cardero resource corp. · office costs 47,367 85,435 professional fees 15,534 23,506 regulatory and...

CARDERO RESOURCE CORP. (An Exploration Stage Company)

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

Three months ended January 31, 2019 and 2018

Corporate Head Office

Suite 2300 – 1177 West Hastings Street Vancouver, British Columbia

V6E 2K3 Tel: 604-408-7488

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3(a)), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Financial Statements (Expressed in Canadian Dollars) (Unaudited – Prepared by Management) January 31, 2019 and 2018

INDEX Page Condensed Interim Consolidated Financial Statements 1-5 Condensed Interim Consolidated Statements of Financial Position 1 Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) 2 Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity 3-4 Condensed Interim Consolidated Statements of Cash Flows 5 Notes to Condensed Interim Consolidated Financial Statements 6-24

See Notes to Condensed Interim Consolidated Financial Statements 1

CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

January 31, 2019 October 31, 2018

ASSETS

Current

Cash $ - $ 21,830

Accounts receivable 40,046 35,314

Due from related parties 6,490 53,578

Prepaid expenses 22,428 18,637

Total Current Assets 68,964 129,359

Property and Equipment (note 4) 64,863 70,299

Investment in Associate (note 13) 597,096 1,137,528

Exploration and Evaluation Assets (note 6) 6,692,526 6,141,543

Deposits 94,714 94,714

Total Assets $ 7,518,163 $ 7,573,443

LIABILITIES

Current

Accounts payable and accrued liabilities (note 9) $ 746,716 $ 849,555

Bank indebtedness 4,948 -

Related party loan (note 9) 1,044,254 373,720

Interest payable (note 9) 17,624 17,624

Dividend payable (note 7) 770,630 530,630

Total Current Liabilities 2,584,172 1,771,529

Liability Portion of Preferred Shares (note 7) 2,400,000 2,400,000

Total Liabilities 4,984,172 4,171,529

SHAREHOLDERS’ EQUITY

Share Capital (note 8) 135,215,897 135,177,497

Contributed Surplus (note 8) 32,421,971 31,731,635

Deficit (165,103,877) (163,507,218)

2,533,991 3,401,914

Total Liabilities and Shareholders’ Equity $ 7,518,163 $ 7,573,443

Commitments (Note 14) Subsequent events (Note 15) Approved on behalf of the Board on March 26, 2019: Approved on behalf of the Board: “Stuart Ross” “Robert van Doorn” Stuart Ross, CEO Robert van Doorn, Director


CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in Canadian Dollars) (Unaudited – Prepared by Management) Three Months Ended January 31

2019 2018

Expenses

Consulting fees (note 9) $ 48,000 $ 15,000

Corporate development - 19,262

Depreciation (note 4) 5,436 5,662

Insurance 8,461 12,712

Investor relations 3,309 201

Office costs 47,367 85,435

Professional fees 15,534 23,506

Regulatory and transfer agent fees 1,890 20,551

Salaries and benefits (note 9) 158,225 161,452

Stock-based compensation (notes 8 and 9) 690,336 385,753

Travel 14,674 13,993

(993,232) (743,527)

Interest expenses (2,227) (56,575)

Foreign exchange gain (loss) (20,768) 21,311

Gain on deconsolidation of subsidiary (note 13) - 3,256,230

Share of change in net assets and dilution in associate (note 13) (340,432) -

Dividend expense (note 7) (240,000) (240,000)

Income (Loss) for the Period $ (1,596,659) $ 2,237,439

Other Comprehensive Income (Loss)

Items that will be subsequently recycled through profit or loss:

Other comprehensive income on available-for-sale securities - 42,478

Other Comprehensive Income (Loss) for the Period $ (1,596,659) 2,279,917

Income (Loss) and Comprehensive Income (Loss) for the Period $ (1,596,659) $ 2,279,917

Basic and Diluted Income (Loss) Per Share $ (0.02) $ 0.04

Weighted Average Number of Common Shares Outstanding 73,885,450 53,131,818


CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

Share Capital

Deficit

Non-Controlling

Interest

Total Shareholders’

Equity

Preferred Shares (note 7)

Common Shares Amount

Contributed Surplus

Accumulated Other

Comprehensive Income

Balance, October 31, 2017 12,000,000 50,453,364 $ 132,206,387 $ 32,011,483 $ 5,073 $ (164,187,672) $ 1,966,546 $ 2,001,817 Income for the year - - - - - 680,454 - 680,454 Other comprehensive income: Realized gain on available-for-sale

investments

- - - - (5,073) - - (5,073) Shares issued for cash: Private placement – flow-through - 1,142,858 200,000 - - - - 200,000 Private placement – units - 4,150,142 581,020 - - - - 581,020

Exercise of options - 2,198,000 219,800 - - - - 219,800 Share issue costs – cash - - (7,893) - - - - (7,893)

Shares issued for non-cash: Property acquisition - 15,579,099 1,918,805 - - - - 1,918,805

Private placement – finders’ shares - 15,750 - - - - - - Reallocation on exercise of options - - 99,378 (99,378) - - - - Flow-through share premium liability - - (40,000) - - - - (40,000) Deconsolidation of subsidiary - - - (614,633) - - (1,966,546) (2,581,179) Credit facility warrants to management - - - 64,546 - - - 64,546 Share-based compensation - - - 369,617 - - - 369,617 Balance, October 31, 2018 12,000,000 73,539,213 $ 135,177,497 $ 31,731,635 $ - $ (163,507,218) $ - $ 3,401,914


CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

Share Capital

Deficit Contributed

Surplus

Total Shareholders’

Equity Preferred

Shares Common

Shares Amount Balance, October 31, 2018 12,000,000 73,539,213 $ 135,177,497 $ (163,507,218) $ 31,731,635 $ 3,401,914 Loss for the period - - - (1,596,659) - (1,596,659) Shares issued for cash: Private placement - 300,000 30,000 - - 30,000 Share issue costs - cash - - (1,600) - - (1,600) Shares issued for non-cash: Property acquisition - 100,000 10,000 - - 10,000 Credit facility warrants to management - - - - 27,336 27,336 Facility and Loan bonus warrants - - - - 619,000 619,000 Share-based compensation - - - - 44,000 44,000 Balance, January 31, 2019 12,000,000 73,939,213 $ 135,215,897 $ (165,103,877) $ 32,421,971 $ 2,533,991


CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Condensed Interim Consolidated Statements of Cash Flows (Expressed in Canadian Dollars) (Unaudited – Prepared by Management) Three Months Ended January 31

2019 2018

Operating Activities

Income (loss) for the period $ (1,596,659) $ 2,237,439

Items not involving cash:

Depreciation 5,436 5,662

Share-based compensation 690,336 385,753

Equity loss in associated company 340,432 -

Gain on deconsolidation of subsidiary - (3,256,230)

Dividend expense 240,000 -

Changes in non-cash working capital items:

Accounts receivable (4,732) 34,382

Prepaid expenses (3,791) (18,662)

Dividend payable - 240,000

Interest payable - 56,575

Due from related parties 47,088 -

Accounts payable and accrued liabilities (102,839) 72,135

Cash (Used in) Operating Activities (384,729) (242,946)

Investing Activities

Expenditures on exploration and evaluation assets (540,983) (926,485)

Proceeds from sale of former subsidiary (investment in associate) (note 13) 200,000 650,000

Cash (Used in) Investing Activities (340,983) (276,485)

Financing Activities

Proceeds from shares issued 30,000 200,000

Share issue costs (1,600) -

Proceeds from exercise of options - 219,800

Line of credit (related party loan) 670,534 -

Bank indebtedness 4,948 -

Cash Provided by Financing Activities 703,882 419,800

Change in cash during the period (21,830) (99,631)

Cash deconsolidated during the period (note 13) - (838,013)

Cash, Beginning of the Period 21,830 1,255,560

Cash, End of the Period $ - $ 317,916

Supplemental cash flow information (note 11)

CARDERO RESOURCE CORP. (AN EXPLORATION STAGE COMPANY) Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian Dollars) Three Months ended January 31, 2019 and 2018

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1. NATURE OF OPERATIONS AND GOING CONCERN Cardero Resource Corp. (“Cardero” or the “Company”) and its subsidiaries are engaged in the exploration of mineral properties, primarily in Canada and the United States. The Company considers itself to be an exploration stage company. The Company is a public company with shares listed on the TSX Venture Exchange (the “TSX.V”) and the Frankfurt Stock Exchange. The head office, principal address and records office of the Company are located at 1177 West Hastings Street, Suite 2300, Vancouver, British Columbia, Canada, V6E 2K3. Effective January 3, 2018, the Company deconsolidated its former subsidiary, Centenera Mining Corporation (“Centenera”) upon disposal of a portion of its holdings in Centenera. The Company now accounts for its remaining interest in Centenera under the equity method, presented as investment in associate (Note 13). Going concern While these condensed interim consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its commitments, continue operations, realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The following events and conditions raise significant doubt on the validity of that assumption: During the period ended January 31, 2019, the Company incurred a loss of $1,596,659;

As at January 31, 2019, the Company had an accumulated deficit of $165,103,877 and a working capital deficit of

$2,653,136; and

Additional sources of financing are required to enable the Company to meet its existing obligations. While the Company has been successful in obtaining its required funding in the past, there is no assurance that sufficient funds will be available to the Company in the future. The Company has no assurance that such financing will be available or be available on favorable terms. Factors that could affect the availability of financing include the progress and results of the Company’s exploration properties, the state of international debt and equity markets, investor perceptions and expectations, and the global financial, copper and gold markets. There can be no assurance the Company will be successful in its endeavor to obtain additional financing. These condensed interim consolidated financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported revenues and expenses, and the condensed interim consolidated statement of financial position classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities in the normal course of operations. Such adjustments could be material.

2. BASIS OF PRESENTATION

(a) Basis of presentation

Statement of compliance These condensed interim consolidated financial statements have been prepared in accordance with Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed interim consolidated financial statements follow the same accounting policies and methods of applications our most recent annual consolidated financial statements. Accordingly, the condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended October 31, 2018, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).


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2. BASIS OF PRESENTATION (Continued)

(a) Basis of presentation (continued) The condensed interim consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as available-for-sale or fair value through profit and loss, which are stated at their fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The presentation and functional currency of the Company and its subsidiaries is the Canadian dollar.

(b) Basis of consolidation

These condensed interim consolidated financial statements include the accounts of Cardero and its wholly owned integrated subsidiaries, Cardero Copper (USA) Ltd., Cardero Hierro Del Peru S.A.C. (inactive), Cerro Colorado Development Ltd. (inactive), and Compania Minera Cardero Chile Limitada (inactive).

(c) Critical accounting estimates and judgments

The preparation of condensed interim consolidated financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. There were no changes to the Company’s most significant accounting judgments and estimates during the period. The Company significant accounting estimates and judgments remain the same as those disclosed in Note 2 (c) of the Company’s annual consolidated financial statements for the year ended October 31, 2018.

3. SIGNIFICANT ACCOUNTING POLICIES

New standards and interpretations not yet adopted Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for future accounting periods. The following have not yet been adopted by the Company and are being evaluated to determine their impact. IFRS 16 Leases This new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. The new standard introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease. The main features of the new standard are as follows:

An entity identifies as a lease a contract that conveys the right to control the use of an identified asset for a

period of time in exchange for consideration. A lessee recognizes an asset representing the right to use the leased asset, and a liability for its obligation to

make lease payments. Exceptions are permitted for short-term leases and leases of low-value assets. A lease asset is initially measured at cost and is then depreciated similarly to property and equipment. A lease

liability is initially measured at the present value of the unpaid lease payments. A lessee presents interest expense on a lease liability separately from depreciation of a lease asset in the

statement of profit or loss and other comprehensive income. A lessor continues to classify its leases as operating leases or finance leases, and to account for them

accordingly. A lessor provides enhanced disclosures about its risk exposure, particularly exposure to residual-value risk.


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3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

IFRS 16 Leases (continued) The new standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The new standard is effective for the Company's annual period beginning November 1, 2019. The Company does not expect a significant impact on its consolidated financial statements upon adoption of this standard. Annual Improvements to IFRS Standards 2015–2017 Cycle The following standards have been revised to incorporate amendments issued by the IASB in December 2017:

IFRS 3 Business Combinations – The amendments clarify that when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in that business.

IFRS 11 Joint Arrangements – The amendments clarify that when an entity obtains joint control of a business that is a joint operation, it does not remeasure previously held interests in that business.

IAS 12 Income Taxes – The amendments clarify that an entity recognizes income tax consequences of dividends in profit or loss, other comprehensive income or equity, depending on where the entity recognized the originating transaction or event that generated the distributable profits giving rise to the dividend.

IAS 23 Borrowing Costs – The amendments clarify that an entity treats as general borrowings any borrowings made specifically to obtain a qualifying asset that remain outstanding when the asset is ready for its intended use or sale.

The amendments are effective for the Company's annual period beginning November 1, 2019. The Company does not expect a significant impact on its consolidated financial statements upon adoption of these standards. New standards adopted Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that became mandatory for effective November 1, 2018 for the Company as follows:

Annual Improvements to IFRS Standards 2014–2016 Cycle

The following standards have been revised to incorporate amendments issued by the IASB in December 2016:

IFRS 1 First-time Adoption of International Financial Reporting Standards – The amendments remove some

short-term exemptions for first-time adopters. IFRS 12 Disclosure of Interests in Other Entities – The amendments clarify that the disclosure requirements

in the standard apply to interests in entities within the scope of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

IAS 28 Investments in Associates and Joint Ventures – The amendments clarify that the election available to some types of investment entities to measure investees at fair value through profit or loss at initial recognition is applied on an investment-by-investment basis. The amendments also clarify that an entity that is not an investment entity decides on an investment-by-investment basis whether to retain the fair value measurements applied by its associates and joint ventures that are investment entities.

There was no impact on the Company’s financial statements as a result of adopting these revisions.


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IFRIC 22 Foreign Currency Transactions and Advance Consideration IFRIC 22 provides guidance on how to determine the "date of the transaction" for purposes of identifying the exchange rate to use in transactions within the scope of IAS 21 The Effects of Changes in Foreign Exchange Rates involving the payment or receipt of consideration in advance. The main features of IFRIC 22 are as follows: An entity uses the exchange rate on the date that the advanced foreign currency consideration is paid or received

to translate the related asset, expense or income upon initial recognition. When there are multiple advance payments or receipts, the entity determines this date for each such payment or

receipt. There was no impact on the Company’s financial statements as a result of adopting this standard. Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2 Share-based Payment) The amendments provide guidance on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the

transaction from cash-settled to equity-settled. There was no impact on the Company’s financial statements as a result of adopting this standard. IFRS 9 Financial Instruments The main features introduced by this new standard compared with predecessor IFRS are as follows: Classification and measurement of financial assets:

Debt instruments are classified and measured on the basis of the entity's business model for managing the asset and its contractual cash flow characteristics as either: “amortized cost”, “fair value through other comprehensive income”, or “fair value through profit or loss” (default). Equity instruments are classified and measured as “fair value through profit or loss” unless upon initial recognition elected to be classified as “fair value through other comprehensive income”.

Classification and measurement of financial liabilities:

When an entity elects to measure a financial liability at fair value, gains or losses due to changes in the entity’s own credit risk is recognized in other comprehensive income (as opposed to previously profit or loss). This change may be adopted early in isolation of the remainder of IFRS 9.

Impairment of financial assets:

An expected credit loss impairment model replaced the incurred loss model and is applied to financial assets at “amortized cost” or “fair value through other comprehensive income”, lease receivables, contract assets or loan commitments and financial guarantee contracts. An entity recognizes twelve-month expected credit losses if the credit risk of a financial instrument has not increased significantly since initial recognition and lifetime expected credit losses otherwise.


