A nalys t s' Ide a s o f th e Wee k Cannabis Stocks O n the M ove January 3 1 , 2022 w w w r ese a r ch f r c .c o m P a g e 2 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT FRC Top Picks The following table shows last week’s top five performers among our Top Picks, including t wo cannabis, two junior resource , and one fertilizer company. The top performer, Kiaro Holdings (TSX V: KO ) , was up 15.4 % . C annabis stocks outpe r f ormed the ma rket amid positive sector develop ments last week (see page 17 ) As the sector has been out of favor since early 2021, we believe the market is overloo king fundamentally so lid companies. Our prior reports can be viewed here Top Five Performers Last Week Source: FRC Companies in our Top Picks list were up 1.5 % on average last week vs 2.5 % for the benchmark (TSXV). Our picks have outperformed the benchmark in four out of the seven time periods presented below. P a g e 3 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Performance by Sector Source: FRC Our complete list of top picks (updated weekly) can be viewed here W e ekl y Min ing C om m ent a r y G l o bal equity m a rk et s rebounded last week ( up 1.6 % ; down 5.1 % in the prior week ) , despit e strong hi nts of rate hikes in March from the U.S. and Canadian central banks Although labor market s are improving , we believe cen tral banks are unlikely to pursue aggressi ve rate hike s , as the global economic recovery is expected to be slower th an expected. The IMF recently lowered its GDP growth forecast s ( as show n in the chart below). In addition, supply - chain dis ruptions are likely to ease in H2 - 20 22 , as governments wor ldwide are relaxing restrictions Source : FR C / Var io us P a g e 4 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Last week, six countries ( previously eight ) a mong the 1 5 nat ions with the most cases experie nc ed higher daily new cases. Seven countries ( previously nine ) e xperie nced WoW increase s in deaths. G lo ball y, 6 1.03 % ha v e rece ived at l east one dose , up 0. 5 ppt WoW vs 0 6 ppt t he same time la st week 79. 07 % of Ca na d ian s ha ve had two doses ( 0. 9 ppt vs 0. 3 ppt ) vs 70. 94 % in the U. K. ( 0. 3 ppt vs 0. 4 ppt ) , a nd 63. 5 3 % in th e U. S. ( 0. 4 ppt v s 0. 7 ppt ). 40 % of Canadian s (previo usly 3 6 %) , and 2 6.4 % of Americans ( previous ly 2 5 2 %) have re ceived booster (third) doses P a g e 5 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT S our c e: Our World in Data / FRC M etal price s retreated l ast week am id a stro nger US$ Inventory lev els of copper and zinc increased signifi cantly in China , i ndicating weakness in the country ’ s economy. P a g e 6 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Sour c e: FRC / V ar ious P a g e 7 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT V aluations of gold producer s were down 3% ( previously flat ) last week ; base metal producers wer e do wn 1 % ( previously d own 4 %) P a g e 8 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT P a g e 9 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT W e are maintain in g our p rice forecasts U pdates from Resourc e Compa nies Und e r C overag e Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: World Copper Ltd. TSXV: WCU $ 0. 90 $ 2 .02 PR Title Announces c losing of Cardero p lan of a rrangement FRC Op inion Posi tive – We were expe cting th is acquisition to close; our fair value estimate already accounts for the acquisition C arder o ’ s Zonia copper - oxide porphyry project in Arizona ha s a n attractive A T - NPV8% of US$447M, at US$4/lb Cu ( 2018 PEA ) We estimate that WCU’s shares are trading at just 17% of the AT - NPV8% of Zonia, and receiving no value for its other ass et ( Escalones ) Compan y Name: Ticker Symbol Current S hare Price: FRC Fai r Value Estimate: Vista Gold Corp. NYSE : VGZ US $ 0. 68 US $ 2.07 PR Title Receives $2.5 millio n Awak M as option payment FRC Op inion Posi tiv e – Strengthen s balance sheet ; Vista is actively seekin g a development part ner for its flags hip Mt. Todd project. P a g e 10 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Company Name: Ticker Symbol Current Share Price: FRC Fair Value Estimate: L ion Copper and G old T SX V : LEO $ 0.095 $ 0.42 New s Tit le Definitive a greement on o ption to a cquire t wo B.C. p roperties FRC Op inion Positive – We believe this deal diversifies the company’s portfolio. The agreement relates to two properties in B.C. – one located east of the Golden Triangle, and one near Lytto n. Op tion p ayments are mostly in shares. As they are in early stages, it is too early to comment on the potential of both projects. R esults of a recent field exploration program will provide us additional ins ights. Company Name: Ticker Symbol Current Share Price: FRC Fair Value Estimate: Cornerstone Capital Resources Inc T SX V : CGP $ 3.86 $ 7.34 New s Title Newcrest (ASX: NCM) wi thdraws from option and farm - in agreement for the Ca ñ a B rava / Tioloma gold - copper project in Ec uador FRC Op inion N egative - Permitting delays led to Newcres t ’ s withdr a wal Although disappointing, this development does not i mp act our fair value estimate as we ha ve not a ccounted for any value on the c ompan y ' s no n - core/ early stage projects. O n a p o si tive note, N ewcrest ha s spent US$2.9M on the prope r ties We believe t his w ork will be useful for finding a new partner Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: Goldplay Mining Inc. TSX V : AUC $ 0.13 $ 0.38 PR Title Complet es technical report s on Big Frank and Goldst orm South pr ojects in BC FRC Op inion Posi tive – The technical reports highlighted the pot enti al for discovering porphyr y , a nd orogenic or gold - rich polymetallic deposits at both projects. P a g e 11 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Company Name: T ick er S ymbol Current S ha re Price: FRC Fair Value Estimate: Southern Silver Explora tion Corp. TS XV : SSV $ 0.28 $ 0.75 PR Title Identifies a new discovery on the E l Sol claim with 3.5 met res averagin g 549 g/t Ag, 0.3 g/t Au, 8.6% Pb and 3.6% Zn (982 g/t AgEq ) FRC Op inion P ositive – Hi ghly encouraging results; the ne w high - grade discove ry ( including 0.8 m of 2,622 g/t Ag Eq ) en hances resour ce expansion potentia l Drilling is underway for three additiona l holes The company will also start drilli ng at its Oro porphyry copper - gold project next month. Compan y Name: Ticker Symbol Current S ha re Price: FRC Fair Value Estimate: GR Silver Mining L td. TSX V : GRSL $ 0. 30 $ 0.67 PR Titl e Underground drill res ults deliver wide and high - grade intervals, 38 m at 299 g/t Ag, including 1,091 g /t Ag over 2.1 m and 1,002 g/t over 3.5 m FRC Op inion Positive – Cont inues to return high grade value s over thick i ntervals , which is pos itive for the up com ing resource e xpansion program . Awai ting results of the rem aining four holes. Compan y Name: Ticke r Symbo l Current S hare Price: FRC Fair Value Estimate: Avrupa Minerals Ltd TSXV: AVU $0.0 8 $0.20 PR Title Drill r esults for 113.8 - meter mineralized sulfide intercept in SES21 - 044 at Sesm arias North, Alvalade p roject, Portugal FRC Op inion Posi tive – Multi ple l ong - intercepts of attr active copper and gold gra des ; currently drilling 100 m NW along strike . AVU has conf irmed mineralization along 35 0 m of a total strike of 1.7 km. We are awaiti ng updates on the recently a nnounc ed pro perties in Finlan d. P a g e 12 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: Golden Minerals Corp. NYSE: AUMN US $ 0.3 8 US $1.00 PR Title Drills 1.5 m g rading 4.02 g/t Au and 1,47 3.2 g/t Ag at Yoquivo FRC Op inion Posi tive – Multiple intercepts with high - g rade silver ; awaiting result s from six more holes. O ur fair value estimate does not account for any value on this pr oject as it is in pre - resource stage. Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: Hannan Metals Ltd. TSXV: HAN $0. 30 $0.57 PR Title E xtends minerali zation by 3 km strike at San Martin, Peru ; Channel samples 0.4 m @ 10.8% copper and 124 g/t silver FRC Op inion Posi tive – These are very high copper grades for a copper - silver project. Although most of the project area remains largely untested, there are similariti es with Poland’s large and high - grade Kupferschiefer copper silver mine. Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: Silverton Metals Corp. TS XV: SVTN $0. 21 $1.29 PR Title Pluton s ilver - z inc p roject g eophysical m odelling c ompleted and c ommencement of s eismic s urvey, Durango FRC Op inion Posi tive – I dentified significant anomalies , reinfor cing the previously identified six target s. We believe th e s eismic survey will provide key insig hts on the project ’ s poten tial. P a g e 13 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Compan y Name: Ticker Symbo l Current S hare Price: FRC Fair Value Estimate: Grid Metals Corp. TSX V: GRDM $0.1 1 $0.54 PR Title Reports w ide z ones of n ickel m inerali zation and h igher g rade c ore at the Bannockburn n ickel p roperty FRC Op inion Posi tive – Long inte rcep ts of ni ckel ; m anagement plans to conduct met studies and additional drilling O ur fair value estimate does not account for any value on this project as it is in pre - resource stage Financials, Technology, Energy, and Special Situations Company Name : Ticker Symbol Current Share Price: FRC Fair Value Estimate: K WESST M icro Systems Inc. TSXV : K WE OTCQB: KWEMF $ 0 6 6 $ 3 66 P R Title New Para Ops l ess l ethal w eapons i nt roduced at SHOT Show 2022 FRC Opinion Positive – Pleased to hear that U.S. and internatio nal distributo rs have expressed strong interest in K WE ’ s products. KWE has to obt ain a non - le thal weap on classification from the Bureau of Alcohol, Tobacco, Firearms and Explosives (expected in the coming weeks) prior to accepting orders The following company recently published results. We will release an update d report shortly. P