2011 Annual Illustrative IFRS Financial Statements - BDO Canada

SAMPLE PRECIOUS & OTHER METALS EXPLORATION CORPORATIONILLUSTRATIVE IFRS FINANCIAL STATEMENTSCANADIAN FIRST-TIME ADOPTERFor the year-ended December 31, 2011

SAMPLE PRECIOUS & OTHER METALS EXPLORATIONFINANCIAL STATEMENTSFor the year-ended December 31, 2011The purpose of this publication is to assist precious and othermetals exploration companies in preparing their first annualInternational Financial Reporting Standards (IFRS) financialstatements.Financial Statement Preparation Assumptions:The illustrative financial statements are based on the followingassumptions:• All investments were classified as available-for-sale underpre-changeover Canadian GAAP and the available-for-saleclassification will be maintained under IFRS.• All property, plant and equipment will be accounted for usingthe cost model.• The fair value as deemed cost election will not be used forproperty, plant and equipment.• The Company has no complex financing arrangements such asconvertible debt.• The Company has early adopted the amendments to IFRS 1which replaces references to a fixed date of ‘1 January 2004’with ‘the date of transition to IFRSs’For more information, please contact:AUDIT AND ASSURANCEVancouverDon de Jersey604 443 4706ddejersey@bdo.caMichael Madsen604 443 4732mmadsen@bdo.caDiane Campbell604 646 4388dcampbell@bdo.caLynn Watt604 443 4730lwatt@bdo.caGlenn Ohlhauser604 646 4395gohlhauser@bdo.caJefry Jai604 646 4390jjai@bdo.caJoe Ozorio604 532 4748jozorio@bdo.caTorontoTammy Thompson416 369 3116tthompson@bdo.caMark Smith416 815 3000marksmith@bdo.caCalgaryLorraine Walker403 213 2592lwalker@bdo.caJonathan Winn403 213 9771jwinn@bdo.caStuart Chalmers403 531 0534schalmers@bdo.caMarilyn Kuntz403 266 5608mkuntz@bdo.caAllan Payne403 213 5426apayne@bdo.caGraham Marjoribanks403 531 0564gmarjoribanks@bdo.caMontrealManon Durivage514 934 1131mdurivage@bdo.caADVISORYSam Khoury416 369 6030skhoury@bdo.caCarlo Mariglia416 369 3078cmariglia@bdo.caDuane Rogers403 205 4342drogers@bdo.caMark Knight604 443 4709mknight@bdo.caThe publication is based on standards and interpretations that have been issued by the International Accounting Standards Board (IASB) by October 31, 2011. The sample financialstatements should not be used as a substitute for referring to standards and interpretations themselves.This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to coverspecific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDOCanada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees agents and affiliates do not accept or assume anyliability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the internationalBDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Precious & Other Metals ExplorationFinancial StatementsFor the year-ended December 31, 2011CONTENTSSTATEMENT OF FINANCIAL POSITION ................................................................................................. 2STATEMENT OF COMPREHENSIVE LOSS ............................................................................................... 3STATEMENT OF CHANGES IN EQUITY ................................................................................................. 4STATEMENT OF CASH FLOWS ........................................................................................................ 51. Corporate Information ....................................................................................................... 62. Basis of Preparation .......................................................................................................... 63. Summary of Significant Accounting Policies ............................................................................. 74. Critical Accounting Estimates and Judgments ........................................................................ 155. Cash and Cash Equivalents ................................................................................................ 166. Available-For-Sale Investment ........................................................................................... 167. Reclamation Deposits ...................................................................................................... 168. Exploration and Evaluation Assets ....................................................................................... 179. Property, Plant and Equipment .......................................................................................... 1810. Other Liabilities ............................................................................................................ 1911. Provisions .................................................................................................................... 1912. Share Capital and Reserves ............................................................................................... 2013. Share-Based Payments ..................................................................................................... 2214. Nature of Expenses ......................................................................................................... 2315. Income Taxes ................................................................................................................ 2316. Financial Instruments and Risk Management .......................................................................... 2517. Capital Management ....................................................................................................... 2718. Related Party Transactions ............................................................................................... 2719. Segmental Reporting ....................................................................................................... 2820. Loss Per Share ............................................................................................................... 2821. Events After the Reporting Date ......................................................................................... 2922. First Time Adoption of International Financial Reporting Standards .............................................. 29

Precious & Other Metals ExplorationSTATEMENT OF FINANCIAL POSITIONExpressed in Canadian DollarsFor the year-ended December 31, 2011References: IAS 1.10(a), IAS 1.38, IAS 1.54, IAS 1.60, IAS 1.66, IAS 1.69, IAS 1.78, IAS 1.113, IFRS 6.23Reference: December 31,2011$’000December 31,2010$’000January 1,2010$’000IAS 1.54IAS 1.60IAS 1.55IAS 1.66AssetsCurrent assetsCash and cash equivalents (Note 5) $ xxx $ xxx $ xxxPrepaid expenses and deposits xxx xxx xxxAvailable-for-sale investment (Note 6) xxx xxx xxxTotal current assets $ xxx $ xxx $ xxxNon-current assetsReclamation deposits (Note 7) $ xxx $ xxx $ xxxIFRS 6.23(c) Exploration and evaluation assets (Note 8) xxx xxx xxxProperty, plant and equipment (Note 9) xxx xxx xxxTotal non-current assets $ xxx $ xxx $ xxxTotal assets $ xxx $ xxx $ xxxIAS 1.54IAS 1.69Liabilities and shareholders' equityCurrent liabilitiesTrade and other payables $ xxx $ xxx $ xxxOther liabilities (Note 10) xxx xxx xxxTotal current liabilities $ xxx $ xxx $ xxxNon-current liabilitiesProvisions (Note 11) $ xxx $ xxx $ xxxTotal liabilities $ xxx $ xxx $ xxxIAS 1.54 Shareholders' equityIAS 1.78 Share capital (Note 12) $ xxx $ xxx $ xxxContributed surplus (Note 12) xxx xxx xxxAccumulated other comprehensive loss (xxx) (xxx) (xxx)Accumulated deficit (xxx) (xxx) (xxx)IAS 1.55 Total shareholders' equity $ xxx $ xxx $ xxxTotal liabilities and shareholders’ equity $ xxx $ xxx $ xxxSigned on behalf of the Board of Directors by: _____________________ _____________________The accompanying notes form an integral part of these financial statementsPAGE 2 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationSTATEMENT OF COMPREHENSIVE LOSSExpressed in Canadian DollarsFor the year-ended December 31, 2011References: IAS 1.10(b), IAS 1.81, IAS 1.82, IAS 1.85, IAS 1.87, IAS 1.97, IAS 1.99, IAS 1.104Reference: December 31,2011$’000December 31,2010$’000IAS 1.82 Interest and other income (Note 10) $ xxx $ xxxIAS 1.99Depreciation (Note 9) xxx xxxEmployee costs xxx xxxFinance expense xxx xxxOther expenses (Note 14) xxx xxxTotal expenses xxx xxxLoss before income tax (xxx) (xxx)IAS 12.77 Income tax expense (Note 15) xxx xxxLoss after income tax $ (xxx) $ (xxx)Other comprehensive lossIFRS 7.20 Fair value gain on available-for-sale investment xxx xxxIAS 1.90 Income tax relating to fair value gain on available-for-sale investment (xxx) (xxx)Total other comprehensive loss $ (xxx) $ (xxx)Total comprehensive loss for the year $ (xxx) $ (xxx)IAS 33.66 Loss per common share, basic and diluted (Note 20) $ (x.xx) $ (x.xx)The accompanying notes form an integral part of these financial statementsPAGE 3 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationSTATEMENT OF CHANGES IN EQUITYExpressed in Canadian DollarsFor the year-ended December 31, 2011References: IAS 1.10(c), IAS 1.79, IAS 1.106Reference:Sharecapital$’000Contributedsurplus$’000Accumulatedothercomprehensiveloss$’000Deficit$’000Total$’000IAS 1.82IAS 1.106IFRS 7.20 Balance at January 1, 2010 $ xxx $ xxx $ (xxx) $ (xxx) $ xxxLoss for the year (xxx) (xxx)Share capital issued (Note 12) xxx xxxStock options issued xxx xxxOptions exercised xxx (xxx) xxxWarrants issued xxx xxxWarrants exercised xxx (xxx) xxxShare issue costs (xxx) xxx (xxx)Available-for-sale investment xxx xxxIAS 1.106 Balance at December 31, 2010 $ xxx $ xxx $ (xxx) $ (xxx) $ xxxIAS 1.106 Balance at January 1, 2011 $ xxx $ xxx $ (xxx) $ (xxx) $ xxxLoss for the year (xxx) (xxx)Stock options issued xxx xxxOptions exercised xxx (xxx) xxxWarrants issued xxx xxxWarrants exercised xxx (xxx) xxxShare issue costs (xxx) xxx (xxx)Available-for-sale investment xxx xxxIAS 1.106 Balance at December 31, 2011 $ xxx $ xxx $ (xxx) $ (xxx) $ xxxThe accompanying notes form an integral part of these financial statementsPAGE 4 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationSTATEMENT OF CASH FLOWSExpressed in Canadian DollarsFor the year-ended December 31, 2011References: IAS 1.10(d), IAS 7.10, IAS 7.17, IAS 7.18, IAS 7.20, IAS 7.21, IAS 7.31, IAS 7.35, IAS 7.43, IAS 7.45Reference: December 31,2011$’000December 