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IFRS 9 Financial Instruments (continued) There was no impact on the Company’s financial statements as a result of adopting this standard. Refer to New accounting policy for details of the Company’s new accounting policy in respect of adopting IFRS 9. Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28 Investments in Associates and Joint Ventures) IAS 28 Investments in Associates and Joint Ventures has been revised to incorporate amendments issued by the IASB in October 2017. The amendments clarify that an entity applies IFRS 9, including its impairment requirements, to long-term interests in an associate or joint venture to which the equity method is not applied. There was no impact on the Company’s financial statements as a result of adopting this standard. New accounting policy IFRS 9 – Financial Instruments

The Company has adopted new accounting standard IFRS 9 - Financial Instruments, effective for annual periods beginning on or after January 1, 2018. The adoption of IFRS 9 did not result in any changes to the classification, measurement or carrying amounts of the Company’s existing financial instruments on the transition date of November 1, 2018. The new standard brings together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 - Financial instruments: recognition and measurement. The standard retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The details of the new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below. Classification and measurement of financial assets and liabilities IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held-to-maturity, loans and receivables, and available-for-sale. The adoption of IFRS 9 has not had a significant effect on the Company’s accounting policies related to financial liabilities. The classifications of financial liabilities remain the same under IFRS 9, as they were under IAS 39. The impact of IFRS 9 on the classification and measurement of financial assets is set out below. A financial asset is classified as measured at: amortized cost; fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification. The classifications of the Company’s financial instruments given effect to the adoption of IFRS 9 are included in the significant accounting policy below, “Financial Instruments.”


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New accounting policy IFRS 9 – Financial Instruments Impairment of financial assets An ‘expected credit loss’ (“ECL”) model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. The Company's financial assets measured at amortized cost and subject to the ECL model are shown in the table below. The adoption of the ECL impairment model had no impact on the carrying amounts of the Company's financial assets on the transition date given the receivables are substantially all current, due from related parties are due from credit worthy individuals, and promissory note receivable is due from a credit-worthy company with the note remaining in good standing. Additionally, there has been minimal historical customer default. Financial instruments All financial instruments are recognized initially at fair value on the date at which the Company becomes a party to the contractual provisions of the instrument. Classification and measurement The Company classifies its financial instruments in the following categories based on the purpose for which the asset was acquired: FVTPL, amortized cost, FVOCI, and other financial liabilities. The impact of the adoption of IFRS 9 did not change the measurement approach of any of the financial instruments below. The Company’s financial assets and financial liabilities are classified and measured as follows:

Measurement Category

Asset/Liability Original (IAS 39)

New (IFRS 9)

Subsequent measurement

Cash FVTPL FVTPL Fair value Accounts receivable Loans and receivables Amortized cost Amortized cost Due from related parties Loans and receivables Amortized cost Amortized cost Accounts payable and accrued liabilities Other financial liabilities Other financial liabilities Amortized cost Bank indebtedness Other financial liabilities Other financial liabilities Amortized cost Related party loan Other financial liabilities Other financial liabilities Amortized cost Interest payable Other financial liabilities Other financial liabilities Amortized cost Dividend payable Other financial liabilities Other financial liabilities Amortized cost


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4. PROPERTY AND EQUIPMENT

Leasehold

Improvements Other Total Cost Balance, October 31, 2017 $ 345,068 $ 421,779 $ 766,847

Deconsolidation of a subsidiary (note 13) - (19,986) (19,986) Balance, October 31, 2018 $ 345,068 $ 401,793 $ 746,861

Additions - - -

Balance, January 31, 2019 $ 345,068 $ 401,793 $ 746,861 Accumulated depreciation Balance, October 31, 2017 $ 296,983 $ 361,800 $ 658,783

Depreciation 13,454 9,195 22,649 Deconsolidation of subsidiary (note 13) - (4,870) (4,870)

Balance, October 31, 2018 $ 310,437 $ 366,125 $ 676,562

Depreciation 3,363 2,073 5,436 Balance, January 31, 2019 $ 313,800 $ 368,198 $ 681,998 Net book value

At October 31, 2018 $ 34,631 $ 35,668 $ 70,299 At January 31, 2019 $ 31,268 $ 33,595 $ 64,863

5. INVESTMENTS

During the year ended October 31, 2018, the Company sold all its remaining investments for net proceeds of $55,700 (2017 - $1,725,069) for a gain on sale of $49,995 (2017 - $1,380,470) with a corresponding recycle of gain on available-for-sale investments of $5,073 (2017 – $1,699,839).


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6. EXPLORATION AND EVALUATION ASSETS The Company’s capitalized acquisition and exploration expenditures on its exploration and evaluation assets are as follows:

U.S.A. Argentina Canada Total Balance, October 31, 2017 $ 2,297,801 $ 936,533 $ 133,428 $ 3,367,762 Acquisition costs: Acquisition costs – Cardero shares 1,863,805 - 55,000 1,918,805 Acquisition costs – cash 881,599 - - 881,599 Total acquisition costs 2,745,404 - 55,000 2,800,404 Deferred exploration costs: Field 49,228 - 161,927 211,155 Assays 133,402 - 52,874 186,276 Geology 352,432 - 79,221 431,653 Claim maintenance 80,826 - - 80,826 Total exploration costs 615,888 - 294,022 909,910

Total expenditures for the year 3,361,292 - 349,022 3,710,314 Deconsolidation of a subsidiary (note 13) - (936,533) - (936,533) Balance, October 31, 2018 $ 5,659,093 $ - $ 482,450 $ 6,141,543 Acquisition costs: Acquisition costs – shares - - 10,000 10,000 Acquisition costs – cash 503,533 - 5,000 508,033 Total acquisition costs 503,533 - 15,000 518,533 Deferred exploration costs: Field 2,332 - - 2,332 Geology 19,809 - 5,596 25,405 Consulting 2,317 - - 2,317 Claim maintenance 2,396 - - 2,396 Total exploration costs 26,854 - 5,596 32,450

Total expenditures for the year 530,387 - 20,596 550,983 Balance, January 31, 2019 $ 6,189,480 $ - $ 503,046 $ 6,692,526


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6. EXPLORATION AND EVALUATION ASSETS (Continued)

(a) United States

Zonia – Arizona Pursuant to an option agreement dated August 27, 2015, and as amended most recently on October 3, 2018, between the Company and Redstone Resources Corporation (“Redstone”), the Company acquired a 100% interest in the Zonia copper project. To exercise the option agreement, the Company must meet an aggregate US $1,981,350 cash payment obligation (amended from US $2,225,000), and 22,679,099 common shares issuance obligation (amended from 16,500,000 common shares), as follows:

Payment/Issuance Date US $ Cardero Shares August, 2015 $ 25,000 (paid) - August 30, 2015 26,350 (paid) - October 27, 2015 (the Effective Date) 150,000 (paid) 1,000,000 (issued) January 31, 2016 75,000 (paid) 1,500,000 (issued) July 31, 2016 75,000 (paid) - January 31, 2017 450,000 (paid) 2,500,000 (issued) July 31, 2017 - 2,500,000 (issued) January 8, 2018 500,000 (paid) 4,000,000 (issued) October 17, 2018 50,000 (paid) - October 31, 2018 126,000 (paid) 5,000,000 (issued) October 31, 2018 - 6,179,099 (issued) November 30, 2018 126,000 (paid) - December 31, 2018 126,000 (paid) - January 31, 2019 126,000 (paid) - February 28, 2019 126,000 (paid) - Total $ 1,981,350 22,679,099

As amended most recently on October 3, 2018, the final payment of $573,000 is to be paid in five installments, with a 10% bonus added to each installment, of US $126,000. The Company received all five installments of US $126,000. In the event that a payment is not made as required this will result in default and the Company will lose its 100% interest in the Zonia copper project.

Silver Queen – Arizona The Company acquired the property through staking.

(b) Canada Kootenay Property, British Columbia The Company entered into a property option agreement to acquire a 100% interest in the Kootenay property. The property is subject to a 1% NSR and the Company has the right to purchase one-half of the royalty for $1,000,000 after the Company has exercised its right to acquire the property. To exercise the option the Company must pay $900,000 and issue 3,000,000 common shares of the Company as follows:

Payment/Issuance Date Amount (CDN) Cardero Shares October 25, 2017 $ 25,000 (paid) - November 17, 2017 - 200,000 (issued) November 19, 2018 5,000 (paid) 100,000 (issued) April 19, 2019 25,000 100,000 June19, 2019 50,000 200,000 November 17, 2019 170,000 600,000 November 17, 2020 225,000 800,000 November 17, 2021 400,000 1,000,000 Total $ 900,000 3,000,000


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6. EXPLORATION AND EVALUATION ASSETS (Continued)

(b) Canada (Continued) Lardeau Property, British Columbia

The Company entered into a property option agreement to acquire a 100% interest in the Lardeau property. To exercise the option the Company must issue 1,400,000 common shares of the Company as follows:

Issuance date Cardero Shares December 12, 2017 (issued) 200,000 December 12, 2018 (issued) 300,000 December 12, 2019 300,000 December 12, 2020 300,000 December 12, 2021 300,000 Total 1,400,000

The property is subject to a 2% NSR and the Company has the right to purchase 50% of the royalty for $1,000,000 after the Company has exercised its right to acquire the property.

Carbon Creek Property, British Columbia During the year ended October 31, 2015, the Company sold its interest in Cardero Coal Ltd. (“Cardero Coal”), owner of the Carbon Creek Property, through its 75% interest in the Carbon Creek Joint Venture with a private Alberta partnership, through a debt restructuring process (note 7) with the Kopple Family Partnership LP and E.L.II Properties Trust (“Kopple Lenders”). Retained Participation Right As part of the debt restructuring, the Company retained a Participation Right on a sliding scale such that the Company will receive maximum benefit if the asset is sold. For example, if Carbon Creek was sold in 2015, the Kopple Lenders would retain the first US $15,000,000 in net proceeds and Cardero would receive 95% of the remaining sale price. The time at which the asset can be monetized, if at all, will be dependent on recovery of the metallurgical coal market.

Retained Participation Right

Year of Sale Initial Amount Retained by the

Kopple Lenders Percentage of Remaining Sale Proceeds Retained by Cardero

2015 US $15,000,000 95% 2016 US $20,000,000 80% 2017 US $25,000,000 50% 2018 US $30,000,000 35% 2019 US $30,000,000 30%

2020-24 US $30,000,000 25% 2025 US $30,000,000 0%

Title and environmental Although the Company has taken steps to verify the title to mineral properties in which it has or had a right to acquire an interest of such properties, these procedures do not guarantee title (whether of the Company or of any underlying vendor(s) from whom the Company may be acquiring its interest). Title to mineral properties may be subject to unregistered prior agreements or transfers and may also be affected by undetected defects or the rights of indigenous peoples. Environmental legislations are becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislations on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated.


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7. CREDIT FACILITY LETTER Effective July 23, 2015, the Kopple Lenders agreed to the restructuring of $10,500,000 (US $8,500,000) of debt owed by the Company. The restructuring is achieved through several mechanisms, including sale of Cardero Coal (pursuant to the Carbon Creek Property sale, (Note 6(b)) to the Kopple Lenders for $4,600,000 (US $3,600,000). The valuation attributed to Cardero Coal was subject to an independent valuation. See Note 9(b) for an additional Facility and Loan entered into by the Company during the period ended January 31, 2019. The remainder of the restructuring was via issuance of preferred shares, valued at $2,400,000 (US $2,000,000), and issuance of units, valued at $3,500,000 (US $2,900,000). The preferred shares and units (one common share and one-half of one warrant) were priced at $0.20. The preferred shares will have voting rights equivalent to the Company’s common shares, priority over the common shares in relation to the payment of dividends, a right of conversion into common shares and a fixed cumulative dividend rate of 8% of par value (being equal to the price) per annum payable yearly. Should any annual dividend not be paid, the cumulative dividend rate will increase to 10%. The Company will retain a right to redeem the preferred shares at a price equal to their par value, plus any accrued and unpaid dividends, for a period of five years. Using Level 3 of the fair value hierarchy, $2,400,000 (2018 - $2,400,000) of the preferred shares has been allocated to the liability portion of the preferred shares.

8. SHARE CAPITAL

(a) Authorized An unlimited number of common shares without par value.

(b) Share issuances During the three months ended January 31, 2019: On November 9, 2018, the Company issued 300,000 units for gross proceeds of $30,000. Each unit

comprised of one common share and one common share purchase warrant exercisable at $0.10 each until November 9, 2023.

On November 19, 2019, 100,000 common shares were issued for the Kootenay property acquisition at a fair value of $0.10 per share totalling $10,000.

During the three months ended January 31, 2018: On December 12, 2017, the Company completed a flow-though private placement of 1,142,858 flow-

through shares for gross proceeds of $200,000. The Company recognized a flow-through premium of $6,000.

On December 29, 2017, 2,198,000 shares were issued upon exercise of stock options for proceeds of $219,800.

On December 12, 2017, 200,000 common shares were issued for the Lardeau property acquisition,

at a price of $0.14 per share. On December 27, 2017, 200,000 common shares were issued for the Kootenay property acquisition,

at a price of $0.135 per share. On January 8, 2018, 4,000,000 common shares were issued for the Zonia property acquisition, at a

price of $0.16 per share.


17

8. SHARE CAPITAL (Continued)

(c) Share purchase warrants The following common share purchase warrants entitle the holders thereof to purchase one common share for each warrant. Warrants transactions are as follows:


Number of Warrants

Weighted Average Exercise

Price Number of Warrants


Price Warrants outstanding, beginning of the period 15,825,071 $ 0.27 22,450,000 $ 0.25 Issued – attached to units 300,000 $ 0.10 2,075,071 $ 0.21 Issued – bonus warrants on Facility and Loan (Note 9(b)) 12,262,850 $ 0.10 - $ - Expired - $ - (8,700,000) $ 0.20 Warrants outstanding, end of the period 28,387,921 $ 0.19 15,825,071 $ 0.27

Share-based payment expense for Credit Facility warrants issued in a prior year and as allocated to management for the period ended January 31, 2019 totalled $27,336 (January 31, 2018 - $16,136). Share-based payment expense for bonus warrants issued with the Facility and Loan (Note 9(b)) during the period ended January 31, 2019 totalled $619,000 (January 31, 2018 - $nil). The remainder of share-based payment expense recorded during the period ended January 31, 2019, relates to stock options. See Note 8(d) for fair value of stock options and weighted average inputs used in the valuation of warrants and options. The weighted average remaining contractual life of warrants outstanding at January 31, 2019 was 1.25 years. Warrants outstanding are as follows:

January 31, 2019

Expiry Date Exercise

Price Number of Warrants

October 11, 2020 $ 0.15 8,750,000 June 13, 2020 $ 0.21 1,346,357 July 12, 2020 $ 0.21 450,000 May 6, 2022 $ 0.50 5,000,000 September 21, 2020 $ 0.21 278,714 November 9, 2023 $ 0.10 300,000 November 13, 2023 $ 0.10 12,262,850 28,387,921

(d) Stock options

The Company has a stock option plan whereby the Company may grant options to directors, officers, employees and consultants to purchase common shares, provided that the aggregate number of shares subject to such options may not exceed 10% of the common shares outstanding at the time of any grant (not including agent or broker options). The exercise price of each option is required to be set at the higher of the closing price of the Company’s common shares on the trading day prior to the date of grant and the five-day volume-weighted average trading price for the five trading days prior to the date of grant (without any discounts). The option term and vesting period is determined by the Board of Directors within regulatory guidelines (the maximum term is ten years). All options are recorded at fair value when granted and are vested at the date of grant. Stock option plan transactions are as follows:


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8. SHARE CAPITAL (Continued) (d) Stock options (continued)


Number of

Options


Price Number of

Options


Price Options outstanding, beginning of the period 5,785,000 $ 0.16 5,045,000 $ 0.13 Granted 1,600,000 $ 0.10 3,000,000 $ 0.16 Cancelled - $ - (62,000) $ 0.10 Exercised - $ - (2,198,000) $ 0.10 Options outstanding, end of the period 7,385,000 $ 0.14 5,785,000 $ 0.16

The weighted average remaining contractual life of options outstanding at January 31, 2019 was 1.06 years. Stock options outstanding are as follows:

January 31, 2019

Expiry Date Exercise

Price Number of

Options Exercisable October 12, 2019 $ 0.15 2,785,000 2,785,000 January 12, 2020 $ 0.16 3,000,000 3,000,000 December 28, 2020 $ 0.10 1,600,000 1,600,000

7,385,000 7,385,000 The Company uses the fair value method for determining share-based payments for all options granted. The fair value was determined using the Black-Scholes option pricing model based on the following weighted average assumptions for the stock options granted, and bonus warrants issued during the period ended January 31, 2019:

January 31, 2019 Expected life (years) 2.00 Risk-free rate 1.85% Volatility 94.35% Dividend yield 0.00%

Share-based payment expense for the period ended January 31, 2019 totalled $690,336 of which $44,000 related to the granting and vesting of stock options during the period then ended (January 31, 2018 - $369,617), with the remainder relating to the Credit Facility warrants and bonus warrants, as discussed in Note 8(c).


