----

|              |   |                    |
|-------------------|--------|-------------------------|
|                   |   |                         |
|              |   |                    |
| Daniel R. Titcomb |   | James M. Roller         |
| President and CEO |   | Chief Financial Officer |

----

|        | KPMG LLPChartered AccountantsSuite 4600 Bay Adelaide Centre 333 Bay StreetToronto ON M5H 2S5 | Telephone | (416) 777-8500 |
|--------|----------------------------------------------------------------------------------------------|-----------|----------------|
| Fax    | (416) 777-8818                                                                               |
|   | www.kpmg.ca                                                                                  |
|   |                                                                                         |
|   |                                                                                         |
|   |                                                                                         |

----

|        | KPMG LLPChartered AccountantsSuite 4600 Bay Adelaide Centre 333 Bay StreetToronto ON M5H 2S5 | Telephone | (416) 777-8500 |
|--------|----------------------------------------------------------------------------------------------|-----------|----------------|
| Fax    | (416) 777-8818                                                                               |
|   | www.kpmg.ca                                                                                  |
|   |                                                                                         |
|   |                                                                                         |
|   |                                                                                         |

----

| JAGUAR MINING INC.                                 |   |                   |    |   |                   |   |
|----------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|
|                                               |   |                   |    |   |                   |   |
| Consolidated Balance Sheet                         |   |                   |    |   |                   |   |
| (Expressed in thousands of U.S. dollars)           |   |                   |    |   |                   |   |
|                                               |   |                   |    |   |                   |   |
|                                               |   | December 31, 2009 |    |   | December 31, 2008 |   |
|                                               |   |                   |    |   |                   |   |
| Assets                                             |   |                   |    |   |                   |   |
| Current assets:                                    |   |                   |    |   |                   |   |
| Cash and cash equivalents (Note 18)                |   | $                      | 121,256 |   |                   | $      | 20,560 |   |
| Inventory (Note 4)                                 |   |                   | 36,986  |   |                   |   | 19,946 |   |
| Prepaid expenses and sundry assets (Note 5)        |   |                   | 19,050  |   |                   |   | 5,351 |   |
| Unrealized foreign exchange gains (Note 6(a)(ii))  |   |                   | 1,280   |   |                   |   | - |   |
|                                               |   |                   | 178,572 |   |                   |   | 45,857 |   |
|                                               |   |                   |    |   |                   |   |   |   |
| Prepaid expenses and sundry assets (Note 5)        |   |                   | 35,837  |   |                   |   | 26,164 |   |
| Net smelter royalty (Note 7)                       |   |                   | 1,006   |   |                   |   | 1,006 |   |
| Restricted cash (Note 8)                           |   |                   | 108     |   |                   |   | 3,106 |   |
| Property, plant and equipment (Note 9)             |   |                   | 205,329 |   |                   |   | 148,422 |   |
| Mineral exploration projects (Note 10)             |   |                   | 129,743 |   |                   |   | 79,279 |   |
|                                               |   |                   |    |   |                   |   |   |   |
|                                               |   | $                      | 550,595 |   |                   | $      | 303,834 |   |
|                                               |   |                   |    |   |                   |   |   |   |
| Liabilities and Shareholders' Equity               |   |                   |    |   |                   |   |   |   |
| Current liabilities:                               |   |                   |    |   |                   |   |   |   |
| Accounts payable and accrued liabilities           |   | $                      | 22,892  |   |                   | $      | 13,416 |   |
| Notes payable (Note 11)                            |   |                   | 5,366   |   |                   |   | 4,319 |   |
| Income taxes payable                               |   |                   | 15,641  |   |                   |   | 8,626 |   |
| Asset retirement obligations (Note 12)             |   |                   | 510     |   |                   |   | 1,337 |   |
| Unrealized foreign exchange losses (Note 6(a)(ii)) |   |                   | -       |   |                   |   | 2,421 |   |
|                                               |   |                   | 44,409  |   |                   |   | 30,119 |   |
|                                               |   |                   |    |   |                   |   |   |   |
| Deferred compensation liability (Note 15)          |   |                   | 8,616   |   |                   |   | 434 |   |
| Notes payable (Note 11)                            |   |                   | 126,784 |   |                   |   | 69,729 |   |
| Future income taxes (Note 13)                      |   |                   | 11,821  |   |                   |   | - |   |
| Asset retirement obligations (Note 12)             |   |                   | 12,331  |   |                   |   | 6,828 |   |
| Other liabilities                                  |   |                   | 738     |   |                   |   | - |   |
| Total liabilities                                  |   |                   | 204,699 |   |                   |   | 107,110 |   |
|                                               |   |                   |    |   |                   |   |   |   |
| Shareholders' equity                               |   |                   |    |   |                   |   |   |   |
| Common shares  (Note 14(a))              |   |                   | 365,667 |   |                   |   | 245,067 |   |
| Stock options (Note 14(c))                         |   |                   | 14,762  |   |                   |   | 19,059 |   |
| Contributed surplus                                |   |                   | 42,028  |   |                   |   | 1,167 |   |
| Deficit                                            |   |                   | (76,561 | )      |                   |   | (68,569 | ) |
|                                               |   |                   | 345,896 |   |                   |   | 196,724 |   |
| Commitments (Notes 6, 9, 10, and 20)               |   |                   |    |   |                   |   |   |   |
|                                               |   | $                      | 550,595 |   |                   | $      | 303,834 |   |

| Gary E. German    |   | Director |
|-------------------|--------|----------|
|              |   |     |
| Daniel R. Titcomb |   | Director |

----

| JAGUAR MINING INC.                                                   |
|----------------------------------------------------------------------|
|                                                                 |
| Consolidated Statements of Operations and Comprehensive Loss         |
| (Expressed in thousands of U.S. dollars, except per share amounts)   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Year Ended December 31, 2009 |   |   | Year Ended December 31, 2008 |   |   | Year Ended December 31, 2007 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
| Gold sales                                                           |   | $ | 140,734 |   |   | $ | 93,657 |   |   | $ | 47,834 |   |
| Production costs                                                     |   |   | (74,287 | ) |   |   | (53,610 | ) |   |   | (28,313 | ) |
| Stock-based compensation (Notes 14(c) and 15)                        |   |   | (600 | ) |   |   | (24 | ) |   |   | - |   |
| Depletion and amortization                                           |   |   | (23,264 | ) |   |   | (12,669 | ) |   |   | (5,232 | ) |
| Gross profit                                                         |   |   | 42,583 |   |   |   | 27,354 |   |   |   | 14,289 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|     Exploration                                  |   |   | 3,079 |   |   |   | 3,536 |   |   |   | 2,365 |   |
|     Stock-based compensation (Note 14(c) and 15) |   |   | 10,644 |   |   |   | 1,238 |   |   |   | 10,750 |   |
|     Administration                               |   |   | 16,411 |   |   |   | 12,571 |   |   |   | 9,617 |   |
|     Management fees (Note 17(a))                 |   |   | 1,604 |   |   |   | 854 |   |   |   | 747 |   |
|     Amortization                                 |   |   | 452 |   |   |   | 264 |   |   |   | - |   |
|     Accretion expense (Note 12)                  |   |   | 786 |   |   |   | 490 |   |   |   | 138 |   |
|     Other                                        |   |   | 2,440 |   |   |   | 379 |   |   |   | 2,782 |   |
|     Total operating expenses                     |   |   | 35,416 |   |   |   | 19,332 |   |   |   | 26,399 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before the following                                   |   |   | 7,167 |   |   |   | 8,022 |   |   |   | (12,110 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss on forward derivatives (Note 6(a)(i))                           |   |   | - |   |   |   | 318 |   |   |   | 9,908 |   |
| Loss (gain) on forward foreign exchange derivatives (Note 6(a)(ii))  |   |   | (2,642 | ) |   |   | 2,623 |   |   |   | (3,690 | ) |
| Foreign exchange gain                                                |   |   | (17,307 | ) |   |   | (2,477 | ) |   |   | (2,280 | ) |
| Interest expense                                                     |   |   | 28,847 |   |   |   | 11,584 |   |   |   | 11,170 |   |
| Interest income                                                      |   |   | (4,203 | ) |   |   | (3,850 | ) |   |   | (4,601 | ) |
| Gain on disposition of property (Note 10(a))                         |   |   | (2,043 | ) |   |   | (452 | ) |   |   | (381 | ) |
| Write down on Sabará property (Note 9)                          |   |   | 3,522 |   |   |   | - |   |   |   | - |   |
| Other non-operating expenses                                         |   |   | 145 |   |   |   | - |   |   |   | 230 |   |
| Total other expenses                                                 |   |   | 6,319 |   |   |   | 7,746 |   |   |   | 10,356 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                    |   |   | 848 |   |   |   | 276 |   |   |   | (22,466 | ) |
| Income taxes  (Note 13)                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Current income taxes                         |   |   | 4,979 |   |   |   | 6,172 |   |   |   | 3,519 |   |
|     Future income taxes (recovered)              |   |   | 3,861 |   |   |   | (1,640 | ) |   |   | 1,675 |   |
| Total income taxes                                                   |   |   | 8,840 |   |   |   | 4,532 |   |   |   | 5,194 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss and comprehensive loss for the year                         |   |   | (7,992 | ) |   |   | (4,256 | ) |   |   | (27,660 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net loss per share (Note 16)                       |   | $ | (0.10 | ) |   | $ | (0.07 | ) |   | $ | (0.52 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding (Note16)        |   |   | 76,410,916 |   |   |   | 62,908,676 |   |   |   | 53,613,175 |   |

