Jacob Willoughby | VP, Research [email protected]

Japan Corp. (TSXV: JG) Initiation Report December 16, 2019 The Dominant Explorer in Japan

We are initiating coverage on Japan Gold, the first mover in the historic low-sulphidation epithermal gold districts of Japan. When the government of Japan opened its doors to foreign mining investment in 2012, Japan Gold was the first Canadian explorer to move into this richly endowed country where gold exploration had been largely on the backburner since 1943. With 24 gold projects encompassed in a massive 127,894 ha portfolio that holds over 40 historic gold mines and a world-renowned team, we favor Japan Gold’s chances of becoming the prominent player in Japan.

Investment Thesis:  Leading the pack but not priced as such. Japan Gold was the first to stake ground in Japan and have built an impressive and strategic portfolio overlying an impressive number of historic mines. In spite of their early-entrant strategy, the company’s pricing (~C$32M Market Cap) lags that of a more recent entrant, peer explorer Irving Resources Inc. (CSE:IRV) (~C$160M Market Cap) that controls a significantly smaller (76,152 ha) and arguably less strategic portfolio.

 Employing modern exploration in well-endowed terrain. With gold exploration and mining having fallen out of focus throughout Japan in WWII, many of the country’s historic mines have yet to be fully assessed using modern exploration techniques. In a country where very high-grade deposits are prevalent, most historic areas have only seen selective shallow mining in known areas. As a result, we expect that there remains much to discover throughout the country’s various gold provinces, both along trend and at depth of the known deposits.

 Impressive team has the bench strength to find and build mines. Japan Gold boasts a deep management team with gold mining and exploration expertise both throughout Japan and internationally and we believe this could be a key driver for the success of this company. Notably, this team has strong ties to Sumitomo Corp, currently the only gold producer in Japan from their super high-grade Hishikari mine, around which Japan Gold has several projects.

Valuation: The market has still not priced Japan Gold’s unique opportunity for uncommon exploration success. We are expecting a positive re-rating as the company releases drilling results at the Kitano-O project in northern and the Ohra-Takamine project in southern Kyushu as well as continued systematic exploration throughout its wider portfolio. We have used a probability weighted average to derive a blended case fair value of $0.70/sh, but also an upside case of $1.44/sh.

Jacob Willoughby | VP, Research Executive Summary Table of Contents We like Japan Gold’s first mover advantage, its deep exploration bench Executive Summary ...... 1 strength and diverse portfolio of highly prospective assets as they offer Investment Thesis ...... 1 a relatively low risk option on exploration success. Although gold exploration in Japan has been largely dormant over the better part of a Catalysts ...... 6 century, Japan offers a first world, favorable jurisdiction including a Valuation ...... 6 straightforward permitting system and infrastructure from a well- established base mining industry. With 24 gold projects, Japan Gold’s Relative Valuation ...... 8 team has been consolidating historical data and conducting surface work Infrastructure ...... 8 in an effort to close in on priority targets to advance towards drill testing. Permitting ...... 9 This includes the Ikutahara project in the Kitami Metallogenic province in Hokkaido with a total of 17 gold prospects. At the Kitano-O property in this Kyushu Portfolio ...... 10 region, the company has launched a phase 1 initial drill program of 3,000 m Hokkaido Portfolio ...... 14 to be completed in December. At the Ohra-Takamine project in Kyushu that holds five gold prospects in the vicinity of the Hishikari mine, a first Honshu Portfolio ...... 18 phase 2,100m drill program has commenced. Risks ...... 22 Upcoming Catalysts: Appendix A – Management ...... 23

Appendix B –Board of Directors ...... 25 1. Drill results from Hokkaido and Kyushu projects (H1/20). 2. Potential JV partnerships with major and mid-tier producers. Appendix C – Board of Advisors ...... 26 3. Surface exploration updates throughout wider property area.

Investment Thesis First Mover in a Top Tier Country. The country of Japan has one of the most diverse and advanced economies

Japan Gold is based in a top-tier in the world. It is also extremely politically stable and transparent. Having these aspects combined with excellent exploration targets that have been jurisdiction and has attracted “frozen in time” for 75 years presents investors with a unique investment prominent investors opportunity. This is why the company has already attracted the likes of Newmont Goldcorp, RCF, Donald Smith & Co. and major Japanese Funds prior to drilling a single hole. Lastly, it’s still underknown to many investors and modestly valued.

The Hishikari Gold Mine – A Crown Jewel Hishikari is owned by Sumitomo Metal Mining Co. Ltd. and has yielded over > 7.6M oz of Au since its commissioning and is still operating today. The

mine is relatively shallow and boasts a head grade of approximately 40

g/t, making it one of the highest-grade gold mines ever. Its production is approximately 225K oz. per annum. The deposit is recognized as a classic low-sulphidation epithermal gold system, which is common along the Ring of Fire of the Pacific tectonic plate. As with many types of deposits, epithermal low-sulphidation mineralization tends to occur in groups or clusters. Thus, it’s unlikely that Hishikari is the only giant gold mine on the , though to date it has been a unique occurrence in terms of size and grade. However, there are in fact six different epithermal

gold provinces identified in Japan. These systems result from the country’s

string of -related islands. Other areas on, or adjacent to the Ring of Fire include Indonesia, Papua New Guinea, Chile, Peru, Nevada and New Zealand. These areas have produced massive low-sulphidation epithermal gold deposits. Some major examples include:

December 16, 2019 1 The Dominant Explorer in Japan Jacob Willoughby | VP, Research - Round Mountain Mine in Nevada (Produced > 15M oz Au, Resources of 7M oz of Au and 3.1M oz of Ag)

- Lihir Mine in Papua New Guinea (Produced > 9M oz Au, Reserves

24M oz)

- Vatukoula Mine in Fiji (Produced > 7M oz Au, Reserves 4M oz)

- Gosowong Mine in Indonesia (Produced > 5.7M oz at avg 21.7 g/t Au)