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9. RELATED PARTY TRANSACTIONS

(a) Management Compensation Key management personnel compensation consists of amounts paid to senior management and the directors of the Company is comprised of:

January 31, 2019 January 31, 2018

Consulting $ 13,500 $ 13,500 Wages and benefits / Directors’ fees 60,000 78,000 Share-based payments - credit facility warrants 23,232 13,716 Share-based payments - stock options granted 43,047 252,571 Share-based payments - bonus warrants Facility and Loan 223,000 -

$ 362,779 $ 357,787

(b) Transactions with other related parties

January 31, 2019 January 31, 2018

Wages and benefits $ 9,000 $ 9,000 Share-based payments - stock options granted 953 27,721 Share-based payments - credit facility warrants 1,368 807

$ 11,321 $ 37,528 Accounts payable and accrued liabilities as at January 31, 2019 included $220,350 (October 31, 2018 - $86,306) owed to an officer and directors of the Company.

The Company entered into a facility agreement with E.L. II Properties Trust, for an unsecured credit facility (the “Facility”) of US $630,000 to be advanced in five equal installments of US $126,000. The Company received four installments of US $126,000 and the remaining advance subsequent to period end (note 14). The Facility bears interest at 12% per annum, and repayment is due on the date which is two years following the date the Facility has been fully advanced to the Company. The Company has negotiated an extension to the maturity date of a previously advanced US $200,000 promissory note (the “Loan”) with the lender and consolidated such loan with two other advances made by the lender for an aggregate loan of US $296,655. The Loan is due on November 13, 2020 and bears interest at 12% per annum. In connection with the Facility and Loan as noted above, the Company has issued 12,262,850 bonus warrants to the lender. The bonus warrants will be exercisable into one common share of the Company at a price of $0.10 per share. 3,912,850 of the bonus warrants in connection with the Loan will expire on November 13, 2020, and the remaining 8,350,000 bonus warrants will expire at the maturity of the Facility. The bonus warrants under the Facility are subject to vesting restrictions in that they only become exercisable as the advances under the Facility are made. The fair value recorded to share-based payment expense in connection with the issuance of these bonus warrants during the period ended January 31, 2019, was $619,000 (Note 8(c)).


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10. RISK AND CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS The Company manages its capital structure, and adjusts it, based on the funds available to the Company in order to support future business opportunities. The Company defines its capital as shareholders’ equity and debt. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company currently has no source of revenues; as such, the Company is dependent upon external financings or the sale of assets (or an interest therein) to fund activities. To carry future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the period ended January 31, 2019. The Company is not subject to externally imposed capital requirements. The classification of the Company’s financial instruments is detailed above in Note 3. The carrying values of accounts receivable, due from related parties, accounts payable and accrued liabilities, bank indebtedness, related party loan, interest payable, and dividend payable approximate their fair values due to the short-term maturity of these financial instruments. Cash is measured at fair value in accordance with Level 1 of the fair value hierarchy. IFRS 13 Fair Value Measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value hierarchy requires the use of observable market inputs whenever such input exists. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. The following table sets forth the Company’s significant financial assets measured at fair value by level within the fair value hierarchy.

January 31, 2019 Level 1 Level 2 Level 3 Total Cash $ - $ $ - $ -

October 31, 2018 Level 1 Level 2 Level 3 Total Cash $ 21,830 $ - $ - $ 21,830


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10. RISK AND CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS (Continued)

The Company’s exposure to risk on its financial instruments is summarized below. (a) Credit risk

The Company is exposed to credit risk by holding cash in bank accounts. The risk is minimized by holding the funds in Canadian banks which are major financial institutions with strong investment-grade ratings given by a primary ratings agency. The Company’s exposure to accounts receivable, and due from related parties is equal to their carrying values as the Company does not have any collateral for these amounts.

(b) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in settling its financial liabilities. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. The Company attempts to maintain sufficient cash to meet the Company’s business requirements, however, at January 31, 2019, the Company was in a bank indebtedness position of $4,948 which means the Company requires additional funding to meet its liabilities as they come due, including ongoing administrative overhead, debt repayments, and maintenance of its mineral interests. The Company must raise additional capital to fund its operations for this fiscal year (note 1). At January 31, 2019, the Company had current liabilities of $2,584,172 most of which are due within 30 days.

(c) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk. i) Interest rate risk

The Company’s cash is held in bank that may earn interest at variable interest rates. Due to the amount and short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values as of January 31, 2019.

ii) Foreign currency risk The Company is exposed to foreign currency risk to the extent that monetary financial instruments

are denominated in United States dollars. The Company has not entered any foreign currency contracts to mitigate this risk. The Company’s sensitivity analysis suggests that a 10% change in the rate of exchange between the Canadian and United States dollar would have an insignificant impact on its results of operations as it held nominal financial assets and liabilities denominated in United States dollars.

iii) Other price risk Other price risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company does not hold any investments at FVTPL and is, therefore, not directly affected by fluctuations in market values.


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11. SUPPLEMENTAL CASH FLOW INFORMATION

The Company’s significant non-cash investing and financing activities were as follows:

January 31,

2019 October 31,

2018 Exploration and evaluation assets in accounts payable and accrued liabilities $ 316,746 $ 316,746 Flow-through share premium liability recorded against share capital $ - $ 40,000 Shares issued for exploration and evaluation assets $ 10,000 $ 1,918,805

12. SEGMENTED INFORMATION

The business of the Company is the acquisition, exploration and development of mineral properties in Canada and the USA. All the Company’s non-current assets are located in North America.

13. INVESTMENT IN ASSOCIATE AND NON-CONTROLLING INTEREST On January 3, 2018, the Company sold 5,000,000 common shares of Centenera for gross proceeds of $650,000 to E.L.II Properties Trust, thereby, lowering the Company’s holdings to 18,958,781 common shares which represented approximately 26% of the total issued and outstanding common shares of Centenera. Centenera is a mineral exploration company incorporated in Canada, and its principal business activity is the exploration and evaluation of mineral properties located in Argentina. Centenera was formerly a subsidiary of the Company due to a reverse acquisition completed by Centenera whereby on June 18, 2015, it completed the acquisition of all of the issued and outstanding common shares of Cardero Argentina, a former subsidiary of the Company. As at January 31, 2019, the Company holds approximately 15% (October 31, 2018 – 23%), of Centenera’s issued and outstanding common shares. The Company ceased consolidating the consolidated financial statements of Centenera effective January 3, 2018, as the Company determined that it no longer exercised control over Centenera. The Company no longer has the power to govern the strategic operating and financing decisions of Centenera, as the Company holds a minority position on the board of directors of Centenera and cannot exercise control over such functions. The Company’s judgement is that it has significant influence, but not control of Centenera. Accordingly, the Company’s retained interest in Centenera is accounted for using the equity method which includes a pro-rata share of Centenera’s change in net assets for the period from January 3, 2018, onwards, and its investment in Centenera is presented as an investment in associate. On January 3, 2018, the Company derecognized the net assets of Centenera, and the non-controlling interest related to Centenera, and recognized the Company’s retained interest in accordance with the equity method as follows:

January 3, 2018Current assets $ 971,315 Non-current assets 951,648 Current liabilities (95,750)

Net assets deconsolidated $ 1,827,213


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13. INVESTMENT IN ASSOCIATE AND NON-CONTROLLING INTEREST (continued)

Derecognized amounts: Year ended

October 31, 2018Net assets deconsolidated $ (1,827,213) Proceeds received 650,000 Non-controlling interest derecognized 1,966,546 Contributed surplus derecognized 614,633 Fair value of retained interest in associate 3,033,406

Gain on deconsolidation of subsidiary $ 4,437,372 The Company’s investment in Centenera is as follows:

Number of

shares

Amount Balance, October 31, 2017 - $ - Fair value of retained interest in associate 18,958,781 3,033,406 Equity and dilution loss from associate - (519,208) - 2,514,198 Impairment - (1,376,670) Balance, October 31, 2018 18,958,781 $ 1,137,528 Disposal of associate (6,250,000) (200,000) Equity and dilution loss from associate - (340,432) Balance, January 31, 2019 12,708,781 $ 597,096

As Centenera is a publicly traded entity, the fair value of the Company’s investment in Centenera was determined by the closing market price of Centenera’s common shares on the TSX-V as at October 31, 2018, of $1,137,528. Accordingly, at October 31, 2018, the Company recorded an impairment loss for its investment in Centenera of $1,376,670 as the decline in fair value of the investment to below carrying value was considered other than temporary. Fair value was determined in accordance with Level 1 of the fair value hierarchy. During the period ended January 31, 2019, the Company sold 6,250,000 common shares of Centenera to the Kopple Lenders for proceeds of $200,000. The amount recorded as equity and dilution loss from associate includes a reduction in the carrying value of the Company’s investment in Centenera to reflect its proportional loss of ownership interest pursuant to the disposal. Subsequent to January 31, 2019, the Company sold the remainder of its investment in Centenera (note 15). As at January 31, 2019, summarized financial information of Centenera unadjusted for the percentage ownership held by the Company is as follows:

January 31, 2019 Current assets $ 140,537 Non-current assets 3,308,826 Current liabilities (871,769) Non-current liabilities (146,452) Net assets 2,431,142 The Company’s ownership percentage 15.38% The Company’s share of net assets $ 373,910


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14. COMMITMENTS

The Company entered a lease dated November 18, 2010, for office space located at 2300 – 1177 West Hastings Street, Vancouver, British Columbia, for a term of ten years commencing April 1, 2011 to March 31, 2021 (subject to renewal for an additional five years). The rent expense to March 31, 2021 is $358,884 per annum plus operating costs. Other commitments are disclosed elsewhere in these consolidated financial statements.

15. SUBSEQUENT EVENTS

Subsequent to January 31, 2019, the Company sold the remainder of its holdings in Centenera, being 12,708,781 common shares of Centenera, at a fair value of approximately $320,000 (note 13). The Company entered into a facility agreement with E.L. II Properties Trust, for an unsecured credit facility (the “Facility”) of US $630,000 to be advanced in five equal installments of US $126,000. The Company received all five installments of US $126,000. The Facility bears interest at 12% per annum, and repayment is due on the date which is two years following the date the Facility has been fully advanced to the Company.

CARDERO RESOURCE CORP. Form 51-102F1

Management’s Discussion and Analysis For the period ended January 31, 2019

INTRODUCTION This Management Discussion and Analysis (“MD&A”) for Cardero Resource Corp. (“Cardero” or the “Company”) for the period ended January 31, 2019 has been prepared by management, in accordance with the requirements of National Instrument 51-102, as of March 26, 2019, and compares its financial results for the three months ended January 31, 2019 to the three months ended January 31, 2018. This MD&A provides a detailed analysis of the business of Cardero and should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the years ended October 31, 2018 and 2017. The Company’s reporting currency is the Canadian dollar and all amounts in this MD&A are expressed in Canadian dollars unless otherwise noted. The Company reports its financial position, results of operations and cash-flows in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Forward-Looking Statements This MD&A contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable Canadian and US securities legislation. These statements relate to future events or the future activities or performance of the Company. All statements, other than statements of historical fact, are forward-looking statements. Information concerning mineral resource/reserve estimates and the economic analysis thereof contained in preliminary economic analyses or prefeasibility studies also may be deemed to be forward-looking statements in that they reflect a prediction of the mineralization that would be encountered, and the results of mining that mineralization if a mineral deposit were developed and mined. Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate, plans and similar expressions, or which by their nature refer to future events. These forward-looking statements include, but are not limited to, statements concerning:

the timing of decisions regarding the timing and costs of exploration programs with respect to, and the issuance of the necessary permits and authorizations required for, the Company’s ongoing exploration programs on its properties;

the Company’s estimates of the quality and quantity of the resources and reserves at its mineral properties;

the timing and cost of any proposed future work with respect to the Zonia Copper Project (“Zonia”), including with respect to the preparation of future technical studies in respect thereof;

general business and economic conditions; and

the Company’s ability to meet its financial obligations as they come due, and to be able to raise the

necessary funds to continue operations. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. Inherent in forward looking statements are risks and uncertainties beyond the Company’s ability to predict or control, including, but not limited to, risks related to the Company’s ability to raise the necessary capital to be able to continue in business and to implement its

Cardero Resource Corp. Form 51-102F1 Management Discussion & Analysis Period ended January 31, 2019 Page 2

business strategies, to identify one or more economic deposits on its properties, variations in the nature, quality and quantity of any mineral deposits that may be located, variations in the market price of any mineral products the Company may produce or plan to produce, the Company’s ability to obtain any necessary permits, consents or authorizations required for its activities, to produce minerals from its properties successfully or profitably, to continue its projected growth, and other risks identified herein under “Risk Factors”. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future performance, and that actual results are likely to differ, and may differ materially, from those expressed or implied by forward looking statements contained in this MD&A. Such statements are based on several assumptions which may prove incorrect, including, but not limited to, assumptions about:

the Company’s future cash requirements, and the ability of the Company to raise the funding necessary to carry out its planned activities and to meet its anticipated general and administrative expenses for the fiscal year ending October 31, 2019;

the level and volatility of the price of commodities, and copper in particular;

general business and economic conditions;

the timing of the receipt of regulatory and governmental approvals, permits and authorizations necessary to implement and carry on the Company’s proposed work programs, particularly at Zonia;

conditions in the financial markets generally;

the Company’s ability to attract and retain key staff;

the accuracy of the Company’s resource/reserve estimates when completed (including with respect to size and grade) and the geological, operational and price assumptions on which these are based;

the ongoing relations of the Company with its underlying optionors/lessors, any joint venture and/or contractual partners, the applicable regulatory agencies, and indigenous groups; and

that the metallurgy and recovery characteristics of samples from certain of the Company’s mineral properties are reflective of the deposit.

These forward-looking statements are made as of the date hereof and the Company does not intend and does not assume any obligation, to update these forward-looking statements, except as required by applicable law. For the reasons set forth above, investors should not attribute undue certainty to or place undue reliance on forward-looking statements. Caution Regarding Adjacent or Similar Mineral Properties This MD&A contains information with respect to adjacent or similar mineral properties in respect of which the Company has no interest or rights to explore or mine. Readers are cautioned that the Company has no interest in or right to acquire any interest in any such properties, and that mineral deposit on adjacent or similar properties are not indicative of mineral deposits on the Company’s properties.


