future financial and operating performance; the future price of silver, lead, zinc, vanadium and other metals; expectations regarding any environmental issues that may affect planned or future exploration and development programs and the potential impact of complying with existing and proposed environmental laws and regulations; the ability to obtain or maintain any required permits, licenses or other necessary approvals for the exploration or development of the Company's projects; government regulation of mineral exploration and development operations in Bolivia and other relevant jurisdictions; the Company's reliance on key management personnel, advisors and consultants; the volatility of global financial markets; the timing and amount of estimated future operating and exploration expenditures; the costs and timing of the development of new deposits; the continuation of the Company as a going concern; the likelihood of securing project financing; the impacts of changes in the legal and regulatory environment in which the Company operates; the timing and possible outcome of any pending litigation and regulatory matters; and other information concerning possible or assumed future results of the Company's operations, including: estimated future coal production at the Chandgana Tal, Ulaan Ovoo and Khavtgai Uul coal properties, and other information concerning possible or assumed future results of operations of the Company. Refer to Section 4 - Property Summary.

Statements relating to mineral resources are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the mineral resources described exist in the quantities predicted or estimated and may be profitably produced in the future. Estimated values of future net revenue do not represent fair market value. There is no certainty that it will be commercially viable to produce any portion of the mineral resources.

Forward-looking statements are not guarantees of future performance and are based upon a number of estimates and assumptions of management at the date the statements are made including, among other things, the following: timely receipt of regulatory and governmental approvals (including licenses and permits) for the development, construction and production of the Company's properties and projects; there being no significant disruptions affecting operations, whether due to labour disruptions, COVID 19 or other causes; currency exchange rates being approximately consistent with current levels; certain price assumptions for silver, lead, zinc, vanadium and other metals; prices for and availability of fuel and electricity; parts and equipment and other key supplies remaining consistent with current levels and prices; production forecasts meeting expectations; the accuracy of the Company's current mineral resource estimates and of any metallurgical testing completed to date; labour and materials costs increasing on a basis consistent with the Company's current expectations; any additional required financing being available on reasonable terms; market developments and trends in global supply and demand for silver, lead, zinc, nickel, vanadium and other metals meeting expectations; favourable operating conditions; political stability; access to necessary financing; stability of labour markets and in market conditions in general; and estimates of costs and expenditures to complete the Company's programs. The Company has no assurance that any of these assumptions will prove to be correct.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Many of these assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies, and other factors that are not within the control of the Company and could thus cause actual performance, achievements, actions, events, results or conditions to be materially different from those projected in the forward-looking statements. Furthermore, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from those reflected in the forward-looking statements, whether expressed or implied. Such factors include, among others, the following: the Company is an exploration stage company; the cost, timing and amount of estimated future capital, operating exploration, acquisition, development and reclamation activities; the volatility of the market price of the Common Shares; judgment of management when exercising discretion in the use of proceeds from offerings of securities; sales of a significant number of Common Shares in the public markets, or the perception of such sales, could depress the market price of the Common Shares; potential dilution with the issuance of additional Common Shares; none of the properties in which the Company has a material interest have mineral reserves; estimates of mineral resources are based on interpretation and assumptions and are inherently imprecise; the Company has not received any material revenue or net profit to date; exploration, development and production risks; no history of profitable mineral production; actual capital costs, operating costs, production and economic returns may differ significantly from those the Company has anticipated; foreign operations and political condition risks and uncertainties; legal and political risk; amendments to local laws; the ability to obtain, maintain or renew underlying licenses and permits; title to mineral properties; environmental risks; competitive conditions in the mineral exploration and mining business; availability of adequate infrastructure; the ability of the Company to retain its key management and employees and the impact of shortages of skilled personnel and contractors; limits of insurance coverage and uninsurable risk; reliance on third party contractors; the availability of additional financing on reasonable terms or at all; foreign exchange risk; impact of anti-corruption legislation; recent global financial conditions; changes to the Company's dividend policy; conflicts of interest; cyber security risks; litigation and regulatory proceedings; the obligations which the Company must satisfy in order to maintain its interests in its properties; the influence of third-party stakeholders; the Company's relationships with the communities in which it operates; human error; the speculative nature of mineral exploration and development in general, including the risk of diminishing quantities or grades of mineralization; and other risks and the factors discussed under the heading "Key Information - Risk Factors" in the 2021 Annual Report and in analogous disclosure in other disclosure documents of the Company

The foregoing list is not exhaustive and additional factors may affect any of the Company's forward-looking statements. Although the Company has attempted to identify important factors that could cause actual performance, achievements, actions, events, results or conditions to differ materially from those described in forward-looking statements, there may be other factors that cause performance, achievements, actions, events, results or conditions to differ from those anticipated, estimated or intended.

These forward‐looking statements, may involve, but are not limited to, statements with respect to future events or future performance, the completion and structure of the Arrangement, the realization of the anticipated benefits deriving from the Company's or Battery Metals Royalties' investments, the general performance of the assets of the Company and Battery Metals Royalties, and the results of exploration, development and production activities as well as expansions projects relating to the properties of the Company and/or in which the Company and/or Battery Metals Royalties will hold a royalty, stream or other interest. Such forward-looking statements, which reflect management's expectations regarding the Company's future growth, results of operations, performance, and business prospects and opportunities, are based on certain factors and assumptions, including, without limitation, management's perceptions of historical trends; current conditions; expected future developments; the ongoing operation of the properties of the Company and/or in which the Company and/or Battery Metals Royalties will hold a royalty, stream or other interest by the operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; no adverse development in respect of any significant property of the Company and/or in which the Company and/or Battery Metals Royalties will hold a royalty, stream or other interest; the accuracy of expectations for the development of underlying properties that are not yet in production; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended, and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

These forward‐looking statements, may involve, but are not limited to, statements with respect to future events or future performance, the completion and structure of the Arrangement, anticipated shareholder, court and regulatory approvals, the realization of the anticipated benefits deriving by any entity from the Arrangement or from the Company's or any SpinCo's assets or investments, the general performance of the assets of the Company and any SpinCo, and the results of exploration, development and production activities as well as expansions projects relating to the properties of the Company and/or any SpinCo and/or in which the Company and/or any SpinCo will hold a royalty, stream or other interest. Such forward-looking statements, which reflect management's expectations regarding the Company's future growth, results of operations, performance, and business prospects and opportunities, are based on certain factors and assumptions, including, without limitation, management's perceptions of historical trends; current conditions; expected future developments; the ongoing operation of the properties of the Company and/or any SpinCo and/or in which the Company and/or any SpinCo will hold a royalty, stream or other interest by the operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; no adverse development in respect of any significant property of the Company and/or any SpinCo and/or in which the Company and/or any SpinCo will hold a royalty, stream or other interest; the accuracy of expectations for the development of underlying properties that are not yet in production; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended, and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Forward‐looking statements are not guarantees of performance.

The forward-looking statements contained herein are made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable law. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. All forward-looking statements attributable to the Company are expressly qualified by these cautionary statements.

3. SIX MONTHS HIGHLIGHTS AND SIGNIFICANT EVENTS

  • On January 14, 2022, the Company completed a strategic reorganization of Silver Elephant Mining Corp. business the Arrangement dated November 8, 2021.  Pursuant to the Arrangement, the common shares of the Company were consolidated on a 10:1 basis pursuant to the Consolidation and each holder of common shares of the Company received in exchange for every 10 pre-Consolidation common shares held: (i) one post-Consolidation common share of the Company; (ii) one common share of Flying Nickel; (iii) one common share of Nevada Vanadium; and (iv) two common shares of Battery Metals.

  • Effective January 14, 2022, each company commenced its corresponding core business with the following: (1) Silver Elephant, holding a 100% interest in the Pulacayo silver and El Triunfo gold-silver projects in Bolivia, and 31,730,110 shares of Battery Metals' (representing 39.7%) as a long-term investment; (2) Flying Nickel, holding a 100% interest in the Minago nickel project in the Thompson nickel belt in Manitoba; (3) Nevada Vanadium, holding a 100% interest in the Gibellini vanadium project in Nevada; and (4) Battery Metals, holding a 2% royalty in each of the assets referenced above, and 22,953,991 shares of Flying Nickel (representing 39.7%) and 22,953,991 shares of Nevada Vanadium (representing 45.9%) as long-term investments.

  • On January 18, 2022, Post-Arrangement and post-Consolidation Common Shares trading on TSX commenced on January 18, 2022.

  • On January 19, 2022, the Company announced it had commenced an exploration drilling program at the Paca deposit of the Pulacayo Project.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

  • On January 25, 2022, the Company announced that it had commenced a 1,500-meter drilling program at the Triunfo Project. The program will probe several prospective induced polarisation ("IP") geophysical anomalies detected in late 2021.
  • On March 16, 2022, pursuant the Company's equity incentive plan dated September 1, 2021, The Company issued 187,049 bonus shares to the company's directors, officers, employees, and consultants.

  • On March 29, 2022, the Company announced regional exploration drilling results from the Pulacayo Project. The results demonstrate that silver and base metals have been deposited in areas distant to the main Tajo Vein system ("TVS"), provided encouraging sign of possibly existing, yet-to-be-discovered, parallel or conjugate vein systems to TVS, which was formed in a large hydrothermal system given its depts extends to 1,000 metres or more from surface.

Also, the Company announced diamond drilling results from the Paca deposit ("Paca") within its Pulacayo Project. A total of 8 holes were drilled at Paca, totaling 1,717 meters.  PND 119, 120, 121 & 122 were drilled to test induced polarization ("IP") geophysical anomalies located to the east of the current Paca resource.  PND 123, 124, 125 & 126 were drilled to test potential northern extension of the Paca resource.

  • On March 31, 2021, the Company entered into a binding letter of intent (the "LOI") with Battery pursuant to which the Battery proposes to acquire a 45% equity interest of ELEF's wholly owned Mega Thermal Coal Corp.(formerly Asia Mining Inc.) ("Mega Coal"), which owns and operates the Ulaan Ovoo and Chandgana thermal coal mines in Mongolia through Mega Coal's wholly-owned Mongolian subsidiaries.  The LOI was amended effective May 12, 2022.  The proposed transaction ("Transaction") includes the following key terms:

(a) ELEF will transfer to Mega Coal: 9,000,000 RoyaltyCo common shares;

(b) Battery will issue 16,000,000 common shares to ELEF;

(c) Battery will complete a concurring private placement for gross proceeds of approximately $2,000,000; and

(d) Battery will complete a listing on the TSX Venture Exchange or Canadian Securities Exchange.

Closing of the Transaction will be subject to such corporate and/or regulatory approvals as may be required, including the approval of the TSX, and such other requirements as may be applicable under applicable laws and the policies of the TSX, including, if applicable, approval of the shareholders of Silver Elephant and/or Battery Metals.

  • On April 4, 2022 the Company announces initial diamond drill results from the Company's 100%-controlled El Triunfo gold-silver project located 75 km east of La Paz city, Bolivia. Five holes totaling 1,500 meters are underway to test induced polarization ("IP") geophysical anomalies discovered in 2021.

