Pasinex Resources : Quarter 1 March 2024 Financial Statements

PASINEX RESOURCES LIMITED

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

THREE MONTHS ENDED

MARCH 31, 2024

(EXPRESSED IN CANADIAN DOLLARS)

(UNAUDITED)

Notice to Reader

The accompanying unaudited condensed interim consolidated financial statements of Pasinex Resources Limited (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.

Pasinex Resources Limited

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

Unaudited

				As at		As at
				March 31, 2024 December 31, 2023
Assets
Current Assets		$	168,181	$
	Cash		177,278
	Receivables			20,454		11,589
	Prepaid expenses and deposits		138,621		142,601
Total current assets			327,256		331,468
Non-current assets			2,365
	Equipment				2,529
	Value added tax receivable		-		6,932
	Exploration and evaluation assets (note 4)		1,893,656		1,859,311
	Equity investment in Horzum AS (note 3)		1,379,832		824,420
Total non-current assets		3,275,853		2,693,192
Total assets		$	3,603,109	$	3,024,660
Shareholders' equity and liabilities
Current liabilities		$	364,590	$
	Accounts payable and accrued liabilities (note 5)	364,467
	Due to related parties (note 11)		211,009		49,682
	Shareholder loans (notes 6 and 11)		2,708,065		2,491,365
	Loan payable (note 7)			29,597		40,000
	Income taxes payable			-		31,175
Total current liabilities			3,313,261		2,976,689
Total liabilities			3,313,261		2,976,689
Shareholders' equity			12,888,506
	Share capital (note 8)				12,888,506
	Reserves			2,157,117		2,157,117
	Deficit			(10,326,318)		(10,612,090)
	Accumuated other comprehensive loss		(4,429,457)		(4,385,562)
Total shareholders' equity		289,848		47,971
Total liabilities and shareholders' equity	$	3,603,109	$	3,024,660
Basis of measurement and going concern (note 2(c))
Subsequent events (note 13)
Approved on behalf of the Board:
	"Larry Seeley"	Director		"Victor Wells"	Director

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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Pasinex Resources Limited

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in Canadian Dollars)

Unaudited

		Three Months Ended
				March 31,
		2024		2023
Equity gain from Horzum AS (note 3(d))	$	633,478	$	775,762
Expenses		(3,280)
Exploration costs			(492,731)
General and administrative costs (note 10)		(317,663)		(316,072)
Total expenses		(320,943)		(808,803)
Other loss		10,598
Other income			844
Interest expense (note 6)		(36,700)		(34,443)
Foreign exchange gain		155,005		20
Loss on net monetary position		(155,666)		(128,963)
Total other loss		(26,763)		(162,542)
Net income (loss) for the period		285,772		(195,583)
Other comprehensive income (loss)
Item that will be reclassified subsequently to profit and loss:		(43,895)
Currency translation adjustment			92,473
Total comprehensive income (loss) for the	$	241,877	$	(103,110)
period
Net income (loss) per share
- basic and diluted	$	0.00	$	0.00
Weighted average number of shares outstanding
- basic and diluted		144,554,371		144,554,371

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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Pasinex Resources Limited

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

Unaudited

	Three Months Ended
		March 31,
	2024	2023

Operating activities	$	285,772
Net income (loss) for the period	$	(195,583)
Net equity gain from Horzum AS		(633,478)		(775,762)
Adjustments for items not involving cash:		36,700
Interest accrual (note 6)			34,443
Foreign exchange		(152,919)		22,245
Loss on net monetary position		155,666		128,963
Depreciation		-		503
Changes in non-cash working capital items:		5,028
Prepaid expenses and deposits			79,283
Accounts payable and accrued liabilities		(25,771)		(292,331)
Due to related parties		161,327		1,218,354
Other		(12,521)		371
Net cash (used in) provided by operating activities		(180,196)		220,486
Investing activities		-
Equipment acquisiton			(1,682)
Net cash used in investing activities		-		(1,682)
Financing activities		180,000
Cash received from shareholders loans (note 6)			-
Net cash from financing activities		180,000		-
Net change in cash		(196)		218,804
Effect of foreign currencies on cash		(8,901)		(10,434)
Cash, beginning of period		177,278		855,567
Cash, end of period	$	168,181	$	1,063,937

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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Pasinex Resources Limited

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity

(Expressed in Canadian Dollars)