Caution Regarding Reference to Resources and Reserves National Instrument 43-101 Standards of Disclosure of Mineral Projects (“NI 43-101”) is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all reserve and resource estimates contained in or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101. Caution Regarding Historical Results Historical results of operations and trends that may be inferred from the discussion and analysis in this MD&A may not necessarily indicate future results from operations. In particular, the current state of the global securities markets may cause significant reductions in the price of the Company’s securities and render it difficult or impossible for the Company to raise the funds necessary to continue operations. See “Risk Factors - Share Price Volatility”. All of the Company's public disclosure filings, including its most recent management information circular, material change reports, press releases and other information, may be accessed via www.sedar.com and readers are urged to review these materials, including the technical reports filed with respect to the Company’s mineral properties. DATE This MD&A reflects information available as at March 26, 2019. RESULTS OF OPERATIONS Background Cardero is a junior resource mineral exploration and development company. Its assets consist of interests in mineral properties, investments and cash. The Company funds its operations primarily through the sale of its equity securities, its investments and interests in its mineral properties and, more recently, debt. The mineral exploration business is very high risk (See “Risk Factors”). RESULTS OF OPERATIONS EXPLORATION ACTIVITIES Cardero is a resource company focussed on the development of the Zonia copper-oxide deposit in Arizona, USA. The Zonia deposit is an advanced stage near-surface copper-oxide resource on which scoping, feasibility and permitting activities are planned over the coming 3 to 4 years. The Company also retains certain participation rights with respect to the assets of Cardero Coal Limited, which was sold in 2015 as part of a comprehensive restructuring of the Company discussed below.


Total E&E Costs Capitalized During

the Year Ended October 31, 2017

Total E&E Costs Capitalized During

the Year Ended October 31, 2018

Proposed Fiscal 2019 Expenditures (1)

Zonia Copper Project Arizona USA $146,947 $615,888 $1,500,000 Note: 1. This amount represents the estimated exploration expenditures for the entire fiscal year ending October

31, 2019 and does not include property acquisition costs. Estimated expenditures are contingent upon the Company raising the necessary financing to carry out its planned work, as it does not currently have the required funds to carry out the planned work.

Material Mineral Properties Zonia, Arizona, USA The Zonia Copper Oxide Project is an advanced discovery-stage property, amenable to low-cost recovery techniques including open pit mining and SX/EW processing. Zonia is located in Yavapai County, Arizona, 130 kilometers to the northwest of Phoenix and is easily accessible with a network of roads to the project site. Cardero has an Option Agreement with Redstone Resources Corporation (“Redstone”) under which Cardero has been granted an exclusive option to acquire a 100% interest in the Zonia Copper Project (the project). Effective February 21, 2019 all cash payment and shares have been issued. The Zonia property was discovered in the 1880’s with the first single stack smelter built in 1900. From 1900 to present Zonia has been explored for copper by several operators. The property has been drill tested with almost 700 drill holes (60,000 meters). This high-density drilling covers 30% of the property and defines the historical resources and reduces technical risk on the deposit. Mineralization is open to the southwest and northeast, providing considerable opportunity to grow the resource. The deposit has undergone deep oxidation from surface and metallurgical studies demonstrate that it is amenable to heap-leaching and SX-EW to produce cathode copper, with an expected recovery of 73% overall based on extensive metallurgical testing. Zonia PEA Announcement In March 2018, Cardero released news about the completion of a Preliminary Economic Assessment (“PEA”) on the Zonia copper-oxide deposit. The PEA gives Cardero the assurance to advance the project through feasibility. The PEA is based on the amended resource estimate by Tetra Tech Inc. (see news release NR-17-08 dated November 2017) and outlines an open-pit, copper-oxide heap leach project with a 9-year mine life and favourable economics. The base case uses a $2.00/lb designed pit shell with a grade cutoff of 0.17% total copper. At a copper price of $3.00/lb the economics are:

After-tax NPV8% and IRR of $ 192 million and 29%, respectively, with a 2.89-year payback of initial capital

Initial capital of $198 million Cumulative Net Cash Flow After Taxes of $331 million


The PEA was prepared by Global Resource Engineering Ltd. (“GRE”) of Denver, Colorado, in accordance with the Canadian Securities Administrators (CSA) NI 43-101. GRE reported on the scoping-level capital and operating costs, and project economics associated with the potential development of the Zonia copper oxide project. The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability. The following table summarizes the main aspects of the PEA study:

Production Profile

Total Tons Leached 92.6 million

Head Grade 0.30%

Mine Life 8.6 years

Payback Period 2.89 years

Mill throughput 30,000 tpd

Copper Recovery (oxide) 73%

Copper Recovery (transition) 70%

Total Copper Recovered 421.5 million lbs

Average Annual Production 49.1 million lbs

Operating Costs

Mining Costs $0.64/lb of copper

Processing Costs $0.74/lb of copper

G&A $0.08/lb of copper

Capital Requirements

Initial Capital $198million

Sustaining Capital $40.8 million PEA Sensitivities: GRE evaluated the after-tax NPV@10% sensitivity to changes in copper price, capital costs, and operating costs. The base case project scenario produces 92.6 million tons of leachable material over an 8.6-year mine life. The project is most sensitive to copper price, then operating costs, then capital costs.


NPV@10% Sensitivity to Changes in Copper Price, Capital Costs, and

Operating Costs

In November 2017 Cardero released an amended technical report for the current resource estimate for Zonia, which corrected several minor deficiencies in the original 2015 technical report. For the 2017 Mineral Resource Estimate, Tetra Tech (“Tt”) completed an independent mineral resource and reserve estimate of the contained copper in the Zonia deposit. The following table shows the Tt estimated Zonia classified mineral resources at a base case cutoff of 0.2 % total copper (“TCu”). Mineral resources were reported within a Whittle® shell generated using the Lerchs-Grossman algorithm using $2.50/lb copper. Mineral resources within an optimized shell are not mineral reserves and do not have demonstrated economic viability.

Tetra Tech 2017 Zonia Classified Mineral Resources Base Case

CLASSIFICATION CUTOFF

GRADE CU%TONS

M GRADE CU%

CU LBS M

Measured 0.2 15.4 0.42 129.3 Indicated 0.2 61.4 0.31 380.6

Measured + Indicated 0.2 76.8 0.33 510.0 Inferred 0.2 27.2 0.28 154.6

Notes: (1) Resources are stated within a Lerchs-Grossman optimized shell using the following parameters:

Mining (ore and waste) $1.5/ton, processing $3.4/ton, General and Administrative $0.45/ton, oxide recovery 73%, transition recovery 70%, and Cu price $2.50/lb

(2) Columns may not total due to rounding, and (3) One Ton is equal to 2,000 lbs or 0.9071847 Tonnes. (4) Inferred Mineral Resources: It is reasonably expected that the majority of Inferred Mineral Resources

could be upgraded to Indicated Mineral Resources with continued exploration.


3D View of block model constrained by the $2.50 Whittle Pit

As part of the PEA, GRE used the 2017 Tetra Tech block model to generate new pit shells at metal prices from $0.50/lb to $5.00/lb Cu, in $0.25/lb increments. Preliminary analysis indicated that the $2.00/lb pit had the greatest potential for economic success. The pit shell for the $2.00/lb pit was imported into Geovia GEMS™ to design the ultimate pit layout using 45 degrees batter angle, 20-foot bench height, 12.7-foot bench width, 10% ramp grade, and ramp width of 100 feet for all but the lowest four benches, which were given a single-wide 50-foot ramp width. The following table shows the estimated classified mineral resources within the $2.00/lb pit at various copper cutoffs.

GRE 2018 Pit-Constrained Mineral Resources at Various Copper Cutoffs

Classification Tons

(millions) Cu Grade

(%) Cu Pounds (millions)

0.12% Cutoff

Measured 15.5 0.415 125.4

Indicated 65.1 0.297 378.3

Measured + Indicated 80.5 0.319 503.7

Inferred 26.4 0.265 153.3

0.16% Cutoff

Measured 15.0 0.418 124.7

Indicated 58.2 0.309 362.0


Inferred 22.2 0.279 143.1

0.20% Cutoff

Measured 14.3 0.419 124.5

Indicated 48.3 0.310 361.1



Classification Tons

(millions) Cu Grade

(%) Cu Pounds (millions)

Inferred 17.0 0.284 138.6

0.22% Cutoff

Measured 13.7 0.430 121.3

Indicated 42.0 0.329 321.4


Inferred 14.4 0.304 117.0 Notes: (1) Resources are stated within a floating cone optimized shell using the following parameters:

Mining (ore and waste) $1.8/ton, processing $2.89/ton plus $0.12/lb copper SX/EW, General and Administrative $0.80/ton, oxide recovery 73%, transition recovery 70%, and Cu price $2.00/lb

(2) Columns may not total due to rounding (3) Inferred Mineral Resources: It is reasonably expected that the majority of Inferred Mineral Resources

could be upgraded to Indicated Mineral Resources with continued exploration. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves. Inferred resources are that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. Good copper extractions were achieved from the majority of the metallurgical samples at Zonia, and range from 59% to 81% in a 91-day locked cycle column leach test (excluding the high sulfide and low grade samples). The copper extraction from the master composite sample, with a nominal P80 size of 25 millimetres (mm), was 77.8%. The overall copper extraction based on the total copper assay (%TCu) for the deposit is estimated to be between 71% and 75%. For pit optimization, copper recovery has been assigned based on mineral type: copper oxide minerals at 73%, secondary copper sulfides at 70% and primary copper sulfides at 0%. The Zonia project would employ open pit mining with a conventional copper acid heap leach system. The mineralized material would be crushed in a three-stage crushing circuit to a nominal P80 size of 25mm. The crushed material would be agglomerated with acid containing solutions using either raffinate or fresh sulfuric acid, and then be delivered to the heap via overland conveyor and grasshopper conveyors and stacked in 10-metre (m) lifts with a radial stacker operating in retreat mode. The heap is designed to contain up to 10 lifts for a maximum height of 100 m, each with an interlift liner. The SX circuit consists of two extraction stages and one stripping stage using a conventional mixer/settler arrangement. The electrowinning (EW) circuit consists of two parallel banks of 50 polycement cells with 1m2 cathodes. The plated copper cathodes are stripped using a mechanized stripping system after being washed. Copper cathodes are then sampled and bundled for shipment. The Zonia Property consists of 261 patented (96) and unpatented (185) mineral claims and 566.85 acres of surface rights acquired from the State of Arizona; comprising 4,279.55 acres total. These claims include lode mining claims and millsite claims and are in the Walnut Grove Mining District. Each mineral claim has a survey description and each patented claim was surveyed by a registered surveyor. The Zonia property was discovered in the 1880’s most likely in the interest of developing gold bearing veins. Prospecting for copper began in the 1890’s and a single stack smelter was built in 1900. From 1900 to present the Zonia property has been extensively explored for copper by several holders and lessees. The


property was mined by open pit from 1966 to March 1975 by McAlester Fuel Company (McAlester). About 17.1 million tons were mined from the pit, of which 7.1 million tons were stacked on leach heaps and 10 million tons were reportedly dumped as waste. The material mined by McAlester for leaching was placed on three asphalt lined leach pads then continuously leached by sprinkling with diluted sulfuric acid on the pads. The copper minerals dissolved, and the pregnant solution was then passed to the launder where copper was precipitated from solution in the form of cement copper on scrap iron or salvaged de-tinned cans. The waste solution was then treated with additional sulfuric acid and recycled to the leach areas. The sulfuric acid was largely produced at the property from native sulfur. From 1966 to March 1975, McAlester produced 33.2 million pounds of cement copper from the Zonia Mine by heap leaching of 7.1 million tons placed on heaps. Most recently, the property was explored by Copper Mesa Mining Corporation (“Copper Mesa”) from 2008 to 2009, Redstone from 2009 to 2015, and currently Cardero from 2015. Historical drilling prior to Redstone and Copper Mesa involvement in 2008 totals some 553 drill holes on the property. Total historical drilling footage for the property is known to be greater than 139,000 feet (ft); the drilled footage from 27 of the historical holes is unknown. Through the work of Tetra Tech and other independent consultants, a total of 443 of the historical drill holes were able to be verified and were used in the development of the resource estimate in this report. The Zonia property is in the southern part of the Basin and Range Transition province of the North American Cordillera, immediately south of the Colorado Plateau and north of the Basin and Range province. This section of the Basin and Range province in Arizona and New Mexico hosts a large number of base and precious metal mines and mineral occurrences. The Zonia deposit is hosted by the steeply dipping, northeast-trending, Precambrian Yavapai Series, which consists of schistose subvolcanic intrusions, volcanic flows, and tuffaceous sedimentary rocks. Portions of the area are covered by post-mineralization Quaternary basalt, fanglomerate, and alluvial material. Rocks at the Zonia Property consist mainly of highly variably foliated rhyolitic to dacitic quart-eye porphyry subvolcanic rocks, diorite, and minor diabase dikes, with highly schistose phyllites and chlorite schist along the southeast margin. Foliation dips steeply to the northwest over most of the Zonia claims block, but changes to southeast dipping along the southeast margin in the Bragg Estate and Silver Queen claim block. This typical greenstone package is intruded and enclosed by younger Precambrian granitic batholiths which show only weak foliation at the margins. Zonia is the highly oxidized portion of a previously supergene-enriched metamorphosed porphyry deposit, though it has previously been interpreted as a volcanogenic massive sulfide (VMS) deposit due to confusion of the protolith of the quartz-sericite schist along the northwest margin and the nature of the contact with adjacent, structurally overlying chlorite schist. The main mineralized unit is variably foliated quartz-feldspar porphyry (quartz monzonite) and related sericite schist, with disseminated sulphides and stockwork quartz-sulphide veins that predominately pre-date the metamorphism, but also post-date it to some extent. Oxidation of the original chalcopyrite mineralization and younger secondary supergene chalcocite has been pervasive and deep, extending down over 250 metres (874 feet) in the central pit at the historical Cuprite shaft. Chrysocolla, malachite, azurite, melaconite, and cuprite are the most common copper minerals. Quartz and jasper accompany the ore minerals; oxides are ubiquitous in the mineralized zones. Higher copper grades are associated with contacts of the quartz monzonite porphyry with acid-reactive mafic chlorite schists, which are zones of increased supergene deposition. Lower grades are association with more massive enclosures of the quartz monzonite porphyry, which were less permeable to supergene fluids.


The Zonia copper deposit has a north-easterly strike length of about 8,000 ft and horizontal width varies from 200 ft to 1,500 ft. The deposit consists of multiple mineralized zones that dip at various angles to the northwest. The zones are generally in the order of 200 ft wide and commonly occur in sub-parallel groups of three or more. Most of the deposit has been drilled to depths of 400 ft or less. From 2008 to 2010, exploration drilling by Copper Mesa and Redstone has totaled 54,211 ft. The drilling consists of 131 drill holes, 77 HQ size core holes totaling 25,227 ft and 54 reverse circulation holes totaling 28,984 ft. Thirty-nine of the holes were designed to twin previous historical drilling for verification purposes. The remaining holes were drilled for exploration and resource development purposes. Tetra Tech reviewed the geologic logging, sample selection, sample preparation, assaying, standards, duplicates, and blanks protocols and believes that the work is consistent with current standard practice and meets the requirements for calculating mineral resource estimations of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards and is compliant with NI 43-101. The project has many positive attributes that justify study advancement:

Politically stable jurisdiction and regional familiarity with mining and associated community economic benefits;

Scoping-level analysis historically completed for many aspects of the project;

Plan to optimize an initial plan of operations restricted to private land, with positive implications for permitting time;

Oxide mineral resources exposed at the surface, with a low waste to mineralized material ratio;

The potential for discovery of additional oxide and sulfide resources;

All resources as currently defined are on private land;

Excellent infrastructure including mine road and upgradeable power transmission line and right of way to mine site;

Hydrogeological work indicates that a suitable groundwater supply exists on site; and

Potentially amenable to truck and shovel mining, heap leaching and SX-EW to produce cathode copper.

