Letter to Shareholders

January 11, 2021

Dear Fellow Shareholders:

I hope you and your loved ones are staying healthy during this continued period of disruption as a result of the global pandemic. Despite the challenges, 2020 brought numerous important achievements for Outcrop. This can be attributed to the superior quality, experience, diligence, persistence and hard work of our Colombian exploration team, local managers, corporate management, and board of directors who worked tirelessly to ensure the health, safety and operational success of our Company.

During 2020, Outcrop rewarded shareholders with over a 500% return. However, with only a CAD $60 million market capitalization, ongoing discoveries at Santa Ana, six other high grade gold projects in Colombia that have yet to be drilled, and the early stages of a precious metals bull market, there is plenty of upside remaining. We represent one of few Junior Explorers with a high-quality discovery poised for rapid growth.

Outcrop has a strong cash balance of over CAD $3,000,000 to support this ongoing growth. In June 2020, we closed a CAD $5,700,000 private placement to fund our exploration drilling program. We were pleased to receive a strong endorsement by Mr. Eric Sprott who led this financing. This was Mr. Sprott’s second investment in Outcrop and he now owns 19% of the Company.

Since acquiring Santa Ana in January 2020, the project has proved to be a major driver of an increasing valuation for the Company. Drilling from the beginning of the year has delivered repeated excellent results with our best drill hole to date of 10.8 kilograms of equivalent silver per tonne over 0.95 metres. Drilling and discoveries have proceeded at a remarkable pace and we are hitting the high-grade silver-gold veins that made the historic Santa Ana Mines of the Spanish colonial era famous. Modern exploration will exponentially expand the potential recognized by mining that dates from the 1500’s.

Every target tested has delivered a large high-grade shoot, and we are currently five for five for a 100% success rate with a very efficient use of drilling that totals less than 12,000 metres. The five Santa Ana shoots discovered to date are exceptional in size for an epithermal vein system, each measuring larger than 250 metres in surface trace and over 250 metres down-dip. All shoots are open in one or more directions along their surface trace and all are open at depth. Limited drilling at depth indicates the shoots may extend to over 400 metres down-dip.

The high-grade shoots show good internal grade contours and physical continuity. Shoots of this size add significant potential to the project with each new discovery. Open strike and especially depth extensions to mineralization could potentially double the size of the existing shoots. With less than 30% of our known vein systems explored, there is significant room for expansion of Santa Ana.

During the year, we also expanded the project from 700 hectares to over 25,000 hectares. We estimate that with the new acquisition the Company has expanded its inventory of vein traces from 14 cumulative kilometres to up to 90 cumulative kilometres. The company controls more than a district, it controls almost an entire regional silver-gold belt. As the new applications are converted to concessions, Outcrop will be positioned to explore a world-class high-grade vein system. The Frias Mine and its extensions, centrally located in the new acquisition, will be a near term area to advance drill targets. The Frias Mine produced more than 10 million ounces of silver from a small footprint before 1907. Exploration adits over 7 kilometres distance around Frias suggest significant potential. Veins are open along strike from the operating Porvenir Mine just south of the Santa Ana acquisition extending northeast onto our ground. The trend between Porvenir, Frias and the Santa Ana Mines provides greater than 22 kilometres distance of exploration potential; historic workings indicate that vein systems are semi-continuous between these three mine areas. Across the entire property, abundant workings surveyed and sampled by the Colombia Geological Survey provide numerous immediate targets.

Regarding making more discoveries on the project, two recent events are critical. First, the most recent San Juan discovery was “blind” which means without a significant metal expression at surface. Studying the near surface characteristics of San Juan will help discover blind shoots elsewhere. Also, the San Juan shoot is only 150 metres north of the Roberto Tovar shoot in the same vein. This represents an encouraging vein density of two large shoots discovered in only 600 metres of vein length. Secondly, ground geophysical surveys correlate well with known vein structures and show inferred vein extensions and previously unknown vein structures and their intersections. The ground geophysics combined with surface sampling will provide new targets to continue drilling through 2021. Depending on exploration success, Outcrop could have enough shoots identified to delineate a maiden resource – although the priority now is exploration drilling to discover as many shoots as possible.

A large airborne geophysical survey is commencing in January 2021. The purpose is to define vein structures on the new acquisition and conduct priority ranking of a steady stream of exploration targets throughout the regional scale silver-gold vein belt that Outcrop controls.

Our commitment to community remains the highest pillar in our business. As such, we are actively working with the government leaders of Falan to provide benefit to our greater community and neighbours living on the Santa Ana concession through various initiatives. This includes providing assistance to schools, providing wheelchairs to the physically disabled in partnership with a non-profit and supporting micro-cap business start-ups. The Company will continue to work with community leaders on all its projects to identify areas of need. Outcrop strives for transparency with our neighbors near and on our concession.

We are also continuously monitoring the COVID-19 virus. Outcrop follows strict internal protocols for prevention, testing and quarantine for employees, contractors and local labor. Outcrop focuses intently on prevention of virus transmission within its own team to help prevent transmission outside of its team.

Outcrop has two drill rigs active and mapping, soil sampling and trenching programs ongoing within the framework of our virus prevention protocols. We believe this level of work can continue but we will be proactive to changes to internal and or external mandates to reduce virus transmission. It is a testament to the quality of the Colombian team that the exploration program proceeded on schedule throughout 2020 while quickly implementing and rigorously maintaining prevention protocols.

The Company is also working with community leaders around our Mallama project to attain a “social license” to begin a drill program on exciting high-grade gold-silver veins where the company has already conducted underground sampling to advance drill-ready targets. We expect to be drilling Mallama along with Santa Ana during 2021.

Outcrop continues with its “Hybrid Prospect Generator” model. Drilling will continue at Santa Ana and begin in Mallama as we believe we can create significant value by advancing these projects. Discussions with major producers regarding joint ventures on other properties continue, as it remains an important objective to advance most of our portfolio with partner funding.

Outcrop Gold enters 2021 with optimism and continued progress. On behalf of the Outcrop team, I thank you for your continued support and look forward to an exciting year ahead.

Joseph Hebert
CEO and President
Outcrop Gold Corp