- Pierina Mine in Peru (Produced 4.7M oz Au and 11.8M oz Ag, bought by Barrick in 1996 for $800M before a resource calculation)

- Waihi Mine in New Zealand (Produced > 3.0M oz Au and 6.2M oz Ag,

Reserves of 1.9M oz Au and 5.8M oz Ag)

- Sleeper Mine in Nevada (Produced 1.7M oz Au and 2.3M oz Ag, Resources 4.6M oz Au, 35.6M oz Ag)

Mining History in Japan And the Opportunity it Presents Despite having five million plus ounce gold deposits and several high-grade gold mines dating back over 500 years (Figure 1, Takatama, Sado and

Yamagano mines) Japan has seen almost no exploration and mining

since World War II. Interestingly, gold mining in Japan was actually Japan has seen virtually no outlawed in 1943 when a government moratorium was placed on its exploration and mining since production, as human resources were diverted to base metal production for WWII the war effort. At that time, the country closed 76 different producing gold mines, with 64 of them still closed today. Significantly, there were no foreign mining companies permitted in the country at that time and that situation remained the case for the ensuing 75 years.

Post WWII, only 12 of the 76 mines were restarted and very little attention was placed on gold exploration for a number of reasons. Japan desperately needed to rebuild itself after the war (essentially from the ground up). Resources to support major infrastructure and industrial expansion were the focus for decades after the war. Japan being a relatively small country with a disproportionate amount of people for its size, the government incentivized its mining and investment companies to “venture abroad and bring resources back home”. Successful examples of these are very familiar to large base metal companies and investors (in order of decreasing market capitalization – Mitsubishi, Mitsui, Itochu, Sumitomo, JX Nippon, Marubeni, Toyota Tsusho & Sojitz,). Gold was simply an afterthought in post war Japan. Additionally, the country’s leaders had a prevailing belief that whatever gold it had, had already been discovered. All that changed with the discovery of the Hishikari mine find in 1981. Just as the legendary Hishikari mine discovery began to excite the people of Japan; a major structural economic shift was reshaping the cultural and business landscape there. Foreign investment in all things in Japan sent the value of the soaring from 360¥/$ in 1971 to 120¥/USD in 1985. Naturally, gold loses its attractiveness as an asset class when a country’s own currency more than doubles in the span of about a decade. Not surprisingly, Japanese companies used their red-hot ¥ to fund the importation of metal concentrates to feed their numerous smelters and refineries (Al, Cu, Zn, Steel, etc.)

December 16, 2019 2 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Figure 1: Significant Gold Production in Japan

Contained Gold Grade Deposit Location Years of Operation Gold (oz) (g/t) Hishikari* 8,400,000 47.3 S. Kyushu 1985 - Present Sado 2,500,000 5.1 N. Honshu 1601-1970 Konomai 2,346,950 6.4 NE. Hokkaido 1917-1974 Kushikino 1,800,000 6.7 S. Kyushu 1914 1974 Taio 1,200,000 6.3 N. Kyushu 1903-1973 Takatama 930,000 10 N. Honshu 1429-1974 Yamagano 900,000 17.4 S. Kyushu 1628-1955 Chitose 739,450 14.5 SW. Hokkaido 1936-1974 Okuchi 710,000 13.6 S. Kyushu 1936-1974 Seigoshi 450,000 10.8 Izu Peninsula 1935-1976 Bajo 420,000 1-5 N. Kyushu 1903-1973 Toi 390,000 9.3 Izu Peninsula 1916-1965 Teine 353,650 7.5 SW. Hokkaido 1932-1971 All grade and production data from Garwin et al., 2005. *Based on the Sumitomo Metal Mining Co., Ltd. website the Hishikari mine produced 7.6 million ounces at an average grade of 30-40 g/t from 1985 to 2018 and is still producing today.

Source: Company Reports

In 2012, a watershed event occurred. The decision was made by the Japanese government to amend the Japan Mining Act to allow foreign mining companies to explore for and develop the country’s resources. After suffering the ongoing effects of both the global financial crisis (2008- 2009) and a devastating Tsunami in northeastern Japan (2011), the country needed to encourage foreign investment, generate trade, employment and new business opportunities. Specifically, there was a need to stimulate the rural economies which were coincidentally located in areas that hosted the closed gold mines. The management team of Japan Gold was struck by the magnitude of the geologic opportunity and almost immediately began a lengthy and thorough two-year study process. In so doing, they were able to assist the Japanese government in the formation of the permitting process for foreign mining and exploration companies. This also allowed Japan Gold the opportunity to establish relationships with the most knowledgeable local geologists. It was then that Japan Gold went public in September 2016 and has been aggressively acquiring and evaluating projects ever since then.

But Where to Begin? Japan Gold was a first mover As everyone in mining has heard numerous times, “the best place to look after the 2012 decision to open for a mine is next to mine”. Naturally, Japan Gold began its search in country Japan up to foreign mining property evaluations by studying all the past producing gold mines that companies were never restarted after WWII. It then chose the best of the properties from the available data and (in 12 different acquisitions) secured 42 of the 64 former producing gold mines. These sites had all been reclaimed by the government, but the underground resources were left as is. Although numerous scientific studies have been conducted by the government, universities and a small number of private Japanese companies, the country has seen very limited modern exploration. This means that what was previously found was discovered without the benefit of modern techniques, in particular geophysical surveying and diamond drilling. The fact that much of the data predates WWII would tend to suggest that the

December 16, 2019 3 The Dominant Explorer in Japan Jacob Willoughby | VP, Research work needs to be rechecked and augmented, which is exactly what Japan Gold has been doing since acquiring its projects.

A Primer on Japan Japan is a ‘shimaguni’ – an island nation of over 6,500 islands with its archipelago being dominated by five main islands. From north to south they are Hokkaido (2nd largest by area with >5M inhabitants), Honshu (the largest island with > 100M inhabitants), (4th largest with 3.8M inhabitants), Kyushu (3rd largest with ~13M inhabitants) and Okinawa (smallest of the main islands with > 1.3M inhabitants). The islands stretch from the sub-arctic Hokkaido (with a latitude comparable to Toronto) to subtropical Kyushu and Okinawa (with a latitude similar to the Bahamas). Despite upwards of 75% of the population occupying mainly urban areas, more than half of Japan is unpopulated, covered by steep, forested mountains and volcanoes.

