Patagonia Gold : Annual Report for the Year Ended December 31 2022

Patagonia Gold Corp.

Consolidated Financial Statements

For the Years Ended December 31, 2022 and 2021

(All amounts in thousands of United States Dollars unless otherwise stated)

Index
Independent Auditor's Report	2
Consolidated Statements of Financial Position	5
Consolidated Statements of Loss and Comprehensive Loss	6
Consolidated Statements of Changes in Equity	7
Consolidated Statements of Cash Flows	8
Notes to the Consolidated Financial Statements	9

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Independent Auditor's Report

To the Board of Directors and Shareholders of Patagonia Gold Corp.

Opinion

Grant Thornton LLP

Suite 1600

333 Seymour Street Vancouver, BC V6B 0A4

T [phone] F [phone]

We have audited the consolidated financial statements of Patagonia Gold Corp. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2022, and December 31, 2021 and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 3 of the consolidated financial statements which indicates the Company incurred a net loss of US$4,328 thousand during the year ended December 31, 2022, and as of that date had an accumulated deficit of US$205,926 thousand. These conditions, along with other matters as set forth in Note 3, indicate that a material uncertainty exists that may cast significant doubt about the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our auditor's report.

Information other than the consolidated financial statements and auditor's report thereon

Management is responsible for the other information. The other information comprises the Management Discussion and Analysis but does not include the consolidated financial statements and our auditor's report thereon.

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Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because of the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Robert Riecken.

Vancouver, Canada	Chartered Professional Accountants
April 28, 2023	Licensed Public Accountants

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Patagonia Gold Corp.

Consolidated Statements of Financial Position (Stated in thousands of U.S. dollars)

			December 31,		December 31,
Current assets	Note		2022		2021
Cash		$	231	$	291
Receivables	12		2,021		2,512
Inventories	6		4,653		3,759
Total current assets			6,905		6,562
Non-current assets
Mineral properties	7		14,893		16,112
Mining rights	9		16,163		17,145
Property, plant and equipment	11		10,644		12,475
Goodwill			4,009		4,009
Other financial assets	10		9		15
Other receivables	13		1,671		1,421
Total non-current assets			47,389		51,177
Total assets		$	54,294	$	57,739
Current liabilities
Bank indebtedness	14	$	8,945	$	6,706
Accounts payable and accrued liabilities	15, 20		5,953		6,859
Accounts payable with related parties	15, 20		285		208
Loan payable and current portion of long-term debt	16, 20		386		517
Total current liabilities			15,569		14,290
Non-current liabilities
Long-term debt	17		20,019		255
Long-term debt with related parties	17, 20		-		15,507
Reclamation and remediation obligations	8		4,069		6,188
Deferred tax liabilities	27		1,837		3,795
Other long-term payables			-		8
Total non-current liabilities			25,925		25,753
Total liabilities			41,494		40,043
Shareholders' equity	19		11,244		11,244
Capital stock
Contributed surplus			190,026		189,677
Accumulated deficit			(205,926)		(201,710)
Accumulated other comprehensive income			18,960		19,877
Total shareholders' equity attributable to the parent			14,304		19,088
Non-controlling interest			(1,504)		(1,392)
Total shareholders' equity			12,800		17,696
Total liabilities and shareholders' equity		$	54,294	$	57,739

Going concern (note 3)

Subsequent events (note 29)

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

Approved on Behalf of the Board of Directors

Signed "Christopher van Tienhoven _ , Director	___Signed "Cristian Lopez Saubidet___, Director

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