Dakota Gold Corp. (DC) FY 2024 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of financial condition and results of operations of Dakota Gold Corp. together with our consolidated financial statements and the related notes included elsewhere in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. Risk Factors above for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

This management's discussion and analysis should be read in conjunction with the annual consolidated financial statements of Dakota Gold Corp. and notes thereto as set forth herein. Readers are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors which affect our business, including without limitation, the disclosures made under Item 1A. Risk Factors.

Our audited annual consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

Overview

The Company's goal is to create stockholder value through the acquisition, responsible exploration, and future development of high caliber gold properties in the Homestake District of South Dakota. Management and the technical teams cumulatively have several hundred years of international mining and exploration experience and key personnel have more than 50 combined years of experience in the Homestake District, mostly with the Homestake Mining Company, as well as other exploration companies that have operated in the region. The Company believes this experience uniquely positions the Company and will allow it to leverage its direct experience and knowledge of past exploration and mining activities in the Homestake District. Combined with the use of modern exploration and mining techniques, and new geologic understanding from experience in other mines, new research and information extracted from its new geophysical surveys, the Company hopes to focus its programs and build upon dominance where the historic Homestake Mining Company left off in the 1990's.

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The Homestake District has yielded approximately 46 million ounces of gold production with most of it coming from within a small area. The production ledges of the Homestake Mine define a cumulative surface projection area of much less than three square miles. Homestake Mining Company's historic gold production and exploration in the Homestake District was overwhelmingly focused on the underground mine. Modern statistical studies of ore deposit trends and understanding of the distribution of large gold camps around the world indicates that large gold deposits generally form in distinct camps and normally occur in clusters that show predictable distributions (Zipf's Law Applied to Ore Deposits). The Company believes this might be true for the Homestake District. Outside of the mine area, the Homestake District has been underexplored and lacks the modern exploration efforts required to search for other deposits especially under the cover of younger rocks that dominate the surface.

Since 2012, the Company has consistently pursued a strategy of expanding its portfolio of brownfield properties located exclusively within the Homestake District to build a dominant land position with the goal of consolidating possible mineral potential. Property acquisitions are focused and based on past exploration, the access to proprietary data sets the Company has assembled over the years, and new research and remote data acquisition (Magnetics, Gravity and Radiometric) that has been conducted over the Homestake District that hosts the Homestake Gold Deposit.

The Company believes the Homestake District is in a safe, low-cost jurisdiction with well-developed infrastructure and is in a favorable regulatory environment in which authorities have consistently demonstrated a willingness to work with responsible operators to permit well-planned compliant projects.

Drill Programs and Results

Permitting and site preparations were initiated for the first drilling program on the iron-formation target and other Tertiary-age replacement targets in the Maitland area and drilling commenced in early 2022. The Company has since expanded its drilling operations to the Richmond Hill Project and has varied between zero to four drill rigs operating on Dakota Gold properties at any point in time. Dakota Gold has completed permit applications and environmental field work for exploration on several target areas and currently has nine active permits in place: four on the Maitland Project, three on the Richmond Hill Project, one on the City Creek Project and one on the Cambrian Unconformity Project. Permitting for targets for some of the other Dakota Gold Properties may be advanced for drilling as exploration activities continue throughout the year.

In total, Dakota Gold has completed 231 drill holes for 397,599 feet (121,188 meters) since drilling started in 2022. The Company completed 25 holes for 70,181feet (21,391 meters) of core drilling on three projects in 2022. The areas drilled were the Maitland Project (39,231 feet; 11,958 meters), the Richmond Hill Project (24,865 feet; 7,579 meters), and the Cambrian Unconformity Project (6,084 feet; 1,854 meters). The Company then completed 89 holes for 180,727 feet (55,086 meters) of core on two projects in 2023; the areas drilled were the Maitland Gold Project (88,626 feet; 27,013 meters) and the Richmond Hill Project (92,101 feet; 24,184 meters). The Company completed 117 holes for 146,691feet feet (44,711 meters) of core on two projects during 2024; the areas drilled were the Maitland Gold Project (102,755 feet; 31,320 meters) and the Richmond Hill Project (43,936 feet; 13,392 meters).

