Aurizon Mines Ltd.

Financial Statements















For
the year ended December 31, 2012



























1
|Page











Management’s responsibility for financial
reporting



Management is responsible for the integrity
and fair presentation of the financial information contained in these annual financial statements. Where appropriate, the financial
information reflects amounts based on the best estimates and judgments of management. The financial statements have been prepared
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial
information presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year
ended December 31, 2012 is consistent with that disclosed in these financial statements.



Management is responsible for establishing
and maintaining adequate internal control over financial reporting. Any system of internal control over financial reporting, no
matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.



The Board of Directors oversees management’s
responsibility for financial reporting and internal control systems through an Audit Committee, which is composed entirely of independent
directors. The Audit Committee meets periodically with management and the independent auditors to review the scope and results
of the annual audit and to review the financial statements and related financial reporting and internal control matters before
the financial statements are approved by the Board of Directors and submitted to the shareholders.



PricewaterhouseCoopers LLP, an independent
registered public accounting firm, appointed by the shareholders, have audited our financial statements in accordance with Canadian
generally accepted auditing standards and have expressed their opinion in the auditors’ report.



| |  | 
| |  | 







|George Paspalas         | Ian S. Walton               | 
|----------------------- | --------------------------- | 
|President and           | Executive Vice-President    | 
|Chief Executive Officer | and Chief Financial Officer | 



Vancouver, B.C., Canada
March 13, 2013



2|Page









Independent Auditor’s Report





To the Shareholders of Aurizon Mines Ltd.



We have completed integrated audits of Aurizon Mines Ltd.’s
December 31, 2012 and 2011 financial statements and its internal control over financial reporting as at December 31, 2012.
Our opinions, based on our audits, are presented below.



Report on the financial statements



We have audited the accompanying financial statements of Aurizon
Mines Ltd., which comprise the balance sheets as at December 31, 2012 and 2011 and the statements of comprehensive income,
changes in equity and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting
policies and other explanatory information.



Management’s responsibility for the financial
statements



Management is responsible for the preparation and
fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.



Auditor’s responsibility



Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an
audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Canadian generally
accepted auditing standards require that we comply with ethical requirements.



An audit involves performing procedures to obtain audit evidence,
on a test basis, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.



We believe that the audit evidence we
have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.



Opinion



In our opinion, the financial statements present fairly, in
all material respects, the financial position of Aurizon Mines Ltd. as at December 31, 2012 and 2011 and its financial performance
and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.





Report on internal control over financial reporting



We have also audited Aurizon Mines Ltd.’s internal control over
financial reporting as at December 31, 2012, based on criteria established in Internal Control - Integrated Framework, issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



3|Page











Management’s responsibility for internal control over
financial reporting



Management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included
in Management’s

Report on Internal Control over Financial Reporting included
in Management’s Discussion and Analysis of Financial Condition and Results of Operations.



Auditor’s responsibility



Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.



An audit of internal control over financial reporting
includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such
other procedures as we consider necessary in the circumstances.



We believe that our audit provides a reasonable
basis for our audit opinion on the company’s internal control over financial reporting.



Definition of internal control over financial reporting



A company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.



Inherent limitations



Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with
the policies or procedures may deteriorate.



Opinion



In our opinion, Aurizon Mines Ltd. maintained, in all material
respects, effective internal control over financial reporting as at December 31, 2012, based on criteria established in Internal
Control - Integrated Framework issued by COSO.









Chartered Accountants

Vancouver, British Columbia

March 13, 2013



4|Page









Aurizon Mines Ltd.

Balance Sheets

(expressed in thousands of Canadian dollars,
unless otherwise stated)



|As at,                                      |  | Notes | December 31, 2012 | December 31, 2011
|------------------------------------------- |  | ----- | ----------------- | -----------------
|Assets                                      |  |       |                   |                  
|Current assets                              |  |       |                   |                  
|Cash and cash equivalents                   |  | 4     | $ 204,232         | $ 213,486        
|Marketable securities                       |  | 5     | 477               | 864              
|Inventories                                 |  | 6     | 16,433            | 12,545           
|Accounts receivable and other               |  | 7     | 5,885             | 9,679            
|Derivative instrument assets                |  |       | -                 | 357              
|Tax credits and other taxes receivable      |  | 8     | 10,061            | 5,210            
|Total current assets                        |  |       | 237,088           | 242,141          
|Non-current assets                          |  |       |                   |                  
|Property, plant and equipment               |  | 9     | 204,451           | 164,783          
|Mineral properties                          |  | 10    | 5,285             | 4,995            
|Deferred finance costs                      |  | 11    | 178               | 343              
|Other assets                                |  | 12    | 2,649             | 6,324            
|TOTAL ASSETS                                |  |       | $ 449,651         | $ 418,586        
|                                            |  |       |                   |                  
|liabilities                                 |  |       |                   |                  
|Current liabilities                         |  |       |                   |                  
|Accounts payable and accrued liabilities    |  | 13    | $ 29,342          | $ 25,993         
|Current income and resource tax liabilities |  | 14    | 3,121             | 18,338           
|Total current liabilities                   |  |       | 32,463            | 44,331           
|Non-current liabilities                     |  |       |                   |                  
|Provisions                                  |  | 15    | 16,706            | 16,153           
|Deferred tax liabilities                    |  | 14    | 35,955            | 36,918           
|Total liabilities                           |  |       | 85,124            | 97,402           
|                                            |  |       |                   |                  
|EQUITY                                      |  |       |                   |                  
|Shareholders’ equity                        |  |       |                   |                  
|Issued share capital                        |  | 16    | 282,600           | 274,165          
|Contributed surplus                         |  |       | 2,921             | 1,170            
|Stock based compensation                    |  | 16    | 19,675            | 18,711           
|Accumulated other comprehensive losses      |  |       | -                 | (386)            
|Retained earnings                           |  |       | 59,331            | 27,524           
|Total shareholders’ equity                  |  |       | 364,527           | 321,184          
|total liabilities AND EQUITY                |  |       | $ 449,651         | $ 418,586        
|                                            |  |       |                   |                  

The attached notes form an integral part of these financial
statements.

Subsequent event – Note 1





These financial statements were approved for issue by the
Board of Directors on March 13, 2013. They are signed on the Company’s behalf by:





















5|Page









Aurizon Mines Ltd.

Statements of Comprehensive Income

(expressed in thousands of Canadian dollars, unless
otherwise stated)



|For the years ended,                                                            |  | Notes  | December 31, 2012 | December 31, 2011
|------------------------------------------------------------------------------- |  | ------ | ----------------- | -----------------
|                                                                                |  |        |                   |                  
|Revenue                                                                         |  |        | $ 223,558         | $ 259,999        
|Less: Cost of sales                                                             |  | 17     | (131,788)         | (127,725)        
|Gross profit                                                                    |  |        | 91,770            | 132,274          
|                                                                                |  |        |                   |                  
|Other operating expenses                                                        |  |        |                   |                  
|Exploration costs                                                               |  | 17     | (17,899)          | (26,468)         
|General and administrative costs                                                |  | 17     | (17,531)          | (19,356)         
|Other net losses                                                                |  |        | (1,840)           | (457)            
|Operating profit                                                                |  |        | 54,500            | 85,993           
|                                                                                |  |        |                   |                  
|Finance income                                                                  |  | 18     | 2,236             | 1,538            
|Finance costs                                                                   |  | 11, 18 | (856)             | (1,112)          
|Other derivative gains                                                          |  | 18     | 193               | 165              
|Profit before income and resource taxes                                         |  |        | 56,073            | 86,584           
|                                                                                |  |        |                   |                  
|Income and resource tax expense                                                 |  | 14     | (24,266)          | (42,653)         
|NET PROFIT                                                                      |  |        | 31,807            | 43,931           
|                                                                                |  |        |                   |                  
|Other comprehensive income (loss)                                               |  |        |                   |                  
|Unrealized loss on marketable securities                                        |  | 5      | -                 | (765)            
|Recycling of impairment loss on marketable securities                           |  | 5      | 386               | -                
|total COMPREHENSIVE INCOME                                                      |  |        | $ 32,193          | $ 43,166         
|                                                                                |  |        |                   |                  
|                                                                                |  |        |                   |                  
|Weighted average number of common shares
        outstanding – Basic            |  |        | 164,169           | 162,623          
|Earnings per share – Basic                                                      |  | 21     | $ 0.19            | $  0.27          
|Weighted average number of common shares
        outstanding – Diluted          |  |        | 164,927           | 164,374          
|Earnings per share – Diluted                                                    |  | 21     | $ 0.19            | $ 0.27           
|The attached notes form an integral part of these financial
        statements. |  |        |                  
|                                                                                |  |        |                   |                  
|                                                                                |  |        |                   |                  



6|Page









Aurizon Mines Ltd.

Statements of Changes in Equity

(expressed in thousands of Canadian dollars,
unless otherwise stated)



|For the years ended,                                                            |   | Notes   | December 31, 2012 | December 31, 2011
|------------------------------------------------------------------------------- | - | ------- | ----------------- | -----------------
|                                                                                |   |         |                   |                  
|Issued share capital                                                            |   |         |                   |                  
|Balance at beginning of year                                                    |   |         | $ 274,165         | $ 269,677        
|Share issuances for cash                                                        |   | 16b     | 5,837             | 3,102            
|Share options exercised                                                         |   | 16b     | 2,598             | 1,386            
|Balance at end of year                                                          |   |         | 282,600           | 274,165          
|                                                                                |   |         |                   |                  
|Contributed surplus                                                             |   |         |                   |                  
|Balance at beginning of year                                                    |   |         | 1,170             | 1,022            
|Vested share option expiries                                                    |   |         | 1,751             | 148              
|Balance at end of year                                                          |   |         | 2,921             | 1,170            
|                                                                                |   |         |                   |                  
|Share based compensation                                                        |   |         |                   |                  
|Balance at beginning of year                                                    |   |         | 18,711            | 13,719           
|Share based compensation charge                                                 |   |         | 5,313             | 6,526            
|Vested share option expiries                                                    |   |         | (1,751)           | (148)            
|Share options exercised, transferred to share capital                           |   | (2,598) | (1,386)          
|Balance at end of year                                                          |   |         | 19,675            | 18,711           
|                                                                                |   |         |                   |                  
|Accumulated other comprehensive income (loss)                                   |   |         |                   |                  
|Balance at beginning of year                                                    |   |         | (386)             | 379              
|Unrealized loss on marketable securities                                        |   | 5       | -                 | (765)            
|Recycling of impairment loss on marketable securities                           | 5 | 386     | -                
|Balance at end of year                                                          |   |         | -                 | (386)            
|                                                                                |   |         |                   |                  
|Retained earnings (Deficit)                                                     |   |         |                   |                  
|Balance at beginning of year                                                    |   |         | 27,524            | (16,407)         
|Net profit                                                                      |   |         | 31,807            | 43,931           
|Balance at end of year                                                          |   |         | 59,331            | 27,524           
|total SHAREHOLDERS’ EQUITY                                                      |   |         | $ 364,527         | $ 321,184        
|The attached notes form an integral part of these financial
        statements. |   |         |                  
|                                                                                |   |         |                   |                  
|                                                                                |   |         |                   |                  



7|Page











Aurizon Mines Ltd.

