----

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

----

|                           | KPMG LLP | Telephone      | (416) 777-8500 |
|---------------------------|----------|----------------|----------------|
| Chartered Accountants     | Fax      | (416) 777-8818 |
| Bay Adelaide Centre       | Internet | www.kpmg.ca    |
| 333 Bay Street Suite 4600 |     |           |
| Toronto ON M5H 2S5        |     |           |
| Canada                    |     |           |

|   | KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG |
|--------|------------------------------------------------------------------------------------|
|   | network of independent member firms affiliated with KPMG International Cooperative |
|   | (“KPMG International”), a Swiss entity.                                |
|   | KPMG Canada provides services to KPMG LLP.                                         |

----

|                           | KPMG LLP | Telephone      | (416) 777-8500 |
|---------------------------|----------|----------------|----------------|
| Chartered Accountants     | Fax      | (416) 777-8818 |
| Bay Adelaide Centre       | Internet | www.kpmg.ca    |
| 333 Bay Street Suite 4600 |     |           |
| Toronto ON M5H 2S5        |     |           |
| Canada                    |     |           |

|   | KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG |
|--------|------------------------------------------------------------------------------------|
|   | network of independent member firms affiliated with KPMG International Cooperative |
|   | (“KPMG International”), a Swiss entity.                                |
|   | KPMG Canada provides services to KPMG LLP.                                         |

----

|                           | KPMG LLP | Telephone      | (416) 777-8500 |
|---------------------------|----------|----------------|----------------|
| Chartered Accountants     | Fax      | (416) 777-8818 |
| Bay Adelaide Centre       | Internet | www.kpmg.ca    |
| 333 Bay Street Suite 4600 |     |           |
| Toronto ON M5H 2S5        |     |           |
| Canada                    |     |           |

|   | KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG |
|--------|------------------------------------------------------------------------------------|
|   | network of independent member firms affiliated with KPMG International Cooperative |
|   | (“KPMG International”), a Swiss entity.                                |
|   | KPMG Canada provides services to KPMG LLP.                                         |

----

|                                                             |           |   |         |     |   |         |   |
|------------------------------------------------------------------|----------------|--------|--------------|----------|--------|--------------|--------|
|                                                             |           |   | December 31, |     |   | December 31, |   |
|                                                             |           |   | 2010         |     |   | 2009         |   |
|                                                             |           |   |         |     |   |         |   |
| Assets                                                           |           |   |         |     |   |         |   |
| Current assets:                                                  |           |   |         |     |   |         |   |
|     Cash and cash equivalents                | Note 17        |   | $            | 39,223   |   |         | $      | 121,256 |   |
|     Inventory                                | Note 3         |   |         | 31,495   |   |         |   | 36,986 |   |
|     Prepaid expenses and sundry assets       | Note 4         |   |         | 24,523   |   |         |   | 19,050 |   |
|     Unrealized foreign exchange gains        | Note 5(a)(ii)  |   |         | 168      |   |         |   | 1,280 |   |
|                                                             |           |   |         | 95,409   |   |         |   | 178,572 |   |
|                                                             |           |   |         |     |   |         |   |   |   |
|     Prepaid expenses and sundry assets       | Note 4         |   |         | 48,582   |   |         |   | 35,837 |   |
|     Net smelter royalty                      | Note 6         |   |         | 1,006    |   |         |   | 1,006 |   |
|     Restricted cash                          | Note 7         |   |         | 908      |   |         |   | 108 |   |
|     Property, plant and equipment            | Note 8         |   |         | 343,363  |   |         |   | 205,329 |   |
|     Mineral exploration projects             | Note 9         |   |         | 90,008   |   |         |   | 129,743 |   |
|                                                             |           |   | $            | 579,276  |   |         | $      | 550,595 |   |
|                                                             |           |   |         |     |   |         |   |   |   |
| Liabilities and Shareholders' Equity                             |           |   |         |     |   |         |   |   |   |
| Current liabilities:                                             |           |   |         |     |   |         |   |   |   |
|     Accounts payable and accrued liabilities |           |   | $            | 27,853   |   |         | $      | 22,892 |   |
|     Notes payable                            | Note 10        |   |         | 26,130   |   |         |   | 5,366 |   |
|     Income taxes payable                     |           |   |         | 16,677   |   |         |   | 15,641 |   |
|     Asset retirement obligations             | Note 11        |   |         | 2,167    |   |         |   | 510 |   |
|     Deferred compensation liability          | Note 14        |   |         | 2,436    |   |         |   | - |   |
|     Other liabilities                        |           |   |         | 704      |   |         |   | - |   |
|                                                             |           |   |         | 75,967   |   |         |   | 44,409 |   |
|                                                             |           |   |         |     |   |         |   |   |   |
|     Notes payable                            | Note 10        |   |         | 141,766  |   |         |   | 126,784 |   |
|     Future income taxes                      | Note 12        |   |         | 12,558   |   |         |   | 11,821 |   |
|     Asset retirement obligations             | Note 11        |   |         | 19,462   |   |         |   | 12,331 |   |
|     Deferred compensation liability          | Note 14        |   |         | 3,816    |   |         |   | 8,616 |   |
|     Other liabilities                        |           |   |         | 497      |   |         |   | 738 |   |
|     Total liabilities                        |           |   |         | 254,066  |   |         |   | 204,699 |   |
|                                                             |           |   |         |     |   |         |   |   |   |
| Shareholders' equity                                             |           |   |         |     |   |         |   |   |   |
|     Common shares                            | Note 13(a)     |   |         | 369,747  |   |         |   | 365,667 |   |
|     Stock options                            | Note 13(c)     |   |         | 13,054   |   |         |   | 14,762 |   |
|     Contributed surplus                      |           |   |         | 42,762   |   |         |   | 42,028 |   |
|     Deficit                                  |           |   |         | (100,353 | )      |         |   | (76,561 | ) |
|                                                             |           |   |         | 325,210  |   |         |   | 345,896 |   |
|     Commitments                              | Notes 5,8,9,19 |   |         |     |   |         |   |   |   |
|     Subsequent events                        | Note 20        |   |         |     |   |         |   |   |   |
|                                                             |           |   | $            | 579,276  |   |         | $      | 550,595 |   |