----

| JAGUAR MINING INC.                                                                                               |   |                                   |    |   |                                   |   |    |                                   |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|--------|----------------------------------------|--------|---------|----------------------------------------|--------|
|                                                                                                             |   |                                   |    |   |                                   |   |    |                                   |   |
| Consolidated Statements of Cash Flows                                                                            |   |                                   |    |   |                                   |   |    |                                   |   |
| (Expressed in thousands of U.S. dollars)                                                                         |   |                                   |    |   |                                   |   |    |                                   |   |
|                                                                                                             |   |                                   |    |   |                                   |   |    |                                   |   |
|                                                                                                             |   |                                   |    |   |                                   |   |    |                                   |   |
|                                                                                                             |   | Year Ended December 31, 2009 |    |   | Year Ended December 31, 2008 |   |    | Year Ended December 31, 2007 |   |
|                                                                                                             |   |                                   |    |   |                                   |   |    |                                   |   |
| Cash provided by (used in):                                                                                      |   |                                   |    |   |                                   |   |    |                                   |   |
|     Operating activities:                                                                    |   |                                   |    |   |                                   |   |    |                                   |   |
|        Net loss and comprehensive loss for the year                           |   | $                                      | (7,992  | )      |                                   | $      | (4,256  | )                                      |   | $ | (27,660 | ) |
|        Items not involving cash:                                              |   |                                   |    |   |                                   |   |    |                                   |   |   |   |   |
|           Unrealized foreign exchange (gain) loss              |   |                                   | (3,227  | )      |                                   |   | (3,471  | )                                      |   |   | 7,907 |   |
|           Stock-based compensation                             |   |                                   | 7,962   |   |                                   |   | 1,262   |                                   |   |   | 10,750 |   |
|           Non-cash interest expense                            |   |                                   | 15,320  |   |                                   |   | 1,982   |                                   |   |   | 2,953 |   |
|           Accretion expense                                    |   |                                   | 786     |   |                                   |   | 490     |                                   |   |   | 138 |   |
|           Future income taxes (recovered)                      |   |                                   | 3,861   |   |                                   |   | (1,640  | )                                      |   |   | 1,675 |   |
|           Depletion and amortization                           |   |                                   | 23,716  |   |                                   |   | 12,933  |                                   |   |   | 5,232 |   |
|           Write down on Sabará property (Note 9)          |   |                                   | 3,522   |   |                                   |   | -       |                                   |   |   | - |   |
|           Amortization of net smelter royalty                  |   |                                   | -       |   |                                   |   | 219     |                                   |   |   | 310 |   |
|           Unrealized loss on forward sales derivatives         |   |                                   | -       |   |                                   |   | -       |                                   |   |   | 4,284 |   |
|           Unrealized loss (gain) on foreign exchange contracts |   |                                   | (3,701  | )      |                                   |   | 4,102   |                                   |   |   | (972 | ) |
|           Gain on disposition of property                      |   |                                   | -       |   |                                   |   | -       |                                   |   |   | (381 | ) |
|        Reclamation expenditure                                                |   |                                   | (328    | )      |                                   |   | -       |                                   |   |   | (157 | ) |
|     Change in non-cash operating working capital                                             |   |                                   |    |   |                                   |   |    |                                   |   |   |   |   |
|           Accounts receivable                                  |   |                                   | -       |   |                                   |   | -       |                                   |   |   | 1,742 |   |
|           Inventory                                            |   |                                   | (11,106 | )      |                                   |   | (4,361  | )                                      |   |   | (2,624 | ) |
|           Prepaid expenses and sundry assets                   |   |                                   | (13,612 | )      |                                   |   | (14,200 | )                                      |   |   | (11,659 | ) |
|           Accounts payable and accrued liabilities             |   |                                   | 9,707   |   |                                   |   | 423     |                                   |   |   | 6,991 |   |
|           Current taxes payable                                |   |                                   | 7,015   |   |                                   |   | 5,107   |                                   |   |   | 2,928 |   |
|                                                                                                             |   |                                   | 31,923  |   |                                   |   | (1,410  | )                                      |   |   | 1,457 |   |
|     Financing activities:                                                                    |   |                                   |    |   |                                   |   |    |                                   |   |   |   |   |
|        Issuance of common shares, special warrants and warrants, net          |   |                                   | 114,294 |   |                                   |   | 105,803 |                                   |   |   | 30,138 |   |
|        Shares purchased for cancellation                                      |   |                                   | -       |   |                                   |   | (6,381  | )                                      |   |   | (2,089 | ) |
|        Settlement of forward derivatives                                      |   |                                   | -       |   |                                   |   | (14,500 | )                                      |   |   | - |   |
|        Decrease (increase) in restricted cash                                 |   |                                   | 2,998   |   |                                   |   | (4      | )                                      |   |   | 2,925 |   |
|        Repayment of debt                                                      |   |                                   | (84,614 | )      |                                   |   | (18,654 | )                                      |   |   | (6,086 | ) |
|        Increase in debt                                                       |   |                                   | 118,204 |   |                                   |   | 3,848   |                                   |   |   | 64,604 |   |
|        Other long term liabilities                                            |   |                                   | 738     |   |                                   |   | -       |                                   |   |   | - |   |
|                                                                                                             |   |                                   | 151,620 |   |                                   |   | 70,112  |                                   |   |   | 89,492 |   |
|     Investing activities                                                                     |   |                                   |    |   |                                   |   |    |                                   |   |   |   |   |
|        Mineral exploration projects                                           |   |                                   | (25,200 | )      |                                   |   | (37,087 | )                                      |   |   | (27,233 | ) |
|        Purchase of property, plant and equipment                              |   |                                   | (60,300 | )      |                                   |   | (52,210 | )                                      |   |   | (35,859 | ) |
|                                                                                                             |   |                                   | (85,500 | )      |                                   |   | (89,297 | )                                      |   |   | (63,092 | ) |
|                                                                                                             |   |                                   |    |   |                                   |   |    |                                   |   |   |   |   |
| Effect of foreign exchange on non-U.S. dollar denominated cash and cash equivalents                              |   |                                   | 2,653   |   |                                   |   | (4,556  | )                                      |   |   | 3,095 |   |
| Increase (decrease) in cash and cash equivalents                                                                 |   |                                   | 100,696 |   |                                   |   | (25,151 | )                                      |   |   | 30,952 |   |
| Cash and cash equivalents, beginning of year                                                                     |   |                                   | 20,560  |   |                                   |   | 45,711  |                                   |   |   | 14,759 |   |
| Cash and cash equivalents, end of year                                                                           |   | $                                      | 121,256 |   |                                   | $      | 20,560  |                                   |   | $ | 45,711 |   |

----

| JAGUAR MINING INC.                              |
|-------------------------------------------------|
|                                            |
| Consolidated Statements of Shareholders' Equity |
| (Expressed in thousands of U.S. dollars)        |