Statements of Cash Flows

(expressed in thousands of Canadian dollars, unless
otherwise stated)





|For the years ended,                                                                                                                                       |  | Notes | December 31, 2012 | December 31, 2011
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | ----------------- | -----------------
|                                                                                                                                                           |  |       |                   |                  
|Operating activities                                                                                                                                       |  |       |                   |                  
|Net profit                                                                                                                                                 |  |       | $ 31,807          | $ 43,931         
|Adjustments for non-cash items:                                                                                                                            |  |       |                   |                  
|Depreciation and amortization                                                                                                                              |  |       | 37,729            | 39,131           
|Share-based compensation                                                                                                                                   |  |       | 5,313             | 6,526            
|Deferred income tax (recovery) expense                                                                                                                     |  |       | (964)             | 1,540            
|Refundable and non-refundable taxes                                                                                                                        |  |       | 3,629             | 2,077            
|Change in fair value of marketable securities                                                                                                              |  | 5     | 1,273             | -                
|Derivative losses (gains)                                                                                                                                  |  | 18    | 357               | (357)            
|Other                                                                                                                                                      |  | 22a   | 910               | 1,581            
|                                                                                                                                                           |  |       | 80,054            | 94,429           
|Decrease (increase) in non-cash working capital items                                                                                                      |  | 22b   | (17,682)          | 26,595           
|Net cash provided by operating activities                                                                                                                  |  |       | 62,372            | 121,024          
|                                                                                                                                                           |  |       |                   |                  
|Investing activities                                                                                                                                       |  |       |                   |                  
|Property, plant and equipment                                                                                                                              |  |       | (75,037)          | (47,270)         
|Mineral properties                                                                                                                                         |  |       | (650)             | (800)            
|Other investing activities                                                                                                                                 |  | 22c   | (1,742)           | (918)            
|Net cash used in investing activities                                                                                                                      |  |       | (77,429)          | (48,988)         
|                                                                                                                                                           |  |       |                   |                  
|Financing activities                                                                                                                                       |  |       |                   |                  
|Issuance of shares                                                                                                                                         |  | 16b   | 5,837             | 3.102            
|Deferred finance costs                                                                                                                                     |  |       | -                 | (493)            
|Long-term obligations                                                                                                                                      |  |       | -                 | (773)            
|Net cash provided by financing activities                                                                                                                  |  |       | 5,837             | 1,836            
|                                                                                                                                                           |  |       |                   |                  
|Net increase (decrease) in cash and cash equivalents                                                                                                       |  |       | (9,254)           | 74,145           
|                                                                                                                                                           |  |       |                  
|Effect of foreign currency exchange rate changes on cash                                                                                                   |  | (34)  | 273              
|                                                                                                                                                           |  |       |                   |                  
|Cash and cash equivalents – beginning of year                                                                                                              |  |       | 213,486           | 139,341          
|                                                                                                                                                           |  |       |                   |                  
|Cash and cash equivalents - end of year                                                                                                                    |  |       | $ 204,232         | $ 213,486        
|The attached notes form an integral part of these financial
        statements.
        Supplemental cash flow information is
        disclosed in Note22. |  |       |                  
|                                                                                                                                                           |  |       |                   |                  
|                                                                                                                                                           |  |       |                   |                  
|                                                                                                                                                           |  |       |                   |                  



8|Page











Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





1.	GENERAL
INFORMATION

| |  | 
| |  | 



Aurizon Mines Ltd. (“Aurizon”
or the “Company”) is a gold producer with operations, development and exploration activities in Quebec, Canada. Aurizon
is a public company listed on the Toronto Stock Exchange (“TSX”) and on the New York Stock Exchange Amex (“NYSE
Amex”). The Company is incorporated and domiciled in Canada, and has no subsidiaries. The address of the Company’s
head office is Suite 1120 Cathedral Place, 925 West Georgia Street, Vancouver, British Columbia, Canada.



On March 3, 2013, Aurizon entered into an Arrangement
Agreement (the “Arrangement”) with Hecla Mining Company and 0963708 B.C. Ltd. (collectively “Hecla”) whereby
Hecla agreed to acquire all of the issued and outstanding common shares of Aurizon in exchange for 0.9953 common shares of Hecla
Mining Company, or in exchange for $4.75 in cash, or any combination thereof per share, all subject to proration. The maximum aggregate
amount of cash consideration to be paid is $513,631,193 and the maximum aggregate number of Hecla Mining Company shares that may
be elected is 57,000,000. Upon completion of the Arrangement, Aurizon would become a wholly-owned subsidiary of Hecla.



All unexercised and in-the-money Aurizon incentive
stock options will be deemed to be fully vested and transferred and disposed by the holder thereof to Aurizon and cancelled in
exchange for consideration in accordance with the Arrangement. Additionally, each DSU and RSU outstanding at the time of completion
shall be cancelled in exchange for a cash payment by Aurizon equal to $4.75 per unit. The Arrangement requires Aurizon to pay a
termination fee of $27.2 million or to reimburse Hecla’s expenses in certain circumstances.



The anticipated transaction is to be effected
by way of a statutory plan of arrangement pursuant to the Business Corporations Act (British Columbia). The Arrangement will require
the approval of 66 2/3% of the votes cast by the affected securityholders of Aurizon voting as a single class and the approval
of 66 2/3% of the votes cast by the Aurizon shareholders at a special meeting which is expected to take place in May, 2013. Assuming
Aurizon securityholders approve the transaction at the special meeting and all court and regulatory approvals are obtained, completion
of the transaction is expected in the second quarter of 2013.



On January 14, 2013, Alamos Gold Inc. (“Alamos”)
commenced an unsolicited offer to acquire all of the issued and outstanding common shares of Aurizon, other than any common shares
held directly or indirectly by Alamos and its affiliates, in exchange for consideration of cash or Alamos shares, or a combination
thereof, all subject to proration. On January 23, 2013, Aurizon’s Board of Directors issued a Director’s Circular with
a recommendation that shareholders reject the offer and not tender their common shares to the offer for reasons set out therein.
On March 5, 2013, Alamos announced the waiver of the minimum tender condition and extended the offer until March 19, 2013. On March
11, 2013, Aurizon announced the adoption of a new shareholder rights plan to ensure equal treatment for all shareholders in connection
with any transaction to acquire control.





| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | -- | ------------------------------------------





The principal accounting policies applied in
the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented,
unless otherwise stated.





| | a) | Basis of preparation
| | -- | --------------------



These
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”). IFRS comprises IFRSs, International Accounting Standards
(“IASs), and interpretations issued by the IFRS Interpretations Committee (“IFRICs”) and the former Standing
Interpretations Committee (“SICs”).



The preparation of financial statements
in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.





| | b) | Principles of consolidation
| | -- | ---------------------------



The Company had no subsidiaries
requiring consolidation for the periods presented.





| | c) | Functional currency and foreign currency translation
| | -- | ----------------------------------------------------



| | (i) | Functional and presentation currency
| | --- | ------------------------------------



Items included in these financial
statements are measured using the currency of the primary economic environment in which the Company operates (the “functional
currency”). These financial statements are presented in Canadian dollars, which is the Company’s functional and presentation
currency.



9|Page











Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | -- | ------------------------------------------------------





| | c) | Functional currency and foreign currency translation
(continued)
| | -- | ----------------------------------------------------------------



| | (ii) | Transactions and balances
| | ---- | -------------------------



Foreign currency transactions are
translated into Canadian dollars at the rates prevailing on the date of the transactions. Monetary assets and liabilities denominated
in a foreign currency are translated into Canadian dollars at rates of exchange in effect at the balance sheet date. Non-monetary
assets, liabilities and other items are translated at historical rates. Revenue and expenses are translated at average exchange
rates prevailing during the year, except for depreciation and amortization which are translated at historical rates. The resulting
gains and losses are included in the determination of earnings.





| | d) | Mineral properties
| | -- | ------------------



Mineral properties consist
of exploration properties which may or may not contain mineral reserves or resources. All costs related to mineral properties are
expensed, with the exception of acquisition costs which are capitalized. Exploration expenditures relating to mineral properties
are not capitalized because the property has not reached a sufficiently advanced stage that would allow certainty of future economic
benefits, as defined in the capitalization conditions set out in Note 2 e)(ii) below. Once these conditions are met, the property
is transferred to Property, plant and equipment and is subject to the accounting treatment described in Note 2 e).



Carrying values of mineral
properties are reviewed for impairment when events or changes in circumstances suggest that the carrying amount exceeds the recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. An impairment
loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The Company evaluates
impairment losses (other than goodwill impairment), for potential reversals when events or circumstances warrant such consideration.
Acquisition costs of abandoned properties are charged to the statement of comprehensive income in the period in which the project
is abandoned.





| | e) | Property, plant and equipment
| | -- | -----------------------------



| | (i) | Mining properties
| | --- | -----------------



Mining properties consist
of production stage properties and development stage properties. Production stage properties contain one or more producing zones,
areas, or mines. Development stage properties are non-producing properties containing proven and probable mineral reserves and
that are sufficiently advanced to allow capitalization of development costs based upon the conditions set out in Note 2 e)(ii).



Production stage mining properties,
and associated mine site infrastructure and tailings, are carried at cost, less accumulated depreciation, amortization, and impairments.
Amortization is provided over the estimated life of a mining property using the estimated recoverable amount of applicable proven
and probable mineral reserves. Development costs associated with a development stage property are capitalized until the property
is producing, abandoned, impaired in value or placed for sale, provided the conditions set out in Note 2 e)(ii) are met.





| | (ii) | Development costs relating to mining properties
| | ---- | -----------------------------------------------



Drilling and
related development costs incurred to define the shape of proven and probable reserves for production planning are included in
cost of sales if said reserves are expected to be mined within the same period. Drilling and related development costs incurred
to prepare areas that will be mined in future years are capitalized and amortized over the life of the ore body. Drilling and related
costs incurred to establish additional reserves from existing measured, indicated and inferred resources at production stage properties
and development stage properties that have existing proven and probable reserves are capitalized, provided that the following conditions
have been met:



| | · | There is a probable future benefit arising from these costs that will
contribute to future net cash inflows;
| | - | ------------------------------------------------------------------------------------------------------------

| | · | The Company can obtain the benefit and control
access to it; and
| | - | ----------------------------------------------------------------

| | · | The transaction or event giving rise to the
benefit has already occurred.
| | - | -------------------------------------------------------------------------



10
|Page











Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | e) | Property, plant and equipment (continued)
| | -- | -----------------------------------------



| | (ii) | Development costs relating to mining properties
(continued)
| | ---- | -----------------------------------------------------------



The following
criteria are used by management in its assessment of determining whether there is sufficient evidence that the expenditure will
result in a future economic benefit to the Company:



|Geology:                   | There is sufficient certainty that the geologic data together with other factors, such as a history of converting resources to reserves, will support the likelihood of conversion of mineral resources to proven and probable reserves.
|-------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Infrastructure:            | The mineral deposit can be extracted and processed utilizing existing or planned infrastructure that is within proximate access to the deposit.                                                                                         
|Life of mine plans:        | A life of mine plan and supporting geologic models provide inputs in the determination of additional drilling and development work required to expand or further define the mineral deposit.                                            
|Authorizations:            | Operating and environmental permits exist or there is reasonable assurance that they are obtainable.                                                                                                                                    
|Stage of mine development: | A production stage property provides greater certainty that a future economic benefit is probable than a development stage property.                                                                                                    





| | (iii) | Deferral of stripping costs
| | ----- | ---------------------------



Pre-commercial production phase:



Stripping (i.e.,
overburden and other waste removal) costs incurred in the pre-commercial production phase of mine development are capitalized.
Upon achievement of commercial production, these capitalized costs are amortized to cost of sales on a unit-of-production basis
over the economically recoverable reserves that directly benefit from the specific stripping activity. As at December 31, 2012,
the carrying amount of capitalized pre-commercial phase stripping costs was $nil (2011 - $nil).





| | (iv) | Land, buildings, plant and equipment
| | ---- | ------------------------------------



General land, buildings, plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that
are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced.
Repairs and maintenance costs are charged to the statement of comprehensive income during the period in which they are incurred.



The Company
allocates the amount initially recognized in respect of an item of land and buildings, plant and equipment to its significant parts
and depreciates separately each such part. Residual values, methods of amortization and useful lives of the assets are reviewed
annually and adjusted if appropriate.





| | (v) | Depreciation rates
| | --- | ------------------



Depreciation
of property, plant and equipment begins when assets are available for use and is calculated as follows:





|Asset catagory                        | Depreciation
    method | Useful Life Estimates        
|------------------------------------- | ----------------------- | -----------------------------
|Mine site infrastructure and tailings | Unit of production      | Mineral reserves/life of mine
|Machinery, equipment and furniture    | 20% declining balance   | 5-10 years                   
|Computers and software                | 50% declining balance   | 2-4 years                    
|Office buildings and warehouse        | 10% declining balance   | 10+ years                    







| | (vi) | Impairment of property, plant and equipment
| | ---- | -------------------------------------------



Carrying
values of property, plant and equipment are reviewed for impairment whenever events or changes in circumstances suggest that the
carrying amount may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The Company evaluates impairment losses (other than goodwill impairment) for potential reversals when events or circumstances
warrant such consideration. Any reversal is limited to the amount of impairment loss originally recognized.



11
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | f) | Cash and cash equivalents
| | -- | -------------------------



Cash
and cash equivalents are unrestricted as to use and consist of cash on hand, demand deposits and short term interest-bearing investments
with maturities of 90 days or less from the original date of acquisition and which can readily be liquidated to known amounts of
cash. Redeemable interest bearing investments with maturities of up to one year are considered cash equivalents if they can readily
be liquidated at any point in time to known amounts of cash, the initial period subject to an interest penalty on redemption is
less than 90 days, and they are redeemable thereafter until maturity for invested value plus accrued interest.





| | g) | Financial instruments
| | -- | ---------------------



Financial assets and liabilities are
recognized when the Company becomes a party to the contractual provisions of an instrument.



At initial recognition, the Company
classifies its financial instruments in the following categories depending on their nature and the purpose for which the instruments
were acquired:



| | (i) | Financial assets and liabilities at fair value
through profit or loss:
| | --- | ----------------------------------------------------------------------



A financial asset or liability is classified in this category
if acquired principally for the purpose of selling or repurchasing in the short-term. Derivatives are also included in this category
unless they are designated as hedges.