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

----

|                                                    |             |   |         |       |   |         |   |       |         |   |
|---------------------------------------------------------|------------------|--------|--------------|------------|--------|--------------|--------|------------|--------------|--------|
|                                                    |             |   | Year Ended   |       |   | Year Ended   |   |       | Year Ended   |   |
|                                                    |             |   | December 31, |       |   | December 31, |   |       | December 31, |   |
|                                                    |             |   | 2010         |       |   | 2009         |   |       | 2008         |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |
| Gold sales                                              |             |   | $            | 170,788    |   |         | $      | 140,734    |         |   | $ | 93,657 |   |
| Production costs                                        |             |   |         | (119,124   | )      |         |   | (74,287    | )            |   |   | (53,610 | ) |
| Stock-based compensation                                | Notes 13(c),14   |   |         | (482       | )      |         |   | (600       | )            |   |   | (24 | ) |
| Depletion and amortization                              |             |   |         | (38,762    | )      |         |   | (23,264    | )            |   |   | (12,669 | ) |
| Gross profit                                            |             |   |         | 12,420     |   |         |   | 42,583     |         |   |   | 27,354 |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Operating expenses:                                     |             |   |         |       |   |         |   |       |         |   |   |   |   |
|     Exploration                     |             |   |         | 3,553      |   |         |   | 3,079      |         |   |   | 3,536 |   |
|     Stock-based compensation        | Notes 13(c),14   |   |         | (2,053     | )      |         |   | 10,644     |         |   |   | 1,238 |   |
|     Administration                  |             |   |         | 20,600     |   |         |   | 16,411     |         |   |   | 12,571 |   |
|     Management fees                 | Note 16(a)       |   |         | 1,131      |   |         |   | 1,604      |         |   |   | 854 |   |
|     Amortization                    |             |   |         | 560        |   |         |   | 452        |         |   |   | 264 |   |
|     Accretion expense               | Note 11          |   |         | 1,697      |   |         |   | 786        |         |   |   | 490 |   |
|     Other                           |             |   |         | 5,051      |   |         |   | 2,440      |         |   |   | 379 |   |
|     Total operating expenses        |             |   |         | 30,539     |   |         |   | 35,416     |         |   |   | 19,332 |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Income (loss) before the following                      |             |   |         | (18,119    | )      |         |   | 7,167      |         |   |   | 8,022 |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Loss on forward derivatives                             | Note 5(a)(i)     |   |         | 686        |   |         |   | -          |         |   |   | 318 |   |
| Loss (gain) on forward foreign exchange derivatives     | Note 5(a)(ii)    |   |         | (1,391     | )      |         |   | (2,642     | )            |   |   | 2,623 |   |
| Foreign exchange gain                                   |             |   |         | (1,697     | )      |         |   | (17,307    | )            |   |   | (2,477 | ) |
| Interest expense                                        | Note 10          |   |         | 16,638     |   |         |   | 28,847     |         |   |   | 11,584 |   |
| Interest income                                         |             |   |         | (3,870     | )      |         |   | (4,203     | )            |   |   | (3,850 | ) |
| Gain on disposition of property                         | Notes 9(a),10(b) |   |         | (6,794     | )      |         |   | (2,043     | )            |   |   | (452 | ) |
| Write down on Sabará property                      | Note 8           |   |         | 313        |   |         |   | 3,522      |         |   |   | - |   |
| Other non-operating expenses                            |             |   |         | -          |   |         |   | 145        |         |   |   | - |   |
| Total other expenses                                    |             |   |         | 3,885      |   |         |   | 6,319      |         |   |   | 7,746 |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Income (loss) before income taxes                       |             |   |         | (22,004    | )      |         |   | 848        |         |   |   | 276 |   |
| Income taxes                                            | Note 12          |   |         |       |   |         |   |       |         |   |   |   |   |
|     Current income taxes            |             |   |         | 1,616      |   |         |   | 4,979      |         |   |   | 6,172 |   |
|     Future income taxes (recovered) |             |   |         | 172        |   |         |   | 3,861      |         |   |   | (1,640 | ) |
| Total income taxes                                      |             |   |         | 1,788      |   |         |   | 8,840      |         |   |   | 4,532 |   |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Net loss and comprehensive loss for the year            |             |   |         | (23,792    | )      |         |   | (7,992     | )            |   |   | (4,256 | ) |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Basic and diluted net loss per share                    | Note 15          |   | $            | (0.28      | )      |         | $      | (0.10      | )            |   | $ | (0.07 | ) |
|                                                    |             |   |         |       |   |         |   |       |         |   |   |   |   |
| Weighted average number of common shares outstanding    | Note 15          |   |         | 84,152,914 |   |         |   | 76,410,916 |         |   |   | 62,908,676 |   |

----

|                                                                                                             |    |   |         |     |   |         |   |    |         |   |
|------------------------------------------------------------------------------------------------------------------|---------|--------|--------------|----------|--------|--------------|--------|---------|--------------|--------|
|                                                                                                             |    |   | Year Ended   |     |   | Year Ended   |   |    | Year Ended   |   |
|                                                                                                             |    |   | December 31, |     |   | December 31, |   |    | December 31, |   |
|                                                                                                             |    |   | 2010         |     |   | 2009         |   |    | 2008         |   |
|                                                                                                             |    |   |         |     |   |         |   |    |         |   |
| Cash provided by (used in):                                                                                      |    |   |         |     |   |         |   |    |         |   |
|     Operating activities:                                                                    |    |   |         |     |   |         |   |    |         |   |
|        Net loss and comprehensive loss for the year                           |    |   | $            | (23,792  | )      |         | $      | (7,992  | )            |   | $ | (4,256 | ) |
|        Items not involving cash:                                              |    |   |         |     |   |         |   |    |         |   |   |   |   |
|           Unrealized foreign exchange gain                     |    |   |         | (151     | )      |         |   | (3,227  | )            |   |   | (3,471 | ) |
|           Stock-based compensation                             |    |   |         | (1,571   | )      |         |   | 7,962   |         |   |   | 1,262 |   |
|           Non-cash interest expense                            |    |   |         | 8,098    |   |         |   | 15,320  |         |   |   | 1,982 |   |
|           Accretion of interest revenue                        |    |   |         | (188     | )      |         |   | -       |         |   |   | - |   |
|           Accretion expense                                    |    |   |         | 1,697    |   |         |   | 786     |         |   |   | 490 |   |
|           Future income taxes (recovered)                      |    |   |         | 172      |   |         |   | 3,861   |         |   |   | (1,640 | ) |
|           Depletion and amortization                           |    |   |         | 39,322   |   |         |   | 23,716  |         |   |   | 12,933 |   |
|           Write down on Sabará property                   | Note 8  |   |         | 313      |   |         |   | 3,522   |         |   |   | - |   |
|           Amortization of net smelter royalty                  |    |   |         | -        |   |         |   | -       |         |   |   | 219 |   |
|           Unrealized loss (gain) on foreign exchange contracts |    |   |         | 1,111    |   |         |   | (3,701  | )            |   |   | 4,102 |   |
|           Gain on disposition of property                      |    |   |         | (4,625   | )      |         |   | -       |         |   |   | - |   |
|        Reclamation expenditure                                                |    |   |         | (1,662   | )      |         |   | (328    | )            |   |   | - |   |
|     Change in non-cash operating working capital                                             |    |   |         |     |   |         |   |    |         |   |   |   |   |
|           Inventory                                            |    |   |         | 8,064    |   |         |   | (11,106 | )            |   |   | (4,361 | ) |
|           Prepaid expenses and sundry assets                   |    |   |         | (12,607  | )      |         |   | (13,612 | )            |   |   | (14,200 | ) |
|           Accounts payable and accrued liabilities             |    |   |         | 4,960    |   |         |   | 9,707   |         |   |   | 423 |   |
|           Income taxes payable                                 |    |   |         | 1,036    |   |         |   | 7,015   |         |   |   | 5,107 |   |
|           Deferred compensation liabilities                    |    |   |         | (546     | )      |         |   | -       |         |   |   | - |   |
|                                                                                                             |    |   |         | 19,631   |   |         |   | 31,923  |         |   |   | (1,410 | ) |
|     Financing activities:                                                                    |    |   |         |     |   |         |   |    |         |   |   |   |   |
|        Issuance of common shares, special warrants and warrants, net          |    |   |         | 2,895    |   |         |   | 114,294 |         |   |   | 105,803 |   |
|        Shares purchased for cancellation                                      |    |   |         | -        |   |         |   | -       |         |   |   | (6,381 | ) |
|        Settlement of forward derivatives                                      |    |   |         | -        |   |         |   | -       |         |   |   | (14,500 | ) |
|        Decrease (increase) in restricted cash                                 |    |   |         | (800     | )      |         |   | 2,998   |         |   |   | (4 | ) |
|        Repayment of debt                                                      |    |   |         | (4,158   | )      |         |   | (84,614 | )            |   |   | (18,654 | ) |
|        Increase in debt                                                       |    |   |         | 31,099   |   |         |   | 118,204 |         |   |   | 3,848 |   |
|        Other long term liabilities                                            |    |   |         | 463      |   |         |   | 738     |         |   |   | - |   |
|                                                                                                             |    |   |         | 29,499   |   |         |   | 151,620 |         |   |   | 70,112 |   |
|     Investing activities                                                                     |    |   |         |     |   |         |   |    |         |   |   |   |   |
|        Mineral exploration projects                                           |    |   |         | (29,275  | )      |         |   | (25,200 | )            |   |   | (37,087 | ) |
|        Purchase of property, plant and equipment                              |    |   |         | (102,089 | )      |         |   | (60,300 | )            |   |   | (52,210 | ) |
|        Proceeds from disposition of property                                  |    |   |         | 1,250    |   |         |   | -       |         |   |   | - |   |
|                                                                                                             |    |   |         | (130,114 | )      |         |   | (85,500 | )            |   |   | (89,297 | ) |
|                                                                                                             |    |   |         |     |   |         |   |    |         |   |   |   |   |
| Effect of foreign exchange on non-U.S. dollar cash and cash equivalents                                          |    |   |         | (1,049   | )      |         |   | 2,653   |         |   |   | (4,556 | ) |
| Increase (decrease) in cash and cash equivalents                                                                 |    |   |         | (82,033  | )      |         |   | 100,696 |         |   |   | (25,151 | ) |
| Cash and cash equivalents, beginning of year                                                                     |    |   |         | 121,256  |   |         |   | 20,560  |         |   |   | 45,711 |   |
| Cash and cash equivalents, end of year                                                                           |    |   | $            | 39,223   |   |         | $      | 121,256 |         |   | $ | 20,560 |   |
|                                                                                                             |    |   |         |     |   |         |   |    |         |   |   |   |   |
| Supplemental cash flow information                                                                               | Note 17 |   |         |     |   |         |   |    |         |   |   |   |   |