|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------|--------|---------------|------------|--------|----------|--------|---------|---------------|--------|--------|---------------------|--------|--------|---------|--------|--------|--------|--------|------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |
|                                                                           |   | Common Shares |       |   | Warrants |   |    | Stock Options |   |   | Contributed Surplus |   |   | Deficit |   |   | Total  |   |
|                                                                           |   | #             |       |   | $        |   |    | #             |   |   | $                   |   |   | #       |   |   | $      |   |       | $      |   |   | $      |   |   | $      |   |
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |
| Balance, December 31, 2006                                                     |   |          | 47,916,908 |   |     |   | 106,834 |          |   |   | 5,741,300           |   |   |    | 4,072  |   |   |   | 5,269,000  |   |   |   | 8,745  |   |   |   | 1,149  |   |   |   | (31,425 | ) |   |   | 89,375 |   |
| Adjustment to opening deficit (Note 2(a)(xvi))                                 |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | 165 |   |   |   | 165 |   |
| Private placement (Note 11(c))                                                 |   |          | 2,156,250  |   |     |   | 10,851  |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 10,851 |   |
| Shares acquired under normal course issuer bid and cancelled (Note 14(a)(iii)) |   |          | (236,400   | )      |     |   | (596    | )             |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | (1,493 | ) |   |   | (2,089 | ) |
| Warrants forced out                                                            |   |          | 67,211     |   |     |   | 72      |          |   |   | (225,403            | )      |   |    | (152   | )      |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | (80 | ) |
| Exercise of purchase warrants                                                  |   |          | 5,670,297  |   |     |   | 23,678  |          |   |   | (5,366,721          | )      |   |    | (3,671 | )      |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 20,007 |   |
| Warrants expired                                                               |   |          | -          |   |     |   | -       |          |   |   | (5,095              | )      |   |    | (4     | )      |   |   | -          |   |   |   | -      |   |   |   | 4      |   |   |   | - |   |   |   | - |   |
| Options granted (Note 14(c))                                                   |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | 2,808,500  |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | 10,792 |   |   |   | -      |   |   |   | - |   |   |   | 10,792 |   |
| Exercise of stock options (Note 14(c))                                         |   |          | 160,134    |   |     |   | 477     |          |   |   | -                   |   |   |    | -      |   |   |   | (216,842   | )      |   |   | (277   | )      |   |   | -      |   |   |   | - |   |   |   | 200 |   |
| Unvested options expired (Note 14(c))                                          |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | (55,000    | )      |   |   | (42    | )      |   |   | -      |   |   |   | - |   |   |   | (42 | ) |
| Net loss                                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | (27,660 | ) |   |   | (27,660 | ) |
| Balance December 31, 2007                                                      |   |          | 55,734,400 |   |     |   | 141,316 |          |   |   | 144,081             |   |   |    | 245    |   |   |   | 7,805,658  |   |   |   | 19,218 |   |   |   | 1,153  |   |   |   | (60,413 | ) |   |   | 101,519 |   |
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                                     |   |          | 55,734,400 |   |     |   | 141,316 |          |   |   | 144,081             |   |   |    | 245    |   |   |   | 7,805,658  |   |   |   | 19,218 |   |   |   | 1,153  |   |   |   | (60,413 | ) |   |   | 101,519 |   |
| Public offering (Note 14(a)(ii))                                               |   |          | 8,250,000  |   |     |   | 103,891 |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 103,891 |   |
| Shares acquired under normal course issuer bid and cancelled (Note 14(a)(iii)) |   |          | (647,300   | )      |     |   | (2,481  | )             |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | (3,900 | ) |   |   | (6,381 | ) |
| Exercise of compensation warrants                                              |   |          | 144,081    |   |     |   | 998     |          |   |   | (144,081            | )      |   |    | (245   | )      |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 753 |   |
| Options granted (Note 14(c))                                                   |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | 130,000    |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | 916    |   |   |   | -      |   |   |   | - |   |   |   | 916 |   |
| Exercise of stock options (Note 14(c))                                         |   |          | 501,100    |   |     |   | 1,343   |          |   |   | -                   |   |   |    | -      |   |   |   | (699,645   | )      |   |   | (1,020 | )      |   |   | -      |   |   |   | - |   |   |   | 323 |   |
| Vested options expired upon termination (Note 14(c))                           |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | (10,000    | )      |   |   | (14    | )      |   |   | 14     |   |   |   | - |   |   |   | - |   |
| Unvested options expired upon termination (Note 14(c))                         |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | (165,000   | )      |   |   | (41    | )      |   |   | -      |   |   |   | - |   |   |   | (41 | ) |
| Net loss                                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | (4,256 | ) |   |   | (4,256 | ) |
| Balance, December 31, 2008                                                     |   |          | 63,982,281 |   |     |   | 245,067 |          |   |   | -                   |   |   |    | -      |   |   |   | 7,061,013  |   |   |   | 19,059 |   |   |   | 1,167  |   |   |   | (68,569 | ) |   |   | 196,724 |   |
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |          |       |   |     |   |    |          |   |   |                |   |   |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                                     |   |          | 63,982,281 |   |     |   | 245,067 |          |   |   | -                   |   |   |    | -      |   |   |   | 7,061,013  |   |   |   | 19,059 |   |   |   | 1,167  |   |   |   | (68,569 | ) |   |   | 196,724 |   |
| Acquisition of Gurupi Property (Note 3)                                        |   |          | 3,377,354  |   |     |   | 42,454  |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 42,454 |   |
| Public offering (Note 14(a)(i))                                                |   |          | 13,915,000 |   |     |   | 63,238  |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | 63,238 |   |
| Exercise of stock options (Note 14(c))                                         |   |          | 2,440,013  |   |     |   | 14,908  |          |   |   | -                   |   |   |    | -      |   |   |   | (2,440,013 | )      |   |   | (4,714 | )      |   |   | -      |   |   |   | - |   |   |   | 10,194 |   |
| Unvested options expired upon termination (Note 14(c))                         |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | (24,500    | )      |   |   | (47    | )      |   |   | -      |   |   |   | - |   |   |   | (47 | ) |
| Stock based compensation                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | 464    |   |   |   | -      |   |   |   | - |   |   |   | 464 |   |
| Equity component of convertible notes (Note 11(f))                             |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | 40,861 |   |   |   | - |   |   |   | 40,861 |   |
| Net loss                                                                       |   |          | -          |   |     |   | -       |          |   |   | -                   |   |   |    | -      |   |   |   | -          |   |   |   | -      |   |   |   | -      |   |   |   | (7,992 | ) |   |   | (7,992 | ) |
| Balance, December 31, 2009                                                     |   |          | 83,714,648 |   |     |   | 365,667 |          |   |   | -                   |   |   |    | -      |   |   |   | 4,596,500  |   |   |   | 14,762 |   |   |   | 42,028 |   |   |   | (76,561 | ) |   |   | 345,896 |   |

----

----

| 1. | Nature of Business: |
|----|---------------------|

| 2. | Significant Accounting Policies: |
|----|----------------------------------|

|   | (a) | Existing Accounting Policies: |
|--------|-----|-------------------------------|

|   | (i) | Consolidation: |
|--------|-----|----------------|

|   | (ii) | Cash and cash equivalents: |
|--------|------|----------------------------|

|   | (iii) | Short-term Investments: |
|--------|-------|-------------------------|

|   | (iv) | Inventory: |
|--------|------|------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (a)  Existing Accounting Policies (continued): |
|--------|----------------------------------------------------------|

|   | (v) | Net smelter royalty: |
|--------|-----|----------------------|

|   | (vi) | Property, plant and equipment: |
|--------|------|--------------------------------|

| Processing plants      | - | over the life of the plant, straight line |
|------------------------|---|-------------------------------------------|
| Vehicles               | - | 5 years, straight line                    |
| Equipment              | - | 5 -10 years, straight line                |
| Leasehold improvements | - | over term of lease, straight line         |
| Mining properties      | - | unit of production method1                |

|   | 1Depletion of mining properties and amortization of preproduction and development costs are calculated and recorded on the unit-of-production basis over the mine’s estimated and economically proven and probable reserves of the mine and the portion of mineralization expected to be classified as reserves. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Impairment: |
|--------|-------|-------------|

|   | (viii) | Mineral exploration projects: |
|--------|--------|-------------------------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (a) | Existing Accounting Policies (continued): |
|--------|-----|-------------------------------------------|

|   | (ix) | Income taxes: |
|--------|------|---------------|

|   | (x) | Reclamation costs: |
|--------|-----|--------------------|

|   | (xi) | Foreign currency translation: |
|--------|------|-------------------------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (a) | Existing Accounting Policies (continued): |
|--------|-----|-------------------------------------------|

|   | (xii) | Revenue recognition: |
|--------|-------|----------------------|

|   | (xiii) | Stock-based compensation: |
|--------|--------|---------------------------|

|   | (xiv) | Net loss per share: |
|--------|-------|---------------------|

|   | (xv) | Use of estimates: |
|--------|------|-------------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (a) | Existing Accounting Policies (continued): |
|--------|-----|-------------------------------------------|

|   | (xvi) | Stripping costs: |
|--------|-------|------------------|

|   | (xvii) | Financial instruments-recognition and measurement |
|--------|--------|---------------------------------------------------|

|   | The Company classifies all financial instruments as either held to maturity, held-for-trading, loans and receivables, available for sale or other financial liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Held-to-maturity financial assets are initially recognized at their fair values and subsequently measured at amortized cost using the effective interest method. Impairment losses are charged to net earnings in the period in which they arise. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Held-for-trading financial instruments are carried at fair value with changes in fair value charged or credited to net earnings in the period in which they arise. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Loans and receivables are initially recognized at their fair values, with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method.  Impairment losses are charged to net earnings in the period in which they arise. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Available-for-sale financial instruments are carried at fair value with changes in the fair value charged or credited to other comprehensive income.  Impairment losses relating to an other than temporary impairment are charged to net earnings in the period in which they arise. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Other financial liabilities are initially measured at cost, net of transaction costs, or at amortized cost depending upon the nature of the instrument with any resulting premium or discount from the face value being amortized to income or expense using the effective interest method. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The following is a summary of the financial instruments outstanding and classifications as at December 31, 2009: |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

| Cash and cash equivalents                     | Held-for-trading      |
|-----------------------------------------------|-----------------------|
| Restricted cash                               | Held-for-trading      |
| Accounts receivable                           | Loans and receivables |
| Forward foreign exchange derivative asset     | Held-for-trading      |
| Accounts payable and accrued liabilities      | Other liabilities     |
| Forward foreign exchange derivative liability | Held-for-trading      |
| Notes payable                                 | Other liabilities     |

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (a) | Existing Accounting Policies (continued): |
|--------|-----|-------------------------------------------|

|   | (b) | Adoption of New Accounting Standards: |
|--------|-----|---------------------------------------|

|   | (i) | Goodwill and intangible assets: |
|--------|-----|---------------------------------|

|   | (ii) | Credit risk and fair value of financial assets and financial liabilities: |
|--------|------|---------------------------------------------------------------------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (b) | Adoption of New Accounting Standards (continued): |
|--------|-----|---------------------------------------------------|

|   | (iii) | Financial instruments - disclosures: |
|--------|-------|--------------------------------------|

|   | (c) | Accounting Standards Issued But Not Yet Implemented: |
|--------|-----|------------------------------------------------------|

|   | (i) | Business combinations: |
|--------|-----|------------------------|

|   | (ii) | Consolidated financial statements and non-controlling interests: |
|--------|------|------------------------------------------------------------------|