Financial instruments in this category
are recognized initially and subsequently at fair value. Transaction costs are expensed in the statement of comprehensive income.
Gains and losses arising from changes in fair value are presented in the statement of comprehensive income within other gains and
losses in the period in which they arise. Financial assets and liabilities at fair value through profit or loss are classified
as current except for any position expected to be settled or paid beyond twelve months of the balance sheet date, which is then
classified as non-current.



| | (ii) | Investments classified as available for sale:
| | ---- | ---------------------------------------------



Available for sale investments are non-derivatives that
are either designated in this category, or not classified in any of the other financial instrument categories. The Company’s
assets classified as available for sale comprise marketable securities.



Investments classified as available
for sale are recognized initially at fair value plus transaction costs, and are subsequently carried at fair value, with gains
or losses arising from changes in fair value recognized in other comprehensive income. Available for sale investments are classified
as non-current, unless the investment matures within twelve months, or management expects to dispose of them within twelve months.



When an available for sale investment
is sold or impaired, the accumulated gains or losses are transferred from other comprehensive income to other gains and losses.



| | (iii) | Loans and receivables:
| | ----- | ----------------------



Loans and receivables are non-derivative financial assets,
with fixed or determinable payments, that are not quoted in an active market. Loans and receivables are initially recognized at
the amount expected to be received less, when material, a discount to reduce the loans and receivables to fair value. Subsequently,
loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment.



| | (iv) | Trade payables and accrued liabilities:
| | ---- | ---------------------------------------



Trade payables and accrued liabilities
are initially recognized at the amount required to be paid less, when material, a discount to reduce the payables to fair value.
Subsequently, trade payables are measured at amortized cost using the effective interest method. Bank debt and long-term debt are
recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost using the effective
interest method.



Financial liabilities are classified
as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.



| | (v) | Derivative financial instruments:
| | --- | ---------------------------------



The Company has used gold and currency
derivative instruments to manage its exposure to the fluctuating price of gold and foreign exchange movements. Such derivatives
are revalued at each reporting period and any gains or losses arising from the use of derivative instruments, both realized and
unrealized, are charged to the statement of comprehensive income.



All derivatives recorded on the balance
sheet are reflected at fair value. Revaluation adjustments on these instruments are reflected in the statement of comprehensive
income, because the Company does not follow hedge accounting.



12
|Page











Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | h) | Impairment of financial assets
| | -- | ------------------------------



At each reporting date, the Company
assesses whether there is objective evidence that a financial asset is impaired. An evaluation is made as to whether a decline
in fair value has occurred is based on indicators such as adverse changes in the market, economic or legal environments. If such
evidence exists, the Company recognizes an impairment loss as follows:



| | (i) | Financial assets carried at amortized cost:
| | --- | -------------------------------------------



The impairment loss is the difference
between the amortized cost of the loan or receivable, and the present value of the estimated future cash flows, discounted using
the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount through the
use of an allowance account. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods
if the amount of the loss decreases, and the decrease can be related objectively to an event occurring after the impairment was
recognized. Financial assets classified as available for sale: the impairment loss is the difference between the original cost
of the asset and its fair value at the measurement date, less any impairment losses previously recognized in the statement of income.
When recording an impairment loss relating to a financial asset classified as available for sale, the losses pertaining to the
impaired asset(s) are reclassified from accumulated other comprehensive income to the Statement of comprehensive income, such that
the losses are recognized in net profit.





| | i) | Inventories
| | -- | -----------



Inventory
is comprised of gold bullion, in-process ore and mine supplies.



Gold bullion
and in-process ore is valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price
in the ordinary course of business, less estimated costs of completion and costs of selling final product.



The costs
included in the value of gold bullion and in-process ore consist of direct costs related to production such as mining, milling,
and refining costs, as well as a portion of indirect costs, which include depreciation of capital assets and amortization of mining
assets. The value of the gold bullion and in-process ore is determined on a weighted-average cost basis.



Mine supplies
are valued at the lower of cost and net realizable value. Any provision for obsolescence is determined by reference to specific
items.





| | j) | Borrowing costs
| | -- | ---------------



Borrowing costs attributable to the
acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use. All other borrowing costs are recognized as finance costs in the statement of comprehensive
income in the period in which they are incurred.





| | k) | Share-based compensation
| | -- | ------------------------



| | (i) | Incentive stock options
| | --- | -----------------------



The Company grants stock options
to key employees, directors, and officers. Each tranche is treated as a separate award with its own vesting period and grant date
fair value. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model, and is
recognized as share based compensation expense within general and administrative costs in the Statements of Comprehensive Income
over the tranche’s vesting period based on the number of awards expected to vest, with a corresponding increase to the stock
based compensation equity account. The number of awards expected to vest is periodically reviewed, and the estimated option forfeiture
rate is adjusted as required throughout the life of the option. The share based compensation expense is then adjusted accordingly.



| | (ii) | Deferred share units
| | ---- | --------------------



The
Company grants deferred share units (“DSUs”) to independent Directors. DSUs vest immediately upon granting, and can
only be settled in cashfollowing the date the director has retired from, or ceased to hold, all positions with the Company,
and will be based upon the number of units held, multiplied by the fair market value of the Company’s share price at the
time of redemption. The fair value of each DSU is recognized as a general and administrative cost in
the Statements of Comprehensive Income, with a corresponding adjustment to current liabilities. The fair value of each unit is
equal to the market price of the underlying shares at each reporting date.



13
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | k) | Share-based compensation (continued)
| | -- | ------------------------------------



| | (iii) | Restricted share units
| | ----- | ----------------------



The
fair value of restricted share units (“RSUs”) awarded to employees is recognized as a general and administrative cost
in the Statements of Comprehensive Income, with a corresponding adjustment to current liabilities. At each reporting date, the
market value of the underlying shares is attributed to each unit using the graded vesting method. RSUs vest over a three year period,
where one third of the units vest on each grant date anniversary. The units may only be settled in cash at the market value of
the underlying shares at each vesting date.Changes to the estimated number of awards that will eventually vest are accounted
for prospectively.





| | l) | Provisions
| | -- | ----------



| | (i) | General
| | --- | -------



Provisions are recognized when (i)
the Company has a present obligation (legal or constructive) as a result of a past event, and (ii), it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount
of the obligation. If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due
to the passage of time is recognized as a finance cost.



| | (ii) | Asset retirement obligation provision
| | ---- | -------------------------------------



The Company records the present
value of estimated costs of legal and constructive obligations to restore operating locations in the period in which the obligation
is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and
tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation
of affected areas. The obligation generally arises when an asset is installed or the ground/environment is disturbed. When the
liability is initially recognized, the present value of the estimated restoration cost is capitalized by increasing the carrying
amount of the related mining assets. Over time, the discounted liability is increased for the change in present value based on
a risk-free discount rate. The periodic unwinding of the discount is recognized in the statement of comprehensive income as a finance
cost. At each reporting date the rehabilitation liability is re-measured to reflect changes in discount rates, and timing or amount
of the costs to be incurred. Additional disturbances or changes in rehabilitation costs will be recognized as additions or charges
to the corresponding assets and rehabilitation liability when they occur. For closed sites, changes to estimated costs are recognized
immediately in the statement of comprehensive income.





| | m) | Income and resource taxes
| | -- | -------------------------



Income and resource taxes comprise
current and deferred taxes. Tax expense is recognized in the Statements of Comprehensive income except to the extent that it relates
to items recognized directly in equity, in which case the tax is also recognized directly in equity.



Current tax is the expected tax payable
on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and
any adjustment to tax payable in respect of previous years.



In general, deferred tax is recognized
in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively
enacted at the balance sheet date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets
are recognized to the extent that it is probable that the assets can be recovered.



Deferred tax assets and liabilities
are presented as non-current in the balance sheet.



Tax expense in interim periods is
accrued using the tax rate that would be applicable to expected total annual earnings of the Company.



Royalties, resource taxes and
revenue-based taxes are accounted for under IAS 12 Income taxes when they have the characteristics of an income tax. This
is considered to be the case when they are imposed under government authority, and the amount payable is based on taxable income
– rather than based on quantity produced or as a percentage of revenue – after adjustment for temporary differences.
For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation.



The Company is entitled to
a refundable tax credit on qualified exploration expenditures incurred in the province of Quebec. The refundable tax credits range
from 15% to 18.75% of qualified exploration expenditure incurred. In accordance with IAS 20, the exploration tax credits have been
applied against the costs incurred. The Company is also entitled to non-refundable tax credits on qualified exploration expenditures
which are deductible against Federal and British Columbia provincial income taxes due. The non-refundable tax credits are 10% of
qualified exploration expenditure incurred. In accordance with IAS 20, the exploration tax credits have been applied against the
costs incurred. Refundable tax credits are recorded as current receivables, while non-refundable taxes are applied against income
taxes payable.



14
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | n) | Revenue recognition
| | -- | -------------------



| | (i) | Bullion sales
| | --- | -------------



Revenue from the sale of gold
bullion is recognized when the significant risks and rewards of ownership have been transferred. This is considered to occur when
title passes to a counterparty pursuant to a purchase arrangement from which collectability is reasonably assured. This generally
occurs on the date the refinery has been instructed by the Company to transfer the bullion to a counterparty. Revenue is measured
at the fair value of the consideration received or receivable.



| | (ii) | Royalty income
| | ---- | --------------



Royalty income is recognized
on an accrual basis when the Company has reasonable assurance with respect to measurement and collectability.



| | (iii) | Interest revenue
| | ----- | ----------------



Interest revenue is recognized
as it accrues, using the effective interest method.





| | o) | Earnings per share
| | -- | ------------------



Basic earnings per share (“EPS”)
is calculated by dividing the net profit (loss) for the year attributable to equity owners of the Company by the weighted average
number of common shares outstanding during the year. Diluted EPS is calculated by adjusting the weighted average number of common
shares outstanding for dilutive instruments and is computed using the treasury stock method. The Company’s potentially dilutive
instruments comprise stock options granted to employees and directors.





| | p) | Segment reporting
| | -- | -----------------



Operating segment disclosure is reported
in a manner consistent with the internal reporting provided to the chief operating decision-maker, identified as the Chief Executive
Officer of the Company. The Company has identified one reportable segment.

| |  | 
| |  | 



| | q) | Changes in accounting policies
| | -- | ------------------------------



The Company did not adopt any new
accounting policies during the year ended December 31, 2012.



Except for IFRS 9 Financial Instruments
as noted below,the Company will adopt the following accounting standards for its financial year beginning on January 1, 2013:



IFRS 10 Consolidated Financial
Statements requires an entity to consolidate an investee when it has power over the investee, is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation – Special Purpose Entities
and parts of IAS 27 Consolidated and Separate Financial statements. It is not expected that IFRS 10 will have a significant impact
on the Company’s financial statements.



IFRS 11 Joint Arrangements
requires a venture to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be
accounted for using the equity method of accounting whereas for a joint operation the venture will recognize its share of the assets,
liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have a choice to proportionately consolidate
or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled
Entities – Non-monetary Contributions by Venturers. The Company is currently evaluating the impact, if any, that IFRS 11
will have on its financial statements.



IFRS 12 Disclosure of Interests
in Other Entities establishes disclosure requirements for interests in other entities, such as subsidiaries, joint arrangements,
associates, and unconsolidated structured entities. This standard carries forward existing disclosures and also introduces significant
additional disclosure that addresses the nature of, and risks associated with, an entity’s interests in other entities. The
Company is currently evaluating the impact, if any, that IFRS 12 will have on its financial statements.



IFRS 13 Fair Value Measurement
is a comprehensive standard for fair value measurement and disclosure for use across all IFRS standards. The new standard clarifies
that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction
between market participants, at the measurement date. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed
among the specific standards requiring fair value measurements and does not always reflect a clear measurement basis or consistent
disclosures. It is not expected that IFRS 13 will have a significant impact on the Company’s financial statements.



15
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





2. 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





| | q) | Changes in accounting policies (continued)
| | -- | ------------------------------------------



IFRIC 20 Stripping Costs in the
Production Phase of a Surface Minesets out the accounting for overburden waste removal (stripping) costs in the production
phase of a mine. Stripping activity may create two types of benefit: i) inventory produced and ii) improved access to ore. Stripping
costs associates with the former should be accounted for as a current production cost in accordance with IAS 2Inventories.
The latter should be accounted for as an addition to or enhancement of an existing asset. It is not expected that IFRIC 20 will
have a significant impact on the Company’s financial statements.





IAS 1 Presentation of Financial
Statements has been amended to require entities to separate items presented in other comprehensive income into two groups,
based whether or not items may be recycled in the future. Entities that choose to present items in other comprehensive income on
a pre-tax basis will be required to show the amount of tax related to the two groups separately. It is not expected that the amendments
to IAS 1 will have a significant impact on the Company’s financial statements.









