Golden Arrow Resources Corporation (TSXV: GRG / FSE: GAC ...Golden Arrow Resources Corporation (TSXV: GRG / FSE: GAC / OTCQB: GARWF) – Processing of ... package held by GRG in Argentina

Siddharth Rajeev, B.Tech, MBA, CFA

October 9, 2018

2018 Fundamental Research Corp. “15+ Years of Bringing Undiscovered Investment Opportunities to the Forefront” www.researchfrc.com

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Golden Arrow Resources Corporation (TSXV: GRG / FSE: GAC / OTCQB: GARWF) – Processing of

Chinchillas’ Ore to Commence Shortly

Sector/Industry: Junior Resource www. goldenarrowresources.com

Market Data (as of October 9, 2018)

Current Price C$0.29

Fair Value C$0.98

Rating* BUY

Risk* 4

52 Week Range C$0.23 - C$0.72

Shares O/S 101,974,517

Market Cap C$29.57 mm

Current Yield N/A

P/E (forward) N/A

P/B N/A

YoY Return -46.3%

YoY TSXV -11.5% *see back of report for rating and risk definitions. * All figures in US$ unless otherwise specified.

Investment Highlights

We believe the recent decline in the share price of Golden Arrow Resources Corporation (“company”, “GRG”) offers investors an attractive entry point.

As a result of the weakness in silver prices, the average Enterprise Value (“EV”) to resource ratio of silver juniors in our list has dropped from C$2.29 to C$1.63 per silver equivalent oz since our initiating report on GRG in May 2018. Golden Arrow’s shares are

trading at just C$0.54 per oz, and continue to trade significantly

lower than the average. GRG holds a 25% interest in Puna Operations Inc. (“Puna”), which

is currently in the final stages of production at the Pirquitas mine - one of the largest primary silver mines in the world. GRG’s partner, and 75% holder of Puna, is SSR Mining Inc. (Nasdaq / TSX: SSRM – market capitalization of C$1.4 billion).

First ore from the Chinchillas silver project (located 45 km from Pirquitas) was trucked to the Pirquitas site in July. SSR estimates total production of 3 Moz to 4.4 Moz in 2018. GRG will receive a 25% share of the net profit.

In September 2018, GRG announced encouraging drill results from the Antofalla project, which is part of a 200,000 hectare exploration package held by GRG in Argentina. Key results included 3 m of 191 g/t silver, and 1 m of 283 g/t silver and 2.1% zinc.

We are maintaining our BUY rating and fair value estimate at

C$0.98 per share.

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Market Update

The strong U$ has impacted the prices of most of commodities this year. Zinc suffered the most (down 23% YTD), followed by silver (down 15%), and copper (down 13%). The TSXV is down 17% YTD.

Source: FRC / Multiple Sources

Silver prices, after dropping from a high of $17.52 per oz in January 2018, to a low of $14.06 per oz by September, have been on an upward trend since to the current price of $14.64 per oz.

Silver Price ($ per oz)

The average EV to resource ratio of silver juniors in our list dropped from C$2.29 to C$1.63 per silver equivalent oz since our initiating report in May 2018. Golden Arrow’s shares are

at just C$0.54 per oz, and continue to trade significantly lower than the average.

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Resource = 100% M&I + 50% Inferred

Source: FRC / Various Company Websites and Technical Reports

Based on the average multiple of C$1.63/oz, we estimate that GRG’s shares should be

currently trading at C$0.83 per share. As we believe the recent decline in share prices

of silver companies do not reflect the sector’s fundamentals, we continue to apply a

multiple of C$2.29 per oz, which values GRG’s shares at C$1.16 per share.

We expect commodity prices to strengthen over the next 12 months from a weakness in the US$, driven by slower expected U.S. GDP growth in 2019, an impact from tariff’s imposed on Chinese goods, as well as the potential for China to reduce its exposure to U.S. treasury holdings.

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Update on

Puna

Operations

Advancing

Chinchillas to

Production

In Q2-2018, Puna generated $16.6 million in revenues, with a net profit of $0.83 million. This is a 9% QoQ improvement in revenues. Also, in Q1-2018, Puna had reported a net loss of $1.75 million. YoY comparisons are not relevant because, as discussed in our initiating report, Puna’s production has been on a declining trend since it started processing stockpiled ore in 2017.

Puna Operations

Data Source: SSRM

In Q2-2018, 0.95 Moz of silver was produced versus 0.94 Moz in Q1-2018. We were pleasantly surprised to see the increase in production as we were expecting grades and production to continue to drop QoQ as operations shift towards processing lower-grade stockpile. The cash cost in Q2 also dropped QoQ from US$17.07 to US$14.73 per oz.

Production is expected to pick up once Chinchillas commences production. Chinchillas received a final Environmental Impact Assessment (EIA) in December 2017. Construction and development activities are ongoing. In July 2018, first ore from Chinchillas was trucked to the Pirquitas site. Ore processing is expected to commence shortly.

Location

Source: Company

Page 5



GRG is contributing its 25% share of the CAPEX. Of the estimated total CAPEX of $81 million, we estimate that more than half of this has already been spent. In order to meet GRG’s funding requirements, in July 2018, the company entered into a credit agreement with SSR for a $10 million non-revolving term loan, maturing in July 2020.