----

----

| 2. | Significant Accounting Policies (continued): |
|----|----------------------------------------------|

|   | (c) | Accounting Standards Issued But Not Yet Implemented (continued): |
|--------|-----|------------------------------------------------------------------|

|   | (iii) | Financial instruments - recognition and measurement: |
|--------|-------|------------------------------------------------------|

| 3. | Acquisition of Gurupi Project: |
|----|--------------------------------|

| Purchase Price:                                                  |   |   |   |
|------------------------------------------------------------------|--------|--------|--------|
|     3,377,354 common shares issued           |   | $      | 42,453 |   |
|     Transaction costs                        |   |   | 385    |   |
|                                                             |   | $      | 42,838 |   |
| Net Assets acquired:                                             |   |   |   |   |
|     Cash and cash equivalents                |   | $      | 7      |   |
|     Prepaid expenses and sundry assets       |   |   | 3      |   |
|     Mineral exploration projects             |   |   | 50,816 |   |
|     Accounts payable and accrued liabilities |   |   | (28    | ) |
|     Future income taxes                      |   |   | (7,960 | ) |
|                                                             |   | $      | 42,838 |   |
|                                                             |   |   |   |   |

----

----

|   | Inventory is comprised of the following: |
|--------|------------------------------------------|

|                                                   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Raw materials                                          |   | $      | 2,341  |   |   | $      | 1,937 |   |
| Mine operating supplies                                |   |   | 7,718  |   |   |   | 4,188 |   |
| Ore stockpiles                                         |   |   | 8,514  |   |   |   | 4,643 |   |
| Gold in process                                        |   |   | 18,413 |   |   |   | 9,178 |   |
|                                                   |   | $      | 36,986 |   |   | $      | 19,946 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Depletion and amortization costs included in inventory |   |   |   |   |   |   |   |   |
| Ore stockpiles                                         |   | $      | 2,512  |   |   | $      | 1,212 |   |
| Gold in process                                        |   |   | 4,303  |   |   |   | 2,334 |   |
|                                                   |   | $      | 6,815  |   |   | $      | 3,546 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Stock - based compensation costs included in inventory |   |   |   |   |   |   |   |   |
| Ore stockpiles                                         |   | $      | 108    |   |   | $      | 14 |   |
| Gold in process                                        |   |   | 227    |   |   |   | 36 |   |
|                                                   |   | $      | 335    |   |   | $      | 50 |   |

|                                                      |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                      |   |   |   |   |   |   |
| Advances to suppliers                                     |   | $      | 591    |   |   | $      | 488 |   |
| Recoverable taxes (a)                                     |   |   | 51,171 |   |   |   | 27,978 |   |
| Sundry receivables from related parties (b)               |   |   | 418    |   |   |   | 174 |   |
| Call option derivative asset related to notes payable (c) |   |   | -      |   |   |   | 1,367 |   |
| Other                                                     |   |   | 2,707  |   |   |   | 1,508 |   |
|                                                      |   |   | 54,887 |   |   |   | 31,515 |   |
| Less:Long term recoverable taxes (a)                      |   |   | 35,401 |   |   |   | 24,635 |   |
| Sundry receivables from related parties (b)               |   |   | 217    |   |   |   | 162 |   |
| Call option derivative asset related to notes payable (c) |   |   | -      |   |   |   | 1,367 |   |
| Other                                                     |   |   | 219    |   |   |   | - |   |
|                                                      |   |   | 35,837 |   |   |   | 26,164 |   |
| Current portion of prepaid expenses and sundry assets     |   | $      | 19,050 |   |   | $      | 5,351 |   |

----

----

|   | (a) | The Company is required to pay certain taxes in Brazil, based on consumption.  These taxes are recoverable from the Brazilian tax authorities through various methods.  Total recoverable taxes denominated in Brazilian reais (R$) amounted R$89.1 million (2008 - R$64.8 million). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Sundry receivables are due from Prometálica Centro Oeste Mineração Ltda (“PCO”) and Brazilian Resources Inc. (“BZI”) related parties (Notes 17(c) and (d)).  BZI is a founding shareholder of the Company and PCO is controlled by IMS Empreendimentos Ltda (“IMS”), a founding shareholder of the Company. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The call option derivative asset related to an option to redeem the private placement notes at a premium prior to maturity.  The private placement notes were redeemed during November 2009 (Note 11(c)). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | Risk Management Policies: |
|----|---------------------------|

|            |   |                     |   |   |                              |   |
|-----------------|--------|--------------------------|--------|--------|-----------------------------------|--------|
| Settlement Date |   | Amount inthousandsof US$ |   |   | Settlementamount inthousandsof R$ |   |
| 29-Jan-10       |   | $                        | 1,000  |   |                              | R$     | 1,870 |   |
| 29-Jan-10       |   |                     | 1,000  |   |                              |   | 1,902 |   |
| 29-Jan-10       |   |                     | 1,000  |   |                              |   | 1,927 |   |
| 26-Feb-10       |   |                     | 1,000  |   |                              |   | 1,880 |   |
| 26-Feb-10       |   |                     | 1,000  |   |                              |   | 1,912 |   |
| 26-Feb-10       |   |                     | 1,000  |   |                              |   | 1,931 |   |
| 31-Mar-10       |   |                     | 1,000  |   |                              |   | 1,933 |   |
| 31-Mar-10       |   |                     | 2,000  |   |                              |   | 3,883 |   |
| 31-Mar-10       |   |                     | 1,000  |   |                              |   | 1,813 |   |
| 30-Apr-10       |   |                     | 1,000  |   |                              |   | 1,932 |   |
| 30-Apr-10       |   |                     | 2,000  |   |                              |   | 3,902 |   |
| 28-May-10       |   |                     | 2,000  |   |                              |   | 3,920 |   |
| 28-May-10       |   |                     | 1,000  |   |                              |   | 1,826 |   |
| 30-Jun-10       |   |                     | 1,000  |   |                              |   | 1,837 |   |
|            |   | $                        | 17,000 |   |                              | R$     | 32,468 |   |

----

----

| 6. | Risk Management Policies (continued): |
|----|---------------------------------------|

|   | During July 2009 the Company entered into a new forward currency hedging facility.  The Company is not required to hold cash in an escrow account for forward foreign exchange transactions, however cash deposits in the amount of $500,000 plus any mark-to-market loss must be made. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                   |   |   |   |   |   |   |   |   |   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                   |   | 2009   |   |   | 2008   |   |   | 2007   |   |
| Unrealized loss (gain) |   | $      | (3,701 | )      |   | $      | 4,099  |   |   | $ | (972 | ) |
| Realized loss (gain)   |   |   | 1,059  |   |   |   | (1,476 | )      |   |   | (2,718 | ) |
|                   |   | $      | (2,642 | )      |   | $      | 2,623  |   |   | $ | (3,690 | ) |

----

----

| 6. | Risk Management Policies (continued): |
|----|---------------------------------------|

|   | (b) | Financial Instruments: |
|--------|-----|------------------------|

|   | (iii) | Currency risk: |
|--------|-------|----------------|

| Exchange Rates                  | Change for Sensitivity Analysis |   | Impact of change to 2009 Gross Profit less Operating Expenses |   |
|---------------------------------|---------------------------------|--------|---------------------------------------------------------------|--------|
| U.S. dollar per Brazilian reais | 10% change in Brazilian reais   |   | $                                                             | 8,122  |   |
| U.S. dollar per Canadian dollar | 10% change in Canadian dollar   |   | $                                                             | 2,172  |   |

|   | (ii) | Interest rate risk: |
|--------|------|---------------------|

|   | (v) | Price risk: |
|--------|-----|-------------|

----

----

| 6. | Risk Management Policies (continued): |
|----|---------------------------------------|

|   | (vi) | Stock - based compensation risk: |
|--------|------|----------------------------------|

|   | (vii) | Fair value estimation: |
|--------|-------|------------------------|

|   | a. | Level 1 - quoted prices (unadjusted) of identical instruments in active markets that the reporting entity has the ability to access at the measurement date. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Level 2 - inputs are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Level 3 - one or more significant inputs used in a valuation technique are unobservable for the instruments. |
|--------|----|--------------------------------------------------------------------------------------------------------------|