IAS 19 Employee Benefits sets
out amendments to the accounting for defined benefit plans and other employee benefits. The changes include elimination of options
to defer or recognize in full in profit or loss actuarial gains and losses and instead mandates immediate recognition of all gains
and losses within other comprehensive income, as well as changes made to the date of recognition of liabilities for termination
benefits and changes to the definitions of short-term employee benefits and other long-term employee benefits which may impact
the classification of liabilities associated with those benefits. It is not expected that the amendments to IAS 19 will have a
significant impact on the Company’s financial statements.



IFRS 9 Financial Instruments,
issued in November 2009 and effective years beginning on or after January 1, 2015, addresses classification and measurement of
financial assets. It replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement
model having only 2 categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring
equity instruments. Such instruments are either recognized at fair value through profit or loss or at fair value through other
comprehensive income. Where equity instruments are measured at fair value through other comprehensive income, dividends are recognized
in profit or loss to the extent that they do not clearly represent a return of investment; however, other gains and losses (including
impairments) associated with such instruments remain in accumulated comprehensive income indefinitely. In addition, this new standard
has been updated to include guidance on financial liabilities and derecognition of financial instruments. The Company expects to
adopt this standard for its financial year beginning on January 1, 2015. The Company has not yet evaluated the impact the final
standard is expected to have on its financial statements.







3.	SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

| |  | 
| |  | 



The preparation of financial statements requires
management to use judgment in applying its accounting policies and estimates and assumptions about the future.



The Company’s financial statements include
critical accounting estimates made by management. Management is required to make various assumptions about matters that are highly
uncertain at the time accounting estimates are made; the use of different assumptions could have a material impact on the Company’s
financial condition and performance. Estimates and other judgments are continuously evaluated and are based on management’s
experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances.
Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
These critical accounting estimates are described below.





| | a) | Mineral reserves
| | -- | ----------------



The Company’s estimate of recoverable
proven and probable gold reserves is critical in assessing potential impairment of mining properties as well as in determining
depreciation and amortization charges for certain assets under the units-of-production method.



The estimate of mineral reserves is
prepared by qualified persons in accordance with industry standards defined under NI 43-101 of the Canadian Securities regulatory
authorities. The process of estimating quantities of gold reserves is complex, requiring significant decisions in the evaluation
of all available geological, geophysical, engineering and economic data. The data for a given ore body may also change substantially
over time as a result of numerous factors, including, but not limited to, additional development activity, production history and
the continual reassessment of the viability of ore bodies under various economic conditions. A material revision to existing reserve
estimates could occur because of, among other things: revisions to geological data or assumptions; a change in the assumed gold
prices; and the results of drilling and exploration activities.



16
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





3.	SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (continued)





| | b) | Impairment of long-lived assets
| | -- | -------------------------------



The Company assesses its property,
plant and equipment for indicators of impairment at the end of each reporting period. An impairment loss is recognized in the statement
of comprehensive income when the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. The recoverable
amount of an asset or cash-generating unit is the higher of its fair value less costs of disposal and its value in use. In determining
the recoverable amount of an asset, management make estimates related to future cash flows and discount rates, and in certain cases,
estimates of fair value less costs of disposal. Estimated future cash flows are based on expected future production, metal selling
prices, foreign currency exchange rates, operating costs and capital costs. Estimated discount rates are based on market assessments
of the time value of money and the risks specific to the asset being assessed. The Company had total property, plant and equipment
assets of $204.5 million recorded as of December 31, 2012.





| | c) | Asset retirement obligations
| | -- | ----------------------------



The Company records the present value
of estimated costs of legal and constructive obligations to restore operating locations in the period in which the obligation is
incurred. Restoration activities include dismantling and removing structures, rehabilitating mines and tailings dams, dismantling
operating facilities, closure of plant and waste sites, and reclamation and re-vegetation of affected areas. At each reporting
date, asset retirement obligations are re-measured to reflect changes, if any, to management estimated discount rates and timing
or amount of the costs expected to be incurred. Re-measurements are reflected as adjustments to the corresponding asset and retirement
obligation, with associated changes occurring to future amortization and accretion expenses. The Company had total asset retirement
obligations of $15.8 million recorded as of December 31, 2012.





4.	CASH AND CASH EQUIVALENTS



|                                        |  |  | December 31, 2012 | December 31, 2011
|--------------------------------------- |  |  | ----------------- | -----------------
|                                        |  |  |                   |                  
|Cash                                    |  |  | $ 129,997         | $ 129,539        
|Short-term investments (i)              |  |  | 74,235            | 83,947           
|Cash and cash equivalents - end of year |  |  | $ 204,232         | $ 213,486        



| | (i) | Short-term investments
are comprised of Canadian chartered banks bankers acceptances, fixed-term deposits cashable after 30
days, andtreasury bills having maturities at the date of acquisition of less than three months, bearing interest at rates
between 0.88% and 1.20% (2011:Bankers’ acceptance notes and treasury bills bearing interest
between 0.765% and 1.13%).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





5. MARKETABLE SECURITIES



The Company acquired marketable securities
in accordance with the requirements of property agreements that were entered into in 2010 and 2011 (Note 10). Unrealized gains
or losses resulting from the change in fair value of the marketable securities are recognized as other comprehensive income or
loss in the statement of comprehensive income.



|                               |  |  | December 31, 2012 | December 31, 2011
|------------------------------ |  |  | ----------------- | -----------------
|Fair value – beginning of year |  |  | $ 864             | $ 1,129          
|Additions – at cost            |  |  | 500               | 500              
|Change in fair value (i)       |  |  | (887)             | (765)            
|Fair value – end of year       |  |  | $ 477             | $ 864            



| | (i) | Marketable securities as at December 31, 2012
are comprised of 3,166,738 common shares of Typhoon Exploration Inc. and 1,000,000 shares of Everton Resources Inc. (2011: 1,243,661
common shares of Typhoon Exploration Inc. and 1,000,000 common shares of Everton Resources Inc.).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The value of the Company’s marketable
securities has declined significantly and for a prolonged period of time. Due to the existence of such conditions, the Company
has estimated the recoverable amount of the marketable securities to equal the current fair market value of the securities, measured
using the share price of the securities at the close of markets on the last trading day of 2012. Accordingly, on December 31, 2012,
the Company recognized a loss of $1.3 million (2011: $nil) represented by the $0.9 million fair value loss in 2012 (2011: $0.8
million), together with the $0.4 million (2011: $nil) impairment loss recycled through accumulated other comprehensive income.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





6.	INVENTORIES



|                                    |  |  | December 31, 2012 | December 31, 2011
|----------------------------------- |  |  | ----------------- | -----------------
|                                    |  |  |                   |                  
|Gold bullion and in-process ore (i) |  |  | $ 10,613          | $ 7,037          
|Supplies and materials (ii)         |  |  | 5,611             | 5,290            
|Stockpiled ore                      |  |  | 209               | 218              
|Inventories                         |  |  | $ 16,433          | $ 12,545         



| | (i) | The gold bullion and in-process ore balance
as at December 31, 2012 includes imputed non-cash depreciation and amortization charges of $2.9 million (2011: $2.4 million).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The supplies and materials balance as at December
31, 2012 includes a provision for obsolete inventory of $0.3 million (2011: $0.7 million).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------





7.	ACCOUNTS RECEIVABLE AND OTHER



|                                       |  |  | December 31, 2012 | December 31, 2011
|-------------------------------------- |  |  | ----------------- | -----------------
|                                       |  |  |                   |                  
|Accounts receivable                    |  |  | $ 5,093           | $ 5,157          
|Prepaid expenses and purchase deposits |  |  | 747               | 3,584            
|Exploration advances                   |  |  | 45                | 938              
|Accounts receivable and other          |  |  | $ 5,885           | $ 9,679          





8.	TAX CREDITS AND OTHER TAXES RECEIVABLE



|                                       |  |  | December 31, 2012 | December 31, 2011
|-------------------------------------- |  |  | ----------------- | -----------------
|                                       |  |  |                   |                  
|Quebec refundable tax credits (i)      |  |  | $ 5,420           | $ 2,490          
|Non-refundable tax credits (ii)        |  |  | -                 | 2,720            
|Income taxes receivable (iii)          |  |  | 1,583             | -                
|Resource taxes receivable (iii)        |  |  | 3,058             | -                
|Tax credits and other taxes receivable |  |  | $ 10,061          | $ 5,210          



| | (i) | During 2012, the Company received a refund
of $3.1 million in respect of tax credits earned from eligible exploration expenditures incurred in 2010. In addition, the Company
expects to receive a refund of $5.4 million in 2013 in relation to eligible exploration expenditures incurred in 2011 and 2012.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Non-refundable tax credits, which arise from
certain eligible exploration activities, may be applied against taxes owed.  Unapplied non-refundable tax credit assets may
be carried forward and applied against taxes owed in future years.  During 2012, the Company’s eligible exploration
activities generated $1.2 million of non-refundable tax credits (2011: $2.0 million), which together with all unapplied non-refundable
tax credit assets from prior years, were applied against 2012 taxes owed, resulting in a non-refundable tax credit asset balance
of $nil as at December 31, 2012 (2011: $2.7 million).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | These amounts are due to the Company as a
result of tax installments paid during the year exceeding the taxes owed.
| | ----- | -------------------------------------------------------------------------------------------------------------------



18
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





9.	PROPERTY, PLANT AND EQUIPMENT

|                         | Producing Property | Mine Infrastructure | Machinery and Equipment | Building and Leasehold Improvements | Computers and Software | Office Equipment and Furniture | TOTAL    
|------------------------ | ------------------ | ------------------- | ----------------------- | ----------------------------------- | ---------------------- | ------------------------------ | ---------
|COST                     |                    |                     |                         |                                     |                        |                                |          
|At January 1, 2011       | $ 211,291          | $ 40,343            | $ 38,584                | $ 1,267                             | $ 2,153                | $ 530                          | $ 294,168
|Additions                | 33,836             | 4,774               | 11,085                  | 156                                 | 307                    | 134                            | 50,292   
|Disposals                | -                  | -                   | (479)                   | -                                   | -                      | -                              | (479)    
|Change in ARO estimates  | -                  | 1,477               | -                       | -                                   | -                      | -                              | 1,477    
|At December 31, 2011     | 245,127            | 46,594              | 49,190                  | 1,423                               | 2,460                  | 664                            | 345,458  
|Additions                | 41,142             | 21,151              | 15,542                  | 58                                  | 263                    | -                              | 78,156   
|Disposals                | -                  | -                   | (1,815)                 | -                                   | -                      | (244)                          | (2,059)  
|Change in ARO estimates  | -                  | 465                 | -                       | -                                   | -                      | -                              | 465      
|At December 31, 2012     | 286,269            | 68,210              | 62,917                  | 1,481                               | 2,723                  | 420                            | 422,020  
|                         |                    |                     |                         |                                     |                        |                                |          
|ACCUMULATED DEPRECIATION |                    |                     |                         |                                     |                        |                                |          
|At January 1, 2011       | (95,978)           | (27,085)            | (16,161)                | (874)                               | (1,642)                | (416)                          | (142,156)
|Charge for year          | (27,881)           | (4,972)             | (5,435)                 | (43)                                | (341)                  | (44)                           | (38,716) 
|Disposals                | -                  | -                   | 292                     | -                                   | -                      | -                              | 292      
|Adjustment (i)           | (95)               | -                   | -                       | -                                   | -                      | -                              | (95)     
|At December 31, 2011     | (123,954)          | (32,057)            | (21,304)                | (917)                               | (1,983)                | (460)                          | (180,675)
|Charge for year          | (27,936)           | (3,545)             | (6,394)                 | (45)                                | (316)                  | (20)                           | (38,256) 
|Disposals                | -                  | -                   | 1,157                   | -                                   | -                      | 205                            | 1,362    
|At December 31, 2012     | (151,890)          | (35,602)            | (26,541)                | (962)                               | (2,299)                | (275)                          | (217,569)
|                         |                    |                     |                         |                                     |                        |                                |          
|NET BOOK VALUE           |                    |                     |                         |                                     |                        |                                |          
|At December 31, 2011     | $ 121,173          | $ 14,537            | $ 27,886                | $ 506                               | $ 477                  | $ 204                          | $ 164,783
|At December 31, 2012     | $ 134,379          | $ 32,608            | $ 36,376                | $ 519                               | $ 424                  | $ 145                          | $ 204,451

| | (i) | Adjustment
of $95 is for reimbursement of Quebec government assistance and deferred accretion charges.
| | --- | ------------------------------------------------------------------------------------------------------





| | a) | Casa Berardi Exploration Property
| | -- | ---------------------------------



Pursuant to the
terms of a joint venture option agreement with Lake Shore Gold Corp.(“Lake Shore”) executed August 30, 2007,
Lake Shore has earned an undivided 50% interest in certain claims surrounding the Casa Berardi Mine (the “Casa Berardi Exploration
Property”) by incurring exploration expenditures of $5 million. If an indicated mineral resource of at least 500,000 ounces
of gold at a minimum grade of 6.0 grams of gold per tonne (or economic equivalent thereof) is established, the area containing
the resource plus a one kilometre radius surrounding the outer perimeter of the resource may be transferred to a specific property
joint venture, in which Aurizon and Lake Shore would each have a 50% interest. Aurizon shall then have the right to earn an additional
10% interest in the specific property by funding the costs of a feasibility study, at which time Aurizon will become the operator.
Any ore produced from the Casa Berardi Exploration Property would be processed at Aurizon’s 100% owned Casa Berardi milling
facility.