On February 8, 2023, the Company announced the discovery of the Unionville Zone in MA22C-009, which intercepted mineralized, Precambrian hosted, Tertiary-age, epithermal gold mineralization in a structurally controlled breccia generally located beneath the horizon of the Cambrian hosted Tertiary replacement gold mineralization on the Maitland Mine. On May 4, 2023, the Company announced the discovery of the JB Zone in MA23C-017, which intercepted significant high-grade, Homestake-type, Precambrian mineralization over potentially mineable widths that has since been followed up with multiple gold intercepts in multiple limbs of Homestake iron formation, the geometry of which is indicative of the West-Ledge system at the Homestake Mine.

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On April 13, 2023, the Company announced commencement of an infill and step-out drilling program at the Richmond Hill Property to convert and expand known gold mineralization identified in 880 historical drill holes, and expanded by new Dakota Gold drilling, into the maiden S-K 1300 compliant resource, which was released in April 2024. On September 27, 2023, the Company announced commencement of an infill drilling program at the Unionville Zone on the Maitland Project for the purpose of advancing to a S-K 1300 compliant resource for 2025.

On April 30, 2024, the Company announced the maiden S-K 1300 initial assessment for the Richmond Hill Gold Project.

On August 7, 2024, the Company received permits to conduct infill and expansion drilling at the Richmond Hill Property. On November 4, 2024, the Company reported additional results from Richmond Hill drilling and announced its plans to complete an updated S-K 1300 resource estimate for Q1 2025 and a S-K 1300 initial assessment with cash flow analysis for Q2 2025.

On February 6, 2025, the Company announced the updated Richmond Hill Initial Assessment, which was prepared by the Qualified Persons working under Independent Mining Company and Woods Processing. This resource update identified a significant measured and indicated heap leachable gold resource containing 244.27 Mt at 0.463 g/t Au and 4.83 g/t Ag totalling 3.65 million ounces of gold and 38.09 million ounces of silver and an inferred heap leachable resource of 230.59 Mt at 0.353 g/t Au and 3.09 g/t Ag totalling 2.61 million ounces of gold and 22.79 million ounces of silver. In addition to the heap leachable resource, a measured and indicated mineral resource (composed of sulfide mineralization) containing 63.14 Mt at 0.483 g/t Au and 4.77 g/t Ag totalling 0.98 million ounces of gold and 9.68 million ounces of silver was identified. An indicated mineral resource of 183.45 Mt at 0.415 g/t Au and 4.97 g/t Ag containing 2.45 million ounces of gold and 29.32 million ounces of silver was also reported. Details of the Richmond Hill Initial Assessment and assumptions used in the resource estimations are shown on Table 1.

Planned Activities

The Company's planned activities in fiscal 2025 will be focused on advancing exploration and resources development drilling on its Richmond Hill and Maitland projects. The Company also expects to issue an initial assessment with cash flow in mid-2025 and to initiate feasibility-level work on the Richmond Hill Property.

Additional land acquisition is possible and will be conducted on an opportunistic basis in order to enhance our ability to conduct efficient exploration and/or for control of developing targets found through the Company's ongoing exploration efforts.

With an expected drill program of two drill rigs operating at the Black Hills Property in 2025, the Company anticipates expenditures of up to approximately $25 million during the calendar year ending December 31, 2025. To fund expenditures at this level, the Company will be required to raise further capital. Should we be unable to raise capital, the Company can scale down the exploration program to maintain greater than 12 months of funding from December 31, 2024.

The Company's projects are all at the exploration stage and do not generate revenues. Other than the mineral resource at the Richmond Hill Property, the Company has not established that any of its properties or projects contain mineral resources or mineral reserves as defined under S-K 1300. Expenditure projections are subject to numerous contingencies and risk factors beyond the Company's control, including exploration and development risks, competition from well-funded competitors, and the Company's ability to manage growth and assessments of ongoing exploration activities and results. The Company cannot offer assurance that its expenses will either meet or exceed its projections.