----

----

| 6. | Risk Management Policies (continued): |
|----|---------------------------------------|

| Financial assets          |   | Quoted Prices in Active Market for Identical Asset (Level 1) |    |   | Significant Observable Inputs (Level 2) |   |   | Significant Unobservable Inputs (Level 3) |   |
|---------------------------|--------|-----------------------------------------------------------------------------|---------|--------|----------------------------------------------|--------|--------|------------------------------------------------|--------|
| Cash and cash equivalents |   |                                                                        |    |   |                                         |   |   |                                           |   |
| Cash                      |   | $                                                                           | 62,618  |   |                                         | $      | -      |                                           |   | $ | - |   |
| Cash equivalents          |   |                                                                        | 58,638  |   |                                         |   | -      |                                           |   |   | - |   |
|                      |   |                                                                        | 121,256 |   |                                         |   | -      |                                           |   |   | - |   |
|                      |   |                                                                        |    |   |                                         |   |   |                                           |   |   |   |   |
| Forward contracts         |   |                                                                        | -       |   |                                         |   | 1,280  |                                           |   |   | - |   |

|                                                    |   | 2009                |     |   | 2008            |   |
|---------------------------------------------------------|--------|---------------------|----------|--------|-----------------|--------|
|                                                    |   | Carrying Value |     |   | Fair Value |   |   | Carrying Value |   |   | Fair Value |   |
| Cash and cash equivalents1                              |   | $                   | 121,256  |   |            | $      | 121,256 |   |   | $ | 20,560 |   |   | $ | 20,560 |   |
| Restricted cash1                                        |   |                | 108      |   |            |   | 108 |   |   |   | 3,106 |   |   |   | 3,106 |   |
| Forward contracts2                                      |   |                |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|    Assets                                |   |                | 1,280    |   |            |   | 1,280 |   |   |   | - |   |   |   | - |   |
|    Liabilities                           |   |                | -        |   |            |   | - |   |   |   | (2,421 | ) |   |   | (2,421 | ) |
| Call option derivative asset relating to notes payable3 |   |                | -        |   |            |   | - |   |   |   | 1,367 |   |   |   | 1,367 |   |
| Notes payable4                                          |   |                | (132,150 | )      |            |   | (136,042 | ) |   |   | (74,048 | ) |   |   | (63,160 | ) |
| Accounts payable and accrued liabilities1               |   |                | (22,892  | )      |            |   | (22,892 | ) |   |   | (16,858 | ) |   |   | (16,858 | ) |
| Deferred compensation liabilities5                      |   |                | (8,616   | )      |            |   | (9,936 | ) |   |   | (434 | ) |   |   | (475 | ) |

|   | 1. | Cash and cash equivalents and restricted cash are recorded at their fair values.  Accounts payable and accrued liabilities approximate their fair values due to their immediate or short terms of maturity. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | The call option derivative asset relating to the private placement notes is recorded at fair value.  Fair value of the call feature was measured using the Black-Karasinski model. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | The fair value of the private placement notes was measured using the Black-Karasinski model.  The fair value of the other notes payable was based on their market price, if available.  If a market price is not available then the fair value is determined by discounting the future cash liabilities at the current market rate of interest available to the Company. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. | The fair value of stock appreciation rights (”SAR”) liabilities is measured using the Black-Scholes model and is recognized over the service or vesting period.   The carrying value, measured using intrinsic value, of the Deferred Share Unit (“DSU”) and Restricted Stock Unit (“RSU”) liabilities approximates their fair values. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 7. | Net Smelter Royalty: |
|----|----------------------|

|                                                           |   | 2009   |   |   | 2008   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Prometálica Mineração Ltda. (“PML”) |   | $      | 1,225  |   |   | $      | 1,225 |   |
| Less: Accumulated amortization                                 |   |   | (219   | )      |   |   | (219 | ) |
| Net                                                            |   | $      | 1,006  |   |   | $      | 1,006 |   |

| 8. | Restricted Cash: |
|----|------------------|

----

----

|                      |   |   |    |   |         |   |    |   |   |
|---------------------------|--------|--------|---------|--------|--------------|--------|---------|--------|--------|
|                      |   |   |    |   | 2009         |   |    |   |   |
|                      |   | Cost   |    |   | Accumulated  |   |    | Net    |   |
|                      |   |   |    |   | Amortization |   |    |   |   |
| Processing plant          |   | $      | 13,500  |   |         | $      | (5,866  | )      |   | $ | 7,634 |   |
| Vehicles                  |   |   | 6,225   |   |         |   | (3,056  | )      |   |   | 3,169 |   |
| Equipment                 |   |   | 120,756 |   |         |   | (22,025 | )      |   |   | 98,731 |   |
| Leasehold improvements    |   |   | 426     |   |         |   | (203    | )      |   |   | 223 |   |
| Assets under construction |   |   | 17,055  |   |         |   | -       |   |   |   | 17,055 |   |
| Mining properties         |   |   | 109,922 |   |         |   | (31,405 | )      |   |   | 78,517 |   |
|                      |   | $      | 267,884 |   |         | $      | (62,555 | )      |   | $ | 205,329 |   |

|                      |   |   |    |   |         |   |    |   |   |
|---------------------------|--------|--------|---------|--------|--------------|--------|---------|--------|--------|
|                      |   |   |    |   | 2008         |   |    |   |   |
|                      |   | Cost   |    |   | Accumulated  |   |    | Net    |   |
|                      |   |   |    |   | Amortization |   |    |   |   |
| Processing plant          |   | $      | 12,830  |   |         | $      | (2,729  | )      |   | $ | 10,101 |   |
| Vehicles                  |   |   | 5,497   |   |         |   | (1,868  | )      |   |   | 3,629 |   |
| Equipment                 |   |   | 82,365  |   |         |   | (11,256 | )      |   |   | 71,109 |   |
| Leasehold improvements    |   |   | 275     |   |         |   | (84     | )      |   |   | 191 |   |
| Assets under construction |   |   | 11,330  |   |         |   | -       |   |   |   | 11,330 |   |
| Mining properties         |   |   | 67,691  |   |         |   | (15,629 | )      |   |   | 52,062 |   |
|                      |   | $      | 179,988 |   |         | $      | (31,566 | )      |   | $ | 148,422 |   |

|   | (a) | Mining properties as at December 31, 2009 include the following properties which are in production: |
|--------|-----|-----------------------------------------------------------------------------------------------------|

----

----

| 9. | Property, Plant and Equipment (continued): |
|----|--------------------------------------------|

|   |   |
|--------|--------|

|                             |   |         |   |   |      |   |   |          |   |   |         |   |   |       |   |   |          |   |   |         |   |
|----------------------------------|--------|--------------|--------|--------|-----------|--------|--------|---------------|--------|--------|--------------|--------|--------|------------|--------|--------|---------------|--------|--------|--------------|--------|
|                             |   | Balance      |   |   | Additions |   |   | Reclassify to |   |   | Balance      |   |   | Additions1 |   |   | Reclassify to |   |   | Balance      |   |
|                             |   | December 31, |   |   |      |   |   | PP&E      |   |   | December 31, |   |   |       |   |   | PP&E      |   |   | December 31, |   |
|                             |   | 2007         |   |   |      |   |   |          |   |   | 2008         |   |   |       |   |   |          |   |   | 2009         |   |
| Paciência (a)               |   | $            | 20,147 |   |      | $      | 19,364 |          |   | $      | (28,054      | )      |   | $          | 11,457 |   |          | $      | 8,160  |         |   | $ | (15,912 | ) |   | $ | 3,705 |   |
| Turmalina (b)                    |   |         | 2,320  |   |      |   | 5,226  |          |   |   | -            |   |   |       | 7,546  |   |          |   | 651    |         |   |   | (7,730 | ) |   |   | 467 |   |
| Caeté Expansion Project (c) |   |         | 38,785 |   |      |   | 21,437 |          |   |   | (17          | )      |   |       | 60,205 |   |          |   | 12,162 |         |   |   | - |   |   |   | 72,367 |   |
| Faina and Pontal                 |   |         | 21     |   |      |   | 50     |          |   |   | -            |   |   |       | 71     |   |          |   | 2,317  |         |   |   | - |   |   |   | 2,388 |   |
| Gurupi (d)                       |   |         | -      |   |      |   | -      |          |   |   | -            |   |   |       | -      |   |          |   | 50,816 |         |   |   | - |   |   |   | 50,816 |   |
|                             |   | $            | 61,273 |   |      | $      | 46,077 |          |   | $      | (28,071      | )      |   | $          | 79,279 |   |          | $      | 74,106 |         |   | $ | (23,642 | ) |   | $ | 129,743 |   |

|   | (a) | Paciência Project |
|--------|-----|------------------------|

----

----

|   | (b) | Turmalina |
|--------|-----|-----------|

|   | (c) | Caeté Expansion Project |
|--------|-----|------------------------------|

|   | (d) | Gurupi Project |
|--------|-----|----------------|

----

----

|                           |   |   |   |    |   |   |
|--------------------------------|--------|--------|--------|---------|--------|--------|
|                           |   | 2009   |   |    | 2008   |   |
| Due to Banco Volkswagen (a)    |   | $      | -      |    |   | $      | 123 |   |
| Due to Banco Bradesco (b)(i)   |   |   | -      |    |   |   | 58 |   |
| Due to Banco Bradesco (b)(ii)  |   |   | 96     |    |   |   | 144 |   |
| Due to Banco Bradesco (b)(iii) |   |   | 471    |    |   |   | 585 |   |
| Private placement notes (c)    |   |   | -      |    |   |   | 60,124 |   |
| Due to CVRD (d)                |   |   |   | 11,125  |   |   |   | 11,908 |   |
| Due to Banco Santander (e)(i)  |   |   | -      |    |   |   | 729 |   |
| Due to Banco Santander(e)(ii)  |   |   | -      |    |   |   | 377 |   |
| Convertible notes (f)          |   |   |   | 120,458 |   |   |   | - |   |
|                           |   |   |   | 132,150 |   |   |   | 74,048 |   |
| Less: Current portion          |   |   |   | 5,366   |   |   |   | 4,319 |   |
|                           |   |   | $      | 126,784 |   |   | $ | 69,729 |   |