Pursuant to an option agreement dated August 27, 2015 and amended on September 21, 2015, July 26, 2017, September 14, 2017, January 8, 2018 and July 31, 2018 between the Company and Redstone Resources Corporation (“Redstone”), the Company acquired a 100% interest in the Zonia copper project. To exercise the option agreement, the Company must make aggregate cash payments of US $1,931,350 and issue an aggregate 22,679,099 common shares as follows:


Date Cash to Redstone

(USD$) Cardero Shares

Within 2 business days of execution of the Letter Agreement

25,000 (Paid) -

On or before August 30, 2015 26,350 (Paid) - October 27, 2015 150,000 (Paid 1,000,000 (issued) January 31, 2016 75,000 (Paid) 1,500,000 (issued)

July 31, 2016 75,000 (Paid) - January 31, 2017 450,000 (Paid) 2,500,000 (issued)

July 31, 2017 - 2,500,000 (issued) January 8, 2018 500,000(Paid) 4,000,000 (issued)

October 17, 2018 50,000(Paid) - October 31, 2018 126,000 (Paid) 5,000,000 (issued) October 31, 2018 - 6,179,099 (issued)

November 30, 2018 126,000 (Paid) - December 31, 2018 126,000 (Paid) - January 31, 2018 126,000 (Paid) - February 28, 2019 126,000 (Paid) -

Total $1,981,350 22,679,099

As amended most recently on October 3, 2018, the final payment of $573,000 (paid) is to be paid in five installments, with a 10% bonus added to each installment, of US$126,000. The Company received all five installments of US $126,000 and the option is complete. In the event that a payment is not made as required this will result in default and the Company will lose it’s 100% interest in the Zonia Copper project. Pursuant to the July 31, 2018 amending agreements, Redstone has agreed to certain extensions of the timing of payments in cash in consideration of, among other things, amendments to the timing of shares issuances, the payment of an additional $200,000 and the payment by Cardero of interest in relation to US $1,123,250 remaining to be paid in cash pursuant to the Option Agreement. The interest payments due to Redstone in relation to the remaining cash payments due pursuant to the Option Agreement accrue from October 1, 2017 and are payable through the issuance of common shares of the Company in the amount of 100,000 shares per month from October 1, 2017 to January 8, 2018 (amounting to 325,806 shares) and 65,000 shares per month from January 9, 2018 until the $50,000 payment is made August 17, 2018 and 80,000 shares per month from August 18, 2018 until the final payment is made October 31, 2018 The Company has accrued interest payable for the period ended July 31, 2018 of $99,324 which represents 764,032 common shares which has been issued. Historical drill samples at Zonia were only analyzed for copper as almost all holes terminate within the upper oxidized zone. Only the last two drill programmes were deep enough to intersect primary sulphides, with several drill holes extending below the copper-oxide resource and intersect underlying copper-sulphide mineralization. Cardero tested the idea that the underlying sulphide mineralization had potential to host significant gold grades by assaying reject pulp samples across a range of copper grades. Eleven samples were taken from drill holes extending below the currently defined resource (table below). All samples returned significant gold values, and the average gold:copper ratio is 0.45. The Company also analyzed samples from the near-surface copper-oxide resource for gold mineralization, but the grades proved too low to be recovered economically.


Grades from sulphide mineralization underlying the Zonia copper-oxide resource.

Drill Hole From

(ft) To (ft)

Width (ft)

Gold (g/t)

Silver (g/t)

Total Copper

(%)

Copper Equivalent

(%) RRC-10-CC 580 585 5 0.584 3.8 0.68 1.21 RRC-10-EE 365 370 5 0.258 2.1 0.70 0.94 RRC-10-EE 395 400 5 0.638 3.4 1.09 1.66 RRC-10-EE 570 575 5 0.174 1.4 0.39 0.55 RRC-10-HH 620 625 5 0.116 1.3 0.34 0.45 RRC-10-21 787 794.5 7.5 0.176 3.4 0.32 0.50 RRC-10-22 851 860 9 0.084 2.6 0.33 0.43 RRC-10-35 505 510 5 0.035 2.5 0.29 0.34 RRC-10-28 520 525 5 0.117 2.6 0.40 0.52 RRC-10-26 300 305 5 0.055 1.8 0.30 0.36 RRC-10-J1 410 415 5 0.048 2.7 0.33 0.39

Copper Equivalent calculations use metal prices assumptions of $2.20/lb for copper, $1200/oz for gold, and $15/oz for silver. Copper equivalent calculations reflect gross metal content and have not been adjusted for metallurgical recoveries.

Silver Queen, Arizona USA In September 2016, Cardero completed staking a total of 57 claims, the Silver Queen block, covering 424.5 hectares (1049 acres) along the southeast edge of the Zonia property. The Silver Queen claims were staked based on examination of historical reports and data that led to the delineation of a prospective area, covering favourable geology and geophysical anomalies that do not appear to have been drill tested. The same rock types that are host to disseminated oxide copper at Zonia have been mapped on the Silver Queen block. Structural evidence suggested these rock units repeat themselves in a fold limb dipping to the southeast. This interpretation is corroborated by a 400 by 2700 metre aeromagnetic low parallel to the Zonia deposit, which was interpreted to be due to magnetite-destructive alteration and possibly mineralization at depth. However, subsequent geophysics and project-wide rock geochemical sampling have shown there is low probability of porphyry copper mineralization in the area. The claim block was therefore reduced to 47 claims, covering 324 hectares (801 acres), in August 2018.


Map of the reduced Silver Queen claim block, relative to the Zonia property. 2018 Geochemical Sampling Rock geochemical sampling in early 2018 on a 150-metre spaced grid over most of both the Zonia and Silver Queen claim blocks generated a new porphyry copper target based on coincident anomalous copper, molybdenum and manganese. The 2500 by 1000 metre anomaly, the “Northeast Porphyry Target”, occurs two kilometres northeast of the drill-defined Zonia copper oxide deposit, and shares characteristics of its geochemical footprint. No further sampling was carried out in the latter part of 2018. Coincident areas of elevated molybdenum (Mo) and copper (Cu) values with depressed manganese (Mn) values is a classic geochemical signature of porphyry copper mineralization (see maps below). Copper values are also anomalous, but copper is not as reliable as the other metals due to its solubility in the weathering profile. The overlapping anomalies suggest a porphyry copper target size on the order of 2500


by 1000 metres. The same quartz-monzonite porphyry that hosts the Zonia copper oxide resource (see NR17-08) underlies the anomaly. The anomaly marks a break in the northeast trend of the mineralization, with a narrow southern “tail” that opens northward to a broader northeast trend. The anomaly is truncated at the north end by younger, post-mineral cover rocks (Gila conglomerate, alluvium, and Tertiary basalt). The east margin of the anomaly contains some narrow high-grade copper bearing structures in the historical Copper Crown mine workings, with associated intense epidote alteration. Sampling Procedures and Quality Assurance and Quality Control The work program at Zonia was designed by John Drobe P.Geo., the Company’s Chief Geologist, with the field work conducted by Discovery Consultants, of Vernon, B.C. Due to a lack of consistent soil cover over the project, composite rock samples were collected by shovel from 10 to 25 cm depth over a roughly one-metre square area at each station, and the locations marked with flagging and aluminum tags hung from the nearest vegetation. Samples were placed in woven Sentry brand 7 by 12.5 inch Olefin sample bags, which were sealed, transported and dropped off directly at ALS Minerals laboratories in Tucson, Arizona by Discovery personnel. The samples were dried at high temperature (method DRY-21), crushed, pulverized (methods CRU-31, SPL-21, PUL-31), and then analysed by ICP-AES for 35 elements (method ME-ICP41) with gold determined by 30g fire assay and atomic absorption finish (method Au-AA23). This sampling program did not include a comprehensive QA/QC programme; however, ALS Minerals is an ISO 9002 registered laboratory and inserted blanks, standards and duplicates following their QA/QC protocol. These additional samples returned satisfactory values.


Gridded and thematic molybdenum (Mo) rock values, with the Whittle pit outline that defines the current resource estimate at Zonia. All claims shown are owned or under option by Cardero.


IP & Resistivity Survey In January and February 2018, HydroGEOPHYSICS, Inc. (HGI), of Tucson, Arizona completed 28 line kilometres of Induced Polarization (“IP”) and Electrical Resistivity (“ER”) on the Zonia project. Coincident IP and ER data were collected to characterize the extent of chargeable sulfides under the area of drill-defined mineralization, and then apply this information to outline other possible subsurface mineralization on the property. The IP method was selected to take advantage of the charge-storage capability of the sulfides that are known to underlie the copper oxide resources. ER measurements were recorded coincident with the IP measurements during this survey, as the ER data provides valuable context for the IP data and information on subsurface structure. The data were collected at 200m (n=1) dipole spacing to a maximum of n=6 spacing between measurements. Depth slices at the 1000, 1100, 1200, and 1300-meter elevations show an increase in chargeability with depth, matching observations in the drill holes of sulphides underlying the copper oxide mineralization in this area. The IP response increases in magnitude in the depth slice from the 1,100-meter elevation, with the highest values towards the southwest end of the survey area. The chargeable body is clearly observed trending across the survey area in a NE-SW direction, with highest magnitude IP responses noted in the southwest and the response dropping off toward the northeast. The top of sulphides (or base of oxidation) is known from the drilling to dip down to the northeast, and this is well reflected in the IP data. The area of overlapping chargeability and copper-molybdenum anomalies extends about 600 metres from the current Whittle pit defined resources. Half of this area has been sparsely drilled by holes targeting copper-gold structures, with the southeast half (up-dip from the chargeability) untested. This area will be tested during the future feasibility study in-fill drill programme. The Northeast geochemical anomaly was only covered at its margins by widely spaced lines, which did not detect sulphides (i.e. a chargeability anomaly) down to depths of 300 metres. This suggests the area is deeply weathered and a good copper oxide porphyry target. Northeast Anomaly Drill Plan Cardero filed for drill permits with the Bureau of Land Management (BLM) and the State of Arizona in preparation of a 5000 metre drill programme testing the Northeast Anomaly, on the Company's Zonia Copper Oxide property ("Zonia"), located in Yavapai County, Arizona USA Cardero plans to drill a total of 5000 metres over the anomaly. The area is covered by both federal BLM and ASTL and requires separate permit applications to the state and federal agencies. Permit applications were filed to the ASTL in March and to the BLM in April. The permit for the BLM land portion was received in late 2018; before drilling commences, a reclamation bond for US$152,000 needs to be paid. The Arizona state land permit is pending approval of the Geologic Field Operations Plan (GFOP 41-120020), which requires completing a Cultural Resource Survey and Native Plant Survey for the area. Westland Resources of Tucson, Arizona will be conducting the surveys as soon as Cardero has the funds to pay them in advance.


Plan of chargeability at 1000m elevation, a slice of the interpolated 3D model.


Kootenay Project, British Columbia Cardero completed two option agreements for five nickel-cobalt properties in south eastern British Columbia (the “Kootenay Project” or the “Project”) totalling approximately 8,000 hectares. The Project is within the prospective Lardeau Group, which hosts numerous volcanogenic massive sulphide deposits, including the past-producing Goldstream mine located north of Revelstoke. The Project includes the Ledgend Property, which has the first documented occurrence of nickel-cobalt bearing massive sulphides in the region. The mineralization was first described in 1998 by the B.C. Geological Survey as outcropping massive pyrrhotite with nickel and cobalt minerals (Plate 1). The geologist noted that the mineralized horizon could be traced over hundreds of meters along strike. In 2016, the underlying owners relocated the discovery outcrop and grab sampling returned values of 0.15 to 0.76% nickel and 0.01 to 0.09% cobalt, as well as up to 0.53% chrome and anomalous copper and zinc. Cardero believes the metavolcanic and metasedimentary units of the southern Lardeau Group to have excellent potential for hosting volcanogenic massive sulphides (VMS) with significant nickel-cobalt (± copper-zinc) content. The other known VMS occurrences in the belt were either discovered in areas of good rock exposure, at high elevations, or by chance during construction of forestry roads. The heavily vegetated low-elevation regions are under-explored, and few previous workers in the area recognized the potential for nickel-cobalt mineralization. Past exploration has focussed on lead-zinc- silver replacement and silver-gold vein deposits. The 8,000 hectares of claims within the Lardeau Group cover the most prospective of the anomalous nickel-cobalt regional silt anomalies produced by the regional sampling programmes of the B.C. Ministry of Mines. Three of the properties (Nico, Spine and Tesla) cover the more prospective nickel-cobalt results reported incidentally by Mineral Mountain Resources in 2012, during their regional exploration for silver-zinc-gold mineralization. The extensive property package allows Cardero to manage a pipeline of results, with Ledgend being the most advanced, and Lardeau being the most grassroots. More details on each project are available at www.cardero.com. The first option agreement applies to four properties being Ledgend, Enerplus-Tesla, Nico, and Spine (2,647 hectares) being optioned from the underlying owners who are at arms-length to the company. Cardero has been granted the exclusive option to acquire a 100% interest in the four properties by paying an aggregate of $900,000 in cash and issuing an aggregate of 3,000,000 common shares over a four year term are as follows:

Date issued Amount (CDN) Cardero Shares October 25, 2017 $ 25,000 (paid) - November 17, 2017 - 200,000 (issued) November 19, 2018 5,000 (paid) 100,000 (issued) April 19, 2019 25,000 100,000 June19, 2019 50,000 200,000 November 17, 2019 170,000 600,000 November 17, 2020 225,000 800,000 November 17, 2021 400,000 1,000,000 Total $ 900,000 3,000,000


Location of Properties in Southeast B.C.


The second option agreement applies to the Lardeau project (1,728 hectares). The underlying owner is Wealth Minerals Ltd (TSX.V: WML), a corporation which is not at arm’s length to the Company. Cardero has been granted the exclusive option to acquire a 100% interest in the Lardeau project by issuing an aggregate of 1,400,000 common shares over a four-year term are as follows:

Date issued Cardero Shares On the Closing (December 12, 2017) (issued) 200,000

December 12, 2018 (issued) 300,000 December 12, 2019 300,000 December 12, 2020 300,000 December 12, 2021 300,000

Total 1,400,000

All of the claims are subject to a 2% net smelter returns royalty. Cardero will have the right to purchase ½ of the royalty applicable to the Ledgend, Enerplus-Tesla, Nico, and Spine properties for a payment of $1,000,000 in cash at any time following date Cardero exercises its right to acquire the properties. A similar buy-back provision applies in relation to the Lardeau project. Ledgend Property From May to July of 2018, Cardero completed surface trenching, sampling and mapping, and approximately 90 line kilometres, covering 375 hectares, of drone (“UAV”) airborne magnetometer geophysics on the North Soil Grid of the Ledgend property. Ledgend is one of five properties in the Kootenay project that together total approximately 8,000 hectares. This work tested anomalies generated by the 2016 and 2017 soil, silt and rock sampling. Results indicate significant potential for subsurface semi-massive sulphides with the main horizon averaging >1000ppm nickel for 800 metres of strike length, a width of about 250 metres. Ten trenches were excavated across the Property, testing various soil anomalies including the high-priority Central Zone and East Zone. Sampling was completed over most of the total trench length of 775m, with 205 sample intervals analyzed using a portable XRF analyzer. Highlights of results are included in the following table. Most of the trenches uncovered interlayered actinolite-tremolite and talc-carbonate schist with disseminated oxides after sulphides. The actinolite and talc schists are altered remnants of high Ni-Co ultramafic rocks that intruded calcareous sedimentary rocks and are interpreted as the probable host and source of the mineralization.


Highlights of the trench and outcrop channel sampling*.