19
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





10.	MINERAL PROPERTIES



|                          |  |  | December 31, 2012 | December 31, 2011
|------------------------- |  |  | ----------------- | -----------------
|                          |  |  |                   |                  
|Exploration properties    |  |  |                   |                  
|Heva-Hosco, Quebec (a)    |  |  | $ 3,865           | $ 3,865          
|Duvay-Fontana, Quebec (b) |  |  | 1,000             | 500              
|Opinaca, Quebec (c)       |  |  | 220               | 100              
|Duverny, Quebec (d)       |  |  | 125               | 95               
|Kipawa, Quebec (e)        |  |  | 75                | 75               
|Rex South, Quebec (f)     |  |  | -                 | 280              
|Patris, Quebec (g)        |  |  | -                 | 80               
|Mineral properties        |  |  | $ 5,285           | $ 4,995          





| | a) | Heva-Hosco Properties
| | -- | ---------------------



The Company holds a 100% interest
in the Heva-Hosco Properties (Joanna) in the Abitibi region of Quebec.



The Company has earned, subject to
a 2% net smelter royalty, a 100% interest in the Feifer claims block. An advance royalty of $0.5 million is payable in cash or
Aurizon shares upon completion of a feasibility study and receipt of a decision by a financial institution to finance development
of the property to commercial production.



The Company has earned, subject to
a1% net smelter royalty, a100% interest in two mineral
claims located within the existing boundary of the properties.  Advance royalties are payable at certain milestones including
$0.7 million at feasibility and $0.8 million upon achieving commercial production.   In addition, a net smelter royalty
of 1.5% is payable on the 75% interest acquired from Vantex Resources Ltd. The Company
has an option to buy back 50% of the 1.5% royalty at any time, at a cost of $0.5 million.



The Company has earned, subject to
a 2% net smelter royalty, a 100% interest in nineteen mineral claims (the “Alexandria claims”) adjacent to the Feifer
claims. One half of the net smelter return royalty may be purchased at any time for $2.0 million.



The Company has earned, subject to
a 2% net smelter royalty, a 100% interest in 20 mineral claims (the “Henricksen claims”) within the existing boundary
of the properties



During the year,
the Company incurred expenditures at Heva-Hosco totalling $9.7 million, of which $7.7 million (2011: $6.0 million) related to exploration
work, and $2.0 million (2011: $4.3 million) related to feasibility work and environmental impact studies. All expenditures were
charged to earnings.





| | b) | Duvay-Fontana Property
| | -- | ----------------------



In
September 2011, the Company entered into an agreement with Tres-Or Resources Ltd. (“Tres-Or”), under which the Company
may earn an initial 50% interest in Tres-Or’s Duvay property. In June of 2012, the Company signed
an Amended and Restated Option Agreement (the “Amended Agreement”) with Tres-Or, which incorporates the Fontana Gold
Project, located in the Abitibi Greenstone Belt in Northwestern Quebec, into the existing Duvay Gold Project Option Agreement.
Under the Amended Agreement, Aurizon can earn an initial 50% interest in the optioned properties by incurring exploration expenditures
totalling $10 million over a period ending September 26, 2015 and making cash payments totalling $2.3 million. As at December 31,
2012, the Company has made cash payments totalling $1.0 million (2011: $0.5 million) in respect of the Amended Agreement. Upon
earning a 50% interest, Aurizon will have the option to acquire a further 15% interest by funding a pre-feasibility study on one
or more of the optioned properties or by incurring an additional $20 million of expenditures over a three year period. Upon formation
of a Joint Venture, Aurizon is required to make a resource payment related to Tres-Or’s percentage interest in the gold contained
in the optioned properties at that date, as calculated by an independent NI 43-101 compliant resource estimate as follows: $30
for each measured gold ounce; $25 for each indicated ounce; and $15 for each inferred gold ounce.The Duvay property is situated adjacent to the 100% owned Duverny property.



During 2012, the Company made cash
payments totalling $0.5 million (2011: $0.5 million) and incurred exploration expenditures totalling $1.3 million (2011: $0.9 million)
in respect of the Amended Agreement, which have been charged to earnings. Since signing the initial agreement in 2011, the Company
has incurred a total of $2.2 million of work expenditures in respect of the Duvay Property.



20|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





10.	MINERAL PROPERTIES (continued)





| | c) | Opinaca Property
| | -- | ----------------



In September 2010, Aurizon entered
into an agreement with Azimut Exploration Inc. (“Azimut”) and Everton Resources Inc. (“Everton”), whereby
Aurizon may acquire up to an undivided 60% ownership interest in the Opinaca property located in the James Bay area, 350 kilometres
north of Matagami, Quebec. The Opinaca property is owned by Azimut and Everton as to an undivided 50% interest each. Aurizon may
earn a 50% interest in the project by making cash payments totalling $0.6 million and incurring expenditures of $6 million over
four years, including 5,000 metres of drilling by the second anniversary. After earning its initial
50% interest in the project, Aurizon may then elect to earn an additional interest of 10%, for a total interest of 60%, by making
cash payments totalling $0.3 million over three years from the election date, incurring expenditures
totalling $3 million over three years from the election date, and delivering an independent pre-feasibility
study on or before the fourth anniversary. In addition, in the event that prior to the end of the eighth year
of the initial option agreement, mineral resources of at least 2,000,000 ounces of gold, at an average grade of at least six grams
of gold per tonne, are discovered, Aurizon shall make a payment of $1.5 million, payable in Aurizon common shares (50% to Azimut,
50% to Everton), subject to regulatory approval.



During 2012, the Company made a cash
payment of $120,000 (2011: $100,000) and incurred $1.2 million (2011: $2.7 million) of work expenditures on the Opinaca property,
which were charged to earnings. During 2011, the Company made a cash payment of $100,000 and incurred $2.7 million of exploration
expenditures. In aggregate, work expenditures incurred by the Company and charged to earnings total $4.0 million since the agreement
was signed.





| | d) | Duverny Property
| | -- | ----------------



During the first quarter of 2012,
the Company fulfilled the terms of a letter of intent signed in March 2010 by making the final cash payment of $30,000 to the owners
of the Duverny property, bringing the total cash payments made to $100,000. Having fulfilled the terms of the letter of intent,
the Company has acquired 100% ownership of the claims comprising the Duverny Property, which is located in the Duverny Township
in the Abitibi region of Northwestern Quebec. In addition, the Company has acquired mineral claims adjacent to the Duverny Property
by staking at a cost of $25,000.



During 2012, exploration expenditures
totalling $1.1 million were incurred on the Duverny property (2011: $0.1 million).





| | e) | Kipawa Property
| | -- | ---------------



The Company has acquired mineral claims
in the Temiscaming area of Quebec by staking at a cost of $75,000.



In July 2011, the Company signed an
agreement with Forum Uranium Corp. (“Forum”), whereby Forum can earn a 50% interest in the Kipawa property by completing
$200,000 in exploration as a firm commitment within 12 months and a further $150,000 in exploration, including a minimum of 1,000
metres of drilling, within 24 months of the date of the agreement. Forum has the option to earn a further 15% interest, totalling
a 65% interest in the project by establishing an NI 43-101 resource estimate on the property within four years
of the agreement date. Forum is Operator during the earn-in period. Upon completion of its earn-in, Forum and Aurizon may form
a Joint Venture with Forum as Operator.





| | f) | Rex South Property
| | -- | ------------------



In May 2012, the Company
terminated an option agreement signed in May 2010 with Azimut Exploration Inc. (“Azimut”) under which the Company could
have earned an initial 50% ownership in Azimut’s Rex South Property situated in Northern Quebec. As a result, capitalized
property acquisition payments totalling $280,000 have been charged to earnings. Between May 2010 and 2012, the Company incurred
a total of $7.3 million of exploration expenditures prior to terminating the option.





| | g) | Patris Property
| | -- | ---------------



In August 2012, the
Company terminated an option agreement signed in December 2010 with Midland Exploration Inc. (“Midland”) under which
the Company may have earned an initial 50% ownership in Midland’s Patris Property situated in the Abitibi region of Northwestern
Quebec. As a result, capitalized property acquisition payments totalling $80,000 have been charged to earnings. Prior to terminating
the option, the Company had incurred $0.6 million of exploration expenditures since the signature of the agreement.



21
|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





10.	MINERAL PROPERTIES (continued)





| | h) | Marban Property
| | -- | ---------------



In July 2010, the Company entered
into an option and joint venture agreement with Niogold Mining Corporation (“Niogold”) with respect to the Marban property,
located in the Malartic gold camp in the Abitibi region, Quebec. Pursuant to the agreement, Aurizon may earn a 50% interest in
the Marban property, subject to underlying royalties, by: (i) incurring expenditures of $20 million over three years;
(ii) completing an updated NI 43-101 compliant mineral resource estimate; and (iii) making a resource payment equal to the sum
of $30 (or $40 if the price of gold is then above US$1,560) multiplied by 50% of the number of total gold ounces in the measured
and indicated resource categories plus $20 (or $30 if the price of gold is then above US$1,560) multiplied by 50% of the number
of total gold ounces in the inferred resource category, based on the updated resource estimate. Aurizon may earn an additional
10% interest, for an aggregate of 60% interest, by delivering a feasibility study. Moreover, Aurizon may earn an additional 5%,
for an aggregate 65% interest, by arranging project financing for capital expenditures estimated by the feasibility study to place
the project into commercial production. Niogold will be operator during the initial earn-in period and Aurizon will provide input
on exploration programs and will become operator after the initial 50% interest has been earned.



During the year,
the Company incurred $5.1 million (2011: $4.8 million) of exploration expenditures at Marban, which have been charged to earnings.
Since the beginning of the agreement, the Company has incurred a total of $11.5 million of exploration expenditures in respect
of this agreement.





| | i) | Fayolle Property
| | -- | ----------------



In May 2010, the Company entered into
an option and joint venture agreement with Typhoon Exploration Inc., (“Typhoon”) whereby Aurizon may earn a 50% interest
in Typhoon’s Fayolle property in the Abitibi region of Quebec. The 50% interest, subject to an underlying 2% net smelter
royalty, may be earned by incurring expenditures of $10 million over four years, of which $3.5
million was a firm commitment to be spent over the first two years. The Company may earn an additional
15% interest on the project by either delivering a bankable feasibility study, or spending an additional $15 million on the project.
During the course of the initial four year term, the Company has the right to subscribe for common
shares of Typhoon of up to $0.5 million on each anniversary of the option agreement, for a total investment of $2 million. The
first two subscriptions totalling $1 million are firm commitments, and all four subscriptions are required in order for the Company
to earn the initial 50% interest.



During the year,
the Company incurred $1.8 million of exploration expenditures on the project which were charged to earnings (2011: $5.7 million).



The first share subscription totalling
$0.5 million was completed in June 2010 and consisted of 609,756 Typhoon shares at a unit price of $0.82 per share. A second subscription
totalling $0.5 million was completed in June 2011 and consisted of 633,905 shares at a unit price of $0.79. A third subscription
totalling $0.5 million was completed in June 2012 and consisted of 1,923,077 shares at a unit price of $0.26.



Since the beginning of the agreement,
the firm commitment to subscribe to $1.0 million of Typhoon shares has been fulfilled, and in the aggregate, a total of $9.0 million
of exploration expenditures have been charged to earnings.





| | j) | Wildcat Property
| | -- | ----------------



In September 2010, Aurizon entered
into an agreement with Everton Resources Inc., (“Everton”), whereby Aurizon may acquire up to a 65% interest in Everton’s
Wildcat property located in the James Bay region, 350 kilometres north of Matagami, Quebec. The Wildcat property is 100% owned
by Everton. Aurizon may earn a 50% interest in the project by incurring expenditures of $3,250,000 over four years,
including 3,000 metres of drilling within two years. In addition, the agreement required Aurizon
to subscribe for a private placement of 1,000,000 units of Everton at a price of $0.25 per unit, each unit comprising one common
share and one share purchase warrant, exercisable to acquire one additional common share at $0.40 per share for a term of two years.



