LODE-STAR MINING INC. – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited financial statements
and related notes appearing elsewhere in this Quarterly Report. In addition to
historical financial information, the following discussion includes a number of
forward-looking statements that reflect our plans, estimates and our current
views with respect to future events and financial performance. Forward-looking
statements are often identified by words like: believe, expect, estimate,
anticipate, intend, project and similar expressions, or words which, by their
nature, refer to future events. You should not place undue certainty on these
forward-looking statements, which apply only as of the date of this report.
Except as required by applicable law, including the securities laws of the
United States, we do not intend to update any of the forward-looking statements
to conform these statements to actual results

Mineral Property Interest

On August 29, 2014, we entered into a Letter of Intent (the “LSG LOI”) with
Lode-Star Gold, Inc. (“LSG”), a private Nevada corporation, pursuant to which we
agreed to issue shares of our common stock and make certain payments to LSG in
consideration for the acquisition of an interest in LSG’s Nevada Goldfield
Bonanza property (the “Property”). LSG would acquire control of us as a result
of the intended transaction.

On October 4, 2014, we entered into a definitive mineral option agreement (the
“Option Agreement”) which superseded the LSG LOI. Pursuant to the Option
Agreement, we issued LSG 35,000,000 shares of our common stock in exchange for a
20% undivided interest in the Property (the “Acquisition”). In order to earn an
additional 60% undivided interest in the Property (for a total of 80%), we are
required to fund all expenditures on the Property and pay LSG an aggregate of $5
million in cash in the form of a net smelter returns (“NSR”) royalty, each
beginning on the closing date of a subscription agreement for the shares (the
“Closing Date”). Until we have earned the additional 60% interest, the NSR
royalty will be split with 79.2% to LSG, 19.8% to and 1% to the former Property
owner.

The Property is located in west-central Nevada, in the Goldfield Mining District
at Latitude 37° 42′, and Longitude 117° 14′. The claims comprising the Property
are located in surveyed sections 35 and 36, Township 2 South, Range 42 East, and
in sections 1, 2, 11, and 12, Township 3 South, Range 42 East, in Esmeralda
County, Nevada. The Property is accessible by traveling approximately one-half
mile northeast of the community of Goldfield, along a county-maintained road
that originates at U.S. Highway 95, which runs through “downtown” Goldfield. The
town of Goldfield, which is the Esmeralda county seat (population 300), is
approximately 200 air miles south of Reno and 180 air miles north of Las Vegas.

The Property consists of 31 patented claims covering a total of approximately
460 acres, or 186 hectares. The claims are owned as private land by LSG, and
only annual property taxes must be paid. Operations are managed from a 6,000 sq.
ft. office and warehouse facility complete with showers and laundry amenities.
Two residential trailer sites are immediately adjacent to this building for crew
needs. All properties, claims, buildings, equipment, and supplies are owned by
LSG and we have free access to utilize and manage all the above-noted items.

The Property has one working shaft, the February Premier, which has access to
the 300 ft level, with approximately 1/2 mile of ventilated drift. Underground
work has identified 2 high-grade gold-bearing zones which the company plans to
further explore. Given that the most prudent exploration must take place
underground, we are applying through LSG for a “Surface Separation Facility”
through the Nevada Department of Environmental Protection (NDEP). The program
that we envision undertaking includes the mining of approximately 10,000 tons of
non-NI 43-101 compliant gold mineralization at an approximate grade of 0.9
ounces per ton. The estimated grade is based on historic drilling work done by
LSG, for which the 1.5-inch core samples were consumed by assay requirements. In
order to provide adequate sample weights to the assaying lab, the entire core
was processed for individual samples. While we have encountered several
additional high-grade drill anomalies throughout the property, it is important
to note that we have no proven and/or probable reserves at the present time and
therefore the program is exploratory in nature.

The Property has two operating water monitoring wells (completed April 15, 2016)
that are mandatory for us to receive a water pollution control permit. Part of
the permitting application is for the allowance of the company to store its
waste rock underground. The property has no milling on site and we must rely on
a third party to receive our mineralized material and tombstone our tailings.