Japan Gold currently has two drill programs underway Drilling is focused on its Kitano-o Japan Gold has been focusing its most advanced work on its Hokkaido prospect and Ohra-Takamine projects and in particular at the Kitano-o prospect. At Kitano-o, detailed project to narrow in on priority gravity and controlled source audio-magnetotellurics (CSAMT) targets geophysical surveys have been completed and the company began a six- hole drill program in late July to be completed in late December. Both the Kitano-o gravity data and CSAMT study have delineated the locations of what could be feeder structures and vein systems that are prime targets for epithermal gold mineralization. The drill holes have targeted a number of these structures with results expected in H1/20.

A second drill program is underway in the southern Kyushu epithermal Au province, which hosts the Hishikari mine. The company has nine projects within the vicinity of Hishikari, three of which actually border its boundaries. The Ohra-Takamine drill program commenced in late June. One drill hole was completed below the historic Ohra mine workings. Subsequently, the Kyushu drill crew was transferred to the Kitano-O program due to the anticipation of harsh winter conditions in northern Hokkaido. Activity should resume at the Ohra-Takamine project in January 2020 including a detailed soil sample grid along with prospect scale gravity and CSAMT surveys. CSAMT is a standard method of exploring for deep sourced alkalic mineralization common to areas in the Ring of Fire. It’s an electromagnetic sounding technique that has proven effective in mapping the earth’s crust down to depths of 2,000m to 3,000m where mineralized epithermal fluids originate. The plan is for the Ohra-Takamine drill program to resume following analysis of the results of the soil sampling and CSAMT surveys.

As Japan Gold completes these two drill programs at its Hokkaido (Kitano- O) Kyushu (Ohra-Takamine) projects, we expect that the company will continue to use systematic consolidation and evaluation to narrow in on priority targets, which in our view could translate into significant discoveries.

In Figure 2 below, we have attempted to breakdown the company’s properties into three basic stages – most advanced (light grey), advanced (dark grey) and least advanced (red) for context.

December 16, 2019 4 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 2: Japan Gold’s Project Portfolio

Source: RCS, Company Reports

Reduced Risk Due to Share Structure At present, Japan Gold has ~140M shares outstanding. This includes 44% ownership from significant institutional and industry shareholders such as Newmont Goldcorp (16%), Resource Capital Funds (9%) and 26% ownership by management. As you can see from Figure 3 below, the public float is only 30% of the total shares outstanding or approximately 42M shares.

Figure 3: Share Ownership of Japan Gold

Source: S&P Global Market Intelligence, Company Reports

December 16, 2019 5 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

The “A Team” of Exploration Japan Gold’s team brings with them a reputable wealth of knowledge on Japanese gold exploration and mine development. This includes a general manager of exploration whose previous positions with Sumitomo Metal Mining Co. Ltd., currently the only active gold producer in the country, undoubtably brings expertise in exploration in Japan. The company’s technical team has reputable geologists well versed in both international and local exploration and we expect that the systematic strategic approach taken by this team sets it well apart from other explorers simply trying to drill obvious targets to drive its share price up. Japan Gold’s key advisors include Douglas Kirwin and Dr. Steve Garwin. Mr. Kirwin was VP Exploration for Ivanhoe Mines ltd. and was instrumental in the discovery of Oyu Tolgoi in Mongolia. Dr. Garwin was previously chief geologist in Nevada for Newmont and was involved in the discovery of SolGold’s enormous Alpala Cu-Au-Ag-Mo porphyry in Ecuador. One very seldomly sees advisors of this calibre involved with early stage junior explorers such as Japan Gold.

Catalysts We expect that ongoing exploration and drilling efforts should provide key catalysts for Japan Gold in the near term.

Upcoming Catalysts for Japan Gold include:

1. Drill results from the Kitano-O Goldfield and Ohra-Takamine projects (H1/20). 2. Potential major JV partnerships. With 42 projects, the company could easily attract majors to earn into some of their projects. Joint venturing some of these properties could attract tremendous attention and would validate the company’s portfolio and concept.

Valuation

We believe Japan Gold’s shares are potentially worth C$0.70. Our fair value estimate is based on our probability-based valuation method, where we assume that one of the company’s projects will be developed (Figure 4). This method incorporates three possible scenarios for the project and If the company finds an weights them based on the likelihood of occurrence while adjusting for the epithermal-style deposit, we time and capital to achieve the outcome. We note that any gold deposit the believe ounces could fetch a company finds that is of the low-sulphidation epithermal type would most premium due to simplified likely be similar to the Hishikari mine. At Hishikari, ore is mined, crushed processing and being in a top- down to ~4 inches in diameter and then transported to the Sumitomo tier jurisdiction smelter for use as flux. We would also highlight that in this situation, the company would not require a mill (there is no mill at Hishikari) and initial capex would be minimal and operating expenditures would be very low once in production. We also believe that the ounces here should get a premium (i.e. US$75/oz) to those in other top-tier jurisdictions owing to the simplified processing required for the ore in this region. Finally, the time to get one of its projects into production would be shortened by the reduced scale of internal processing and having a smaller environmental footprint with the reduction in infrastructure.

December 16, 2019 6 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

We outline our three cases here:

1. Upside Case – C$1.44/sh – ~4M oz at +5 g/t AuEq – 10% probability – In our view, the proximity of the company’s projects to past producing mines and, in particular, of three of its projects bordering the prolific Hishikari mine suggests this is a possibility; however, for this scenario to work, drilling would have to delineate a resource. 2. Medium Case – C$0.68/sh – ~2M oz at +5 g/t AuEq – 70% probability – We view this case as the most likely, since many of the company’s projects are adjacent to past-producing mines and our confidence is high that the company will discover a resource around 2M oz. 3. Base Case – C$0.36/sh – ~1M oz at +5 g/t AuEq – 20% probability – In our view, we see this case as a starting point for the company and it is likely that the scale of a resource around 1M oz should be relatively easy to define within a short timeframe. We’d anticipate possible production around 60-70 koz/yr for a period of 10-12 years initially.