Trench From (m) To (m) Width

(m)** Ni (ppm) Cu (ppm) Zn (ppm)

Main Zone 0.0 4.2 4.2 1337 103 24

and 11.0 17.6 6.7 312 539 283

Road Showing A 2.0 4.0 2.0 820 1026 230

TR0900N‐1400B 0.0 10.8 10.8 1200 18 22

TR1000N‐1300A 15.0 27.2 12.2 1070 87 86

and 32.3 47.2 14.9 1388 108 196

TR1000N‐1300B 9.9 16.2 6.3 1487 62 47

TR1000N‐1300C 3.5 8.4 4.9 1035 80 66

and 34.6 38.5 3.9 1643 84 41

TR1100N‐1300 0.0 4.0 4.0 1645 26 105

and 12.7 18.5 5.8 994 39 130

Channel_1 1.7 3.1 1.3 1602 311 293

Channel_2 0.0 1.0 1.0 3750 477 920

TR1600N‐1425 9.9 14.1 4.2 1453 27 30

and 40.8 49.6 8.8 1345 40 30

TR1600N‐1925 45.2 52.0 6.8 276 656 116 * these portable XRF results are given only to demonstrate exploration potential, and are subject to

confirmation by further analysis from an independent laboratory. No resource potential is implied. ** there is insufficient data to determine true widths.

Trench & Outcrop Sampling Results Trenches were excavated sub-parallel to previous soil sampling lines. Channel samples, approximately one-metre in length, were collected using a portable angle grinder to cut a narrow slot in the rock. A dust collector was attached to catch the cuttings, which were then transferred to plastic Ziploc© bags with sample tags inserted, and these were then analyzed with a portable Niton XRF analyzer. QA/QC procedures are described below. With the exception of the re-sampled Creek Outcrop and certain narrow intervals, all trench and outcrop exposures were oxidized due to deep weathering and mostly only iron and some chrome oxides indicated mineralization. Four hand trenches from 0.5 to 3 metres in depth and spaced roughly 100 metres apart were completed over the central nickel-cobalt (“Ni-Co”) (“Central Zone”) soil anomaly, which is 800 metres in length, with peak values up to 8400 ppm Ni and 250 ppm Co. Trench TR1000N-1300 tested the peak soil anomaly and returned Ni values up to 3.9m of 1643 ppm. Highly siliceous schist, with abundant fuchsite, crops out east of the end of the TR1000N (“Channel 1” and “2”) runs up to 3750 ppm Ni over one metre (and up to 3836 ppm Cr and 920 ppm Zn). This is interpreted as an exhalative horizon overlying the talc and actinolite schists that host the sulphides. Similar results were obtained from trenches south and north of TR1000N, with the units dipping subparallel to topography and the trench bottoms. TR1100N uncovered tremolite-actinolite schist averaging over 1100 ppm Ni and 1500 ppm Cr. The southern-most trench, TR0900N-1400, averaged 1200 ppm Ni within talc schist west of the creek, but the overlying massive sulphide horizon was not exposed. The sulphide horizon is interpreted to plunge under the surface to the south, as indicated by the continuation of the main aeromagnetic anomaly in this area (see previous news release).


The “Main Zone” trench is located along the west slope of the creek 20 metres north of the massive sulphides boulders of the “Discovery Showing”. The lower 4m uncovered oxidized talc schist with Ni values up to 1411 ppm over 1.1 metres, as well as anomalous Cu and Zn in the overlying graphitic biotite schist. The massive sulphides of the Discovery Showing, as sampled in the Creek Outcrop 30 metres to the south, appear to plunge under the surface to the north, and underlie the talc schist in this trench. The next time this horizon resurfaces is at trench TR1600N-1425, where actinolite and talc schist average over 1400 ppm Ni, with values up to 1926 ppm over 1.85m. Again, the massive sulphide horizon in the footwall is not exposed. The aeromagnetic data indicates they are eroded away to the north, but may be down-dropped and preserved across the northeast trending fault running down Ledgend Creek, under the West Zone soil anomaly. Northwest trending Cu-Zn-Co±Ni anomalies occur along the western and eastern margins of the soil grid. The four trenches completed over the East Zone anomaly returned weak Ni values from narrow tremolite-actinolite schist within predominantly biotite-muscovite schist that hosts better Cu-Zn values. Best results are from TR1600N-1925 with up to 836 ppm Cu over 2.2m in sparse disseminated iron oxides. One trench was completed over the north end of the West Zone anomaly, which is a two kilometre long, Cu-Zn ± Co-Ag anomaly along the northwest margin of the soil grid, open to the north and southwest (see website for Cu, Zn, and Co maps). TR1900N-1200 uncovered biotite-muscovite schist and graphitic phyllite with weakly anomalous Cu and Zn values. The Zn soil anomaly widens to the north and more trenches are planned.


Ledgend north soil grid, with gridded soil Ni and trench locations (all results on this map are by ALS

Laboratories).


Cross section along line 1000N, with TR1000N and Channel outcrop Ni results (values are by portable XRF).

Sampling Procedures and Quality Assurance and Quality Control The trench sampling programme at Ledgend was directed by John Drobe, P.Geo., the Company’s Chief Geologist, and supervised by Lucia Theny, P.Geo. of Lithos Geological Inc. and Rick Henderson of Hendex Exploration Services. All trench and outcrop samples were collected in situ by cutting a 4mm wide slot/channel with a 4.5 inch electric angle grinder, using an attached dust collector to catch the cuttings. Cuttings were then transferred to plastic Ziploc© sandwich bags with sample tags inserted, and the grinder cleaned. Samples (including QA/QC insertions) were collected for an entire trench and then, at the end of each day, analyzed with a portable Niton XRF (x-ray fluorescence) analyzer (model XL3T-500) back at the hotel after a thorough stirring. Samples lengths averaged 1.5 metres and all were between 0.5 and 2.6 metres; sample weights averaged 20-30g. A comprehensive QA/QC protocol was followed during sampling. The XRF scan duration was 120 seconds taken with the sample in the bag; thin plastic only affects the non-metallic lighter elements (tests were taken both in and out of the bags to verify this). All trench samples were taken twice (“pulp” duplicates or replicates), with the material in the bags stirred between shots. Field duplicates were taken every 20 samples by cutting a parallel channel to the original. Blanks were cut and inserted every 40 samples. A review of the duplicates, blanks and standards indicated reliable, satisfactory values were obtained for nickel, copper and zinc, as well as some pathfinder elements such as chromium. Cobalt values were mostly too low for reliable reporting, the higher values being only 2-3 times the detection limit of the XRF unit (about 200 ppm). Nickel had the best precision and accuracy mainly because the grades were higher than the other metals. For pulp duplicates, Ni precision averaged 7% for values above 5X the detection limit of 50 ppm, and for field duplicates the precision averaged 20% for Ni (Cu was 23%, Zn 31%). Test XRF


scans on four existing lab reject pulps from previous sampling returned acceptable bias and precision: average Ni bias was 5% (negative, XRF under-reported), Cu 17% (positive), and Zn 19% (negative). Samples with >3000 ppm Ni, Cu or Zn were sent to ALS Laboratories for further analysis and results are expected in a few weeks. Any variances between the laboratory and handheld XRF results will be explained in a follow-up news release, once sufficient confirmation laboratory results are available. Airborne Magnetometer Survey The pyrrhotite-bearing massive sulphides as exposed at the Discovery Showing were considered to be most easily traced in the subsurface with a magnetometer survey. Pioneer Aerial Surveys Ltd. (“Pioneer”) mobilized to the property in mid-June to fly approximately 90 line kilometres of aeromagnetometry, covering 375 hectares over the North Soil Grid. Pioneer used their UAV-MAG™ system, consisting of a multi-rotor UAV platform, a GEM Systems GSMP-35A potassium vapor magnetometer, and GEM Systems GSM-19 Overhauser base station. The survey flew east-west lines spaced at 50m with 500m perpendicular tie lines. Drone-flown magnetometer surveys have the advantage of low-flight speed, resulting in ultra-high-density resolution with the average station separation around 60cm at 10 m/s. Cardero received plan maps of total magnetic intensity (“TMI”), analytical signal (“AS”), 1st vertical derivative (“VD”), and horizontal derivative (“HD”), as well as a 3D inversion and elevation sections through the 3D model. The AS map below clearly shows a magnetic anomaly associated with the Discovery Showing massive sulphide mineralization and underlying the hosting talc-carbonate schist exposed in trenches TR0900N to 1600N. A layer of semi-massive or massive pyrrhotite with remnant magnetism is interpreted as the cause of this anomaly. The Central Zone magnetic anomaly extends over 500 metres farther south past TR0900N, to the southwest corner of the soil grid, merging with the West Zone soil anomaly. The West Zone also has a coincident magnetic anomaly at the north end, separated from the Central Zone anomaly by a northeast trending fault running along upper Ledgend Creek. Trenching is planned for this area.


Analytical Signal from the UAV-aeromagnetic survey, with thematic soil and rock Ni values.


Next Steps The results obtained to date on the Ledgend property gives Cardero strong encouragement that the metavolcanic and metasedimentary units of the southern Lardeau Group have excellent potential for hosting volcanogenic massive sulphides (“VMS”) with potentially economic nickel-cobalt and/or copper-zinc content. The exposures of massive and semi-massive sulphides, their host rock types and associated mineralization, and their apparent subsurface extents, as indicated by the aeromagnetic survey, all warrant further exploration for a Outokumpu/Besshi-style VMS deposit fitting the proposed model. Exploration will expand to cover the remainder of the Ledgend property. The western property limits have a strong magnetic response with anomalous nickel from silt sampling, and reconnaissance mapping indicates more potential host rocks there. The northern third of the property remains to be evaluated, and a historical aeromagnetic survey indicates there is good potential on-strike with the mineralized units described in this news release. Cardero has received a quote from Geotech Airborne Geophysical Surveys to fly 159 line kilometres of helicopter-borne aeromagetics over Ledgend, coupled with 405 line kilometres over the Lardeau claim block, for a total of CDN$85,300. Lardeau Property The Lardeau property covers 6315 Ha of mostly low-lying forest with sparse outcrop west of the Lardeau River. It was staked based on anomalous nickel-cobalt regional silt anomalies produced by the regional sampling programmes of the B.C. Ministry of Mines. Cardero collected 126 silt samples at approximately 200-metre spacing from the numerous small creeks which cut across the regional geological trend. Three drainages returned highly anomalous Ni (>100 ppm), Co (>30 ppm) and Cu (>50 ppm) values, over up to three kilometres of their length. Limited reconnaissance work along the access roads at Lardeau identified listwanite float in the northern anomalous creeks. Listwanite is a quartz-carbonate alteration product of nickel-bearing ultramafic rocks, and like the talc and actinolite schists found at Ledgend, is associated with nickel-cobalt mineralization. Ultramafic rocks are also associated with the massive sulphides at the Standard showing. For 2019, Cardero plans to fly aeromagnetics over the two most anomalous drainages (see above quote).


Area of proposed helicopter aeromagnetics for north portion of the Ledgend claims.


Area of proposed aeromagnetics for Lardeau property, with nickel silt sampling anomalies.


Tesla-Enerplus Soil Sampling The Tesla-Enerplus property comprises three claims totaling 732 Ha west of Gerrard, along Healy Creek. In 2011, Mineral Mountain Resources completed close-spaced soil sampling and limited rock sampling along the Healy Creek forest service road, having identified several horizons of black, manganiferous biotite schist. These horizons are anomalous in Ni and Co, as well and Cu and Zn (Assessment Report 32242). Cardero followed-up on this work with contour soil sampling along several logging roads up the west slope of Healy Creek, and has traced one of the anomalous Co-Cu-Zn horizons for about 700 metres up the slope to above road exposures of rusty manganiferous biotite schist horizons within quartzite-biotite schist. A second Co-Cu anomaly at the south margin of the property appears to correlate to anomalous soil samples taken by Mineral Mountain along Healy Creek road 500 metres to the south. The claims were extended 1400 metres to the south to cover the anomaly. Cardero will follow up with more detailed soil and sediment sampling on the west and south areas of the property in the next field season. Sampling Procedures and Quality Assurance and Quality Control The work programme at the Lardeau and Tesla-Enerplus properties was designed and supervised by M. McClaren, P.Geo. and J.M. Dawson, P.Eng., and John Drobe, P.Geo., the Company’s Chief Geologist. Soil samples were taken from the ‘B’ horizon whenever possible and were collected using a mattock or shovel. Sample sites were labelled with blue and orange flagging tape with the number recorded on the tape. Soil samples were placed in waterproof kraft envelopes, after which samples were dried and collated. All samples were then shipped in sealed bags to ALS Minerals laboratories in Kamloops or North Vancouver, B.C. The samples were dried at <60 degrees C. and sieved to -180 microns (Prep 41), then analysed by ICP-MS for 51 elements (method AuME–TL43). Over-limit gold results (>1ppm) were repeated by method Au-AROR43. This sampling program did not include a comprehensive QA/QC programme. However, ALS Minerals is an ISO 17025 registered laboratory and inserted blanks, standards and duplicates following their QA/QC protocol. Note that the exploration results described here for the Kootenay Project are preliminary in nature and not conclusive evidence of the likelihood of a mineral deposit. Qualified Person John Drobe P.Geo., Cardero's Chief Geologist and a qualified person as defined by National Instrument 43-101, has reviewed the scientific information that forms the basis for this news release, and has approved the disclosure herein. Mr. Drobe is not independent of the Company as he is an officer, a shareholder and hold incentive stock options.


RISK FACTORS The Company is in the business of acquiring, exploring and, if warranted, developing and exploiting natural resource properties. Due to the nature of the Company’s proposed business and the present stage of exploration of its mineral properties, the following risk factors, among others, will apply: Lack of Operating Funds: In the recent past, the Company has experiencing significant difficulty in raising additional capital to continue its operations. As a result, the Company took steps to conserve cash by reducing staffing, halting/delaying further work on its properties and shutting down its subsidiaries in Ghana, Peru and the United States. Although the Company continues to pursue potential funding opportunities, there can be no assurance that it will be successful in doing so. If the Company is not successful in raising funds it may be forced to further curtail or cease operations at Zonia. Resource Exploration and Development is Generally a Speculative Business: Resource exploration and development is a speculative business and involves a high degree of risk, including, among other things, unprofitable efforts resulting both from the failure to discover mineral deposits and from finding mineral deposits which, though present, are insufficient in size and grade at the then prevailing market conditions to return a profit from production. The marketability of natural resources which may be acquired or discovered by the Company will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations, the proximity and capacity of natural resource markets, government regulations, including regulations relating to prices, taxes, royalties, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital. There are no known reserves or resources on any of the Company’s properties. The majority of exploration projects do not result in the discovery of commercially mineable deposits of ore. Substantial expenditures are required to establish ore reserves through drilling and metallurgical and other testing techniques, determine metal content and metallurgical recovery processes to extract metal from the ore, and construct, renovate or expand mining and processing facilities. No assurance can be given that any level of recovery of ore reserves will be realized or that any identified mineral deposit, even it is established to contain an estimated resource, will ever qualify as a commercial mineable ore body which can be legally and economically exploited. Mineral resources are not mineral reserves and there is no assurance that any mineral resources will ultimately be reclassified as proven or probable reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability. Fluctuation of Commodity Prices: Even if commercial quantities of mineral deposits are discovered by the Company, there is no guarantee that a profitable market will exist for the sale of the minerals produced. The Company’s long-term viability and profitability depend, in large part, upon the market price of minerals which have experienced significant movement over short periods of time, and are affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The recent price fluctuations in the price of all commodities for which the Company is presently exploring is an example of a situation over which the Company has no control and may materially adversely affect the Company in a manner that it may not be able to compensate for. The supply of and demand for minerals are affected by various factors, including political events, economic conditions and production costs in major producing regions. There can be no assurance that the price of any minerals produced from the Company’s properties will be such that any such deposits can be mined at a profit.