Our primary objective remains the completion of our Surface Separation Facility
permit, to allow processing of material extracted from our targeted underground
zones. This entails having a toll milling agreement with an existing milling
operation to handle processing of our mineralized material, as well as the
tomb-stoning of the tailings from that mineralized material. On February 17,
2017, we executed an agreement with Scorpio Gold Corporation for a pilot toll
milling test. We completed the first test in May 2017 and both companies have
determined that further testing needs to be completed to determine a definitive
cost analysis and other operational details. The sample processed was historic
material stockpiled on the property surface and therefore of limited
metallurgical value, but indicative of material that will be run through the
mill. Milling throughput did identify specific equipment configuration details
that need to be considered for future runs. The Company expects to provide
material from its targeted underground zone for more comprehensive milling
results when we are permitted to do so.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS (Continued)

Recent Developments

For Q1 2018, all work and processes as described below are continuing. No
material, additional developments have occurred since December 31, 2017.

Permitting for operations on the Property has not been completed. We filed our
permit application with NDEP on April 5, 2017. NDEP has completed its
Administrative Review of the application and is underway with its Technical
Review. We received NDEP’s response letter on October 20, 2017 requesting
additional information on a small number of engineering and hydrology concerns,
as well as recommendations on some additional matters. Following a successful
review by NDEP of our reply dated March 20, 2018, the permit will be put out for
public review for a period expected to be no longer than 60 days.

The Company has filed its Notification of Commencement to both State of Nevada
and Federal MSHA agencies, in order to reoccupy our mine workings. The company
has filed with MSHA for Small and Remote Mine Application for Alternative Mine
Rescue Capability and is awaiting review of that. In accordance with MSHA
guidelines, we are in the process of re-occupying our underground workings.

We have agreed with LSG that upon the successful completion of a toll milling
agreement, we will have the basis to form a joint management committee to
outline work programs and budgets, as contemplated in our Option agreement dated
October 4, 2014, and for us to act as the operator of the property.

Personnel

We have no employees. Our president and CEO, Mark Walmesley, receives no
compensation for his services. We expect to continue to use outside consultants,
advisors, attorneys and accountants as necessary.

Our Chief Operating Officer, Thomas Temkin, who is also a director, is a
Certified Professional Geologist and a Qualified Person under National
Instrument (NI) 43101, with more than 38 years of experience in the mining
industry, primarily in exploration in the Western United States. He is currently
a consulting geologist working with LSG. Mr. Temkin has been associated with LSG
and the Property for over 15 years and has been instrumental through its entire
exploration program to date.

Our Corporate Secretary, Pam Walters, has been associated with the mining
industry for over 25 years and has managed the corporate finance and business
operations of LSG and its owners.

Plan of Operations

As noted above, our primary objective remains the completion of our Surface
Separation Facility permit, to allow processing of material extracted from our
targeted underground zones. This entails having a toll milling agreement with an
existing milling operation to handle processing of our mineralized material, as
well as the tomb-stoning of the tailings from that mineralized material

The following specialists in underground permitting of narrow vein, high sulfide
mines are charged with executing the permitting process:

· Rubicon Environmental Consulting is the lead consultant
· Hydrogeologica Inc. consults on water and geology
· Tierra Group International consults on mine planning and engineering

Unique to our permitting is the proposed underground area of work named the Red
Hills Stope Zone. It is 150 feet above the 450-foot-deep water table, making the
mine essentially a dry mine.

The mine’s 300-foot level workings has pockets of unused volume where our
potentially acid-generating waste rock can be stored. This means no waste rock
will come to the surface and LSM will avoid, for the short-term, the expense of
having to build and maintain a surface storage facility.

