THE MINERAL EXPLORATION INDUSTRYAn Introduction

Kuujjuaq Workshop, April 2016April 24, 2017 – Kuujjuaq Workshop

Disclaimers and Cautionary Statements: The information contained in this presentation is provided by Commerce Resource Corp. (“Commerce”) for informational purposes only and does not constitute an offer to issue or arrange to issue, or the solicitation of an offer to issue, securities of Commerce or other financial products. The information contained herein is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. The views, opinions and advice provided in this presentation reflect those of the individual presenters, and are provided for information purposes only. The presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Commerce nor its directors, officers, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation.

Except for statements of historical fact, this presentation contains certain “forward-looking information” within the meaning of applicable securities laws. Forward-looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements, including, among others, the accuracy of mineral grades and related assumptions, planned expenditures, proposed exploration and development at the Ashram Rare Earth Project, anticipated rare earth element prices and the relationship between rare earth elements and Chinese and global demand, the anticipated timing and conclusions of drilling results, as well as those risk factors identified in Commerce’s Management Discussion & Analysis for the most recent period and other disclosure documents available at www.sedar.com under Commerce’s name. Commerce undertakes no obligation to update forward-looking information if circumstances or management’s estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements.

This presentation includes industry, market and competitive position data from industry journals and publications, data on websites maintained by private and public entities, including independent industry associations, general publications and other publicly available information. Commerce believes that all of these sources are reliable, but we have not independently verified any of this information and cannot guarantee its accuracy or completeness. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. Further, because certain of these organizations are industry organizations, they may present information in a manner that is more favourable to the industry than would be presented by an independent source. In addition, forecasts are often inaccurate, especially over long periods of time. References in this presentation to research reports or articles should not be construed as depicting the complete findings of the entire referenced report or article. The information in each report or article is not incorporated by reference into this presentation.

Cautionary Notes regarding Technical Information: This presentation may include disclosure of scientific and technical information, as well as information in relation to the calculation of resources, with respect to the Ashram Rare Earth Project. Commerce’s disclosure of mineral resource information is governed by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM (“CIM Standards”). There can be no assurance that mineral resources will ultimately be converted into mineral reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

Further information about the Ashram Rare Earth Project, including information relating to quality assurance and quality control procedures, is available in accordance with NI 43-101 within the Technical Report entitled “NI 43-101 Technical Report – Preliminary Economic Assessment – Ashram Rare Earth Deposit” with an effective date of July 5, 2012 (revised date of January 7, 2015), a copy of which is filed under Commerce’s profile on SEDAR at www.sedar.com.

The technical information in this presentation has been prepared in accordance with the Canadian regulatory requirements set out in NI 43-101 and reviewed on behalf of the Company by Mr. Darren Smith, M.Sc., P.Geol., of Dahrouge Geological Consulting Ltd., a Qualified Person.

Forward-Looking Information

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Mining Company vs Exploration Company

Mining Company Exploration Company

• Owns and operates a producing mineral asset (i.e. cash flow)

• In general, a less speculative and lower risk investment

• Relatively higher impact, but impacts are “well defined”

• Long term business opportunities

• Large number of employees and/or consultants

• E.g. Glencore, Rio Tinto, Goldcorp, …

• Owns the mineral rights to a property/asset (i.e. NO cash flow)

• Speculative and high risk investment; BUT, potential for high reward

• Relatively low impact – collect field data, interpret, & evaluate potential for development

• Limited number of employees and/or consultants

• E.g. Commerce Resources Corp., NexGen Energy Ltd.

A junior exploration company is a “Treasure Hunter” that seeks to create wealth for shareholders through the discovery and development of a mineral asset

• Jointly funded hunt for new mineral wealth

– Spreads out the risk, and wealth (still substantial)

– ~ 1/10,000 “grassroots projects” reach development1

– ~ 1/200 “discoveries” advance to development1

Objective is to maximize shareholder value through discovery and asset development

1. Raise money – through issuing shares

2. Explore – with money raised

3. Create value – through discovery

4. Raise money – at higher share prices

5. Create value – develop asset, buy out

The Purpose of an Exploration Company

Exploration Company

Shareholders(own a small piece of company)

$

$

$ $$

$$

$$$

$$$

EXPLORE, DISCOVER, DEVELOP(i.e. Create Value)

Aunt Betty Farmer

BillInstitution

Mr. & Mrs. Smith

Shares of company issued

Shares of company issued

Neighbour FrankSister Mary

1. Minerals & Petroleum Resources Directorate, 20074

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Exploration Companies Collect Field Data

Camp Valcourt (Commerce Resources Corp.)Prospector Tents

Camp Valcourt

Camps are temporary and are the largest footprints of most exploration projects• Typically 10-30 people

Exploration Companies Collect Field Data

Total Magnetic Intensity – Eldor Complex6

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Exploration Companies Collect Field Data

Drill hole collar a few years after completion

Winter drill set-up on lake ice

Log drill core

Prospecting and rock sampling

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Defining the Company & Project Focus

1. Overall market and momentum

– Recognize the current market situation & where it is going

2. Commodity(s) of interest

– What are the market opportunities

3. Jurisdiction

– What is the current and historic attitude towards mineral exploration by the government & population

4. Geology

– Identifying the right geologic setting is fundamental to discovery

5. Property/Project

– Grassroots (new exploration), or Brownfield (historic discovery, mine expansion)

6. Management team

– Relevant experience – financial, geological, marketing, etc.