a g e 14 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Weekly Crypto Commentary The global MCAP of cryptos increased 11 % last week to US$ 1.7 T (previously down 21 %). Source: Coinmarketca p Prices of mainstream/ popular cryptos increased 1 % on average last week, due to an increase in the S & P 500 , and lower gold prices, pa rtially offset by lower crypto trading volumes. We n ote that Bitcoin prices have been positively correlated to the S&P 500 and crypto trading vol umes, and negatively correlated to gold As we are expecting near - term weakne ss in equity markets, and st ronger gold prices, we are ex pecting cry pto prices to be under pres sure this week. Source: FRC / Yahoo Finance P a g e 15 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Companies operating in the crypto space are trading at an average EV/R of 8.9 x (previously 8.3 x). EV/R of Crypto Companies Source: S&P Capital IQ/FRC Source: S&P Capital IQ/FRC Key sector development s listed below ( p ositive ): ➢ Crypto exchange FTX raised US$400M to develop new prod ucts and obtain regulatory licenses We believe s uch large investments in t he sector , despite the P a g e 16 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT recent downt urn in crypto pr ices , are positive for market sentiment. ➢ ETF and mutual fund manager V an Eck launched its first crypto fund The fund will hold Bi tcoin , Ethereum , Polkadot , Solana , Tron, Avalanche , and Polygo n ➢ The White House is expected to release a report on cryptos this week ; the report wi ll like ly pr ovide insights on the govern ment ’ s v iew on cryp tos. ➢ On January 14, 2022, the F ed released a re port outlining the potential pros and cons of a Central Bank Digital Coin (CBDC). After reviewing the report, we feel th at the U.S. is moving slower than expected on this initiative We believe t h e F ed is lik ely to move ahead with a CBDC as it will allow f aster , mor e transparent tran sactions , and reduce con sumers ’ rel iance on private c r y ptos As Chi na is advancing quickly on their CBDC , we believe the U.S. will have to move quickly to ensure that the US$ maintains its status as the global curr ency. Weekly Cannabis Commentary Cannabis Industry Performance Source: FRC P a g e 17 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Last week, U.S. cannabis stocks outperformed their Canadian peers ( 11 % vs 9 %). Key sector developments below ( positive ): ➢ California lawmakers introduced a new bill to increase penalties for unlicensed cannabis grow ers ➢ T he SAFE Banking Act , a bill to increase access to banking services for cannabis companies, has been included in a spending bill . The bill requires senate approval, but if approved, we believe it would provide additional supp ort for future federal legalization. Valuation The Canadian big four LPs are trading at a 6 % premium ( previously 0.4% ) over their U.S. peers Source: S&P Capital IQ, FRC P a g e 18 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Average EV/R Source: S&P Capital IQ, FRC Canadian Retail Cannabis Pricing The average retail price per gram increased from $10.9 3 to $10.94. Canadian Retail Dried Cannabis Flower Pricing Source: Online Provincial Cannabis Stores, FRC P a g e 19 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Canadian Retail Cannabis Stores As of January 31 , 2022, there are 3,017 retail cannabis stores in Canada, a WoW increase of 22 stores, including 10 in Ontario, four in Manitoba, three in B.C., three in Newfoundland, one in Alberta, and one in Quebec. Nationwide Store Count Source: Provincial Websites, FRC P a g e 20 © 2 0 2 2 Fu n d a m e n ta l R e s e a rch Cor p “1 8 + Ye ars o f B rin g in g U nd i s c o v e red I nv e s tm e n t O pp or t u n it ie s t o the F o r efr o n t” C l ic k h e r e t o v i ew F R C ’ s c omple t e li st of t op pi c ks PLE A S E R E AD THE IMP OR T AN T DI S CL O S U RES AT T H E B A CK O F T H I S RE PO RT Updates f rom Cannabis Companies Under Coverage Company Name: Ticker Symbol Current Share Price: FRC Fair Value Estimate: Ayurcann Holdings Corp. CSE: AYUR $0. 16 $0. 55 Company Name: Ticker Symbol Current Share Price: FRC Fair Value Estimate: THC BioMed Intl. Ltd. CSE: THC $0. 08 $ 0.20 PR Title R oll s into fifth province with bestselling F uego vapes in A lberta FRC Opinion Positive – Pleased to see AYUR’s in - house p roduct ( Fuego vapes ) generate strong demand from provincial distributors . We are expect ing stronger revenue in Q2 (quarter ended December 2021) as the company has been ramping up its operations PR Title Granted l icense to c ultivate c annabis for m edical and s cientific u se FRC Opinion Positive – M anagement’s initi ative to research the potential of CBD to fight COVID - 19 related infections is appealing , as long as it does not dilute management ’ s f ocus and resources on core operations. We are expecting stronger revenue in Q2 (quarter ended January 2022) as a result of a significant ramp up in 2.0 product sales.