----

|                                                         |            |   |          |       |   |   |   |    |     |   |   |          |   |   |        |   |   |    |   |       |    |   |
|--------------------------------------------------------------|-----------------|--------|---------------|------------|--------|--------|--------|---------|----------|--------|--------|---------------|--------|--------|-------------|--------|--------|---------|--------|------------|---------|--------|
|                                                         |            |   | Common Shares |       |   |   |   |    | Warrants |   |   | Stock Options |   |   | Contributed |   |   | Deficit |   |       | Total   |   |
|                                                         |            |   |          |       |   |   |   |    |     |   |   |          |   |   |        |   |   |    |   |       | Surplus |   |   |   |   |   |   |   |
|                                                         |            |   | #             |       |   | $      |   |    | #        |   |   | $             |   |   | #           |   |   | $       |   |       | $       |   |   | $ |   |   | $ |   |
|                                                         |            |   |          |       |   |   |   |    |     |   |   |          |   |   |        |   |   |    |   |       |    |   |   |   |   |   |   |   |
| 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 13(a)(ii)  |   |          | 8,250,000  |   |   |   | 103,891 |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 103,891 |   |
| Shares acquired under normal course issuer bid and cancelled | Note 13(a)(iii) |   |          | (647,300   | )      |   |   | (2,481  | )        |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | (3,900 | ) |   |   | (6,381 | ) |
| Exercise of compensation warrants                            |            |   |          | 144,081    |   |   |   | 998     |     |   |   | (144,081      | )      |   |        | (245   | )      |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 753 |   |
| Options granted                                              | Note 13(c)      |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | 130,000    |    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                     |            |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | 916 |   |   |   | - |   |   |   | - |   |   |   | 916 |   |
| Exercise of stock options                                    | Note 13(c)      |   |          | 501,100    |   |   |   | 1,343   |     |   |   | -             |   |   |        | -      |   |    |   | (699,645   | )       |   |   | (1,020 | ) |   |   | - |   |   |   | - |   |   |   | 323 |   |
| Vested options expired upon termination                      | Note 13(c)      |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | (10,000    | )       |   |   | (14 | ) |   |   | 14 |   |   |   | - |   |   |   | - |   |
| Unvested options expired upon termination                    | Note 13(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 9(d)       |   |          | 3,377,354  |   |   |   | 42,454  |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 42,454 |   |
| Public offering                                              | Note 13(a)(i)   |   |          | 13,915,000 |   |   |   | 63,238  |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 63,238 |   |
| Exercise of stock options                                    | Note 13(c)      |   |          | 2,440,013  |   |   |   | 14,908  |     |   |   | -             |   |   |        | -      |   |    |   | (2,440,013 | )       |   |   | (4,714 | ) |   |   | - |   |   |   | - |   |   |   | 10,194 |   |
| Unvested options expired upon termination                    | Note 13(c)      |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | (24,500    | )       |   |   | (47 | ) |   |   | - |   |   |   | - |   |   |   | (47 | ) |
| Stock based compensation                                     |            |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | 464 |   |   |   | - |   |   |   | - |   |   |   | 464 |   |
| Equity component of convertible                              | Note 10(d)      |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | 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 |   |
|                                                         |            |   |          |       |   |   |   |    |     |   |   |          |   |   |        |   |   |    |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |            |   |          |       |   |   |   |    |     |   |   |          |   |   |        |   |   |    |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                   |            |   |          | 83,714,648 |   |   |   | 365,667 |     |   |   | -             |   |   |        | -      |   |    |   | 4,596,500  |    |   |   | 14,762 |   |   |   | 42,028 |   |   |   | (76,561 | ) |   |   | 345,896 |   |
| Exercise of stock options                                    | Note 13(c)      |   |          | 659,000    |   |   |   | 4,080   |     |   |   | -             |   |   |        | -      |   |    |   | (659,000   | )       |   |   | (1,185 | ) |   |   | - |   |   |   | - |   |   |   | 2,895 |   |
| Vested options expired upon termination                      | Note 13(c)      |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | (160,000   | )       |   |   | (734 | ) |   |   | 734 |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                     |            |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | 211 |   |   |   | - |   |   |   | - |   |   |   | 211 |   |
| Net loss                                                     |            |   |          | -          |   |   |   | -       |     |   |   | -             |   |   |        | -      |   |    |   | -          |    |   |   | - |   |   |   | - |   |   |   | (23,792 | ) |   |   | (23,792 | ) |
| Balance, December 31, 2010                                   |            |   |          | 84,373,648 |   |   |   | 369,747 |     |   |   | -             |   |   |        | -      |   |    |   | 3,777,500  |    |   |   | 13,054 |   |   |   | 42,762 |   |   |   | (100,353 | ) |   |   | 325,210 |   |

----

----

| 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: |
|--------|------|------------|

----

----

|   | (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: |
|--------|--------|-------------------------------|

----

----

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

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

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

----

----

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

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

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

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

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

----

----

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

|   | • | 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, 2010: |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

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

----

----

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

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

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

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

|   | (iv) | International Financial Reporting Standards (“IFRS”) |
|--------|------|------------------------------------------------------------------|

----

----

| 3. | Inventory: |
|----|------------|

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

|                                                   |   |   |   |   |   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                   |   | 2010   |   |   | 2009   |   |
|                                                   |   |   |   |   |   |   |   |   |
| Raw materials                                          |   | $      | 3,267  |   |   | $      | 2,341 |   |
| Mine operating supplies                                |   |   | 8,565  |   |   |   | 7,718 |   |
| Ore stockpiles                                         |   |   | 1,653  |   |   |   | 8,514 |   |
| Gold in process                                        |   |   | 18,010 |   |   |   | 18,413 |   |
|                                                   |   | $      | 31,495 |   |   | $      | 36,986 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Depletion and amortization costs included in inventory |   |   |   |   |   |   |   |   |
| Ore stockpiles                                         |   | $      | 443    |   |   | $      | 2,512 |   |
| Gold in process                                        |   |   | 4,726  |   |   |   | 4,303 |   |
|                                                   |   | $      | 5,169  |   |   | $      | 6,815 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Stock - based compensation costs included in inventory |   |   |   |   |   |   |   |   |
| Ore stockpiles                                         |   | $      | 1      |   |   | $      | 108 |   |
| Gold in process                                        |   |   | 54     |   |   |   | 227 |   |
|                                                   |   | $      | 55     |   |   | $      | 335 |   |