For further information please view the Company's 2022 news releases available under the Company's and its subsidiaries, Nevada Vanadium, Flying Nickel and Battery Metals SEDAR profile at www.sedar.com.

4. ARRANGEMENT AND TRANSFER OF ASSETS

On January 14, 2022, pursuant to the Arrangement, the common shares of the Company were consolidated on a 10:1 basis pursuant to the Consolidation and each holder of common shares of the Company received in exchange for every 10 pre-Consolidation common shares held: (i) one post-Consolidation common share of the Company; (ii) one common share of Flying Nickel (iii) one common share of Nevada Vanadium and (iv) two common shares of Battery Metals.

As a result of the Arrangement:

i. certain royalties hold by the Company in certain projects were transferred into its own entity, Battery Metals Royalty Corp in exchange for the issuance of 1,785,430 RoyaltyCo shares;


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

ii. spun-out the Minago Project into its own entity, Flying Nickel Mining Corp. in exchange for the issuance of 50,000,000 NickelCo shares, and the assumption of certain liabilities related to the underlying assets;

iii. and spun-out the Gibellini Project into its own entity, Nevada Vanadium Mining Corp. in exchange for the issuance of 50,000,000 VanadiumCo shares, and the assumption of certain liabilities related to the underlying assets; and

iv. Battery Metals purchased 22,953,991 of the outstanding shares of both Nevada Vanadium and Flying Nickel in exchange for the issuance of 78,214,750 RoyaltyCo shares to ELEF.

Effective January 14, 2022, each company commenced its corresponding core business with the following: (1) Silver Elephant, holding a 100% interest in the Pulacayo and the Triunfo projects in Bolivia, the Titan project in Canada, the Ulaan Ovoo and the Chandgana  projects in Mongolia and 31,730,110 shares of Battery Metals (representing 39.7%) as a subsidiary; (2) Flying Nickel, holding a 100% interest in the Minago nickel project in Canada; (3) Nevada Vanadium, holding a 100% interest in the Gibellini project in Nevada; and (4) Battery Metals, holding a 2% royalty in each of the assets referenced above and 22,953,991 shares of Flying Nickel (representing 39.7%) and 22,953,991 shares of Nevada Vanadium (representing 45.9%) as long-term investments.

As a result of the Arrangement, the Company acquired 39.7% of Battery Metals issued and outstanding shares and, through other relationships, was determined to have had de facto control over Battery Metals following completion of the Arrangement. Accordingly, the Company consolidated the results of Battery Metals from January 14, 2022.

Also, as a result of the Arrangement and Consolidation, each the Company option and warrant holder (the "Holder") is entitled to receive, upon exercise of each such warrant and option ("January 14, 2022 Options and Warrants") at the same original exercise price and in accordance with the terms of such warrant and option, one share of each of Flying Nickel and Nevada Vanadium; two shares of the Battery Metals (collectively, the "Reserved Shares"); and one share of ELEF.

5. PROPERTY SUMMARY

Definitions and Interpretations

This MD&A contains a number of technical terms relating to exploration and resource development that may be unfamiliar to a general reader. The following definitions are provided for reference and clarification, and reflect their common use and understanding in the mining industry:

"deposit" means a mineral deposit which is a mineralized mass that may be economically valuable, but whose characteristics may require more detailed information. Mineral resources are calculated from geological data collected from deposits, however, deposits do not necessarily reflect the presence of mineral resources.

"mineral resource" means a concentration or occurrence of natural, solid, inorganic, or fossilized organic material in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics, and continuity of a mineral resource are known, estimated, or interpreted from specific geological evidence and knowledge. Mineral resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated, and Measured categories. Note that the confidence level in Inferred Mineral Resources is insufficient to allow the application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Regardless of category, a mineral resource is estimated through application of the guidelines of the Canadian Institute of Mining, Metallurgy and Petroleum Standards for Mineral Resources and Reserves: Definitions and Guidelines, as amended in 2014. A "historic" mineral resource estimate refers to a mineral resource estimate of the quantity, grade, or metal or mineral content of a deposit that the Company has not verified as current, and which was prepared before the Company acquired or entered into an agreement to acquire, an interest in the property that contains the deposit.

"project", as used in the context of the Pulacayo Project, the Gibellini Project, the Triunfo Project, the Sunawayo Project and the Titan Project defined in this MD&A, refers to a mineral project which, pursuant to NI 43-101, means any exploration, development or production activity, including a royalty or similar interest in these activities with respect to base metals, precious metals or industrial metals as it applies to the Company.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

"property" refers to land concessions for which the Company holds mineral rights to conduct its activities.

"Qualified Person" means, pursuant to NI 43-101, an individual who is an engineer or geoscientist with at least five years experience in mineral exploration, mine development or operation, or mineral project assessment. This individual is a member or licensee in good standing of a professional association and has to have relevant experience of the subject matter of the mineral project and the technical report.

Pulacayo Project, Bolivia

The scientific and technical information in this section of this MD&A that specifically relates to the current Pulacayo Project mineral resource estimates for the Pulacayo and Paca deposits has been extracted or summarized from the Pulacayo Technical Report. Additional information presented below that pertains to the Pulacayo Project but does not specifically appear in the Pulacayo Technical Report has been provided by the Company. The Pulacayo Technical Report is available under the Company's SEDAR profile at www.sedar.com.

The Company filed an amended Pulacayo Technical Report on November 17, 2020. The Amended Pulacayo Technical Report was filed by the Company with Canadian securities regulatory authorities in connection with the filing of the final short form prospectus of the Company in relation to the Offering.

The Pulacayo Project consists of many licenses within which are located the Pulacayo and Paca mineral deposits, several areas of potential mineralization and historic tailings piles.

The Pulacayo Project mining rights are recognized by two legally independent contractual arrangements, one covering all, except the Apuradita mining concession, from the Pulacayo MPC between the Company and COMIBOL, a Bolivian state mining company, and the original holder of the rights, executed on October 3, 2019. The Pulacayo MPC grants the Company the 100% exclusive right to develop and mine at the Pulacayo and Paca mineral deposits for up to 30 years against certain royalty payments. It is comparable to a mining license in Canada or the United States. In connection with the Apuradita mining concession, its rights are covered by a second contractual arrangement, with the Bolivian Jurisdictional Mining Authority, acting for the State, which is in process of formalization, as a mean of recognition of the acquired rights to what was originally the mining concession. Until such time as the contract is formalized, all mining rights, as recognized in the Bolivian Mining Law 535, can be exercised by the holder of the ex-concession.

The Pulacayo Project comprises seven mining concessions covering an area of approximately 3,560 hectares of contiguous areas centered on the historical Pulacayo mine and town site. The Pulacayo Project is located 18 kilometers east of the town of Uyuni in the Department of Potosí, in southwestern Bolivia. It is located 460 kilometers south-southeast of the national capital of La Paz and 150 kilometers southwest of the City of Potosí, which is the administrative capital of the department. The Pulacayo Project is fully permitted with secured social licenses for mining.

Mineral Resources and Reserves

The Pulacayo Technical Report describes mineral resources estimated following the guidelines of the Canadian Institute of Mining, Metallurgy and Petroleum Standards for Mineral Resources and Reserves: Definitions and Guidelines, as amended in 2014 (the "CIM Standards, 2014"). Two mineral resource estimates were disclosed according to the requirements of NI 43-101 for the Pulacayo Project, one for the Pulacayo deposit and one for the Paca deposit (the "Pulacayo MRE" and "Paca MRE", respectively, and collectively referred to herein as the "Mineral Resource Estimate").

The Mineral Resource Estimate has an effective date of October 13, 2020, and includes an indicated mineral resource of 106.7 million oz of silver, 1,384.7 million pounds of zinc, and 693.9 million pounds of lead, and an inferred mineral resource of 13.1 million oz of silver, 122.8 million pounds of zinc and 61.9 million pounds of lead. Apogee Mineral Bolivia S.A., the Company's wholly owned Bolivian subsidiary, has invested over US$30 million at the Pulacayo Project since 2006.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Mineral Resource Estimate was prepared by Mercator under the supervision of Matthew Harrington, P. Geo., who is an independent Qualified Person as defined under NI 43-101. A contained metal summary based on the Mineral Resource Estimate for the Pulacayo Project is reported below:

Pulacayo Project Mineral Resource Estimate Summary of Total Contained Metal - Effective October 13, 2020**

Zone Category Rounded Tonnes Ag Moz Zn Mlbs Pb Mlbs *AgEq Moz
Open Pit Constrained Indicated 47,380,000 101.0 1,365.0 687.5 202.0
Inferred 4,165,000 8.0 80.3 53.5 14.3
Out-of-Pit Indicated 660,000 5.7 19.6 6.4 6.5
Inferred 900,000 5.2 42.4 8.3 7.4
Total: Indicated 48,040,000 106.7 1,384.7 693.9 208.5
Inferred 5,065,000 13.1 122.8 61.9 21.7

**Notes:

1. The Mineral Resource Estimate was prepared in accordance with NI 43-101, the CIM Definition Standards (2014) and CIM MRMR Best Practice Guidelines (2019).

2. *Ag Eq. = silver equivalent (recovered) = (Ag g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)). Sulphide zone metal recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were used in the silver equivalent (recovered) equation and reflect metallurgical testing results disclosed previously for the Pulacayo deposit. A metal recovery of 80% Ag was used for oxide zone mineral resources.

3. Metal prices of US$17/oz Ag, US$0.95/lb Pb, and US$1.16 Zn apply. A currency exchange rate of CDN$1.00 to US$0.75 applies.

4. Pit-constrained mineral resources are defined for each deposit within optimized pit shells with average pit slope angles of 45⁰. The Pulacayo MRE was optimized at a 12.3:1 strip ratio and the Paca MRE was optimized with at a 4.3: strip ratio.

5. Base-case sulfide zone pit optimization parameters include: mining at US$2.00 per tonne; combined processing and general and administrative ("G&A") at US$12.50 per tonne processed; haulage at US$0.50 per tonne processed for the Pulacayo deposit and US$2.00 per tonne processed for the Paca deposit.

6. Base-case oxide zone pit optimization parameters include: mining at US$2.00 per tonne; combined processing and G&A at US$23.50 per tonne processed; haulage at US$0.50 per tonne processed for the Pulacayo deposit and US$2.00 per tonne processed for the Paca deposit.

7.  Pit-constrained sulphide zone mineral resources are reported at a cut-off grade of 30 g/t ag eq. within the optimized pit shells and pit-constrained oxide zone mineral resources are reported at a cut-off grade of 50 g/t Ag within the optimized pit shells. Cut-off grades reflect total operating costs used in pit optimization and are considered to define reasonable prospects for eventual economic extraction by open pit mining methods.

8. Out of pit mineral resources are external to the optimized pit shells and are reported at a cut-off grade of 100 g/t Ag Eq. They are considered to have reasonable prospects for eventual economic extraction using conventional underground methods such as long hole stoping based on a mining cost of $35 per tonne and processing and G&A cost of $20 per tonne processed.

9.  "Total" mineral resources for the Pulacayo MRE is the tonnage-weighted average summation of pit-constrained and out-of-pit Pulacayo deposit mineral resources.