After earning its initial 50% interest
in the project, Aurizon may then elect to earn an additional interest of 15%, for a total interest of 65%, by making cash payments
totalling $300,000 over three years from the election date, incurring expenditures totalling
$3 million over three years from the election date, and delivering an independent pre-feasibility
study by the end of the fourth anniversary of the election date. In addition, in the event that prior to the end of the eighth
year of the initial option agreement, mineral resources of at least 2,000,000 ounces of gold,
at an average grade of at least 6 grams of gold per tonne, are discovered, Aurizon shall make a payment of $1.5 million, payable
to Everton in Aurizon common shares, subject to regulatory approval.



During the year,
the Company incurred $1.1 million of work expenditures at the Wildcat project. In 2011, the Company incurred a total of $0.9 million
of exploration expenditures on the Wildcat property, and subscribed to 1,000,000 Everton common shares at a cost of $250,000.



22|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





10.	MINERAL PROPERTIES (continued)





| | k) | Eleonore East Property
| | -- | ----------------------



In September 2011, Aurizon entered
into an agreement with Mines Virginia Inc. (“Virginia”), pursuant to which Aurizon may, over a thirty year term, participate
in the exploration and development of 184 mining claims adjacent to the Opinaca and Wildcat Properties in Northern Quebec. Aurizon’s
initial contribution of $50,000 to the joint venture represents an initial interest of 50%. The Company’s interest in the
joint venture increases or decreases depending on the proportion of expenditures incurred by each of the parties during the term
of the agreement. If a participating interest falls below 10%, that party shall be deemed to have withdrawn from the agreement
and to have relinquished its entire participating interest. In lieu, the relinquishing party shall receive a 2% net smelter royalty
on any minerals commercially produced from the property. Virginia is the current operator of the Property, and to date, work expenditures
have been equally shared by Aurizon and Virginia, thereby maintaining both parties’ participating interests at 50% each.



During 2012 Aurizon incurred $40,000
(2011: $53,000) of work expenditures in respect of this agreement, which were charged to earnings.





11.	DEFERRED FINANCE COSTS



|                       |  |  | December 31, 2012 | December 31, 2011
|---------------------- |  |  | ----------------- | -----------------
|                       |  |  |                   |                  
|Deferred finance costs |  |  | $ 178             | $ 343            



On January 31, 2011, the Company established
a US$50 million revolving credit facility with Canadian Imperial Bank of Commerce and the Bank of Nova Scotia. The revolving credit
facility has an initial three year term and is collateralized by a charge over the assets of Aurizon. The facility is available
for drawdown in U.S. dollars or the Canadian dollar equivalent at a bank base rate or a LIBOR-based rate (plus 200 to 400 basis
points depending on the type of loan and financial and operating measures), payable according to the quoted rate term. The Company
has the ability to repay the principal in part or in its entirety at any time without penalty. Funds drawn on the facility may
be used to finance working capital requirements, acquisitions, and for general corporate purposes. There are no hedging requirements
under the terms of the credit facility.



The facility has three financial covenants
including a leverage ratio, a tangible net worth calculation, and a mine coverage ratio. For the year ended December 31, 2012 these
covenants were met.



The standby
fees on undrawn amounts under the facility range between 0.75% and 1.0% per annum depending on certain financial measures. As atDecember31, 2012, there were no amounts outstanding under the credit facility.

For the year ended December 31, 2012,
the Company recognized a facility establishment cost amortization expense of $165,000 (2011 - $150,000), and standby fees of $373,000
(2011 - $344,000).





12.	OTHER ASSETS



|                                            |  |  | December 31, 2012 | December 31, 2011
|------------------------------------------- |  |  | ----------------- | -----------------
|                                            |  |  |                   |                  
|Reclamation deposits (i)                    |  |  | $ 2,557           | $ 1,315          
|Refundable tax credits                      |  |  | -                 | 4,457            
|Workers compensation premiums receivable    |  |  | 92                | 222              
|Deposit on long-term hydro-electric project |  |  | -                 | 330              
|Other assets                                |  |  | $ 2,649           | $ 6,324          





| | (i) | Reclamation deposits
| | --- | --------------------



As at December 31, 2012,
the Company has invested $2.6 million (2011: $1.3 million) in restricted deposits in accordance with the current financial guarantee
requirements set forth by the Ministère des Ressources naturelles et de la Faune of the province of Quebec for future
site restoration costs at the Casa Berardi mine. As updated mine closure plans are submitted to and approved by this government
body, the related financial guarantees will be adjusted accordingly. See notes 15 and 19 for further information.



23|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





13.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES



|                                         |  |  | December 31, 2012 | December 31, 2011
|---------------------------------------- |  |  | ----------------- | -----------------
|                                         |  |  |                   |                  
|Trade payables                           |  |  | $ 14,160          | $ 14,599         
|Accrued expenses                         |  |  | 15,182            | 11,394           
|Accounts payable and accrued liabilities |  |  | $ 29,342          | $ 25,993         





14.	INCOME AND RESOURCE TAXES





| | a) | Current and deferred income and resource tax
expense is represented in the statements of comprehensive income as follows:
| | -- | -------------------------------------------------------------------------------------------------------------------------



|                                                                |  |          | December 31, 2012 | December 31, 2011
|--------------------------------------------------------------- |  | -------- | ----------------- | -----------------
|Current income tax expense – Federal                            |  |          | $
7,703           | $ 13,139         
|Current income tax expense – Quebec                             |  |          | 5,128             | 5,194            
|Current income tax expense – B.C.                               |  |          | 737               | 920              
|Deferred income tax expense (recovery) – Federal and Provincial |  | (269)    | 2,850            
|                                                                |  |          | 13,299            | 22,103           
|Current resource tax expense                                    |  |          | 11,662            | 21,860           
|Deferred resource tax recovery                                  |  |          | (695)             | (1,310)          
|Total current and deferred income and resource tax expense      |  | $ 24,266 | $ 42,653         



The combined federal and provincial
statutory income tax rate for 2012 is 26.71% (2011: 28.21%).



In addition to federal and provincial
income taxes, Aurizon is subject to Quebec mining resource taxes. On May 4, 2011, resource tax legislation was substantively enacted
which required accounting recognition in the second quarter of 2011 of changes in the Quebec Mining Tax Act that are retroactive
to March 31, 2010. The law increased the tax rate from 12% to 14% after March 31, 2010, 15% in 2011, and rising to 16% in 2012.
The resource tax legislation also impacted changes to the maximum deductibility of certain costs in a particular year.



The provision for income and resource
taxes is different from the amount that would have resulted from applying the combined federal and provincial income and resource
tax rates as a result of the following:



|For the years ended                                                |  |        | December 31, 2012 | December 31, 2011
|------------------------------------------------------------------ |  | ------ | ----------------- | -----------------
|Profit before income and resource taxes                            |  |        | $ 57,346          | $ 86,584         
|Combined federal and provincial income and resource tax rates      |  | 38.44% | 38.98%           
|Income and resource taxes at combined federal and provincial rates |  | 22,042 | 33,750           
|Increase (decrease) resulting from:                                |  |        |                   |                  
|Effect of change in enacted tax rates                              |  |        | -                 | 7,905            
|Non-deductible costs                                               |  |        | 2,843             | 2,635            
|Other                                                              |  |        | (619)             | (1,637)          
|Income and resource tax expense                                    |  |        | $ 24,266          | $ 42,653         





| | b) | The significant components of the Company’s
current income and resource taxes payable are as follows:
| | -- | -----------------------------------------------------------------------------------------------------



|Current income and resource taxes payable       |  |  | December 31, 2012 | December 31, 2011
|----------------------------------------------- |  |  | ----------------- | -----------------
|Current income taxes payable                    |  |  | $ 3,121           | $ 5,071          
|Current resource taxes payable                  |  |  | -                 | 13,267           
|Total current income and resource taxes payable |  |  | $ 3,121           | $ 18,338         



24|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





14.	INCOME AND RESOURCE TAXES (continued)





| | c) | The significant components of the Company’s
deferred tax assets and liabilities are as follows:
| | -- | -----------------------------------------------------------------------------------------------



|Deferred tax liabilities                             |  |         | December 31, 2012 | December 31, 2011
|---------------------------------------------------- |  | ------- | ----------------- | -----------------
|Deferred income and resource tax assets              |  |         |                   |                  
|Marketable securities                                |  | $ -     | $ 136            
|Asset retirement obligations                         |  | (6,074) | (5,772)          
|Employee incentive provision                         |  |         | (347)             | (436)            
|Other                                                |  |         | (496)             | (435)            
|                                                     |  |         | (6,917)           | (6,507)          
|Deferred income and resource tax liabilities         |  |         |                   |                  
|Unrealized derivative gains                          |  | -       | 92               
|Property, plant and equipment and mineral properties |  | 39,625  | 36,848           
|Inventories                                          |  |         | 1,107             | -                
|Refundable tax credits                               |  |         | 811               | 1,856            
|Non-refundable tax credits                           |  |         | 1,329             | 4,629            
|                                                     |  |         | 42,872            | 43,425           
|Deferred tax liabilities                             |  |         | $ 35,955          | $ 36,918         





15.	PROVISIONS

|                                             |  |  | December 31, 2012 | December 31, 2011
|-------------------------------------------- |  |  | ----------------- | -----------------
|                                             |  |  |                   |                  
|Asset retirement obligations (a)             |  |  | $ 15,802          | $ 15,019         
|Non-current employee incentive provision (b) |  |  | 904               | 1,134            
|Provisions                                   |  |  | $ 16,706          | $ 16,153         





| | a) | Asset retirement obligations (“AROs”)
| | -- | -------------------------------------



|                                                 |  |  | December 31, 2012 | December 31, 2011
|------------------------------------------------ |  |  | ----------------- | -----------------
|                                                 |  |  |                   |                  
|Asset retirement obligations – beginning of year |  |  | $ 15,019          | $ 13,114         
|Change of obligations during the year            |  |  | 89                | -                
|Change in ARO estimate                           |  |  | 376               | 1,477            
|Accretion expense                                |  |  | 318               | 428              
|Asset retirement obligations – end of year       |  |  | $ 15,802          | $ 15,019         



Asset retirement obligations (AROs)
result from the acquisition, development, construction and ordinary operation of mining property, plant and equipment, and from
environmental regulations set by regulatory authorities. AROs include costs related to tailings pond and tailings dam reclamation,
and/or closure (i.e. ongoing monitoring of ground water quality in tailings dam, closing of portals, shafts and tunnels, decontamination
of soil, revegetation, etc.), and removal and/or demolition of mine and processing equipment (i.e. crushers, conveyors, mills,
floatation tanks, etc.), buildings and other infrastructure.



During the year, estimated reclamation
work totalling $0.5 million resulting from the ongoing construction of the paste backfill and wet shotcrete plants at Casa Berardi,
together with other cost adjustments of ($0.4 million), have resulted in an increase in the obligations of $89,000 (2011: $nil).



Changes in the timing of cash flows
relating to the reclamation work, together with changes in the applied discount rates, have resulted in an increase in the obligation
of $0.4 million (2011: $1.5 million). The changes in the timing of the cash flows are due to rescheduling of the reclamation of
tailings cells #1 and #2 from 2013 to 2016, and extension of the final reclamation work from 2022 to 2025 due to increased mine
life due to mineral reserves increases and changes to the long-term mining plan.



25|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





15.	PROVISIONS (continued)





| | a) | Asset retirement obligations (“AROs”)
(continued)
| | -- | -------------------------------------------------



The present
value of AROs is estimated on a discounted cash flow basis in accordance with existing laws, contracts or other policies and current
technology and conditions. The estimates or assumptions required to calculate the present value of AROs include, among other
items, abandonment and reclamation amounts, inflation rates, credit-adjusted risk free rates and timing of retirement of assets.





The following significant assumptions
were made for the purpose of estimating the AROs:



|Assumption                                                                               | 2012     | 2011    
|---------------------------------------------------------------------------------------- | -------- | --------
|Undiscounted reclamation costs                                                           | $ 19,504 | $ 19,002
|Pre-tax discount rates used for reclamation expenditures expected to be incurred in 2016 | 1.21%    | 0.99%   
|Pre-tax discount rates used for reclamation expenditures expected to be incurred in 2025 | 1.80%    | 2.49%   
|Average years to reclamation                                                             | 11.9     | 10      



As at December 31, 2012, $2.6 million
(2011 - $1.3 million) has been invested in restricted deposits for future site reclamation obligations at Casa Berardi (Note 12).



