Mr. Dragos Tanase reports

2023 SECOND QUARTER REPORT

Gabriel Resources Ltd. has published its second quarter financial statements and management's discussion and analysis report for the period ended June 30, 2023.

Summary:

• Gabriel and its wholly owned indirect subsidiary, Gabriel Resources (Jersey) Ltd. (together the claimants), remain focused on concluding their arbitration case against the Romanian State (respondent) under the rules of the International Centre for Settlement of Investment Disputes (ICSID), part of the World Bank (ICSID arbitration):
  • The claimants and respondent (together the parties) currently await a final decision from the presiding arbitral tribunal in the ICSID arbitration proceedings (an arbitral award). In a procedural order made by the tribunal on June 27, 2023, the tribunal noted that its decision-making at this stage is almost complete.
  • However, there is no specified time frame in the ICSID rules applicable to this case in which an award is to be rendered by the tribunal. Accordingly, there is no certainty as to when the written award will be issued or whether further procedural steps may be required by the tribunal prior to the issuance of an award.
• On June 8, 2023, the company completed a non-brokered private placement of 24,782,212 common shares of the company at a price of 26 cents each for gross proceeds of $4.75-million (U.S.) (approximately $6.4-million).
• As at June 30, 2023, the company held $7.0-million of cash and cash equivalents (Q1 2023 -- $3.6-million).
• The company believes that it has sufficient financing necessary to cover its planned activities through to December, 2023, and will need to raise additional financing thereafter to finance ICSID arbitration costs and working capital requirements.
• The net loss for the second quarter of 2023 was $2.6-million (Q1 2023 -- $2.0-million).
• All resolutions were adopted at the annual general meeting of shareholders (AGM) held earlier today.

Dragos Tanase, Gabriel's president and chief executive officer, stated:

"We remain grateful for the continued financial support and patience of our shareholders as Gabriel looks forward to the prospect of receiving a binding and enforceable judgment in its favour from the ICSID arbitration tribunal this year. We will then assess the strategic direction and tactical steps of the business postaward."

Further information and commentary on the results in the second quarter of 2023 are given below. The company has filed its unaudited condensed interim consolidated financial statements for Q2 2023 and related management's discussion and analysis on SEDAR, and each is available for review on the company's website.

Status of the ICSID arbitration:

• The ICSID arbitration seeks compensation for all of the loss and damage suffered by the claimants resulting from the respondent's wrongful conduct and its breaches of the protections afforded by certain treaties for the promotion and protection of foreign investment to which Romania is a party, including unlawful treatment in respect of the Rosia Montana gold and silver project, together with the gold, silver and porphyry copper deposits defined in the Bucium concession area and related licences.
• In April, 2023, the president of the tribunal advised the parties that the tribunal's latest deliberations took place in December, 2022, and March, 2023, and that the tribunal was working hard to prepare an award and deliver it to the parties in a timely manner.
• In a procedural order made by the tribunal on June 27, 2023, rejecting a further request by non-disputing parties for leave to add a second submission to the record of the case, the tribunal noted that its decision-making at this stage is almost complete.
• There is no specified time frame in the ICSID rules applicable to this case in which an award is to be rendered by the tribunal. Accordingly, there is no certainty as to when the written award will be issued or whether further procedural steps may be required by the tribunal prior to the issuance of an award.
• Any award may be subject to a request for annulment by either party (albeit such annulment application can only be made on very limited grounds under the ICSID convention). The process for annulment, enforcement and recovery of an award may present material challenges and take a number of years. There can be no assurances that the ICSID arbitration will advance in a customary or predictable manner or be completed or settled within any specific or reasonable period of time.

Liquidity:

• Cash and cash equivalents at June 30, 2023, were $7.0-million.
• The company's average monthly cash usage during Q2 2023 was $1.0-million (Q1 2023 -- $700,000), primarily reflecting the consistent level of continuing operational cost and limited ICSID arbitration activity quarter on quarter.
• At June 30, 2023, accruals for costs in respect of the ICSID arbitration amounted to $4.6-million (Q1 2023 -- $4.5-million), reflecting the continuation of a fee agreement in respect of the deferred payment of certain ICSID arbitration costs until an award is issued.

Capital resources

Private placement:

• On June 8, 2023, the company completed the 2023 private placement of 24,782,212 common shares at a price of 26 cents each for gross proceeds of $4.75-million (U.S.) (approximately $6.4-million). The company will use the proceeds from the 2023 private placement to finance the continuing costs of the ICSID arbitration and for general working capital requirements.

Future financing requirements:

• The company believes that, taking into account (i) the fee agreement in respect of the deferral of payment of certain ICSID arbitration costs; and (ii) the deferral of a portion of salary and fees for certain employees and directors, it has sufficient cash to enable the group to finance general working capital requirements, together with the material estimated costs associated with the company advancing the ICSID arbitration through to December, 2023.
• At that time, the tribunal may not have yet reached a decision. Accordingly, after December, 2023, Gabriel will require further financing in order to pursue the long-term activities required to see the ICSID arbitration through to its conclusion (which may include, as appropriate, costs of any potential annulment proceedings and/or costs of enforcement of any award) and for general working capital purposes, including to preserve its remaining assets, such as its exploitation licence for the Rosia Montana project and associated rights and permits.
• Notwithstanding the company's recent and historic financing, there is a risk that sufficient additional financing may not be available to the company on acceptable terms or at all.