10. "Total" mineral resources for the Mineral Resource Estimate is the tonnage-weighted average summation of the total Pulacayo MRE and Paca MRE.

11. Mineral resources were estimated using ordinary Kriging methods applied to 1 m downhole assay composites capped at 2,300 g/t Ag, 13% Pb and 15% Zn.

12. Bulk density was interpolated using ordinary Kriging methods for Pulacayo MRE. An average bulk density of 2.32 g/cm3 or 2.24 g/cm3 was applied to Paca MRE, based on grade domain solid models.

13. Mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.

14. Mineral resource tonnages have been rounded to the nearest 5,000; totals may vary due to rounding.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Mineral Resource Estimate is based on estimates of pit-constrained and out-of-pit mineral resources, details of which are presented in the following two tables for the Pulacayo and Paca deposits, respectively. The Pulacayo MRE incorporate 73,016 metres of diamond drilling (244 surface and 42 underground drill holes). The Paca MRE incorporates results of 104 diamond drill holes and 6 reverse circulation drill holes totaling 19,916 meters completed between 2002 and 2020. Geovia Surpac ® Version 2020 was used to create the Pulacayo Project block models, associated geological and grade solids, and to interpolate silver-zinc-lead grade. Geovia Whittle pit optimization software and the PseudoFlow algorithm were applied for pit shell optimization purposes.

Pulacayo Deposit Combined Pit-Constrained and Out-of-Pit Mineral Resource Estimate - Effective Date October 13, 2020**

Cut -off Grade Zone Category Rounded
Tonnes
Ag
g/t
Zn % Pb % Ag
Moz
Zn
Mlbs
Pb
Mlbs
*AgEq
Moz
*AgEq
g/t
50 Ag g/t Oxide In-Pit Indicated 1,090,000 125     4.4        
Inferred 25,000 60     0.0        
30 *AgEq g/t Sulfide In-Pit Indicated 24,600,000 76 1.63 0.70 60.1 884.0 379.6 123.4 156
Inferred 745,000 82 1.79 0.61 2.0 29.4 10.0 3.9 164
100 *AgEq g/t Sulfide Out-of-Pit Indicated 660,000 268 1.35 0.44 5.7 19.6 6.4 6.5 307
Inferred 900,000 179 2.14 0.42 5.2 42.4 8.3 7.4 257
Total: Indicated 26,350,000       70.2 903.7 386.0 133.4  
Inferred 1,670,000       7.2 71.8 18.4 11.4  

Paca Deposit Pit-Constrained Mineral Resource Estimate - Effective Date October 13, 2020**

Cut -off Grade Zone Category Rounded
Tonnes
Ag
g/t
Zn % Pb % Ag
Moz
Zn
Mlbs
Pb
Mlbs
*AgEq
Moz
*AgEq
g/t
50 Ag g/t Oxide
In-Pit
Indicated 1,095,000 185     6.5        
Inferred 345,000 131     1.5        
30 *AgEq g/t Sulfide
In-Pit
Indicated 20,595,000 46 1.07 0.67 30.5 485.8 304.2 70.2 106
Inferred 3,050,000 46 0.76 0.65 4.5 51.1 43.7 9.2 94
Total: Indicated 21,690,000       37 485.8 304.2 70.2  
Inferred 3,395,000       6 51.1 43.7 9.2  

**See detailed notes on the Mineral Resource Estimate parameters under preceding Table titled "Pulacayo Project Mineral Resource Estimate Summary of Total Contained Metal - Effective Date October 13, 2020".

Pulacayo Deposit Sensitivity Analysis from October 13, 2020 Mineral Resource Estimate

The sensitivity analysis is shown in the following tables showing various pit-constrained grade-tonnage scenarios for the Pulacayo deposit based on a range of cut-off grades for the sulphide and oxide zones.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Pulacayo Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for Oxide Zone

Cut -off Grade Category Rounded
Tonnes
Ag
g/t
Zn % Pb % Ag
Moz
Zn
Mlbs
Pb
Mlbs
*AgEq
Moz
AgEq
g/t
30 Ag g/t Indicated 1,760,000 92     5.2        
Inferred 35,000 55     0.1        
45 Ag g/t Indicated 1,220,000 116     4.6        
Inferred 30,000 58     0.1        
90 Ag g/t Indicated 615,000 171     3.4        
Inferred         0        
200 Ag g/t Indicated 185,000 250     1.5        
Inferred         0        

Note: Cut-off grade for pit-constrained oxide mineral resources is 50 g/t Ag.

Pulacayo Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for Sulfide Zone

Cut -off Grade Category Rounded
Tonnes
Ag
g/t
Zn % Pb % Ag
Moz
Zn Mlbs Pb Mlbs *AgEq
Moz
AgEq
g/t
30 AgEq g/t Indicated 24,600,000 76 1.63 0.7 60.1 884 379.6 123.4 156
Inferred 745,000 82 1.79 0.61 2 29.4 10 3.9 164
45 AgEq g/t Indicated 23,715,000 78 1.67 0.72 59.5 873.1 376.4 122 160
Inferred 735,000 83 1.81 0.61 2 29.3 9.9 3.9 166
90 AgEq g/t Indicated 13,700,000 121 2.17 0.99 53.3 655.4 299 100 227
Inferred 290,000 154 3.62 0.97 1.4 23.1 6.2 2.9 312
200 AgEq g/t Indicated 5,385,000 249 2.75 1.54 43.1 326.5 182.8 66.3 383
Inferred 180,000 230 4.57 1.22 1.3 18.1 4.8 2.5 426
400 AgEq g/t Indicated 1,860,000 387 3.62 2.25 23.1 148.4 92.3 33.8 565
Inferred 105,000 297 5.29 1.46 1 12.2 3.4 1.8 521

Note: Mineral resource estimate cut-off grade bolded.

The following table shows sensitivity analysis for the Pulacayo deposit for out-of-pit grade tonnage scenarios:

Pulacayo Deposit Out-of-Pit Cut-Off Grade Sensitivity Report for Sulfide Zone


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)


Cut -off Grade Category Rounded
Tonnes
Ag g/t Zn % Pb % Ag Moz Zn Mlbs Pb
Mlbs
*AgEq
Moz
AgEq
g/t
100 AgEq g/t Indicated 660,000 268 1.35 0.44 5.7 19.6 6.4 6.5 307
Inferred 900,000 179 2.14 0.42 5.2 42.4 8.3 7.4 257
150 AgEq g/t Indicated 530,000 321 1.3 0.49 5.5 15.2 5.7 6 354
Inferred 680,000 220 2.25 0.46 4.8 33.7 6.9 6.6 300
200 AgEq g/t Indicated 435,000 359 1.41 0.53 5 13.5 5.1 5.5 394
Inferred 505,000 260 2.37 0.54 4.2 26.4 6 5.6 343
250 AgEq g/t Indicated 350,000 397 1.53 0.59 4.5 11.8 4.6 4.9 435
Inferred 375,000 309 2.14 0.64 3.7 17.7 5.3 4.6 381
300 Ag Eq g/t Indicated 290,000 429 1.63 0.64 4 10.4 4.1 4.4 468
Inferred 310,000 327 2.23 0.72 3.3 15.2 4.9 4 403
350 Ag Eq g/t Indicated 230,000 462 1.74 0.7 3.4 8.8 3.5 3.7 504
Inferred 225,000 358 2.18 0.85 2.6 10.8 4.2 3.1 434
400 Ag Eq g/t Indicated 180,000 490 1.93 0.74 2.8 7.7 2.9 3.1 538
Inferred 165,000 384 2.01 0.99 2 7.3 3.6 2.4 455

Note: Mineral resource estimate cut-off grade bolded.

Paca Deposit Sensitivity Analysis from October 13, 2020 MRE

The Paca deposit is located 7 kilometers north of the Pulacayo deposit. Sensitivity analysis shown in the following two tables illustrates various pit-constrained grade-tonnage scenarios at the Paca deposit based on a range of cut-off grades.

Paca Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for Oxide Zone

Cut -off Grade Category Rounded
Tonnes
Ag g/t Zn % Pb % Ag Moz Zn
Mlbs
Pb
Mlbs
*AgEq
Moz
AgEq
g/t
30 Ag g/t Indicated 1,805,000 128     7.4        
Inferred 500,000 102     1.6        
45 Ag g/t Indicated 1,225,000 170     6.7        
Inferred 375,000 124     1.5        
90 Ag g/t Indicated 800,000 231     5.9        
Inferred 235,000 159     1.2        
200 Ag g/t Indicated 420,000 311     4.2        
Inferred 55,000 285     0.5        
400 Ag g/t Indicated 80,000 493     1.3        
Inferred 5,000 459     0.1        

Note: Cut-off grade for pit-constrained oxide mineral resources is 50 g/t Ag.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Paca Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for Sulfide Zone

Cut -off Grade Category Rounded
Tonnes
Ag
g/t
Zn % Pb % Ag
Moz
Zn
Mlbs
Pb
Mlbs
*AgEq
Moz
AgEq
g/t
30 AgEq g/t Indicated 20,595,000 46 1.07 0.67 30.5 485.8 304.2 70.2 106
Inferred 3,050,000 46 0.76 0.65 4.5 51.1 43.7 9.2 94
45 AgEq g/t Indicated 19,315,000 48 1.11 0.69 29.8 472.7 293.8 68.3 110
Inferred 2,650,000 51 0.81 0.7 4.4 47.3 40.9 8.7 102
90 AgEq g/t Indicated 8,600,000 87 1.38 0.95 24.1 261.6 180.1 45.4 164
Inferred 950,000 114 0.94 0.95 3.5 19.7 19.9 5.2 171
200 AgEq g/t Indicated 1,810,000 256 1.22 1.22 14.9 48.7 48.7 18.5 318
Inferred 190,000 338 0.61 0.98 2.1 2.6 4.1 2.2 360
400 AgEq g/t Indicated 300,000 490 1.38 1.47 4.7 9.1 9.7 5.2 542
Inferred 50,000 545 0.39 0.82 0.9 0.4 0.9 0.9 530

Note: Mineral resource estimate cut-off grade bolded.

Reported results in the following section do not define a mineral resource and it is uncertain if further exploration will result in the delineation of mineral resource. Drilling that began at the Pulacayo deposit in December of 2019 was completed in February of 2020. The Company announced its first set of results on January 21, 2020, from borehole PUD 267 which intercepted 10 meters of mineralization grading 147 g/t silver, 9.8% zinc, and 2.0% lead (539 g/t AgEq) within 35.5-meter mineralization grading 230 g/t AgEq starting 31.5 meters downhole.