|                                        |   |     |    |   |   |   |
|---------------------------------------------|--------|----------|---------|--------|--------|--------|
|                                        |   | 2009     |    |   | 2008   |   |
|                                        |   | Carrying |    |   | Fair   |   |   | Carrying |   |   | Fair |   |
|                                        |   | Value    |    |   | Value  |   |   | Value |   |   | Value |   |
| Notes Payable                               |   | $        | 132,150 |   |   | $      | 136,042 |   |   | $ | 74,048 |   |   | $ | 63,160 |   |
|                                        |   |     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal repayments over the next 5 years: |   |     |    |   |   |   |   |   |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2010 |   |   | $ | 5,842 |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2011 |   |   |   | 6,918 |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2012 |   |   |   | - |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2013 |   |   |   | - |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2014 |   |   |   | 165,000 |   |   |   |   |   |
| Total                                       |   |     |    |   |   |   |   |   |   |   | 177,760 |   |   |   |   |   |
| Less: Unamortized discounts                 |   |     |    |   |   |   |   |   |   |   | (45,610 | ) |   |   |   |   |
|                                        |   |     |    |   |   |   |   |   |   | $ | 132,150 |   |   |   |   |   |

|   | (a) | Due to Banco Volkswagen |
|--------|-----|-------------------------|

|   | (b) | Due to Banco Bradesco |
|--------|-----|-----------------------|

|   | (i) | Related to a secured credit facility of R$1.5 million ($648,000) as at December 31, 2008 of which R$137,000 ($58,000) was outstanding December 31, 2008.  The equipment loans bore interest at TJLP (Brazilian government rate) plus 2.8% per annum (9.05% at December 31, 2008) and were repayable over 36 months.  The loans were secured by the equipment purchased. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | (ii) | Relates to secured credit facility of R$167,000 ($96,000) at December 31, 2009 (R$336,000 ($144,000) - December 31, 2008). The equipment loan bears interest at TJLP (Brazilian government rate) plus 1.9% per annum (7.9% at December 31, 2009 and 8.15% at December 31, 2008) and is repayable over 36 months.  The loan is secured by the equipment purchased. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Relates to secured credit facility of R$820,000 ($471,000) at December 31, 2009 (R$1.4 million ($585,000) - December 31, 2008. The equipment loan bears interest at TJLP (Brazilian government rate) plus 3.02% per annum (9.02% at December 31, 2009 and 9.27% at December 31, 2008) and is repayable over 36 months.  The loan is secured by the equipment purchased. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Private placement notes |
|--------|-----|-------------------------|

| Premium paid on redemption                     |   | $      | 4,082  |   |
|------------------------------------------------|--------|--------|--------|--------|
| Interest at 10.5%                              |   |   | 6,964  |   |
| Amortization of discount                       |   |   | 2,559  |   |
| Write off of unamortized discount              |   |   | 8,793  |   |
| Write off of embedded early redemption feature |   |   | 4,027  |   |
|                                           |   | $      | 26,425 |   |

----

----

| 11. | Notes Payable (continued): |
|-----|----------------------------|

|   | (e) | Due to Banco Santander |
|--------|-----|------------------------|

|   | (i) | Related to a secured credit facility of $729,000. The equipment loan bore interest at LIBOR plus 3.85% (5.27% at December 31, 2008) and was repayable on April 17, 2009. The loan was secured by the equipment purchased. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Related to a secured credit facility of $377,000. The equipment loan bore interest at LIBOR plus 3.90% (5.32% at December 31, 2008) and was repayable over 36 months. The loan was secured by the equipment purchased. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Convertible notes |
|--------|-----|-------------------|

----

----

| 12. | Asset Retirement Obligations: |
|-----|-------------------------------|

|                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |   |   |   | 2009   |   |   |   |   |   | 2008   |   |
| Balance, beginning of year                 |   |   |   |   | $      | 8,165  |   |   |   |   |   | $      | 2,975 |   |
| Increase in reclamation obligations        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Sabará (a)    |   | $      | -      |   |   |   |   |   |   | $      | 191    |   |   |   |   |   |
|     Turmalina (b)      |   |   | 3,126  |   |   |   |   |   |   |   | -      |   |   |   |   |   |
|     Paciência (c) |   |   | 1,092  |   |   |   |   |   |   |   | 4,413  |   |   |   |   |   |
|     Caeté (d)     |   |   | -      |   |   |   | 4,218  |   |   |   | 96     |   |   |   | 4,700 |   |
| Reclamation expenditures                   |   |   |   |   |   |   | (328   | )      |   |   |   |   |   |   | - |   |
| Accretion expense                          |   |   |   |   |   |   | 786    |   |   |   |   |   |   |   | 490 |   |
| Balance, end of year                       |   |   |   |   |   |   | 12,841 |   |   |   |   |   |   |   | 8,165 |   |
| Less: current portion                      |   |   |   |   |   |   | 510    |   |   |   |   |   |   |   | 1,337 |   |
|                                       |   |   |   |   |   |   | 12,331 |   |   |   |   |   |   | $ | 6,828 |   |

|   | (a) | Sabará: |
|--------|-----|--------------|

|   | (b) | Turmalina: |
|--------|-----|------------|

|   | (c) | Paciência: |
|--------|-----|-----------------|

|   | (d) | Caeté: |
|--------|-----|-------------|

| The credit adjusted risk free rate at which the estimated future cash flows have been discounted is 10% to 12% and the inflation rate used to determine future expected cost ranges is 3.7% to 6.2% per annum. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1 These figures have not been discounted or adjusted for inflation.  |
|--------|---------------------------------------------------------------------------|

----

----

| 13. | Income Taxes: |
|-----|---------------|

|                                                                   |   |   |   |   |   |   |    |   |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                                                                   |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|                                                                   |   |   |   |   |   |   |    |   |   |
| Expected income tax expense (recovery) using statutory income tax rate |   | $      | 280    |   |   | $      | 93      |   |   | $ | (8,114 | ) |
|                                                                   |   |   |   |   |   |   |    |   |   |   |   |   |
| Increase (decrease) in tax expense resulting from:                     |   |   |   |   |   |   |    |   |   |   |   |   |
|     Foreign exchange                               |   |   | 5,342  |   |   |   | (14,542 | )      |   |   | (824 | ) |
|     Stock based compensation                       |   |   | 138    |   |   |   | 445     |   |   |   | 3,883 |   |
|     Loss on forward sales derivatives              |   |   | -      |   |   |   | 2,170   |   |   |   | 3,910 |   |
|     Non-deductible interest expense                |   |   | 355    |   |   |   | (5      | )      |   |   | 497 |   |
|     Capital gains tax on expired warrants          |   |   | -      |   |   |   | -       |   |   |   | 1 |   |
|     Impact of future changes in enacted tax rates  |   |   | 3,274  |   |   |   | -       |   |   |   | 2,403 |   |
|     Other non-deductible expense                   |   |   | 1,253  |   |   |   | 77      |   |   |   |   |   |
|     Withholding tax on inter-company interest      |   |   | 986    |   |   |   | 1,397   |   |   |   | 915 |   |
|     Valuation allowance                            |   |   | (2,788 | )      |   |   | 14,897  |   |   |   | 2,523 |   |
|     Income tax expense                             |   | $      | 8,840  |   |   | $      | 4,532   |   |   | $ | 5,194 |   |

----

----

|                                                               |   |   |    |   |   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                               |   | 2009   |    |   | 2008   |   |
| Future Tax Assets                                                  |   |   |    |   |   |   |
| Canada                                                             |   |   |    |   |   |   |
|     Non-capital losses (a)                     |   | $      | 9,828   |   |   | $      | 5,109 |   |
|     Stock isssuance costs and financing fees   |   |   | 4,266   |   |   |   | 2,234 |   |
|     Cumulative eligible capital                |   |   | 141     |   |   |   | 141 |   |
|     Property, plant and equipment              |   |   | 111     |   |   |   | - |   |
|     Unrealized loss (gain) on foreign exchange |   |   | 985     |   |   |   | (4,341 | ) |
|                                                               |   |   |    |   |   |   |   |   |
| Brazil                                                             |   |   |    |   |   |   |   |   |
|     Pre-production costs                       |   |   | 280     |   |   |   | 208 |   |
|     Unrealized loss on foreign exchange        |   |   | -       |   |   |   | 19,061 |   |
|     Net smelter royalty amortization           |   |   | 64      |   |   |   | - |   |
|     Non-capital losses (b)                     |   |   | 9,401   |   |   |   | 3,912 |   |
|     Sabara impairment                          |   |   | 1,410   |   |   |   | - |   |
|     Amounts not deductible until paid          |   |   | 3,663   |   |   |   | 1,269 |   |
|                                                               |   |   | 30,148  |   |   |   | 27,593 |   |
|     Valuation allowance                        |   |   | (21,043 | )      |   |   | (23,832 | ) |
|                                                               |   |   | 9,105   |   |   |   | 3,761 |   |
| Future Tax Liabilities                                             |   |   |    |   |   |   |   |   |
| Brazil                                                             |   |   |    |   |   |   |   |   |
|     Acquisition of mineral property            |   |   |    |   |   |   |   |   |
|        Sabara                   |   |   | -       |   |   |   | (19 | ) |
|        Rio de Peixe             |   |   | (611    | )      |   |   | (452 | ) |
|        Gurupi                   |   |   | (7,971  | )      |   |   | - |   |
|     Acquisition of Caete Plant                 |   |   | -       |   |   |   | (10 | ) |
|     Unrealized gain on foreign exchange        |   |   | (7,021  | )      |   |   | - |   |
|     Net smelter royalty amortization           |   |   | -       |   |   |   | (64 | ) |
|     Capitalized pre-stripping cost             |   |   | (5,243  | )      |   |   | (3,088 | ) |
|     Engineering costs capitalized              |   |   | (80     | )      |   |   | (128 | ) |
|                                                               |   |   | (20,926 | )      |   |   | (3,761 | ) |
|     Net future tax liabilities                 |   | $      | (11,821 | )      |   | $      | - |   |