Subsequent to December 31, 2024, the Company utilized its ATM to raise gross proceeds of approximately $7.45 million by issuing 2,548,713 shares of common stock.  Additionally, approximately $1.62 million was raised through the exercise of 780,048 warrants and approximately $0.02 million was raised through the exercise of 10,000 options.

Liquidity and Capital Resources

The Company is in the exploration-stage and currently does not generate revenues. As such, the Company finances its operations and the acquisition and exploration of its mineral properties through the issuance of common stock, and the Company could be materially adversely affected if it is unable to raise capital because of market or other factors.

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As of December 31, 2024, the Company had working capital of approximately $7.19 million and a retained deficit of approximately $76.55 million. The Company had a net loss and comprehensive loss for the fiscal year ended December 31, 2024, of approximately $33.88 million.

During the year ended December 31, 2024, the Company issued 2,344,836 shares of common stock for net proceeds of approximately $5.71 million pursuant to the 2024 Orion Equity Investment, a total of 4,510,486 shares of common stock under its at-the-market program (the "ATM Program") for net proceeds of approximately $9.86 million, and another 82,500 shares of common stock for the exercise of stock options for proceeds of approximately $0.16 million. Concurrent with the consummation of the 2024 Orion Equity Investment, the Company sold to Orion a 1% net smelter return royalty interest on certain properties held by the Company for total consideration of approximately $0.18 million paid at closing.

During the 12 months ending December 31, 2025, the Company anticipates cash expenditures of approximately $25 million.

Based on the Company's cash balance at December 31, 2024 of approximately $9.41 million and the anticipated ability to utilize the ATM Program during the year, the Company believes that it will have sufficient funds to fund its activities for the 12 months ended December 31, 2025. The actual timing of expected expenditures is dependent upon a number of factors, including the management of variable exploration expenditures.

Should it be unable to raise sufficient capital, the Company plans to scale down the exploration program in order to maintain greater than 12 months of funding as of December 31, 2024.

Results of Operations

Years Ended December 31, 2024 and 2023

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Revenue

We had no operating revenues during the years ended December 31, 2024 and 2023. We had net losses and comprehensive losses of approximately $33.88 million and $36.45 million for the years ended December 31, 2024 and 2023, respectively.

Exploration Expenses

During the years ended December 31, 2024 and 2023, our exploration expenses totaled approximately $23.71 million and $28.35 million, respectively. The period-over-period decrease primarily related to (i) the level of activity associated with drilling, which decreased by approximately $2.57 million compared to 2023; (ii) payroll-related costs, which decreased by approximately $0.81 million compared to 2023 due to a lower average number of drills operating on the property; (iii) assay costs, which decreased by approximately $0.34 million due to lower drilled footage, which decreased as the Company ceased drilling when the required drilling for the Richmond Hill resource update was completed, which was in advance of year-end and occurred earlier in 2024 than 2023; (iv) costs for studies, data and reports, which decreased by approximately $0.54 million; (v) equipment-related costs, which decreased by approximately $0.37 million compared 2023, and (vi) permitting and environmental costs, which decreased by approximately $0.13 million compared to 2023. Road and pad construction costs increased by approximately $0.24 million for required infrastructure. Included in these costs were non-cash exploration-related stock-based compensation expenses of approximately $0.63 million and $0.73 million for the years ended December 31, 2024 and 2023, respectively.

General and Administrative Expenses

Our general and administrative expenses for the year ended December 31, 2024 and 2023, were approximately $10.63 million and $9.69 million, respectively. These expenditures were primarily for legal, accounting, and professional fees, investor relations, and other general and administrative expenses necessary for our operations. During the years ended December 31, 2024 and 2023, support costs included in general and administrative costs were approximately $4.82 million and $4.59 million, respectively, and the increase was due to higher legal costs related to administrative matters in the second half of 2024. Stock-based compensation expense allocated to administration expenses were approximately $3.14 and $3.60 million, respectively, and consulting expenses were approximately $0.09 and $0.08 million, respectively. Investor relations expenses increased to $0.73 million for the year ended December 31, 2024 from approximately $0.14 million during the year ended December 31, 2023, largely due to increased investor relations activities related to raising capital during 2024. Professional fees rose to approximately $1.58 million during the year ended December 31, 2024 compared to $1.00 million during the year ended December 31, 2023 due to higher legal costs related to administrative matters in the second half of 2024.