31,2010$’000IAS 7.18-21Cash flows from operating activitiesLoss for the year $ (xxx) $ (xxx)Adjustments to reconcile loss to net cash used in operatingactivities:Depreciation (Note 9) xxx xxxInterest income xxx xxxFinance expense xxx xxxIncome tax expense xxx xxxChanges in non-cash working capital balances:Other receivables xxx xxxPrepaid expenses xxx xxxTrade and other payables xxx xxxOther liabilities xxx xxxProvisions xxx xxxCash generated from operations xxx xxxIAS 7.35 Income tax paid xxx xxxIAS 7.10 Total cash inflows from operating activities $ xxx $ xxxCash flows from investing activitiesAcquisition of property, plant and equipment (xxx) (xxx)Investment in exploration and evaluation assets (xxx) (xxx)Change in reclamation deposits xxx xxxIAS 7.31 Interest received xxx xxxIAS 7.10 Total cash (outflows) from investing activities $ (xxx) $ (xxx)IAS 7.17 Cash flows from financing activitiesProceeds from share issuance xxx xxxCosts of issue of shares (xxx) (xxx)Proceeds from exercise of stock options xxx xxxIAS 7.31 Interest paid (xxx) (xxx)IAS 7.10 Total cash inflows from financing activities $ xxx $ xxxTotal increase in cash during the year $ xxx $ xxxCash and cash equivalents at beginning of year $ xxx $ xxxIAS 7.45 Cash and cash equivalents at end of year $ xxx $ xxxThe accompanying notes form an integral part of these financial statementsPAGE 5 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference: d) Mineral Exploration and Evaluation ExpendituresPre-exploration CostsPre-exploration costs are expensed in the year in which they are incurred.IFRS 6.23IFRS 6.24IFRS 6.10Exploration and Evaluation Expenditures 1Once the legal right to explore a property has been acquired, costs directly related to exploration andevaluation expenditures (“E&E”) are recognized and capitalized, in addition to the acquisition costs. Thesedirect expenditures include such costs as materials used, surveying costs, drilling costs, payments made tocontractors and depreciation on plant and equipment during the exploration phase. Costs not directlyattributable to exploration and evaluation activities, including general administrative overhead costs, areexpensed in the year in which they occur.The Company may occasionally enter into farm-out arrangements, whereby the Company will transfer part ofa mineral interest, as consideration, for an agreement by the transfee to meet certain exploration andevaluation expenditures which would have otherwise been undertaken by the Company. The Company doesnot record any expenditures made by the farmee on its behalf. Any cash consideration received from theagreement is credited against the costs previously capitalized to the mineral interest given up by theCompany, with any excess cash accounted for as a gain on disposal.When a project is deemed to no longer have commercially viable prospects to the Company, exploration andevaluation expenditures in respect of that project are deemed to be impaired. As a result, those explorationand evaluation expenditure costs, in excess of estimated recoveries, are written off to the statement ofcomprehensive loss/income.The Company assesses exploration and evaluation assets for impairment when facts and circumstancessuggest that the carrying amount of an asset may exceed its recoverable amount. The recoverable amount isthe higher of the asset’s fair value less costs to sell and value in use.Once the technical feasibility and commercial viability of extracting the mineral resource has beendetermined, the property is considered to be a mine under development and is classified as ‘mines underconstruction’. Exploration and evaluation assets are also tested for impairment before the assets aretransferred to development properties.As the Company currently has no operational income, any incidental revenues earned in connection withexploration activities are applied as a reduction to capitalized exploration costs.Mineral exploration and evaluation expenditures are classified as intangible assets.e) Reclamation DepositsCash which is subject to contractual restrictions on use is classified separately as reclamation deposits.Reclamation deposits are classified as loans and receivables.1 Capitalizing vs. Expensing Exploration and Evaluation Costs:Under IFRS 6, upon transition to IFRS, an entity may continue to follow their current accounting policies,whereby E&E expenditures are capitalized or a Company may elect to expense all E&E costs. Current industrypractice on the capitalization vs. expensing of E&E activities varies by company. Significant managementjudgment is required to determine appropriate accounting policies relating to the treatment of E&E expendituresupon transition to IFRS. Precious & Other Metals Exploration has elected to continue to capitalize E&E activitiesthat are directly related to the discovery, acquisition or development of E&E activities upon transition to IFRS.PAGE 8 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 16.6IAS 16.73IAS 16.16IAS 16.30f) Property, Plant and EquipmentRecognition and MeasurementOn initial recognition, property, plant and equipment are valued at cost, being the purchase price anddirectly attributable cost of acquisition or construction required to bring the asset to the location andcondition necessary to be capable of operating in the manner intended by the Company, includingappropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantlingand removing items. The corresponding liability is recognized within provisions.Property, plant and equipment is subsequently measured at cost less accumulated depreciation, less anyaccumulated impairment losses, with the exception of land which is not depreciated.When parts of an item of property, plant and equipment have different useful lives, they are accounted for asseparate items (major components) of property, plant and equipment.Subsequent CostsThe cost of replacing part of an item of property, plant and equipment is recognized in the carrying amountof the item if it is probable that the future economic benefits embodied within the part will flow to theCompany and its cost can be measured reliably. The carrying amount of the replaced part is derecognized.The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss asincurred.Major Maintenance and RepairsSubsequent costs are included in the asset’s carrying amount or recognized as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theCompany and the cost of the item can be measured reliably. All other repairs and maintenance are chargedto profit or loss during the financial year in which they are incurred.Gains and LossesGains and losses on disposal of an item of property, plant and equipment are determined by comparing theproceeds from disposal with the carrying amount, and are recognized net within other income in profit orloss.IAS 16.73IAS 16.51DepreciationDepreciation is recognized in profit or loss and is provided on a straight-line basis over the estimated usefullife of the assets as follows:Furniture and FixturesOffice EquipmentVehiclesField EquipmentStraight line over x YearsStraight line over x YearsStraight line over x YearsStraight line over x YearsDepreciation methods, useful lives and residual values are reviewed at each financial year-end and adjustedif appropriate.PAGE 9 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 36.12g) Impairment of Non-Financial AssetsImpairment tests on intangible assets with indefinite useful economic lives are undertaken annually at thefinancial year-end. Other non-financial assets, including exploration and evaluation assets are subject toimpairment tests whenever events or changes in circumstances indicate that their carrying amount may notbe recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher ofvalue in use and fair value less costs to sell, the asset is written down accordingly.Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test iscarried out on the asset's cash-generating unit, which is the lowest group of assets in which the asset belongsfor which there are separately identifiable cash inflows that are largely independent of the cash inflows fromother assets. The Company has one cash-generating unit for which impairment testing is performed.An impairment loss is charged to profit or loss, except to the extent they reverse gains previously recognizedin accumulated other comprehensive loss/income.IAS 39.9 h) Financial InstrumentsFinancial AssetsFinancial assets are classified into one of the following categories based on the purpose for which the assetwas acquired. All transactions related to financial instruments are recorded on a trade date basis. TheCompany's accounting policy for each category is as follows:IFRS 7.21IAS 39.43IAS 39.46IFRS 7.21B5IAS 39.43IAS 39.44IAS 39.45IAS 39.46Loans and ReceivablesThese assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lenderto a borrower in return for a promise to repay on a specified date or dates, or on demand. They are initiallyrecognized at fair value plus transaction costs that are directly attributable to their acquisition or issue andsubsequently carried at amortized cost, using the effective interest rate method, less any impairment losses.Amortized cost is calculated taking into account any discount or premium on acquisition and includes feesthat are an integral part of the effective interest rate and transaction costs. Gains and losses are recognizedin profit or loss when the loans and receivables are derecognized or impaired, as well as through theamortization process.Available-For-Sale InvestmentsNon-derivative financial assets that do not meet the definition of loans and receivables are classified asavailable-for-sale and comprise principally the Company's strategic investments in entities not qualifying assubsidiaries or associates. Available-for-sale investments are carried at fair value with changes in fair valuerecognized in other comprehensive loss/income. Where there is a significant or prolonged decline in the fairvalue of an available-for-sale financial asset (which constitutes objective evidence of impairment), the fullamount of the impairment, including any amount previously recognized in other comprehensive loss/income,is recognized