|   | Canada |
|--------|--------|

|   | (a) | The Company has non-capital losses carried forward of approximately $39.3 million that are available for tax purposes. The losses expire as follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   |   |             |   |
|--------|--------|------------------|--------|
| Year   |   | Amount in        |   |
|   |   | Thousands of US$ |   |
| 2010   |   | $                | 2,142  |   |
| 2014   |   |             | 3,572  |   |
| 2015   |   |             | 5,461  |   |
| 2026   |   |             | 1,545  |   |
| 2027   |   |             | 5,785  |   |
| 2028   |   |             | 1,883  |   |
| 2029   |   |             | 18,924 |   |
|   |   | $                | 39,312 |   |

|   | The benefit of the Canadian non-capital loss carry-forwards has not been recognized in future tax assets. |
|--------|-----------------------------------------------------------------------------------------------------------|

|   | Brazil |
|--------|--------|

|   | (b) | The Company has non-capital loss carry-forwards of approximately $27.8 million which can be carried forward indefinitely, however, only 30% of the taxable income in one year can be applied against the loss carry-forward balance. The benefit of the Brazilian non-capital loss carry-forwards has not been recognized in future tax assets. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | Common shares: |
|--------|-----|----------------|

|   | (i) | On March 2, 2009 the Company completed an equity financing underwritten by a syndicate of underwriters and issued 13,915,000 common shares at Cdn.$6.20 per share for gross proceeds of Cdn.$86.3 million ($66.9 million). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | On February 21, 2008 the Company completed an equity financing underwritten by a syndicate of underwriters and issued 8,250,000 common shares at Cdn.$13.40 per share for gross proceeds of Cdn.$110.6 million ($109.6 million). |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In August 2006, Jaguar received approval from the TSX for a normal course issuer bid to purchase up to the lesser of 2,291,655 common shares, being 5% of the issued and outstanding common shares of Jaguar at that time, or the number of common shares equal to a maximum aggregate purchase price of $1 million.  The normal course issuer bid commenced on August 25, 2006 and terminated on August 24, 2007.  During2007 the Company purchased 62,400 shares at an average price of Cdn.$5.80 per common share. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | (a) | Common shares (continued): |
|--------|-----|----------------------------|

|   | (iv) | On December 2, 2009, the Company issued 3,377,354 common shares, valued at $42.5 million on the date of sale, as payment for the 100% equity ownership of MCT, which holds all of the mineral licenses for the Gurupi Project, a gold project located in the state of Maranhão, Brazil (Note 3). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Warrants: |
|--------|-----|-----------|

----

----

|   | (c) | Stock options: |
|--------|-----|----------------|

| Common share options                                      |   | Number |       |   | Weighted Average Exercise Price U.S. |   |   | Weighted Average Exercise Price Cdn. |   |
|-----------------------------------------------------------|--------|--------|------------|--------|-----------------------------------------------------|--------|--------|-----------------------------------------------------|--------|
| Balance, December 31, 2006                                |   |   | 5,269,000  |   |                                                | $      | 1.03   |                                                |   | $ | 4.80 |   |
| Issued during the year                                    |   |   | 2,808,500  |   |                                                |   | -      |                                                |   |   | 7.59 |   |
| Options exercised:                                        |   |   |       |   |                                                |   |   |                                                |   |   |   |   |
|       -exercisable in US$   |   |   | (24,000    | )      |                                                |   | 1.17   |                                                |   |   | - |   |
|       -exercisable in Cdn.$ |   |   | (192,842   | )      |                                                |   | -      |                                                |   |   | 3.74 |   |
| Options expired                                           |   |   | (55,000    | )      |                                                |   | -      |                                                |   |   | 4.51 |   |
| Balance, December 31, 2007                                |   |   | 7,805,658  |   |                                                | $      | 1.00   |                                                |   | $ | 5.85 |   |
| Issued during the year                                    |   |   | 130,000    |   |                                                |   | -      |                                                |   |   | 6.86 |   |
| Options exercised:                                        |   |   |       |   |                                                |   |   |                                                |   |   |   |   |
|       -exercisable in Cdn.$ |   |   | (699,645   | )      |                                                |   | -      |                                                |   |   | 3.83 |   |
| Options expired                                           |   |   | (175,000   | )      |                                                |   | -      |                                                |   |   | 6.36 |   |
| Balance, December 31, 2008                                |   |   | 7,061,013  |   |                                                | $      | 1.00   |                                                |   | $ | 6.06 |   |
| Options exercised:                                        |   |   |       |   |                                                |   |   |                                                |   |   |   |   |
|       -exercisable in US$   |   |   | (135,000   | )      |                                                |   | 1.00   |                                                |   |   | - |   |
|       -exercisable in Cdn.$ |   |   | (2,305,013 | )      |                                                |   | -      |                                                |   |   | 4.69 |   |
| Options expired                                           |   |   | (24,500    | )      |                                                |   | -      |                                                |   |   | 5.47 |   |
| Balance, December 31, 2009                                |   |   | 4,596,500  |   |                                                | $      | -      |                                                |   | $ | 6.76 |   |

----

----

|   | (c) | Stock options (continued): |
|--------|-----|----------------------------|

| Exercise Price     |   | OutstandingDecember 31, 2009 |   | Weighted Average Remaining Life in Years | Number Exercisable |
|-------------------------|--------|------------------------------|--------|---------------------------------------------------------|-------------------------|
|                    |   |                         |   |                                                    |                    |
| $   3.29 | Cdn.   | 40,000                       |   | 0.94                                                    | 40,000                  |
| $   3.47 | Cdn.   | 320,000                      |   | 0.13                                                    | 320,000                 |
| $   3.65 | Cdn.   | 24,000                       |   | 0.19                                                    | 24,000                  |
| $   4.41 | Cdn.   | 50,000                       |   | 1.50                                                    | 50,000                  |
| $   4.62 | Cdn.   | 36,000                       |   | 1.67                                                    | 36,000                  |
| $   5.47 | Cdn.   | 600,000                      |   | 1.36                                                    | 600,000                 |
| $   5.94 | Cdn.   | 940,000                      |   | 2.22                                                    | 940,000                 |
| $   6.40 | Cdn.   | 1,010,000                    |   | 1.92                                                    | 1,010,000               |
| $   6.48 | Cdn.   | 336,500                      |   | 2.69                                                    | 66,500                  |
| $   9.54 | Cdn.   | 1,240,000                    |   | 2.93                                                    | 1,240,000               |
|                    |   | 4,596,500                    |   |                                                    | 4,326,500               |

|                                   |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                   |   |   |   |   |   |   |   |   |   |
| Risk-free interest rate                |   |   | -      |   |   |   | -      |   |   |   | 3.9% - 4.3 | % |
| Expected dividend yield                |   |   | -      |   |   |   | -      |   |   |   | 0.0 | % |
| Expected share price volatility        |   |   | -      |   |   |   | -      |   |   |   | 55.0% - 60.0 | % |
| Expected life of the options           |   |   | -      |   |   |   | -      |   |   | 2.8 - 4.0 years |   |
| Weighted average grant date fair value |   |   | -      |   |   |   | -      |   |   | $ | 4.07 |   |