In accordance with the regulations
prescribed by the Minister of Natural Resources in Quebec, approximately 48% of the Company’s ARO liability will be guaranteed
by restricted deposits held in the name of the Minister of Natural Resources Quebec by the year 2015. The Company is not required
to fund any further restricted deposits for the remaining unguaranteed portion of the liability.





| | b) | Employee incentive plans
| | -- | ------------------------



The Company
established an employee incentive plan in 1996 for the discovery and acquisition of Casa Berardi. Under the terms of the plan,
once a mineral deposit has achieved commercial production, a bonus of 0.2% of the net smelter revenues, less any advance payments,
is paid to those participating in the plan. As at December 31, 2012, the fair value of the estimated incentive payments to be made
under this plantotals$1.4 million (2011 - $1.7 million), which includes a current portion of
$0.5 million and a non-current portion of $0.9 million (2011: current portion of $0.6 million and non-current portion of $1.1 million).



The Company
also has an employee incentive plan for the discovery of other mineral deposits. Under the terms of this plan, a bonus of 0.08%
of the value of the mineral reserves as determined in an approved pre-feasibility study, to a maximum of $0.1 million, is paid
to those participating in the plan. Upon approval of a feasibility study, a bonus of 0.15% of the value of the mineral reserves,
to a maximum of $0.5 million including the payment at the pre-feasibility stage shall be paid. During the year ended December 31,2012, no amount in respect of this incentive plan has been recorded (2011 - $nil).





16.	ISSUED SHARE CAPITAL



| | a) | Authorized
| | -- | ----------



Unlimited number of common shares without par value.



Unlimited number of preferred shares without par value
of which 8,050,000 are designated as series “A” convertible preferred shares (Issued: none) and 1,135,050 are designated
as series “B” convertible preferred shares (Issued: none).





| | b) | Issued and fully paid
| | -- | ---------------------



|Common shares                         |  |  | Shares  | Amount   
|------------------------------------- |  |  | ------- | ---------
|                                      |  |  | (000’s) |          
|Outstanding, January 1, 2011          |  |  | 162,145 | $ 269,677
|Exercise of share options             |  |  | 927     | 3,102    
|Fair value of share options exercised |  |  | -       | 1,386    
|Outstanding, December 31, 2011        |  |  | 163,072 | 274,165  
|Exercise of share options             |  |  | 1,491   | 5,837    
|Fair value of share options exercised |  |  | -       | 2,598    
|Outstanding, December 31, 2012        |  |  | 164,563 | $ 282,600



26|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





16.	ISSUED SHARE CAPITAL (continued)



| | c) | Share based compensation
| | -- | ------------------------



The Company has a share based compensation
plan for key employees, directors, and officers of the Company. In accordance with the terms of the plan, as approved by shareholders’
resolution dated May 10, 2012, key employees, directors, and officers of the Company may be granted options to purchase ordinary
shares at an exercise price to be determined by the Directors at the time the option is granted, provided that such price not be
less than the closing price of the common shares for the Company on the TSX on the trading day immediately preceding the date of
the grant of the option or if there was no trade of the Company’s common shares on such date, on the last day on which there
was a trade. Under the terms of the plan, options that are granted are subject to a three year vesting period, where 25% of the
options vest on the grant date, and subsequent tranches of 25% of the options vest on each of the first, second, and third anniversaries
of the grant date. The maximum term of options granted under the plan is five years, and may only be settled in equity. The number
of options granted is determined by the Board of Directors and pursuant to the shareholders’ resolution dated May 10, 2012,
the maximum number of options that can be issued was increased from 7% to 10% of the total number of common shares then outstanding
on a non-diluted basis. As at December 31, 2012, the maximum number of awards available to be granted under the plan is 16.4 million
shares (outstanding: 10.5 million). The status of share options granted to employees and directors as at December
31, 2012 and 2011 and the changes during the years ended on those dates is presented below:



|                                          |  |  | Number of options | Weighted-average exercise price
|----------------------------------------- |  |  | ----------------- | -------------------------------
|                                          |  |  | (000’s)           |                                
|Outstanding, January 1, 2011              |  |  | 9,670             | $5.05                          
|Granted                                   |  |  | 2,541             | $6.11                          
|Exercised                                 |  |  | (927)             | $3.35                          
|Expired                                   |  |  | (374)             | $5.31                          
|Outstanding, December 31, 2011            |  |  | 10,910            | $5.43                          
|Granted                                   |  |  | 1,992             | $3.62                          
|Exercised                                 |  |  | (1,491)           | $3.92                          
|Expired                                   |  |  | (910)             | $5.32                          
|Outstanding, December 31, 2012            |  |  | 10,501            | $5.31                          
|Vested and exercisable, December 31, 2012 |  |  | 6,955             | $5.39                          





| | c) | Share based compensation
| | -- | ------------------------



During 2012, 1,489,800 share options
were exercised at a weighted-average exercise price of $3.92 per share (2011: 927,325 share options at $3.35). The weighted-average
market price at the time of exercise during 2012 was $4.90 per share (2011: $6.28 per share). The following shows the vested and
exercisable share options, and total outstanding share options, by exercise price range, as at December 31, 2012:

|Vested and exercisable options | All outstanding options                       
|------------------------------ | ----------------------------------------------
|Exercise price range           | Vested and exercisable options
        (000’s)
|$2.95 - $2.99                  | 956                                           
|$3.00 - $3.99                  | 491                                           
|$4.00 - $4.99                  | 1,442                                         
|$5.00 - $5.99                  | 1,141                                         
|$6.00 - $6.99                  | 1,295                                         
|$7.00 - $7.59                  | 1,630                                         
|Totals                         | 6,955                                         





27|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





16.	ISSUED SHARE CAPITAL (continued)



| | c) | Share based compensation (continued)
| | -- | ------------------------------------



During 2012, incentive share options
were granted to directors, officers and employees to purchase up to 1,992,000 shares at a weighted-average exercise price of $3.62
per share. The weighted average fair value of the options granted was estimated at $1.28 per share option using the Black-Scholes
option-pricing model. The total estimated share based compensation cost associated with these grants is $2.4 million, of which
$0.6 million was expensed immediately based on the options that vested immediately on the grant dates. The remaining cost of $1.8
million will be charged to earnings over the vesting period.



In addition to the share based compensation
charges totalling $0.6 million (2011 - $1.7 million) relating to options granted during the year
that vested immediately on the grant dates as detailed above, additional share based compensation charges totalling $4.7 million
(2011- $4.8 million) relating to the vesting of all other unvested options have been charged
to operations. The total aggregate share based compensation charge for the current year is $5.3
million (2011 - $6.5 million).



The fair value of each option is estimated
on the date of grant based on the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants:



|                                    | 2012  | 2011
|----------------------------------- | ----- | ----
|Pre-vest forfeiture rate            | 5.7%  | 4.8%
|Expected life of options (in years) | 3.8   | 3.7 
|Expected volatility                 | 44.7% | 60% 
|Risk-free interest rate             | 1.3   | 1.1%
|Dividend yield                      | Nil   | Nil 





The Black-Scholes and other option
pricing models require the input of highly subjective assumptions. The expected life of the options is based upon the average length
of time similar option grants in the past have remained outstanding prior to exercise. Volatility was estimated based upon historical
price observations over the expected life of the options. Changes in the subjective inputs can materially affect the fair value
estimate and therefore do not necessarily provide a reliable measure of the fair value of the Company’s share options.



As at December 31,
2012, there are 5.9 million share options available for granting (2011:0.5 million) in accordance with the provisions in
the Company’s share option plan.





| | d) | Deferred and restricted share units
| | -- | -----------------------------------



|                               |  |  | Deferred share units (i) | Restricted share units (ii)
|------------------------------ |  |  | ------------------------ | ---------------------------
|                               |  |  |                          |                            
|Outstanding, January 1, 2012   |  |  | -                        | -                          
|Granted                        |  |  | 260,480                  | 249,762                    
|Cancelled                      |  |  | -                        | (5,475)                    
|Outstanding, December 31, 2012 |  |  | 260,480                  | 244,287                    



| | (i) | Deferred share units
| | --- | --------------------



During the first quarter of 2012,
the Company established a Deferred Share Unit Plan for non-executive directors (the “DSU Plan”), whereby a portion
of compensation paid to directors may be paid in deferred share units (“DSUs”).   Under the terms of the
DSU Plan, each director may receive an annual grant of DSUs in an amount and on the date determined by the Board for that year. 
DSUs vest immediately and are based on the closing price of the common shares on the Toronto Stock Exchange on the business day
prior to the date of grant.  DSUs can only be settled in cash, following the date the director has retired from, or ceased
to hold, all positions with the Company, and will be based upon the number of units held, multiplied by the fair market value of
the Company’s share price at the time of redemption.



During 2012, the Company granted
260,480 DSUs to non-executive directors. As at December 31, 2012, the fair value of the units outstanding was $0.9 million based
upon the Company’s share price of $3.43 on the last trading day of 2012. Accordingly, the Company has recorded a current
liability of $0.9 million as at December 31, 2012 (2011: $nil), with a corresponding charge to profit to reflect the fair value
of the units.



28|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





16.	ISSUED SHARE CAPITAL (continued)



| | d) | Deferred and restricted share units (continued)
| | -- | -----------------------------------------------



| | (ii) | Restricted share units
| | ---- | ----------------------



During
the third quarter of 2012, the Company established a Restricted Share Unit Plan for key employees of the Company (the “RSU
Plan”, whereby a portion of these employees’ compensation may be paid in restricted share units (“RSUs”).
Under the terms of the RSU Plan, RSUs granted vest over a period of three years, where one third of the units vest at each grant
date anniversary. At each vesting date, the RSUs may be settled in cash only, at a value corresponding to the number of units vested
multiplied by thethe fair market value of the Company’s closing share price on the vesting date.



The Company granted 249,762
RSUs to employees during the third quarter of 2012 at a grant-date fair value of $4.22 per unit. Using the graded vesting method,
the corresponding RSU expense recognized during 2012 was $0.2 million (2011: $nil), based upon the closing share price of $3.43
on the last trading day of 2012.





17.	EXPENSES BY NATURE



|For the years ended                                         |  |        | December 31, 2012 | December 31, 2011
|----------------------------------------------------------- |  | ------ | ----------------- | -----------------
|                                                            |  |        |                   |                  
|Cost of sales:                                              |  |        |                   |                  
|Operating costs                                             |  |        | $ 70,879          | $ 77,814         
|Employee wages and benefits                                 |  |        | 23,370            | 10,984           
|Depreciation and amortization charge relating to operations |  | 37,539 | 38,927           
|Total cost of sales                                         |  |        | $ 131,788         | $ 127,725        
|Exploration costs (i):                                      |  |        |                   |                  
|Contractors, supplies and other                             |  |        | $ 16,646          | $ 25,082         
|Employee wages and benefits                                 |  |        | 1,253             | 1,386            
|Total exploration costs                                     |  |        | $ 17,899          | $ 26,468         
|General and administrative costs:                           |  |        |                   |                  
|Employee wages and benefits                                 |  |        | $ 5,477           | $ 6,577          
|Other administration costs                                  |  |        | 6,551             | 6,050            
|Depreciation and amortization                               |  |        | 190               | 203              
|Share based compensation                                    |  |        | 5,313             | 6,526            
|Total general and administration costs                      |  |        | $ 17,531          | $ 19,356         



| | (i) | Net of refundable and non-refundable tax credits.
| | --- | -------------------------------------------------



29|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





18.	FINANCE INCOME AND COSTS



|For the years ended                                    |  |  | December 31, 2012 | December 31, 2011
|------------------------------------------------------ |  |  | ----------------- | -----------------
|                                                       |  |  |                   |                  
|Finance income                                         |  |  |                   |                  
|Interest income on cash and short-term investments (i) |  |  | $ 2,236           | $ 1,538          
|                                                       |  |  |                   |                  
|Finance costs                                          |  |  |                   |                  
|Accretion of asset retirement obligation               |  |  | $ (318)           | $ (428)          
|Standby fees – revolving credit facility               |  |  | (373)             | (150)            
|Other interest charges                                 |  |  | -                 | (190)            
|Amortization of deferred finance costs                 |  |  | (165)             | (344)            
|Total finance costs                                    |  |  | $ (856)           | $ (1,112)        
|                                                       |  |  |                   |                  
|Other derivative gains (losses)                        |  |  |                   |                  
|Realized                                               |  |  | $ 550             | $ (192)          
|Unrealized                                             |  |  | (357)             | 357              
|Total other derivative gains                           |  |  | $ 193             | $ 165            



| | (i) | Cash earns interest at floating rates on daily
bank deposit accounts.
| | --- | ---------------------------------------------------------------------





19.	COMMITMENTS



The Company’s significant contractual
obligations and commitments as at December 31, 2012 are as follows:



|(All figures undiscounted)                    | Notes       | Total    | Due in less than 1 year | Due 2 - 3 years | Due 3 - 5 years | Due in more than 5 years | As at December 31, 2011
|--------------------------------------------- | ----------- | -------- | ----------------------- | --------------- | --------------- | ------------------------ | -----------------------
|Current liabilities                           | (i)         | $ 31,795 | $ 31,795                | $ -             | $ -             | $ -                      | $ 42,450               
|Asset retirement obligations                  | (ii), 15(i) | 19,505   | -                       | -               | 1,238           | 18,267                   | 19,002                 
|Equipment supply and contracts                | (iii)       | 6,263    | 1,566                   | 3,131           | 1,566           | -                        | 13,518                 
|Reclamation deposits                          | (iv)        | 4,981    | 2,079                   | 2,902           | -               | -                        | 6,223                  
|Employee incentives                           | 15(ii)      | 1,505    | 522                     | 983             | -               | -                        | 1,821                  
|Head office operating lease                   |             | 569      | 253                     | 316             | -               | -                        | 822                    
|Mineral properties firm commitments           | (v)         | 267      | 267                     | -               | -               | -                        | 2,222                  
|Total contractual obligations and commitments |             | $ 64,885 | $ 36,482                | $ 7,332         | $ 2,804         | $ 18,267                 | $ 86,058               





| | (i) | Exclusive of employee incentive and equipment
supply commitments payable as at December 31, 2012 and 2011, which are presented separately.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | On a discounted basis, the asset retirement
obligations total $15.8 million as at December 31, 2012 (2011: $15.0 million)
| | ---- | -------------------------------------------------------------------------------------------------------------------------



| | (iii) | The Company has secured the procurement of
some of its reagents used in the mill concentrator until the end of year 2016, resulting in an
estimated commitment of $6.3 million (2011: $7.8 million).
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Future funding requirements in respect of
financial guarantees for mine reclamation as prescribed by the Ministère des Ressources naturelles et de la Faune:
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Firm commitments represent exploration work
expenditures and property option payments that the Company is contractually bound to make, whether the Company fulfills all the
requirements of the agreements or not.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has no derivative positions as at
December 31, 2012 (2011: unrealized mark-to-market asset of currency derivative positions of $357,000).