Unaudited

									Accumulated
									Other
	Number of		Share					Comprehensive
	Shares		Capital		Reserves		Deficit		Loss		Total
	(note 8)		(note 8)
Balance as at December 31, 2022	144,554,371	$	12,888,506	$	2,157,117	$	(10,302,322)	$	(4,226,128)	$	517,173
Currency translation adjustment	-		-		-		-		92,473		92,473
Net income for the period	-		-		-		(195,583)		-		(195,583)
Balance as at March 31, 2023	144,554,371	$	12,888,506	$	2,157,117	$	(10,497,905)	$	(4,133,655)	$	414,063
Balance as at December 31, 2023	144,554,371	$	12,888,506	$	2,157,117	$	(10,612,090)	$	(4,385,562)	$	47,971
Currency translation adjustment	-		-		-		-		(43,895)		(43,895)
Net income for the period	-		-		-		285,772		-		285,772
Balance as at March 31, 2024	144,554,371	$	12,888,506	$	2,157,117	$	(10,326,318)	$	(4,429,457)	$	289,848

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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Pasinex Resources Limited

Notes to Condensed Interim Consolidated Financial Statements Three Months Ended March 31, 2024

(Expressed in Canadian Dollars, unless otherwise indicated) Unaudited

1. Corporate information and nature of operations

Pasinex Resources Limited ("Pasinex" or the "Company") is a publicly listed company incorporated in British Columbia. The Company's shares are listed on the Canadian Securities Exchange ("CSE") under the symbol "PSE" and on the Frankfurt Stock Exchange ("FSE") under the symbol "PNX". The head office, principal address and registered and records office of the Company are located at 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

Pasinex Resources Limited owns 50% of Horzum Maden Arama ve Isletme Anonim Sirketi ("Horzum AS" or "Joint Venture"), through its 100% owned subsidiary Pasinex Arama ve Madencilik Anonim Sirketi ("Pasinex Arama"). The other 50% owner is Akmetal Madencilik Sanayi ve Ticaret A.S. ("Akmetal"), a private Turkish company. Horzum AS holds 100% of the producing Pinargozu high-grade zinc mine. Horzum AS sells directly to zinc smelters and or refiners through commodity brokers from its mine site in Türkiye. The Company also holds a 51% interest, with an option to increase to an 80% interest of a high-grade zinc exploration project, the Gunman Project, located in Nevada.

These unaudited condensed interim consolidated financial statements were approved and authorized for issuance by the Audit Committee and Board of Directors on July 8, 2024.

The Company has not been materially impacted by the ongoing conflict in the Ukraine, but uncertainty remains surrounding the conflict and the extent and duration of the impacts that it may have on the Company's ability to operate, on prices for zinc, on logistics and supply chains, on the Company's employees and on global financial markets.

2. Basis of presentation and accounting policies

(a) Statement of compliance

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") in effect for the fiscal period beginning January 1, 2024.

These unaudited condensed interim consolidated financial statements have been prepared on a historical basis and compliance with International Financial Reporting Standards ("IFRS") applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. These unaudited condensed interim consolidated financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the Company's December 31, 2023, audited annual consolidated financial statements.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of Pasinex and its subsidiaries from their respective dates of control, as listed below:

	Location	Nature of Operation	Interest
	2024	2023
Pasinex Arama	Türkiye	Mineral exploration	100%	100%
Pasinex Nevada	United States	Mineral exploration	100%	100%

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Pasinex Resources Limited

Notes to Condensed Interim Consolidated Financial Statements Three Months Ended March 31, 2024

(Expressed in Canadian Dollars, unless otherwise indicated) Unaudited

2. Basis of presentation and accounting policies (continued)

(b) Principles of consolidation (continued)

Pasinex and its subsidiaries are collectively referred to as the "Company". All intercompany transactions, balances and unrealized gains and losses from intercompany transactions have been eliminated upon consolidation.

In addition, the Company, through Pasinex Arama, holds a joint venture interest which is equity accounted in the consolidated financial statements, as follows:

	Location	Nature of Operation	Interest
	2024	2023
Horzum AS	Türkiye	Mining	50%	50%

(c) Basis of measurement and going concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, under the historical cost basis, except for financial instruments classified as financial instruments at fair value through profit or loss and fair value of stock-based compensations which, are measured at their fair value. These unaudited condensed interim consolidated financial statements are presented in Canadian dollars except where otherwise indicated. In addition, these unaudited condensed interim consolidated financial statements have been prepared using the accrual basis of accounting.