----

----

| 4. | Prepaid Expenses and Sundry Assets: |
|----|-------------------------------------|

|                                        |   |   |   |   |   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                        |   | 2010   |   |   | 2009   |   |
|                                        |   |   |   |   |   |   |
| Advances to suppliers                       |   | $      | 1,098  |   |   | $      | 591 |   |
| Recoverable taxes (a)                       |   |   | 65,583 |   |   |   | 51,171 |   |
| Sundry receivables from related parties (b) |   |   | 352    |   |   |   | 418 |   |
| Other (c)                                   |   |   | 6,072  |   |   |   | 2,707 |   |
|                                        |   |   | 73,105 |   |   |   | 54,887 |   |
|                                        |   |   |   |   |   |   |   |   |
| Less:                                       |   |   |   |   |   |   |   |   |
| Long term recoverable taxes (a)             |   |   | 48,344 |   |   |   | 35,401 |   |
| Sundry receivables from related parties (b) |   |   | 227    |   |   |   | 217 |   |
| Other                                       |   |   | 11     |   |   |   | 219 |   |
|                                        |   |   | 48,582 |   |   |   | 35,837 |   |
| Current portion of prepaid expenses         |   |   |   |   |   |   |   |   |
|    and sundry assets         |   | $      | 24,523 |   |   | $      | 19,050 |   |

|   | (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.  At December 31, 2010 total recoverable taxes denominated in Brazilian reais (R$) amounted to R$109.3 million ($65.6 million) (December 31, 2009 - R$89.1 million ($51.2 million)). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Sundry receivables are due from Prometálica Centro Oeste Mineração Ltda (“PCO”) and Brazilian Resources Inc. (“BZI”) related parties (Note 16(c)).  BZI is a founding shareholder of the Company and PCO is controlled by IMS Empreendimentos Ltda (“IMS”), a founding shareholder of the Company. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | CVRD acquired iron mineral rights from the Company valued at $5 million during 2009.  As of December 31, 2010 current prepaid expenses and sundry assets includes $3.6 million receivable from Vale (December 31, 2009 - $nil).  (Note 10(b)) |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | Derivative Financial Instruments: |
|--------|-----|-----------------------------------|

|   | (i) | Forward sales and derivative contracts: |
|--------|-----|-----------------------------------------|

----

----

|   | (ii) | Forward foreign exchange contracts: |
|--------|------|-------------------------------------|

|            |   |         |            |   |       |   |
|-----------------|--------|--------------|-----------------|--------|------------|--------|
| Settlement Date |   | Amount in    |            |   | Settlement |   |
|            |   | thousands of |            |   | amount in  |   |
|            |   | US$          | thousands of R$ |   |
|            |   |         |            |   |       |   |   |   |
| 28-Jan-11       |   | $            | 1,000           |   |       | R$     | 1,746 |   |
| 25-Feb-11       |   |         | 1,000           |   |       |   | 1,735 |   |
| 25-Feb-11       |   |         | 1,000           |   |       |   | 1,769 |   |
| 30-Mar-11       |   |         | 1,000           |   |       |   | 1,745 |   |
| 30-Mar-11       |   |         | 1,000           |   |       |   | 1,780 |   |
|            |   | $            | 5,000           |   |       | R$     | 8,775 |   |

|   | As at December 31, 2010 $800,000 of cash was held on deposit as collateral for a facility for forward foreign exchange transactions (Note 7). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|                   |   |   |   |   |   |   |   |   |   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                   |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized loss (gain) |   | $      | 1,111  |   |   | $      | (3,701 | )      |   | $ | 4,099 |   |
| Realized loss (gain)   |   |   | (2,502 | )      |   |   | 1,059  |   |   |   | (1,476 | ) |
|                   |   | $      | (1,391 | )      |   | $      | (2,642 | )      |   | $ | 2,623 |   |

----

----

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

|   | (i) | Credit risk: |
|--------|-----|--------------|

|   | (ii) | Liquidity risk: |
|--------|------|-----------------|

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

----

----

| Exchange Rates                        | Change for Sensitivity Analysis     | Impact of Change to 2010  Foreign Exchange Gain or Loss                  |
|---------------------------------------|-------------------------------------|------------------------------------------------------------------------------------|
|  U.S. dollar per Brazilian reais |  10% change in Brazilian reais |  $         5,420                 |
|  U.S. dollar per Canadian dollar |  10% change in Canadian dollar |  $            208 |

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

|   | (v) | Commodity price risk: |
|--------|-----|-----------------------|

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

----

----

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

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

|   | • | 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. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                               |   |                                                                             |   |   |                                              |   |   |                                                |   |
|------------------------------------|--------|----------------------------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|--------|-----------------------------------------------------|--------|
| 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             |   | $                                                                                | 26,961 |   |                                              | $      | -      |                                                |   | $ | - |   |
|    Cash equivalents |   |                                                                             | 12,262 |   |                                              |   | -      |                                                |   |   | - |   |
|                               |   |                                                                             | 39,223 |   |                                              |   | -      |                                                |   |   | - |   |
| Restricted cash                    |   |                                                                             | 908    |   |                                              |   |   |                                                |   |   |   |   |
| Forward contracts                  |   |                                                                             | -      |   |                                              |   | 168    |                                                |   |   | - |   |

----

----

|                                  |   |                |     |   |      |   |
|---------------------------------------|--------|---------------------|----------|--------|-----------|--------|
|                                  |   | 2010                |     |   | 2009      |   |
|                                  |   | Carrying Value |     |   | FairValue |   |   | Carrying Value |   |   | Fair Value |   |
|                                  |   |                |     |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents1            |   | $                   | 39,223   |   |      | $      | 39,223 |   |   | $ | 121,256 |   |   | $ | 121,256 |   |
| Restricted cash1                      |   |                | 908      |   |      |   | 908 |   |   |   | 108 |   |   |   | 108 |   |
| Forward contracts assets2             |   |                | 168      |   |      |   | 168 |   |   |   | 1,280 |   |   |   | 1,280 |   |
| Notes payable3                        |   |                | (167,896 | )      |      |   | (151,430 | ) |   |   | (132,150 | ) |   |   | (147,734 | ) |
| Accounts payable and                  |   |                |     |   |      |   |   |   |   |   |   |   |   |   |   |   |
|  accrued  liabilities1 |   |                | (27,853  | )      |      |   | (27,853 | ) |   |   | (22,892 | ) |   |   | (22,892 | ) |
| Deferred compensation                 |   |                |     |   |      |   |   |   |   |   |   |   |   |   |   |   |
|  liabilities4                    |   |                | (6,252   | )      |      |   | (7,271 | ) |   |   | (8,616 | ) |   |   | (9,936 | ) |
| Other liabilities1                    |   |                | (1,201   | )      |      |   | (1,201 | ) |   |   | (738 | ) |   |   | (738 | ) |

|   | 1. | Cash and cash equivalents and restricted cash are recorded at their fair values.  Accounts payable and accrued liabilities and other 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 fair value of the 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 flows at the current market rate of interest available to the Company. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | 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 Stock Unit (“DSU”) and Restricted Stock Unit (“RSU”) liabilities approximates their fair values. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   |   |   |   |   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                           |   | 2010   |   |   | 2009   |   |
|                                                           |   |   |   |   |   |   |   |   |
| Prometálica Mineração Ltda. (“PML”) |   | $      | 1,225  |   |   | $      | 1,225 |   |
| Less: Accumulated amortization                                 |   |   | (219   | )      |   |   | (219 | ) |
| Net                                                            |   | $      | 1,006  |   |   | $      | 1,006 |   |