Figure 4: Probability Based Valuation

Cost to Shares to be Est. Share Per Time to Time Adjusted Potential Scenario Description Achieve issued to achieve Count When Share Achieve Per Share Probability Value ($M) ($M) this case Achieved (C$) (Years) Value (C$)

Base Case ~1M oz at +5 g/t AuEq (US$75/oz) $100.0 $30.0 130.4 270.5 $0.37 0.5 $0.36 20%

Medium Case ~2M oz resources at +5 g/t AuEq (US$75/oz) $200.0 $30.0 0.0 270.5 $0.74 1.0 $0.68 70%

Upside Case ~4M oz resources at +5 g/t AuEq (US$75/oz) $400.0 $30.0 -23.4 247.1 $1.62 1.5 $1.44 10%

Probability Weighted Valuation Estimate $0.69 Notes: Discount rate of 8% To achieve downside case, shares issued at current share price Medium case shares issued in 3 tranches at an average price of $0.43 Upside case shares issued in 3 tranches at an averag e price of $1.29 Capital to be raised in subsequent cases, reduced by prior case Assumed that any in the money warrants/options woul d reduce the required capital to be raised and would have a roughly neutral impact

Source: RCS Estimates

December 16, 2019 7 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Relative Valuation Based on comparative peer group valuations (see Figure 5), we estimate that Japan Gold’s EV could re-rate by a factor of 2x to 3x on the first hint of positive drilling news.

Figure 5: Comparable Companies

Price YTD Shares Mkt. Cap Cash Debt EV Company Ticker (C$/sh) Perf. (M) C$M C$M C$M C$M

Japan Gold Corp. TSXV:JG $0.23 5% 140 $32 $5 $0 $27 Japan Gold’s EV could re-rate by a factor of 2x to 3x on the first Quebec Precious Corporation TSXV:CJC $0.23 -18% 67 $16 $2 $0 $14 Talisker Resources Ltd. CNSX:TSK $0.24 96% 92 $22 $8 $0 $14 hint of positive drilling news Brixton Metals Corporation TSXV:BBB $0.18 13% 142 $26 $1 $0 $24 Sirios Resources Inc. TSXV:SOI $0.16 11% 164 $25 $1 $0 $25 Triumph Gold Corp. TSXV:TIG $0.28 -40% 102 $28 $2 $0 $26 Klondike Gold Corp. TSXV:KG $0.28 56% 115 $32 $2 $1 $31 TerraX Inc. TSXV:TXR $0.28 -33% 138 $39 $3 $0 $36 Benchmark Metals Inc. TSXV:BNCH $0.37 54% 108 $40 $1 $0 $39 Balmoral Resources Ltd TSX:BAR $0.33 141% 170 $55 $2 $1 $54 Westhaven Ventures Inc. TSXV:WHN $0.83 -39% 101 $84 $0 $0 $84 Irving Resources Inc. CNSX:IRV $3.00 58% 59 $178 $11 $0 $166 Catalyst Metals Limited ASX:CYL $2.56 47% 83 $213 $15 $0 $198

Median $34 Average $59 Source: RCS Estimates, S&P Global Market Intelligence

Infrastructure Many regions in Japan have long histories in mining dating back to the 1800’s (Figure 6). The remoteness of the company’s prospects varies greatly by island, with some projects adjacent to small or abandoned towns and others closer to urban centres. Based on conversations with management, the company has access to a supply of all the basic infrastructure needed for exploration such as water, power and fuel. Japan’s climate is continental with a ~3-month rainy season and occasional snow fall except in Hokkaido, which has relatively cool summers and icy/snowy winters and is unaffected by the rainy season.

Figure 6: Historic Mine Locations and Epithermal Gold Provinces

Source: Company Reports

December 16, 2019 8 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Notably, Japan possesses a large network of smelters throughout the islands born as a result of the country’s well-established base metal industry Japan has a large network of (Figure 7). We expect the associated infrastructure would be a facilitating smelters that use high-grade ore factor for new mines in most parts of the country. At Hishikari, Sumitomo as “flux” with Au and Ag being ships its visually sorted high-grade ore to its own Cu smelter where it is recovered from slag utilized as a “flux” with gold and later recovered from slag. Due to numerous smelters in Japan, very strong demand exists for flux material.

Figure 7: Smelters in Japan

Source: Irving Resources

Permitting Japan offers a well-established regulatory framework making for a relatively simple permitting process. Mining and prospecting rights are obtained through the Ministry of Economy Trade and Industry under the legislative guidelines of the Mining Act of 1950 as well as the 2012 Mining Amendment Act. Other notable aspects include:

- Rights must be held by a Japanese individual or Japanese registered company - Applications are processed on a first to file basis - No minimum work obligations or expenditure requirements but the work for which the permit was granted must commence within six months of receipt of the permit. - Prospecting Rights last for two years with two optional renewals of two years - Mining rights do not expire so long as the right holder does not discontinue mining activities for a period longer than a year

24 projects over 127,894 ha over three islands, 23 epithermal targets overlying areas which have seen historic production as well as 1 potential porphyry intrusive lithocap. The company’s properties exist at various stages of permitting. Japan Gold has some 410 accepted prospecting rights Japan Gold already has a large applications which give the company reservations for surface work. Further number of permits in place still, the company has been granted 59 Prospecting Rights which allow for across its portfolio drilling.