On March 6, 2020, the Company released additional results from 2,598 meters of drilling, which focused on the western portion of the Pulacayo Project and on August 11, 2020, the Company announced further diamond infill drilling results from the Pulacayo Project. Complete results of all first phase 2020 drilling are tabulated below:



Hole ID From
(m)
To (m) Interval
(m)
Ag (g/t) Zn (%) Pb (%) AgEq
PUD267* 31.5 67 35.5 54.3 4.31 0.92 229.6
including… 117 123 6 47.8 1.11 0.25 89.7
PUD268 21 23 2 20 1.34 0.77 92.6
PUD274 75 77 2 93.5   0.42 98.8
PUD274 82 83 1 83   0.09 77.4
PUD283 248 350 102 145 2.56 1.05 255
including.. 248 282 34 9 1.05 0.22 52
and… 282 297 15 35 2.99 0.4 148
and… 297 310 13 157 5.15 1.47 370
and… 310 317 7 225 3.74 1.15 371
and… 317 322 5 1565 3.85 8.25 1825
and… 322 329 7 134 1.73 1.18 222
and… 329 350 21 76 2.65 0.82 188
PUD284 30.5 204.2 173.7 15 0.67 0.28 46
including… 30.5 55 24.5 3 2.45 0.1 20
and… 55 65 10 113 2.11 1.93 243
and… 65 79 14 13 1.2 0.44 69
and… 79 101 22 4 0.36 0.11 20
and… 101 204.2 103.2 10 0.59 0.18 36
PUD284 206.3 273 66.7 112 1.94 0.46 182
Interval: 206.3 240 33.7 46 2.12 0.41 129
Interval: 240 256 16 79 2.7 0.72 189
Interval: 256 273 17 274 1.13 0.33 295
PUD284 282 318 36 26 1.01 0.34 70
including… 282 288 6 13 0.94 0.27 54
and… 288 300 12 60 1.48 0.61 127
and… 300 318 18 7 0.72 0.18 38

Reported widths are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths are estimated at approximately 61% of reported core lengths. Silver equivalent is calculated as follows: Ag Eq. (g/t) = Ag (g/t)*89.2% + (Pb% *(US$0.94/ lb. Pb /14.583 Troy oz/lb./US$16.50 per Troy oz. Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy oz/lb./US$16.50 per Troy oz. Ag)*10,000*82.9). This calculation incorporates metallurgical recoveries from test work completed for Pulacayo in 2013 by Universidad Tecnica de Oruro (UTO), in Oruro and La Paz, Bolivia as well as at Maelgwyn Mineral Services Africa (MMSA) in Roodeporrt, South Africa.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Company adopts industry recognized best practices in its implementation of QA/QC methods. A geochemical standard control sample and one blank sample is inserted into the sample stream every 20th sample. Duplicates are taken at every 40th sample. Standards and duplicates including lab duplicates and standards and are analyzed using Thompson-Howarth plots. Samples are shipped to ALS Global Laboratories in Ururo, Bolivia for preparation, and then shipped to ALS Global laboratories for analysis in Lima, Peru. Samples were analyzed using intermediate level four acid digestion. Silver over limits are analyzed using fire assay with a gravimetric finish. ALS Laboratories sample management system meets all requirements of International Standards ISO/IEC 17025:2017 and ISO 9001:2015. All ALS geochemical hub laboratories are accredited to ISO/IEC 17025:2017 for specific analytical procedures.

All samples are taken from HQ-diameter core which split in half by a diamond-blade masonry saw. One-half of the core is submitted for laboratory analysis and the other half is preserved on the Company's secured core facility for reference. All core is geotechnically analyzed, photographed and then logged by geologists prior to sampling.

On November 30, 2020, the Company announced that further to the news release dated October 14, 2020, it has received the complete assay results from the Company's diamond drill program at the Paca deposit. All 5 drill holes intersected mineralization, with the results shown in the following table:

Hole ID From To Length (m) Ag g/t Zn % Pb % AgEq*
PND114 1.5 18.0 16.5 43 0.11 0.36 55
PND115 3.0 69.0 66.0 48 0.10 0.80 75
PND116 7.0 37.0 30.0 23 0.15 0.42 41
PND117 51.0 82.0 31.0 3 0.45 0.31 31
PND118 18.0 38.0 20.0 25 0.09 0.09 29
PND118 67.0 179.0 112.0 15 0.50 0.48 50
including… 133.0 143.0 10.0 61 0.65 0.37 93

(*) Silver equivalent ("AgEq") calculation is based on NI43-101 compliant 2020 resource report completed for the Paca deposit by Mercator Geological Services (see Company's press release dated October 13th, 2020). Silver equivalent is calculated as follows: Ag Eq. = Silver Equivalent (Recovered) = (Ag g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)) and assumed metallurgical recoveries. Metal prices of US$17/oz Ag, US$0.95/lb Pb, and US$1.16/lb Zn apply.

Reported widths are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths range from 77% to 86% of the reported core length.

PND 114, 115, 118 drilled tested oblique structures parallel to the main east-west trend and discovered new mineralized zones.

PND 114 intersected 16.5 meters of mineralization grading 55g/t silver equivalent that is to the north of the Paca north zone.

PND 115 intercepted 66 meters of mineralization grading 75g/t silver equivalent between Paca main zone and Paca north zone, which are 250 meters apart.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

PND 118 was drilled at the eastern edge of the Paca main zone and intersected 112 meters of mineralization grading 50 g/t silver equivalent.

The Company is integrating the drill results to the recently completed geomodelling. Commencement of next round of Paca drilling is tentatively scheduled for the first half of 2021.

In March 2020 the Company further announced that it had commenced district exploration program at its Pulacayo project. The Company would be conducting geological mapping, with relevant sampling and possible trenching on the property. Induced polarization geophysics would also be conducted in tandem with the field program, with 106 line-kilometers of survey having been outlined.

In July 2020, the Company announced results of rock chip samples taken from the San Leon underground tunnel. This geological sampling and mapping program are part of an ongoing district exploration program announced on March 9, 2020, at the Company's Pulacayo Silver Project in Bolivia. A total of 113 chip samples were collected at intervals of from 0.85 to 3.0 meters to better characterize the geology and alteration of the San Leon tunnel, which continues for 3km to the south of the mapping area, passing through the Company's existing NI43-101 Pulacayo resource and connects to the town of Pulacayo. The tunnel also extends to the north for 1 km where historically the Pulacayo mine's ore was carted for smelting during the 1800's. Sample results are tabulated below:

Sample ID TYPE Azimuth WIDTH
(m)
Ag
ppm
Pb % Zn % Ag Eq.
ppm
Structure DIP DIR DIP
3879 Chip 350 1.5 400 0.876 0.929 420 Breccia 20 80
3883 Chip 350 0.9 77 0.342 0.287 91 Fault 0 72
3881 Chip 7 1.8 25 0.137 0.127 32 Contact 345 78
3878 Chip 13 0.9 5 0.306 0.399 29 Veinlets 0 85
3882 Chip 338 1.8 17 0.18 0.074 24 Veinlets 350 65
3880 Chip 5 1.9 6 0.132 0.102 14 Veinlets 345 65

(*) Silver equivalent is calculated as follows: Ag Eq.(g/t) = Ag (g/t)*89.2%+(Pb% *(US$0.94/ lb. Pb /14.583 Troy oz/lb./US$16.50 per Troy oz. Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy oz/lb./US$16.50 per Troy oz. Ag)*10,000*82.9). This calculation incorporates metallurgical recoveries from test work completed for the Pulacayo project in 2013.

Mapping identified a vein system trending in a roughly east-west direction at the Pacamayo zone ("Veta Pacamayo"). The vein system measures approximately 175 meters in width south to north in the tunnel and is situated 1.3 kilometers north of the Pulacayo resource and 5km south of Paca resource. Highlights of the tunnel chip samples taken in Veta Pacamayo include 420g/t AgEq* over 1.5 meters and 91g/t AgEq over 0.9 meters.

Geological mapping also identified a transition in the intensity of alteration (argillic-style) along the San Leon tunnel. Highest intensity alteration occurs in the Veta Pulacayo, and Veta Pacamayo areas and coincides with the highest observed chip sample silver values. Reported results do not define a mineral resource and it is uncertain if further exploration will result in the delineation of mineral resource.

In September 2020 geological mapping was conducted in the Pero area of the Pulacayo Project. Pero is located to the southeast of the Tajo Vein system that hosts the Pulacayo deposit. Geological mapping and surface sampling identified an area of silver bearing surface mineralization of up to 200 g/t silver several hundreds of meters south of the projected east-west Tajo Vein system trend, suggesting that the Tajo Vein system was offset southward in this portion of the system where strong alteration can be observed at surface covering 250 meters by 100 meters wide. This reinterpreted surface projection of the Tajo Vein system coincides with some historic Spanish workings in that area of property that date back to the 16th Century. Highlights of assay results from recent surface samples at Pero are tabulated below:


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)


Sample ID Type Azimuth Width (m) Ag (g/t) Zn% Pb%
1313 Chip 210 3 200 0.1 0.1
1314 Chip 195 1.2 200 0.1 0.01
1295 Chip 340 3 164 0.0164 0.0164
1297 Chip 320 1.4 132 0.0132 0.0132
1315 Chip 200 2.9 100 0.01 0.01
1301 Chip 240 4 72 0.0072 0.0072
1303 Chip 200 6.4 67 0.0067 0.0067
1323 Chip 20 4 50 0.005 0.005
1304 Chip 150 3.7 46 0.0046 0.0046

2021

On January 12, 2021, the Company announced the completion of a 980m drilling program testing the so-called Pero area located at the southeastern area of the Pulacayo project. The program was designed to follow-up on the 2020 sampling program in the area. Field work in 2020 identified potential structural remobilization in this area that might explain the erratic nature of mineralization within the Tajo Vein System as it occurs in this area of the property. A summary of results from this drilling is tabulated below:

BHID From (m) To (m) Length (m) Ag (g/t) Pb % Zn % AgEq* (g/t)
PUD285 30.6 44.6 14.0 43 0.19 0.02 46
PUD 285 143.0 191.0 48.0 10 0.11 0.17 23
PUD 286 99.0 124.0 25.0 18 0.33 0.09 32
PUD 286 148.0 152.0 4.0 393 3.79 0.88 518
PUD 286 174.0 183.0 9.0 20 0.13 0.05 25
PUD 287 56.0 78.0 22.0 43 0.23 0.02 48
PUD 287 127.0 139.0 12.0 15 0.01 0.01 15

*Ag Eq. = Silver Equivalent (Recovered) = (Ag g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)). Sulphide zone metal recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were used in the Silver Equivalent (Recovered) equation and reflect metallurgical testing results disclosed previously for the Pulacayo Deposit. Reported widths are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths range from 75% to 85% of the reported core length.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

On June 21, 2021, the Company commenced a 2000m drilling program on the project. Based on the favorable results of an ongoing 108-km-line Induced Polarization ("IP") geophysical survey, the Company testing a large linear anomaly measuring 1,400 meters in length, and up to 250 meters wide. The IP anomaly has never been drilled and is situated parallel to the main 3 km east-west trending Tajo vein system (TVS), which is just 300 meters to the south. Initial drill targets included El Abra, Veta Quatro, and Pacamayo-all of which exhibit high chargeability that starts shallow and runs vertically to at least 600 meters (IP detection limit) at depth. The program is ongoing as of writing.