The application of the going concern concept assumes that the Company will continue in operation for at least the next twelve months and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at March 31, 2024, the Company has a deficit of $10,326,318 (December 31, 2023 - $10,612,090) and has a working capital deficiency position of $2,986,005 (December 31, 2023 - working capital deficiency position of $2,645,221). The Company had a net income of $285,772 for the three months ended March 31, 2024, compared with a net loss of $195,583 for the three months ended March 31, 2023 and negative cash flows from operations of $180,196 for the three months ended March 31, 2024 compared with positive cash flows from operations of $220,486 for the three months ended March 31, 2023.

Horzum AS had a net income of $1,242,428 for the three months ended March 31, 2024, compared with a net income of $1,528,961 for the three months ended March 31, 2023. Pasinex Arama received approximately TRY

5.3 million (approximately $0.23 million using the exchange rates on the dates of the various transfers from Horzum AS) in advances and other receivable collections from Horzum AS in the three months ended March 31, 2024, compared with TRY 17.4 million (approximately $1.2 million using the exchange rates on the dates of the various transfers from Horzum AS) in advanced dividend payments from Horzum AS in the three months ended March 31, 2023.

Pasinex Arama transferred USD $80,000 (approximately $107,000 using the exchange rates on the dates of the transfers) to Pasinex Canada in the three months ended March 31, 2024.TRY 12.5 million (approximately $0.9 million using the exchange rates on the dates of the transfers) was transferred to Pasinex Canada by Pasinex Arama in the three months ended March 31, 2023.With the reduction of cash inflows to Canada, partially caused by the decrease in the value of the Turkish Lira against the Canadian Dollar, the Company does not have sufficient cash on hand to fund its ongoing activities for the next 12 months nor does the Company have enough cash on hand to repay all of its outstanding obligations. As at March 31, 2024, Horzum AS has a receivable owing from Akmetal of approximately $35.5 million (see note 3(a)).

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Pasinex Resources Limited

Notes to Condensed Interim Consolidated Financial Statements Three Months Ended March 31, 2024

(Expressed in Canadian Dollars, unless otherwise indicated) Unaudited

2. Basis of presentation and accounting policies (continued)

(c) Basis of measurement and going concern (continued)

Legal Actions

The Company provided an update on May 29, 2024, of the status of two separate legal actions initiated by Pasinex Arama. In connection with the annual shareholders meeting of Horzum AS, the Joint Venture made two separate judicial applications.

The first application was before the Republic of Türkiye Adana 3rd Commercial Court (the "3rd Court") seeking the appointment of an interim management trustee committee (the "Interim Committee") as the term for Horzum AS' board of directors (the "Horzum Board") expired on April 30, 2024. Consequently, Horzum AS became unmanaged due to its inability to appoint the new Horzum Board. The 3rd Court accepted the application and appointed the following persons to the Interim Committee, Prof. Dr. Ömer Korkut (Chairman of the Horzum Board), Ahmet Ferit Savaşçı and Ahmet Yüksel.

The 3rd Court further ordered that, inter alia, (a) the Interim Committee is authorized to act solely for the purpose of making the due payments of Horzum AS and the necessary and mandatory payments for Horzum AS' activities; and (b) the validity of all legal transactions (borrowing, promissory note commitment, disposal, etc.) on behalf of Horzum AS requires the signatures of at least two Interim Committee members. The appointment of the Interim Committee is an interim measure until a final decision is made for the appointment of a fully authorized trustee.

The second application was before the Republic of Türkiye Adana 2nd Commercial Court (the "2nd Court") seeking the appointment of a trustee to Horzum AS: (a) with sole signing authority to use all the powers of Horzum AS' executives; (b) determine the agenda for subsequent meeting of Horzum AS's shareholders (the "Shareholders"); and (c) convene a meeting of Shareholders to ensure continuation of Horzum AS' activities. The 2nd Court approved the appointment of the trustee HALİL ALUMERT (30529131992) on June 4, 2024.

In the interim, Horzum AS' continues to operate normally and without disruption. In addition, a legal action in the 2nd Court is on-going by Horzum AS for the recovery of the debt owed by Akmetal. The objective of the legal action by Pasinex and Horzum AS is to recover the debt owed by Akmetal in either assets or cash and to restructure or eliminate the Joint Venture with Pasinex assuming control of the management of the Joint Venture.