General Economic Conditions: The recent unprecedented events in global financial markets have had a profound impact on the global economy. Many industries, including the gold and base metal mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company’s growth and profitability. Specifically:

The global credit/liquidity crisis could impact the cost and availability of financing and the Company’s overall liquidity;

the volatility of commodity prices may impact the Company’s future revenues, profits and cash flow;

volatile energy prices, commodity and consumables prices and currency exchange rates impact

potential production costs; and

the devaluation and volatility of global stock markets impacts the valuation of the Common Shares, which may impact the Company’s ability to raise funds through the issuance of Common Shares.

These factors could have a material adverse effect on the Company’s financial condition and results of operations. Share Price Volatility: In recent years, worldwide securities markets, particularly those in the United States and Canada, have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly those considered exploration or development stage companies, have experienced unprecedented fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. Most significantly, the share prices of junior natural resource companies have experienced an unprecedented decline in value and there has been a significant decline in the number of buyers willing to purchase such securities. In addition, significantly higher redemptions by holders of mutual funds has forced many of such funds (including those holding the Company’s securities) to sell such securities at any price. As a consequence, despite the Company’s past success in securing significant equity financing, market forces may render it difficult or impossible for the Company to secure subscribers to purchase new share issues at a price which will not lead to severe dilution to existing shareholders, or at all. Therefore, there can be no assurance that significant fluctuations in the trading price of the Company’s common shares will not occur, or that such fluctuations will not materially adversely impact on the Company’s ability to raise equity funding without significant dilution to its existing shareholders, or at all. Permits and Licenses: The operations of the Company will require licenses and permits from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects, on reasonable terms or at all. Delays in obtaining, or a failure to obtain, such licenses and permits, or a failure to comply with the terms of any such licenses and permits that the Company does obtain, could have a material adverse effect on the Company. Acquisition of Mineral Properties under Agreements: The agreements pursuant to which the Company has the right to acquire several its properties provide that the Company must make a series of cash payments


and/or share issuances over certain time periods, expend certain minimum amounts on the exploration of the properties or contribute its share of ongoing expenditures. Failure by the Company to make such payments, issue such shares or make such expenditures in a timely fashion may result in the Company losing its interest in such properties. There can be no assurance that the Company will have, or be able to obtain, the necessary financial resources to be able to maintain all of its property agreements in good standing, or to be able to comply with all of its obligations thereunder, with the result that the Company could forfeit its interest in one or more of its mineral properties. Title Matters: The acquisition of title to mineral properties can be a very detailed and time-consuming process. Title to, and the area of, mineral properties may be disputed. While the Company has diligently investigated title to all mineral properties in which it has an interest and, to the best of its knowledge, title to all such properties is in good standing or, where not yet granted, the application process appears to be proceeding normally in all the circumstances, this should not be construed as a guarantee of title or that any such applications for concessions will be granted. Title to mineral properties may be affected by undetected defects such as aboriginal or indigenous peoples’ land claims, or unregistered agreements or transfers. The Company has not obtained title opinions for the majority of its mineral properties. Not all the mineral properties in which the Company has an interest have been surveyed, and their actual extent and location may be in doubt. Surface Rights and Access: Although the Company acquires the rights to some or all of the minerals in the ground subject to the mineral tenures that it acquires, or has a right to acquire, in most cases it does not thereby acquire any rights to, or ownership of, the surface to the areas covered by its mineral tenures. In such cases, applicable mining laws usually provide for rights of access to the surface for the purpose of carrying on mining activities, however, the enforcement of such rights through the courts can be costly and time consuming. It is necessary to negotiate surface access or to purchase the surface rights if long-term access is required. There can be no guarantee that, despite having the right at law to access the surface and carry on mining activities, the Company will be able to negotiate satisfactory agreements with any such existing landowners/occupiers for such access or purchase of such surface rights, and therefore it may be unable to carry out planned mining activities. In addition, in circumstances where such access is denied, or no agreement can be reached, the Company may need to rely on the assistance of local officials or the courts in the applicable jurisdiction, the outcomes of which cannot be predicted with any certainty. The inability of the Company to secure surface access or purchase required surface rights could materially and adversely affect the timing, cost or overall ability of the Company to develop any mineral deposits it may locate. This is a particular problem in Argentina where blockades of access to the Company’s properties, hostile actions by local communities and indigenous peoples and the potential unwillingness of local police or governmental officials to assist a foreign company against its own citizens can result in the Company being unable to carry out any exploration activities despite being legally authorized to do so and having complied with all applicable local laws and requirements. Such issues can also occur in Canada, especially in connection with actions concerning resource development projects and involving first nations and environmental protest groups. No Assurance of Profitability: The Company has no history of production or earnings and due to the nature of its business there can be no assurance that the Company will be profitable. The Company has not paid dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. All of the Company’s properties are in the exploration stage and, with the exception of Zonia, the Company has not defined or delineated any proven or probable reserves on any of its properties. None of the Company’s properties are currently under development. Continued exploration of its existing properties and the future development of any properties found to be economically feasible, will require significant funds. The only present source of funds available to the Company is through the sale of its equity securities, the sale or optioning of a portion of its interest in its mineral properties or debt financing, none of which may be available at any time. Even if the results of exploration are encouraging, the Company may not


have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists. While the Company may generate additional working capital through further equity offerings, through the sale or possible syndication of its properties, or through short-term debt facilities, there is no assurance that any such funds will be available through any of such methods on favourable terms, or at all. At present, it is impossible to determine what amounts of additional funds, if any, may be required. Failure to raise such additional capital could put the continued viability of the Company at risk. Uninsured or Uninsurable Risks: Exploration, development and mining operations involve various hazards, including environmental hazards, industrial accidents, metallurgical and other processing problems, unusual or unexpected rock formations, structural cave-ins or slides, flooding, fires, metal losses and periodic interruptions due to inclement or hazardous weather conditions. These risks could result in damage to or destruction of mineral properties, facilities or other property, personal injury, environmental damage, delays in operations, increased cost of operations, monetary losses and possible legal liability. The Company may not be able to obtain insurance to cover these risks at economically feasible premiums or at all. The Company may elect not to insure where premium costs are disproportionate to the Company’s perception of the relevant risks. The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration and production activities. Government Regulation: Any exploration, development or mining operations carried on by the Company will be subject to government legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labour standards. The Company cannot predict whether such legislation, policies or controls, as presently in effect, will remain so, and any changes therein (for example, significant new royalties or taxes), which are completely outside the control of the Company, may materially adversely affect the ability of the Company to continue its planned business within any such jurisdictions. Foreign Countries and Political Risk: The Company has a majority shareholding in Centenera, which owns mineral properties located in Argentina. In other countries, mineral exploration and mining activities may be affected in varying degrees by political or economic instability, expropriation of property and changes in government regulations such as tax laws, business laws, environmental laws and mining laws. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may materially adversely affect it business, or if significant enough, may make it impossible to continue to operate in certain countries. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, foreign exchange restrictions, export controls, income taxes, expropriation, environmental legislation and mine safety. Dependence Upon Others and Key Personnel: The success of the Company’s operations will depend upon numerous factors, many of which are beyond the Company’s control, including (i) the ability of the Company to enter strategic alliances through a combination of one or more joint ventures, mergers or acquisition transactions; and (ii) the ability to attract and retain additional key personnel in exploration, mine development, sales, marketing, technical support and finance. These and other factors will require the use of outside suppliers as well as the talents and efforts of the Company. There can be no assurance of success with any or these factors on which the Company’s operations will depend. The Company has relied and may continue to rely, upon consultants and others for operating expertise. Exploration and Mining Risks: Fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are other risks involved in the operation of mines and the conduct of exploration programs. Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits


may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. The economics of developing mineral properties is affected by many factors including the cost of operations, variations of the grade of ore mined, fluctuations in the price of gold or other minerals produced, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Short term factors, such as the need for orderly development of ore bodies or the processing of new or different grades, may have an adverse effect on mining operations and on the results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in geological resources, grades, stripping ratios or recovery rates may affect the economic viability of projects. Currency Fluctuations: The Company presently maintains its accounts in Canadian dollars. Due to the nature of its operations in other countries, the Company also maintains accounts in Argentinian pesos. Such fluctuations are out of its control and may materially adversely affect the Company’s financial position and results. The Company does not engage in any hedging programs with respect to currencies. Environmental Restrictions: The activities of the Company are subject to environmental regulations promulgated by government agencies on spills, releases or emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations. Regulatory Requirements: The activities of the Company are subject to extensive regulations governing various matters, including environmental protection, management and use of toxic substances and explosives, management of natural resources, exploration, development of mines, production and post-closure reclamation, exports, price controls, taxation, regulations concerning business dealings with indigenous peoples, labour standards on occupational health and safety, including mine safety, and historic and cultural preservation. Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties, enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions, any of which could result in the Company incurring significant expenditures. The Company may also be required to compensate those suffering loss or damage because of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspension of the Company’s operations and delays in the exploration and development of the Company’s properties. Limited Experience with Development-Stage Mining Operations: The Company has limited experience in placing resource properties into production, and its ability to do so will be dependent upon using the services of appropriately experienced personnel or entering agreements with other major resource companies that can provide such expertise. There can be no assurance that the Company will have available to it the necessary expertise when and if it places its resource properties into production.


Estimates of Mineral Reserves and Resources and Production Risks: The mineral resource estimates presented in the Company’s filings with securities regulatory authorities, press releases and other public statements that may be made from time to time are based upon estimates made by Company personnel and independent geologists, and no assurance can be given that any particular level of recovery of minerals will in fact be realized or that an identified reserve or resource will ever qualify as a commercially mineable (or viable) deposit which can be legally and economically exploited. The estimating of mineral resources and mineral reserves is a subjective process and the accuracy of mineral resource and mineral reserve estimates is a function of the quantity and quality of available data, the accuracy of statistical computations, and the assumptions used, and judgments made in interpreting available engineering and geological information. There is significant uncertainty in any mineral resource or mineral reserve estimate and the actual deposits encountered and the economic viability of a deposit may differ materially from the Company’s estimates. Accordingly, there can be no assurance that:

• these estimates will be accurate;

• reserve, resource or other mineralization figures will be accurate; or

• this mineralization could be mined or processed profitably. Because the Company has not commenced production at any of its properties, and has not defined or delineated any proven or probable reserves on any of its properties, mineralization estimates for the Company’s properties may require adjustments or downward revisions based upon further exploration or development work or actual production experience. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. There can be no assurance that minerals recovered in small-scale tests will be duplicated in large-scale tests under on-site conditions or in production scale. Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. Short term factors, such as the need for orderly development of deposits or the processing of new or different grades, may have a material adverse effect on mining operations and on the results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in reserves or resources, grades, stripping ratios or recovery rates may affect the economic viability of projects. The estimated resources described in the Company’s filings with securities regulatory authorities, press releases and other public statements that may be made from time to time should not be interpreted as assurances of mine life or of the profitability of future operations. Estimated mineral resources and mineral reserves may have to be re-estimated based on changes in applicable commodity prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral resource or mineral reserve estimates. Market price fluctuations for coal, iron ore and other commodities, increased production costs or reduced recovery rates or other factors may render any particular reserves uneconomical or unprofitable to develop at a particular site or sites. A reduction in estimated reserves could require material write downs in investment in the affected mining property and increased amortization, reclamation and closure charges. Mineral resources are not mineral reserves and there is no assurance that any mineral resources will ultimately be reclassified as proven or probable reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability. Enforcement of Civil Liabilities: As many of the assets of the Company and its subsidiaries are located outside of Canada and the United States, and certain of the directors and officers of the Company are resident outside of Canada and/or the United States, it may be difficult or impossible to enforce judgements


granted by a court in Canada or the United States against the assets of the Company or its subsidiaries or the directors and officers of the Company residing outside of such country. Mining Industry is Intensely Competitive: The Company’s business of the acquisition, exploration and development of mineral properties is intensely competitive. The Company may be at a competitive disadvantage in acquiring additional mining properties because it must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than the Company. The Company may also encounter increasing competition from other mining companies in efforts to hire experienced mining professionals. Competition for exploration resources at all levels is currently very intense, particularly affecting the availability of manpower, drill rigs and helicopters. Increased competition could adversely affect the Company’s ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future. The Company may be a “passive foreign investment company” under the U.S. Internal Revenue Code, which may result in material adverse U.S. federal income tax consequences to investors in Common Shares that are U.S. taxpayers: Investors in Common Shares that are U.S. taxpayers should be aware that Cardero believes that it has been in one or more prior tax years, and may be in current and future tax years, a “passive foreign investment company” under Section 1297(a) of the U.S. Internal Revenue Code (a “PFIC”). However, no determination has been made regarding Cardero’s PFIC status for any tax year. If Cardero is or becomes a PFIC, generally any gain recognized on the sale of the Common Shares and any “excess distributions” (as specifically defined) paid on the Common Shares must be rateably allocated to each day in a U.S. taxpayer’s holding period for the Common Shares. The amount of any such gain or excess distribution allocated to prior years of such U.S. taxpayer’s holding period for the Common Shares generally will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year, and the U.S. taxpayer will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income. Alternatively, a U.S. taxpayer that makes a “qualified electing fund” (a “QEF”) election with respect to Cardero generally will be subject to U.S. federal income tax on such U.S. taxpayer’s pro rata share of Cardero’s “net capital gain” and “ordinary earnings” (as specifically defined and calculated under U.S. federal income tax rules), regardless of whether such amounts are distributed by Cardero. U.S. taxpayers should be aware, however, that there can be no assurance that Cardero will satisfy record keeping requirements under the QEF rules or that Cardero will supply U.S. taxpayers with required information under the QEF rules, if Cardero is a PFIC and a U.S. taxpayer wishes to make a QEF election. As a second alternative, a U.S. taxpayer may make a “mark-to-market election” if Cardero is a PFIC and the Common Shares are “marketable stock” (as specifically defined). A U.S. taxpayer that makes a mark-to-market election generally will include in gross income, for each taxable year in which Cardero is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares as of the close of such taxable year over (b) such U.S. taxpayer’s adjusted tax basis in the Common Shares. The above paragraphs contain only a summary of certain U.S. federal income tax considerations. Investors should consult their own tax advisor regarding the PFIC rules and other U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.


SUMMARY OF QUARTERLY RESULTS The table below sets out the quarterly results for the past eight quarters:

Quarter Ended Amounts in

000’s

Jan. 31, 2019

$

Oct. 31, 2018

$

July 31, 2018

$

Apr 30, 2018

$

Jan. 31, 2018

$

Oct. 31, 2017

$

July 31, 2017

$

Apr 30, 2017

$

Income (loss) (1,597) (672) (522) (363) 2,237 (1,470) (500) (503) Income (loss) per share – basic and diluted (0.02) (0.01) (0.01) (0.01) 0.04 (0.04) (0.01) (0.02) Comprehensive income (loss) (1,597) (672) (522) (411) $2,280 (1,469) (506) (514)

The variation seen over such quarters is primarily dependent upon the success of the Company’s ongoing property evaluation program and the timing and results of the Company’s exploration activities on its then current properties, none of which are possible to predict with any accuracy. There are no general trends regarding the Company’s quarterly results, and the Company’s business of mineral exploration is not seasonal. Quarterly results can vary significantly depending on whether the Company has abandoned any properties or granted any stock options and these are the factors that account for material variations in the Company’s quarterly net losses, none of which are predictable. While the Company may seek, in the future, to sell some or all the interests in other of its exploration and evaluation assets, the timing and potential effect of any such sale is impossible to predict. The write-off of exploration and evaluation assets can have a material effect on quarterly results as and when they occur. Another factor which can cause a material variation in net loss on a quarterly basis is the grant of stock options due to the resulting share-based payment charges which can be significant when they arise. General operating costs other than the specific items noted above tend to be quite similar from period to period. FINANCIAL RESULTS OF OPERATIONS During the period ended January 31, 2019, the Company incurred a loss of $1,596,659 (January 31, 2018 – $2,237,439). The following discussion explains the variations in key components of these numbers but, as with most junior mineral exploration companies, the results of operations are not the main factor in establishing the financial health of the Company. Of far greater significance are the mineral properties in which the Company has, or may earn, an interest, its working capital and how many shares it has outstanding. Quarterly results can vary significantly depending on whether the Company has abandoned any properties or granted any stock options. Three Months ended January 31, 2019 compared to three months ended January 31, 2018 The Company’s expenses were $993,232 (2018 - $743,527); a review of the significant components is as follows:

Office costs of $47,367 (2018 - $85,435), decreased from prior period; Professional fees of $15,534 (2018 - $23,506) consisted of legal $5,925 (2018 - $18,164) and audit

and accounting of $9,609 (2018 - $5,341) legal expenses related to property agreements entered and general corporate matters;


Regulatory and transfer agent fees of $1,890 (2018 - $20,551) decreased from prior period;

Stock-based compensation of $690,336 (2018 - $385,753) consists of stock options issued, credit facility warrants allocated to management, and bonus warrants issued on an additional credit facility and loan;

Consulting fees of $48,000 (2018 - $15,000), and consisted of fees paid to the CFO $13,500 (2018

- $13,500), and other consultants of $34,500 (2018 - $1,500); and Salaries and benefits of $158,225 (2018 - $161,452) for salaried employees.