On August 30, 2021, the company reported that further to news dated June 21, 2021, Silver Elephant has drilled 1,972 meters of its announced 2,000m drill program. Drilling has been completed at El Abra, Veta Quattro, and Pacamayo prospects identified through mapping and 2021 IP survey at Pulacayo District.  These are distant unexplored targets located up to 1km from the Pulacayo Tajo Vein System ("TVS") whereat all of the historic production of 678 Moz occurred as reported by the National Geological and Mineral Service of Bolivia (SERGEOTECMIN)

It should be noted that the Pulacayo TVS showed up in the IP survey with high chargeability and medium resistivity, and that many of the IP anomalies such as Pacamayo in the survey carry very similar IP signatures to the TVS which is what makes these targets compelling.  Matrix Geotechnologies Limited of Canada has completed surveying at Paca as part of the expanded 108 line-km IP program and has identified additional targets which the Company will assess for possible drilling.

During the year ended December 31, 2021, the Company incurred total costs of $2,922,190 (2020 - $2,357,534; 2019 - 1,474,026) for the Pulacayo Project including $2,532,969 (2020 - $1,767,089; 2019 - $964,716) for geological, consulting and engineering services, $384,021 (2020 - $584,712; 2019 - $503,071) for personnel, legal, general and administrative expenses and $5,200 (2020 - $5,733; 2019 - $6,239) for fees and permits.

The Company also reports that the national COVID-19 quarantine in Bolivia was lifted in late-June of 2020. The Company has continued with various mapping and geophysical survey programs on the property since this time, which are still ongoing.  The Company will follow the guidance of federal and local authorities in Bolivia with regards to COVID-19.

2022

On March 29, 2022, the Company announced regional exploration drilling results from the Pulacayo Project. A total of 9 holes were drilled, totaling 3,251 meters to test several induced polarization ("IP") geophysical targets within a 3km radius from the San Leon tunnel entrance accessing the east-west trending Tajo Vein System ("TVS") that comprises the Pulacayo deposit. The TVS is where all of the historic Pulacayo silver production took place from the early 1800's until 1952. 

This modest drill program covering an area of 3.5km by 2km is the largest regional drill campaign outside of the Pulacayo and Paca deposits (Paca is 7km north of Pulacayo).

3 of the 9 holes encountered multiple intersections of mineralization, including 2 meters grading 299g/t silver, 0.75% lead and 0.44% zinc at PUD292 (Pacamayo target). PUD291 and PUD292 prematurely ended in mineralization at depths of 717meters and 562 meters respectively due to drill rig capability, while PUD 293 was abandoned due to poor ground conditions.

The results demonstrate that silver and base metals have been deposited in areas distant to the main TVS, providing encouraging signs of possibly existing, yet-to-be-discovered, parallel or conjugate vein systems to TVS, which was formed in a large hydrothermal system given its depth extends to 1,000 meters or more from surface.

Also notable are the similarly strong IP signatures exhibited at the TVS versus the drilled targets. The TVS (i.e. Pulacayo deposit) features increasing grades and thickness with depth that may be related to lithological contrasts with changing structural behaviour where these contrasts occur. This combination may have led to dramatic changes in the pressure-temperature conditions that induce precipitation of favorable metals.  The Company plans to further rehabilitate the San Leon tunnel and adits to provide a platform for future underground drilling to reach deeper targets beneath the pyrite caps while conserving drill meterage.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Company will examine the drill assays and core to reconstruct the geological model for the district where no information other than surface mapping was previously available. Incorporating these results with isopach and isochore modeling, geological mapping, geochemistry and geophysics will enhance the Company's understanding in order to refine and inform the next round of exploration drill targets towards the end of 2022.

The results are summarized in the following table:

Hole ID Target From To Width
(m)
Ag (g/t) Pb % Zn % AgEq
(g/t)
PUD 291 El Abra 391.0 393.0 2.0 6 0.14 0.36 24
PUD 291   426.0 428.0 2.0 7 0.39 0.81 51
PUD 291   628.0 636.0 8.0 2 0.08 0.27 16
PUD 291   693.0 699.0 6.0 4 0.22 0.50 31
PUD 291   711.0 717.5 6.5 10 0.29 0.56 41
PUD-292 Pacamayo 38.0 52.0 14.0 6 0.13 0.23 19
PUD-292   86.0 98.0 12.0 2 0.06 0.27 14
PUD-292   151.0 173.0 22.0 2 0.06 0.21 11
PUD-292   175.0 212.0 37.0 2 0.06 0.24 13
PUD-292   291.0 303.0 12.0 6 0.05 0.14 12
PUD-292   356.0 364.0 8.0 3 0.13 0.39 23
PUD-292   486.0 520.0 34.0 22 0.26 0.22 37
Incl…   495.0 497.0 2.0 299 0.75 0.44 310
PUD-292   526.0 537.0 11.0 2 0.09 0.50 25
PUD-292   541.0 562.0 21.0 4 0.11 0.53 28
PUD 293 Pero 114.0 123.0 9.0 12 0.17 0.42 33
PUD 293   165.0 171.0 6.0 18 0.09 0.06 22

Note: Reported widths are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths range from 75% to 85% of the reported core length. Please see note on AgEq calculation in preceding paragraphs. Sulphide zone metal recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were used in the Silver Equivalent (Recovered) equation and reflect metallurgical testing results disclosed previously for the Pulacayo Deposit. Summaries of each hole and their target rationale are provided in the discussion below. Silver equivalents are noted where "AgEq"=Silver Equivalent (Recovered) and is equal to (Ag g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)).


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

PUD288 was a hole completed in early 2021 in conclusion of a drilling program at the Pero area, southeast of the TVS. This program successfully identified mineralization in that area, including encountering 4 meters of 518 g/t AgEq (PUD286; 393 g/t Ag, 0.88% Pb, 3.79% Zn; see Company's press release dated January 27, 2021). No significant results are reported from PUD288.

PUD289 was drilled 330 meters north of the western TVS trend to test a shallow IP anomaly. No significant silver mineralization was encountered, and the anomaly was explained by the presence of pyrite in the hole which is a highly chargeable iron-sulphide.

PUD290 was drilled to test an IP anomaly drilling north-to-south in what is called the El Abra area. The El Abra area is host to a weakly mineralized hydrothermal breccia pipe on the property approximately 900 meters north of the TVS on the western side. An IP anomaly at depth was noted as a target that may have represented an increase in the amount of mineralization observed at surface at the noted target depth. The hole encountered 6 meters of weak mineralization from 270 to 276 meters grading of 8 g/t AgEq (1 g/t Ag, 0.04% Pb, 0.15% Zn).

PUD291 was designed to test IP targets on the south portion and directly underneath the El Abra breccia. The first target was projected between 375 and 425 meters, the second target at 575-625 meters The hole encountered silicified pyrite-bearing rocks early in the hole and encountered 24 g/t AgEq mineralization at 391-393 meters (6 g/t Ag, 0.14% Pb, 0.36% Zn) and 51 g/t AgEq at 426 to 428 meters (7 g/t Ag, 0.39% Pb, 0.81% Zn).  For the second target, three mineralized intervals were encountered (8 meters from 628-636 meters @ 2 g/t Ag, 0.39% Pb, 0.89% Zn, 16 g/t AgEq; 6 meters from 693-699 meters @ 4 g/t Ag, 0.22% Pb, 0.50% Zn, 31 g/t AgEq; 6.5 meters from 711-717.5 meters @ 10 g/t Ag, 0.29% Pb, 0.56% Zn, 41 g/t AgEq).  The hole ended in this mineralization at 717.5 meters.

PUD292 was drilled to test the Pacamayo area (approximately 1.5 km north of the TVS), the most prospective and advanced target of this campaign underneath the northern portion of the San Leon tunnel, which is the adit for the historic Pulacayo mine. This underground area was mapped by Silver Elephant in 2020 which discovered a strong alteration envelope coinciding with chips samples of 0.6-1m intervals that returned high-grade assays of over 1,500 g/t Ag (beyond detection limit), up to 3.1% copper, up to 17.6% lead and up to 6.9% zinc. PUD292 tested an IP target below this zone. A total of 9 mineralized intervals were encountered in the hole with varying amounts of modest grades with the exception of a 2-meter interval of 299 g/t Ag, 0.75% Pb, 0.44% Zn, 310 g/t AgEq from 495-497 meters, nested in a wider interval of 34 meters of 22 g/t Ag, 0.26% Pb, 0.22% Zn, 37 g/t AgEq from 486-520 meters. The hole ended in modest mineralization at 562 meters.

PUD293 and PUD294 were both designed to test IP anomalies in and around the Pero area, below what is believed to be a thrusted block of sandstone. Holes were designed to test several clustered anomalies. PUD293 was abandoned at 233 meters due to ground conditions and tested the shallower portion of this anomaly.  Several intervals of mineralization were encountered including 9 meters of 12 g/t Ag, 0.17% Pb, 0.42% Zn, 33 g/t AgEq from 114-123 meters, and 6 meters of 18 g/t Ag, 0.09% Pb, 0.06% Zn, 22 g/t AgEq from 165-171 meters. No significant results are reported from PUD294 which tested the deeper portions of the same anomaly and crossed several smaller anomalies at depth.

On March 29, 2022, the Company also released results from its Paca drilling program.  A total of 8 holes were drilled at Paca, totaling 1,717 meters.  PND 119, 120, 121 & 122 were drilled to test induced polarization ("IP") geophysical anomalies located to the east of the current Paca resource.  PND 123, 124, 125 & 126 were drilled to test potential northern extension of the Paca resource.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The results are summarized in the following table:

Paca East Discovery
Hole ID From To Width (m) Ag (g/t) Pb % Zn % AgEq (g/t)
PND119 360.0 399.0 39.0 5 0.40 0.49 37
incl… 377.0 379.0 2.0 31 1.14 1.15 112
PND120 39.0 75.0 36.0 12 0.08 0.51 33
incl… 68.0 75.0 7.0 14 0.21 0.94 56
PND120 184.0 187.0 3.0 28 2.18 0.64 126
PND120 280.0 284.0 4.0 6 0.52 0.60 46
PND121 50.0 68.0 18.0 2 0.65 0.81 56
incl… 57.0 59.0 2.0 1 1.25 2.64 147
PND121 75.0 79.0 4.0 56 0.16 0.12 60
PND122 34.0 56.0 22.0 1 0.56 0.46 38
Paca North Oxide Discovery
Hole ID From To Width (m) Ag (g/t) Pb % Zn % AgEq (g/t)
PND123 3.0 30.0 27.0 159 0.28 0.05 154
incl… 7.5 9.0 1.5 565 0.30 0.08 518
PND123 37.5 45.0 7.5 68 0.11 0.07 67
PND124 0.0 28.5 28.5 22 0.42 0.73 63
incl… 15.0 27.0 12.0 21 0.54 1.29 88
PND125 0.0 18.8 18.8 33 0.20 0.52 56
incl… 10.4 15.4 5.0 80 0.40 1.13 130
PND126 0.0 31.0 31.0 31 0.22 0.09 39
incl… 29.0 31.0 2.0 78 0.27 0.08 82

Note: Reported widths are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths range from 75% to 85% of the reported core length. Please see note on AgEq calculation in preceding paragraphs. Sulphide zone metal recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were used in the Silver Equivalent (Recovered) equation and reflect metallurgical testing results disclosed previously for the Pulacayo Deposit. Silver equivalents are noted where "AgEq"=Silver Equivalent (Recovered) and is equal to (Ag g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)).