----

----

| 7. | Restricted Cash: |
|----|------------------|

| 8. | Property, Plant and Equipment: |
|----|--------------------------------|

|                      |   |   |    |   |         |   |     |   |   |
|---------------------------|--------|--------|---------|--------|--------------|--------|----------|--------|--------|
|                      |   |   |    |   | 2010         |   |     |   |   |
|                      |   | Cost   |    |   | Accumulated  |   |     | Net    |   |
|                      |   |   |    |   | Amortization |   |     |   |   |
|                      |   |   |    |   |         |   |     |   |   |   |   |   |
| Processing plants         |   | $      | 13,733  |   |         | $      | (6,786   | )      |   | $ | 6,947 |   |
| Vehicles                  |   |   | 12,683  |   |         |   | (4,792   | )      |   |   | 7,891 |   |
| Equipment                 |   |   | 188,967 |   |         |   | (36,782  | )      |   |   | 152,185 |   |
| Leasehold improvements    |   |   | 2,208   |   |         |   | (378     | )      |   |   | 1,830 |   |
| Assets under construction |   |   | 8,390   |   |         |   | -        |   |   |   | 8,390 |   |
| Mining properties         |   |   | 224,394 |   |         |   | (58,274  | )      |   |   | 166,120 |   |
|                      |   | $      | 450,375 |   |         | $      | (107,012 | )      |   | $ | 343,363 |   |

|                      |   |   |    |   |         |   |    |   |   |
|---------------------------|--------|--------|---------|--------|--------------|--------|---------|--------|--------|
|                      |   |   |    |   | 2009         |   |    |   |   |
|                      |   | Cost   |    |   | Accumulated  |   |    | Net    |   |
|                      |   |   |    |   | Amortization |   |    |   |   |
|                      |   |   |    |   |         |   |    |   |   |   |   |   |
| Processing plants         |   | $      | 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 |   |

----

----

|   | (a) | Mining properties: |
|--------|-----|--------------------|

|   | (b) | Sabará write down: |
|--------|-----|-------------------------|

----

----

| 9. | Mineral Exploration Projects: |
|----|-------------------------------|

|                             |   |   |   |   |      |   |   |        |   |   |    |   |   |      |    |   |        |   |   |   |   |
|----------------------------------|--------|--------|--------|--------|-----------|--------|--------|-------------|--------|--------|---------|--------|--------|-----------|---------|--------|-------------|--------|--------|--------|--------|
| Mineral Exploration Project      |   | 2008   |   |   | Additions |   |   | Reclassify  |   |   | 2009    |   |   | Additions |    |   | Reclassify  |   |   | 2010   |   |
|                             |   |   |   |   |      |   |   | to PP&E |   |   |    |   |   |      |    |   | to PP&E |   |   |   |   |
|                             |   |   |   |   |      |   |   |        |   |   |    |   |   |      |    |   |        |   |   |   |   |   |   |   |   |   |   |   |
| Paciência (a)               |   | $      | 11,457 |   |      | $      | 8,160  |        |   | $      | (15,912 | )      |   | $         | 3,705   |   |        | $      | 6,329  |   |   | $ | - |   |   | $ | 10,034 |   |
| Turmalina (b)                    |   |   | 7,617  |   |      |   | 2,968  |        |   |   | (7,730  | )      |   |      | 2,855   |   |        |   | 4,519  |   |   |   | - |   |   |   | 7,374 |   |
| Caeté Expansion Project (c) |   |   | 60,205 |   |      |   | 12,162 |        |   |   | -       |   |   |      | 72,367  |   |        |   | 14,046 |   |   |   | (69,058 | ) |   |   | 17,355 |   |
| Gurupi (d)                       |   |   | -      |   |      |   | 50,816 |        |   |   | -       |   |   |      | 50,816  |   |        |   | 4,429  |   |   |   | - |   |   |   | 55,245 |   |
|                             |   | $      | 79,279 |   |      | $      | 74,106 |        |   | $      | (23,642 | )      |   | $         | 129,743 |   |        | $      | 29,323 |   |   | $ | (69,058 | ) |   | $ | 90,008 |   |

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

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

----

----

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

|   | (d) | 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 |   |

----

----

| 10. | Notes Payable: |
|-----|----------------|

|                           |   |   |    |   |   |   |
|--------------------------------|--------|--------|---------|--------|--------|--------|
|                           |   | 2010   |    |   | 2009   |   |
|                           |   |   |    |   |   |   |   |   |
| Due to Banco Bradesco (a)(i)   |   | $      | -       |   |   | $      | 96 |   |
| Due to Banco Bradesco (a)(ii)  |   |   | 164     |   |   |   | 471 |   |
| Due to Banco Bradesco (a)(iii) |   |   | 514     |   |   |   | - |   |
| Due to Banco Bradesco (a)(iv)  |   |   | 657     |   |   |   | - |   |
| Due to Banco Bradesco (a)(v)   |   |   | 3,000   |   |   |   | - |   |
| Due to Banco Bradesco (a)(vi)  |   |   | 6,000   |   |   |   | - |   |
| Due to Banco Bradesco (a)(vii) |   |   | 5,000   |   |   |   | - |   |
| Due to CVRD (b)                |   |   | 7,968   |   |   |   | 11,125 |   |
| Due to Banco Safra (c)(i)      |   |   | 3,211   |   |   |   | - |   |
| Due to Banco Safra (c)(ii)     |   |   | 3,000   |   |   |   | - |   |
| Convertible notes (d)          |   |   | 128,555 |   |   |   | 120,458 |   |
| Due to Banco Itau (e)(i)       |   |   | 1,498   |   |   |   | - |   |
| Due to Banco Itau (e)(ii)      |   |   | 2,379   |   |   |   | - |   |
| Due to Banco Itau (e)(iii)     |   |   | 3,000   |   |   |   | - |   |
| Due to Banco Itau (e)(iv)      |   |   | 2,950   |   |   |   | - |   |
|                           |   |   | 167,896 |   |   |   | 132,150 |   |
| Less: Current portion          |   |   | 26,130  |   |   |   | 5,366 |   |
|                           |   | $      | 141,766 |   |   | $      | 126,784 |   |

|                                        |   |     |    |   |   |   |    |     |   |   |    |   |
|---------------------------------------------|--------|----------|---------|--------|--------|--------|---------|----------|--------|--------|---------|--------|
|                                        |   | 2010     |    |   |   |   |    | 2009     |   |   |    |   |
|                                        |   | Carrying |    |   | Fair   |   |    | Carrying |   |   | Fair    |   |
|                                        |   | Value    |    |   | Value  |   |    | Value    |   |   | Value   |   |
|                                        |   |     |    |   |   |   |    |     |   |   |    |   |   |   |   |   |
| Notes Payable                               |   | $        | 167,896 |   |   | $      | 151,430 |     |   | $      | 132,150 |   |   | $ | 147,734 |   |
| Principal repayments over the next 5 years: |   |     |    |   |   |   |    |     |   |   |    |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2011    |     |   | $      | 26,391  |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2012    |     |   |   | 11,321  |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2013    |     |   |   | 2,301   |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2014    |     |   |   | 165,187 |   |   |   |   |   |
|                                        |   |     |    |   |   |   | 2015    |     |   |   | 188     |   |   |   |   |   |
| Total                                       |   |     |    |   |   |   |    |     |   |   | 205,388 |   |   |   |   |   |
| Less: Unamortized discounts                 |   |     |    |   |   |   |    |     |   |   | (37,492 | )      |   |   |   |   |
|                                        |   |     |    |   |   |   |    |     |   | $      | 167,896 |   |   |   |   |   |