We are hopeful that these two mitigating circumstances will make our permitting
process more rapid and therefore, the costs of execution and infrastructure
improvements will be kept at a minimum.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS (Continued)

Permitting costs to date are approximately $240,000 and are anticipated to total
$250,000, as follows:

Rubicon         $40,000
Hydrogeologica  $135,000
Tierra          $75,000
State / NDEP    $0
Total           $250,000

In addition to the permitting costs we expect 1-year development costs to come
in as follows:

Site and Surface Preparation                      $100,000
Equipment and Mining Materials                    $500,000

Underground Rehab & Preliminary Mine Development$110,000
Ore Grade Control

                                 $50,000
Red Hill's Vein Zone Work                         $270,000

General Corporate and Administration Fees $720,000

Exploration

The Company is currently structuring a drill program, targeting expansion of its
known gold zones as soon as permitting is achieved.

Funding

The Property continues to be advanced by work executed by LSG. This interim
advancement will continue for the foreseeable future.

We do not currently have sufficient funds to carry out our entire plan of
operations, so we intend to meet the balance of our cash requirements for the
next 12 months through a combination of debt financing and equity financing
through private placements. Currently we are active in contacting broker/dealers
regarding possible financing arrangements; however, we do not currently have any
arrangements in place to complete any private placement financings and there is
no assurance that we will be successful in completing any such financings.

If we are unsuccessful in obtaining sufficient funds through our capital raising
efforts, we may review other financing options, although we cannot provide any
assurance that any such options will be available to us or on terms reasonably
acceptable to us. Further, if we are unable to secure any additional financing
then we plan to reduce the amount that we spend on our operations, including our
management-related consulting fees and other general expenses, so as not to
exceed the capital resources available to us. Regardless, our current cash
reserves and working capital will not be sufficient for us to sustain our
business for the next 12 months, even if we decide to scale back our operations.

Going Concern

Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our expenses. This is
because we have not generated any revenues to date and we cannot currently
estimate the timing of any possible future revenues. Our only source for cash at
this time is investments by others in our common stock, or loans. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.

Results of Operations

The following summary of our results of operations should be read in conjunction
with our financial statements for the period ended March 31, 2018 which are
included above in Part I, Item 1.

                            Three Months Ended March 31   Change


                            2018           2017           Amount     Percentage



                             $              $              $
     Revenue                 -              -              -          -
     Operating Expenses      105,544        250,183        (144,639)  (58%)
     Operating Loss          (105,544)      (250,183)      144,639    (58%)
     Other Income (Expense)  (13,999)       (10,775)       (3,224)    30%
     Net Loss                (119,543)      (260,958)      141,415    (54%)





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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS (Continued)

Revenues

We had no operating revenues during the three-months ended March 31, 2018 and
2017. We recorded a net loss of $119,543 for the current quarter and have an
accumulated deficit of $2,491,311. The possibility and timing of revenue being
generated from our mineral property interest remains uncertain.

Expenses

Notable year over year differences in expenses for the first quarter are as
follows:


                                    Three Months Ended March 31   Increase/(Decrease)


                                    2018          2017            Amount       Percentage

Consulting services                  $37,119$204,797$(167,768)   (82%)
Office, foreign exchange and sundry  $4,284$904$3,380       374%
Professional fees                    $22,231$4,714$17,517      372%

Interest, bank and finance charges $13,999$10,775$3,224 30%

?
Consulting services expense in the 2018 first quarter included approximately
$31,000 related to options granted during the first quarter of 2017. In the
equivalent 2017 period, consulting expense include approximately $199,000
related to the same options.
?
Office, foreign exchange and sundry expenses were higher in Q1 of 2018 due to
approximately $1,000 of license fees and rent incurred after relocating our
office from Texas to Nevada, with no 2017 equivalent, and an approximate
increase of $2,000 in foreign exchange loss due to fluctuation in the
US/Canadian dollar exchange rate.
?
Professional fees were higher in the first quarter of 2018 primarily due to the
accrual at March 31, 2018 of accounting and audit services incurred in Q1 2018
for the 2017 year end, with no equivalent accrual at March 31, 2017 for the 2016
year end. Accounting and audit services for the 2016 year end were accrued in Q2
of 2017.
?
Interest, bank and finance charges were higher primarily due to an increase of
approximately $3,000 in interest charged in Q1 of 2018 compared to that charged
in the equivalent 2017 period on accrued mineral option fees due to LSG.

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