Notable results include PND 123, collared at the northern edge of the Paca resource and drilled further to the north.  The hole intercepted 27 meters of 159 g/t silver from near surface, including 1.5 meters of 565 g/t silver. PND 123, 124, 125 & 126 are step-out holes and all intercepted silver mineralization demonstrate the northern extension of Paca oxide resource that is open to the north and to the northeast by at least 100 meters.  The company plans to conduct further drilling to expand the Paca oxide resource in 2nd half of 2022.

Paca north's shallow oxide resource and flat-tabular morphology may be well suited for a potential open-pit operation, which will be Company's priority development moving forward. Silver Elephant will announce the commissioning of a prefeasibility study shortly and provide an update on its environmental permitting efforts enabling an open-pit mining, oxide leach processing operation at Paca that can later transition to sulphide flotation processing.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

PND 119, 120, 121 & 122 are exploration holes that tested IP anomalies located east and southeast from the Paca resource.  All 4 holes encountered metal-bearing sulphide mineralization and the results confirm Paca hydrothermal mineralizing systems continue eastward beyond what was previously known.  The Company is incorporating all available drill data, mapping, sampling, and geophysical data to better understand the geological and resource models to generate new drill targets.

Summaries of each hole and their target rationale are provided in the discussion below.

Paca East Discovery

PND119 was the first hole to test a large semi-circular IP anomaly approximately 160 meters southeast of the known Paca resource.  The hole was planned to intercept the anomaly and also drill under a historic artisanal mining trench.  The anomaly was targeted between 325-350 meters downhole.  The hole encountered 2 meters of 31 g/t Ag, 1.14% Pb, 1.15% Zn, 112 g/t AgEq within a larger interval 39 meters of 5 g/t Ag, 0.40% Pb, 0.49%, 37 g/t Ag.

PND120 was designed to test a potential down-dip extension of the 39 meters of mineralization encountered in PND119 and to ascertain any potential increase in concentration of this mineralization.  A 36-meter interval was intercepted from 39-75 meters of 12 g/t Ag, 0.21% Pb, 0.08%, 0.51% Zn, 33 g/t AgEq including 7 meters of 14 g/t Ag, 0.21% Pb and 0.94% Zn, 56 g/t AgEq and encountered sulphides from 184-187 meters at 28 g/t Ag, 2.18% Pb, 0.64% Zn, 126 g/t AgEq.  Both these intercepts precede the expected down dip portion of PND119. An intercept in the target area at 280-284 meters returned 6 g/t Ag, 0.52% Pb, 0.60% Zn, 46 g/t AgEq.

PND121 was planned to test strong IP anomaly 280 meters south of the Paca resource and crosscut faulted structures indicated from surface mapping.  A 2-meter interval of sulphide mineralization was encountered at 57-59 meters grading 1 g/t Ag, 1.25% Pb, 2.64% Zn, 147 g/t AgEq nested within a wider interval of 18 meters (50-68 meters) of 2 g/t Ag, 0.65% Pb, 0.81% Zn, 56 g/t AgEq.  Another 4-meter interval shortly downhole of this interval from 75-79 meters grades 56 g/t Ag, 0.16% Pb, 0.12% Zn, 60 g/t AgEq.

PND122 was designed to test an IP anomaly 240 meters southeast of the Paca resource.  Disseminated sulphides were encountered from 34-56 meters (22 meters) grading 1 g/t Ag, 0.56% Pb, 0.46% Zn, 38 g/t AgEq, and a silver-bearing interval from 66-69 meters (3 meters) grading 76 g/t Ag, 0.03% Pb, 0.09% Zn, 72 g/t AgEq. Lightly mineralized sulfide bearing sediments were encountered at a depth of about 200 meters redefining the shape of previously interpreted andesite dome and significantly extending the area of exploration interest.

Paca North Oxide Discovery

PND123 was drilled immediately outside of the resource limits to the north and encountered 27 meters of 159 g/t Ag, 0.28% Pb, 0.05% Zn, 154 g/t AgEq starting at 3.0 meters depth, including 1.5 meters of 565 g/t Ag, 0.30% Pb, 0.08% Zn, 518 g/t AgEq.  A second 7.5-meter interval at 37.5-45.0 meters with 68 g/t Ag, 0.11% Pb, 0.07% Zn, 67 g/t AgEq was encountered.

PND124 was drilled 80 meters north of the resource and hit mineralization starting at surface encountering 28.5 meters of 22 g/t Ag, 0.42% Pb, 0.74% Zn, 63 g/t AgEq.

PND125 was drilled 25 meters east of the resource and also encountered mineralization starting at surface to 18.8 meters of 33 g/t Ag, 0.2% Pb, 0.52% Zn, 56 g/t AgEq including 5.0 meters of 80 g/t Ag, 0.40% Pb, 1.13% Zn, 130 g/t AgEq from 10.4-15.4 meters.

PND126 was collared just outside the resource drilling west into the resource and encountered mineralization from surface to 31.0 meters of 31 g/t Ag, 0.22% Pb, 0.09% Zn, 39 g/t AgEq, including 78 g/t Ag, 0.27% Pb, 0.08% Zn, 82 g/t AgEq.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

2022 Outlook

The Company is planning

  • Complete a geological model incorporating collected metadata

  • Drill test high priority targets identified through modeling

  • Advance permitting for potential mining exploitation on the property

  • Complete a PFS to assess potential mining activity for the project

Triunfo Project, Bolivia

On July 13, 2020, the Company executed the Triunfo Agreement with the Triunfo Vendor. The Triunfo Agreement provides the Company with the Triunfo Rights (consisting of the Exploration Right and the Purchase Right) with respect to the Triunfo Project. The Purchase Right can be exercised at any time after the Triunfo Vendor completes the required Bolivian administrative procedures for the Triunfo Project (expected to occur no later than March 2021) until July 13, 2025, or such further period as the parties may agree. To secure the Triunfo Rights, the Company paid the Triunfo Vendor US$100,000 upon execution of the Triunfo Agreement. Until the Company exercises its Purchase Right, beginning in 2021 the Company must pay the Triunfo Vendor US$50,000 on June 15 of each year (2021 - paid) to maintain the Triunfo Rights. The Company may elect to terminate the Triunfo Agreement at any time. If the Company exercises the Purchase Right, the Triunfo Vendor will maintain the Residual Interest. Upon exercise of the Purchase Right, the Company may make a lump sum payment to the Triunfo Vendor at any time to reduce some or all of the Residual Interest as follows:

  • the Residual Interest may be extinguished for US$300,000;

  • the Residual Interest may be reduced by 4% for US$250,000;

  • the Residual Interest may be reduced by 3% for US$200,000;

  • the Residual Interest may be reduced by 2% for US$150,000; or

  • the Residual Interest may be reduced by 1% for US$100,000.

The Triunfo Project area covers approximately 256 hectares located in the La Paz Department, which is located about 75 kilometers to the east of the city of La Paz, Bolivia. The Triunfo Project has access to power and water and is accessible by road year-round. The Triunfo Vendor maintains a positive relationship with the local community. Exploration was conducted in 2005 through 2007 by Solitario Resources, which made 3 drill holes, all of which intercepted mineralization. Only 20% of the Triunfo Project was explored by Solitario.

The mineralization is characterized by pyrite, arsenopyrite, galena, and sphalerite and carries gold, silver, and zinc and lead in various proportions. Mineralization outcrops at the surface and continues for at least 750 meters in three discrete blocks, known as A, B, and C. The mineralized blocks have widths varying from 20 meters to 150 meters and are locally displaced for several meters by north-east trending faults. In the past decade, some artisanal mining has been developed where gold mineralization has been identified. Those areas have been principally mined for gold.

The Triunfo Project contains polymetallic vein-style mineralization hosted in metasediments of the Silurian and Devonian periods. The metasediments were intruded by nearby plutonic batholiths which are likely related to the mineralizing event. This style of mineralization is well documented in Bolivia. Examples include Cerro Rico and Porco, located in and around Potosi. Several dozen chip samples were taken from the surface and tunnels at Triunfo in late-May 2020. The sampling returned significant results from both blocks.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The following table shows the assay results, equal to and over 1.0 g/t Au Equivalent which represent over 36% of the samples (37 / 103).

El Triunfo Chip Channel Results Returning 1g/t AuEq* or greater

ID BLOCK Type WIDTH Au Ag Pb Zn AuEq AgEq
(m) (g/t) (g/t) (%) (%) (g/t) (g/t)
46506 A chip channel 3.9 2 113 3.46 0.12 8 814
46505 A chip channel 2 4 29 1.34 0.06 8 806
46504 A chip channel 2.1 1 69 2.52 1.82 6 547
46503 A chip channel 2.2 1 64 1.93 0.13 5 465
46502 A chip channel 3.8 1 55 2.34 1.08 4 415
46501 A chip channel 2.3 0 75 2.61 1.29 4 406
46299 A chip channel 2.8 2 25 0 0.02 4 385
46298 A chip channel 2.3 1 35 1.42 1.76 4 366
46297 A chip channel 2 2 40 0 0.01 4 358
46296 A chip channel 2.4 1 96 0 0.01 3 304
46295 A chip channel 2.1 2 6 0 0 3 293
46294 A chip channel 3 0 46 2.88 0.14 3 289
46293 A chip channel 1.3 1 15 0.34 0.03 3 284
46292 A chip channel 2.6 1 75 0 0.04 3 270
46291 A chip channel 2 0 42 1.88 0.45 3 265
46290 A chip channel 2 0 47 1.76 0.1 3 251
46289 A chip channel 1 1 31 0.54 0.02 2 238
46288 A chip channel 1.7 0 20 0.53 2.23 2 218
46287 A chip channel 1 1 30 0.35 0.11 2 210
46286 A chip channel 3.4 1 14 0 0 2 209
46285 A chip channel 3 1 5 0 0 2 207
46284 A chip channel 2 0 25 1.02 0.37 2 206
46283 A chip channel 2.2 1 6 0 0 2 178
46282 A chip channel 1.3 1 2 0 0 2 175


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)


ID BLOCK Type WIDTH Au Ag Pb Zn AuEq AgEq
(m) (g/t) (g/t) (%) (%) (g/t) (g/t)
46281 A chip channel 1.5 0 42 0 0.01 2 168
46279 A chip channel 2.4 1 14 0 0 2 164
46278 A chip channel 2 0 17 0.59 0.41 2 151
46277 A chip channel 2.1 1 26 0 0 2 149
46276 A chip channel 2 0 16 0.54 0.23 1 126
46275 A chip channel 2 0 6 0.25 0.23 1 126
46274 A chip channel 4 1 2 0 0 1 118
46273 A chip channel 2.3 1 4 0 0 1 114
46272 A chip channel 2.9 1 4 0 0.01 1 109
46271 A chip channel 2 0 11 0.3 0.36 1 102
46270 A chip channel 2.4 0 9 0.02 0.02 1 97
46269 A chip channel 2.5 0 23 0.25 0.46 1 95

(*) Gold equivalent calculation uses a gold price of $1,795, a zinc price of $0.93, a lead price of $0.80, and a silver price of $18.30 (all USD), and assumes a 100% metallurgical recovery. Gold equivalent values can be calculated using the following formula: AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x 0.3055). Silver equivalent calculation uses a silver price of $25.00/oz, a zinc price of $1.10/lb., a lead price of $0.80/lb. (all USD), and assumes a 100% metallurgical recovery. Silver equivalent values can be calculated using the following formula: AgEq = Ag g/t + (Zn % x 30.1644 ) + (Pb % x 21.9377).