Other Income

We earned interest income from bank accounts for the years ended December 31, 2024 and 2023 of approximately $0.61 million and $0.41 million, respectively. Interest expense of $0.14 million for 2025 related to the purchase of the VMC property.

We had losses from operations for the years ended December 31, 2024 and 2023, totaling approximately $34.33 million and $38.04 million respectively, losses before income tax of approximately $33.89 million and $37.67 million, respectively and net income tax benefits of $0.01 and $1.22 million, respectively, leading to net losses of $33.88 million and $36.45 million, respectively.

The effective tax rate for the fiscal year ended December 31, 2024 is less than the statutory rate as the Company does not expect to benefit from the losses generated during the year.

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Cash Flows Used in Operating Activities

During the years ended December 31, 2024 and 2023, the Company's net cash flows used in operating activities were approximately $31.48 million and $31.30 million, respectively. Cash used in operations for year ended December 31, 2024 were essentially flat period over period, primarily as a result of having similar levels of overall activities during the periods.

Cash Flows Used in Investing Activities

During the years ended December 31, 2024 and 2023, cash flow used in investing activities were approximately $0.57 million and $1.66 million, respectively. In the year ended December 31, 2024, the cash used for investing activities consisted of approximately $0.43 million for the acquisition of mineral properties and approximately $0.14 million for the purchases of property and equipment. In the year ended December 31, 2023, the cash used for investing activities consisted of approximately $0.61 million for the acquisition of mineral properties and approximately $1.05 million for the purchases of property and equipment. The decrease in property acquisition costs was due to having completed strategic acquisitions by the end of 2022 and continued reductions in required property acquisitions.

Cash Flows from Financing Activities

During the years ended December 31, 2024 and 2023, cash flows from financing activities were approximately $15.91 million and $34.59 million respectively.

In the year ended December 31, 2024, the Company issued 2,344,836 shares of common stock for net proceeds of approximately $5.71 million pursuant to the 2024 Orion Equity Investment, a total of 4,510,486 shares of common stock under the ATM Program for net proceeds of approximately $9.86 million, and another 82,500 shares of common stock for the exercise of stock options for proceeds of approximately $0.16 million. Concurrent with the consummation of the 2024 Orion Equity Investment, the Company sold to Orion a 1% net smelter return royalty interest on certain properties held by the Company for total consideration of approximately $0.18 million paid at closing.

In the year ended December 31, 2023, the Company issued 6,666,667 shares of common stock for net proceeds of $16.82 million pursuant to the 2023 Orion Equity Investment, a total of 6,470,564 shares of common stock under the ATM Program for net proceeds of approximately $17.95 million, another 68,750 shares of common stock for the exercise of stock options for proceeds of approximately $0.07 million, and 9,018 shares of common stock for the exercise of share purchase warrants for proceeds of approximately $0.02 million. In addition, the Company paid income taxes related to vested RSUs and PSUs totaling approximately $0.26 million on behalf of the employees.

Off-Balance Sheet Arrangements

As of December 31, 2024 and 2023, we did not have, and we do not currently have, any off-balance sheet arrangements, as defined by the SEC.

Critical Accounting Estimates

Management's discussion and analysis of financial condition and results of operations is based on the Company's consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that the Company's consolidated financial statements are fairly presented in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from the Company's assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on the Company's consolidated financial statements; valuation of options granted to directors and officers using Black-Scholes and Monte Carlo models. The Company's accounting policies are described in greater detail in Note 2 to the Company's audited annual consolidated financial statements for the year ended December 31, 2024.

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