- Ikuthara has 38 Prospecting Rights - Ohra-Takamine has 5 Prospecting Rights - Tobaru has 4 Prospecting Rights

December 16, 2019 9 The Dominant Explorer in Japan Jacob Willoughby | VP, Research - Kamitsue has 12 Prospecting Rights

Kyushu Portfolio The Kyushu island is home to many historic mines and two epithermal gold provinces (Figure 8 and 9). Japan Gold’s Kyushu Portfolio comprises 11 epithermal gold projects and 1 lithocap project summarized in the table below and shown in Figure 10. This is also the location of the Hishikari mine, operated by Sumitomo Corp and the only producing gold mine in Japan.

Figure 8: Kyushu Provinces and Major Mines

Southern Kyushu Middle Kyushu Middle Kyushu Epithermal Gold Epithermal Gold Lithocap Project Projects Projects - Ebino - Usa - Kamitsue - Kurino - Bajo - Onoyama - Mizobe - Yaeyama - Ohra- Takamine - Gumyo - Isa - Tobaru

Source: Company Reports

December 16, 2019 10 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 9: Kyushu Mineral Provinces and Major Mines

Japan Gold has projects in the vicinity of the prolific Hishikari Mine

Source: Company Reports

December 16, 2019 11 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 10: Kyushu Portfolio

Source: Company Reports

Ohra - Takamine Asset Overview The Ohra-Takamine project is a low-sulphidation epithermal gold-silver project located in southern Kyushu. The project occupies 4,872 ha within the Hokusatsu-Kshikino mining district, the birthplace of several large high- grade historic mines including the Hishikari mine. Near surface mineralization together with evidence of a fossil geothermal system as localized sinter, suggests the property hosts a shallow epithermal deposit. Historic work completed by Metal Mining Agency of Japan (MMAJ) included eight drill holes drilled between 1982-1989 to the east of the Takamine- Urushi mine. Results returned grades of 12.3 g/t and 13.3 g/t Au over two distinct 10cm intervals (60MAH-2). MMAJ also conducted regional geophysical studies in addition to surface sampling and drilling.

Historic Mines Historic mines included Japan Gold’s tenements: - Ohra (27k oz Au 3.5-20 g/t) was discovered in 1885 and was selectively mined until 1943. - Takamine-Urushi (13k oz Au between 1896 and 1916). Vein No. 2 from this mine was reported to contain grades between 50-100 g/t Au. - Takamine (91.6k oz Au at 5.1-28.3 g/t) Brought into production in the late 1800’s and halted in 1943. - Four historic mines also located 1-3km to the east and south-east

Mines from the Hokusatsu-Kshikino mining district include: - Hishikari mine (~8.5M oz Au at 30-40 g/t Au produced to date, in production since 1985) - Kushikino (1.8M oz @ 6.7 g/t Au) - Yamanago (0.91M oz at 17.4 g/t Au) - Okuchi Mine (0.714M oz at 13.6 g/t Au)

December 16, 2019 12 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Exploration Programs The company is advancing a 2,100m (~4 holes), Phase I drill program which began in June 2019. The first hole has been completed and the company plans to complete geophysical surveys and soil sampling in Q1/20 before completing this 4-hole program. The program is targeting a 3.5km epithermal corridor which hosts the historic Ohra, Takamine and Urushi Mines. Exploration here aims to extend the mineralized footprint beyond historic mine workings which occur in a large alteration corridor.

Tobaru Asset Overview Tobaru is a low sulphidation epithermal target located in the Hokusatsu- Kushukino mining district. The 1,348-ha property hosts a large (1,500m x 700m) hydrothermal alteration zone with potential for shallow epithermal gold. Additionally, zones of advanced argillic alteration are suggestive of a potential porphyry at depth. The Tobaru area was explored by Mitsui Mining & Smelting Company & BHP-Utah Japan Inc in the period of 1980- 1990. Additionally, the Tobaru area was surveyed and drilled by MMAJ.

Historic Mines The project hosts the historic Tobaru mine workings which have limited historical data. To the West, the Fuke mine where Au production of 0.106M oz were reported mined from several Au bearing veins.

Japan Gold’s Exploration Programs The company continues to complete data consolidation in an effort to move the project to more advanced exploration such as surface work, geochemical surveying, geophysics and eventually confirmation drilling.

Kamitsue Asset Overview Kamitsue is a prospective porphyry target located in the northern part of Kyushu. The project has seen some preliminary surface work by First Quantum Minerals (TSX:FM) in 2018 and 2019 as part of a binding letter agreement between the two entities. Although First Quantum opted not to pursue the agreement further, since Kamitsue displayed higher prospectivity for gold than copper.

Historic Mines Kamitsue is located ~10km from the Taio mine (1.2M oz Au at 6.3 g/t) shown in Figure 9. The project is also located in the northern Kyushu epithermal gold province.

Japan Gold’s Exploration Programs Following initial appraisal of the property by First Quantum, exploration data (which includes semi detailed mapping and soil and rock sampling) suggested the project warranted further investigation. The property hosts zones of advanced-argillic alteration suggesting the potential for a copper gold porphyry deposit.

December 16, 2019 13 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Other Kyushu Assets Southern Kyushu Epithermal Gold Projects Kurino Kurino is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 941 ha. Onoyama Onoyama is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 2,784 ha. Mizobe Mizobe is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 1,195 ha. Yaeyama Yaeyama is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 5,460 ha. Ebino Ebino is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 15,162 ha. Gumyo Gumyo is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 7,837 ha. Isa Isa is a low sulphidation epithermal Au target located in Southern Kyushu. The project covers an area of 5,964 ha. Middle Kyusho Epithermal Gold Projects Usa Usa is a low sulphidation epithermal Au target located in Middle Kyushu. The project covers an area of 1,838ha. Bajo Bajo is a low sulphidation epithermal Au target located in Middle Kyushu. The project covers an area of 4,478 ha.

Hokkaido Portfolio Japan Gold is advancing 11 epithermal targets in the Hokkaido region (Figure 11). Canadian explorer Irving Resources, a more recent entrant into Japan is also exploring in the north eastern region of Hokkaido at its flagship Omu project where epithermal mining dates back to the early 1800s. Irving launched its first drill program at Omu in 2019 returning encouraging results with high grade intersections extending the interpreted vein system for ~1km.