Denser sets of veins and veinlets hosted by shales and quartzites appear to correlate with higher grades. The strike lengths of these mineralized trends have been recognized as continuing along several hundreds of meters at surface.

On November 25, 2020, the Company announced it has received the complete assay results from the Triunfo Project.

Borehole TR007 intercepted 48.9 meters of mineralization grading 0.42 g/t gold, 35.5 g/t silver, 1.17% zinc, and 0.83% lead (1.45 g/t AuEq) within 98.9 meters of mineralization grading 1.04 g/t AgEq starting 13.0 meters downhole.

Notable highlights include:

Hole ID From To Length (m) Au (g/t) Ag (g/t) Zn % Pb % AuEq* (g/t)
TR006 40.0 76.0 36.0 0.49 15.46 0.54 0.44 0.97
including… 58.0 72.0 14.0 0.48 20.23 0.76 0.66 1.16
TR007 13.0 111.9 98.9 0.37 22.71 0.74 0.58 1.04
including… 63.0 111.9 48.9 0.42 35.49 1.17 0.83 1.45
TR008 6.8 84.0 77.3 0.31 17.65 0.57 0.53 0.85
including… 45.0 51.4 6.4 1.60 56.49 1.66 0.94 3.05

(*) Gold equivalent calculation uses a gold price of $1,795, a zinc price of $0.93, a lead price of $0.80, and a silver price of $18.30 (all USD) and assumes a 100% metallurgical recovery. Gold equivalent values can be calculated using the following formula: AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x 0.3055).


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Mineralization is hosted in altered black shales exhibiting hydrothermal sheeted quartz-carbonate vein sets that are concentrated along the axes of regional anticlinal fold structures.

Assay results are detailed in the table below:

Hole ID From To Length (m) Au
(g/t)
Ag (g/t) Zn % Pb % AuEq* (g/t)
TR004 14.0 15.0 1.0 0.24 18.85 0.21 0.65 0.70
17.0 18.0 1.0 0.74 2.21 0.03 0.04 0.78
71.0 74.0 3.0 1.11 5.01 0.00 0.00 1.16
TR005 61.0 62.0 1.0 0.59 8.00 0.00 0.01 0.67
122.0 124.0 2.0 0.50 2.29 0.01 0.02 0.53
TR006 5.0 6.0 1.0 0.73 3.19 0.10 0.13 0.84
20.0 21.0 1.0 0.15 11.10 0.35 0.29 0.48
40.0 76.0 36.0 0.49 15.46 0.54 0.44 0.97
including… 58.0 72.0 14.0 0.48 20.23 0.76 0.66 1.16
TR006 94.5 101.5 7.0 0.56 23.21 0.82 0.56 1.26
106.5 107.4 0.8 0.32 12.70 0.25 0.01 0.54
120.0 121.0 1.0 0.07 15.90 0.50 0.67 0.62
142.8 143.3 0.5 0.60 0.43 0.00 0.00 0.61
190.0 191.3 1.3 0.72 89.58 2.07 0.16 2.42
TR007 13.0 111.9 98.9 0.37 22.71 0.74 0.58 1.04
including… 63.0 111.9 48.9 0.42 35.49 1.17 0.83 1.45

TR007

118.5

119.5

1.0

0.03

4.55

0.17

0.53

0.30

121.5

122.5

1.0

0.30

3.69

0.07

0.46

0.50

125.5

126.3

0.8

0.56

3.18

0.09

0.03

0.63

179.0

181.0

2.0

1.05

1.38

0.01

0.01

1.07

185.6

186.2

0.6

0.44

5.69

0.02

0.01

0.51

196.0

197.0

1.0

0.74

1.46

0.00

0.00

0.76



SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)


Hole ID

From

To

Length (m)

Au (g/t)

Ag (g/t)

Zn %

Pb %

AuEq* (g/t)

TR008

6.8

84.0

77.3

0.31

17.65

0.57

0.53

0.85

including…

45.0

51.4

6.4

1.60

56.49

1.66

0.94

3.05

TR008

138.1

139.1

1.0

0.71

0.90

0.01

0.00

0.72

149.0

151.0

2.0

0.10

22.73

0.78

0.03

0.61

156.0

157.0

1.0

0.74

1.33

0.02

0.01

0.76

183.0

183.6

0.6

1.65

2.62

0.02

0.01

1.69

231.6

232.6

1.0

0.41

4.50

0.00

0.00

0.46

247.5

250.0

2.5

1.64

35.99

0.00

0.00

2.01

257.0

258.0

1.0

0.78

2.15

0.00

0.00

0.80

*See Notes on gold equivalent (AuEq) calculations and metals prices above.

Reported widths in all tables are intercepted core lengths and not true widths, as relationships with intercepted structures and contacts vary. Based on core-angle measurements, true widths range from 54% to 65% of reported core length. Reported results do not define a mineral resource and it is uncertain if further exploration will result in the delineation of mineral resource.

Silver Elephant has completed a 30 line-km IP survey at its El Triunfo project and has identified several IP anomalies. Of particular interest is an anomaly that extends 200m east of the artisanal workings where all prior exploration and drilling occurred.  The east anomaly measures 50 to 75m wide, and 200m along strike and appears to be 100 to 200 meters from surface. This anomaly is open to the east as the Company ground crew compiles remaining data to determine its full dimensions. This east anomaly has never been drilled and exhibits the same IP signature as prior drilled areas beneath the artisanal workings to the west.

Significant prior drill results at El Triunfo west are tabulated below as reference (refer further to news release dated November 25, 2020):

Hole ID From-To Length Au Ag Zn Pb AuEq
(m) (g/t) (g/t) % % (g/t)
TR006 40.0-76.0 36 0.49 15.46 0.54 0.44 0.97
including… 58.0-72.0 14 0.48 20.23 0.76 0.66 1.16
TR007 13.0-111.9 98.9 0.37 22.71 0.74 0.58 1.04
including… 63.0-111.9 48.9 0.42 35.49 1.17 0.83 1.45
TR008 6.8-84.0 77.3 0.31 17.65 0.57 0.53 0.85
including… 45.0-51.4 6.4 1.6 56.49 1.66 0.94 3.05

(*) Gold equivalent calculation uses a gold price of $1,795, a zinc price of $0.93, a lead price of $0.80, and a silver price of $18.30 (all USD), and assumes a 100% metallurgical recovery. Gold equivalent values can be calculated using the following formula: AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x 0.3055). Based on core-angle measurements, true widths range from 54% to 65% of reported core length.


Significant assay results from a total of 74 surface samples, taken as part of the mapping program on this eastern extension, are tabulated below.

Sample No. Type Width (m) Au (g/t) Ag (g/t) Zn % Pb % AuEq (g/t)
3495 CHIP 0.6 4.3 173.0 0.07 2.50 6.8
3494 CHIP 1.0 2.4 34.4 0.12 0.55 3.0
3477 CHIP 1.1 2.3 44.9 5.88 6.57 6.9
6558 CHIP 2.4 1.9 1.1 0.00 0.00 1.9
6572 CHIP 1.9 1.4 0.6 0.00 0.00 1.4
3488 CHIP 1.0 0.9 8.0 0.00 0.00 1.0
3500 CHIP 2.2 0.9 187.0 4.48 5.40 6.0
6503 CHIP 1.0 0.7 15.4 0.32 1.00 1.3
3499 CHIP 2.6 0.7 38.0 0.06 1.03 1.4
6582 CHIP 0.3 0.7 294.0 2.09 6.11 6.3
3475 CHIP 3.0 0.5 124.0 0.90 4.74 3.5
6517 CHIP 1.1 0.3 24.0 3.08 0.76 1.9

(*) Gold equivalent calculation uses a gold price of $1,795, a zinc price of $0.93, a lead price of $0.80, and a silver price of $18.30 (all USD), and assumes a 100% metallurgical recovery. Gold equivalent values can be calculated using the following formula: AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x 0.3055).

The IP anomaly correlate to the findings from the Company's geological mapping program which demonstrates that both the sheeted vein system, and host rocks (Tertiary-aged black shales) to the polymetallic mineralization intercepted at prior El Triunfo drill holes, extend another 1.5km eastward.

So far, the identified mineralized strike on the project has expanded from 750m to 2.3km, the Company is working to prioritize drill targets based on all available information to commence October drilling.

On January 25, 2022, the Company announced that it has commenced a 1,500-meter drilling program at the Triunfo Project. The program will probe several prospective induced polarisation ("IP") geophysical anomalies detected in late 2021 ("Triunfo East"). The IP anomalies are coincident with surface Au-Ag mineralization that was observed during a geological mapping field program in early 2021.

The drilling program is a follow-up to the Company's maiden drill program in 2020 where three of the four wide-spaced diamond drill holes intercepted mineralization, starting from surface across a 750-meter mineralized trend ("Triunfo West"). Triunfo West is where artisanal mining and all prior drilling had occurred, including TR007, which encountered 98.9 meters of 1 g/t AuEq* (0.4g/t Au, 23 g/t Ag, 0.74% Zn, 0.58% Pb).