SSR estimates (unchanged) total production of 3 Moz to 4.4 Moz in 2018. SSR also forecasts 7.0 - 12.5 Mlbs lead, and 5.5 – 7.5 Mlbs zinc. Puna is planning a 2,400 m surface drill program at Pirquitas to potentially add resources to the existing underground resource estimate. Based on a 4,000 tpd operation, the 2017 PFS on Chinchillas estimated annual silver equivalent production of 8.4 Moz, at a cash cost of $7.4/oz. The Chinchillas property has reserves of approximately 80 Moz silver equivalent. Measured and indicated resources total 140 Moz, and inferred resources total 63 Moz silver equivalent. The base-case scenario

showed an after-tax NPV at 5% of $178 million, an after-tax IRR of 29.1%, and a payback period of 3.5 years, based on a silver price of $19.5/oz, lead price of $0.95/lb, and zinc price of $1/lb.

Data Source: PFS

The after-tax NPV at 5% drops to $57 million at US$16 per oz silver and $0.85 per lb lead. GRG’s 25% interest, in this case, will have a valuation of approximately C$18 million. This is the reason why we believe GRG’s share price has declined significantly (along with most silver juniors) in recent months. As mentioned earlier, we have a positive outlook on

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New Gold

Explorations

Inc.

commodity prices and believe that the current softness in GRG’s share price offers investors a good speculative opportunity.

Data Source: PFS

GRG’s 100% owned subsidiary, New Gold Explorations Inc., holds a number of early stage exploration projects covering over 200,000 ha. Management’s objective is to either take New Gold public (while retaining a significant carried interest), and/or individually spin-out or joint venture projects in the portfolio. The following map shows the key target areas within Argentina.

New Gold’s Portfolio

Source: Company

A brief description of the key projects are shown in the table below:

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Portfolio Summary – Key Projects

Source: Company

GRG has spent over $6 million on its exploration projects. A common aspect of most of the projects in the current portfolio is their high altitude. Therefore, exploratory work is more capital intensive and are restricted during certain periods of a year. In September 2018, the company announced results of its first diamond drill program

(3,000 m / 11 holes) at the Antofalla project. Antofalla is considered to have strong geologic similarities to Chinchillas. Best historic results from the project are listed below:

18 m at 128 g/t Ag, 0.23 g/t Au, 0.88% Pb from historic drilling 14.9 m at 271 g/t Ag, 1% Pb from channel sampling 2 m at 9.2 Au g/t, 52 Ag g/t, 5 % Pb from trenches

The 2018 drill program tested four targets (see image below) of the Dome zone, which covers an area of approximately 4 km by 4 km. The Cizalla Norte target is the primary focus, as drilling confirmed the potential for significant silver and base metal mineralization in a 650 m long shear belt comprised of two parallel composite shear zones.

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Antofalla Project

Source: Company

Of the 11 holes drilled, two holes (110 m apart) targeted the Cizalla Norte target. Both holes intercepted both shear zones, and gave encouraging results:

3 m of 191 g/t silver, 1 m of 283 g/t silver and 2.1% zinc, 3 m of 130 g/t silver, and 1 m of 110 g/t silver, 1.7% lead and 4.1% zinc.

Cizalla Norte Drill Holes

Source: Company

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Financials

Stock Options

and Warrants

Valuation and

Rating

Management is planning further geophysics, and follow-up drilling, to evaluate the full potential of this project. At the end of Q2-2018, the company had cash and working capital of C$6.97 million and C$7.11 million, respectively. We estimate the company had a burn rate (cash spent on operating and investing activities) of C$1.70 million per month in the six month period in 2018. The following table summarizes the company’s liquidity position:

Source: Company / FRC

In September 2018, the company announced its intent to complete a $2.63 million financing by issuing 7.50 million units at C$0.35 per unit. Each unit will consist of a common share and one full warrant (exercise price of C$0.55 per share for two years).

The company currently has 9 million options (weighted average exercise price of C$0.53 per share) and 9 million warrants (weighted average exercise price of C$0.70 per share) outstanding. At this time, none of the options or warrants are in-the-money.

Our Discounted Cash Flow value on GRG’s 25% interest in Puna increased to $0.80 per share (previously $0.70 per share), as we estimate that over 50% of the CAPEX has already been spent to date. The following table shows our key assumptions / inputs. Note that we used a 12 year mine life to account for upside from Chinchillas’ resource estimate as well as the remaining resources at Pirquitas. The PFS’ 8 year mine life estimate was solely based on Chinchillas’ reserve estimate.

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Source: FRC

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Sensitivity to Key Inputs

Source: FRC

The average of our DCF and comparables valuations is $0.98 per share (unchanged). We are

maintaining our BUY rating on GRG’s shares.

Source: FRC

Page 12



Risks

We believe the company is exposed to the following key risks (not exhaustive):

The value of the company is highly dependent on commodity prices. Delay in commencement of processing at Chinchillas. Actual results may vary from the inputs / assumptions used in the PFS. Exposure to exploratory risks associated with New Gold Explorations. Access to capital and potential share dilution. Exposure to exchange rate risks.

We rate GRG’s shares a risk of 4 (Speculative).

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Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” do not own any shares of the subject company, do not make a market or offer shares for sale of the subject company, and do not have any investment banking business with the subject company. Fees were paid by GRG to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, GRG has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The distribution of FRC’s ratings are as follows: BUY (72%), HOLD (7%), SELL / SUSPEND (21%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscribe.php for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

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Golden Arrow Resources Corporation (TSXV: GRG / FSE: GAC ...Golden Arrow Resources Corporation (TSXV: GRG / FSE: GAC / OTCQB: GARWF) – Processing of ... package held by GRG in Argentina