December 16, 2019 14 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 11: Hokkaido Projects (Not shown: Minamikayabe Project)

The Kitami metallogenic province has seen little mining at depth, making low-sulphidation intrusions compelling drill targets

Source: Company Reports

Ikutahara (Includes the Katano-o Gold District) Asset Overview The Ikutahara project is located in Japan’s Kitami metallogenic province, that hosts 17 historic mines and prospects. Mineralization in this region has formed in the numerous subduction zones as low sulphidation intrusions (Figure 12). As historic mining was primarily conducted near surface, the underlying epithermal veins and stockworks make for compelling drill targets.

December 16, 2019 15 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 12: Epithermal Au-Ag System

Source: Company Reports

History Ikutahara is in the very high-grade Kitano-o Gold District. Historic Au-Ag mines include the Showa (16.8 g/t Au, 7.8 g/t Ag), Kitano-o Mine (5.9 g/t Au), Ikatura Mine (5.2 g/t Au, 40.6 g/t Ag) and the Sakinzawa workings. The project is situated 20km along trend from the Konomai mine, which produced over 2.3M oz au at 6.4 g/t Au from 1917 to 1974. The project property encompasses the historic Kitano-o mine which produced 96,450 oz at 5.9 g/t Au largely from the shallow mining of gold bearing eluvium and a smaller amount of selective hard rock mining.

Japan Gold’s Exploration Programs Ikatuhara is one of the company’s more advanced projects with roughly 5km of drilling planned for the Kitano-o and Ryuo prospects. The program Ikatuhara is one of the more is targeting a quartz vein corridor along the central and western portion of advanced projects, with ~5km of the Kitano-o workings as well as along a 1,000m x 400m alteration system drilling planned mapped at the historic Ryou mine workings. In November 2017, a 2-week alteration mapping program was done over the Kitano-o District (Figure 13). Japan Gold has completed detailed mapping and data consolidation focusing on areas around historic mine workings. Having obtained a drill permit in 2017, the company completed scout drilling over the Akebono prospect intersecting high grade gold shoots highlighted by 0.27m at 29.7 g/t Au and 77 g/t Ag from 39.1m (Feb 2018).

In 2019, the company completed detailed sampling over the east Kitano-o area, with very positive gold results, and completed detailed CSAMT and a gravity survey over the full 3 km Kitano-o prospect. Drilling over west and central Kitano-o commenced earlier in the year and the 6-hole scout drill program will be completed in December.

December 16, 2019 16 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 13: Surface Sample Data

Source: Company Reports

December 16, 2019 17 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Other Hokkaido Assets Sanru The Sanru project is a 24,112 ha, low sulphidation epithermal gold project and overlying the eastern strike extension of the historic Sanru mine (215,410 oz Au at 7.4 g/t &1.4Moz Ag). The Sanru project’s northern border is contiguous with the southern border of Irving Resources flagship Omu prospect Hakuryu The Hakuryu project is a 4,901 ha low sulphidation epithermal gold project overlying the southern vein system of the historic Konomai Au-Ag mine (2.35Moz Au at 6.4 g/t Au and 40 Moz Ag at 109 g/t)The Hakuryu project is a 4,901-ha low sulphidation epithermal gold project overlying the southern vein system of the historic Konomai Au-Ag mine (2.35M oz Au at 6.4 g/t Au and 40M Ag at 109 g/t) Aibetsu The Aibetsu low sulphidation project covers 7,034.5 ha includes five historic Au Ag & Hg mines. Tenryu The Tenryu project is a 1,267-ha low sulphidation epithermal gold project located proximally to the Aibetsu project. The Tenryu project is a 1,267-ha low sulphidation epithermal gold project located proximally to the Aibetsu project. Numanoue Numanoue is a low sulphidation epithermal gold project and occupies property along trend to the historic Konomai Au-Ag mine. Onne & Fujimi The Onne Fujimi assets together encompass multiple epithermal gold vein targets and historic mines from the Kitami mining region of northern Hokkaido. Harutomi The Harutomi is centered over the historic Au-Ag Harutomi mine which saw some small-scale mining, but limited exploration following the 1943 moratorium. Buho The Buho project is a Au-Ag project located in the Sapporo-Iwanai gold district in southwestern Hokkaido where some 65 known deposits exist including the historic Chitose mine (0.736M oz Au at 14.5 g/t) Minamikayabe The Minamikayabe project is an intermediate sulphidation epithermal gold vein project with a potential deeper porphyry target located in the southwest region of Hokkaido.

Honshu Portfolio Japan Gold is also advancing the Togi project on the Honshu island.

Togi Asset Overview The Togi epithermal project is on trend to the prolific historic Sado Mine (2.5M oz & 74M oz Ag) located 160km to the northeast (Figure 14). The presence of sinter and mineralization in the form of stock work veins offer evidence that the property could overlie a deeper epithermal boiling zone – a key control for high-grade gold deposition.

December 16, 2019 18 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Figure 14: Project Location and Togi Goldfield

Source: Company Reports

History Gold exploration in the Togi Goldfields dates back to 1896 with workings across seven reported areas over a 7km trend producing a reported 48,000 oz Au and 180,000 oz Ag (Figure 15). The area is currently divided into northeast Hirochi and southwest Urugami deposits. In the Hirochi group, the Mori vein was reported to have produced 16,500 oz Au at 14 g/t. The extent of the vein is estimated at 4m in width and remains open at depth as historic mine depth remained within 120m below portal level.

In the Urugami group to the southwest, multiple deposits have been identified over a 2km x 2km area in which over 30 vein occurrences have been identified. Significant historic mines in the Urugami area include the Togo Mine which produced 18,000 oz Au and 83,000 oz Ag.