In April 2022 the Company announced initial diamond drill results from the Company's 100%-controlled El Triunfo gold-silver project located 75 km east of La Paz city, Bolivia. Five holes totaling 1,500 meters are underway to test induced polarization ("IP") geophysical anomalies discovered in 2021. TR009 encountered separate intersections of 14 meters of 2.5 g/t AuEq (0.8 g/t Au, 65 g/t Ag, 1.74% Pb, 1.44% Zn), 2 meters of 2.7 AuEq (0.2 g/t Au, 211 g/t Ag, 0.84% Pb, 0.24% Zn), and 4 meters of 2.6 g/t AuEq (2.4 g/t Au, 12.9 g/t Ag, 0.19% Pb, and 0.04% Zn) within 247 meters grading 0.4 AuEq, starting from 3 meters downhole. TR010 encountered 1.2 meters of 7.7 g/t AuEq (2.4 g/t Au, 61 g/t Ag, 10.80% Pb, 2.98% Zn), 1 meter of 2.7 g/t AuEq (1.8 g/t Au, 27 g/t Ag, 0.81% Pb, and 1.25% Zn) within 45 meters grading 0.7 AuEq, starting from 7 meters downhole. TR009 and TR010 were drilled at eastern and western edges of the Triunfo West block ("TWB") and successfully expanded the mineralized width and open up the exploration prospects immediately west of the TWB. The TWB (featuring a strike length of 750 meters) is where Company's maiden drill program in 2020 and artisanal mining took place. The maiden program included hole TR007 with 98.9 meters of 1 g/t AuEq (0.4g/t Au, 23 g/t Ag, 0.74% Zn, 0.58% Pb (see Company's press release dated November 25, 2020)). TR011, -012, -013 are drilled at wide spacing at the Triunfo East block ("TEB"), a 1.5 kilometer extension to the TWB that is separated by a fault that resulted in this area being previously unexplored until recently. The Company is currently drilling the final hole, TR013, of this program, and waiting for assay results for TR011 and TR012 expected in April. If the TEB drilling discovers mineralization, when combined with TWB, the total Triunfo project mineralized strike length will triple to 2.3-kilometers, greatly enhancing the project's potential.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Reported results are tabulated below:

Hole ID From To Width
(m)
Au (g/t) Ag (g/t) Pb % Zn % (g/t)
TR009 3 250 247 0.2 8.1 0.17 0.14 0.4
incl... 46 47 1 0.4 1.7 0.01 0 0.4
...and 109 115 6 0.5 1.9 0.02 0 0.5
...and 137 138 1 0.4 18.3 0.7 0.14 0.9
...and 154 156 2 0.2 211 0.84 0.24 2.7
...and 164 178 14 0.8 65 1.74 1.44 2.5
...and 193 197 4 1.2 2.1 0.04 0.01 1.2
...and 232 236 4 2.4 12.9 0.19 0.04 2.6
TR-010 7 52 45 0.3 8.7 0.58 0.4 0.7
incl... 24 25 1 1.8 27 0.81 1.25 2.7
...and 39.6 40.8 1.2 2.4 61.4 10.8 2.98 7.7
TR-010 144 151 7 0.4 2.4 0 0 0.5
TR-010 190 192 2 0.9 4.6 0.05 0.03 0.9
TR-010 219 221 2 0.6 5.3 0.01 0.04 0.6
TR-010 237 245 8 0.4 4.5 0.04 0.04 0.4
incl... 241 243 2 1.1 5 0.01 0.01 1.2
TR-010 290 291 1 0.3 95.3 1.96 0.2 2

*AuEq: Gold equivalent calculation uses a gold price of $1,795, a zinc price of $0.93, a lead price of $0.80, and a silver price of $18.30 (all USD) and assumes a 100% metallurgical recovery. Gold equivalent values can be calculated using the following formula: AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x 0.3055). Core widths are not true widths. True widths are estimated to range between 45-78% of true widths based on core angle measurements.

Summaries of each hole and their target rationale are provided in the discussion below. TR009 was collared 55 meters north of TR006 (36 meters 0.97 g/t AuEq) from Company's maiden drilling program in 2020. TR009 was drilled southward into the eastern edge of the TWB and increased the width of known mineralization. The 55-meter step-back was rationalized based on geological mapping that was completed in 2021 that identified wider zonation of host-rocks for the project's mineralization, and also delineated the bounding structures to the main hanging wall and footwall bedrock. The hole tested drilling from the bounding structure into the host-rock and encountered near-surface continuous mineralization, as well as numerous high-grade gold-bearing zones across these host-rocks. TR010 was based on a concept similar to TR009 (i.e. proposed drilling based on geological mapping to determine bounding structures), collaring 160m north-northeast of the previously drilled TR004 (3 meters of 1.16 g/t Au) and drilled from the northside hanging wall contact to the south, located at the western edge of the TWB. TR010 confirms that mineralization does extend westward. Prior drilling in this area was from the south to the north (TR004) which did not encounter mineralization. Geological mapping suggests that TR004 was drilled subparallel to the main structure and therefore did not properly intercept the main host-rocks. The results of TR010 show that this zone does continue to the west, leaving the TWB open in this direction.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

The Company's 2022 Triunfo objectives are:

  • Test targets identified in the 2021 mapping program through drilling;

  • Determine continuity of mineralization over the extend strike length of the property;

  • Ascertain the potential of a resource on the property;

  • Complete NI43-101 technical report for the project.

Minago Project, Manitoba Canada

The Minago Property is located in northern Manitoba, Canada within the southern part of the Thompson Nickel Belt, approximately 107 kilometers north of the Town of Grand Rapids, Manitoba and 225 kilometres south of the City of Thompson, Manitoba. Provincial Highway 6 transects the eastern portion of the Minago Property.

The Minago Property is comprised of 94 mining claims and two mining leases. Mining claims MB8497, P235F, P238F and P239F are subject to a net smelter return ("NSR") royalty interest (the "Glencore Royalty") retained by Glencore Canada Corporation ("Glencore"). The Glencore Royalty in respect of nickel, shall for any calendar quarter be: (i) 2% NSR royalty when the London Metals Exchange 3-month nickel price is equal to or greater than US$13,227.74 per tonne in that quarter; and (ii) a 1% NSR when the London Metals Exchange 3-month nickel price is less than US$13,227.74 per tonne in that quarter. The Glencore Royalty in respect of other minerals, metals and concentrates, shall be a 2% NSR. In the event that the Glencore Royalty consists of a 2% NSR royalty, Flying Nickel may purchase a portion of the royalty interest which represents in the aggregate no more than 1% of the royalty interest for $1,000,000. The Glencore Royalty interest shall never be less than a 1% NSR. No portion of the reported Minago resource currently exists within claims subject to the Glencore Royalty.

In addition, pursuant to the Arrangement, Silver Elephant transferred to Battery Metals, and Battery Metals retains, a 2% NSR on the Minago Property. The Royalty will be calculated quarterly and will be payable in each quarter where the average nickel price on the London Metals Exchange exceeds US$15.00.

As currently defined, the Deposit contains a large mineral resource inventory that exceeds the previous historical mineral resource estimate prepared by Wardop for Victory Nickel that is documented in Victory Nickel's 2010 feasibility study. The main factor contributing to this increase is inclusion of North Limb Zone mineralization into the current estimate which incorporated drilling completed in 2011 by the previous operator. The mineralized strike length of the entire deposit, measured continuously around the Nose Zone fold and then northward to the North Limb Zone, is approximately 2500 m, and good potential exists to define strike extensions to this trend beyond its current limits. An opportunity also exists to define additional mineralization in the drilling gap that exists between the two zones at present. The Nose Zone has been defined by drilling to a maximum depth of approximately 925 m below surface and remains open down dip along its entire modelled length. The North Limb Zone has not been as thoroughly defined by drilling as the Nose Zone and remains open down dip below the limit of current modelling, that occurs at a depth below surface of approximately 450 m. Successful future testing of these direct deposit extension areas by core drilling could result in substantial additions to the current mineral resource inventory. Based on current results and market conditions, such assessment of expansion potential is warranted.

An extensive amount of historical metallurgical testing of deposit mineralization has been carried out, culminating in the historical 2010 feasibility study. In combination with analytical results present in the core drilling database, metallurgical study results show that nickel associated with sulphide mineralization in the deposit represents the most important source of economically recoverable nickel present. Nickel is also present throughout the deposit in various silicate mineral phases from which very low recoveries by conventional processing have been documented.

The ratio of sulphide and silicate associated nickel varies spatially within the deposit and bears directly on definition of mineralization having potential for categorization within a mineral resource estimate. To address this important distribution relationship, the current mineral resource estimate is based on modelling of the sulphide‐associated nickel content as well as the total nickel content. The cut‐off value is directly based on sulphide‐associated nickel grades plus pit optimization recoveries applied to each model block that plus reflect application of a sulphide‐associated nickel recovery regression equation. This approach ensured that mineralization included in the mineral resource estimate was restricted to material with demonstrated potential for recovery by conventional processing methods. It also contributed to qualification of mineral resources as having "reasonable prospects for eventual economic extraction" as set out in the CIM Standards (2014). A sulphide‐ nickel approach to mineral resource estimation and associated modelling also formed the basis of the now‐historical 2010 mineral resource and reserve estimates that supported the 2010 feasibility study completed by Wardrop for Victory Nickel.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

Open pit mineral resources defined at a 0.18 % sulphide nickel cut‐off grade account for approximately 40 % of the global resource inventory. The remaining 60 % of the inventory is defined at a sulphide nickel cut‐off grade of 0.36 % and is considered to have "reasonable prospects for eventual economic extraction" using conventional underground bulk mining methods. 

6. SUMMARY OF QUARTERLY RESULTS

To date, COVID-19 has not significantly impacted the Company's operations. Silver Elephant has implemented extensive preventative measures across its offices and operations in order to safeguard the health of its employees, while continuing to operate safely and responsibly maintain employment and economic activity.

The following table summarizes selected consolidated financial information prepared in accordance with IFRS for the eight most recently completed quarters:

    2022
Q2
    2022
Q1
    2021
Q4
    2021
Q3
 
Net gain(loss) $ (26,562,159 ) $ 22,521,833   $ (4,443,467 ) $ (1,712,620 )
Net gain (loss) per share, basic and diluted $ (0.85 ) $ 1.15   $ (0.19 ) $ (0.10 )
Comprehensive gain (loss) $ (26,562,159 ) $ 22,521,833   $ (4,443,467 ) $ (1,712,620 )
Comprehensive gain (loss) per share $ (085 ) $ 1.15   $ (0.19 ) $ (0.10 )

    2021
Q2
    2021
Q1
    2020
Q4
    2020
Q3
 
Net gain(loss) $ (1,686,135 ) $ 1,012,508   $ (2,259,661 ) $ (1,037,332 )
Net gain (loss) per share, basic and diluted $ (0.10 ) $ 0.10   $ (0.10 ) $ (0.10 )
Comprehensive gain (loss) $ (1,686,135 ) $ 1,012,508   $ (2,259,661 ) $ (1,037,332 )
Comprehensive gain (loss) per share $ (0.10 ) $ 0.10   $ (0.10 ) $ (0.10 )

The fluctuation on quarterly net gain/(loss) was primarily due to a valuation of marketable securities, common Share-based compensation expenses recognized as stock options granted to directors and officers, impairment losses recognized on resource properties and debt settlements. For the quarter ended March 31, 2022, a net income was recorded largely due to a recognition of a gain on transfer of spin-out assets related to the Arrangement. During the quarter ended June 30, 2022 the gain was reversed as the relations with the group of companies to which the assets were spun out was re-estimated.

7. DISCUSSION OF OPERATIONS

Although we have adjusted some of our operating procedures, to date our operations have not been significantly impacted by Covid-19.

The reader is encouraged to refer to Note 6 of the Company's Annual Financial Statements for the year ended December 31, 2021 for the Company's IFRS accounting policies. For discussion on each project, the reader is encouraged to refer to the "Property Summary" section of this MD&A.


SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the six months ended June 30, 2022
(Expressed in Canadian dollars, except where indicated)

On January 14, 2022, the Company competed the spin-out of its wholly owned Nevada Vanadium, Flying Nickel and Battery Metals subsidiaries.

Results of operations for the six months ended June 30, 2022 and 2021

    Six months ended June 30,  
Operating Expenses   2022     2021  
Advertising and promotion $ 273,914   $ 330,602  
Consulting and management fees   470,574     488,696  
Depreciation and accretion