----

----

|   | (a) | Due to Banco Bradesco: |
|--------|-----|------------------------|

|   | (i) | Relates to secured credit facility of R$167,000 ($96,000) at December 31, 2009. The equipment loan bore interest at TJLP (Brazilian government rate) plus 1.9% per annum (7.9% at December 31, 2009) and was repayable over 36 months.  Security was provided by the equipment purchased. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Relates to secured credit facility of R$273,000 ($164,000) at December 31, 2010 (R$820,000 ($471,000) - December 31, 2009). The equipment loan bears interest at TJLP (Brazilian government rate) plus 3.02% per annum (9.02% at December 31, 2010 and December 31, 2009) and is repayable over 36 months.  Security was provided by the equipment purchased. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Relates to notes payable at 4.5% per annum with security provided by equipment and by personal guarantees by certain directors of MSOL.  The notes mature June 2013 and are repayable over 30 months commencing January 2011. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Relates to note payable at 6.35% per annum with security provided by equipment, maturing August 2015. The notes are payable in seven semi-annual payments commencing August 2012. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Relates to a promissory note at 2.96% per annum with security provided by future gold sales, payable at the maturity date of February 2011. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | Relates to two promissory notes at 3.0% per annum with security provided by future gold sales, payable at the maturity date of August 2011. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Relates to two promissory notes at 3.0% per annum with security provided by future gold sales, payable at the maturity date of November 2011. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Due to CVRD: |
|--------|-----|--------------|

----

----

|   | (c) | Due to Banco Safra: |
|--------|-----|---------------------|

|   | (i) | Relates to a note payable at 6.0% per annum with security provided by equipment, maturing February 2013.  The note is payable over 30 months which commenced October 2010. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Relates to a promissory note at 3.55% per annum with security provided by future gold sales, payable at the maturity date of February 2011. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Convertible notes: |
|--------|-----|--------------------|

|   | (e) | Due to Banco Itau: |
|--------|-----|--------------------|

|   | (i) | Relates to two notes payable at 4.5% per annum with security provided by equipment, maturing April 2013. The notes are payable over 30 months which commenced December 2010. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Relates to two notes payable at 5.0% per annum with security provided by equipment. $1.7 million is repayable over 31 months commencing in March 2011, maturing July 2013.  $649,000 is payable over 31 months commencing March 2011, maturing August 2013. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Relates to two promissory notes at 3.0% per annum with security provided by future gold sales, payable at the maturity date of December 2011. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Relates to a note payable at 5.0% per annum with security provided by equipment, maturing October 2013.  The note is payable over 30 months commencing May 2011. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 11. | Asset Retirement Obligations: |
|-----|-------------------------------|

|                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |   |   |   | 2010   |   |   |   |   |   | 2009   |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning of year                 |   |   |   |   | $      | 12,841 |   |   |   |   |   | $      | 8,165 |   |
| Increase in reclamation obligations        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Sabará (a)    |   | $      | 410    |   |   |   |   |   |   | $      | -      |   |   |   |   |   |
|     Turmalina (b)      |   |   | 1,274  |   |   |   |   |   |   |   | 3,126  |   |   |   |   |   |
|     Paciência (c) |   |   | 534    |   |   |   |   |   |   |   | 1,092  |   |   |   |   |   |
|     Caeté (d)     |   |   | 6,535  |   |   |   | 8,753  |   |   |   | -      |   |   |   | 4,218 |   |
| Reclamation expenditures                   |   |   |   |   |   |   | (1,662 | )      |   |   |   |   |   |   | (328 | ) |
| Accretion expense                          |   |   |   |   |   |   | 1,697  |   |   |   |   |   |   |   | 786 |   |
| Balance, end of year                       |   |   |   |   |   |   | 21,629 |   |   |   |   |   |   |   | 12,841 |   |
| Less: current portion                      |   |   |   |   |   |   | 2,167  |   |   |   |   |   |   |   | 510 |   |
|                                       |   |   |   |   |   | $      | 19,462 |   |   |   |   |   |   | $ | 12,331 |   |

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

|   | The Company expects to spend approximately $1.5 million1 between 2011 and 2015 to reclaim land that has been disturbed as a result of mining activity. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|---------------------------------------------------------------------|

----

----

| 12. | Income Taxes: |
|-----|---------------|

|                                                                   |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                   |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |
| Expected income tax expense (recovery) using statutory income tax rate |   | $      | (6,821 | )      |   | $      | 280    |   |   | $ | 93 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in tax expense resulting from:                     |   |   |   |   |   |   |   |   |   |   |   |   |
|     Foreign exchange                               |   |   | (899   | )      |   |   | 5,342  |   |   |   | (14,542 | ) |
|     Stock based compensation                       |   |   | 65     |   |   |   | 138    |   |   |   | 445 |   |
|     Loss on forward sales derivatives              |   |   | -      |   |   |   | -      |   |   |   | 2,170 |   |
|     Non-deductible interest expense                |   |   | 303    |   |   |   | 355    |   |   |   | (5 | ) |
|     Impact of future changes in enacted tax rates  |   |   | 51     |   |   |   | 3,274  |   |   |   | - |   |
|     Other non-deductible expense                   |   |   | 4,879  |   |   |   | 1,253  |   |   |   | 77 |   |
|     Withholding tax on inter-company interest      |   |   | 958    |   |   |   | 986    |   |   |   | 1,397 |   |
|     Valuation allowance                            |   |   | 3,252  |   |   |   | (2,788 | )      |   |   | 14,897 |   |
|     Income tax expense                             |   | $      | 1,788  |   |   | $      | 8,840  |   |   | $ | 4,532 |   |

----

----

|                                                             |   |   |    |   |   |   |
|------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                             |   | 2010   |    |   | 2009   |   |
|                                                             |   |   |    |   |   |   |
| Future Tax Assets                                                |   |   |    |   |   |   |
| Canada                                                           |   |   |    |   |   |   |
|     Non-capital losses (a)                   |   | $      | 12,193  |   |   | $      | 9,828 |   |
|     Stock isssuance costs and financing fees |   |   | 2,665   |   |   |   | 4,266 |   |
|     Cumulative eligible capital              |   |   | 149     |   |   |   | 141 |   |
|     Property, plant and equipment            |   |   | 209     |   |   |   | 111 |   |
|     Unrealized loss on foreign exchange      |   |   | 2,081   |   |   |   | 985 |   |
|                                                             |   |   |    |   |   |   |   |   |
| Brazil                                                           |   |   |    |   |   |   |   |   |
|     Pre-production costs                     |   |   | 754     |   |   |   | 280 |   |
|     Net smelter royalty amortization         |   |   | 65      |   |   |   | 64 |   |
|     Non-capital losses (b)                   |   |   | 18,517  |   |   |   | 9,401 |   |
|     Impairments                              |   |   | 1,854   |   |   |   | 1,410 |   |
|     Amounts not deductible until paid        |   |   | 5,298   |   |   |   | 3,663 |   |
|                                                             |   |   |    |   |   |   |   |   |
|                                                             |   |   | 43,786  |   |   |   | 30,148 |   |
|     Valuation allowance                      |   |   | (24,298 | )      |   |   | (21,043 | ) |
|                                                             |   |   |    |   |   |   |   |   |
|                                                             |   |   | 19,488  |   |   |   | 9,105 |   |
|                                                             |   |   |    |   |   |   |   |   |
| Future Tax Liabilities                                           |   |   |    |   |   |   |   |   |
| Brazil                                                           |   |   |    |   |   |   |   |   |
|     Acquisition of mineral property          |   |   |    |   |   |   |   |   |
|        Rio de Peixe           |   |   | (638    | )      |   |   | (611 | ) |
|        Gurupi                 |   |   | (8,362  | )      |   |   | (7,971 | ) |
|     Unrealized gain on foreign exchange      |   |   | (12,511 | )      |   |   | (7,021 | ) |
|     Capitalized pre-stripping costs          |   |   | (10,470 | )      |   |   | (5,243 | ) |
|     Engineering costs capitalized            |   |   | (64     | )      |   |   | (80 | ) |
|                                                             |   |   |    |   |   |   |   |   |
|                                                             |   |   | (32,046 | )      |   |   | (20,926 | ) |
|                                                             |   |   |    |   |   |   |   |   |
| Net future tax liabilities                                       |   | $      | (12,558 | )      |   | $      | (11,821 | ) |