in profit or loss. If there is no quoted market price in an active market and fair value cannot bereadily determined, available-for-sale investments are carried at cost.On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassifiedfrom accumulated other comprehensive loss/income to profit or loss.IFRS 7 B5IAS 39.58Impairment on Financial AssetsAt each reporting date the Company assesses whether there is any objective evidence that a financial asset ora group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired,if, and only if, there is objective evidence of impairment as a result of one or more events that has occurredafter the initial recognition of the asset and that event has an impact on the estimated future cash flows ofthe financial asset or the group of financial assets.PAGE 10 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 7.21h) Financial instruments (continued)Financial LiabilitiesFinancial liabilities are classified as other financial liabilities, based on the purpose for which the liability wasincurred, and comprise of trade payables and accrued liabilities. These liabilities are initially recognized atfair value net of any transaction costs directly attributable to the issuance of the instrument andsubsequently carried at amortized cost using the effective interest rate method. This ensures that anyinterest expense over the period to repayment is at a constant rate on the balance of the liability carried inthe statement of financial position. Interest expense in this context includes initial transaction costs andpremiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.Trade and other payables represent liabilities for goods and services provided to the Company prior to theend of the year which are unpaid.IAS 37.10 i) ProvisionsRehabilitation ProvisionThe Company is subject to various government laws and regulations relating to environmental disturbancescaused by exploration and evaluation activities. The Company records the present value of the estimatedcosts of legal and constructive obligations required to restore the exploration sites in the year in which theobligation is incurred. The nature of the rehabilitation activities include restoration, reclamation and revegetationof the affected exploration sites.The rehabilitation provision generally arises when the environmental disturbance is subject to governmentlaws and regulations. When the liability is recognized, the present value of the estimated costs is capitalizedby increasing the carrying amount of the related exploration properties. Over time, the discounted liability isincreased for the changes in present value based on current market discount rates and liability specific risks.Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to thecorresponding assets and rehabilitation liability in the year in which they occur.IAS 37.10Other ProvisionsProvisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of pasttransactions, including legal or constructive obligations. The provision is measured at the best estimate ofthe expenditure required to settle the obligation at the reporting date.j) Income TaxesIAS 1.32IAS 12.34IAS 12.58IAS 12.12IAS 12.46IAS 12.15IAS 12.24IAS 12.24IAS 12.34IAS 12.37Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized innet income except to the extent that it relates to a business combination or items recognized directly inequity or in other comprehensive loss/income.Current income taxes are recognized for the estimated income taxes payable or receivable on taxable incomeor loss for the current year and any adjustment to income taxes payable in respect of previous years. Currentincome taxes are determined using tax rates and tax laws that have been enacted or substantively enacted bythe year-end date.Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differsfrom its tax base, except for taxable temporary differences arising on the initial recognition of goodwill andtemporary differences arising on the initial recognition of an asset or liability in a transaction which is not abusiness combination and at the time of the transaction affects neither accounting nor taxable profit or loss.Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences isrestricted to those instances where it is probable that future taxable profit will be available against whichthe deferred tax asset can be utilized. At the end of each reporting year the Company reassessesunrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset tothe extent that it has become probable that future taxable profit will allow the deferred tax asset to berecovered.PAGE 11 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference: k) Government GrantsIAS 20.39From time to time the Company receives government incentive programs such as investment tax credits.Government incentives are accrued when there is reasonable assurance of realization and reflected as areduction of the related asset or expense. In the event the investment tax credits received are less than theamount claimed, the difference will be reflected in profit or loss in the year in which it is determined.IFRS 7.76 l) Share CapitalEquity instruments are contracts that give a residual interest in the net assets of the Company. Financialinstruments issued by the Company are classified as equity only to the extent that they do not meet thedefinition of a financial liability or financial asset. The Company’s common shares, preferred shares, sharewarrants and flow-through shares are classified as equity instruments.Incremental costs directly attributable to the issue of new shares or options are shown in equity as adeduction, net of tax, from the proceeds.Flow-through SharesThe Company will from time to time, issue flow-through common shares to finance a significant portion of itsexploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer thetax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates theflow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investorspay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expendituresbeing incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amountof tax reduction renounced to the shareholders. The premium is recognised as other income and the relateddeferred tax is recognized as a tax provision.Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadianresource property exploration expenditures within a two-year period. The portion of the proceeds receivedbut not yet expended at the end of the Company’s reporting year is disclosed separately as flow-throughshare proceeds in Note 10.The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the LookbackRule, in accordance with Government of Canada flow-through regulations. When applicable, this tax isaccrued as a financial expense until paid.IAS 33.70m) Earnings / Loss Per ShareBasic earnings/loss per share is computed by dividing the net income or loss applicable to common shares ofthe Company by the weighted average number of common shares outstanding for the relevant year.Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to commonshares by the sum of the weighted average number of common shares issued and outstanding and alladditional common shares that would have been outstanding, if potentially dilutive instruments wereconverted.PAGE 12 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 2.12IFRS 2.46IFRS 2.13IAS 1.79(b)IAS 1.31,IAS 8.30,IAS 8.31n) Share-based PaymentsWhere equity-settled share options are awarded to employees, the fair value of the options at the date ofgrant is charged to the statement of comprehensive loss/income over the vesting period. Performance vestingconditions are taken into account by adjusting the number of equity instruments expected to vest at eachreporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on thenumber of options that eventually vest. Non-vesting conditions and market vesting conditions are factoredinto the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge ismade irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.Where the terms and conditions of options are modified before they vest, the increase in the fair value of theoptions, measured immediately before and after the modification, is also charged to the statement ofcomprehensive loss/income over the remaining vesting period.Where equity instruments are granted to employees, they are recorded at the fair value of the equityinstrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/incomeover the vesting period, described as the period during which all the vesting conditions are to be satisfied.Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods orservices received in the statement of comprehensive loss/income. Options or warrants granted related to theissuance of shares are recorded as a reduction of share capital.When the value of goods or services received in exchange for the share-based payment cannot be reliablyestimated, the fair value is measured by use of a valuation model.All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise,shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital,adjusted for any consideration paid.Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vestingconditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration ofvesting and recognizes the amount that otherwise would have been recognized for services received over theremainder of the vesting period. Any payment made to the employee on the cancellation is accounted for asthe repurchase of an equity interest except to the extent the payment exceeds the fair value of the equityinstrument granted, measured at the repurchase date. Any such excess is recognized as an expense.o) Standards, Amendments and Interpretations Not Yet Effective 2Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatoryfor accounting years beginning after January 1, 2011 or later years. None of these is expected to have asignificant effect on the consolidated financial statements, except for the following:• The Company has early adopted amendments to IFRS 1 which replaces references to a fixed date of‘1 January 2004’ with ‘the date of transition to IFRSs’. This eliminates the need for the Company torestate derecognition transactions that occurred before the date of transition to IFRSs. Theamendment is effective for year-ends beginning on or after July 1, 2011; however, the Company hasearly adopted the amendment. The impact of the amendment and early adoption is that theCompany only applies IAS 39 derecognition requirements to transactions that occurred after the dateof transition i.e. January 1, 2010.2 “Standards, Amendments and Interpretations Not Yet Effective” section may need further updating prior tofinancial statement release.PAGE 13 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:The following standards and interpretations have been issued but are not yet effective:• IFRS 9 Financial InstrumentsIFRS 9 Financial Instruments is part of the IASB's wider project to replace IAS 39 FinancialInstruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurementmodel and establishes two primary measurement categories for financial assets: amortized cost andfair value. The basis of classification depends on the entity's business model and the contractual cashflow characteristics of the financial asset. The standard is effective for annual periods beginning onor after January 1, 2015. The Company is in the process of evaluating the impact of the newstandard on the accounting for the available-for-sale investment.• IFRS 10 Consolidated Financial StatementsIFRS 10 builds on existing principles by identifying the concept of control as the determining factorin whether an entity should be included within the consolidated financial statements of the parentcompany. The standard provides additional guidance to assist in the determination of control wherethis is difficult to assess. The Company is yet to assess the full impact of IFRS 10 and intends toadopt the standard no later than the accounting period beginning on January 1, 2013.• IFRS 11 Joint ArrangementsIFRS 11 describes the accounting for arrangements in which there is joint control; proportionateconsolidation is not permitted for joint ventures (as newly defined). IFRS 11 replaces IAS 31 Interestsin Joint Ventures and SIC 13 Jointly Controlled Entities — Non-Monetary Contributions by Venturers.The Company is yet to assess the full impact of IFRS 11 and intends to adopt the standard no laterthan the accounting period beginning on January 1, 2013.• IFRS 12 Disclosures of Interests in Other EntitiesIFRS 12 includes the disclosure requirements for all forms of interests in other entities, includingjoint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. TheCompany is yet to assess the full impact of IFRS 12 and intends to adopt the standard no later thanthe accounting period beginning on January 1, 2013.• IFRS 13 Fair Value MeasurementIFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fairvalue and a single source of fair value measurement and disclosure requirements for use acrossIFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend theuse of fair value accounting but provide guidance on how it should be applied where its use isalready required or permitted by other standards within IFRSs or US GAAP. The Company is yet toassess the full impact of IFRS 13 and intends to adopt the standard no later than the accountingperiod beginning on January 1, 2013.• IFRIC 20 Stripping Costs in the Production Phase of a Surface MineIn IFRIC 20, the IFRS Interpretations Committee sets out principles for the recognition of productionstripping costs in the balance sheet. The interpretation recognizes that some production stripping insurface mining activity will benefit production in future periods and sets out criteria for capitalizingsuch costs. While the Company is not yet in the production phase, the Company is currently assessingthe future impact of this interpretation.There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expectedto have a material impact on the Company.PAGE 14 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 1.122IAS 1.125IAS 1.129IAS 1.130IAS 8.364. CRITICAL ACCOUNTING ESTIMATES AND J UDGMENT SThe Company makes estimates and assumptions about the future that affect the reported amounts of assetsand liabilities. Estimates and judgments are continually evaluated based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.In the future, actual experience may differ from these estimates and assumptions.The effect of a change in an accounting estimate is recognized prospectively by including it incomprehensive income in the year of the change, if the change affects that year only, or in the year of thechange and future years, if the change affects both.Information about critical judgments in applying accounting policies that have the most significant risk ofcausing material adjustment to the carrying amounts of assets and liabilities recognized in the financialstatements within the next financial year are discussed below:i) Rehabilitation ProvisionsRehabilitation provisions have been created based on the Company’s internal estimates. Assumptions, basedon the current economic environment, have been made which management believes are a reasonable basisupon which to estimate the future liability. These estimates take into account any material changes to theassumptions that occur when reviewed regularly by management. Estimates are reviewed annually and arebased on current regulatory requirements. Significant changes in estimates of contamination, restorationstandards and techniques will result in changes to provisions from year to year. Actual rehabilitation costswill ultimately depend on future market prices for the rehabilitation costs which will reflect the marketcondition at the time of the rehabilitation costs are actually incurred. The final cost of the currentlyrecognized rehabilitation provisions may be higher or lower than currently provided for.The discount rate currently applied in the calculation of the net present value of the provision is x.x%.ii)Exploration and Evaluation ExpenditureThe application of the Company’s accounting policy for exploration and evaluation expenditure requiresjudgment in determining whether it is likely that future economic benefits will flow to the Company, whichmay be based on assumptions about future events or circumstances. Estimates and assumptions made maychange if new information becomes available. If, after expenditure is capitalized, information becomesavailable suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in theprofit or loss in the year the new information becomes available.iii) Title to Mineral Property InterestsAlthough the Company has taken steps to verify title to mineral properties in which it has an interest, theseprocedures do not guarantee the Company’s title. Such properties may be subject to prior agreements ortransfers and title may be affected by undetected defects.iv) Income TaxesSignificant judgment is required in determining the provision for income taxes. There are many transactionsand calculations undertaken during the ordinary course of business for which the ultimate tax determinationis uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based onthe Company’s current understanding of the tax law. For matters where it is probable that an adjustmentwill be made, the Company records its best estimate of the tax liability including the related interest andpenalties in the current tax provision. Management believes they have adequately provided for the probableoutcome of these matters; however, the final outcome may result in a materially different outcome than theamount included in the tax liabilities.PAGE 15 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extentthat it is probable that taxable profit will be available against which a deductible temporary difference canbe utilized. This is deemed to be the case when there are sufficient taxable temporary differences relatingto the same taxation authority and the same taxable entity which are expected to reverse in the same yearas the expected reversal of the deductible temporary difference, or in years into which a tax loss arisingfrom the deferred tax asset can be carried back or forward. However, utilization of the tax losses alsodepends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.v) Share-based Payment T ransactionsThe Company measures the cost of equity-settled transactions with employees by reference to the fair valueof the equity instruments at the date at which they are granted. Estimating fair value for share-basedpayment transactions requires determining the most appropriate valuation model, which is dependent on theterms and conditions of the grant. This estimate also requires determining the most appropriate inputs tothe valuation model including the expected life of the stock option, volatility and dividend yield and makingassumptions about them. The assumptions and models used for estimating fair value for share-basedpayment transactions are disclosed in Note 13.5. CASH AND CASH EQUIVALENTSCash at banks and on hand earn interest at floating rates based on daily bank deposit rates.6. AVAILABLE-F OR-SALE INVEST MENTIFRS 7.7Available-for-sale investment consists of an investment in common shares of XYZ Mine Company Limited, andtherefore has no fixed maturity date or coupon rate. The fair value of the listed available-for-saleinvestment has been determined directly by reference to published price quotations in an active market.7. RECLAMATION DEPOSITSThe Company is required to make reclamation deposits in respect of its expected rehabilitation obligations.The reclamation deposits represent collateral for possible reclamation activities necessary on mineralproperties in connection with the permits required for exploration activities by the Company. Thereclamation deposits are held in certificates of deposits with a maturity date of 20xx and an interest rate ofx.xx%.PAGE 16 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:8. EXPLORATION AND EVALUATION ASSETSIFRS 6.23Property xxx$’000Property xxx$’000Total$ ‘000IFRS 6.24 Balance at January 1, 2010 $ xxx $ xxx $ xxxIFRS 6.25 Exploration costs xxx xxx xxxAcquisition of property xxx xxx xxx xxxFarm-out of interest in property xxx (xxx) (xxx) (xxx)Write-off of unsuccessful exploration expenditure (xxx) (xxx) (xxx)Balance at December 31, 2010 $ xxx $ xxx $ xxxExploration costs xxx xxx xxxAcquisition of property xxx xxx xxx xxxFarm-out of interest in property xxx (xxx) (xxx) (xxx)Write-off of unsuccessful exploration expenditure (xxx) (xxx) (xxx)Balance at December 31, 2011 $ xxx $ xxx $ xxxProperty xxx is 100% owned and is located in north-western Québec. Property xxx is 100% owned and islocated in northern Ontario.The Company entered into a farm-out agreement with ABC Limited to share costs and risks associated withexploration activities on property xxx. The cash received has been credited against costs previouslycapitalized for the whole interest. No gain on disposal was recognized.The impairment assessment of exploration and evaluation assets did not result in amounts being written offthe Company’s properties.PAGE 17 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:9. PROPERTY, PLANT AND EQUIPMENTIAS 16.73CostOfficeequipment$’000Vehicles$’000Fieldequipment$’000Total$’000IAS 16.73d Balance at January 1, 2010 $ xxx $ xxx $ xxx $ xxxIAS 16.73e Additions xxx xxx xxx xxxIAS 16.73dDisposals (xxx) (xxx) (xxx) (xxx)Balance at December 31, 2010 $ xxx $ xxx $ xxx $ xxxIAS 16.73e Additions xxx xxx xxx xxxDisposals (xxx) (xxx) (xxx) (xxx)IAS 16.73dBalance at December 31, 2011 $ xxx $ xxx $ xxx $ xxxDepreciation and impairmentIAS 16.73d Balance at January 1, 2010 $ xxx $ xxx $ xxx $ xxxIAS 16.73e Depreciation for the year xxx xxx xxx xxxDisposals xxx xxx xxx xxxImpairment loss xxx xxx xxx xxxIAS 16.73dBalance at December 31, 2010 $ xxx $ xxx $ xxx $ xxxIAS 16.73e Depreciation for the year xxx xxx xxx xxxDisposals xxx xxx xxx xxxImpairment loss xxx xxx xxx xxxIAS 16.73dBalance at December 31, 2011 $ xxx $ xxx $ xxx $ xxxCarrying amountsAt January 1, 2010 $ xxx $ xxx $ xxx $ xxxAt December 31, 2010 $ xxx $ xxx $ xxx $ xxxIAS 1.78a At December 31, 2011 $ xxx $ xxx $ xxx $ xxxPAGE 18 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:10. OTHER L IABILITIESOther liabilities include the liability portion of the flow-through shares issued. The following is a continuityschedule of the liability portion of the flow-through shares issuances.IFRS 7.7Flow-through SharesIssued on MonthDD,2009$’000Issued on MonthDD,2010$’000Total$’000Balance at January 1, 2010 $ xxx $ - $ xxxLiability incurred on flow-through shares issued xxx xxxSettlement of flow-through share liability onincurring expendituresBalance at December 31, 2010 $ - $ xxx $ xxxSettlement of flow-through share liability onincurring expendituresBalance at December 31, 2011 $ - $ - $ -(xxx)(xxx)(xxx)(xxx)On Month DD, 2009, the Company completed a brokered private placement, consisting of the issue and saleof xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐throughcommon share and one‐half of one common share purchase warrant.As at December 2010, the Company had fulfilled its commitment to incur exploration expenditures inrelation to this flow-through share financing.On Month DD, 2010, the Company completed a brokered private placement, consisting of the issue and saleof xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐throughcommon share and one‐half of one common share purchase warrant; each common share unit consisted ofone common share and one‐half of one common share purchase warrant.As at December 2011, the Company had fulfilled its commitment to incur exploration expenditures inrelation to this flow-through share financing.11. PROVISIONSIAS 37.84IAS 37.88Rehabilitation$’000Other$’000Total$’000Balance at January 1, 2010 $ xxx $ xxx $ xxxChange in liability estimate xxx xxx xxxAccretion of interest xxx xxx xxxBalance at December 31, 2010 $ xxx $ xxx $ xxxChange in liability estimate xxx xxx xxxAccretion of interest xxx xxx xxxBalance at December 31, 2011 $ xxx $ xxx $ xxxRehabilitation ProvisionPrecious & Other Metals Exploration makes full provision for the future cost of site rehabilitation on adiscounted basis at the time exploration and evaluation activities take place. The rehabilitation provisionrepresents the present value of rehabilitation costs relating to exploration and evaluation activities thathave occurred to date. The rehabilitation expenditure is expected to be incurred in various stages up to20xx.PAGE 19 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 1.79IAS 1.13412. SHARE CAPITAL AND RESERVESa) Common SharesThe Company is authorized to issue an unlimited number of common shares, issuable in series.The holders of common shares are entitled to receive dividends which are declared from time to time, andare entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards tothe Company's residual assets.The following is a summary of changes in common share capital from January 1, 2010 to December 31, 2011:Number ofSharesIssue PriceAmount$’000'sBalance at January 1, 2010 xxx $ xxxShares issued via private placement xxx $ x.xx xxxFlow-through share issuance xxx $ x.xx xxxIssue of shares on exercise of warrants xxx $ x.xx xxxIAS 1.79(a) Issue of shares on exercise of options xxx $ x.xx xxxLess share issue costsBalance at December 31, 2010 xxx $ xxxIssue of shares on exercise of warrants xxx $ x.xx xxxIssue of shares on exercise of options xxx $ x.xx xxxLess share issue costsBalance at December 31, 2011 xxx $ xxxIAS 1.79(a) b) Preferred SharesThe Company is authorized to issue an unlimited number of preference shares, issuable in series.The preferred shares may be issued in one or more series and the directors are authorized to fix the numberof shares in each series and to determine the designation, rights, privileges, restrictions and conditionsattached to the shares of each series. No preferred shares have been issued since the Company’s inception.c) Contributed SurplusDecember 31, 2011$’000December 31, 2010$’000(xxx)(xxx)January 1, 2010$’000Warrants $ xxx $ xxx $ xxxStock Options (Note 13) xxx xxx xxxContributed Surplus $ xxx $ xxx $ xxxPAGE 20 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 1.79IAS 1.134d) Share Purchase WarrantsThe following is a summary of changes in warrants from January 1, 2010 to December 31, 2011:Number ofWarrantsAmount$’000'sBalance at January 1, 2010 xxx $ xxxIssue of warrants xxx xxxExercised warrants (xxx) (xxx)Balance December 31, 2010 xxx $ xxxIssue of warrants xxx xxxExercised warrants (xxx) (xxx)Balance as at December 31, 2011 xxx $ xxxAs at December 31, 2011, the Company had outstanding warrants as follows:Number of warrants Exercise price Expiryxxx $ x.xx MM/DD/ 20YYxxx $ x.xx MM/DD/ 20YYxxx $ x.xx MM/DD/ 20YYOn Month DD, 2010, the Company completed a brokered private placement, consisting of the issue and saleof xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐throughcommon share and one‐half of one common share purchase warrant; each common share uni t consisted ofone common share and one-half of one common share purchase warrant. Each whole common share purchasewarrant entitles the holder to purchase one additional common share of the Company at a price of $x.xx pershare for a period of xx months after the closing of the offering. The Company paid commission of $xxx andissued xxx broker compensation warrants exercisable at $x.xx per share expiring Month DD, 20xx valued at$xxx. Share issuance costs related to the placement totaled $xxx.e) Nature and Purpose of Equity and ReservesThe reserves recorded in equity on the Company’s Statement of Financial Position include ‘ContributedSurplus’, ‘Accumulated Other Comprehensive Loss/Income’ and ‘Accumulated Deficit’.‘Contributed Surplus’ is used to recognize the value of stock option grants and share purchase warrants priorto exercise.‘Accumulated Other Comprehensive Loss/Income’ includes an available-for-sale reserve. This reserve is usedto recognize fair value changes on available-for-sale investments.‘Accumulated Deficit’ is used to record the Company’s change in deficit from earnings from year to year.PAGE 21 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 2.45IFRS 2.4413. SHARE-BASED PAYMENT Sa) Option Plan DetailsThe Company has an incentive Stock Option Plan (“the Plan”) under which non-transferable options topurchase common shares of the Company may be granted to directors, officers, employees or serviceproviders of the Company. The terms of the Plan provide that the Directors have the right to grant options toacquire common shares of the Company at not less than the closing market price of the shares on the daypreceding the grant at terms of up to four years. No amounts are paid or payable by the recipient on receiptof the option, and the options granted are not dependent on any performance-based criteria. In accordancewith the Plan, 25% of the options vest immediately, with a further 25% vesting in each of the subsequentthree years on the anniversary of the initial grant date.IFRS 2.45 The following is a summary of changes in options from January 1, 2010 to December 31, 2011:Grant DateExpiry DateExercisePriceOpeningBalanceDuring the YearGranted Exercised ForfeitedClosingBalanceVested andExercisableUnvestedMM/DD/YY MM/DD/YY $ x.xx xxx xxx (xxx) (xxx) xxx xxx xxxMM/DD/YY MM/DD/YY $ x.xx xxx xxx (xxx) (xxx) xxx xxx xxxMM/DD/YY MM/DD/YY $ x.xx xxx xxx (xxx) (xxx) xxx xxx xxxMM/DD/YY MM/DD/YY $ x.xx xx xxx (xxx) (xxx) xxx xxx xxxxxx xxx xxx xxx xxx xxx xxxWeighted Average Exercise Price $ x.xx $ x.xx $ x.xx $ x.xx $ x.xx $ x.xx $ x.xxb) Fair Value of Options Issued During the YearThe weighted average fair value at grant date of options granted during the year ended December 31, 2011was $x.xx per option (year-ended December 31, 2010: $x.xx).IFRS 2.44Options Issued to EmployeesThe fair value at grant date is determined using a Black-Scholes option pricing model that takes into accountthe exercise price, the term of the option, the impact of dilution, the share price at grant date andexpected price volatility of the underlying share, the expected dividend yield and the risk free interest ratefor the term of the option.Options Issued to Non-EmployeesIFRS 2.44Options issued to non-employees, are measured based on the fair value of the goods or services received, atthe date of receiving those goods or services. If the fair value of the goods or services received cannot beestimated reliably, the options are measured by determining the fair