December 16, 2019 19 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 15: Surface Sample Data at Togi

Source: Company Reports

Japan Gold’s Exploration Programs The property has seen surface work and preliminary drilling by previous operators which has identified encouraging areas of anomalous alteration, however the larger extent of the wider 7km trend remains largely untested. Additionally, alteration zones uncovered between the northeast and southwest zones suggest the hydrothermal system could be continuous between the two. As a result, the company plans to complete further reconnaissance work to determine a better understanding of the controls and extent of the mineralized zones in the Togi Goldfields.

Flying under the radar – Irving Resources a compelling case study. With a portfolio of strategically staked projects throughout Japan (Figure 16), Japan Gold has a much larger Japan Gold has been seemingly flying under the radar despite the steady property package and portfolio development of its massive portfolio of compelling targets. Irving Resources than competitor Irving Resources Inc. (CSE: IRV) is one of the few other Canadian explorers more recently staking ground in Japan. At a ~C$160M market cap and 76,152 ha in Japan over 7 projects, compared to Japan Gold’s massive 127,894 ha, 24-project portfolio is evidence of Japan Gold’s discounted valuation.

December 16, 2019 20 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Figure 16: Irving Resources & Japan Gold Project Locations

Source: Japan Gold & Irving Resources Company Reports

Drilling at Irving’s Omu could bode well for nearby Japan Gold assets. Japan Gold’s Sanru project is on trend and contiguous with the southern border of the Omu project. Omu is Irving’s flagship project which it began exploring in 2016 and commenced drilling in 2019. Located on the island of Hokkaido, Omu is also located in the same region as 11 of Japan Gold’s own projects including Sanru. Omu is notable for its proximity to the historic epithermal Omui and Hokuryu mines and is located in the Omu volcanic graben. Irving recently completed 8 widely spaced drill holes at Omu, which returned highlight results of 1.33m at 29.77 g/t UA and 575.7 g/t Ag (19OMS- Exploration success could 002) and extend the mineralized vein at Omu for ~1km. Irving also holds provide the catalysts needed for property on Sado Island, an area which was previously host to the Sado Japan Gold to catch up to the Kinzan mine. We believe that continued exploration success for Japan Gold pricing of peers could provide the catalysts needed to create outsized returns as the company catches up to the pricing of peers such as Irving Resources

(Figure 17).

Figure 17: Irving Resources vs Japan Gold Performance Charts

700%

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Irving Resources Inc. (CNSX:IRV) - Share Pricing Japan Gold Corp. (TSXV:JG) - Share Pricing Source: S&P Global Market Intelligence

December 16, 2019 21 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Risks Our view is based on publicly available information but note that our estimates and views are not without political, technical, geologic or financing risk typical for junior exploration companies. For Japan Gold, three risks are of note.

 Exploration – Our positive view relies on very early stage exploration results. Future results may materially differ and negatively impact our assumptions.

 Permitting – A permitting risk exists should the company fail to meet technical and permitting requirements for its projects or encounter unforeseen hurdles pertaining to the permitting of its projects.

 Market Sentiment – While we expect current markets to continue to improve, our estimates may be negatively impacted by a change in market sentiment.

As new information becomes available, we plan to refine our numbers.

December 16, 2019 22 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Appendix A – Management

John Proust, C.Dir. Chairman & CEO John Proust has successfully founded and managed a number of resource companies. Mr. Proust has served on the boards and held senior operating positions and has directed and advised public and private companies regarding corporate strategy, debt and equity financing, mergers and acquisitions and corporate restructuring since 1986. Mr. Proust is currently Chairman and CEO of Southern Arc Minerals Inc., and a director of Rise Gold Corp.

Dr. Michael Andrews, PhD, FausIM – President and COO, Director Dr. Mike Andrews is a geologist with more than 40 years of research and mining industry experience in gold, copper, and . He holds an honours degree in Geology from the University of Reading, and a doctorate in exploration geochemistry from the University of Wales. Dr. Andrews is also currently President & COO and a director of Southern Arc Minerals Inc.,and a Non-executive Director of Kingsrose Mining Limited. He was a founding director of Kingsrose Mining Limited and played an instrumental role in the discovery, exploration, feasibility and development of its Way Linggo Gold Mine in Indonesia.

John Carlile, BSc, MSc, FAusIMM – Executive Vice President, Director Mr. John Carlile is a geologist with more than 35 years of experience in the resource industry. Mr. Carlile has held senior executive and director positions with both major and junior resource companies, including President of Indonesian and Philippines subsidiaries of Newcrest Mining Limited, and Chairman of Singaporean public listed oil company Pearl Energy Ltd. As a geologist, Mr. Carlile has a proven track record of mineral discovery and business building in Asia, most notably as Exploration Manager, Asia for Newcrest Mining Limited when it discovered its Gosowong mine.

Andrew Rowe, BSc, MAusIMM, FSEG - Vice President Exploration, Japan Country Manager Andrew Rowe comes to Japan Gold through his previous position with Southern Arc Minerals. Mr. Rowe joined Southern Arc in 2006 as a Senior Geological Consultant and was soon promoted to Chief Geologist and then Executive Vice President, leading Southern Arc’s exploration programs from grassroots exploration through to completion of the first resource estimate at the company’s West Lombok Project.

Takashi Kuriyama, B.Eng. – General Manager, Exploration Takashi Kuriyama, a geology graduate of the Mining and Geology Department of University, served in increasingly senior roles with Sumitomo Metal Mining Co., Ltd. (“Sumitomo”) from 1974 until his recent retirement as General Manager of its Global Exploration and Development Department. During his career at Sumitomo, Mr. Kuriyama had the role of Exploration and Geology Manager at Sumitomo’s Hishikari world class gold mine in Kyushu, Southern Japan, and subsequently held senior exploration positions in Africa, Australia, Mexico, Canada and the United States of America. In the roles of Executive Vice President of Sumitomo Metal Mining America Inc. and Managing Director of Sumitomo Metal Mining Oceania Pty Ltd., he oversaw the development of the Northparkes copper-gold porphyry copper mine and the Pogo gold mine in Alaska.