----

----

|   | (a) | Canada: |
|--------|-----|---------|

|   |   |   |   |
|--------|--------|--------|--------|
| Year   |   | US$    |   |
|   |   |   |   |   |
| 2014   |   |   | 3,774  |   |
| 2015   |   |   | 5,771  |   |
| 2026   |   |   | 1,633  |   |
| 2027   |   |   | 6,113  |   |
| 2028   |   |   | 1,989  |   |
| 2029   |   |   | 20,008 |   |
| 2030   |   |   | 9,485  |   |
|   |   | $      | 48,773 |   |

|   | (b) | Brazil: |
|--------|-----|---------|

| 13. | Capital Stock: |
|-----|----------------|

|   | (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 June 2008, the Company received approval from the TSX for an amendment to the prior normal course issuer bid to purchase additional shares up to the lesser of 2,242,924 common shares, or the number of common shares equal to a maximum aggregate purchase price of Cdn.$10.0 million.  During 2008 the Company purchased 647,300 shares at an average price of Cdn.$9.98 per common share. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | (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. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

----

|                              |   |   |       |   |                                      |   |   |                                 |   |
|-----------------------------------|--------|--------|------------|--------|-------------------------------------------|--------|--------|--------------------------------------|--------|
| Common share options              |   | Number |       |   | Weighted Average Exercise Price U.S. |   |   | Weighted Average Exercise Price Cdn. |   |
|                              |   |   |       |   |                                      |   |   |                                 |   |   |   |   |
| 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 |   |
| Options exercised:                |   |   |       |   |                                      |   |   |                                 |   |   |   |   |
| -exercisable in Cdn.$             |   |   | (659,000   | )      |                                      |   | -      |                                 |   |   | 4.54 |   |
| Expired                           |   |   | (160,000   | )      |                                      |   | -      |                                 |   |   | 9.35 |   |
| Balance, December 31, 2010        |   |   | 3,777,500  |   |                                      | $      | -      |                                 |   | $ | 7.03 |   |

|                    |   |                          |   |                                     |   |               |
|-------------------------|--------|-------------------------------|--------|------------------------------------------|--------|--------------------|
| Exercise Price          |   | Outstanding December 31, 2010 |   | Weighted Average Remaining Life in Years |   | Number Exercisable |
|                    |   |                          |   |                                     |   |               |
| $   4.41 | Cdn.   | 25,000                        |   | 0.50                                     |   | 25,000             |
| $   4.62 | Cdn.   | 36,000                        |   | 0.67                                     |   | 36,000             |
| $   5.47 | Cdn.   | 550,000                       |   | 0.36                                     |   | 550,000            |
| $   5.94 | Cdn.   | 940,000                       |   | 1.22                                     |   | 940,000            |
| $   6.40 | Cdn.   | 810,000                       |   | 0.92                                     |   | 810,000            |
| $   6.48 | Cdn.   | 326,500                       |   | 1.69                                     |   | 326,500            |
| $   9.54 | Cdn.   | 1,090,000                     |   | 1.93                                     |   | 1,090,000          |
|                    |   | 3,777,500                     |   |                                     |   | 3,777,500          |

----

----

| 14. | Long- Term Incentive Plans: |
|-----|-----------------------------|

|   | (a) | Deferred Share Units |
|--------|-----|----------------------|

|                                                                                                               |   |   |    |   |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred Stock Units                                                                                               |   | 2010   |    |   | 2009   |   |
|                                                                                                               |   |   |    |   |   |   |   |   |
|     Units outstanding, beginning of period                                                     |   |   | 174,559 |   |   |   | 111,737 |   |
|     Units granted                                                                              |   |   | 46,668  |   |   |   | 62,822 |   |
|     Balance outstanding, end of period                                                         |   |   | 221,227 |   |   |   | 174,559 |   |
|                                                                                                               |   |   |    |   |   |   |   |   |
|     Liability included in deferred compensation liabilities in the consolidated balance sheets |   | $      | 1,518   |   |   | $      | 1,984 |   |
|                                                                                                               |   |   |    |   |   |   |   |   |
|     Expense recorded in the consolidated statements of operations and comprehensive loss       |   |   |    |   |   |   |   |   |
|        Stock-based compensation expense (recovery)                              |   | $      | (526    | )      |   | $      | 1,439 |   |
|        Foreign exchange loss                                                    |   |   | 60      |   |   |   | 170 |   |
|                                                                                                               |   | $      | (466    | )      |   | $      | 1,609 |   |

----

----

|   | (b) | Restricted Stock Units |
|--------|-----|------------------------|

|                                                                                                                     |   |   |    |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Restricted Stock Units                                                                                                   |   | 2010   |    |   | 2009   |   |
|                                                                                                                     |   |   |    |   |   |   |   |   |
|     Units outstanding, beginning of period                                                           |   |   | 675,900 |   |   |   | 313,200 |   |
|     Units granted                                                                                    |   |   | 251,425 |   |   |   | 395,250 |   |
|     Units vested upon termination                                                                    |   |   | (84,700 | )      |   |   | (6,900 | ) |
|     Units vested upon time vesting                                                                   |   |   | (4,200  | )      |   |   | - |   |
|     Units cancelled                                                                                  |   |   | (34,300 | )      |   |   | (25,650 | ) |
|     Balance outstanding, end of period                                                               |   |   | 804,125 |   |   |   | 675,900 |   |
|                                                                                                                     |   |   |    |   |   |   |   |   |
|     Liability included in deferred compensation liabilities in the consolidated balance sheets       |   |   |    |   |   |   |   |   |
|        Current portion                                                                |   | $      | 1,348   |   |   | $      | - |   |
|        Long term portion                                                              |   |   | 1,567   |   |   |   | 2,305 |   |
|                                                                                                                     |   | $      | 2,915   |   |   | $      | 2,305 |   |
|                                                                                                                     |   |   |    |   |   |   |   |   |
|     Expense recorded in the consolidated statements of operations and comprehensive loss             |   |   |    |   |   |   |   |   |
|        Production costs                                                               |   | $      | 413     |   |   | $      | 501 |   |
|        Stock-based compensation expense - cash                                        |   |   | 546     |   |   |   | - |   |
|        Stock-based compensation expense                                               |   |   | 344     |   |   |   | 1,449 |   |
|        Foreign exchange loss                                                          |   |   | 111     |   |   |   | 100 |   |
|                                                                                                                     |   | $      | 1,414   |   |   | $      | 2,050 |   |
|     Expense deferred and included in mineral exploration projects in the consolidated balance sheets |   | $      | 28      |   |   | $      | 213 |   |

----

----

|   | (c) | Stock Appreciation Rights |
|--------|-----|---------------------------|

|                                                                                                               |   |   |      |   |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Stock Appreciation Rights                                                                                          |   | 2010   |      |   | 2009   |   |
|                                                                                                               |   |   |      |   |   |   |   |   |
|     Units outstanding, beginning of period                                                     |   |   | 951,669   |   |   |   | 685,000 |   |
|     Units granted                                                                              |   |   | 855,100   |   |   |   | 685,000 |   |
|     Units exercised                                                                            |   |   | -         |   |   |   | (418,331 | ) |
|     Balance outstanding, end of period                                                         |   |   | 1,806,769 |   |   |   | 951,669 |   |
|                                                                                                               |   |   |      |   |   |   |   |   |
|     Liability included in deferred compensation liabilities in the consolidated balance sheets |   |   |      |   |   |   |   |   |
|        Current portion                                                          |   | $      | 1,088     |   |   | $      | - |   |
|        Long term portion                                                        |   |   | 731       |   |   |   | 4,327 |   |
|                                                                                                               |   | $      | 1,819     |   |   | $      | 4,327 |   |
|                                                                                                               |   |   |      |   |   |   |   |   |
|     Expense recorded in the consolidated statements of operations and comprehensive loss       |   |   |      |   |   |   |   |   |
|        Stock-based compensation expense - cash                                  |   | $      | -         |   |   | $      | 3,283 |   |
|        Stock-based compensation expense (recovery) - non-cash                   |   |   | (2,508    | )      |   |   | 4,310 |   |
|                                                                                                               |   | $      | (2,508    | )      |   | $      | 7,593 |   |

|   | (d) | Cliff Share Appreciation Rights |
|--------|-----|---------------------------------|