value of the options granted, using avaluation model.IFRS 2.45(d)The model inputs for options granted during the year ended December 31, 2011 included:Share Price at Exercise Risk-Free InterestGrant Date Expiry Date Grant Date PriceRate Expected Life Volatility Factor Dividend YieldMM/DD/YY MM/DD/YY $ x.xx $ x.xx x.xx% -x.xx% xx-xx-months x.xx% -x.xx% -%MM/DD/YY MM/DD/YY $ x.xx $ x.xx x.xx% -x.xx% xx-xx-months x.xx% -x.xx% -%MM/DD/YY MM/DD/YY $ x.xx $ x.xx x.xx% -x.xx% xx-xx-months x.xx% -x.xx% -%MM/DD/YY MM/DD/YY $ x.xx $ x.xx x.xx% -x.xx% xx-xx-months x.xx% -x.xx% -%PAGE 22 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 2.45(c)IFRS 2.51(a)IFRS 6.23The expected price volatility is based on the historic volatility (based on the remaining life of the options),adjusted for any expected changes to future volatility due to publicly available information.The weighted average share price at the date of exercise of options during the year ended December 31,2011 was $x.xx per share.c) Expenses Arising from Share-based Payment TransactionsTotal expenses arising from share-based payment transactions recognized during the year as part ofemployee benefit expense were $xxx (year-ended December 31, 2010: $xxx).d) Amounts Capitalized Arising from Share-based Payment TransactionsTotal expenses arising from share-based payment transactions that were capitalized during the year as partof exploration and evaluation activities were $xxx (year-ended December 31, 2010: $xxx).14. NATURE OF EXPENSESIAS 1.99December 31, 2011$’000December 31, 2010$’000Other expenses include:General and administrative expenses $ xxx $ xxxTransportation expenses xxx xxxAdvertising expenses xxx xxx$ xxx $ xxx15. INCOME T AXESIAS 12.80December 31, 2011 December 31, 2010$’000$’000Loss before income taxes $ (xxx) $ (xxx)Tax recovery based on the statutory rate of xx% (2010: xx%) $ (xxx) $ (xxx)Change in tax rates xxx xxxNon-deductible expenses xxx xxxUnrecognized non-capital loss carry-forwards xxx xxxTotal income tax expense (recovery) $ xxx $ xxxIAS 12.80(d)Changes to the federal and provincial tax rates were announced in 2011 which resulted in an adjustment tothe opening carrying value of temporary differences.PAGE 23 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 12.81Deferred Tax Assets and LiabilitiesThe nature and tax effect of the temporary differences giving rise to the deferred tax assets and liabilities atDecember 31, 2011 and 2010 are summarized as follows:January 1, 2011$’000Recognizedin netincomeRecognizeddirectly inequityRecognized inaccumulated othercomprehensiveincomeDecember 31,2011$’000Property, plant and equipment $ xxx $ xxx $ xxxShare issue costs xxx xxx xxxNon-capital losses carried forward xxx xxx xxxCapital losses carried forward xxx xxx xxx$ xxx $ xxx $ xxx $ xxxOffset against deferred tax liabilities (xxx) (xxx) (xxx) (xxx)Unrecognized deferred tax asset (xxx) (xxx) (xxx) (xxx)Deferred tax assets $ - $ xxx $ - $ - $xxxExploration and evaluation $ (xxx) $ (xxx) $ (xxx)Available-for-sale investment (xxx) (xxx) (xxx)Offset against deferred tax assets xxx xxx XxxDeferred tax liabilities $ - $ - $ - $ (xxx) $(xxx)Net deferred tax balance $ - $ xxx $ - $ (xxx) $ -January 1, 2010$’000Recognize innet incomeRecognizedirectly inequityRecognized inaccumulated othercomprehensiveincomeDecember 31, 2010$’000Property, plant and equipment $ xxx $ xxx $ xxxShare issue costs xxx Xxx xxxNon-capital losses carried forward xxx xxx xxxCapital losses carried forward xxx xxx xxx$ xxx $ xxx $ xxx $ xxxOffset against deferred tax liabilities (xxx) (xxx) (xxx) (xxx)Unrecognized deferred tax asset (xxx) (xxx) (xxx) (xxx)Deferred tax assets $ - $ xxx $ - $ - $ xxxExploration and evaluation $ (xxx) $ (xxx) $ (xxx)Available-for-sale investment (xxx) (xxx)Offset against deferred tax assets xxx xxx XxxDeferred tax liabilities $ - $ - $ - $ (xxx) $ (xxx)Net deferred tax balance $ - $ xxx $ - $ (xxx) $ -As at December 31, 2011, the Company had estimated capital losses for Canadian tax purposes of $xxx(December 31, 2010: $xxx). These losses do not expire and may be utilized to reduce future capital gains, ifany.PAGE 24 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 12.81IAS 12.81(e)IAS 12.81As at December 31, 2011, the Company has estimated non-capital losses for Canadian income tax purposesthat may be carried forward to reduce taxable income derived in future years. A summary of these tax lossesis provided below.Tax LossesThese tax losses will expire as follows:Year of Expiry20xx20xx20xxTotalTaxable Losses$ xxxxxxxxx$ xxxIAS 12.81The potential benefits of these carry-forward non-capital losses, capital losses and deductible temporarydifferences has not been recognized in these financial statements as it is not considered probable thatsufficient future taxable profit will allow the deferred tax asset to be recovered.16. F INANCIAL INST RUMENT S AND RISK MANAGEMENTThe company is exposed through its operations to the following financial risks:• Market Risk• Credit Risk• Liquidity RiskIn common with all other businesses, the company is exposed to risks that arise from its use of financialinstruments. This note describes the Company’s objectives, policies and processes for managing those risksand the methods used to measure them. Further quantitative information in respect of these risks ispresented throughout these financial statements.IFRS 7.33There have been no substantive changes in the Company’s exposure to financial instrument risks, itsobjectives, polices and processes for managing those risks or the methods used to measure them fromprevious years unless otherwise stated in the note.General Objectives, Policies and Processes:The Board of Directors has overall responsibility for the determination of the Company’s risk managementobjectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authorityfor designing and operating processes that ensure the effective implementation of the objectives andpolicies to the Company’s finance function. The Board of Directors receive monthly reports from theCompany’s Financial Controller through which it reviews the effectiveness of the processes put in place andthe appropriateness of the objectives and policies it sets.The overall objective of the Board is to set policies that seek to reduce risk as far as possible without undulyaffecting the Company’s competitiveness and flexibility. Further details regarding these policies are set outbelow.a) Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate becauseof changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interestrate risk, commodity price risk and equity price risk.PAGE 25 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS7.40(a)Foreign Currency Risk:Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and US dollaror other foreign currencies will affect the Company’s operations and financial results. The company does nothave significant exposure to foreign exchange rate fluctuation.Interest Rate Risk:Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interestrates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases onthe interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions.The Company consider this risk to be immaterial.Equity Price Risk:Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.The Company is exposed to this risk through its equity holdings. The available-for-sale investment in thecommon shares of XYZ Mine Company is monitored by Management with decisions on sale taken at Boardlevel. A 10% decrease in the fair value of XYZ Mine Company would result in a $x decrease in equity.b) Credit RiskIFRS 7.36Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financialinstrument fails to meet its contractual obligations. Financial instruments which are potentially subject tocredit risk for the Company consist primarily of cash and cash equivalents. Cash and cash equivalents aremaintained with financial institutions of reputable credit and may be redeemed upon demand.The carrying amount of financial assets represent the maximum credit exposure. The Company has grosscredit exposure at December 31, 2011 and December 31, 2010 relating to cash and cash equivalents of $xxand $xx respectively. All cash and cash equivalents are held at BCD Bank which has a rating of XXX. TheCompany has performed a sensitivity analysis on changes in the credit risk associated with BCD Bank andconsiders this risk to be minimal for all cash and cash equivalent assets based on changes that are reasonablypossible at the reporting date.c) Liquidity RiskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they becomedue. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet itsliabilities when they become due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Company’s reputation. The key to success in managing liquidityis the degree of certainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidityrisk increases.Typically, the Company ensures that it has sufficient cash on demand to meet expected operationalexpenses for a period of xx days. To achieve this objective, the Company prepares annual capitalexpenditure budgets, which are regularly monitored and updated as considered necessary. Further, theCompany utilizes authorizations for expenditures on exploration projects to further manage expenditure.The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade andother accounts payable.IFRS 7.39(a)The following table sets out the contractual maturities (representing undiscounted contractual cash flows) offinancial liabilities:Up to 3 Between 3 Between 1 Between 2 Over 5 Totalmonths and 12 months and 2 years and 5 years yearsTrade payables and other liabilitiesAs at January 1, 2010 $xxx $xxx $xxx $xxx $xxx $xxxDecember 31, 2010 $xxx $xxx $xxx $xxx $xxx $xxxDecember 31, 2011 $xxx $xxx $xxx $xxx $xxx $xxxPAGE 26 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 7.25IFRS 7.26Determination of Fair Value:Fair values have been determined for measurement and/or disclosure purposes based on the followingmethods. When applicable, further information about the assumptions made in determining fair values isdisclosed in the notes specific to that asset or liability.The Statement of Financial Position carrying amounts