December 16, 2019 23 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Dr. Kotaro Ohga, PhD – Chief Engineer Kotaro Ohga held the position of Associate Professor at Hokkaido University in the Graduate School of Engineering. With a PhD in Mining Engineering, Dr. Ohga has extensive experience with permitting and drill programs in Japan. As Chief Engineer, Dr. Ohga is the main point of contact between Japan Gold and the Japanese Government, offering invaluable insight and expertise as Japan Gold advances its properties.

Vincent Boon, CPA, CA – Chief Financial Officer & Corporate Secretary Mr. Boon is a chartered accountant with over ten years of professional accounting experience with private and public companies focusing on financial reporting, regulatory compliance, internal control and corporate finance activities. Mr. Boon’s experience includes financial reporting for both Canadian and U.S. listed companies with international subsidiaries, strategic planning, tax planning, corporate governance, equity financings and due diligence for acquisitions.

December 16, 2019 24 The Dominant Explorer in Japan Jacob Willoughby | VP, Research

Appendix B – Board of Directors John Proust, C.Dir. – Chairman & CEO See management section above.

Dr. Michael Andrews, PhD, FAusIMM – President and COO, Director See management section above.

John Carlile, BSc, MSc, FAusIMM – Executive Vice President, Director See management section above.

Mitsuhiko Yamada, BA (International Economics) -Director Mitsuhiko Yamada is a mining business professional with international experience overseeing all aspects of mining projects from exploration through to production. He earned his degree in International Economics at Keio University and spent his career with Sumitomo Corporation. Mr. Yamada worked around the globe for Sumitomo, managing various mining projects and overseeing joint venture relationships with some of the world’s biggest mining companies, including Newmont, Phelps Dodge, Teck, Xstrata, Rio Tinto and Sherritt.

Robert Gallagher, BapSc – Director Bob Gallagher has more than 40 years of experience in the mining industry and is a Mineral Engineer with a specialty in mineral processing. Currently Mr. Gallagher is a director of Southern Arc Minerals Inc., Capstone Mining Corp., and BC Hydro. Most recently, he held the position of President and Chief Executive Officer at New Gold Inc. Previously, Mr. Gallagher held increasingly senior management roles at Newmont Mining Corporation over a seven-year period, including Vice President Operations, Asia Pacific; Vice President, Indonesian Operations; and General Manager, Batu Hijau. Earlier in his career, Mr. Gallagher worked at a number of operating mines located throughout the Americas and Asia in various engineering, metallurgical, and mine management roles, including most notably 15 years at Placer Dome Inc.

Dr. Sally Eyre, PhD (Economic Geology) – Director Sally Eyre is a mining finance professional with extensive experience in global resource capital markets and mining operations. Dr. Eyre is also currently a Director of Adventus Corp., and a Non-Executive Director of Centamin plc, and a Director of Ero Copper Corp. During 2011 to 2014 she served as President & CEO of Copper North Mining and prior to Copper North Mining she served as Senior Vice President, Operations at Endeavour Mining, responsible for a portfolio of exploration, development and production projects throughout West Africa. Dr. Eyre also served as President & CEO of Etruscan Resources Inc. (now Endeavour Mining Corp.), a gold company with producing assets in West Africa. She has served as Director of Business Development for Endeavour Financial Ltd. and has held executive positions with a number of Canadian resource companies.

Murray Flanigan CPA, CA, CFA – Director Mr. Flanigan is a management consultant providing financial advisory services to a number of public and private oil and gas, mining and technology companies in North America and abroad. Mr. Flanigan is a Chartered Accountant and a Chartered Financial Analyst with expertise in corporate finance, mergers and acquisitions, international taxation, risk management, banking, treasury, corporate restructuring and accounting, and has served as Chief Financial Officer for various public and private

December 16, 2019 25 The Dominant Explorer in Japan Jacob Willoughby | VP, Research companies. Mr. Flanigan is currently a Managing Principal of Kepis & Pobe Financial Group Inc. and a key member of its executive management team responsible for the negotiation and closing of numerous recent large-scale oil & gas transactions in West Africa, offshore Guyana and the Middle East.

Appendix C – Board of Advisors

Douglas J. Kirwin, B.Sc, M.Sc, FSEG Doug Kirwin is an independent geologist with 45 years of international exploration experience. Doug has held senior positions with Anglo American and Amax during the 1970’s and was managing director of a successful international geological consulting firm during the 1980’s and early 1990’s.

Dr. Steve Garwin, B.Sc, M.Sc, PhD, FAusIMM, FAIG, FSEG Dr. Steve Garwin has over 29 years of experience as an exploration geologist and is one of the leading authorities on porphyry, epithermal and Carlin‐ style mineralization in the circum‐Pacific region and applies methods of structural geology and geochemistry towards gold and base‐metals exploration. He has previously worked with Newmont Mining for ten years, including two years as Chief Geologist in Nevada, USA. He has been involved with several exploration and mining projects.

December 16, 2019 26 The Dominant Explorer in Japan Jacob Willoughby | VP, Research Derek Macpherson | VP Research, [email protected] Jacob Willoughby | VP Research, [email protected] Zachary Kotowych | Research Associate, [email protected] Taylor Combaluzier | Research Associate, [email protected]

Red Cloud Securities 105 King Street East, 2nd Floor Toronto ON, M5C 1G6 [email protected] www.redcloudfs.com/research-home

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1. A member of Red Cloud Securities team has visited/viewed material operations of the issuer. 2. In the last 12 months, Red Cloud Securities has been retained under a service or advisory agreement by the subject issuer. 3. In the last 12 months, Red Cloud Securities has received compensation for investment banking services. 4. Red Cloud Securities or a member of the Red Cloud Securities team or household, has a long position in the shares and/or the options of the subject issuer. 5. Red Cloud Securities or a member of the Red Cloud Securities team or household, has a short position in the shares and/or the options of the subject issuer. 6. Red Cloud Securities or a member of the Red Cloud Securities team own more than 1% of any class of common equity of the subject issuer. 7. A member of Red Cloud Securities team or a member’s household serves as a Director or Officer or Advisory Board Member of the subject issuer.

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