Pasinex has engaged the legal services of Denton's Canada LLP in Toronto, Canada and two Canadian partners. Pasinex has also engaged the legal services of HBB Hukuk Burosu in Istanbul, Türkiye and two senior Turkish partners as well as a university legal professor who is the Chair of the Legal Department and founder of OZATA Law & Partners. This legal team has further legal and accounting resources available in both Canada and Türkiye.The legal process is underway and Pasinex remains optimistic that a resolution will result from these legal actions, but assurance of success is not certain.

Horzum AS's operations have generated positive operating income in the first three months of 2024, however in the absence of the receipt of additional dividends from Horzum AS, the Company would need to secure funding from either equity financing or additional related party loans to fund its ongoing activities. There can be no assurance that the Company will be able to generate either sufficient dividends from Horzum AS or be able to generate funds from other sources.

Accordingly, until Akmetal makes significant payments, these conditions represent a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. These unaudited condensed interim consolidated financial statements do not include adjustments to the carrying values of recorded assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

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Pasinex Resources Limited

Notes to Condensed Interim Consolidated Financial Statements Three Months Ended March 31, 2024

(Expressed in Canadian Dollars, unless otherwise indicated) Unaudited

3. Investment in Horzum AS

On January 17, 2013, the Company, through its wholly owned Turkish subsidiary, Pasinex Arama, entered into a joint venture agreement with Türkiye based miner, Akmetal, to explore for zinc and other associated commodities in the region between and around Horzum and Tufanbeyli, Adana Province, Türkiye. A joint venture company was formed, Horzum AS, held 50% by each joint venture partner. Horzum AS is controlled by a board consisting of equal representatives of both Pasinex and Akmetal.

In 2013, Horzum AS acquired the Pinargozu mine in Türkiye. The property is located within the Turkish Provinces of Adana and has been in operation since 2016 producing high grade zinc. The investment in Horzum AS is considered a joint venture for accounting purposes and accordingly is accounted for using the equity method. Horzum AS can distribute its profits based on terms under the joint venture agreement, which requires approval from Horzum AS's Board of Directors.

The following table shows the change in the value of the Company's 50% investment in Horzum AS.

		Three Months Ended March 31,
		2024		2023
Opening balance	$	824,420	$	1,016,855
Equity gain from Horzum AS		633,478		775,762
Foreign exchange loss		(78,066)		(39,709)
Closing balance	$	1,379,832	$	1,752,908

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Pasinex Resources Limited

Notes to Condensed Interim Consolidated Financial Statements Three Months Ended March 31, 2024

(Expressed in Canadian Dollars, unless otherwise indicated) Unaudited

3. Investment in Horzum AS (continued) Summarized Financial Statements for Horzum AS

Statements of Financial Position		As at March 31,		As at December 31,
(100% basis - Canadian dollars)		2024		2023
Current assets	$	343,753
Cash and prepaid expenses	$	381,510
Akmetal receivable (note 3(a))		35,487,654		34,639,070
Less - allowance on Akmetal receivable (note 3(a))		(35,487,654)		(34,639,070)
Trade receivables		128,210		3,077
Other receivables		36,899		320,556
Due from shareholders and related parties (note 3(b))		104,750		-
Inventories		418,983		1,345,344
Total current assets		1,032,595		2,050,487
Non-current assets		1,460,393
Lease asset			1,368,055
Plant and equipment		1,578,778		1,480,338
Other non-current assets		16,797		169,282
Total non-current assets		3,055,968		3,017,675
Total assets	$	4,088,563	$	5,068,162
Current Liabilities	$	293,261
Trade payable and other current liabilities	$	260,085
Amounts due to shareholders and related parties (note 3(c))		88,730		518,316
Lease liabilities		288,286		318,000
Deferred revenue		-		1,565,517
Taxes payable		144,067		293,803
Total current liabilities		814,344		2,955,721
Non-current liabilities		185,409
Employee benefits and other liabilities			198,242
Deferred tax liability		329,146		265,359
Total liabilities		1,328,899		3,419,322
Shareholders' equity		852,543
Share capital			828,014
Deficit		645,825		(596,603)
Foreign exchange difference		1,261,297		1,417,429
Total shareholders' equity		2,759,664		1,648,840
Total liabilities and shareholders' equity	$	4,088,563	$	5,068,162
Pasinex ownership interest		50%		50%
Net equity above	$	2,759,664	$	1,648,840
Pasinex investment in Horzum AS	$	1,379,832	$	824,420

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