for cash and cash equivalents and trade and otherpayables approximate fair value due to their short-term nature. Due to the use of subjective judgments anduncertainties in the determination of fair values these values should not be interpreted as being realizable inan immediate settlement of the financial instruments.Fair Value Hierarchy:IFRS 7.27BFinancial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels1 to 3 based on the degree to which the fair value is observable:• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in activemarkets for identical assets or liabilities; and• Level 2 fair value measurements are those derived from inputs other than quoted prices includedwithin level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and• Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable marker data (unobservable inputs).The available-for-sale investment is based on quoted prices and is therefore considered to be Level 1.17. CAPITAL MANAGEMENTIAS 1.124AIAS 1.124B(a)The company monitors its cash, common shares, warrants and stock options as capital. The Company’sobjectives when maintaining capital are to maintain sufficient capital base in order to meet its short-termobligations and at the same time preserve investor’s confidence required to sustain future development andproduction of the business.The company is not exposed to any externally imposed capital requirements.18. RELATED PARTY T RANSACTIONSIAS 24.18The following is a summary of the Company’s related party transactions during the year:a) Legal FeesLegal fees of $xxx (year-ended December 31, 2010: $xxx), incurred in connection with the Company’sfinancings as well as general corporate matters, were paid to a law firm of which one partner is a Director ofthe Company. At December 31, 2011, $xxx (January 1, 2010: $xxx, December 31, 2010: $xxx) owing to thislegal firm was included in accounts payable.b) Rental PaymentsRental payments of $xxx (year-ended December 31, 2010: $xxx) were paid to Office Company, which iscontrolled by a Director of the Company. At December 31, 2011, $xxx (January 1, 2010: $xxx, December 31,2010: $xxx) owing was included in accounts payable.PAGE 27 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 24.17c) Key Management CompensationKey management personnel are persons responsible for planning, directing and controlling the activities of anentity, and include executive and non-executive directors. Key management personnel compensationcomprised:December 31,2011$’000December 31,2010$’000Short term employee benefits and director fees $ xxx $ xxxShare-based payments xxx xxx$ xxx $ xxxd) Loans to Key Management PersonnelNo loans were made to Directors or any other key management personnel, including personally relatedentities during the reporting year.19. SEGMENTAL REPORTINGIFRS 8.20The Company is organized into business units based on mineral properties and has one reportable operatingsegment, being that of acquisition and exploration and evaluation activities.20. L OSS PER SHAREBasic loss per share amounts are calculated by dividing the net profit for the year by the weighted averagenumber of ordinary shares outstanding during the year.IAS 33.702011$’0002010$’000Loss attributable to ordinary shareholders $xxx $xxxWeighted average number of common shares xxx xxxBasic and diluted loss per share $x.xx $x.xxWeighted Average Number of Common Shares:20110002010000Issued common shares at January 1 xxx xxxEffect of shares issued in MONTH 20XX xxx xxxEffect of stock options exercised xxx xxxEffect of stock options on issue xxx xxxEffect of share warrants on issue xxx xxxWeighted average number of common shares (basic and diluted)at December 31xxxxxxThe basic and diluted loss per share are the same as there are no instruments that have a dilutive effect onearnings.The brokered private placement which occurred on February 12, 2012 consists of one flow-through share andone non-transferrable share purchase warrants exercisable at a price of $x.xx for each warrant. Thistransaction, which occurred between the reporting date and the date of completion of these financialstatements, has an impact on the number of ordinary and potential ordinary shares.PAGE 28 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 10.2121. EVENT S AFTER THE REPORT ING DATEPrivate Placement FinancingOn February 12, 2012, the Company obtained a brokered private placement for total proceeds of $xxxconsisting of xxx flow-through units at a price of $x.xx. Each flow-through unit consisted of one flow-throughshare and one non-transferrable share purchase warrant exercisable at a price of $x.xx for each warrant.22. F IRST T IME ADOPTION OF INT ERNAT IONAL F INANCIAL REPORTING ST ANDARDSIFRS 1.23-28The Company’s financial statements for the year-ending December 31, 2011 are the first annual financialstatements prepared in accordance with IFRS. IFRS 1, First Time Adoption of International Financial ReportingStandards (“IFRS 1”), requires that comparative financial information be provided. As a result, the first dateat which the Company has applied IFRS was January 1, 2010 (the “Transition Date”). IFRS 1 requires first-timeadopters to retrospectively apply all effective IFRS standards as of the reporting date, which for the Companywill be December 31, 2011. Therefore, the financial statements for the year-ended December 31, 2011, thecomparative information presented in these financial statements for the year-ended December 31, 2010 andthe opening IFRS statement of financial position at January 1, 2010 are prepared in accordance with IFRSstandards effective at the reporting date. However, IFRS 1 also provides for certain optional exemptions andcertain mandatory exceptions for first time IFRS adopters. Prior to transition to IFRS, the Company preparedits financial statements in accordance with pre-changeover Canadian Generally Accepted AccountingPrinciples (“pre-changeover Canadian GAAP”).In preparing the Company’s opening IFRS financial statements, the Company has adjusted amounts reportedpreviously in the financial statements prepared in accordance with pre-changeover Canadian GAAP.An explanation of how the transition from pre-changeover Canadian GAAP to IFRS has affected theCompany’s financial position, financial performance and cash flows is set out in the following notes andtables:OPTIONAL EXE MPT IONSIFRS 1.C1-C5IFRS 1.D2IFRS 1.D18IFRS 1.D21IFRS 1.D23Business CombinationsThe Company elected not to retrospectively apply IFRS 3 Business Combinations to any business combinationsthat may have occurred prior to its Transition Date and such business combinations have not been restated.Share-based Payment TransactionsThe Company has elected not to retrospectively apply IFRS 2 Share-based Payments to equity instruments thatwere granted and had vested before the Transition Date. As a result of applying this exemption, the Companywill apply the provisions of IFRS 2 only to all outstanding equity instruments that are unvested as at theTransition Date to IFRS.Compound Financial InstrumentsThe Company has elected not to retrospectively separate the liability and equity components of compoundinstruments for which the liability component is no longer outstanding at the date of transition to IFRS.Changes in Existing Decommissioning, Restoration and Similar LiabilitiesThe Company has elected to apply the exemption from full retrospective application of decommissioningprovisions as allowed under IFRS 1. As a result the Company has re-measured the provisions at January 1, 2010under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and estimated the amount to be includedin the cost of the related asset by discounting the liability to the date at which the liability first arose.Borrowing CostsThe Company has elected to apply the transitional provisions of IAS 23 Borrowing Costs which permitsprospective capitalization of borrowing costs on qualifying assets from the Transition Date.PAGE 29 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 1.B2,B3IFRS 1.14-16IFRS 1.23IFRS 1.25MANDATORY EXCEPT IONSDerecognition of Financial Assets and LiabilitiesThe Company has applied the derecognition requirements in IAS 39 Financial Instruments: Recognition andMeasurement prospectively from the Transition Date. As a result any non-derivative financial assets or nonderivativefinancial liabilities derecognized prior to the Transition Date in accordance with pre-changeoverCanadian GAAP have not been reviewed for compliance with IAS 39.EstimatesThe estimates previously made by the Company under pre-changeover Canadian GAAP were not revised forthe application of IFRS except where necessary to reflect any difference in accounting policy or where therewas objective evidence that those estimates were in error. As a result the Company has not used hindsightto revise estimates.RECONCILIATIONS OF PRE-CHANGEOVER CANADIAN GAAP EQUIT Y AND COMPREHENSIVE INCOME TO IFRSIFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. Thechanges made to the statements of financial position and statements of comprehensive income as shownbelow have resulted in reclassifications of various amounts on the statements of cash flows, however asthere have been no material adjustments to the net cash flows, no reconciliation of the statement of cashflows has been prepared.PAGE 30 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 1.24-25RECONCILIATION OF STATEMENT OF FINANCIAL POSITION AS AT JANUARY 1, 2010 – TRANSITION DATEAssetsCurrent assetsSubnoteCanadianGAAP$’000Effect oftransition toIFRS$’000IFRS$’000Cash and cash equivalents $ xxx $ xxxPrepaid expenses and deposits xxx xxxAvailable-for-sale investment xxx xxxTotal current assets $ xxx $ - $ xxxNon-current assetsReclamation deposits $ xxx $ xxxExploration and evaluation assets (i) xxx xxx xxxProperty, plant and equipment xxx xxxTotal non-current assets $ xxx $ xxx $ xxxTotal assets $ xxx $ xxx $ xxxLiabilities and shareholders' equityCurrent liabilitiesTrade and other payables $ xxx $ xxxOther liabilities (iii) xxx xxx xxxTotal current liabilities $ xxx $ xxx $ xxxNon-current liabilitiesProvisions (i) $ xxx xxx $ xxxTotal non-current liabilities $ xxx $ xxx $ xxxTotal liabilities $ xxx $ xxx $ xxxShareholders' equityShare