Financial performance:

• Operating loss for the second quarter of 2023 of $2.6-million was $200,000 lower when compared with the corresponding period in 2022 ($2.8-million), primarily reflecting a $200,000 lower share-based compensation charge.
• Overall loss for the second quarter of 2023 was also $2.6-million, compared with $2.8-million in the corresponding period in 2022.

RMGC -- government audits and investigations:

• Since the filing of the ICSID arbitration, RMGC has been subjected to several value-added tax (VAT) audits and other investigations by divisions of the Romanian National Agency for Fiscal Administration (ANAF), an agency of the Romanian Ministry of Public Finance, the ministry charged with Romania's defence of the ICSID arbitration. The timing, scope and manner of implementation of these audits and investigations are, in the view of Gabriel and RMGC, excessive and retaliatory to the company's pursuit of the ICSID arbitration.
• In October, 2022, RMGC was notified of ANAF's decision to fully reimburse amounts challenged by RMGC to the refusal of ANAF to refund VAT during initial audits of periods from February, 2016, to September, 2021 (in aggregate approximately $250,000).
• For over eight years, a directorate of ANAF has continued to pursue an ad hoc investigation covering a broad range of operational activities and transactions of RMGC, and several of its suppliers, consultants and advisers, covering an extensive period spanning 1997 to 2023. The investigation remains active and continuing and the most recent developments include the following.
• In December, 2022, a division of ANAF issued two findings reports in respect of an aggregate 16 suppliers of RMGC. In March, 2023, a division of ANAF issued a further findings report in respect of an additional 35 suppliers of RMGC.
• These findings reports assessed transactions amounting to an aggregate value of approximately $157-million and allege that various amounts were incorrectly deducted for fiscal purposes, erroneously adjusting VAT and with labour tax inaccuracies.
• ANAF concluded that expenditure of approximately $14.6-million was allegedly incurred on purposes not directly related to carrying out RMGC's object of activity.
• A further findings report in respect of an investigation of transactions involving RMGC's core technical advisers is expected in due course.
• RMGC (together with its professional advisers) has filed substantive written rebuttal submissions in response to the above-noted findings reports, identifying, among other things, the multiple errors and inaccuracies in such reports, that the conclusions of the findings' reports contradict the conclusions of multiple prior fiscal audits undertaken in respect of RMGC, and that such conclusions disregard Romanian legislation, European jurisprudence and prior decisions of the Romanian Supreme Court.
• Gabriel and RMGC will continue to vigorously challenge and contest the continuing abusive investigations by ANAF and the flawed findings reports.

Change of auditor:

• Effective as of May 12, 2023, PriceWaterhouseCoopers LLP resigned as auditor at the request of the company, and Ernst & Young LLP has been appointed as successor auditor to hold office until the close of next annual meeting of the company at a remuneration to be fixed by the board.

Annual general meeting:

• The company held its AGM earlier today, Aug. 3, 2023, and all of the resolutions proposed to shareholders, as set out in the company's management information circular dated June 28, 2023, were adopted. The resolutions included: (i) re-electing Anna El-Erian, Jeffrey Couch, Dag Cramer, Ali Erfan, Daniel Kochav, James Lieber and Dragos Tanase as directors of the company; and (ii) reappointing Ernst and Young LLP as the auditor of the company for the ensuing year and authorization of the directors of the company to fix the auditor's remuneration.

Russia-Ukraine conflict:

• Given, among other things, the geographical proximity of Romania to Ukraine, Gabriel is closely monitoring the situation in Ukraine with concern for all those who are impacted by the unfolding conflict and humanitarian crisis. At this time, Gabriel has not experienced any material disruption to its operations, including its limited activities in Romania, as a consequence of the Russia-Ukraine conflict and the group will continue to operate its business in accordance with the circumstances that arise.

About Gabriel Resources Ltd.

Gabriel is a Canadian resource company listed on the TSX Venture Exchange. The company's principal business had been the exploration and development of the Rosia Montana gold and silver project in Romania. The Rosia Montana project, one of the largest undeveloped gold deposits in Europe, is situated in the South Apuseni Mountains of Transylvania, Romania, a historic and prolific mining district that since pre-Roman times has been mined intermittently for over 2,000 years. The exploitation licence for the Rosia Montana project is held by Rosia Montana Gold Corp. S.A., a Romanian company in which Gabriel owns an 80.69-per-cent equity interest, with the 19.31-per-cent balance held by Minvest Rosia Montana S.A., a Romanian state-owned mining company.

Upon obtaining the licence in June, 1999, the group focused substantially all of its management and financial resources on the exploration, feasibility and subsequent development of the Rosia Montana project. Despite the company's fulfilment of its legal obligations and its development of the Rosia Montana project as a high-quality, sustainable and environmentally responsible mining project, using best available techniques, Romania has unlawfully blocked and prevented implementation of the Rosia Montana project without due process and without compensation. Accordingly, the company's current core focus is the ICSID arbitration.

We seek Safe Harbor.