30|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





20.	RELATED PARTY TRANSACTIONS





Other than those disclosed in the following table, there were no material
related party transactions in 2012 and 2011.



Compensation of key management personnel:



|For the years ended           |  |  | December 31, 2012 | December 31, 2011
|----------------------------- |  |  | ----------------- | -----------------
|                              |  |  |                   |                  
|Wages and short-term benefits |  |  | $ 2,253           | $ 2,555          
|Share based compensation      |  |  | 2,928             | 3,565            
|                              |  |  | $
5,181           | $ 6,120          



Key management personnel include the Chief Executive Officer, Chief
Financial Officer, Vice-President of Operations, Chairman and independent members of the Board of Directors.





21.	EARNINGS PER SHARE





| | a) | Basic
| | -- | -----



Basic earnings per share (“EPS”)
are calculated by dividing the net profit (loss) by the weighted average number of common shares outstanding during the year.



|For the years ended                                              |  |         | December 31, 2012 | December 31, 2011
|---------------------------------------------------------------- |  | ------- | ----------------- | -----------------
|                                                                 |  |         |                   |                  
|Net profit                                                       |  |         | $ 31,807          | $ 43,931         
|Weighted average number of common shares outstanding (thousands) |  | 164,169 | 162,623          
|Basic earnings per share                                         |  |         | $
0.19            | $ 0.27           





| | b) | Diluted
| | -- | -------



Diluted EPS is calculated by adjusting
the weighted average number of common shares outstanding for dilutive instruments and is computed using the treasury stock method.
The Company’s potentially dilutive instruments comprise stock options granted to employees. The calculation excludes out-of-the
money stock options that are anti-dilutive and could potentially dilute EPS calculations in the future.



|For the years ended                                                     |         |         | December 31, 2012 | December 31, 2011
|----------------------------------------------------------------------- | ------- | ------- | ----------------- | -----------------
|                                                                        |         |         |                   |                  
|Net profit                                                              |         |         | $ 31,807          | $ 43,931         
|Weighted average number of common shares outstanding (thousands)        |         | 164,169 | 162,623          
|Adjustments for:                                                        |         |         |                  
|Stock options                                                           |         | 758     | 1,751            
|Weighted average number of common shares for diluted earnings per share | 164,927 | 164,374
|Diluted earnings per share                                              |         |         | $ 0.19            | $ 0.27           



31|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





22.	CASH FLOW INFORMATION





| | a) | Analysis of other operating activities
| | -- | --------------------------------------



|For the years ended                                                         |    |       | December 31, 2012 | December 31, 2011
|--------------------------------------------------------------------------- | -- | ----- | ----------------- | -----------------
|                                                                            |    |       |                   |                  
|Accretion charges on asset retirement obligations                           |    |       | $ 318             | $ 427            
|Change in fair value of future employee incentives                          |    |       | (230)             | 506              
|Loss on disposal of property, plant and equipment                           |    |       | 354               | 170              
|Amortization of deferred finance costs                                      |    |       | 165               | 150              
|Mineral property impairments                                                |    |       | 360               | 25               
|Amortization of prepaid Hydro Quebec deposit                                |    |       | 180               | -                
|Workers’ compensation adjustments                                           |    |       | 130               | 117              
|Inventory adjustment for obsolete items                                     |    |       | (401)             | 459              
|Unrealized foreign exchange (gain) loss on cash denominated in U.S. dollars | 34 | (273)
|Other operating activities                                                  |    |       | $ 910             | $ 1,581          





| | b) | Analysis of changes in non-cash working capital
items
| | -- | -----------------------------------------------------



|For the years ended                          |  |  | December 31, 2012 | December 31, 2011
|-------------------------------------------- |  |  | ----------------- | -----------------
|                                             |  |  |                   |                  
|Accounts payable and accrued liabilities     |  |  | $ 1,888           | $ 3,376          
|Prepaid expenses                             |  |  | 1,875             | 669              
|Accounts receivable and exploration advances |  |  | 752               | (1,738)          
|Tax credits receivable                       |  |  | 618               | 7,188            
|Supplies inventory                           |  |  | 80                | (1,688)          
|Gold bullion and in-process ore              |  |  | (3,037)           | 450              
|Prepaid income and resource taxes            |  |  | (4,641)           | -                
|Current income taxes payable                 |  |  | (15,217)          | 18,338           
|Change in non-cash working capital items     |  |  | $ (17,682)        | $ 26,595         





| | c) | Analysis of other investing activities
| | -- | --------------------------------------



|For the years ended        |  |  | December 31, 2012 | December 31, 2011
|-------------------------- |  |  | ----------------- | -----------------
|                           |  |  |                   |                  
|Reclamation deposits       |  |  | $ (1,242)         | $ (418)          
|Marketable securities      |  |  | (500)             | (500)            
|Other investing activities |  |  | $ (1,742)         | $ (918)          



32|Page









Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





23.	FINANCIAL INSTRUMENTS





Classification of Financial Instruments



The Company has classified cash and cash equivalents,
accounts receivable and other receivables, and reclamation and other deposits as loans and receivables which are measured at amortized
cost.  Accounts payable and accrued liabilities are classified as other liabilities which are measured at amortized cost.
 Derivative instruments are measured at fair value through profit and loss. Marketable securities are classified as available
for sale, with changes in fair value recorded in other comprehensive income.



The carrying values of cash and cash equivalents,
reclamation and other deposits, accounts receivable and other receivables, accounts payable and accrued liabilities approximate
fair value due to the short periods until settlement.



Fair Value Hierarchy



Financial instruments recognized at fair value
on the Balance Sheet must be classified in one of the following three fair value hierarchy levels:



| | · | Level 1 – measurement based on quoted
prices (unadjusted) observed in active markets for identical assets or liabilities;
| | - | -------------------------------------------------------------------------------------------------------------------------

| | · | Level 2 – measurement based on inputs
other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level 3 – measurement based on inputs
that are not observable (supported by little or no market activity) for the asset or liability.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



The only items recognized at fair value on the
Balance Sheets were derivative instruments and marketable securities. The fair value of derivative instruments is based on quoted
market prices for comparable contracts and represents the amount the Company would have received from, or paid to, a counterparty
to settle the contract at the market rates in effect at the balance sheet dates and therefore derivative instruments are classified
within Level 2 of the fair value hierarchy. As at December 31, 2012 there were no derivative assets recorded on the balance sheet
(2011: $357,000).  The fair value of marketable securities is based on quoted market prices of the instrument at the balance
sheet date and therefore these securities are classified within Level 1 of the fair value hierarchy.  As at December 31, 2012
marketable securities totalling $477,000 were recorded on the balance sheet (2011: $864,000).



There were no reclassifications of financial
instruments between fair value hierarchy levels in 2012 or 2011.





Financial risk factors



The Company’s activities expose it to a
variety of financial risks: market risk (including price risk, interest rate risk, and foreign currency risk), credit risk and
liquidity risk. Risk management is carried out by management under policies approved by the board of directors. The board of directors
provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange
risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment
of excess liquidity. The Company’s overall risk management program seeks to minimize potential adverse effects on the Company’s
financial performance.





| | a) | Price risk
| | -- | ----------



The Company is not subject to significant
price risk on its financial instruments.





| | b) | Interest rate risk
| | -- | ------------------



The Company’s cash and cash
equivalents earn interest at fixed rates and have maturities as described in Note 5. The risk of investing cash equivalents into
fixed interest rate investments is mitigated by the short terms over which the investments mature. This way, the Company can adapt
its investment strategy in the event of any large fluctuations in the prevailing market rates.





Based on the interest rates in effect
on all cash and cash equivalents balances as at December 31, 2012, a decrease in interest rates of 100 basis points, or 1%, would
cause a decrease in cash flows totalling $1.8 million (2011: $1.8 million) over the next twelve months. An increase in interest
rates of 100 basis points, or 1%, would cause an increase in cash flows totalling $2.0 million (2011: $2.1 million) over the next
twelve months. The difference between the fluctuation downward and upward is due to the fact that certain cash balances held by
the Company earned interest at a rate of less than 1% as at December 31, 2012.



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Aurizon Mines Ltd.

Notes to Financial Statements

As at and for the Years Ended December 31,
2012 and 2011

(Amounts in tables are expressed in thousands
of Canadian dollars, unless otherwise stated)





23.	FINANCIAL INSTRUMENTS (continued)





Financial risk factors (continued)





| | c) | Foreign currency risk
| | -- | ---------------------



The Company’s revenues are received
in United States dollars (USD), and as such, are subject to foreign currency risk which increases or decreases based on the currency
exchange rate between the USD and the Canadian dollar. The Company may, from time to time, enter into short-term currency forward
contracts to benefit from a guaranteed exchange rate on certain portions of its revenue.



As at December 31, 2012, the Company
is exposed to foreign currency risk with cash held in US dollars of $11.0 million (December 31, 2011: US dollars $14.0 million).
Based on the exposure as at December 31, 2012, and assuming all other variables remain constant, an appreciation or depreciation
of 10% of the Canadian dollar against the U.S. dollar would result in a gain or loss of $1.1 million in the Company’s profit
before income taxes (2011: $1.4 million).



| | d) | Credit risk
| | -- | -----------



Credit risk is the risk that a third
party might fail to fulfill its performance obligations under the terms of a financial instrument. Financial instruments that are
potentially exposed to credit risk consist of cash and cash equivalents, and accounts receivable. The Company mitigates credit
risk by investing its cash and cash equivalents with Schedule I banks in Canada. Schedule I banks are domestic banks and are authorized
under the Bank Acttoaccept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit
Insurance Corporation. As at Dec 31, 2012, the Company’s cash and cash equivalents were held with four financial institutions,
of which approximately 35%, 34% and 26% was respectively held with three of these institutions. As at December 31, 2011, approximately
46% of the Company's cash and cash equivalents were held with one financial institution.



The Company sells gold via bullion
traders and as such, incurs a credit risk related to a two day collection period between delivery of bullion and receipt of funds.



| | e) | Liquidity risk management
| | -- | -------------------------



The Company has established a liquidity
risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management
requirements. The Company manages liquidity risk by maintaining adequate working capital, maintaining its borrowing facility, by
continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.



As at December 31, 2012 the Company’s
accounts payable and accrued liabilities totalled $29.3 million (2011: $26.0 million), all of which fall due for payment within
one year of the balance sheet date.





24.	CAPITAL MANAGEMENT



The Company’s capital management objectives
are to safeguard its ability to continue as a going concern in order to pursue the operation of its producing property as well
as the development of its other mineral properties. Capital management consists of optimizing the debt and equity balances to maximize
returns for shareholders.



The capital structure of the Company consists
of equity components consisting of capital stock, stock based compensation and contributed surplus. To maintain or adjust the capital
structure, the Company may attempt to issue new shares or enter into new debt arrangements.



The Company is currently subject to covenants
on the revolving credit facility described in Note 11.



During the year ended December 31, 2012 there
has been no change in the overall capital management strategy employed by the Company.



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