capital (iii) $ xxx $ xxx $ xxxContributed surplus (ii) xxx xxx xxxAccumulated other comprehensive loss (xxx) (xxx)Accumulated deficit(i), (ii),(iii)(xxx) (xxx) (xxx)Total shareholders' equity $ xxx $ xxx $ xxxTotal liabilities and shareholders’ equity $ xxx $ xxx $ xxxPAGE 31 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 1.24-25RECONCILIATION OF STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2010AssetsCurrent assetsSubnoteCanadianGAAP$’000Effect oftransition toIFRS$’000IFRS$’000Cash and cash equivalents $ xxx $ xxxPrepaid expenses and deposits xxx xxxAvailable-for-sale investment xxx xxxTotal current assets $ xxx $ - $ xxxNon-current assetsReclamation deposits $ xxx $ xxxExploration and evaluation assets (i) xxx xxx xxxProperty, plant and equipment xxx xxxTotal non-current assets $ xxx $ xxx $ xxxTotal assets $ xxx $ xxx $ xxxLiabilities and shareholders' equityCurrent liabilitiesTrade and other payables $ xxx $ xxxOther liabilities (iii) xxx xxx xxxTotal current liabilities $ xxx $ xxx $ xxxNon-current liabilitiesProvisions (i) $ xxx xxx $ xxxTotal non-current liabilities $ xxx $ xxx $ xxxTotal liabilities $ xxx $ xxx $ xxxShareholders' equityShare capital (iii) $ xxx $ xxx $ xxxContributed surplus (ii) xxx xxx xxxAccumulated other comprehensive income xxx xxxAccumulated deficit(i), (ii),(iii)(xxx) (xxx) (xxx)Total shareholders' equity $ xxx $ xxx $ xxxTotal liabilities and shareholders’ equity $ xxx $ xxx $ xxxPAGE 32 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 1.24-25RECONCILIATION OF THE STATEMENT OF COMPREHENSIVE LOSS FOR THE YEAR-ENDED DECEMBER 31, 2010Effect ofSubnoteCanadianGAAP$’000transition toIFRS$’000IFRS$’000Interest and other income (iii) $ xxx $ xxx $ xxxDepreciation xxx xxxEmployee costs (ii) xxx xxx xxxFinance expense (i) xxx xxx xxxOther expenses xxx xxxTotal expenses $ xxx $ xxx $ xxxLoss before income tax $ xxx $ xxx $ xxxIncome tax expense (iv) xxx xxxLoss after income tax $ xxx $ xxx $ xxxOther comprehensive incomeFair value gain on available-for-sale investment xxx xxxIncome tax relating to fair value gain onavailable-for-sale investmentTotal other comprehensive loss $ xxx $ xxx $ xxx(xxx)(xxx)Total comprehensive loss for the year $ xxx $ xxx $ xxxLoss per common share, basic and diluted $ x.xx $ x.xx $ x.xxEXPLANATIONS FOR THE ADJ USTMENTS ARE AS F OLLOWS:i) Rehabilitation ProvisionUnder pre-changeover Canadian GAAP, rehabilitation provisions are measured incorporating marketassumptions and discount rates based on the entity’s credit-adjusted risk-free rate. Adjustments are madeto rehabilitation provisions for changes in the timing or amount of the cash flows and the unwinding of thediscount. However, changes in discount rates alone do not result in a re-measurement of the provision.Changes in estimates that decrease the liability are discounted using the discount rate applied upon initialrecognition of the liability, while changes that increase the liability are discounted using the currentdiscount rate.PAGE 33 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS requires decommissioning provisions to be measured based on management’s best estimate of theexpenditures that will be made and adjustments to the provision are made in each year for changes in thetiming or amount of cash flow, changes in the discount rate, and the accretion of the liability (unwinding ofthe discount). Furthermore, the estimated future cash flows should be discounted using the current rates.As a result, the rehabilitation provision will increase by $xxx at January 1, 2010 (December 31, 2010 - $xxx)with an increase of $xxx at January 1, 2010 (December 31, 2010 - $xxx) to exploration and evaluation assets.The remaining $xxx (December 31, 2010 - $xxx; December 31, 2011 - $xxx) represents the accretion of theliability which decreases retained earnings. As a result of the increased accretion, finance expense will be $xhigher than pre-changeover Canadian GAAP during 2010, resulting in lower net income.ii)Share-based PaymentsIFRS 2 is effective for the Company as at January 1, 2010 and is applicable to:• New grants of stock-based payments subsequent to January 1, 2010;• Equity-settled stock-based compensation awards granted subsequent to November 7, 2002 and thatvest after January 1, 2010; and• Awards that are modified on or after January 1, 2010, even if the original grant of the award wasnot accounted for in accordance with IFRS 2.Pre-changeover Canadian GAAP allows the Company to calculate the fair value of the stock-basedcompensation on all awards granted and recognizes the expense from the date of grant over the vestingperiod using the graded vesting methodology. The Company determines the fair value of stock optionsgranted using the Black-Scholes option pricing model.IFRS 2 requires each tranche in an award with graded vesting features to be treated as a separate grant witha different vesting date and fair value. Each grant is accounted for on that basis.As a result, contributed surplus and accumulated deficit increased by $xxx at January 1, 2010 (December 31,2010 - $xxx and $xxx). The share-based payment expense will be lower than pre-changeover Canadian GAAPby $x during 2010, resulting in an increase in net income.Further under pre-changeover Canadian GAAP, the Company previously capitalized exploration expendituressettled in the Company’s shares, including any related deferred tax. These temporary differences do notarise as a result of business combinations and affect neither accounting nor taxable profit on initialrecognition. As a result, they meet the criteria outlined in IAS 12 Income Taxes, to exempt the Companyfrom recognizing deferred tax on initial recognition (the “initial recognition exemption”). No deferred taxliabilities were recognized under pre-changeover Canadian GAAP, therefore there will be no measurementimpact on change. However, the note disclosures on deferred tax liabilities will change as a result of thisdifference (refer to Note 15).iii) Flow-through SharesUnder pre-changeover Canadian GAAP, the entire proceeds from the issuance of flow-through shares wererecognized in equity less the tax effects of renunciation. Under IFRS, on issuance of flow-through shares, theCompany bifurcates the flow-through share into i) a flow-through share premium, equal to the estimatedpremium, if any, investors pay for the flow-through feature, which is recognized as a liability and; ii) sharecapital. Upon expenses being incurred, the Company derecognizes the liability and recognizes a deferred taxliability for the amount of tax reduction renounced to the shareholders. The premium is recognized as otherincome and the related deferred tax is recognized as a tax provision.To the extent that the Company has deferred tax assets in the form of tax loss carry-forwards and otherunused tax credits as at the end of the reporting year, the Company may use them to reduce its deferred taxliability relating to tax benefits transferred through flow-through shares.PAGE 34 OF 35BDO CANADA LLP

Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:As a result, for issuances of flow-through shares for which expenditures have been incurred, share capitalwas increased by $xxx at the date of transition (December 31, 2010 - $xxx) and retained earnings weredecreased by $xxx (December 31, 2010 - $xxx). The impact on net income for the year-ended December 31,2011 was $xxx (year-ended December 31, 2010 - $xxx; year-ended December 31, 2011 - $xxx).Where flow-through shares were issued but expenditures not incurred by the end of the reporting year, aliability is shown in ‘other liabilities’. This resulted in a liability of $xxx at the date of transition (December31, 2010 - $xxx).iv) Deferred Income TaxesAs a result of the transition to IFRS the carrying amounts of various assets and liabilities have been adjusted(see (i) to (ii) above). There has not been a corresponding change to the tax basis of these assets andliabilities. This will not impact the deferred taxes recognized. However, this will impact the disclosure ofindividual temporary differences. Details of the various deferred tax liabilities at January 1, 2010 andDecember 31, 2010 and December 31, 2011 and the corresponding amounts recorded in income and othercomprehensive income for the year-ended December 31, 2011 and 2010 are provided in Note 15.PAGE 35 OF 35BDO CANADA LLP

For more information, please contact:AUDIT AND ASSURANCEVancouverDon de Jersey604 443 4706ddejersey@bdo.caMichael Madsen604 443 4732mmadsen@bdo.caDiane Campbell604 646 4388dcampbell@bdo.caLynn Watt604 443 4730lwatt@bdo.caGlenn Ohlhauser604 646 4395gohlhauser@bdo.caJefry Jai604 646 4390jjai@bdo.caJoe Ozorio604 532 4748jozorio@bdo.caTorontoTammy Thompson416 369 3116tthompson@bdo.caMark Smith416 815 3000marksmith@bdo.caCalgaryLorraine Walker403 213 2592lwalker@bdo.caJonathan Winn403 213 9771jwinn@bdo.caStuart Chalmers403 531 0534schalmers@bdo.caMarilyn Kuntz403 266 5608mkuntz@bdo.caAllan Payne403 213 5426apayne@bdo.caGraham Marjoribanks403 531 0564gmarjoribanks@bdo.caMontrealManon Durivage514 934 1131mdurivage@bdo.caADVISORYSam Khoury416 369 6030skhoury@bdo.caCarlo Mariglia416 369 3078cmariglia@bdo.caDuane Rogers403 205 4342drogers@bdo.caMark Knight604 443 4709mknight@bdo.caThis publication has been carefully prepared, but it has been written in generalterms and should be seen as broad guidance only. The publication cannot be reliedupon to cover specific situations and you should not act, or refrain from acting, uponthe information contained therein without obtaining specific professional advice.Please contact BDO Canada LLP to discuss these matters in the context of yourparticular circumstances. BDO Canada LLP, its partners, employees and agents donot accept or assume any liability or duty of care for any loss arising from any actiontaken or not taken by anyone in reliance on the information in this publication or forany decision based on it.BDO Canada LLP, a Canadian limited liability partnership, is a member of BDOInternational Limited, a UK company limited by guarantee, and forms part of theinternational BDO network of independent member firms. BDO is the brand name forthe BDO network and for each of the BDO Member Firms.