----

----

|                                                                                       |   |   |    |   |   |   |
|--------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred Stock Units                                                                       |   | 2009   |    |   | 2008   |   |
| Units outstanding, beginning of year                                                       |   |   | 111,737 |   |   |   | - |   |
| Units granted                                                                              |   |   | 62,822  |   |   |   | 111,737 |   |
| Balance outstanding, end of year                                                           |   |   | 174,559 |   |   |   | 111,737 |   |
|                                                                                       |   |   |    |   |   |   |   |   |
| Liability included in deferred compensation liabilities in the consolidated balance sheets |   | $      | 1,984   |   |   | $      | 375 |   |
|                                                                                       |   |   |    |   |   |   |   |   |
| Expense recorded in the consolidated statements of operations and comprehensive loss       |   |   |    |   |   |   |   |   |
|     Stock-based compensation expense                                   |   | $      | 1,439   |   |   | $      | 393 |   |
|     Foreign exchange loss (gain)                                       |   |   | 170     |   |   |   | (18 | ) |
|                                                                                       |   | $      | 1,609   |   |   | $      | 375 |   |

|                                                                                             |   |   |    |   |   |   |
|--------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Restricted Stock Units                                                                           |   | 2009   |    |   | 2008   |   |
| Units outstanding, beginning of the year                                                         |   |   | 313,200 |   |   |   | - |   |
| Units granted                                                                                    |   |   | 395,250 |   |   |   | 313,200 |   |
| Units vested upon termination                                                                    |   |   | (6,900  | )      |   |   | - |   |
| Units cancelled                                                                                  |   |   | (25,650 | )      |   |   | - |   |
| Balance outstanding, end of year                                                                 |   |   | 675,900 |   |   |   | 313,200 |   |
|                                                                                             |   |   |    |   |   |   |   |   |
| Liability included in deferred compensation liabilities in the consolidated balance sheets       |   | $      | 2,305   |   |   | $      | 42 |   |
|                                                                                             |   |   |    |   |   |   |   |   |
| Expense recorded in the consolidated statements of operations and comprehensive loss             |   |   |    |   |   |   |   |   |
|     Production costs                                                         |   | $      | 501     |   |   | $      | 2 |   |
|     Stock-based compensation expense                                         |   |   | 1,449   |   |   |   | 33 |   |
|     Foreign exchange loss                                                    |   |   | 100     |   |   |   | - |   |
|                                                                                             |   | $      | 2,050   |   |   | $      | 35 |   |
|                                                                                             |   |   |    |   |   |   |   |   |
| Expense deferred and included in mineral exploration projects in the consolidated balance sheets |   | $      | 213     |   |   | $      | 7 |   |

----

----

|                                                                                       |   |   |     |   |   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| Stock Appreciation Rights                                                                  |   | 2009   |     |   | 2008   |   |
| Units outstanding, beginning of year                                                       |   |   | 685,000  |   |   |   | - |   |
| Units granted                                                                              |   |   | 685,000  |   |   |   | 685,000 |   |
| Units exercised                                                                            |   |   | (418,331 | )      |   |   | - |   |
| Balance outstanding, end of year                                                           |   |   | 951,669  |   |   |   | 685,000 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Liability included in deferred compensation liabilities in the consolidated balance sheets |   | $      | 4,327    |   |   | $      | 17 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Expense recorded in the consolidated statements of operations and comprehensive loss       |   |   |     |   |   |   |   |   |
|     Stock-based compensation expense - cash                            |   | $      | 3,283    |   |   | $      | - |   |
|     Stock-based compensation expense - non-cash                        |   |   | 4,310    |   |   |   | 17 |   |
|                                                                                       |   | $      | 7,593    |   |   | $      | 17 |   |

|                                                                                           |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                           |   | 2009   |   |   | 2008   |   |   | 2007   |   |
| Numerator                                                                                      |   |   |   |   |   |   |   |   |   |
|     Net loss for the year                                                  |   | $      | (7,992 | )      |   | $      | (4,256 | )      |   | $ | (27,660 | ) |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|        Weighted average number of common shares outstanding |   |   | 76,411 |   |   |   | 62,909 |   |   |   | 53,613 |   |
| Basic and diluted net loss per share                                                           |   | $      | (0.10  | )      |   | $      | (0.07  | )      |   | $ | (0.52 | ) |

----

----

|   | (a) | The Company incurred fees of $1.6 million for the year ended December 31, 2009 (2008 - $719,000, 2007 - $747,000) from IMS Engenharia Mineral Ltda. ("IMSE"), a company held by several officers of the Company, which provides operating services to the Company's Brazilian subsidiaries.  The fees are included in management fees in the statement of operations.   The Company entered into a service agreementwith IMSE to render senior management services.  The agreement will expire on December 31, 2011. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The Company incurred occupancy fees of $180,000 for the year ended December 31, 2009 (2008 - $180,000, 2007 - $120,000) to Brazilian Resources Inc. (“BZI”), a corporate shareholder, for use of administrative offices.  As at December 31, 2009 prepaid expenses and sundry assets includes $126,000 from BZI relating to leasehold improvements paid by the Company (December 31, 2008 - $nil). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The Company recognized rental income of $nil from PML and $nil from PCO for the year ended December 31, 2009 (2008 - $9,000 from PML and $34,000 from PCO, 2007 - $192,000 from PML and $126,000 from PCO) for temporarily idle equipment and the use of administrative offices.  PCO is controlled by IMS, a founding shareholder of the Company.  As at December 31, 2009 prepaid expenses and sundry assets includes$nil from PML and $15,000 from PCO (as at December 31, 2008 - $nil from PML and $12,000 from PCO) (Note 5(b)).  During 2009 the Company received $nil (2008 - $30,000, 2007 - $0.3 million) of royalty income relating to the NSR (Note 7). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | The Company’s subsidiaries MSOL and MTL were required to pay an employment claim of a former employee who performed work for MSOL, then owned by BZI, and other BZI companies.  BZI has guaranteed the amount owed to the Company of R$378,000 ($217,000).  As at December 31, 2009, prepaid expenses and sundry assets include $217,000 receivable from BW Mineração, a wholly owned subsidiary of BZI.  (December31, 2008 - $162,000 (Note 5 (b)). The above related party transactions are in the normal course of operations and have been measured at the exchange amount agreed upon between the related parties. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                           |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   | 2009   |   |   | 2008   |   |   | 2007   |   |
| Equipment purchased on issuing note payable (Note11(a),(b),(e))                |   | $      | -      |   |   | $      | 2,263  |   |   | $ | - |   |
| Transfer of Zone C in return for forgiveness of royalties payable (Note 10(a)) |   | $      | 2,043  |   |   | $      | 452    |   |   | $ | 350 |   |
| Mineral rights purchased on issuing note payable to CVRD Note 11(d))           |   | $      | -      |   |   | $      | 5,494  |   |   | $ | 8,208 |   |
| Mineral rights purchased on issuing common stock (Notes 3, 14(a)(iv))          |   | $      | 39,000 |   |   | $      | -      |   |   | $ | 0 |   |

|              |   |   |   |   |   |   |   |   |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|              |   | 2009   |   |   | 2008   |   |   | 2007   |   |
| Interest paid     |   | $      | 11,450 |   |   | $      | 9,312  |   |   | $ | 8,217 |   |
| Income taxes paid |   | $      | 1,201  |   |   | $      | -      |   |   | $ | - |   |

|   | Cash and cash equivalents include R$100.4 million ($57.6 million) in bank certificates of deposit (2008 - R$415,000 ($177,000)) and $1.0 million in term deposits (2008 - Cdn.$7.5 million ($6.0 million) of cashable guaranteed investment certificates). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During 2009, the Company paid R$2.8 million ($1.2 million) in income taxes in Brazil. |
|--------|---------------------------------------------------------------------------------------|

| 20.     Commitments: |
|------------------------------------------|

----

----

| 20.     Commitments (continued): |
|------------------------------------------------------|

|                                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
|------------------------------------------------------------------|--------|-----------|--------|--------|-------------|--------|--------|-------------|--------|--------|-----------|--------|--------|--------|--------|
| Commitments                                                      |   | Less than |   |   | 1 - 3 years |   |   | 3 - 5 years |   |   | More than |   |   | Total  |   |
|                                                             |   | 1 year    |   |   |        |   |   |        |   |   | 5 years   |   |   |   |   |
|                                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
| Current liabilities                                              |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
|     Accounts payable and accrued liabilities |   | $         | 22,892 |   |        | $      | -      |        |   | $      | -         |   |   | $      | -      |   |   | $ | 22,892 |   |
|     Income taxes payable                     |   |      | 15,641 |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 15,641 |   |
| Notes Payable                                                    |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Principal                                |   |      | 5,842  |   |        |   | 6,918  |        |   |   | 165,000   |   |   |   | -      |   |   |   | 177,760 |   |
|     Interest                                 |   |      | 8,399  |   |        |   | 14,858 |        |   |   | 14,850    |   |   |   | -      |   |   |   | 38,107 |   |
| Operating Lease Agreements                                       |   |      | 20     |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 20 |   |
| Management agreements (a)                                        |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Operations                               |   |      | 1,068  |   |        |   | 595    |        |   |   | -         |   |   |   | -      |   |   |   | 1,663 |   |
| Suppliers agreements                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Mine operations (b)                      |   |      | 1,836  |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 1,836 |   |
|     Drilling (c)                             |   |      | 551    |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 551 |   |
| Asset retirement obligations (d)                                 |   |      | 535    |   |        |   | 886    |        |   |   | 465       |   |   |   | 15,762 |   |   |   | 17,648 |   |
| Total                                                            |   | $         | 56,784 |   |        | $      | 23,257 |        |   | $      | 180,315   |   |   | $      | 15,762 |   |   | $ | 276,118 |   |

|   | (a) | The terms of the management agreements are one to two years (Note 17(a)). |
|--------|-----|---------------------------------------------------------------------------|

|   | (b) | The Company has the right to cancel the mine operations contract with 60 days advance notice.  The amount included in the contractual obligations table represents the amount due within 60 days. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The Company has the right to cancel the drilling contract with 30 days advance notice.  The amount included in the contractual obligations table represents the amount due within 30 days. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | The asset retirement obligations are not adjusted for inflation and are not discounted. |
|--------|-----|-----------------------------------------------------------------------------------------|