----

----

| 15. | Basic and Diluted Net Loss per Share: |
|-----|---------------------------------------|

|                                                                                           |   |   |    |   |   |   |   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
|                                                                                           |   | 2010   |    |   | 2009   |   |   | 2008   |   |
|                                                                                           |   |   |    |   |   |   |   |   |   |
| Numerator                                                                                      |   |   |    |   |   |   |   |   |   |
|     Net loss for the year                                                  |   | $      | (23,792 | )      |   | $      | (7,992 | )      |   | $ | (4,256 | ) |
|                                                                                           |   |   |    |   |   |   |   |   |   |   |   |   |
| Denominator                                                                                    |   |   |    |   |   |   |   |   |   |   |   |   |
|        Weighted average number of common shares outstanding |   |   | 84,153  |   |   |   | 76,411 |   |   |   | 62,909 |   |
| Basic and diluted net loss per share                                                           |   | $      | (0.28   | )      |   | $      | (0.10  | )      |   | $ | (0.07 | ) |

|                                       |   |    |   |   |    |   |   |   |   |
|--------------------------------------------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
| Options and warrants and                   |   | 2010    |   |   | 2009    |   |   | 2008   |   |
| convertible notes considered anti-         |   |    |   |   |    |   |   |   |   |
| dilutive                                   |   |    |   |   |    |   |   |   |   |
|                                       |   |    |   |   |    |   |   |   |   |   |
| Warrants                                   |   | ‐ |   |   | ‐ |   |   |   | 26     |   |
| Options                                    |   |    | 4,187  |   |    |   | 5,829  |   |   |   | 7,433 |   |
| 4.5% Senior convertible notes (Note 10(d)) |   |    | 12,941 |   |    |   | 3,774  |   |   | ‐ |   |
| Total                                      |   |    | 17,128 |   |    |   | 9,603  |   |   |   | 7,459 |   |

----

----

| 16. | Related Party Transactions: |
|-----|-----------------------------|

|   | (a) | The Company incurred fees of $1.1 million for the year ended December 31, 2010 (2009 - $1.6 million, 2008 - $719,000) from IMS Engenharia Mineral Ltda. ("IMSE"), a company held by two officers of the Company, with which the Company entered into a service agreement with IMSE to render senior management services.  The fees are included in management fees in the statement of operations.   The Company entered into a service agreement with 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, 2010 (2009 - $180,000, 2008 - $180,000) to Brazilian Resources Inc. (“BZI”), a corporate shareholder, for use of administrative offices.  As at December 31, 2010 prepaid expenses and sundry assets includes $70,000 from BZI relating to leasehold improvements paid by the Company (December 31, 2009 - $126,000). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | On August 11, 2008, PML filed a judicial restructuring in Belo Horizonte, state of Minas Gerais, Brazil.  At this time the financial impact of this action is indeterminate.  Prior to the filing, the primary shareholders of PML, BZI and IMS, provided a guarantee of PML’s obligation to Mineração Serras do Oeste Ltda (“MSOL”), a 100% owned subsidiary of the Company.  This guarantee will ensure the recovery of the NSR due from PML if PML is unable to pay the Company.  As at December 31, 2010 the amount of the obligation is approximately $1.0 million (Note 6). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 ($227,000).  As at December 31, 2010, prepaid expenses and sundry assets include $227,000 receivable from BW Mineração, a wholly owned subsidiary of BZI.  (December 31, 2009 - $217,000) (Note 4 (b)). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 17. | Supplemental Cash Flow Information: |
|-----|-------------------------------------|

|                                                     |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                     |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|                                                     |   |   |   |   |   |   |   |   |   |
| Equipment purchased on issuing note                      |   |   |   |   |   |   |   |   |   |
|     payable (Note10(a)(i)(ii)(iii))  |   | $      | 505    |   |   | $      | -      |   |   | $ | 2,263 |   |
| Transfer of Zone C in return for forgiveness             |   |   |   |   |   |   |   |   |   |   |   |   |
|     of royalties payable (Note 9(a)) |   | $      | 1,765  |   |   | $      | 2,043  |   |   | $ | 452 |   |
| Mineral rights purchased on issuing note                 |   |   |   |   |   |   |   |   |   |   |   |   |
|     payable to CVRD Note 11(b))      |   | $      | -      |   |   | $      | -      |   |   | $ | 5,494 |   |
| Mineral rights purchased on issuing                      |   |   |   |   |   |   |   |   |   |   |   |   |
|     common stock (Notes 13(a)(iv))   |   | $      | -      |   |   | $      | 39,000 |   |   | $ | - |   |

|              |   |   |   |   |   |   |   |   |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|              |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|              |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest paid     |   | $      | 9,172  |   |   | $      | 11,450 |   |   | $ | 9,312 |   |
| Income taxes paid |   | $      | -      |   |   | $      | 1,201  |   |   | $ | - |   |

| 18. | Capital Disclosures: |
|-----|----------------------|

----

----

| 19. | Commitments: |
|-----|--------------|

|                                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
|------------------------------------------------------------------|--------|-----------|--------|--------|-------------|--------|--------|-------------|--------|--------|-----------|--------|--------|--------|--------|
| Commitments                                                      |   | Less than |   |   | 1 - 3 years |   |   | 3 - 5 years |   |   | More than |   |   | Total  |   |
|                                                             |   | 1 year    |   |   |        |   |   |        |   |   | 5 years   |   |   |   |   |
|                                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
| Current liabilities                                              |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |
|     Accounts payable and accrued liabilities |   | $         | 27,853 |   |        | $      | -      |        |   | $      | -         |   |   | $      | -      |   |   | $ | 27,853 |   |
|     Income taxes payable                     |   |      | 16,677 |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 16,677 |   |
|     Other liabilities                        |   |      | 704    |   |        |   | 497    |        |   |   | -         |   |   |   | -      |   |   |   | 1,201 |   |
| Notes payable                                                    |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Principal                                |   |      | 26,391 |   |        |   | 13,622 |        |   |   | 165,375   |   |   |   | -      |   |   |   | 205,388 |   |
|     Interest                                 |   |      | 9,355  |   |        |   | 15,499 |        |   |   | 7,462     |   |   |   | -      |   |   |   | 32,316 |   |
| Operating lease agreements                                       |   |      | 201    |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 201 |   |
| Management agreements (a)                                        |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Operations                               |   |      | 595    |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 595 |   |
| Suppliers agreements                                             |   |      |   |   |        |   |   |        |   |   |      |   |   |   |   |   |   |   |   |   |
|     Mine operations (b)                      |   |      | 541    |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 541 |   |
|     Drilling (c)                             |   |      | 450    |   |        |   | -      |        |   |   | -         |   |   |   | -      |   |   |   | 450 |   |
| Asset retirement obligations (d)                                 |   |      | 2,335  |   |        |   | 1,506  |        |   |   | 1,649     |   |   |   | 30,970 |   |   |   | 36,460 |   |
| Total                                                            |   | $         | 85,102 |   |        | $      | 31,124 |        |   | $      | 174,486   |   |   | $      | 30,970 |   |   | $ | 321,682 |   |

|   | (a) | The term of the management agreement is one year (Note 16(a)). |
|--------|-----|----------------------------------------------------------------|

|   | (b) | The Company has the right to cancel the mine operations contract with 10 days to 4 months advance notice.  The amount included in the contractual obligations table represents the amount due within this period. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|-----|-----------------------------------------------------------------------------------------|

----

----

| 20. | Subsequent Events: |
|-----|--------------------|

| 21. | Contingencies: |
|-----|----------------|

| 22. | Comparative Figures: |
|-----|----------------------|