The Company also incurred other income and expenses including:

Dividends expense of $240,000 (2018 – $240,000) on the preferred shares; and

Share of change in net assets and dilution in associate, being Centenera, of $340,432 (2018 - $nil); DECONSOLIDATION OF CENTENERA AS A SUBSIDIARY, AND RECOGNITION OF CENTENERA AS AN ASSOCIATE As at October 31, 2017 the Companies consolidated financial statements include the consolidated financial statements of Centenera because of an RTO completed by Centenera, a mineral exploration company incorporated in Canada with properties located in Argentina. On June 18, 2015, Centenera completed the acquisition of all the issued and outstanding shares of Cardero Argentina. Cardero Argentina was a wholly owned subsidiary of the Company and is a mineral exploration company with properties located in Argentina. As consideration for the acquisition, as well as for services provided by the Company relating to the RTO, Centenera paid to the Company US $50,000 cash and issued 23,743,781 common shares, which resulted in the Company owning a controlling interest in Centenera.

On January 3, 2018, the Company entered a share sale agreement with E.L.II Properties Trust (the “Purchaser”) for sale of 5,000,000 common shares in the capital of Centenera (the “shares”). The purchaser paid consideration of $650,000 for the shares representing a per share purchase price of $0.13. The Company determined that it no longer exercised control over Centenera, as it no longer had the power to govern the financial and operating policies of Centenera. The Company derecognized the related assets, liabilities and non-controlling interests of Centenera, and recognized the Company’s equity portion of remaining assets and liabilities as an investment in associate as follows:

January 3, 2018

Current Assets $ 971,315 Non-Current 951,648 Current liabilities (95,750)

Net assets deconsolidated $ 1,827,213


Total consideration

Net assets derecognized Net assets deconsolidated $ (1,827,213) Non-controlling interest 1,966,546 Contributed surplus derecognized 614,633 Fair value of retained interest in associate (note 13) 3,3033,406 Proceeds from the sale of Centenera shares (650,000)

Gain on deconsolidation of subsidiary $ 4,437,372 All operations of Centenera prior to deconsolidation were proportionally recognized in accordance with the Company’s accounting policy. Subsequent to deconsolidation, the Company records its share of the changes in the equity in its associate Centenera using the equity method. INVESTMENT IN ASSOCIATE On January 3, 2018, the Company sold 5,000,000 common shares of Centenera for proceeds of $650,000 to E.L.II Properties Trust, thereby, lowering the Company’s holdings to 18,958,781 common shares which represented 26.16% of total shares outstanding. Centenera was deconsolidated as a subsidiary with the fair value retained interest in Centenera recorded as an investment in associate. As at October 31, 2018, the Company holds approximately 15% (2017 – 36%), of Centenera’s issued and outstanding common shares. The decrease is attributed to the sale of Centenera common shares by the Company, and additional dilution resulting from additional shares being issued by Centenera. The Company has a minority position on the board of directors of Centenera and does not control operation decisions. The Company’s judgement is that it has significant influence, but not control and accordingly equity accounting is appropriate. As at January 31, 2019, Centenera’s aggregate assets, aggregate liabilities and net losses are as follows:

Centenera

Current Assets $ 140,537 Non-Current 3,308,826 Current liabilities (871,769) Non-current liabilities (146,452) Net assets 2,431,142 The Company’s ownership percentage 15.38% The Company’s share of net assets $ 373,910

The Company’s investment in Centenera is as follows:

Number of

shares

Amount Balance, October 31, 2017 - $ - Fair value of retained interest in associate 18,958,781 3,033,406 Equity and dilution loss from associate - (519,208) - 2,514,198 Impairment - (1,376,670) Balance, October 31, 2018 18,958,781 $ 1,137,528 Disposal of associate (6,250,000) (200,000) Equity and dilution loss from associate - (340,432) Balance, January 31, 2019 12,708,781 $ 597,096


As Centenera is a publicly traded entity, the fair value of the Company’s investment in Centenera was determined by the closing market price of Centenera’s common shares on the TSX-V as at October 31, 2018, of $1,137,528. Accordingly, at October 31, 2018, the Company recorded an impairment loss for its investment in Centenera of $1,376,670 as the decline in fair value of the investment to below carrying value was considered other than temporary. Fair value was determined in accordance with Level 1 of the fair value hierarchy. During the period ended January 31, 2019, the Company sold 6,250,000 common shares of Centenera to the Kopple Lenders for proceeds of $200,000. The amount recorded as equity and dilution loss from associate includes a reduction in the carrying value of the Company’s investment in Centenera to reflect its proportional loss of ownership interest pursuant to the disposal.

LIQUIDITY AND CAPITAL RESOURCES The Company has no revenue generating operations from which it can internally generate funds. Over the past three fiscal years, the Company’s ongoing operations have been predominantly financed by a short-term loan, a credit facility, the sale of its equity securities by way of private placements and the subsequent exercise of share purchase warrants and broker options issued regarding such private placements. However, the exercise of warrants/options is dependent primarily on the market price and overall market liquidity of the Company’s securities at or near the expiry date of such warrants/options (over which the Company has no control) and therefore there can be no guarantee that any existing warrants/options will be exercised. The Company has also successfully generated operating funds through the sale of certain of its resource related investments, some of which had significantly increased in value since their acquisition. However, such returns are subject to fluctuations in the market for the shares of the companies in which the Company has invested, and therefore there can be no assurance that the Company will continue to be able to generate significant additional funds through the liquidation of its investments. As illustrative of this, the current market conditions for junior resource equities have resulted in a significant decline in the market value, and hence the price at which the Company can sell, any of its remaining resource related investments, and the Company does not presently envision raising any further significant funds through the sale of such investments. In addition, the Company has already disposed of the bulk of its resource-related investments and therefore does not anticipate being able to generate material funds through further sales in the foreseeable future. The Company can raise funds through the sale of interests in its mineral properties, and negotiations in this regard are underway, although there can be no assurance that it will be successful in doing so. On December 12, 2017, the Company closed a flow-through non-brokered private placement of 1,142,858 flow-through shares for gross proceeds of $200,000. On December 29, 2017, 2,198,000 shares were issued upon exercise of stock options for proceeds of $219,800. On January 3, 2018, the Company entered into a share purchase and sale agreement with E.L. II Properties Trust, Robert C. Kopple trustee, a related party to the Company, for the sale of 5,000,000 common shares in the capital of Centenera. Pursuant to the agreement, the purchaser will pay an aggregate consideration of $650,000 for the shares, representing a per-share purchase price of 13 cents. On March 8, 2018 the Company negotiated a loan supported by a promissory note to E.L. II Properties Trust, Robert C. Kopple trustee (the “Lender”), a related party to the company, in the amount of $200,000 (U.S.).The promissory note will be due at the earliest of June 8, 2018, or the occurrence of an event of default, or within three business days of the completion by the Company of any debt or equity financing. Interest will be calculated on the promissory note from March 8, 2018 at a rate of nil percent if the principal amount is repaid by the Company to the Lender on or before the June 8, 2018; or, in all other instances,


10% per annum, calculated daily, both before and after maturity, with interest on all overdue interest at the same rate from the due date to the date of payment. As at October 31, 2018, the Company has accrued interest of $17,624 in connection with this loan. On July 12, 2018, the Company closed a non-brokered private placement of 3,592,714 units for gross proceeds of $502,980. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant entitling the holder to acquire one additional share at a price of $0.21 per share for a period of up to two years. The Company paid cash finders' fees of $3,830 and issued 15,750 finders’ shares. During the three months ended January 31, 2019:

On November 9, 2018, the Company issued 300,000 units for gross proceeds of $30,000. Each unit comprised of one common share and one common share purchase warrant exercisable at $0.10 each until November 9, 2023.

On November 19, 2019, 100,000 common shares were issued for the Kootenay property acquisition at a fair value of $0.10 per share totalling $10,000.

The Company expects that it will operate at a loss for the foreseeable future. The Company requires additional funding to carry on business and meet its objectives of advancing the Zonia project. As at January 31, 2019, the Company reported bank indebtedness of $4,948 compared to cash of $21,830 at October 31, 2018. The change in cash and cash equivalents over the period is comprised of funds used by operating activities of $384,729, investing activities used ($340,983) and $703,882 was provided by financing activities due to a private placement financing, and a line of credit extended by a related party. As at January 31, 2019, the Company had a working capital deficit of $2,653,136. To move the Company’s projects forward and to continue as a going concern, the Company will be required to raise additional funds. The Company will raise funds in the 2019 fiscal year to advance its projects. It is the Company’s intention to specifically move the Zonia copper project forward in anticipation of a copper market recovery continuing through the next 3 to 5 years. The Company is investigating several potential sources of capital including but not limited to an equity placement, Joint Venture and potential royalty and/or streaming arrangement. Although the Company believes it will be able to raise capital, there can be no assurances that the Company’s future cash requirements, and the ability of the Company to raise the funding necessary to carry out its planned activities and to meet its anticipated general and administrative expenses for the fiscal year ending October 31, 2019 will be successful. The Company does not believe that the credit, liquidity or market risks with respect to cash held in banks has increased because of the current market conditions. However, to achieve greater security for the preservation of its capital, the Company has, of necessity, been required to accept lower rates of interest which has also lowered its potential interest income. The following table discloses the Company’s contractual obligations:

Contractual Obligations

Payments Due by Period

Total

Prior to October 31,

2019 (9 months)

November 1, 2019 to March 31, 2021 (29

months) Operating Lease Obligations $777,582 $269,163 $508,419


OFF BALANCE-SHEET ARRANGMENTS The Company has no off-balance sheet arrangements. RELATED PARTY TRANSACTIONS During the three months ended January 31, 2019, the Company entered the following transactions with related parties and paid or accrued the following amounts, excluding share-based payment charges in connection therewith:

Name Relationship Purpose of

Transaction Three Months

Ended Stuart Ross CEO and President Wages and

Salaries $ 30,000

Marla Ritchie Corporate Secretary of the Company

Wages and Salaries

$ 9,000

Robert Kopple Director of the Company Director's fees $ 6,000

Henk van Alphen Director of the Company Director's fees $ 6,000

Deepak Malholtra Director of the Company Director's fees $ 6,000

Robert Van Doorn Director of the Company Director's fees $ 6,000

Keith Henderson Director of the Company Director's fees $ 6,000

Keith Henderson Director of the Company Director's fees $ 6,000

Promaid Services Ltd Company controlled by the CFO of the Company

Consulting $ 13,500

Accounts payable and accrued liabilities as at January 31, 2019 included $220,350 (October 31, 2018 - $86,306) owed to an officer and directors of the Company. The Company entered into a facility agreement with E.L. II Properties Trust, for an unsecured credit facility (the “Facility”) of US $630,000 to be advanced in five equal installments of US $126,000. The Company received all five installments of US $126,000. The Facility bears interest at 12% per annum, and repayment is due on the date which is two years following the date the Facility has been fully advanced to the Company. The Company has negotiated an extension to the maturity date of a previously advanced US $200,000 promissory note (the “Loan”) with the lender and consolidated such loan with two other advances made by the lender for an aggregate loan of US $296,655. The Loan is due on November 13, 2020 and bears interest at 12% per annum. In connection with the Facility and Loan as noted above, the Company has issued 12,262,850 bonus warrants to the lender. The bonus warrants will be exercisable into one common share of the Company at a price of $0.10 per share. 3,912,850 of the bonus warrants in connection with the Loan will expire on November 13, 2020, and the remaining 8,350,000 bonus warrants will expire at the maturity of the Facility. The bonus warrants under the Facility are subject to vesting restrictions in that they only become exercisable as the advances under the Facility are made. The fair value recorded to share-based payment expense in connection with the issuance of these bonus warrants during the period ended January 31, 2019, was $619,000.


PROPOSED TRANSACTIONS As at the date of this MD&A, except as disclosed in Exploration Activities - General, there are no other proposed transactions where the Board of Directors or senior management believes that confirmation of the decision by the Board is probable or with which the Board and senior management have decided to proceed. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. There were no changes to the Company’s most significant accounting judgments and estimates during the period. The Company significant accounting estimates and judgments remain the same as those disclosed in Note 2 (c) of the Company’s annual consolidated financial statements for the year ended October 31, 2018. CHANGES IN ACCOUNTING POLICIES The impact of the adoption of new accounting standards and amendments are disclosed in the Company’s interim condensed consolidated financial statements for the three months ended January 31, 2019 within Note 3. None of the new standards or amendments had a significant impact on the consolidated financial statements of the Company. The Company’s significant accounting policies are disclosed in Note 2 to its audited annual consolidated financial statements for the year ended October 31, 2018. FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS The Company’s amounts due from related parties, and its accounts payable and accrued liabilities at January 31, 2019 were normal course business items. The Company manages its capital structure, and adjusts it, based on the funds available to the Company to support future business opportunities. The Company defines its capital as shareholders’ equity and debt. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company currently has no source of revenues; as such, the Company is dependent upon external financings or related party loans and line of credit to fund activities. To carry future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the period ended January 31, 2019. The Company is not subject to externally imposed capital requirements. IFRS 13 Fair Value Measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).


The fair value hierarchy requires the use of observable market inputs whenever such input exists. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. DISCLOSURE OF OUTSTANDING SHARE DATA

(a) As of the date of this MDA, the Company has 73,939,213 issued and outstanding common shares. The authorized share capital is an unlimited number of common shares without par value.

(b) As at the date of this MDA, the Company has 7,385,000 incentive stock options outstanding. (c) As at the date of this MDA, the Company has 28,387,921 share purchase warrants.

DISCLOSURE OF MANAGEMENT COMPENSATION In accordance with the requirements of Section 19.5 of TSXV Policy 3.1, the Company provides the following disclosure with respect to the compensation of its directors and officers during the period:

1. During the three months ended January 31, 2019, the Company did not enter any standard compensation arrangements made directly or indirectly with any directors or officers of the Company, for their services as directors or officers, or in any other capacity, with the Company or any of its subsidiaries except as disclosed under “Related Parties Transactions”.

2. During the three months ended January 31, 2019, officers of the Company were paid (or accrued)

for their services as officers of the Company as noted above under “Related Parties Transactions”.

3. During the three months ended January 31, 2019, the Company did not enter any arrangement relating to severance payments to be paid to directors and officers of the Company and its subsidiaries.

ADDITIONAL SOURCES OF INFORMATION Additional disclosures pertaining to the Company, including its most recent, financial statements, management information circular, material change reports, press releases and other information, are available on the SEDAR website at www.sedar.com or on the Company’s website at www.cardero.com. Readers are urged to review these materials, including the technical reports filed with respect to the Company's mineral properties.

cardero resource corp. · office costs 47,367 85,435 professional fees 15,534 23,506 regulatory and...

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