– “Story tellers” – proper balance of promotion and development skills

Gold

USDA, Peggy Greb

Rare Earth Oxides

Copper

Iron Ore Pellets

Market Environment – Ability to Fund Exploration

Positive momentum will drive investment (i.e. bull market)

Great Recession

Optimism?

Declining commodity price environment(difficult market to finance in)

Bear Market

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TSX Venture 10 year chart, www.stockwatch.com

Market Environment – Pick Commodity Wisely

COMMODITY PRICE is the fundamental incentive that drives exploration

• High commodity price makes exploration projects amenable to financing

– Prices currently low for many commodities – diminished exploration activity

– Lithium & cobalt – hot commodities right now

• Watch out! – leads to many “bandwagon” companies with un-validated projects that are forcefully promoted

A fundamental flaw with industry is that a mine typically takes 10-15 years to develop post discovery; however, commodity prices today drive exploration today, whereas in reality, at production commodity prices may be markedly different

Global staking rush right now for lithium projects

Market Environment – Commodity Price

Commodity price drives exploration

Eldor Complex Discovered

Eldor claims lapse

Virginia Mines stakes complex

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Market Environment – Commodity Price

Easy to finance projectsLOTS OF EXPLORATION >600 active

REE projects

Downturn weeds out the weak

<10 projects estimated to still be advancing globally

Rare earth what?

China cuts off REE exports to

Japan

Market Environment – Commodity Cycle

The commodity cycle is complex – supply & demand are fundamental

• High price environment

– Increased exploration and development expenditures

– Mines may increase production to capture upside

• Large expansions approved that may take years to complete

• May result in oversupply if added production comes online during market downturn

• Low price environment

– Mines may increase production to bring down unit cost

• Exacerbates problem by saturating market and further depressing prices (e.g. iron ore, oil)

– Mine may continue to operate at a loss because it's so expensive re-start back up when prices are higher (e.g. oil sands, potash mines)

– Focus on “high-grading” a deposit

• Short term solution with long term downside as ore body depleted sooner & lower grade ore may be sterilized

– “the cure for low prices, is low prices” – removes supply from market

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Why Explore Here and Not There?

As they say in real-estate, Location, Location, Location!

• Jurisdiction

– Security of tenure is absolutely essential or investment will not occur

– Canada consistently ranks among the top jurisdictions globally for mining investment attractiveness (Fraser Institute Annual Report)

• In 2016 – Saskatchewan (1/104), Manitoba (2/104), Quebec (6/104), Alberta (47/104, was #14 in 2012), Argentina – Jujuy (104 of 104),

• Presence of infrastructure

– A lack thereof requires higher grade/tonnage

• Geology and mineral potential

• Social portrait

– Recognize, respect, engage

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Regulated Industry

The mineral exploration industry is regulated based on jurisdiction of listing

• Regulatory guidelines include National Instrument 43-101 (Canada), PERC (Europe), SAMREC (South Africa), JORC (Australia)

– Standards of disclosure

– Regular financial filings

– Regular third party financial audits

– Disclosure available in public domain (www.SEDAR.com for NI 43-101)

• Most Canadian listed Junior resource companies trade on the TSX-Venture exchange

– Vancouver, Toronto, or Montreal are most common head office locations

– Projects may be located in Canada or abroad

NI 43-101 came into force in early 2001, and established standards for all public disclosure an Issuer [company] makes of scientific and technical information concerning mineral properties/projects1

1. Canadian Institute of Mining, Metallurgy, and Petroleum (CIM)

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• Exploration

• Discovery

• Deposit Definition

• Mineral Resource Estimate

• Preliminary Economic Assessment (PEA)

• Pre-feasibility Study (PFS)

• Feasibility Study (FS)

• Production Decision & Financing

The Journey – Asset Development & De-risking

• Construction Begins

• Mining Operations Commence

Preliminary Economic Assessment (PEA) –Is there a project worth pursuing?

Pre-feasibility Study –Establishes a Project Description

Feasibility Study – Provides the basis for financing & development decision

Each stage is a GO, or NO GO decision on whether or not to advance the project. Production is never guaranteed

Terms like NPV (net present value), IRR (internal rate of return), CAPEX, OPEX, and Payback used to assess economic potential of project, and compare to peers

Mine Closure & Reclamation

Project Acquisition

ESIA Process Begins(Environmental & Social Impact Assessment)

ESIA Process Completed

Impact & Benefit Agreement (IBA)

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The Journey – Discovery to Mine Closure

Time

Mar

ket

Cap

(“c

om

pan

y va

lue”

)

Discovery

EXPLORATION(High Risk)

DEVELOPMENT(De-risking Phase)

PRODUCTION

Speculation(“Blue Sky Euphoria”)

Engineering & Related Studies

Production Decision

First Production

Construction

Reality Check

Mine Depletion, Closure, &Reclamation

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The Journey – Voisey’s Bay Mine (Ni-Cu-Co)

Speculation(“Blue Sky Euphoria”)

Reality Check

Discovery

Increased market value with production

Shar

e P

rice

Year

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Mineral Exploration Company – Final Takeaways

1. No producing assets, but rather owns mineral rights

2. No operating cash flow - ability to finance essential

3. Objective is to maximize shareholder value through discovery and asset development

4. Odds of success are very low; however, potential reward is very high

5. Successfully mineral exploration relies on favourable geology, jurisdiction, location, and ability to finance project (i.e. positive market environment)

The mineral exploration industry is notoriously cyclical

Core Logging Tools

Ashram Mineralization

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Contact

Darren L. Smith, M.Sc., P.Geol. | Ashram Project Manager

COMMERCE RESOURCES CORP.T 780-434-9808 |C 780-288-5440 |